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PS Business Parks, Inc. Reports Results for the Quarter Ended June 30, 2019

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PS Business Parks, Inc. (NYSE:PSB) reported operating results for the three and six months ended June 30, 2019.

Operating Results for the Three Months Ended June 30, 2019

Net income allocable to common shareholders was $28.6 million, or $1.04 per diluted common share, for the three months ended June 30, 2019, a decrease of $41.6 million, or 59.3%, from $70.2 million, or $2.56 per diluted common share, for the same period in 2018. The decrease was mainly due to the gain on sale of real estate facilities sold during the second quarter of 2018 that did not recur in the second quarter of 2019, partially offset by an increase in net operating income ("NOI") with respect to our real estate facilities. The increase in NOI includes a $3.4 million, or 5.2%, increase attributable to our Same Park facilities driven by an increase in rental rates, combined with increased NOI from our Non-Same Park and multifamily assets, partially offset by reduced NOI generated from facilities sold in 2018 as well as assets held for sale as of June 30, 2019.

Operating Results for the Six Months Ended June 30, 2019

Net income allocable to common shareholders was $54.9 million, or $2.00 per diluted common share, for the six months ended June 30, 2019, a decrease of $61.4 million, or 52.8%, from $116.3 million, or $4.24 per diluted common share, for the same period in 2018. The decrease was mainly due to the gain on sale of real estate facilities sold during the first half of 2018 that did not recur in 2019, partially offset by an increase in NOI with respect to our real estate facilities. The increase in NOI includes a $6.2 million, or 4.8%, increase attributable to our Same Park facilities driven by an increase in rental rates, combined with increased NOI from our Non-Same Park and multifamily assets, partially offset by reduced NOI generated from facilities sold in 2018.

Funds from Operations ("FFO"), Core FFO and Funds Available for Distribution ("FAD")

FFO increased 10.4% during the three months ended June 30, 2019 compared to the same period in 2018, increasing to $1.75 per share from $1.59 per share in the prior period. FFO increased 7.8% during the six months ended June 30, 2019 compared to the same period in 2018, increasing to $3.42 per share from $3.18 per share in the prior period. FFO is a non-GAAP (generally accepted accounting principles) measure defined by the National Association of Real Estate Investment Trusts and generally represents GAAP net income before real estate depreciation and amortization expense, gains or losses on sales of operating properties and land and impairment charges on real estate assets.

Core FFO per share was exactly equal to FFO per share for the three and six months ended June 30, 2019 and 2018. Core FFO is also a non-GAAP measure that represents FFO excluding the impact of (i) charges related to the redemption of preferred stock and (ii) nonrecurring income or expense items, neither of which were incurred by the Company during the three and six month periods ended June 30, 2019 and 2018.

FAD was $52.3 million for the three months ended June 30, 2019 as compared to $46.8 million for the same period in 2018, an increase of 11.6%. FAD was $98.5 million for the six months ended June 30, 2019 as compared to $90.8 million for the same period in 2018, an increase of 8.5%. FAD is a non-GAAP measure that represents Core FFO adjusted to (i) deduct recurring capital improvements and capitalized tenant improvements and lease commissions and (ii) eliminate certain non-cash income or expenses such as straight-line rent and stock compensation expense.

FFO, Core FFO and FAD are not substitutes for GAAP net income. Other real estate investment trusts ("REITs") may compute these measures differently; and, in the case of Core FFO and FAD, other REITs may not use the same methodology which could inhibit comparability. We believe our presentations of FFO, Core FFO and FAD assist investors and analysts in analyzing and comparing our operating and financial performance between reporting periods.

Property Operations–Same Park Portfolio

We believe that evaluation of our Same Park portfolio, defined as all properties owned and operated as of June 30, 2019 that were acquired prior to January 1, 2017, provides an informative view of how the Company's portfolio has performed over comparable periods. As of June 30, 2019, our Same Park facilities constitute 25.8 million rentable square feet, or 91.2% of the 28.3 million rentable square feet in the Company's total portfolio, and excludes our 95.0% interest in our 395-unit multifamily property. Approximately 1.3 million square feet of flex and office business parks located in Rockville and Silver Spring, Maryland have been classified as held for sale as of June 30, 2019. As such, these parks have been removed from Same Park results for the three and six months ended June 30, 2019 and 2018.

The following table presents the unaudited operating results of the Company's Same Park facilities for the three and six months ended June 30, 2019 and 2018 (in thousands, except per square foot amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

For The Six Months

 

 

Ended June 30,

 

Ended June 30,

 

 

2019

2018

Change

2019

2018

Change

Rental income (1)

$

95,945

 

$

91,942

 

4.4

%

$

191,638

 

$

183,620

 

4.4

%

 

 

 

 

 

 

 

 

 

 

 

Adjusted cost of operations (2)

 

 

 

 

 

 

 

 

 

 

Property taxes

 

10,129

 

 

9,764

 

3.7

%

 

20,337

 

 

19,512

 

4.2

%

Utilities

 

4,524

 

 

4,637

 

(2.4

%)

 

9,516

 

 

9,572

 

(0.6

%)

Repairs and maintenance

 

6,138

 

 

5,695

 

7.8

%

 

11,725

 

 

11,127

 

5.4

%

Snow removal

 

36

 

 

42

 

(14.3

%)

 

1,049

 

 

655

 

60.2

%

Other expenses

 

6,120

 

 

6,228

 

(1.7

%)

 

12,762

 

 

12,722

 

0.3

%

Total

 

26,947

 

 

26,366

 

2.2

%

 

55,389

 

 

53,588

 

3.4

%

 

 

 

 

 

 

 

 

 

 

 

NOI (2) (3)

$

68,998

 

$

65,576

 

5.2

%

$

136,249

 

$

130,032

 

4.8

%

 

 

 

 

 

 

 

 

 

 

 

Selected Statistical Data

 

 

 

 

 

 

 

 

 

 

NOI margin (4)

 

71.9

%

 

71.3

%

0.8

%

 

71.1

%

 

70.8

%

0.4

%

Weighted average square foot occupancy

 

94.3

%

 

94.5

%

(0.2

%)

 

94.5

%

 

94.5

%

0.0

%

Annualized revenue per occupied

 

 

 

 

 

 

 

 

 

 

square foot (5)

$

15.77

 

$

15.08

 

4.6

%

$

15.71

 

$

15.06

 

4.3

%

Revenue per available foot (RevPAF) (6)

$

14.87

 

$

14.25

 

4.4

%

$

14.85

 

$

14.23

 

4.4

%

(1)

Same Park rental income includes lease buyout income of $780,000 and $122,000 for the three months ended June 30, 2019 and 2018, respectively, and $957,000 and $250,000 for the six months ended June 30, 2019 and 2018, respectively.

(2)

Adjusted cost of operations, as presented above, excludes stock compensation expense for employees whose compensation expense is recorded in cost of operations, which can vary significantly period to period based upon the performance of the Company. Beginning January 1, 2019, the Company has recorded our divisional vice presidents' compensation costs within general and administrative expense as we determined that the nature of these individuals' responsibilities is more consistent with corporate oversight as opposed to direct property operations. As a result of this change, we have reclassified divisional vice presidents' compensation costs totaling $289,000 and $655,000 for the three and six months ended June 30, 2018, respectively, from adjusted cost of operations into general and administrative expenses in order to conform to the current period presentation. Non-cash compensation expense for our divisional vice presidents, which totaled $149,000 and $302,000 for the three and six months ended June 30, 2018, respectively, had previously been excluded from adjusted cost of operations.

(3)

We utilize NOI, a non-GAAP financial measure, to evaluate the operating performance of our business parks. We define NOI as rental income less adjusted cost of operations. We believe NOI assists investors in analyzing the performance and value of our business parks by excluding (i) corporate overhead (i.e., general and administrative expenses) because it does not relate to the direct operating performance of our business parks, (ii) depreciation and amortization expense because it does not accurately reflect changes in the fair value of our business parks and (iii) stock compensation expense because this expense item can vary significantly from period to period and thus impact comparability across periods.

(4)

NOI margin is computed by dividing NOI by rental income.

(5)

Revenue per occupied square foot is computed by dividing rental income during the period by weighted average occupied square feet during the same period. For the three and six month periods ending June 30, 2019 and 2018, rental income amounts have been annualized.

(6)

Revenue per available foot is computed by dividing rental income during the period by weighted average available square feet during the same period. For the three and six month periods ending June 30, 2019 and 2018, rental income amounts have been annualized.

The following table summarizes unaudited selected quarterly financial data with respect to the Same Park facilities (in thousands, except per square foot amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

March 31

 

June 30

 

September 30

 

December 31

Rental income

 

 

 

 

 

 

 

 

 

 

 

2019

$

95,693

 

 

$

95,945

 

 

$

 

$

2018

$

91,678

 

 

$

91,942

 

 

$

92,356

 

 

$

92,459

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted cost of operations (1)

 

 

 

 

 

 

 

 

 

 

 

2019

$

28,442

 

 

$

26,947

 

 

$

 

$

2018

$

27,222

 

 

$

26,366

 

 

$

26,252

 

 

$

25,495

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI (1)

 

 

 

 

 

 

 

 

 

 

 

2019

$

67,251

 

 

$

68,998

 

 

$

 

$

2018

$

64,456

 

 

$

65,576

 

 

$

66,104

 

 

$

66,964

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average square foot occupancy

 

 

 

 

 

 

 

 

2019

 

94.7

%

 

 

94.3

%

 

 

 

 

2018

 

94.5

%

 

 

94.5

%

 

 

95.1

%

 

 

95.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Annualized revenue per occupied square foot

 

 

 

 

 

 

 

 

 

2019

$

15.66

 

 

$

15.77

 

 

$

 

$

2018

$

15.04

 

 

$

15.08

 

 

$

15.05

 

 

$

15.01

 

 

 

 

 

 

 

 

 

 

 

 

 

RevPAF

 

 

 

 

 

 

 

 

 

2019

$

14.83

 

 

$

14.87

 

 

$

 

$

2018

$

14.21

 

 

$

14.25

 

 

$

14.31

 

 

$

14.33

 

(1)

Beginning January 1, 2019, the Company has recorded our divisional vice presidents' compensation costs within general and administrative expense as we determined that the nature of these individuals' responsibilities is more consistent with corporate oversight as opposed to direct property operations. To conform to current period presentation, we have reclassified divisional vice presidents' compensation costs totaling $366,000, $289,000, $281,000 and $281,000 for each of the three months ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, respectively, from adjusted cost of operations into general and administrative expenses. Non-cash compensation expense for our divisional vice presidents had previously been excluded from adjusted cost of operations.

Distributions Declared

On July 23, 2019, the Board of Directors declared a quarterly dividend of $1.05 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. Distributions will be payable on September 27, 2019 to shareholders of record on September 12, 2019.

Company Information

PS Business Parks, Inc., a member of the S&P MidCap 400, is a REIT that acquires, develops, owns and operates commercial properties, primarily multi-tenant industrial, flex and office space. As of June 30, 2019, the Company wholly owned 28.3 million rentable square feet with approximately 5,100 commercial customers in six states and held a 95.0% interest in a 395-unit apartment complex.

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 Company's website at psbusinessparks.com.

A conference call is scheduled for Wednesday, July 24, 2019, at 9:00 a.m. PDT (12:00 p.m. EDT) to discuss second quarter results. The toll free number is (866) 342-8591; the conference ID is PSBQ219. 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 7, 2019 at (800) 839-0866, as well as via webcast on the Company's website.

Additional financial data attached.

 

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

 

 

 

 

June 30,

 

December 31,

 

2019

 

2018

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

42,046

 

 

$

37,379

 

 

 

 

 

 

 

Real estate facilities, at cost

 

 

 

 

 

Land

 

772,399

 

 

 

762,731

 

Buildings and improvements

 

2,171,281

 

 

 

2,157,407

 

 

 

2,943,680

 

 

 

2,920,138

 

Accumulated depreciation

 

(1,135,107

)

 

 

(1,097,748

)

 

 

1,808,573

 

 

 

1,822,390

 

Properties held for sale, net

 

124,680

 

 

 

128,093

 

Land and building held for development

 

31,841

 

 

 

30,848

 

 

 

1,965,094

 

 

 

1,981,331

 

Rent receivable, net

 

2,308

 

 

 

1,403

 

Deferred rent receivable, net

 

34,572

 

 

 

33,308

 

Other assets

 

13,524

 

 

 

15,173

 

Total assets

$

2,057,544

 

 

$

2,068,594

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

Accrued and other liabilities

$

80,367

 

 

$

85,141

 

Total liabilities

 

80,367

 

 

 

85,141

 

Commitments and contingencies

 

 

 

 

 

Equity

 

 

 

 

 

PS Business Parks, Inc.'s shareholders' equity

 

 

 

 

 

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

 

 

 

 

 

38,390 shares issued and outstanding at

 

 

 

 

 

June 30, 2019 and December 31, 2018

 

959,750

 

 

 

959,750

 

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

 

 

 

 

 

27,429,756 and 27,362,101 shares issued and outstanding at

 

 

 

 

 

June 30, 2019 and December 31, 2018, respectively

 

274

 

 

 

274

 

Paid-in capital

 

733,777

 

 

 

736,131

 

Accumulated earnings

 

67,049

 

 

 

69,207

 

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

 

1,760,850

 

 

 

1,765,362

 

Noncontrolling interests

 

216,327

 

 

 

218,091

 

Total equity

 

1,977,177

 

 

 

1,983,453

 

Total liabilities and equity

$

2,057,544

 

 

$

2,068,594

 

 

PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

For The Three Months

 

For The Six Months

 

Ended June 30,

 

Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

$

107,782

 

 

$

101,824

 

 

$

215,607

 

 

$

205,583

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Cost of operations(1)

 

31,460

 

 

 

30,796

 

 

 

65,053

 

 

 

63,252

 

Depreciation and amortization

 

24,768

 

 

 

24,416

 

 

 

49,643

 

 

 

48,298

 

General and administrative (1)

 

2,827

 

 

 

2,828

 

 

 

6,060

 

 

 

5,678

 

Total operating expenses

 

59,055

 

 

 

58,040

 

 

 

120,756

 

 

 

117,228

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

764

 

 

 

294

 

 

 

1,382

 

 

 

578

 

Interest and other expense

 

(118

)

 

 

(167

)

 

 

(285

)

 

 

(332

)

Gain on sale of real estate facilities

 

 

 

58,448

 

 

 

 

 

85,283

 

Net income

 

49,373

 

 

 

102,359

 

 

 

95,948

 

 

 

173,884

 

Allocation to noncontrolling interests

 

(7,623

)

 

 

(18,400

)

 

 

(14,650

)

 

 

(30,300

)

Net income allocable to PS Business Parks, Inc.

 

41,750

 

 

 

83,959

 

 

 

81,298

 

 

 

143,584

 

Allocation to preferred shareholders

 

(12,959

)

 

 

(12,959

)

 

 

(25,918

)

 

 

(25,962

)

Allocation to restricted stock unit holders

 

(212

)

 

 

(779

)

 

 

(480

)

 

 

(1,353

)

Net income allocable to common shareholders

$

28,579

 

 

$

70,221

 

 

$

54,900

 

 

$

116,269

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.04

 

 

$

2.57

 

 

$

2.00

 

 

$

4.26

 

Diluted

$

1.04

 

 

$

2.56

 

 

$

2.00

 

 

$

4.24

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

27,426

 

 

 

27,322

 

 

 

27,400

 

 

 

27,294

 

Diluted

 

27,532

 

 

 

27,423

 

 

 

27,505

 

 

 

27,395

 

(1)

We have reclassified our divisional vice presidents' compensation costs totaling $460,000 for the three months ended June 30, 2018, consisting of $305,000 of compensation costs and $155,000 of stock compensation expense, and $1.0 million for the six months ended June 30, 2018, consisting of $690,000 of compensation costs and $314,000 of stock compensation expense, from cost of operations into general and administrative expenses on our consolidated statements of income in the three and six months ended June 30, 2018 in order to conform to the current period presentation.

 

PS BUSINESS PARKS, INC.

Computation of Funds from Operations ("FFO"), Core FFO and Funds Available for Distribution ("FAD")

(In thousands, except per share amounts)

(Unaudited)

 

 

For The Three Months

 

For The Six Months

 

Ended June 30,

 

Ended June 30,

 

2019

 

2018

 

2019

 

2018

Net income allocable to common shareholders

$

28,579

 

 

$

70,221

 

 

$

54,900

 

 

$

116,269

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate facilities

 

 

 

(58,448

)

 

 

 

 

(85,283

)

Depreciation and amortization expense

 

24,768

 

 

 

24,416

 

 

 

49,643

 

 

 

48,298

 

Net income allocated to noncontrolling interests

 

7,623

 

 

 

18,400

 

 

 

14,650

 

 

 

30,300

 

Net income allocated to restricted stock unit holders

 

212

 

 

 

779

 

 

 

480

 

 

 

1,353

 

FFO (income) loss allocated to joint venture partner

 

(37

)

 

 

(2

)

 

 

(66

)

 

 

11

 

FFO allocable to common and dilutive shares (1)

$

61,145

 

 

$

55,366

 

 

$

119,607

 

 

$

110,948

 

 

 

 

 

 

 

 

 

 

 

 

 

Core FFO allocable to common and dilutive shares (1)

$

61,145

 

 

$

55,366

 

 

 $

119,607

 

 

 $

110,948

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

Recurring capital improvements

 

(2,428

)

 

 

(2,329

)

 

 

(3,608

)

 

 

(3,460

)

Tenant improvements

 

(5,016

)

 

 

(3,817

)

 

 

(8,567

)

 

 

(7,757

)

Lease commissions

 

(1,417

)

 

 

(1,834

)

 

 

(3,373

)

 

 

(3,773

)

Straight-line rent

 

(652

)

 

 

(609

)

 

 

(1,309

)

 

 

(1,344

)

In-place lease adjustment

 

4

 

 

 

16

 

 

 

25

 

 

 

23

 

Tenant improvement reimbursement amortization,

 

 

 

 

 

 

 

 

 

 

 

net of lease incentive amortization

 

(284

)

 

 

(619

)

 

 

(663

)

 

 

(1,134

)

Non-cash stock compensation expense

 

918

 

 

 

671

 

 

 

1,889

 

 

 

1,781

 

Cash paid for taxes in lieu of shares upon vesting of

 

 

 

 

 

 

 

 

 

 

 

restricted stock units

 

(6

)

 

 

 

 

(5,500

)

 

 

(4,529

)

FAD allocable to common and dilutive shares (2)

$

52,264

 

 

$

46,845

 

 

$

98,501

 

 

$

90,755

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to common shareholders, noncontrolling interests and

 

 

 

 

 

 

 

 

 

 

 

restricted stock unit holders

$

36,728

 

 

$

29,675

 

 

$

73,404

 

 

$

59,351

 

Distribution payout ratio

 

70.3

%

 

 

63.3

%

 

 

74.5

%

 

 

65.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Earnings per Share to FFO per Share

 

 

 

 

 

 

 

 

 

 

 

Net income per common share—diluted

$

1.04

 

 

$

2.56

 

 

$

2.00

 

 

$

4.24

 

Gain on sale of real estate facilities

 

 

 

(1.67

)

 

 

 

 

(2.44

)

Depreciation and amortization expense

 

0.71

 

 

 

0.70

 

 

 

1.42

 

 

 

1.38

 

FFO per share (1)

$

1.75

 

 

$

1.59

 

 

$

3.42

 

 

$

3.18

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average outstanding:

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

27,426

 

 

 

27,322

 

 

 

27,400

 

 

 

27,294

 

Operating partnership units

 

7,305

 

 

 

7,305

 

 

 

7,305

 

 

 

7,305

 

Restricted stock units

 

109

 

 

 

156

 

 

 

132

 

 

 

189

 

Common share equivalents

 

106

 

 

 

101

 

 

 

105

 

 

 

101

 

Total common and dilutive shares

 

34,946

 

 

 

34,884

 

 

 

34,942

 

 

 

34,889

 

(1)

FFO and Core FFO are defined above. For the three and six months ended June 30, 2019 and 2018, Core FFO was exactly equal to FFO as the Company did not incur any preferred share redemption charges or nonrecurring income or expenses in either period.

(2)

FAD is defined above.

 

PS BUSINESS PARKS, INC.

Reconciliation of Selected non-GAAP Measures to Analogous GAAP Measures

(Unaudited, in thousands)

 

 

For The Three Months

 

 

 

For The Six Months

 

 

 

Ended June 30,

 

 

 

Ended June 30,

 

 

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Rental income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Park (1)

$

95,945

 

 

$

91,942

 

 

4.4

%

 

$

191,638

 

 

$

183,620

 

 

4.4

%

Non-Same Park

 

3,429

 

 

 

627

 

 

446.9

%

 

 

5,910

 

 

 

627

 

 

842.6

%

Multifamily

 

2,475

 

 

 

1,738

 

 

42.4

%

 

 

4,973

 

 

 

3,162

 

 

57.3

%

Assets sold or held for sale (2)

 

5,933

 

 

 

7,517

 

 

(21.1

%)

 

 

13,086

 

 

 

18,174

 

 

(28.0

%)

Total rental income

 

107,782

 

 

 

101,824

 

 

5.9

%

 

 

215,607

 

 

 

205,583

 

 

4.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of operations (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Park

 

26,947

 

 

 

26,366

 

 

2.2

%

 

 

55,389

 

 

 

53,588

 

 

3.4

%

Non-Same Park

 

1,024

 

 

 

224

 

 

357.1

%

 

 

2,167

 

 

 

224

 

 

867.4

%

Multifamily

 

1,002

 

 

 

973

 

 

3.0

%

 

 

2,073

 

 

 

1,970

 

 

5.2

%

Assets sold or held for sale (2)

 

2,192

 

 

 

2,899

 

 

(24.4

%)

 

 

4,823

 

 

 

6,763

 

 

(28.7

%)

Stock compensation expense (4)

 

295

 

 

 

334

 

 

(11.7

%)

 

 

601

 

 

 

707

 

 

(15.0

%)

Total cost of operations

 

31,460

 

 

 

30,796

 

 

2.2

%

 

 

65,053

 

 

 

63,252

 

 

2.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Park

 

68,998

 

 

 

65,576

 

 

5.2

%

 

 

136,249

 

 

 

130,032

 

 

4.8

%

Non-Same Park

 

2,405

 

 

 

403

 

 

496.8

%

 

 

3,743

 

 

 

403

 

 

828.8

%

Multifamily

 

1,473

 

 

 

765

 

 

92.5

%

 

 

2,900

 

 

 

1,192

 

 

143.3

%

Assets sold or held for sale (2) (5)

 

3,741

 

 

 

4,618

 

 

(19.0

%)

 

 

8,263

 

 

 

11,411

 

 

(27.6

%)

Stock compensation expense (4)

 

(295

)

 

 

(334

)

 

(11.7

%)

 

 

(601

)

 

 

(707

)

 

(15.0

%)

Depreciation and amortization expense

 

(24,768

)

 

 

(24,416

)

 

1.4

%

 

 

(49,643

)

 

 

(48,298

)

 

2.8

%

General and administrative expense (3)

 

(2,827

)

 

 

(2,828

)

 

(0.0

%)

 

 

(6,060

)

 

 

(5,678

)

 

6.7

%

Interest and other income

 

764

 

 

 

294

 

 

159.9

%

 

 

1,382

 

 

 

578

 

 

139.1

%

Interest and other expense

 

(118

)

 

 

(167

)

 

(29.3

%)

 

 

(285

)

 

 

(332

)

 

(14.2

%)

Gain on sale of real estate facilities

 

 

 

58,448

 

 

(100.0

%)

 

 

 

 

85,283

 

 

(100.0

%)

Net income

$

49,373

 

 

$

102,359

 

 

(51.8

%)

 

$

95,948

 

 

$

173,884

 

 

(44.8

%)

(1)

Same Park rental income includes lease buyout income of $780,000 and $122,000 for the three months ended June 30, 2019 and 2018, respectively, and $957,000 and $250,000 for the six months ended June 30, 2019 and 2018, respectively.

(2)

Amounts for the three and six months ended June 30, 2019 reflect the operating results related to 1.3 million square feet of flex and office assets held for sale as of June 30, 2019; amounts shown for the three and six months ended June 30, 2018 reflect the operating results related to 1.3 million square feet of flex and office assets held for sale as of June 30, 2019 as well as operating results related to 899,000 square feet of assets sold in 2018.

(3)

We have reclassified our divisional vice presidents' compensation costs totaling $460,000 and $1.0 million for the three and six months ended June 30, 2018, respectively, from cost of operations into general and administrative expenses on our consolidated statements of income in the three and six months ended June 30, 2018 in order to conform to the current period presentation. Of this amount, $155,000 and $314,000 of stock compensation expense for the three and six months, respectively, have previously been excluded from NOI.

(4)

Stock compensation expense, as shown here, represents stock compensation expense for employees whose compensation expense is recorded in cost of operations. Note that stock compensation expense attributable to our executive management team (including divisional vice presidents) and other corporate employees is recorded within general and administrative expense.

(5)

NOI from assets held for sale was $3.7 million and $4.2 million for the three months ended June 30, 2019 and 2018, respectively, and $8.3 million and $8.5 million for the six months ended June 30, 2019 and 2018, respectively. The three and six months 2018 remaining NOI balances relate to assets sold during 2018.

 

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