~~Table~~UNITED ~~of Contents~~STATES

~~UNITED STATES~~ SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON~~Washington, D.C. 20549

~~FORM~~ Form 10-Q

x			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the quarterly period ended June 30, 2022
			or
o			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the transition period from to

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Commission~~For ~~File~~the ~~Number~~quarterly ~~1-10709~~period ended September 30, 2022

=OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-10709

PS BUSINESS PARKS, INC.

(Exact ~~name~~Name of ~~registrant~~Registrant as ~~specified~~Specified in ~~its~~Its ~~charter~~Charter)

Maryland			95-4300881
(State or Other Jurisdiction			(I.R.S. Employer
(State or Other Jurisdiction ofIncorporation or Organization)			(I.R.S. EmployerIdentification No.)
of Incorporation)			Identification Number)
345 Park Avenue, New York, New York			10154
(Address of Principal Executive Offices)			(Zip Code)

~~701~~Registrant’s ~~Western~~telephone ~~Avenue~~number, ~~Glendale,~~including ~~California~~area ~~91201~~code: (212) 583-~~2349~~5000

~~(Address of principal executive offices) (Zip Code)~~ N/A

~~Registrant’s~~(Former ~~telephone~~name, ~~number~~former address and former fiscal year, ~~including~~if ~~area~~changed ~~code:~~since ~~(818)~~last ~~244-8080~~report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Ticker Symbol

Name of Each Exchange on Which Registered

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

PSB

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.250% Cum Pref Stock, Series X, $0.01 par value

PSBPrX

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Stock, Series Y, $0.01 par value

PSBPrY

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 4.875% Cum Pref Stock, Series Z, $0.01 par value

PSBPrZ

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

~~Yes~~Indicate xby Nocheck omark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant ~~has~~is ~~submitted~~a ~~electronically~~large ~~every~~accelerated ~~Interactive~~filer, ~~Data~~an ~~File~~accelerated ~~required~~filer, toa benon-accelerated ~~submitted~~filer, ~~pursuant~~smaller toreporting ~~Rule~~company ~~405~~or ofan ~~Regulation~~emerging ~~S-T~~growth ~~(§232~~company.~~405~~ ofSee ~~this~~the ~~chapter)~~definitions ~~during~~of ~~the~~“large ~~preceding~~accelerated 12filer,” ~~months~~“accelerated ~~(or~~filer,” ~~for~~“smaller ~~such~~reporting ~~shorter~~company” ~~period~~and ~~that~~“emerging ~~the~~growth ~~registrant~~company” ~~was~~in ~~required~~Rule 12b-2 toof ~~submit~~the ~~such~~Exchange ~~files)~~Act.

~~Yes~~Large xaccelerated Nofiler oý Non-accelerated filer ¨ Accelerated filer ¨ Smaller reporting company ¨ Emerging growth company ¨

~~Indicate~~If an emerging growth company, indicate by check mark ~~whether~~if the registrant ishas aelected ~~large~~not ~~accelerated~~to ~~filer,~~use anthe ~~accelerated~~extended ~~filer,~~transition aperiod ~~non-accelerated~~for ~~filer,~~complying awith ~~smaller~~any ~~reporting~~new ~~company,~~ or anrevised ~~emerging~~financial ~~growth~~accounting ~~company.~~standards ~~See~~provided ~~definition~~pursuant ofto ~~“large~~Section 13(a) ~~accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2~~ of the Exchange Act. ¨

~~Large~~Indicate ~~accelerated~~by ~~filer~~check ~~Accelerated~~mark ~~filer~~whether ~~Non-accelerated~~the ~~filer~~registrant ~~Smaller~~is ~~reporting~~a shell company ~~Emerging~~(as ~~growth~~defined ~~company~~in xRule 12b-2 oof othe oExchange oAct). Yes ¨ No ý

IfAs anof ~~emerging~~November 7, ~~growth company~~2022, ~~indicate~~the bynumber ~~check~~of ~~mark~~shares ifof the registrant’s ~~has~~common ~~elected~~stock, ~~not~~$0.01 topar ~~use~~value ~~the~~per ~~extended~~share, ~~transition~~outstanding ~~period~~was ~~for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act~~100. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of July 13, 2022, the number of shares of the registrant’s common stock, $0.01 par value per share, outstanding was 27,631,499.

Table of Contents

PS BUSINESS PARKS, INC.

INDEX

			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets as of June 30, 2022 (unaudited) and December 31, 2021			3
Consolidated statements of income (unaudited) for the three and six months ended June 30, 2022 and 2021			4
Consolidated statements of equity (unaudited) for the three and six months ended June 30, 2022 and 2021			5
Consolidated statements of cash flows (unaudited) for the six months ended June 30, 2022 and 2021			7
Notes to consolidated financial statements (unaudited)			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			46
Item 4. Controls and Procedures			46
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			47
Item 1A. Risk Factors			47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			48
Item 6. Exhibits			49

Table of Contents


PART I. FINANCIAL INFORMATION		2

Item 1.	Financial Statements	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	3
	Consolidated Statements of Equity	4
	Consolidated Statements of Cash Flows	7
	Notes to the Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34

PART II. OTHER INFORMATION		34

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41

SIGNATURES		42

Table of Contents

PART I. FINANCIAL INFORMATION

~~ITEM~~Item 1. ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements

PS ~~BUSINESS~~Business ~~PARKS~~Parks, ~~INC~~Inc.

~~CONSOLIDATED~~Consolidated ~~BALANCE~~Balance ~~SHEETS~~Sheets

(~~Amounts in thousands, except share data~~Unaudited)

	June 30,2022		December 31,2021
	(Unaudited)
ASSETS
Cash and cash equivalents	$	173,460	$	27,074
Real estate facilities, at cost
Land	849,942		852,073
Buildings and improvements	2,202,358		2,186,849
	3,052,300		3,038,922
Accumulated depreciation	(1,182,746)		(1,141,727)
	1,869,554		1,897,195
Properties held for sale, net	—		66,914
Land and building held for development, net	112,952		76,575
	1,982,506		2,040,684
Rent receivable	1,571		1,621
Deferred rent receivable	37,525		37,581
Other assets	10,995		16,262
Total assets	$	2,206,057	$	2,123,222
LIABILITIES AND EQUITY
Accrued and other liabilities	$	92,047	$	97,151
Credit facility	—		32,000
Total liabilities	92,047		129,151
Commitments and contingencies
Equity
PS Business Parks, Inc.’s stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 30,200 shares issued and outstanding at June 30, 2022 and December 31, 2021	755,000		755,000
Common stock, $0.01 par value, 100,000,000 shares authorized, 27,631,499 and 27,589,807 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively.	276		275
Paid-in capital	755,873		752,444
Accumulated earnings	318,782		226,737
Total PS Business Parks, Inc.’s stockholders’ equity	1,829,931		1,734,456
Noncontrolling interests	284,079		259,615
Total equity	2,114,010		1,994,071
Total liabilities and equity	$	2,206,057	$	2,123,222

(in thousands - except share data)

See accompanying notes.


	Successor		Predecessor
	September 30, 2022		December 31, 2021
ASSETS
Assets:
Investments in real estate, net	$	5,613,947	$	1,936,338
Assets held for sale	—		33,609

Cash and cash equivalents	112,180		27,074
Restricted cash	634		—
Tenant and other receivables	8,422		39,202

Lease-related intangible assets, net	276,748		71,793

Prepaid expenses and other assets	127,953		15,206
Due from affiliates	9		—
Total assets1	$	6,139,893	$	2,123,222


LIABILITIES AND EQUITY
Liabilities:
Debt, net	$	3,751,039	$	32,000

Accounts payable, accrued expenses and other liabilities	151,342		94,301

Lease-related intangible liabilities, net	162,623		2,779

Due to affiliates	15,837		71
Total liabilities1	4,080,841		129,151
Commitments and contingencies (Note 11)
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 30,325 and 30,200 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	563,526		755,000
Common stock, $0.01 par value, 200,000,000 shares authorized, 100 shares issued and outstanding as of September 30, 2022; 100,000,000 shares authorized, 27,589,807 shares issued and outstanding as of December 31, 2021	—		275
Paid-in capital	2,847,170		752,444
Accumulated earnings (deficit)	(1,365,111)		226,737
Total PS Business Parks, Inc.'s stockholders' equity	2,045,585		1,734,456

Noncontrolling interest	13,467		259,615
Total equity	2,059,052		1,994,071
Total liabilities and equity	$	6,139,893	$	2,123,222

____________________________

¹ See Note 2 — Summary of Significant Accounting Policies for details related to variable interest entities (“VIEs”).

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

PS Business Parks, Inc.

Consolidated Statements of Operations

(Unaudited)

(in thousands – except share data)


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from July 1, 2022 through July 19, 2022		Three Months Ended September 30, 2021		Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Revenue:
Rental revenue	$	77,764	$	22,412	$	110,478	$	246,175	$	328,308

Total revenue	77,764		22,412		110,478		246,175		328,308
Expenses:
Property expenses	17,810		8,135		33,099		74,848		98,198
Depreciation and amortization	100,211		4,626		23,857		50,557		69,356
General and administrative	2,642		2,572		5,155		19,079		14,511
Merger costs	37,266		94,805		—		100,952		—

Total expenses	157,929		110,138		62,111		245,436		182,065



Other income (expense):
Gain on sale of real estate, net	—		38,221		29,924		157,022		49,117
Interest income (expense)	9,933		(59)		(207)		(615)		(478)


Other income	144		89		379		2,044		1,138
Total other income (expense)	10,077		38,251		30,096		158,451		49,777

Income (loss) before income tax	(70,088)		(49,475)		78,463		159,190		196,020
Income tax provision	(25)		—		—		—		—
Net income (loss)	(70,113)		(49,475)		78,463		159,190		196,020

Net (income) loss attributable to noncontrolling interests	157		10,213		(13,850)		(29,224)		(33,355)

Net income (loss) attributable to the Company	(69,956)		(39,262)		64,613		129,966		162,665
Allocation to preferred stockholders	(9,580)		—		(12,046)		(19,160)		(36,139)
Allocation to restricted stock unit holders	—		(13)		(350)		(1,011)		(828)
Net income (loss) attributable to common stockholders	$	(79,536)	$	(39,275)	$	52,217	$	109,795	$	125,698

Earnings (loss) per common share – basic and diluted:
Net income (loss) attributable to common stockholders - basic			$	(1.42)	$	1.90	$	3.98	$	4.57
Net income (loss) attributable to common stockholders - diluted			$	(1.42)	$	1.89	$	3.96	$	4.55
Weighted average common shares outstanding - basic			27,631,499		27,543,274		27,619,484		27,523,225
Weighted average common shares outstanding - diluted			27,631,499		27,634,778		27,708,617		27,622,549

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

~~Table~~PS ofBusiness ~~Contents~~Parks, Inc.

PSConsolidated ~~BUSINESS~~Statements ~~PARKS,~~of ~~INC.~~Equity

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Rental income	$	110,910	$	109,364	$	223,750	$	217,411
Expenses
Cost of operations	32,587		31,849		66,701		65,067
Depreciation and amortization	22,799		22,514		45,931		45,499
General and administrative	11,092		4,799		22,416		9,181
Total operating expenses	66,478		59,162		135,048		119,747
Interest and other income	1,722		923		1,968		1,179
Interest and other expense	(476)		(268)		(806)		(479)
Gain on sale of real estate facilities	61,842		19,193		118,801		19,193
Net income	107,520		70,050		208,665		117,557
Allocation to noncontrolling interests	(20,388)		(12,094)		(39,437)		(19,505)
Net income allocable to PS Business Parks, Inc.	87,132		57,956		169,228		98,052
Allocation to preferred stockholders	(9,580)		(12,047)		(19,160)		(24,093)
Allocation to restricted stock unit holders	(475)		(314)		(998)		(478)
Net income allocable to common stockholders	$	77,077	$	45,595	$	149,070	$	73,481
Net income per share of common stock
Basic	$	2.79	$	1.66	$	5.40	$	2.67
Diluted	$	2.78	$	1.65	$	5.38	$	2.66
Weighted average common stock outstanding
Basic	27,630		27,531		27,618		27,513
Diluted	27,722		27,632		27,707		27,611

(in thousands – except share data)

See accompanying notes.


	Successor
Period from July 20, 2022 through September 30, 2022	Preferred Stock			Common Stock			Paid-in Capital		Accumulated Earnings (Deficit)		Total PS Business Parks, Inc.'s Stockholders' Equity		Noncontrolling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance at July 20, 2022 - pre-merger	—	$	—	—	$	—	$	—	$	—	$	—	$	—	$	—
Total Blackstone purchase and contribution	—	—		—	—		2,847,170		—		2,847,170		—		2,847,170
Redemption of common shares	—	—		(27,631,499)	(276)		(756,431)		(4,279,134)		(5,035,841)		—		(5,035,841)
Application of purchase accounting	30,200	563,026		27,631,499	276		756,431		4,279,134		5,598,867		1,308,704		6,907,571
Distribution of assets	—	—		—	—		—		—		—		(1,295,217)		(1,295,217)
Parent Partners Loans receivable	—	—		—	—		—		(1,285,575)		(1,285,575)		—		(1,285,575)
Balance at July 20, 2022 - post-merger	30,200	563,026		—	—		2,847,170		(1,285,575)		2,124,621		13,487		2,138,108
Issuance of stock, net of costs	125	500		100	—		—		—		500		—		500
Noncontrolling interests - joint venture	—	—		—	—		—		—		—		137		137
Distributions
Preferred stock	—	—		—	—		—		(9,580)		(9,580)		—		(9,580)
Net income (loss)	—	—		—	—		—		(69,956)		(69,956)		(157)		(70,113)
Balance at September 30, 2022	30,325	$	563,526	100	$	—	$	2,847,170	$	(1,365,111)	$	2,045,585	$	13,467	$	2,059,052

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

~~Table~~PS ofBusiness ~~Contents~~Parks, Inc.

PSConsolidated ~~BUSINESS~~Statements ~~PARKS,~~of ~~INC.~~Equity

CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in thousands, except share data)

(Unaudited)

Three Months Ended June 30, 2022	Preferred Stock			Common Stock			Paid-inCapital		AccumulatedEarnings		Total PSBusiness Parks,Inc.’s Stockholders' Equity		NoncontrollingInterests		TotalEquity
	Shares	Amount		Shares	Amount
Balances at March 31, 2022	30,200	$	755,000	27,627,443	$	276	$	754,387	$	270,243	$	1,779,906	$	271,156	$	2,051,062
Issuance of common stock in connection with share-based compensation	—	—		4,056	—		—		—		—		—		—
Stock compensation, net	—	—		—	—		1,873		—		1,873		—		1,873
Cash paid for taxes in lieu of stock upon vesting of restricted stock units	—	—		—	—		(387)		—		(387)		—		(387)
Capital contribution from noncontrolling interests—joint venture	—	—		—	—		—		—		—		227		227
Net income	—	—		—	—		—		87,132		87,132		20,388		107,520
Distributions									—
Preferred stock (Note 9)	—	—		—	—		—		(9,580)		(9,580)		—		(9,580)
Common stock ($1.05 per share)	—	—		—	—		—		(29,013)		(29,013)		—		(29,013)
Noncontrolling interests—
Common units	—	—		—	—		—		—		—		(7,670)		(7,670)
Joint venture	—	—		—	—		—		—		—		(22)		(22)
Balances at June 30, 2022	30,200	$	755,000	27,631.499	$	276	$	755,873	$	318,782	$	1,829,931	$	284,079	$	2,114,010
Three Months Ended June 30, 2021
Balances at March 31, 2021	37,790	$	944,750	27,516,939	$	274	$	736,336	$	72,809	$	1,754,169	$	218,845	$	1,973,014
Issuance of common stock in connection with share-based compensation	—	—		24,525	1		906		—		907		—		907
Stock compensation, net	—	—		—	—		2,099		—		2,099		—		2,099
Cash paid for taxes in lieu of stock upon vesting of restricted stock units	—	—		—	—		(5)		—		(5)		—		(5)
Capital contribution from noncontrolling interests—joint venture	—	—		—	—		—		—		—		128		128
Net income	—	—		—	—		—		57,956		57,956		12,094		70,050
Distributions
Preferred stock (Note 9)	—	—		—	—		—		(12,047)		(12,047)		—		(12,047)
Common stock ($1.05 per share)	—	—		—	—		—		(28,918)		(28,918)		—		(28,918)
Noncontrolling interests—
Common units	—	—		—	—		—		—		—		(7,670)		(7,670)
Joint venture	—	—		—	—		—		—		—		(23)		(23)
Balances at June 30, 2021	37,790	$	944,750	27,541,464	$	275	$	739,336	$	89,800	$	1,774,161	$	223,374	$	1,997,535

(in thousands – except share data)

See accompanying notes.


	Predecessor
Period from July 1, 2022 through July 19, 2022	Preferred Stock			Common Stock			Paid-in Capital		Accumulated Earnings (Deficit)		Total PS Business Parks, Inc.'s Stockholders' Equity		Noncontrolling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2022	30,200	$	755,000	27,631,499	$	276	$	755,873	$	318,782	$	1,829,931	$	284,079	$	2,114,010
Issuance cost	—	—		—	—		176		—		176		—		176

Stock compensation, net	—	—		—	—		382		—		382		—		382

Capital contribution from noncontrolling interests—joint venture	—	—		—	—		—		—		—		79		79
Distributions

Common stock ($5.47 per share)	—	—		—	—		—		(151,056)		(151,056)		—		(151,056)
Noncontrolling interests	—	—		—	—		—		—		—		(39,972)		(39,972)
Net income (loss)	—	—		—	—		—		(39,262)		(39,262)		(10,213)		(49,475)
Balance at July 19, 2022¹	30,200	$	755,000	27,631,499	$	276	$	756,431	$	128,464	$	1,640,171	$	233,973	$	1,874,144



Three Months Ended September 30, 2021	Preferred Stock			Common Stock			Paid-in Capital		Accumulated Earnings (Deficit)		Total PS Business Parks, Inc.'s Stockholders' Equity		Noncontrolling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2021	37,790	$	944,750	27,541,464	$	275	$	739,336	$	89,800	$	1,774,161	$	223,374	$	1,997,535
Issuance of common stock in connection with share-based compensation	—	—		4,689	—		—		—		—		—		—
Stock compensation, net	—	—		—	—		2,174		—		2,174		—		2,174
Cash paid for taxes in lieu of stock upon vesting of restricted stock units	—	—		—	—		(478)		—		(478)		—		(478)
Capital contribution from noncontrolling interests—joint venture	—	—		—	—		—		—		—		236		236
Distributions
Preferred stock	—	—		—	—		—		(12,046)		(12,046)		—		(12,046)
Common stock ($1.05 per share)	—	—		—	—		—		(28,923)		(28,923)		—		(28,923)
Noncontrolling interests	—	—		—	—		—		—		—		(7,691)		(7,691)
Net income (loss)	—	—		—	—		—		64,613		64,613		13,850		78,463
Balance at September 30, 2021	37,790	$	944,750	27,546,153	$	275	$	741,032	$	113,444	$	1,799,501	$	229,769	$	2,029,270

____________________________

¹ This balance was reset as part of purchase accounting. Refer to Note 2 — Summary of Significant Accounting Policies for additional details.

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

~~Table~~PS ofBusiness ~~Contents~~Parks, Inc.

PSConsolidated ~~BUSINESS~~Statements ~~PARKS,~~of ~~INC.~~Equity

CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in thousands, except share data)

(Unaudited)

Six Months Ended June 30, 2022	Preferred Stock			Common Stock			Paid-inCapital		AccumulatedEarnings		Total PSBusiness Parks,Inc.’s Stockholders' Equity		NoncontrollingInterests		TotalEquity
	Shares	Amount		Shares	Amount
Balances at December 31, 2021	30,200	$	755,000	27,589,807	$	275	$	752,444	$	226,737	$	1,734,456	$	259,615	$	1,994,071
Issuance of common stock in connection with share-based compensation	—	—		41,692	1		2,101		—		2,102		—		2,102
Stock compensation, net	—	—		—	—		2,646		—		2,646		—		2,646
Cash paid for taxes in lieu of stock upon vesting of restricted stock units	—	—		—	—		(1,318)		—		(1,318)		—		(1,318)
Capital contribution from noncontrolling interests—joint venture	—	—		—	—		—		—		—		413		413
Net income	—	—		—	—		—		169,228		169,228		39,437		208,665
Distributions	—	—		—	—		—		—		—
Preferred stock (Note 9)	—	—		—	—		—		(19,160)		(19,160)		—		(19,160)
Common stock ($2.10 per share)	—	—		—	—		—		(58,023)		(58,023)		—		(58,023)
Noncontrolling interests—
Common units	—	—		—	—		—		—		—		(15,341)		(15,341)
Joint venture	—	—		—	—		—		—		—		(45)		(45)
Balances at June 30, 2022	30,200	$	755,000	27,631.499	$	276	$	755,873	$	318,782	$	1,829,931	$	284,079	$	2,114,010
Six Months Ended June 30, 2021
Balances at December 31, 2020	37,790	$	944,750	27,488,547	$	274	$	738,022	$	73,631	$	1,756,677	$	218,963	$	1,975,640
Issuance of common stock in connection with share-based compensation	—	—		52,917	1		906		—		907		—		907
Stock compensation, net	—	—		—	—		3,715		—		3,715		—		3,715
Cash paid for taxes in lieu of stock upon vesting of restricted stock units	—	—		—	—		(3,202)		—		(3,202)		—		(3,202)
Capital contribution from noncontrolling interests—joint venture	—	—		—	—		—		—		—		287		287
Issuance costs	—	—		—	—		(105)		—		(105)		—		(105)
Net income	—	—		—	—		—		98,052		98,052		19,505		117,557
Distributions
Preferred stock (Note 9)	—	—		—	—		—		(24,093)		(24,093)		—		(24,093)
Common stock ($2.10 per share)	—	—		—	—		—		(57,790)		(57,790)		—		(57,790)
Noncontrolling interests—
Common units	—	—		—	—		—		—		—		(15,341)		(15,341)
Joint venture	—	—		—	—		—		—		—		(40)		(40)
Balances at June 30, 2021	37,790	$	944,750	27,541,464	$	275	$	739,336	$	89,800	$	1,774,161	$	223,374	$	1,997,535

(in thousands – except share data)

See accompanying notes.


	Predecessor
Period from January 1, 2022 through July 19, 2022	Preferred Stock			Common Stock			Paid-in Capital		Accumulated Earnings (Deficit)		Total PS Business Parks, Inc.'s Stockholders' Equity		Noncontrolling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	30,200	$	755,000	27,589,807	$	275	$	752,444	$	226,737	$	1,734,456	$	259,615	$	1,994,071
Issuance cost	—	—		—	—		176		—		176		—		176
Issuance of common stock in connection with share-based compensation	—	—		41,692	1		2,101		—		2,102		—		2,102
Stock compensation, net	—	—		—	—		3,028		—		3,028		—		3,028
Cash paid for taxes in lieu of stock upon vesting of restricted stock units	—	—		—	—		(1,318)		—		(1,318)		—		(1,318)
Capital contribution from noncontrolling interests—joint venture	—	—		—	—		—		—		—		492		492
Distributions
Preferred stock	—	—		—	—		—		(19,160)		(19,160)		—		(19,160)
Common stock ($7.57 per share)	—	—		—	—		—		(209,079)		(209,079)		—		(209,079)
Noncontrolling interests	—	—		—	—		—		—		—		(55,358)		(55,358)
Net income (loss)	—	—		—	—		—		129,966		129,966		29,224		159,190
Balance at July 19, 2022¹	30,200	$	755,000	27,631,499	$	276	$	756,431	$	128,464	$	1,640,171	$	233,973	$	1,874,144



Nine Months Ended September 30, 2021	Preferred Stock			Common Stock			Paid-in Capital		Accumulated Earnings (Deficit)		Total PS Business Parks, Inc.'s Stockholders' Equity		Noncontrolling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	37,790	$	944,750	27,488,547	$	274	$	738,022	$	73,631	$	1,756,677	$	218,963	$	1,975,640
Issuance of common stock in connection with share-based compensation	—	—		57,606	1		906		—		907		—		907
Stock compensation, net	—	—		—	—		5,889		—		5,889		—		5,889
Cash paid for taxes in lieu of stock upon vesting of restricted stock units	—	—		—	—		(3,680)		—		(3,680)		—		(3,680)
Capital contribution from noncontrolling interests—joint venture	—	—		—	—		—		—		—		523		523
Issuance costs	—	—		—	—		(105)		—		(105)		—		(105)
Distributions
Preferred stock	—	—		—	—		—		(36,139)		(36,139)		—		(36,139)
Common stock ($3.15 per share)	—	—		—	—		—		(86,713)		(86,713)		—		(86,713)
Noncontrolling interests	—	—		—	—		—		—		—		(23,072)		(23,072)
Net income (loss)	—	—		—	—		—		162,665		162,665		33,355		196,020
Balance at September 30, 2021	37,790	$	944,750	27,546,153	$	275	$	741,032	$	113,444	$	1,799,501	$	229,769	$	2,029,270

__________________________

¹ This balance was reset as part of purchase accounting. Refer to Note 2 — Summary of Significant Accounting Policies for additional details.

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

~~Table~~PS ofBusiness ~~Contents~~Parks, Inc.

PSConsolidated ~~BUSINESS~~Statements ~~PARKS,~~of ~~INC.~~Cash Flows

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~(Unaudited)

(~~Unaudited, amounts~~ in thousands)

	Six Months Ended June 30,
	Successor				Predecessor
	2022		2021
	Period from July 20, 2022 through September 30, 2022				Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Cash flows from operating activities
Operating activities:
Net income	$	208,665	$	117,557
Net income (loss)	$	(70,113)			$	159,190	$	196,020
Adjustments to reconcile net income to net cash provided by operating activities
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	45,931		45,499
Depreciation and amortization	100,211				50,557		69,356
Straight-line rent and amortization of lease intangibles, net	(2,171)		(1,490)
Gain on interest rate derivatives	(61,661)				—		—
Gain on sale of real estate facilities	(118,801)		(19,193)
Straight-line rents and amortization of above and below market leases	(11,542)				(2,276)		(1,943)
Stock compensation expense	2,940		4,081
Amortization of deferred financing costs	4,993				488		468
Amortization of financing costs	488		272
Incentive compensation expense	—				3,335		6,422
Other, net	(2,635)		1,381
Gain on sale of real estate, net	—				(157,022)		(49,117)
Total adjustments	(74,248)		30,550
(Increase) decrease in tenant and other receivables, lease right-of-use assets, net, prepaid expenses and other assets, and due from affiliates	4,429				3,020		(3,370)
Net cash provided by operating activities	134,417		148,107
Increase in accounts payable, accrued expenses and other liabilities, lease liabilities, and due to affiliates	12,343				59,096		14,576
Cash flows from investing activities
Net cash provided by (used in) operating activities	(21,340)				116,388		232,412
Capital expenditures to real estate facilities	(19,120)		(15,707)
Investing activities:
Capital expenditures to land and building held for development, net	(34,522)		(18,240)
Acquisitions of real estate	—				—		(122,171)
Proceeds from sale of real estate facilities	189,509		32,622
Proceeds from sales of investments in real estate	—				236,230		76,566
Net cash provided by (used in) investing activities	135,867		(1,325)
Capital expenditures	(15,230)				(57,964)		(57,987)
Cash flows from financing activities
Net cash provided by (used in) investing activities	(15,230)				178,266		(103,592)
Proceeds from borrowing on credit facility	20,000		—
Financing activities:
Repayment of borrowing on credit facility	(52,000)		—
Proceeds from debt	3,756,828				20,000		—
Payment of financing costs	(198)		(157)
Repayments on debt	—				(52,000)		—
Proceeds from the exercise of stock options	2,102		907
Payment of deferred financing costs	(10,782)				(198)		(2,485)
Payment of Issuance costs	—		(105)
Proceeds from issuance of preferred stock	500				—		—
Cash paid for taxes in lieu of stock upon vesting of restricted stock units	(1,318)		(3,202)
Exercise of stock options	—				2,101		907
Cash paid to restricted stock unit holders	(328)		(366)
Payment of issuance costs	—				176		(105)
Capital contribution from noncontrolling interests – joint venture	413		287
Cash paid for taxes in lieu of shares upon vesting of restricted stock units	—				(1,318)		(3,680)
Distributions paid to preferred stockholders	(19,160)		(24,093)
Cash paid to restricted stock unit holders	—				(328)		(545)
Distributions paid to common stockholders	(58,023)		(57,790)
Contributions from noncontrolling interests	137				492		523
Distributions paid to noncontrolling interests—common units	(15,341)		(15,341)
Distributions to noncontrolling interests	—				(55,358)		(23,072)
Distributions paid to noncontrolling interests—joint venture	(45)		(40)
Distribution to preferred stockholders	(9,580)				(19,160)		(36,139)
Net cash used in financing activities	(123,898)		(99,900)
Distribution to common stockholders	—				(209,079)		(86,713)
Net increase in cash and cash equivalents	146,386		46,882
Blackstone contribution	2,847,170				—		—
Cash, cash equivalents and restricted cash at the beginning of the period	28,162		70,171
Redemption of common shares and related costs	(5,141,856)				—		—
Cash, cash equivalents and restricted cash at the end of the period	$	174,548	$	117,053
Parent Partners Loans	(1,285,575)				—		—
Supplemental disclosures
Derivative premium paid	(32,758)				—		—
Interest Paid	$	71	$	—
Derivative premium received	25,300				—		—
Supplemental schedule of non-cash investing and financing activities
Net cash provided by (used in) financing activities	149,384				(314,672)		(151,309)
Accrued capital expenditures to land and building held for development
Net increase (decrease) in Cash and cash equivalents and restricted cash	112,814				(20,018)		(22,489)
Land and building held for development, net	$	7,307	$	4,642
Cash and cash equivalents and restricted cash - beginning of period	—				27,074		69,083
Accrued and other liabilities	$	(7,307)	$	(4,642)
Cash and cash equivalents and restricted cash - end of period	$	112,814			$	7,056	$	46,594

~~See accompanying notes.~~____________________________

See Note 12 — Supplemental Cash Flow Disclosures for information on noncash investing and financing activities and other information.

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

Table of Contents

PS ~~BUSINESS~~Business ~~PARKS~~Parks, ~~INC~~Inc.

~~NOTES~~Notes TOto ~~CONSOLIDATED~~the ~~FINANCIAL~~Consolidated ~~STATEMENTS~~Financial Statements

~~June 30, 2022~~(Unaudited)

1.(dollars ~~Organization~~in ~~and~~thousands, ~~description~~except ofshare ~~business~~data)

Note 1. Description of Business

Organization

PS Business Parks, Inc. (“PSB” or the “Company”), a Maryland corporation, was organized in 1990. Effective May 19, 2021, following approval by its common and preferred stockholders, PSB reincorporated from the state of California to the state of Maryland. As of June 30, 2022, PSB owned 79.1% of the common partnership units of PS Business Parks, L.P. (the “OP”). The remaining common partnership units are owned by Public Storage (“PS”). PS’s interest in the OP is referred to as the “PS OP Interests.” PSB, as the sole general partner of the OP, has full, exclusive and complete responsibility and discretion in managing and controlling the OP. PSB and its subsidiaries, including the OP and its consolidated joint ventures, are collectively referred to as the “Company,” “we,” “us,” or “our.” PS also owns 7.2 million shares of common stock and would own 41.4% (or 14.5 million shares) of the outstanding shares of the Company’s common stock if it redeemed its common partnership units for shares of common stock.

~~Refer~~On July 20, 2022 (the “Acquisition Date”), pursuant to ~~Note~~the 12terms ~~for~~and ~~information~~subject ~~regarding~~to the conditions set forth in an Agreement and Plan of Merger, dated as of April 24, 2022 (the “Merger Agreement”), a merger (~~defined~~the ~~below~~“Merger”) was completed between PSB and a direct subsidiary of Sequoia Parent LP, a Delaware limited partnership (“Parent”), with the Company ~~entered~~surviving. ~~into~~As ona ~~April~~result 24of the Merger, ~~2022~~the Company became a subsidiary of Parent and certain of its affiliates, and PS Business Parks, L.P (the “Partnership”) remained a subsidiary of the Company. The Parent is an affiliate of Blackstone Real Estate Partners IX, L.P., which is an affiliate of Blackstone Inc. (“Blackstone”). The common stock of the Company is wholly owned by the Parent and certain of its affiliates and is not publicly traded. The depositary shares representing the preferred stock of the Company are publicly traded. Refer to Note 2 for additional information on basis of presentation.

PSB and its subsidiaries, including the Partnership and its consolidated joint ventures, are collectively referred to as the “Company,” “we,” “us,” or “our.”

Public Storage Operating Partnership Interests

Pursuant to the terms and conditions of the Merger Agreement, upon the Closing each partnership unit of the Partnership (a “Partnership Unit”) that was issued and outstanding prior to the effective time of the Merger (the “Partnership Merger Effective Time”) (other than units held by the Company, Parent, or any of their respective wholly owned subsidiaries) was automatically cancelled and converted into the right to receive an amount in cash equal to $182.25 (the “Per Company Share Merger Consideration”), less any applicable withholding taxes, which represented $187.50 per share of Common Stock as reduced by a $5.25 per share cash dividend paid in connection with the Closing (the “Closing Cash Dividend”) in accordance with the terms of the Merger Agreement. At the Partnership Merger Effective Time, each Partnership Unit owned by the Company or any of its subsidiaries immediately prior to the Partnership Merger Effective Time remained outstanding as a Partnership Unit of the Partnership held by the Company or the relevant subsidiary.

As a result of the completion of the Merger, an aggregate of approximately 21% of the Partnership’s issued and outstanding limited partnership interests were directly owned by Parent and certain of its affiliates (other than the Company) (the “Parent Partners”). Pursuant to a Distribution and Contribution Agreement, immediately following the completion of the Merger, the Partnership redeemed all of such limited partnership units in exchange for the distribution (the “Redemption and Distribution”) to the Parent Partners of certain subsidiaries of the Partnership which held assets comprised of 58 properties located in California, Washington and Virginia (the “Non-Core Portfolio”). As a result of the Redemption and Distribution, the Company (directly or indirectly) owns 100% of the Partnership. Total consideration for the exchange was $1,295,217, which represents the fair values as determined between us and our Parent Partners, a related party, on the transaction date. No gain or loss was recognized in connection with this transaction. We accounted for this transaction as a non-cash equity distribution in the Consolidated Financial Statements.

Description of business

The Company is a ~~fully-integrated, self-advised and self-managed~~ real estate investment trust (“REIT”) that owns, operates, acquires and develops commercial properties, primarily multi-tenant industrial, industrial-flex and low-rise suburban office space. As of ~~June~~September 30, 2022 and December 31, 2021, the Company owned ~~and~~471 ~~operated~~buildings ~~26.6 million rentable square feet of commercial space~~ in six states, ~~comprising~~with ~~93 parks and 636 buildings. The Company also held a 95.0% interest in a joint venture entity which owns Highgate at The Mile~~20,659,564 arentable ~~395-~~square ~~unit~~feet ~~multifamily apartment complex located in Tysons, Virginia,~~ and a666 ~~98.2%~~buildings ~~interest~~ in asix ~~joint~~states ~~venture~~with ~~formed to develop Brentford at The Mile~~27, ~~a planned 411- unit multifamily apartment complex also located in Tysons~~716,719 ~~Virginia. The Company also manages for a fee approximately 0.3 million~~ rentable square feet, ~~on behalf of PS~~respectively.

References herein to the number of properties, parks, apartment units or square footage are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Pending acquisition by affiliates of Blackstone Inc.

As previously announced, on April 24, 2022, the Company and the OP entered into an agreement and plan of merger (the “Merger Agreement”) with certain affiliates of Blackstone Inc. (“Blackstone”) pursuant to which, subject to the terms and conditions set forth therein, the outstanding shares of common stock of the Company will be acquired for $187.50 per share in an all-cash transaction. Each share of the Company’s outstanding preferred stock (and each depositary share representing an interest therein) will remain outstanding in accordance with their respective terms. The transaction was approved by the Company’s common stockholders at a special meeting on July 15, 2022 and is expected to close on or around July 20, 2022, after the conditions to closing are satisfied or waived. Refer to Note 12 for information regarding the Merger Agreement.

2. Summary of significant accounting policies

Basis of presentation

The accompanying unaudited consolidated financial statements include the accounts of PSB and its subsidiaries, including the OP and its consolidated joint ventures. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements. The financial statements are presented on an accrual basis in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ended December 31,

Table of Contents

~~2022~~Note 2. ~~For~~Summary ~~further~~of ~~information,~~Significant ~~refer~~Accounting ~~to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.~~Policies

~~Consolidation~~Basis ~~and equity method~~ of ~~accounting~~Presentation

WeThe ~~consider~~accompanying ~~entities~~unaudited toConsolidated beFinancial ~~Variable~~Statements ~~Interest Entities (“VIEs”) when they~~ have ~~insufficient~~been ~~equity~~prepared toin ~~finance~~conformity ~~their~~with ~~activities~~U.S. ~~without~~generally ~~additional~~accepted ~~subordinated~~accounting ~~financial~~principles ~~support~~(“GAAP”) ~~provided by other parties, or the equity holders~~ as aestablished ~~group~~by ~~do not have a controlling financial interest. A limited partnership is also generally considered a VIE if~~ the ~~limited~~Financial ~~partners~~Accounting doStandards ~~not~~Board ~~participate~~(“FASB”) inincluding ~~operating~~modifications ~~decisions.~~issued Weunder ~~consolidate~~Accounting ~~VIEs~~Standards ~~when~~Updates ~~we are the primary beneficiary, generally defined as having~~ (i“ASUs”). ~~the~~In ~~power to direct~~ the ~~activities~~opinion ~~most~~of ~~significantly~~management, ~~impacting~~all ~~economic~~adjustments ~~performance and~~ (~~ii)~~consisting ~~either~~of ~~the~~normal ~~obligation~~and torecurring ~~absorb~~adjustments) ~~losses~~necessary orfor ~~the~~a ~~right~~fair topresentation ~~receive~~have ~~benefits~~been ~~from the VIE~~included.

WeThe ~~account~~Merger was accounted for ~~investments~~as ina ~~entities~~business ~~that~~combination ~~are~~because substantially all of the fair value of the gross assets acquired was not ~~VIEs~~concentrated ~~that~~in wea ~~have~~single ~~significant~~identifiable ~~influence~~asset ~~over~~or group of similar identifiable assets. The Parent elected to apply pushdown accounting. Accordingly, ~~but~~the dopurchase ~~not~~price ~~control~~of the Merger has been allocated to the Company’s assets and liabilities based upon their estimated fair values at the Acquisition Date in accordance with Accounting Standards Codification (“ASC”) 805, ~~using~~Business Combinations. Costs related to the ~~equity~~Merger ~~method~~have been expensed as incurred and classified within Merger costs in the Consolidated Statements of ~~accounting~~Operations, totaling $37,266, $94,805, and $100,952 for ~~investment~~the inperiod ~~entities~~from ~~that~~July we20, ~~control~~2022 through September 30, we2022, ~~consolidate.~~the Weperiod dofrom ~~not~~July ~~consider~~1, 2022 through July 19, 2022, and the ~~joint~~period ~~venture~~from ~~entity~~January ~~that~~1, ~~owns~~2022 ~~Highgate~~through atJuly 19, 2022, respectively. The ~~Mile~~Company engaged a ~~VIE~~third-party valuation firm to assist in determination of the fair values of tangible and intangible assets acquired. As used herein, ~~but~~the weterm ~~consolidate~~“Predecessor” refers to the ~~entity~~financial asposition and results of operations of the Company ~~has~~prior ~~control~~to ~~over~~ the ~~joint~~Acquisition ~~venture~~Date. ~~See~~The ~~Note~~term 3“Successor” ~~for~~refers ~~more~~to ~~information~~the ~~relating~~financial toposition ~~this~~and ~~joint~~results ~~venture~~of ~~arrangement~~operations of the Company on or after the Acquisition Date.

WeUpon ~~have~~acquisition of a ~~98.2%~~rental ~~interest~~property inthat ~~Brentford~~is ataccounted ~~The~~for ~~Mile,~~as a ~~planned~~business ~~411-~~combination, ~~unit~~the ~~multifamily~~Company ~~apartment~~allocates ~~complex (~~the ~~“Brentford~~purchase ~~Joint~~price, ~~Venture”).~~of Aneach ~~unrelated~~acquired ~~real~~property ~~estate~~based ~~development~~upon ~~company (~~the ~~“JV~~fair ~~Partner”)~~value ~~holds the remaining 1.8% interest. Based on management’s analysis~~ of the ~~joint~~individual ~~venture~~assets acquired and ~~certain~~liabilities ~~related agreements~~assumed, wewhich ~~determined~~generally ~~Brentford~~include ~~Joint~~tangible ~~Venture~~assets, isconsisting aof ~~VIE~~land, ~~because~~building, ~~(a)~~building ~~Brentford~~improvements, ~~Joint~~tenant ~~Venture~~improvements, ~~does~~and ~~not~~identified ~~have~~intangible ~~sufficient~~assets ~~equity~~and atliabilities, ~~risk~~generally toconsisting ~~finance~~of ~~its~~above-and ~~activities~~below-market ~~without~~leases, ~~additional~~in-place ~~subordinated financial support from other parties~~leases, and ~~(b)~~origination ~~there~~costs ~~are~~associated nowith ~~substantive kick~~in-~~out~~place ~~rights~~leases. WeIn ~~have~~estimating ~~also~~the ~~concluded~~fair wevalue ~~have~~of ~~control~~tangible ~~over~~and ~~the~~intangible ~~Brentford~~assets ~~Joint~~and ~~Venture~~liabilities asacquired, wethe ~~(i)~~Company ~~are~~considers ~~the~~information ~~managing~~obtained ~~member~~about of the ~~Brentford~~property ~~Joint~~during ~~Venture,~~its ~~(ii)~~due ~~have~~diligence ~~designated~~and ~~decision~~marketing ~~making~~and ~~power~~leasing ~~to direct the~~ activities, ~~that~~and ~~most~~utilizes ~~significantly~~appropriate ~~affect~~discount ~~the~~and ~~economic~~capitalization ~~performance~~rates, estimates of ~~the~~replacement ~~Brentford~~costs ~~Joint~~net ~~Venture~~of depreciation, and ~~(iii)~~available ~~have~~market ~~a 98~~information.2% ~~economic~~The ~~interest~~values inof ~~the~~above-and ~~investment.~~below-market ~~Thus,~~leases weare ~~determined~~recorded ~~that~~to weLease-related ~~are~~intangible ~~the~~assets, ~~primary~~net ~~beneficiary~~and ofLease-related ~~Brentford~~intangible ~~Joint~~liabilities, ~~Venture.~~net, ~~As such~~respectively, wein ~~consolidate~~ the ~~Brentford~~Consolidated ~~Joint~~Balance ~~Venture,~~Sheets and ~~the~~are ~~related~~amortized ~~land~~as ~~and~~either ~~development~~a ~~costs~~decrease of(in ~~$77.2~~the ~~million~~case ~~and~~of ~~$59.9~~above-market ~~million~~leases) ~~were~~or ~~included~~an increase (in ~~land~~the ~~and~~case ~~building~~of ~~held~~below-market ~~for~~leases) ~~development,~~to ~~net~~rental onrevenue ~~our~~over ~~consolidated~~the ~~balance~~remaining ~~sheets~~term as of ~~June 30,~~the ~~2022~~associated ~~and~~tenant ~~December 31, 2021, respectively~~lease. The ~~assets~~values ofassociated ~~the~~with ~~Brentford~~in-place ~~Joint~~leases ~~Venture~~are ~~may~~recorded ~~only~~in beLease-related ~~used~~intangible toassets, ~~settle~~net ~~obligations~~in of the ~~Brentford~~Consolidated ~~Joint~~Balance ~~Venture~~Sheets and ~~the~~are ~~creditors~~amortized ofto ~~the~~depreciation ~~Brentford~~and ~~Joint~~amortization ~~Venture~~expense ~~have~~over ~~no recourse to~~ the ~~general~~remaining ~~credit~~lease ~~of the Company~~term. ~~See Note 4 for more information relating to this joint venture arrangement.~~

~~PS,~~In ~~the sole limited partner in the OP~~a business combination, ~~has no power to direct~~ the ~~activities~~initial allocation of the ~~OP.~~purchase ~~PSB~~price is ~~the~~considered ~~primary~~preliminary ~~beneficiary~~ and ~~has~~may ~~control~~change ~~over~~upon ~~the~~final OPdetermination asof ~~it has~~ the ~~exclusive~~fair ~~responsibility~~values ~~under~~of the ~~Operating~~assets ~~Partnership~~acquired ~~Agreement to manage~~ and ~~conduct~~liabilities ~~the business of the OP~~assumed. ~~Accordingly,~~The wefinal ~~consider~~determination ~~the~~must OPoccur awithin ~~VIE~~one ~~and~~year ~~consolidate it. Substantially all~~ of ~~our assets and liabilities are held by~~ the ~~OP.~~acquisition date.

~~Noncontrolling~~The ~~interests~~Company performs the following procedures for properties it acquires:

~~Noncontrolling~~•Estimate ~~interests represent (i) PS’s noncontrolling interest in~~ the OPvalue ~~through its ownership~~ of ~~7,305,355 common partnership units, (ii)~~ the JVproperty ~~Partner’s~~“as ~~5.0%~~if ~~interest~~vacant” inas ~~our~~of ~~consolidated joint venture that owns Highgate at The Mile, and (iii)~~ the JVacquisition ~~Partner’s 1.8% interest in our consolidated joint venture formed to develop Brentford at The Mile. See Note 7 for further information on noncontrolling interests.~~date;

~~Use~~•Calculate the value and associated life of ~~estimates~~above and below market leases on a tenant-by-tenant basis. The difference between the contractual rental rates and the Company’s estimate of market rental rates is measured over a period equal to the remaining term of the leases (using a discount rate which reflects the risks associated with the leases acquired);

~~The~~•Estimate ~~preparation of~~ the ~~consolidated~~fair ~~financial~~value ~~statements~~of inland ~~conformity~~acquired ~~with~~based ~~GAAP~~upon ~~requires~~relevant ~~management~~adjusted toland ~~make~~sales ~~estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates.~~comparable;

~~Financial~~•Estimate ~~instruments~~the fair value of the tenant improvements, legal expenses and leasing commissions incurred to obtain the leases and calculate the associated useful life for each;

~~The~~•Estimate ~~methods and assumptions used to estimate~~ the ~~fair~~intangible value of ~~financial instruments are described below. The Company has estimated~~ the ~~fair value of financial instruments using available market information and appropriate valuation methodologies. Considerable judgment is required~~ in-place ~~interpreting~~leases market data to develop estimates of market value. Accordingly, estimated fair values are not necessarily indicative of the amounts that could be realized in current market exchanges. The Company determines the estimated fair value of financial assets and ~~liabilities~~their ~~utilizing~~associated auseful ~~hierarchy~~lives ~~of valuation techniques based~~ on ~~whether the inputs to~~ a ~~fair~~tenant-by-tenant ~~value measurement are considered to be observable or~~ basis;

•Estimate the carrying values of other assets and liabilities approximate fair value due to their short term nature and credit risk;

•Identify the fair value of assets to be sold within one year, and

•Allocate the purchase consideration of each acquired property based upon the fair value of the individual assets acquired and liabilities assumed.

Table of Contents

~~unobservable~~The infollowing atable ~~marketplace.~~is ~~Observable~~a ~~inputs~~summary ~~reflect~~of ~~market~~the ~~data~~fair ~~obtained~~value ~~from~~of ~~independent~~assets ~~sources,~~acquired ~~while~~less ~~unobservable~~liabilities ~~inputs~~assumed ~~reflect~~of ~~market assumptions. This hierarchy requires~~ the ~~use~~Company ofrecognized ~~observable~~in ~~market~~connection ~~data~~with ~~when~~the ~~available.~~ Merger:

The following is the fair value hierarchy:


	July 20, 2022
Building	$	3,339,161
Site improvements	177,159

Land	1,921,093
Tenant improvements	71,805
Development in progress	150,977
In-place lease intangibles	242,551
Above market lease assets	7,888
Below market lease liabilities	(172,109)
Other assets1	144,523


Acquired noncontrolling interest at fair value	(13,481)
Acquired preferred shares at fair value	(563,026)
Net assets acquired	$	5,306,541

Funded by:
Total Blackstone contribution, net of parent partner loan distributed	(1,561,595)
Debt issued	(3,744,946)


Total consideration and merger contributions	$	(5,306,541)

____________________________

~~•Level~~¹ ~~1—quoted~~Includes ~~prices~~$143,111 ~~for~~of ~~identical~~working ~~instruments~~capital incontributed ~~active~~by ~~markets;~~our Parent.

•Level 2—quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and Reclassifications

~~•Level~~As ~~3—fair~~a ~~value~~result ~~measurements~~of ~~derived~~the ~~from~~Merger ~~valuation~~discussed ~~techniques~~in Note 1 and the election to apply pushdown accounting, the Company also aligned its accounting policies with that of the Parent. Accordingly, certain prior year amounts in ~~which~~the ~~one~~consolidated orfinancial ~~more~~statements ~~significant~~have ~~inputs~~been orreclassified ~~significant~~to ~~value~~conform ~~drivers~~to ~~are~~the ~~unobservable~~current year presentation. As of December 31, 2021, the reclassifications represent changes to aggregation and presentation of financial information and resulted in zero change to total assets and zero change to total liabilities. For the three and nine months ended September 30, 2021, it resulted in $30 and $449 changes to total revenue, $15 and $222 changes in total expenses, and $15 and $227 changes in total other income (expense), respectively. There was no change to net income as historically reported.

~~Financial~~Principles ~~assets that are exposed to credit risk consist primarily~~ of cash equivalents and receivables. The Company considers all highly liquid investments with a remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents, which consist primarily of money market investments, are only invested in entities with an investment grade rating. Receivables are balances due from various customers. Balances that the Company expects to become uncollectible are written off. Due to the short period to maturity of the Company’s cash and cash equivalents, accounts receivable, other assets and accrued and other liabilities, the carrying values as presented on the consolidated balance sheets are reasonable estimates of fair value.Consolidation

~~Carrying~~The ~~values~~Company’s policy is to consolidate all entities in which it owns more than 50% of the outstanding voting interest unless it does not control the entity. It is also the Company’s ~~Credit~~policy ~~Facility~~to consolidate any variable interest entity (“VIE”) for which the Company is the primary beneficiary, as defined inby ~~Note~~GAAP. 6The Company is deemed to be the primary beneficiary when it has (i) ~~approximate~~the ~~fair~~power ~~value.~~to ~~The~~direct ~~characteristics~~the ofactivities that most significantly impact the ~~Credit~~economic ~~Facility,~~performance ~~market~~of ~~data~~the entity, and ~~other~~(ii) ~~comparative~~the ~~metrics~~obligation ~~utilized~~(or inright) ~~determining~~to ~~these~~absorb ~~fair~~losses ~~values~~(or ~~are~~receive ~~“Level~~benefits) 2”of ~~inputs~~the entity that could potentially be significant.

~~The~~Investments ~~following~~in ~~table~~entities ~~provides~~in awhich ~~reconciliation~~the ofCompany ~~cash,~~does ~~cash~~not ~~equivalents~~control but which it has the ability to exercise significant influence over operating and ~~restricted~~financial ~~cash~~policies ~~per~~are presented under the ~~consolidated~~equity ~~statements~~method. Investments in entities that the Company does not control and over which it does not exercise significant influence are carried at the lower of ~~cash~~cost ~~flow~~or fair value, as appropriate. The Company’s ability to ~~the~~correctly ~~corresponding~~assess ~~financial~~control ~~statement~~over ~~line~~an ~~items~~entity affects the presentation of these investments in the Consolidated Financial Statements. The portions of consolidated ~~balance~~entities ~~sheets~~not ~~(in~~owned ~~thousands):~~by the Company are presented as noncontrolling interests as of and during the periods presented. All intercompany transactions and balances have been eliminated.

	December 31,
	2021		2020
Consolidated balance sheets
Cash and cash equivalents	$	27,074	$	69,083
Restricted cash included in Land and building held for development, net	1,088		1,088
Cash and cash equivalents and restricted cash at the end of the period	$	28,162	$	70,171

	June 30,
	2022		2021
Consolidated balance sheets
Cash and cash equivalents	$	173,460	$	115,965
Restricted cash included in Land and building held for development, net	1,088		1,088
Cash and cash equivalents and restricted cash at the end of the period	$	174,548	$	117,053

Intangible assets/liabilities

When we acquire real estate facilities, an intangible asset is recorded in other assets for leases where the in-place rent is higher than market rents, and an intangible liability is recorded in other liabilities where the market rents are higher than the in-place rents. The amounts recorded are based upon the present value (using a discount rate which reflects the risks associated with the leases acquired) of such differences over the lease term and such amounts are amortized to rental income over the respective remaining lease term. As of June 30, 2022, the value of above-market in-place rents resulted in net intangible assets of $0.5 million, net of $11.8 million of accumulated amortization, and the value of below-market in-place rents resulted in net intangible liabilities of $2.2 million, net of $13.4 million of accumulated amortization. As of December 31, 2021, the value of above-market in-place rents resulted in net intangible assets of $0.6 million, net of $11.6 million of accumulated amortization, and the value of below-market in-place rents resulted in net intangible liabilities of $2.8 million, net of $13.1 million of accumulated amortization.

Table of Contents

~~Additionally,~~Use ~~when we acquire real estate facilities, the value~~ of in-place lease intangible (i.e., customer lease-up costs) is recorded in other assets and is amortized to depreciation and amortization expense over the respective remaining lease term. As of June 30, 2022, the value of acquired in-place lease intangible resulted in net intangible assets of $4.5 million, net of $12.0 million of accumulated amortization. As of December 31, 2021, the value of acquired in-place leases resulted in net intangible assets of $6.0 million, net of $10.5 million of accumulated amortization. Estimates

AsThe preparation of ~~June 30,~~the ~~2022,~~Consolidated ~~the~~Financial ~~value~~Statements ofin ~~our~~conformity ~~right-of-use~~with ~~(“ROU”)~~GAAP ~~assets~~requires ~~relating~~management to ~~our~~make ~~existing~~estimates ~~ground~~and ~~lease~~assumptions ~~arrangements,~~that ~~included~~affect inthe ~~“other~~reported ~~assets”~~amounts onof ~~our~~assets ~~consolidated~~and ~~balance~~liabilities ~~sheets~~ and the ~~corresponding~~disclosure ~~liability~~of ~~included~~contingent ~~under~~assets ~~“accrued~~ and ~~other~~ liabilities,” ~~was~~at ~~$1.3~~the ~~million,~~date ~~net~~ of ~~$0.4~~the ~~million~~Consolidated ofFinancial ~~accumulated~~Statements ~~amortization.~~and ~~As of December 31, 2021,~~ the ~~value~~reported amounts of ~~our~~revenue ~~ROU assets~~ and ~~related~~expenses ~~liability~~during ~~relating~~the toreporting ~~our~~period. ~~ground~~Significant ~~lease~~estimates, ~~arrangements~~judgments ~~was~~and ~~$1.3~~assumptions ~~million,~~are ~~net~~required ofin ~~$0.3~~a ~~million~~number of ~~accumulated~~areas, ~~amortization.~~including, ~~The~~but ~~ground~~not ~~leases~~limited ~~expire~~to, inevaluating ~~2029~~the ~~and~~impairment ~~2030~~of ~~and~~long-lived doassets ~~not~~and ~~have~~investments, ~~options~~allocating tothe ~~extend.~~purchase Asprice of ~~June 30,~~acquired ~~2022~~properties, determining the ~~remaining~~fair ~~lease~~value ~~terms~~of ~~were~~debt ~~7.3 years~~ and ~~7.6~~incentive ~~years~~compensation. ~~Lease~~These ~~expense~~estimates, ~~for~~judgments ~~these~~and ~~ground~~assumptions ~~leases~~are isbased ~~recognized~~on inhistorical ~~the~~experience ~~period~~and ~~the~~various ~~applicable~~other ~~costs~~factors ~~are~~that ~~incurred, and~~ the ~~monthly~~Company ~~lease~~believes ~~amount~~to ~~for~~be ~~these~~reasonable ~~operating~~under ~~leases~~the iscircumstances. ~~constant~~Actual ~~and~~results ~~without~~may ~~contractual~~differ ~~increases~~from ~~throughout~~those ~~the remaining terms~~estimates.

~~Real~~Investments ~~estate~~in ~~facilities~~Real Estate

~~Real estate facilities are recorded at cost.~~ Property ~~taxes,~~and ~~insurance~~improvements, including interest, and other costs ~~essential to the development of property for its intended use are~~ capitalized during ~~the~~construction ~~period~~and of development., ~~Direct~~are ~~costs~~included ~~related~~in toInvestments ~~the~~in ~~renovation~~real orestate, ~~improvement~~net ~~of the properties are capitalized. Expenditures for repairs~~ and ~~maintenance~~ are ~~expensed~~stated asat ~~incurred~~cost. ~~Expenditures~~Property ~~that~~and ~~are~~improvements, ~~expected~~excluding toland, ~~provide benefit for a period greater than two years~~ are ~~capitalized and~~ depreciated over their estimated useful ~~life.~~lives ~~Buildings and improvements are depreciated~~ using the straight-line method. ~~over~~The ~~their~~ estimated useful lives, ~~which~~by ~~generally~~asset ~~range~~category ~~from five to 30 years. Transaction costs, which include tenant improvements and lease commissions, for leases with terms greater than one year~~ are ~~capitalized~~as ~~and depreciated over the corresponding lease term.~~follows:

Property held for development


			Estimated useful life
Buildings			10-40 years
Building equipment and fixtures			5-10 years
Land and building improvements			10-15 years
Tenant improvements			Shorter of the asset's useful life or the noncancelable term of lease

~~Property~~Expenditures ~~is classified as held~~ for ~~development~~ordinary ~~when~~repairs itand ismaintenance noare ~~longer~~expensed ~~used~~as inincurred. ~~its~~Renovations ~~original form~~ and itimprovements, ~~will~~which beimprove ~~developed~~or toextend anthe ~~alternate~~useful ~~use.~~life ~~Property~~of ~~held~~the ~~for~~assets, ~~development~~are ~~is not depreciated~~capitalized.

~~Property~~Capitalization ~~held~~of ~~for sale~~Costs

~~Property~~During ~~is classified as held for sale when all of~~ the ~~following~~land ~~criteria~~development ~~for~~and aconstruction ~~plan~~periods of ~~sale~~qualifying ~~have been met: (i) management~~projects, ~~having~~ the ~~authority~~Company tocapitalizes ~~approve~~interest ~~the~~costs, ~~action~~insurance, ~~commits~~real toestate ataxes ~~plan~~and togeneral ~~sell~~and ~~the~~administrative ~~property;~~costs ~~(ii)~~of the ~~property~~personnel isperforming ~~available~~the ~~for immediate sale in its present condition~~development, ~~subject~~renovation ~~only~~and torehabilitation ~~terms~~if ~~that~~such costs are ~~usual~~incremental and ~~customary;~~identifiable ~~(iii)~~to ana ~~active~~specific ~~program~~activity to ~~locate~~ready athe ~~buyer~~asset ~~and~~for ~~other~~its ~~actions~~intended ~~required~~use. toThe ~~complete~~Company ~~the~~capitalizes ~~plan~~transaction costs related to ~~sell~~the ~~have~~acquisition ~~been~~of ~~initiated;~~land ~~(iv)~~for ~~the~~future ~~sale~~development ofand ~~the~~operating ~~property~~properties isthat ~~probable~~qualify ~~and~~as isasset ~~expected~~acquisitions. toThe beCompany ~~completed~~capitalizes ~~within~~incremental ~~one~~costs ~~year;~~incurred ~~(v)~~to ~~the~~successfully ~~property~~originate isa ~~being~~lease ~~actively~~that ~~marketed~~result ~~for~~directly ~~sale~~from atobtaining a ~~price~~lease ~~that~~and iswould ~~reasonable~~also innot ~~relation~~have tobeen ~~its~~incurred ~~current~~if ~~fair~~the ~~value;~~lease ~~and~~had ~~(vi)~~not ~~actions~~been ~~necessary~~obtained. toIn ~~complete~~assessing the ~~plan~~amount of ~~sale~~direct ~~indicate~~and ~~that~~indirect itcosts isto ~~unlikely~~be ~~that~~capitalized, ~~significant~~allocations ~~changes~~are tomade ~~the~~based ~~plan~~on ~~will~~estimates beof ~~made~~the oractual ~~that~~amount ~~the~~of ~~plan~~time ~~will~~spent bein ~~withdrawn~~each activity. ~~Depreciation~~The ofCompany ~~assets~~does ~~ceases~~not ~~upon~~capitalize ~~designation~~any ofcosts aattributable ~~property~~to asdowntime ~~held~~or ~~for~~to ~~sale~~unsuccessful projects.

IfLeasing ~~the~~costs ~~disposal of a property represents a strategic shift~~ that ~~has~~meet ~~(or~~the ~~will~~requirements ~~have)~~for acapitalization ~~major~~are ~~effect~~presented ~~on our operations or financial results, such~~ as ~~(i)~~ a ~~major~~component ~~line~~ of ~~business,~~Lease-related ~~(ii)~~intangible ~~a major geographic area~~assets, ~~(iii)~~net ain ~~major equity method investment, or (iv) other major parts of an entity, then~~ the ~~operations~~Consolidated ofBalance ~~the~~Sheets ~~property, including any interest expense directly attributable to it, are classified as discontinued operations in our consolidated statements of operations,~~ and ~~amounts for~~ all ~~prior~~other ~~periods~~capitalized ~~presented~~costs are ~~reclassified~~included ~~from~~in ~~continuing~~the ~~operations~~investment tobasis ~~discontinued operations. The disposal~~ of ~~an individual property generally will not represent a strategic shift and therefore will typically not meet~~ the ~~criteria~~real ~~for~~estate ~~classification as a discontinued operation~~assets.

~~Sales~~Acquisition of ~~real~~Real ~~estate facilities~~ Estate

~~Sales~~In ofaccordance ~~real~~with ~~estate~~the ~~facilities~~guidance ~~are~~for ~~not~~business ~~part~~combinations, ofthe ~~our~~Company ~~ordinary~~determines ~~activities,~~whether ~~and~~a astransaction or other event is a ~~result~~business combination, wewhich ~~consider~~requires ~~such~~that ~~sales~~the asassets ~~contracts~~acquired ~~with~~and ~~non-customers~~liabilities assumed constitute a business. WeIf ~~recognize~~the ~~sales~~assets ofacquired ~~real~~are ~~estate~~not ~~when~~a webusiness, ~~have~~the ~~collected~~Company ~~payment~~would ~~and~~account for the ~~attributes~~transaction ofor ~~ownership,~~other ~~such~~event as ~~possession~~an ~~and~~asset ~~control~~acquisition. The Company’s acquisitions of ~~the~~investment properties are accounted for as asset acquisitions, ~~have~~as ~~been~~substantially ~~transferred~~all toof the ~~buyer.~~fair Ifvalue aof ~~contract~~the ~~for~~gross ~~sale~~assets ~~includes~~acquired ~~obligations~~is totypically ~~provide~~concentrated ~~goods~~in ora ~~services~~single toidentifiable ~~the~~asset ~~buyer,~~or ana ~~allocated~~group ~~portion~~ of ~~the~~similar ~~contract~~identifiable ~~price~~assets. isWhen ~~recognized~~acquisitions asare ~~revenue~~treated as asset acquisitions, the related ~~goods~~transaction orcosts ~~services~~ are ~~transferred to the buyer~~capitalized.

Disposition of Real Estate

The Company assesses whether a property is considered held for sale based on the criteria in ASC 360 Property, Plant, and Equipment (“ASC 360”). The Company generally classifies certain properties and related assets and liabilities as held for sale when the sale of an asset has been duly approved by management, a legally enforceable contract has been executed and the buyer’s due diligence period, if any, has expired and a non-refundable deposit has been received. If a property is considered held for sale, a provision for loss is recognized if the fair value of the property less the estimated cost to sell is less than its carrying amount. Depreciation and amortization expense cease once a property is considered held for sale. As of September 30, 2022 and December 31, 2021, zero and 12 properties were classified as held for sale, respectively.

Table of Contents

~~Evaluation~~The Company’s sales of real estate are generally considered to be sales to non-customers, requiring the Company to identify each distinct non-financial asset ~~impairment~~promised to the buyer. The Company determines whether the buyer obtains control of the non-financial assets, achieved through the transfer of the risks and rewards of ownership of the non-financial assets.

WeThe ~~evaluate~~Company ~~our~~recognizes ~~real~~gains ~~estate~~on ~~and~~the ~~finite-lived~~disposition ~~intangible~~of ~~assets~~real ~~for~~estate ~~impairment~~when ~~each~~the ~~quarter.~~recognition Wecriteria ~~review~~have ~~current~~been ~~activities~~met, ~~and~~generally ~~changes~~at in the ~~business~~time ~~conditions~~the ofrisks ~~all~~and ofrewards ~~our~~and ~~long-lived~~title ~~assets~~have totransferred, ~~determine~~and ~~the~~we ~~existence~~no oflonger ~~any~~have ~~triggering~~substantial ~~events~~continuing orinvolvement ~~impairment~~with ~~indicators~~the ~~requiring~~real anestate ~~impairment analysis~~sold. IfThe ~~triggering~~Company ~~events~~recognizes gains or ~~impairment~~losses ~~indicators~~from ~~are~~the ~~identified,~~disposition weof ~~review~~real anestate ~~estimate~~when ofknown ~~the~~as ~~future~~Gain ~~undiscounted~~(loss) ~~cash~~on ~~flows,~~sale ~~including,~~of ifreal ~~necessary~~estate, anet ~~probability-weighted~~in ~~approach~~the ifConsolidated ~~multiple~~Statement ~~outcomes~~of ~~are under consideration~~Operations.

~~Upon~~Impairment ~~determination~~of ~~that an impairment has occurred, a write~~Long-~~down~~Lived is recognized to reduce the carrying amount of the asset to its estimated fair value. If an impairment charge is not required to be recognized, the recognition of depreciation or amortization is adjusted prospectively, as necessary, to reduce the carrying amount of the asset to its estimated disposition value over the remaining period that the asset is expected to be held and used. We may adjust the depreciation of properties that are expected to be disposed of or redeveloped prior to the end of their useful lives.Assets

NoThe ~~impairment~~Company ~~charges~~periodically ~~were~~assesses ~~recorded~~whether inthere are any indicators that the value of its real estate may be impaired. When impairment indicators exist, the Company’s properties are evaluated for impairment. A property’s value is considered impaired if the sum of expected future cash flows (on an undiscounted basis) over the anticipated holding period ~~presented~~is ~~herein~~less than the property’s carrying value. Upon determination that an impairment exists, properties are reduced to their fair value.

~~Asset~~The evaluation of future cash flows is highly subjective and is based in part on the Company’s assumptions regarding future occupancy, rental rates, capital requirements, and holding periods. These assumptions could differ materially from actual results in future periods. Should circumstances change, and the Company shortens the expected holding period for an asset or group of assets, an impairment ~~due~~loss tomay ~~casualty~~be recognized, and such loss could be material. During the periods presented, no impairment was recognized in the Consolidated Financial Statements.

ItImpairment ~~is our policy to record losses due to physical damages during the accounting period in which they occur, while the amount~~ of ~~monetary~~Real ~~assets~~Estate toAssets beClassified ~~received from the insurance policy, if any, is recognized when receipt of insurance recoveries is probable. Losses, which are reduced by the related probable insurance recoveries, are recorded~~ as ~~costs~~Held of operations on the consolidated statements of income. Anticipated proceeds in excess of recognized losses would be considered a gain contingency and recognized when the contingency related to the insurance claim has been resolved. Anticipated recoveries for ~~lost~~Sale ~~rental income due to property damages are also considered to be a gain contingency and recognized when the contingency related to the insurance claim has been resolved.~~

NoA ~~material~~property ~~casualty~~is ~~losses~~classified ~~were~~as ~~incurred~~held infor ~~any~~sale when all of the accounting criteria for a plan of sale have been met. Upon classification as held for sale, the Company recognizes an impairment charge, if necessary, to lower the carrying amount of the real estate asset to its estimated fair value less cost to sell. The determination of fair value can involve significant judgments and assumptions. The Company develops key assumptions based on the contractual sales price. If this information is not available, the Company uses estimated replacement costs or estimated cash flow projections that utilize estimated discount and capitalization rates. These estimates are subject to uncertainty and therefore require significant judgment by the Company. The Company reviews all assets held for sale each reporting period ~~presented~~to ~~herein~~determine whether the existing carrying amounts are fully recoverable in comparison to their estimated fair values less costs to sell.

~~Stock~~Deferred ~~compensation~~Leasing Costs

~~Share-based~~Deferred ~~payments~~leasing tocosts ~~employees,~~consist ~~including~~primarily ~~grants~~ of ~~employee~~costs ~~stock~~incurred ~~options,~~to ~~are~~execute ~~recognized~~new asand ~~stock~~renewal ~~compensation~~tenant ~~expense~~leases, inprimarily ~~the~~costs ~~Company’s~~paid ~~consolidated~~to ~~statements~~third ofparties. ~~income~~Deferred ~~based~~leasing costs are amortized on ~~their~~a ~~grant~~straight-line ~~date~~basis ~~fair~~over ~~values,~~the ~~except~~terms ~~for~~of ~~performance-based~~the ~~grants,~~respective ~~which~~leases. ~~are~~The ~~accounted~~amortization ~~for~~of ~~based~~deferred onleasing ~~their~~costs ~~fair~~is ~~values~~included atin the ~~beginning~~line ofitem ~~the~~Depreciation ~~service~~and ~~period.~~amortization ~~See~~in ~~Note~~the ~~11.~~Consolidated Statement of Operations.

~~Accrued~~Deferred ~~and~~Financing ~~other~~Costs ~~liabilities~~

~~Accrued~~The ~~and~~Company ~~other~~defers ~~liabilities~~fees ~~consist~~and ~~primarily~~direct ofcosts ~~rents~~incurred ~~prepaid~~to byobtain ~~our customers~~financing, ~~trade~~which ~~payables,~~is ~~property~~reflected ~~tax~~as ~~accruals,~~a ~~accrued~~component ~~payroll~~of ~~and~~Debt, ~~contingent~~net ~~loss~~within ~~accruals~~the ~~when~~accompanying ~~probable~~Consolidated ~~and~~Balance ~~estimable,~~Sheets. asDeferred ~~well~~financing ascosts ~~the~~are ~~intangible~~amortized ~~liabilities~~to ~~discussed~~interest ~~above.~~expense Weusing ~~disclose~~ the ~~nature~~effective ofrate ~~significant~~method, ~~losses~~which ~~not~~approximates ~~accrued~~the ~~that~~effective ~~are~~interest ~~reasonably~~method, ~~possible~~over ofthe ~~occurring~~term ~~and,~~of ifthe ~~estimable,~~debt ato ~~range~~which ofthey ~~exposure~~apply. ~~The~~Unamortized ~~fair~~deferred ~~value~~financing ofcosts ~~accrued~~are ~~and~~charged ~~other~~to ~~liabilities~~interest ~~approximate~~expense ~~book~~when ~~value~~the ~~due~~related tofinancing ~~the~~is ~~short~~repaid ~~period~~prior ~~until~~to ~~settlement.~~its scheduled maturity date.

~~Other~~Revenue ~~assets~~Recognition

~~Other~~The ~~assets~~Company leases its operating properties to customers under agreements that are ~~comprised~~classified as operating leases. Rental revenue primarily consists of ~~prepaid~~base rent arising from tenant leases and tenant reimbursements of property operating expenses related to common area maintenance, asreal ~~well~~estate astaxes, ~~the~~and ~~intangible~~other ~~assets~~recoverable ~~discussed~~costs ~~above~~included in lease agreements.

~~Revenue~~The ~~recognition~~Company begins to recognize revenue for leases that are assumed upon the acquisition of the related property or when a tenant takes possession of the leased space for a new lease.

WeIf ~~recognize the aggregate rent to be collected (including the impact of escalators and concessions) under leases ratably throughout the non-cancellable lease term on~~ a ~~“straight-line” basis, commencing when the customer takes control of the leased space. Cumulative straight-line rent recognized in excess of amounts billed per the~~ lease ~~term~~provides ~~is presented as “deferred rent receivable” on our consolidated balance sheets. The Company presents reimbursements from customers~~ for ~~real~~tenant ~~estate~~reimbursement ~~taxes~~of ~~and~~building ~~other recoverable~~ operating expenses ~~under a single lease component presentation as the timing and pattern of transfer of such reimbursements are the same as base rent~~, ~~and~~ the ~~combined single component of such leases are classified as operating leases. Accordingly, the~~ Company recognizes ~~such~~revenue ~~variable~~associated ~~lease~~with ~~payments resulting from~~ the ~~reimbursements~~recovery ~~from~~of ~~customers~~those ~~for~~building ~~real estate taxes and other recoverable~~ operating expenses as ~~rental~~those ~~income~~expenses ~~in the period the applicable costs~~ are incurred. ~~Property management fees are recognized in the period earned as other income.~~

Table of Contents

The Company ~~monitors~~records rental revenue on a straight-line basis as it is earned during the ~~collectability~~lease ofterm. ~~its~~Certain ~~receivable~~leases ~~balances,~~provide ~~including~~for ~~deferred~~tenant occupancy during periods for which no rent ~~receivable~~is ~~balances,~~due onor anwhere ~~ongoing~~minimum ~~basis.~~rent ~~The~~payments ~~Company~~change ~~writes~~during ~~off~~the ~~uncollectible~~lease ~~customer~~term. Accordingly, a receivable ~~balances,~~is ~~including~~recorded ~~deferred~~representing the difference between the straight-line rent ~~receivable~~and ~~balances,~~the asrent athat ~~reduction~~is tocontractually ~~rental~~due ~~income~~from inthe tenant over the ~~period~~contractual ~~such~~lease ~~balances~~term. These amounts are noclassified ~~longer~~as ~~probable~~Tenant ofand ~~being~~other ~~collected~~receivables in the Consolidated Balance Sheets. ~~Therefore~~When a property is acquired, ~~recognition~~the terms of ~~rental~~existing ~~income~~leases isare ~~limited~~considered to ~~the~~commence ~~lesser~~as of the ~~amount~~acquisition date for purposes of ~~cash~~this ~~collected~~calculation. orAs ~~rental~~a ~~income~~result ~~reflected~~of onthe aelection ~~“straight-line”~~of ~~basis~~pushdown accounting for the Merger, ~~plus~~the ~~any~~Acquisition ~~accruable~~Date ~~variable~~was ~~lease~~used ~~payments~~as commencement date for ~~those~~purposes ~~customer~~of ~~receivable~~active ~~balances.~~leases that existed as of that date.

~~The~~Noncontrolling Company recognized revenue from its lease arrangements aggregating to $110.9 million and $109.4 million for the three months ended June 30, 2022 and 2021, respectively, and $223.7 million and $217.4 million for the six months ended June 30, 2022 and 2021, respectively. This revenue consisted primarily of rental income from operating leases and the related variable lease payments resulting from reimbursements of property operating expenses. Base rental income was $83.1 million and $83.7 million for the three months ended June 30, 2022 and 2021, respectively, and $167.9 million and $165.8 million for the six months ended June 30, 2022 and 2021, respectively. Variable lease payments, consisting primarily of reimbursement of property operating expenses, were $27.8 million and $25.7 million for the three months ended June 30, 2022 and 2021, respectively, and $55.8 million and $51.6 million for the six months ended June 30, 2022 and 2021, respectively. Interests

InNoncontrolling ~~April~~interests ~~2020,~~represent the ~~Financial~~share ~~Accounting~~of ~~Standards~~consolidated ~~Board~~entities ~~issued~~owned aby ~~Staff~~third ~~Question-and-Answer~~parties. ~~(“Lease~~The ~~Modification~~Company ~~Q&A”)~~recognizes toeach ~~respond~~noncontrolling toholder’s ~~frequently~~respective ~~asked~~share ~~questions~~of ~~about~~the ~~accounting~~estimated ~~for~~fair ~~lease~~value ~~concessions~~of ~~related to~~ the ~~coronavirus~~net ~~(“COVID-19”)~~assets ~~pandemic.~~at ~~Under~~the ~~existing~~date ~~lease~~of ~~guidance,~~formation anor ~~entity~~acquisition. ~~would~~Noncontrolling ~~have~~interests toare ~~determine,~~subsequently onadjusted ~~a lease by lease basis, if a lease concession contained a lease modification which would be accounted~~ for ~~under~~ the ~~lease~~noncontrolling ~~modification~~holder’s ~~framework,~~share orof ifadditional acontributions, ~~lease~~distributions ~~concession~~and ~~was~~their anshare ~~enforceable~~of ~~right or obligation that existed in~~ the ~~original~~net ~~lease,~~earnings ~~which~~or ~~would~~losses beof ~~accounted~~each ~~for~~respective ~~outside~~consolidated ~~the lease modification framework~~entity. The ~~Lease~~Company ~~Modification~~allocates ~~Q&A~~net ~~provides~~income ~~that,~~or loss to ~~the~~noncontrolling ~~extent~~interests ~~that~~based ~~cash~~on ~~flow after~~ the ~~lease~~weighted ~~concessions~~average ~~are~~ownership ~~substantially~~interest ~~the~~during ~~same, or less than,~~ the ~~cash~~period. ~~flow~~The ~~previously~~net ~~required~~income byor ~~the~~loss ~~existing~~that ~~lease, an entity~~ is not ~~required~~attributable to ~~evaluate~~the ~~each~~Company ~~contract~~is toreflected ~~determine whether a concession provided by a lessor to a lessee~~ in ~~response to~~ the ~~COVID-19~~line ~~pandemic~~item isNet ~~a lease modification. Instead, an entity can account for such lease concessions either~~ (iincome) asloss ifattributable ~~they~~to ~~were~~noncontrolling ~~part~~interests ofwithin the ~~enforceable~~Consolidated ~~rights~~Statements ~~and obligations~~ of ~~the parties under the existing lease contract; or (ii) as a lease modification~~Operations. ~~Based~~As onof the ~~Lease~~Acquisition ~~Modification Q&A~~Date, annoncontrolling ~~entity~~interest iswas ~~not~~stepped ~~required~~up to ~~account~~fair ~~for~~value ~~all~~as ~~lease~~a ~~concessions~~result inof ~~response~~pushdown ~~to the COVID-19 pandemic under one elected option; however, the entity is required to apply the elected option consistently to leases with similar characteristics and in similar circumstances~~accounting.

InTenant accordance with the Lease Modification Q&A, the Company has elected to account for lease concessions in response to the COVID-19 pandemic as a lease modification if the cash flow after these lease concessions is substantially the same, or less than, the cash flow previously required by the existing lease. The Company records rent deferrals and ~~rent~~Other abatements in deferred rent receivable in the accompanying consolidated balance sheets and will recognize these amounts over the remainder of the respective lease terms. For lease concessions in response to the COVID-19 pandemic that modified the terms and substantially changed the underlying cash flow of the existing lease for the remaining term, the Company also accounts for such concessions as a lease modification.Receivables

~~Since~~The ~~the onset of the COVID-19 pandemic, the~~ Company ~~entered~~provides ~~into~~for ~~rent~~potentially ~~relief~~uncollectible ~~agreements~~accounts ~~consisting~~on oftenant ~~$6.2 million of rent deferrals~~ and ~~$1.6~~other ~~million~~receivables ofbased ~~rent~~on ~~abatements.~~analysis As of ~~June 30, 2022,~~ the ~~289~~risk ~~current~~of ~~customers~~loss ~~that~~on ~~received~~specific ~~rent relief account for 9~~accounts.~~30%~~ ofThe ~~rental~~analysis ~~income.~~places ~~Also~~particular asemphasis ofon ~~June 30,~~past ~~2022,~~due ~~the~~accounts ~~Company~~and ~~had~~considers ~~collected~~information ~~$5.7 million~~such ofas ~~rent deferral repayment, representing 99.8% of~~ the ~~amounts~~nature ~~scheduled to be repaid through June 30, 2022. An additional $0.5 million of rent deferral repayment is scheduled to be repaid thereafter. The duration~~ and ~~severity~~age of the ~~effects~~receivable, of the ~~COVID-19~~payment ~~pandemic~~history ~~on the economy are uncertain and are likely to impact collectability~~ of ~~certain customers’ rent receivable balances in~~ the ~~future.~~tenant ~~The~~or ~~Company~~other ~~has~~debtor, ~~taken into account~~ the ~~current~~ financial condition of ~~its~~the ~~tenants,~~tenant ~~including~~and ~~consideration~~the ofCompany’s ~~COVID-19~~assessment ~~impacts, in its estimation~~ of its ~~uncollectible~~ability ~~accounts~~to ~~and~~meet ~~deferred~~its ~~rents~~lease ~~receivable at June 30~~obligations, ~~2022.~~the ~~The~~basis ~~Company~~for isany ~~closely~~disputes, ~~monitoring~~and the ~~collectability~~status of ~~such~~related ~~rents~~lease ~~and will adjust future estimations as appropriate as further information becomes known~~negotiations.

~~General~~The Company’s determination of the adequacy of its allowances for tenant receivables includes a binary assessment of whether or not the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and ~~administrative~~deferred ~~expense~~rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination.

~~General~~Cash and ~~administrative~~Cash ~~expense includes executive and other compensation, corporate office expenses, professional fees, and other such costs that are not directly related to the operation of our real estate facilities.~~Equivalents

Cash and cash equivalents represent cash held in banks, cash on hand, and liquid investments with maturities at date of purchase of three months or less.

Restricted Cash

Restricted cash primarily consists of reserves for certain capital improvements, leasing, interest and real estate tax and insurance payments as required by certain debt obligations.

Income and Other Taxes

The Company has elected to be taxed as a REIT. This, along with the nature of the operations of its operating properties, resulted in no provision for federal income taxes at the Company level. In addition, the Partnership generally is not liable for federal income taxes as the partners recognize their allocable share of income or loss in their tax returns; therefore no provision for federal income taxes has been made at the Partnership level. The Company generally only incurs certain state and local income, excise and franchise taxes. The Company has elected taxable REIT subsidiary (“TRS”) status for certain of its corporate subsidiaries and, as a result, these entities will incur both federal and state income taxes on any taxable income of such entities after consideration of any net operating losses.

Table of Contents

~~Income~~The Company accounts for deferred income taxes using the asset and liability method and recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s Consolidated Financial Statements or tax returns. Under this method, the Company determines deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Any increase or decrease in the deferred tax liability that results from a change in circumstances, and that causes management to change its judgment about expected future tax consequences of events, is included in the tax provision when such changes occur. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if the Company believes it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances, and that causes management to change its judgment about the realizability of the related deferred tax asset, is included in the tax provision when such changes occur.

WeThe ~~have~~Company ~~elected~~recognizes tothe betax ~~treated~~benefit asfrom aan ~~REIT,~~uncertain astax ~~defined~~position inclaimed ~~the~~or ~~Internal~~expected ~~Revenue~~to ~~Code~~be ofclaimed ~~1986,~~on asa ~~amended~~tax ~~(the~~return ~~“Code”).~~only Asif ait ~~REIT,~~is wemore dolikely than not ~~incur~~that ~~U.S.~~the ~~federal~~tax ~~corporate~~position ~~income~~will ~~tax~~be ifsustained weon ~~distribute~~examination ~~all~~by taxing authorities, based on the technical merits of ~~our~~the ~~“REIT~~position. ~~taxable~~The ~~income”~~tax ~~each~~benefits ~~year,~~recognized ~~and~~in ifthe weConsolidated ~~meet~~Financial ~~certain~~Statements ~~organizational~~from ~~and~~such ~~operational~~a ~~requirements.~~position Weare ~~believe~~measured webased ~~have~~on ~~met~~the ~~these~~largest ~~REIT~~benefit ~~requirements~~that ~~for~~has ~~all~~a ~~periods~~greater ~~presented~~than ~~herein.~~50% ~~Accordingly,~~likelihood weof ~~have~~being ~~recorded~~realized noupon Uultimate settlement.S. ~~federal~~The ~~corporate~~Company ~~income~~recognizes ~~tax~~interest ~~expense~~and penalties, if applicable, related to ~~our~~uncertain ~~“REIT~~tax ~~taxable~~positions as part of income tax benefit or expense.”

WeDerivatives recognize tax benefits of uncertain income tax positions that are subject to audit only if we believe it is more likely than not that the position would ultimately be sustained assuming the relevant taxing authorities had full knowledge of the relevant facts and ~~circumstances~~Hedging ~~of our positions. As of June 30, 2022 and December 31, 2021, we did not recognize any tax benefit for uncertain tax positions.~~ Activities

~~Accounting~~The Company buys or sells derivative financial instruments to limit exposure to changes in interest rates on variable rate debt. The Company does not use derivative instruments for ~~preferred~~speculative ~~equity~~or ~~issuance~~trading ~~costs~~purposes. None of the Company’s interest rate caps or swaps are currently or have been designated as hedges for accounting purposes. The Company’s derivative financial instruments are recorded at fair value and are recorded in the line items Prepaid expenses and other assets and Accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets.

WeChanges ~~record preferred equity issuance costs as a reduction to paid-~~in ~~capital on our consolidated balance sheets at~~ the ~~time~~fair ~~the preferred securities are issued and reflect the carrying~~ value of ~~the~~our ~~preferred~~derivative ~~equity~~financial atinstruments ~~its~~are ~~redemption~~marked ~~value. An additional allocation of income is made from the common stockholders~~ to ~~the~~market ~~preferred~~through ~~stockholders~~earnings ineach ~~the~~quarter ~~amount of the original issuance costs,~~ and weare ~~reclassify~~reflected ~~the~~in ~~redemption~~Interest ~~value~~income ~~from~~(expense) ~~equity~~in ~~to liabilities, when we call preferred stock for redemption, with such liabilities relieved once~~ the ~~preferred~~Consolidated ~~stock~~Statements isof ~~redeemed~~Operations.

~~Net~~Notional ~~income~~principal ~~per~~amounts ~~share~~are used to express the volume of ~~common~~these ~~stock~~transactions, but the cash requirements and amounts subject to credit risk are substantially less. Parties to interest rate cap or swap agreements are subject to market risk for changes in interest rates and credit risk in the event of nonperformance by the counterparty. The Company does not require any collateral under these agreements but deals only with highly rated institutional counterparties and expects that they will meet their obligations.

~~Notwithstanding~~Fair ~~the~~Value presentation of income allocations on our consolidated statements of income, net income is allocated to (a) preferred stockholders, for distributions paid or payable, (b) preferred stockholders, to the extent redemption value exceeds the related carrying value (“Preferred Redemption Allocation”), (c) our joint venture partner in proportion to its percentage interest in the joint ventures, to the extent the consolidated joint ventures produce net income or loss during the period and (d) restricted stock unit (“RSU”) holders, for non-forfeitable dividends paid adjusted for participation rights in undistributed earnings. The remaining net income is allocated to the common partnership units and our common stockholders, respectively, based upon the pro-rata aggregate number of units and stock outstanding.Measurements

~~Basic~~Various ~~and~~inputs ~~diluted net income per share of common stock~~ are ~~each~~used ~~calculated based upon net income allocable to common stockholders, divided by (i)~~ in determining the ~~case~~fair ofvalue ~~basic net income per share~~ of ~~common~~derivative ~~stock,~~instruments ~~weighted~~presented ~~average common stock and (ii)~~ in the ~~case~~Consolidated ofFinancial ~~diluted~~Statements. ~~net~~The ~~income~~Company ~~per~~classifies ~~share of common stock, weighted average common stock adjusted for~~ the ~~impact~~inputs ofas ~~stock compensation awards outstanding (see Note 10) using the treasury stock method.~~follows:

Level 1—Quoted unadjusted prices for identical instruments in active markets to which the Company has access at the date of measurement.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.

Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Company’s own assumptions that market participants would use to price the asset or liability based on the best available information.

Fair Value Measurements on a Recurring Basis. The Company estimates the fair value of its financial instruments using available market information and valuation methodologies management believes to be appropriate for these purposes. In connection with the Merger, the preferred stocks were valued using quoted market prices in active markets (Level 1).

The fair value of the Company’s derivatives was determined by management, based on valuation information prepared by an independent third party. Their fair value model incorporates credit risk and changes in credit risk to determine a credit valuation adjustment. This model is based on the applicable forward curve as a reflection of the market’s current expectation of payments discounted at market factors. The Company classifies these valuations within the Level 2 fair value hierarchy.

Table of Contents

~~The~~Under ~~following~~interest ~~table~~rate ~~sets~~cap ~~forth~~agreements, the ~~components~~Company ofmakes ~~our~~initial ~~basic~~premium ~~and~~payments ~~diluted~~to ~~net~~the ~~income~~counterparties ~~per~~in ~~share~~exchange ~~that~~for ~~are~~the ~~not~~right ~~reflected~~to onreceive payments from them if interest rates exceed specified levels during the ~~face~~agreement ofperiod. ~~our~~Notional ~~consolidated~~principal ~~statements~~amounts are used to express the volume of ~~income~~these transactions, ~~including~~but the ~~allocation~~cash ofrequirements ~~income~~and amounts subject to ~~common~~credit ~~stockholders~~risk are substantially less. Parties to interest rate cap agreements are subject to market risk for changes in interest rates and ~~common~~credit ~~partnership~~risk ~~units,~~in the ~~percentage~~event of ~~weighted~~nonperformance ~~average~~by ~~common~~the ~~stock~~counterparty. ~~and~~The ~~common~~Company ~~partnership~~does ~~units~~not ~~outstanding,~~require asany ~~well~~collateral asunder ~~basic~~these ~~and~~agreements ~~diluted~~but ~~weighted~~deals ~~average~~only ~~common~~with ~~stock~~highly-rated ~~outstanding~~institutional ~~(in~~counterparties ~~thousands):~~and expects that they will meet their obligations.

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Calculation of net income allocable to common stockholders
Net income	$	107,520		$	70,050		$	208,665		$	117,557
Net (income) loss allocated to
Preferred stockholders based upon distributions	(9,580)			(12,047)			(19,160)			(24,093)
Noncontrolling interests—joint venture	(9)			7			(8)			5
Restricted stock unit holders	(475)			(314)			(998)			(478)
Net income allocable to common stockholders and noncontrolling interests—common units	97,456			57,696			188,499			92,991
Net income allocation to noncontrolling interests—common units	(20,379)			(12,101)			(39,429)			(19,510)
Net income allocable to common stockholders	$	77,077		$	45,595		$	149,070		$	73,481
Calculation of common partnership units as a percentage of common stock equivalents
Weighted average common stock outstanding	27,630			27,531			27,618			27,513
Weighted average common partnership units outstanding	7,305			7,305			7,305			7,305
Total common stock equivalents	34,935			34,836			34,923			34,818
Common partnership units as a percentage of common stock equivalents	20.9		%	21.0		%	20.9		%	21.0		%
Weighted average common stock outstanding
Basic weighted average common stock outstanding	27,630			27,531			27,618			27,513
Net effect of dilutive stock compensation—based on treasury stock method using average market price	92			101			89			98
Diluted weighted average common stock outstanding	27,722			27,632			27,707			27,611

The Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy. Although the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties, the Company assesses the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

~~Segment~~Fair ~~reporting~~Value Measurements on a Nonrecurring Basis. Assets measured at fair value on a nonrecurring basis generally consist of real estate assets and investments in unconsolidated equity investments that were subject to impairment charges related to the Company’s change of intent to sell the investments and through its recoverability analysis. The Company estimates fair value based on expected sales prices in the market (Level 2) or by applying the income approach methodology using a discounted cash flow analysis (Level 3)

Acquired lease intangible assets: The Company ~~has~~estimated ~~two~~the ~~operating~~fair ~~segments:~~value of its above-market and below-market in-place leases based on the present value (using a discount rate that reflects the risk associated with the leases acquired) of the difference between (i) the ~~acquisition,~~contractual ~~development,~~amounts ~~ownership~~to ~~and~~be ~~management~~paid ofpursuant ~~commercial~~to ~~real~~the ~~estate~~in-place leases and (ii) management’s estimate of fair market lease rates for the ~~acquisition,~~corresponding ~~development~~in-place leases, ~~ownership~~measured ~~and~~over ~~management~~the remaining non-cancelable term of ~~multifamily~~the ~~real~~leases. ~~estate,~~Any ~~but~~below-market ~~has~~renewal ~~only~~options ~~one~~are ~~reportable~~also ~~segment~~considered asin the ~~multifamily~~in-place ~~segment~~lease ~~does~~values. ~~not~~This ~~meet~~valuation ~~the~~methodology ~~quantitative~~is ~~thresholds~~based ~~necessary~~on toLevel ~~require~~3 ~~reporting~~inputs asin athe ~~separate~~fair ~~segment~~value hierarchy.

~~Reclassifications~~In-place lease liabilities: The Company estimated the fair value of its in-place leases using independent and internal sources, which are methods similar to those used by independent appraisers. Factors we consider in our analysis include an estimate of costs to execute similar leases including tenant improvements, leasing commissions and foregone costs and rent received during the estimated lease-up period as if the space was vacant. This valuation methodology is based on Level 3 inputs in the fair value hierarchy.

WeFair ~~combined~~Value ~~all~~of ~~non-cash~~Financial ~~rental~~Instruments. ~~income~~The ~~items~~Company ~~into~~estimates ~~“straight-line~~the ~~rent~~fair ~~and~~value ~~amortization~~ of ~~lease~~its ~~intangibles~~debt, net” ~~within~~by discounting the ~~operating~~future ~~activities~~cash ~~section~~flows ofusing ~~our~~rates ~~consolidated~~and ~~statements~~borrowing ofspreads ~~cash~~currently ~~flows~~available ~~for~~to ~~all~~the ~~periods~~Company ~~presented~~(Level ~~herein~~3).

Segment Reporting

The Company currently operates in a single reportable operating segment, which includes the acquisition, leasing, and ownership of logistics properties. There is an immaterial amount of non logistics properties that do not meet the quantitative thresholds necessary to require reporting as a separate segment. The company’s chief operation decision maker assesses, measures, and reviews the operating financial results at the consolidated level for the entire portfolio.

Variable Interest Entities

The Company has equity interests in certain entities that primarily own and operate properties or hold land for development. The Company consolidates those entities that are considered to be VIEs where the Company is the primary beneficiary. The Company (i) evaluates the sufficiency of the total equity investment at risk, (ii) reviews the voting rights and decision- making authority of the equity investment holders as a group and whether there are limited partners (or similar owning entities) that lack substantive participating or kick out rights, guaranteed returns, protection against losses, or capping of residual returns within the group and (iii) establishes whether activities within the entities are on behalf of an investor with disproportionately few voting rights in making this VIE determination.

To the extent that the Company owns interests in a VIE and (i) has the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) has the obligation or rights to absorb losses or receive benefits that could potentially be significant to the VIE, then the Company would be determined to be the primary beneficiary and would consolidate the VIE. At each reporting period, the Company re-assesses the conclusions as to which, if any, party within the VIE is considered the primary beneficiary.

Table of Contents

3The Company has a 98.2% ~~Real~~interest in Brentford at The Mile, a planned 411-unit multifamily apartment complex (the “Brentford Joint Venture”). An unrelated real estate ~~facilities~~development company (the “JV Partner”) holds the remaining 1.8% interest. Based on management’s analysis of the joint venture and certain related agreements, the Company determined Brentford Joint Venture is a VIE because (a) Brentford Joint Venture does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, and (b) there are no substantive kick-out rights. The Company has also concluded it has control over the Brentford Joint Venture as it (a) is the managing member of the Brentford Joint Venture, (b) has designated decision making power to direct the activities that most significantly affect the economic performance of the Brentford Joint Venture, and (c) has a 98.2% economic interest in the investment. Thus, we determined that we are the primary beneficiary of Brentford Joint Venture. The assets of the Brentford Joint Venture may only be used to settle obligations of the Brentford Joint Venture and the creditors of the Brentford Joint Venture have no recourse to the general credit of the Company.

~~Activity~~The ~~related~~following totable ~~our~~presents ~~real~~a ~~estate~~summary ~~facilities~~of ~~for~~financial ~~the~~data ~~six~~of ~~months~~the ~~ended~~consolidated ~~June~~VIE ~~30,~~included ~~2022~~in ~~was~~the asCompany’s ~~follows~~Consolidated ~~(in~~Balance ~~thousands)~~Sheets:

	Land		Buildings andImprovements		AccumulatedDepreciation		Total
										Successor				Predecessor
Balances at December 31, 2021	$	852,073	$	2,186,849	$	(1,141,727)	$	1,897,195
										September 30, 2022				December 31, 2021
Capital expenditures	—		18,651		—		18,651
Investment			State				Company % Interest			Total Assets		Total Liabilities		Total Assets		Total Liabilities
Disposals (1)	—		(2,889)		2,889		—
Brentford Joint Venture			VA				98.2		%	$	151,433	$	7,972	$	76,206	$	7,421
Depreciation and amortization expense	—		—		(43,908)		(43,908)
Transfer to properties held for development	(2,131)		—		—		(2,131)
Transfer to properties held for sale	—		(253)		—		(253)
Balances at June 30, 2022	$	849,942	$	2,202,358	$	(1,182,746)	$	1,869,554

~~_______________~~Recent Accounting Pronouncements

~~(1)Disposals~~The ~~primarily~~Company ~~represent~~evaluated ~~the~~recently ~~book~~issued ~~value~~accounting ofstandards ~~tenant~~or ~~improvements~~pronouncements ~~that~~and determined such standards or pronouncements are either not relevant to the Company or not expected to have ~~been~~a ~~removed~~material ~~upon~~effect on the ~~customer~~Company’s ~~vacating~~Consolidated ~~their~~Financial ~~space~~Statements.

WeNote ~~have a 95~~3.0% ~~interest~~Investments in aReal joint venture that owns Highgate at The Mile, a 395-unit multifamily apartment complex on a five-acre parcel within the Company’s 44.5 acre office and multifamily park located in Tysons, Virginia (“The Mile”). The remaining 5.0% interest in the joint venture is held by the JV Partner. We consolidate the joint venture that owns Highgate at The Mile and as such, the consolidated real estate assets and activities related to this joint venture are included in the table above. Estate

AsThe offollowing ~~June 30,~~comprise ~~2022,~~the weCompany’s ~~have~~real ~~commitments,~~estate ~~pursuant to executed leases throughout our portfolio, to spend $7.1 million on leasing transaction costs, which include tenant improvements and lease commissions.~~ investments:

Acquisitions


	Successor		Predecessor
	September 30, 2022		December 31, 2021
Buildings and improvements	$	3,589,032	$	2,266,793
Land	1,921,093		763,961
Development in progress	165,652		—
Land held for development	—		78,991
Investments in real estate	5,675,777		3,109,745
Accumulated depreciation	(61,830)		(1,173,407)
Investments in real estate, net	$	5,613,947	$	1,936,338

WeDepreciation ~~account~~expense of investments in real estate was $61,830, $4,626 and $23,857 for ~~acquisitions~~the asperiod ~~asset~~from ~~acquisitions.~~July ~~The~~20, ~~purchase~~2022 ~~price~~through ofSeptember ~~acquired~~30, ~~properties~~2022, isthe ~~allocated~~period tofrom ~~land~~July 1, ~~buildings~~2022 through July 19, 2022, and ~~improvements~~the ~~(including~~three ~~tenant~~months ~~improvements~~ended September 30, ~~and~~2021, ~~intangible~~respectively. ~~assets~~Depreciation expense of investments in real estate was $61,830, $50,557 and ~~intangible~~$69,356 ~~liabilities~~for ~~(see~~the ~~Note~~period 2)from July 20, ~~based~~2022 ~~upon~~through September 30, 2022, the ~~relative~~period ~~fair~~from ~~value~~January of1, ~~each~~2022 ~~component~~through July 19, ~~which~~2022, ~~are~~and ~~evaluated~~the ~~independently~~nine months ended September 30, 2021, respectively.

~~The~~We ~~Company~~have ~~must~~a ~~make~~95.0% ~~significant~~interest ~~assumptions~~ in ~~determining~~a ~~the~~joint ~~fair~~venture ~~value~~that ofowns ~~assets~~Highgate ~~acquired~~at ~~and~~The ~~liabilities assumed~~Mile, ~~which~~a ~~can~~395-unit ~~affect~~multifamily ~~the~~apartment ~~recognition~~complex ~~and~~located ~~timing~~in ofTysons, ~~revenue~~Virginia ~~and~~(“The ~~depreciation~~Mile”). ~~and~~The ~~amortization~~remaining ~~expense~~5.0% ~~The~~interest ~~fair~~in ~~value~~the ofjoint ~~land~~venture is ~~estimated~~held ~~based~~by ~~upon, among other considerations, comparable sales of land within~~ the ~~same~~JV ~~region~~Partner. ~~The~~We ~~fair~~consolidate ~~value~~the ofjoint ~~buildings~~venture ~~and~~that ~~improvements~~owns isThe ~~determined~~Mile ~~using a combination of the income~~ and ~~replacement~~as ~~cost~~such, ~~approaches which both utilize available market information relevant to~~ the ~~acquired~~consolidated ~~property.~~real ~~The~~estate ~~fair value of other acquired~~ assets ~~including tenant improvements~~ and ~~unamortized~~activities ~~lease~~related ~~commissions are determined using the replacement cost approach. The amount recorded~~ to ~~acquired~~this ~~in-place~~joint ~~lease~~venture ~~intangible is also determined utilizing the income approach using market assumptions which~~ are ~~based~~included onin ~~management’s assessment of current market conditions and~~ the ~~estimated~~table ~~lease-up periods for the respective spaces~~above. ~~Transaction costs related to asset acquisitions are capitalized.~~

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

Table of Contents

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.Acquisitions

The following table summarizes the Company’s acquisition activity:


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from July 1, 2022 through July 19, 2022		Three Months Ended September 30, 2021		Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Operating properties acquired	—		—		7		—		7
Square feet	—		—		718,000		—		718,000

Total purchase price	$	—	$	—	$	123,268	$	—	$	123,268

The purchase price of the above acquisition, including the associated transaction costs, was allocated to the assets acquired and liabilities assumed based on their relative fair values as of the acquisition date, and are summarized below:


	Successor		Predecessor
	2022 Acquisitions		2022 Acquisitions		2021 Acquisitions
Building	$	—	$	—	$	90,897
Site improvements	—		—		6,998

Land	—		—		20,308
Tenant improvements	—		—		2,998

In-place lease intangibles	—		—		3,223

Below market lease liabilities	—		—		(1,156)
Other	—		—		(1,097)
Allocated purchase price	$	—	$	—	$	122,171

Transaction costs of $—, $— and $271 were capitalized and included within the allocated purchase price for the period from July 20, 2022 through September 30, 2022, the period from July 1, 2022 through July 19, 2022, and the three months ended September 30, 2021, respectively. Transaction costs of $—, $— and $271 were capitalized and included within the allocated purchase price for the period from July 20, 2022 through September 30, 2022, the period from January 1, 2022 through July 19, 2022, and the nine months ended September 30, 2021, respectively.

Dispositions

~~Refer~~The tofollowing ~~“Note~~table ~~12.~~summarizes ~~Merger Events” for information regarding~~ the ~~Merger Agreement the~~ Company ~~entered into on April 24, 2022. Refer to “Note 13. Subsequent Events” for information regarding the Company'~~’s ~~asset sales in July 2022.~~dispositions:

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.


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from July 1, 2022 through July 19, 2022		Three Months Ended September 30, 2021		Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Number of buildings	168		13		8		40		11
Number of land parcels	—		—		—		1		—
Net proceeds	$	1,295,217	$	46,721	$	43,900	$	236,362	$	76,540
Gain on sale of real estate, net	$	—	$	38,221	$	29,924	$	157,022	$	49,117

OnFor ~~May 6,~~additional ~~2022,~~information on the ~~Company sold a 291,000 square foot office~~Non-~~oriented~~Core ~~business~~Portfolio ~~park~~disposition ~~located~~refer into ~~Fairfax,~~Note ~~Virginia,~~1 ~~for~~— ~~net~~Description ~~sale proceeds~~ of ~~$35~~Business.~~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 Company determined that the 2022 Assets Sold and the 2021 Asset Sold did not meet the criteria for discontinued operations presentation, as the sale of such assets did not represent a strategic shift that will have a major effect on our operations and financial results.

4. Multifamily developmental activity

In August 2020, the Company entered into the Brentford Joint Venture with the JV Partner for the purpose of developing Brentford at The Mile, a planned 411- unit multifamily apartment complex. Under the Brentford Joint Venture agreement, the Company has a 98.2% controlling interest and is the managing member with the JV Partner holding the remaining 1.8% limited partnership interest. We contributed a parcel of land to the Brentford Joint Venture (the “Brentford Parcel”) at a value of $18.5 million, for which we received equity contribution credit in the Brentford Joint Venture. Our cost basis in the Brentford Parcel was $5.1 million as of 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. 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.

5. Leasing activity

The Company leases space in its commercial real estate facilities to customers primarily under non-cancelable leases generally ranging from one to 10 years. Future minimum rental income, excluding recovery of operating expenses that may be collectable under these leases, as of June 30, 2022 is as follows (in thousands):

Remainder of 2022	$	150,404
2023	258,127
2024	189,786
2025	122,009
2026	83,657
Thereafter	125,746
Total	$	929,729

Table of Contents

In addition to minimum rental payments, certain customers reimburse the Company for their pro rata share of specified property operating expenses. Such reimbursements amounted to $27.8 million and $25.7 million for the three months ended June 30, 2022 and 2021, respectively, and $55.8 million and $51.6 million for the six months ended June 30, 2022 and 2021, respectively. These variable lease payment amounts are included as rental income in the accompanying consolidated statements of income. Development

Leases accounting for 2.5% of total leased square footage are subject to termination options, of which 1.6% have termination options exercisable through December 31, 2022. In general, these leases provide for termination payments to us should the termination options be exercised. Certain leases also have an option to extend the term of the lease. The ~~future~~Company ~~minimum~~completed ~~rental income in~~ the ~~above~~construction ~~table assumes termination options~~ and ~~lease~~placed ~~extension~~into ~~options~~service ~~are~~the ~~not~~following ~~exercised.~~buildings:

6. Bank loans


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from July 1, 2022 through July 19, 2022		Three Months Ended September 30, 2021		Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Buildings placed into service	—		—		—		—		1
Square feet	—		—		—		—		83,000
Total costs incurred1	$	—	$	—	$	—	$	—	$	8,062

In August 2021, the Company amended and restated the credit agreement (the “Amended Credit Agreement”) governing its unsecured revolving line of credit (the “Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, and the other lenders party thereto. The Amended Credit Agreement increased the aggregate principal amount of the Credit Facility from $250.0 million to $400.0 million, and extended the maturity date to August 24, 2025, with two six-month extension options or one 12-month extension option. The per annum rate of interest charged on borrowings is based on LIBOR plus 0.70% to LIBOR plus 1.35%. Currently, the Company’s rate under the Credit Facility is LIBOR plus 0.70% per annum. In addition, the Company is required to pay an annual facility fee ranging from 0.10% to 0.25% per annum calculated on the aggregate committed amount of the Credit Facility (currently 0.10% per annum). The interest rate margin and facility fee may increase in the future based on the ratio of the Company’s total consolidated indebtedness to its consolidated gross asset value defined in accordance with the Amended Credit Agreement. The Credit Facility also features a sustainability-linked pricing component whereby the pricing can improve by 0.01%, if the Company meets certain sustainability performance targets, and an accordion feature whereby it has an option to increase commitments under the Credit Facility up to an additional $300.0 million.____________________________

~~The~~¹ ~~Company~~Total ~~had~~costs ~~zero~~incurred ~~balance~~represent ~~outstanding on its Credit Facility at June 30, 2022 and a $32.0 million balance outstanding, at an interest rate of 0.80%, at December 31, 2021. In connection with~~ the ~~Amended Credit Agreement, the~~ Company’s ~~paid~~cumulative ~~$2.2~~spend ~~million~~on ofdevelopment ~~loan~~activity ~~origination~~relating ~~costs.~~to ~~The~~the ~~Company~~properties ~~had~~placed ~~$1.8~~into ~~million~~service ~~and $2.1 million of total unamortized loan origination costs as of June 30, 2022 and December 31, 2021, respectively, which are included~~ in ~~other assets in~~ the ~~accompanying~~above ~~consolidated~~periods, ~~balance~~including ~~sheets.~~any ~~The~~allocation ~~Credit Facility requires the Company to meet certain covenants, all~~ of ~~which~~purchase itprice ~~was~~resulting infrom ~~compliance~~acquisition ~~with as~~ of ~~June 30,~~properties ~~2022.~~under ~~Interest on outstanding borrowings is payable monthly~~development.

7.Assets ~~Noncontrolling~~and ~~interests~~Liabilities Held for Sale

~~Noncontrolling~~In ~~interests~~the ~~represent~~normal ~~(i)~~course ~~PS’s~~of ~~noncontrolling~~business, ~~interest~~the inCompany ~~the~~identifies OPnon-strategic ~~through~~assets ~~its~~for ~~ownership~~sale. ofThe ~~7,305,355~~Company ~~common~~separately ~~partnership~~classifies ~~units,~~properties ~~totaling~~held ~~$279.8~~for ~~million~~sale ~~and~~in ~~$255~~its Consolidated Financial Statements.7 ~~million~~Real atestate ~~June 30,~~investments ~~2022~~to ~~and~~be ~~December 31,~~disposed ~~2021,~~of ~~respectively,~~are ~~and~~reported ~~(ii)~~at the JVlower ~~Partner’s~~of ~~interests~~carrying inamount ~~our~~or ~~consolidated~~estimated ~~joint~~fair ~~ventures~~value, ~~totaling~~less $4costs to sell.3 ~~million~~Once ~~and~~an ~~$3.9~~asset ~~million~~is atclassified ~~June 30~~as held for sale, ~~2022~~depreciation and ~~December 31,~~amortization ~~2021,~~expense ~~respectively~~is no longer recorded. Once a liability is classified as held for sale, amortization of below market leases is no longer recorded.

PSThe OPfollowing ~~Interests~~table is a summary of the assets and liabilities of the Company’s zero and 12 properties classified as held for sale as of September 30, 2022 and December 31, 2021, respectively:

Each common partnership unit receives a cash distribution equal to the dividend paid on our common stock and is redeemable at PS’s option.


	Successor		Predecessor
	September 30, 2022		December 31, 2021
Assets:
Investments in real estate, net	$	—	$	26,788




Lease-related intangible assets, net	—		6,819
Prepaid expenses and other assets	—		2

Total assets held for sale	$	—	$	33,609

IfNote PS exercises its right of redemption, at PSB’s option (a) PS will receive one share of common stock from us for each common partnership unit redeemed, or (b) PS will receive cash from us for each common partnership unit redeemed generally equal to the market value of a share of common stock (as defined in the Operating Partnership Agreement)4. We can prevent redemptions that we believe would violate either our articles of incorporation or securities laws, cause PSB to no longer qualify as a REIT, or could result in the OP no longer being treated as a partnership for U.S. federal tax purposes. Debt

InMortgage allocating net income and presenting equity, we treat the common partnership units as if converted to shares of common stock. Accordingly, they received the same net income allocation per unit as a share of common stock totaling $20.4 million and $12.1 million for the three months ended June 30, 2022 and 2021, respectively, and $39.4 million and $19.5 million for the six months ended June 30, 2022 and 2021, respectively. loans

In connection with the completion of the Merger, certain indirect subsidiaries of the Partnership and certain subsidiaries of Blackstone Real Estate Partners IX, L.P within the Non-Core Portfolio (collectively, the “Loan A Mortgage Borrowers”) obtained a $2,733,620 mortgage loan (the “Loan A Mortgage Loan”) on July 20, 2022 from Bank of America, N.A., Citi Real Estate Funding Inc., Barclays Capital Real Estate Inc., Morgan Stanley Bank, N.A., and Societe Generale Financial Corporation (together with its successors and assigns, the “Loan A Lenders”), and certain other indirect subsidiaries of the Partnership and certain subsidiaries of Blackstone Real Estate Partners IX, L.P within the Non-Core Portfolio (collectively, the “Loan B Mortgage Borrowers” and, together with the Loan A Mortgage Borrowers, the “Mortgage Borrowers”) obtained a $1,960,000 mortgage loan with an additional $96,000 future funding option (the “Loan B Mortgage Loan” and, together with the Loan A Mortgage Loan, the “Mortgage Loans”) on July 20, 2022 from Citibank, N.A., as administrative agent and the other lenders party thereto (together with the Loan B Lenders, the “Lenders”). On August 5, 2022, the Loan A Mortgage Loan was securitized as evidenced by that certain Offering Circular by BX Trust 2022-PSB, as the issuing entity, Bank of America Merrill Lynch Large Loan, Inc., as depositor, and Bank of America, National Association, Barclays Capital Real Estate Inc., Citi Real Estate Funding Inc., Morgan Stanley Mortgage Capital Holdings LLC and Societe Generale Financial Corporation, as mortgage loan sellers.

Table of Contents

JVThe ~~Partner~~Loan A Mortgage Loan is secured by first-priority, cross-collateralized mortgage liens on certain of the Company’s properties located in California, Florida, Maryland, Texas, Washington and Virginia, as well as other properties comprising the Non-Core Portfolio that are owned by affiliated entities outside of the Company (the Non-Core Affiliates”), all related personal property, reserves, a pledge of all income received by the Loan A Mortgage Borrowers with respect to such properties and a security interest in a cash management account. The Loan B Mortgage Loan is secured by first-priority, cross-collateralized mortgage liens on certain of the Company’s properties located in California, Florida, Texas, Washington and Virginia, as well as other properties comprising the Non-Core Portfolio that are owned by the Non-Core Affiliates, all related personal property, reserves, a pledge of all income received by the Loan B Mortgage Borrowers with respect to such properties and a security interest in a cash management account.

The Company and the Non-Core Affiliates are jointly and severally liable for the debt but are allocated debt and related interest based on allocated loan amounts. The Company recorded ~~capital~~the ~~contributions~~interest and principal obligation of $0its portion of the Mortgage Loans on its Consolidated Balance Sheets.2 ~~million~~The Company does not expect to pay interest and ~~$0.4~~principal ~~million~~on ~~during~~the portion of the ~~three~~Mortgage Loans allocated to the Non-Core Affiliates and ~~six~~therefore ~~months~~have ~~ended~~not ~~June 30,~~recorded ~~2022~~any liability related to their share of the debt. Principal balances relating to the Company’s allocated amount of these loans are further outlined in the table below. Transaction costs related to loan issuances have been capitalized, ~~respectively~~deducted from the loan liabilities, and $0are amortized over the life of each respective loan.1 ~~million~~The Company used the proceeds from the Mortgage Loans, among other things, to (i) fund the consideration for the Merger, (ii) pay for certain costs and ~~$0.3~~expenses ~~million~~relating ~~during~~to (a) the ~~three~~transactions in connection with the Merger and ~~six~~incurred ~~months~~in ~~ended~~connection ~~June 30~~with the closing of the Mortgage Loans, ~~2021~~and (b) the operation of the properties (including, ~~respectively~~without limitation, ~~from~~carrying costs with respect to the JVproperties ~~Partner~~and ~~related~~funding working capital requirements of the properties), (iii) establish reserves, including certain reserves required to ~~its~~be ~~noncontrolling~~established ~~interest~~under inthe terms of the ~~Brentford~~Mortgage ~~Joint~~Loans, ~~Venture~~and (iv) other general corporate purposes. General corporate purposes may include, but are not limited to, the repayment of other debt and selective development, redevelopment, or acquisition of properties.

8.The ~~Related~~Mortgage ~~party~~Loans ~~transactions~~are scheduled to mature on August 9, 2024, with an option for the Mortgage Borrowers to extend the initial term for three one-year extension terms, subject to certain conditions.

WeThe ~~manage certain industrial, office and retail facilities in the United States for PS under either the “Public Storage” or “PS Business Parks” names (the “PS Management Agreement”). Under PS~~Company’s ~~supervision,~~debt weincludes ~~coordinate~~various ~~and~~representations ~~assist in rental~~ and ~~marketing activities~~warranties, ~~property~~as ~~maintenance~~well ~~and~~as ~~other~~a ~~operational~~series ~~activities, including the selection~~ of ~~vendors,~~financial ~~suppliers, employees~~ and ~~independent~~other ~~contractors.~~covenants Wethat ~~receive~~the aCompany ~~management~~has ~~fee~~to ~~based~~comply ~~upon~~with ~~a percentage of revenues, which is included~~ in ~~interest~~order ~~and~~to ~~other~~borrow ~~income~~under ~~on our consolidated statements of income~~them. ~~Management~~The ~~fee~~Company ~~revenues~~was ~~were~~in ~~$0.1~~compliance ~~million~~with ~~for~~all ~~each~~representations ~~of the three~~ and ~~six months ended June 30~~warranties, ~~2022~~as ~~and~~well ~~2021.We~~the ~~allocate~~covenants ~~certain~~under ~~operating expenses to PS related to~~ the ~~management~~various ofdebt ~~these~~facilities ~~properties,~~as ~~including payroll and other business expenses, totaling $0.1 million for each~~ of ~~the three months ended June~~ September 30, 2022 and December 31, 2021, ~~and~~as ~~$0.1~~required ~~million~~ and $0applicable.~~2 million for the six months ended June 30, 2022 and 2021, respectively.~~

The PSfollowing ~~Business~~table ~~Parks~~is ~~name and logo are owned by PS and licensed to us under~~ a ~~non-exclusive,~~summary ~~royalty-free~~of ~~license~~the ~~agreement.~~Company’s ~~The~~debt ~~license can be terminated by either party for any reason with six months written notice.~~ arrangements:

PS provides us property management services for the self-storage component of two assets we own and operates them under the “Public Storage” name. Either the Company or PS can cancel the property management contract upon 60 days’ notice. Under our supervision, PS coordinates and assists in rental and marketing activities, and property maintenance and other operational activities, including the selection of vendors, suppliers, employees and independent contractors. Management fee expenses were less than $0.1 million for each of the three months ended June 30, 2022 and 2021, and $0.1 million for each of the six months ended June 30, 2022 and 2021. Additionally, PS allocated certain operating expenses to us related to the management of these properties totaling less than $0.1 million for each of the three and six months ended June 30, 2022 and 2021. These amounts are included under cost of operations on our consolidated statements of income.


	Outstanding Balance at				Interest Rate at September 30, 2022¹	Maturity Date at September 30, 2022²
	Successor		Predecessor
	September 30, 2022		December 31, 2021



Debt, variable
Floating rate mortgages3	$	3,795,930	$	—	5.25% - 6.84%	August 2024

Unsecured revolving line of credit4	—		32,000		N/A	N/A
Unamortized debt issuance costs, net	(9,697)		—
Unamortized discounts, net	(35,194)		—
Total debt, net / Weighted average interest rate5	$	3,751,039	$	32,000	6.13%

Pursuant to a cost sharing agreement, we share certain administrative services, corporate office space, and certain other third party costs with PS which are allocated based upon fair and reasonable estimates of the cost of the services expected to be provided. We reimbursed PS $0.3 million and $0.2 million for costs PS incurred on our behalf for the three months ended June 30, 2022 and 2021, respectively, and $0.5 million for each of the six months ended June 30, 2022 and 2021. PS reimbursed us less than $0.1 million for costs we incurred on their behalf for each of the three and six months ended June 30, 2022 and 2021. ____________________________

~~The~~¹ ~~Company~~All ~~had~~rates ~~net~~presented ~~amounts~~reflect ~~due~~a toblended PSsecured ofovernight ~~$0.1~~financing ~~million~~rate ~~and~~(“SOFR”) ~~due~~for ~~from~~a ~~PS of $0.2 million at June~~ 30, ~~2022~~day ~~and~~period ~~December 31,~~as ~~2021,~~stipulated ~~respectively,~~by ~~for~~our ~~these~~debt ~~contracts~~agreements.

~~Refer~~² toAt ~~Note 12 for information regarding~~ the ~~Support~~Company’s ~~Agreement~~option, ~~entered~~maturity ~~into~~may byextend ~~PS with affiliates of Blackstone and (for certain limited purposes) the Company,~~ pursuant to ~~which~~three PSone-year ~~agreed~~options, ~~among~~subject ~~other things,~~ to ~~vote~~certain ~~in favor of the mergers described in the Merger Agreement~~restrictions.

~~Refer~~3 toInterest ~~Note~~rate 13based ~~for~~on ~~information~~one-month ~~regarding~~SOFR ~~the~~plus ~~July~~an ~~2022~~applicable ~~sale~~margin ofranging ~~properties~~from 2.40% to PS3.99% based on amended agreements post closing. The Company uses derivative financial instruments to limit the exposure to changes in interest rates on variable rate debt as further discussed in

Note 5 — Derivative Financial Instruments.

4 As of December 31, 2021 the aggregate borrowing capacity on the line of credit was $400,000, and bore interest at a rate equal to London Inter-bank offered rate plus 0.70%. The line of credit was terminated upon the completion of the Merger.

5 The weighted average interest rate calculation does not include the amortization of debt issuance costs or debt discounts incurred in obtaining debt.

Table of Contents

9.Scheduled ~~Stockholders’~~principal ~~equity~~payments due on our debt for the remainder of 2022 and for each year through the period ended December 31, 2026, and thereafter were as follows at September 30, 2022:

Preferred stock


Years ending December 31:	Principal¹
2022 remainder	$	—
2023	—
2024	3,795,930
2025	—
2026	—
Thereafter	—
Total debt	$	3,795,930

~~As of June 30, 2022 and December 31, 2021, the Company had the following series of preferred stock outstanding:~~ ____________________________

Series	Issuance Date	Earliest PotentialRedemption Date	DividendRate		SharesOutstanding	Amount (in thousands)
Series X	September 2017	September 2022	5.250	%	9,200	230,000
Series Y	December 2017	December 2022	5.200	%	8,000	200,000
Series Z	November 2019	November 2024	4.875	%	13,000	325,000
Total					30,200	$	755,000

¹ Debt payment reflects repayment dates, when applicable, pursuant to related loan agreement. These dates do not reflect the extension of periods that are at the Company’s election, subject to certain conditions.

WeNote ~~paid $9~~5.6 ~~million~~Derivative ~~and~~Financial $19.2 million in distributions to our preferred stockholders for the three and six months ended June 30, 2022, respectively, and $12.0 million and $24.1 million for the three and six months ended June 30, 2021, respectively.Instruments

The ~~holders~~Company ofuses ~~our~~derivative ~~preferred~~financial ~~stock~~instruments ~~have general preference rights with respect~~ to ~~liquidation,~~manage ~~quarterly~~interest ~~distributions~~rate ~~and~~risk ~~any accumulated unpaid distributions. Holders of our preferred stock will not be entitled to vote~~ on ~~most~~its ~~matters,~~floating ~~except~~rate ~~under certain conditions~~debt. In the event of a cumulative arrearage equal to six quarterly dividends, the holders of our preferred stock will have the right to elect two additional members to serve on the Company’s Board of Directors (the “Board”) until all events of default have been cured. At June 30, 2022, there were no dividends in arrears.

~~Except~~In ~~under~~connection ~~certain~~with ~~conditions~~the ~~relating~~mortgages toobtained on the ~~Company’s~~date ~~qualification~~of asthe ~~a REIT~~Merger, ~~our~~as ~~preferred~~further ~~stock~~described isin ~~not~~Note ~~redeemable~~4 ~~prior~~— toDebt, the ~~redemption~~Company ~~dates~~entered ~~noted~~into ~~above.~~interest Onrate orderivative ~~after~~contracts ~~the~~to ~~respective~~limit ~~redemption~~its ~~dates,~~exposure ~~the respective series~~ of ~~preferred~~interest ~~stock~~rate ~~will~~risk. beThe ~~redeemable,~~following atis ~~the~~a ~~option~~summary of the Company,’s inderivative ~~whole~~financial ~~or in part, at $25.00 per depository share, plus any accrued and unpaid dividends.~~instruments:

Common stock and units


		Successor
	Number of Instruments	Balance at September 30, 2022				Notional Amounts
		Asset1		Liability2					Strike		Maturity Date
Undesignated derivatives:
Interest rate caps - purchased	2	$	47,804	$	—		$	3,592,215	3.85	%	August 2024
Interest rate cap - sold	1	—		47,804			$	3,592,215	3.85	%	August 2024
Interest rate swap - purchased	1	68,993		—			$	3,592,215	3.10	%	August 2024
Total fair value of derivatives		$	116,797	$	47,804

We paid $29.0 million and $28.9 million ($1.05 per share of common stock) in distributions to our common stockholders for each of the three months ended June 30, 2022 and 2021, respectively, and $58.0 million ($2.10 per share of common stock) and $57.8 million ($2.10 per share of common stock) in distributions to our common stockholders for each of the six months ended June 30, 2022 and 2021, respectively.____________________________

We¹ ~~paid~~Included ~~$7.7 million ($1.05 per common unit)~~ in ~~distributions~~Prepaid toexpenses ~~our common unit holders for each of the three months ended June 30, 2022~~ and ~~2021,~~other ~~and~~assets ~~$15.3 million ($2.10 per share of common unit)~~ in ~~distributions to our common unit holders for each of~~ the ~~six~~Consolidated ~~months~~Balance ~~ended June 30, 2022 and 2021~~Sheets.

~~Equity~~2 ~~stock~~Included in Accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets.

~~The~~During ~~Company~~the isperiod ~~authorized to issue 100.0 million shares of equity stock. Our articles of incorporation provide that equity stock may be issued~~ from ~~time~~July to20, ~~time~~2022 inthrough ~~one~~September or30, ~~more~~2022, ~~series and give~~ the ~~Board~~Company ~~broad~~recognized ~~authority~~a tonet ~~fix~~gain ~~the~~on ~~dividend~~interest ~~and~~rate ~~distribution~~derivatives ~~rights,~~of ~~conversion and voting rights~~$61,661. ~~redemption~~Gains ~~provisions~~ and ~~liquidation~~losses ~~rights~~on ofinterest ~~each~~rate ~~series~~derivatives ofare ~~equity~~recorded ~~stock.~~in Asthe ofline ~~June 30,~~item ~~2022~~Interest ~~and~~income ~~December 31,~~(expense) ~~2021,~~in nothe ~~equity~~Consolidated ~~stock~~Statements ~~had~~of ~~been issued~~Operations.

~~10.~~There ~~Commitments~~were ~~and~~no ~~contingencies~~derivative instruments as of December 31, 2021 or for the period from January 1, 2022 through July 19, 2022.

~~The~~Note ~~Company~~6. ~~currently~~Fair isValue neither subject to any material litigation nor, to management’s knowledge, is any material litigation currently threatened against the Company other than routine litigation and administrative proceedings arising in the ordinary course of business.Measurements

11The Company did not have any transfers within the fair value hierarchy during the periods presented. ~~Stock~~The ~~compensation~~Company’s Level 3 inputs are model-derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Company’s own assumptions that market participants would use to price the asset or liability based on the best available information. In evaluating the fair value information, judgment is required to interpret the market data used to develop the estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially different fair value estimates.

~~Under~~The ~~various~~carrying ~~share-based~~amounts ~~compensation~~of ~~plans,~~cash ~~PSB~~and ~~grants~~cash ~~non-qualified~~equivalents, ~~options~~restricted tocash, ~~purchase~~tenant ~~the~~and ~~Company’s~~other ~~common~~receivables, ~~stock~~prepaid atexpenses aand ~~price~~other ~~not~~assets, ~~less~~accounts ~~than~~payable, ~~fair~~accrued ~~value~~expenses onand ~~the~~other ~~date~~liabilities ofreasonably ~~grant,~~approximates asfair ~~well as RSUs~~value, toin ~~certain~~management’s ~~directors~~judgment, ~~officers~~because ~~and~~of ~~key~~their ~~employees.~~short-term nature.

Table of Contents

~~The~~Fair ~~service~~Value ~~period~~Measurements ~~for stock options and RSUs begins when (i) the Company and the recipient reach a mutual understanding~~ of ~~the~~Financial key terms of the award, (ii) the award has been authorized, (iii) the recipient is affected by changes in the market price of our stock and (iv) it is probable that any performance conditions will be met, and ends when the stock options or RSUs vest. Instruments

WeThe ~~amortize~~following ~~the~~table ~~fair~~displays ~~value of awards starting at~~ the ~~beginning~~carrying ofvalues ~~the service period as compensation expense. For awards that are earned solely upon the passage of time~~ and ~~continued~~fair ~~service,~~values ~~the entire cost~~ of the ~~award~~Company’s isfinancial amortized on a straight-line basis over the service period. For awards with performance conditions, the individual cost of each vesting is amortized separately over each individual service period (the “accelerated attribution” method). instruments:

In connection with the separation agreement with our former President and Chief Executive Officer (“CEO”), who stepped down from his positions with the Company for health reasons effective March 23, 2022, the Company paid a lump sum payment of $6.6 million in exchange for 41,186 restricted stock units owned by the former CEO, which represents the market value of the Company common stock underlying such units as of March 18, 2022.


		Successor				Predecessor
		September 30, 2022				December 31, 2021
		Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Interest rate derivative assets1, 2	Level 2	$	116,797	$	116,797	$	—	$	—
Financial liabilities:

Interest rate derivative liability2, 3	Level 2	$	47,804	$	47,804	$	—	$	—
Debt, net4	Level 3	$	3,751,039	$	3,774,620	$	32,000	$	32,000

We account for forfeitures of share-based payments as they occur by reversing previously amortized share-based compensation expense with respect to unvested grants that are forfeited in the period the employee terminates employment. ____________________________

~~Stock~~1 ~~Options~~Included within Prepaid expenses and other assets on the Consolidated Balance Sheets.

~~Stock~~2 ~~options~~The ~~expire~~fair 10value ~~years~~of ~~after~~ the ~~grant~~Company’s ~~date~~derivatives ~~and~~were ~~the~~determined ~~exercise~~by ~~price~~management, isbased ~~equal~~on tovaluation ~~the~~information ~~closing~~prepared ~~trading~~by ~~price~~an ofindependent ~~our~~third ~~common~~party. ~~stock~~This onmodel ~~the~~incorporates ~~grant~~credit ~~date.~~risk ~~Stock~~and ~~option~~changes ~~holders~~in ~~cannot~~credit ~~require~~risk ~~the Company~~ to ~~settle~~determine ~~their~~a ~~award~~credit invaluation ~~cash~~adjustment. WeThis ~~use~~model ~~the~~is ~~Black-Scholes~~based ~~option~~on ~~valuation~~the ~~model~~applicable toforward ~~estimate~~SOFR ~~the~~curve ~~fair~~as ~~value~~a reflection of ~~our~~the ~~stock~~market’s ~~options~~current onexpectation ~~the~~of ~~date~~payments ofdiscounted ~~grant.~~at market factors.

~~For~~3 ~~the~~Included ~~three~~within ~~and~~Accounts ~~six months ended June 30~~payable, ~~2022,~~accrued weexpenses ~~recorded $0.1 million~~ and ~~$0.2~~other ~~million,~~liabilities ~~respectively,~~on ~~in compensation expense related to stock options as compared to $0.2 million and $0.4 million for~~ the ~~same~~Consolidated ~~periods~~Balance ~~in 2021~~Sheets.

~~During~~4 The carrying values of the ~~six~~debt ~~months~~are ~~ended~~shown ~~June 30,~~net ~~2022,~~of nodeferred ~~stock~~financing ~~options~~costs ~~were~~of ~~granted~~$44,891 ~~27,403~~and ~~options~~$— ~~were~~as ~~exercised~~of ~~and~~September 30, no2022 ~~options~~and ~~were~~December 31, ~~forfeited~~2021, respectively. AThe ~~total~~Company estimates the fair value of ~~132~~its debt,~~167~~ ~~and~~net ~~159,570~~by ~~options~~discounting ~~were~~the ~~outstanding~~future atcash ~~June 30,~~flows ~~2022~~using rates and ~~December 31,~~borrowing ~~2021,~~spreads ~~respectively.~~currently available to the Company.

~~Restricted~~Fair ~~Stock~~Value ~~Units~~Measurements on a Nonrecurring Basis

~~RSUs~~Assets ~~granted~~measured ~~prior~~at tofair ~~2016~~value ~~are~~on ~~subject to~~ a ~~six-year~~nonrecurring ~~vesting,~~basis ~~with~~generally ~~20%~~consist ~~vesting~~of ~~after~~real ~~year~~estate ~~two~~acquired, ~~and~~investments ~~20%~~in ~~vesting~~unconsolidated ~~after~~joint ~~each~~ventures, ofand assets the ~~next~~Company ~~four~~expects ~~years.~~to ~~RSUs~~sell ~~granted~~that ~~during~~were ~~and~~subject ~~subsequent~~ to ~~2016~~impairment ~~are~~charges ~~subject~~in toconnection awith ~~five-year~~the ~~vesting~~Company’s atchange ~~the~~of ~~rate~~intent ofto ~~20%~~sell ~~per~~the ~~year~~investments orand athrough ~~three-year~~its ~~vesting~~recoverability atanalysis. ~~the~~See ~~rate~~Note of2 ~~one-third~~— ~~per~~Summary ~~year.~~of ~~Grantees~~Significant ~~receive~~Accounting ~~dividends~~Policies for ~~each~~more ~~outstanding~~information ~~RSU~~regarding ~~equal to~~ the ~~per~~fair ~~share~~value ~~dividend~~measurement ~~received~~of bythe ~~common~~assets ~~stockholders,~~acquired ~~which~~and ~~are~~liabilities ~~recorded~~assumed in ~~paid-in~~connection ~~capital.~~with ~~We expense any dividends previously paid upon forfeiture of~~ the ~~related RSU~~Merger. ~~Upon~~The ~~vesting,~~Company ~~the~~estimates ~~grantee~~fair ~~receives~~value ~~shares~~based ofon ~~common~~expected ~~stock~~sales ~~equal~~prices toin the ~~number~~market of(Level ~~vested~~2) ~~RSUs,~~or ~~less shares of common stock withheld in exchange for tax withholding made~~ by applying the ~~Company~~income toapproach ~~satisfy~~methodology ~~the~~using ~~grantee’s~~a ~~statutory~~discounted ~~tax~~cash ~~liabilities~~flow ~~arising~~analysis ~~from~~(Level ~~the vesting~~3). ~~The~~During ~~fair~~the ~~value~~periods ofpresented, ~~our RSUs is determined based upon~~ the ~~applicable~~Company ~~closing~~did ~~trading~~not ~~price~~record ofany ~~our~~impairment ~~common stock on the date of grant~~losses.

InNote March 2020, the Compensation Committee of the Board approved an annual performance-based equity incentive program (“Annual Equity Incentive Program”) under the Company’s 2012 Equity and Performance-Based Incentive Compensation Plan7. ~~Under~~Lease the program, certain employees will be eligible on an annual basis to receive RSUs based on the Company’s achievement of pre-established targets for (i) growth in net asset value per share, and (ii) stockholder value creation, each as computed pursuant to the terms of the Annual Equity Incentive Program. In the event the pre-established targets are achieved, eligible employees will receive the target award, except that the Compensation Committee of the Board may adjust the actual award to 75% to 125% of the target award based on its assessment of whether certain strategic and operational goals were accomplished in the performance period. RSUs awarded under the Annual Equity Incentive Program for the 2022 performance year will be awarded on or around March 1, 2023 and will vest in five equal installments, with the first installment vesting on the award date. RSU holders will earn dividend equivalent rights during the vesting period. Agreements

~~For~~The ~~the~~Company’s ~~three~~rental ~~and~~revenue ~~six~~primarily ~~months~~consists ~~ended~~of ~~June 30,~~rent ~~2022,~~earned ~~respectively,~~from weoperating ~~recorded~~leases $1at the Company’s real estate properties.7 ~~million~~Leases generally include both a fixed base rent and $2variable component.2 ~~million~~The invariable ~~compensation~~component ~~expense~~of ~~related~~the toleases ~~RSUs~~primarily consists of the reimbursement of operating expenses such as ~~compared~~real toestate ~~$1.8~~taxes, ~~million~~insurance, management fees, and $3common area maintenance costs.2 ~~million~~Leases ~~for~~are ~~the~~generally ~~same~~longer ~~periods~~term inand ~~2021.~~may contain extension and termination options at the lessee’s election.

The following table details the components of operating lease income from leases in which the Company is the lessor:


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from July 1, 2022 through July 19, 2022		Three Months Ended September 30, 2021		Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Fixed lease payments	$	59,492	$	16,967	$	82,652	$	184,011	$	247,387
Variable lease payments	18,272		5,445		27,826		62,164		80,921
Rental revenue	$	77,764	$	22,412	$	110,478	$	246,175	$	328,308

Note 8. Related Party Transactions

Master Services Agreement

On July 20, 2022, the Company entered into a Master Services Agreement with Link Logistics Real Estate Holdco LLC (together with its subsidiaries, “Link”), a portfolio company owned by Blackstone-advised investment vehicles, to provide, as applicable, corporate support services (including, without limitation, accounting, legal, tax, treasury, valuation services, information

Table of Contents

technology and data management), loan management, management services, operational services, property management services, and transaction support services to the Company. During the ~~six~~period ~~months~~from ~~ended~~July ~~June~~ 20, 2022 through September 30, 2022, 38total fees of $1,~~151~~722, ~~RSUs~~were recognized in the line item General and administrative in the Consolidated Statements of Operations. During the period from July 20, 2022 through September 30, 2022, total fees of $2,772 were ~~granted~~recognized in the line item Property operating expenses in the Consolidated Statements of Operations. As of September 30, 222022,~~209~~ ~~RSUs~~the ~~vested~~Company had $15,837 due to Link recorded in the line item Due to affiliates in the Consolidated Balance Sheets and ~~55,976~~$9 ~~RSUs~~due ~~were~~from ~~forfeited~~Link recorded in the line item Due from affiliates in the Consolidated Balance Sheets. The current term of the Master Services Agreement extends to December 31, 2022, and may be renewed for additional one-year terms thereafter; provided, however, that the Master Services Agreement may be terminated at any time upon prior written notice by either Link or the Company.

~~Tax~~During ~~withholding~~the ~~totaling~~period ~~$1.3~~from ~~million~~July ~~were~~20, ~~made~~2022 onthrough ~~behalf~~September of30, ~~employees~~2022, inthe ~~exchange~~Company ~~for~~incurred ~~7,920~~expenses ~~shares~~in ofconnection ~~common~~with ~~stock~~the ~~withheld~~Merger ~~upon~~totaling ~~vesting~~$14,948, for ~~the~~services ~~six~~rendered ~~months~~by ~~ended~~Link. ~~June 30,~~Such ~~2022,~~expenses ~~resulting~~are recorded in the ~~issuance~~line ofitem ~~12,528~~Merger ~~shares~~costs ofin ~~common~~the ~~stock.~~Consolidated Statements of Operations.

~~Tax~~Parent ~~withholding~~Partners totaling $3.2 million were made on behalf of employees in exchange for 20,824 shares of common stock withheld upon vesting for the six months ended June 30, 2021, resulting in the issuance of 28,439 shares of common stock. A total of 78,557 and 118,591 RSUs were outstanding at June 30, 2022 and December 31, 2021, respectively. Loans

~~Under~~In ~~the~~connection ~~Retirement~~with ~~Plan~~the ~~for~~closing ~~Non-Employee~~of ~~Directors (~~the ~~“Director Retirement Plan”)~~Merger, ~~the~~in ~~Company~~lieu ~~grants~~of ~~1,000~~distributing ~~shares~~all of ~~common~~the ~~stock~~proceeds ~~for~~from ~~each~~the ~~year~~Mortgage ~~served~~Loans asto afund ~~director~~the upconsideration tofor athe ~~maximum of 10~~Merger,~~000~~ ~~shares~~certain ~~issued~~amounts ~~upon~~were ~~retirement.~~loaned ~~The~~to ~~Company~~the ~~recognizes~~Parent ~~compensation~~Partners ~~expense~~(the ~~with~~“Parent ~~regard~~Partners toLoans”). ~~grants~~The toParent bePartners ~~issued~~Loans inare ~~the~~evidenced ~~future~~by ~~under~~promissory ~~the~~notes, ~~Director~~bear ~~Retirement~~interest ~~Plan~~at ~~over~~4.16% ~~the~~per ~~requisite~~annum ~~service~~and ~~period.~~mature ~~For~~in ~~the~~July ~~three~~2027. ~~and~~The ~~six~~aggregate ~~months~~principal ~~ended~~amount ~~June 30,~~of ~~2022,~~the weParent ~~recorded~~Partners ~~$0.3~~Loans ~~million~~is ~~and~~ $~~0.5 million~~1, ~~respectively~~285,575, inand ~~compensation~~is ~~expense~~recorded ~~related~~within toAccumulated ~~these~~earnings ~~shares~~(deficit) ason ~~compared to $0.3 million and $0.5 million for~~ the ~~same~~Consolidated ~~periods~~Balance ~~in 2021~~Sheets.

~~No director retirement shares were issued during the six months ended June 30, 2022.~~Other

InGryphon ~~April~~Mutual ~~2021~~Insurance Company (“GMUC”), wean ~~issued~~affiliate 10of the Company,~~000~~ ~~shares~~is ofa ~~common~~captive ~~stock~~insurance company that began providing insurance coverage to athe ~~director~~Company ~~upon~~in ~~retirement~~July ~~with~~2022. anDuring ~~aggregate~~the ~~fair~~period ~~value~~from ofJuly 20, 2022 through September 30, 2022, the Company incurred $~~1.6~~986 ~~million~~for insurance premiums recognized in Property operating expenses in the Consolidated Statements of Operations. ~~Compensation~~The ~~expense~~fees paid are in place of insurance premiums and fees that would otherwise be paid to third party insurance companies, and are equivalent or less than the rate third-party insurance companies would charge for ~~these~~such ~~shares~~services. ~~was~~There ~~previously~~were ~~recognized~~$— amounts payable to GMUC as of September 30, 2022.

12Note 9. ~~Merger~~Stockholders' ~~Events~~ Equity

OnPreferred April 24, 2022, PSB and the OP entered into the Merger Agreement with Sequoia Parent LP, a Delaware limited partnership (“Parent”), Sequoia Merger Sub I LLC, a Maryland limited liability company (“Merger Sub I”), and Sequoia Merger Sub II LLC, a Maryland limited liability company (“Merger Sub II,” together with Parent and Merger Sub I, the “Parent Parties”). The Parent Parties are affiliates of Blackstone Real Estate Partners IX L.P. (the “Guarantor”), which is an affiliate of Blackstone. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the closing of the Mergers (as defined below), Merger Sub II will merge with and into the OP (the “Partnership Merger”), and, immediately following the Partnership Merger, Merger Sub I will merge with and into PSB (the “Company Merger” and, together with the Partnership Merger, the “Mergers”). Upon completion of the Partnership Merger, the Partnership will survive and the separate existence of Merger Sub II will cease. Upon completion of the Company Merger, PSB will survive and the separate existence of Merger Sub I will cease. As required pursuant to the terms of the Merger Agreement, the OP has been converted from a California limited partnership into a Maryland limited partnership.stock

~~Subject~~On toJuly 21, ~~the terms and conditions set forth in the Merger Agreement~~2022, in the ~~Mergers each share of the~~ Company’s ~~common~~issued ~~stock~~125 ~~and~~shares ~~each common unit~~ of ~~partnership~~preferred ~~interest of the OP~~stock, ~~respectively,~~par ~~subject~~value to$0.01 ~~certain~~per ~~exceptions~~share, ~~specified~~designated inas the ~~Merger~~12% ~~Agreement,~~Series ~~will~~A beRedeemable ~~converted~~Preferred ~~into~~Stock (the ~~right~~“Series toA ~~receive~~Preferred anStock”), ~~amount~~for inan aggregate cash ~~equal~~amount toof $~~187~~500.~~50,~~ ~~less~~The ~~the~~issuance ~~amount~~ of the ~~Closing~~Series ~~Cash~~A ~~Dividend~~Preferred ~~(as~~Stock ~~described~~was ~~below),~~made ~~without~~in ~~interest.~~a ~~Each~~private ~~share~~placement ofin ~~PSB’s~~reliance ~~outstanding~~on ~~preferred~~Section ~~stock~~ 4(~~and~~a)(2) ~~each~~of ~~depositary~~the ~~share~~Securities ~~representing~~Act anof ~~interest~~1933, ~~therein)~~as ~~will~~amended, ~~remain~~and ~~outstanding~~the inrules ~~accordance~~and ~~with~~regulations ~~their~~promulgated ~~respective terms~~thereunder.

OnAs 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 and (ii) a cash dividend (the "Special Cash Dividend") of $5.25 per share of the Company’s common stock, 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 amount of the pro rata dividend is based upon the Company’s current quarterly dividend rate of $1.05 per share of Company common stock and pro-rated for the number of days from and including JulySeptember 130, 2022 ~~through~~and ~~the day immediately prior to the closing date of the transaction. Based on the anticipated closing date of the transaction of July~~December 2031, ~~2022~~2021, the ~~pro rata dividend will equal $0.216848 per share of~~ Company ~~common~~had ~~stock, and each of~~ the ~~pro~~following ~~rata~~series ~~dividend and the Closing Cash Dividend will be payable immediately prior to the partnership merger effective time on July 20, 2022 to the holders~~ of ~~record~~preferred asstock ~~of the close of business on July 19, 2022.~~outstanding:

If the transaction is completed on July 20, 2022, Company stockholders who hold their shares of common stock on the record date for the dividends and through the effective time of the Company merger will be entitled to receive an aggregate of $187.716848 per share in cash, consisting of (i) $187.50, representing the $5.25 closing cash dividend and the merger consideration of $187.50 per share as reduced by the $5.25 closing cash dividend plus (ii) the $0.216848 pro rata dividend.


Series	Issuance Date	Earliest Potential Redemption Date	Dividend Rate		Shares Outstanding
Series X	September 2017	September 2022	5.250	%	9,200
Series Y	December 2017	December 2022	5.200	%	8,000
Series Z	November 2019	November 2024	4.875	%	13,000
Series A1	July 2022	N/A1	12.000	%	125
Total					30,325

____________________________

1 The Company, at its option, may redeem shares of the Series A Preferred Stock, by resolutions of the Board, in whole or in part, at any time or from time to time, for cash at a redemption price equal to $4,000 per share plus an amount equal to all accrued and unpaid dividends thereon to and including the date fixed for redemption. The redemption is within the Company’s control, and thus the preferred equity arrangements are classified as permanent equity in the Consolidated Financial Statements. The preferred stock was issued in 2022 and therefore the balance as of December 31, 2021 was $—.

The Company paid $9,580, $— and $12,046 in distributions to its preferred stockholders for the period from July 20, 2022 through September 30, 2022, the period from July 1, 2022 through July 19, 2022, and the three months ended September 30, 2021, respectively.

Table of Contents

IfThe ~~the~~Company ~~closing~~paid ~~date~~$9,580, of$19,160 ~~the~~and ~~transaction~~$36,139 isin ~~delayed~~distributions ~~past~~to ~~July 20,~~its ~~2022,~~preferred ~~holders~~stockholders offor the ~~Company’s~~period ~~common~~from ~~stock~~July ~~will~~20, ~~not~~2022 ~~receive~~through ~~the~~September ~~pro~~30, ~~rata~~2022, ~~dividend~~the orperiod ~~the~~from ~~closing~~January ~~cash~~1, ~~dividend~~2022 onthrough July 20 19, 2022, and ~~in such case~~ the ~~Company~~nine ~~will~~months ~~make~~ended aSeptember 30, ~~public~~2021, ~~announcement providing further updates with respect to these matters~~respectively.

~~The~~Series consummation of the Mergers is subject to certain customary closing conditions. A termination fee of up to $220.0 million may be payable by the Company if the Merger Agreement is terminated in certain specified circumstancesX, ~~as more fully described in the Merger Agreement. A termination fee of $735.0 million may be payable by Parent if the Merger Agreement is terminated in certain other specified circumstances~~Y, asand ~~more~~Z ~~fully~~preferred ~~described in the Merger Agreement.~~ stock

InThe ~~connection~~holders ~~with~~of the ~~transaction,~~Company’s ~~the~~preferred ~~Company,~~stock ~~Blackstone~~have ~~and~~general PSpreference ~~entered~~rights ~~into~~with arespect ~~support~~to ~~agreement~~liquidation, ~~pursuant~~quarterly todistributions ~~which~~and PSany ~~voted~~accumulated ~~its~~unpaid ~~common~~distributions. ~~equity~~Holders ~~interests~~of in the Company’s ~~and~~preferred ~~the~~stock OPwill innot ~~favor~~be ofentitled ~~adopting~~to ~~the~~vote ~~Merger~~on ~~Agreement~~most ~~and~~matters, ~~approving~~except ~~the~~under ~~Mergers~~certain ~~and~~conditions. In the ~~transactions~~event ~~contemplated~~of ~~thereby.~~a ~~The~~cumulative ~~support~~arrearage ~~agreement~~equal ~~will~~to ~~automatically~~six ~~terminate~~quarterly ~~in certain cases~~dividends, ~~including upon~~ the ~~termination~~holders of the ~~Merger~~Company’s ~~Agreement~~preferred instock ~~accordance~~will ~~with~~have ~~its~~the ~~terms.~~right Asto ofelect ~~April~~two ~~21,~~additional ~~2022,~~members PSto ~~held~~serve ~~approximately~~on ~~25.9% of~~ the ~~issued~~Company’s ~~and~~Board ~~outstanding shares~~ of ~~common~~Directors ~~stock of~~ (the ~~Company~~“Board”) ~~and~~until ~~20.9%~~all events of ~~the~~default ~~issued~~have ~~and~~been ~~outstanding~~cured. ~~common~~At ~~units~~September 30, of2022, ~~partnership~~there ~~interest~~were ofno ~~the~~dividends OPin arrears.

InExcept ~~connection~~under ~~with~~certain conditions relating to the ~~transaction~~Company’s qualification as a REIT, the Company’s ~~recorded~~preferred ~~Merger~~stock ~~related~~is ~~costs~~not redeemable prior to the redemption dates noted above. On or after the respective redemption dates, the respective series of preferred stock will be redeemable, at the option of the Company, in whole or in part, at $625.100 ~~million~~per depositary share, inplus ~~general~~any accrued and ~~administrative~~unpaid ~~expenses,~~dividends. ~~for~~The ~~professional~~redemption ~~fees~~is within the Company’s control, and ~~investor~~thus ~~related~~the ~~services~~preferred equity arrangements are classified as permanent equity in the Consolidated Financial Statements.

13Pursuant to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Company Merger Effective Time”), each share of the 5.250% ~~Subsequent~~Series ~~Events~~X Cumulative Preferred Stock of the Company, par value $0.01 per share, 5.200% Series Y Cumulative Preferred Stock of the Company, par value $0.01 per share, and 4.875% Series Z Cumulative Preferred Stock of the Company, par value $0.01 per share (collectively, the “Existing Preferred Stock”), issued and outstanding immediately prior to the Company Merger Effective Time and each depositary share issued pursuant to the deposit agreements for the Existing Preferred Stock, representing one-thousandth of one share of Existing Preferred Stock issued and outstanding immediately prior to the Company Merger Effective Time, was unaffected by the Merger and remained outstanding in accordance with their respective terms.

OnCommon ~~July 8,~~stock ~~2022,~~and the Company completed the sale of five properties with approximately 0.3 million rentable square feet to PS for $47.0 million. These properties were originally contributed to the Company by PS in connection with the Company’s initial public offering in 1998.units

OnThe ~~July 15,~~following ~~2022,~~table ~~the~~summarizes ~~Company announced that, at a special meeting of stockholders held earlier that day,~~ the Company’s ~~common~~distributions ~~stockholders voted~~ to ~~approve~~common ~~the~~stockholders ~~Company Merger~~ and ~~the~~common ~~other~~unit transactions contemplated by the Merger Agreement. Subject to the satisfaction or waiver of all of the conditions to the closing of the transaction in the Merger Agreement, the transaction is expected to be completed on or around July 20, 2022. holders:

The description of the Merger Agreement set forth in these Notes to the Consolidated Financial Statements is only a summary, does not purport to be complete, and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 to the Company’s current report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on April 25, 2022.


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from July 1, 2022 through July 19, 2022		Three Months Ended September 30, 2021		Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Distributions to common stockholders	$	—	$	151,056	$	28,923	$	209,079	$	86,713
Distributions to common unit holders	$	—	$	39,972	$	7,691	$	55,358	$	23,072

Pursuant to the terms and conditions of the Merger Agreement, at Company Merger Effective Time, each share of common stock of the Company, par value $0.01 per share (“Common Stock”), issued and outstanding immediately prior to the Company Merger Effective Time was automatically converted into the right to receive an amount in cash equal to $182.25 per share, without interest and less any applicable withholding taxes, representing $187.50 per share of Common Stock as reduced by the $5.25 per share Closing Cash Dividend.

Note 10. Incentive Compensation

Prior to the Merger, under various share-based compensation plans, PSB granted non-qualified options to purchase the Company’s common stock at a price not less than fair value on the date of grant, as well as RSUs, to certain directors, officers and key employees.

Prior to the Merger, we amortized the fair value of awards starting at the beginning of the service period as compensation expense. For awards that are earned solely upon the passage of time and continued service, the entire cost of the award was amortized on a straight-line basis over the service period. For awards with performance conditions, the individual cost of each vesting was amortized separately over each individual service period (the “accelerated attribution” method). We accounted for forfeitures of share-based payments as they occurred by reversing previously amortized share-based compensation expense with respect to unvested grants that were forfeited in the period the employee terminates employment.

Table of Contents

~~ITEM~~In 2.connection ~~MANAGEMENT’S~~with ~~DISCUSSION~~the ~~AND~~separation ~~ANALYSIS~~agreement OFwith ~~FINANCIAL~~our ~~CONDITION~~former ~~AND~~President ~~RESULTS~~and OFChief ~~OPERATIONS~~Executive Officer (“CEO”), who stepped down from his positions with the Company for health reasons effective March 23, 2022, the Company paid a lump sum payment of $6,643 in exchange for 41,186 restricted stock units owned by the former CEO, which represents the market value of the Company common stock underlying such units as of March 18, 2022.

~~Forward-Looking~~Pursuant 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,~~terms ~~the words “may,” “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” “intends”~~ and ~~similar~~conditions ~~expressions are intended to identify forward-looking statements. There are a number~~ of ~~important factors that could cause~~ the ~~results~~Merger ~~of the Company to differ materially from those indicated by such forward-looking statements~~Agreement, ~~including~~at ~~but not limited to: (i) the occurrence of any event, change~~ or ~~other~~immediately ~~circumstance~~prior ~~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~~as ~~may affect the timing or occurrence of the proposed transaction or result in significant costs of defense~~applicable, ~~indemnification and liability; (iv)~~ the ~~effect~~Company ofMerger ~~the~~Effective ~~announcement of the proposed transaction on the ability of PSB to retain and hire key personnel and maintain relationships with its tenants~~Time, ~~vendors~~each ~~and~~2022 ~~others~~Equity ~~with~~Incentive ~~whom~~Plan itaward ~~does~~approved ~~business,~~under ~~or on its operating results and businesses generally; (v) risks associated with~~ the ~~disruption of management~~Company’s ~~attention~~2022 ~~from~~Equity ~~ongoing~~Incentive ~~business~~Plan ~~operations~~Awards ~~due~~Program towas ~~the~~cancelled 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~~exchange ~~economic~~for ~~and business conditions, including as~~ a ~~result~~specific ofcash 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 1986payment, asless 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~~applicable ~~person~~withholding ~~that our objectives and plans will be achieved~~taxes. 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~~Stock ~~Accounting Policies and Estimates:~~ Options

~~Our~~For ~~critical~~the ~~accounting~~period ~~estimates~~from ~~are~~July ~~defined~~1, as2022 ~~accounting~~through ~~estimates~~July or19, ~~assumptions~~2022 ~~made~~and inthe ~~accordance~~three ~~with~~months ~~U.S.~~ended ~~generally~~September 30, ~~accepted accounting principles ("GAAP")~~2021, ~~which~~we ~~involve~~recorded a$— ~~significant level of estimation uncertainty or subjectivity~~ and ~~have~~$124, ~~had~~respectively, orin ~~are~~compensation ~~reasonably~~expense ~~likely~~related to ~~have~~stock aoptions. ~~material~~For ~~impact~~the onperiod ~~our~~from ~~financial~~January ~~condition or results of operations. Our significant accounting policies~~1, ~~which~~2022 ~~utilize~~through ~~these~~July ~~critical accounting estimates~~19, ~~are~~2022 ~~described~~and inthe ~~Note~~nine 2months –ended ~~“Summary~~September 30, of2021, ~~significant~~we ~~accounting~~recorded ~~policies”~~$— toand ~~our~~$523, ~~consolidated~~respectively, ~~financial statements under Item 1~~ in ~~this~~compensation ~~quarterly~~expense ~~report~~related onto ~~Form~~stock ~~10-Q~~options.

During the ~~three~~period ~~months~~from ~~ended~~January ~~June 30~~1, 2022, ~~there~~through ~~were~~July no19, ~~material~~2022, ~~changes~~zero tostock ~~our~~options ~~critical~~were ~~accounting~~granted, ~~estimates~~27,403 asoptions ~~compared~~were toexercised, ~~the~~132,167 ~~critical~~options ~~accounting~~were ~~estimates~~cancelled, ~~disclosed in Management’s Discussion~~ and ~~Analysis~~zero ofoptions ~~Financial~~were ~~Condition~~forfeited. ~~and~~A ~~Results~~total of ~~Operations~~zero ~~contained~~and ~~in Part II~~159,570 ~~Item~~options 7were ofoutstanding ~~our~~at ~~Annual~~September 30, ~~Report~~2022 onand ~~Form 10-K for the year ended~~ December 31, 2021, respectively.

Pursuant to the terms and conditions of the Merger Agreement, at or immediately prior to, as applicable, the Company Merger Effective Time, each stock option to purchase shares of Common Stock (each, a “Company Option”) outstanding immediately prior to the Company Merger Effective Time was automatically cancelled in exchange for a cash payment in an amount in cash equal to (1) the number of shares of Common Stock subject to the Company Option immediately prior to the Company Merger Effective Time multiplied by (2) the excess of the Per Company Share Merger Consideration over the per share exercise price applicable to the Company Option, less any applicable withholding taxes.

Restricted Stock Units

For the period from July 1, 2022 through July 19, 2022 and the three months ended September 30, 2021, we recorded $327 and $1,946, respectively, in compensation expense related to RSUs. For the period from January 1, 2022 through July 19, 2022 and the nine months ended September 30, 2021, we recorded $2,522 and $5,093, respectively, in compensation expense related to RSUs.

During the period from January 1, 2022 through July 19, 2022, 38,151 RSUs were granted, 22,209 RSUs vested, 78,557 were cancelled, and 55,976 RSUs were forfeited.

Tax withholding totaling $1,318 were made on behalf of employees in exchange for 7,920 shares of common stock withheld upon vesting for the period from January 1, 2022 through July 19, 2022, resulting in the issuance of 12,528 shares of common stock. Tax withholding totaling $3,680 were made on behalf of employees in exchange for 23,935 shares of common stock withheld upon vesting for the nine months ended September 30, 2021, resulting in the issuance of 33,128 shares of common stock. A total of zero and 118,591 RSUs were outstanding at September 30, 2022 and December 31, 2021, respectively.

Under the Retirement Plan for Non-Employee Directors (the “Director Retirement Plan”), the Company granted 1,000 shares of common stock for each year served as a director up to a maximum of 10,000 shares issued upon retirement. In April 2021, we issued 10,000 shares of common stock to a director upon retirement with an aggregate fair value of $1,635. Compensation expense for these shares was previously recognized. No director retirement shares were issued during the period from January 1, 2022 through July 19, 2022.

For the period from July 1, 2022 through July 19, 2022 and the three months ended September 30, 2021, we recorded $68 and $275, respectively, in compensation expense related to the Director Retirement Plan shares. For the period from January 1, 2022 through July 19, 2022 and the nine months ended September 30, 2021, we recorded $812 and $759, respectively, in compensation expense related to the Director Retirement Plan shares.

Pursuant to the terms and conditions of the Merger Agreement, at or immediately prior to, as applicable, the Company Merger Effective Time, each Company RSU award of restricted stock units covering shares of Common Stock granted under a Company equity plan and each award of deferred stock units governed under the Company’s retirement plan for non-employee directors that were outstanding immediately prior to the Company Merger Effective Time was cancelled in exchange for a cash payment in an amount in cash equal to (1) the number of shares of Common Stock subject to the Company RSU Award immediately prior to the

Table of Contents

~~Business~~Company ~~Overview~~Merger Effective Time multiplied by (2) the Per Company Share Merger Consideration, less any applicable withholding taxes.

~~The~~In ~~Company~~addition, iseach aCompany ~~fully-integrated,~~RSU ~~self-advised~~Award and ~~self-managed~~vested ~~REIT~~(as ~~that~~of ~~owns~~July 19, ~~operates,~~2022) ~~acquires~~Company ~~and~~Deferred ~~develops~~Stock ~~commercial~~Unit ~~properties,~~Award ~~primarily~~was ~~multi-tenant~~additionally ~~industrial~~entitled, ~~industrial-flex,~~pursuant ~~and~~to ~~low~~the ~~rise-suburban~~terms ~~office space. As~~ of ~~June 30,~~each ~~2022~~award, ~~the~~to ~~Company~~a ~~owned~~dividend ~~and~~equivalent ~~operated~~payment ~~26.6~~in ~~million~~respect ~~rentable square feet~~ of ~~commercial~~the ~~space~~Pro inRata ~~six~~Dividend. ~~states~~Each ~~consisting~~holder of 93a ~~parks~~Company ~~and~~RSU ~~636~~Award, ~~buildings. The~~ Company’s ~~properties~~Deferred ~~are~~Stock ~~primarily~~Unit ~~located~~Award inand/or ~~major~~Company ~~coastal~~Option ~~markets~~received ~~that~~an ~~have~~aggregate ~~experienced~~payment ~~long-term~~with ~~economic~~respect ~~growth.~~to ~~The~~such ~~Company~~award ~~also~~inclusive ~~held~~of athe ~~95.0%~~aggregate ~~interest~~Closing inCash aDividend ~~joint~~that ~~venture~~such ~~entity~~holder ~~which~~would ~~owns~~have ~~Highgate~~received athad ~~The~~such ~~Mile,~~Company aRSU ~~395-unit~~Award ~~multifamily~~or ~~apartment~~Company ~~complex~~Deferred ~~located~~Stock inUnit ~~Tysons,~~Award ~~Virginia,~~been ~~and~~settled ~~a 98.2% interest~~ in aCompany ~~joint~~Common ~~venture~~Stock ~~formed~~or toCompany ~~develop~~Option ~~Brentford~~been atexercised, ~~The~~in ~~Mile~~each case, aimmediately ~~planned~~prior ~~411-unit~~to ~~multifamily~~the ~~apartment~~close ~~complex~~of ~~also~~business ~~located~~on ~~in Tysons~~July 19, ~~Virginia~~2022.

~~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”)11. ~~The~~Commitments ~~Merger,~~and 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. Contingencies

~~Existing~~Funding ~~Real~~Commitments ~~Estate~~— ~~Facilities:~~In ~~The~~conjunction ~~operating~~with ~~results~~the terms of ~~our~~the ~~existing~~leases ~~real~~with ~~estate~~certain ~~facilities~~of ~~are substantially influenced by demand for rental space within~~ our ~~properties and our markets~~tenants, 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~~has ~~decrease~~commitments ~~rental~~for ~~rates~~tenant inimprovements ~~markets~~of ~~where~~$1,886 ~~conditions~~on ~~require. Management’s initiatives and strategies with respect to~~ our ~~existing~~ real estate ~~facilities,~~properties ~~which~~owned ~~include~~at ~~incentivizing~~September 30, ~~our personnel to maximize the return on investment for each lease transaction and provide a superior level of service to our customers~~2022.

~~Acquisitions~~Concentration of ~~Real~~Credit ~~Estate~~Risk ~~Facilities:~~—The WeCompany ~~seek~~maintains toits ~~grow~~cash, ~~our~~cash ~~portfolio~~equivalents ~~through~~and ~~acquisitions~~restricted ofcash ~~facilities~~at ~~generally~~various ~~consistent~~high-quality ~~with~~financial ~~the~~institutions. ~~Company’s~~The ~~focus~~consolidated onaccount ~~owning~~balances ~~concentrated~~at ~~business~~each ~~parks~~institution ~~with~~typically ~~easy~~exceed toFederal ~~configure~~Deposit ~~space~~Insurance Corporation (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts on deposit in ~~markets~~excess ~~and~~of ~~product~~FDIC ~~types~~insurance ~~with~~coverage. ~~favorable~~The ~~long-term~~Company ~~return~~believes ~~potential~~this risk is not significant.

WeEnvironmental ~~continue~~— toAs ~~seek~~an owner of real estate, the Company is subject to ~~acquire~~various ~~additional~~environmental ~~properties~~laws inof ~~our~~federal, state, and local governments. Compliance with existing ~~markets~~environmental laws has not had a material impact on the Company’s consolidated financial condition and ~~generally~~results inof ~~close~~operations. ~~proximity~~The Company has obtained various environmental insurance policies to ~~our~~mitigate ~~existing~~its ~~portfolio;~~exposure ~~however,~~to ~~there~~environmental ~~can~~obligations. beThe noCompany ~~assurance~~cannot ~~that~~predict wethe ~~will~~impact ~~acquire~~of ~~additional~~unforeseen ~~facilities~~environmental contingencies or new or changed laws or regulations on its properties, properties that ~~meet~~have ~~our~~been ~~risk-adjusted~~sold, ~~return~~or ~~and~~properties ~~underwriting~~that ~~requirements~~may be acquired in the future.

~~Development~~Litigation or— ~~Redevelopment~~The Company is party to a variety of ~~Real~~legal ~~Estate~~proceedings ~~Facilities:~~arising Inin ~~certain~~the ~~instances,~~ordinary wecourse ~~may~~of ~~seek~~business. toAll ~~redevelop~~of ~~our~~these ~~existing~~matters, ~~real~~taken ~~estate~~together, ordid ~~develop~~not ~~new~~have ~~buildings~~a material impact on ~~excess~~the ~~land~~consolidated ~~parcels.~~financial condition, results of operations, or of the Company.

~~As of June 30, 2022, we were in the process of developing an approximately 83,000 square foot multi~~Off-~~tenant~~Balance ~~industrial~~Sheet ~~building~~Liabilities at— ~~our~~The ~~212~~Company ~~Business~~may ~~Park~~be ~~located~~required inunder ~~Kent,~~capital ~~Washington.~~commitments ~~During~~or ~~the~~may ~~quarter~~choose ~~ended~~to ~~June 30,~~make ~~2022,~~additional ~~$1.5 million~~capital ~~was~~contributions ~~reclassified from land~~ to ~~property~~certain ~~held for development on our consolidated balance sheet and, as~~ of ~~June 30,~~its ~~2022,~~unconsolidated ~~$10.7 million of the estimated $17.1 million total development costs had been incurred. The total investment~~entities, ~~inclusive~~representing ofits ~~land~~proportionate ~~and~~ownership ~~development costs~~interest, ~~for~~should ~~the~~additional ~~212~~capital ~~Business~~contributions ~~Park development is projected to~~ be ~~$18.6 million.~~necessary ~~This construction project is scheduled~~ to befund ~~completed~~development inor ~~the~~acquisition ~~fourth~~costs, ~~quarter~~repayment of ~~2022.~~debt Asor ofoperational ~~June 30, 2022, we have contractual construction commitments totaling $3~~shortfalls.~~7 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.

Table of Contents

InNote 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 complex12. ~~Under~~Supplemental ~~the~~Cash ~~Brentford~~Flow 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. Disclosures

~~Construction of Brentford at~~ The ~~Mile~~following ~~commenced~~table inrepresents ~~August~~supplemental ~~2020~~cash ~~and~~flow 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. disclosures:

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.


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Reconciliation to the Consolidated Balance Sheets:




Cash and cash equivalents	$	112,180	$	7,056	$	46,594
Restricted cash	634		—		—
Total cash and cash equivalents and restricted cash	$	112,814	$	7,056	$	46,594

Supplemental disclosures of cash flow information:
Interest paid	$	35,972	$	58	$	—
Interest capitalized	$	—	$	—	$	—
Income taxes paid	$	25	$	—	$	—
Cash paid for operating lease liabilities	$	33	$	—	$	—

Supplemental disclosures of non-cash activities:

Accrued but not yet paid development and capital expenditures	$	(3,289)	$	(3,160)	$	(3,362)


Pushdown accounting opening balance sheet	$	5,306,541	—		$	—
Distribution of Non-Core Portfolio	$	1,295,217	$	—	$	—

WeIn ~~consolidate~~connection ~~both~~with the ~~joint~~Merger, ~~venture~~the ~~that~~Company ~~owns~~applied ~~Highgate~~pushdown ataccounting ~~The~~and ~~Mile~~the ~~and~~non-cash activity represents the ~~joint~~fair ~~venture~~value ~~that~~of isassets ~~developing~~acquired ~~Brentford~~less atliabilities ~~The~~assumed ~~Mile~~to reflect the acquisition in accordance with ASC 805. Refer to Note 2. Summary of Significant Accounting Policies for additional details.

~~See “Analysis of Net Income – Multifamily” below and~~ Note 313. ~~and~~Subsequent ~~4 to our consolidated financial statements for more information on Highgate at The Mile and Brentford at The Mile.~~Events

~~Sale~~In ofOctober 2022, the Brentford Joint Venture entered into an agreement with Blackstone Real Estate ~~Facilities:~~Partners WeIX, ~~may~~L.P, ~~from~~an ~~time~~affiliate, to ~~time~~borrow ~~sell~~$110,000, ~~individual~~at ~~real~~an ~~estate~~interest ~~facilities~~rate ~~based~~equal onto ~~market~~SOFR ~~conditions~~plus 2.25%, ~~fit~~which ~~with~~is ~~our~~the ~~existing~~rate ~~portfolio~~at which Blackstone Real Estate Partners IX, ~~evaluation~~L.P ofborrowed ~~long-term~~under ~~potential~~its ~~returns~~unsecured revolving credit facility. The loan is collateralized by the real estate assets owned by the Brentford Joint Venture and has a maturity date of ~~markets~~November or2025. ~~product~~Subsequent ~~types~~to closing, orthe ~~other~~Brentford ~~reasons~~Joint Venture distributed the proceeds to the JV partner. No additional material subsequent events have occurred since September 30, 2022 that require recognition or disclosure in the Company’s Consolidated Financial Statements.

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.

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.

Table of Contents

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 locatedItem 2. ~~Due to the uncertainty of the COVID-19 pandemic~~ Management’s ~~impact~~Discussion ~~on the Company’s future ability to grow or maintain existing occupancy levels, possible decreases in rental rates on new~~ and ~~renewal~~Analysis ~~transactions, and the potential negative effect~~ of ~~additional~~Financial ~~rent~~Condition ~~deferrals, rent abatements,~~ and ~~customer~~Results ~~defaults,~~of ~~we believe in some instances the COVID-19 pandemic may continue to have adverse effects on rental income for 2022 and possibly beyond~~Operations.

~~Impact~~(dollars ~~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.thousands)

~~Regional~~Forward-Looking ~~Concentration~~Statements: ~~Our~~Forward-looking ~~portfolio~~statements, iswithin ~~concentrated~~the inmeaning ~~eight~~of ~~regions~~the Private Securities Litigation Reform Act of 1995, inare ~~six~~made ~~states~~throughout this Quarterly Report on Form 10-Q. WeFor ~~have~~this ~~chosen~~purpose, toany ~~concentrate~~statements incontained ~~these~~herein ~~regions~~that ~~because~~are wenot ~~believe~~statements ~~they~~of ~~have~~historical ~~characteristics~~fact ~~which~~may ~~enable~~be ~~them~~deemed to be ~~competitive~~forward-looking ~~economically,~~statements. ~~such~~Without aslimiting ~~above~~the ~~average~~foregoing, ~~population~~the ~~growth~~words “may,” ~~job~~“believes,” ~~growth~~“anticipates,” ~~higher~~“plans,” ~~education~~“expects,” ~~levels~~“seeks,” “estimates,” “intends” and ~~personal~~similar ~~income~~expressions are intended to identify forward-looking statements. ~~Changes~~There inare ~~economic~~a ~~conditions~~number inof ~~these~~important ~~regions~~factors inthat could cause the ~~future~~results ~~could~~of ~~impact~~the ~~our~~Company ~~future~~to ~~results.~~differ materially from those indicated by such forward-looking statements, including but not limited to the following:

~~Industry~~•changes ~~and~~in ~~Customer~~general ~~Concentrations:~~economic Weand ~~seek~~business ~~to minimize the risk of industry or customer concentrations. As of June 30~~conditions, ~~2022,~~including ~~leases~~as ~~from~~a ~~our~~result ~~top 10 customers comprised 10.0%~~ of ~~our annualized rental income, with only four customers representing 1% or more–~~ the USeconomic ~~Government~~fallout ~~(2.5%), Amazon Inc. (1.6%), KZ Kitchen Cabinet & Stone (1.3%), and Luminex Corporation (1.0%). In terms~~ of ~~industry~~the ~~concentration,~~COVID-19 ~~24.1%~~pandemic; ~~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~~•potential ~~credit~~regulatory ~~risk:~~actions ~~Historically,~~to weclose ~~have~~our ~~experienced~~facilities aor ~~low~~limit ~~level~~our ofability ~~write-offs~~to ofevict ~~uncollectible~~delinquent ~~rents,~~customers; ~~with~~decreases ~~less~~in ~~than 0.4% of~~ rental ~~income~~rates ~~written~~or ~~off~~increases in ~~any~~vacancy ~~single~~rates/failure ~~year~~to ~~from~~renew ~~2011-2019.~~or Asreplace ofexpiring ~~June 30,~~leases; ~~2022 and December 31, 2021, our level of write-offs of uncollectible rents were 0.1%, and 0.0% of rental income, respectively.~~

As•tenant ofdefaults; 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~~•the ~~Operating~~effect ~~Income~~of the recent credit and financial market conditions;

We•our ~~utilize~~failure ~~net~~to ~~operating~~maintain ~~income~~our ~~(“NOI”),~~status as a ~~measure~~real ~~that~~estate isinvestment ~~not~~trust ~~defined~~(a in“REIT”) ~~accordance~~under ~~with GAAP, to evaluate~~ the ~~operating~~Internal ~~performance~~Revenue Code of ~~our~~1986, ~~real estate. We define NOI~~ as ~~rental~~amended ~~income~~(the ~~less Cost of Operations.~~“Code”);

~~We believe NOI assists investors in analyzing~~ •the ~~performance~~economic ofhealth ~~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~~customers; 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,~~health ~~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~~officers 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.directors;

~~See~~•increases ~~“Analysis~~in ofoperating ~~net~~costs; ~~income” below for reconciliations of each of these measures to their closest analogous GAAP measure from our consolidated statements of income.~~

•casualties to our properties not covered by insurance;

•the availability and cost of capital;

•increases in interest rates;

•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, and

•the impact of inflation.

This list of risks is not exhaustive. Additional information regarding risk factors that may affect us is discussed under the heading “Part I, Item 1A. Risk Factors”of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and under “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. 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.

Table of Contents

We periodically evaluate the appropriateness of our accounting policies in accordance with authoritative guidance. Prior to the Merger, our acquisitions of real estate or in-substance real estate were accounted for as asset acquisitions and not business combinations. The estimates used to measure the Merger accounted for as business combinations 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 September 30, 2022, there were no other 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.

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

~~For~~Business ~~the~~Overview 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~~Company ~~was~~is ~~mainly due to~~ a ~~$118.8~~REIT ~~million~~that ~~gain on sale of assets sold during the first six months of 2022~~owns, ~~compared to a $19.2 million gain on sale of assets sold during the same period in 2021~~operates, ~~combined~~acquires ~~with~~and adevelops ~~$9.0~~commercial ~~million increase in NOI from our Same Park portfolio (defined below)~~properties, aprimarily ~~$3.0 million increase in NOI from our Non~~multi-~~Same~~tenant ~~Park portfolio (defined below)~~industrial, ~~and $4.9 million lower preferred distributions in 2022 compared to 2021 due to the redemption of preferred stock in November 2021~~industrial-flex, ~~partially offset by a decrease of $7.3 million in NOI generated from assets sold, Merger related costs of $6.1 million,~~ and alow ~~one~~rise-~~time~~suburban ~~cash~~office ~~payment of $6~~space.7 ~~million~~As ~~to the former Chief Executive Officer ("CEO"), which consists~~ of ~~a $6.6~~September ~~million~~30, ~~cash payment for RSUs~~2022, athe ~~$0.1~~Company ~~million~~owned ~~cash~~471 ~~payment~~buildings ~~for COBRA coverage reimbursement~~ in ~~accordance~~six states with ~~his separation agreement~~20,659,564 ~~partially~~rentable ~~offset~~square ~~by $0~~feet.6 ~~million~~The ~~non-cash~~Company’s ~~adjustment~~properties ~~related~~are toprimarily ~~the~~located ~~reversal~~in ofmajor ~~stock~~coastal ~~compensation~~markets ~~for~~that ~~the~~have ~~unvested~~experienced ~~former~~long-term ~~CEO's~~economic ~~shares, net of dividend forfeiture expense~~growth.

~~Analysis~~The operating results of ~~Net~~our ~~Income~~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 investing in capital expenditures when market conditions indicate favorable return on investment, 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.

~~Our~~As ~~net~~a ~~income~~result ~~is comprised primarily~~ of ~~our~~the ~~real~~Merger ~~estate operations, depreciation~~ and ~~amortization~~the ~~expense,~~application ~~general~~of ~~and~~pushdown ~~administrative expense~~accounting, ~~interest~~the ~~and~~periods ~~other~~presented ~~income,~~are ~~interest~~not ~~and~~necessarily ~~other expenses and gain on sale of real estate facilities~~comparable.

WeDevelopment ~~segregate~~or ~~our~~Redevelopment ~~real~~of ~~estate~~Real ~~activities~~Estate ~~into~~Facilities: ~~(i)~~In ~~same~~certain ~~park operations~~instances, ~~generally~~we ~~representing~~may ~~all~~seek ~~operating properties acquired prior~~ to ~~January~~redevelop ~~1, 2020, comprising 25.4 million rentable square feet of~~ our ~~26.6~~existing ~~million~~real ofestate 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~~develop ~~for~~new ~~sale,~~buildings ~~including~~on ~~the~~excess ~~2022~~land ~~Assets Sold totaling 1~~parcels.1 ~~million square feet and the 2021 Asset Sold totaling 0.2 million square feet.~~

The following table presents the Company’s development pipeline at September 30, 2022:


	Number of Projects	Estimated Square Feet	Estimated Project Cost 1		Estimated Stabilization/In Service Date 2




Development/redevelopment under construction	3	472,825	$	197,254	3Q23 - 1Q24


Total	3	472,825	$	197,254

____________________________

1 Estimated project cost includes the initial purchase price allocation See Note 3. Investments in Real Estate to our Consolidated Financial Statements under Item 1 in this Quarterly Report on Form 10-Q.

2 Estimated stabilization/in service date is defined as the earlier of 12 months post completion or 90% occupancy.

Sale of Real Estate Facilities: We continually evaluate opportunities with respect to our portfolio and may from time to time sell individual real estate facilities and land parcels or groups of facilities and land parcels based on market conditions, fit with our existing portfolio, evaluation of long-term potential returns of markets or product types, or other reasons. The size of such sales may be significant to us. Refer to “Dispositions” in Note 3 — Investments in Real Estate to our Consolidated Financial Statements under Item 1 in this Quarterly Report on Form 10-Q. for a summary of our recent dispositions.

Factors that May Affect Our Future Results of Operations and Financial Condition

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.

Table of Contents

~~The~~Regional ~~table~~Concentration: ~~below~~Our ~~sets~~portfolio ~~forth~~is ~~the~~concentrated ~~various~~in ~~components~~eight ofregions, ~~our~~in ~~net~~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 ~~thousands):~~economic conditions in these regions in the future could impact our future results.

	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	%

Customer Concentrations: We seek to minimize the risk of industry or customer concentrations. No significant tenant concentrations existed as of September 30, 2022.

~~_______________~~Results of Operations

~~(1)Amounts~~Comparison ~~shown~~of ~~for~~ the ~~three~~period ~~and~~from ~~six~~July ~~months~~20, ~~ended~~2022 ~~June~~ through September 30, 2022 (Successor) and ~~2021,~~the ~~respectively,~~period ~~include~~from ~~operating~~July ~~results~~1, ~~attributable~~2022 tothrough ~~the~~July 19, 2022 ~~Assets~~(Predecessor) ~~Sold~~compared ~~and~~to the ~~2021~~three ~~Asset~~months ~~Sold~~ended September 30, ~~respectively.~~2021 (Predecessor)

(2)Cost of Operations under Cash NOI excludes the impact of stock compensation expense.


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from July 1, 2022 through July 19, 2022		Three Months Ended September 30, 2021
Revenue:
Rental revenue	$	77,764	$	22,412	$	110,478

Total revenue	$	77,764	$	22,412	$	110,478

(Revenue: Rental revenue decreased by $10,302 or 9.3~~)Stock~~%, ~~compensation~~for ~~expense~~the three months ended September 30, as2022, ~~shown~~including ~~here~~the successor and predecessor periods, ~~represents~~as ~~stock~~compared ~~compensation~~to ~~expense~~the ~~for~~three ~~employees~~months ~~whose~~ended ~~compensation~~September 30, ~~expense~~2021 isprimarily ~~recorded~~due into ~~cost~~the distribution of ~~operations.~~the ~~Note~~Company’s ~~that~~interest ~~stock~~in ~~compensation~~58 ~~expense~~properties ~~attributable~~included toin ~~our~~the ~~executive~~Non-Core ~~management~~Portfolio ~~team~~ (~~including~~see ~~divisional~~Note ~~vice~~1 ~~presidents)~~— ~~and~~Description ~~other~~of ~~corporate~~Business ~~employees~~to isour ~~recorded~~Consolidated ~~within~~Financial ~~general~~Statements ~~and~~under ~~administrative~~Item ~~expense~~1 in this Quarterly Report on Form 10-Q).

(4)NOI represents rental income less Cost of Operations.


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from July 1, 2022 through July 19, 2022		Three Months Ended September 30, 2021
Expenses:
Property expenses	$	17,810	$	8,135	$	33,099
Depreciation and amortization	100,211		4,626		23,857
General and administrative	2,642		2,572		5,155
Merger costs	37,266		94,805		—

Total expenses	$	157,929	$	110,138	$	62,111


Other income (expense):
Gain on sale of real estate, net	$	—	$	38,221	$	29,924
Interest income (expense)	9,933		(59)		(207)


Other income	144		89		379
Total other income (expense)	$	10,077	$	38,251	$	30,096

~~Rental~~Expenses: ~~income~~Total expenses increased by $~~1.5~~205,956, ~~million~~or ~~and $6~~331.36%, ~~million~~ for the three ~~and six~~ months ended ~~June~~September 30, 2022, ~~respectively,~~including asthe ~~compared~~successor toand ~~the~~predecessor ~~same~~ periods, inas ~~2021 due primarily to higher occupancy in 2022~~ compared to the ~~same~~three ~~period~~months inended September 30, 2021, ~~combined~~primarily ~~with~~due ~~rental~~to ~~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.~~following:

Depreciation and amortization increased by $80,980 for the three months ended September 30, 2022, including the successor and predecessor periods, as compared to the three months ended September 30, 2021, primarily due to the step-up in basis of the real estate assets acquired and intangibles assumed in connection with the Merger (see Note 2 — Summary of Significant Accounting Policies to our Consolidated Financial Statements under Item 1 in this Quarterly Report on Form 10-Q).

Table of Contents

~~Cost~~Merger costs of ~~operations~~$132,071 ~~excluding~~during ~~stock~~the ~~compensation~~three ~~expense~~months ended September 30, ~~increased~~2022, ~~$0.7~~including ~~million~~the successor and $1predecessor periods, are comprised primarily of legal and other professional fees incurred in connection with the Merger discussed herein.5 ~~million~~These increases in expenses were partially offset by a decrease in property expenses of $7,154 for the three ~~and six~~ months ended ~~June~~September 30, 2022, ~~respectively~~including the successor and predecessor periods, as compared to the ~~same~~three ~~periods~~months inended September 30, 2021, ~~due~~ primarily due to ~~higher~~the ~~Cost~~distribution of ~~Operations~~the ~~incurred~~Company’s byinterest ~~our~~in ~~Same~~58 ~~Park~~properties ~~(discussed~~included ~~below)~~in ~~and~~the Non-~~Same~~Core ~~Park~~Portfolio ~~portfolios,~~(see ~~partially~~Note ~~offset~~1 by— aDescription ~~decrease~~of Business to our Consolidated Financial Statements under Item 1 in ~~Cost~~this ofQuarterly ~~Operations~~Report ~~from~~on ~~assets~~Form ~~sold~~10-Q).

~~Net~~Other ~~income~~Income ~~increased~~(Expense): ~~$37.5~~Total ~~million~~other ~~and~~income ~~$90.6~~(expense) ~~million~~ for the three ~~and six~~ months ended ~~June~~September 30, 2022, ~~respectively,~~including asthe ~~compared~~successor toand ~~the~~predecessor ~~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~~48,328 as compared to the ~~same~~total ~~period~~other inincome ~~2021, combined with a $3.3 million increase in NOI from our Same Park portfolio~~ (~~defined below~~expense), aof $~~1.5 million~~30,096 ~~increase~~for inthree ~~NOI~~months ~~from~~ended ~~our Non-Same Park portfolio (defined below)~~September 30, ~~and $2.5 million lower preferred distributions in 2022 compared to~~ 2021, primarily 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.~~following:

~~The~~Gain ~~six month increase was due to a $99.6 million increase in the gain~~ on sale of ~~assets~~real ~~sold~~estate, ~~during~~net for the ~~six~~three months ended ~~June~~ September 30, 2022, ~~compared~~including to the ~~same~~successor ~~period~~and inpredecessor ~~2021~~periods, ~~combined~~was ~~with an~~ $~~8.9~~38,221, ~~million~~which ~~increase~~was inrelated ~~NOI~~to ~~from~~the ~~our~~sale ~~Same~~of ~~Park~~13 ~~portfolio (defined below), a $3~~buildings.0 ~~million~~Gain ~~increase~~on insale ~~NOI~~of ~~from~~real ~~our Non-Same Park portfolio (defined below)~~estate, ~~partially~~net ~~offset by a decrease of $7.3 million in NOI generated from assets sold or held~~ for ~~sale,~~ the ~~Merger~~three ~~related~~months ~~costs~~ended ~~of $6.1~~September ~~million~~30, ~~and~~2021 awas ~~one-time~~$29,924, ~~cash~~which ~~payment~~was ofrelated ~~$6.7 million~~ to the ~~former~~sale ~~CEO, which consists~~ of aeight $6buildings.6 ~~million~~Refer ~~cash~~to ~~payment~~Note ~~for~~3 ~~RSUs,~~— aInvestments ~~$0.1 million cash payment for COBRA coverage reimbursement~~ in ~~accordance~~Real ~~with~~Estate ~~his~~to ~~separation~~our ~~agreement,~~Consolidated ~~partially~~Financial ~~offset~~Statements byunder ~~$0.6~~Item ~~million~~1 ~~non-cash~~in ~~adjustment~~this ~~related~~Quarterly toReport ~~the~~on ~~reversal~~Form ~~of stock compensation~~ 10-Q.for ~~the~~more ~~unvested~~information ~~former~~regarding ~~CEO's~~our ~~shares, net of dividend forfeiture expense~~dispositions.

Interest income (expense) changed from a $207 expense for the three months ended September 30, 2021 to a $9,874 income for the three months ended September 30, 2022, including the successor and predecessor periods, a total movement of $10,081. There was (i) an increase in interest expense on our outstanding debt of $46,619, (ii) a $7,332 realized loss during the current year period due to changes in fair value on our interest rate derivatives, and (iii) amortization of financing costs of $4,992 during the current year period. This was offset by an unrealized gain on interest rate swaps of $68,993 in connection with the interest rate contracts entered into during the current year period (see Note 5 — Derivative Financial Instruments to our Consolidated Financial Statements under Item 1 in this Quarterly Report on Form 10-Q). Subsequent to the Merger, we obtained two mortgage loans and terminated the unsecured revolving line of credit (see Note 4 — Debt to our Consolidated Financial Statements under Item 1 in this Quarterly Report on Form 10-Q).

Comparison of the period from July 20, 2022 through September 30, 2022 (Successor) and the period from January 1, 2022 through July 19, 2022 (Predecessor) compared to the nine months ended September 30, 2021


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Revenue:
Rental revenue	$	77,764	$	246,175	$	328,308

Total revenue	$	77,764	$	246,175	$	328,308

Revenue: Rental revenue decreased by $4,369 or 1.3%, for the nine months ended September 30, 2022, including the successor and predecessor periods, as compared to the nine months ended September 30, 2021 primarily due to the distribution of the Company’s interest in 58 properties included in the Non-Core Portfolio (see Note 1 — Description of Business to our Consolidated Financial Statements under Item 1 in this Quarterly Report on Form 10-Q).

Table of Contents

Same Park Portfolio


	Successor		Predecessor
	Period from July 20, 2022 through September 30, 2022		Period from January 1, 2022 through July 19, 2022		Nine Months Ended September 30, 2021
Expenses:
Property expenses	$	17,810	$	74,848	$	98,198
Depreciation and amortization	100,211		50,557		69,356
General and administrative	2,642		19,079		14,511
Merger costs	37,266		100,952		—

Total expenses	$	157,929	$	245,436	$	182,065


Other income (expense):
Gain on sale of real estate, net	$	—	$	157,022	$	49,117
Interest income (expense)	9,933		(615)		(478)


Other income	144		2,044		1,138
Total other income (expense)	$	10,077	$	158,451	$	49,777

WeExpenses: ~~believe~~Total ~~that~~expenses ~~evaluation~~increased ofby ~~the~~$221,300, ~~Same~~or ~~Park~~121.5%, ~~portfolio~~for ~~provides~~the annine ~~informative~~months ~~view~~ended ofSeptember 30, ~~how~~2022, including the ~~Company’s~~successor ~~portfolio~~and ~~has~~predecessor ~~performed over comparable~~ periods., Weas ~~believe~~compared ~~that~~to ~~investors~~the ~~and~~nine ~~analysts~~months ~~use~~ended ~~Same~~September 30,

Filing Compare · PS BUSINESS PARKS, INC./MD