PS Business Parks, Inc. Reports Results for the Fourth Quarter Ended December 31, 2007 and Announces an Increase in the Number of Common Shares Authorized for Repurchase

PS Business Parks, Inc. (AMEX:PSB) reported operating results for the fourth quarter ended December 31, 2007 and announced an increase in the number of common shares authorized for repurchase. Net income allocable to common shareholders for the three months ended December 31, 2007 was $3.8 million or $0.17 per diluted share on revenues of $70.0 million compared to $3.7 million or $0.17 per diluted share on revenues of $62.8 million for the same period in 2006. Net income allocable to common shareholders for the year ended December 31, 2007 was $17.7 million or $0.82 per diluted share on revenues of $271.5 million compared to $16.6 million or $0.77 per diluted share on revenues of $242.8 million for the same period in 2006. Revenues increased $7.2 million for the three months ended December 31, 2007 as a result of an increase of $4.6 million from acquired properties combined with an increase of $2.6 million from the Company’s Same Park portfolio. Net income allocable to common shareholders for the three months ended December 31, 2007 slightly increased over the same period of 2006 as a result of a decrease in non-cash distributions reported in 2006 associated with preferred equity redemptions partially offset by a higher level of preferred equity cash distributions. Revenues increased $28.7 million for the year ended December 31, 2007 as a result of an increase of $20.7 million from acquired properties combined with an increase of $7.8 million from the Company’s Same Park portfolio. Net income allocable to common shareholders for the year ended December 31, 2007 increased from the same period of 2006 by $1.1 million or $0.05 per diluted share resulting from an increase in income from continuing operations combined with a decrease in non-cash distributions reported in 2006 associated with preferred equity redemptions partially offset by a higher level of preferred equity cash distributions and a decrease in gain on disposition of real estate. Supplemental Measures Funds from operations ("FFO”) allocable to common shareholders and unit holders for the three months ended December 31, 2007 and 2006 were $31.8 million, or $1.10 per diluted share, and $27.5 million, or $0.95 per diluted share, respectively. FFO allocable to common shareholders and unit holders for the year ended December 31, 2007 was $122.4 million, or $4.23 per diluted share, compared to $106.2 million, or $3.67 per diluted share, for the same period in 2006. The increase in FFO for the three months and year ended December 31, 2007 over the same periods of 2006 was primarily due to an increase in income from continuing operations and a decrease in non-cash distributions reported in 2006 associated with preferred equity redemptions partially offset by an increase in preferred equity cash distributions. The following table summarizes the impact of the implementation of the SEC’s clarification of Emerging Issues Task Force ("EITF”) Topic D-42 on the Company’s FFO per common shareholders and unit holders for the three months and years ended December 31, 2007 and 2006:   For the Three Months Ended December 31,       For the Years Ended December 31, 2007     2006 2007     2006 FFO per common share, before adjustments $ 1.10 $ 1.01 $ 4.23 $ 3.83 Application of EITF Topic D-42   —   (0.06)   —   (0.16) FFO per common share, as reported $ 1.10 $ 0.95 $ 4.23 $ 3.67 Property Operations In order to evaluate the performance of the Company’s overall portfolio over two comparable periods, management analyzes the operating performance of a consistent group of properties owned and operated throughout both periods (herein referred to as "Same Park”). Operating properties that the Company acquired subsequent to January 1, 2006 are referred to as "Non-Same Park.” For the three months and years ended December 31, 2007 and 2006, the Same Park portfolio constitutes 17.5 million rentable square feet, which includes all assets included in continuing operations the Company owned and operated from January 1, 2006 through December 31, 2007 and represents approximately 89.4% of the total square footage of the Company’s portfolio as of December 31, 2007. The Company’s property operations account for substantially all of the net operating income earned by the Company. The following table presents the operating results of the Company’s properties for the three months and years ended December 31, 2007 and 2006 in addition to other income and expense items affecting income from continuing operations before minority interests (unaudited, in thousands, except per square foot amounts):     For the Three Months Ended December 31,       For the Years Ended December 31,     2007   2006 Change 2007   2006 Change Rental income: Same Park (17.5 million rentable square feet) (1) $ 60,928 $ 58,335 4.4 % $ 238,783 $ 230,965 3.4 % Non-Same Park (2.1 million rentable square feet) (2)   8,918     4,271   108.8 %   31,992     11,249   184.4 % Total rental income   69,846     62,606   11.6 %   270,775     242,214   11.8 % Cost of operations: Same Park 18,236 17,452 4.5 % 72,995 70,707 3.2 % Non-Same Park   3,459     1,865   85.5 %   11,365     3,964   186.7 % Total cost of operations   21,695     19,317   12.3 %   84,360     74,671   13.0 % Net operating income (3): Same Park 42,692 40,883 4.4 % 165,788 160,258 3.5 % Non-Same Park   5,459     2,406   126.9 %   20,627     7,285   183.1 % Total net operating income   48,151     43,289   11.2 %   186,415     167,543   11.3 % Other income and expenses: Facility management fees 182 183 (0.5 %) 724 625 15.8 % Interest and other income 963 1,417 (32.0 %) 5,104 6,874 (25.7 %) Interest expense (1,002 ) (917 ) 9.3 % (4,130 ) (2,575 ) 60.4 % Depreciation and amortization (26,680 ) (22,496 ) 18.6 % (98,521 ) (86,216 ) 14.3 % General and administrative   (1,979 )   (1,782 ) 11.1 %   (7,917 )   (7,046 ) 12.4 % Income from continuing operations before minority interests $ 19,635   $ 19,694   (0.3 %) $ 81,675   $ 79,205   3.1 % Same Park gross margin (4) 70.1 % 70.1 % 0.0 % 69.4 % 69.4 % 0.0 % Same Park weighted average for the period: Occupancy 94.7 % 94.0 % 0.7 % 93.8 % 93.4 % 0.4 % Annualized realized rent per square foot (5) $ 14.71 $ 14.19 3.7 % $ 14.55 $ 14.14 2.9 %       (1)   See above for a definition of Same Park. (2) Represents operating properties owned by the Company as of December 31, 2007 that are not included in Same Park. (3) Net operating income ("NOI") is an important measurement in the commercial real estate industry for determining the value of the real estate generating the NOI. The Company's calculation of NOI may not be comparable to those of other companies and should not be used as an alternative to measures of performance in accordance with generally accepted accounting principles ("GAAP"). (4) Same Park gross margin is computed by dividing NOI by rental income. (5) Same Park realized rent per square foot represents the annualized revenues earned per occupied square foot. Financial Condition The following are key financial ratios with respect to the Company’s leverage at and for the three months ended December 31, 2007.       Ratio of FFO to fixed charges (1)   47.2x Ratio of FFO to fixed charges and preferred distributions (1) 3.1x Debt and preferred equity to total market capitalization (based on common stock price of $52.55 at December 31, 2007) 37.1% Available under line of credit at December 31, 2007 $100.0 million     (1) Fixed charges include interest expense of $1.0 million. Stock Repurchase Program The Company’s Board of Directors previously authorized the repurchase, from time to time, of up to 4.5 million shares of the Company’s common stock on the open market or in privately negotiated transactions. During the year ended December 31, 2007, the Company repurchased 601,042 shares of common stock at an aggregate cost of $31.9 million or an average cost per share of $53.00. Subsequent to December 31, 2007, the Company repurchased 370,042 shares of common stock at an aggregate cost of $18.3 million or an average cost per share of $49.52. Since inception of the program, the Company has repurchased an aggregate of 4.3 million shares of common stock at an aggregate cost of $152.8 million or an average cost per share of $35.84. On February 25, 2008, the Board of Directors authorized the repurchase of an additional 2.0 million shares of the Company’s common stock on the open market or in privately negotiated transactions. Purchases will be made subject to market conditions and other investment opportunities available to the Company. Under existing board authorizations, the Company can repurchase 2.2 million shares. Distributions Declared The Board of Directors declared a quarterly dividend of $0.44 per common share on February 25, 2008. Distributions were also declared on the various series of depositary shares, each representing 1/1,000 of a share of preferred stock listed below. Distributions are payable March 31, 2008 to shareholders of record on March 17, 2008. Series   Dividend Rate   Dividend Declared Series H 7.000 % $ 0.437500 Series I 6.875 % $ 0.429688 Series K 7.950 % $ 0.496875 Series L 7.600 % $ 0.475000 Series M 7.200 % $ 0.450000 Series O 7.375 % $ 0.460938 Series P 6.700 % $ 0.418750 Company Information PS Business Parks, Inc., a member of the S&P SmallCap 600, is a self-advised and self-managed equity real estate investment trust ("REIT”) that acquires, develops, owns and operates commercial properties, primarily flex, multi-tenant office and industrial space. The Company defines "flex” space as buildings that are configured with a combination of office and warehouse space and can be designed to fit a number of uses (including office, assembly, showroom, laboratory, light manufacturing and warehouse space). As of December 31, 2007, PSB wholly owned approximately 19.6 million rentable square feet with 3,870 customers located in eight states, concentrated in California (5.8 million sq. ft.), Florida (3.6 million sq. ft.), Virginia (3.0 million sq. ft.), Texas (2.9 million sq. ft.), Maryland (1.8 million sq. ft.), Oregon (1.3 million sq. ft.), Arizona (0.7 million sq. ft.) and Washington (0.5 million sq. ft.). Forward-Looking Statements When used within this press release, the words "may,” "believes,” "anticipates,” "plans,” "expects,” "seeks,” "estimates,” "intends” and similar expressions are intended to identify "forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results and performance of the Company to be materially different from those expressed or implied in the forward-looking statements. Such factors include the impact of competition from new and existing commercial facilities which could impact rents and occupancy levels at the Company’s facilities; the Company’s ability to evaluate, finance and integrate acquired and developed properties into the Company’s existing operations; the Company’s ability to effectively compete in the markets that it does business in; the impact of the regulatory environment as well as national, state and local laws and regulations including, without limitation, those governing REITs; the impact of general economic conditions upon rental rates and occupancy levels at the Company’s facilities; the availability of permanent capital at attractive rates, the outlook and actions of Rating Agencies and risks detailed from time to time in the Company’s SEC reports, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. Additional information about PS Business Parks, Inc., including more financial analysis of the fourth quarter operating results, is available on the Internet. The Company’s website is www.psbusinessparks.com. A conference call is scheduled for Tuesday, February 26, 2008, at 10:00 a.m. (PST) to discuss the fourth quarter results. The toll free number is 1-800-399-4409; the conference ID is 34233366. The call will also be available via a live webcast on the Company’s website. A replay of the conference call will be available through March 4, 2008 at 1-800-642-1687. A replay of the conference call will also be available on the Company’s website. Additional financial data attached. PS BUSINESS PARKS, INC. SELECTED FINANCIAL DATA (Unaudited, in thousands)       At December 31, 2007 At December 31, 2006 Balance Sheet Data: Cash and cash equivalents $ 35,041 $ 67,017 Real estate facilities, before accumulated depreciation $ 1,978,898 $ 1,793,219 Total assets $ 1,516,583 $ 1,463,599 Total debt $ 60,725 $ 67,048 Preferred stock called for redemption $ — $ 50,000 Minority interest – common units $ 154,470 $ 165,469 Minority interest – preferred units $ 94,750 $ 82,750 Perpetual preferred stock $ 716,250 $ 572,500 Common shareholders’ equity $ 439,330 $ 482,703 Total common shares outstanding at period end   20,777   21,311 Total common shares outstanding at period end, assuming conversion of all Operating Partnership ("OP”) units into common stock   28,082   28,616 PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited, in thousands, except per share amounts)   For the Three Months Ended December 31, For the Years Ended December 31, 2007   2006 2007   2006   Revenues: Rental income $ 69,846 $ 62,606 $ 270,775 $ 242,214 Facility management fees   182     183     724     625   Total operating revenues   70,028     62,789     271,499     242,839   Expenses: Cost of operations 21,695 19,317 84,360 74,671 Depreciation and amortization 26,680 22,496 98,521 86,216 General and administrative   1,979     1,782     7,917     7,046   Total operating expenses   50,354     43,595     190,798     167,933   Other income and expenses: Interest and other income 963 1,417 5,104 6,874 Interest expense   (1,002 )   (917 )   (4,130 )   (2,575 ) Total other income and expenses   (39 )   500     974     4,299   Income from continuing operations before minority interests   19,635     19,694     81,675     79,205   Minority interests in continuing operations: Minority interest in income – preferred units Distributions to preferred unit holders (1,751 ) (1,555 ) (6,854 ) (9,789 ) Redemption of preferred operating partnership units — — — (1,366 ) Minority interest in income – common units   (1,370 )   (1,263 )   (6,155 )   (5,113 ) Total minority interests in continuing operations   (3,121 )   (2,818 )   (13,009 )   (16,268 ) Income from continuing operations   16,514     16,876     68,666     62,937   Discontinued operations: Loss from discontinued operations — — — (125 ) Gain on disposition of real estate — — — 2,328 Minority interest in income attributable to discontinued operations – common units   —     —     —     (560 ) Income from discontinued operations   —     —     —     1,643     Net income   16,514     16,876     68,666     64,580   Net income allocable to preferred shareholders: Preferred stock distributions: Preferred stock distributions 12,756 11,442 50,937 44,553 Redemption of preferred stock   —     1,722     —     3,380   Total preferred stock distributions   12,756     13,164     50,937     47,933     Net income allocable to common shareholders $ 3,758   $ 3,712   $ 17,729   $ 16,647   Net income per common share – basic: Continuing operations $ 0.18 $ 0.17 $ 0.83 $ 0.70 Discontinued operations $ — $ — $ — $ 0.08 Net income $ 0.18 $ 0.17 $ 0.83 $ 0.78 Net income per common share – diluted: Continuing operations $ 0.17 $ 0.17 $ 0.82 $ 0.69 Discontinued operations $ — $ — $ — $ 0.08 Net income $ 0.17 $ 0.17 $ 0.82 $ 0.77 Weighted average common shares outstanding: Basic   21,257     21,303     21,313     21,335   Diluted   21,519     21,666     21,634     21,646   PS BUSINESS PARKS, INC. Computation of Funds from Operations ("FFO”) and Funds Available for Distribution ("FAD”) (Unaudited, in thousands, except per share amounts)     For the Three Months Ended December 31, For the Years Ended December 31, 2007   2006 2007   2006   Computation of Diluted Funds From Operations per Common Share ("FFO”) (1):   Net income allocable to common shareholders $ 3,758 $ 3,712 $ 17,729 $ 16,647 Adjustments: Gain on disposition of real estate — — — (2,328 ) Depreciation and amortization 26,680 22,496 98,521 86,243 Minority interest in income – common units   1,370     1,263     6,155     5,673   FFO allocable to common shareholders/unit holders $ 31,808   $ 27,471   $ 122,405   $ 106,235     Weighted average common shares outstanding 21,257 21,303 21,313 21,335 Weighted average common OP units outstanding 7,305 7,305 7,305 7,305 Weighted average common stock equivalents outstanding   262     363     321     311   Weighted average common shares and OP units for purposes of computing fully-diluted FFO per common share   28,824     28,971     28,939     28,951     Diluted FFO per common share equivalent $ 1.10   $ 0.95   $ 4.23   $ 3.67     Computation of Funds Available for Distribution ("FAD”) (2):   FFO allocable to common shareholders/unit holders $ 31,808 $ 27,471 $ 122,405 $ 106,235   Adjustments: Recurring capital improvements (3,140 ) (4,362 ) (13,677 ) (10,773 ) Tenant improvements (6,073 ) (5,741 ) (17,882 ) (17,989 ) Lease commissions (2,026 ) (1,285 ) (5,803 ) (5,334 ) Straight-line rent 16 (367 ) (473 ) (2,804 ) Stock compensation expense 978 796 3,724 2,845 In-place lease adjustment (49 ) 60 (102 ) 232 Lease incentives, net of tenant improvement reimbursements (129 ) 53 (33 ) 440 Impact of EITF Topic D-42   —     1,722     —     4,746   FAD $ 21,385   $ 18,347   $ 88,159   $ 77,598     Distributions to common shareholders/unit holders $ 12,565   $ 8,298   $ 46,076   $ 33,192     Distribution payout ratio   58.8 %   45.2 %   52.3 %   42.8 %     (1)   Funds From Operations ("FFO") is computed in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). The White Paper defines FFO as net income, computed in accordance with GAAP, before depreciation, amortization, minority interest in income, gains or losses on asset dispositions and extraordinary items. FFO should be analyzed in conjunction with net income. However, FFO should not be viewed as a substitute for net income as a measure of operating performance or liquidity as it does not reflect depreciation and amortization costs or the level of capital expenditure and leasing costs necessary to maintain the operating performance of the Company's properties, which are significant economic costs and could materially impact the Company's results from operations. Other REITs may use different methods for calculating FFO and, accordingly, the Company's FFO may not be comparable to other real estate companies.   (2) Funds available for distribution ("FAD") is computed by deducting from consolidated FFO recurring capital improvements, which the Company defines as those costs incurred to maintain the assets' value, tenant improvements, capitalized leasing commissions and straight-line rent from FFO and adding stock compensation expense, amortization of lease incentives, in-place lease adjustment and the impact of EITF Topic D-42. Like FFO, the Company considers FAD to be a useful measure for investors to evaluate the operations and cash flows of a REIT. FAD does not represent net income or cash flow from operations as defined by GAAP.