PS BUSINESS PARKS, INC./MD MANAGEMENT’S DISCUSSION AND

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 - "Merger Events" to our consolidated financial statements
under Item 1 in this quarterly report on Form 10-Q; (ii) 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 1 in this quarterly report on Form 10-Q.

During the three months ended June 30, 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 June 30,
2022, the Company owned and operated 26.6 million rentable square feet of
commercial space in six states consisting of 93 parks and 636 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 Acquisition of Company by Affiliates of Blackstone: Refer to Note 12 -
"Merger Events" to our consolidated financial statements under Item 1 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"). The Merger, which was approved by the Company's common stockholders
at a special meeting on July 15, 2022, is subject to other customary closing
conditions. The Merger is expected to close on or around July 20, 2022, after
the conditions to closing are satisfied or waived. The Company can provide no
assurances regarding whether the Merger will close as expected, or at all.

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 June 30, 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 June 30, 2022,
$1.5 million was reclassified from land to property held for development on our
consolidated balance sheet and, as of June 30, 2022, $10.7 million of the
estimated $17.1 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 $18.6 million. This construction project is
scheduled to be completed in the fourth quarter of 2022. As of June 30, 2022, we
have contractual construction commitments totaling $3.7 million that will be
paid to various contractors as the project is completed.

As of June 30, 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 June 30, 2022, $0.6
million was reclassified from land to property held for development on our
consolidated balance sheet and, as of June 30, 2022, $3.4 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 June 30, 2022, we
have contractual construction commitments totaling $0.8 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
June 30, 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
June 30, 2022, the development cost incurred was $77.2 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 June 1, 2022, the Company sold a 93,000 square foot industrial-flex business
park located in San Francisco, California, for net sale proceeds of $62.1
million
, which resulted in a gain on sale of $55.3 million.

On May 6, 2022, the Company sold a 291,000 square foot office-oriented business
park located in Fairfax, Virginia, for net sale proceeds of $35.6 million, which
resulted in a gain on sale of $6.5 million.

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 June 1, May 6, and March
29, 2022 sales, collectively the "2022 Assets Sold").

On June 17, 2021, the Company sold a 198,000 square foot office-oriented flex
business park located in Chantilly, Virginia, for net sale proceeds of $32.6
million, which resulted in a gain on sale of $19.2 million. (The "2021 Asset
Sold").

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 – “Merger Events” to our
consolidated financial statements under Item 1 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 entered into rent relief
agreements consisting of $6.2 million of rent deferrals and $1.6 million of rent
abatements. As of June 30, 2022, the 289 current customers that received rent
relief account for 9.30% of rental income. Also as of June 30, 2022, the Company
had collected $5.7 million of rent deferral repayment, representing 99.8% of the
amounts scheduled to be repaid through June 30, 2022. An additional $0.5 million
of rent deferral repayment is scheduled to be repaid thereafter.
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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,
including as a result of adverse impacts to our tenants and to the economy
generally. The Company continues to seek ways to mitigate its potential impact.
A substantial portion of the 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 June 30, 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 (2.5%), Amazon Inc. (1.6%),
KZ Kitchen Cabinet & Stone (1.3%), and Luminex Corporation (1.0%). In terms of
industry concentration, 24.1% of our annualized rental income comes from
Business services, and 15.4% 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 June 30, 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 July 13, 2022, we had 25,000 square feet of leased space occupied by one
customer that is protected by Chapter 11 of the U.S. Bankruptcy Code, which has
a remaining lease value of $0.1 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.

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Results of Operations

Operating Results Overview: Three and Six Months Ended June 30, 2022 and 2021

For the three months ended June 30, 2022, net income allocable to common
stockholders was $77.1 million, or $2.78 per diluted share, compared to $45.6
million, or $1.65 per diluted share, for the same period in 2021. The increase
was mainly due to a $61.8 million gain on sale of assets sold during second
quarter of 2022, compared to a $19.2 million gain on sale of assets sold during
the same period in 2021, combined with a $3.3 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 Merger related costs of $6.1 million and a
decrease of $4.3 million in NOI generated from assets sold.

For the six months ended June 30, 2022, net income allocable to common
stockholders was $149.1 million, or $5.38 per diluted share, compared to $73.5
million, or $2.66 per diluted share for the same period in 2021. The increase
was mainly due to a $118.8 million gain on sale of assets sold during the first
six months of 2022, compared to a $19.2 million gain on sale of assets sold
during the same period in 2021, combined with a $9.0 million increase in NOI
from our Same Park portfolio (defined below), a $3.0 million increase in NOI
from our Non-Same Park portfolio (defined below), and $4.9 million lower
preferred distributions in 2022 compared to 2021 due to the redemption of
preferred stock in November 2021, partially offset by a decrease of $7.3 million
in NOI generated from assets sold, Merger related costs of $6.1 million, 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 25.4 million rentable square feet of our 26.6 million of rentable
square feet at June 30, 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 Assets Sold totaling
1.1 million square feet and the 2021 Asset Sold totaling 0.2 million square
feet.
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The table below sets forth the various components of our net income (in
thousands):

                               Three Months Ended June 30,                                         Six Months Ended June 30,
                                  2022                 2021               % Change                  2022                  2021               % Change
Rental income
Same Park                  $       103,988          $ 98,010                     6.1  %       $      207,390          $ 194,167                    6.8  %
Non-Same Park                        3,659             1,377                   165.7  %                7,007              2,623                  167.1  %
Multifamily                          2,524             2,248                    12.3  %                4,893              4,575                    7.0  %
Assets sold (1)                        739             7,729                   (90.4) %                4,460             16,046                  (72.2  %)
Total rental income                110,910           109,364                     1.4  %              223,750            217,411                    2.9  %

Cost of Operations (2)
Same Park                           29,853            27,188                     9.8  %               59,950             55,594                    7.8  %
Non-Same Park                        1,279               494                   158.9  %                2,339                916                  155.3  %
Multifamily                          1,181             1,177                     0.3  %                2,405              2,244                    7.2  %
Assets sold (1)                        274             2,990                   (90.8) %                2,007              6,313                  (68.2  %)
Total cost of operations            32,587            31,849                     2.3  %               66,701             65,067                    2.5  %
Stock compensation expense
(3)                                   (549)             (481)                   14.1  %               (1,085)              (937)                  15.8 

%

Total cost of operations
excl. stock compensation
expense                             32,038            31,368                     2.1  %               65,616             64,130                    2.3   %

NOI (4)
Same Park                           74,135            70,822                     4.7  %              147,440            138,573                    6.4  %
Non-Same Park                        2,380               883                   169.5  %                4,668              1,707                  173.5  %
Multifamily                          1,343             1,071                    25.4  %                2,488              2,331                    6.7  %
Assets sold (1)                        465             4,739                   (90.2) %                2,453              9,733                  (74.8  %)

Depreciation and
amortization expense               (22,799)          (22,514)                    1.3  %              (45,931)           (45,499)                   0.9   %
General and administrative
expense                            (11,092)           (4,799)                  131.1  %              (22,416)            (9,181)                 144.2  

%

Interest and other income            1,722               923                    86.6  %                1,968              1,179                   66.9 

%

Interest and other expense            (476)             (268)                   77.6  %                 (806)              (479)                  68.3   %
Gain on sale of real
estate facilities                   61,842            19,193                   222.2  %              118,801             19,193                  519.0   %
Net income                 $       107,520          $ 70,050                    53.5  %       $      208,665          $ 117,557                   77.5   %


_______________

(1)Amounts shown for the three and six months ended June 30, 2022 and 2021,
respectively, include operating results attributable to the 2022 Assets Sold and
the 2021 Asset Sold, respectively.

(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 $1.5 million and $6.3 million for the three and six
months ended June 30, 2022, respectively, as compared to the same periods 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.
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Cost of operations, excluding stock compensation expense, increased $0.7 million
and $1.5 million for the three and six months ended June 30, 2022, respectively,
as compared to the same periods 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 $37.5 million and $90.6 million for the three and six
months ended June 30, 2022, respectively, as compared to the same periods in
2021. The three month increase was mainly due to a $42.6 million increase in the
gain on sale of assets sold during second quarter of 2022, compared to the same
period in 2021, combined with a $3.3 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 the Merger related costs of $6.1 million and a decrease of
$4.3 million in NOI generated from assets sold or held for sale.

The six month increase was due to a $99.6 million increase in the gain on sale
of assets sold during the six months ended June 30, 2022 compared to the same
period in 2021, combined with an $8.9 million increase in NOI from our Same Park
portfolio (defined below), a $3.0 million increase in NOI from our Non-Same Park
portfolio (defined below), partially offset by a decrease of $7.3 million in NOI
generated from assets sold or held for sale, the Merger related costs of
$6.1 million, 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.
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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.

The following table summarizes the historical operating results of our Same Park
portfolio and certain statistical information related to leasing activity during
the three and six months ended June 30, 2022 and 2021 (in thousands, except per
square foot data):

                                         Three Months Ended June 30,                                        Six Months Ended June 30,
                                            2022                 2021              % Change                2022                     2021              % Change
Rental income
Cash Rental Income (1)               $      103,242           $ 97,698                 5.7  %        $    205,749               $ 192,518                 6.9  %
Non-Cash Rental Income (2)                      746                312               139.1  %               1,641                   1,649                (0.5  %)
Total rental income                         103,988             98,010                 6.1  %             207,390                 194,167                 6.8  %

Cost of Operations
Property taxes                               11,366             10,718                 6.0  %              22,997                  21,756                 5.7  %
Utilities                                     4,172              3,948                 5.7  %               8,586                   8,169                 5.1  %
Repairs and maintenance                       6,339              5,428                16.8  %              11,805                  10,461                12.8  %
Compensation                                  4,857              4,345                11.8  %               9,936                   8,825                12.6  %
Snow removal                                     12                  6               100.0  %                 784                     928               (15.5  %)
Property insurance                            1,251              1,147                 9.1  %               2,502                   2,302                 8.7  %
Other expenses                                1,856              1,596                16.3  %               3,340                   3,153                 5.9  %
Total Cost of Operations (3)                 29,853             27,188                 9.8  %              59,950                  55,594                 7.8  %
Less: Non-cash stock based
compensation in operating costs                (518)              (438)               18.3  %              (1,004)                   (852)               17.8  %
Total Cash Cost of Operations                29,335             26,750                 9.7  %              58,946                  54,742                 7.7  %
NOI (4)                              $       74,135           $ 70,822                 4.7  %        $    147,440               $ 138,573                 6.4  %

Cash NOI (5)                         $       73,907           $ 70,948                 4.2  %        $    146,803               $ 137,776                 6.6  %

Selected Statistical Data
Square footage at period end                 25,365             25,365                   -                 25,365                  25,365                   -
NOI margin (6)                                 71.3   %           72.3  %             (1.0  %)               71.1   %                71.4  %             (0.3  %)
Cash NOI margin (7)                            71.6   %           72.6  %             (1.0  %)               71.4   %                71.6  %             (0.2  %)
Weighted average square foot
occupancy                                      95.6   %           94.2  %              1.4  %                95.9   %                93.8  %              1.9  %
Revenue per Occupied Square Foot (8) $        16.83           $  16.41                 2.6  %        $      16.78               $   16.32                 2.8  %
Cash Rental Income per Occupied
Square Foot (9)                      $        16.58           $  16.36                 1.3  %        $      16.47               $   16.18                 1.8  %


_______________

(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.

(3)Cost of Operations, as presented above, includes stock compensation expense
for employees whose compensation expense is recorded in cost of operations.

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(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 and six month periods 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 and six
month periods shown is annualized.

Analysis of Same Park Rental Income

Rental income for our Same Park portfolio increased 6.1% and 6.8% for the three
and six months ended June 30, 2022, respectively, as compared to the same
periods in 2021. The three and six 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 2.6% and 2.8%, in the
three and six months ended June 30, 2022, respectively, compared to the same
periods in 2021.

The following table details the change in Same Park rental income for the three
and six months ended June 30, 2022 and 2021 (in thousands):

                                                  Three Months Ended June 30,                                   Six Months Ended June 30,
                                                     2022                 2021            $ Change               2022                  2021            $ Change
Rental income
Base rental income                            $        76,232          $ 73,270          $  2,962          $      151,919          $ 143,437          $  8,482
Expense recovery income                                26,694            23,815             2,879                  53,050             47,587             5,463
Lease buyout income                                       112               170               (58)                    272                486              (214)
Rent receivable recovery/(write-off)                     (128)               47              (175)                   (215)                46              (261)
Abatements                                                  -              (103)              103                      (2)              (185)              183
Deferrals                                                   -               (78)               78                       -               (280)              280
Deferral repayments, net                                  139               422              (283)                    289              1,103              (814)
Fee Income                                                193               155                38                     436                324               112
Cash Rental Income                                    103,242            97,698             5,544                 205,749            192,518            13,231
Non-Cash Rental Income (1)                                746               312               434                   1,641              1,649                (8)
Total rental income                           $       103,988          $ 98,010          $  5,978          $      207,390          $ 194,167          $ 13,223


_______________

(1)Non-cash rental income includes amortization of deferred rent receivable (net
of write-offs), in-place lease intangible, tenant improvement reimbursements,
and lease incentives.
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We expect our future revenue growth will come primarily from contractual rental
increases as well as from potential increases in market rents which would allow
us to increase rent levels when leases are either renewed with existing
customers or re-leased to new customers.

The following table sets forth the expirations of existing leases in our Same
Park portfolio over the next five years based on lease data at June 30, 2022
(dollars and square feet in thousands):

                                                                                                                                                     Percent of
                                                                Square                    Percent of              Annualized Rental              Annualized Rental
                                     Number of            Footage Subject to             Total Leased               Income Under                 Income Represented
 Year of Lease Expiration            Customers              Expiring Leases             Square Footage             Expiring Leases               by Expiring Leases
Remainder of 2022                      1,155                      2,787                            12  %                50,250                                    11  %
2023                                   1,441                      5,860                            24  %               101,889                                    23  %
2024                                   1,006                      5,017                            21  %                92,169                                    21  %
2025                                     460                      3,858                            16  %                72,389                                    17  %
2026                                     225                      2,356                            10  %                42,911                                    10  %
Thereafter                               193                      4,131                            17  %                79,007                                    18  %
Total                                  4,480                     24,009                           100  %               438,615                                   100  %

See “Analysis of Same Park Market Trends” below for further analysis of such
data on a by market basis.

Analysis of Same Park Cost of Operations

Cost of Operations, excluding stock-based compensation, for our Same Park
portfolio increased 9.8% and 7.8% for the three and six months ended June 30,
2022, respectively, as compared to the same periods in the prior year. The three
and six month increases were due to increases in almost all cost of operations
categories due to increased traffic as customers returned to the workplace,
except for snow removal and other expenses.

Property taxes increased 6.0% and 5.7% for the three and six months ended
June 30, 2022, respectively, as compared to the same periods in the prior year.
These increases were due to higher assessed values. We expect potential property
tax growth in the future due to higher assessed values.

Utilities are dependent upon energy prices and usage levels. Changes in usage
levels are driven primarily by weather and temperature. Utilities increased 5.7%
and 5.1% during the three and six months ended June 30, 2022, respectively, as
compared to the same period in the prior year. The three-month increase was
driven by increased rates and increased usage as customers returned to the
workplace. It is difficult to estimate future utility costs because weather,
temperature, and energy prices are volatile and not readily predictable.
However, we expect utility costs in the future to return to pre-COVID-19
pandemic levels over time due to expected increases in traffic and use at our
parks as our customers resume operations.

Repairs and maintenance increased 16.8% and 12.8% for the three and six months
ended June 30, 2022, as compared to the same period in the prior year. The
three-month increase was due to increased usage as customers returned to the
workplace. Repairs and maintenance costs are dependent upon many factors
including weather conditions, which can impact repair and maintenance needs,
inflation in material and labor costs, and random events, and as a result, are
not always predictable. We expect repairs and maintenance costs for the
remainder of 2022 to be more consistent with pre-COVID-19 pandemic levels as a
result of expected increases in traffic and use at our parks as customers resume
operations.

Compensation increased 11.8% and 12.6% for the three and six months ended
June 30, 2022, respectively, as compared to the same periods in the prior year.
The increase in compensation was primarily due to increases in personnel and
increased wages due to inflationary impacts on labor. We expect compensation and
payroll expenses to continue to increase in the future.
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Snow removal costs increased 100.0% and decreased 15.5% during the three and six
months ended June 30, 2022, respectively, as compared to the same periods in the
prior year. Snow removal costs are weather dependent and therefore not
predictable.

Property insurance increased 9.1% and 8.7% for the three and six months ended
June 30, 2022, respectively, as compared to the same periods in the prior year.
The three-month increase was primarily due to an increase in our property
insurance premiums due to unfavorable market conditions pervasive throughout
commercial real estate sectors. We expect to experience increases in property
insurance expense in the future as unfavorable market conditions pervasive
throughout commercial real estate sectors persist.

Other expenses increased 16.3% and 5.9% for the three and six months ended
June 30, 2022, respectively, as compared to the same periods in the prior year.
Other expenses are comprised of general property expenses incurred in the
operation of our properties. We expect other expenses for the remainder of 2022
to be similar to our results for the three and six months ended June 30, 2022.


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Analysis of Same Park Market Trends

The following tables set forth historical data by region related to the
operations of our Same Park portfolio for Cash Rental Income, Cash Cost of
Operations, weighted average occupancy, and Cash Rental Income per Occupied
Square Foot (in thousands, except per square foot data):

                                                  Three Months Ended June 30,                                       Six Months Ended June 30,
Region                                               2022                 2021              Change                 2022                     2021              Change

Geographic Data on Same Park

Cash Rental Income             Square Feet
Northern California               7,231       $       30,209           $ 28,573              5.7%            $     60,457               $  55,937              8.1%
Southern California               3,529               16,177             15,411              5.0%                  32,132                  29,504              8.9%
Dallas                            2,093                5,553              5,173              7.3%                  10,999                  10,217              7.7%
Austin                            1,963                9,537              8,652              10.2%                 18,371                  17,285              6.3%
Northern Virginia                 4,241               17,916             17,951             (0.2)%                 36,631                  36,044              1.6%
South Florida                     3,866               13,747             12,020              14.4%                 26,922                  23,806              13.1%
Seattle                           1,350                5,135              5,081              1.1%                  10,367                  10,001              3.7%
Suburban Maryland                 1,092                4,968              4,837              2.7%                   9,870                   9,724              1.5%
Total Same Park                  25,365       $      103,242           $ 97,698              5.7%                 205,749                 192,518              6.9%

Cash Cost of Operations
Northern California                           $        6,913           $  6,218              11.2%                 13,524                  12,561              7.7%
Southern California                                    4,141              3,836              8.0%                   8,353                   7,691              8.6%
Dallas                                                 1,960              1,989             (1.5)%                  3,751                   3,908             (4.0)%
Austin                                                 3,892              3,141              23.9%                  7,398                   6,356              16.4%
Northern Virginia                                      5,922              5,525              7.2%                  12,645                  11,958              5.7%
South Florida                                          3,632              3,175              14.4%                  7,159                   6,359              12.6%
Seattle                                                1,269              1,271             (0.2)%                  2,709                   2,563              5.7%
Suburban Maryland                                      1,606              1,595              0.7%                   3,407                   3,346              1.8%
Total Same Park                               $       29,335           $ 26,750              9.7%                  58,946                  54,742              7.7%

Cash NOI
Northern California                           $       23,296           $ 22,355              4.2%                  46,933                  43,376              8.2%
Southern California                                   12,036             11,575              4.0%                  23,779                  21,813              9.0%
Dallas                                                 3,593              3,184              12.8%                  7,248                   6,309              14.9%
Austin                                                 5,645              5,511              2.4%                  10,973                  10,929              0.4%
Northern Virginia                                     11,994             12,426             (3.5)%                 23,986                  24,086             (0.4)%
South Florida                                         10,115              8,845              14.4%                 19,763                  17,447              13.3%
Seattle                                                3,866              3,810              1.5%                   7,658                   7,438              3.0%
Suburban Maryland                                      3,362              3,242              3.7%                   6,463                   6,378              1.3%
Total Same Park                               $       73,907           $ 70,948              4.2%            $    146,803               $ 137,776              6.6%

Weighted average square foot occupancy
Northern California                                     96.3   %           93.9  %           2.4%                    96.9   %                93.5  %           3.4%
Southern California                                     97.6   %           97.0  %           0.6%                    97.7   %                96.6  %           1.1%
Dallas                                                  91.3   %           88.4  %           2.9%                    92.1   %                87.7  %           4.4%
Austin                                                  94.3   %           95.0  %          (0.7)%                   94.3   %                95.0  %          (0.7)%
Northern Virginia                                       93.8   %           92.8  %           1.0%                    94.2   %                92.7  %           1.5%
South Florida                                           98.6   %           96.9  %           1.7%                    98.3   %                96.2  %           2.1%
Seattle                                                 95.7   %           94.0  %           1.7%                    95.6   %                93.6  %           2.0%
Suburban Maryland                                       91.6   %           91.8  %          (0.2)%                   91.8   %                92.0  %          (0.2)%
Total Same Park                                         95.6   %           94.2  %           1.4%                    95.9   %                93.8  %           2.1%

Cash Rental Income per Occupied Square Foot (1)
Northern California                           $        17.36           $  16.82              3.2%            $      17.27               $   16.53              4.5%
Southern California                           $        18.80           $  18.01              4.4%            $      18.64               $   17.32              7.6%
Dallas                                        $        11.62           $  11.18              3.9%            $      11.40               $   11.13              2.4%
Austin                                        $        20.60           $  18.55              11.1%           $      19.83               $   18.53              7.0%
Northern Virginia                             $        18.01           $  18.24             (1.3)%           $      18.33               $   18.34             (0.1)%
South Florida                                 $        14.42           $  12.83              12.4%           $      14.16               $   12.80              10.6%
Seattle                                       $        15.89           $  16.02             (0.8)%           $      16.06               $   15.82              1.5%
Suburban Maryland                             $        19.81           $  19.25              2.9%            $      19.64               $   19.31              1.7%
Total Same Park                               $        17.03           $  16.36              4.1%            $      16.92               $   16.18              4.6%


_______________

(1)Defined in Management’s Discussion and Analysis of Financial Condition and
Results of Operations-Analysis of Net Income-Same Park Portfolio table.

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Our past revenue growth has come from contractual annual rent increases, as well
as re-leasing of space at rates above outgoing rental rates. We believe the
percentage difference between outgoing cash rent inclusive of estimated expense
recoveries and incoming cash rent inclusive of estimated expense recoveries for
leases executed ("Cash Rental Rate Change") is useful in understanding trends in
current market rates relative to our existing lease rates. The following table
summarizes Cash Rental Rate Change and other key statistical information with
respect to the Company's leasing production for its Same Park portfolio for the
three months ended June 30, 2022 (square feet in thousands):

                                                                               Three Months Ended June 30, 2022
                                            Square                                         Transaction
                                           Footage                 Customer                 Costs per              Cash Rental                GAAP
Industrial                                  Leased                 Retention               Executed Foot         Rate Change (1)        Rent Change (2)
Northern California                            149                        53.8  %       $          4.77                   32.1  %                63.3  %
Southern California                            145                        65.2  %                  1.70                   22.4  %                41.6  %
Dallas                                          90                        96.5  %                  2.23                   43.0  %                59.7  %
Austin                                          14                        35.7                     0.72                    7.7  %                30.4  %
Northern Virginia                               32                        77.3  %                     -                   12.8  %                25.2  %
South Florida                                  176                        71.1  %                  1.06                   36.8  %                49.2  %
Seattle                                         31                        71.5  %                  4.59                   20.4  %                41.8  %
Suburban Maryland                               44                       100.0  %                  0.08                   16.5  %                18.2  %
Industrial Totals by Region                    681                        68.4  %       $          2.21                   28.2  %                47.8  %

Flex
Northern California                             23                        65.6  %       $          1.63                    8.6  %                13.3  %
Southern California                             34                        67.1  %                  2.50                   20.0  %                35.3  %
Dallas                                          66                        69.2  %                  4.96                   12.6  %                29.3  %
Austin                                          65                        82.3  %                 11.72                    2.6  %                17.5  %
Northern Virginia                               52                        56.8  %                  4.84                    1.0  %                 8.5  %
South Florida                                    1                       100.0  %                     -                   25.7  %                43.9  %
Seattle                                         19                        91.8  %                  1.75                    8.7  %                21.4  %

Flex Totals by Region                          260                        68.5  %       $          5.74                    7.6  %                19.8  %

Office
Northern California                             19                        75.5  %       $          0.29                   (4.1) %                (4.0) %
Southern California                              5                       100.0  %                  0.26                    4.1  %                12.4  %

Northern Virginia                               70                        87.1  %                  6.67                   (5.3) %                (0.4) %

Suburban Maryland                               12                        42.5  %                 11.17                   (4.4) %                 1.1  %
Office Totals by Region                        106                        79.0  %       $          5.74                   (4.4) %                

(0.8) %

Company Totals by Type                       1,047                        69.6  %       $          3.44                   17.8  %                32.3  %


_______________

(1)Cash Rental Rate Change is computed by taking the percentage difference
between the incoming initial billed monthly cash rental rates inclusive of
estimated expense recoveries (excluding the impact of certain items such as
concessions or future escalators) on new leases or extensions executed in the
period, and the outgoing monthly cash rental rates inclusive of estimated
expense recoveries last billed on the previous lease for that space. Leases
executed on spaces vacant for more than the preceding twelve months have been
excluded from this measure.
(2)GAAP rent represents average rental payments for the term of a lease on a
straight-line basis in accordance with GAAP and excludes operating expense
reimbursements.

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The following table summarizes Cash Rental Rate Change and other key statistical
information with respect to the Company's leasing production for its Same Park
portfolio for the six months ended June 30, 2022 (square feet in thousands):

                                                                                       Six Months Ended June 30, 2022
                                                   Square                                         Transaction
                                                  Footage                 Customer                 Costs per           Cash Rental Rate       GAAP Rent Change
Industrial                                         Leased                 Retention              Executed Foot            Change (1)                (2)
Northern California                                   375                        67.3  %       $         3.28                   22.0  %                43.7  %
Southern California                                   378                        71.3  %                 2.17                   16.3  %                30.5  %
Dallas                                                187                        57.4  %                 2.89                   24.9  %                41.8  %
Austin                                                 42                        31.3                    2.39                   15.4  %                41.7  %
Northern Virginia                                     172                        93.0  %                 1.20                    7.9  %                19.3  %
South Florida                                         475                        66.7  %                 1.25                   29.1  %                50.3  %
Seattle                                                76                        68.8  %                 3.42                   19.2  %                39.4  %
Suburban Maryland                                      52                       100.0  %                 0.25                   13.1  %                14.8  %
Industrial Totals by Region                         1,757                        69.4  %       $         2.14                   20.3  %                38.1  %

Flex
Northern California                                    54                        75.8  %       $         1.36                    9.6  %                15.7  %
Southern California                                    78                        74.5  %                 3.91                   12.4  %                26.0  %
Dallas                                                117                        68.3  %                 4.08                   10.4  %                24.5  %
Austin                                                168                        86.3  %                 8.73                    4.1  %                17.3  %
Northern Virginia                                      87                        55.6  %                 4.48                    0.3  %                 5.3  %
South Florida                                           7                        63.9  %                 1.84                   18.5  %                36.4  %
Seattle                                                51                        63.0  %                 2.41                    8.1  %                18.8  %

Flex Totals by Region                                 562                        70.5  %       $         5.07                    6.8  %                17.9  %

Office
Northern California                                    38                        77.0  %       $         0.15                   (5.4) %                (4.9) %
Southern California                                     6                        66.2  %                 0.20                    3.4  %                11.5  %

Northern Virginia                                     144                        68.9  %                 9.46                   (7.4) %                (0.1) %

Seattle                                                 1                       100.0  %                    -                    6.2  %                15.3  %
Suburban Maryland                                      34                        56.3  %                10.59                   (2.6) %                 2.6  %
Office Totals by Region                               223                        68.3  %       $         7.74                   (5.9) %                (0.8) %

Company Totals by Type                              2,542                        69.6  %       $         6.19                   13.7  %                27.7  %


_______________

(1)Cash Rental Rate Change is computed by taking the percentage difference
between the incoming initial billed monthly cash rental rates inclusive of
estimated expense recoveries (excluding the impact of certain items such as
concessions or future escalators) on new leases or extensions executed in the
period, and the outgoing monthly cash rental rates inclusive of estimated
expense recoveries last billed on the previous lease for that space. Leases
executed on spaces vacant for more than the preceding twelve months have been
excluded from this measure.
(2)GAAP rent represents average rental payments for the term of a lease on a
straight-line basis in accordance with GAAP and excludes operating expense
reimbursements.

For the three and six months ended June 30, 2022, weighted average occupancy was
95.6% and 95.9%, respectively, an increase from weighted average occupancy of
94.2% and 93.8% for the three and six months ended June 30, 2021. Renewals of
leases with existing customers represented 73.8% of our leasing activity for the
six months ended June 30, 2022. Average lease term of the leases executed during
the three months ended June 30, 2022, respectively, was 3.8 years with
associated average transaction costs (tenant improvements and leasing
commissions) of $3.44. For comparative purposes, average lease term and
transaction costs on leases executed during the three months ended June 30, 2021
were 3.3 years and $2.76 per square foot, respectively. The uncertainty of the
COVID-19 pandemic's impact on the Company's future ability to increase or
maintain existing occupancy levels, possible decreases in rental rates on new
and renewal transactions, and potential additional rent deferrals, rent
abatements, and customer defaults, may affect our ability to grow Same Park
rental income in the near future.
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Non-Same Park Portfolio: The table below reflects the assets comprising our
Non-Same Park portfolio (in thousands):

                                                                                                     Purchase            Square                 Occupancy at June
Acquired Property                          Date Acquired                    Location                  Price               Feet                       30, 2022
Jupiter Business Park                      November 2021            Plano, TX                      $  25,600                141                       100.0%
Port America                               September 2021           Grapevine, Texas                 123,268                718                       96.5%
Pickett Industrial Park                     October 2020            Alexandria, VA                    46,582                246                       58.2%
La Mirada Commerce Center                   January 2020            La Mirada, CA                     13,513                 73                       100.0%
Total acquired property                                                                            $ 208,963              1,178                       

89.1%


We believe that our management and operating infrastructure typically allows us
to generate higher NOI from newly acquired real estate facilities than was
achieved by previous owners. However, it can take 24 or more months for us to
fully achieve higher NOI, and the ultimate levels of NOI achieved can be
affected by changes in general economic conditions. Due to the uncertainty of
the COVID-19 pandemic's impact on the Company's ability to generate higher NOI
from these newly acquired real estate facilities in the future, there can be no
assurance that we will achieve our expectations with respect to newly acquired
real estate facilities.

Multifamily: As of June 30, 2022, we held a 95.0% controlling interest in a
joint venture that owns Highgate at The Mile, a 395-unit apartment complex in
Tysons, Virginia. The following table summarizes the historical operating
results of Highgate at The Mile and certain statistical information (in
thousands, except per unit data):

                                     Three Months Ended June 30,                                      Six Months Ended June 30,
                                        2022                 2021              % Change                 2022                2021             % Change
Rental income                     $       2,524           $ 2,248                   12.3  %       $      4,893           $  4,575                7.0  %
Cost of operations                        1,181             1,177                    0.3  %              2,405              2,244                7.2  %
NOI                               $       1,343           $ 1,071                   25.4  %       $      2,488           $  2,331                6.7  %

Selected Statistical Data
Weighted average square foot
occupancy                                  94.9   %          94.6  %                 0.3  %               94.9  %            94.4  %             0.5  %

                                                                                                                              As of June 30, 2022
Total costs (1)                                                                                                                            $ 115,426
Physical occupancy                                                                                                                              94.1  %
Average rent per unit (2)                                                                                                                  $   2,132


_______________

(1)The project cost for Highgate at The Mile includes the underlying land at its
assigned contribution value upon formation of the joint venture of $27.0
million, which includes unrealized land appreciation of $6.0 million that is not
recorded on our balance sheet.

(2)Average rent per unit is defined as the total potential monthly rental
revenue (actual rent for occupied apartment units plus market rent for vacant
apartment units) divided by the total number of rentable apartment units.


The three and six month increases in NOI in 2022 compared to 2021 were primarily
due to an increase in rental income as the Tysons submarket continued to show
signs of recovery. The cost of operations for the three months ended June 30,
2022 remained flat compared to the same period in 2021. The increase in the cost
of operations for the six months ended June 30, 2022 is primarily due to an
increase in utility charges, increased costs for common area cleaning, increased
turnover costs, and unscheduled repairs to the garage door and HVAC units. Due
to the uncertainty of the COVID-19 pandemic's impact on the Company's future
ability to maintain existing occupancy levels and rental rates, we may continue
to experience NOI levels below those which were achieved prior to the onset of
the COVID-19 pandemic in the future.
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Assets sold or held for sale: These amounts include historical operating results
with respect to properties that were sold or held for sale.

For the three and six months ended June 30, 2022, the operating results include
1.1 million square feet of 2022 Assets Sold. For the three and six months ended
June 30, 2021, the operating results include 1.1 million square feet of 2022
Assets Sold and 0.2 million square feet of 2021 Assets Sold.

Depreciation and Amortization Expense: Depreciation and amortization expense was
$22.8 million and $45.9 million for the three and six months ended June 30, 2022
and 2021, and consistent with the $22.5 million and $45.5 million for the same
periods in 2021.

General and Administrative Expense: General and administrative expense primarily
represents executive and other compensation, including non-cash stock
compensation, audit and tax fees, legal expenses and other costs associated with
being a public company. For the three months ended June 30, 2022, general and
administrative expense increased $6.3 million compared to the same period in
2021 primarily due to Merger related costs of $6.1 million for professional fees
and investor related services.

For the six months ended June 30, 2022, general and administrative expense
increased $13.2 million compared to the same period in 2021 primarily due to
Merger related costs of $6.1 million for professional fees and investor related
services and a one-time cash payment of $6.7 million to the former CEO in the
first quarter of 2022, 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 the non-cash $0.6 million reversal
of stock compensation for the unvested former CEO's shares net of dividend
forfeiture expense.

Gain on Sale of Real Estate Facilities

On June 1, 2022, the Company sold a 93,000 square foot industrial-flex business
park located in San Francisco, California, for net sale proceeds of $62.1
million
, which resulted in a gain on sale of $55.3 million.

On May 6, 2022, the Company sold a 291,000 square foot office-oriented business
park located in Fairfax, Virginia, for net sale proceeds of $35.6 million, which
resulted in a gain on sale of $6.5 million.

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.

On June 17, 2021, the Company sold a 198,000 square foot office-oriented flex
business park located in Chantilly, Virginia, for net sale proceeds of $32.6
million, which resulted in a gain on sale of $19.2 million.

Refer to “Note 13. Subsequent Events” for information regarding Company’s asset
sales in July 2022.

Liquidity and Capital Resources


This section should be read in conjunction with our consolidated statements of
cash flows for the three and six months ended June 30, 2022 and 2021 and the
notes to our consolidated financial statements, which set forth the major
components of our historical liquidity and capital resources. The discussion
below sets forth the factors which we expect will affect our future liquidity
and capital resources or which may vary substantially from historical levels.

Overview and Outlook

Our expected material cash requirements for the three months ended June 30, 2022
and thereafter consist of (i) contractually obligated expenditures, including
payments of principal and interest; (ii) other essential expenditures, including
property operating expenses, maintenance capital expenditures and dividends paid
in accordance with REIT distribution requirements; and (iii) opportunistic
expenditures, including acquisitions and developments and repurchases of our
securities. We expect to satisfy these short-term and long-term cash
requirements through operating cash flow, disposition proceeds and opportunistic
debt and equity financing.

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Refer to Note 12 - "Merger Events" to our consolidated financial statements
under Item 1 in this quarterly report on Form 10-Q, for information regarding
the Merger. If and when the Merger closes, we expect that Blackstone will
operate the Company with higher leverage and secured debt levels than the
Company has historically utilized. These changes could significantly impact the
Company's liquidity in future periods.

These anticipated changes will and have impacted our credit ratings. For
example, as a result of the announced Merger, our corporate credit rating by
Standard and Poor's (S&P) was downgraded to BBB+, while our preferred stock
classes were downgraded to a rating of BBB-. S&P placed all their ratings on
PSB, including our 'BBB+' issuer credit rating, on CreditWatch with negative
implications. The CreditWatch placement reflects that S&P could lower their
ratings upon closing of the transaction, based on the pro forma capital
structure and their view of the acquirer's financial policy. S&P no longer views
PSB as being strategic to Public Storage.

In addition, following the announcement of the Merger, Moody's Investors Service
("Moody's") placed under review for downgrade the ratings of the Company and our
Baa2 preferred stock rating and the Baa1 senior unsecured shelf rating of our
main operating subsidiary, PS Business Parks, L.P. The review for downgrade
reflects the likelihood that PSB's credit profile will deteriorate under
Blackstone's ownership, with the potential for meaningfully higher leverage and
secured debt levels that could result in a multi-notch downgrade of the REIT's
ratings, including crossing over to non-investment grade territory, upon
transaction close.

Sources of Capital

Operating Cash Flow: We believe that our net cash provided by our operating
activities will continue to be sufficient to enable us to meet our ongoing
requirements for debt service, capital expenditures and distributions to our
stockholders for the foreseeable future. In the last five years, we have
retained $40 to $60 million in operating cash flow per year. Retained operating
cash flow represents cash flow provided by operating activities, less
stockholder and unit holder distributions and capital expenditures, excluding
development costs. In addition, as of June 30, 2022, we had $173.5 million in
unrestricted cash.

Proceeds from Dispositions: Refer to "Business Overview-Sale of Real Estate
Facilities" above for a discussion of our dispositions. We expect to continue
sell properties that are no longer consistent with our investment strategy and
expect to use the proceeds from these dispositions to fund new acquisitions,
development or other cash requirements.

Access to Capital Markets: As a REIT, we are required to distribute at least 90%
of our "REIT taxable income" to our stockholders each year, which relative to a
taxable C corporation, limits the amount of cash flow from operations that we
can retain for investment purposes, such as to fund acquisitions and
developments. As a result, in order to grow our asset base, access to capital is
important.

In August 2021, we amended and restated the credit agreement governing our
revolving Credit Facility to increase the aggregate principal amount of the
Credit Facility from $250.0 million to $400.0 million and extend the expiration
date to August 2025. The Credit Facility can also be expanded to $700.0 million.
We can use the Credit Facility as necessary as temporary financing until we are
able to raise longer term capital. Historically we have funded our long-term
capital requirements with retained operating cash flow and proceeds from the
issuance of common and preferred securities. We will select among these sources
of capital based upon availability, relative cost, the impact of constraints on
our operations (such as covenants), and the desire for leverage.
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Cash Requirements

Contractual Commitments: Our material contractual commitments as of June 30,
2022 consist of principal and interest on our Credit Facility, payment of
dividends on our preferred stock (which if not paid will accrue), contractual
construction commitments for development projects, and ground lease obligations:

•Credit Facility: As of June 30, 2022, we have zero balance outstanding on our
Credit Facility. We are in compliance with all of the covenants and other
requirements of our Credit Facility. Our Credit Facility expires in August 2025.

•Preferred stock dividends: We paid $19.2 million and to preferred stockholders
during the six months ended June 30, 2022. We expect to continue to pay
quarterly distributions of $9.6 million to our preferred stockholders for the
foreseeable future or until such time as there is a change in the amount or
composition of our series of preferred equity outstanding. Dividends on
preferred equity are paid when and if declared by our Board of Directors (the
"Board") and accumulate if not paid.

•Contractual commitments: Contractual construction commitments as of June 30,
2022
are approximately $28.0 million.

•Ground lease obligations: Our contractual payment requirements under various
operating leases as of June 30, 2022 are approximately $0.1 million for 2022 and
$1.4 million thereafter.

•Leasing transaction cost commitments: We have commitments, pursuant to executed
leases throughout our portfolio, to spend $7.1 million on transaction costs,
which include tenant improvements and lease commissions as of June 30, 2022.

Capital Expenditures: We define recurring capital expenditures as those
necessary to maintain and operate our real estate at its current economic value.
Nonrecurring capital improvements generally are related to property
reconfiguration and other capital expenditures related to repositioning asset
acquisitions.

The following table sets forth our commercial capital expenditures paid for in
the six months ended June 30, 2022 and 2021 on an aggregate and per square foot
basis:

                                                                 Six Months Ended June 30,
                                              2022               2021                2022                2021
                                                  (in thousands)                      (per square foot) (1)
Commercial Real Estate
Recurring capital expenditures
Capital improvements                      $   5,116          $   4,429          $      0.19          $    0.16
Tenant improvements                           8,956              7,024                 0.33               0.25
Lease commissions                             2,928              3,404                 0.11               0.12
Total commercial recurring capital
expenditures                                 17,000             14,857                 0.63               0.53
Nonrecurring capital improvements             2,120                843                 0.08               0.03

Total commercial capital expenditures $ 19,120 $ 15,700

    $      0.71          $    0.56


_______________

(1)Per square foot amounts are calculated based on capital expenditures divided
by total weighted average square feet owned for the periods presented.

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The following table summarizes recurring capital expenditures paid and the
related percentage of NOI for Same Park by region for the six months ended
June 30, 2022 and 2021 (in thousands):

                                                                             Six Months Ended June 30,
                                                                                                                     Recurring
                                                Recurring                                                       Capital Expenditures
                                           Capital Expenditures                                                as a Percentage of NOI
                                         2022                 2021                                          2022                      2021
Region
Same Park
Northern California                 $      1,729          $   4,143              (58.3)%                           3.7  %                 9.4  %
Southern California                        3,452              1,535               124.9%                          14.5  %                 6.7  %
Dallas                                     1,076              1,283              (16.1)%                          15.0  %                20.5  %
Austin                                     1,055                569               85.4%                            9.6  %                 5.4  %
Northern Virginia                          3,354              2,713               23.6%                           13.5  %                11.3  %
South Florida                              1,394                958               45.5%                            7.2  %                 5.6  %
Seattle                                    1,047                607               72.5%                           13.5  %                 8.2  %
Suburban Maryland                            495              1,534              (67.7)%                           7.9  %                25.3  %
Total Same Park                           13,602             13,342                1.9%                            9.2  %                 9.6  %
Non-Same Park

Southern California                           32                 38              (15.8)%
Dallas                                       554                 72               669.4%
Northern Virginia                          2,077                145              1332.4%
Total Non-Same Park                        2,663                255               944.3%
Assets sold or held for sale                 735              1,260              (41.7)%
Total commercial recurring                                                        14.4%
capital expenditures                $     17,000          $  14,857


In the last five years, our annual Same Park recurring capital expenditures have
ranged between 10.7% and 14.3% as a percentage of NOI, and we expected future
recurring capital expenditures to be within this range. While what we disclose
herein with respect to capital expenditures represents our best estimates at
this time, there can be no assurance that these amounts will not change
substantially in the future for various reasons, including the potential impact
of the COVID-19 pandemic on capital projects and leasing volume.

Redemption of Preferred Stock: Shares of preferred stock are redeemable by the
Company five years after issuance or in order to preserve its status as a REIT,
but shares of preferred stock are never redeemable at the option of the holder.
Historically, we have reduced our cost of capital by refinancing higher coupon
preferred securities with lower coupon preferred securities. Our Series X
preferred shares, with a coupon rate of 5.25%, at a par value of $230.0 million
and Series Y preferred shares, with a coupon rate of 5.20%, at a par value of
$200.0 million are redeemable in September 2022 and December 2022, respectively.
Future redemptions of preferred stock will depend upon many factors, including
available cash and our cost of capital. Refer to Note 9 to our consolidated
financial statements or more information on our preferred stock.

Acquisitions of real estate facilities: Refer to "Business Overview-Acquisition
of Real Estate Facilities" above for a discussion of our recent acquisitions. We
continue to seek to acquire additional real estate facilities; however, there is
significant competition to acquire existing facilities in our markets and there
can be no assurance as to the volume of future acquisition activity.
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Development real estate facilities: Refer to "Business Overview-Development or
Redevelopment of Real Estate Facilities" above for a discussion of our recently
completed developments.

As of June 30, 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 June 30, 2022,
$1.5 million was reclassified from land to property held for development on our
consolidated balance sheet and, as of June 30, 2022, $10.7 million of the
estimated $17.1 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 $18.6 million. This construction project is
scheduled to be completed in the fourth quarter of 2022. As of June 30, 2022, we
have contractual construction commitments totaling $3.7 million that will be
paid to various contractors as the project is completed.

As of June 30, 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 June 30, 2022, $0.6
million was reclassified from land to property held for development on our
consolidated balance sheet and, as of June 30, 2022, $3.4 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 June 30, 2022, we
have contractual construction commitments totaling $0.8 million that will be
paid to various contractors as the project is completed.

In August 2020, we entered into the Brentford Joint Venture for the purpose of
developing a second multifamily property, Brentford at The Mile, a planned
411-unit multifamily apartment complex. We contributed 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 June 30, 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
June 30, 2022, the development cost incurred was $77.2 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 June 30, 2022, we have contractual construction commitments totaling $20.8
million that will be paid to various contractors as the project is completed.

Repurchase of Common Stock: The Board has approved a common stock repurchase
program and we may in the future acquire our shares under the program. As of
June 30, 2022, management has the authorization to repurchase an additional
1,614,721 shares. No shares of common stock were repurchased under the
board-approved common stock repurchase program during the three and six months
ended June 30, 2022. The Company does not expect to repurchase shares prior to
the closing of the Mergers.

Requirement to Pay Distributions: Our election to be taxed as a REIT, as defined
by the Code, applies to all periods presented herein. As a REIT, we do not incur
U.S. federal corporate income tax on our "REIT taxable income" that is
distributed each year (for this purpose, certain distributions paid in a
subsequent year may be considered), and we continue to meet certain
organizational and operational requirements. We believe we have met these
requirements in all periods presented herein, and we expect we will continue to
qualify as a REIT in future periods.

We paid REIT qualifying distributions of $38.6 million ($9.6 million to
preferred stockholders and $29.0 million to common stockholders) during the six
months ended June 30, 2022.

Our consistent, long-term dividend policy has been to set dividend distribution
amounts based on our taxable income.

On July 8, 2022, the Company announced that, in accordance with the Merger
Agreement, the Board declared (i) a prorated quarterly cash dividend on the
Company's common stock equal $0.216848 per share and (ii) a cash dividend of
$5.25 per share of the Company's common stock (the "Closing Cash Dividend), each
payable immediately before the effective time of the Partnership Merger, to
holders of record as of the close of business on the business day immediately
preceding the closing of the Mergers and contingent upon the approval of the
Company Merger by the Company's stockholders, the satisfaction or waiver of the
other conditions to the Mergers, and the Merger Agreement not having been
terminated. The 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. Refer to Note 12 - "Merger Events" to our consolidated
financial statements under Item 1 in this quarterly report on Form 10-Q, for
additional information regarding the Merger.
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Funds from Operations, Core Funds from Operations, and Funds Available for Distributions


Funds from Operations ("FFO") is a non-GAAP measure defined by the National
Association of Real Estate Investment Trusts and is considered a helpful measure
of REIT performance by REITs and many REIT analysts. FFO represents GAAP net
income before real estate depreciation and amortization expense, gains or losses
on sales of operating properties and land and impairment charges on real estate
assets.

We also present Core FFO and Funds Available for Distribution ("FAD") which are
both also non-GAAP measures. The Company defines Core FFO as FFO excluding the
impact of (i) income allocated to preferred stockholders to the extent
redemption value exceeds the related carrying value and (ii) other nonrecurring
income or expense items as appropriate. FAD represents Core FFO adjusted to (i)
deduct recurring capital improvements and capitalized tenant improvements and
lease commissions and (ii) remove certain non-cash income or expense items such
as amortization of deferred rent receivable and stock compensation expense.

FFO for the three and six months ended June 30, 2022 was $1.68 per share and
$3.33 per share, representing a 4.0% and 2.9% decrease from the same periods in
2021.

The decrease in FFO per share for the three months ended June 30, 2022 was due
to Merger related costs of $6.1 million and higher general and administrative
expenses. The decrease in FFO was partially offset by lower preferred
distributions in the second quarter due to the Series W preferred stock
redemption in Q4 2021, and higher NOI as described above.

The decrease in FFO per share for the six months ended June 30, 2022 was due to
the above-mentioned Merger costs of $6.1 million, a one-time cash payment of
$6.6 million to the former Chief Executive Officer ("CEO") for RSUs and a $0.1
million cash payment for COBRA coverage reimbursement, in accordance with his
separation agreement, partially offset by a $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, and higher general and
administrative expenses. The decrease in FFO was partially offset by lower
preferred distributions due to the Series W preferred stock redemption in Q4
2021, and higher NOI as described above.

Core FFO for the three and six months ended June 30, 2022 was $1.85 per share
and $3.68, per share representing a 4.5% and 7.0% increase from the same periods
in 2021.

Core FFO for the three and six months ended June 30, 2022 excludes the impact of
the Merger related costs of $6.1 million and the 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.
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The following table reconciles net income allocable to common stockholders to
FFO, Core FFO and FAD as well as net income per share to FFO per share and Core
FFO per share (amounts in thousands, except per share data):

                                                Three Months Ended June 30,                 Six Months Ended June 30,
                                                 2022                  2021                  2022                  2021

Net income allocable to common
stockholders                               $       77,077          $   45,595          $      149,070          $  73,481
Adjustments
Gain on sale of real estate facilities            (61,842)            (19,193)               (118,801)           (19,193)
Depreciation and amortization                      22,799              22,514                  45,931             45,499
Net income allocable to noncontrolling
interests                                          20,388              12,094                  39,437             19,505
Net income allocable to restricted stock
unit holders                                          475                 314                     998                478
FFO allocated to joint venture partner                (33)                (18)                    (56)               (45)
FFO allocable to diluted common stock and          58,864              61,306                 116,579            119,725

units

Acquisition and merger costs                        6,147                   -                   6,147                  -
CEO cash payment for RSUs net of reversal
of stock compensation                                   -                   -                   6,108                  -

Maryland reincorporation costs                          -                 510                       -                510

Core FFO allocable to diluted common stock
and units                                  $       65,011          $   

61,816 $ 128,834 $ 120,235

FAD

FFO allocable to diluted common stock and
units                                      $       58,864          $   61,306          $      116,579          $ 119,725
Adjustments:
Recurring capital improvements                     (3,055)             (3,638)                 (4,611)            (4,183)
Tenant improvements                                (5,837)             (3,849)                 (8,735)            (6,254)
Capitalized lease commissions                      (1,620)             (1,430)                 (2,920)            (3,160)
Total recurring capital expenditures for
assets sold                                          (139)               (542)                   (734)            (1,261)

Cash paid for taxes in lieu of stock upon
vesting of restricted stock units                    (387)                 (5)                 (1,318)            (3,202)

Non-cash rental income (1)                         (1,015)               (183)                 (2,172)            (1,490)
Non-cash stock compensation expense                 2,000               2,301                   2,940              4,081
FAD allocable to diluted common stock and
units                                              48,811              53,960                  99,029            104,249

Weighted average outstanding
Common stock                                       27,630              27,531                  27,618             27,513
Operating partnership units                         7,305               7,305                   7,305              7,305
Restricted stock units                                 39                  32                      39                 35
Common stock equivalents                               92                 101                      89                 98
Total diluted common stock and units               35,066              34,969                  35,051             34,951

Reconciliation of Earnings per share to
FFO per share
Net income per common stock-diluted        $         2.78          $     1.65          $         5.38          $    2.66
Gain on sale of real estate facilities              (1.76)              (0.55)                  (3.39)             (0.55)
Depreciation and amortization expense                0.65                0.64                    1.31               1.31
Net income allocated to restricted stock
unit holders                                         0.01                0.01                    0.03               0.01
FFO per share                              $         1.68          $     1.75          $         3.33          $    3.43
Acquisition and merger costs                         0.17                   -                    0.17                  -
CEO cash payment for RSUs net of reversal
of stock compensation                                   -                   -                    0.18                  -
Maryland reincorporation costs                          -                0.01                       -               0.01

Core FFO per share                         $         1.85          $     1.77          $         3.68          $    3.44


_______________

(1)Non-cash rental income includes amortization of deferred rent receivable (net
of write-offs), in-place lease intangible, tenant improvement reimbursements,
and lease incentives.

We believe FFO, Core FFO, and FAD assist investors in analyzing and comparing
the operating and financial performance of a company's real estate from period
to period. FFO, Core FFO, and FAD are not substitutes for GAAP net income. In
addition, other REITs may compute FFO, Core FFO, and FAD differently, which
could inhibit comparability.
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