News Release Exhibit 99.1
PS Business Parks, Inc.
701 Western Avenue
P.O. Box 25050
Glendale, CA 91221-5050
www.psbusinessparks.com
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For Release: Immediately
Date: April 15, 2002
Contact: Mr. Jack Corrigan
(818) 244-8080, Ext. 663
PS Business Parks, Inc. (AMEX - PSB) reported first quarter 2002 net income of
$13.1 million or $0.60 per share, vs. $10.2 million or $0.44 per share in the
prior year. Net income in 2002 includes the gain on sale of real estate of $5.4
million or $0.19 per share. PSB also reported FFO per share of $0.87 for the
first quarter of 2002, an increase of 16.0% from $0.75 per share in the prior
year. PSB's "Same Park" net operating income growth was 2.0% for the quarter.
Glendale, California - PS Business Parks, Inc. (AMEX: PSB), reported operating
results for the first quarter ending March 31, 2002.
Net income allocable to common shareholders for the first quarter of 2002 was
$13.1 million or $0.60 per diluted share on revenues of $50.9 million compared
to $10.2 million or $0.44 per diluted share on revenues of $39.5 million for the
same period in 2001. Net income allocable to common shareholders in the first
quarter of 2002 included recognizing a deferred gain on the disposition of a
property of $5.4 million or $0.19 per common share.
Net income per diluted share before the recognition of the deferred gain on the
disposition of a property was $0.41 or $0.03 less than the same period in 2001.
The decrease is the result of an increase in depreciation expense as a result of
$305 million of property acquisitions in 2001. The increased depreciation
expense was partially offset by the net operating income from the acquired
properties net of financing costs.
Funds from operations ("FFO") for the first quarter of 2002 were $25.2 million
or $0.87 per share compared to $22.7 million or $0.75 per share for the same
period in 2001. This represents an increase of 16.0% in FFO per share based on
29.0 million and 30.4 million weighted average shares outstanding during the
first quarter of 2002 and 2001, respectively. FFO and FFO per share exclude the
gain on disposition of real estate and marketable securities and the accrual of
straight line rents, all of which are included in the calculation of net income.
The growth in FFO per share is due to net operating income from acquisitions and
developments completed during 2001 and a reduction in the number of the
Company's outstanding common shares. Acquisitions, developments and the
repurchase of shares were financed primarily with retained cash flows, existing
cash, low cost debt, and the issuance of preferred stock. These factors were
augmented by the performance of the Company's "Same Park" operations.
Property Operations
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In order to evaluate the performance of the Company's overall portfolio,
management analyzes the operating performance of a consistent group of
properties (12.0 million net rentable square feet). These properties in which
the Company currently has an ownership interest (herein referred to as the "Same
Park" facilities) have been owned and operated by the Company for the comparable
periods. The "Same Park" facilities represent approximately 81% of the square
footage of the Company's wholly-owned portfolio at March 31, 2002.
The following tables summarize the pre-depreciation historical operating results
of the "Same Park" facilities and the entire portfolio, excluding the effects of
accounting for rental income on a straight-line basis.
"Same Park" Facilities (12.0 million square feet)
Three Months Ended
March 31,
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2002 2001 Change
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Rental income (1)................. $ 37,648,000 $ 36,746,000 2.5%
Cost of operations................ 10,100,000 9,735,000 3.7%
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Net operating income.............. $ 27,548,000 $ 27,011,000 2.0%
============= ============= ======
Gross margin (2).................. 73.2% 73.5% (0.3%)
Weighted average for period:
Occupancy..................... 95.2% 96.5% (1.3%)
Annualized realized rent per
occupied sq. ft.(3)....... $13.14 $12.66 3.8%
................................................................................
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(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.
................................................................................
Total Portfolio Statistics
Three Months Ended
March 31,
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2002 2001 Change
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Rental income (1) (4)............. $ 48,917,000 $ 38,023,000 28.7%
Cost of operations (4)............ 13,607,000 10,371,000 31.2%
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Net operating income.............. $ 35,310,000 $ 27,652,000 27.7%
============= ============= =======
Gross margin (2).................. 72.2% 72.7% (0.5%)
Weighted average for period:
Square footage................ 14,578,000 12,600,000 15.7%
Occupancy..................... 94.8% 96.2% (1.5%)
Annualized realized rent per
occupied sq. ft.(3)....... $14.29 $12.55 13.7%
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(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.
(4) Rental income ($467,000), cost of operations ($220,000), square footage
(238,000), and occupancy (47%) of development properties have been excluded
from Total Portfolio Statistics in 2002.
Development Properties
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The Company has developed one office and one flex facility that are currently
shell complete and in the lease-up phase. The properties were developed using
the expertise of local development companies. The office development consisting
of two buildings totaling 97,000 square feet was completed in the second quarter
of 2001 in the Beaverton submarket of Portland, Oregon and is 27% leased. The
flex development consisting of two buildings totaling 141,000 square feet in the
Chantilly submarket of Northern Virginia was completed in the fourth quarter of
2000 and is 60% leased.
The projects total approximately 238,000 square feet and have an estimated
aggregate cost of approximately $25 million. The Company capitalized $144,000 of
interest expense for the three months ended March 31, 2002.
Preferred Stock Issuance
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During the first quarter, the Company completed a public offering of 2,000,000
depositary shares, each representing 1/1,000 of a share of the Company's 8 3/4%
Cumulative Preferred Stock, Series F, at $25.00 per share. Net proceeds totaling
$48.4 million were partially used to repay borrowings from an affiliate of $30
million. The remaining proceeds will be used for general corporate purposes.
Credit Facility Agreement
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During the first quarter, the Company entered into a seven year $50 million term
loan agreement with Fleet National Bank. The note bears interest at LIBOR plus
1.45% and is due on February 20, 2009. In addition, the Company incurred a
one-time facility fee of 0.35% or $175,000 for the facility. The Company expects
to use the proceeds of the loan to reduce the amount drawn on its line of credit
with Wells Fargo Bank, N.A.
Line of Credit
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During the fourth quarter of 2001, the Company borrowed $100 million on its line
of credit and committed to six-month LIBOR contracts that expire during the
second quarter. When these commitments expire, the Company expects to use
available cash to reduce the outstanding balance on its line of credit. As of
March 31, 2002, the Company had approximately $84 million of cash and cash
equivalents available for such purpose.
Financial Condition
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The Company continued to maintain financial strength and flexibility. The
following are the Company's key financial ratios with respect to its leverage
for the three months ended March 31, 2002.
Ratio of FFO to fixed charges (1)..................................... 20.5x
Ratio of FFO to fixed charges and preferred distributions (2)......... 3.6x
Debt and preferred equity to total market capitalization (based on
the common stock price of $34.75 at March 31, 2002).................. 35%
Pro forma debt and preferred equity to total market capitalization
(based on the common stock price of $34.75 at March 31, 2002) (3)..... 31%
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(1) Fixed charges include interest expense of $1,551,000 and capitalized
interest of $144,000.
(2) Preferred distributions include amounts paid to preferred shareholders of
$3,617,000 and preferred unitholders in the operating partnership of
$4,412,000.
(3) Pro forma reflects the available cash as of March 31, 2002 of $84,000,000
as if it had been used to reduce the outstanding balance on its line of
credit.
Property Dispositions
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As previously announced in the fourth quarter of 2001, the Company identified
two properties totaling 199,000 square feet that do not meet its ongoing
investment strategy. These properties are currently being marketed. The Company
expects net proceeds to approximate book value of $9.5 million, although there
can be no assurance that a sale will be consummated or such proceeds will be
realized.
Stock Repurchase Program
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The Company's Board of Directors has authorized the repurchase from time to time
of up to 4,500,000 shares of the Company's common stock on the open market or in
privately negotiated transactions. From January 1, 2002 through March 31, 2002,
the Company has not repurchased any common stock. Since the inception of the
program (March 2000), the Company has repurchased an aggregate total of
2,321,711 shares of common stock and 30,484 common units in its operating
partnership at an aggregate cost of approximately $61.4 million (average cost of
$26.10 per share/unit).
Company Information
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PSB is a self-advised and self-managed equity real estate investment trust that
acquires, develops, owns and operates commercial properties, primarily flex,
multi-tenant office and industrial space. The Company defines "flex" space as
buildings that are configured with a combination of office and warehouse space
and can be designed to fit an almost limitless number of uses (including office,
assembly, showroom, laboratory, light manufacturing and warehouse space). As of
March 31, 2002, PSB wholly-owned approximately 14.8 million net rentable square
feet of commercial space with approximately 3,300 customers located in 9 states,
concentrated primarily in California (4,673,000 sq. ft.), Texas (2,983,000 sq.
ft.), Oregon (1,973,000 sq. ft.), Virginia (2,621,000 sq. ft.) and Maryland
(1,769,000 sq. ft.).
Forward-Looking Statements
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When used within this press release, the words "expects," "believes,"
"anticipates," "should," "estimates," and similar expressions are intended to
identify "forward-looking statements." Such forward-looking statements involve
known and unknown risks, uncertainties, and other factors, which may cause the
actual results and performance of the Company to be materially different from
those expressed or implied in the forward-looking statements. Such factors
include the impact of competition from new and existing commercial facilities
which could impact rents and occupancy levels at the Company's facilities, the
Company's ability to evaluate, finance, and integrate acquired and developed
properties into the Company's existing operations; the Company's ability to
effectively compete in the markets that it does business in; the impact of the
regulatory environment as well as national, state, and local laws and
regulations including, without limitation, those governing Real Estate
Investment Trusts; the impact of general economic conditions upon rental rates
and occupancy levels at the Company's facilities; the availability of permanent
capital at attractive rates, the outlook and actions of Rating Agencies and
risks detailed from time to time in the Company's SEC reports, including
quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form
10-K.
Additional information about PS Business Parks, Inc. including more financial
analysis of the first quarter's operating results is available on the Internet.
The Company's web site is www.psbusinessparks.com.
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A conference call is scheduled for Tuesday, April 16, 2002 at 10:00 a.m. (PDT)
to discuss these results. The toll free number is 1-800-399-4409, the conference
ID is 3541230. An instant replay of the conference call will be available
through April 25, 2002 at 1-800-642-1687. The replay can also be accessed under
the "Investor Relations" section of our web site.
Additional financial data attached.
PS BUSINESS PARKS, INC.
Selected Financial Data
At March 31, 2002 At December 31, 2001
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Balance Sheet Data:
Cash and cash equivalents........................................ $ 84,098,000 $ 3,076,000
Marketable securities............................................ $ 5,865,000 $ 9,134,000
Note receivable.................................................. $ 200,000 $ 7,450,000
Properties held for disposition, net............................. $ 9,564,000 $ 9,498,000
Real estate facilities, before accumulated depreciation.......... $ 1,245,719,000 $ 1,237,691,000
Total assets..................................................... $ 1,236,280,000 $ 1,169,955,000
Total debt....................................................... $ 178,140,000 $ 165,145,000
Minority interest - common units................................. $ 164,085,000 $ 162,141,000
Minority interest - preferred units.............................. $ 197,750,000 $ 197,750,000
Perpetual preferred stock........................................ $ 171,000,000 $ 121,000,000
Common shareholders' equity...................................... $ 484,472,000 $ 478,731,000
Total common shares outstanding at period end.................... 21,550,000 21,540,000
================= ====================
Total common shares outstanding at period end, assuming
conversion of all Operating Partnership units
into common stock.............................................. 28,855,000 28,845,000
================= ====================
PS BUSINESS PARKS, INC.
Selected Financial Data
For the Three Months Ended
March 31,
--------------------------------
2002 2001
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Revenues:
Rental income..................................... $ 50,344,000 $ 38,393,000
Facility management fees primarily from affiliates 195,000 161,000
Business services................................. 41,000 157,000
Equity in income of joint venture................. 42,000 -
Interest income................................... 241,000 760,000
Dividend income................................... 4,000 4,000
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50,867,000 39,475,000
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Expenses:
Cost of operations................................ 13,826,000 10,371,000
Cost of facility management....................... 45,000 36,000
Cost of business services......................... 176,000 184,000
Depreciation and amortization..................... 13,978,000 9,646,000
General and administrative........................ 1,136,000 1,128,000
Interest expense.................................. 1,551,000 237,000
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30,712,000 21,602,000
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Income before income from gain on disposition of
real estate, gain on investments and minority
interest......................................... 20,155,000 17,873,000
Gain on disposition of real estate................ 5,366,000 -
Gain on investment in marketable securities....... 25,000 15,000
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Income before minority interest..................... 25,546,000 17,888,000
Minority interest in income - preferred units..... (4,412,000) (3,187,000)
Minority interest in income - common units........ (4,432,000) (3,236,000)
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Net income.......................................... $ 16,702,000 $ 11,465,000
============== ==============
Net income allocation:
Allocable to preferred shareholders.............. $ 3,617,000 $ 1,272,000
Allocable to common shareholders................. 13,085,000 10,193,000
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$ 16,702,000 $ 11,465,000
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Net income per common share - diluted: $ 0.60 $ 0.44
============== ==============
Weighted average common shares outstanding -
diluted: 21,736,000 23,097,000
============== ==============
PS BUSINESS PARKS, INC.
Computation of Funds from Operations ("FFO")
Three Months Ended
March 31,
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2002 2001
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Net income allocable to common shareholders............ $ 13,085,000 $ 10,193,000
Less: Gain on investment in marketable securities. (25,000) (15,000)
Less: Gain on disposition of real estate.......... (5,366,000) -
Depreciation and amortization...................... 13,978,000 9,646,000
Depreciation from unconsolidated joint venture..... 20,000 -
Minority interest in income - common units......... 4,432,000 3,236,000
Less: Straight line rent adjustment............... (960,000) (370,000)
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Consolidated FFO allocable to common shareholders...... $ 25,164,000 $ 22,690,000
============== ==============
Computation of Diluted FFO per Common Share (1):
Consolidated FFO allocable to common shareholders...... $ 25,164,000 $ 22,690,000
============== ==============
Weighted average common shares outstanding........ 21,543,000 23,021,000
Weighted average common OP units outstanding...... 7,305,000 7,309,000
Dilutive effect of stock options.................. 193,000 76,000
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Weighted average common shares and OP units for purposes
of computing fully-diluted FFO per common share...... 29,041,000 30,406,000
============== ==============
Fully diluted FFO per common share .................... $ 0.87 $ 0.75
Computation of Funds Available for Distribution ("FAD")
(2)
Consolidated FFO allocable to common shareholders...... $ 25,164,000 $ 22,690,000
============== ==============
Less capitalized expenditures:
Maintenance capital expenditures.................. (842,000) (573,000)
Tenant improvements............................... (2,163,000) (929,000)
Capitalized lease commissions..................... (858,000) (391,000)
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Total capitalized expenditures......................... (3,863,000) (1,893,000)
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FAD.................................................... $ 21,301,000 $ 20,797,000
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FAD per common share/OP unit........................... $ 0.73 $ 0.68
============== ==============
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(1) Funds from operations ("FFO") is a term defined by the National Association
of Real Estate Investment Trusts, Inc. ("NAREIT") by which real estate
investment trusts ("REITs") may be compared. It is generally defined as net
income before depreciation and extraordinary items. FFO computations do not
factor out the REIT's requirement to make either capital expenditures or
principal payments on debt. The Company excludes straight line rent
adjustments, gains/losses on disposition of real estate and gains/losses on
sale of marketable securities to more accurately reflect cash flow from
real estate operations. Other REITs may not make these adjustments in
computing FFO.
(2) Funds available for distribution ("FAD") is computed by deducting recurring
capital expenditures, tenant improvements and capitalized leasing
commissions from FFO.