10-Q 1 psb-20220331.htm 10-Q psb-20220331
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2022
or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-10709
psb-20220331_g1.gif
PS BUSINESS PARKS, INC.
(Exact name of registrant as specified in its charter)
Maryland95-4300881
(State or Other Jurisdiction(I.R.S. Employer
of Incorporation)Identification Number)
701 Western Avenue, Glendale, California 91201-2349
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (818) 244-8080
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTicker SymbolName of Each Exchange on Which Registered
Common Stock, $0.01 par value per sharePSBNew York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.250% Cum Pref Stock, Series X, $0.01 par valuePSBPrXNew York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Stock, Series Y, $0.01 par valuePSBPrYNew York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.875% Cum Pref Stock, Series Z, $0.01 par valuePSBPrZNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
xoooo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
As of April 27, 2022, the number of shares of the registrant’s common stock, $0.01 par value per share, outstanding was 27,627,443.


PS BUSINESS PARKS, INC.
INDEX
Page
 


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PS BUSINESS PARKS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
 March 31,
2022
December 31,
2021
ASSETS
 
Cash and cash equivalents $104,204 $27,074 
Real estate facilities, at cost
Land 865,214 867,345 
Buildings and improvements 2,244,104 2,239,137 
3,109,318 3,106,482 
Accumulated depreciation (1,197,811)(1,178,397)
1,911,507 1,928,085 
Properties held for sale, net 33,609 
Land and building held for development, net97,212 78,990 
2,008,719 2,040,684 
Rent receivable2,988 1,621 
Deferred rent receivable37,484 37,581 
Other assets 13,176 16,262 
Total assets $2,166,571 $2,123,222 
 
LIABILITIES AND EQUITY
 
Accrued and other liabilities $95,509 $97,151 
Credit facility20,000 32,000 
Total liabilities 115,509 129,151 
Commitments and contingencies
Equity
PS Business Parks, Inc.’s stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 30,200 shares issued and outstanding at March 31, 2022 and December 31, 2021
755,000 755,000 
Common stock, $0.01 par value, 100,000,000 shares authorized, 27,627,443 and 27,589,807 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
276 275 
Paid-in capital 754,387 752,444 
Accumulated earnings270,243 226,737 
Total PS Business Parks, Inc.’s stockholders’ equity 1,779,906 1,734,456 
Noncontrolling interests271,156 259,615 
Total equity 2,051,062 1,994,071 
Total liabilities and equity $2,166,571 $2,123,222 
See accompanying notes.
3

PS BUSINESS PARKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
20222021
Rental income$112,840 $108,047 
Expenses
Cost of operations 34,114 33,218 
Depreciation and amortization 23,132 22,985 
General and administrative 11,324 4,382 
Total operating expenses68,570 60,585 
Interest and other income 246 256 
Interest and other expense(330)(211)
Gain on sale of real estate facilities56,959  
Net income 101,145 47,507 
Allocation to noncontrolling interests(19,049)(7,411)
Net income allocable to PS Business Parks, Inc.82,096 40,096 
Allocation to preferred stockholders(9,580)(12,046)
Allocation to restricted stock unit holders(523)(164)
Net income allocable to common stockholders$71,993 $27,886 
Net income per share of common stock
Basic$2.61 $1.01 
Diluted$2.60 $1.01 
Weighted average common stock outstanding
Basic 27,607 27,495 
Diluted 27,691 27,594 
See accompanying notes.
4

PS BUSINESS PARKS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Amounts in thousands, except share data)
(Unaudited)
Three months ended March 31, 2022Preferred Stock  Common Stock  Paid-in
Capital
Accumulated
Earnings
Total PS
Business Parks,
Inc.’s Stockholders'
 Equity
Noncontrolling
Interests
Total
Equity
Shares  Amount  Shares  Amount      
Balances at December 31, 2021
30,200 $755,000 27,589,807 $275 $752,444 $226,737 $1,734,456 $259,615 $1,994,071 
Issuance of common stock in connection with share-based compensation— — 37,636 1 2,101 — 2,102 — 2,102 
Stock compensation, net— — — — 773 — 773 — 773 
Cash paid for taxes in lieu of stock upon vesting of restricted stock units— — — — (931)— (931)— (931)
Capital contribution from noncontrolling interests—joint venture— — — — — — — 186 186 
Net income— — — — — 82,096 82,096 19,049 101,145 
Distributions— 
Preferred stock (Note 9)— — — — — (9,580)(9,580)— (9,580)
Common stock ($1.05 per share)
— — — — — (29,010)(29,010)— (29,010)
Noncontrolling interests—
Common units— — — — — — — (7,671)(7,671)
Joint venture— — — — — — — (23)(23)
Balances at March 31, 2022
30,200 $755,000 27,627.443 $276 $754,387 $270,243 $1,779,906 $271,156 $2,051,062 
Three months ended March 31, 2021
Balances at December 31, 2020
37,790 $944,750 27,488,547 $274 $738,022 $73,631 $1,756,677 $218,963 $1,975,640 
Issuance of common stock in connection with share-based compensation— — 28,392 — — — — — — 
Stock compensation, net— — — — 1,616 — 1,616 — 1,616 
Cash paid for taxes in lieu of stock upon vesting of restricted stock units— — — — (3,197)— (3,197)— (3,197)
Capital contribution from noncontrolling interests—joint venture— — — — — — — 159 159 
Issuance costs— — — — (105)— (105)— (105)
Net income— — — — — 40,096 40,096 7,411 47,507 
Distributions
Preferred stock (Note 9)— — — — — (12,046)(12,046)— (12,046)
Common stock ($1.05 per share)
— — — — — (28,872)(28,872)— (28,872)
Noncontrolling interests—
Common units— — — — — — — (7,671)(7,671)
Joint venture— — — — — — — (17)(17)
Balances at March 31, 2021
37,790 $944,750 27,516,939 $274 $736,336 $72,809 $1,754,169 $218,845 $1,973,014 
See accompanying notes.

5

PS BUSINESS PARKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
Three Months Ended March 31,
20222021
Cash flows from operating activities
Net income$101,145 $47,507 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization expense23,132 22,985 
Straight-line rent and amortization of lease intangibles, net(1,157)(1,307)
Gain on sale of real estate facilities(56,959) 
Stock compensation expense940 1,780 
Amortization of financing costs252 136 
Other, net(798)(2,277)
Total adjustments(34,590)21,317 
Net cash provided by operating activities66,555 68,824 
Cash flows from investing activities
Capital expenditures to real estate facilities(7,860)(5,816)
Capital expenditures to land and building held for development, net(16,251)(10,608)
Proceeds from sale of real estate facilities91,907  
Net cash provided by (used in) investing activities67,796 (16,424)
Cash flows from financing activities
Proceeds from borrowing on credit facility20,000  
Repayment of borrowing on credit facility(32,000) 
Payment of financing costs(106)(78)
Proceeds from the exercise of stock options2,102  
Payment of Issuance costs (105)
Cash paid for taxes in lieu of stock upon vesting of restricted stock units(931)(3,197)
Cash paid to restricted stock unit holders(188)(164)
Capital contribution from noncontrolling interests – joint venture186 159 
Distributions paid to preferred stockholders(9,580)(12,046)
Distributions paid to common stockholders(29,010)(28,872)
Distributions paid to noncontrolling interests—common units(7,671)(7,671)
Distributions paid to noncontrolling interests—joint venture(23)(17)
Net cash used in financing activities(57,221)(51,991)
Net increase in cash and cash equivalents77,130 409 
Cash, cash equivalents and restricted cash at the beginning of the period28,162 70,171 
Cash, cash equivalents and restricted cash at the end of the period$105,292 $70,580 
Supplemental disclosures
Interest Paid$35 $ 
Supplemental schedule of non-cash investing and financing activities
Accrued capital expenditures to land and building held for development
Land and building held for development, net$5,565 $2,615 
Accrued and other liabilities $(5,565)$(2,615)
See accompanying notes.
6

PS BUSINESS PARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
1. Organization and description of business
Organization
PS Business Parks, Inc. (“PSB”), a Maryland corporation, was organized in 1990. Effective May 19, 2021, following approval by its common and preferred stockholders, PSB reincorporated from the state of California to the state of Maryland. As of March 31, 2022, PSB owned 79.1% of the common partnership units of PS Business Parks, L.P. (the “OP”). The remaining common partnership units are owned by Public Storage (“PS”). PS’s interest in the OP is referred to as the “PS OP Interests.” PSB, as the sole general partner of the OP, has full, exclusive and complete responsibility and discretion in managing and controlling the OP. PSB and its subsidiaries, including the OP and its consolidated joint ventures, are collectively referred to as the “Company,” “we,” “us,” or “our.” PS also owns 7.2 million shares of common stock and would own 41.4% (or 14.5 million shares) of the outstanding shares of the Company’s common stock if it redeemed its common partnership units for shares of common stock.

Refer to Note 12 for information regarding the Merger Agreement (defined below) the Company entered into on April 24, 2022.
Description of business
The Company is a fully-integrated, self-advised and self-managed real estate investment trust (“REIT”) that owns, operates, acquires and develops commercial properties, primarily multi-tenant industrial, industrial-flex and low-rise suburban office space. As of March 31, 2022, the Company owned and operated 27.0 million rentable square feet of commercial space in six states, comprising 96 parks and 652 buildings. The Company also held a 95.0% interest in a joint venture entity which owns Highgate at The Mile, a 395- unit multifamily apartment complex located in Tysons, Virginia, and a 98.2% interest in a joint venture formed to develop Brentford at The Mile, a planned 411- unit multifamily apartment complex also located in Tysons, Virginia. The Company also manages for a fee approximately 0.3 million rentable square feet on behalf of PS.
References herein to the number of properties, parks, apartment units or square footage are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).
2. Summary of significant accounting policies
Basis of presentation
The accompanying unaudited consolidated financial statements include the accounts of PSB and its subsidiaries, including the OP and its consolidated joint ventures. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements. The financial statements are presented on an accrual basis in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ended December 31, 2022. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Consolidation and equity method of accounting
We consider entities to be Variable Interest Entities (“VIEs”) when they have insufficient equity to finance their activities without additional subordinated financial support provided by other parties, or the equity holders as a group do not have a controlling financial interest. A limited partnership is also generally considered a VIE if the limited partners do not participate in operating decisions. We consolidate VIEs when we are the primary beneficiary, generally defined as having (i) the power to direct the activities most significantly impacting economic performance and (ii) either the obligation to absorb losses or the right to receive benefits from the VIE.
7

We account for investments in entities that are not VIEs that we have significant influence over, but do not control, using the equity method of accounting and for investment in entities that we control, we consolidate. We do not consider the joint venture entity that owns Highgate at The Mile a VIE, but we consolidate the entity as the Company has control over the joint venture. See Note 3 for more information relating to this joint venture arrangement.
We have a 98.2% interest in Brentford at The Mile, a planned 411- unit multifamily apartment complex (the “Brentford Joint Venture”). An unrelated real estate development company (the “JV Partner”) holds the remaining 1.8% interest. Based on management’s analysis of the joint venture and certain related agreements, we determined Brentford Joint Venture is a VIE because (a) Brentford Joint Venture does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, and (b) there are no substantive kick-out rights. We have also concluded we have control over the Brentford Joint Venture as we (i) are the managing member of the Brentford Joint Venture, (ii) have designated decision making power to direct the activities that most significantly affect the economic performance of the Brentford Joint Venture, and (iii) have a 98.2% economic interest in the investment. Thus, we determined that we are the primary beneficiary of Brentford Joint Venture. As such, we consolidate the Brentford Joint Venture, and the related land and development costs of $69.5 million and $59.9 million were included in land and building held for development, net on our consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively. The assets of the Brentford Joint Venture may only be used to settle obligations of the Brentford Joint Venture and the creditors of the Brentford Joint Venture have no recourse to the general credit of the Company. See Note 4 for more information relating to this joint venture arrangement.
PS, the sole limited partner in the OP, has no power to direct the activities of the OP. PSB is the primary beneficiary and has control over the OP as it has the exclusive responsibility under the Operating Partnership Agreement to manage and conduct the business of the OP. Accordingly, we consider the OP a VIE and consolidate it. Substantially all of our assets and liabilities are held by the OP.
Noncontrolling interests
Noncontrolling interests represent (i) PS’s noncontrolling interest in the OP through its ownership of 7,305,355 common partnership units, (ii) the JV Partner’s 5.0% interest in our consolidated joint venture that owns Highgate at The Mile, and (iii) the JV Partner’s 1.8% interest in our consolidated joint venture formed to develop Brentford at The Mile. See Note 7 for further information on noncontrolling interests.
Use of estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates.
Financial instruments
The methods and assumptions used to estimate the fair value of financial instruments are described below. The Company has estimated the fair value of financial instruments using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop estimates of market value. Accordingly, estimated fair values are not necessarily indicative of the amounts that could be realized in current market exchanges. The Company determines the estimated fair value of financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. This hierarchy requires the use of observable market data when available. The following is the fair value hierarchy:
Level 1—quoted prices for identical instruments in active markets;
Level 2—quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3—fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
8

Financial assets that are exposed to credit risk consist primarily of cash equivalents and receivables. The Company considers all highly liquid investments with a remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents, which consist primarily of money market investments, are only invested in entities with an investment grade rating. Receivables are balances due from various customers. Balances that the Company expects to become uncollectible are written off. Due to the short period to maturity of the Company’s cash and cash equivalents, accounts receivable, other assets and accrued and other liabilities, the carrying values as presented on the consolidated balance sheets are reasonable estimates of fair value.
Carrying values of the Company’s Credit Facility (as defined in Note 6) approximate fair value. The characteristics of the Credit Facility, market data and other comparative metrics utilized in determining these fair values are “Level 2” inputs.
The following table provides a reconciliation of cash, cash equivalents and restricted cash per the consolidated statements of cash flow to the corresponding financial statement line items in the consolidated balance sheets (in thousands):
December 31,
20212020
Consolidated balance sheets
Cash and cash equivalents $27,074 $69,083 
Restricted cash included in Land and building held for development, net1,088 1,088 
Cash and cash equivalents and restricted cash at the end of the period$28,162 $70,171 
March 31,
20222021
Consolidated balance sheets
Cash and cash equivalents $104,204 $69,492 
Restricted cash included in Land and building held for development, net1,088 1,088 
Cash and cash equivalents and restricted cash at the end of the period$105,292 $70,580 
Intangible assets/liabilities
When we acquire real estate facilities, an intangible asset is recorded in other assets for leases where the in-place rent is higher than market rents, and an intangible liability is recorded in other liabilities where the market rents are higher than the in-place rents. The amounts recorded are based upon the present value (using a discount rate which reflects the risks associated with the leases acquired) of such differences over the lease term and such amounts are amortized to rental income over the respective remaining lease term. As of March 31, 2022, the value of above-market in-place rents resulted in net intangible assets of $0.6 million, net of $11.7 million of accumulated amortization, and the value of below-market in-place rents resulted in net intangible liabilities of $2.5 million, net of $13.4 million of accumulated amortization. As of December 31, 2021, the value of above-market in-place rents resulted in net intangible assets of $0.6 million, net of $11.6 million of accumulated amortization, and the value of below-market in-place rents resulted in net intangible liabilities of $2.8 million, net of $13.1 million of accumulated amortization.
Additionally, when we acquire real estate facilities, the value of in-place lease intangible (i.e., customer lease-up costs) is recorded in other assets and is amortized to depreciation and amortization expense over the respective remaining lease term. As of March 31, 2022, the value of acquired in-place lease intangible resulted in net intangible assets of $5.2 million, net of $11.3 million of accumulated amortization. As of December 31, 2021, the value of acquired in-place leases resulted in net intangible assets of $6.0 million, net of $10.5 million of accumulated amortization.
As of March 31, 2022, the value of our right-of-use (“ROU”) assets relating to our existing ground lease arrangements, included in “other assets” on our consolidated balance sheets and the corresponding liability included under “accrued and other liabilities,” was $1.3 million, net of $0.4 million of accumulated amortization. As of December 31, 2021, the value of our ROU assets and related liability relating to our ground lease arrangements was $1.3 million, net of $0.3 million of accumulated amortization. The ground leases expire in 2029 and 2030 and do not have options to extend. As of March 31, 2022, the remaining lease terms were 7.5 years and 7.8 years. Lease expense for these ground leases is recognized in the
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period the applicable costs are incurred, and the monthly lease amount for these operating leases is constant and without contractual increases throughout the remaining terms.
Real estate facilities
Real estate facilities are recorded at cost. Property taxes, insurance, interest, and costs essential to the development of property for its intended use are capitalized during the period of development. Direct costs related to the renovation or improvement of the properties are capitalized. Expenditures for repairs and maintenance are expensed as incurred. Expenditures that are expected to provide benefit for a period greater than two years are capitalized and depreciated over their estimated useful life. Buildings and improvements are depreciated using the straight-line method over their estimated useful lives, which generally range from five to 30 years. Transaction costs, which include tenant improvements and lease commissions, for leases with terms greater than one year are capitalized and depreciated over the corresponding lease term.
Property held for development
Property is classified as held for development when it is no longer used in its original form and it will be developed to an alternate use. Property held for development is not depreciated.
Property held for sale
Property is classified as held for sale when all of the following criteria for a plan of sale have been met: (i) management, having the authority to approve the action, commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; (iii) an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; (iv) the sale of the property is probable and is expected to be completed within one year; (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Depreciation of assets ceases upon designation of a property as held for sale.
If the disposal of a property represents a strategic shift that has (or will have) a major effect on our operations or financial results, such as (i) a major line of business, (ii) a major geographic area, (iii) a major equity method investment, or (iv) other major parts of an entity, then the operations of the property, including any interest expense directly attributable to it, are classified as discontinued operations in our consolidated statements of operations, and amounts for all prior periods presented are reclassified from continuing operations to discontinued operations. The disposal of an individual property generally will not represent a strategic shift and therefore will typically not meet the criteria for classification as a discontinued operation.
Sales of real estate facilities
Sales of real estate facilities are not part of our ordinary activities, and as a result, we consider such sales as contracts with non-customers. We recognize sales of real estate when we have collected payment and the attributes of ownership, such as possession and control of the asset, have been transferred to the buyer. If a contract for sale includes obligations to provide goods or services to the buyer, an allocated portion of the contract price is recognized as revenue as the related goods or services are transferred to the buyer.
Evaluation of asset impairment
We evaluate our real estate and finite-lived intangible assets for impairment each quarter. We review current activities and changes in the business conditions of all of our long-lived assets to determine the existence of any triggering events or impairment indicators requiring an impairment analysis. If triggering events or impairment indicators are identified, we review an estimate of the future undiscounted cash flows, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration.
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Upon determination that an impairment has occurred, a write-down is recognized to reduce the carrying amount of the asset to its estimated fair value. If an impairment charge is not required to be recognized, the recognition of depreciation or amortization is adjusted prospectively, as necessary, to reduce the carrying amount of the asset to its estimated disposition value over the remaining period that the asset is expected to be held and used. We may adjust the depreciation of properties that are expected to be disposed of or redeveloped prior to the end of their useful lives.
No impairment charges were recorded in any period presented herein.
Asset impairment due to casualty loss
It is our policy to record losses due to physical damages during the accounting period in which they occur, while the amount of monetary assets to be received from the insurance policy, if any, is recognized when receipt of insurance recoveries is probable. Losses, which are reduced by the related probable insurance recoveries, are recorded as costs of operations on the consolidated statements of income. Anticipated proceeds in excess of recognized losses would be considered a gain contingency and recognized when the contingency related to the insurance claim has been resolved. Anticipated recoveries for lost rental income due to property damages are also considered to be a gain contingency and recognized when the contingency related to the insurance claim has been resolved.
No material casualty losses were incurred in any period presented herein.
Stock compensation
Share-based payments to employees, including grants of employee stock options, are recognized as stock compensation expense in the Company’s consolidated statements of income based on their grant date fair values, except for performance-based grants, which are accounted for based on their fair values at the beginning of the service period. See Note 11.
Accrued and other liabilities
Accrued and other liabilities consist primarily of rents prepaid by our customers, trade payables, property tax accruals, accrued payroll and contingent loss accruals when probable and estimable, as well as the intangible liabilities discussed above. We disclose the nature of significant losses not accrued that are reasonably possible of occurring and, if estimable, a range of exposure. The fair value of accrued and other liabilities approximate book value due to the short period until settlement.
Other assets
Other assets are comprised primarily of prepaid expenses, as well as the intangible assets discussed above.
Revenue recognition
We recognize the aggregate rent to be collected (including the impact of escalators and concessions) under leases ratably throughout the non-cancellable lease term on a “straight-line” basis, commencing when the customer takes control of the leased space. Cumulative straight-line rent recognized in excess of amounts billed per the lease term is presented as “deferred rent receivable” on our consolidated balance sheets. The Company presents reimbursements from customers for real estate taxes and other recoverable operating expenses under a single lease component presentation as the timing and pattern of transfer of such reimbursements are the same as base rent, and the combined single component of such leases are classified as operating leases. Accordingly, the Company recognizes such variable lease payments resulting from the reimbursements from customers for real estate taxes and other recoverable operating expenses as rental income in the period the applicable costs are incurred. Property management fees are recognized in the period earned as other income.
The Company monitors the collectability of its receivable balances, including deferred rent receivable balances, on an ongoing basis. The Company writes off uncollectible customer receivable balances, including deferred rent receivable balances, as a reduction to rental income in the period such balances are no longer probable of being collected. Therefore, recognition of rental income is limited to the lesser of the amount of cash collected or rental income reflected on a “straight-line” basis, plus any accruable variable lease payments for those customer receivable balances.
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The Company recognized revenue from its lease arrangements aggregating to $112.8 million and $108.0 million for the three months ended March 31, 2022 and 2021, respectively. This revenue consisted primarily of rental income from operating leases and the related variable lease payments resulting from reimbursements of property operating expenses. Base rental income was $84.8 million and $82.1 million for the three months ended March 31, 2022 and 2021, respectively. Variable lease payments, consisting primarily of reimbursement of property operating expenses, were $28.0 million and $25.9 million for the three months ended March 31, 2022 and 2021.
In April 2020, the Financial Accounting Standards Board issued a Staff Question-and-Answer (“Lease Modification Q&A”) to respond to frequently asked questions about accounting for lease concessions related to the coronavirus (“COVID-19”) pandemic. Under existing lease guidance, an entity would have to determine, on a lease by lease basis, if a lease concession contained a lease modification which would be accounted for under the lease modification framework, or if a lease concession was an enforceable right or obligation that existed in the original lease, which would be accounted for outside the lease modification framework. The Lease Modification Q&A provides that, to the extent that cash flow after the lease concessions are substantially the same, or less than, the cash flow previously required by the existing lease, an entity is not required to evaluate each contract to determine whether a concession provided by a lessor to a lessee in response to the COVID-19 pandemic is a lease modification. Instead, an entity can account for such lease concessions either (i) as if they were part of the enforceable rights and obligations of the parties under the existing lease contract; or (ii) as a lease modification. Based on the Lease Modification Q&A, an entity is not required to account for all lease concessions in response to the COVID-19 pandemic under one elected option; however, the entity is required to apply the elected option consistently to leases with similar characteristics and in similar circumstances.
In accordance with the Lease Modification Q&A, the Company has elected to account for lease concessions in response to the COVID-19 pandemic as a lease modification if the cash flow after these lease concessions is substantially the same, or less than, the cash flow previously required by the existing lease. The Company records rent deferrals and rent abatements in deferred rent receivable in the accompanying consolidated balance sheets and will recognize these amounts over the remainder of the respective lease terms. For lease concessions in response to the COVID-19 pandemic that modified the terms and substantially changed the underlying cash flow of the existing lease for the remaining term, the Company also accounts for such concessions as a lease modification.
Since the onset of the COVID-19 pandemic, the Company entered into rent relief agreements consisting of $6.2 million of rent deferrals and $1.6 million of rent abatements. As of March 31, 2022, the 307 current customers that received rent relief account for 9.60% of rental income. Also as of March 31, 2022, the Company had collected $5.4 million of rent deferral repayment, representing 99.8% of the amounts scheduled to be repaid through March 31, 2022. An additional $0.8 million of rent deferral repayment is scheduled to be repaid thereafter. The duration and severity of the effects of the COVID-19 pandemic on the economy are uncertain and are likely to impact collectability of certain customers’ rent receivable balances in the future. The Company has taken into account the current financial condition of its tenants, including consideration of COVID-19 impacts, in its estimation of its uncollectible accounts and deferred rents receivable at March 31, 2022. The Company is closely monitoring the collectability of such rents and will adjust future estimations as appropriate as further information becomes known.
General and administrative expense
General and administrative expense includes executive and other compensation, corporate office expenses, professional fees, and other such costs that are not directly related to the operation of our real estate facilities.
Income taxes
We have elected to be treated as a REIT, as defined in the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, we do not incur U.S. federal corporate income tax if we distribute all of our “REIT taxable income” each year, and if we meet certain organizational and operational requirements. We believe we have met these REIT requirements for all periods presented herein. Accordingly, we have recorded no U.S. federal corporate income tax expense related to our “REIT taxable income.”
We recognize tax benefits of uncertain income tax positions that are subject to audit only if we believe it is more likely than not that the position would ultimately be sustained assuming the relevant taxing authorities had full knowledge of the relevant facts and circumstances of our positions. As of March 31, 2022 and December 31, 2021, we did not recognize any tax benefit for uncertain tax positions.
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Accounting for preferred equity issuance costs
We record preferred equity issuance costs as a reduction to paid-in capital on our consolidated balance sheets at the time the preferred securities are issued and reflect the carrying value of the preferred equity at its redemption value. An additional allocation of income is made from the common stockholders to the preferred stockholders in the amount of the original issuance costs, and we reclassify the redemption value from equity to liabilities, when we call preferred stock for redemption, with such liabilities relieved once the preferred stock is redeemed.
Net income per share of common stock
Notwithstanding the presentation of income allocations on our consolidated statements of income, net income is allocated to (a) preferred stockholders, for distributions paid or payable, (b) preferred stockholders, to the extent redemption value exceeds the related carrying value (“Preferred Redemption Allocation”), (c) our joint venture partner in proportion to its percentage interest in the joint ventures, to the extent the consolidated joint ventures produce net income or loss during the period and (d) restricted stock unit (“RSU”) holders, for non-forfeitable dividends paid adjusted for participation rights in undistributed earnings. The remaining net income is allocated to the common partnership units and our common stockholders, respectively, based upon the pro-rata aggregate number of units and stock outstanding.
Basic and diluted net income per share of common stock are each calculated based upon net income allocable to common stockholders, divided by (i) in the case of basic net income per share of common stock, weighted average common stock and (ii) in the case of diluted net income per share of common stock, weighted average common stock adjusted for the impact of stock compensation awards outstanding (see Note 10) using the treasury stock method.
The following table sets forth the components of our basic and diluted net income per share that are not reflected on the face of our consolidated statements of income, including the allocation of income to common stockholders and common partnership units, the percentage of weighted average common stock and common partnership units outstanding, as well as basic and diluted weighted average common stock outstanding (in thousands):
Three Months Ended March 31,
2022 2021
Calculation of net income allocable to common stockholders
Net income$101,145 $47,507 
Net (income) loss allocated to
Preferred stockholders based upon distributions(9,580)(12,046)
Noncontrolling interests—joint venture1 (2)
Restricted stock unit holders(523)(164)
Net income allocable to common stockholders and noncontrolling interests—common units91,043 35,295 
Net income allocation to noncontrolling interests—common units(19,050)(7,409)
Net income allocable to common stockholders $71,993 $27,886 
Calculation of common partnership units as a percentage of common stock equivalents
Weighted average common stock outstanding27,607 27,495 
Weighted average common partnership units outstanding7,305 7,305 
Total common stock equivalents34,912 34,800 
Common partnership units as a percentage of common stock equivalents20.9 %21.0 %
Weighted average common stock outstanding
Basic weighted average common stock outstanding27,607 27,495 
Net effect of dilutive stock compensation—based on treasury stock method using average market price84 99 
Diluted weighted average common stock outstanding 27,691 27,594 
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Segment reporting
The Company has two operating segments: (i) the acquisition, development, ownership and management of commercial real estate and (ii) the acquisition, development, ownership and management of multifamily real estate, but has only one reportable segment as the multifamily segment does not meet the quantitative thresholds necessary to require reporting as a separate segment.
Reclassifications
We combined all non-cash rental income items into “straight-line rent and amortization of lease intangibles, net” within the operating activities section of our consolidated statements of cash flows for all periods presented herein.
3. Real estate facilities
Activity related to our real estate facilities for the three months ended March 31, 2022 was as follows (in thousands):
 Land Buildings and
Improvements
Accumulated
Depreciation
Total
Balances at December 31, 2021
$867,345 $2,239,137 $(1,178,397)$1,928,085 
Capital expenditures 7,868 — 7,868 
Disposals (1)
 (2,894)2,894 — 
Depreciation and amortization expense— — (22,308)(22,308)
Transfer to properties held for development(2,131) — (2,131)
Transfer to properties held for sale (7)— (7)
Balances at March 31, 2022
$865,214 $2,244,104 $(1,197,811)$1,911,507 
_______________
(1)Disposals primarily represent the book value of tenant improvements that have been removed upon the customer vacating their space.
We have a 95.0% interest in a joint venture that owns Highgate at The Mile, a 395-unit multifamily apartment complex on a five-acre parcel within the Company’s 44.5 acre office and multifamily park located in Tysons, Virginia (“The Mile”). The remaining 5.0% interest in the joint venture is held by the JV Partner. We consolidate the joint venture that owns Highgate at The Mile and as such, the consolidated real estate assets and activities related to this joint venture are included in the table above.
As of March 31, 2022, we have commitments, pursuant to executed leases throughout our portfolio, to spend $11.4 million on leasing transaction costs, which include tenant improvements and lease commissions.
Acquisitions
We account for acquisitions as asset acquisitions. The purchase price of acquired properties is allocated to land, buildings, and improvements (including tenant improvements, and intangible assets and intangible liabilities (see Note 2), based upon the relative fair value of each component, which are evaluated independently.
The Company must make significant assumptions in determining the fair value of assets acquired and liabilities assumed, which can affect the recognition and timing of revenue and depreciation and amortization expense. The fair value of land is estimated based upon, among other considerations, comparable sales of land within the same region. The fair value of buildings and improvements is determined using a combination of the income and replacement cost approaches which both utilize available market information relevant to the acquired property. The fair value of other acquired assets including tenant improvements and unamortized lease commissions are determined using the replacement cost approach. The amount recorded to acquired in-place lease intangible is also determined utilizing the income approach using market assumptions which are based on management’s assessment of current market conditions and the estimated lease-up periods for the respective spaces. Transaction costs related to asset acquisitions are capitalized.

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As of March 31, 2022, we were in the process of developing an approximately 83,000 square foot multi-tenant industrial building at our 212 Business Park located in Kent, Washington. During the quarter ended March 31, 2022, $1.5 million was reclassified from land to property held for development on our consolidated balance sheet and, as of March 31, 2022, $5.5 million of the estimated $16.0 million total development costs had been incurred. The total investment, inclusive of land and development costs, for the 212 Business Park development is projected to be $17.5 million. This construction project is scheduled to be completed in the fourth quarter of 2022. As of March 31, 2022, we have contractual construction commitments totaling $10.5 million that will be paid to various contractors as the project is completed.
As of March 31, 2022, we were in the process of developing an approximately 17,000 square foot multi-tenant industrial building at our Boca Commerce Park, located in Boca Raton, Florida. During the quarter ended March 31, 2022, $0.6 million was reclassified from land to property held for development on our consolidated balance sheet and, as of March 31, 2022, $2.3 million of the estimated $4.2 million total development costs had been incurred. The total investment, inclusive of land and development costs, for the Boca Commerce Park development is projected to be $4.8 million. This construction project is scheduled to be completed in the fourth quarter of 2022. As of March 31, 2022, we have contractual construction commitments totaling $1.9 million that will be paid to various contractors as the project is completed.
Dispositions

Refer to “Note 12. Subsequent Events” for information regarding the Merger Agreement the Company entered into on April 24, 2022.

In March 29, 2022, the Company sold a 702,000 square foot industrial-flex business park located in Irving, Texas, for net sale proceeds of $91.9 million, which resulted in a gain on sale of $57.0 million. (the "2022 Asset Sold"). There were no asset sales during the three months ended March 31, 2021.
The Company determined that the 2022 Asset Sold did not meet the criteria for discontinued operations presentation, as the sale of such assets did not represent a strategic shift that will have a major effect on our operations and financial results.
4. Multifamily developmental activity
In August 2020, the Company entered into the Brentford Joint Venture with the JV Partner for the purpose of developing Brentford at The Mile, a planned 411- unit multifamily apartment complex. Under the Brentford Joint Venture agreement, the Company has a 98.2% controlling interest and is the managing member with the JV Partner holding the remaining 1.8% limited partnership interest. We contributed a parcel of land to the Brentford Joint Venture (the “Brentford Parcel”) at a value of $18.5 million, for which we received equity contribution credit in the Brentford Joint Venture. Our cost basis in the Brentford Parcel was $5.1 million as of March 31, 2022.
Construction of Brentford at The Mile commenced in August 2020 and is anticipated to be completed over a period of 24 to 36 months. As of March 31, 2022, the development cost incurred was $64.4 million, which is reflected in land and building held for development, net on our consolidated balance sheets along with our $5.1 million cost basis in the Brentford Parcel. As of March 31, 2022, we have contractual construction commitments totaling $31.6 million that will be paid to various contractors as the project is completed.
5. Leasing activity
The Company leases space in its commercial real estate facilities to customers primarily under non-cancelable leases generally ranging from one to 10 years. Future minimum rental income, excluding recovery of operating expenses that may be collectable under these leases, as of March 31, 2022 is as follows (in thousands):
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Remainder of 2022
$226,849 
2023247,271 
2024179,063 
2025112,943 
202676,014 
Thereafter 115,503 
Total
$957,643 
In addition to minimum rental payments, certain customers reimburse the Company for their pro rata share of specified property operating expenses. Such reimbursements amounted to $28.0 million and $25.9 million for the three months ended March 31, 2022 and 2021, respectively. These variable lease payment amounts are included as rental income in the accompanying consolidated statements of income.
Leases accounting for 2.5% of total leased square footage are subject to termination options, of which 1.6% have termination options exercisable through December 31, 2022. In general, these leases provide for termination payments to us should the termination options be exercised. Certain leases also have an option to extend the term of the lease. The future minimum rental income in the above table assumes termination options and lease extension options are not exercised.
6. Bank loans
In August 2021, the Company amended and restated the credit agreement (the “Amended Credit Agreement”) governing its unsecured revolving line of credit (the “Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, and the other lenders party thereto. The Amended Credit Agreement increased the aggregate principal amount of the Credit Facility from $250.0 million to $400.0 million, and extended the maturity date to August 24, 2025, with two six-month extension options or one 12-month extension option. The per annum rate of interest charged on borrowings is based on LIBOR plus 0.70% to LIBOR plus 1.35%. Currently, the Company’s rate under the Credit Facility is LIBOR plus 0.70% per annum. In addition, the Company is required to pay an annual facility fee ranging from 0.10% to 0.25% per annum calculated on the aggregate committed amount of the Credit Facility (currently 0.10% per annum). The interest rate margin and facility fee may increase in the future based on the ratio of the Company’s total consolidated indebtedness to its consolidated gross asset value defined in accordance with the Amended Credit Agreement. The Credit Facility also features a sustainability-linked pricing component whereby the pricing can improve by 0.01%, if the Company meets certain sustainability performance targets, and an accordion feature whereby it has an option to increase commitments under the Credit Facility up to an additional $300.0 million.
The Company had a $20.0 million and $32.0 million balance outstanding, at an interest rate of 1.16% and 0.80%, on its Credit Facility at March 31, 2022 and December 31, 2021, respectively. In connection with the Amended Credit Agreement, the Company paid $2.2 million of loan origination costs. The Company had $2.0 million and $2.1 million of total unamortized loan origination costs as of March 31, 2022 and December 31, 2021, respectively, which are included in other assets in the accompanying consolidated balance sheets. The Credit Facility requires the Company to meet certain covenants, all of which it was in compliance with as of March 31, 2022. Interest on outstanding borrowings is payable monthly.
7. Noncontrolling interests
Noncontrolling interests represent (i) PS’s noncontrolling interest in the OP through its ownership of 7,305,355 common partnership units, totaling $267.1 million and $255.7 million at March 31, 2022 and December 31, 2021, respectively, and (ii) the JV Partner’s interests in our consolidated joint ventures, totaling $4.1 million and $3.9 million at March 31, 2022 and December 31, 2021, respectively.
PS OP Interests
Each common partnership unit receives a cash distribution equal to the dividend paid on our common stock and is redeemable at PS’s option.
If PS exercises its right of redemption, at PSB’s option (a) PS will receive one share of common stock from us for each common partnership unit redeemed, or (b) PS will receive cash from us for each common partnership unit redeemed
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generally equal to the market value of a share of common stock (as defined in the Operating Partnership Agreement). We can prevent redemptions that we believe would violate either our articles of incorporation or securities laws, cause PSB to no longer qualify as a REIT, or could result in the OP no longer being treated as a partnership for U.S. federal tax purposes.
In allocating net income and presenting equity, we treat the common partnership units as if converted to shares of common stock. Accordingly, they received the same net income allocation per unit as a share of common stock totaling $19.1 million and $7.4 million for the three months ended March 31, 2022 and 2021, respectively.
JV Partner
During the three months ended March 31, 2022, the Company recorded capital contributions of $0.2 million, from the JV Partner related to its noncontrolling interest in the Brentford Joint Venture.
8. Related party transactions
We manage certain industrial, office and retail facilities in the United States for PS under either the “Public Storage” or “PS Business Parks” names (the “PS Management Agreement”). Under PS’s supervision, we coordinate and assist in rental and marketing activities, property maintenance and other operational activities, including the selection of vendors, suppliers, employees and independent contractors. We receive a management fee based upon a percentage of revenues, which is included in interest and other income on our consolidated statements of income. Management fee revenues were $0.1 million for each of the three months ended March 31, 2022 and 2021. We allocate certain operating expenses to PS related to the management of these properties, including payroll and other business expenses totaling $0.1 million for each of the three months ended March 31, 2022 and 2021.
The PS Business Parks name and logo are owned by PS and licensed to us under a non-exclusive, royalty-free license agreement. The license can be terminated by either party for any reason with six months written notice.
PS provides us property management services for the self-storage component of two assets we own and operates them under the “Public Storage” name. Either the Company or PS can cancel the property management contract upon 60 days’ notice. Under our supervision, PS coordinates and assists in rental and marketing activities, and property maintenance and other operational activities, including the selection of vendors, suppliers, employees and independent contractors. Management fee expenses were less than $0.1 million for each of the three months ended March 31, 2022 and 2021. Additionally, PS allocated certain operating expenses to us related to the management of these properties totaling less than $0.1 million for each of the three months ended March 31, 2022 and 2021. These amounts are included under cost of operations on our consolidated statements of income.
Pursuant to a cost sharing agreement, we share certain administrative services, corporate office space, and certain other third party costs with PS which are allocated based upon fair and reasonable estimates of the cost of the services expected to be provided. We reimbursed PS $0.2 million for costs PS incurred on our behalf for each of the three months ended March 31, 2022 and 2021. PS reimbursed us less than $0.1 million for costs we incurred on their behalf for each of the three months ended March 31, 2022 and 2021.
The Company had net amounts due to PS of $0.3 million and due from PS of $0.2 million at March 31, 2022 and December 31, 2021, respectively, for these contracts.
9. Stockholders’ equity
Preferred stock
As of March 31, 2022 and December 31, 2021, the Company had the following series of preferred stock outstanding:
Series Issuance Date Earliest Potential
Redemption Date
Dividend
Rate
Shares
Outstanding
Amount
(in thousands)
Series XSeptember 2017September 20225.250 %9,200 230,000 
Series YDecember 2017December 20225.200 %8,000 200,000 
Series ZNovember 2019November 20244.875 %13,000 325,000 
Total   30,200 $755,000 
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We paid $9.6 million and $12.0 million in distributions to our preferred stockholders for the three months ended March 31, 2022 and 2021, respectively.
The holders of our preferred stock have general preference rights with respect to liquidation, quarterly distributions and any accumulated unpaid distributions. Holders of our preferred stock will not be entitled to vote on most matters, except under certain conditions. In the event of a cumulative arrearage equal to six quarterly dividends, the holders of our preferred stock will have the right to elect two additional members to serve on the Company’s Board of Directors (the “Board”) until all events of default have been cured. At March 31, 2022, there were no dividends in arrears.
Except under certain conditions relating to the Company’s qualification as a REIT, our preferred stock is not redeemable prior to the redemption dates noted above. On or after the respective redemption dates, the respective series of preferred stock will be redeemable, at the option of the Company, in whole or in part, at $25.00 per depository share, plus any accrued and unpaid dividends.
Common stock and units
We paid $29.0 million and $28.9 million ($1.05 per share of common stock) in distributions to our common stockholders for each of the three months ended March 31, 2022 and 2021, respectively.
We paid $7.7 million ($1.05 per common unit) in distributions to our common unit holders for each of the three months ended March 31, 2022 and 2021, respectively.
Equity stock
The Company is authorized to issue 100.0 million shares of equity stock. Our articles of incorporation provide that equity stock may be issued from time to time in one or more series and give the Board broad authority to fix the dividend and distribution rights, conversion and voting rights, redemption provisions and liquidation rights of each series of equity stock. As of March 31, 2022 and December 31, 2021, no equity stock had been issued.
10. Commitments and contingencies
The Company currently is neither subject to any material litigation nor, to management’s knowledge, is any material litigation currently threatened against the Company other than routine litigation and administrative proceedings arising in the ordinary course of business.
11. Stock compensation
Under various share-based compensation plans, PSB grants non-qualified options to purchase the Company’s common stock at a price not less than fair value on the date of grant, as well as RSUs, to certain directors, officers and key employees.
The service period for stock options and RSUs begins when (i) the Company and the recipient reach a mutual understanding of the key terms of the award, (ii) the award has been authorized, (iii) the recipient is affected by changes in the market price of our stock and (iv) it is probable that any performance conditions will be met, and ends when the stock options or RSUs vest.
We amortize the fair value of awards starting at the beginning of the service period as compensation expense. For awards that are earned solely upon the passage of time and continued service, the entire cost of the award is amortized on a straight-line basis over the service period. For awards with performance conditions, the individual cost of each vesting is amortized separately over each individual service period (the “accelerated attribution” method).
In connection with the separation agreement with our former President and Chief Executive Officer (“CEO”), who stepped down from his positions with the Company for health reasons effective March 23, 2022,     the Company paid a lump sum payment of $6.6 million in exchange for 41,186 restricted stock units owned by the former CEO, which represents the market value of the Company common stock underlying such units as of March 18, 2022.
We account for forfeitures of share-based payments as they occur by reversing previously amortized share-based compensation expense with respect to unvested grants that are forfeited in the period the employee terminates employment.
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Stock Options
Stock options expire 10 years after the grant date and the exercise price is equal to the closing trading price of our common stock on the grant date. Stock option holders cannot require the Company to settle their award in cash. We use the Black-Scholes option valuation model to estimate the fair value of our stock options on the date of grant.
For the three months ended March 31, 2022, we recorded $0.1 million in compensation expense related to stock options as compared to $0.2 million for the same period in 2021.
During the three months ended March 31, 2022, no stock options were granted, 27,403 options were exercised and no options were forfeited. A total of 132,167 and 159,570 options were outstanding at March 31, 2022 and December 31, 2021, respectively.
Restricted Stock Units
RSUs granted prior to 2016 are subject to a six-year vesting, with 20% vesting after year two, and 20% vesting after each of the next four years. RSUs granted during and subsequent to 2016 are subject to a five-year vesting at the rate of 20% per year or a three-year vesting at the rate of one-third per year. Grantees receive dividends for each outstanding RSU equal to the per share dividend received by common stockholders, which are recorded in paid-in capital. We expense any dividends previously paid upon forfeiture of the related RSU. Upon vesting, the grantee receives shares of common stock equal to the number of vested RSUs, less shares of common stock withheld in exchange for tax withholding made by the Company to satisfy the grantee’s statutory tax liabilities arising from the vesting. The fair value of our RSUs is determined based upon the applicable closing trading price of our common stock on the date of grant.
In March 2020, the Compensation Committee of the Board approved an annual performance-based equity incentive program (“Annual Equity Incentive Program”) under the Company’s 2012 Equity and Performance-Based Incentive Compensation Plan. Under the program, certain employees will be eligible on an annual basis to receive RSUs based on the Company’s achievement of pre-established targets for (i) growth in net asset value per share, and (ii) stockholder value creation, each as computed pursuant to the terms of the Annual Equity Incentive Program. In the event the pre-established targets are achieved, eligible employees will receive the target award, except that the Compensation Committee of the Board may adjust the actual award to 75% to 125% of the target award based on its assessment of whether certain strategic and operational goals were accomplished in the performance period. RSUs awarded under the Annual Equity Incentive Program for the 2022 performance year will be awarded on or around March 1, 2023 and will vest in five equal installments, with the first installment vesting on the award date. RSU holders will earn dividend equivalent rights during the vesting period.
For the three months ended March 31, 2022, respectively, we recorded $0.5 million in compensation expense related to RSUs as compared to $1.4 million for the same period in 2021.
During the three months ended March 31, 2022, 38,151 RSUs were granted, 16,076 RSUs vested and 55,396 RSUs were forfeited. Tax withholding totaling $0.9 million were made on behalf of employees in exchange for 5,843 shares of common stock withheld upon vesting for the three months ended March 31, 2022 resulting in the issuance of 10,233 shares of common stock.
Tax withholding totaling $3.2 million were made on behalf of employees in exchange for 20,791 shares of common stock withheld upon vesting for the three months ended March 31, 2021 resulting in the issuance of 28,392 shares of common stock. A total of 85,270 and 118,591 RSUs were outstanding at March 31, 2022 and December 31, 2021, respectively.
Under the Retirement Plan for Non-Employee Directors (the “Director Retirement Plan”), the Company grants 1,000 shares of common stock for each year served as a director up to a maximum of 10,000 shares issued upon retirement. The Company recognizes compensation expense with regard to grants to be issued in the future under the Director Retirement Plan over the requisite service period. For the three months ended March 31, 2022, we recorded $0.3 million in compensation expense related to these shares as compared to $0.2 million for the same period in 2021.
No director retirement shares were issued during the three months ended March 31, 2022 and March 31, 2021, respectively.
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12. Subsequent Events
On April 24, 2022, PSB and the OP entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Sequoia Parent LP, a Delaware limited partnership (“Parent”), Sequoia Merger Sub I LLC, a Maryland limited liability company (“Merger Sub I”), and Sequoia Merger Sub II LLC, a Maryland limited liability company (“Merger Sub II,” together with Parent and Merger Sub I, the “Parent Parties”), whereby affiliates of Blackstone Inc. (“Blackstone”) will acquire all outstanding shares of PSB common stock for $187.50 per share in cash. Pursuant to the Merger Agreement, Merger Sub II will merge with and into the OP (the “Partnership Merger”), and, immediately following the Partnership Merger, Merger Sub I will merge with and into PSB (the “Company Merger” and, together with the Partnership Merger, the “Mergers”). Upon completion of the Partnership Merger, the Partnership will survive and the separate existence of Merger Sub II will cease. Upon completion of the Company Merger, PSB will survive and the separate existence of Merger Sub I will cease. Prior to the closing of the Mergers, the OP will be converted from a California limited partnership into a Maryland limited partnership.
Subject to the terms and conditions set forth in the Merger Agreement, each share of the Company’s common stock and each common unit of partnership interest of the OP, respectively, will be converted into the right to receive an amount in cash equal to $187.50, without interest. Each share of PSB’s outstanding preferred stock (and each depositary share representing an interest therein) will be unaffected and will remain outstanding in accordance with their respective terms.
From the date of the Merger Agreement through the closing, the Company may declare and pay regular, quarterly cash distributions to holders of its common stock and to holders of common units of partnership interest of the OP, in an amount of up to $1.05 per share or unit, including a pro rata distribution in respect of any stub period. Additionally, the Company is permitted to declare and pay regular quarterly dividends on its shares of preferred stock. Subject to the terms of the Merger Agreement, immediately prior to the effective time of the Partnership Merger, the Company will also pay a closing cash dividend (the “Closing Cash Dividend”) to holders of record of Company common stock as of the close of business on the business day immediately prior to the closing date in an aggregate amount no greater than the cash available for distribution, which Closing Cash Dividend will be designated, to the maximum extent permitted by applicable law, as a “capital gains dividend” under the Code. The per share merger consideration will be reduced by the per share amount of such Closing Cash Dividend.
The consummation of the Mergers is subject to certain customary closing conditions, including, among others, approval of the Company Merger by holders of a majority of the outstanding shares of Company common stock. A termination fee equal to $110 million may be payable by PSB if the Merger Agreement is terminated by the Company prior to June 4, 2022, as more fully described in the Merger Agreement. A fee of up to $220 million may be payable by PSB if the Merger Agreement is terminated in certain other specified circumstances, as more fully described in the Merger Agreement. A fee of $735 million may be payable by an affiliate of Blackstone upon termination of the transaction, as more fully described in the Merger Agreement.
In connection with the transaction, the Company, Blackstone and PS entered into a support agreement, pursuant to which PS agreed, among other things, that at any meeting of the stockholders of the Company or partners of the OP, vote its common equity interests in the Company and the OP in favor of adopting the Merger Agreement and approving the Mergers and the transactions contemplated thereby. The support agreement will automatically terminate in certain cases, including upon the termination of the Merger Agreement in accordance with its terms. As of April 21, 2022, PS held approximately 25.9% of the issued and outstanding shares of common stock of the Company and 20.9% of the issued and outstanding common units of partnership interest of the OP.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements: Forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, are made throughout this Quarterly Report on Form 10-Q. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “may,” “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” “intends” and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including but not limited to: (i) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement described in Note 12 – “Subsequent Events” to our consolidated financial statements under Item 15 in this quarterly report on Form 10-Q; (ii) the failure to obtain the approval of PSB’s stockholders of the proposed transaction or the failure to satisfy any of the other conditions to the completion of the proposed transaction; (iii) stockholder litigation in connection with the proposed transaction, which may affect the timing or occurrence of the proposed transaction or result in significant costs of defense, indemnification and liability; (iv) the effect of the announcement of the proposed transaction on the ability of PSB to retain and hire key personnel and maintain relationships with its tenants, vendors and others with whom it does business, or on its operating results and businesses generally; (v) risks associated with the disruption of management’s attention from ongoing business operations due to the proposed transaction; (vi) the ability to meet expectations regarding the timing and completion of the proposed transaction; (vii) significant transaction costs, fees, expenses and charges; (viii) the duration and severity of the coronavirus (“COVID-19”) pandemic and its impact on our business and our customers; (ix) changes in general economic and business conditions, including as a result of the economic fallout of the COVID-19 pandemic; (x) potential regulatory actions to close our facilities or limit our ability to evict delinquent customers; (xi) decreases in rental rates or increases in vacancy rates/failure to renew or replace expiring leases; (xii) tenant defaults; (xiii) the effect of the recent credit and financial market conditions; (xiv) our failure to maintain our status as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”); (xv) the economic health of our customers; (xvi) the health of our officers and directors; (xvii) increases in operating costs; (xviii) casualties to our properties not covered by insurance; (xix) the availability and cost of capital; (xx) increases in interest rates and its effect on our stock price; (xxi) security breaches, including ransomware, or a failure of our networks, systems or technology which could adversely impact our operations or our business, customer and employee relationships or result in fraudulent payments; (xxii) the impact of inflation; and (xxiii) other factors discussed under the heading “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Moreover, we assume no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements, except as required by law.
Critical Accounting Policies and Estimates:
Our critical accounting estimates are defined as accounting estimates or assumptions made in accordance with U.S. generally accepted accounting principles ("GAAP"), which involve a significant level of estimation uncertainty or subjectivity and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Our significant accounting policies, which utilize these critical accounting estimates, are described in Note 2 – “Summary of significant accounting policies” to our consolidated financial statements under Item 15 in this quarterly report on Form 10-Q.

During the three months ended March 31, 2022, there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.



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Business Overview
The Company is a fully-integrated, self-advised and self-managed REIT that owns, operates, acquires and develops commercial properties, primarily multi-tenant industrial, industrial-flex, and low rise-suburban office space. As of March 31, 2022, the Company owned and operated 27.0 million rentable square feet of commercial space in six states consisting of 96 parks and 652 buildings. The Company’s properties are primarily located in major coastal markets that have experienced long-term economic growth. The Company also held a 95.0% interest in a joint venture entity which owns Highgate at The Mile, a 395-unit multifamily apartment complex located in Tysons, Virginia, and a 98.2% interest in a joint venture formed to develop Brentford at The Mile, a planned 411-unit multifamily apartment complex also located in Tysons, Virginia.

Pending merger transaction: Refer to Note 12 – “Subsequent Events” to our consolidated financial statements under Item 15 in this quarterly report on Form 10-Q, for information regarding the merger agreement the Company enter into on April 24, 2022 (the mergers described therein, the “Merger”).
Existing Real Estate Facilities: The operating results of our existing real estate facilities are substantially influenced by demand for rental space within our properties and our markets, which impacts occupancy, rental rates, and capital expenditure requirements. We strive to maintain high occupancy levels while increasing rental rates and minimizing capital expenditures when market conditions allow, although the Company may decrease rental rates in markets where conditions require. Management’s initiatives and strategies with respect to our existing real estate facilities, which include incentivizing our personnel to maximize the return on investment for each lease transaction and provide a superior level of service to our customers.
Acquisitions of Real Estate Facilities: We seek to grow our portfolio through acquisitions of facilities generally consistent with the Company’s focus on owning concentrated business parks with easy to configure space and in markets and product types with favorable long-term return potential.
We continue to seek to acquire additional properties in our existing markets and generally in close proximity to our existing portfolio; however, there can be no assurance that we will acquire additional facilities that meet our risk-adjusted return and underwriting requirements.
Development or Redevelopment of Real Estate Facilities: In certain instances, we may seek to redevelop our existing real estate or develop new buildings on excess land parcels.
As of March 31, 2022, we were in the process of developing an approximately 83,000 square foot multi-tenant industrial building at our 212 Business Park located in Kent, Washington. During the quarter ended March 31, 2022, $1.5 million was reclassified from land to property held for development on our consolidated balance sheet and, as of March 31, 2022, $5.5 million of the estimated $16.0 million total development costs had been incurred. The total investment, inclusive of land and development costs, for the 212 Business Park development is projected to be $17.5 million. This construction project is scheduled to be completed in the fourth quarter of 2022. As of March 31, 2022, we have contractual construction commitments totaling $10.5 million that will be paid to various contractors as the project is completed.
As of March 31, 2022, we were in the process of developing an approximately 17,000 square foot multi-tenant industrial building at our Boca Commerce Park, located in Boca Raton, Florida. During the quarter ended March 31, 2022, $0.6 million was reclassified from land to property held for development on our consolidated balance sheet and, as of March 31, 2022, $2.3 million of the estimated $4.2 million total development costs had been incurred. The total investment, inclusive of land and development costs, for the Boca Commerce Park development is projected to be $4.8 million. This construction project is scheduled to be completed in the fourth quarter of 2022. As of March 31, 2022, we have contractual construction commitments totaling $1.9 million that will be paid to various contractors as the project is completed.
The Mile is an office and multifamily park we own which sits on 44.5 contiguous acres of land located in Tysons, Virginia. The park consists of 628,000 square feet of office space and a 395-unit multifamily apartment community we developed, Highgate at The Mile, which we completed in 2017 through a joint venture with the JV Partner. In 2019, we successfully rezoned The Mile allowing us to develop, at our election, up to 3,000 additional multifamily units and approximately 500,000 square feet of other commercial uses.
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In August 2020, the Company entered into a new joint venture with the JV Partner (the “Brentford Joint Venture”) for the purpose of developing a second multifamily property, Brentford at The Mile, a planned 411-unit multifamily apartment complex. Under the Brentford Joint Venture agreement, the Company has a 98.2% controlling interest and is the managing member with the JV Partner holding the remaining 1.8% limited partnership interest. We contributed a parcel of land to the Brentford Joint Venture (the “Brentford Parcel”) at a value of $18.5 million, for which we received equity contribution credit in the Brentford Joint Venture. Our cost basis in the Brentford Parcel was $5.1 million as of March 31, 2022.
Construction of Brentford at The Mile commenced in August 2020 and is anticipated to be completed over a period of 24 to 36 months at an estimated development cost of $110 million to $115 million, excluding land cost. As of March 31, 2022, the development cost incurred was $64.4 million, which is reflected in land and building held for development, net on our consolidated balance sheets along with our $5.1 million cost basis in the Brentford Parcel.
While multifamily real estate was not previously a core asset class for us, we determined that multifamily real estate represents a unique opportunity and the highest and best use of the Brentford Parcel. Through joint ventures we have partnered with a local developer and operator of multifamily properties in order to leverage their development and operational expertise. The scope and timing of the future phases of development of The Mile are subject to a variety of uncertainties, including site plan approvals and building permits.
We consolidate both the joint venture that owns Highgate at The Mile and the joint venture that is developing Brentford at The Mile.
See “Analysis of Net Income – Multifamily” below and Note 3 and 4 to our consolidated financial statements for more information on Highgate at The Mile and Brentford at The Mile.
Sale of Real Estate Facilities: We may from time to time sell individual real estate facilities based on market conditions, fit with our existing portfolio, evaluation of long-term potential returns of markets or product types, or other reasons.
On March 29, 2022, the Company sold a 702,000 square foot industrial-flex business park located in Irving, Texas, for net sale proceeds of $91.9 million, which resulted in a gain on sale of $57.0 million. (the "2022 Asset Sold"). There were no asset sales during the three months ended March 31, 2021.
The operations of these facilities are presented in the tables below under “assets sold.”
Certain Factors that May Impact Future Results
Pending merger transaction: Refer to Note 12 – “Subsequent Events” to our consolidated financial statements under Item 15 in this quarterly report on Form 10-Q, for information regarding the Merger.

Impact of COVID-19 pandemic: Starting in March 2020, the COVID-19 pandemic resulted in cessation, severe curtailment, or impairment of business activities in most sectors of the economy in all markets we operate in, due to governmental “stay at home” orders, risk mitigation procedures, and closure of businesses not considered to be “essential.” Since it remains unknown at this time how long the COVID-19 pandemic will continue, particularly given the impact of existing and potential future variants, we cannot estimate how long these negative economic impacts will persist.
Since the onset of the COVID-19 pandemic, the Company has entered into rent relief agreements consisting of $6.2 million of rent deferrals and $1.6 million of rent abatements. As of March 31, 2022, the 307 current customers that received rent relief account for 9.6% of rental income. Also as of March 31, 2022, the Company had collected $5.4 million of rent deferral repayment, representing 99.8% of the amounts scheduled to be repaid through March 31, 2022. An additional $0.8 million of rent deferral repayment is scheduled to be repaid thereafter.
Our ability to re-lease space as leases expire in a way that minimizes vacancy periods and maximizes market rental rates will depend upon market conditions in the specific submarkets in which each of our properties are located. Due to the uncertainty of the COVID-19 pandemic’s impact on the Company’s future ability to grow or maintain existing occupancy levels, possible decreases in rental rates on new and renewal transactions, and the potential negative effect of additional rent deferrals, rent abatements, and customer defaults, we believe in some instances the COVID-19 pandemic may continue to have adverse effects on rental income for 2022 and possibly beyond.
Impact of Inflation: Inflation has significantly increased recently and a continued increase in inflation could adversely impact our future results. The Company continues to seek ways to mitigate its potential impact. A substantial portion of the
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Company’s leases require customers to pay operating expenses, including real estate taxes, utilities, and insurance, as well as increases in common area expenses, which should partially reduce the Company’s exposure to inflation.
Regional Concentration: Our portfolio is concentrated in eight regions, in six states. We have chosen to concentrate in these regions because we believe they have characteristics which enable them to be competitive economically, such as above average population growth, job growth, higher education levels and personal income. Changes in economic conditions in these regions in the future could impact our future results.
Industry and Customer Concentrations: We seek to minimize the risk of industry or customer concentrations. As of March 31, 2022, leases from our top 10 customers comprised 10.0% of our annualized rental income, with only four customers representing 1% or more– the US Government (2.6%), Amazon Inc. (1.6%), KZ Kitchen Cabinet & Stone (1.3%), and Luminex Corporation (1.0%). In terms of industry concentration, 23.8% of our annualized rental income comes from Business services, and 15.0% from Logistics. No other industry group represents more than 10% of our annualized rental income.
Customer credit risk: Historically, we have experienced a low level of write-offs of uncollectible rents, with less than 0.4% of rental income written off in any single year from 2011-2019. As of March 31, 2022 and December 31, 2021, our level of write-offs of uncollectible rents were 0.1%, and 0.0% of rental income,respectively.
As of April 27, 2022, we had 29,320 square feet of leased space occupied by two customers that are protected by Chapter 11 of the U.S. Bankruptcy Code, which have an aggregate remaining lease value of $1.2 million. From time to time, customers contact us, requesting early termination of their lease, reductions in space leased, or rent deferment or rent abatement, which we are not obligated to grant but will consider and grant under certain circumstances.
Net Operating Income
We utilize net operating income (“NOI”), a measure that is not defined in accordance with GAAP, to evaluate the operating performance of our real estate. We define NOI as rental income less Cost of Operations.
We believe NOI assists investors in analyzing the performance of our real estate by excluding (i) corporate overhead (i.e., general and administrative expense) because it does not relate to the direct operating performance of our real estate, and (ii) depreciation and amortization expense because it does not accurately reflect changes in the fair value of our real estate. The Company’s calculation of NOI may not be comparable to those of other companies and should not be used as an alternative to performance measures calculated in accordance with GAAP. NOI should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs. NOI should not be used as a substitute for cash flow from operating activities in accordance with GAAP.
We also report NOI on a basis which excludes non-cash rents that have been deferred or abated during the period, certain non-cash revenue items, including amortization of deferred rent receivable, in-place lease intangible, tenant improvement reimbursements, and lease incentives, and also excludes stock-compensation expense for employees whose compensation expense is recorded in cost of operations (“Cash NOI”). We utilize Cash NOI to evaluate the cash flow performance of our properties and believe investors and analysts utilize this metric for the same purpose. Cash NOI should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs. Cash NOI should not be used as a substitute for cash flow from operating activities in accordance with GAAP.
See “Analysis of net income” below for reconciliations of each of these measures to their closest analogous GAAP measure from our consolidated statements of income.
Results of Operations
Operating Results Overview: Three Months Ended March 31, 2022 and 2021
For the three months ended March 31, 2022, net income allocable to common stockholders was $72.0 million, or $2.60 per diluted share, compared to $27.9 million, or $1.01 per diluted share, for the same period in 2021. The increase was mainly due to a $57.0 million gain on sale of assets sold during the first quarter of 2022, compared to no assets sold in the first quarter of 2021, combined with a $5.3 million increase in NOI from our Same Park portfolio (defined below), a $1.5 million increase in NOI from our Non-Same Park portfolio (defined below), and $2.5 million lower preferred distributions in 2022 compared to 2021 due to the redemption of preferred stock in November 2021, partially offset by a
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decrease of $2.7 million in NOI generated from assets sold or held for sale, and a one-time cash payment of $6.7 million to the former Chief Executive Officer ("CEO"), which consists of a $6.6 million cash payment for RSUs, a $0.1 million cash payment for COBRA coverage reimbursement in accordance with his separation agreement, partially offset by $0.6 million non-cash adjustment related to the reversal of stock compensation for the unvested former CEO's shares, net of dividend forfeiture expense.
Analysis of Net Income
Our net income is comprised primarily of our real estate operations, depreciation and amortization expense, general and administrative expense, interest and other income, interest and other expenses and gain on sale of real estate facilities.
We segregate our real estate activities into (i) same park operations, generally representing all operating properties acquired prior to January 1, 2020, comprising 25.7 million rentable square feet of our 27.0 million of rentable square feet at March 31, 2022 the “Same Park” portfolio), (ii) non-same park operations, representing those facilities we own that were acquired after January 1, 2020 (the “Non-Same Park” portfolio), (iii) multifamily operations, and (iv) assets sold or held for sale, including the 2022 Asset Sold totaling 0.7 million square feet and the 2021 Assets Sold totaling 1.0 million square feet.
The table below sets forth the various components of our net income (in thousands):
Three Months Ended March 31,
20222021% Change
Rental income     
Same Park$105,014 $98,012 7.1 %
Non-Same Park3,348 1,246 168.7 %
Multifamily2,369 2,327 1.8 %
Assets sold or held for sale (1)
2,109 6,462 (67.4)%
Total rental income112,840 108,047 4.4 %
Cost of Operations (2)
Same Park30,900 29,175 5.9 %
Non-Same Park1,060 422 151.2 %
Multifamily1,224 1,067 14.7 %
Assets sold or held for sale (1)
930 2,554 (63.6)%
Total cost of operations34,114 33,218 2.7 %
Stock compensation expense (3)
(536)(456)17.5 %
Total cost of operations excluding stock compensation expense33,578 32,762 2.5 %
NOI (4)
Same Park74,114 68,837 7.7 %
Non-Same Park2,288 824 177.7 %
Multifamily1,145 1,260 (9.1)%
Assets sold or held for sale (1)
1,179 3,908 (69.8)%
Depreciation and amortization expense(23,132)(22,985)0.6 %
General and administrative expense(11,324)(4,382)158.4 %
Interest and other income246 256 (3.9)%
Interest and other expense(330)(211)56.4 %
Gain on sale of real estate facilities56,959 — 100.0 %
Net income$101,145 $47,507 112.9 %
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(1)Amounts shown for the three months ended March 31, 2022 and 2021 include operating results attributable to the 2022 Asset Sold and the 2021 Assets Sold, respectively.
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(2)Cost of Operations under Cash NOI excludes the impact of stock compensation expense.
(3)Stock compensation expense, as shown here, represents stock compensation expense for employees whose compensation expense is recorded in cost of operations. Note that stock compensation expense attributable to our executive management team (including divisional vice presidents) and other corporate employees is recorded within general and administrative expense.
(4)NOI represents rental income less Cost of Operations.
Rental income increased $4.8 million for the three months ended March 31, 2022 as compared to the same period in 2021 due primarily to higher occupancy in 2022 compared to the same period in 2021 combined with rental income from our Non-Same Park portfolio acquired during the third and fourth quarters of 2021. These increases were partially offset by a decrease in rental income from assets sold.
Cost of operations, excluding stock compensation expense, increased $0.8 million for the three months ended March 31, 2022, as compared to the same period in 2021 due primarily to higher Cost of Operations incurred by our Same Park (discussed below) and Non-Same Park portfolios, partially offset by a decrease in Cost of Operations from assets sold.
Net income increased $53.6 million for the three months ended March 31, 2022, as compared to the same period in 2021. The three month increase was mainly due to a $57.0 million gain on sale of assets sold during the first quarter of 2022 compared to 2021 as there were no assets sold in the first quarter of 2021, a $5.3 million increase in NOI from our Same Park portfolio (defined below), a $1.5 million increase in NOI from our Non-Same Park portfolio (defined below), partially offset by a decrease of $2.7 million in NOI generated from assets sold or held for sale, and a one-time cash payment of $6.7 million to the former CEO, which consists of a $6.6 million cash payment for RSUs, a $0.1 million cash payment for COBRA coverage reimbursement in accordance with his separation agreement, partially offset by $0.6 million non-cash adjustment related to the reversal of stock compensation for the unvested former CEO's shares, net of dividend forfeiture expense.
Same Park Portfolio
We believe that evaluation of the Same Park portfolio provides an informative view of how the Company’s portfolio has performed over comparable periods. We believe that investors and analysts use Same Park information in a comparable manner.
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The following table summarizes the historical operating results of our Same Park portfolio and certain statistical information related to leasing activity during the three months ended March 31, 2022 and 2021 (in thousands, except per square foot data):
 Three Months Ended March 31, 
 20222021% Change
Rental income
Cash Rental Income (1)
$104,096 $96,638 7.7 %
Non-Cash Rental Income (2)
918 1,374 (33.2 %)
Total rental income105,014 98,012 7.1 %
Cost of Operations
Property taxes11,788 11,197 5.3 %
Utilities4,637 4,417 5.0 %
Repairs and maintenance5,679 5,244 8.3 %
Compensation5,168 4,559 13.4 %
Snow removal846 1,002 (15.6 %)
Property insurance1,268 1,167 8.7 %
Other expenses1,514 1,589 (4.7 %)
Total Cost of Operations (3)
30,900 29,175 5.9 %
Less: Non-cash stock based compensation in operating costs(496)(421)17.8 %
Total Cash Cost of Operations30,404 28,754 5.7 %
NOI (4)
$74,114 $68,837 7.7 %
Cash NOI (5)
$73,692 $67,884 8.6 %
Selected Statistical Data
Square footage at period end25,749 25,749 — 
NOI margin (6)
70.6 %70.2 %0.4 %
Cash NOI margin (7)
70.8 %70.2 %0.6 %
Weighted average square foot occupancy96.0 %93.3 %2.7 %
Revenue per Occupied Square Foot (8)
$16.99 $16.32 4.1 %
Cash Rental Income per Occupied Square Foot (9)
$16.84 $16.10 4.6 %
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(1)Cash Rental Income represents rental income excluding Non-Cash Rental Income (defined below). See table below for the change in Cash Rental Income.
(2)Non-Cash Rental Income represents amortization of deferred rent receivable (net of write-offs), in-place lease intangible, tenant improvement reimbursements, and lease incentives. Same Park Non-Cash Rental Income is presented net of deferred rent receivable write-offs of $0.0 million and $0.1 million for the three months ended March 31, 2022 and 2021, respectively
(3)Cost of Operations, as presented above, includes stock compensation expense for employees whose compensation expense is recorded in cost of operations.
(4)NOI represents rental income less Cost of Operations.
(5)Cash NOI represents Cash Rental Income less Cash Cost of Operations.
(6)NOI margin is computed by dividing NOI by rental income.
(7)Cash NOI margin is computed by dividing Cash NOI by Cash Rental Income.
(8)Revenue per Occupied Square Foot is computed by dividing rental income for the period by weighted average occupied square feet for the same period. Revenue per Occupied Square Foot for the three month period shown is annualized.
(9)Cash Rental Income per Occupied Square Foot is computed by dividing Cash Rental Income for the period by weighted average occupied square feet for the same period. Cash rental Income per Occupied Square Foot for the three month period shown is annualized.
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Analysis of Same Park Rental Income
Rental income for our Same Park portfolio increased 7.1% for the three months ended March 31, 2022, as compared to the same period in 2021. The three month increase was due primarily due to an increase in weighted average occupancy and higher rental rates charged to our customers, as revenue per occupied square foot increased 4.1%, in the three months ended March 31, 2022, compared to the same period in 2021.
The following table details the change in Same Park rental income for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
20222021$ Change
Rental income