UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
--------------- ---------------
Commission File Number 1-10709
-------
PS BUSINESS PARKS, INC.
-----------------------
(Exact name of registrant as specified in its charter)
California 95-4300881
---------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification Number)
701 Western Avenue, Glendale, California 91201-2397
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares outstanding of each of the issuer's classes of common stock, as
of August 10, 2000:
Common Stock, $0.01 par value, 23,108,190 shares outstanding
PS BUSINESS PARKS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999........ 2
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30,
2000 and 1999.......................................................................... 3
Condensed Consolidated Statement of Shareholders' Equity for the Six Months Ended June
30, 2000............................................................................... 4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000
and 1999............................................................................... 5 - 6
Notes to Condensed Consolidated Financial Statements................................... 7 - 16
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................................... 17 - 26
Item 3. Quantitative and Qualitative Disclosures about Market Risk...................... 27
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............................. 28
Item 6. Exhibits & Reports on Form 8-K.................................................. 28
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2000 1999
----------------- ------------------
(unaudited)
ASSETS
------
Cash and cash equivalents............................... $ 48,853,000 $ 74,220,000
Marketable securities................................... 24,804,000 18,263,000
Real estate facilities, at cost:
Land............................................... 200,176,000 194,140,000
Buildings and equipment............................ 656,984,000 636,261,000
----------------- ------------------
857,160,000 830,401,000
Accumulated depreciation........................... (66,104,000) (50,976,000)
----------------- ------------------
791,056,000 779,425,000
Properties held for disposition, net.................... 17,291,000 14,235,000
Construction in progress................................ 13,707,000 8,616,000
----------------- ------------------
822,054,000 802,276,000
Receivables............................................. 1,197,000 771,000
Deferred rent receivables............................... 6,717,000 5,493,000
Intangible assets, net.................................. 1,132,000 1,282,000
Other assets............................................ 1,564,000 1,436,000
----------------- ------------------
Total assets.............................. $ 906,321,000 $ 903,741,000
================= ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accrued and other liabilities.............................. $ 26,602,000 $ 21,195,000
Mortgage notes payable..................................... 31,362,000 37,066,000
----------------- ------------------
Total liabilities................................. 57,964,000 58,261,000
Minority interest:
Preferred units................................... 132,750,000 132,750,000
Common units...................................... 158,546,000 157,199,000
Shareholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares
authorized, 2,200 shares issued and outstanding at June
30, 2000 and December 31, 1999......................... 55,000,000 55,000,000
Common stock, $0.01 par value, 100,000,000 shares
authorized, 23,203,974 shares issued and outstanding at
June 30, 2000 (23,645,461 shares issued and outstanding
at December 31, 1999).................................. 232,000 236,000
Paid-in capital......................................... 467,605,000 478,889,000
Cumulative net income................................... 96,064,000 73,809,000
Comprehensive income.................................... 4,809,000 -
Cumulative distributions................................ (66,649,000) (52,403,000)
----------------- ------------------
Total shareholders' equity........................ 557,061,000 555,531,000
----------------- ------------------
Total liabilities and shareholders' equity... $ 906,321,000 $ 903,741,000
================= ==================
See accompanying notes.
2
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------------------- -----------------------------------
2000 1999 2000 1999
----------------- ---------------- ---------------- -----------------
Revenues:
Rental income................................. $ 36,414,000 $ 30,859,000 $ 70,467,000 $ 59,976,000
Facility management fees from affiliates...... 129,000 116,000 252,000 230,000
Business services............................. 267,000 - 267,000 -
Interest income............................... 741,000 252,000 2,011,000 264,000
Dividend income............................... 440,000 21,000 858,000 29,000
----------------- ---------------- ---------------- -----------------
37,991,000 31,248,000 73,855,000 60,499,000
----------------- ---------------- ---------------- -----------------
Expenses:
Cost of operations............................. 10,118,000 8,655,000 19,670,000 17,031,000
Cost of facility management.................... 25,000 23,000 50,000 46,000
Cost of business services...................... 64,000 - 64,000 -
Depreciation and amortization.................. 8,898,000 7,314,000 17,274,000 14,047,000
General and administrative..................... 981,000 795,000 1,864,000 1,597,000
Interest expense............................... 370,000 772,000 744,000 1,681,000
----------------- ---------------- ---------------- -----------------
20,456,000 17,559,000 39,666,000 34,402,000
----------------- ---------------- ---------------- -----------------
Income before disposition of real estate and
minority interest............................. 17,535,000 13,689,000 34,189,000 26,097,000
Gain on disposition of real estate............. 97,000 - 97,000 -
----------------- ---------------- ---------------- -----------------
Income before minority interest.................. 17,632,000 13,689,000 34,286,000 26,097,000
Minority interest in income - preferred units.. (2,921,000) (214,000) (5,841,000) (214,000)
Minority interest in income - common units..... (3,199,000) (3,220,000) (6,190,000) (6,186,000)
----------------- ---------------- ---------------- -----------------
Net income....................................... $ 11,512,000 $ 10,255,000 $ 22,255,000 $ 19,697,000
================= ================ ================ =================
Net income allocation:
Allocable to preferred shareholders............ $ 1,272,000 $ 862,000 $ 2,544,000 $ 862,000
Allocable to common shareholders............... 10,240,000 9,393,000 19,711,000 18,835,000
----------------- ---------------- ---------------- -----------------
$ 11,512,000 $ 10,255,000 $ 22,255,000 $ 19,697,000
================= ================ ================ =================
Net income per common share:
Basic.......................................... $ 0.44 $ 0.40 $ 0.84 $ 0.80
================= ================ ================ =================
Diluted........................................ $ 0.44 $ 0.40 $ 0.84 $ 0.79
================= ================ ================ =================
Weighted average common shares outstanding:
Basic.......................................... 23,356,000 23,639,000 23,474,000 23,638,000
================= ================ ================ =================
Diluted........................................ 23,428,000 23,716,000 23,537,000 23,709,000
================= ================ ================ =================
See accompanying notes.
3
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Six Months Ended June 30, 2000
(Unaudited)
Preferred Stock Common Stock
----------------------------- ---------------------------- Paid-in Cumulative
Shares Amount Shares Amount Capital Net Income
------------- ------------- ------------- ------------ -------------- -------------
Balances at December 31, 1999..... 2,200 $55,000,000 23,645,461 $ 236,000 $478,889,000 $73,809,000
Issuance of common stock:
Conversion of common OP units... - - 107,517 1,000 2,530,000 -
Exercise of stock options....... - - 3,596 - 60,000 -
Unrealized gain - appreciation in
marketable securities........... - - - - - -
Repurchase of common stock....... - - (552,600) (5,000) (12,373,000) -
Net income....................... - - - - - 22,255,000
Distributions paid:
Preferred stock................. - - - - - -
Common stock.................... - - - - - -
Adjustment to reflect minority
interest to underlying ownership
interest....................... - - - - (1,501,000) -
------------- ------------- ------------- ------------ -------------- -------------
Balances at June 30, 2000.......... 2,200 $55,000,000 23,203,974 $ 232,000 $467,605,000 $96,064,000
============= ============= ============= ============ ============== =============
Comprehensive Cumulative Shareholders'
Income Distributions Equity
------------------ ------------------ ------------------
Balances at December 31, 1999..... - $ (52,403,000) $ 555,531,000
Issuance of common stock:
Conversion of common OP units... - - 2,531,000
Exercise of stock options....... - - 60,000
Unrealized gain - appreciation in
marketable securities........... 4,809,000 - 4,809,000
Repurchase of common stock....... - - (12,378,000)
Net income....................... - - 22,255,000
Distributions paid:
Preferred stock................. - (2,544,000) (2,544,000)
Common stock.................... - (11,702,000) (11,702,000)
Adjustment to reflect minority
interest to underlying ownership
interest....................... - - (1,501,000)
------------------ ------------------ ------------------
Balances at June 30, 2000.......... $ 4,809,000 $ (66,649,000) $ 557,061,000
================== ================== ==================
See accompanying notes.
4
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
-----------------------------------------
2000 1999
--------------------- ------------------
Cash flows from operating activities:
Net income....................................................... $ 22,255,000 $ 19,697,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense........................ 17,274,000 14,047,000
Minority interest in income.................................. 12,031,000 6,400,000
Increase in receivables and other assets..................... (1,778,000) (1,292,000)
Increase in accrued and other liabilities.................... 5,289,000 3,442,000
--------------------- ------------------
Total adjustments....................................... 32,816,000 22,597,000
--------------------- ------------------
Net cash provided by operating activities.................. 55,071,000 42,294,000
--------------------- ------------------
Cash flows from investing activities:
Other investments............................................ (1,732,000) (448,000)
Acquisition of real estate facilities........................ (29,497,000) (42,530,000)
Disposition of real estate facilities........................ 5,756,000 -
Capital improvements to real estate facilities............... (4,747,000) (7,207,000)
Construction in progress...................................... (8,414,000) (9,397,000)
--------------------- ------------------
Net cash used in investing activities...................... (38,634,000) (59,582,000)
--------------------- ------------------
Cash flows from financing activities:
Borrowings from an affiliate................................. - 41,400,000
Repayment of borrowings from an affiliate.................... - (41,400,000)
Loans to an affiliate........................................ 77,000,000 -
Repayment of loans to an affiliate........................... (77,000,000) -
Borrowings from line of credit............................... - 14,000,000
Repayment of borrowings from line of credit.................. - (26,500,000)
Principal payments on mortgage notes payable................. (5,704,000) (11,688,000)
Net proceeds from the issuance of common stock............... 60,000 93,000
Repurchase of common stock................................... (12,378,000) -
Net proceeds from the issuance of preferred stock............ - 53,119,000
Net proceeds from the issuance of preferred operating
partnership units.......................................... - 12,495,000
Distributions paid to preferred shareholders................. (2,544,000) (862,000)
Distributions paid to minority interests - preferred units... (5,841,000) (214,000)
Distributions paid to common shareholders.................... (11,702,000) (11,819,000)
Distributions paid to minority interests - common units...... (3,695,000) (3,707,000)
--------------------- ------------------
Net cash (used in) provided by financing activities........ (41,804,000) 24,917,000
--------------------- ------------------
Net (decrease) increase in cash and cash equivalents................ (25,367,000) 7,629,000
Cash and cash equivalents at the beginning of the period............ 74,220,000 6,068,000
--------------------- ------------------
Cash and cash equivalents at the end of the period.................. $ 48,853,000 $ 13,697,000
===================== ==================
See accompanying notes.
5
PS BUSINESS PARKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
-----------------------------------------
2000 1999
--------------------- ------------------
Supplemental schedule of non cash investing and financing activities:
Acquisitions of real estate facilities in exchange for minority
interests and mortgage notes payable:
Real estate facilities....................................... $ - $ (20,752,000)
Minority interest - common units............................. - 1,033,000
Mortgage notes payable....................................... - 19,719,000
Conversion of common OP units into shares of common stock:
Minority interest - common units............................. (2,531,000) -
Common stock................................................. 1,000 -
Paid-in capital.............................................. 2,530,000 -
Adjustment to reflect minority interest to underlying ownership
interest:
Minority interest - common units............................. 1,501,000 (844,000)
Paid-in capital.............................................. (1,501,000) 844,000
Capitalization of developed properties:
Real estate facilities....................................... (3,323,000) -
Construction in progress..................................... 3,323,000 -
Unrealized gain:
Marketable securities........................................ (4,809,000 -
Comprehensive income......................................... 4,809,000 -
See accompanying notes.
6
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
1. Organization and description of business
PS Business Parks, Inc. ("PSB") was incorporated in the state of California
in 1990. As of June 30, 2000, PSB owned an approximate 74.3% general and
limited partnership interest in PS Business Parks, L.P. (the "Operating
Partnership" or "OP"). PSB, as the sole general partner of the Operating
Partnership, has full, exclusive and complete responsibility and discretion
in managing and controlling the Operating Partnership. PSB and the
Operating Partnership are collectively referred to as the "Company."
The Company is a fully-integrated, self-advised and self-managed real
estate investment trust ("REIT") that acquires, develops, owns and
operates commercial properties containing commercial and industrial rental
space. As of June 30, 2000, the Company owned and operated 124 commercial
properties (approximately 12.3 million net rentable square feet) located in
10 states. In addition, the Company managed, on behalf of Public Storage,
Inc. ("PSI") and affiliated entities, 38 commercial properties
(approximately 1.1 million net rentable square feet).
2. Summary of significant accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States for complete
financial statements. The preparation of the condensed consolidated
financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and
assumptions that affect the amounts reported in the condensed consolidated
financial statements and accompanying notes. Actual results could differ
from estimates. In the opinion of management, all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation have been
included. Operating results for the three and six months ended June 30,
2000 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1999.
The condensed consolidated financial statements include the accounts of PSB
and the Operating Partnership. All significant intercompany balances and
transactions have been eliminated in the condensed consolidated financial
statements.
Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less at the date of purchase to be cash
equivalents. The carrying amount of cash and cash equivalents approximates
fair value.
Marketable securities
The Company owns approximately one million common shares of Pacific Gulf
Properties Inc. The investment is classified as "available- for-sale" in
accordance with Statement of Financial Accounting Standards ("SFAS") No.
115, Accounting for Certain Investments in Debt and Equity Securities. The
investment is reflected on the balance sheet at fair market value. The
unrealized gain of $4,809,000 is excluded from earnings and reported in a
separate component of shareholders' equity. Dividend income is recognized
when earned.
Real estate facilities
Real estate facilities are recorded at cost. Costs related to the
renovation or improvement of the properties are capitalized. Expenditures
for repair and maintenance are expensed as incurred. Buildings and
equipment are depreciated on the straight-line method over the estimated
useful lives, which are generally 30 and 5 years, respectively.
7
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
Interest cost and property taxes incurred during the period of construction
of real estate facilities are capitalized. Construction in progress and
developed projects include $1,945,000 and $1,257,000 of interest costs
capitalized at June 30, 2000 and December 31, 1999, respectively. The
Company capitalized $688,000 and $410,000 during the six months ended June
30, 2000 and 1999, respectively.
Intangible assets
Intangible assets consist of property management contracts for properties
managed, but not owned, by the Company. The intangible assets are being
amortized over seven years. Intangible assets are net of accumulated
amortization of $1,024,000 and $874,000 at June 30, 2000 and December 31,
1999, respectively.
Evaluation of asset impairment
The Company evaluates its assets used in operations, by identifying
indicators of impairment and by comparing the sum of the estimated
undiscounted future cash flows for each asset to the asset's carrying
amount. When indicators of impairment are present and the sum of the
undiscounted future cash flows is less than the carrying value of such
asset, an impairment loss is recorded equal to the difference between the
asset's current carrying value and its value based on discounting its
estimated future cash flows. At June 30, 2000, no such indicators of
impairment have been identified.
Assets held for disposition are reported at the lower of carrying amount or
fair value less selling costs.
Borrowings from and loans to affiliate
The Company borrowed an aggregate of $41.4 million from PSI and paid
$371,000 in interest expense during the period of January 19, 1999 through
April 30, 1999. The notes bore interest at 5.5% (per annum) and were repaid
as of April 30, 1999.
The Company loaned an aggregate of $77 million to PSI and received $153,000
in interest income during the period of January 5, 2000 through March 20,
2000. The notes bore interest at 5.9% (per annum) and were repaid as of
March 20, 2000.
Revenue and expense recognition
All leases are classified as operating leases. Rental income is recognized
on a straight-line basis over the terms of the leases. Reimbursements from
tenants for real estate taxes and other recoverable operating expenses are
recognized as revenue in the period the applicable costs are incurred.
Costs incurred in connection with leasing (primarily tenant improvements
and leasing commissions) are capitalized and amortized over the lease
period.
Property management fees are recognized in the period earned.
General and administrative expense
General and administrative expense includes executive compensation, office
expense, professional fees, state income taxes, cost of acquisition
personnel and other such administrative items. Such amounts include amounts
incurred by PSI on behalf of the Company, which were subsequently charged
to the Company in accordance with the allocation methodology pursuant to
the cost allocation and administrative service agreement between the
Company and PSI.
Acquisition costs
Internal acquisition costs are expensed as incurred.
8
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
Income taxes
During 1997, the Company qualified and intends to continue to qualify as a
REIT, as defined in Section 856 of the Internal Revenue Code. As a REIT,
the Company is not subject to federal income tax to the extent that it
distributes its taxable income to its shareholders. A REIT must distribute
at least 95% of its taxable income each year. In addition, REITs are
subject to a number of organizational and operating requirements. If the
Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative minimum
tax) based on its taxable income using corporate income tax rates. Even if
the Company qualifies for taxation as a REIT, the Company may be subject to
certain state and local taxes on its income and property and to federal
income and excise taxes on its undistributed taxable income. The Company
believes it met all organization and operating requirements to maintain
its REIT status during 1999 and intends to continue to meet such
requirements for 2000. Accordingly, no provision for income taxes has
been made in the accompanying financial statements.
Net income per common share
Per share amounts are computed using the weighted average common shares
outstanding. "Diluted" weighted average common shares outstanding include
the dilutive effect of stock options under the treasury stock method.
"Basic" weighted average common shares outstanding excludes such effect.
Earnings per share has been calculated as follows:
For the Three Months For the Three Months
Ended June 30, Ended June 30,
---------------------------------- -------------------------------
2000 1999 2000 1999
---------------- ----------------- --------------- ---------------
Net income allocable to common shareholders.................... $ 10,240,000 $ 9,393,000 $ 19,711,000 $ 18,835,000
================ ================= =============== ===============
Weighted average common shares outstanding:
Basic weighted average common shares outstanding............ 23,356,000 23,639,000 23,474,000 23,638,000
Net effect of dilutive stock options - based on treasury
stock method using average market price................... 72,000 77,000 63,000 71,000
---------------- ----------------- --------------- ---------------
Diluted weighted average common shares outstanding.......... 23,428,000 23,716,000 23,537,000 23,709,000
================ ================= =============== ===============
Basic earnings per common share................................ $ 0.44 $ 0.44 $ 0.84 $ 0.80
================ ================= =============== ===============
Diluted earnings per common share.............................. $ 0.44 $ 0.40 $ 0.84 $ 0.79
================ ================= =============== ===============
9
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
3. Real estate facilities
The activity in real estate facilities for the six months ended June 30,
2000 is as follows:
Accumulated
Land Buildings Depreciation Total
----------------- ----------------- ------------------ ------------------
Balances at December 31, 1999...... $ 194,140,000 $ 636,261,000 $ (50,976,000) $ 779,425,000
Property acquisitions.............. 7,673,000 21,824,000 - 29,497,000
Property dispositions.............. (1,215,000) (3,482,000) 475,000 (4,222,000)
Developed projects................. 358,000 2,965,000 - 3,323,000
Properties held for disposition.... (780,000) (5,331,000) 1,521,000 (4,590,000)
Capital improvements............... - 4,747,000 - 4,747,000
Depreciation expense............... - - (17,124,000) (17,124,000)
----------------- ----------------- ------------------ ------------------
Balances at June 30, 2000.......... $ 200,176,000 $ 656,984,000 $ (66,104,000) $ 791,056,000
================= ================= ================== ==================
Certain properties have been identified as not meeting the Company's
ongoing investment strategy and have been designated as properties held for
disposition at June 30, 2000. These properties are currently being marketed
and the Company anticipates a gain on the sale during this fiscal year. The
following summarizes the condensed results of operations of the properties
held for disposition which are included in the condensed consolidated
statements of income:
For the Six Months
Ended June 30,
------------------------------------
2000 1999
---------------- -----------------
Rental income................... $ 2,250,000 $ 2,153,000
Cost of operations.............. 765,000 750,000
Depreciation.................... 326,000 247,000
---------------- -----------------
Net operating income............ $ 1,159,000 $ 1,156,000
================ =================
4. Leasing activity
The Company leases space in its real estate facilities to tenants under
non-cancelable leases generally ranging from one to ten years. Future
minimum rental revenues excluding recovery of expenses as of June 30, 2000
under these leases are as follows:
2000 (July - December).............. $ 59,458,000
2001................................ 98,990,000
2002................................ 71,783,000
2003................................ 50,967,000
2004................................ 35,309,000
Thereafter.......................... 47,753,000
-----------------
$ 364,260,000
=================
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amount to
$9,175,000 and $8,216,000 for the six months ended June 30, 2000
10
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
and 1999, respectively. These amounts are included as rental income and
cost of operations in the accompanying condensed consolidated statements of
income.
5. Revolving line of credit
In August 1999, the Company extended its unsecured line of credit (the
"Credit Facility") with Wells Fargo Bank. The Credit Facility has a
borrowing limit of $100 million and an expiration date of August 6, 2002.
The expiration date may be extended by one year on each anniversary of the
Credit Facility. Interest on outstanding borrowings is payable monthly. At
the option of the Company, the rate of interest charged is equal to (i) the
prime rate or (ii) a rate ranging from the London Interbank Offered Rate
("LIBOR") plus 0.75% to 1.35% depending on the Company's credit ratings and
coverage ratios, as defined (currently LIBOR plus 1.00%). In addition, the
Company is required to pay an annual commitment fee of 0.25%. The Company
had no outstanding balance and $100 million available on its line of credit
at June 30, 2000 and December 31, 1999.
The Credit Facility requires the Company to meet certain covenants
including (i) maintain a balance sheet leverage ratio (as defined) of less
than 0.50 to 1.00, (ii) maintain interest and fixed charge coverage ratios
(as defined) of not less than 2.25 to 1.0 and 1.75 to 1.0, respectively,
(iii) maintain a minimum total shareholders' equity (as defined) and (iv)
limit distributions to 95% of funds from operations. In addition, the
Company is limited in its ability to incur additional borrowings (the
Company is required to maintain unencumbered assets with an aggregate book
value equal to or greater than two times the Company's unsecured recourse
debt) or sell assets. The Company was in compliance with the covenants of
the Credit Facility at June 30, 2000.
6. Mortgage notes payable
Mortgage notes consist of the following:
June 30, December 31,
2000 1999
------------------- -----------------
7.125% mortgage note, principal and interest payable monthly, due
May 2006...................................................... $ 8,662,000 $ 8,751,000
8.190% mortgage note, principal and interest payable monthly, due
March 2007.................................................... 6,576,000 6,666,000
7.290% mortgage note, principal and interest payable monthly, due
February 2009................................................. 6,323,000 6,372,000
7.280% mortgage note, principal and interest payable monthly, due
February 2003................................................. 4,246,000 4,304,000
8.000% mortgage note, principal and interest payable monthly, due
April 2003.................................................... 2,066,000 2,108,000
8.500% mortgage note, principal and interest payable monthly, due
July 2007..................................................... 1,874,000 1,898,000
8.000% mortgage note, principal and interest payable monthly, due
April 2003.................................................... 1,615,000 1,640,000
8.125% mortgage note............................................... - 5,327,000
------------------- -----------------
$31,362,000 $37,066,000
=================== =================
11
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
At June 30, 2000, approximate principal maturities of mortgage notes
payable are as follows:
2000 (July - December).............. $ 390,000
2001................................ 829,000
2002................................ 895,000
2003................................ 7,871,000
2004................................ 696,000
Thereafter.......................... 20,681,000
--------------------
$ 31,362,000
====================
7. Minority interests
Common units
The Company presents the accounts of PSB and the Operating Partnership on a
consolidated basis. Ownership interests in the Operating Partnership, other
than PSB's interest, are classified as minority interest in the condensed
consolidated financial statements. Minority interest in income consists of
the minority interests' share of the condensed consolidated operating
results.
Beginning one year from the date of admission as a limited partner and
subject to certain limitations described below, each limited partner other
than PSB has the right to require the redemption of its partnership
interest.
A limited partner that exercises its redemption right will receive cash
from the Operating Partnership in an amount equal to the market value (as
defined in the Operating Partnership Agreement) of the partnership
interests redeemed. In lieu of the Operating Partnership redeeming the
partner for cash, PSB, as general partner, has the right to elect to
acquire the partnership interest directly from a limited partner exercising
its redemption right, in exchange for cash in the amount specified above or
by issuance of one share of PSB common stock for each unit of limited
partnership interest redeemed.
A limited partner cannot exercise its redemption right if delivery of
shares of PSB common stock would be prohibited under the applicable
articles of incorporation, if the general partner believes that there is a
risk that delivery of shares of common stock would cause the general
partner to no longer qualify as a REIT, would cause a violation of the
applicable securities laws, or would result in the Operating Partnership no
longer being treated as a partnership for federal income tax purposes.
At June 30, 2000, there were 7,335,839 OP units owned by minority interests
(7,305,355 were owned by PSI and affiliated entities and 30,484 were owned
by unaffiliated third parties). On a fully converted basis, assuming all
7,335,839 minority interest OP units were converted into shares of common
stock of PSB at June 30, 2000, the minority interests would own
approximately 24.0% of the common shares outstanding. At the end of each
reporting period, PSB determines the amount of equity (book value of net
assets) which is allocable to the minority interest based upon the
ownership interest and an adjustment is made to the minority interest, with
a corresponding adjustment to paid-in capital, to reflect the minority
interests' equity in the Company.
Preferred units
On April 23, 1999, the Operating Partnership completed a private placement
of 510,000 preferred units with a preferred distribution rate of 8 7/8%.
The net proceeds from the placement of preferred units were approximately
$12.5 million and were used to repay borrowings from an affiliate.
12
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
On September 3, 1999, the Operating Partnership completed a private
placement of 3,200,000 preferred units with a preferred distribution rate
of 8 3/4%. The net proceeds from the placement of preferred units were
approximately $78 million and part of the proceeds was used to prepay a
mortgage note payable of approximately $8.5 million.
On September 7 and 23, 1999, the Operating Partnership completed private
placements of 1,200,000 and 400,000 preferred units, respectively, with a
preferred distribution rate of 8 7/8%. The net proceeds from the placement
of preferred units were approximately $39.2 million.
The Operating Partnership has the right to redeem the preferred units on or
after the fifth anniversary of the issuance date at the original capital
contribution plus the cumulative priority return, as defined, to the
redemption date to the extent not previously distributed. The preferred
units are exchangeable for Cumulative Redeemable Preferred Stock of the
respective series of PS Business Parks, Inc. on or after the tenth
anniversary of the date of issuance at the option of the Operating
Partnership or majority of the holders of the preferred units. The
Preferred Stock will have the same distribution rate and par value as the
respective units and will have equivalent terms to those described in Note
9.
8. Property management contracts
The Operating Partnership manages industrial, office and retail facilities
for PSI and entities affiliated with PSI. These facilities, all located in
the United States, operate under the "Public Storage" or "PS Business
Parks" name.
The property management contracts provide for compensation of five percent
of the gross revenue of the facilities managed. Under the supervision of
the property owners, the Operating Partnership coordinates rental policies,
rent collections, marketing activities, the purchase of equipment and
supplies, maintenance activities, and the selection and engagement of
vendors, suppliers and independent contractors. In addition, the Operating
Partnership assists and advises the property owners in establishing
policies for the hire, discharge and supervision of employees for the
operation of these facilities, including property managers, leasing,
billing and maintenance personnel.
The property management contract with PSI is for a seven year term with the
term being extended one year each anniversary. The property management
contracts with affiliates of PSI are cancelable by either party upon sixty
days notice.
9. Shareholders' equity
Preferred stock
On April 30, 1999, the Company issued 2,200,000 depositary shares each
representing 1/1,000 of a share of 9 1/4% Cumulative Preferred Stock,
Series A. Net proceeds from the public perpetual preferred stock offering
were approximately $53.1 million and were used to repay borrowings from an
affiliate and a mortgage note payable of approximately $11 million. The
remaining proceeds were used for investment in real estate.
Holders of the Company's preferred stock will not be entitled to vote on
most matters, except under certain conditions. In the event of a cumulative
arrearage equal to six quarterly dividends, the holders of the preferred
stock will have the right to elect two additional members to serve on the
Company's Board of Directors until all events of default have been cured.
At June 30, 2000, there were no dividends in arrears.
13
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
Except under certain conditions relating to the Company's qualification as
a REIT, the preferred stock is not redeemable prior to April 30, 2004. On
or after April 30, 2004, the preferred stock will be redeemable, at the
option of the Company, in whole or in part, at $25 per depositary share,
plus any accrued and unpaid dividends.
The Company paid $2,544,000 ($1.156250 per depositary share) and $862,000
($0.391840 per depositary share) in distributions to its preferred
shareholders for the six months ended June 30, 2000 and 1999, respectively.
Common stock
On March 2, 2000, the Board of Directors authorized the repurchase from
time to time of up to 1,000,000 shares of the Company's common stock on the
open market or in privately negotiated transactions. As of June 30, 2000,
the Company repurchased 552,600 shares of common stock at an aggregate cost
of approximately $12.4 million.
On March 31, 2000, a holder of common OP units exercised its option and
converted its 107,517 common OP units into an equal number of shares of PSB
common stock. The conversion resulted in an increase in shareholders'
equity and a corresponding decrease in minority interest of approximately
$2,531,000 representing the book value of the OP units at the time of
conversion.
The Company paid $11,702,000 ($0.50 per common share) and $11,819,000
($0.50 per common share) in distributions to its common shareholders for
the six months ended June 30, 2000 and 1999, respectively. Pursuant to
restrictions on the Credit Facility, distributions may not exceed 95% of
funds from operations, as defined.
Equity stock
In addition to common and preferred stock, the Company is authorized to
issue 100,000,000 shares of Equity Stock. The Articles of Incorporation
provide that the Equity Stock may be issued from time to time in one or
more series and gives the Board of Directors broad authority to fix the
dividend and distribution rights, conversion and voting rights, redemption
provisions and liquidation rights of each series of Equity Stock.
10. Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 2000. This
statement provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. The
Company is studying this statement to determine its effect on the
consolidated financial statements and will adopt this statement in the year
ending December 31, 2001.
11. Commitments and contingencies
The Company is subject to the risks inherent in the ownership and operation
of commercial real estate. These include, among others, the risks normally
associated with changes in the general economic climate, trends in the real
estate industry, creditworthiness of tenants, competition, changes in tax
laws, interest rate levels, the availability of financing and potential
liability under environmental and other laws.
14
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
Substantially all of the properties have been subjected to Phase I
environmental reviews. Such reviews have not revealed, nor is management
aware of, any probable or reasonably possible environmental costs that
management believes would be material to the consolidated financial
statements except as discussed below.
The Company acquired a property in Beaverton, Oregon ("Creekside Corporate
Park") in May 1998. A property adjacent to Creekside Corporate Park is
currently the subject of an environmental remedial
investigation/feasibility study that is being conducted by the current and
past owners of the property, pursuant to an order issued by the Oregon
Department of Environmental Quality ("ODEQ"). As part of that study, ODEQ
ordered the property owners to sample soil and groundwater on the Company's
property to determine the nature and extent of contamination resulting from
past industrial operations at the property subject to the study. The
Company, which is not a party of the Order on Consent, executed separate
Access Agreements with the property owners to allow access to its property
to conduct the required sampling and testing. The sampling and testing is
ongoing, and preliminary results from one area indicate that the
contamination from the property subject to the study may have migrated onto
a portion of Creekside Corporate Park owned by the Company.
There is no evidence that any past or current use of the Creekside
Corporate Park property contributed in any way to the contamination that is
the subject of the current investigation. Nevertheless, upon completion of
the study, it is likely that removal or remedial measures will be required
to address any contamination detected during the current investigation,
including any contamination on or under the Creekside Corporate Park
property. Because of the preliminary nature of the investigation, the
Company cannot predict the outcome of the investigation, nor can it
estimate the costs of any remediation or removal activities that may be
required.
The Company believes that it bears no responsibility or liability for the
contamination. In the event the Company is ultimately deemed responsible
for any costs relating to this matter, the Company believes that the party
from whom the property was purchased will be responsible for any expenses
or liabilities that the Company may incur as a result of this
contamination.
On November 3, 1999, the Company filed an action in the Los Angeles
Superior Court seeking damages in excess of $1 million, as well as
equitable relief. The complaint alleges that Mr. Howard and entities
controlled by him engaged in unfair trade practices, including (1)
negotiating kickbacks, secret rebates and/or unearned discounts from third
party suppliers for "providing" Company business to those suppliers and (2)
disrupting the Company's relationship with various suppliers.
On or about February 14, 2000, Mr. Howard and entities controlled by him
filed a cross-complaint against the Company, Public Storage, Inc., and
several other cross-defendants alleging, among other things, (1)
interference with Mr. Howard's contractual relations with various third
party suppliers, (2) violation of Title VII of the Civil Rights Act and (3)
abuse of process. None of the cross-complainants assigned any dollar amount
in the cross-complaint to the claims. The Company intends to vigorously
contest the claims in the cross-complaint.
The Company currently is neither subject to any other material litigation
nor, to management's knowledge, is any material litigation currently
threatened against the Company other than routine litigation and
administrative proceedings arising in the ordinary course of business.
Based on consultation with counsel, management believes that these items
will not have a material adverse impact on the Company's condensed
consolidated financial position or results of operations.
15
PS BUSINESS PARKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
12. Subsequent events
On July 12, 2000 the Operating Partnership completed a private placement of
480,000 preferred units with a preferred distribution rate of 8 7/8%. The
net proceeds from the placement of preferred units were approximately $11.7
million and will be used for investment in real estate.
On July 27, 2000, the Board of Directors authorized the repurchase of up to
an additional 600,000 shares of the Company's common stock (for a total
repurchase authorization of up to 1,600,000 shares) on the open market or
in privately negotiated transactions. Purchases will be made subject to
market conditions and other investment opportunities available to the
Company.
16
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------------
Operations
- ----------
Forward-Looking Statements: When used within this document, the words
"expects," "believes," "anticipates," "should," "estimates," and similar
expressions are intended to identify "forward-looking statements" within the
meaning of that term in Section 27A of the Securities Exchange Act of 1933, as
amended, and in Section 21F of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors. Actual results could differ materially from those set forth
in the forward-looking statements as a result of various factors. Such factors
include, but are not limited to a change in economic conditions in the various
markets served by the Company's operations which would adversely affect the
level of demand for rental of commercial space and the cost structure of the
Company, general real estate investment risks, competition, risks associated
with acquisition and development activities and debt financing, environmental
matters, general uninsured losses and seismic activity. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Overview: During 2000 and 1999, the Company focused on increasing cash flow
from its existing core portfolio of properties, expanded its presence in
existing markets through strategic acquisitions and developments and
strengthened its balance sheet primarily through the issuance of preferred
stock/OP units at reasonable prices. By maintaining low leverage, the Company
believes that future growth is facilitated.
During the first half of 2000, the Company acquired 178,000 square feet in
Northern California for approximately $23.3 million. In addition, the Company
acquired 21 acres of land in Texas for approximately $3.7 million for the
development of two 100,000 square feet flex buildings.
During 1999, the Company added approximately 1.3 million square feet to its
portfolio at an aggregate cost of approximately $103 million. The Company
acquired 483,000 square feet in Texas for approximately $32 million, 405,000
square feet in Northern Virginia/Maryland market for approximately $41 million,
211,000 square feet in Northern California for approximately $17 million and
200,000 square feet in Arizona for approximately $13 million.
Results of Operations: Net income for the three months ended June 30, 2000
was $11,512,000 compared to $10,255,000 for the same period in 1999. Net income
allocable to common shareholders (net income less preferred stock dividends) for
the three months ended June 30, 2000 was $10,240,000 compared to $9,393,000 for
the same period in 1999. Net income per common share on a diluted basis was
$0.44 for the three months ended June 30, 2000 compared to $0.40 for the same
period in 1999 (based on weighted average diluted common shares outstanding of
23,428,000 and 23,716,000, respectively). Net income for the six months ended
June 30, 2000 was $22,255,000 compared to $19,697,000 for the same period in
1999. Net income allocable to common shareholders (net income less preferred
stock dividends) for the six months ended June 30, 2000 was $19,711,000 compared
to $18,835,000 for the same period in 1999. Net income per common share on a
diluted basis was $0.84 for the six months ended June 30, 2000 compared to $0.79
for the same period in 1999 (based on weighted average diluted common shares
outstanding of 23,537,000 and 23,709,000, respectively). The increases in net
income and net income per share reflect the Company's growth in its asset base
through the acquisition and development of commercial properties in addition to
increased net operating income from its stabilized base of properties.
17
The Company's property operations account for almost all of the net
operating income earned by the Company. The following table presents the
pre-depreciation operating results of the properties for the three and six
months ended June 30, 2000 and 1999:
Three Months Ended June 30,
---------------------------------
2000 1999 Change
--------------- --------------- -------------
Rental income:
"Same Park" facilities (107 facilities, 10.5 million net
rentable square feet)................................... $30,726,000 $28,995,000 6.0%
Other facilities............................................. 5,688,000 1,864,000 205.2%
--------------- --------------- -------------
Total rental income.......................................... $36,414,000 $30,859,000 18.0%
=============== =============== =============
Cost of operations (excluding depreciation):
"Same Park" facilities....................................... $ 8,068,000 $ 7,867,000 2.6%
Other facilities............................................. 2,050,000 788,000 160.2%
--------------- --------------- -------------
Total cost of operations..................................... $10,118,000 $ 8,655,000 16.9%
=============== =============== =============
Net operating income (rental income less cost of operations):
"Same Park" facilities....................................... $22,658,000 $21,128,000 7.2%
Other facilities............................................. 3,638,000 1,076,000 238.1%
--------------- --------------- -------------
Total net operating income................................... $26,296,000 $22,204,000 18.4%
=============== =============== =============
Six Months Ended June 30,
---------------------------------
2000 1999 Change
--------------- --------------- -------------
Rental income:
"Same Park" facilities (107 facilities, 10.5 million net
rentable square feet)................................... $59,766,000 $56,441,000 5.9%
Other facilities............................................. 10,701,000 3,535,000 202.7%
--------------- --------------- -------------
Total rental income.......................................... $70,467,000 $59,976,000 17.5%
=============== =============== =============
Cost of operations (excluding depreciation):
"Same Park" facilities....................................... $15,840,000 $15,406,000 2.8%
Other facilities............................................. 3,830,000 1,625,000 135.7%
--------------- --------------- -------------
Total cost of operations..................................... $19,670,000 $17,031,000 15.5%
=============== =============== =============
Net operating income (rental income less cost of operations):
"Same Park" facilities....................................... $43,926,000 $41,035,000 7.0%
Other facilities............................................. 6,871,000 1,910,000 259.7%
--------------- --------------- -------------
Total net operating income................................... $50,797,000 $42,945,000 18.3%
=============== =============== =============
18
Rental income and rental income less cost of operations or net operating
income ("NOI") prior to depreciation are summarized for the three months ended
June 30, 2000 by major geographic regions below:
Square Percent Rental Percent Percent
Region Footage of Total Income of Total NOI of Total
- ----------------------------- -------------- ---------- ---------------- ---------- -------------- ---------------
Southern California 3,093,000 25.2% $ 8,970,000 24.6% $ 6,775,000 25.8%
Northern California 1,495,000 12.2% 4,185,000 11.5% 3,096,000 11.8%
Southern Texas 1,032,000 8.4% 2,670,000 7.3% 1,556,000 5.9%
Northern Texas 1,849,000 15.1% 5,724,000 15.7% 4,163,000 15.8%
Virginia 1,612,000 13.1% 5,627,000 15.5% 4,039,000 15.4%
Maryland 1,104,000 9.0% 3,519,000 9.7% 2,562,000 9.7%
Oregon 1,191,000 9.7% 3,718,000 10.2% 2,919,000 11.1%
Other 888,000 7.3% 2,001,000 5.5% 1,186,000 4.5%
-------------- ---------- ---------------- ---------- -------------- ---------------
12,264,000 100.0% $36,414,000 100.0% $26,296,000 100.0%
============== ========== ================ ========== ============== ===============
Rental income and rental income less cost of operations or net operating income
("NOI") prior to depreciation are summarized for the six months ended June 30,
2000 by major geographic regions below:
Square Percent Rental Percent Percent
Region Footage of Total Income of Total NOI of Total
- ----------------------------- -------------- ---------- ---------------- ---------- -------------- ---------------
Southern California 3,093,000 25.2% $17,763,000 25.2% $13,533,000 26.7%
Northern California 1,495,000 12.2% 7,847,000 11.1% 5,806,000 11.4%
Southern Texas 1,032,000 8.4% 5,264,000 7.5% 3,094,000 6.1%
Northern Texas 1,849,000 15.1% 10,175,000 14.4% 7,129,000 14.0%
Virginia 1,612,000 13.1% 10,988,000 15.6% 7,968,000 15.7%
Maryland 1,104,000 9.0% 6,871,000 9.8% 4,894,000 9.6%
Oregon 1,191,000 9.7% 7,441,000 10.6% 5,887,000 11.6%
Other 888,000 7.3% 4,118,000 5.8% 2,486,000 4.9%
-------------- ---------- ---------------- ---------- -------------- ---------------
12,264,000 100.0% $70,467,000 100.0% $50,797,000 100.0%
============== ========== ================ ========== ============== ===============
Supplemental Property Data and Trends: In order to evaluate the performance
of the Company's overall portfolio, management analyzes the operating
performance of a consistent group of 107 properties (10.5 million net rentable
square feet). These 107 properties (herein referred to as the "Same Park"
facilities) have been owned and operated by the Company for the comparable
periods. These properties do not include planned dispositions or properties that
have been sold during the year. The "Same Park" facilities represent
approximately 86% of the square footage of the Company's portfolio at June 30,
2000.
19
The following table summarizes the pre-depreciation historical operating
results of the "Same Park" facilities excluding the effects of accounting for
rental revenues on a straight-line basis.
"Same Park" Facilities (107 Properties)
---------------------------------------
Three Months Ended
June 30,
------------------------------------
2000 1999 Change
----------------- ----------------- --------------
Rental income (1).................................... $ 30,225,000 $ 28,191,000 7.2%
Cost of operations................................... 8,068,000 7,867,000 2.6%
----------------- ----------------- --------------
Net operating income................................. $ 22,157,000 $ 20,324,000 9.0%
================= ================= ==============
Gross margin (2)..................................... 73.3% 72.1% 1.2%
Weighted average for period:
Occupancy........................................ 97.3% 96.9% 0.4%
Annualized realized rent per sq. ft.(3).......... $11.79 $11.04 6.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30,
2000 1999 Change
----------------- ----------------- --------------
Rental income (1).................................... $ 58,728,000 $ 54,929,000 6.9%
Cost of operations................................... 15,840,000 15,406,000 2.8%
----------------- ----------------- --------------
Net operating income................................. $ 42,888,000 $ 39,523,000 8.5%
================= ================= ==============
Gross margin (2)..................................... 73.0% 72.0% 1.0%
Weighted average for period:
Occupancy........................................ 97.1% 96.9% 0.2%
Annualized realized rent per sq. ft.(3).......... $11.48 $10.76 6.7%
- --------------
(1) Rental income does not include the effect of straight-line accounting.
(2) Gross margin is computed by dividing property net operating income by rental
income.
(3) Realized rent per square foot represents the actual revenues earned per
occupied square foot.
20
The following tables summarize the "Same Park" operating results by major
geographic region for the three months ended June 30, 2000 and 1999:
Revenues Revenues NOI NOI Increase
Region 2000 1999 Increase 2000 1999 (Decrease)
- -------------------------- -------------- -------------- ------------ ---------------- -------------- ------------
Southern California..... $9,248,000 $8,157,000 13.4% $7,050,000 $6,131,000 15.0%
Northern California..... 3,058,000 2,640,000 15.8% 2,350,000 1,988,000 18.2%
Southern Texas.......... 2,324,000 2,332,000 (0.3%) 1,310,000 1,383,000 (5.3%)
Northern Texas.......... 3,916,000 4,400,000 (11.0%) 2,691,000 3,037,000 (11.4%)
Virginia................ 4,176,000 3,642,000 14.7% 3,037,000 2,567,000 18.3%
Maryland................ 2,482,000 2,273,000 9.2% 1,863,000 1,635,000 13.9%
Oregon.................. 3,809,000 3,614,000 5.4% 3,093,000 2,902,000 6.6%
Other................... 1,212,000 1,133,000 7.0% 763,000 681,000 12.0%
-------------- -------------- ------------ ---------------- -------------- ------------
$30,225,000 $28,191,000 7.2% $22,157,000 $20,324,000 9.0%
============== ============== ============ ================ ============== ============
The following tables summarize the "Same Park" operating results by major
geographic region for the six months ended June 30, 2000 and 1999:
Revenues Revenues NOI NOI Increase
Region 2000 1999 Increase 2000 1999 (Decrease)
- -------------------------- -------------- -------------- ------------ ---------------- -------------- ------------
Southern California..... $17,879,000 $16,000,000 11.7% $13,651,000 $11,887,000 14.8%
Northern California..... 5,987,000 5,299,000 13.0% 4,564,000 3,980,000 14.7%
Southern Texas.......... 4,581,000 4,487,000 2.1% 2,629,000 2,749,000 (4.4%)
Northern Texas.......... 7,562,000 7,863,000 (3.8%) 5,105,000 5,316,000 (4.0%)
Virginia................ 7,985,000 7,245,000 10.2% 5,797,000 5,104,000 13.6%
Maryland................ 4,861,000 4,617,000 5.3% 3,607,000 3,382,000 6.7%
Oregon.................. 7,463,000 7,154,000 4.3% 6,050,000 5,712,000 5.9%
Other................... 2,410,000 2,264,000 6.5% 1,485,000 1,393,000 6.6%
-------------- -------------- ------------ ---------------- -------------- ------------
$58,728,000 $54,929,000 6.9% $42,888,000 $39,523,000 8.5%
============== ============== ============ ================ ============== ============
The increases noted above reflect the performance of the Company's existing
markets. The Company experienced growth in rental rates in Southern and Northern
California and Virginia due to a strong economic climate. In Southern Texas,
increases in operating expenses in excess of revenue increases resulted in a
decrease in NOI. The increases are primarily related to property tax expenses.
In Northern Texas, decreases in revenue and NOI are primarily related to
decreased expense recoveries for the three and six months ended June 30, 2000.
Facility Management Operations: The Company's facility management accounts
for a small portion of the Company's net operating income. During the three
months ended June 30, 2000, $104,000 in net operating income was recognized from
facility management operations compared to $93,000 for the same period in 1999.
During the six months ended June 30, 2000, $202,000 in net operating income was
recognized from facility management operations compared to $184,000 for the same
period in 1999. Facility management fees have increased due to the increase in
rental rates of the properties managed by the Company.
Business Services: The Company recently hired a Vice President to
focus on creating new revenue opportunities for the Company and additional
products and services for our customers. Currently the Company has
21
begun receiving income from construction management fees and fees from
telecommunication service providers. During the three and six months ended June
30, 2000, $203,000 in net operating income was derived from such services
compared to none for the same periods in 1999.
Interest Income: Interest income reflects earnings on cash balances.
Interest income was $741,000 for the three months ended June 30, 2000 compared
to $252,000 for the same period in 1999. Interest income was $2,011,000 for the
six months ended June 30, 2000 compared to $264,000 for the same period in 1999.
The increase is attributable to increased average cash balances and higher
interest rates. Average cash balances for the three months ended June 30, 2000
were approximately $49.4 million compared to $20.1 million for the same period
in 1999. Average cash balances for the six months ended June 30, 2000 were
approximately $69.9 million compared to $10.6 million for the same period in
1999.
Dividend Income: Dividend income reflects earnings from marketable
securities. Dividend income was $440,000 for the three months ended June 30,
2000 compared to $21,000 for the same period in 1999. Dividend income was
$858,000 for the six months ended June 30, 2000 compared to $29,000 for the same
period in 1999. The increase is attributable to increased investments in
marketable securities.
Cost of Operations: Cost of operations for the three months ended June 30,
2000 was $10,118,000 compared to $8,655,000 for the same period in 1999. Cost of
operations for the six months ended June 30, 2000 was $19,670,000 compared to
$17,031,000 for the same period in 1999. Cost of operations for the three months
ended June 30, 2000 consists primarily of property taxes ($3,223,000), property
maintenance ($1,793,000), utilities ($1,487,000) and direct payroll
($1,409,000). Cost of operations for the six months ended June 30, 2000 consists
primarily of property taxes ($6,343,000), property maintenance ($3,581,000),
utilities ($3,099,000) and direct payroll ($2,877,000). The increase is due
primarily to the growth in the total square footage of the Company's portfolio
of properties. Cost of operations as a percentage of rental income decreased
from 28.0% to 27.8% and from 28.4% to 27.9% for the three and six months ended
June 30, 2000, respectively, as a result of economies of scale achieved through
the acquisition and development of properties in existing markets.
Depreciation and Amortization Expense: Depreciation and amortization
expense for the three months ended June 30, 2000 was $8,898,000 compared to
$7,314,000 for the same period in 1999. Depreciation and amortization expense
for the six months ended June 30, 2000 was $17,274,000 compared to $14,047,000
for the same period in 1999. The increase is due to the acquisition and
development of real estate facilities during 1999 and 2000.
General and Administrative Expense: General and administrative expense was
$981,000 for the three months ended June 30, 2000 compared to $795,000 for the
same period in 1999. General and administrative expense was $1,864,000 for the
six months ended June 30, 2000 compared to $1,597,000 for the same period in
1999. The increase is due primarily to the increased size and activities of the
Company. Included in general and administrative costs are acquisition costs and
abandoned transaction costs. Acquisition expenses were $117,000 and $95,000 for
the three months ended June 30, 2000 and 1999, respectively. Abandoned
transaction costs were none and $28,000 for the three months ended June 30, 2000
and 1999, respectively. Acquisition expenses were $248,000 and $185,000 for the
six months ended June 30, 2000 and 1999, respectively. Abandoned transaction
costs were $7,000 and $30,000 for the six months ended June 30, 2000 and 1999,
respectively.
Interest Expense: Interest expense was $370,000 for the three months ended
June 30, 2000 compared to $772,000 for the same period in 1999. Interest expense
was $744,000 for the six months ended June 30, 2000 compared to $1,681,000 for
the same period in 1999. The decrease is attributable to decreased average debt
balances during the period. Interest expense of $290,000 and $225,000 was
capitalized as part of building costs associated with properties under
development during the three months ended June 30, 2000 and 1999, respectively.
Interest expense of $688,000 and $410,000 was capitalized as part of building
costs associated with properties under development during the six months ended
June 30, 2000 and 1999, respectively.
22
Minority Interest in Income: Minority interest in income reflects the
income allocable to equity interests in the Operating Partnership that are not
owned by the Company. Minority interest in income for the three months ended
June 30, 2000 was $6,120,000 ($2,921,000 allocated to preferred unitholders and
$3,199,000 allocated to common unitholders) compared to $3,434,000 ($214,000
allocated to preferred unitholders and $3,220,000 allocated to common
unitholders) for the same period in 1999. Minority interest in income for the
six months ended June 30, 2000 was $12,031,000 ($5,841,000 allocated to
preferred unitholders and $6,190,000 allocated to common unitholders) compared
to $6,400,000 ($214,000 allocated to preferred unitholders and $6,186,000
allocated to common unitholders) for the same period in 1999. The increase in
minority interest in income is due primarily to the issuance of preferred
operating partnership units in April and September of 1999.
23
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities for the six months ended June 30,
2000 and 1999 was $55,071,000 and $42,294,000, respectively. Management believes
that its internally generated net cash provided by operating activities will
continue to be sufficient to enable it to meet its operating expenses, capital
improvements, debt service requirements and maintain the current level of
distribution to shareholders.
The Company owns approximately one million common shares of Pacific Gulf
Properties, Inc. ("PAG") representing an investment of approximately $20
million. PAG recently announced the disposition of its industrial portfolio and
the planned disposition of its multi-family portfolio. PAG expects to make a
cash distribution to shareholders in the fourth quarter of 2000 of up to $26 per
share from the sale proceeds. This would result in net proceeds of approximately
$26 million to the Company or $6 million in excess of our original investment.
The investment is currently reflected on the balance sheet at $25 million
reflecting the fair market value of the stock at June 30,2000. The unrealized
gain is not reflected in net income or FFO. There is no assurance that the
Company will realize the estimated net proceeds.
The Company sold three properties for approximately $5.7 million in the
second quarter of 2000 at a gain of $97,000. Two additional properties are
currently being marketed. There is no assurance that the sales will be
consummated or that the Company will realize the estimated net proceeds.
The following table summarizes the Company's ability to make capital
improvements to maintain its facilities through the use of cash provided by
operating activities. The remaining cash flow is available to the Company to pay
distributions to shareholders, make principal payments on debt and to make
investments in real estate.
Six Months Ended June 30,
----------------------------------
2000 1999
---------------- ----------------
Net income............................................................ $ 22,255,000 $ 19,697,000
Depreciation and amortization......................................... 17,274,000 14,047,000
Change in working capital............................................. 3,511,000 2,150,000
Minority interest in income........................................... 12,031,000 6,400,000
---------------- ----------------
Net cash provided by operating activities............................. 55,071,000 42,294,000
Maintenance capital expenditures...................................... (1,181,000) (1,422,000)
Tenant improvements................................................... (2,074,000) (2,665,000)
Capitalized lease commissions......................................... (1,492,000) (878,000)
---------------- ----------------
Funds available for distributions to shareholders, minority interests,
acquisitions and other corporate purposes........................... 50,324,000 37,329,000
Cash distributions to shareholders and minority interests............. (23,782,000) (16,602,000)
---------------- ----------------
Excess funds available for principal payments on debt, investments in
real estate and other corporate purposes............................ $ 26,542,000 $ 20,727,000
================ ================
The Company's capital structure is characterized by a low level of
leverage. As of June 30, 2000, the Company had seven fixed rate mortgage notes
payable totaling $31,362,000 which represented 3.6% of its total capitalization
(based on book value, including minority interests and debt). The weighted
average interest rate for the mortgage notes is 7.59%.
In August 1999, the Company extended its unsecured line of credit (the
"Credit Facility") with Wells Fargo Bank. The Credit Facility has a borrowing
limit of $100 million and an expiration date of August 6, 2002. The expiration
date may be extended by one year on each anniversary of the Credit Facility.
Interest on outstanding borrowings is payable monthly. At the
option of the Company, the rate of interest charged is equal to
(i) the prime rate or (ii) a rate ranging from the London Interbank
Offered Rat ("LIBOR") plus 0.75% to 1.35% depending on
24
the Company's credit ratings and coverage ratios, as defined (currently LIBOR
plus 1.00%). In addition, the Company is required to pay an annual commitment
fee of 0.25%.
The Company expects to fund its growth strategies with permanent capital,
including issuances of common and preferred stock and internally generated
retained cash flows. In addition, the Company may sell properties that no longer
meet its investment criteria. The Company may finance acquisitions on a
temporary basis with borrowings from its line of credit. The Company intends to
repay amounts borrowed under the Credit Facility from undistributed cash flow
or, as market conditions permit and as determined to be advantageous, from the
public or private placement of preferred and common stock/OP units or formation
of joint ventures. The Company targets a leverage ratio of 40% and Funds from
Operations ("FFO") to combined fixed charges and preferred distributions ratio
of 3.0 to 1.0. As of June 30, 2000 and for the six months then ended, the
leverage ratio was 23% (based on the fair market capitalization) and the FFO to
fixed charges and preferred distributions coverage ratio was 5.2 to 1.0.
In April 1999, the Company completed a private placement of preferred OP
units and a public offering of depositary shares representing fractional
interest in perpetual preferred stock resulting in net proceeds totaling $65.6
million. The net proceeds from the placement of preferred OP units, completed
April 23, 1999 were approximately $12.5 million. The preferred OP units have a
preferred distribution rate of 8 7/8% on a stated value of $12.75 million. The
preferred OP units have equivalent terms to those of perpetual preferred stock.
Net proceeds from the public perpetual preferred stock offering completed April
30, 1999 were $53.1 million. The preferred stock has a dividend rate of 9 1/4%
on a stated value of $55 million. Proceeds from the issuances were used to pay
off borrowings from an affiliate and a portion was used to repay a mortgage note
payable of approximately $11 million. The remaining proceeds were used for
investment in real estate.
On September 3, 1999, the Operating Partnership completed a private
placement of 3,200,000 preferred units with a preferred distribution rate of 8
3/4%. The net proceeds from the placement of preferred units were approximately
$78 million. A portion of the proceeds was used to prepay a mortgage note
payable of approximately $8.5 million. On September 7 and 23, 1999, the
Operating Partnership completed private placements of 1,200,000 and 400,000
preferred units, respectively, with a preferred distribution rate of 8 7/8%. The
net proceeds from the placement of preferred units were approximately $39.2
million.
On July 12, 2000 the Operating Partnership completed a private placement of
480,000 preferred units with a preferred distribution rate of 8 7/8%. The net
proceeds from the placement of preferred units were approximately $11.7 million
and will be used for investment in real estate.
Funds from Operations: FFO is defined as net income, computed in accordance
with generally accepted accounting principles ("GAAP"), before depreciation,
amortization, minority interest in income, straight line rent adjustments and
extraordinary or non-recurring items. FFO is presented because the Company
considers FFO to be a useful measure of the operating performance of a REIT
which, together with net income and cash flows provides investors with a basis
to evaluate the operating and cash flow performances of a REIT. FFO does not
represent net income or cash flows from operations as defined by GAAP. FFO does
not take into consideration scheduled principal payments on debt and capital
improvements. Accordingly, FFO is not necessarily a substitute for cash flow or
net income as a measure of liquidity or operating performance or ability to make
acquisitions and capital improvements or ability to pay distributions or debt
principal payments. Also, FFO as computed and disclosed by the Company may not
be comparable to FFO computed and disclosed by other REITs.
25
FFO for the Company is computed as follows:
Six Months Ended June 30,
-----------------------------------
2000 1999
------------------ ----------------
Net income allocable to common shareholders........................ $ 19,711,000 $ 18,835,000
Gain on disposition of real estate............................... (97,000) -
Depreciation and amortization.................................... 17,274,000 14,047,000
Minority interest in income - common units....................... 6,190,000 6,186,000
Less effects of straight-line rents.............................. (1,224,000) (1,607,000)
------------------ ----------------
Consolidated FFO allocable to common shareholders and minority
interests........................................................ 41,854,000 37,461,000
FFO allocated to common minority interest - common units........... (10,003,000) (9,010,000)
------------------ ----------------
FFO allocated to common shareholders............................... $ 31,851,000 $ 28,451,000
================== ================
Capital Expenditures: During the first half of 2000, the Company incurred
$4.7 million in maintenance capital expenditures, tenant improvements and
capitalized lease commissions. On a recurring annual basis, the Company expects
$0.90 to $1.20 per square foot in recurring capital expenditures (an aggregate
of $11 - $15 million based on square footage at June 30, 2000) and expects to
make approximately $1 million in renovations on a property in Southern
California during the remainder of 2000.
Distributions: The Company has elected and intends to qualify as a REIT for
federal income tax purposes. As a REIT, the Company must meet, among other
tests, sources of income, share ownership and certain asset tests. In addition,
the Company is not taxed on that portion of its taxable income which is
distributed to its shareholders provided that at least 95% of its taxable income
is so distributed to its shareholders prior to filing of the Company's tax
return.
The Board of Directors declared a quarterly dividend of $0.25 per common
share on July 27, 2000. In addition, the Board of Directors declared a quarterly
dividend of $0.578125 per share on the depositary shares each representing
1/1000 of a share of 9 1/4% Cumulative Preferred Stock, Series A. Distributions
are payable on September 30, 2000 to shareholders of record as of the close of
business on September 15, 2000.
26
ITEM 3. 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. At June 30, 2000, the Company's debt as a
percentage of shareholders' equity (based on book values) was 5.6%.
The Company's market risk sensitive instruments include mortgage notes
payable which totaled $31,362,000 at June 30, 2000. Substantially all of the
Company's mortgage notes payable bear interest at fixed rates. See Note 6 of the
Notes to Consolidated Financial Statements for terms, valuations and approximate
principal maturities of the mortgage notes payable as of June 30, 2000. Based on
borrowing rates currently available to the Company, the carrying amount of debt
approximates fair value.
27
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held an annual meeting of shareholders on May 9, 2000. Proxies
for the annual meeting were solicited pursuant to Regulation 14 under the
Securities Exchange Act of 1934. The annual meeting involved the following
matter:
Election of Directors
Number of Shares of Common Stock
--------------------------------
Name Voted For Withheld
---- --------- --------
Ronald L. Havner, Jr. 19,222,551 25,935
Harvey Lenkin 19,222,051 26,435
Vern O. Curtis 19,222,551 25,935
Arthur M. Friedman 19,222,551 25,935
James H. Kropp 19,222,051 26,435
Alan K. Pribble 19,222,551 25,935
Jack D. Steele 19,222,551 25,935
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Amended and Restated Agreement and Plan of Reorganization among
Registrant, American Office Park Properties, Inc. ("AOPP") and Public
Storage, Inc. ("PSI") dated as of December 17, 1997. Filed with
Registrant's Registration Statement No. 333-45405 and incorporated
herein by reference.
3.1 Restated Articles of Incorporation. Filed with Registrant's Registration
Statement No. 333-78627 and incorporated herein by reference.
3.2 Certificate of Determination of Preferences of 8 1/4% Series C
Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed
with Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1999 and incorporated herein by reference.
3.3 Certificate of Determination of Preferences of 8 7/8% Series X
Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed
with Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1999 and incorporated herein by reference.
3.4 Amendment to Certificate of Determination of Preferences of 8 7/8%
Series X Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1999 and incorporated herein by
reference.
3.5 Certificate of Determination of Preferences of 8 7/8% Series Y
Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed
herewith.
3.6 Restated Bylaws. Filed with Registrant's Current Report on Form 8-K
dated March 17, 1998 and incorporated herein by reference.
28
10.1 Amended Management Agreement between Storage Equities, Inc. and Public
Storage Commercial Properties Group, Inc. dated as of February 21, 1995.
Filed with PSI's Annual Report on Form 10-K for the year ended December
31, 1994 and incorporated herein by reference.
10.2 Registrant's 1997 Stock Option and Incentive Plan. Filed with
Registrant's Registration Statement No. 333-48313 and incorporated
herein by reference.
10.3 Agreement of Limited Partnership of PS Business Parks, L.P. Filed with
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1998 and incorporated herein by reference.
10.4 Merger and Contribution Agreement dated as of December 23, 1997 among
Acquiport Two Corporation, Acquiport Three Corporation, New York State
Common Retirement Fund, American Office Park Properties, L.P., AOPP and
AOPP Acquisition Corp. Three. Filed with Registrant's Registration
Statement No. 333-45405 and incorporated herein by reference.
10.5 Agreement Among Shareholders and Company dated as of December 23, 1997
among Acquiport Two Corporation, AOPP, American Office Park Properties,
L.P. and PSI. Filed with Registrant's Registration Statement No.
333-45405 and incorporated herein by reference.
10.6 Amendment to Agreement Among Shareholders and Company dated as of
January 21, 1998 among Acquiport Two Corporation, AOPP, American Office
Park Properties, L.P. and PSI. Filed with Registrant's Registration
Statement No. 333-45405 and incorporated herein by reference.
10.7 Non-Competition Agreement dated as of December 23, 1997 among PSI, AOPP,
American Office Park Properties, L.P. and Acquiport Two Corporation.
Filed with Registrant's Registration Statement No. 333-45405 and
incorporated herein by reference.
10.8 Employment Agreement between AOPP and Ronald L. Havner, Jr. dated as of
December 23, 1997. Filed with Registrant's Registration Statement No.
333-45405 and incorporated herein by reference.
10.9 Employment Agreement between Registrant and J. Michael Lynch dated as of
May 20, 1998. Filed with Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998 and incorporated herein by
reference.
10.10 Common Stock Purchase Agreement dated as of January 23, 1998 among AOPP
and the Investors signatory thereto. Filed with Registrant's
Registration Statement No. 333-45405 and incorporated herein by
reference.
10.11 Registration Rights Agreement dated as of January 30, 1998 among AOPP
and the Investors signatory thereto. Filed with Registrant's
Registration Statement No. 333-45405 and incorporated herein by
reference.
10.12 Registration Rights Agreement dated as of March 17, 1998 between
Registrant and Acquiport Two Corporation ("Acquiport Registration Rights
Agreement"). Filed with Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998 and incorporated herein by
reference.
10.13 Letter dated May 20, 1998 relating to Acquiport Registration Rights
Agreement. Filed with Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998 and incorporated herein by
reference.
10.14 Revolving Credit Agreement dated August 6, 1998 among PS Business Parks,
L.P., Wells Fargo Bank, National Association, as Agent, and the Lenders
named therein. Filed with Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998 and incorporated herein by
reference.
29
10.15 First Amendment to Revolving Credit Agreement dated as of August 19,
1999 among PS Business Parks, L.P., Wells Fargo Bank, National
Association, as Agent, and the Lenders named therein. Filed with
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1999 and incorporated herein by reference.
10.16 Form of Indemnity Agreement. Filed with Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1998 and incorporated
herein by reference.
10.17 Cost Sharing and Administrative Services Agreement dated as of November
16, 1995 by and among PSCC, Inc. and the owners listed therein. Filed
with Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998 and incorporated herein by reference.
10.18 Amendment to Cost Sharing and Administrative Services Agreement dated as
of January 2, 1997 by and among PSCC, Inc. and the owners listed
therein. Filed with Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998 and incorporated herein by
reference.
10.19 Accounts Payable and Payroll Disbursement Services Agreement dated as of
January 2, 1997 by and between PSCC, Inc. and American Office Park
Properties, L.P. Filed with Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1998 and incorporated herein by
reference.
10.20 Amendment to Agreement of Limited Partnership of PS Business Parks, L.P.
Relating to 8 7/8% Series B Cumulative Redeemable Preferred Units, dated
as of April 23, 1999. Filed with Registrant's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1999 and incorporated
herein by reference.
10.21 Amendment to Agreement of Limited Partnership of PS Business Parks, L.P.
Relating to 9 1/4% Series A Cumulative Redeemable Preferred Units, dated
as of April 30, 1999. Filed with Registrant's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1999 and incorporated
herein by reference.
10.22 Amendment to Agreement of Limited Partnership of PS Business Parks, L.P.
Relating to 8 1/4% Series C Cumulative Redeemable Preferred Units, dated
as of September 3, 1999. Filed with Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1999 and
incorporated herein by reference.
10.23 Amendment to Agreement of Limited Partnership of PS Business Parks, L.P.
Relating to 8 7/8% Series X Cumulative Redeemable Preferred Units, dated
as of September 7, 1999. Filed with Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1999 and
incorporated herein by reference.
10.24 Amendment to Agreement of Limited Partnership of PS Business Parks, L.P.
Relating to Additional 8 7/8% Series X Cumulative Redeemable Preferred
Units, dated as of September 23, 1999. Filed with Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1999
and incorporated herein by reference.
10.25 Amendment to Agreement of Limited Partnership of PS Business Parks L.P.
Relating to 8 7/8% Series Y Cumulative Redeemable Preferred Units, dated
as of July 12, 2000. Filed herewith.
11 Statement re: Computation of Earnings per Share. Filed herewith.
12 Statement re: Computation of Ratio of Earnings to Fixed Charges. Filed
herewith.
27 Financial Data Schedule. Filed herewith.
30
(b) Reports on Form 8-K
None.
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 11, 2000
PS BUSINESS PARKS, INC.
BY: /s/ Jack Corrigan
------------------------------------------
Jack Corrigan
Vice President and Chief Financial Officer