UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________

FORM 8-K

____________________

Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 27, 2014

____________________

PS BUSINESS PARKS, INC.

(Exact name of registrant as specified in its charter)

____________________

California

(State or Other Jurisdiction of Incorporation)

1-10709

95-4300881

(Commission File Number)

(I.R.S. Employer Identification Number)

 

701 Western Avenue, Glendale, California

91201-2349

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (818) 244-8080

N/A

(Former name or former address, if changed since last report)

____________________

Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

Item 2.02.  Results of Operations and Financial Conditions

On October 27, 2014, PS Business Parks reported its results of operations and financial condition for the quarter ended September 30, 2014 and declares special cash dividend of $2.75 per share. The full text of the press release is furnished as exhibit 99.1 to this Current Report on Form 8-K. The information in Item 2.02 and Exhibit 99.1 are being “furnished” in accordance with General Instruction B.2 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01.   Financial Statements and Exhibits

(d) Exhibits

Exhibit 99.1:  Press release dated October 27, 2014.


 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PS BUSINESS PARKS, INC.

Date:  October 27, 2014

By:

/s/ Edward A. Stokx

 

Edward A. Stokx

 

Chief Financial Officer


 

INDEX TO EXHIBITS

 

 

 

Exhibit No.

 

Description

 

 

99.1

 

PS Business Parks, Inc. Earnings Press Release dated October 27, 2014.

 




News Release

PS Business Parks, Inc.

701 Western Avenue 

Glendale,  CA 91201-2349 

www.psbusinessparks.com

 

 

 

For Release:

Immediately

Date:

October 27, 2014

Contact:

Edward A. Stokx

 

(818) 244-8080, Ext. 1649

 

PS Business Parks, Inc. Reports Results for the Third Quarter Ended September 30, 2014 and Declares Special Cash Dividend of $2.75 Per Share

GLENDALE, California  PS Business Parks, Inc. (NYSE:PSB) reported operating results for the third quarter ended September 30, 2014.

Funds from operations (“FFO”) were $43.2 million, or $1.26 per share, as adjusted, for the three months ended September 30, 2014, an increase of $3.7 million, or 1.6% per share, from the three months ended September 30, 2013 of $39.5 million, or $1.24 per share, as adjusted. FFO was $128.4 million, or $3.74 per share, as adjusted, for the nine months ended September 30, 2014,  an increase of $10.8 million, or 1.4% per share, from the nine months ended September 30, 2013 of $117.5 million, or $3.69 per share, as adjusted.  The three and nine month increases in FFO were primarily the result of an increase in net operating income (“NOI”).  Reported FFO per share for the three months ended September 30, 2014 compared to the same period in 2013 was flat, while the nine months ended September 30, 2014 decreased 0.3% compared to the same period in 2013. Both adjusted and reported FFO per share were impacted by an increase in shares outstanding as a result of the November, 2013 common equity offering.

In order to provide meaningful period-to-period comparisons of FFO derived from the Company’s ongoing business operations, the following table reconciles reported FFO to adjusted FFO, which excludes Long-Term Equity Incentive Plan (“LTEIP”) amortization due to the change in plans and acquisition transaction costs for the three and nine months ended September 30, 2014 and 2013: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

 

 

For the Nine Months

 

 

 

Ended September 30,

 

 

 

Ended September 30,

 

 

 

2014

 

2013

 

Change

 

2014

 

2013

 

Change

FFO per share, as reported

$

1.20 

 

$

1.20 

 

 

$

3.58 

 

$

3.59 

 

(0.3%)

LTEIP amortization

 

0.05 

 

 

0.03 

 

 

 

 

0.15 

 

 

0.09 

 

 

Acquisition transaction costs

 

0.01 

 

 

0.01 

 

 

 

 

0.01 

 

 

0.01 

 

 

FFO per share, as adjusted

$

1.26 

 

$

1.24 

 

1.6%

 

$

3.74 

 

$

3.69 

 

1.4%

 

Noted in the table above are the following adjustments to reconcile adjusted FFO to reported FFO.  In March, 2014, the Company put in place a new LTEIP and recorded $1.9 million and $5.1 million of amortization for the three and nine months ended September 30, 2014 compared to $1.0 million and $3.0 million for the three and nine months ended September 30, 2013 related to the previous LTEIP.  Acquisition transaction costs were $124,000 and $153,000 for the three and nine months ended September 30, 2014 and 2013, respectively.

Same Park rental income increased $1.5 million, or 1.8%, and $6.5 million, or 2.6%, for the three and nine months ended September 30, 2014 compared to the same periods in 2013 as a result of an increase in occupancy.  Non-Same Park rental income increased $4.2 million and $12.8 million for the three and nine months ended September 30, 2014 compared to the same periods in 2013 due to a combination of an increase in occupancy and the acquisition of additional parks during the latter half of 2013.  

Same Park operating expenses increased $901,000, or 3.3%, from $27.1 million for the three months ended September 30, 2013 to $28.0 million for the three months ended September 30, 2014 primarily as a result of higher 

1

 


 

repairs and maintenance and utility costsSame Park operating expenses increased $3.6 million, or 4.5%, from $80.2 million for the nine months ended September 30, 2013 to $83.8 million for the nine months ended September 30, 2014 primarily as a  result of a $1.6 million increase in snow removal costs due to the severe winter in Virginia and Maryland.

Net income allocable to common shareholders increased $2.3 million, or 25.2%, from $9.0 million, or $0.37 per share, for the three months ended September 30, 2013 to $11.3 million, or $0.42 per share, for the three months ended September 30, 2014. Net income allocable to common shareholders increased $4.8 million, or 18.2%, from $26.3 million, or $1.07 per share, for the nine months ended September 30, 2013 to $31.0 million, or $1.15 per share, for the nine months ended September 30, 2014.  These increases were due to an increase in NOI combined with a decrease in interest expense, partially offset by an increase in depreciation expense. 

All per share amounts noted above are presented on a diluted basis.

Property Operations

To evaluate the performance of the Company’s portfolio over comparable periods, management analyzes the operating performance of properties owned and operated throughout both periods (herein referred to as “Same Park”).  The Same Park portfolio includes all operating properties owned or acquired prior to January 1, 2012 (excludes the 1.2 million square feet of assets sold subsequent to September 30, 2014). Operating properties that the Company acquired subsequent to January 1, 2012 are referred to as “Non-Same Park.” For the three and nine months ended September 30, 2014 and 2013, the Same Park facilities constitute 25.8 million rentable square feet, representing 89.5% of the 28.8 million square feet in the Company’s portfolio as of September 30, 2014. 

The following table presents the operating results of the Company’s properties for the three and nine months ended September 30, 2014 and 2013 in addition to other income and expense items affecting income from continuing operations (unaudited, in thousands, except per square foot amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

 

 

For the Nine Months

 

 

 

Ended September 30,

 

 

 

Ended September 30,

 

 

 

2014

 

2013

 

Change

 

2014

 

2013

 

Change

Rental income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Park (25.8 million rentable square feet)

$

84,994 

 

$

83,524 

 

1.8% 

 

$

254,823 

 

$

248,333 

 

2.6% 

Non-Same Park (3.0 million rentable square feet)

 

6,044 

 

 

1,807 

 

234.5% 

 

 

17,074 

 

 

4,288 

 

298.2% 

Total rental income

 

91,038 

 

 

85,331 

 

6.7% 

 

 

271,897 

 

 

252,621 

 

7.6% 

Cost of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Park

 

28,016 

 

 

27,115 

 

3.3% 

 

 

83,786 

 

 

80,213 

 

4.5% 

Non-Same Park

 

2,688 

 

 

795 

 

238.1% 

 

 

7,369 

 

 

1,908 

 

286.2% 

Total cost of operations

 

30,704 

 

 

27,910 

 

10.0% 

 

 

91,155 

 

 

82,121 

 

11.0% 

Net operating income (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Park

 

56,978 

 

 

56,409 

 

1.0% 

 

 

171,037 

 

 

168,120 

 

1.7% 

Non-Same Park

 

3,356 

 

 

1,012 

 

231.6% 

 

 

9,705 

 

 

2,380 

 

307.8% 

Total net operating income

 

60,334 

 

 

57,421 

 

5.1% 

 

 

180,742 

 

 

170,500 

 

6.0% 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income from sold assets (2)

 

2,837 

 

 

2,793 

 

1.6% 

 

 

7,942 

 

 

8,260 

 

(3.8%)

LTEIP amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of operations

 

(646)

 

 

(343)

 

88.3% 

 

 

(1,831)

 

 

(943)

 

94.2% 

General and administrative

 

(1,250)

 

 

(681)

 

83.6% 

 

 

(3,297)

 

 

(2,044)

 

61.3% 

Facility management fees

 

164 

 

 

162 

 

1.2% 

 

 

495 

 

 

477 

 

3.8% 

Other income and expense

 

(3,322)

 

 

(3,954)

 

(16.0%)

 

 

(9,944)

 

 

(12,391)

 

(19.7%)

Depreciation and amortization

 

(26,811)

 

 

(26,597)

 

0.8% 

 

 

(83,547)

 

 

(80,187)

 

4.2% 

General and administrative

 

(1,828)

 

 

(1,954)

 

(6.4%)

 

 

(5,631)

 

 

(5,360)

 

5.1% 

Income from continuing operations

$

29,478 

 

$

26,847 

 

9.8% 

 

$

84,929 

 

$

78,312 

 

8.4% 

Same Park gross margin (3)

 

67.0% 

 

 

67.5% 

 

(0.7%)

 

 

67.1% 

 

 

67.7% 

 

(0.9%)

Same Park weighted average occupancy

 

92.8% 

 

 

91.4% 

 

1.5% 

 

 

92.6% 

 

 

91.1% 

 

1.6% 

Non-Same Park weighted average occupancy

 

77.5% 

 

 

69.0% 

 

12.3% 

 

 

76.9% 

 

 

62.8% 

 

22.5% 

Same Park annualized realized rent per square foot (4)

$

14.19 

 

$

14.16 

 

0.2% 

 

$

14.22 

 

$

14.08 

 

1.0% 

 

(1)NOI is an important measurement in the commercial real estate industry for determining the value of the real estate generating the NOI. The Company’s calculation of NOI may not be comparable to those of other companies and should not be used as an alternative to measures of performance in accordance with generally accepted accounting principles (“GAAP”).

2

 


 

(2)The Company sold two business parks located in Beaverton, Oregon, on October 1, 2014. These assets generated rental income of $4.6 million and $13.0 million for the three and nine months ended September 30, 2014, respectively, compared to $4.4 million and $13.2 million for the three and nine months ended September 30, 2013. Cost of operations for the sold assets was $1.8 million and $5.1 million for the three and nine months ended September 30, 2014, respectively, compared to $1.6 million and $4.9 million for the three and nine months ended September 30, 2013.

(3)Computed by dividing Same Park NOI by Same Park rental income.

(4)Represents the annualized Same Park rental income earned per occupied square foot. 

 

Property Acquisitions

 

On August 21, 2014, the Company acquired five multi-tenant flex buildings adjacent to its existing Springlake Business Center in the Valwood submarket of Dallas, Texas, for $5.1 million. The buildings, which comprise 145,000 square feet, were 35.4% leased at the time of acquisition.

 

As previously announced, during the third quarter of 2014, the Company acquired a 19,000 square foot  multi-tenant flex building in Dallas, Texas, for $1.1 million and a 149,000 square foot building in Miami, Florida, for $12.7 million.

Financial Condition

The following are key financial ratios with respect to the Company’s leverage as of and for the three months ended September 30, 2014: 

 

 

 

Ratio of FFO to fixed charges (1)

16.4x

 

 

Ratio of FFO to fixed charges and preferred distributions (1)

3.2x

 

 

Debt and preferred equity to total market capitalization (based on

 

common stock price of $76.14 at September 30, 2014)

32.3%

 

 

Available balance under the $250.0 million unsecured credit facility at September 30, 2014

$250.0 million

 

 

(1)Fixed charges include interest expense and capitalized interest of $3.6 million.

Regular and Special Distributions Declared

On October 27, 2014, the Board of Directors declared a regular quarterly dividend of $0.50 per common share. As a result of the net taxable gains generated by the sale of two business parks in Beaverton, Oregon, on October 1, 2014 as well as additional anticipated asset sales, the Board of Directors declared a one-time special cash dividend of $2.75 per common share. Combined, the regular and special dividend will result in a total dividend of $3.25 per common share. The dividends are payable on December 30, 2014 to shareholders of record on December 15, 2014.

 

Distributions were also declared on the various series of depositary shares, each representing 1/1,000 of a share of preferred stock listed below.

 

 

 

 

 

 

Series

Dividend Rate

Dividend Declared

 

 

 

Series R

6.875%

$0.429688

Series S

6.450%

$0.403125

Series T

6.000%

$0.375000

Series U

5.750%

$0.359375

Series V

5.700%

$0.356250

 

Distributions are payable on December 30, 2014 to shareholders of record on December 15, 2014.

 

3

 


 

Company Information

PS Business Parks, Inc., a member of the S&P SmallCap 600, is a self-advised and self-managed real estate investment trust (“REIT”) that acquires, develops, owns and operates commercial properties, primarily multi-tenant flex, office and industrial space. The Company defines “flex” space as buildings that are configured with a combination of office and warehouse space and can be designed to fit a number of uses (including office, assembly, showroom, laboratory, light manufacturing and warehouse space). As of October 1, 2014,  the Company wholly owned 28.8 million rentable square feet with approximately 5,140 customers located in eight states, concentrated in California  (11.5 million sq. ft.), Texas  (4.8 million sq. ft.), Virginia  (4.0 million sq. ft.), Florida  (3.9 million sq. ft.),  Maryland  (2.3 million sq. ft.), Washington  (1.5 million sq. ft.), Arizona  (0.7 million sq. ft.) and Oregon (0.1 million sq. ft.).

Forward-Looking Statements

When used within this press release, the words “may,” “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” “intends” and similar expressions are intended to identify “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results and performance of the Company to be materially different from those expressed or implied in the forward-looking statements. Such factors include the impact of competition from new and existing commercial facilities which could impact rents and occupancy levels at the 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 REITs; 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 third quarter operating results, is available on the Internet. The Company’s website is www.psbusinessparks.com.

A conference call is scheduled for Tuesday,  October 28, 2014, at 10:00 a.m. (PDT) to discuss the third quarter results. The toll free number is (888) 299-3246; the conference ID is 19314826. The call will also be available via a live webcast on the Company’s website. A replay of the conference call will be available through November 4, 2014 at (855) 859-2056. A replay of the conference call will also be available on the Company’s website.

Additional financial data attached.

4

 


 

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

2014

 

2013

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

57,535 

 

$

31,481 

 

 

 

 

 

 

Real estate facilities, at cost:

 

 

 

 

 

Land

 

789,217 

 

 

781,541 

Buildings and improvements

 

2,194,493 

 

 

2,152,178 

 

 

2,983,710 

 

 

2,933,719 

Accumulated depreciation

 

(990,782)

 

 

(918,202)

 

 

1,992,928 

 

 

2,015,517 

Properties held for disposition, net

 

123,011 

 

 

124,883 

Land and building held for development

 

24,028 

 

 

22,253 

 

 

2,139,967 

 

 

2,162,653 

Rent receivable

 

3,581 

 

 

5,248 

Deferred rent receivable

 

28,036 

 

 

25,903 

Other assets

 

12,891 

 

 

13,274 

 

 

 

 

 

 

Total assets

$

2,242,010 

 

$

2,238,559 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

Accrued and other liabilities

$

80,454 

 

$

73,919 

Mortgage note payable

 

250,000 

 

 

250,000 

Total liabilities

 

330,454 

 

 

323,919 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

PS Business Parks, Inc.’s shareholders’ equity:

 

 

 

 

 

Preferred stock, $0.01 par value, 50,000,000 shares authorized,

 

 

 

 

 

39,800 shares issued and outstanding at

 

 

 

 

 

September 30, 2014 and December 31, 2013

 

995,000 

 

 

995,000 

Common stock, $0.01 par value, 100,000,000 shares authorized,

 

 

 

 

 

26,919,161 and 26,849,822 shares issued and outstanding at

 

 

 

 

 

September 30, 2014 and December 31, 2013, respectively

 

268 

 

 

267 

Paid-in capital

 

706,503 

 

 

699,314 

Cumulative net income

 

1,147,474 

 

 

1,070,975 

Cumulative distributions

 

(1,133,332)

 

 

(1,047,615)

Total PS Business Parks, Inc.’s shareholders’ equity

 

1,715,913 

 

 

1,717,941 

 

 

 

 

 

 

Noncontrolling interests:

 

 

 

 

 

Common units

 

195,643 

 

 

196,699 

Total noncontrolling interests

 

195,643 

 

 

196,699 

Total equity

 

1,911,556 

 

 

1,914,640 

 

 

 

 

 

 

Total liabilities and equity

$

2,242,010 

 

$

2,238,559 

 

 

5

 


 

 

PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

For the Nine Months

 

Ended September 30,

 

Ended September 30,

 

2014

 

2013

 

2014

 

2013

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Rental income

$

95,627 

 

$

89,772 

 

$

284,934 

 

$

265,822 

Facility management fees

 

164 

 

 

162 

 

 

495 

 

 

477 

Total operating revenues

 

95,791 

 

 

89,934 

 

 

285,429 

 

 

266,299 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of operations

 

33,102 

 

 

29,901 

 

 

98,081 

 

 

88,005 

Depreciation and amortization

 

26,811 

 

 

26,597 

 

 

83,547 

 

 

80,187 

General and administrative

 

3,078 

 

 

2,635 

 

 

8,928 

 

 

7,404 

Total operating expenses

 

62,991 

 

 

59,133 

 

 

190,556 

 

 

175,596 

Other income and (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

90 

 

 

63 

 

 

247 

 

 

175 

Interest and other expense

 

(3,412)

 

 

(4,017)

 

 

(10,191)

 

 

(12,566)

Total other income and (expense)

 

(3,322)

 

 

(3,954)

 

 

(9,944)

 

 

(12,391)

Income from continuing operations

 

29,478 

 

 

26,847 

 

 

84,929 

 

 

78,312 

Net income

$

29,478 

 

$

26,847 

 

$

84,929 

 

$

78,312 

 

 

 

 

 

 

 

 

 

 

 

 

Net income allocation:

 

 

 

 

 

 

 

 

 

 

 

Net income allocable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests — common units

$

3,058 

 

$

2,696 

 

$

8,430 

 

$

7,875 

Total net income allocable to noncontrolling interests

 

3,058 

 

 

2,696 

 

 

8,430 

 

 

7,875 

Net income allocable to PS Business Parks, Inc.:

 

 

 

 

 

 

 

 

 

 

 

Preferred shareholders

 

15,122 

 

 

15,122 

 

 

45,366 

 

 

44,094 

Restricted stock unit holders

 

30 

 

 

28 

 

 

99 

 

 

91 

Common shareholders

 

11,268 

 

 

9,001 

 

 

31,034 

 

 

26,252 

Total net income allocable to PS Business Parks, Inc.

 

26,420 

 

 

24,151 

 

 

76,499 

 

 

70,437 

 

$

29,478 

 

$

26,847 

 

$

84,929 

 

$

78,312 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.42 

 

$

0.37 

 

$

1.15 

 

$

1.08 

Diluted

$

0.42 

 

$

0.37 

 

$

1.15 

 

$

1.07 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

26,914 

 

 

24,386 

 

 

26,892 

 

 

24,351 

Diluted

 

27,003 

 

 

24,472 

 

 

26,988 

 

 

24,452 

 

 

 

 

 

 

 

 

6

 


 

PS BUSINESS PARKS, INC.

Computation of Diluted Funds from Operations and Funds Available for Distribution

(Unaudited, in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

For the Nine Months

 

Ended September 30,

 

Ended September 30,

 

2014

 

2013

 

2014

 

2013

Computation of Diluted Funds From Operations (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income allocable to common shareholders

$

11,268 

 

$

9,001 

 

$

31,034 

 

$

26,252 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

26,811 

 

 

26,597 

 

 

83,547 

 

 

80,187 

Net income allocable to noncontrolling

 

 

 

 

 

 

 

 

 

 

 

interests — common units

 

3,058 

 

 

2,696 

 

 

8,430 

 

 

7,875 

Net income allocable to restricted stock unit holders

 

30 

 

 

28 

 

 

99 

 

 

91 

FFO allocable to common and dilutive shares

$

41,167 

 

$

38,322 

 

$

123,110 

 

$

114,405 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

26,914 

 

 

24,386 

 

 

26,892 

 

 

24,351 

Weighted average common OP units outstanding

 

7,305 

 

 

7,305 

 

 

7,305 

 

 

7,305 

Weighted average restricted stock units outstanding

 

55 

 

 

92 

 

 

54 

 

 

95 

Weighted average common share equivalents outstanding

 

89 

 

 

86 

 

 

96 

 

 

101 

Total common and dilutive shares

 

34,363 

 

 

31,869 

 

 

34,347 

 

 

31,852 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share — diluted

$

0.42 

 

$

0.37 

 

$

1.15 

 

$

1.07 

Depreciation and amortization (2)

 

0.78 

 

 

0.83 

 

 

2.43 

 

 

2.52 

FFO per common and dilutive share, as reported (2)

$

1.20 

 

$

1.20 

 

$

3.58 

 

$

3.59 

 

 

 

 

 

 

 

 

 

 

 

 

Computation of Funds Available for Distribution ("FAD") (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO allocable to common and dilutive shares

$

41,167 

 

$

38,322 

 

$

123,110 

 

$

114,405 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Recurring capital improvements

 

(3,713)

 

 

(4,590)

 

 

(7,494)

 

 

(8,194)

Tenant improvements

 

(8,196)

 

 

(8,804)

 

 

(19,733)

 

 

(21,757)

Lease commissions

 

(3,136)

 

 

(1,646)

 

 

(8,280)

 

 

(6,106)

Straight-line rent

 

(560)

 

 

(355)

 

 

(2,244)

 

 

(1,219)

Non-cash stock compensation expense

 

322 

 

 

363 

 

 

988 

 

 

1,028 

Long-term equity incentive amortization

 

1,896 

 

 

1,024 

 

 

5,128 

 

 

2,987 

In-place lease adjustment

 

(231)

 

 

27 

 

 

(672)

 

 

148 

Tenant improvement reimbursements, net of lease incentives

 

(356)

 

 

(370)

 

 

(1,195)

 

 

(995)

Capitalized interest

 

(240)

 

 

 

 

(697)

 

 

FAD

$

26,953 

 

$

23,971 

 

$

88,911 

 

$

80,297 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to common and dilutive shares

$

17,141 

 

$

13,977 

 

$

51,408 

 

$

41,891 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution payout ratio

 

63.6% 

 

 

58.3% 

 

 

57.8% 

 

 

52.2% 

 

(1)FFO is computed in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”).  The White Paper defines FFO as net income, computed in accordance with GAAP, before depreciation, amortization,  gains or losses on asset dispositions, net income allocable to noncontrolling interests — common units, net income allocable to restricted stock unit holders, impairment charges and nonrecurring items.  FFO should be analyzed in conjunction with net income.  However, FFO should not be viewed as a substitute for net income as a measure of operating performance or liquidity as it does not reflect depreciation and amortization costs or the level of capital expenditure and leasing costs necessary to maintain the operating performance of the Company’s properties, which are significant economic costs and could materially impact the Company’s results from operations.  Other REITs may use different methods for calculating FFO and, accordingly, the Company’s FFO may not be comparable to other real estate companies.

 

(2)Per share amounts are computed using additional dilutive shares related to noncontrolling interests and restricted stock units.

(3)FAD is computed by adjusting consolidated FFO for recurring capital improvements, which the Company defines as those costs incurred to maintain the assets’ value, tenant improvements, lease commissions, straight-line rent, stock compensation expense, in-place lease adjustment, amortization of lease incentives and tenant improvement reimbursements, capitalized interest and the effect of redemption/repurchase of preferred equity.  Like FFO, the Company considers FAD to be a useful measure for investors to evaluate the operations and cash flows of a REIT.  FAD does not represent net income or cash flow from operations as defined by GAAP.

7

 


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