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Form 8-K PS BUSINESS PARKS INC/CA For: Jul 28

July 29, 2015 6:02 AM EDT

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): July 28, 2015

____________________

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 July 28, 2015, PS Business Parks reported its results of operations and financial condition for the quarter ended June 30, 2015 and increases quarterly common dividend by 20.0% to $0.60 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 July 28, 2015.


 

 

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: July 28, 2015

 

 

 

 

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 and Increases Quarterly Common Dividend by 20.0% to $0.60 per share dated July 28, 2015.

 


News Release

PS Business Parks, Inc.

701 Western Avenue 

Glendale,  CA 91201-2349 

psbusinessparks.com

 

 

 

 

 

For Release:

Immediately

 

Date:

July 28, 2015

 

Contact:

Edward A. Stokx

 

 

(818) 244-8080, Ext. 1649

PS Business Parks, Inc. Reports Results for the Second Quarter Ended June 30, 2015 and Increases Quarterly Common Dividend by 20.0% to $0.60 Per Share

GLENDALE, CaliforniaPS Business Parks, Inc. (NYSE: PSB) reported operating results for the second quarter ended June 30, 2015.

Funds from operations (“FFO”) were $41.2 million, or $1.20 per share for the three months ended June 30, 2015, an increase of $389,000 from the three months ended June 30, 2014 of $40.8 million, or $1.19 per share.  FFO was $80.2 million, or $2.33 per share for the six months ended June 30, 2015, a decrease of $1.8 million from the six months ended June 30, 2014 of $81.9 million, or $2.39 per share. The three month increase in FFO was primarily the result of a  $4.4 million increase in net operating income (“NOI”) resulting from both the Same Park and Non-Same Park portfoliosThese increases were partially offset by a decrease in NOI from assets sold.  The six month decrease in FFO was  due to a decrease in NOI from assets sold partially offset by higher NOI from both the Same Park and Non-Same Park portfolios.  

Same Park NOI increased $2.4 million, or 4.2%, for the three months ended June 30, 2015 and $4.0 million, or 3.6%, for the six months ended June 30, 2015 compared to the same periods in 2014.  Same Park rental income increased $3.0 million, or 3.6%,  from $83.0 million for the three months ended June 30, 2014 to $86.0 million for the three months ended June 30, 2015.  Same Park rental income increased $4.2 million, or 2.5%, from $167.0 million for the six months ended June 30, 2014 to $171.2 million for the six months ended June 30, 2015.  The three and six month increases were primarily a result of increases in occupancy and rental rates.

Non-Same Park NOI increased $2.0 million, or 121.5%, for the three months ended June 30, 2015 and $3.1 million, or 78.5%, for the six months ended June 30, 2015 compared to the same periods in 2014 as a result of an increase in occupancy and the acquisition of additional parks during the latter half of 2014

Net income allocable to common shareholders increased $1.3 million, or 13.3%, from $9.8 million, or $0.36 per share, for the three months ended June 30, 2014 to $11.1 million, or $0.41 per share, for the three months ended June 30, 2015. The increase was primarily the result of a decrease in depreciation of $1.3 million.  Net income allocable to common shareholders increased $11.1 million, or 56.3%, from $19.8 million, or $0.73 per share, for the six months ended June 30, 2014 to $30.9 million, or $1.14 per share, for the six months ended June 30, 2015.  The increase was primarily due to the gain on sale of real estate facilities of $12.5 million and an increase in NOI from both the Same Park and Non-Same Park portfolios of $7.2 million offset by a decrease in NOI from assets sold.

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, 2013  (excluding 390,000 square feet of assets held for sale as of June 30, 2015). Operating properties that the Company acquired subsequent to January 1, 2013 are referred to as “Non-Same Park.” For the three and six months ended June 30, 2015 and 2014, the Same Park facilities constitute 25.8 million rentable square feet, representing 90.8% of the 28.4 million square feet in the Company’s total portfolio as of June 30, 2015. 

1

 


 

The following table presents the operating results of the Company’s properties for the three and six months ended June 30, 2015 and 2014 in addition to other income and expense items affecting net income (unaudited, in thousands, except per square foot amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

 

 

For the Six Months

 

 

 

Ended June 30,

 

 

 

Ended June 30,

 

 

 

2015

 

2014

 

Change

 

2015

 

2014

 

Change

Rental income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Park (25.8 million rentable square feet)

$

85,970 

 

$

83,018 

 

3.6% 

 

$

171,189 

 

$

167,039 

 

2.5% 

Non-Same Park (2.2 million rentable square feet)

 

6,000 

 

 

3,544 

 

69.3% 

 

 

11,708 

 

 

7,494 

 

56.2% 

Total rental income

 

91,970 

 

 

86,562 

 

6.2% 

 

 

182,897 

 

 

174,533 

 

4.8% 

Cost of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Park

 

26,585 

 

 

26,028 

 

2.1% 

 

 

54,700 

 

 

54,561 

 

0.3% 

Non-Same Park

 

2,266 

 

 

1,858 

 

22.0% 

 

 

4,553 

 

 

3,485 

 

30.6% 

Total cost of operations

 

28,851 

 

 

27,886 

 

3.5% 

 

 

59,253 

 

 

58,046 

 

2.1% 

Net operating income (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Park

 

59,385 

 

 

56,990 

 

4.2% 

 

 

116,489 

 

 

112,478 

 

3.6% 

Non-Same Park

 

3,734 

 

 

1,686 

 

121.5% 

 

 

7,155 

 

 

4,009 

 

78.5% 

Total net operating income

 

63,119 

 

 

58,676 

 

7.6% 

 

 

123,644 

 

 

116,487 

 

6.1% 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income from assets held for sale or sold (2)

 

551 

 

 

4,631 

 

(88.1%)

 

 

1,327 

 

 

9,026 

 

(85.3%)

LTEIP amortization (3):  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of operations

 

(779)

 

 

(856)

 

(9.0%)

 

 

(1,511)

 

 

(1,185)

 

27.5% 

General and administrative

 

(1,642)

 

 

(1,518)

 

8.2% 

 

 

(3,000)

 

 

(2,047)

 

46.6% 

Facility management fees

 

133 

 

 

165 

 

(19.4%)

 

 

280 

 

 

331 

 

(15.4%)

Other income and expense

 

(3,193)

 

 

(3,308)

 

(3.5%)

 

 

(6,409)

 

 

(6,622)

 

(3.2%)

Depreciation and amortization

 

(27,025)

 

 

(28,295)

 

(4.5%)

 

 

(53,258)

 

 

(56,736)

 

(6.1%)

General and administrative

 

(1,855)

 

 

(1,845)

 

0.5% 

 

 

(3,896)

 

 

(3,803)

 

2.4% 

Gain on sale of real estate facilities

 

 

 

 

0.0% 

 

 

12,487 

 

 

 

100.0% 

Net income

$

29,309 

 

$

27,650 

 

6.0% 

 

$

69,664 

 

$

55,451 

 

25.6% 

Same Park gross margin (4)

 

69.1% 

 

 

68.6% 

 

0.7% 

 

 

68.0% 

 

 

67.3% 

 

1.0% 

Same Park weighted average occupancy

 

93.1% 

 

 

92.2% 

 

1.0% 

 

 

92.9% 

 

 

92.0% 

 

1.0% 

Non-Same Park weighted average occupancy

 

82.8% 

 

 

75.9% 

 

9.1% 

 

 

81.0% 

 

 

74.7% 

 

8.4% 

Same Park annualized realized rent per square foot (5)

$

14.34 

 

$

13.98 

 

2.6% 

 

$

14.31 

 

$

14.09 

 

1.6% 

 

(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)The Company sold one business park located in Milwaukie, Oregon, on February 13, 2015 and five buildings located in Redmond, Washington, on February 27, 2015.  Combined with the business parks in Beaverton, Oregon, and Phoenix, Arizona, sold in 2014 and the assets held for sale in Tempe, Arizona, and Sacramento, California, these assets generated rental income of $978,000 and $2.4 million for the three and six months ended June 30, 2015, respectively, compared to $7.4 million and $14.8 million for the three and six months ended June 30, 2014, respectively.  Cost of operations for the assets held for sale or sold was $427,000 and $1.0 million for the three and six months ended June 30, 2015, respectively, compared to $2.8 million and $5.7 million for the three and six months ended June 30, 2014, respectively.

(3)Senior Management Long-Term Equity Incentive Plan (“LTEIP”).

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

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

 

Property Dispositions

 

In July, 2015, the Company disposed of North Pointe Business Park located in Sacramento, California, for net proceeds of $17.4 million.  The parks consist of five multi-tenant flex buildings aggregating 213,000 square feet and was 75.7% leased as of June 30, 2015.

2

 


 

Financial Condition

The following are key financial ratios with respect to the Company’s leverage as of and for the six months ended June 30, 2015: 

 

 

 

Ratio of FFO to fixed charges (1)

16.6x

 

 

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 $72.15 at June 30, 2015)

33.5%

 

 

Available balance under the $250.0 million unsecured credit facility at June 30, 2015

$250.0 million

 

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

 

Distributions Declared

On July 28, 2015, the Board of Directors declared a quarterly dividend of $0.60 per common share, an increase of 20.0%, from $0.50 per common share.  Distributions were also declared on the various series of depositary shares, each representing 1/1,000 of a share of preferred stock listed below. Distributions are payable on September  30, 2015 to shareholders of record on September 15, 2015.

 

 

 

 

 

 

 

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

 

 

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 June 30, 2015,  the Company wholly owned 28.4 million rentable square feet with approximately 4,900 customers concentrated primarily in six states.

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 second quarter operating results, is available on the Internet. The Company’s website is psbusinessparks.com.

A conference call is scheduled for Wednesday,  July 29, 2015, at 8:00 a.m. (PDT) to discuss the second quarter results. The toll free number is (888) 299-3246; the conference ID is 80668254. 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 August 4, 2015 at (855) 859-2056. A replay of the conference call will also be available on the Company’s website.

Additional financial data attached.

3

 


 

 

 

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

2015

 

2014

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

200,194 

 

$

152,467 

 

 

 

 

 

 

Real estate facilities, at cost:

 

 

 

 

 

Land

 

793,569 

 

 

793,569 

Buildings and improvements

 

2,200,094 

 

 

2,182,993 

 

 

2,993,663 

 

 

2,976,562 

Accumulated depreciation

 

(1,036,023)

 

 

(991,497)

 

 

1,957,640 

 

 

1,985,065 

Properties held for disposition, net

 

14,267 

 

 

25,937 

Land and building held for development

 

26,288 

 

 

24,442 

 

 

1,998,195 

 

 

2,035,444 

Rent receivable, net

 

4,538 

 

 

2,838 

Deferred rent receivable, net

 

28,199 

 

 

26,050 

Other assets

 

8,493 

 

 

10,315 

 

 

 

 

 

 

Total assets

$

2,239,619 

 

$

2,227,114 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

Accrued and other liabilities

$

70,014 

 

$

68,905 

Mortgage note payable

 

250,000 

 

 

250,000 

Total liabilities

 

320,014 

 

 

318,905 

 

 

 

 

 

 

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

 

 

 

 

 

June 30, 2015 and December 31, 2014

 

995,000 

 

 

995,000 

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

 

 

 

 

 

26,971,885 and 26,919,161 shares issued and outstanding at

 

 

 

 

 

June 30, 2015 and December 31, 2014, respectively

 

268 

 

 

268 

Paid-in capital

 

714,182 

 

 

709,008 

Cumulative net income

 

1,306,231 

 

 

1,244,946 

Cumulative distributions

 

(1,293,133)

 

 

(1,235,941)

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

 

1,722,548 

 

 

1,713,281 

 

 

 

 

 

 

Noncontrolling interests:

 

 

 

 

 

Common units

 

197,057 

 

 

194,928 

Total noncontrolling interests

 

197,057 

 

 

194,928 

Total equity

 

1,919,605 

 

 

1,908,209 

 

 

 

 

 

 

Total liabilities and equity

$

2,239,619 

 

$

2,227,114 

 

 

4

 


 

 

PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

For the Six Months

 

Ended June 30,

 

Ended June 30,

 

2015

 

2014

 

2015

 

2014

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Rental income

$

92,948 

 

$

93,986 

 

$

185,263 

 

$

189,307 

Facility management fees

 

133 

 

 

165 

 

 

280 

 

 

331 

Total operating revenues

 

93,081 

 

 

94,151 

 

 

185,543 

 

 

189,638 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of operations

 

30,057 

 

 

31,535 

 

 

61,803 

 

 

64,979 

Depreciation and amortization

 

27,025 

 

 

28,295 

 

 

53,258 

 

 

56,736 

General and administrative

 

3,497 

 

 

3,363 

 

 

6,896 

 

 

5,850 

Total operating expenses

 

60,579 

 

 

63,193 

 

 

121,957 

 

 

127,565 

Other income and (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

145 

 

 

95 

 

 

252 

 

 

157 

Interest and other expense

 

(3,338)

 

 

(3,403)

 

 

(6,661)

 

 

(6,779)

Total other income and (expense)

 

(3,193)

 

 

(3,308)

 

 

(6,409)

 

 

(6,622)

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate facilities

 

 

 

 

 

12,487 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

29,309 

 

$

27,650 

 

$

69,664 

 

$

55,451 

 

 

 

 

 

 

 

 

 

 

 

 

Net income allocation:

 

 

 

 

 

 

 

 

 

 

 

Net income allocable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests—common units

$

3,016 

 

$

2,669 

 

$

8,379 

 

$

5,372 

Total net income allocable to noncontrolling interests

 

3,016 

 

 

2,669 

 

 

8,379 

 

 

5,372 

Net income allocable to PS Business Parks, Inc.:

 

 

 

 

 

 

 

 

 

 

 

Preferred shareholders

 

15,122 

 

 

15,122 

 

 

30,244 

 

 

30,244 

Restricted stock unit holders

 

42 

 

 

33 

 

 

140 

 

 

69 

Common shareholders

 

11,129 

 

 

9,826 

 

 

30,901 

 

 

19,766 

Total net income allocable to PS Business Parks, Inc.

 

26,293 

 

 

24,981 

 

 

61,285 

 

 

50,079 

 

$

29,309 

 

$

27,650 

 

$

69,664 

 

$

55,451 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.41 

 

$

0.37 

 

$

1.15 

 

$

0.74 

Diluted

$

0.41 

 

$

0.36 

 

$

1.14 

 

$

0.73 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

26,956 

 

 

26,899 

 

 

26,941 

 

 

26,881 

Diluted

 

27,033 

 

 

26,999 

 

 

27,027 

 

 

26,981 

 

5

 


 

 

 

 

 

 

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 Six Months

 

Ended June 30,

 

Ended June 30,

 

2015

 

2014

 

2015

 

2014

Computation of Diluted Funds From Operations (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income allocable to common shareholders

$

11,129 

 

$

9,826 

 

$

30,901 

 

$

19,766 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate facilities

 

 

 

 

 

(12,487)

 

 

Depreciation and amortization

 

27,025 

 

 

28,295 

 

 

53,258 

 

 

56,736 

Net income allocable to noncontrolling

 

 

 

 

 

 

 

 

 

 

 

interests—common units

 

3,016 

 

 

2,669 

 

 

8,379 

 

 

5,372 

Net income allocable to restricted stock unit holders

 

42 

 

 

33 

 

 

140 

 

 

69 

FFO allocable to common and dilutive shares

$

41,212 

 

$

40,823 

 

$

80,191 

 

$

81,943 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

26,956 

 

 

26,899 

 

 

26,941 

 

 

26,881 

Weighted average common OP units outstanding

 

7,305 

 

 

7,305 

 

 

7,305 

 

 

7,305 

Weighted average restricted stock units outstanding

 

110 

 

 

56 

 

 

114 

 

 

56 

Weighted average common share equivalents outstanding

 

77 

 

 

100 

 

 

86 

 

 

100 

Total common and dilutive shares

 

34,448 

 

 

34,360 

 

 

34,446 

 

 

34,342 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share—diluted

$

0.41 

 

$

0.36 

 

$

1.14 

 

$

0.73 

Depreciation and amortization (2)

 

0.79 

 

 

0.83 

 

 

1.55 

 

 

1.66 

Gain on sale of real estate facilities (2)

 

 

 

 

 

(0.36)

 

 

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

$

1.20 

 

$

1.19 

 

$

2.33 

 

$

2.39 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO allocable to common and dilutive shares

$

41,212 

 

$

40,823 

 

$

80,191 

 

$

81,943 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Recurring capital improvements

 

(2,764)

 

 

(2,534)

 

 

(3,881)

 

 

(3,781)

Tenant improvements

 

(6,425)

 

 

(6,348)

 

 

(13,225)

 

 

(11,538)

Lease commissions

 

(2,717)

 

 

(1,884)

 

 

(4,285)

 

 

(5,144)

Straight-line rent

 

(1,159)

 

 

(497)

 

 

(2,192)

 

 

(1,682)

Non-cash stock compensation expense

 

213 

 

 

294 

 

 

526 

 

 

666 

Long-term equity incentive amortization

 

2,421 

 

 

2,374 

 

 

4,511 

 

 

3,232 

In-place lease adjustment

 

(352)

 

 

(244)

 

 

(663)

 

 

(441)

Tenant improvement reimbursements, net of lease incentives

 

(543)

 

 

(401)

 

 

(940)

 

 

(839)

Capitalized interest

 

(271)

 

 

(233)

 

 

(531)

 

 

(457)

FAD

$

29,615 

 

$

31,350 

 

$

59,511 

 

$

61,959 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to common and dilutive shares

$

17,193 

 

$

17,135 

 

$

34,372 

 

$

34,267 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution payout ratio

 

58.1% 

 

 

54.7% 

 

 

57.8% 

 

 

55.3% 

 

(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.

6

 




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