Document and Entity Information
v2.2.0.25
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2010
Feb. 21, 2011
Jun. 30, 2010
Document and Entity Information      
Document Type 10-K    
Document Period End Date Dec. 31, 2010
Document Fiscal Year Focus 2010    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Registrant Name PS BUSINESS PARKS INC/CA    
Entity Central Index Key 0000866368    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Current Fiscal Year End Date --12-31    
Entity Filer Category Large Accelerated Filer    
Entity Well-known Seasoned Issuer Yes    
Entity Common Stock, Shares Outstanding   24,676,177  
Entity Public Float     $ 1,039,197,725

CONSOLIDATED BALANCE SHEETS
v2.2.0.25
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands
12 Months Ended
Dec. 31, 2010
Dec. 31, 2009
ASSETS    
Cash and cash equivalents $ 5,066 $ 208,229
Real estate facilities, at cost:    
Land 564,851 493,709
Buildings and equipment 1,782,613 1,528,044
Gross real estate investment property 2,347,464 2,021,753
Accumulated depreciation (776,840) (707,209)
Net real estate investment property 1,570,624 1,314,544
Property held for disposition, net   4,260
Land held for development 6,829 6,829
Total real estate investments 1,577,453 1,325,633
Rent receivable 3,127 2,313
Deferred rent receivable 22,277 21,596
Other assets 13,134 7,051
Total assets 1,621,057 1,564,822
LIABILITIES AND EQUITY    
Accrued and other liabilities 53,421 46,298
Credit facility 93,000  
Mortgage notes payable 51,511 52,887
Total liabilities 197,932 99,185
Commitments and contingencies    
PS Business Parks, Inc.'s shareholders' equity:    
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 23,942 and 25,042 shares issued and outstanding at December 2010 and 2009, respectively 598,546 626,046
Common stock, $0.01 par value, 100,000,000 shares authorized, 24,671,177 and 24,399,509 shares issued and outstanding at December 31, 2010 and 2009, respectively 246 243
Paid-in capital 557,882 548,393
Cumulative net income 784,616 699,291
Cumulative distributions (747,762) (658,294)
Total PS Business Parks, Inc.'s shareholders' equity 1,193,528 1,215,679
Noncontrolling interests:    
Preferred units 53,418 73,418
Common units 176,179 176,540
Total noncontrolling interests 229,597 249,958
Total equity 1,423,125 1,465,637
Total liabilities and equity $ 1,621,057 $ 1,564,822

CONSOLIDATED BALANCE SHEETS (Parenthetical)
v2.2.0.25
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Dec. 31, 2010
Dec. 31, 2009
Consolidated Balance Sheets    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 50,000,000 50,000,000
Preferred stock, shares issued 23,942 25,042
Preferred stock, shares outstanding 23,942 25,042
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 24,671,177 24,399,509
Common stock, shares outstanding 24,671,177 24,399,509

CONSOLIDATED STATEMENTS OF INCOME
v2.2.0.25
CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data
12 Months Ended
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2008
Revenues:      
Rental income $ 278,417 $ 270,957 $ 281,115
Facility management fees 672 698 728
Total operating revenues 279,089 271,655 281,843
Expenses:      
Cost of operations 90,534 85,912 87,182
Depreciation and amortization 78,868 84,504 99,317
General and administrative 9,651 6,202 8,099
Total operating expenses 179,053 176,618 194,598
Other income and expenses:      
Interest and other income 333 536 1,457
Interest expense (3,534) (3,552) (3,952)
Total other income and expenses (3,201) (3,016) (2,495)
Income from continuing operations 96,835 92,021 84,750
Discontinued operations:      
Income from discontinued operations 34 830 597
Gain on sale of land and real estate facility 5,153 1,488  
Total discontinued operations 5,187 2,318 597
Net income 102,022 94,339 85,347
Net income allocable to noncontrolling interests:      
Noncontrolling interests - common units 11,594 19,730 8,296
Noncontrolling interests - preferred units 5,103 (2,569) 7,007
Total net income allocable to noncontrolling interests 16,697 17,161 15,303
Net income allocable to PS Business Parks, Inc.:      
Common shareholders 38,959 59,413 23,179
Preferred shareholders 46,214 17,440 46,630
Restricted stock unit holders 152 325 235
Total net income allocable to PS Business Parks, Inc. 85,325 77,178 70,044
Net income $ 102,022 $ 94,339 $ 85,347
Net income per common share - basic:      
Continuing operations $ 1.42 $ 2.62 $ 1.11
Discontinued operations $ 0.16 $ 0.08 $ 0.02
Net income $ 1.59 $ 2.70 $ 1.13
Net income per common share - diluted:      
Continuing operations $ 1.42 $ 2.61 $ 1.10
Discontinued operations $ 0.16 $ 0.08 $ 0.02
Net income $ 1.58 $ 2.68 $ 1.12
Weighted average common shares outstanding:      
Basic 24,546 21,998 20,443
Diluted 24,687 22,128 20,618

CONSOLIDATED STATEMENT OF EQUITY
v2.2.0.25
CONSOLIDATED STATEMENT OF EQUITY (USD $)
In Thousands, except Share data
Preferred Stock [Member]
Common Stock [Member]
Paid-in Capital [Member]
Cumulative Net Income [Member]
Cumulative Distributions [Member]
Total PS Business Parks, Inc.'s Shareholders' Equity [Member]
Noncontrolling Interests [Member]
Total
Balances, value at Dec. 31, 2007 $ 716,250 $ 207 $ 371,267 $ 552,069 $ (484,213) $ 1,155,580 $ 249,220 $ 1,404,800
Balances, shares at Dec. 31, 2007 28,650 20,777,219            
Repurchase of preferred stock, net of issuance costs, value (10,000)   4,810   (291) (5,481)   (5,481)
Repurchase of preferred stock, net of issuance, shares (400)              
Repurchase of common stock, value   (3) (18,321)     (18,324)   (18,324)
Repurchase of common stock, shares   (370,042)            
Exercise of stock options, value     792     792   792
Exercise of stock options, shares   30,234            
Stock compensation, net, value     3,152     3,152   3,152
Stock compensation, net, shares   22,505            
Net income       70,044   70,044 15,303 85,347
Distributions:                
Preferred stock         (50,858) (50,858)   (50,858)
Common stock         (35,978) (35,978)   (35,978)
Noncontrolling interests             (19,863) (19,863)
Adjustment to noncontrolling interests in underlying operating partnership     1,887     1,887 (1,887) 1,887
Balances, value at Dec. 31, 2008 706,250 204 363,587 622,113 (571,340) 1,120,814 242,773 1,363,587
Balances, shares at Dec. 31, 2008 28,250 20,459,916            
Issuance of common stock, net of issuance costs, value   38 171,194     171,232   171,232
Issuance of common stock, net of issuance costs, shares   3,833,333            
Repurchase of preferred stock, net of issuance costs, value (80,204)   32,788   (2,783) (50,199)   (50,199)
Repurchase of preferred stock, net of issuance, shares (3,208)              
Repurchase of preferred units, net of issuance costs     9,577     9,577 (21,912) (12,335)
Repurchase of common stock, value     (230)     (230)   (230)
Repurchase of common stock, shares                
Exercise of stock options, value     1,177     1,177   1,177
Exercise of stock options, shares   35,100            
Stock compensation, net, value   1 1,015     1,016   1,016
Stock compensation, net, shares   71,160            
Shelf registration     (75)     (75)   (75)
Net income       77,178   77,178 17,161 94,339
Distributions:                
Preferred stock         (44,662) (44,662)   (44,662)
Common stock         (39,509) (39,509)   (39,509)
Noncontrolling interests             (18,704) (18,704)
Adjustment to noncontrolling interests in underlying operating partnership     (30,640)     (30,640) 30,640 (30,640)
Balances, value at Dec. 31, 2009 626,046 243 548,393 699,291 (658,294) 1,215,679 249,958 1,465,637
Balances, shares at Dec. 31, 2009 25,042 24,399,509            
Issuance of preferred stock, net of issuance costs, value 75,000   (2,487)     72,513   72,513
Issuance of preferred stock, net of issuance costs, shares 3,000              
Redemption of preferred stock, net of issuance costs, value (102,500)   3,484   (3,484) (102,500)   (102,500)
Redemption of preferred stock, net of issuance costs, shares (4,100)              
Redemption of preferred units, net of issuance costs     582     582 (20,582) (20,000)
Exercise of stock options, value   3 7,780     7,783   7,783
Exercise of stock options, shares   243,936            
Stock compensation, net, value     1,031     1,031   1,031
Stock compensation, net, shares   27,732            
Net income       85,325   85,325 16,697 102,022
Distributions:                
Preferred stock         (42,730) (42,730)   (42,730)
Common stock         (43,254) (43,254)   (43,254)
Noncontrolling interests             (17,377) (17,377)
Adjustment to noncontrolling interests in underlying operating partnership     (901)     (901) 901 (901)
Balances, value at Dec. 31, 2010 $ 598,546 $ 246 $ 557,882 $ 784,616 $ (747,762) $ 1,193,528 $ 229,597 $ 1,423,125
Balances, shares at Dec. 31, 2010 23,942 24,671,177            

CONSOLIDATED STATEMENTS OF CASH FLOWS
v2.2.0.25
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands
12 Months Ended
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2008
Cash flows from operating activities:      
Net income $ 102,022 $ 94,339 $ 85,347
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization expense 78,868 85,094 99,848
In-place lease adjustment 571 (252) (194)
Tenant improvement reimbursements net of lease incentives (603) (326) (379)
Amortization of mortgage premium (285) (271) (260)
Gain on sale of land and real estate facility (5,153) (1,488)  
Stock compensation 2,116 2,900 4,061
Decrease (increase) in receivables and other assets (2,809) 262 1,759
Increase (decrease) in accrued and other liabilities 3,214 (633) (845)
Total adjustments 75,919 85,286 103,990
Net cash provided by operating activities 177,941 179,625 189,337
Cash flows from investing activities:      
Capital improvements to real estate facilities (40,378) (29,513) (35,192)
Acquisition of real estate facilities (296,251)    
Proceeds from sale of land and real estate facility 9,181 2,557  
Net cash used in investing activities (327,448) (26,956) (35,192)
Cash flows from financing activities:      
Borrowings on credit facility 93,000    
Principal payments on mortgage notes payable (1,091) (1,022) (1,157)
Repayment of mortgage note payable   (5,128)  
Net proceeds from the issuance of preferred stock 72,513    
Net proceeds from the issuance of common stock   171,232  
Proceeds from the exercise of stock options 7,783 1,177 792
Shelf registration costs   (75)  
Redemption/repurchase of preferred stock (102,500) (12,335)  
Redemption/repurchase of preferred units (20,000) (50,199) (5,481)
Repurchase of common stock   (230) (21,626)
Distributions paid to common shareholders (43,254) (39,509) (35,978)
Distributions paid to preferred shareholders (42,730) (44,662) (50,858)
Distributions paid to noncontrolling interests - common units (12,856) (12,856) (12,856)
Distributions paid to noncontrolling interests - preferred units (4,521) (5,848) (7,007)
Net cash (used in) provided by financing activities (53,656) 545 (134,171)
Net (decrease) increase in cash and cash equivalents (203,163) 153,214 19,974
Cash and cash equivalents at the beginning of the period 208,229 55,015 35,041
Cash and cash equivalents at the end of the period 5,066 208,229 55,015
Supplemental disclosures:      
Interest paid 3,547 3,523 4,050
Adjustment to noncontrolling interests in underlying operating partnership:      
Noncontrolling interests - common units 901 30,640 (1,887)
Paid-in capital (901) (30,640) 1,887
Gain on repurchase of preferred equity:      
Preferred stock   (30,005) (4,519)
Preferred units   (8,997)  
Paid-in capital   39,002 4,519
Issuance costs related to the redemption/repurchase of preferred equity:      
Cumulative distributions (3,484) (2,783) (291)
Noncontrolling interest - common units (582) (580)  
Paid-in capital $ 4,066 $ 3,363 $ 291

Organization and description of business
v2.2.0.25
Organization and description of business
12 Months Ended
Dec. 31, 2010
Organization and description of business  
Organization and description of business

1. Organization and description of business

 

Organization

 

PS Business Parks, Inc. ("PSB") was incorporated in the state of California in 1990. As of December 31, 2010, PSB owned 77.2% of the common partnership units of PS Business Parks, L.P. (the "Operating Partnership"). The remaining common partnership units are owned by Public Storage ("PS"). PSB, as the sole general partner of the Operating Partnership, has full, exclusive and complete responsibility and discretion in managing and controlling the Operating Partnership. PSB and the Operating Partnership are collectively referred to as the "Company."

 

Description of business

 

The Company is a fully-integrated, 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. As of December 31, 2010, the Company owned and operated 21.8 million rentable square feet of commercial space located in eight states. The Company also manages 1.4 million rentable square feet on behalf of PS and its affiliated entities.

 

References to the number of properties or square footage are unaudited and outside the scope of the Company's independent registered public accounting firm's audit of the Company's financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).


Summary of significant accounting policies
v2.2.0.25
Summary of significant accounting policies
12 Months Ended
Dec. 31, 2010
Summary of significant accounting policies  
Summary of significant accounting policies

2. Summary of significant accounting policies

 

Basis of presentation

 

The accompanying consolidated financial statements include the accounts of PSB and the Operating Partnership. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements.

 

Noncontrolling Interests

 

The Company's noncontrolling interests are reported as a component of equity separate from the parent's equity. Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest is included in consolidated net income on the face of the income statement and, upon a gain or loss of control, the interest purchased or sold, as well as any interest retained, is recorded at fair value with any gain or loss recognized in earnings.

 

Use of estimates

 

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

 

Allowance for doubtful accounts

 

The Company monitors the collectability of its receivable balances including the deferred rent receivable on an ongoing basis. Based on these reviews, the Company maintains an allowance for doubtful accounts for estimated losses resulting from the possible inability of tenants to make contractual rent payments to the Company. A provision for doubtful accounts is recorded during each period. The allowance for doubtful accounts, which represents the cumulative allowances less write-offs of uncollectible rent, is netted against tenant and other receivables on the consolidated balance sheets. Tenant receivables are net of an allowance for uncollectible accounts totaling $400,000 December 31, 2010 and 2009.

 

Financial instruments

 

The methods and assumptions used to estimate the fair value of financial instruments are described below. The Company has estimated the fair value of financial instruments using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop estimates of market value. Accordingly, estimated fair values are not necessarily indicative of the amounts that could be realized in current market exchanges.

 

The Company considers all highly liquid investments with a remaining maturity of three months or less at the date of purchase to be cash equivalents. Due to the short period to maturity of the Company's cash and cash equivalents, accounts receivable, other assets and accrued and other liabilities, the carrying values as presented on the consolidated balance sheets are reasonable estimates of fair value. Based on borrowing rates currently available to the Company, the carrying amount of debt approximates fair value.

 

Financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and receivables. Cash and cash equivalents, which consist primarily of money market investments, are only invested in entities with an investment grade rating. Receivables are comprised of balances due from a large number of customers. Balances that the Company expects to become uncollectible are reserved for or written off.

 

Real estate facilities

 

Real estate facilities are recorded at cost. Costs related to the renovation or improvement of the properties are capitalized. Expenditures for repairs and maintenance are expensed as incurred. Expenditures that are expected to benefit a period greater than two years and exceed $2,000 are capitalized and depreciated over the estimated useful life. Buildings and equipment are depreciated on the straight-line method over the estimated useful lives, which are generally 30 and five years, respectively. Transaction costs, which include tenant improvements and lease commissions, in excess of $1,000 for leases with terms greater than one year are capitalized and depreciated over their estimated useful lives. Transaction costs for leases of one year or less or less than $1,000 are expensed as incurred.

 

Properties held for disposition

 

An asset is classified as an asset held for disposition when it meets these requirements, which include, among other criteria, the approval of the sale of the asset, the marketing of the asset for sale and the expectation of the Company that the sale will likely occur within the next 12 months. Upon classification of an asset as held for disposition, the net book value of the asset is included on the balance sheet as properties held for disposition, depreciation of the asset is ceased and the operating results of the asset are included in discontinued operations for all periods presented.


Intangible assets/liabilities

 

Intangible assets and liabilities include above-market and below-market in-place lease values of acquired properties based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market and below-market lease values (included in other assets and accrued liabilities in the accompanying consolidated balance sheets) are amortized to rental income over the remaining non-cancelable terms of the respective leases. The Company recorded net amortization of $571,000, $252,000 and $194,000 of intangible assets and liabilities resulting from the above-market and below-market lease values during the years ended December 31, 2010, 2009 and 2008, respectively. As of December 31, 2010, the value of in-place leases resulted in a net intangible asset of $5.4 million, net of $2.1 million of accumulated amortization with a weighted average amortization period of 6.1 years, and a net intangible liability of $2.2 million net of $1.5 million of accumulated amortization with a weighted average amortization period of 4.5 years. As of December 31, 2009, the value of in-place leases resulted in a net intangible asset of $94,000, net of $1.1 million of accumulated amortization, and a net intangible liability of $247,000, net of $1.1 million of accumulated amortization.

 

Evaluation of asset impairment

 

The Company evaluates its assets used in operations by identifying indicators of impairment and by comparing the sum of the estimated undiscounted future cash flows for each asset to the asset's carrying value. When indicators of impairment are present and the sum of the undiscounted future cash flows is less than the carrying value of such asset, an impairment loss is recorded equal to the difference between the asset's current carrying value and its value based on discounting its estimated future cash flows. In addition, the Company evaluates its assets held for disposition for impairment. Assets held for disposition are reported at the lower of their carrying value or fair value, less cost of disposition. At December 31, 2010, the Company did not consider any assets to be impaired.

 

Asset impairment due to casualty loss

 

It is the Company's policy to record as a casualty loss or gain, in the period the casualty occurs, the differential between (a) the book value of assets destroyed and (b) any insurance proceeds that the Company expects to receive in accordance with its insurance contracts. Potential proceeds from insurance that are subject to any uncertainties, such as interpretation of deductible provisions of the governing agreements, the estimation of costs of restoration, or other such items, are treated as contingent proceeds and not recorded until the uncertainties are satisfied.

 

For the years ended December 31, 2010, 2009 and 2008 no material casualty losses were recorded.

 

Stock compensation

 

All share-based payments to employees, including grants of employee stock options, are recognized as stock compensation in the Company's income statement based on their fair values. See Note 10.

 

Revenue and expense recognition

 

The Company must meet four basic criteria before revenue can be recognized: persuasive evidence of an arrangement exists; the delivery has occurred or services rendered; the fee is fixed or determinable; and collectability is reasonably assured. All leases are classified as operating leases. Rental income is recognized on a straight-line basis over the terms of the leases. Straight-line rent is recognized for all tenants with contractual fixed increases in rent that are not included on the Company's credit watch list. Deferred rent receivable represents rental revenue recognized on a straight-line basis in excess of billed rents. Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as rental income in the period the applicable costs are incurred. Property management fees are recognized in the period earned.

 

Costs incurred in connection with leasing (primarily tenant improvements and lease commissions) are capitalized and amortized over the lease period.

 

Gains from sales of real estate facilities

 

The Company recognizes gains from sales of real estate facilities at the time of sale using the full accrual method, provided that various criteria related to the terms of the transactions and any subsequent involvement by the Company with the properties sold are met. If the criteria are not met, the Company defers the gains and recognizes them when the criteria are met or using the installment or cost recovery methods as appropriate under the circumstances.

 

General and administrative expenses

 

General and administrative expenses include executive and other compensation, office expense, professional fees, state income taxes and other such administrative items.

 

Income taxes

 

The Company has qualified and intends to continue to qualify as a REIT, as defined in Section 856 of the Internal Revenue Code. As a REIT, the Company is not subject to federal income tax to the extent that it distributes its REIT taxable income to its shareholders. A REIT must distribute at least 90% of its taxable income each year. In addition, REITs are subject to a number of organizational and operating requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) based on its taxable income using corporate income tax rates. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property and to federal income and excise taxes on its undistributed taxable income. The Company believes it met all organization and operating requirements to maintain its REIT status during 2010, 2009 and 2008 and intends to continue to meet such requirements. Accordingly, no provision for income taxes has been made in the accompanying consolidated financial statements.

 

The Company can recognize a tax benefit only if it is "more likely than not" that a particular tax position will be sustained upon examination or audit. To the extent that the "more likely than not" standard has been satisfied, the benefit associated with a position is measured as the largest amount that is greater than 50% likely of being recognized upon settlement. As of December 31, 2010, the Company did not recognize any tax benefit for uncertain tax positions.

 

Accounting for preferred equity issuance costs

 

The Company records issuance costs as a reduction to paid-in capital on its balance sheet at the time the preferred securities are issued and reflects the carrying value of the preferred equity at the stated value. The Company records issuance costs as non-cash preferred equity distributions at the time it notifies the holders of preferred stock or units of its intent to redeem such shares or units.


 

Net income allocation

 

Net income was allocated as follows for the years ended December 31, (in thousands):

 

 

      2010    

      2009     

      2008     

Net income allocable to noncontrolling interests:

 

 

 

Noncontrolling interests — common units:

 

 

 

Continuing operations

$  10,408

$  19,155

$     8,139

Discontinued operations

        1,186

           575

           157

Total net income allocable to noncontrolling interests — common units

      11,594

      19,730

       8,296

Noncontrolling interests — preferred units:

 

 

 

Distributions to preferred unit holders

        4,521

        5,848

        7,007

Non-cash distributions related to the redemption of preferred units

           582

              —

              —

Gain on repurchase of preferred units, net of issuance costs

              —

       (8,417)

              —

Total net income allocable to noncontrolling interests — preferred units

        5,103

       (2,569)

        7,007

Total net income allocable to noncontrolling interests

      16,697

      17,161

      15,303

Net income allocable to PS Business Parks, Inc.:

 

 

 

Common shareholders:

 

 

 

Continuing operations

      34,974

      57,680

      22,742

Discontinued operations

        3,985

        1,733

           437

Total net income allocable to common shareholders..

      38,959

      59,413

      23,179

Preferred shareholders:

 

 

 

Distributions to preferred shareholders

      42,730

      44,662

      50,858

Non-cash distributions related to the redemption of preferred stock

        3,484

              —

              —

Gain on repurchase of preferred stock, net of issuance costs

              —

    (27,222)

       (4,228)

Total net income allocable to preferred shareholders..

      46,214

      17,440

      46,630

Restricted stock unit holders:

 

 

 

Continuing operations

           136

           315

           232

Discontinued operations

             16

             10

                3

Total net income allocable to restricted stock unit holders

           152

           325

           235

Total net income allocable to PS Business Parks, Inc

      85,325

      77,178

      70,044

 

$ 102,022

$  94,339

$  85,347

 


Net income per common share

 

Per share amounts are computed using the number of weighted average common shares outstanding. "Diluted" weighted average common shares outstanding includes the dilutive effect of stock options and restricted stock units under the treasury stock method. "Basic" weighted average common shares outstanding excludes such effect. The Company's restricted stock units are participating securities and included in the computation of basic and diluted weighted average common shares outstanding. The Company's allocation of net income to the restricted stock unit holders are paid non-forfeitable dividends in excess of the expense recorded which results in a reduction in net income allocable to common shareholders and unit holders. Earnings per share has been calculated as follows for the years ended December 31, (in thousands, except per share amounts):

 

 

      2010    

      2009    

      2008    

Net income allocable to common shareholders

$  38,959

$  59,413

$  23,179

Weighted average common shares outstanding:

 

 

 

Basic weighted average common shares outstanding

      24,546

      21,998

      20,443

Net effect of dilutive stock compensation — based on treasury stock method using average market price

          141

          130

          175

Diluted weighted average common shares outstanding

     24,687

     22,128

     20,618

Net income per common share — Basic

$       1.59

$       2.70

$       1.13

Net income per common share — Diluted

$       1.58

$       2.68

$       1.12

 

Options to purchase 78,000, 126,000 and 76,000 shares for the years ended December 31 2010, 2009 and 2008, respectively, were not included in the computation of diluted net income per share because such options were considered anti-dilutive.

 

Segment reporting

 

The Company views its operations as one segment.

 

Reclassifications

 

Certain reclassifications have been made to the consolidated financial statements for 2009 and 2008 in order to conform to the 2010 presentation.


Real estate facilities
v2.2.0.25
Real estate facilities
12 Months Ended
Dec. 31, 2010
Real estate facilities  
Real estate facilities

3. Real estate facilities

 

The activity in real estate facilities for the years ended December 31, 2010, 2009, and 2008 is as follows (in thousands):

 

 

 

 

       Land     

   Buildings and

     Equipment 

Accumulated

Depreciation

 

        Total       

Balances at December 31, 2007 Balances at December 31, 2006

$  493,709

$  1,476,763

$   (536,412)

$  1,434,060

Capital improvements, net

               —

          35,192

                 —

          35,192

Disposals

               —

           (1,757)

           1,757

                   —

Depreciation expense

               —

                   —

       (99,848)

         (99,848)

Transfer to properties held for dispositions..

               —

               (185)

              531

                346

Balances at December 31, 2008

     493,709

     1,510,013

     (633,972)

     1,369,750

Capital improvements, net

               —

          29,513

                 —

          29,513

Disposals

               —

         (11,267)

         11,267

                   —

Depreciation expense

               —

                   —

       (85,094)

         (85,094)

Transfer to properties held for dispositions..

               —

               (215)

              590

                375

Balances at December 31, 2009

     493,709

     1,528,044

     (707,209)

     1,314,544

Acquisition of real estate facilities

       71,142

        223,428

                 —

        294,570

Capital improvements, net

               —

          40,378

                 —

          40,378

Disposals

               —

           (9,237)

           9,237

                   —

Depreciation expense

               —

                   —

       (78,868)

         (78,868)

Balances at December 31, 2010

$  564,851

$  1,782,613

$   (776,840)

$  1,570,624

The unaudited basis of real estate facilities for federal income tax purposes was approximately $1.5 billion at December 31, 2010. The Company had approximately 5.9% of its properties, in terms of net book value, encumbered by mortgage debt at December 31, 2010.

 

On December 15, 2010, the Company acquired Westpark Business Campus, a seven-building multi-tenant office park aggregating 735,000 square feet in Tysons Corner, Virginia, for $140.0 million. In connection with this purchase, the Company received a $1.9 million credit for committed tenant improvements. On July 30, 2010, the Company acquired a two-building multi-tenant office park, known as Tysons Corporate Center, aggregating 270,000 square feet in Tysons Corner, Virginia, for $35.4 million. On June 18, 2010, the Company acquired Parklawn Business Park, a 232,000 square foot multi-tenant office and flex park located in Rockville, Maryland, for $23.4 million. On April 21, 2010, the Company acquired a portfolio of assets in Austin, Texas, aggregating 704,000 square feet of multi-tenant flex parks for $42.9 million. In connection with this purchase, the Company received a $129,000 credit for committed tenant improvements. On March 16, 2010, the Company acquired Shady Grove Executive Center, a 350,000 square foot multi-tenant office park located in Rockville, Maryland, for $60.0 million. In connection with this purchase, the Company received a $1.6 million credit for committed tenant improvements and lease commissions. The Company incurred and expensed acquisition transaction costs of $3.3 million for the year ended December 31, 2010. The Company did not acquire any assets or assume any liabilities during the years ended December 31, 2009 and 2008.

 

The following table summarizes the assets acquired and liabilities assumed during the year ended December 31, (in thousands):

 

 

       2010     

Land

$        71,142

Buildings and equipment

        223,428

Above-market in-place lease value

             6,304

Below-market in-place lease value

           (2,348)

Total purchase price

        298,526

Net operating assets acquired and liabilities assumed

           (2,275)

Total cash paid

$      296,251

 

The purchase price of acquired properties is allocated to land, buildings and equipment and intangible assets and liabilities associated with in-place leases (including tenant improvements, unamortized lease commissions, value of above-market and below-market leases, acquired in-place lease values, and tenant relationships, if any) based on their respective estimated fair values. In addition, beginning January 1, 2009, acquisition-related costs are expensed as incurred.

 

In determining the fair value of the tangible assets of the acquired properties, management considers the value of the properties as if vacant as of the acquisition date. Management must make significant assumptions in determining the value of assets acquired and liabilities assumed. Using different assumptions in the allocation of the purchase cost of the acquired properties would affect the timing of recognition of the related revenue and expenses. Amounts allocated to land are derived from comparable sales of land within the same region. Amounts allocated to buildings and improvements, tenant improvements and unamortized lease commissions are based on current market replacement costs and other market information. The amount allocated to acquired in-place leases is determined based on management's assessment of current market conditions and the estimated lease-up periods for the respective spaces.

 

In addition to the 2010 acquisitions, the Company also completed construction on a parcel of land within the Miami International Commerce Center in Miami, Florida, which added 75,000 square feet of rentable small tenant industrial space.

 

In January, 2010, the Company completed the sale of a 131,000 square foot office building located in Houston, Texas, for a gross sales price of $10.0 million, resulting in a net gain of $5.2 million.


 

The following summarizes the condensed results of operations for the property sold during the first quarter of 2010 (in thousands):

 

 

      For the Years Ended December 31,    

 

      2010    

      2009     

      2008     

Rental income

$          91

               $       2,515

               $       2,388

Cost of operations

            (57)

      (1,095)

      (1,260)

Depreciation

              —

         (590)

         (531)

Income from discontinued operations

$          34

               $           830

               $           597

 

In addition to minimum rental payments, tenants reimburse the Company for their pro rata share of specified operating expenses, which amounted to $16,000, $281,000, and $306,000, for the years ended December 31, 2010, 2009 and 2008, respectively. These amounts are included as rental income in the table presented above.

 

In May, 2009, the Company sold 3.4 acres of land held for development in Portland, Oregon, for a gross sales price of $2.7 million, resulting in a net gain of $1.5 million.


Leasing activity
v2.2.0.25
Leasing activity
12 Months Ended
Dec. 31, 2010
Leasing activity  
Leasing activity

4. Leasing activity

 

The Company leases space in its real estate facilities to tenants primarily under non-cancelable leases generally ranging from one to 10 years. Future minimum rental revenues excluding recovery of operating expenses as of December 31, 2010 under these leases are as follows (in thousands):

 

2011

$  212,721

2012

    165,728

2013

    113,928

2014

       72,452

2015

       45,802

Thereafter

       73,231

Total

$  683,862

 

In addition to minimum rental payments, certain tenants reimburse the Company for their pro rata share of specified operating expenses. Such reimbursements amounted to $58.0 million, $55.2 million and $54.4 million, for the years ended December 31, 2010, 2009 and 2008, respectively. These amounts are included as rental income in the accompanying consolidated statements of income.

 

Leases accounting for 5.9% of total leased square footage are subject to termination options which include leases accounting for 2.9% of total leased square footage having termination options exercisable through December 31, 2011 (unaudited). In general, these leases provide for termination payments should the termination options be exercised. The above table is prepared assuming such options are not exercised.


Bank loans
v2.2.0.25
Bank loans
12 Months Ended
Dec. 31, 2010
Bank loans  
Bank loans

5. Bank loans

 

On July 28, 2010, the Company extended the term of its line of credit (the "Credit Facility") with Wells Fargo Bank to August 1, 2012. The Credit Facility has a borrowing limit of $100.0 million. Interest on outstanding borrowings is payable monthly. The rate of interest charged on borrowings is equal to a rate ranging from the London Interbank Offered Rate ("LIBOR") plus 1.60% to LIBOR plus 2.60% depending on the Company's credit ratings and coverage ratios, as defined. Currently, the Company's rate under the Credit Facility is LIBOR plus 1.80%. In addition, the Company is required to pay an annual commitment fee ranging from 0.15% to 0.40% of the borrowing limit (currently 0.20%). The Company had $93.0 million outstanding on the Credit Facility at an interest rate of 2.11% at December 31, 2010. Subsequent to December 31, 2010, the Company used the funds borrowed from PS, as discussed in Note 8, to pay down the Credit Facility in full and as such, the available balance is $100.0 million. The Company had no balance outstanding on the Credit Facility at December 31, 2009.

 

The Credit Facility requires the Company to meet certain covenants including (i) maintain a balance sheet leverage ratio (as defined therein) of less than 0.45 to 1.00, (ii) maintain a fixed charge coverage ratio (as defined therein) of not less than 1.75 to 1.00, (iii) maintain a minimum tangible net worth (as defined) and (iv) limit distributions to 95% of funds from operations (as defined therein) for any four consecutive quarters. In addition, the Company is limited in its ability to incur additional borrowings (the Company is required to maintain unencumbered assets with an aggregate book value equal to or greater than two times the Company's unsecured recourse debt; the Company did not have any unsecured recourse debt at December 31, 2010) or sell assets. The Company was in compliance with the covenants of the Credit Facility at December 31, 2010.


Mortgage notes payable
v2.2.0.25
Mortgage notes payable
12 Months Ended
Dec. 31, 2010
Mortgage notes payable  
Mortgage notes payable

6. Mortgage notes payable

 

Mortgage notes payable consist of the following (in thousands):

 

 

 

December 31,

       2010      

December 31,

       2009      

5.73% mortgage note, secured by one commercial property with a net book value of $28.5 million, principal and interest payable monthly, due March, 2013

 

 

  $  13,729

 

 

  $  14,006

6.15% mortgage note, secured by one commercial property with a net book value of $26.7 million, principal and interest payable monthly, due November, 2031 (1)

       15,950

       16,446

5.52% mortgage note, secured by one commercial property with a net book value of $15.4 million, principal and interest payable monthly, due May, 2013

         9,572

         9,819

5.68% mortgage note, secured by one commercial property with a net book value of $17.1 million, principal and interest payable monthly, due May, 2013

         9,594

         9,836

5.61% mortgage note, secured by one commercial property with a net book value of $5.6 million, principal and interest payable monthly, due January, 2011 (2)

       2,666

       2,780

Total

  $  51,511

  $  52,887

____________

 

(1)The mortgage note has a stated principal balance of $15.7 million and a stated interest rate of 7.20%. Based on the fair market value at the time of assumption, a mortgage premium was computed based on an effective interest rate of 6.15%. The unamortized premiums were $209,000 and $427,000 as of December 31, 2010 and 2009, respectively. This mortgage is repayable without penalty beginning November, 2011.

 

(2)The mortgage note has a stated principal balance of $2.7 million and a stated interest rate of 7.61%. Based on the fair market value at the time of assumption, a mortgage premium was computed based on an effective interest rate of 5.61%. The unamortized premiums were $6,000 and $73,000 as of December 31, 2010 and 2009, respectively. Subsequent to December 31, 2010, the Company repaid the outstanding balance of $2.7 million in full.

 

At December 31, 2010, mortgage notes payable had a weighted average interest rate of 5.8% and a weighted average maturity of 8.0 years with principal payments as follows (in thousands):

 

2011

$    3,984

2012

       1,174

2013

    31,573

2014

          371

2015

          399

Thereafter

    14,010

Total

$  51,511


Noncontrolling interests
v2.2.0.25
Noncontrolling interests
12 Months Ended
Dec. 31, 2010
Noncontrolling interests  
Noncontrolling interests

7. Noncontrolling interests

 

As described in Note 2, the Company reports noncontrolling interests within equity in the consolidated financial statements, but separate from the Company's shareholders' equity. In addition, net income allocable to noncontrolling interests is shown as a reduction from net income in calculating net income allocable to common shareholders.

 

Common partnership units

 

The Company presents the accounts of PSB and the Operating Partnership on a consolidated basis. Ownership interests in the Operating Partnership that can be redeemed for common stock, other than PSB's interest, are classified as noncontrolling interests — common units in the consolidated financial statements. Net income allocable to noncontrolling interests — common units consists of the common units' share of the consolidated operating results after allocation to preferred units and shares. Beginning one year from the date of admission as a limited partner (common units) and subject to certain limitations described below, each limited partner other than PSB has the right to require the redemption of its partnership interest.

 

A limited partner (common units) that exercises its redemption right will receive cash from the Operating Partnership in an amount equal to the market value (as defined in the Operating Partnership Agreement) of the partnership interests redeemed. In lieu of the Operating Partnership redeeming the partner for cash, PSB, as general partner, has the right to elect to acquire the partnership interest directly from a limited partner exercising its redemption right, in exchange for cash in the amount specified above or by issuance of one share of PSB common stock for each unit of limited partnership interest redeemed.

 

A limited partner (common units) cannot exercise its redemption right if delivery of shares of PSB common stock would be prohibited under the applicable articles of incorporation, or if the general partner believes that there is a risk that delivery of shares of common stock would cause the general partner to no longer qualify as a REIT, would cause a violation of the applicable securities laws, or would result in the Operating Partnership no longer being treated as a partnership for federal income tax purposes.

 

At December 31, 2010, there were 7,305,355 common units owned by PS, which are accounted for as noncontrolling interests. On a fully converted basis, assuming all 7,305,355 noncontrolling interests — common units were converted into shares of common stock of PSB at December 31, 2010, the noncontrolling interests — common units would convert into 22.8% of the common shares outstanding. Combined with PS's common stock ownership, on a fully converted basis, PS has a combined ownership of 41.0% of the Company's common equity. At the end of each reporting period, the Company determines the amount of equity (book value of net assets) which is allocable to the noncontrolling interest based upon the ownership interest, and an adjustment is made to the noncontrolling interest, with a corresponding adjustment to paid-in capital, to reflect the noncontrolling interests' equity interest in the Company.

 

Preferred partnership units

 

Through the Operating Partnership, the Company had the following preferred units outstanding as of December 31, 2010 and 2009:

 

 

 

 

 

                   December 31, 2010            

                December 31, 2009              

 

Series

 

      Issuance Date    

Earliest Potential

Redemption Date 

    Dividend

        Rate       

              Units

       Outstanding    

       Amount      

(in thousands)              

            Units

     Outstanding     

       Amount      

(in thousands)              

Series J

May & June, 2004

May, 2009

       7.500%

         1,710,000

$      42,750

       1,710,000

   $      42,750

Series N

December, 2005

December, 2010

       7.125%

             223,300

           5,583

           223,300

              5,583

Series Q

March, 2007

March, 2012

       6.550%

             203,400

           5,085

           203,400

              5,085

Series G

October, 2002

October, 2007

       7.950%

                         —

                  —

           800,000

            20,000

Total

 

 

 

         2,136,700

$      53,418

       2,936,700

   $      73,418

 

Subsequent to December 31, 2010, the Company paid an aggregate of $39.1 million to repurchase 1,710,000 units of its 7.50% Series J Cumulative Redeemable Preferred Units and 203,400 units of its 6.55% Series Q Cumulative Redeemable Preferred Units for a weighted average purchase price of $20.43 per unit. The aggregate par value of the repurchased preferred units was $47.8 million, which generated a gain of $7.4 million, net of original issuance costs of $1.4 million, which will be added to net income allocable to common shareholders in 2011.

 

On May 12, 2010, the Company redeemed 800,000 units of its 7.950% Series G Cumulative Redeemable Preferred Units for $20.0 million. The Company reported non-cash distributions of $582,000, equal to the original issuance costs, as a reduction of net income allocable to common shareholders for the year ended December 31, 2010.

 

During the first quarter of 2009, the Company paid $12.3 million to repurchase 853,300 units of various series of Cumulative Redeemable Preferred Units for a weighted average purchase price of $14.46 per unit. The aggregate par value of the repurchased preferred units was $21.3 million, which generated a gain of $8.4 million, net of original issuance costs of $580,000, which was added to net income allocable to common shareholders.

 

The Operating Partnership has the right to redeem preferred units on or after the fifth anniversary of the applicable issuance date at the original capital contribution plus the cumulative priority return, as defined, to the redemption date to the extent not previously distributed. The preferred units are exchangeable for Cumulative Redeemable Preferred Stock of the respective series of PSB on or after the tenth anniversary of the date of issuance at the option of the Operating Partnership or a majority of the holders of the respective preferred units. The Cumulative Redeemable Preferred Stock will have the same distribution rate and par value as the corresponding preferred units and will otherwise have equivalent terms to the other series of preferred stock described in Note 9. As of December 31, 2010 and 2009, the Company had $1.5 million and $2.1 million, respectively, of deferred costs in connection with the issuance of preferred units, which the Company will report as additional distributions upon notice of redemption.


Related party transactions
v2.2.0.25
Related party transactions
12 Months Ended
Dec. 31, 2010
Related party transactions  
Related party transactions

8. Related party transactions

 

On February 9, 2011, the Company entered into an agreement with PS to borrow $121.0 million with a maturity date of August 9, 2011 at an interest rate of LIBOR plus 0.85%. Funds from this loan were used for the repurchase of the Company's 7.50% Series J Cumulative Redeemable Preferred Units for $35.4 million and to repay, in full, the outstanding balance on the Company's Credit Facility.

 

Concurrent with the public offering that closed August 14, 2009, as discussed in Note 9, the Company sold 383,333 shares of common stock to PS for net proceeds of $17.8 million.

 

Pursuant to a cost sharing and administrative services agreement, the Company shares costs with PS and its affiliated entities for certain administrative services, which are allocated among PS and its affiliates in accordance with a methodology intended to fairly allocate those costs. These costs totaled $543,000, $372,000 and $390,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

 

The Operating Partnership manages industrial, office and retail facilities for PS and its affiliated entities. These facilities, all located in the United States, operate under the "Public Storage" or "PS Business Parks" names. The PS Business Parks name and logo is owned by PS and licensed to the Company under a non-exclusive, royalty-free license agreement. The license can be terminated by either party for any reason with six months written notice.

 

Under the property management contracts, the Operating Partnership is compensated based on a percentage of the gross revenues of the facilities managed. Under the supervision of the property owners, the Operating Partnership coordinates rental policies, rent collections, marketing activities, the purchase of equipment and supplies, maintenance activities, and the selection and engagement of vendors, suppliers and independent contractors. In addition, the Operating Partnership assists and advises the property owners in establishing policies for the hire, discharge and supervision of employees for the operation of these facilities, including property managers and leasing, billing and maintenance personnel.

 

The property management contract with PS is for a seven-year term with the agreement automatically extending for an additional one-year period upon each one-year anniversary of its commencement (unless cancelled by either party). Either party can give notice of its intent to cancel the agreement upon expiration of its current term. Management fee revenues under these contracts were $672,000, $698,000 and $728,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

 

In December, 2006, PS began providing property management services for the mini storage component of two assets owned by the Company. These mini storage facilities, located in Palm Beach County, Florida, operate under the "Public Storage" name.

 

Under the property management contracts, PS is compensated based on a percentage of the gross revenues of the facilities managed. Under the supervision of the Company, PS coordinates rental policies, rent collections, marketing activities, the purchase of equipment and supplies, maintenance activities, and the selection and engagement of vendors, suppliers and independent contractors. In addition, PS assists and advises the Company in establishing policies for the hire, discharge and supervision of employees for the operation of these facilities, including on-site managers, assistant managers and associate managers.

 

Either the Company or PS can cancel the property management contract upon 60 days notice. Management fee expenses under the contract were $48,000, $50,000 and $45,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

 

The Company had amounts due from PS of $530,000 and $396,000 at December 31, 2010 and 2009, respectively, for these contracts, as well as for certain operating expenses paid by the Company on behalf of PS.


Shareholders' equity
v2.2.0.25
Shareholders' equity
12 Months Ended
Dec. 31, 2010
Shareholders' equity  
Shareholders' equity

9. Shareholders' equity

 

Preferred stock

 

As of December 31, 2010 and 2009, the Company had the following series of preferred stock outstanding:

 

 

 

 

 

             December 31, 2010     

          December 31, 2009         

 

Series 

 

               Issuance Date              

Earliest Potential

Redemption Date                  

Dividend

     Rate   

       Shares

Outstanding            

     Amount   

(in thousands)

       Shares

Outstanding            

     Amount   

(in thousands)

Series H

January & October, 2004

January, 2009

   7.000%

       6,340,776

$       158,520

      6,340,776

$       158,520

Series I

April, 2004

April, 2009

   6.875%

       2,745,050

            68,626

      2,745,050

            68,626

Series M

May, 2005

May, 2010

   7.200%

       3,182,000

            79,550

      3,182,000

            79,550

Series O

June & August, 2006

June, 2011

   7.375%

       3,384,000

            84,600

      3,384,000

            84,600

Series P

January, 2007

January, 2012

   6.700%

       5,290,000

         132,250

      5,290,000

         132,250

Series R

October, 2010

October, 2015

   6.875%

       3,000,000

            75,000

                      —

                     —

Series K

June, 2004

June, 2009

   7.950%

                      —

                     —

      2,165,000

            54,125

Series L

August, 2004

August, 2009

   7.600%

                      —

                     —

      1,935,000

            48,375

Total

 

 

 

    23,941,826

$       598,546

    25,041,826

$       626,046

 

On October 15, 2010, the Company issued 3,000,000 depositary shares, each representing 1/1,000 of a share of the 6.875% Cumulative Preferred Stock, Series R, at $25.00 per depositary share for gross proceeds of $75.0 million.

 

The Company used the proceeds from this issuance to redeem 1,935,000 depositary shares, each representing 1/1,000 of a share of the 7.60% Cumulative Preferred Stock, Series L, for $48.4 million on November 8, 2010. The Company reported non-cash distributions of $1.6 million, equal to the original issuance costs, as a reduction of net income allocable to common shareholders for the year ended December 31, 2010.

 

On June 7, 2010, the Company redeemed 2,165,000 depositary shares, each representing 1/1,000 of a share of the 7.950% Cumulative Preferred Stock, Series K, for $54.1 million. The Company reported non-cash distributions of $1.9 million, equal to the original issuance costs, as a reduction of net income allocable to common shareholders for the year ended December 31, 2010.

 

During the first quarter of 2009, the Company paid $50.2 million to repurchase 3,208,174 depositary shares, each representing 1/1,000 of a share of various series of Cumulative Redeemable Preferred Stock for a weighted average purchase price of $15.65 per depositary share. The aggregate par value of the repurchased preferred stock was $80.2 million, which generated a gain of $27.2 million, net of original issuance costs of $2.8 million, which was added to net income allocable to common shareholders.

 

On December 1, 2008, the Company paid $5.5 million to repurchase 400,000 depositary shares, each representing 1/1,000 of a share of the 6.700% Cumulative Preferred Stock, Series P, for a cost of $13.70 per depositary share. The aggregate par value of the repurchased preferred stock was $10.0 million, which generated a gain of $4.2 million, net of original issuance costs of $291,000, which was added to net income allocable to common shareholders.

 

The Company paid $42.7 million, $44.7 million and $50.9 million in distributions to its preferred shareholders for the years ended December 31, 2010, 2009 and 2008, respectively.

 

Holders of the Company's preferred stock will not be entitled to vote on most matters, except under certain conditions. In the event of a cumulative arrearage equal to six quarterly dividends, the holders of the preferred stock will have the right to elect two additional members to serve on the Company's Board of Directors until all events of default have been cured. At December 31, 2010, there were no dividends in arrears.

 

Except under certain conditions relating to the Company's qualification as a REIT, the preferred stock is not redeemable prior to the previously noted redemption dates. On or after the respective redemption dates, the respective series of preferred stock will be redeemable, at the option of the Company, in whole or in part, at $25.00 per depositary share, plus any accrued and unpaid dividends. As of December 31, 2010 and 2009, the Company had $19.7 million and $20.7 million, respectively, of deferred costs in connection with the issuance of preferred stock, which the Company will report as additional non-cash distributions upon notice of its intent to redeem such shares.

 

Common stock

 

On August 14, 2009, the Company sold 3,450,000 shares of common stock in a public offering and concurrently sold 383,333 shares of common stock to PS. The aggregate net proceeds were $171.2 million.

 

The Company's Board of Directors previously authorized the repurchase, from time to time, of up to 6.5 million shares of the Company's common stock on the open market or in privately negotiated transactions. During the year ended December 31, 2008, the Company repurchased 370,042 shares of common stock at an aggregate cost of $18.3 million or an average cost per share of $49.52. Since inception of the program, the Company has repurchased an aggregate of 4.3 million shares of common stock at an aggregate cost of $152.8 million or an average cost per share of $35.84. Under existing board authorizations, the Company can repurchase an additional 2.2 million shares. No shares of common stock were repurchased under this program during the years ended December 31, 2010 and 2009.

 

The Company paid $43.3 million ($1.76 per common share), $39.5 million ($1.76 per common share) and $36.0 million ($1.76 per common share) in distributions to its common shareholders for the years ended December 31, 2010, 2009 and 2008, respectively. The portion of the distributions classified as ordinary income was 100.0%, 100.0% and 100.0% for the years ended December 31, 2010, 2009 and 2008, respectively. No portion of the distributions was classified as long-term capital gain income for the years ended December 31, 2010, 2009 and 2008. Percentages in the three preceding sentences are unaudited.

 

Equity stock

 

In addition to common and preferred stock, the Company is authorized to issue 100.0 million shares of equity stock. The Articles of Incorporation provide that the equity stock may be issued from time to time in one or more series and give the Board of Directors broad authority to fix the dividend and distribution rights, conversion and voting rights, redemption provisions and liquidation rights of each series of equity stock.


Stock compensation
v2.2.0.25
Stock compensation
12 Months Ended
Dec. 31, 2010
Stock compensation  
Stock compensation

10. Stock compensation

 

PSB has a 1997 Stock Option and Incentive Plan (the "1997 Plan") and a 2003 Stock Option and Incentive Plan (the "2003 Plan"), each covering 1.5 million shares of PSB's common stock. Under the 1997 Plan and 2003 Plan, PSB has granted non-qualified options to certain directors, officers and key employees to purchase shares of PSB's common stock at a price no less than the fair market value of the common stock at the date of grant. Additionally, under the 1997 Plan and 2003 Plan, PSB has granted restricted stock units to officers and key employees.

 

Generally, options under the 1997 Plan vest over a three-year period from the date of grant at the rate of one third per year and expire 10 years after the date of grant. Options under the 2003 Plan vest over a five-year period from the date of grant at the rate of one fifth per year and expire 10 years after the date of grant. Restricted stock units granted prior to August, 2002 are subject to a five-year vesting schedule, at 30% in year three, 30% in year four and 40% in year five. Generally, restricted stock units granted subsequent to August, 2002 are subject to a six-year vesting schedule, none in year one and 20% for each of the next five years. Certain restricted stock unit grants are subject to a four-year vesting schedule, with either cliff vesting after year four or none in year one and 33.3% for each of the next three years.

 

The weighted average grant date fair value of options granted in the years ended December 31, 2010, 2009 and 2008 were $6.08 per share, $4.14 per share and $8.50 per share, respectively. The Company has calculated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants for the years ended December 31, 2010, 2009 and 2008, respectively; a dividend yield of 3.3%, 4.4% and 3.1%; expected volatility of 17.5%, 19.4% and 19.1%; expected life of five years; and risk-free interest rates of 2.4%, 2.0% and 3.1%.

 

The weighted average grant date fair value of restricted stock units granted during the years ended December 31, 2010, 2009 and 2008 were $54.44, $35.00 and $52.66, respectively. The Company calculated the fair value of each restricted stock unit grant using the market value on the date of grant.

 

At December 31, 2010, there were a combined total of 882,000 options and restricted stock units authorized to grant. Information with respect to outstanding options and nonvested restricted stock units granted under the 1997 Plan and 2003 Plan is as follows:

 

 

 

 

Options:

 

 

  Number of

    Options   

 

      Weighted

       Average

  Exercise Price 

     Weighted

      Average

    Remaining

  Contract Life 

     Aggregate

       Intrinsic

         Value

  (in thousands) 

Outstanding at December 31, 2007

   572,587

      $  37.86

 

 

Granted

     14,000

      $  57.79

 

 

Exercised

    (30,234)

      $  26.19

 

 

Forfeited

              —

      $        —

 

 

Outstanding at December 31, 2008

   556,353

      $  39.00

 

 

Granted

     26,000

      $  40.50

 

 

Exercised

    (35,100)

      $  33.53

 

 

Forfeited

      (4,501)

      $  38.16

 

 

Outstanding at December 31, 2009

   542,752

      $  39.43

 

 

Granted

   291,000

      $  52.79

 

 

Exercised

(243,936)

      $  31.90

 

 

Forfeited

   (12,000)

      $  58.19

 

 

Outstanding at December 31, 2010

   577,816

      $  48.95

6.50 Years

     $     4,500

Exercisable at December 31, 2010

   252,816

      $  44.08

3.63 Years

     $     3,258

 

 

 

Restricted Stock Units:

 

  Number of

      Units     

      Weighted

Average Grant

Date Fair Value

Nonvested at December 31, 2007

   228,227

      $  53.91

Granted

     40,700

      $  52.66

Vested

    (35,499)

      $  46.57

Forfeited

      (3,740)

      $  54.14

Nonvested at December 31, 2008

   229,688

      $  54.81

Granted

     11,700

      $  35.00

Vested

(114,797)

      $  53.94

Forfeited

      (7,500)

      $  55.96

Nonvested at December 31, 2009

   119,091

      $  53.64

Granted

     13,900

      $  54.44

Vested

    (44,857)

      $  53.84

Forfeited

      (2,460)

      $  55.90

Nonvested at December 31, 2010

     85,674

      $  53.60

 

Included in the Company's consolidated statements of income for the years ended December 31, 2010, 2009 and 2008 was $509,000, $467,000 and $436,000, respectively, in net compensation expense related to stock options. Net compensation expense of $1.5 million, $2.3 million and $3.5 million related to restricted stock units was recognized during the years ended December 31, 2010, 2009 and 2008, respectively.

 

As of December 31, 2010, there was $1.6 million of unamortized compensation expense related to stock options expected to be recognized over a weighted average period of 3.9 years. As of December 31, 2010, there was $2.8 million of unamortized compensation expense related to restricted stock units expected to be recognized over a weighted average period of 3.4 years.

 

Cash received from 243,936 stock options exercised during the year ended December 31, 2010 was $7.8 million. Cash received from 35,100 stock options exercised during the year ended December 31, 2009 was $1.2 million. Cash received from 30,234 stock options exercised during the year ended December 31, 2008 was $792,000. The aggregate intrinsic value of the stock options exercised during the years ended December 31, 2010, 2009 and 2008 was $5.3 million, $453,000 and $844,000, respectively.

 

During the year ended December 31, 2010, 44,857 restricted stock units vested; in settlement of these units, 27,732 shares were issued, net of shares applied to payroll taxes. The aggregate fair value of the shares vested for the year ended December 31, 2010 was $2.4 million. During the year ended December 31, 2009, 114,797 restricted stock units vested; in settlement of these units, 71,160 shares were issued, net of shares applied to payroll taxes. The aggregate fair value of the shares vested for the year ended December 31, 2009 was $4.3 million. During the year ended December 31, 2008, 35,499 restricted stock units vested; in settlement of these units, 22,505 shares were issued, net of shares applied to payroll taxes. The aggregate fair value of the shares vested for the year ended December 31, 2008 was $1.8 million.

 

In May of 2004, the shareholders of the Company approved the issuance of up to 70,000 shares of common stock under the Retirement Plan for Non-Employee Directors (the "Director Plan"). Under the Director Plan the Company grants 1,000 shares of common stock for each year served as a director up to a maximum of 5,000 shares issued upon retirement. The Company recognizes compensation expense with regards to grants to be issued in the future under the Director Plan. As a result, included in the Company's consolidated statements of income was $153,000, $167,000 and $101,000 in compensation expense for the years ended December 31, 2010, 2009 and 2008, respectively. As of December 31, 2010, 2009 and 2008, there was $339,000, $252,000 and $210,000, respectively, of unamortized compensation expense related to these shares. No shares were issued during the years ended December 31, 2010, 2009 and 2008.


Supplementary quarterly financial data
v2.2.0.25
Supplementary quarterly financial data
12 Months Ended
Dec. 31, 2010
Supplementary quarterly financial data  
Supplementary quarterly financial data

11. Supplementary quarterly financial data (unaudited)

 

 

                               Three Months Ended                             

 

 

March 31,

     2010   

  June 30,

     2010   

September 30,

        2010      

December 31,

       2010      

 

(In thousands, except per share data)

Revenues

$  67,132

$  69,878

   $  70,187

  $  71,220

Cost of operations

$  22,966

$  21,720

   $  22,947

  $  22,901

 

 

 

 

 

Net income allocable to common shareholders

$  11,740

$    9,229

   $     9,608

  $     8,375

 

 

 

 

 

Net income per share:

 

 

 

 

Basic

$       0.48

$       0.38

   $       0.39

  $       0.34

Diluted

$       0.48

$       0.37

   $       0.39

  $       0.34

 
 
 

 

                               Three Months Ended                             

 

 

March 31,

     2009   

  June 30,

     2009   

September 30,

        2009      

December 31,

       2009      

 

(In thousands, except per share data)

Revenues

$  69,132

$  67,375

   $  66,885

  $  67,565

Cost of operations

$  22,436

$  21,251

   $  21,320

  $  20,905

 

 

 

 

 

Net income allocable to common shareholders

$  32,588

$    8,152

   $     8,327

  $     9,855

 

 

 

 

 

Net income per share:

 

 

 

 

Basic

$       1.59

$       0.40

   $       0.37

  $       0.40

Diluted

$       1.59

$       0.39

   $       0.37

  $       0.40


Commitments and contingencies
v2.2.0.25
Commitments and contingencies
12 Months Ended
Dec. 31, 2010
Commitments and contingencies  
Commitments and contingencies

12. Commitments and contingencies

 

Substantially all of the Company's properties have been subjected to Phase I environmental reviews. Such reviews have not revealed, nor is management aware of, any probable or reasonably possible environmental costs that management believes would have a material adverse effect on the Company's business, assets or results of operations, nor is the Company aware of any potentially material environmental liability.

 

The Company currently is neither subject to any other material litigation nor, to management's knowledge, is any material litigation currently threatened against the Company other than routine litigation and administrative proceedings arising in the ordinary course of business.


401(K) Plan
v2.2.0.25
401(K) Plan
12 Months Ended
Dec. 31, 2010
401(K) Plan  
401(K) Plan

Real Estate and Accumulated Depreciation
v2.2.0.25
Real Estate and Accumulated Depreciation
12 Months Ended
Dec. 31, 2010
Real Estate and Accumulated Depreciation  
Real Estate and Accumulated Depreciation

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2010

(DOLLARS IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Initial Cost to Company    

           Cost

    Capitalized

  Subsequent to

    Acquisition  

 

 

             Gross Amount at Which Carried at

                             December 31, 2010                             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description                                 

 

 

               Location                       

 

 

Encumbrances

 

 

        Land      

      Buildings

            and

Improvements              

      Buildings

            and

Improvements              

 

 

        Land      

      Buildings

            and

Improvements

 

 

         Total        

 

Accumulated

Depreciation             

 

 

Year(s) Acquired

Depreciable

       Lives

     (Years)   

Mesa

Mesa, AZ

$            —

$        675

  $      1,692

  $      2,859

$        675

                  $           4,551

$        5,226

$     2,741

1997

5-30

Corporate/Metro Park Phoenix

Phoenix, AZ

              —

       5,130

       17,514

         2,294

       5,130

                             19,808

        24,938

        9,172

1999/2003

5-30

Tempe/McKellips

Tempe, AZ

              —

          195

            522

            621

          195

           1,143

          1,338

           686

1997

5-30

University

Tempe, AZ

              —

       2,805

         7,107

         5,938

       2,805

         13,045

        15,850

        8,029

1997

5-30

Parkway Commerce

Hayward, CA

              —

       4,398

       10,433

         3,845

       4,398

         14,278

        18,676

        7,006

1997

5-30

Monterey/Calle

Monterey, CA

              —

          288

            706

            272

          288

              978

          1,266

           543

1997

5-30

Northpointe Business Center

Sacramento, CA

              —

       3,031

       13,826

         5,437

       3,031

         19,263

        22,294

      10,786

1999

5-30

Sacramento/Northgate

Sacramento, CA

              —

       1,710

         4,567

         3,012

       1,710

           7,579

          9,289

        4,342

1997

5-30

Las Plumas

San Jose, CA

              —

       4,379

       12,889

         5,581

       4,379

         18,470

        22,849

      10,752

1998

5-30

Oakland Road

San Jose, CA

              —

       3,458

         8,765

         2,631

       3,458

         11,396

        14,854

        5,835

1997

5-30

Rogers Ave

San Jose, CA

              —

       3,540

         4,896

            363

       3,540

           5,259

          8,799

        1,560

2006

5-30

San Ramon/Norris Canyon

San Ramon, CA

              —

       1,486

         3,642

         1,157

       1,486

           4,799

          6,285

        2,350

1997

5-30

Commerce Park

Santa Clara, CA

              —

     17,218

       21,914

         3,528

     17,218

         25,442

        42,660

      12,200

2007

5-30

Santa Clara Tech Park

Santa Clara, CA

              —

       7,673

       15,645

         1,944

       7,673

         17,589

        25,262

        7,926

2000

5-30

Airport Blvd.

So. San Francisco, CA

              —

          899

         2,387

            613

          899

           3,000

          3,899

        1,447

1997

5-30

So. San Francisco/Produce

So. San Francisco, CA

              —

          776

         1,886

            381

          776

           2,267

          3,043

        1,079

1997

5-30

Buena Park Industrial Center

Buena Park, CA

              —

       3,245

         7,703

         1,882

       3,245

           9,585

        12,830

        4,727

1997

5-30

Carson

Carson, CA

              —

          990

         2,496

         1,223

          990

           3,719

          4,709

        2,015

1997

5-30

Cerritos Business Center

Cerritos, CA

              —

       4,218

       10,273

         3,175

       4,218

         13,448

        17,666

        7,019

1997

5-30

Cerritos/Edwards

Cerritos, CA

              —

          450

         1,217

         1,017

          450

           2,234

          2,684

        1,094

1997

5-30

Culver City

Culver City, CA

              —

       3,252

         8,157

         4,715

       3,252

         12,872

        16,124

        7,173

1997

5-30

Corporate Pointe

Irvine, CA

              —

       6,876

       18,519

         5,664

       6,876

         24,183

        31,059

      12,286

2000

5-30

Laguna Hills Commerce Center

Laguna Hills, CA

              —

     16,261

       39,559

         4,096

     16,261

         43,655

        59,916

      20,161

1997

5-30

Plaza Del Lago

Laguna Hills, CA