PS Business Parks, Inc. Reports Results for the Second Quarter Ended June 30, 2009

PS Business Parks, Inc. (NYSE:PSB) reported operating results for the second quarter ended June 30, 2009.

Net income allocable to common shareholders for the three months ended June 30, 2009 was $8.7 million, or $0.42 per diluted share, on revenues of $68.1 million compared to $4.6 million, or $0.22 per diluted share, on revenues of $70.6 million for the same period in 2008. Net income allocable to common shareholders for the six months ended June 30, 2009 was $41.5 million, or $2.01 per diluted share, on revenues of $138.1 million compared to $8.3 million, or $0.40 per diluted share, on revenues of $140.9 million for the same period in 2008.

Revenues for the three months ended June 30, 2009 decreased $2.5 million, or 3.5%, over the same period in 2008. Net income allocable to common shareholders for the three months ended June 30, 2009 increased $4.1 million over the same period in 2008 primarily as a result of a decrease in depreciation expense of $3.7 million, a decrease in preferred equity distributions of $2.0 million and a $1.5 million gain on the sale of a parcel of land in Oregon partially offset by a decrease in net operating income of $2.1 million due to a decrease in occupancy combined with an increase in net income allocable to noncontrolling interest — common units of $1.4 million.

Revenues for the six months ended June 30, 2009 decreased $2.9 million, or 2.0%, over the same period in 2008. Net income allocable to common shareholders for the six months ended June 30, 2009 increased $33.2 million over the same period in 2008 primarily as a result of a net gain of $35.6 million on the repurchase of preferred equity, a $1.5 million gain on the sale of a parcel of land in Oregon, a decrease in depreciation expense of $6.8 million and a decrease in preferred equity distributions of $3.6 million partially offset by an increase in net income allocable to noncontrolling interests — common units of $11.8 million and a decrease in net operating income of $2.7 million due to a decrease in occupancy.

Supplemental Measures

Funds from operations ("FFO”) allocable to common and dilutive shares for the three months ended June 30, 2009 and 2008 were $31.7 million, or $1.13 per common and dilutive share, and $31.4 million, or $1.12 per common and dilutive share, respectively. The increase in FFO for the three months ended June 30, 2009 over the same period in 2008 was primarily due to a decrease in preferred equity distributions as a result of the preferred equity repurchased during the first quarter of 2009 combined with a decrease in general and administrative expense partially offset by a decrease in net operating income. FFO allocable to common and dilutive shares for the six months ended June 30, 2009 was $98.9 million, or $3.53 per common and dilutive share, compared to $62.0 million, or $2.21 per common and dilutive share, for the same period in 2008. The increase in FFO for the six months ended June 30, 2009 over the same period in 2008 was primarily due to a net gain of $35.6 million on the repurchase of preferred equity combined with a decrease in preferred equity distributions and a decrease in general and administrative expense partially offset by a decrease in net operating income. Excluding the $35.6 million net gain, FFO allocable to common and dilutive shares would have been $63.3 million, or $2.26 per common and dilutive share, for the six months ended June 30, 2009.

Property Operations

In order to evaluate the performance of the Company’s overall portfolio over two comparable periods, management analyzes the operating performance of a consistent group of properties owned and operated throughout both periods (herein referred to as "Same Park”). As the Company has had no acquisitions or dispositions since January 1, 2008, for the three and six months ended June 30, 2009 and 2008, the Same Park portfolio constitutes 19.6 million rentable square feet, which includes 100.0% of the assets of the Company.

The Company’s property operations account for substantially all of the net operating income earned by the Company. The following table presents the operating results of the Company’s properties for the three and six months ended June 30, 2009 and 2008 in addition to other income and expense items affecting net income (unaudited, in thousands, except per square foot amounts):

Financial Condition

The following are key financial ratios with respect to the Company’s leverage at and for the three months ended June 30, 2009:

Land Disposition

During 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.

Distributions Declared

The Board of Directors declared a quarterly dividend of $0.44 per common share on August 4, 2009. Distributions were also declared on the various series of depositary shares, each representing 1/1,000 of a share of preferred stock listed below. Distributions are payable September 30, 2009 to shareholders of record on September 15, 2009.

Company Information

PS Business Parks, Inc., a member of the S&P SmallCap 600, is a self-advised and self-managed equity real estate investment trust ("REIT”) that acquires, develops, owns and operates commercial properties, primarily flex, multi-tenant office and industrial space. The Company defines "flex” space as buildings that are configured with a combination of office and warehouse space and can be designed to fit a number of uses (including office, assembly, showroom, laboratory, light manufacturing and warehouse space). As of June 30, 2009, PSB wholly owned 19.6 million rentable square feet with approximately 3,750 customers located in eight states, concentrated in California (5.8 million sq. ft.), Florida (3.6 million sq. ft.), Virginia (3.0 million sq. ft.), Texas (2.9 million sq. ft.), Maryland (1.8 million sq. ft.), Oregon (1.3 million sq. ft.), Arizona (0.7 million sq. ft.) and Washington (0.5 million sq. ft.).

Forward-Looking Statements

When used within this press release, the words "may,” "believes,” "anticipates,” "plans,” "expects,” "seeks,” "estimates,” "intends” and similar expressions are intended to identify "forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results and performance of the Company to be materially different from those expressed or implied in the forward-looking statements. Such factors include the impact of competition from new and existing commercial facilities which could impact rents and occupancy levels at the Company’s facilities; the Company’s ability to evaluate, finance and integrate acquired and developed properties into the Company’s existing operations; the Company’s ability to effectively compete in the markets that it does business in; the impact of the regulatory environment as well as national, state and local laws and regulations including, without limitation, those governing REITs; the impact of general economic conditions upon rental rates and occupancy levels at the Company’s facilities; the availability of permanent capital at attractive rates, the outlook and actions of Rating Agencies and risks detailed from time to time in the Company’s SEC reports, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K.

Additional information about PS Business Parks, Inc., including more financial analysis of the second quarter operating results, is available on the Internet. The Company’s website is www.psbusinessparks.com.

A conference call is scheduled for Thursday, August 6, 2009, at 10:00 a.m. (PDT) to discuss the second quarter results. The toll free number is (888) 299-3246; the conference ID is 18886527. 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 13, 2009 at (800) 642-1687. A replay of the conference call will also be available on the Company’s website.

Additional financial data attached.