þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the fiscal year ended December 31, 2004. | ||
or | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from to |
California
|
95-4300881 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer Identification No.) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, $0.01 par value | American Stock Exchange | |
Depositary Shares Each Representing 1/1,000 of a Share of
9.500% Cumulative Preferred Stock, Series D, $0.01 par value |
American Stock Exchange | |
Depositary Shares Each Representing 1/1,000 of a Share of
8.750% Cumulative Preferred Stock, Series F, $0.01 par value |
American Stock Exchange | |
Depositary Shares Each Representing 1/1,000 of a Share of
7.000% Cumulative Preferred Stock, Series H, $0.01 par value |
American Stock Exchange | |
Depositary Shares Each Representing 1/1,000 of a Share of
6.875% Cumulative Preferred Stock, Series I, $0.01 par value |
American Stock Exchange | |
Depositary Shares Each Representing 1/1,000 of a Share of
7.950% Cumulative Preferred Stock, Series K, $0.01 par value |
American Stock Exchange | |
Depositary Shares Each Representing 1/1,000 of a Share of
7.600% Cumulative Preferred Stock, Series L, $0.01 par value |
American Stock Exchange |
Common Stock, $0.01 par value, $659,664,541 (computed on the basis of $40.24 per share which was the reported closing sale price of the Companys Common Stock on the American Stock Exchange on June 30, 2004). |
ITEM 1. | BUSINESS |
2
3
4
5
6
7
8
9
10
11
12
| the national, state and local economic climate and real estate conditions, such as oversupply of or reduced demand for space and changes in market rental rates; | |
| how prospective tenants perceive the attractiveness, convenience and safety of our properties; | |
| our ability to provide adequate management, maintenance and insurance; | |
| our ability to collect rent from tenants on a timely basis; | |
| the expense of periodically renovating, repairing and reletting spaces; | |
| environmental issues; | |
| compliance with the Americans with Disabilities Act and other federal, state, and local laws and regulations; | |
| increasing operating costs, including real estate taxes, insurance and utilities, if these increased costs cannot be passed through to tenants; | |
| changes in tax, real estate and zoning laws; |
13
| increase in new commercial properties in our market; | |
| tenant defaults and bankruptcies; | |
| tenants right to sublease space; and | |
| concentration of properties leased to non-rated private companies. |
14
15
16
17
Rentable Square Footage | ||||||||||||||||||||
Weighted Average | ||||||||||||||||||||
Location | Flex | Industrial | Office | Total | Occupancy Rate | |||||||||||||||
Arizona
|
||||||||||||||||||||
Mesa
|
78,038 | | | 78,038 | 98.5% | |||||||||||||||
Phoenix
|
309,585 | | | 309,585 | 88.0% | |||||||||||||||
Tempe
|
291,264 | | | 291,264 | 95.7% | |||||||||||||||
678,887 | | | 678,887 | 92.5% | ||||||||||||||||
Northern California
|
||||||||||||||||||||
Hayward
|
| 406,712 | | 406,712 | 99.0% | |||||||||||||||
Monterey
|
| | 12,003 | 12,003 | 69.7% | |||||||||||||||
Sacramento
|
| | 366,203 | 366,203 | 91.3% | |||||||||||||||
San Jose
|
387,631 | | | 387,631 | 92.2% | |||||||||||||||
San Ramon
|
| | 52,149 | 52,149 | 99.7% | |||||||||||||||
Santa Clara
|
178,132 | | | 178,132 | 100.0% | |||||||||||||||
So. San Francisco
|
93,775 | | | 93,775 | 94.5% | |||||||||||||||
659,538 | 406,712 | 430,355 | 1,496,605 | 95.0% | ||||||||||||||||
Southern California
|
||||||||||||||||||||
Buena Park
|
| 317,312 | | 317,312 | 100.0% | |||||||||||||||
Carson
|
77,255 | | | 77,255 | 94.2% | |||||||||||||||
Cerritos
|
| 394,610 | 31,270 | 425,880 | 96.9% | |||||||||||||||
Culver City
|
146,402 | | | 146,402 | 92.4% | |||||||||||||||
Irvine
|
| | 160,499 | 160,499 | 99.6% | |||||||||||||||
Laguna Hills
|
613,947 | | | 613,947 | 94.3% | |||||||||||||||
Lake Forest
|
296,597 | | | 296,597 | 93.0% | |||||||||||||||
Monterey Park
|
199,056 | | | 199,056 | 95.7% | |||||||||||||||
Orange
|
| | 107,073 | 107,073 | 86.3% | |||||||||||||||
San Diego
|
535,345 | | | 535,345 | 96.3% | |||||||||||||||
Santa Ana
|
| | 436,611 | 436,611 | 74.1% | |||||||||||||||
Signal Hill
|
178,146 | | | 178,146 | 97.5% | |||||||||||||||
Studio City
|
22,092 | | | 22,092 | 96.1% | |||||||||||||||
Torrance
|
147,220 | | | 147,220 | 93.2% | |||||||||||||||
2,216,060 | 711,922 | 735,453 | 3,663,435 | 93.0% | ||||||||||||||||
18
Rentable Square Footage
Weighted Average
Location
Flex
Industrial
Office
Total
Occupancy Rate
307,791
307,791
88.6%
28,994
28,994
96.5%
213,853
691,434
905,287
92.0%
521,644
720,428
1,242,072
91.2%
1,462,886
346,376
1,809,262
78.5%
101,578
101,578
89.7%
1,564,464
346,376
1,910,840
79.1%
236,997
236,997
86.3%
113,302
113,302
83.4%
36,458
36,458
92.2%
713,526
231,217
944,743
85.4%
56,541
56,541
88.9%
184,809
184,809
61.5%
116,800
116,800
81.8%
1,458,433
231,217
1,689,650
82.8%
788,428
788,428
81.3%
176,977
131,214
308,191
85.2%
66,000
66,000
95.8%
1,031,405
131,214
1,162,619
83.2%
623,443
2,555,763
11,840
3,191,046
84.6%
623,443
2,555,763
11,840
3,191,046
84.6%
208,519
208,519
98.0%
494,618
494,618
99.2%
165,514
165,514
83.4%
193,623
50,750
244,373
88.2%
246,520
246,520
100.0%
302,723
355,127
657,850
94.5%
359,742
359,742
99.6%
295,625
295,625
94.7%
113,629
113,629
99.6%
2,214,999
571,391
2,786,390
96.1%
27,912
27,912
81.5%
27,912
27,912
81.5%
10,996,785
3,905,614
2,947,057
17,849,456
88.9%
(1) | The Company owns one property that is subject to a ground lease in Las Colinas, Texas. |
(2) | Two commercial properties serve as collateral to mortgage notes payable. For more information, see Note 6 of the Consolidated Financial Statements. |
19
20
For the Year Ended December 31, 2004 | ||||||||||||||||
Flex | Office | Industrial | Total | |||||||||||||
Rental Income:
|
||||||||||||||||
Southern California
|
$ | 33,605 | $ | 13,062 | $ | 5,129 | $ | 51,796 | ||||||||
Northern California
|
10,576 | 6,131 | 2,786 | 19,493 | ||||||||||||
Southern Texas
|
7,971 | 1,682 | | 9,653 | ||||||||||||
Northern Texas
|
13,209 | | 953 | 14,162 | ||||||||||||
Florida
|
5,293 | 159 | 14,834 | 20,286 | ||||||||||||
Virginia
|
35,312 | 10,813 | | 46,125 | ||||||||||||
Maryland
|
6,823 | 17,598 | | 24,421 | ||||||||||||
Oregon
|
20,489 | 5,434 | | 25,923 | ||||||||||||
Other
|
6,588 | | | 6,588 | ||||||||||||
139,866 | 54,879 | 23,702 | 218,447 | |||||||||||||
Cost of Operations:
|
||||||||||||||||
Southern California
|
7,807 | 5,422 | 922 | 14,151 | ||||||||||||
Northern California
|
2,025 | 1,983 | 568 | 4,576 | ||||||||||||
Southern Texas
|
3,314 | 875 | | 4,189 | ||||||||||||
Northern Texas
|
5,197 | | 269 | 5,466 | ||||||||||||
Florida
|
1,708 | 74 | 5,408 | 7,190 | ||||||||||||
Virginia
|
9,172 | 3,733 | | 12,905 | ||||||||||||
Maryland
|
1,546 | 4,716 | | 6,262 | ||||||||||||
Oregon
|
5,534 | 1,938 | | 7,472 | ||||||||||||
Other
|
2,758 | | | 2,758 | ||||||||||||
39,061 | 18,741 | 7,167 | 64,969 | |||||||||||||
NOI:
|
||||||||||||||||
Southern California
|
25,798 | 7,640 | 4,207 | 37,645 | ||||||||||||
Northern California
|
8,551 | 4,148 | 2,218 | 14,917 | ||||||||||||
Southern Texas
|
4,657 | 807 | | 5,464 | ||||||||||||
Northern Texas
|
8,012 | | 684 | 8,696 | ||||||||||||
Florida
|
3,585 | 85 | 9,426 | 13,096 | ||||||||||||
Virginia
|
26,140 | 7,080 | | 33,220 | ||||||||||||
Maryland
|
5,277 | 12,882 | | 18,159 | ||||||||||||
Oregon
|
14,955 | 3,496 | | 18,451 | ||||||||||||
Other
|
3,830 | | | 3,830 | ||||||||||||
$ | 100,805 | $ | 36,138 | $ | 16,535 | $ | 153,478 | |||||||||
21
For the Year Ended December 31, 2003
Flex
Office
Industrial
Total
$
33,784
$
7,534
$
5,106
$
46,424
11,275
6,577
2,824
20,676
10,150
2,084
12,234
16,664
859
17,523
98
98
33,277
9,319
42,596
6,660
16,375
23,035
20,738
4,797
25,535
5,872
5,872
138,420
46,686
8,887
193,993
7,689
3,063
899
11,651
2,094
1,917
525
4,536
3,505
824
4,329
4,862
302
5,164
40
40
8,988
2,960
11,948
1,525
4,616
6,141
5,292
1,896
7,188
2,413
2,413
36,368
15,276
1,766
53,410
26,095
4,471
4,207
34,773
9,181
4,660
2,299
16,140
6,645
1,260
7,905
11,802
557
12,359
58
58
24,289
6,359
30,648
5,135
11,759
16,894
15,446
2,901
18,347
3,459
3,459
$
102,052
$
31,410
$
7,121
$
140,583
22
For the Year Ended December 31, 2002
Flex
Office
Industrial
Total
$
33,016
$
4,170
$
4,701
$
41,887
12,007
6,455
2,678
21,140
10,687
1,966
12,653
17,092
17,092
32,050
8,146
40,196
6,941
14,760
21,701
24,264
5,138
29,402
5,823
5,823
141,880
40,635
7,379
189,894
7,513
1,574
915
10,002
2,182
1,984
572
4,738
3,697
803
4,500
4,968
4,968
8,733
2,666
11,399
1,427
4,887
6,314
4,407
1,856
6,263
2,486
2,486
35,413
13,770
1,487
50,670
25,503
2,596
3,786
31,885
9,825
4,471
2,106
16,402
6,990
1,163
8,153
12,124
12,124
23,317
5,480
28,797
5,514
9,873
15,387
19,857
3,282
23,139
3,337
3,337
$
106,467
$
26,865
$
5,892
$
139,224
23
For the Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Property net operating income
|
$ | 153,478 | $ | 140,583 | $ | 139,224 | ||||||
Facility management fees
|
624 | 742 | 763 | |||||||||
Gain on sale of marketable equity securities
|
| 2,043 | 41 | |||||||||
Interest and other income
|
406 | 1,125 | 959 | |||||||||
Depreciation and amortization
|
(72,336 | ) | (57,436 | ) | (55,333 | ) | ||||||
General and administrative
|
(4,628 | ) | (4,683 | ) | (5,125 | ) | ||||||
Interest expense
|
(3,054 | ) | (4,015 | ) | (5,324 | ) | ||||||
Income from continuing operations before minority interests and
equity in income of liquidated joint venture
|
$ | 74,490 | $ | 78,359 | $ | 75,205 | ||||||
2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||
Weighted average occupancy rate
|
91.4 | % | 89.3 | % | 86.3 | % | 81.7 | % | 83.8 | % | ||||||||||
Annualized realized rent per square foot
|
$ | 6.89 | $ | 7.06 | $ | 6.96 | $ | 7.12 | $ | 7.75 |
24
Percentage of Total | ||||||||||||||||
Rentable Square | Annual Base Rents | Annual Base Rents | ||||||||||||||
Number of Leases | Footage Subject to | Under Expiring | Represented by | |||||||||||||
Year of Lease Expiration | Expiring | Expiring Leases | Leases | Expiring Leases | ||||||||||||
2005
|
84 | 820 | $ | 6,366 | 26.6% | |||||||||||
2006
|
82 | 886 | 6,673 | 27.9% | ||||||||||||
2007
|
72 | 591 | 4,299 | 18.0% | ||||||||||||
2008
|
38 | 410 | 3,103 | 13.0% | ||||||||||||
2009
|
24 | 199 | 1,759 | 7.3% | ||||||||||||
2010
|
6 | 131 | 816 | 3.4% | ||||||||||||
2011
|
2 | 76 | 619 | 2.6% | ||||||||||||
2012
|
| | | | ||||||||||||
2013
|
4 | 7 | 296 | 1.2% | ||||||||||||
Total
|
312 | 3,120 | $ | 23,931 | 100.0% | |||||||||||
Rate of | Life In | Accumulated | ||||||||||||||||||
Tax Basis | Depreciation | Method | Years | Depreciation | ||||||||||||||||
Land Improvements
|
$ | 49,080 | 10.2 | % | MACRS, 150 | % | 15 | $ | 5,619 | |||||||||||
Improvements
|
27,585 | 37.3 | % | VARIOUS | 5 | 11,609 | ||||||||||||||
Tenant Buildings
|
84,074 | 4.2 | % | MACRS, SL | 39 | 3,581 | ||||||||||||||
Total
|
$ | 160,739 | $ | 20,809 | ||||||||||||||||
Percentage of Total | ||||||||||||
Rentable Square | Annual Base Rents | Annual Base Rents | ||||||||||
Footage Subject to | Under Expiring | Represented by | ||||||||||
Year of Lease Expiration | Expiring Leases | Leases | Expiring Leases | |||||||||
2005
|
4,044 | $ | 50,280 | 23.5% | ||||||||
2006
|
3,744 | 45,401 | 21.2% | |||||||||
2007
|
2,733 | 32,006 | 15.0% | |||||||||
2008
|
1,940 | 29,211 | 13.7% | |||||||||
2009
|
1,618 | 18,694 | 8.7% | |||||||||
Thereafter
|
2,554 | 38,352 | 17.9% | |||||||||
Total
|
16,633 | $ | 213,944 | 100.0% | ||||||||
25
Percentage of Small | ||||||||||||
Tenant Annual | ||||||||||||
Rentable Square | Annual Base Rents | Base Rents | ||||||||||
Footage Subject to | Under Expiring | Represented by | ||||||||||
Year of Lease Expiration | Expiring Leases | Leases | Expiring Leases | |||||||||
2005
|
1,390 | $ | 15,990 | 29.5% | ||||||||
2006
|
1,286 | 15,701 | 29.0% | |||||||||
2007
|
831 | 9,956 | 18.4% | |||||||||
2008
|
337 | 4,629 | 8.6% | |||||||||
2009
|
302 | 4,004 | 7.4% | |||||||||
Thereafter
|
195 | 3,841 | 7.1% | |||||||||
Total
|
4,341 | $ | 54,121 | 100.0% | ||||||||
Percentage of Large | ||||||||||||
Tenant Annual | ||||||||||||
Rentable Square | Annual Base Rents | Base Rents | ||||||||||
Footage Subject to | Under Expiring | Represented by | ||||||||||
Year of Lease Expiration | Expiring Leases | Leases | Expiring Leases | |||||||||
2005
|
2,654 | $ | 34,290 | 21.4% | ||||||||
2006
|
2,458 | 29,700 | 18.6% | |||||||||
2007
|
1,902 | 22,050 | 13.8% | |||||||||
2008
|
1,603 | 24,582 | 15.4% | |||||||||
2009
|
1,316 | 14,690 | 9.2% | |||||||||
Thereafter
|
2,359 | 34,511 | 21.6% | |||||||||
Total
|
12,292 | $ | 159,823 | 100.0% | ||||||||
26
ITEM 4A. | EXECUTIVE OFFICERS OF THE REGISTRANT |
27
28
ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Range | ||||||||
Three Months Ended | High | Low | ||||||
March 31, 2003
|
$ | 32.12 | $ | 29.63 | ||||
June 30, 2003
|
$ | 36.12 | $ | 29.47 | ||||
September 30, 2003
|
$ | 39.62 | $ | 35.15 | ||||
December 31, 2003
|
$ | 41.65 | $ | 37.30 | ||||
March 31, 2004
|
$ | 46.35 | $ | 41.30 | ||||
June 30, 2004
|
$ | 46.60 | $ | 35.38 | ||||
September 30, 2004
|
$ | 41.30 | $ | 38.51 | ||||
December 31, 2004
|
$ | 45.95 | $ | 39.83 |
29
ITEM 6. | SELECTED FINANCIAL DATA |
For the Years Ended December 31, | |||||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||
(In thousands, except per share and square footage data) | |||||||||||||||||||||||
Revenues:
|
|||||||||||||||||||||||
Rental income
|
$ | 218,447 | $ | 193,993 | $ | 189,894 | $ | 153,805 | $ | 129,857 | |||||||||||||
Facility management fees primarily from affiliates
|
624 | 742 | 763 | 683 | 539 | ||||||||||||||||||
Total operating revenues
|
219,071 | 194,735 | 190,657 | 154,488 | 130,396 | ||||||||||||||||||
Expenses:
|
|||||||||||||||||||||||
Property operations
|
64,969 | 53,410 | 50,670 | 40,440 | 33,479 | ||||||||||||||||||
Depreciation and amortization
|
72,336 | 57,436 | 55,333 | 37,465 | 33,068 | ||||||||||||||||||
General and administrative
|
4,628 | 4,683 | 5,125 | 4,892 | 4,298 | ||||||||||||||||||
Total operating expenses
|
141,933 | 115,529 | 111,128 | 82,797 | 70,845 | ||||||||||||||||||
Other income and expenses:
|
|||||||||||||||||||||||
Gain on sale of marketable securities
|
| 2,043 | 41 | 8 | 7,849 | ||||||||||||||||||
Interest and other income
|
406 | 1,125 | 959 | 2,621 | 5,924 | ||||||||||||||||||
Interest expense
|
(3,054 | ) | (4,015 | ) | (5,324 | ) | (1,715 | ) | (1,481 | ) | |||||||||||||
Total other income and expenses
|
(2,648 | ) | (847 | ) | (4,324 | ) | 914 | 12,292 | |||||||||||||||
Income from continuing operations before minority interests and
equity in income of liquidated joint venture
|
74,490 | 78,359 | 75,205 | 72,605 | 71,843 | ||||||||||||||||||
Equity in income of liquidated joint venture
|
| 2,296 | 1,978 | 25 | | ||||||||||||||||||
Minority interests in continuing operations:
|
|||||||||||||||||||||||
Minority interest in income preferred units:
|
|||||||||||||||||||||||
Distributions paid to preferred unitholders
|
(17,106 | ) | (19,240 | ) | (17,927 | ) | (14,107 | ) | (12,185 | ) | |||||||||||||
Redemption of preferred operating partnership units
|
(3,139 | ) | | | | | |||||||||||||||||
Minority interest in income common units
|
(5,328 | ) | (11,593 | ) | (11,101 | ) | (12,186 | ) | (13,091 | ) | |||||||||||||
Total minority interests in continuing operations
|
(25,573 | ) | (30,833 | ) | (29,028 | ) | (26,293 | ) | (25,276 | ) | |||||||||||||
Income from continuing operations
|
48,917 | 49,822 | 48,155 | 46,337 | 46,567 | ||||||||||||||||||
Discontinued operations:
|
|||||||||||||||||||||||
Income from discontinued operations
|
2,196 | 2,036 | 4,294 | 4,729 | 5,823 | ||||||||||||||||||
Impairment charge
|
| (5,907 | ) | (900 | ) | | | ||||||||||||||||
Gain on disposition of real estate
|
15,462 | 2,897 | 9,023 | | 256 | ||||||||||||||||||
Minority interest in earnings (loss) attributable to
operations common units
|
(4,432 | ) | 248 | (3,142 | ) | (1,196 | ) | (1,465 | ) | ||||||||||||||
Income (loss) from discontinued operations
|
13,226 | (726 | ) | 9,275 | 3,533 | 4,614 | |||||||||||||||||
Net Income
|
62,143 | 49,096 | 57,430 | 49,870 | 51,181 | ||||||||||||||||||
Net income allocable to preferred shareholders:
|
|||||||||||||||||||||||
Preferred distributions
|
|||||||||||||||||||||||
Preferred distributions paid
|
31,154 | 15,784 | 15,412 | 8,854 | 5,088 | ||||||||||||||||||
Redemptions of preferred stock
|
1,866 | | | | | ||||||||||||||||||
Total preferred distributions
|
33,020 | 15,784 | 15,412 | 8,854 | 5,088 | ||||||||||||||||||
Net income allocable to common shareholders
|
$ | 29,123 | $ | 33,312 | $ | 42,018 | $ | 41,016 | $ | 46,093 | |||||||||||||
Per Common Share:
|
|||||||||||||||||||||||
Cash Distribution(2)
|
$ | 1.16 | $ | 1.16 | $ | 1.16 | $ | 1.31 | $ | 1.00 | |||||||||||||
Net income Basic
|
$ | 1.34 | $ | 1.56 | $ | 1.95 | $ | 1.84 | $ | 1.98 | |||||||||||||
Net income Diluted
|
$ | 1.33 | $ | 1.54 | $ | 1.93 | $ | 1.83 | $ | 1.97 | |||||||||||||
Weighted average common shares Basic
|
21,767 | 21,412 | 21,552 | 22,350 | 23,284 | ||||||||||||||||||
Weighted average common shares Diluted
|
21,960 | 21,565 | 21,743 | 22,435 | 23,365 | ||||||||||||||||||
Balance Sheet Data:
|
|||||||||||||||||||||||
Total assets
|
$ | 1,363,829 | $ | 1,358,861 | $ | 1,156,802 | $ | 1,169,955 | $ | 930,756 | |||||||||||||
Total debt
|
$ | 11,367 | $ | 264,694 | $ | 70,279 | $ | 165,145 | $ | 30,971 | |||||||||||||
Minority interest preferred units
|
$ | 127,750 | $ | 217,750 | $ | 217,750 | $ | 197,750 | $ | 144,750 | |||||||||||||
Minority interest common units
|
$ | 169,295 | $ | 169,888 | $ | 167,469 | $ | 162,141 | $ | 161,728 | |||||||||||||
Redeemable Preferred stock
|
$ | 510,850 | $ | 168,673 | $ | 170,813 | $ | 121,000 | $ | 55,000 | |||||||||||||
Common shareholders equity
|
$ | 506,114 | $ | 502,155 | $ | 493,589 | $ | 478,731 | $ | 509,343 | |||||||||||||
Other Data:
|
|||||||||||||||||||||||
Net cash provided by operating activities
|
$ | 151,958 | $ | 132,410 | $ | 134,926 | $ | 126,677 | $ | 111,197 | |||||||||||||
Net cash (used in) provided by investing activities
|
$ | (26,108 | ) | $ | (294,885 | ) | $ | 5,776 | $ | (318,367 | ) | $ | (77,468 | ) | |||||||||
Net cash (used in) provided by financing activities
|
$ | (91,971 | ) | $ | 123,472 | $ | (98,966 | ) | $ | 145,471 | $ | (58,654 | ) | ||||||||||
Funds from operations(3)
|
$ | 97,214 | $ | 97,448 | $ | 104,543 | $ | 95,472 | $ | 88,181 | |||||||||||||
Square footage owned at end of period
|
17,988 | 18,322 | 14,426 | 14,817 | 12,600 |
30
(1) | See Note 3 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for a discussion of income from discontinued operations. |
(2) | In March 2001, the Board of Directors increased the annual distribution to $1.16 per common share. In December 2001, the Board of Directors declared a one-time special distribution of $0.15 per common share. |
(3) | Funds From Operations (FFO) is computed in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT). The White Paper defines FFO as net income, computed in accordance with generally accepted accounting principles (GAAP), before depreciation, amortization, minority interest in income, and extraordinary items. FFO should be analyzed in conjunction with net income. However, FFO should not be viewed as a substitute for net income as a measure of operating performance or liquidity as it does not reflect depreciation and amortization costs or the level of capital expenditure and leasing costs necessary to maintain the operating performance of the Companys properties, which are significant economic costs and could materially impact the Companys results from operations. Other REITs may use different methods for calculating FFO and, accordingly, the Companys FFO may not be comparable to other real estate companies. See Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Funds from Operations, for a reconciliation of FFO and net income allocable to common shareholders and for information on why the Company presents FFO. |
31
ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Critical Accounting Policies and Estimates: |
Revenue Recognition: We recognize revenue in accordance with Staff Accounting Bulletin No. 101 of the Securities and Exchange Commission, Revenue Recognition in Financial Statements (SAB 101), as amended. SAB 101 requires that the following four basic criteria must be met before revenue can be recognized: persuasive evidence of an arrangement exists; the delivery has occurred or services rendered; the fee is fixed and determinable; and collectibility is reasonably assured. All leases are classified as |
32
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 increases in rent that are not included on the Companys credit watch list. Deferred rent receivables represent 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 revenues in the period the applicable costs are incurred. | |
Allowance for Doubtful Accounts: Rental revenue from our tenants is our principal source of revenue. We monitor the collectibility of our receivable balances including the deferred rent receivable on an on-going basis. Based on these reviews, we maintain an allowance for doubtful accounts for estimated losses resulting from the possible inability of our tenants to make required rent payments to us. Tenant receivables and deferred rent receivables are carried net of the allowances for uncollectible tenant receivables and deferred rent. As discussed below, managements determination of the adequacy of these allowances requires significant judgments and estimates. Managements estimate of the required allowance is subject to revision as the factors discussed below change and is sensitive to the effect of economic and market conditions on out tenants. | |
Tenant receivables consist primarily of amounts due for contractual lease payments, reimbursements of common area maintenance expenses, property taxes and other expenses recoverable from tenants. Managements determination of the adequacy of the allowance for uncollectible current tenant receivables is performed using a methodology that incorporates specific identification, aging analysis, an overall evaluation of the Companys historical loss trends and the current economic and business environment. The specific identification methodology relies on factors such as the age and nature of the receivables, the payment history and financial condition of the tenant, the Companys assessment of the tenants ability to meet its lease obligations, and the status of negotiations of any disputes with the tenant. The Companys allowance also includes a reserve based on historical loss trends not associated with any specific tenant. This reserve as well as the Companys specific identification reserve is reevaluated quarterly based on economic conditions and the current business environment. | |
Deferred rents receivable represents the amount that the cumulative straight-line rental income recorded to date exceeds cash rents billed to date under the lease agreement. Given the longer-term nature of these types of receivables, managements determination of the adequacy of the allowance for unbilled deferred rents receivables is based primarily on historical loss experience. Management evaluates the allowance for unbilled deferred rents receivable using a specific identification methodology for the Companys significant tenants designed to assess the tenants financial condition and their ability to meet their lease obligations. | |
Impairment of Long-Lived Assets: The Company evaluates a property for potential impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. On a quarterly basis, the Company evaluates the whole portfolio for impairment based on current operating information. In the event that these periodic assessments reflect that the carrying amount of a property exceeds the sum of the undiscounted cash flows (excluding interest) that are expected to result from the use and eventual disposition of the property, the Company would recognize an impairment loss to the extent the carrying amount exceeded the estimated fair value of the property. The estimation of expected future net cash flows is inherently uncertain and relies on subjective assumptions dependent upon future and current market conditions and events that affect the ultimate value of the property. It requires management to make assumptions related to the property such as future rental rates, tenant allowances, operating expenditures, property taxes, capital improvements, occupancy levels, and the estimated proceeds generated from the future sale of the property. These assumptions could differ materially from actual results in future periods. Since Statement of Financial Accounting Standards (SFAS) No. 144 provides that the future cash flows used in this analysis be considered on an undiscounted basis, our historically established intent to hold properties over the long term directly decreases the likelihood of recording an impairment loss. If our strategy changes or if market conditions otherwise dictate an earlier sale date, an impairment loss could be recognized and such loss could be material. |
33
Depreciation: We compute depreciation on our buildings and equipment using the straight-line method based on estimated useful lives of generally 30 and 5 years. A significant portion of the acquisition cost of each property is allocated to building and building components (usually 75-85%). The allocation of the acquisition cost to building and building components, as well as, the determination of their useful lives are based on managements estimates. If we do not appropriately allocate to these components or we incorrectly estimate the useful lives of these components, our computation of depreciation expense may not appropriately reflect the actual impact of these costs over future periods, which will affect net income. In addition, the net book value of real estate assets could be over or understated. The statement of cash flows, however, would not be affected. | |
Accruals of Operating Expenses: The Company accrues for property tax expenses, performance bonuses and other operating expenses each quarter based on historical trends and anticipated disbursements. If these estimates are incorrect, the timing of expense recognition will be affected. | |
Accruals for Contingencies: The Company is exposed to business and legal liability risks with respect to events that may have occurred, but in accordance with generally accepted accounting principles has not accrued for such potential liabilities because the loss is either not probable or not estimable. Future events and the result of pending litigation could result in such potential losses becoming probable and estimable, which could have a material adverse impact on our financial condition or results of operations. |
34
35
36
Weighted | ||||||||||||||||||||||||||||||||
Square | Percent of | Rental | Percent of | Cost of | Percent of | Percent of | ||||||||||||||||||||||||||
Region | Footage | Total | Income | Total | Operations | Total | NOI | Total | ||||||||||||||||||||||||
Southern California
|
3,663 | 20.5% | $ | 51,797 | 23.7% | $ | 14,151 | 21.8% | $ | 37,646 | 24.5% | |||||||||||||||||||||
Northern California
|
1,497 | 8.4% | 19,493 | 8.9% | 4,576 | 7.1% | 14,917 | 9.7% | ||||||||||||||||||||||||
Southern Texas
|
1,163 | 6.5% | 9,654 | 4.4% | 4,190 | 6.4% | 5,464 | 3.6% | ||||||||||||||||||||||||
Northern Texas
|
1,690 | 9.5% | 14,162 | 6.5% | 5,466 | 8.4% | 8,696 | 5.7% | ||||||||||||||||||||||||
Florida
|
3,191 | 17.9% | 20,285 | 9.3% | 7,190 | 11.1% | 13,095 | 8.6% | ||||||||||||||||||||||||
Virginia
|
2,786 | 15.6% | 46,125 | 21.1% | 12,904 | 19.9% | 33,221 | 21.6% | ||||||||||||||||||||||||
Maryland
|
1,242 | 6.9% | 24,420 | 11.2% | 6,262 | 9.6% | 18,158 | 11.8% | ||||||||||||||||||||||||
Oregon
|
1,939 | 10.9% | 25,922 | 11.9% | 7,471 | 11.5% | 18,451 | 12.0% | ||||||||||||||||||||||||
Other
|
678 | 3.8% | 6,589 | 3.0% | 2,759 | 4.2% | 3,830 | 2.5% | ||||||||||||||||||||||||
Subtotal
|
17,849 | 100% | 218,447 | 100% | 64,969 | 100% | 153,478 | 100% | ||||||||||||||||||||||||
Less: Depreciation and amortization expense
|
| 72,336 | (72,336 | ) | ||||||||||||||||||||||||||||
Total based on generally accepted accounting principles
|
$ | 218,447 | $ | 137,305 | $ | 81,142 | ||||||||||||||||||||||||||
37
Computer hardware, software, and related service
|
12.1% | |||
Business services
|
11.8% | |||
Government
|
10.4% | |||
Contractors
|
9.5% | |||
Warehouse, transportation, logistics
|
8.6% | |||
Financial services
|
8.1% | |||
Retail
|
5.8% | |||
Home furnishing
|
4.5% | |||
Electronics
|
4.4% | |||
Communications
|
4.1% | |||
79.3% | ||||
% of Total | ||||||||||||
Tenants | Square Footage | Annual Rents | Annual Rents | |||||||||
U.S. Government
|
475 | $ | 11,293 | 5.0% | ||||||||
Citigroup
|
262 | 4,223 | 1.9% | |||||||||
Intel
|
214 | 3,647 | 1.6% | |||||||||
IBM
|
180 | 2,960 | 1.3% | |||||||||
County of Santa Clara
|
97 | 2,951 | 1.3% | |||||||||
Hughes Network Systems
|
106 | 2,239 | 1.0% | |||||||||
Axcelis Technologies
|
89 | 1,609 | 0.7% | |||||||||
Symantec Corporation Inc.
|
81 | 1,559 | 0.7% | |||||||||
Welch Allyn Protocol, Inc.
|
95 | 1,511 | 0.7% | |||||||||
MCI Worldcom
|
88 | 1,413 | 0.6% | |||||||||
1,687 | $ | 33,405 | 14.9% | |||||||||
38
Years Ended | |||||||||||||
December 31, | |||||||||||||
2004 | 2003 | Change | |||||||||||
Rental income:
|
|||||||||||||
Same Park facilities (13.7 million net rentable square
feet)(1)
|
$ | 185,778 | $ | 189,311 | (1.9 | )% | |||||||
Other facilities (4.1 million net rentable square feet)(2)
|
32,669 | 4,682 | 597.8 | % | |||||||||
Total rental income
|
218,447 | 193,993 | 12.6 | % | |||||||||
Cost of operations (excluding depreciation):
|
|||||||||||||
Same Park facilities
|
52,003 | 51,054 | 1.9 | % | |||||||||
Other facilities
|
12,966 | 2,356 | 450.3 | % | |||||||||
Total cost of operations (excluding depreciation)
|
64,969 | 53,410 | 21.6 | % | |||||||||
Net operating income (rental income less cost of operations)(3):
|
|||||||||||||
Same Park facilities
|
133,775 | 138,257 | (3.2 | )% | |||||||||
Other facilities
|
19,703 | 2,326 | 747.1 | % | |||||||||
Total net operating income
|
153,478 | 140,583 | 9.2 | % | |||||||||
Other income and expenses:
|
|||||||||||||
Facility management fees
|
624 | 742 | (15.9 | )% | |||||||||
Interest and other income
|
406 | 1,125 | (63.9 | )% | |||||||||
Interest expense
|
(3,054 | ) | (4,015 | ) | (23.9 | )% | |||||||
Gain on sale of marketable securities
|
| 2,043 | (100.0 | )% | |||||||||
Depreciation and amortization
|
(72,336 | ) | (57,436 | ) | 25.9 | % | |||||||
General and administrative
|
(4,628 | ) | (4,683 | ) | (1.2 | )% | |||||||
Income before discontinued operations and minority interest
|
$ | 74,490 | $ | 78,359 | (4.9 | )% | |||||||
Total Same Park gross margin(4)
|
72.0 | % | 73.0 | % | (1.4 | )% | |||||||
Same Park weighted average for period:
|
|||||||||||||
Occupancy
|
90.5 | % | 92.8 | % | (2.5 | )% | |||||||
Annualized realized rent per square foot(5)
|
$ | 14.96 | $ | 14.86 | 0.7 | % |
(1) | See Supplemental Property Data and Trends below for a definition of Same Park facilities. |
(2) | Represents assets owned and held in continuing operations by the Company as of December 31, 2004 that are not included in the Same Park facilities. |
(3) | Net operating income (NOI) is an important measurement in the commercial real estate industry for determining the value of the real estate generating the NOI. See Concentration of Portfolio by Region above for more information on NOI, including why the Company presents NOI and how the Company uses NOI. The Companys calculation of NOI may not be comparable to those of other companies and should not be used as an alternative to measures of performance in accordance with generally accepted accounting principles. |
(4) | Gross margin is computed by dividing NOI by rental income. |
(5) | Realized rent per square foot represents the actual revenues earned per occupied square foot. |
39
Rental | Rental | Cost of | Cost of | |||||||||||||||||||||||||||||||||
Income | Income | Operations | Operations | NOI | NOI | |||||||||||||||||||||||||||||||
December 31, | December 31, | Increase | December 31, | December 31, | Increase | December 31, | December 31, | Increase | ||||||||||||||||||||||||||||
Region | 2004 | 2003 | (Decrease) | 2004 | 2003 | (Decrease) | 2004 | 2003 | (Decrease) | |||||||||||||||||||||||||||
Southern California
|
$ | 42,957 | $ | 43,078 | (0.3 | )% | $ | 10,234 | $ | 10,036 | 2.0% | $ | 32,723 | $ | 33,042 | (1.0 | )% | |||||||||||||||||||
Northern California
|
19,401 | 20,644 | (6.0 | )% | 4,543 | 4,518 | 0.6% | 14,858 | 16,126 | (7.9 | )% | |||||||||||||||||||||||||
Southern Texas
|
9,668 | 12,215 | (20.9 | )% | 4,159 | 4,291 | (3.1 | )% | 5,509 | 7,924 | (30.5 | )% | ||||||||||||||||||||||||
Northern Texas
|
13,276 | 16,511 | (20.0 | )% | 5,012 | 4,830 | 3.8% | 8,264 | 11,681 | (29.3 | )% | |||||||||||||||||||||||||
Virginia
|
44,372 | 42,530 | 4.3% | 12,095 | 11,796 | 2.5% | 32,277 | 30,734 | 5.0% | |||||||||||||||||||||||||||
Maryland
|
24,455 | 23,000 | 6.3% | 6,217 | 6,124 | 1.5% | 18,238 | 16,876 | 8.1% | |||||||||||||||||||||||||||
Oregon
|
26,229 | 25,789 | 1.7% | 7,419 | 7,156 | 3.7% | 18,810 | 18,633 | 0.9% | |||||||||||||||||||||||||||
Arizona
|
5,420 | 5,544 | (2.2 | )% | 2,324 | 2,303 | 0.9% | 3,096 | 3,241 | (4.5 | )% | |||||||||||||||||||||||||
Total Same Park
|
185,778 | 189,311 | (1.9 | )% | 52,003 | 51,054 | 1.9% | 133,775 | 138,257 | (3.2 | )% | |||||||||||||||||||||||||
Other Facilities
|
32,669 | 4,682 | 597.8% | 12,966 | 2,356 | 450.3% | 19,703 | 2,326 | 747.1% | |||||||||||||||||||||||||||
Total Before Depreciation and amortization
|
218,447 | 193,993 | 12.6% | 64,969 | 53,410 | 21.6% | 153,478 | 140,583 | 9.2% | |||||||||||||||||||||||||||
Depreciation and amortization
|
| | | 72,336 | 57,436 | 25.9% | (72,336 | ) | (57,436 | ) | (25.9 | )% | ||||||||||||||||||||||||
Total based on GAAP
|
$ | 218,447 | $ | 193,993 | 12.6% | $ | 137,305 | $ | 110,846 | 23.9% | $ | 81,142 | $ | 83,147 | (2.4 | )% | ||||||||||||||||||||
Southern California |
40
Northern California |
Southern Texas |
Northern Texas |
Virginia |
Maryland |
Oregon |
41
42
43
Years Ended | |||||||||||||
December 31, | |||||||||||||
2003 | 2002 | Change | |||||||||||
Rental income:
|
|||||||||||||
Same Park facilities (13.5 million net rentable square
feet)(1)
|
$ | 187,180 | $ | 187,264 | (0.0 | )% | |||||||
Other facilities (4.2 million net rentable square feet)(2)
|
6,813 | 2,630 | 159.0 | % | |||||||||
Total rental income
|
193,993 | 189,894 | 2.2 | % | |||||||||
Cost of operations (excluding depreciation):
|
|||||||||||||
Same Park facilities
|
50,457 | 49,672 | 1.6 | % | |||||||||
Other facilities
|
2,953 | 998 | 195.9 | % | |||||||||
Total cost of operations (excluding depreciation)
|
53,410 | 50,670 | 5.4 | % | |||||||||
Net operating income (rental income less cost of operations)(3):
|
|||||||||||||
Same Park facilities
|
136,723 | 137,592 | (0.6 | )% | |||||||||
Other facilities
|
3,860 | 1,632 | 136.5 | % | |||||||||
Total net operating income
|
140,583 | 139,224 | 1.0 | % | |||||||||
Other income and expenses:
|
|||||||||||||
Facility management fees
|
742 | 763 | (2.8 | )% | |||||||||
Interest and other income
|
1,125 | 959 | 17.3 | % | |||||||||
Interest expense
|
(4,015 | ) | (5,324 | ) | (24.6 | )% | |||||||
Gain on sale of marketable securities
|
2,043 | 41 | 4,882.9 | % | |||||||||
Depreciation and amortization
|
(57,436 | ) | (55,333 | ) | 3.8 | % | |||||||
General and administrative
|
(4,683 | ) | (5,125 | ) | (8.6 | )% | |||||||
Income before discontinued operations and minority interest
|
$ | 78,359 | $ | 75,205 | 4.2 | % | |||||||
Total Same Park gross margin(4)
|
73.0 | % | 73.5 | % | (0.7 | )% | |||||||
Same Park weighted average for period:
|
|||||||||||||
Occupancy
|
93.3 | % | 94.6 | % | (1.3 | )% | |||||||
Annualized realized rent per square foot(5)
|
$ | 14.87 | $ | 14.67 | 1.35 | % |
(1) | See Supplemental Property Data and Trends below for a definition of Same Park facilities. |
(2) | Represents assets owned and held in continuing operations by the Company as of December 31, 2003 that are not included in the Same Park facilities. |
(3) | Net operating income (NOI) is an important measurement in the commercial real estate industry for determining the value of the real estate generating the NOI. See Concentration of Portfolio by Region above for more information on NOI, including why the Company presents NOI and how the Company uses NOI. The Companys calculation of NOI may not be comparable to those of other companies and should not be used as an alternative to measures of performance in accordance with generally accepted accounting principles. |
(4) | Gross margin is computed by dividing NOI by rental income. |
(5) | Realized rent per square foot represents the actual revenues earned per occupied square foot. |
44
Cost of | Cost of | |||||||||||||||||||||||||||||||||||
Rental Income | Rental Income | Operations | Operations | NOI | NOI | |||||||||||||||||||||||||||||||
December 31, | December 31, | Increase | December 31, | December 31, | Increase | December 31, | December 31, | Increase | ||||||||||||||||||||||||||||
Region | 2003 | 2002 | (Decrease) | 2003 | 2002 | (Decrease) | 2003 | 2002 | (Decrease) | |||||||||||||||||||||||||||
Southern California
|
$ | 43,057 | $ | 41,670 | 3.3 | % | $ | 10,037 | $ | 10,110 | (0.7 | )% | $ | 33,020 | $ | 31,560 | 4.6 | % | ||||||||||||||||||
Northern California
|
20,634 | 20,955 | (1.5 | )% | 4,519 | 4,794 | (5.7 | )% | 16,115 | 16,161 | (0.3 | )% | ||||||||||||||||||||||||
Southern Texas
|
12,209 | 12,610 | (3.2 | )% | 4,317 | 4,520 | (4.5 | )% | 7,892 | 8,090 | (2.4 | )% | ||||||||||||||||||||||||
Northern Texas
|
16,502 | 17,065 | (3.3 | )% | 4,832 | 5,042 | (4.2 | )% | 11,670 | 12,023 | (2.9 | )% | ||||||||||||||||||||||||
Virginia
|
40,710 | 38,747 | 5.1 | % | 11,492 | 11,145 | 3.1 | % | 29,218 | 27,602 | 5.9 | % | ||||||||||||||||||||||||
Maryland
|
22,988 | 21,663 | 6.1 | % | 6,124 | 5,587 | 9.6 | % | 16,864 | 16,076 | 4.9 | % | ||||||||||||||||||||||||
Oregon
|
25,538 | 29,046 | (12.1 | )% | 6,834 | 6,056 | 12.8 | % | 18,704 | 22,990 | (18.6 | )% | ||||||||||||||||||||||||
Arizona
|
5,542 | 5,508 | 0.6 | % | 2,302 | 2,418 | (4.8 | )% | 3,240 | 3,090 | 4.9 | % | ||||||||||||||||||||||||
Total Same Park
|
187,180 | 187,264 | 0.0 | % | 50,457 | 49,672 | 1.6 | % | 136,723 | 137,592 | (0.6 | )% | ||||||||||||||||||||||||
Other Facilities
|
6,813 | 2,630 | 159.0 | % | 2,953 | 998 | 195.9 | % | 3,860 | 1,632 | 136.5 | % | ||||||||||||||||||||||||
Total Before Depreciation and amortization
|
193,993 | 189,894 | 2.2 | % | 53,410 | 50,670 | 5.4 | % | 140,583 | 139,224 | 1.0 | % | ||||||||||||||||||||||||
Depreciation and amortization
|
| | | 57,436 | 55,333 | 3.8 | % | (57,436 | ) | (55,333 | ) | (3.8 | )% | |||||||||||||||||||||||
Total based on GAAP
|
$ | 193,993 | $ | 189,894 | 2.2 | % | $ | 110,846 | $ | 106,003 | 4.6 | % | $ | 83,147 | $ | 83,891 | (0.9 | )% | ||||||||||||||||||
45
Southern California |
Northern California |
Southern Texas |
Northern Texas |
Virginia |
Maryland |
Oregon |
46
47
48
49
Years Ended December 31, | |||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||
Net income allocable to common shareholders
|
$ | 29,123 | $ | 33,312 | $ | 42,018 | 41,016 | 46,093 | |||||||||||||
Less: Gain on sale of marketable and other securities
|
| (2,043 | ) | (41 | ) | (8 | ) | (7,849 | ) | ||||||||||||
Less: Gain on disposition of real estate
|
(15,462 | ) | (2,897 | ) | (9,023 | ) | | (256 | ) | ||||||||||||
Less: Equity income from sale of joint venture properties
|
| (1,376 | ) | (861 | ) | | | ||||||||||||||
Depreciation and amortization
|
73,793 | 59,107 | 58,144 | 41,067 | 35,637 | ||||||||||||||||
Depreciation from joint venture
|
| | 63 | 15 | | ||||||||||||||||
Minority interest in income common units
|
9,760 | 11,345 | 14,243 | 13,382 | 14,556 | ||||||||||||||||
Consolidated FFO allocable to common shareholders and minority
interests
|
97,214 | 97,448 | 104,543 | 95,472 | 88,181 | ||||||||||||||||
FFO allocated to minority interests common units
|
(24,401 | ) | (24,657 | ) | (26,291 | ) | (23,018 | ) | (20,634 | ) | |||||||||||
FFO allocated to common shareholders
|
$ | 72,813 | $ | 72,791 | $ | 78,252 | $ | 72,454 | $ | 67,547 | |||||||||||
50
Year Ended | Year Ended | |||||||
December 31, 2004 | December 31, 2003 | |||||||
Recurring capital expenditures
|
$ | 45,759 | $ | 22,954 | ||||
First generation tenant improvements and leasing commissions on
developed properties
|
| 838 | ||||||
Property renovations and other capital expenditures
|
6,310 | 15,984 | ||||||
Total capital expenditures
|
$ | 52,069 | $ | 39,776 | ||||
51
Payments Due by Period | ||||||||||||||||
Contractual Obligations | Total | Less than 1 Year | 1 3 Years | 3 5 Years | ||||||||||||
Mortgage notes payable (principal and interest)
|
$ | 14,002 | $ | 1,284 | $ | 6,950 | $ | 5,768 | ||||||||
Total
|
$ | 14,002 | $ | 1,284 | $ | 6,950 | $ | 5,768 | ||||||||
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
52
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
53
54
/s/
ERNST & YOUNG
LLP
55
56
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11.
EXECUTIVE COMPENSATION
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a)
(b)
(c)
Number of Securities
Remaining Available for
Future Issuance under
Number of Securities to
Weighted-Average
Equity Compensation
be Issued Upon Exercise
Exercise Price of
Plans (Excluding
of Outstanding Options,
Outstanding Options,
Securities Reflected in
Plan Category
Warrants, and Rights
Warrants, and Rights
Column(a))
714,335
$
34.91
1,560,361
714,335
*
$
34.91
*
1,560,361
*
*
Amounts include restricted stock units
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
57
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The financial statements listed in the accompanying Index to
Consolidated Financial Statements and Schedules are filed as
part of this report.
The financial statements schedule listed in the accompanying
Index to Consolidated Financial Statements and Schedules are
filed as part of this report.
See Exhibit Index contained herein.
2 | .1 | Amended and Restated Agreement and Plan of Reorganization among Registrant, American Office Park Properties, Inc. (AOPP) and Public Storage, Inc. (PSI) dated as of December 17, 1997. Filed with Registrants Registration Statement No. 333-45405 and incorporated herein by reference. | ||
3 | .1 | Restated Articles of Incorporation. Filed with Registrants Registration Statement No. 333-78627 and incorporated herein by reference. | ||
3 | .2 | Certificate of Determination of Preferences of 8.75% Series C Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed with Registrants Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999 (SEC File No. 001-10709) and incorporated herein by reference. | ||
3 | .3 | Certificate of Determination of Preferences of 8.875% Series X Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed with Registrants Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999 (SEC File No. 001-10709) and incorporated herein by reference. | ||
3 | .4 | Amendment to Certificate of Determination of Preferences of 8.875% Series X Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed with Registrants Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999 (SEC File No. 001-10709) and incorporated herein by reference. | ||
3 | .5 | Certificate of Determination of Preferences of 8.875% Series Y Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed with Registrants Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000 and incorporated herein by reference. | ||
3 | .6 | Certificate of Determination of Preferences of 9.50% Series D Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed with Registrants Current Report on Form 8-K dated May 7, 2001 and incorporated herein by reference. | ||
3 | .7 | Amendment to Certificate of Determination of Preferences of 9.50% Series D Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed with Registrants Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 and incorporated herein by reference. | ||
3 | .8 | Certificate of Determination of Preferences of 9.25% Series E Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed with Registrants Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 and incorporated herein by reference. | ||
3 | .9 | Certificate of Determination of Preferences of 8.75% Series F Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed with Registrants Current Report on Form 8-K dated January 18, 2002 and incorporated herein by reference. | ||
3 | .10 | Certificate of Determination of Preferences of 7.95% Series G Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. Filed with Registrants Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by reference. | ||
3 | .11 | Certificate of Determination of Preferences of 7.00% Series H Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. filed with Registrants Current Report on Form 8-K, dated January 16, 2004 and incorporated herein by reference. | ||
3 | .12 | Certificate of Determination of Preferences of 6.875% Series I Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. filed with Registrants Current Report on Form 8-K, dated March 31, 2004 and incorporated herein by reference. | ||
3 | .13 | Certificate of Determination of Preferences of 7.50% Series J Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. filed with Registrants Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 and incorporated herein by reference. | ||
3 | .14 | Certificate of Determination of Preferences of 7.950% Series K Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. filed with Registrants Current Report on Form 8-K, dated June 24, 2004 and incorporated herein by reference. | ||
3 | .15 | Certificate of Determination of Preferences of 7.60% Series L Cumulative Redeemable Preferred Stock of PS Business Parks, Inc. filed with Registrants Current Report on Form 8-K, dated August 23, 2004 and incorporated herein by reference. |
58
3
.16
Certificate of Correction of Certificate of Determination of
Preferences for the 7.00% Cumulative Preferred Stock,
Series H filed with Registrants Current Report on
Form 8-K, dated October 18, 2004 and incorporated
herein by reference.
3
.17
Amendment to Certificate of Determination of Preferences for the
7.00% Cumulative Preferred Stock, Series H filed with
Registrants Current Report on Form 8-K, dated
October 18, 2004 and incorporated herein by reference.
3
.18
Restated Bylaws. Filed with Registrants Current Report on
Form 8-K dated March 17, 1998 (SEC File No. 001-10709)
and incorporated herein by reference.
3
.19
Amendments to Bylaws of PS Business Parks, Inc. Filed with
Registrants Quarterly report on Form 10-Q for the
quarter period ended September 30, 2003 and incorporated
herein by reference.
4
.1
Deposit Agreement Relating to 9.60% Cumulative Preferred Stock,
Series D of PS Business Parks, Inc., dated as of
May 7, 2001. Filed with Registrants Current Report on
Form 8-K dated May 7, 2001 and incorporated herein by
reference.
4
.2
Specimen Stock Certificate for Registrants 9.60%
Cumulative Preferred Stock, Series D. Filed herewith.
4
.3
Deposit Agreement Relating to 8.75% Cumulative Preferred Stock,
Series F of PS Business Parks, Inc., dated as of
January 18, 2002. Filed with Registrants Current
Report on Form 8-K dated January 18, 2002 and
incorporated herein by reference.
4
.4
Specimen Stock Certificate for Registrants 8.75%
Cumulative Preferred Stock, Series F. Filed herewith.
4
.5
Deposit Agreement Relating to 7.00% Cumulative Preferred Stock,
Series H of PS Business Parks, Inc., dated as of
January 15, 2004. Filed with Registrants Current
Report on Form 8-K dated January 15, 2004 and
incorporated herein by reference.
4
.6
Specimen Stock Certificate for Registrants 7.00%
Cumulative Preferred Stock, Series H. Filed with
Registrants Current Report on Form 8-K dated
January 15, 2004 and incorporated herein by reference.
4
.7
Deposit Agreement Relating to 6.875% Cumulative Preferred Stock,
Series I of PS Business Parks, Inc., dated as of
March 31, 2004. Filed with Registrants Current Report
on Form 8-K dated March 31, 2004 and incorporated
herein by reference.
4
.8
Specimen Stock Certificate for Registrants 6.875%
Cumulative Preferred Stock, Series I. Filed with
Registrants Current Report on Form 8-K dated
March 31, 2004 and incorporated herein by reference.
4
.9
Deposit Agreement Relating to 7.95% Cumulative Preferred Stock,
Series K of PS Business Parks, Inc., dated as of
June 24, 2004. Filed with Registrants Current Report
on Form 8-K dated June 24, 2004 and incorporated
herein by reference.
4
.10
Specimen Stock Certificate for Registrants 7.95%
Cumulative Preferred Stock, Series K. Filed with
Registrants Current Report on Form 8-K dated
June 24, 2004 and incorporated herein by reference.
4
.11
Deposit Agreement Relating to 7.60% Cumulative Preferred Stock,
Series L of PS Business Parks, Inc., dated as of
August 23, 2004. Filed with Registrants Current
Report on Form 8-K dated August 23, 2004 and
incorporated herein by reference.
4
.12
Specimen Stock Certificate for Registrants 7.60%
Cumulative Preferred Stock, Series L. Filed with
Registrants Current Report on Form 8-K dated
August 23, 2004 and incorporated herein by reference.
10
.1
Amended Management Agreement between Storage Equities, Inc. and
Public Storage Commercial Properties Group, Inc. dated as of
February 21, 1995. Filed with PSIs Annual Report on
Form 10-K for the year ended December 31, 1994 (SEC
File No. 001-08389) and incorporated herein by reference.
10
.2*
Registrants 1997 Stock Option and Incentive Plan. Filed
with Registrants Registration Statement No. 333-48313
and incorporated herein by reference.
10
.3
Agreement of Limited Partnership of PS Business Parks, L.P.
Filed with Registrants Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1998 (SEC File No.
001-10709) and incorporated herein by reference.
10
.4
Agreement Among Shareholders and Company dated as of
December 23, 1997 among Acquiport Two Corporation, AOPP,
American Office Park Properties, L.P. and PSI. Filed with
Registrants Registration Statement No. 333-45405 and
incorporated herein by reference.
59
10
.5
Amendment to Agreement Among Shareholders and Company dated as
of January 21, 1998 among Acquiport Two Corporation, AOPP,
American Office Park Properties, L.P. and PSI. Filed with
Registrants Registration Statement No. 333-45405 and
incorporated herein by reference.
10
.6
Non-Competition Agreement dated as of December 23, 1997
among PSI, AOPP, American Office Park Properties, L.P. and
Acquiport Two Corporation. Filed with Registrants
Registration Statement No. 333-45405 and incorporated
herein by reference.
10
.7**
Offer Letter/ Employment Agreement between Registrant and Joseph
D. Russell, Jr., dated as of September 6, 2002. Filed
with Registrants Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2003 and incorporated
herein by reference.
10
.8
Revolving Credit Agreement dated August 6, 1998 among PS
Business Parks, L.P., Wells Fargo Bank, National Association, as
Agent, and the Lenders named therein. Filed with
Registrants Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998 (SEC File No.
001-10709) and incorporated herein by reference.
10
.9
First Amendment to Revolving Credit Agreement dated as of
August 19, 1999 among PS Business Parks, L.P., Wells Fargo
Bank, National Association, as Agent, and the Lenders named
therein. Filed with Registrants Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
1999 (SEC File No. 001-10709) and incorporated herein by
reference.
10
.10
Second Amendment to Revolving Credit Agreement dated as of
September 29, 2000 among PS Business Parks, L.P., Wells
Fargo Bank, National Association, as Agent, and the Lenders
named therein. Filed with Registrants Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2000 and incorporated herein by reference.
10
.11
Form of Indemnity Agreement. Filed with Registrants
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998 (SEC File No. 001-10709) and
incorporated herein by reference.
10
.12
Cost Sharing and Administrative Services Agreement dated as of
November 16, 1995 by and among PSCC, Inc. and the owners
listed therein. Filed with Registrants Quarterly Report on
Form 10-Q for the quarterly period ended March 31,
1998 (SEC File No. 001-10709) and incorporated herein by
reference.
10
.13
Amendment to Cost Sharing and Administrative Services Agreement
dated as of January 2, 1997 by and among PSCC, Inc. and the
owners listed therein. Filed with Registrants Quarterly
Report on Form 10-Q for the quarterly period ended
March 31, 1998 (SEC File No. 001-10709) and incorporated
herein by reference.
10
.14
Accounts Payable and Payroll Disbursement Services Agreement
dated as of January 2, 1997 by and between PSCC, Inc. and
American Office Park Properties, L.P. Filed with
Registrants Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998 (SEC File No.
001-10709) and incorporated herein by reference.
10
.15
Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 8.875% Series B Cumulative
Redeemable Preferred Units, dated as of April 23, 1999.
Filed with Registrants Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1999 (SEC File No.
001-10709) and incorporated herein by reference.
10
.16
Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 9.25% Series A Cumulative
Redeemable Preferred Units, dated as of April 30, 1999.
Filed with Registrants Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1999 (SEC File No.
001-10709) and incorporated herein by reference.
10
.17
Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 8.75% Series C Cumulative
Redeemable Preferred Units, dated as of September 3, 1999.
Filed with Registrants Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1999 (SEC File
No. 001-10709) and incorporated herein by reference.
10
.18
Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 8.875% Series X Cumulative
Redeemable Preferred Units, dated as of September 7, 1999.
Filed with Registrants Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1999 (SEC File
No. 001-10709) and incorporated herein by reference.
60
10
.19
Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to Additional 8.875% Series X
Cumulative Redeemable Preferred Units, dated as of
September 23, 1999. Filed with Registrants Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 1999 (SEC File No. 001-10709) and
incorporated herein by reference.
10
.20
Amendment to Agreement of Limited Partnership of PS Business
Parks L.P. Relating to 8.875% Series Y Cumulative
Redeemable Preferred Units, dated as of July 12, 2000.
Filed with Registrants Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2000 and
incorporated herein by reference.
10
.21
Amendment to Agreement of Limited Partnership of PS Business
Parks L.P. Relating to 9.50% Series D Cumulative Redeemable
Preferred Units, dated as of May 10, 2001. Filed with
Registrants Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2001 and incorporated
herein by reference.
10
.22
Amendment No. 1 to Amendment to Agreement of Limited
Partnership of PS Business Parks L.P. Relating to 9.50%
Series D Cumulative Redeemable Preferred Units, dated as of
June 18, 2001. Filed with Registrants Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 2001 and incorporated herein by reference.
10
.23
Amendment to Agreement of Limited Partnership of PS Business
Parks L.P. Relating to 9.25% Series E Cumulative Redeemable
Preferred Units, dated as of September 21, 2001. Filed with
Registrants Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2001 and incorporated
herein by reference.
10
.24
Amendment to Agreement of Limited Partnership of PS Business
Parks L.P. Relating to 8.75% Series F Cumulative Redeemable
Preferred Units, dated as of January 18, 2002. Filed with
Registrants Form 10-K for the year ended
December 31, 2001 and incorporated herein by reference.
10
.25
Amendment to Agreement of Limited Partnership of PS Business
Parks L.P. Relating to 7.95% Series G Cumulative Redeemable
Preferred Units, dated as of October 30, 2002. Filed with
Registrants Annual Report on Form 10-K for the year
ended December 31, 2003 and incorporated herein by
reference.
10
.26
Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 7.00% Series H Cumulative
Redeemable Preferred Units, dated as of January 16, 2004.
Filed with Registrants Annual Report on Form 10-K for
the year ended December 31, 2003 and incorporated herein by
reference.
10
.27
Amendment to Agreement of Limited Partnership of PS Business
Parks L.P. relating to 6.875% Series I Cumulative
Redeemable Preferred Units, dated as of April 21, 2004,
filed with Registrants Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2004 and
incorporated herein by reference.
10
.28
Amendment to Agreement of Limited Partnership of PS Business
Parks L.P. Relating to 7.50% Series J Cumulative Redeemable
Preferred Units, dated as of May 27, 2004, filed with
Registrants Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2004 and incorporated
herein by reference.
10
.29
Amendment No. 1 to Amendment to Agreement of Limited
Partnership of PS Business Parks L.P. Relating to 7.50%
Series J Cumulative Redeemable Preferred Units, dated as of
June 17, 2004, filed with Registrants Quarterly
Report on Form 10-Q for the quarterly period ended
June 30, 2004 and incorporated herein by reference.
10
.30
Amendment to Agreement of Limited Partnership of PS Business
Parks L.P. relating to 7.95% Series K Cumulative Redeemable
Preferred Units, dated as of June 30, 2004, filed herewith.
10
.31
Amendment to Agreement of Limited Partnership of PS Business
Parks L.P. relating to 7.60% Series L Cumulative Redeemable
Preferred Units, dated as of August 31, 2004, filed with
Registrants Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2004 and incorporated
herein by reference.
10
.32
Amendment No. 1 to Amendment to Agreement of Limited
Partnership of PS Business Parks L.P. relating to 7.00%
Series H Cumulative Redeemable Preferred Units, dated as of
October 25, 2004, filed with Registrants Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 2004 and incorporated herein by reference.
61
10
.33
Third Amendment to Revolving Credit Agreement dated as of
February 15, 2002 among PS Business Parks, L.P., Wells
Fargo Bank, National Association, as Agent, and the Lenders
named therein. Filed with Registrants Form 10-K for
the year ended December 31, 2001 and incorporated herein by
reference.
10
.34
Term Loan Agreement dated as of February 20, 2002 among PS
Business Parks, L.P. and Fleet National Bank, as Agent. Filed
with the Registrants Form 10-K for the year ended
December 31, 2003 and incorporated herein by reference.
10
.35
Amended and Restated Revolving Credit Agreement dated as of
October 29, 2002 among PS Business Parks, L.P., Wells Fargo
Bank, National Association, as Agent, and the Lenders named
therein. Filed with Registrants Form 10-K for the
year ended December 31, 2002 and incorporated herein by
reference.
10
.36*
Registrants 2003 Stock Option and Incentive Plan. Filed
with Registrants Registration Statement on Form S-8,
No. 333-104604 and incorporated herein by reference.
10
.37
Letter Agreement, dated as of December 29, 2003, between
Public Storage, Inc. and PS Business Parks, L.P. Filed with the
Registrants Current Report on Form 8-K dated
January 14, 2004 and incorporated herein by reference.
10
.38
Modification Agreement dated as of December 29, 2003. Filed
with the Registrants Form 10-K for the year ended
December 31, 2003 and incorporated herein reference. This
exhibit modifies the Amended and Restated Revolving Credit
Agreement dated as of October 29, 2002 and filed with the
Registrants Form 10-K for the year ended
December 31, 2002 and incorporated herein by reference.
10
.39
Modification Agreement dated as of January 23, 2004. Filed
with the Registrants Form 10-K for the year ended
December 31, 2003 and incorporated herein reference. This
exhibit modifies the Modification Agreement dated as of
December 29, 2003 and filed with the Registrants
Form 10-K for the year ended December 31, 2003 and
incorporated herein by reference.
10
.40*
Form of Indemnification Agreement for Executive Officers. Filed
herewith.
10
.41*
Form of PS Business Parks, Inc. Restricted Stock Unit Agreement.
Filed with Registrants Form 10-Q for the quarter ended
September 30, 2004 and incorporated herein by reference.
10
.42*
Form of PS Business Parks, Inc. 2003 Stock Option and Incentive
Plan Non-Qualified Stock Option Agreement. Filed with
Registrants Form 10-Q for the quarter ended September 30, 2004
and incorporated herein by reference.
10
.43*
Form of PS Business Parks, Inc. 2003 Stock Option and Incentive
Plan Stock Option Agreement. Filed with Registrants Form 10-Q
for the quarter ended September 30, 2004 and incorporated
herein by reference.
12
Statement re: Computation of Ratio of Earnings to Fixed Charges.
Filed herewith.
14
Code of Ethics for Senior Financial Officers. Filed with
Registrants Annual Report on Form 10-K for the year
ended December 31, 2003 and incorporated herein by
reference.
21
List of Subsidiaries. Filed herewith.
23
Consent of Independent Registered Public Accounting Firm. Filed
herewith.
31
.1
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. Filed
herewith.
31
.2
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. Filed
herewith.
32
.1
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. Filed herewith.
* | Compensatory benefit plan. |
** | Management contract. |
62
63
64
Dated: March 14, 2005
PS Business Parks, Inc.
By:
/s/ Joseph D. Russell, Jr.
Joseph D. Russell, Jr.
President and Chief Executive Officer
Signature
Title
Date
/s/ Ronald L. Havner, Jr.
Chairman of the Board
March 14, 2005
/s/ Joseph D. Russell, Jr.
President, Director and Chief Executive Officer (principal
executive officer)
March 14, 2005
/s/ Edward A. Stokx
Chief Financial Officer (principal financial officer and
principal accounting officer)
March 14, 2005
/s/ Vern O. Curtis
Director
March 14, 2005
/s/ Arthur M. Friedman
Director
March 14, 2005
/s/ James H. Kropp
Director
March 14, 2005
/s/ Harvey Lenkin
Director
March 14, 2005
/s/ Alan K. Pribble
Director
March 14, 2005
/s/ Jack D. Steele
Director
March 14, 2005
Page
F-1
F-2
F-3
F-4
F-5
F-7
F-25
F-1
/s/ Ernst & Young LLP
December 31,
2004
2003
(In thousands, except
share data)
ASSETS
$
39,688
$
5,809
382,908
378,239
1,187,584
1,120,579
1,570,492
1,498,818
(295,415
)
(223,103
)
1,275,077
1,275,715
16,876
49,171
11,583
11,399
1,303,536
1,336,285
2,079
1,885
15,470
12,929
3,056
1,877
76
$
1,363,829
$
1,358,861
LIABILITIES AND SHAREHOLDERS EQUITY
$
38,453
$
35,701
95,000
100,000
7,938
11,367
11,756
50,000
49,820
300,395
127,750
217,750
169,295
169,888
510,850
168,673
218
216
420,351
420,778
343,529
281,386
(535
)
(257,984
)
(199,690
)
1,016,964
670,828
$
1,363,829
$
1,358,861
F-2
For the Years Ended
December 31,
2004
2003
2002
(In thousands, except
per share data)
$
218,447
$
193,993
$
189,894
624
742
763
219,071
194,735
190,657
64,969
53,410
50,670
72,336
57,436
55,333
4,628
4,683
5,125
141,933
115,529
111,128
2,043
41
406
1,125
959
(3,054
)
(4,015
)
(5,324
)
(2,648
)
(847
)
(4,324
)
74,490
78,359
75,205
2,296
1,978
(17,106
)
(19,240
)
(17,927
)
(3,139
)
(5,328
)
(11,593
)
(11,101
)
(25,573
)
(30,833
)
(29,028
)
48,917
49,822
48,155
2,196
2,036
4,294
(5,907
)
(900
)
15,462
2,897
9,023
(4,432
)
248
(3,142
)
13,226
(726
)
9,275
62,143
49,096
57,430
31,154
15,784
15,412
1,866
33,020
15,784
15,412
$
29,123
$
33,312
$
42,018
$
0.73
$
1.59
$
1.52
$
0.61
$
(0.03
)
$
0.43
$
1.34
$
1.56
$
1.95
$
0.72
$
1.58
$
1.51
$
0.60
$
(0.03
)
$
0.43
$
1.33
$
1.54
$
1.93
21,767
21,412
21,552
21,960
21,565
21,743
F-3
Preferred Stock
Common Stock
Cumulative
Other
Paid-in
Net
Comprehensive
Cumulative
Shareholders
Shares
Amount
Shares
Amount
Capital
Income
Income/(Loss)
Distributions
Equity
(In thousands, except share data)
4,840
$
121,000
21,539,783
$
215
$
422,161
$
174,860
$
108
$
(118,613
)
$
599,731
2,000
50,000
(1,737
)
48,263
(7
)
(187
)
(5
)
(192
)
29,998
723
723
438
15
15
525
525
(38,800
)
(1,206
)
(1,206
)
726
726
(1,094
)
(1,094
)
57,430
57,430
57,062
(15,412
)
(15,412
)
(25,003
)
(25,003
)
(104
)
(104
)
6,833
170,813
21,531,419
215
420,372
232,290
(260
)
(159,028
)
664,402
(261,200
)
(2
)
(8,117
)
(8,119
)
(86
)
(2,140
)
69
(2,071
)
293,309
3
7,618
7,621
2,000
386
386
(834
)
(834
)
559
559
49,096
49,096
48,821
(15,784
)
(15,784
)
(24,878
)
(24,878
)
450
450
6,747
168,673
21,565,528
216
420,778
281,386
(535
)
(199,690
)
670,828
15,800
395,000
(13,870
)
381,130
(2,113
)
(52,823
)
1,866
(1,866
)
(52,823
)
269,710
2
6,956
6,958
4,429
1,365
1,365
(101
)
(101
)
535
535
62,143
62,143
62,678
(31,154
)
(31,154
)
(25,274
)
(25,274
)
3,357
3,357
20,434
$
510,850
21,839,667
$
218
$
420,351
$
343,529
$
$
(257,984
)
$
1,016,964
F-4
For the Years Ended December 31,
2004
2003
2002
(In thousands)
$
62,143
$
49,096
$
57,430
73,793
59,107
58,144
156
30,005
30,585
32,170
(2,296
)
(1,978
)
(2,043
)
(41
)
(15,462
)
(2,897
)
(9,023
)
5,907
900
914
386
540
(4,172
)
(1,615
)
(3,529
)
4,581
(3,820
)
313
89,815
83,314
77,496
151,958
132,410
134,926
(52,069
)
(38,938
)
(26,675
)
7,600
4,823
(1,396
)
(255
)
7,450
(22,323
)
(279,137
)
(1,156
)
48,284
14,498
23,313
(838
)
(3,712
)
3,326
1,988
(26,108
)
(294,885
)
5,776
138,000
95,000
(233,000
)
(100,000
)
100,000
(100,000
)
(35,000
)
(8,327
)
(585
)
(9,866
)
50,000
(50,000
)
381,130
48,263
41,533
19,453
6,958
7,621
723
(101
)
(8,119
)
(1,206
)
(132,750
)
(52,823
)
(2,198
)
(192
)
(31,154
)
(15,657
)
(15,412
)
(17,689
)
(19,240
)
(17,927
)
(25,274
)
(24,878
)
(28,234
)
(8,474
)
(8,472
)
(9,568
)
(91,971
)
123,472
(98,966
)
33,879
(39,003
)
41,736
5,809
44,812
3,076
$
39,688
$
5,809
$
44,812
$
3,434
$
4,607
$
5,424
F-5
For the Years Ended
December 31,
2004
2003
2002
(In thousands)
(218
)
(450
)
104
218
450
(104
)
(1,866
)
(3,139
)
5,005
834
(726
)
(834
)
726
(535
)
(559
)
1,094
535
559
(1,094
)
F-6
1. | Organization and description of business |
Organization |
Description of business |
2. | Summary of significant accounting policies |
Basis of presentation |
Use of estimates |
Allowance for doubtful accounts |
Financial instruments |
F-7
Marketable securities and financial instruments |
Real estate facilities |
F-8
Properties Held for Disposition |
Investment in joint venture |
F-9
For the Years
Ended
December 31,
2003
2002
$
20
$
1,570
3,668
3,444
$
3,688
$
5,014
48
477
251
4
405
52
1,133
$
3,636
$
3,881
Intangible assets |
Evaluation of asset impairment |
Borrowings from affiliate |
Stock-based compensation |
F-10
Revenue and expense recognition |
Gains/ Losses from sales of real estate |
General and administrative expense |
Related party transactions |
F-11
Income taxes |
Accounting for preferred equity issuance costs |
Net income per common share |
For the Years Ended December 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Net income allocable to common shareholders
|
$ | 29,123 | $ | 33,312 | $ | 42,018 | |||||||
Weighted average common shares outstanding:
|
|||||||||||||
Basic weighted average common shares outstanding
|
21,767 | 21,412 | 21,552 | ||||||||||
Net effect of dilutive stock options and restricted stock
units based on treasury stock method using average
market price
|
193 | 153 | 191 | ||||||||||
Diluted weighted average common shares outstanding
|
21,960 | 21,565 | 21,743 | ||||||||||
Net income per common share Basic
|
$ | 1.34 | $ | 1.56 | $ | 1.95 | |||||||
Net income per common share Diluted
|
$ | 1.33 | $ | 1.54 | $ | 1.93 | |||||||
F-12
Segment Reporting |
Reclassifications |
3. | Real estate facilities |
Accumulated | |||||||||||||||||
Land | Buildings | Depreciation | Total | ||||||||||||||
Balances at December 31, 2001
|
$ | 275,042 | $ | 898,240 | $ | (111,860 | ) | $ | 1,061,422 | ||||||||
Disposition of real estate
|
| (38 | ) | 402 | 364 | ||||||||||||
Developed projects
|
8 | 3,704 | | 3,712 | |||||||||||||
Capital improvements, net
|
| 26,538 | | 26,538 | |||||||||||||
Depreciation expense
|
| | (57,842 | ) | (57,842 | ) | |||||||||||
Transfer to properties held for disposition
|
| (716 | ) | 2,327 | 1,611 | ||||||||||||
Balances at December 31, 2002
|
275,050 | 927,728 | (166,973 | ) | 1,035,805 | ||||||||||||
Acquisition of real estate
|
112,718 | 170,137 | | 282,855 | |||||||||||||
Disposition of real estate
|
| (85 | ) | 279 | 194 | ||||||||||||
Developed projects
|
| 838 | | 838 | |||||||||||||
Capital improvements, net
|
| 38,938 | | 38,938 | |||||||||||||
Lease termination write-off
|
| (1,766 | ) | 1,041 | (725 | ) | |||||||||||
Depreciation expense
|
| | (58,805 | ) | (58,805 | ) | |||||||||||
Impairment charge
|
| (5,210 | ) | | (5,210 | ) | |||||||||||
Transfer to properties held for disposition
|
(9,529 | ) | (10,001 | ) | 1,355 | (18,175 | ) | ||||||||||
Balances at December 31, 2003
|
378,239 | 1,120,579 | (223,103 | ) | 1,275,715 | ||||||||||||
Acquisition of real estate
|
4,669 | 19,419 | | 24,088 | |||||||||||||
Disposition of real estate
|
| (2,063 | ) | 1,046 | (1,017 | ) | |||||||||||
Capital improvements, net
|
| 49,933 | | 49,933 | |||||||||||||
In-place rent adjustment
|
| | (156 | ) | (156 | ) | |||||||||||
Depreciation expense
|
| | (73,717 | ) | (73,717 | ) | |||||||||||
Transfer to properties held for disposition
|
| (284 | ) | 515 | 231 | ||||||||||||
Balances at December 31, 2004
|
$ | 382,908 | $ | 1,187,584 | $ | (295,415 | ) | $ | 1,275,077 | ||||||||
F-13
F-14
F-15
For the Years Ended December 31,
2004
2003
2002
$
5,962
$
5,736
$
11,043
(2,078
)
(2,029
)
(3,938
)
(1,457
)
(1,671
)
(2,811
)
(231
)
$
2,196
$
2,036
$
4,294
4. | Leasing activity |
2005
|
$ | 189,546 | ||
2006
|
142,383 | |||
2007
|
102,908 | |||
2008
|
73,847 | |||
2009
|
47,692 | |||
Thereafter
|
94,903 | |||
$ | 651,279 | |||
5. | Bank Loans |
F-16
6. | Mortgage notes payable |
December 31, | December 31, | |||||||
2004 | 2003 | |||||||
8.190% mortgage note, secured by one commercial property with an
approximate carrying amount of $10.2 million, principal and
interest payable monthly, due March 2007
|
$ | 5,578 | $ | 5,832 | ||||
7.290% mortgage note, secured by one commercial property with an
approximate carrying amount of $6.7 million, principal and
interest payable monthly, due February 2009
|
5,789 | 5,924 | ||||||
7.050% mortgage note, secured by one commercial property with an
approximate carrying amount of $0, principal and interest
payable monthly, repaid November, 2004
|
| 7,938 | ||||||
$ | 11,367 | $ | 19,694 | |||||
2005
|
$ | 420 | ||
2006
|
455 | |||
2007
|
5,169 | |||
2008
|
179 | |||
2009
|
5,144 | |||
$ | 11,367 | |||
7. | Minority interests |
Common partnership units |
F-17
Preferred partnership units |
December 31, | ||||||||||||||||||||||||||||
2004 | 2003 | |||||||||||||||||||||||||||
Date Redeemed or | ||||||||||||||||||||||||||||
Earliest Redemption | Dividend | Units | Units | |||||||||||||||||||||||||
Series | Issuance Date | Date | Rate | Outstanding | Amount | Outstanding | Amount | |||||||||||||||||||||
Series B
|
April, 1999 | April, 2004 | 8.875 | % | | $ | | 510 | $ | 12,750 | ||||||||||||||||||
Series C
|
September, 1999 | September, 2004 | 8.750 | % | | | 3,200 | 80,000 | ||||||||||||||||||||
Series E
|
September, 2001 | September, 2006 | 9.250 | % | 2,120 | 53,000 | 2,120 | 53,000 | ||||||||||||||||||||
Series G
|
October, 2002 | October, 2007 | 7.950 | % | 800 | 20,000 | 800 | 20,000 | ||||||||||||||||||||
Series J
|
May & June, 2004 | May, 2009 | 7.500 | % | 1,710 | 42,750 | | | ||||||||||||||||||||
Series X
|
September, 1999 | September, 2004 | 8.875 | % | | | 1,600 | 40,000 | ||||||||||||||||||||
Series Y
|
July, 2000 | July, 2005 | 8.875 | % | 480 | 12,000 | 480 | 12,000 | ||||||||||||||||||||
5,110 | $ | 127,750 | 8,710 | $ | 217,750 | |||||||||||||||||||||||
F-18
8. | Property management contracts |
F-19
9.
Shareholders equity
Preferred stock
Date
Redeemed or
December 31, 2004
December 31, 2003
Earliest
Redemption
Dividend
Shares
Shares
Series
Issuance Date
Date
Rate
Outstanding
Amount
Outstanding
Amount
April, 1999
April, 2004
9.250
%
$
2,113
$
52,823
May, 2001
May, 2006
9.500
%
2,634
65,850
2,634
65,850
January, 2002
January, 2007
8.750
%
2,000
50,000
2,000
50,000
January & October, 2004
January, 2009
7.000
%
8,200
205,000
April, 2004
April, 2009
6.875
%
3,000
75,000
June, 2004
June, 2009
7.950
%
2,300
57,500
August, 2004
August, 2009
7.600
%
2,300
57,500
20,434
$
510,850
6,747
$
168,673
F-20
Common Stock |
Equity stock |
10. | Stock options |
F-21
Number of | Weighted Average | ||||||||||||
Options | Exercise Price | Exercise Price | |||||||||||
Outstanding at December 31, 2001
|
832,922 | $ | 16.69 $29.19 | $ | 24.94 | ||||||||
Granted
|
300,000 | 31.11 36.01 | 33.47 | ||||||||||
Exercised
|
(29,998 | ) | 16.69 26.71 | 23.07 | |||||||||
Forfeited
|
(64,168 | ) | 23.37 26.71 | 26.01 | |||||||||
Outstanding at December 31, 2002
|
1,038,756 | $ | 16.69 $36.01 | $ | 27.36 | ||||||||
Granted
|
167,000 | 31.66 40.30 | 34.77 | ||||||||||
Exercised
|
(293,309 | ) | 16.69 35.43 | 25.98 | |||||||||
Forfeited
|
(60,834 | ) | 24.69 36.01 | 27.61 | |||||||||
Outstanding at December 31, 2003
|
851,613 | $ | 16.69 $40.30 | $ | 29.27 | ||||||||
Granted
|
90,000 | 39.26 45.51 | 44.46 | ||||||||||
Exercised
|
(269,710 | ) | 16.85 34.75 | 27.33 | |||||||||
Forfeited
|
(77,668 | ) | 26.71 34.75 | 31.69 | |||||||||
Outstanding at December 31, 2004
|
594,235 | $ | 16.69 $45.51 | 34.23 | |||||||||
Exercisable at:
|
|||||||||||||
December 31, 2002
|
120,588 | $ | 16.69 $22.88 | $ | 18.48 | ||||||||
346,150 | $ | 23.50 $31.11 | $ | 25.72 | |||||||||
December 31, 2003
|
102,107 | $ | 16.69 $22.88 | $ | 18.13 | ||||||||
289,157 | $ | 23.01 $36.01 | $ | 27.66 | |||||||||
December 31, 2004
|
15,196 | $ | 16.69 $22.88 | $ | 21.87 | ||||||||
332,434 | $ | 23.75 $40.30 | $ | 29.35 |
F-22
For the Years Ended December 31,
2004
2003
2002
(In thousands, except per share
data)
$
29,123
$
33,312
$
42,018
(215
)
(628
)
(802
)
$
28,908
$
32,684
$
41,216
$
1.34
$
1.56
$
1.95
$
1.33
$
1.53
$
1.91
$
1.33
$
1.54
$
1.93
$
1.32
$
1.52
$
1.90
11. | Recent accounting pronouncements |
F-23
12.
Supplementary quarterly financial data (unaudited)
Three Months Ended
March 31,
June 30,
September 30,
December 31,
2003
2003
2003
2003
(In thousands, except per share data)
$
47,974
$
47,826
$
49,270
$
49,665
$
13,010
$
12,628
$
13,487
$
14,285
$
5,803
$
12,991
$
7,792
$
6,726
$
0.27
$
0.61
$
0.36
$
0.31
$
0.27
$
0.60
$
0.36
$
0.31
Three Months Ended
March 31,
June 30,
September 30,
December 31,
2004
2004
2004
2004
$
53,765
$
53,976
$
55,179
$
56,151
$
16,116
$
15,812
$
16,342
$
16,699
$
4,158
$
5,206
$
2,847
$
16,912
$
0.19
$
0.24
$
0.13
$
0.77
$
0.19
$
0.24
$
0.13
$
0.77
(1) | Discontinued operations are excluded. |
13. | Commitments and contingencies |
14. | 401(K) Plan |
F-24
Cost
Capitalized
Subsequent
to
Gross Amount at Which Carried at
Initial Cost to Company
Acquisition
December 31, 2004
Buildings
Buildings
Buildings
Depreciable
and
and
and
Accumulated
Date
Lives
Description
Location
Encumbrances
Land
Improvements
Improvements
Land
Improvements
Totals
Depreciation
Acquired
(Years)
San Francisco, CA
$
776
$
1,886
$
91
$
776
$
1,977
$
2,753
$
470
03/17/98
5-30
Torrance, CA
2,318
6,069
1,263
2,318
7,332
9,650
2,142
04/12/97
5-30
San Francisco, CA
899
2,387
314
899
2,701
3,600
706
04/12/97
5-30
Gaithersburg, MD
475
1,203
235
475
1,438
1,913
435
04/12/97
5-30
Monterey Park, CA
3,078
7,862
758
3,078
8,620
11,698
2,454
01/01/97
5-30
Monterey, CA
288
706
198
288
904
1,192
274
01/01/97
5-30
Milwaukie, OR
1,125
2,857
821
1,125
3,678
4,803
1,087
01/01/97
5-30
Cerritos, CA
450
1,217
523
450
1,740
2,190
505
01/01/97
5-30
Renton, WA
330
889
217
330
1,106
1,436
334
01/01/97
5-30
San Diego, CA
1,500
3,738
939
1,500
4,677
6,177
1,434
01/01/97
5-30
Alexandria, VA
1,440
3,635
1,056
1,440
4,691
6,131
1,392
01/01/97
5-30
Tempe, AZ
195
522
312
195
834
1,029
269
01/01/97
5-30
San Jose, CA
3,458
8,765
1,554
3,458
10,319
13,777
2,937
01/01/97
5-30
Signal Hill, CA
900
2,510
315
900
2,825
3,725
725
01/01/97
5-30
Sacramento, CA
1,710
4,567
1,676
1,710
6,243
7,953
1,828
01/01/97
5-30
Culver City, CA
3,252
8,157
3,165
3,252
11,322
14,574
3,582
01/01/97
5-30
Tempe, AZ
2,160
5,454
2,897
2,160
8,351
10,511
2,774
01/01/97
5-30
Signal Hill, CA
1,500
3,749
788
1,500
4,537
6,037
1,308
01/01/97
5-30
Mesa, AZ
675
1,692
999
675
2,691
3,366
900
01/01/97
5-30
Tempe, AZ
645
1,653
1,149
645
2,802
3,447
906
01/01/97
5-30
Carson, CA
990
2,496
854
990
3,350
4,340
1,059
01/01/97
5-30
Woodbridge, VA
1,350
3,398
776
1,350
4,174
5,524
1,251
01/01/97
5-30
Studio City, CA
621
1,530
217
621
1,747
2,368
524
01/01/97
5-30
Lorton, VA
4,146
17,872
1,846
4,146
19,718
23,864
6,428
06/17/98
5-30
Lake Forest, CA
5,508
13,785
2,817
5,508
16,602
22,110
4,318
12/23/97
5-30
Laguna Hills, CA
16,261
39,559
2,260
16,261
41,819
58,080
10,308
12/23/97
5-30
Laguna Hills, CA
2,037
5,051
3,181
2,037
8,232
10,269
2,405
12/23/97
5-30
Buena Park, CA
3,245
7,703
1,237
3,245
8,940
12,185
2,619
12/23/97
5-30
Cerritos, CA
4,218
10,273
1,702
4,218
11,975
16,193
3,276
12/23/97
5-30
Hayward, CA
4,398
10,433
1,795
4,398
12,228
16,626
3,255
12/23/97
5-30
Sterling, VA
1,156
2,957
649
1,156
3,606
4,762
952
12/10/97
5-30
Beltsville, MD
4,278
18,380
4,750
4,278
23,130
27,408
8,649
01/13/98
5-30
Sterling, VA
2,969
10,008
2,885
2,969
12,893
15,862
4,564
03/09/98
5-30
Beaverton, OR
2,733
7,779
1,283
2,733
9,062
11,795
3,132
05/04/98
5-30
Beaverton, OR
807
2,542
990
807
3,532
4,339
1,014
05/04/98
5-30
Beaverton, OR
521
1,603
552
521
2,155
2,676
688
05/04/98
5-30
Beaverton, OR
1,326
4,035
1,130
1,326
5,165
6,491
1,680
05/04/98
5-30
Beaverton, OR
1,353
4,101
879
1,353
4,980
6,333
1,854
05/04/98
5-30
F-25
Cost
Capitalized
Subsequent
to
Gross Amount at Which Carried at
Initial Cost to Company
Acquisition
December 31, 2004
Buildings
Buildings
Buildings
Depreciable
and
and
and
Accumulated
Date
Lives
Description
Location
Encumbrances
Land
Improvements
Improvements
Land
Improvements
Totals
Depreciation
Acquired
(Years)
Beaverton, OR
1,741
5,301
993
1,741
6,294
8,035
2,303
05/04/98
5-30
Beaverton, OR
2,616
7,908
2,100
2,616
10,008
12,624
3,266
05/04/98
5-30
Beaverton, OR
3,293
9,938
3,423
3,293
13,361
16,654
4,281
05/04/98
5-30
Beaverton, OR
1,140
3,644
437
1,140
4,081
5,221
1,361
05/04/98
5-30
Beaverton, OR
2,987
8,982
2,268
2,987
11,250
14,237
4,080
05/04/98
5-30
Beaverton, OR
255
784
345
255
1,129
1,384
401
05/04/98
5-30
Bldg-7&8
Beaverton, OR
2,101
6,386
1,261
2,101
7,647
9,748
2,657
05/04/98
5-30
Beaverton, OR
2,890
6,763
0
2,890
6,763
9,653
2,584
05/04/98
5-30
Beaverton, OR
3,093
9,084
0
3,093
9,084
12,177
2,813
05/04/98
5-30
Sterling, VA
824
2,964
1,066
824
4,030
4,854
1,491
06/11/98
5-30
San Jose, CA
4,379
12,889
3,132
4,379
16,021
20,400
5,713
12/31/98
5-30
Chantilly, VA
671
4,179
222
671
4,401
5,072
1,382
01/29/99
5-30
Beaverton, OR
358
3,232
85
358
3,317
3,675
587
04/17/00
5-30
Beaverton, OR
1,262
9,427
0
1,262
9,427
10,689
1,703
07/15/99
5-30
Chantilly, VA
599
3,098
314
599
3,412
4,011
1,073
06/30/99
5-30
Chantilly, VA
774
3,712
509
774
4,221
4,995
1,378
06/30/99
5-30
Chantilly, VA
5,578
2,324
10,875
499
2,324
11,374
13,698
3,522
06/30/99
5-30
Chantilly, VA
5,789
1,527
7,154
396
1,527
7,550
9,077
2,405
06/30/99
5-30
Sacramento, CA
729
3,324
745
729
4,069
4,798
1,417
07/29/99
5-30
Phoenix, AZ
2,761
10,269
937
2,761
11,206
13,967
3,055
12/30/99
5-30
Santa Clara, CA
7,673
15,645
486
7,673
16,131
23,804
4,460
03/28/00
5-30
Irvine, CA
6,876
18,519
2,162
6,876
20,681
27,557
5,423
09/22/00
5-30
Pleasant Valley Rd
Chantilly, VA
1,009
9,219
2,269
1,009
11,488
12,497
3,229
08/15/01
5-30
Sacramento, CA
717
3,269
836
717
4,105
4,822
1,382
07/29/99
5-30
Sacramento, CA
726
3,313
956
726
4,269
4,995
1,353
07/29/99
5-30
Sacramento, CA
427
1,950
220
427
2,170
2,597
695
07/29/99
5-30
Sacramento, CA
432
1,970
137
432
2,107
2,539
619
07/29/99
5-30
Springfield, VA
1,308
5,790
206
1,308
5,996
7,304
1,564
12/20/00
5-30
Springfield, VA
1,308
5,790
900
1,308
6,690
7,998
1,726
12/20/00
5-30
Springfield, VA
919
4,092
7,604
919
11,696
12,615
3,637
12/20/00
5-30
Fairfax, VA
3,404
9,883
72
3,404
9,955
13,359
2,142
06/01/01
5-30
Fairfax, VA
2,199
6,374
776
2,199
7,150
9,349
1,470
06/01/01
5-30
Fairfax, VA
969
2,844
241
969
3,085
4,054
654
06/01/01
5-30
Fairfax, VA
1,047
3,099
187
1,047
3,286
4,333
779
06/01/01
5-30
Fairfax, VA
1,898
5,502
619
1,898
6,121
8,019
1,433
06/01/01
5-30
Fairfax, VA
576
1,673
763
576
2,436
3,012
706
06/01/01
5-30
Fairfax, VA
3,011
8,841
1,264
3,011
10,105
13,116
2,270
06/01/01
5-30
Fairfax, VA
524
1,521
223
524
1,744
2,268
376
06/01/01
5-30
F-26
Cost
Capitalized
Subsequent
to
Gross Amount at Which Carried at
Initial Cost to Company
Acquisition
December 31, 2004
Buildings
Buildings
Buildings
Depreciable
and
and
and
Accumulated
Date
Lives
Description
Location
Encumbrances
Land
Improvements
Improvements
Land
Improvements
Totals
Depreciation
Acquired
(Years)
Fairfax, VA
890
2,732
29
890
2,761
3,651
729
06/01/01
5-30
Fairfax, VA
786
2,284
198
786
2,482
3,268
591
06/01/01
5-30
Fairfax, VA
4,203
12,190
2,464
4,203
14,654
18,857
3,133
06/01/01
5-30
Fairfax, VA
3,640
10,632
112
3,640
10,744
14,384
2,341
06/01/01
5-30
Beaverton, OR
1,558
6,512
0
1,558
6,512
8,070
962
09/30/01
5-30
Beaverton, OR
2,771
8,403
1,305
2,771
9,708
12,479
1,813
11/20/01
5-30
Beaverton, OR
4,348
13,502
927
4,348
14,429
18,777
3,199
11/20/01
5-30
Beaverton, OR
5,535
16,814
874
5,535
17,688
23,223
3,433
11/20/01
5-30
Beaverton, OR
4,045
12,419
1,363
4,045
13,782
17,827
2,961
11/20/01
5-30
Beaverton, OR
2,478
7,531
69
2,478
7,600
10,078
1,537
11/20/01
5-30
Beaverton, OR
1,439
4,566
1,396
1,439
5,962
7,401
1,376
11/20/01
5-30
Santa Ana, CA
734
2,752
37
734
2,789
3,523
528
06/10/03
5-30
Santa Ana, CA
2,154
8,093
154
2,154
8,247
10,401
1,559
06/10/03
5-30
Santa Ana, CA
3,019
11,348
2,594
3,019
13,942
16,961
2,293
06/10/03
5-30
Santa Ana, CA
1,655
6,243
4,971
1,655
11,214
12,869
1,880
06/10/03
5-30
Santa Ana, CA
1,843
7,310
471
1,843
7,781
9,624
1,405
06/10/03
5-30
Phoenix, AZ
2,369
7,245
272
2,369
7,517
9,886
486
12/17/03
5-30
Orange, CA
2,637
12,291
859
2,637
13,150
15,787
827
12/24/03
5-30
Fairfax, VA
4,647
19,492
907
4,647
20,399
25,046
796
05/27/04
5-30
Farmers Branch, TX
941
6,884
682
941
7,566
8,507
821
02/12/03
5-30
Miami, FL
6,502
7,409
431
6,502
7,840
14,342
587
12/30/03
5-30
Miami, FL
6,502
7,409
229
6,502
7,638
14,140
586
12/30/03
5-30
Miami, FL
7,015
7,993
468
7,015
8,461
15,476
631
12/30/03
5-30
Miami, FL
4,837
5,511
443
4,837
5,954
10,791
448
12/30/03
5-30
Miami, FL
6,209
7,075
329
6,209
7,404
13,613
566
12/30/03
5-30
Miami, FL
6,371
7,259
322
6,371
7,581
13,952
574
12/30/03
5-30
Miami, FL
5,011
5,710
261
5,011
5,971
10,982
458
12/30/03
5-30
Miami, FL
5,398
6,150
602
5,398
6,752
12,150
495
12/30/03
5-30
Miami, FL
7,392
8,424
361
7,392
8,785
16,177
668
12/30/03
5-30
Miami, FL
9,341
10,644
394
9,341
11,038
20,379
841
12/30/03
5-30
Miami, FL
3,025
3,447
66
3,025
3,513
6,538
268
12/30/03
5-30
Miami, FL
2,342
2,669
135
2,342
2,804
5,146
210
12/30/03
5-30
Miami, FL
5,900
6,723
607
5,900
7,330
13,230
557
12/30/03
5-30
Miami, FL
3,295
3,755
151
3,295
3,906
7,201
298
12/30/03
5-30
Miami, FL
1,263
1,439
66
1,263
1,505
2,768
114
12/30/03
5-30
Miami, FL
2,106
1,249
150
2,106
1,399
3,505
75
12/30/03
5-30
Miami, FL
322
367
35
322
402
724
30
12/30/03
5-30
Miami, FL
2,335
2,662
21
2,335
2,683
5,018
204
12/30/03
5-30
Miami, FL
2,674
3,044
22
2,674
3,066
5,740
234
12/30/03
5-30
Austin, TX
2,528
6,596
3,338
2,528
9,934
12,462
3,095
01/01/97
5-30
Houston, TX
1,140
3,003
2,278
1,140
5,281
6,421
1,984
01/01/97
5-30
Mesquite, TX
495
1,235
231
495
1,466
1,961
396
01/01/97
5-30
Garland, TX
480
1,203
124
480
1,327
1,807
380
01/01/97
5-30
F-27
Cost
Capitalized
Subsequent
to
Gross Amount at Which Carried at
Initial Cost to Company
Acquisition
December 31, 2004
Buildings
Buildings
Buildings
Depreciable
and
and
and
Accumulated
Date
Lives
Description
Location
Encumbrances
Land
Improvements
Improvements
Land
Improvements
Totals
Depreciation
Acquired
(Years)
Missouri City, TX
360
918
347
360
1,265
1,625
372
01/01/97
5-30
Richardson, TX
799
3,568
840
799
4,408
5,207
1,558
05/04/98
5-30
Plano, TX
1,536
6,654
1,413
1,536
8,067
9,603
2,986
05/04/98
5-30
Dallas, TX
1,274
5,505
1,110
1,274
6,615
7,889
2,517
05/04/98
5-30
Dallas, TX
304
1,545
298
304
1,843
2,147
626
05/04/98
5-30
Irving, TX
319
1,393
298
319
1,691
2,010
675
05/04/98
5-30
Irving, TX
894
3,824
1,155
894
4,979
5,873
1,747
05/04/98
5-30
Irving, TX
606
2,615
1,658
606
4,273
4,879
1,438
05/04/98
5-30
Irving, TX
246
1,061
137
246
1,198
1,444
396
05/04/98
5-30
Irving, TX
1,517
6,499
1,375
1,517
7,874
9,391
2,797
05/04/98
5-30
Irving, TX
1,060
4,531
80
1,060
4,611
5,671
1,580
05/04/98
5-30
Irving, TX
548
2,347
172
548
2,519
3,067
921
05/04/98
5-30
Irving, TX
1,466
6,263
251
1,466
6,514
7,980
2,146
05/04/98
5-30
Irving, TX
955
4,080
346
955
4,426
5,381
1,523
05/04/98
5-30
Irving, TX
2,010
10,242
640
2,010
10,882
12,892
3,617
05/04/98
5-30
Irving, TX
1,307
5,600
153
1,307
5,753
7,060
1,916
11/04/98
5-30
Houston, TX
2,173
7,338
445
2,173
7,783
9,956
2,127
12/30/99
5-30
Austin, TX
789
3,571
23
789
3,594
4,383
1,203
12/31/98
5-30
Austin, TX
761
3,444
160
761
3,604
4,365
1,207
12/31/98
5-30
Austin, TX
662
2,994
488
662
3,482
4,144
1,164
12/31/98
5-30
Austin, TX
749
3,390
509
749
3,899
4,648
1,249
12/31/98
5-30
Austin, TX
597
2,752
713
597
3,465
4,062
940
01/06/99
5-30
Austin, TX
367
1,672
121
367
1,793
2,160
543
05/20/99
5-30
Austin, TX
1,144
5,225
102
1,144
5,327
6,471
1,651
05/20/99
5-30
Austin, TX
437
2,013
833
437
2,846
3,283
726
01/06/09
5-30
Austin, TX
325
1,536
33
325
1,569
1,894
488
01/06/99
5-30
Austin, TX
535
2,487
264
535
2,751
3,286
871
01/06/99
5-30
Austin, TX
469
2,190
116
469
2,306
2,775
721
01/06/99
5-30
Austin, TX
535
2,422
179
535
2,601
3,136
897
12/31/98
5-30
Austin, TX
158
762
178
158
940
1,098
333
01/06/99
5-30
Irving, TX
2,464
2,703
2,017
2,464
4,720
7,184
879
07/01/99
5-30
Irving, TX
1,832
6,901
1,563
1,832
8,464
10,296
1,227
08/15/01
5-30
Herndon, VA
5,926
13,944
4,339
5,926
18,283
24,209
5,524
08/01/97
5-30
San Diego, CA
1,077
2,644
226
1,077
2,870
3,947
716
03/17/98
5-30
San Diego, CA
1,230
3,005
880
1,230
3,885
5,115
1,098
03/17/98
5-30
San Ramon, CA
1,486
3,642
744
1,486
4,386
5,872
1,224
03/17/98
5-30
Sterling, VA
787
2,857
1,112
787
3,969
4,756
1,552
06/11/98
5-30
Herndon, VA
811
4,967
517
811
5,484
6,295
1,867
01/29/99
5-30
Rockville, MD
5,383
15,404
891
5,383
16,295
21,678
3,172
12/27/01
5-30
Rockville, MD
5,404
15,748
2,359
5,404
18,107
23,511
3,727
12/27/01
5-30
Rockville, MD
1,223
3,490
528
1,223
4,018
5,241
813
12/27/01
5-30
Rockville, MD
2,287
6,533
1,190
2,287
7,723
10,010
1,669
12/27/01
5-30
Rockville, MD
4,555
13,039
2,864
4,555
15,903
20,458
3,265
12/27/01
5-30
Rockville, MD
4,188
12,035
255
4,188
12,290
16,478
2,414
12/27/01
5-30
F-28
Cost
Capitalized
Subsequent
to
Gross Amount at Which Carried at
Initial Cost to Company
Acquisition
December 31, 2004
Buildings
Buildings
Buildings
Depreciable
and
and
and
Accumulated
Date
Lives
Description
Location
Encumbrances
Land
Improvements
Improvements
Land
Improvements
Totals
Depreciation
Acquired
(Years)
Rockville, MD
9,813
28,214
1,498
9,813
29,712
39,525
5,780
12/27/01
5-30
San Diego, CA
785
1,933
785
785
2,718
3,503
813
03/17/98
5-30
San Diego, CA
2,109
5,156
412
2,109
5,568
7,677
1,369
03/17/98
5-30
Alexandria, VA
572
1,401
1,296
572
2,697
3,269
848
03/17/98
5-30
San Diego, CA
1,904
4,662
536
1,904
5,198
7,102
1,285
03/17/98
5-30
Alexandria, VA
1,624
3,979
367
1,624
4,346
5,970
1,068
03/17/98
5-30
Springfield, VA
987
2,418
2,010
987
4,428
5,415
1,233
03/17/98
5-30
Springfield, VA
946
2,318
401
946
2,719
3,665
740
03/17/98
5-30
$
11,367
$
382,908
$
1,027,883
$
159,701
$
382,908
$
1,187,584
$
1,570,492
$
295,415
F-29
Exhibit 4.2
9.500% Cumulative Preferred Stock, Series D
Number
|
Shares | |||
|
PS BUSINESS PARKS, INC. | |||
|
Incorporated Under the Laws of the State of California | |||
|
CUSIP 69360J 40 4 |
This certifies that __________________________________________ is the record holder of _______________________________ Shares of the 9.500% Cumulative Preferred Stock, Series D of
PS BUSINESS PARKS, INC .
transferable only on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed.
Any Shareholder may obtain from the office of the Corporation a statement of the rights, preferences, privileges and restrictions granted to or imposed upon the respective classes of shares and upon the holders thereof. By acceptance of this Certificate the holder hereof assents and agrees to be bound by all of the provisions of the Articles of Incorporation and Bylaws of the Corporation and all amendments thereto.
See reverse for further information and for description of provisions of the Articles of Incorporation governing the shares represented by this Certificate relating to redemption and restrictions on ownership and transfer.
Witness the facsimile Corporate Seal of this Corporation and the facsimile signatures of its duly authorized officers.
Dated:
Jack E. Corrigan, Secretary
David Goldberg, Vice President
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST
COMPANY (NEW YORK,N.Y.)
TRANSFER AGENT AND REGISTRAR
By:
Authorized Officer
FOR VALUE RECEIVED ___________________HEREBY SELL, ASSIGN AND TRANSFER UNTO
_______________________________________ SHARES REPRESENTED BY THE WITHIN
CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT _________________________________
ATTORNEY TO TRANSFER THE SAID SHARES ON THE SHARE REGISTER OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED_____________________, 20 ___
)
)
)
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR NAY CHANGE
WHATEVER.
Signature(s) Guarantee
By ____________________________________
The signature(s) should be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership
in an approved signature guarantee medallion program), pursuant to S.E.C. Rule
17Ad-15.
The Corporation is authorized to issue Common Stock, one or more series of Preferred Stock, one or more series of Equity Stock and Depositary Shares. The Corporation will furnish without charge to each shareholder, who so requests in writing, a statement of the rights, preferences, privileges and restrictions granted to or imposed upon the respective classes of shares and upon the holders thereof and a copy of the Corporations Bylaws. Any such request shall be made to the Corporation at the principal office of the Corporation at 701 Western Avenue, Glendale, California 91201-2349, Attention: Secretary.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF THE ARTICLES, INCLUDING BUT NOT LIMITED TO (1) SECTION (C) OF THE CERTIFICATE OF DETERMINATION RELATING TO THE SHARES REPRESENTED BY THIS CERTIFICATE, WHICH CONFERS UPON THE BOARD THE RIGHT, ON OR AFTER MAY 10, 2006, TO CALL FOR REDEMPTION THE SHARES REPRESENTED BY THIS CERTIFICATE, AND (2) THE PROVISIONS OF THE ARTICLES WHICH SET FORTH OWNERSHIP LIMITATION PROVISIONS DESIGNED TO MAINTAIN THE CORPORATIONS QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
The shares of Stock represented by this certificate are subject to restrictions on ownership and transfer for the purpose of assisting this corporation to maintain its status as a Real Estate Investment Trust under the Internal Revenue Code of 1986, as amended. Except as set forth in Article IV of this corporations Articles of Incorporation, no person may Beneficially Own (i) more than 7.0% of the outstanding shares of Common Stock of this corporation, or (ii) more than 9.9% of the outstanding shares of any series of Preferred Stock or Equity Stock of this corporation, with certain further restrictions and exceptions as are set forth in this corporations Articles of Incorporation. Any Person who attempts to own or Beneficially Own Stock in excess of the above limitations must notify this corporation in writing at least 15 days prior to such attempt. If any of the restrictions on transfer or ownership set forth in Article IV of the Articles of Incorporation are violated, the Stock represented hereby will be automatically transferred to the Charitable Trustee of a Charitable Trust for the benefit of a Charitable Beneficiary pursuant to the terms of Article IV of the Articles of Incorporation. In addition, attempted transfers of Stock in violation of the limitations described above (as modified or expanded upon in Article IV of the Articles of Incorporation), may be void ab initio . All capitalized terms in this legend have the meanings defined in this corporations Articles of Incorporation, as the same may be amended from time to time. This corporation will furnish to the holder hereof, upon request and without charge, a complete written statement of the terms and conditions of Article IV of the Articles of Incorporation. Requests for such documents may be directed to the corporate secretary.
Exhibit 4.4
8.750% Cumulative Preferred Stock, Series F
Number
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Shares | |||
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PS BUSINESS PARKS, INC. | |||
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Incorporated Under the Laws of the State of California | |||
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CUSIP 69360J 60 2 |
This certifies that _________________________________________, is the record holder of ___________________________ Shares of the 8.750% Cumulative Preferred Stock, Series F of
PS BUSINESS PARKS, INC .
transferable only on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed.
Any Shareholder may obtain from the office of the Corporation a statement of the rights, preferences, privileges and restrictions granted to or imposed upon the respective classes of shares and upon the holders thereof. By acceptance of this Certificate, the holder hereof assents and agrees to be bound by all of the provisions of the Articles of Incorporation and Bylaws of the Corporation and all amendments thereto.
See the reverse side of this Certificate for further information and for a description of provisions of the Articles of Incorporation governing the shares represented by this Certificate relating to redemption and restrictions on ownership and transfer.
Witness the facsimile Corporate Seal of this Corporation and the facsimile signatures of its duly authorized officers.
Dated:
Jack E. Corrigan, Secretary
David Goldberg, Vice President
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST
COMPANY (NEW YORK, N.Y.)
TRANSFER AGENT AND REGISTRAR
By:
Authorized Officer
FOR VALUE RECEIVED ___________________HEREBY SELL, ASSIGN AND TRANSFER UNTO
_____________________________________ SHARES REPRESENTED BY THE WITHIN
CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
___________________________________________________
DATED___________________, 20____
)
)
)
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR NAY CHANGE
WHATEVER.
Signature(s) Guarantee
By _______________________________
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and
credit unions with membership in an approved signature guarantee
medallion program), pursuant to S.E.C. Rule 17Ad-15.
The Corporation is authorized to issue Common Stock, one or more series of Preferred Stock, one or more series of Equity Stock and Depositary Shares. The Corporation will furnish without charge to each shareholder, who so requests in writing, a statement of the rights, preferences, privileges and restrictions granted to or imposed upon the respective classes of shares and upon the holders thereof and a copy of the Corporations Bylaws. Any such request shall be made to the Corporation at the principal office of the Corporation at 701 Western Avenue, Glendale, California 91201-2349, Attention: Secretary.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF THE ARTICLES OF INCORPORATION, INCLUDING BUT NOT LIMITED TO (1) SECTION (C) OF THE CERTIFICATE OF DETERMINATION RELATING TO THE SHARES REPRESENTED BY THIS CERTIFICATE, WHICH CONFERS UPON THE BOARD THE RIGHT, ON OR AFTER JANUARY 28, 2007, TO CALL FOR REDEMPTION THE SHARES REPRESENTED BY THIS CERTIFICATE, AND (2) THE PROVISIONS OF THE ARTICLES OF INCORPORATION WHICH SET FORTH OWNERSHIP LIMITATION PROVISIONS DESIGNED TO MAINTAIN THE CORPORATIONS QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
The shares of Stock represented by this certificate are subject to restrictions on ownership and transfer for the purpose of assisting this corporation to maintain its status as a Real Estate Investment Trust under the Internal Revenue Code of 1986, as amended. Except as set forth in Article IV of this corporations Articles of Incorporation, no person may Beneficially Own (i) more than 7.0% of the outstanding shares of Common Stock of this corporation, or (ii) more than 9.9% of the outstanding shares of any series of Preferred Stock or Equity Stock of this corporation, with certain further restrictions and exceptions as are set forth in this corporations Articles of Incorporation. Any Person who attempts to own or Beneficially Own Stock in excess of the above limitations must notify this corporation in writing at least 15 days prior to such attempt. If any of the restrictions on transfer or ownership set forth in Article IV of the Articles of Incorporation are violated, the Stock represented hereby will be automatically transferred to the Charitable Trustee of a Charitable Trust for the benefit of a Charitable Beneficiary pursuant to the terms of Article IV of the Articles of Incorporation. In addition, attempted transfers of Stock in violation of the limitations described above (as modified or expanded upon in Article IV of the Articles of Incorporation), may be void ab initio . All capitalized terms in this legend have the meanings defined in this corporations Articles of Incorporation, as the same may be amended from time to time. This corporation will furnish to the holder hereof, upon request and without charge, a complete written statement of the terms and conditions of Article IV of the Articles of Incorporation. Requests for such documents may be directed to the corporate secretary.
Exhibit 10.30
PS BUSINESS PARKS, L.P.
AMENDMENT TO AGREEMENT OF LIMITED
PARTNERSHIP RELATING TO
7.950% SERIES K CUMULATIVE REDEEMABLE
PREFERRED UNITS
This Amendment to the Agreement of Limited Partnership of PS Business Parks, L.P., a California limited partnership (the Partnership" ), dated as of June 30, 2004 (this Amendment" ), amends the Agreement of Limited Partnership of the Partnership, dated as of March 17, 1998, as amended, by and among PS Business Parks, Inc. (the General Partner" ) and each of the limited partners described on Exhibit A to that partnership agreement (the Partnership Agreement" ). Section references are (unless otherwise specified) references to sections in this Amendment.
WHEREAS, the General Partner agreed to issue 2,300,000 Depositary Shares each representing 1/1000th of a share of the General Partners preferred stock designated as the 7.950% Cumulative Preferred Stock, Series K (the Depositary Shares" ) for a price of $25.00 per Depositary Share;
WHEREAS, Section 4.1(b)(2) of the Partnership Agreement requires the General Partner to contribute to the Partnership the funds raised through the issuance of additional shares of the General Partner in return for additional Partnership Units, and provides that the General Partners capital contribution shall be deemed to equal the amount of the gross proceeds of that share issuance (i.e., the net proceeds actually contributed, plus any underwriters discount or other expenses incurred, with any such discount or expense deemed to have been incurred on behalf of the Partnership);
WHEREAS, Section 4.2(a) of the Partnership Agreement provides generally for the creation and issuance of Partnership Units with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to other Partnership Interests, all as shall be determined by the General Partner, without the consent of the Limited Partners, and Section 4.2(b) of the Partnership Agreement specifically contemplates the issuance of Units to the General Partner having designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of shares issued by the General Partner, such as the Depositary Shares;
WHEREAS, the General Partner desires to cause the Partnership to issue additional Units of a new class and series, with the designations, preferences and relative, participating, optional or other special rights, powers and duties set forth herein; and
WHEREAS, the General Partner desires by this Amendment to so amend the Partnership Agreement as of the date first set forth above to provide for the designation and issuance of such new class and series of Units.
NOW, THEREFORE, the Partnership Agreement is hereby amended by establishing and fixing the rights, limitations and preferences of a new class and series of Units as follows:
Section 1. Definitions . Capitalized terms not otherwise defined herein shall have their respective meanings set forth in the Partnership Agreement. Capitalized terms that are used in this Amendment shall have the meanings set forth below:
(a) Liquidation Preference means, with respect to the Series K Preferred Units (as defined below), $25.00 per Series K Preferred Unit, plus the amount of any accumulated and unpaid Priority Return (as defined below) with respect to such Series K Preferred Unit, whether or not declared, minus any distributions in excess of the Priority Return that has accrued with respect to such Series K Preferred Units, to the date of payment.
(b) Parity Preferred Units means any class or series of Partnership Interests (as such term is defined in the Partnership Agreement) of the Partnership now or hereafter authorized, issued or outstanding and expressly designated by the Partnership to rank on a parity with the Series K Preferred Units with respect to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Partnership, including the 83/4% Series C Cumulative Redeemable Preferred Units (the Series C Preferred Units ), the 91/2% Series D Cumulative Redeemable Preferred Units (the Series D Preferred Units ), the 91/4% Series E Cumulative Redeemable Preferred Units (the Series E Preferred Units ), the 83/4% Series F Cumulative Redeemable Preferred Units (the Series F Preferred Units ), the 7.95% Series G Cumulative Redeemable Preferred Units (the Series G Preferred Units ), the 7.000% Series H Cumulative Redeemable Preferred Units (the Series H Preferred Units ), the 6.875% Series I Cumulative Redeemable Preferred Units (the Series I Preferred Units ), the 7.50% Series J Cumulative Redeemable Preferred Units (the Series J Preferred Units ), the 8 7 / 8 % Series X Cumulative Redeemable Preferred Units (the Series X Preferred Units ) and the 8 7 / 8 % Series Y Cumulative Redeemable Preferred Units (the Series Y Preferred Units ). Notwithstanding the differing allocation rights set forth in Section 4 below that apply to the Series C, D, F, H, I and K Preferred Units (as compared to the Series E, G, J, X and Y Preferred Units), for purposes of this Amendment those Series C, D, F, H, I and K Preferred Units and any future series of preferred units that rank in parity with those series also shall be considered Parity Preferred Units to the Series E, G, J, X and Y Preferred Units.
(c) Priority Return means an amount equal to 7.950% per annum, of the Liquidation Preference per Series K Preferred Unit, commencing on the date of issuance of such Series K Preferred Unit, determined on the basis of a 360-day year (and twelve 30-day months), cumulative to the extent not distributed on any Series K Preferred Unit Distribution Payment Date (as defined below).
Section 2. Creation of Series K Preferred Units . (a) Designation and Number. Pursuant to Section 4.2(a) of the Partnership Agreement, a series of Partnership Units (as such term is defined in the Partnership Agreement) in the Partnership designated as the 7.950% Series K Cumulative Redeemable Preferred Units (the Series K Preferred Units" ) is hereby established effective as of June 30, 2004. The number of Series K Preferred Units shall be 2,300,000. The Holders of Series K Preferred Units shall not have any Percentage Interest (as such term is defined in the Partnership Agreement) in the Partnership.
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(b) Capital Contribution . In return for the issuance to the General Partner of the Series K Preferred Units set forth on Exhibit C to this Amendment, the General Partner has contributed to the Partnership the funds raised through the General Partners issuance of the Depositary Shares (the General Partners capital contribution shall be deemed to equal the amount of the gross proceeds of that share issuance, i.e. , the net proceeds actually contributed, plus any underwriters discount or other expenses incurred, with any such discount or expense deemed to have been incurred by the General Partner on behalf of the Partnership).
(c) Construction . The Series K Preferred Units have been created and are being issued in conjunction with the General Partners issuance of the Depositary Shares relating to the General Partners 7.950% Cumulative Preferred Stock, Series K, and as such, the Series K Preferred Units are intended to have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the Depositary Shares, and the terms of this Amendment shall be interpreted in a fashion consistent with this intent.
Section 3. Distributions . (a) Payment of Distributions . Subject to the rights of holders of Parity Preferred Units as to the payment of distributions, pursuant to Section 5.1 of the Partnership Agreement, holders of Series K Preferred Units shall be entitled to receive, when, as and if declared by the Partnership acting through the General Partner, the Priority Return. Such distributions shall be cumulative, shall accrue from the original date of issuance of the Series K Preferred Units and, notwithstanding Section 5.1 of the Partnership Agreement, will be payable (i) quarterly in arrears on March 31, June 30, September 30 and December 31 of each year commencing on September 30, 2004 and (ii) in the event of a redemption of Series K Preferred Units (each a Series K Preferred Unit Distribution Payment Date" ). If any date on which distributions are to be made on the Series K Preferred Units is not a Business Day (as defined below), then payment of the distribution to be made on such date will be made on the Business Day immediately preceding such date with the same force and effect as if made on such date. Distributions on the Series K Preferred Units will be made to the holders of record of the Series K Preferred Units on the relevant record dates to be fixed by the Partnership acting through the General Partner, which record dates shall in no event exceed fifteen (15) Business Days prior to the relevant Series K Preferred Unit Distribution Payment Date. Business Day shall be any day other than a Saturday, Sunday or day on which banking institutions in the State of New York or the State of California are authorized or obligated by law to close, or a day which is or is declared a national or a New York or California state holiday.
(b) Prohibition on Distribution . No distributions on Series K Preferred Units shall be authorized by the General Partner or paid or set apart for payment by the Partnership at any such time as the terms and provisions of any agreement of the Partnership or the General Partner, including any agreement relating to their indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or to the extent that such authorization or payment shall be restricted or prohibited by law.
(c) Distributions Cumulative . Distributions on the Series K Preferred Units will accrue whether or not the terms and provisions of any agreement of the Partnership, including any agreement relating to its indebtedness, at any time prohibit the current payment of
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distributions, whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized. Accrued but unpaid distributions on the Series K Preferred Units will accumulate as of the Series K Preferred Unit Distribution Payment Date on which they first become payable. Distributions on account of arrears for any past distribution periods may be declared and paid at any time, without reference to a regular Series K Preferred Unit Distribution Payment Date, to holders of record of the Series K Preferred Units on the record date fixed by the Partnership acting through the General Partner which date shall not exceed fifteen (15) Business Days prior to the payment date. Accumulated and unpaid distributions will not bear interest.
(d) Priority as to Distributions . Subject to the provisions of Article 13 of the Partnership Agreement:
(i) So long as any Series K Preferred Units are outstanding, no distribution of cash or other property shall be authorized, declared, paid or set apart for payment on or with respect to any class or series of Partnership Interests ranking junior as to the payment of distributions or rights upon a voluntary or involuntary liquidation, dissolution or winding-up of the Partnership to the Series K Preferred Units (collectively, Junior Units" ), nor shall any cash or other property be set aside for or applied to the purchase, redemption or other acquisition for consideration of any Series K Preferred Units, any Parity Preferred Units or any Junior Units, unless, in each case, all distributions accumulated on all Series K Preferred Units and all classes and series of outstanding Parity Preferred Units have been paid in full. The foregoing sentence shall not prohibit (x) distributions payable solely in Junior Units, or (y) the conversion of Junior Units or Parity Preferred Units into Partnership Interests ranking junior to the Series K Preferred Units.
(ii) So long as distributions have not been paid in full (or a sum sufficient for such full payment is not irrevocably deposited in trust for payment) upon the Series K Preferred Units, all distributions authorized and declared on the Series K Preferred Units and all classes or series of outstanding Parity Preferred Units shall be authorized and declared so that the amount of distributions authorized and declared per Series K Preferred Unit and such other classes or series of Parity Preferred Units shall in all cases bear to each other the same ratio that accrued distributions per Series K Preferred Unit and such other classes or series of Parity Preferred Units (which shall not include any accumulation in respect of unpaid distributions for prior distribution periods if such class or series of Parity Preferred Units do not have cumulative distribution rights) bear to each other.
(e) No Further Rights . Holders of Series K Preferred Units shall not be entitled to any distributions, whether payable in cash, other property or otherwise, in excess of the full cumulative distributions described herein.
Section 4. Allocations . Section 6.1(a)(ii) of the Partnership Agreement is amended to read, in its entirety, as follows:
(ii) (A) Notwithstanding anything to the contrary contained in this Agreement, in any taxable year: (1) the holders of series C, D, F, H, I and K Preferred Units shall first be allocated an amount of gross income equal to the
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Priority Return distributed to such holders in such taxable year, and (2) subject to any prior allocation of Profit pursuant to the loss chargeback set forth in Section 6.1(a)(ii)(B) below, the holders of Series E, G, J, X and Y Preferred Units shall then be allocated an amount of Profit equal to the Priority Return distributed to such holders either in such taxable year or in prior taxable years to the extent that such distributions have not previously been matched with an allocation of Profit pursuant to this Section 6.1(a)(ii)(A)(2).
(B) After the Capital Account balances of all Partners other than holders of any series of Preferred Units have been reduced to zero, Losses of the Partnership that otherwise would be allocated so as to cause deficit Capital Account balances for those other Partners shall be allocated to the holders of the Series C, D, E, F, G, H, I, J, K, X and Y Preferred Units in proportion to the positive balances of their Capital Accounts until those Capital Account balances have been reduced to zero. If Losses have been allocated to the holders of the Series C, D, E, F, G, H, I, J, K, X and Y Preferred Units pursuant to the preceding sentence, the first subsequent Profits shall be allocated to those preferred partners so as to recoup, in reverse order, the effects of the loss allocations.
(C) Upon liquidation of the Partnership or the interest of the holders of Series C, D, E, F, G, H, I, J, K, X or Y Preferred Units in the Partnership: (1) items of gross income or deduction shall first be allocated to the holders of Series C, D, F, H, I and K Preferred Units in a manner such that, immediately prior to such liquidation, the Capital Account balances of such holders shall equal the amount of their Liquidation Preferences, and (2) an amount of Profit or Loss shall then be allocated to the holders of Series E, G, J, X and Y Preferred Units in a manner such that, immediately prior to such liquidation, the Capital Account balances of such holders shall equal the amount of their Liquidation Preferences.
Section 5. Optional Redemption . The Series K Preferred Units shall be redeemed at the same time, to the same extent, and applying, except as set forth below, similar procedures, as any redemption by the General Partner of the Depositary Shares. The redemption price, payable in cash, shall equal the Liquidation Preference (the Series K Redemption Price" ). The Partnership will deliver into escrow with an escrow agent acceptable to the Partnership and the holders of the Series K Preferred Units being redeemed (the Escrow Agent" ) the Series K Redemption Price and an executed Redemption Agreement, in substantially the form attached as Exhibit A (the Redemption Agreement" ), and an Amendment to the Agreement of Limited Partnership evidencing the Redemption, in substantially the form attached as Exhibit B. The holders of the Series K Preferred Units to be redeemed will also deliver into escrow with the Escrow Agent an executed Redemption Agreement and an executed Amendment to the Agreement of Limited Partnership evidencing the redemption. Upon delivery of all of the above-described items by both parties, on the redemption date the Escrow Agent shall release the Series K Redemption Price to the holders of the Series K Preferred Units and the fully-executed Redemption Agreement and Amendment to
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Agreement of Limited Partnership to both parties. On and after the date of redemption, distributions will cease to accumulate on the Series K Preferred Units called for redemption, unless the Partnership defaults in the payment of the Series K Redemption Price. The Redemption Right (as such term is defined in the Partnership Agreement) given to Limited Partners (as such term is defined in the Partnership Agreement) in Section 8.6 of the Partnership Agreement shall not be available to the holders of the Series K Preferred Units and all references to Limited Partners in said Section 8.6 (and related provisions of the Partnership Agreement) shall not include holders of the Series K Preferred Units.
Section 6. Voting Rights . Holders of the Series K Preferred Units will not have any voting rights or right to consent to any matter requiring the consent or approval of the Limited Partners, except as set forth in Section 14.1 of the Partnership Agreement and in this Section 6. Solely for purposes of Section 14.1 of the Partnership Agreement, each Series K Preferred Unit shall be treated as one Partnership Unit.
Section 7. Transfer Restrictions . The holders of Series K Preferred Units shall be subject to all of the provisions of Section 11 of the Partnership Agreement.
Section 8. No Conversion Rights . The holders of the Series K Preferred Units shall not have any rights to convert such units into shares of any other class or series of stock or into any other securities of, or interest in, the Partnership.
Section 9. No Sinking Fund . No sinking fund shall be established for the retirement or redemption of Series K Preferred Units.
Section 10. Exhibit A to Partnership Agreement . In order to duly reflect the issuance of the Series K Preferred Units provided for herein, the Partnership Agreement is hereby further amended pursuant to Section 12.3 of the Partnership Agreement by replacing the current form of Exhibit A to the Partnership Agreement with the form of Exhibit A that is attached to this Amendment as Exhibit C.
Section 11. Inconsistent Provisions . Nothing to the contrary contained in the Partnership Agreement shall limit any of the rights or obligations set forth in this Amendment.
IN WITNESS WHEREOF, this Amendment has been executed as of the date first above written.
PS BUSINESS PARKS, INC.
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By: | /s/ Edward A. Stokx | |||
Name: | Edward A. Stokx | |||
Title: | Executive Vice President and Chief Financial Officer |
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Exhibit A
FORM OF
REDEMPTION AGREEMENT
THIS REDEMPTION AGREEMENT (the Agreement) is entered into effective as of the ___day of , , by and between (the Retiring Partner), and PS Business Parks, L.P., a California limited partnership (the Partnership).
RECITALS:
WHEREAS, the Agreement of Limited Partnership of the Partnership, dated as of March 17, 1998, as amended, was amended by an Amendment to Agreement of Limited Partnership Relating to 7.950% Series K Cumulative Redeemable Preferred Units (the Amendment), as further amended from time to time;
WHEREAS, the Retiring Partner owns ___of the 7.950% Series K Cumulative Redeemable Preferred Units in the Partnership (the Series K Preferred Units); and
WHEREAS, the Partnership desires to redeem the Series K Preferred Units of the Retiring Partner, and the Retiring Partner desires to liquidate its Series K Preferred Units (the Redemption) pursuant to the Amendment and based on the representations and under the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants, representations and agreements herein contained, the parties hereto, intending to be legally bound, do covenant and agree as follows:
1. Liquidation of Retiring Partner . In satisfaction of the terms and conditions set forth herein and in the Amendment, the Retiring Partners Series K Preferred Units are hereby completely liquidated and the Retiring Partner immediately and automatically ceases to be a limited partner in the Partnership in exchange for the payment of the Series K Redemption Price (as defined in the Amendment and in accordance with the provisions set forth in the Amendment) and for other good and valuable consideration.
2. Representations of Retiring Partner . The Retiring Partner represents and warrants to the Partnership that:
(a) The Retiring Partner is duly organized and validly existing under the laws of the State of ____________and has been duly authorized by all necessary and appropriate [limited liability company] [corporate] [partnership] action to enter into this Agreement and to consummate the transactions contemplated herein. This Agreement is a valid and binding obligation of the Retiring Partner, enforceable against the Retiring Partner in accordance with its terms, except insofar as such enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditors rights generally and the availability of any particular equitable remedy.
(b) The Retiring Partner has not sold, assigned or otherwise disposed of all or any portion of the Series K Preferred Units and the Series K Preferred Units are free of any liens, security interests, encumbrances or other restrictions, whether existing of record or otherwise.
(c) The execution of this Agreement by the Retiring Partner and the performance of its obligations hereunder will not violate any contract, mortgage, indenture, or other similar restriction to which the Retiring Partner is a party or by which its assets are bound.
(d) Neither the execution nor the delivery of this Agreement nor the consummation of the transactions contemplated herein nor fulfillment of or compliance with the terms and conditions hereof (a) conflict with or will result in a breach of any of the terms, conditions or provisions of (i) the organizational and governing documents of the Retiring Partner or (ii) any agreement, order, judgment, decree, arbitration award, statute, regulation or instrument to which the Retiring Partner is a party or by which it or its assets are bound, or (b) constitutes or will constitute a breach, violation or default under any of the foregoing. No consent or approval, authorization, order, regulation or qualification of any governmental entity or any other person is required for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Retiring Partner.
3. Representations and Warranties of the Partnership . The Partnership represents and warrants to the Retiring Partner as follows:
(a) The Partnership is duly organized and validly existing under the laws of the State of California and has been duly authorized by all necessary and appropriate partnership action to enter into this Agreement and to consummate the transactions contemplated herein. This Agreement is a valid and binding obligation of the Partnership enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally.
(b) The execution of this Agreement by the Partnership and the performance of its obligations hereunder will not violate any contract, mortgage, indenture, or other similar restriction to which the Partnership is a party or by which the Partnership is bound.
(c) Neither the execution nor the delivery of this Agreement nor the consummation of the transactions contemplated herein nor fulfillment of or compliance with the terms and conditions hereof (a) conflict with or will result in a breach of any of the terms, conditions or provisions of (i) the organizational and governing documents of the Partnership or (ii) any agreement, order, judgment, decree, arbitration award, statute, regulation or instrument to which the Partnership is a party or by which it or its assets are bound, or (b) constitutes or will constitute a breach, violation or default under any of the foregoing. No consent or approval, authorization, order, regulation or qualification of any governmental entity or any other person is required for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Partnership.
(d) Consummation of the Redemption by the Partnership will not render the Partnership insolvent under California partnership law.
4. Indemnification .
(a) The Retiring Partner covenants and agrees to indemnify the Partnership and hold it harmless against and with respect to any and all damage, loss, liability, deficiency,
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cost and expense, including reasonable attorneys fees, (i) resulting from any misrepresentation, breach of warranty or non-fulfillment of any agreement or covenant on the part of the Retiring Partner under this Agreement, and (ii) from any and all actions, suits, proceedings, demands, assessments, judgments, costs and legal and other expenses incident to any of the foregoing.
(b) The Partnership covenants and agrees to indemnify the Retiring Partner and hold it harmless against and with respect to any and all damage, loss, liability, deficiency, cost and expense, including reasonable attorneys fees, (i) resulting from any misrepresentation, breach of warranty or non-fulfillment of any agreement or covenant on the part of such Partnership under this Agreement and (ii) from any and all actions, suits, proceedings, demands, assessments, judgments, costs and legal and other expenses incident to any of the foregoing.
5. Survival of Representations and Warranties . All representations, warranties, covenants and agreements of any of the parties hereto made in this Agreement shall survive the execution and delivery hereof, the closing hereunder, and the execution and delivery of all instruments and documents executed in connection therewith.
6. Integration, Interpretation and Miscellaneous . This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter herein and it shall not be changed or terminated orally. This Agreement shall be construed in accordance with the laws of the State of California. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, and successors, or successors and assigns, as the case may be. The headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
RETIRING PARTNER:
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By: | ||||
Name: | ||||
Title: | ||||
PARTNERSHIP:
PS Business Parks, L.P. |
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By: | PS Business Parks, Inc., its | |||
General Partner |
By: | ||||
Name: | ||||
Title: |
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Exhibit B
FORM OF
AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
PS BUSINESS PARKS, L.P.
This Amendment to Agreement of Limited Partnership of PS Business Parks, L.P. (the Partnership" ), dated as of (this Amendment" ) is entered into by the General Partner of the Partnership, PS Business Parks, Inc., and , as a withdrawing Limited Partner of the Partnership (the Withdrawing Partner" ).
RECITALS:
WHEREAS, capitalized terms used herein, unless otherwise defined, have the meanings assigned to such terms in the Agreement of Limited Partnership of the Partnership entered into as of March 17, 1998, as amended (the Partnership Agreement" ).
WHEREAS, pursuant to the redemption by the Partnership of the 7.950% Series K Cumulative Redeemable Preferred Units pursuant to the terms and conditions set forth in that certain Redemption Agreement by and between the Partnership and the Withdrawing Partner, dated as of , 200_, 7.950% Series K Cumulative Redeemable Preferred Units of the Withdrawing Partner have been redeemed by the Partnership and the General Partner desires to amend the Partnership Agreement to (a) set forth a revised list of all Partners of the Partnership as of the date hereof and (b) reflect the withdrawal of the Withdrawing Partner from the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereby agree as follows:
1. This Amendment shall be deemed effective as of the date first above written. Except as amended hereby, the Partnership Agreement shall remain in full force and effect and shall be otherwise unaffected hereby.
2. To evidence the redemption of the 7.950% Series K Cumulative Redeemable Preferred Units of the Withdrawing Partner and the withdrawal of the Withdrawing Partner as a Limited Partner of the Partnership, attached as Schedule A is a current list of Partners of the Partnership as of the date hereof.
3. The Withdrawing Partner is entering into this Amendment to evidence its withdrawal as a Limited Partner of the Partnership.
4. This Amendment shall be deemed to be a contract made under the laws of the State of California and for all purposes shall be governed by and construed in accordance with the laws of such state.
IN WITNESS WHEREOF, the undersigned has caused this Amendment to be executed and delivered as of the date first above written.
GENERAL PARTNER
PS Business Parks, Inc. |
||||
By: | ||||
Name: | ||||
Title: | ||||
WITHDRAWING LIMITED PARTNER
|
||||
By: | ||||
Name: | ||||
Title: |
-2-
Exhibit C
[revised Exhibit A to the Partnership Agreement]
Exhibit 10.40
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the Agreement) is made as of this ___day of ______, 200______by and between PS Business Parks, Inc., a California corporation (the Company) and ______, an officer of the Company (Indemnitee).
RECITALS
A. Both the Company and Indemnitee recognize the increased risk of litigation and other claims currently being asserted against directors and officers of corporations.
B. In recognition of Indemnitees need for substantial protection against personal liability in order to enhance Indemnitees continued and effective service to the Company, and in order to induce Indemnitee to provide services to the Company as a director and officer, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the coverage of Indemnitee under the Companys directors and officers liability insurance policies.
AGREEMENT
In consideration of the foregoing recitals and of Indemnitees continuing to serve the Company and intending to be legally bound hereby, the parties agree as follows:
1. Certain Definitions.
As used in this Agreement the following terms shall have the meanings set forth in this section:
(a) Expenses: any expense, liability, or loss, including attorneys fees, judgments, fines, ERISA excise taxes and penalties, amounts paid or to be paid in settlement, any interest, assessments, or other charges imposed thereon, and any federal, state, local, or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement, paid or incurred in connection with investigating, defending, being a witness in, or participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding relating to any Indemnifiable Event.
(b) Indemnifiable Event: any event or occurrence that takes place either prior to or after the execution of this Agreement, related to Indemnitees service as a director and officer of the Company or an affiliate, or, at the request of the Company, as a director, officer, employee, trustee, agent, or fiduciary of another foreign or domestic corporation, partnership, joint venture, employee benefit plan, trust, or other enterprise, or as a director, officer, employee, or agent of a foreign or domestic corporation that was a predecessor corporation of the Company or of another enterprise at the request of such predecessor corporation, or related to anything done or not done by Indemnitee in any such capacity, whether or not the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent of the Company, as described above.
(c) Proceeding: (i) any threatened, pending, or completed action, suit, or proceedings, whether civil, criminal, administrative, investigative or other, or (ii) any inquiry, hearing, or investigation, whether conducted by the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding.
2. Agreement to Indemnify.
(a) General Agreement. If Indemnitee becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in any Proceeding by reason of (or arising in part out of) an Indemnifiable Event, Indemnitee shall be indemnified and held harmless by the Company from and against any and all Expenses actually or reasonably incurred or suffered by Indemnitee in connection with such Proceeding to the fullest extent permitted by law, as the same exists or may hereafter be amended or interpreted (but in the case of any such amendment or interpretation, only to the extent that such amendment or interpretation permits the Company to provide broader indemnification rights than were permitted prior thereto). The Company shall also cooperate fully with Indemnitee and render such assistance as Indemnitee may reasonably require in the defense of any Proceeding in which Indemnitee was or is a party or is threatened to be made a party, and shall make available to Indemnitee and his counsel all information and documents reasonably available to it which relate to the subject of any such Proceeding. The parties hereto intend that this Agreement shall provide for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Companys Articles of Incorporation, its Bylaws, or vote of its shareholders or disinterested directors.
(b) Statutory Limitation on Indemnification. The parties intend to indemnify Indemnitee to the fullest extent permitted by law. The General Corporation Law of California presently prohibits indemnification in an action brought by or in the right of the corporation for breach of a directors duties to the corporation and its shareholders (i) for acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) for acts or omissions that an Indemnitee believes to be contrary to the best interests of the Company or its shareholders or that involve the absence of good faith on the part of the Indemnitee, (iii) for any transaction from which an Indemnitee derived an improper personal benefit, (iv) for acts or omissions that show a reckless disregard for the Indemnitees duty to the Company or its shareholders, (v) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the Indemnitees duty to the Company or its shareholders, (vi) under Section 310 of the General Corporation Law of California or (vii) under Section 316 of the General Corporation Law of California. The General Corporation Law of California also presently prohibits indemnification in circumstances in which indemnity is expressly prohibited by Section 317 of the General Corporation Law of California. To the extent that the General Corporation Law of California is amended or interpreted to permit the Company to provide broader indemnification rights than are now permitted, the parties contemplate that this Agreement, without amendment or modification, shall encompass such broadened powers to indemnify and that Indemnitee shall be entitled hereunder to any such broadened indemnification rights.
(c) Initiation of Proceeding. Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Proceeding initiated by Indemnitee against the Company or any director or officer of the Company unless (i) the Company has joined in or the Board of Directors has consented to the initiation of such Proceeding, or (ii) the Proceeding is one to enforce indemnification rights.
2
(d) Expense Advances. Expenses incurred by Indemnitee in defending any Proceeding relating in whole or in part to an Indemnifiable Event shall be advanced by the Company prior to the final disposition of any such Proceeding upon receipt by the Company of an undertaking by or on behalf of Indemnitee to repay all amounts so advanced if it should be determined ultimately that Indemnitee is not entitled to be indemnified under this Agreement or otherwise.
(e) Mandatory Indemnification. Notwithstanding any other provision of this Agreement, (i) to the extent that Indemnitee has been successful on the merits in defense of any Proceeding relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred in connection therewith and (ii) if the monetary liability of Indemnitee in a Proceeding brought by the Company or by a shareholder suing derivatively on behalf of the Company may be eliminated pursuant to Section 204(a) of the General Corporation Law of California, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.
(f) Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
3. Notification and Defense of Proceeding.
(a) Notice. Promptly after receipt by Indemnitee of notice of the commencement of any Proceeding, Indemnitee will, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company will not relieve it from any liability that it may have to Indemnitee.
(b) Defense. With respect to any Proceeding as to which Indemnitee notifies the Company of the commencement thereof, the Company will be entitled to participate in the Proceeding to the full extent permitted by law and at its own expense, when, and only to the extent that the Company, in its sole discretion, chooses to so participate. The Indemnitee shall cooperate fully with the Company and render such assistance as the Company may reasonably require in the Companys participation in any such Proceeding and shall make available to the Company and its counsel all information and documents reasonably available to Indemnitee which relate to the subject of such Proceeding. The Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial award if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action; the Companys liability hereunder shall not be excused if participation in the Proceeding by the Company was barred.
(c) Settlement of Claims. The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Companys written consent; the Company will not unreasonably withhold its consent to any proposed settlement.
4. Remedy to Enforce Right to Indemnification. If a claim for indemnity under Section 2 of this Agreement is not paid in full by the Company within ninety days after a written claim has been received by the Company, Indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim, together with interest thereon, and if successful in whole or in part, Indemnitee shall also be entitled to be paid the expense of prosecuting such claim, including reasonable attorneys fees incurred in
3
connection therewith. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking has been tendered to the Company) that Indemnitee has not met the standards of conduct which make it permissible under the General Corporation Law of California for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such a defense shall be on the Company. Neither the failure of the Company (or of its full Board of Directors, its directors who are not parties to the Proceeding with respect to which indemnification is claimed, its shareholders, or independent legal counsel) to have made a determination prior to the commencement of an action pursuant to this Section 4 that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct set forth in the General Corporation Law of California, nor an actual determination by any such person or persons that Indemnitee has not met such applicable standard of conduct, shall be a defense to such action or create a presumption that Indemnitee has not met the applicable standard of conduct.
5. Contract Right Not Exclusive. The rights conferred by this Agreement shall not be exclusive of any other right which Indemnitee may have or hereafter acquire under the General Corporation Law of California, the California Labor Code or any other statute, or any provision contained in the Companys Articles of Incorporation or Bylaws, or any agreement, or pursuant to a vote of shareholders or disinterested directors, or otherwise.
6. Insurance. The Company may purchase and maintain insurance on behalf of its directors and officers against any liability asserted against or incurred by any of them by reason of the fact that such person is or was a director or officer of the Company whether or not the Company would have the power to indemnify such persons against such liability under the General Corporation Law of California.
7. Amendment of this Agreement. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. Unless otherwise consented to in writing by Indemnitee, any amendment to this Agreement shall apply only to acts or omissions of Indemnitee after such amendment is executed by Indemnitee but such amendment shall not affect Indemnitees rights hereunder with respect to acts or omissions occurring prior thereto. No waiver of any of the provisions of this Agreement shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.
8. Amendment of Articles of Incorporation, Bylaws. The Company shall be entitled to amend or repeal its Articles of Incorporation or Bylaws or both but any amendment which reduces or eliminates Indemnitees right to indemnification shall apply only to acts or omissions of Indemnitee after such amendment is effective and such amendment shall not affect Indemnitees rights with respect to acts or omissions occurring prior to the effectiveness of such amendment. If the Company amends its Articles of Incorporation or Bylaws or both to permit the Company to provide broader indemnification than currently permitted under the Articles of Incorporation or Bylaws or both, Indemnitee shall be entitled to such broadened indemnification rights to the fullest extent permitted by law.
9. Termination. This Agreement may be terminated by a writing to that effect executed by the Company and delivered to Indemnitee; such termination shall apply only to acts or omissions of Indemnitee after such notice is delivered to Indemnitee but such termination shall not affect Indemnitees rights hereunder with respect to acts or omissions occurring prior thereto. Indemnitee shall not forfeit Indemnitees status as a beneficiary under this Agreement by the termination of Indemnitees position with the Company.
10. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise received payment (under any insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable hereunder.
4
11. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business and/or assets of the Company), spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation, or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity pertaining to an Indemnifiable Event even though he may have ceased to serve in such capacity at the time of any Proceeding.
12. Severability. If any provision (or portion thereof) of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void, or otherwise unenforceable, that is not itself invalid, void, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, void, or unenforceable.
13. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws.
14. Notices. All notices, demands, and other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, postage prepaid, certified or registered mail, return receipt requested, and addressed to the Company at:
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PS Business Parks, Inc. | |
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701 Western Avenue | |
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Glendale, California 91201-2397 | |
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Attn: | |
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and to Indemnitee at:
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701 Western Avenue
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|
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Glendale, California 91201-2397 |
Notice of change of address shall be effective only when done in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of delivery or on the third business day after mailing.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the day specified above.
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PS BUSINESS PARKS, INC. |
5
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By: | |||||
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Name: | |||||
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Title: | |||||
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INDE | MNITEE | ||||
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Name: | ||||||
6
EXHIBIT 12
PS BUSINESS PARKS, INC.
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratio data)
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
|
||||||||||||||||||||
Net income
|
$ | 62,143 | $ | 49,096 | $ | 57,430 | $ | 49,870 | $ | 51,181 | ||||||||||
Minority interest
|
30,005 | 30,585 | 32,170 | 27,489 | 26,741 | |||||||||||||||
Interest expense
|
3,054 | 4,015 | 5,324 | 1,715 | 1,481 | |||||||||||||||
|
||||||||||||||||||||
Earnings available to cover fixed
charges
|
$ | 95,202 | $ | 83,696 | $ | 94,924 | $ | 79,074 | $ | 79,403 | ||||||||||
|
||||||||||||||||||||
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||||||||||||||||||||
Fixed charges (2)
|
$ | 3,054 | $ | 4,015 | $ | 5,612 | $ | 2,806 | $ | 2,896 | ||||||||||
Preferred distributions
|
53,265 | 35,024 | 33,339 | 22,961 | 17,273 | |||||||||||||||
|
||||||||||||||||||||
Combined fixed charges and
preferred distributions
|
$ | 56,319 | $ | 39,039 | $ | 38,951 | $ | 25,767 | $ | 20,169 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Ratio of earnings to fixed charges
|
31.2 | 20.8 | 16.9 | 28.2 | 27.4 | |||||||||||||||
|
||||||||||||||||||||
Ratio of earnings to combined
fixed charges and preferred
distributions
|
1.7 | 2.1 | 2.4 | 3.1 | 3.9 | |||||||||||||||
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Supplemental disclosure of Ratio of Funds from Operations (FFO) to fixed charges:
2004
2003
2002
2001
2000
$
97,214
$
97,448
$
104,543
$
95,472
$
88,181
3,054
4,015
5,324
1,715
1,481
20,245
19,240
17,927
14,107
12,185
33,020
15,784
15,412
8,854
5,088
$
153,533
$
136,487
$
143,206
$
120,148
$
106,935
$
3,054
$
4,015
$
5,612
$
2,806
$
2,896
48,260
35,024
33,339
22,961
17,273
$
51,314
$
39,039
$
38,951
$
25,767
$
20,169
50.3
34.0
25.5
42.8
36.9
3.0
3.5
3.7
4.7
5.3
1. | FFO has been adjusted to include the effect of impairment charges | |||
2. | Fixed charges include interest expense plus capitalized interest | |||
3. | Excludes EITF Topic D-42 distributions. |
EXHIBIT 21
List of Subsidiaries
The following sets forth the subsidiaries of the Registrant and their respective states of
incorporation or organization:
Name
State
California
California
Maryland
California
California
California
Texas
Virginia
Virginia
Virginia
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on Form S-8 (No.
333-48313) of PS Business Parks, Inc. pertaining to the PS Business Parks, Inc. 1997 Stock Option
and Incentive Plan, the Registration Statement on Form S-8 (No. 333-50274) of PS Business Parks,
Inc. pertaining to the PS 401(k)/Profit Sharing Plan, the Registration Statement on Form S-8 (No.
333-104604) of PS Business Parks, Inc. pertaining to the PS Business Parks, Inc. 2003 Stock Option
and Incentive Plan, the Registration Statement on Form S-3 (No. 333-78627) and in the related
prospectus, the Registration Statement on Form S-3 (No. 333-50463) and in the related prospectus,
and the Registration Statement on Form S-3 (No. 333-112969) and the related prospectus of our
report dated March 10, 2005 with respect to the consolidated financial statements and related
financial statement schedule of PS Business Parks, Inc., managements assessment of the
effectiveness of internal control over financial reporting, and the effectiveness of internal
control over financial reporting of PS Business Parks, Inc., included in this Annual Report on Form
10-K for the year ended December 31, 2004.
/s/ ERNST & YOUNG LLP
Los Angeles, California
March 10, 2005
Exhibit 31.1
CERTIFICATION PURSUANT TO
I, Joseph D. Russell, Jr. certify that:
/s/ Joseph D. Russell, Jr.
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this annual report on Form 10-K of PS Business Parks, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrants other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d)
Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants most recent
fiscal quarter (the registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect,
the registrants internal control over financial reporting; and
5.
The registrants other certifying officers and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrants ability to record, process, summarize and
report financial information; and
(b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over
financial reporting.
Name: Joseph D. Russell, Jr.
Title: Chief Executive Officer
Date: March 14, 2005
Exhibit 31.2
CERTIFICATION PURSUANT TO
I, Edward A. Stokx certify that:
/s/ Edward A. Stokx
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this annual report on Form 10-K of PS Business Parks, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrants other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d)
Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants most recent
fiscal quarter (the registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect,
the registrants internal control over financial reporting; and
5.
The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrants ability to record, process, summarize and
report financial information; and
(b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over
financial reporting.
Name: Edward A. Stokx
Title: Chief Financial Officer
Date: March 14, 2005
Exhibit 32.1
Certification of CEO and CFO Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of PS Business Parks, Inc. (the Company) for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Report), Joseph D. Russell Jr., as Chief Executive Officer of the Company, and Edward A. Stokx, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Joseph D. Russell, Jr. | ||
Name:
|
Joseph D. Russell, Jr. | |
Title:
|
Chief Executive Officer | |
Date:
|
March 14, 2005 | |
|
||
/s/ Edward A. Stokx | ||
Name:
|
Edward A. Stokx | |
Title:
|
Chief Financial Officer | |
Date:
|
March 14, 2005 |
A signed original of this written statement required by Section 906 has been provided to PS Business Parks, Inc. and will be retained by PS Business Parks, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.