NEWS RELEASE EXHIBIT 99.1
PS Business Parks, Inc.
701 Western Avenue
P.O. Box 25050
Glendale, CA 91221-5050
www.psbusinessparks.com
- --------------------------------------------------------------------------------
For Release: Immediately
Date: July 12, 2002
Contact: Mr. Jack Corrigan
(818) 244-8080, Ext. 663
PS Business Parks, Inc. (AMEX - PSB) reported second quarter 2002 net income of
$9.5 million or $0.44 per share, vs. $10.9 million or $0.48 per share in the
prior year. PSB also reported FFO per share of $0.90 for the second quarter of
2002, an increase of 13.9% from $0.79 per share in the prior year. PSB'S "Same
Park" net operating income growth was 1.7% for the quarter.
GLENDALE, CALIFORNIA - PS Business Parks, Inc. (AMEX: PSB), reported operating
results for the second quarter ending June 30, 2002.
Net income allocable to common shareholders for the second quarter of 2002 was
$9.5 million or $0.44 per diluted share on revenues of $51.7 million compared to
$10.9 million or $0.48 per diluted share on revenues of $41.1 million for the
same period in 2001. Net income allocable to common shareholders for the six
months ended June 30, 2002 was $22.6 million or $1.04 per diluted share on
revenues of $102.6 million compared to net income allocable to common
shareholders of $21.1 million or $0.92 per diluted share on revenues of $80.6
million for the same period in 2001. Net income allocable to common shareholders
for the first six months of 2002 included recognizing a deferred gain on the
disposition of a property of $5.4 million or $0.19 per share, and the Company's
share of gains on disposition of two buildings in its joint venture of $148,000
or less than $0.01 per share.
Net income per diluted share for the second quarter of 2002 was $0.44 or $0.04
less than the same period in 2001. The net income per diluted share before the
recognition of the deferred gain on the disposition of a property for the first
six months of 2002 was $0.85 or $.07 less than the same period in 2001. The
decreases for both periods were 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 second quarter of 2002 were $26.2 million
or $0.90 per share compared to $23.7 million or $0.79 per share for the same
period in 2001. This represents an increase of 13.9% in FFO per share based on
29.1 million and 30.0 million weighted average shares outstanding during the
second quarter of 2002 and 2001, respectively. FFO for the six months ended June
30, 2002 was $51.3 million or $1.77 per share compared to $46.4 million or $1.54
per share for the same period in 2001. This represents an increase of 14.9% in
FFO per share based on 29.1 million and 30.2 million weighted average shares
outstanding during the six months ended June 30, 2002 and 2001 respectively. FFO
and FFO per share exclude the gain on disposition of real estate and marketable
securities, the Company's share of gains from dispositions in its joint venture
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 primarily to net operating income from
acquisitions completed during 2001 and a reduction in the number of the
Company's outstanding common shares. Acquisitions and the repurchase of shares
were financed primarily with existing cash, issuance of preferred stock, low
cost debt and retained cash. 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 June 30, 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)
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Three Months Ended
June 30,
--------------------------------------
2002 2001 Change
------------------ ------------------ --------------
Rental income (1).................................... $ 38,237,000 $ 37,510,000 1.9%
Cost of operations................................... 10,098,000 9,846,000 2.6%
------------------ ------------------ --------------
Net operating income................................. $ 28,139,000 $ 27,664,000 1.7%
================== ================== ==============
Gross margin (2)..................................... 73.6% 73.8% (0.2%)
Weighted average for period:
----------------------------
Occupancy........................................ 94.7% 96.0% (1.3%)
Annualized realized rent per occupied sq. ft.(3). $13.50 $13.06 3.4%
===================================================================================================================
Six Months Ended
June 30,
--------------------------------------
2002 2001 Change
------------------ ------------------ --------------
Rental income (1).................................... $ 75,885,000 $ 74,283,000 2.2%
Cost of operations................................... 19,951,000 19,613,000 1.7%
------------------ ------------------ --------------
Net operating income................................. $ 55,934,000 $ 54,670,000 2.3%
================== ================== ==============
Gross margin (2)..................................... 73.7% 73.6% 0.1%
Weighted average for period:
----------------------------
Occupancy........................................ 94.9% 96.3% (1.4%)
Annualized realized rent per occupied sq. ft.(3). $13.38 $12.90 3.7%
(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.
Total Portfolio Statistics
--------------------------
Three Months Ended
June 30,
--------------------------------------
2002 2001 Change
------------------ ------------------ --------------
Rental income (1) (4)................................ $ 49,846,000 $ 39,768,000 25.3%
Cost of operations (4)............................... 13,476,000 10,475,000 28.6%
------------------ ------------------ --------------
Net operating income................................. $ 36,370,000 $ 29,293,000 24.2%
================== ================== ==============
Gross margin (2)..................................... 73.0% 73.7% (0.7%)
Weighted average for period:
----------------------------
Square footage................................... 14,579,000 12,810,000 13.8%
Occupancy........................................ 94.3% 95.8% (1.5%)
Annualized realized rent per occupied sq. ft.(3). $14.50 $12.96 11.9%
===================================================================================================================
Six Months Ended
June 30,
--------------------------------------
2002 2001 Change
------------------ ------------------ --------------
Rental income (1) (4)................................ $ 98,763,000 $ 77,791,000 27.0%
Cost of operations (4)............................... 27,082,000 20,846,000 29.9%
------------------ ------------------ --------------
Net operating income................................. $ 71,681,000 $ 56,945,000 25.9%
================== ================== ==============
Gross margin (2)..................................... 72.6% 73.2% (0.6%)
Weighted average for period:
----------------------------
Square footage................................... 14,579,000 12,706,000 14.7%
Occupancy........................................ 94.5% 96.1% (1.6%)
Annualized realized rent per occupied sq. ft.(3). $14.35 $12.74 12.6%
(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 ($307,000 and $774,000 for the three and six months ended
June 30, 2002), cost of operations ($150,000 and $370,000 for the three
and six months ended June 30, 2002), square footage (238,000), and occupancy
(47%) of development properties have been excluded from Total Portfolio
Statistics.
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 projects total approximately
238,000 square feet and have an estimated aggregate cost of approximately $25
million. The office development consist 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. There were no new leases signed for this
facility during the six months ended June 30, 2002. The flex development consist
of two buildings totaling 141,000 square feet in the Chantilly submarket of
Northern Virginia was completed in the fourth quarter of 2000. The Company
leased an additional 24,000 square feet during the second quarter of 2002 at the
Northern Virginia development bringing the development to 78% leased. Both
properties are classified as operating as of June 30, 2002 and the Company has
ceased capitalizing interest.
Line of Credit
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During the fourth quarter of 2001, the Company borrowed $100 million on its line
of credit. During the second quarter, the Company used available cash to reduce
most of the outstanding balance on its line of credit to $10 million at June 30,
2002. The Company expects to payoff the balance during the third quarter and use
the line of credit to maintain the flexibility to take advantage of acquisition
opportunities.
Financial Condition
- -------------------
The Company continued to maintain financial strength and flexibility. The
following are the Company's key financial ratios with respect to its leverage at
June 30, 2002.
Ratio of FFO to fixed charges for the quarter (1)............ 22.9x
Ratio of FFO to fixed charges year-to-date (1)............... 21.7x
Ratio of FFO to fixed charges and preferred distributions
for the quarter and year-to-date (2).......................... 3.6x
Debt and preferred equity to total market capitalization
(based on the common stock price of $34.95 at June 30, 2002).. 31%
Available under line of credit at June 30, 2002............... $90 million
(1) Fixed charges include interest expense of $1,432,000 ($2,983,000
year-to-date) and capitalized interest of $144,000 ($288,000 year-to-date)
for the second quarter of 2002.
(2) Preferred distributions include amounts paid to preferred shareholders of
$3,933,000 ($7,550,000 year-to-date) and preferred unitholders in the
operating partnership of $4,413,000 ($8,825,000 year-to-date) for the
second quarter of 2002.
Joint Venture Property Dispositions
- -----------------------------------
Through a joint venture with GE Capital Corporation, the Company holds a 25%
equity interest in an industrial park in the City of Industry, submarket of Los
Angeles County. Initially the joint venture consisted of 14 buildings totaling
294,000 square feet. During the second quarter, the joint venture sold two of
the buildings totaling 47,000 square feet. The Company recognized a gain of
$148,000 on the disposition of the two buildings which is included in equity in
income of joint venture. The gain has been excluded from funds from operations.
The joint venture has a variable rate mortgage obligation of approximately $5.8
million which currently bears interest at 5.45%. The Company has guaranteed
repayment of the mortgage under certain conditions, but it is not included in
the Company's total liabilities.
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 $9.6 million, although there
can be no assurance that a sale will be consummated or such proceeds will be
realized.
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
June 30, 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 second 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 Monday, July 15, 2002 at 10:00 a.m. (PDT) to
discuss these results. The toll free number is 1-800-399-4409, the conference ID
is 4718130. An instant replay of the conference call will be available through
July 22, 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 June 30, 2002 At December 31, 2001
--------------------- ----------------------
Balance Sheet Data:
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Cash and cash equivalents......................................... $ 704,000 $ 3,076,000
Marketable securities............................................. $ 5,784,000 $ 9,134,000
Note receivable................................................... $ 200,000 $ 7,450,000
Properties held for disposition, net.............................. $ 9,629,000 $ 9,498,000
Real estate facilities, before accumulated depreciation........... $ 1,251,336,000 $ 1,237,691,000
Total assets...................................................... $ 1,146,403,000 $ 1,169,955,000
Total debt........................................................ $ 87,932,000 $ 165,145,000
Minority interest - common units.................................. $ 165,197,000 $ 162,141,000
Minority interest - preferred units............................... $ 197,750,000 $ 197,750,000
Preferred stock................................................... $ 170,988,000 $ 121,000,000
Common shareholders' equity....................................... $ 487,684,000 $ 478,731,000
Total common shares outstanding at period end..................... 21,549,000 21,540,000
===================== ======================
Total common shares outstanding at period end, assuming
conversion of all Operating Partnership units into common stock. 28,854,000 28,845,000
===================== ======================
PS BUSINESS PARKS, INC.
Selected Financial Data
For the Three Months Ended For the Six Months Ended
June 30, June 30,
----------------------------------- -----------------------------------
2002 2001 2002 2001
----------------- ---------------- ----------------- -----------------
Revenues:
Rental income..................................... $ 50,930,000 $ 40,281,000 $ 101,274,000 $ 78,674,000
Facility management fees primarily from affiliates 191,000 168,000 386,000 329,000
Business services................................. 28,000 76,000 69,000 233,000
Equity in income of joint venture................. 207,000 - 249,000 -
Interest and dividend income...................... 355,000 557,000 600,000 1,321,000
----------------- ---------------- ----------------- -----------------
51,711,000 41,082,000 102,578,000 80,557,000
----------------- ---------------- ----------------- -----------------
Expenses:
Cost of operations................................ 13,626,000 10,475,000 27,452,000 20,846,000
Cost of facility management....................... 45,000 37,000 90,000 73,000
Cost of business services......................... 112,000 129,000 288,000 313,000
Depreciation and amortization..................... 14,313,000 9,733,000 28,290,000 19,379,000
General and administrative........................ 1,068,000 992,000 2,204,000 2,120,000
Interest expense.................................. 1,432,000 157,000 2,983,000 394,000
----------------- ---------------- ----------------- -----------------
30,596,000 21,523,000 61,307,000 43,125,000
----------------- ---------------- ----------------- -----------------
Income before income from gain on disposition of
real estate, gain on investments and minority 21,115,000 19,559,000 41,271,000 37,432,000
interest........................................
Gain on disposition of real estate................ - - 5,366,000 -
Gain on investment in marketable securities....... - - 25,000 15,000
----------------- ---------------- ----------------- -----------------
Income before minority interest..................... 21,115,000 19,559,000 46,662,000 37,447,000
Minority interest in income - preferred units..... (4,413,000) (3,186,000) (8,825,000) (6,373,000)
Minority interest in income - common units........ (3,230,000) (3,543,000) (7,663,000) (6,779,000)
Net income.......................................... $ 13,472,000 $ 12,830,000 $ 30,174,000 $ 24,295,000
================= ================ ================= =================
Net income allocation:
Allocable to preferred shareholders.............. $ 3,933,000 $ 1,903,000 $ 7,550,000 $ 3,175,000
Allocable to common shareholders................. 9,539,000 10,927,000 22,624,000 21,120,000
----------------- ---------------- ----------------- -----------------
$ 13,472,000 $ 12,830,000 $ 30,174,000 $ 24,295,000
================= ================ ================= =================
Net income per common share - diluted: $ 0.44 $ 0.48 $ 1.04 $ 0.92
================= ================ ================= =================
Weighted average common shares outstanding -
diluted:.......................................... 21,799,000 22,679,000 21,774,000 22,885,000
================= ================ ================= =================
PS BUSINESS PARKS, INC.
Computation of Funda from Operations ("FFO")
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- -----------------------------------
2002 2001 2002 2001
---------------- ----------------- ---------------- ------------------
Net income allocable to common shareholders.............. $ 9,539,000 $ 10,927,000 $ 22,624,000 $ 21,120,000
Less: Gain on investment in marketable securities... - - (25,000) (15,000)
Less: Gain on disposition of real estate............ - - (5,366,000) -
Less: Equity income from sale of joint venture
properties......................................... (148,000) - (148,000) -
Less: Straight line rent adjustment................. (777,000) (513,000) (1,737,000) (883,000)
Plus: Depreciation and amortization................. 14,313,000 9,733,000 28,290,000 19,379,000
Plus: Depreciation from unconsolidated joint venture 20,000 - 40,000 -
Plus: Minority interest in income - common units.... 3,230,000 3,543,000 7,663,000 6,779,000
---------------- ----------------- ---------------- ------------------
Consolidated FFO allocable to common shareholders........ $ 26,177,000 $ 23,690,000 $ 51,341,000 $ 46,380,000
================ ================= ================ ==================
Computation of Diluted FFO per Common Share (1):
- ------------------------------------------------
Consolidated FFO allocable to common shareholders........ $ 26,177,000 $ 23,690,000 $ 51,341,000 $ 46,380,000
================ ================= ================ ==================
Weighted average common shares outstanding.......... 21,549,000 22,610,000 21,546,000 22,814,000
Weighted average common OP units outstanding........ 7,305,000 7,305,000 7,305,000 7,307,000
Dilutive effect of stock options.................... 250,000 69,000 228,000 71,000
---------------- ----------------- ---------------- ------------------
Weighted average common shares and OP units for purposes
of computing fully-diluted FFO per common share........ 29,104,000 29,984,000 29,079,000 30,192,000
================ ================= ================ ==================
Fully diluted FFO per common share ...................... $ 0.90 $ 0.79 $ 1.77 $ 1.54
================ ================= ================ ==================
Computation of Funds Available for Distribution
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("FAD") 2)
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Consolidated FFO allocable to common shareholders........ $ 26,177,000 $ 23,690,000 $ 51,341,000 $ 46,380,000
================ ================= ================ ==================
Less capitalized expenditures:
Maintenance capital expenditures.................... (1,776,000) (650,000) (2,618,000) (1,223,000)
Tenant improvements................................. (2,532,000) (709,000) (4,695,000) (1,638,000)
Capitalized lease commissions....................... (191,000) (588,000) (1,049,000) (979,000)
---------------- ----------------- ---------------- ------------------
Total capitalized expenditures........................... (4,499,000) (1,947,000) (8,362,000) (3,840,000)
---------------- ----------------- ---------------- ------------------
FAD...................................................... $ 21,678,000 $ 21,743,000 $ 42,979,000 $ 42,540,000
================ ================= ================ ==================
FAD per common share/OP unit............................. $ 0.74 $ 0.73 $ 1.48 $ 1.41
================ ================= ================ ==================
(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.