##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007.
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from          to
 Commission File Number 1-10709
 PS BUSINESS PARKS, INC.
 (Exact name of registrant as specified in its charter)
 California
    
    95-4300881(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 701 Western Avenue, Glendale, California 91201-2397
 (Address of principal executive offices) (Zip Code)
 818-244-8080
 (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $0.01 par value per share
    
    American Stock ExchangeDepositary Shares Each Representing 1/1,000 of a Share of
7.000% Cumulative Preferred Stock, Series H, $0.01 par value per share
    
    American Stock ExchangeDepositary Shares Each Representing 1/1,000 of a Share of
6.875% Cumulative Preferred Stock, Series I, $0.01 par value per share
    
    American Stock ExchangeDepositary Shares Each Representing 1/1,000 of a Share of
7.950% Cumulative Preferred Stock, Series K, $0.01 par value per share
    
    American Stock ExchangeDepositary Shares Each Representing 1/1,000 of a Share of
7.600% Cumulative Preferred Stock, Series L, $0.01 par value per share
    
    American Stock ExchangeDepositary Shares Each Representing 1/1,000 of a Share of
7.200% Cumulative Preferred Stock, Series M, $0.01 par value per share
    
    American Stock ExchangeDepositary Shares Each Representing 1/1,000 of a Share of
7.375% Cumulative Preferred Stock, Series O, $0.01 par value per share
    
    American Stock ExchangeDepositary Shares Each Representing 1/1,000 of a Share of
6.700% Cumulative Preferred Stock, Series P, $0.01 par value per share
    
    American Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
None
 (Title of class)
 þ o
 o þ
 þ o
 þ
  Large accelerated filer þ
    
    Accelerated filer oNon-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANTPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBIT INDEXEXHIBIT 12EXHIBIT 21EXHIBIT 23EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1    Table of Contents  
 PART I.
 
 ITEM 1. BUSINESS
 The Company
   History of the Company:
       2




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Business of the Company:
   3




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Operating Partnership
    Summary of the Operating Partnership Agreement
  Issuance of Additional Partnership Interests:
 4




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Capital Contributions:
 Distributions:
 Preferred Units:
  Redemption of Partnership Interests:
   Limited Partner Transfer Restrictions:
 5




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Management:
   Extraordinary Transactions:
  6




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Indemnification:
 Duties and Conflicts:
 Term:
 Other Provisions:
 Cost Allocation and Administrative Services
  Common Officers and Directors with PS
  7




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Property Management
   Management
  REIT Structure
   Operating Strategy
  Maximize Net Cash Flow of Existing Properties:
 8




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Focus on Targeted Markets:
 Reduce Capital Expenditures and Increase Occupancy Rates by Providing Flexible Properties and
Attracting a Diversified Tenant Base:
 Provide Superior Property Management:
 Financing Strategy
  Retain Operating Cash Flow:
 Perpetual Preferred Stock/Units:
 9




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Debt Financing:
 Access to Acquisition Capital:
 Competition
   Investments in Real Estate Facilities
  Summary of Business Model
  Restrictions on Transactions with Affiliates
  10




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Borrowings
     Employees
  Insurance
  Environmental Matters
   11




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ITEM 1A. RISK FACTORS
  PS has significant influence over us.
  Provisions in our organizational documents may prevent changes in control.
 Our articles generally prohibit owning more than 7% of our shares:
 Our board can set the terms of certain securities without shareholder approval:
 The partnership agreement of our Operating Partnership restricts mergers:
 Our Operating Partnership poses additional risks to us.
  12




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We would incur adverse tax consequences if we fail to qualify as a REIT.
 Our cash flow would be reduced if we fail to qualify as a REIT:
 We may need to borrow funds to meet our REIT distribution requirements:
 Since we buy and operate real estate, we are subject to general real estate investment and
operating risks.
 Summary of real estate risks:
 
    
    the national, state and local economic climate and real estate conditions, such as
oversupply of or reduced demand for space and changes in market rental rates;
    
    how prospective tenants perceive the attractiveness, convenience and safety of our
properties;
    
    difficulties in consummating and financing acquisitions and developments on
advantageous terms and the failure of acquisitions and developments to perform as expected;
    
    our ability to provide adequate management, maintenance and insurance;
    
    our ability to collect rent from tenants on a timely basis;
    
    the expense of periodically renovating, repairing and reletting spaces;
    
    environmental issues;
    
    compliance with the Americans with Disabilities Act and other federal, state, and local
laws and regulations;
    
    increasing operating costs, including real estate taxes, insurance and utilities, if
these increased costs cannot be passed through to tenants;
    
    changes in tax, real estate and zoning laws;
    
    increase in new commercial properties in our market;
    
    tenant defaults and bankruptcies;
    
    tenants right to sublease space; and
    
    concentration of properties leased to non-rated private companies.
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We may be unable to consummate acquisitions and developments on advantageous terms or new
acquisitions and developments may fail to perform as expected:
 We may encounter significant delays and expense in reletting vacant space, or we may not be
able to relet space at existing rates, in each case resulting in losses of income:
 Tenant defaults and bankruptcies may reduce our cash flow and distributions:
 14




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We may be adversely affected by significant competition among commercial properties:
 We may be adversely affected if casualties to our properties are not covered by insurance:
 The illiquidity of our real estate investments may prevent us from adjusting our portfolio to
respond to market changes:
 We may be adversely affected by changes in laws:
 We may incur significant environmental remediation costs:
 We depend on external sources of capital to grow our company.
  Our ability to control our properties may be adversely affected by ownership through partnerships
and joint ventures.
  15




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We can change our business policies and increase our level of debt without shareholder approval.
  We can issue additional securities without shareholder approval.
  Increases in interest rates may adversely affect the market price of our common stock.
  Shares that become available for future sale may adversely affect the market price of our common
stock.
  We depend on key personnel.
  Terrorist attacks and the possibility of wider armed conflict may have an adverse impact on our
business and operating results and could decrease the value of our assets.
  16




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Taxation of corporate dividends may adversely affect the value of our shares.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  17




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ITEM 2. PROPERTIES
  (in thousands)
 WeightedRentable Square Footage
    
    AverageLocation
    
    Flex
    
    Industrial
    
    Office
    
    Total
    
    Occupancy RateArizonaMesa
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    54.6
    %Phoenix
    
    
    310
    
    
    
    
    
    
    
    
    
    
    
    310
    
    
    
    92.9
    %Tempe
    
    
    291
    
    
    
    
    
    
    
    
    
    
    
    291
    
    
    
    95.1
    %679
    
    
    
    
    
    
    
    
    
    
    
    679
    
    
    
    89.4
    %Northern CaliforniaHayward
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    407
    
    
    
    91.1
    %Monterey
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12
    
    
    
    96.2
    %Sacramento
    
    
    
    
    
    
    
    
    
    
    367
    
    
    
    367
    
    
    
    93.7
    %San Jose
    
    
    708
    
    
    
    
    
    
    
    
    
    
    
    708
    
    
    
    85.3
    %San Ramon
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    52
    
    
    
    98.7
    %Santa Clara
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    100.0
    %So. San Francisco
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    94
    
    
    
    95.4
    %980
    
    
    
    407
    
    
    
    431
    
    
    
    1,818
    
    
    
    90.9
    %Southern CaliforniaBuena Park
    
    
    
    
    
    
    317
    
    
    
    
    
    
    
    317
    
    
    
    100.0
    %Carson
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    97.4
    %Cerritos
    
    
    
    
    
    
    395
    
    
    
    31
    
    
    
    426
    
    
    
    95.8
    %Culver City
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    149
    
    
    
    88.0
    %Irvine
    
    
    
    
    
    
    
    
    
    
    160
    
    
    
    160
    
    
    
    90.0
    %Laguna Hills
    
    
    614
    
    
    
    
    
    
    
    
    
    
    
    614
    
    
    
    95.3
    %Lake Forest
    
    
    297
    
    
    
    
    
    
    
    
    
    
    
    297
    
    
    
    92.0
    %Monterey Park
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    199
    
    
    
    96.9
    %Orange
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    108
    
    
    
    91.8
    %San Diego (1)
    
    
    768
    
    
    
    
    
    
    
    
    
    
    
    768
    
    
    
    94.3
    %Santa Ana
    
    
    
    
    
    
    
    
    
    
    437
    
    
    
    437
    
    
    
    97.1
    %Signal Hill
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    267
    
    
    
    90.8
    %Studio City
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    100.0
    %Torrance
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    95.2
    %2,540
    
    
    
    712
    
    
    
    736
    
    
    
    3,988
    
    
    
    94.8
    %MarylandBeltsville
    
    
    309
    
    
    
    
    
    
    
    
    
    
    
    309
    
    
    
    97.6
    %Gaithersburg
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    29
    
    
    
    94.0
    %Rockville
    
    
    212
    
    
    
    
    
    
    
    688
    
    
    
    900
    
    
    
    94.3
    %Silver Spring (1)
    
    
    366
    
    
    
    
    
    
    
    166
    
    
    
    532
    
    
    
    93.9
    %887
    
    
    
    
    
    
    
    883
    
    
    
    1,770
    
    
    
    94.7
    %OregonBeaverton
    
    
    1,024
    
    
    
    
    
    
    
    188
    
    
    
    1,212
    
    
    
    89.5
    %Milwaukee
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    83.7
    %1,126
    
    
    
    
    
    
    
    188
    
    
    
    1,314
    
    
    
    89.0
    %
 18




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WeightedRentable Square Footage
    
    AverageLocation
    
    Flex
    
    Industrial
    
    Office
    
    Total
    
    Occupancy RateNorthern TexasDallas
    
    
    237
    
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    84.2
    %Farmers Branch
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    83.7
    %Garland
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    79.2
    %Irving (2)
    
    
    715
    
    
    
    231
    
    
    
    
    
    
    
    946
    
    
    
    91.7
    %Mesquite
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    82.8
    %Plano
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    184
    
    
    
    62.4
    %Richardson
    
    
    117
    
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    91.4
    %1,458
    
    
    
    231
    
    
    
    
    
    
    
    1,689
    
    
    
    86.3
    %Southern TexasAustin
    
    
    787
    
    
    
    
    
    
    
    
    
    
    
    787
    
    
    
    95.4
    %Houston
    
    
    177
    
    
    
    
    
    
    
    131
    
    
    
    308
    
    
    
    90.4
    %Missouri City
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    95.1
    %1,030
    
    
    
    
    
    
    
    131
    
    
    
    1,161
    
    
    
    94.1
    %South FloridaBoca Raton (1)
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    92.1
    %Miami
    
    
    631
    
    
    
    2,556
    
    
    
    12
    
    
    
    3,199
    
    
    
    98.2
    %Wellington (1)
    
    
    262
    
    
    
    
    
    
    
    
    
    
    
    262
    
    
    
    94.3
    %1,028
    
    
    
    2,556
    
    
    
    12
    
    
    
    3,596
    
    
    
    97.7
    %VirginiaAlexandria
    
    
    155
    
    
    
    
    
    
    
    54
    
    
    
    209
    
    
    
    95.8
    %Chantilly (1)
    
    
    563
    
    
    
    
    
    
    
    38
    
    
    
    601
    
    
    
    92.6
    %Fairfax
    
    
    
    
    
    
    
    
    
    
    292
    
    
    
    292
    
    
    
    88.0
    %Herndon
    
    
    
    
    
    
    
    
    
    
    244
    
    
    
    244
    
    
    
    93.0
    %Lorton
    
    
    246
    
    
    
    
    
    
    
    
    
    
    
    246
    
    
    
    99.7
    %Merrifield
    
    
    303
    
    
    
    
    
    
    
    355
    
    
    
    658
    
    
    
    96.1
    %Springfield
    
    
    270
    
    
    
    
    
    
    
    90
    
    
    
    360
    
    
    
    99.2
    %Sterling
    
    
    296
    
    
    
    
    
    
    
    
    
    
    
    296
    
    
    
    88.5
    %Woodbridge
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    95.9
    %1,947
    
    
    
    
    
    
    
    1,073
    
    
    
    3,020
    
    
    
    94.4
    %WashingtonRedmond
    
    
    465
    
    
    
    
    
    
    
    28
    
    
    
    493
    
    
    
    89.4
    %Renton
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    90.4
    %493
    
    
    
    
    
    
    
    28
    
    
    
    521
    
    
    
    89.5
    %Total
    
    
    12,168
    
    
    
    3,906
    
    
    
    3,482
    
    
    
    19,556
    
    
    
    93.4
    %
 
 (1)
    
    Six commercial properties, one in San Diego, California, one in Chantilly, Virginia, one in
Silver Spring, Maryland, one in Boca Raton, Florida, and two in Wellington, Florida, serve as
collateral to mortgage notes payable. For more information, see Note 6 to the consolidated
financial statements.(2)
    
    The Company owns one property that is subject to a ground lease in Las Colinas, Texas.   19




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(in thousands)
 For the Year Ended December 31, 2007
    
    
    For the Year Ended December 31, 2006
    
    
    For the Year Ended December 31, 2005Flex
    
    
    Office
    
    
    Industrial
    
    
    Total
    
    
    Flex
    
    
    Office
    
    
    Industrial
    
    
    Total
    
    
    Flex
    
    
    Office
    
    
    Industrial
    
    
    TotalRental Income:Southern California
    
    $
    43,049
    
    
    $
    16,099
    
    
    $
    5,326
    
    
    $
    64,474
    
    
    $
    41,077
    
    
    $
    15,020
    
    
    $
    5,130
    
    
    $
    61,227
    
    
    $
    36,093
    
    
    $
    13,748
    
    
    $
    4,878
    
    
    $
    54,719Northern California
    
    
    12,559
    
    
    
    6,977
    
    
    
    2,676
    
    
    
    22,212
    
    
    
    9,743
    
    
    
    6,805
    
    
    
    2,475
    
    
    
    19,023
    
    
    
    9,427
    
    
    
    6,505
    
    
    
    3,039
    
    
    
    18,971Southern Texas
    
    
    9,648
    
    
    
    2,201
    
    
    
    
    
    
    
    11,849
    
    
    
    8,271
    
    
    
    2,201
    
    
    
    
    
    
    
    10,472
    
    
    
    7,906
    
    
    
    1,709
    
    
    
    
    
    
    
    9,615Northern Texas
    
    
    14,062
    
    
    
    
    
    
    
    1,100
    
    
    
    15,162
    
    
    
    13,643
    
    
    
    
    
    
    
    1,093
    
    
    
    14,736
    
    
    
    14,585
    
    
    
    
    
    
    
    1,127
    
    
    
    15,712South Florida
    
    
    11,777
    
    
    
    230
    
    
    
    19,508
    
    
    
    31,515
    
    
    
    6,256
    
    
    
    198
    
    
    
    18,219
    
    
    
    24,673
    
    
    
    5,786
    
    
    
    185
    
    
    
    16,109
    
    
    
    22,080Virginia
    
    
    32,666
    
    
    
    21,536
    
    
    
    
    
    
    
    54,202
    
    
    
    30,361
    
    
    
    20,442
    
    
    
    
    
    
    
    50,803
    
    
    
    28,804
    
    
    
    19,895
    
    
    
    
    
    
    
    48,699Maryland
    
    
    17,341
    
    
    
    21,532
    
    
    
    
    
    
    
    38,873
    
    
    
    15,763
    
    
    
    19,656
    
    
    
    
    
    
    
    35,419
    
    
    
    7,576
    
    
    
    16,613
    
    
    
    
    
    
    
    24,189Oregon
    
    
    15,015
    
    
    
    3,266
    
    
    
    
    
    
    
    18,281
    
    
    
    15,531
    
    
    
    3,065
    
    
    
    
    
    
    
    18,596
    
    
    
    15,648
    
    
    
    2,805
    
    
    
    
    
    
    
    18,453Arizona
    
    
    6,976
    
    
    
    
    
    
    
    
    
    
    
    6,976
    
    
    
    7,001
    
    
    
    
    
    
    
    
    
    
    
    7,001
    
    
    
    6,936
    
    
    
    
    
    
    
    
    
    
    
    6,936Washington
    
    
    6,676
    
    
    
    555
    
    
    
    
    
    
    
    7,231
    
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    264
    
    
    
    230
    
    
    
    
    
    
    
    
    
    
    
    230Total
    
    
    169,769
    
    
    
    72,396
    
    
    
    28,610
    
    
    
    270,775
    
    
    
    147,910
    
    
    
    67,387
    
    
    
    26,917
    
    
    
    242,214
    
    
    
    132,991
    
    
    
    61,460
    
    
    
    25,153
    
    
    
    219,604Cost of Operations:Southern California
    
    
    10,580
    
    
    
    5,875
    
    
    
    1,038
    
    
    
    17,493
    
    
    
    10,416
    
    
    
    6,163
    
    
    
    1,012
    
    
    
    17,591
    
    
    
    8,142
    
    
    
    5,881
    
    
    
    974
    
    
    
    14,997Northern California
    
    
    3,426
    
    
    
    2,279
    
    
    
    750
    
    
    
    6,455
    
    
    
    2,236
    
    
    
    2,150
    
    
    
    657
    
    
    
    5,043
    
    
    
    1,969
    
    
    
    2,005
    
    
    
    609
    
    
    
    4,583Southern Texas
    
    
    4,041
    
    
    
    1,115
    
    
    
    
    
    
    
    5,156
    
    
    
    3,649
    
    
    
    1,019
    
    
    
    
    
    
    
    4,668
    
    
    
    3,182
    
    
    
    933
    
    
    
    
    
    
    
    4,115Northern Texas
    
    
    5,477
    
    
    
    
    
    
    
    288
    
    
    
    5,765
    
    
    
    5,550
    
    
    
    
    
    
    
    261
    
    
    
    5,811
    
    
    
    5,076
    
    
    
    
    
    
    
    261
    
    
    
    5,337South Florida
    
    
    4,157
    
    
    
    110
    
    
    
    5,807
    
    
    
    10,074
    
    
    
    2,070
    
    
    
    94
    
    
    
    6,008
    
    
    
    8,172
    
    
    
    1,996
    
    
    
    82
    
    
    
    5,689
    
    
    
    7,767Virginia
    
    
    8,263
    
    
    
    7,332
    
    
    
    
    
    
    
    15,595
    
    
    
    7,310
    
    
    
    6,976
    
    
    
    
    
    
    
    14,286
    
    
    
    7,176
    
    
    
    6,705
    
    
    
    
    
    
    
    13,881Maryland
    
    
    4,719
    
    
    
    7,055
    
    
    
    
    
    
    
    11,774
    
    
    
    4,129
    
    
    
    5,824
    
    
    
    
    
    
    
    9,953
    
    
    
    1,703
    
    
    
    4,787
    
    
    
    
    
    
    
    6,490Oregon
    
    
    5,288
    
    
    
    1,375
    
    
    
    
    
    
    
    6,663
    
    
    
    4,988
    
    
    
    1,300
    
    
    
    
    
    
    
    6,288
    
    
    
    4,551
    
    
    
    1,216
    
    
    
    
    
    
    
    5,767Arizona
    
    
    2,907
    
    
    
    
    
    
    
    
    
    
    
    2,907
    
    
    
    2,746
    
    
    
    
    
    
    
    
    
    
    
    2,746
    
    
    
    2,659
    
    
    
    
    
    
    
    
    
    
    
    2,659Washington
    
    
    2,289
    
    
    
    189
    
    
    
    
    
    
    
    2,478
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    113
    
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    116Total
    
    
    51,147
    
    
    
    25,330
    
    
    
    7,883
    
    
    
    84,360
    
    
    
    43,207
    
    
    
    23,526
    
    
    
    7,938
    
    
    
    74,671
    
    
    
    36,570
    
    
    
    21,609
    
    
    
    7,533
    
    
    
    65,712NOI:Southern California
    
    
    32,469
    
    
    
    10,224
    
    
    
    4,288
    
    
    
    46,981
    
    
    
    30,661
    
    
    
    8,857
    
    
    
    4,118
    
    
    
    43,636
    
    
    
    27,951
    
    
    
    7,867
    
    
    
    3,904
    
    
    
    39,722Northern California
    
    
    9,133
    
    
    
    4,698
    
    
    
    1,926
    
    
    
    15,757
    
    
    
    7,507
    
    
    
    4,655
    
    
    
    1,818
    
    
    
    13,980
    
    
    
    7,458
    
    
    
    4,500
    
    
    
    2,430
    
    
    
    14,388Southern Texas
    
    
    5,607
    
    
    
    1,086
    
    
    
    
    
    
    
    6,693
    
    
    
    4,622
    
    
    
    1,182
    
    
    
    
    
    
    
    5,804
    
    
    
    4,724
    
    
    
    776
    
    
    
    
    
    
    
    5,500Northern Texas
    
    
    8,585
    
    
    
    
    
    
    
    812
    
    
    
    9,397
    
    
    
    8,093
    
    
    
    
    
    
    
    832
    
    
    
    8,925
    
    
    
    9,509
    
    
    
    
    
    
    
    866
    
    
    
    10,375South Florida
    
    
    7,620
    
    
    
    120
    
    
    
    13,701
    
    
    
    21,441
    
    
    
    4,186
    
    
    
    104
    
    
    
    12,211
    
    
    
    16,501
    
    
    
    3,790
    
    
    
    103
    
    
    
    10,420
    
    
    
    14,313Virginia
    
    
    24,403
    
    
    
    14,204
    
    
    
    
    
    
    
    38,607
    
    
    
    23,051
    
    
    
    13,466
    
    
    
    
    
    
    
    36,517
    
    
    
    21,628
    
    
    
    13,190
    
    
    
    
    
    
    
    34,818Maryland
    
    
    12,622
    
    
    
    14,477
    
    
    
    
    
    
    
    27,099
    
    
    
    11,634
    
    
    
    13,832
    
    
    
    
    
    
    
    25,466
    
    
    
    5,873
    
    
    
    11,826
    
    
    
    
    
    
    
    17,699Oregon
    
    
    9,727
    
    
    
    1,891
    
    
    
    
    
    
    
    11,618
    
    
    
    10,543
    
    
    
    1,765
    
    
    
    
    
    
    
    12,308
    
    
    
    11,097
    
    
    
    1,589
    
    
    
    
    
    
    
    12,686Arizona
    
    
    4,069
    
    
    
    
    
    
    
    
    
    
    
    4,069
    
    
    
    4,255
    
    
    
    
    
    
    
    
    
    
    
    4,255
    
    
    
    4,277
    
    
    
    
    
    
    
    
    
    
    
    4,277Washington
    
    
    4,387
    
    
    
    366
    
    
    
    
    
    
    
    4,753
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    151
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    114Total
    
    $
    118,622
    
    
    $
    47,066
    
    
    $
    20,727
    
    
    $
    186,415
    
    
    $
    104,703
    
    
    $
    43,861
    
    
    $
    18,979
    
    
    $
    167,543
    
    
    $
    96,421
    
    
    $
    39,851
    
    
    $
    17,620
    
    
    $
    153,892
 20




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##### Table of Contents



(in thousands)
 For the Years Ended December 31,2007
    
    
    2006
    
    
    2005Property net operating income
    
    $
    186,415
    
    
    $
    167,543
    
    
    $
    153,892Facility management fees
    
    
    724
    
    
    
    625
    
    
    
    579Interest and other income
    
    
    5,104
    
    
    
    6,874
    
    
    
    4,888Depreciation and amortization
    
    
    (98,521
    )
    
    
    (86,216
    )
    
    
    (76,178
    )General and administrative
    
    
    (7,917
    )
    
    
    (7,046
    )
    
    
    (5,843
    )Interest expense
    
    
    (4,130
    )
    
    
    (2,575
    )
    
    
    (1,330
    )Asset impairment due to casualty loss
    
    
    
    
    
    
    
    
    
    
    (72
    )Income from continuing operations
before minority interests
    
    $
    81,675
    
    
    $
    79,205
    
    
    $
    75,936
 Significant Properties
    2003
    
    2004
    
    2005
    
    2006
    
    2007Weighted average occupancy rate
    
    
    81.7
    %
    
    
    83.8
    %
    
    
    91.8
    %
    
    
    96.4
    %
    
    
    98.2
    %Realized rent per square foot
    
    $
    7.12
    
    
    $
    7.75
    
    
    $
    7.47
    
    
    $
    7.88
    
    
    $
    8.24
  (in
thousands, except number of leases expiring)
 Percentage of TotalRentable Square
    
    Annual Base Rents
    
    Annual Base RentsNumber of Leases
    
    Footage Subject to
    
    Under Expiring
    
    Represented byYear of Lease Expiration
    
    Expiring
    
    Expiring Leases
    
    Leases
    
    Expiring Leases2008
    
    
    75
    
    
    
    701
    
    
    
    $
    6,411
    
    
    
    22.1
    %2009
    
    
    84
    
    
    
    662
    
    
    
    
    5,900
    
    
    
    20.3
    %2010
    
    
    99
    
    
    
    839
    
    
    
    
    7,427
    
    
    
    25.6
    %2011
    
    
    45
    
    
    
    465
    
    
    
    
    4,566
    
    
    
    15.7
    %2012
    
    
    41
    
    
    
    336
    
    
    
    
    3,455
    
    
    
    11.9
    %Thereafter
    
    
    9
    
    
    
    126
    
    
    
    
    1,278
    
    
    
    4.4
    %Total
    
    
    353
    
    
    
    3,129
    
    
    
    $
    29,037
    
    
    
    100.0
    %
 21




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(in
thousands, except year data)
 Rate of
    
    
    
    Life in
    
    AccumulatedTax Basis
    
    Depreciation
    
    Method
    
    Years
    
    DepreciationLand Improvements
    
    
    $
    45,588
    
    
    
    7.2
    %
    
    MACRS, 150%
    
    
    15
    
    
    
    $
    16,185Improvements
    
    
    
    24,582
    
    
    
    10.9
    %
    
    VARIOUS
    
    
    5
    
    
    
    
    22,167Tenant Buildings
    
    
    
    90,305
    
    
    
    2.8
    %
    
    MACRS, SL
    
    
    VAR
    
    
    
    
    9,956Total
    
    
    $
    160,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    48,308
  Portfolio Information
 (in thousands)
 Lease Expirations (Entire Portfolio) as of December 31, 2007
 Percentage of TotalRentable Square
    
    Annual Base Rents
    
    Annual Base RentsFootage Subject to
    
    Under Expiring
    
    Represented byYear of Lease Expiration
    
    Expiring Leases
    
    Leases
    
    Expiring Leases2008
    
    
    3,895
    
    
    
    $
    59,002
    
    
    
    20.0
    %2009
    
    
    4,428
    
    
    
    
    65,538
    
    
    
    22.3
    %2010
    
    
    3,558
    
    
    
    
    54,813
    
    
    
    18.6
    %2011
    
    
    2,262
    
    
    
    
    39,406
    
    
    
    13.4
    %2012
    
    
    1,812
    
    
    
    
    31,617
    
    
    
    10.7
    %Thereafter
    
    
    2,341
    
    
    
    
    44,089
    
    
    
    15.0
    %Total
    
    
    18,296
    
    
    
    $
    294,465
    
    
    
    100.0
    %
 Lease Expirations (Small Tenant Portfolio) as of December 31, 2007
  Percentage of SmallTenant AnnualRentable Square
    
    Annual Base Rents
    
    Base RentsFootage Subject to
    
    Under Expiring
    
    Represented byYear of Lease Expiration
    
    Expiring Leases
    
    Leases
    
    Expiring Leases2008
    
    
    1,933
    
    
    
    $
    30,705
    
    
    
    10.4
    %2009
    
    
    2,103
    
    
    
    
    34,914
    
    
    
    11.9
    %2010
    
    
    1,349
    
    
    
    
    24,168
    
    
    
    8.2
    %2011
    
    
    598
    
    
    
    
    11,504
    
    
    
    3.9
    %2012
    
    
    559
    
    
    
    
    10,838
    
    
    
    3.7
    %Thereafter
    
    
    369
    
    
    
    
    8,851
    
    
    
    3.0
    %Total
    
    
    6,911
    
    
    
    $
    120,980
    
    
    
    41.1
    %
 22




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##### Table of Contents



Lease Expirations (Large Tenant Portfolio) as of December 31, 2007
  Percentage of LargeTenant AnnualRentable Square
    
    Annual Base Rents
    
    Base RentsFootage Subject to
    
    Under Expiring
    
    Represented byYear of Lease Expiration
    
    Expiring Leases
    
    Leases
    
    Expiring Leases2008
    
    
    1,962
    
    
    
    $
    28,297
    
    
    
    9.6
    %2009
    
    
    2,325
    
    
    
    
    30,624
    
    
    
    10.4
    %2010
    
    
    2,209
    
    
    
    
    30,645
    
    
    
    10.4
    %2011
    
    
    1,664
    
    
    
    
    27,902
    
    
    
    9.5
    %2012
    
    
    1,253
    
    
    
    
    20,779
    
    
    
    7.0
    %Thereafter
    
    
    1,972
    
    
    
    
    35,238
    
    
    
    12.0
    %Total
    
    
    11,385
    
    
    
    $
    173,485
    
    
    
    58.9
    %
 
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
    23




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,
 24




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##### Table of Contents



PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
   RangeThree Months Ended
    
    High
    
    
    LowMarch 31, 2006
    
    $
    56.68
    
    
    $
    49.10June 30, 2006
    
    $
    59.48
    
    
    $
    50.00September 30, 2006
    
    $
    62.80
    
    
    $
    57.18December 31, 2006
    
    $
    74.75
    
    
    $
    59.55March 31, 2007
    
    $
    77.60
    
    
    $
    66.75June 30, 2007
    
    $
    72.25
    
    
    $
    60.22September 30, 2007
    
    $
    66.67
    
    
    $
    49.35December 31, 2007
    
    $
    63.95
    
    
    $
    50.45
     25




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##### Table of Contents



Total Number of
    
    Maximum NumberTotal Number
    
    
    
    
    
    
    Shares Repurchased as
    
    of Shares that Mayof Shares
    
    Average Price
    
    Part of Publicly
    
    Yet Be RepurchasedPeriod Covered
    
    Repurchased
    
    Paid per Share
    
    Announced Program
    
    Under the ProgramOctober 1 through October 31, 2007
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    1,177,305November 1 through November 30,
2007
    
    
    91,867
    
    
    
    $
    52.68
    
    
    
    91,867
    
    
    
    1,085,438December 1 through December 31,
2007
    
    
    509,175
    
    
    
    $
    53.05
    
    
    
    509,175
    
    
    
    576,263Total
    
    
    601,042
    
    
    
    $
    53.00
    
    
    
    601,042
    
    
    
    576,263
   26




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
  For the Years Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(In thousands, except per share data)Revenues:Rental income
    
    $
    270,775
    
    
    $
    242,214
    
    
    $
    219,604
    
    
    $
    210,937
    
    
    $
    186,171Facility management fees primarily from
affiliates
    
    
    724
    
    
    
    625
    
    
    
    579
    
    
    
    624
    
    
    
    742Total operating revenues
    
    
    271,499
    
    
    
    242,839
    
    
    
    220,183
    
    
    
    211,561
    
    
    
    186,913Expenses:Cost of operations
    
    
    84,360
    
    
    
    74,671
    
    
    
    65,712
    
    
    
    62,994
    
    
    
    51,536Depreciation and amortization
    
    
    98,521
    
    
    
    86,216
    
    
    
    76,178
    
    
    
    69,942
    
    
    
    56,179General and administrative
    
    
    7,917
    
    
    
    7,046
    
    
    
    5,843
    
    
    
    4,628
    
    
    
    4,683Total operating expenses
    
    
    190,798
    
    
    
    167,933
    
    
    
    147,733
    
    
    
    137,564
    
    
    
    112,398Other income and expenses:Gain on sale of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,043Interest and other income
    
    
    5,104
    
    
    
    6,874
    
    
    
    4,888
    
    
    
    406
    
    
    
    1,125Interest expense
    
    
    (4,130
    )
    
    
    (2,575
    )
    
    
    (1,330
    )
    
    
    (3,054
    )
    
    
    (4,015
    )Total other income and expenses
    
    
    974
    
    
    
    4,299
    
    
    
    3,558
    
    
    
    (2,648
    )
    
    
    (847
    )Asset impairment due to casualty loss
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    Income from continuing operations before
minority interests and equity in income of
liquidated joint venture
    
    
    81,675
    
    
    
    79,205
    
    
    
    75,936
    
    
    
    71,349
    
    
    
    73,668Equity in income of liquidated joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,296Minority interests in continuing operations:Minority interest in income  preferred
units:Distributions to preferred unit holders
    
    
    (6,854
    )
    
    
    (9,789
    )
    
    
    (10,350
    )
    
    
    (17,106
    )
    
    
    (19,240
    )Redemption of preferred operating
partnership units
    
    
    
    
    
    
    (1,366
    )
    
    
    (301
    )
    
    
    (3,139
    )
    
    
    Minority interest in income  common units
    
    
    (6,155
    )
    
    
    (5,113
    )
    
    
    (5,611
    )
    
    
    (4,540
    )
    
    
    (10,398
    )Total minority interests in continuing
operations
    
    
    (13,009
    )
    
    
    (16,268
    )
    
    
    (16,262
    )
    
    
    (24,785
    )
    
    
    (29,638
    )Income from continuing operations
    
    
    68,666
    
    
    
    62,937
    
    
    
    59,674
    
    
    
    46,564
    
    
    
    46,326Discontinued operations:Income (loss) from discontinued operations
    
    
    
    
    
    
    (125
    )
    
    
    2,769
    
    
    
    5,337
    
    
    
    6,727Impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,907
    )Gain on disposition of real estate
    
    
    
    
    
    
    2,328
    
    
    
    18,109
    
    
    
    15,462
    
    
    
    2,897Minority interest in income attributable
to discontinued operations  common units
    
    
    
    
    
    
    (560
    )
    
    
    (5,258
    )
    
    
    (5,220
    )
    
    
    (947
    )Income from discontinued operations
    
    
    
    
    
    
    1,643
    
    
    
    15,620
    
    
    
    15,579
    
    
    
    2,770Net Income
    
    
    68,666
    
    
    
    64,580
    
    
    
    75,294
    
    
    
    62,143
    
    
    
    49,096Net income allocable to preferred
shareholders:Preferred stock distributions:Preferred stock distributions
    
    
    50,937
    
    
    
    44,553
    
    
    
    43,011
    
    
    
    31,154
    
    
    
    15,784Redemptions of preferred stock
    
    
    
    
    
    
    3,380
    
    
    
    
    
    
    
    1,866
    
    
    
    Total preferred stock distributions
    
    
    50,937
    
    
    
    47,933
    
    
    
    43,011
    
    
    
    33,020
    
    
    
    15,784Net income allocable to common shareholders
    
    $
    17,729
    
    
    $
    16,647
    
    
    $
    32,283
    
    
    $
    29,123
    
    
    $
    33,312
 27




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##### Table of Contents



For the Years Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(In thousands, except per share data)Per Common Share:Cash Distribution
    
    $
    1.61
    
    
    $
    1.16
    
    
    $
    1.16
    
    
    $
    1.16
    
    
    $
    1.16Net income  basic
    
    $
    0.83
    
    
    $
    0.78
    
    
    $
    1.48
    
    
    $
    1.34
    
    
    $
    1.56Net income  diluted
    
    $
    0.82
    
    
    $
    0.77
    
    
    $
    1.47
    
    
    $
    1.33
    
    
    $
    1.54Weighted average common
shares  basic
    
    
    21,313
    
    
    
    21,335
    
    
    
    21,826
    
    
    
    21,767
    
    
    
    21,412Weighted average common
shares  diluted
    
    
    21,634
    
    
    
    21,646
    
    
    
    22,018
    
    
    
    21,960
    
    
    
    21,565Balance Sheet Data:Total assets
    
    $
    1,516,583
    
    
    $
    1,463,599
    
    
    $
    1,463,794
    
    
    $
    1,366,768
    
    
    $
    1,359,369Total debt
    
    $
    60,725
    
    
    $
    67,048
    
    
    $
    25,893
    
    
    $
    11,367
    
    
    $
    264,694Preferred stock called for redemption
    
    $
    
    
    
    $
    50,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Minority interest  preferred units
    
    $
    94,750
    
    
    $
    82,750
    
    
    $
    135,750
    
    
    $
    127,750
    
    
    $
    217,750Minority interest  common units
    
    $
    154,470
    
    
    $
    165,469
    
    
    $
    169,451
    
    
    $
    169,295
    
    
    $
    169,888Preferred stock
    
    $
    716,250
    
    
    $
    572,500
    
    
    $
    593,350
    
    
    $
    510,850
    
    
    $
    168,673Common shareholders equity
    
    $
    439,330
    
    
    $
    482,703
    
    
    $
    500,108
    
    
    $
    506,114
    
    
    $
    502,155Other Data:Net cash provided by operating activities
    
    $
    184,094
    
    
    $
    166,134
    
    
    $
    148,828
    
    
    $
    152,166
    
    
    $
    130,897Net cash (used in) provided by investing
activities
    
    $
    (180,188
    )
    
    $
    (169,986
    )
    
    $
    24,389
    
    
    $
    (26,108
    )
    
    $
    (294,885
    )Net cash (used in) provided by financing
activities
    
    $
    (35,882
    )
    
    $
    (129,694
    )
    
    $
    (13,058
    )
    
    $
    (91,971
    )
    
    $
    123,472Funds from operations (1)
    
    $
    122,405
    
    
    $
    106,235
    
    
    $
    102,463
    
    
    $
    97,214
    
    
    $
    97,448Square footage owned at end of period
    
    
    19,556
    
    
    
    18,687
    
    
    
    17,555
    
    
    
    17,988
    
    
    
    18,322
 
 (1)
    
    Funds from operations (FFO) is computed in accordance with the White Paper on FFO approved
by the Board of Governors of the NAREIT. The White Paper defines FFO as net income, computed
in accordance with GAAP, before depreciation, amortization, minority interest in income, gains
or losses on asset dispositions and extraordinary items. FFO should be analyzed in conjunction
with net income. However, FFO should not be viewed as a substitute for net income as a measure
of operating performance or liquidity as it does not reflect depreciation and amortization
costs or the level of capital expenditure and leasing costs necessary to maintain the
operating performance of the Companys properties, which are significant economic costs and
could materially impact the Companys results of operations. Other REITs may use different
methods for calculating FFO and, accordingly, the Companys FFO may not be comparable to that
of other real estate companies. See Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and Capital Resources  Funds from
Operations, for a reconciliation of FFO and net income allocable to common shareholders and
for information on why the Company presents FFO. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements:
 28




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##### Table of Contents



Overview
     Critical Accounting Policies and Estimates:
  Revenue Recognition:
 Property Acquisitions:
   29




---



##### Table of Contents



Allowance for Doubtful Accounts:
   Impairment of Long-Lived Assets:
 Depreciation:
 30




---



##### Table of Contents



Accruals of Operating Expenses:
 Accruals for Contingencies:
 Effect of Economic Conditions on the Companys Operations:
  Effect of Economic Conditions on the Companys Primary Markets:
   31




---



##### Table of Contents



32




---



##### Table of Contents



Growth of the Companys Operations and Acquisitions and Dispositions of Properties:
      Impact of Inflation:
 Concentration of Portfolio by Region:
 33




---



##### Table of Contents



(in thousands)
 WeightedSquare
    
    Percent of
    
    Rental
    
    
    Percent of
    
    Cost of
    
    
    Percent of
    
    
    
    
    
    Percent ofRegion
    
    Footage
    
    Total
   
    Income
    
    
    Total
   
    Operations
    
    
    Total
   
    NOI
    
    
    TotalSouthern California
    
    
    3,988
    
    
    
    20.6
    %
    
    $
    64,474
    
    
    
    23.8
    %
    
    $
    17,493
    
    
    
    20.7
    %
    
    $
    46,981
    
    
    
    25.2
    %Northern California
    
    
    1,760
    
    
    
    9.1
    %
    
    
    22,212
    
    
    
    8.2
    %
    
    
    6,455
    
    
    
    7.7
    %
    
    
    15,757
    
    
    
    8.5
    %Southern Texas
    
    
    1,161
    
    
    
    6.0
    %
    
    
    11,849
    
    
    
    4.4
    %
    
    
    5,156
    
    
    
    6.1
    %
    
    
    6,693
    
    
    
    3.6
    %Northern Texas
    
    
    1,689
    
    
    
    8.7
    %
    
    
    15,162
    
    
    
    5.6
    %
    
    
    5,765
    
    
    
    6.8
    %
    
    
    9,397
    
    
    
    5.1
    %South Florida
    
    
    3,596
    
    
    
    18.6
    %
    
    
    31,515
    
    
    
    11.6
    %
    
    
    10,074
    
    
    
    11.9
    %
    
    
    21,441
    
    
    
    11.5
    %Virginia
    
    
    2,945
    
    
    
    15.2
    %
    
    
    54,202
    
    
    
    20.0
    %
    
    
    15,595
    
    
    
    18.5
    %
    
    
    38,607
    
    
    
    20.7
    %Maryland
    
    
    1,770
    
    
    
    9.1
    %
    
    
    38,873
    
    
    
    14.3
    %
    
    
    11,774
    
    
    
    14.0
    %
    
    
    27,099
    
    
    
    14.5
    %Oregon
    
    
    1,314
    
    
    
    6.8
    %
    
    
    18,281
    
    
    
    6.8
    %
    
    
    6,663
    
    
    
    7.9
    %
    
    
    11,618
    
    
    
    6.2
    %Arizona
    
    
    679
    
    
    
    3.5
    %
    
    
    6,976
    
    
    
    2.6
    %
    
    
    2,907
    
    
    
    3.5
    %
    
    
    4,069
    
    
    
    2.2
    %Washington
    
    
    459
    
    
    
    2.4
    %
    
    
    7,231
    
    
    
    2.7
    %
    
    
    2,478
    
    
    
    2.9
    %
    
    
    4,753
    
    
    
    2.5
    %Total before depreciation
and amortization
    
    
    19,361
    
    
    
    100.0
    %
    
    
    270,775
    
    
    
    100.0
    %
    
    
    84,360
    
    
    
    100.0
    %
    
    
    186,415
    
    
    
    100.0
    %Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,521
    
    
    
    
    
    
    
    (98,521
    )Total
    
    
    
    
    
    
    
    
    
    $
    270,775
    
    
    
    
    
    
    $
    182,881
    
    
    
    
    
    
    $
    87,894
 Concentration of Credit Risk by Industry:
 Business services
    
    
    12.7
    %Government
    
    
    10.7
    %Financial services
    
    
    9.8
    %Contractors
    
    
    9.5
    %Computer hardware, software and related service
    
    
    9.3
    %Warehouse, transportation and logistics
    
    
    8.9
    %Health services
    
    
    7.1
    %Retail
    
    
    5.8
    %Communications
    
    
    5.6
    %Home furnishing
    
    
    4.0
    %Electronics
    
    
    3.1
    %Total
    
    
    86.5
    %
 34




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##### Table of Contents



in thousands
 % of TotalTenants
    
    Square Footage
    
    Annual Rents (1)
    
    Annual RentsU.S. Government
    
    
    505
    
    
    
    $
    12,026
    
    
    
    4.3
    %Kaiser Permanente
    
    
    194
    
    
    
    
    3,718
    
    
    
    1.3
    %County of Santa Clara
    
    
    97
    
    
    
    
    2,489
    
    
    
    0.9
    %Intel
    
    
    214
    
    
    
    
    1,921
    
    
    
    0.7
    %Wells Fargo
    
    
    102
    
    
    
    
    1,706
    
    
    
    0.6
    %AARP
    
    
    102
    
    
    
    
    1,596
    
    
    
    0.6
    %Northrop Grumman
    
    
    58
    
    
    
    
    1,585
    
    
    
    0.6
    %Raytheon
    
    
    78
    
    
    
    
    1,391
    
    
    
    0.5
    %American Intercontinental University
    
    
    75
    
    
    
    
    1,310
    
    
    
    0.5
    %MCI
    
    
    72
    
    
    
    
    1,266
    
    
    
    0.4
    %Total
    
    
    1,497
    
    
    
    $
    29,008
    
    
    
    10.4
    %
  Comparison of 2007 to 2006
 Results of Operations:
 35




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##### Table of Contents



(in thousands, except per square foot data)
 For the Years Ended December 31,2007
    
    
    2006
    
    
    ChangeRental income:Same Park (17.5 million rentable square feet) (1)
    
    $
    238,783
    
    
    $
    230,965
    
    
    
    3.4
    %Non-Same Park (2.1 million rentable square feet) (2)
    
    
    31,992
    
    
    
    11,249
    
    
    
    184.4
    %Total rental income
    
    
    270,775
    
    
    
    242,214
    
    
    
    11.8
    %Cost of operations:Same Park
    
    
    72,995
    
    
    
    70,707
    
    
    
    3.2
    %Non-Same Park
    
    
    11,365
    
    
    
    3,964
    
    
    
    186.7
    %Total cost of operations
    
    
    84,360
    
    
    
    74,671
    
    
    
    13.0
    %Net operating income (3):Same Park
    
    
    165,788
    
    
    
    160,258
    
    
    
    3.5
    %Non-Same Park
    
    
    20,627
    
    
    
    7,285
    
    
    
    183.1
    %Total net operating income
    
    
    186,415
    
    
    
    167,543
    
    
    
    11.3
    %Other income and expenses:Facility management fees
    
    
    724
    
    
    
    625
    
    
    
    15.8
    %Interest and other income
    
    
    5,104
    
    
    
    6,874
    
    
    
    (25.7
    %)Interest expense
    
    
    (4,130
    )
    
    
    (2,575
    )
    
    
    60.4
    %Depreciation and amortization
    
    
    (98,521
    )
    
    
    (86,216
    )
    
    
    14.3
    %General and administrative
    
    
    (7,917
    )
    
    
    (7,046
    )
    
    
    12.4
    %Income from continuing operations before minority interests
    
    $
    81,675
    
    
    $
    79,205
    
    
    
    3.1
    %Same Park gross margin (4)
    
    
    69.4%
    
    
    
    69.4%
    
    
    
    0.0
    %Same Park weighted average for the period:Occupancy
    
    
    93.8%
    
    
    
    93.4%
    
    
    
    0.4
    %Realized rent per square foot (5)
    
    $
    14.55
    
    
    $
    14.14
    
    
    
    2.9
    %
 
 (1)
    
    See below for a definition of Same Park.(2)
    
    Represents operating properties owned by the Company as of December 31, 2007 that are not
included in Same Park.(3)
    
    Net operating income (NOI) is an important measurement in the commercial real estate
industry for determining the value of the real estate generating the NOI. See Concentration
of Portfolio by Region above for more information on NOI. The Companys calculation of NOI
may not be comparable to those of other companies and should not be used as an alternative to
measures of performance in accordance with GAAP.(4)
    
    Same Park gross margin is computed by dividing Same Park NOI by Same Park rental income.(5)
    
    Same Park realized rent per square foot represents the Same Park rental income earned per
occupied square foot. Supplemental Property Data and Trends:
  36




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##### Table of Contents



(in thousands)
 Cost of
    
    
    Cost ofRental Income
    
    
    Rental Income
    
    
    
    
    
    
    Operations
    
    
    Operations
    
    
    
    
    
    
    NOI
    
    
    NOIDecember 31,
    
    
    December 31,
    
    
    Increase
    
    December 31,
    
    
    December 31,
    
    
    Increase
    
    December 31,
    
    
    December 31,
    
    
    IncreaseRegion
    
    2007
    
    
    2006
    
    
    (Decrease)

    
    2007
    
    
    2006
    
    
    (Decrease)

    
    2007
    
    
    2006
    
    
    (Decrease)Southern California
    
    $
    63,570
    
    
    $
    60,803
    
    
    
    4.6
    %
    
    $
    17,115
    
    
    $
    17,362
    
    
    
    (1.4
    %)
    
    $
    46,455
    
    
    $
    43,441
    
    
    
    6.9
    %Northern California
    
    
    19,589
    
    
    
    18,854
    
    
    
    3.9
    %
    
    
    5,380
    
    
    
    5,006
    
    
    
    7.5
    %
    
    
    14,209
    
    
    
    13,848
    
    
    
    2.6
    %Southern Texas
    
    
    11,849
    
    
    
    10,472
    
    
    
    13.1
    %
    
    
    5,156
    
    
    
    4,668
    
    
    
    10.5
    %
    
    
    6,693
    
    
    
    5,804
    
    
    
    15.3
    %Northern Texas
    
    
    15,162
    
    
    
    14,736
    
    
    
    2.9
    %
    
    
    5,765
    
    
    
    5,811
    
    
    
    (0.8
    %)
    
    
    9,397
    
    
    
    8,925
    
    
    
    5.3
    %South Florida
    
    
    25,899
    
    
    
    24,316
    
    
    
    6.5
    %
    
    
    7,869
    
    
    
    8,041
    
    
    
    (2.1
    %)
    
    
    18,030
    
    
    
    16,275
    
    
    
    10.8
    %Virginia
    
    
    51,219
    
    
    
    50,055
    
    
    
    2.3
    %
    
    
    14,779
    
    
    
    14,056
    
    
    
    5.1
    %
    
    
    36,440
    
    
    
    35,999
    
    
    
    1.2
    %Maryland
    
    
    25,909
    
    
    
    25,868
    
    
    
    0.2
    %
    
    
    7,251
    
    
    
    6,616
    
    
    
    9.6
    %
    
    
    18,658
    
    
    
    19,252
    
    
    
    (3.1
    %)Oregon
    
    
    18,281
    
    
    
    18,596
    
    
    
    (1.7
    %)
    
    
    6,663
    
    
    
    6,288
    
    
    
    6.0
    %
    
    
    11,618
    
    
    
    12,308
    
    
    
    (5.6
    %)Arizona
    
    
    6,976
    
    
    
    7,001
    
    
    
    (0.4
    %)
    
    
    2,907
    
    
    
    2,746
    
    
    
    5.9
    %
    
    
    4,069
    
    
    
    4,255
    
    
    
    (4.4
    %)Washington
    
    
    329
    
    
    
    264
    
    
    
    24.6
    %
    
    
    110
    
    
    
    113
    
    
    
    (2.7
    %)
    
    
    219
    
    
    
    151
    
    
    
    45.0
    %Total Same Park
    
    
    238,783
    
    
    
    230,965
    
    
    
    3.4
    %
    
    
    72,995
    
    
    
    70,707
    
    
    
    3.2
    %
    
    
    165,788
    
    
    
    160,258
    
    
    
    3.5
    %Non-Same Park
    
    
    31,992
    
    
    
    11,249
    
    
    
    184.4
    %
    
    
    11,365
    
    
    
    3,964
    
    
    
    186.7
    %
    
    
    20,627
    
    
    
    7,285
    
    
    
    183.1
    %Total before
depreciation and
amortization
    
    
    270,775
    
    
    
    242,214
    
    
    
    11.8
    %
    
    
    84,360
    
    
    
    74,671
    
    
    
    13.0
    %
    
    
    186,415
    
    
    
    167,543
    
    
    
    11.3
    %Depreciation and
amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,521
    
    
    
    86,216
    
    
    
    14.3
    %
    
    
    (98,521
    )
    
    
    (86,216
    )
    
    
    14.3
    %Total based on GAAP
    
    $
    270,775
    
    
    $
    242,214
    
    
    
    11.8
    %
    
    $
    182,881
    
    
    $
    160,887
    
    
    
    13.7
    %
    
    $
    87,894
    
    
    $
    81,327
    
    
    
    8.1
    %
  Southern California
  Northern California
  Southern Texas
  Northern Texas
  37




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##### Table of Contents



South Florida
  Virginia
  Maryland
  Oregon
  Arizona
  Washington
  38




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##### Table of Contents



Facility Management Operations:
 Cost of Operations:
 Depreciation and Amortization Expense:
 General and Administrative Expense:
 Interest and Other Income:
 Interest Expense:
 Gain on Disposition of Real Estate:
 Minority Interest in Income:
 39




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##### Table of Contents



Comparison of 2006 to 2005
 Results of Operations:
 (in thousands, except per square foot data)
 For the Years Ended December 31,2006
    
    
    2005
    
    
    ChangeRental income:Same Park (17.3 million rentable square feet) (1)
    
    $
    227,073
    
    
    $
    218,981
    
    
    
    3.7
    %Non-Same Park (1.4 million rentable square feet) (2)
    
    
    15,141
    
    
    
    623
    
    
    
    2,330.3
    %Total rental income
    
    
    242,214
    
    
    
    219,604
    
    
    
    10.3
    %Cost of operations:Same Park
    
    
    69,271
    
    
    
    65,558
    
    
    
    5.7
    %Non-Same Park
    
    
    5,400
    
    
    
    154
    
    
    
    3,406.5
    %Total cost of operations
    
    
    74,671
    
    
    
    65,712
    
    
    
    13.6
    %Net operating income (3):Same Park
    
    
    157,802
    
    
    
    153,423
    
    
    
    2.9
    %Non-Same Park
    
    
    9,741
    
    
    
    469
    
    
    
    1,977.0
    %Total net operating income
    
    
    167,543
    
    
    
    153,892
    
    
    
    8.9
    %Other income and expenses:Facility management fees
    
    
    625
    
    
    
    579
    
    
    
    7.9
    %Interest and other income
    
    
    6,874
    
    
    
    4,888
    
    
    
    40.6
    %Interest expense
    
    
    (2,575
    )
    
    
    (1,330
    )
    
    
    93.6
    %Depreciation and amortization
    
    
    (86,216
    )
    
    
    (76,178
    )
    
    
    13.2
    %General and administrative
    
    
    (7,046
    )
    
    
    (5,843
    )
    
    
    20.6
    %Asset impairment due to casualty loss
    
    
    
    
    
    
    (72
    )
    
    
    (100.0
    %)Income from continuing operations before minority interests
    
    $
    79,205
    
    
    $
    75,936
    
    
    
    4.3
    %Same Park gross margin (4)
    
    
    69.5%
    
    
    
    70.1%
    
    
    
    (0.9
    %)Same Park weighted average for the period:Occupancy
    
    
    93.4%
    
    
    
    92.3%
    
    
    
    1.2
    %Realized rent per square foot (5)
    
    $
    14.09
    
    
    $
    13.75
    
    
    
    2.5
    %
 
 (1)
    
    See below for a definition of Same Park.(2)
    
    Represents operating properties owned by the Company as of December 31, 2006 that are not
included in Same Park.(3)
    
    Net operating income (NOI) is an important measurement in the commercial real estate
industry for determining the value of the real estate generating the NOI. See Concentration
of Portfolio by Region above for more information on NOI. The Companys calculation of NOI
may not be comparable to those of other companies and should not be used as an alternative to
measures of performance in accordance with GAAP.(4)
    
    Same Park gross margin is computed by dividing Same Park NOI by Same Park rental income.(5)
    
    Same Park realized rent per square foot represents the Same Park rental income earned per
occupied square foot. 40




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##### Table of Contents



Supplemental Property Data and Trends:
  (in thousands)
 Cost of
    
    
    Cost ofRental Income
    
    
    Rental Income
    
    
    
    
    
    
    Operations
    
    
    Operations
    
    
    
    
    
    
    NOI
    
    
    NOIDecember 31,
    
    
    December 31,
    
    
    Increase
    
    December 31,
    
    
    December 31,
    
    
    Increase
    
    December 31,
    
    
    December 31,
    
    
    IncreaseRegion
    
    2006
    
    
    2005
    
    
    (Decrease)

    
    2006
    
    
    2005
    
    
    (Decrease)

    
    2006
    
    
    2005
    
    
    (Decrease)Southern California
    
    $
    56,911
    
    
    $
    54,096
    
    
    
    5.2
    %
    
    $
    15,926
    
    
    $
    14,843
    
    
    
    7.3
    %
    
    $
    40,985
    
    
    $
    39,253
    
    
    
    4.4
    %Northern California
    
    
    18,854
    
    
    
    18,971
    
    
    
    (0.6
    %)
    
    
    5,006
    
    
    
    4,583
    
    
    
    9.2
    %
    
    
    13,848
    
    
    
    14,388
    
    
    
    (3.8
    %)Southern Texas
    
    
    10,472
    
    
    
    9,615
    
    
    
    8.9
    %
    
    
    4,668
    
    
    
    4,115
    
    
    
    13.4
    %
    
    
    5,804
    
    
    
    5,500
    
    
    
    5.5
    %Northern Texas
    
    
    14,736
    
    
    
    15,712
    
    
    
    (6.2
    %)
    
    
    5,811
    
    
    
    5,337
    
    
    
    8.9
    %
    
    
    8,925
    
    
    
    10,375
    
    
    
    (14.0
    %)South Florida
    
    
    24,316
    
    
    
    22,080
    
    
    
    10.1
    %
    
    
    8,041
    
    
    
    7,767
    
    
    
    3.5
    %
    
    
    16,275
    
    
    
    14,313
    
    
    
    13.7
    %Virginia
    
    
    50,055
    
    
    
    48,699
    
    
    
    2.8
    %
    
    
    14,056
    
    
    
    13,881
    
    
    
    1.3
    %
    
    
    35,999
    
    
    
    34,818
    
    
    
    3.4
    %Maryland
    
    
    25,868
    
    
    
    24,189
    
    
    
    6.9
    %
    
    
    6,616
    
    
    
    6,490
    
    
    
    1.9
    %
    
    
    19,252
    
    
    
    17,699
    
    
    
    8.8
    %Oregon
    
    
    18,596
    
    
    
    18,453
    
    
    
    0.8
    %
    
    
    6,288
    
    
    
    5,767
    
    
    
    9.0
    %
    
    
    12,308
    
    
    
    12,686
    
    
    
    (3.0
    %)Arizona
    
    
    7,001
    
    
    
    6,936
    
    
    
    0.9
    %
    
    
    2,746
    
    
    
    2,659
    
    
    
    3.3
    %
    
    
    4,255
    
    
    
    4,277
    
    
    
    (0.5
    %)Washington
    
    
    264
    
    
    
    230
    
    
    
    14.8
    %
    
    
    113
    
    
    
    116
    
    
    
    (2.6
    %)
    
    
    151
    
    
    
    114
    
    
    
    32.5
    %Total Same Park
    
    
    227,073
    
    
    
    218,981
    
    
    
    3.7
    %
    
    
    69,271
    
    
    
    65,558
    
    
    
    5.7
    %
    
    
    157,802
    
    
    
    153,423
    
    
    
    2.9
    %Non-Same Park
    
    
    15,141
    
    
    
    623
    
    
    
    2,330.3
    %
    
    
    5,400
    
    
    
    154
    
    
    
    3,406.5
    %
    
    
    9,741
    
    
    
    469
    
    
    
    1,977.0
    %Total before
depreciation and
amortization
    
    
    242,214
    
    
    
    219,604
    
    
    
    10.3
    %
    
    
    74,671
    
    
    
    65,712
    
    
    
    13.6
    %
    
    
    167,543
    
    
    
    153,892
    
    
    
    8.9
    %Depreciation and
amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,216
    
    
    
    76,178
    
    
    
    13.2
    %
    
    
    (86,216
    )
    
    
    (76,178
    )
    
    
    13.2
    %Total based on GAAP
    
    $
    242,214
    
    
    $
    219,604
    
    
    
    10.3
    %
    
    $
    160,887
    
    
    $
    141,890
    
    
    
    13.4
    %
    
    $
    81,327
    
    
    $
    77,714
    
    
    
    4.6
    %
  Southern California
  Northern California
  41




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##### Table of Contents



Southern Texas
  Northern Texas
  South Florida
  Virginia
  Maryland
  Oregon
  42




---



##### Table of Contents



Arizona
  Washington
  Facility Management Operations:
 Cost of Operations:
 Depreciation and Amortization Expense:
 General and Administrative Expense:
 Interest and Other Income:
 Interest Expense:
 43




---



##### Table of Contents



Gain on Disposition of Real Estate:
 Minority Interest in Income:
 Liquidity and Capital Resources
      44




---



##### Table of Contents



Non-GAAP Supplemental Disclosure Measure: Funds from Operations:
 45




---



##### Table of Contents



in thousands
 For the Years Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Net income allocable to common
shareholders
    
    $
    17,729
    
    
    $
    16,647
    
    
    $
    32,283
    
    
    $
    29,123
    
    
    $
    33,312Gain on sale of marketable and
other securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,043
    )Gain on disposition of real estate
    
    
    
    
    
    
    (2,328
    )
    
    
    (18,109
    )
    
    
    (15,462
    )
    
    
    (2,897
    )Equity income from sale of joint
venture properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,376
    )Depreciation and amortization
    
    
    98,521
    
    
    
    86,243
    
    
    
    77,420
    
    
    
    73,793
    
    
    
    59,107Minority interest in income 
common units
    
    
    6,155
    
    
    
    5,673
    
    
    
    10,869
    
    
    
    9,760
    
    
    
    11,345Consolidated FFO allocable to
common shareholders and minority
interests
    
    
    122,405
    
    
    
    106,235
    
    
    
    102,463
    
    
    
    97,214
    
    
    
    97,448FFO allocated to minority
interests  common units
    
    
    (31,580
    )
    
    
    (27,005
    )
    
    
    (25,810
    )
    
    
    (24,401
    )
    
    
    (24,657
    )FFO allocated to common
shareholders
    
    $
    90,825
    
    
    $
    79,230
    
    
    $
    76,653
    
    
    $
    72,813
    
    
    $
    72,791
  Capital Expenditures: in thousands
 2007
    
    
    2006
    
    
    2005Recurring capital expenditures
    
    $
    37,362
    
    
    $
    34,096
    
    
    $
    35,821Property renovations and other capital expenditures
    
    
    5,239
    
    
    
    5,131
    
    
    
    4,519Total capital expenditures
    
    $
    42,601
    
    
    $
    39,227
    
    
    $
    40,340
 Stock Repurchase:
 46




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##### Table of Contents



Redemption of Preferred Equity:
 Distributions:
 Related Party Transactions:
  Off-Balance Sheet Arrangements:
 Contractual Obligations: (in thousands)
 Payments Due by PeriodContractual Obligations
    
    Total
    
    
    Less than 1 year
    
    
    1 - 3 years
    
    
    3 - 5 years
    
    
    More than 5 yearsMortgage notes payable
(principal and
interest)
    
    $
    74,785
    
    
    $
    4,914
    
    
    $
    13,912
    
    
    $
    24,181
    
    
    $
    31,778Total
    
    $
    74,785
    
    
    $
    4,914
    
    
    $
    13,912
    
    
    $
    24,181
    
    
    $
    31,778
  47




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  48




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##### Table of Contents



ITEM 9A. CONTROLS AND PROCEDURES
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
   Managements Report on Internal Control over Financial Reporting
 Internal Control-Integrated Framework
  Changes in Internal Control Over Financial Reporting
  49




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework
      
 50




---



##### Table of Contents



ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
      
 ITEM 11. EXECUTIVE COMPENSATION
  51




---



##### Table of Contents



ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
   (a)
    
    
    (b)
    
    
    (c)Number of Securities
    
    
    Weighted
    
    
    Number of Securitiesto be Issued Upon
    
    
    Average
    
    
    Remaining Available forExercise of
    
    
    Exercise Price of
    
    
    Future Issuance underOutstanding
    
    
    Outstanding
    
    
    Equity CompensationOptions, Warrants,
    
    
    Options,
    
    
    Plans (Excludingand
    
    
    Warrants, and
    
    
    Securities Reflected inPlan Category
    

Rights
    
    
    Rights
    
    
    Column (a))Equity
compensation
plans approved
by security
holders
    
    
    800,814
    
    
    $
    42.43
    
    
    
    1,249,261Equity
compensation
plans not
approved by
security
holders
    
    
    
    
    
    $
    
    
    
    
    Total
    
    
    800,814
    *
    
    $
    42.43
    *
    
    
    1,249,261
    *
 
 *
    
    Amounts include restricted stock units
 
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit Fees:
 Audit-Related Fees:
 Tax Fees:
 All Other Fees:
  52




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
           53




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##### Table of Contents



PS BUSINESS PARKS, INC.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
(Item 15(a)(1) and Item 15(a)(2))
 PageReport of Independent Registered Public Accounting Firm
    
    
    55Consolidated balance sheets as of December 31, 2007 and 2006
    
    
    56Consolidated statements of income for the years ended December 31, 2007, 2006 and 2005
    
    
    57Consolidated statements of shareholders equity for the years ended December 31, 2007, 2006 and 2005
    
    
    58Consolidated statements of cash flows for the years ended December 31, 2007, 2006 and 2005
    
    
    59Notes to consolidated financial statements
    
    
    61Schedule:III  Real estate and accumulated depreciation
    
    
    77
  54




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal Control  Integrated
Framework
 
 55




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##### Table of Contents



PS BUSINESS PARKS, INC.
 CONSOLIDATED BALANCE SHEETS
 December 31,2007
    
    
    2006(In thousands, exceptshare data)ASSETSCash and cash equivalents
    
    $
    35,041
    
    
    $
    67,017Real estate facilities, at cost:Land
    
    
    494,849
    
    
    
    439,777Buildings and equipment
    
    
    1,484,049
    
    
    
    1,353,4421,978,898
    
    
    
    1,793,219Accumulated depreciation
    
    
    (539,857
    )
    
    
    (441,336
    )1,439,041
    
    
    
    1,351,883Land held for development
    
    
    7,869
    
    
    
    9,0111,446,910
    
    
    
    1,360,894Rent receivable
    
    
    2,240
    
    
    
    2,080Deferred rent receivable
    
    
    21,927
    
    
    
    21,454Other assets
    
    
    10,465
    
    
    
    12,154Total assets
    
    $
    1,516,583
    
    
    $
    1,463,599LIABILITIES AND SHAREHOLDERS EQUITYAccrued and other liabilities
    
    $
    51,058
    
    
    $
    43,129Preferred stock called for redemption
    
    
    
    
    
    
    50,000Mortgage notes payable
    
    
    60,725
    
    
    
    67,048Total liabilities
    
    
    111,783
    
    
    
    160,177Minority interests:Preferred units
    
    
    94,750
    
    
    
    82,750Common units
    
    
    154,470
    
    
    
    165,469Commitments and contingenciesShareholders equity:Preferred stock, $0.01 par value, 50,000,000 shares authorized,
28,650 and 22,900 shares issued and outstanding at
December 31, 2007 and 2006, respectively
    
    
    716,250
    
    
    
    572,500Common stock, $0.01 par value, 100,000,000 shares authorized,
20,777,219 and 21,311,005 shares issued and outstanding at
December 31, 2007 and 2006, respectively
    
    
    207
    
    
    
    213Paid-in capital
    
    
    371,267
    
    
    
    398,048Cumulative net income
    
    
    552,069
    
    
    
    483,403Cumulative distributions
    
    
    (484,213
    )
    
    
    (398,961
    )Total shareholders equity
    
    
    1,155,580
    
    
    
    1,055,203Total liabilities and shareholders equity
    
    $
    1,516,583
    
    
    $
    1,463,599
  56




---



##### Table of Contents



PS BUSINESS PARKS, INC.
 CONSOLIDATED STATEMENTS OF INCOME
 For the Years Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands, exceptper share data)Revenues:Rental income
    
    $
    270,775
    
    
    $
    242,214
    
    
    $
    219,604Facility management fees
    
    
    724
    
    
    
    625
    
    
    
    579Total operating revenues
    
    
    271,499
    
    
    
    242,839
    
    
    
    220,183Expenses:Cost of operations
    
    
    84,360
    
    
    
    74,671
    
    
    
    65,712Depreciation and amortization
    
    
    98,521
    
    
    
    86,216
    
    
    
    76,178General and administrative
    
    
    7,917
    
    
    
    7,046
    
    
    
    5,843Total operating expenses
    
    
    190,798
    
    
    
    167,933
    
    
    
    147,733Other income and expenses:Interest and other income
    
    
    5,104
    
    
    
    6,874
    
    
    
    4,888Interest expense
    
    
    (4,130
    )
    
    
    (2,575
    )
    
    
    (1,330
    )Total other income and expenses
    
    
    974
    
    
    
    4,299
    
    
    
    3,558Asset impairment due to casualty loss
    
    
    
    
    
    
    
    
    
    
    72Income from continuing operations before minority interests
    
    
    81,675
    
    
    
    79,205
    
    
    
    75,936Minority interests in continuing operations:Minority interest in income  preferred units:Distributions to preferred unit holders
    
    
    (6,854
    )
    
    
    (9,789
    )
    
    
    (10,350
    )Redemption of preferred operating partnership units
    
    
    
    
    
    
    (1,366
    )
    
    
    (301
    )Minority interest in income  common units
    
    
    (6,155
    )
    
    
    (5,113
    )
    
    
    (5,611
    )Total minority interests in continuing operations
    
    
    (13,009
    )
    
    
    (16,268
    )
    
    
    (16,262
    )Income from continuing operations
    
    
    68,666
    
    
    
    62,937
    
    
    
    59,674Discontinued operations:Income (loss) from discontinued operations
    
    
    
    
    
    
    (125
    )
    
    
    2,769Gain on disposition of real estate
    
    
    
    
    
    
    2,328
    
    
    
    18,109Minority interest in income attributable to discontinued
operations  common units
    
    
    
    
    
    
    (560
    )
    
    
    (5,258
    )Income from discontinued operations
    
    
    
    
    
    
    1,643
    
    
    
    15,620Net Income
    
    
    68,666
    
    
    
    64,580
    
    
    
    75,294Net income allocable to preferred shareholders:Preferred stock distributions:Preferred stock distributions
    
    
    50,937
    
    
    
    44,553
    
    
    
    43,011Redemptions of preferred stock
    
    
    
    
    
    
    3,380
    
    
    
    Total preferred stock distributions
    
    
    50,937
    
    
    
    47,933
    
    
    
    43,011Net income allocable to common shareholders
    
    $
    17,729
    
    
    $
    16,647
    
    
    $
    32,283Net income per common share  basic:Continuing operations
    
    $
    0.83
    
    
    $
    0.70
    
    
    $
    0.76Discontinued operations
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.72Net income
    
    $
    0.83
    
    
    $
    0.78
    
    
    $
    1.48Net income per common share  diluted:Continuing operations
    
    $
    0.82
    
    
    $
    0.69
    
    
    $
    0.76Discontinued operations
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.71Net income
    
    $
    0.82
    
    
    $
    0.77
    
    
    $
    1.47Weighted average common shares outstanding:Basic
    
    
    21,313
    
    
    
    21,335
    
    
    
    21,826Diluted
    
    
    21,634
    
    
    
    21,646
    
    
    
    22,018
  57




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##### Table of Contents



PS BUSINESS PARKS, INC.
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 CumulativePreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Net
    
    
    Cumulative
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income
    
    
    Distributions
    
    
    Equity(In thousands, except share data)Balances at December 31, 2004
    
    
    20,434
    
    
    $
    510,850
    
    
    
    21,839,667
    
    
    $
    218
    
    
    $
    420,351
    
    
    $
    343,529
    
    
    $
    (257,984
    )
    
    $
    1,016,964Issuance of preferred stock, net of costs
    
    
    3,300
    
    
    
    82,500
    
    
    
    
    
    
    
    
    
    
    
    (2,873
    )
    
    
    
    
    
    
    
    
    
    
    79,627Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (361,400
    )
    
    
    (4
    )
    
    
    (16,628
    )
    
    
    
    
    
    
    
    
    
    
    (16,632
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    70,364
    
    
    
    1
    
    
    
    1,936
    
    
    
    
    
    
    
    
    
    
    
    1,937Stock compensation
    
    
    
    
    
    
    
    
    
    
    11,962
    
    
    
    
    
    
    
    2,588
    
    
    
    
    
    
    
    
    
    
    
    2,588Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,294
    
    
    
    
    
    
    
    75,294Distributions:Preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,011
    )
    
    
    (43,011
    )Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,315
    )
    
    
    (25,315
    )Adjustment to minority interests underlying ownership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,006
    
    
    
    
    
    
    
    
    
    
    
    2,006Balances at December 31, 2005
    
    
    23,734
    
    
    
    593,350
    
    
    
    21,560,593
    
    
    
    215
    
    
    
    407,380
    
    
    
    418,823
    
    
    
    (326,310
    )
    
    
    1,093,458Issuance of preferred stock, net of costs
    
    
    3,800
    
    
    
    95,000
    
    
    
    
    
    
    
    
    
    
    
    (2,798
    )
    
    
    
    
    
    
    
    
    
    
    92,202Redemption of preferred stock
    
    
    (2,634
    )
    
    
    (65,850
    )
    
    
    
    
    
    
    
    
    
    
    1,658
    
    
    
    
    
    
    
    (1,658
    )
    
    
    (65,850
    )Preferred stock called for redemption
    
    
    (2,000
    )
    
    
    (50,000
    )
    
    
    
    
    
    
    
    
    
    
    1,722
    
    
    
    
    
    
    
    (1,722
    )
    
    
    (50,000
    )Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (309,100
    )
    
    
    (3
    )
    
    
    (16,114
    )
    
    
    
    
    
    
    
    
    
    
    (16,117
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    37,900
    
    
    
    1
    
    
    
    1,366
    
    
    
    
    
    
    
    
    
    
    
    1,367Stock compensation
    
    
    
    
    
    
    
    
    
    
    21,612
    
    
    
    
    
    
    
    2,286
    
    
    
    
    
    
    
    
    
    
    
    2,286Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,580
    
    
    
    
    
    
    
    64,580Distributions:Preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,553
    )
    
    
    (44,553
    )Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,718
    )
    
    
    (24,718
    )Adjustment to minority interests underlying ownership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,548
    
    
    
    
    
    
    
    
    
    
    
    2,548Balances at December 31, 2006
    
    
    22,900
    
    
    
    572,500
    
    
    
    21,311,005
    
    
    
    213
    
    
    
    398,048
    
    
    
    483,403
    
    
    
    (398,961
    )
    
    
    1,055,203Issuance of preferred stock, net of costs
    
    
    5,750
    
    
    
    143,750
    
    
    
    
    
    
    
    
    
    
    
    (4,183
    )
    
    
    
    
    
    
    
    
    
    
    139,567Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (601,042
    )
    
    
    (6
    )
    
    
    (31,847
    )
    
    
    
    
    
    
    
    
    
    
    (31,853
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    43,384
    
    
    
    
    
    
    
    1,468
    
    
    
    
    
    
    
    
    
    
    
    1,468Stock compensation
    
    
    
    
    
    
    
    
    
    
    23,872
    
    
    
    
    
    
    
    2,813
    
    
    
    
    
    
    
    
    
    
    
    2,813Shelf registration
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    
    
    
    
    (88
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,666
    
    
    
    
    
    
    
    68,666Distributions:Preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,937
    )
    
    
    (50,937
    )Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,315
    )
    
    
    (34,315
    )Adjustment to minority interests underlying ownership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,056
    
    
    
    
    
    
    
    
    
    
    
    5,056Balances at December 31, 2007
    
    
    28,650
    
    
    $
    716,250
    
    
    
    20,777,219
    
    
    $
    207
    
    
    $
    371,267
    
    
    $
    552,069
    
    
    $
    (484,213
    )
    
    $
    1,155,580
 58




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##### Table of Contents



PS BUSINESS PARKS, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Cash flows from operating activities:Net income
    
    $
    68,666
    
    
    $
    64,580
    
    
    $
    75,294Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization expense
    
    
    98,521
    
    
    
    86,243
    
    
    
    77,420In-place lease adjustment
    
    
    (102
    )
    
    
    232
    
    
    
    155Lease incentives net of tenant improvement reimbursements.
    
    
    (33
    )
    
    
    440
    
    
    
    144Amortization of mortgage premium
    
    
    (247
    )
    
    
    (76
    )
    
    
    Minority interest in income
    
    
    13,009
    
    
    
    16,828
    
    
    
    21,520Gain on disposition of properties
    
    
    
    
    
    
    (2,328
    )
    
    
    (18,109
    )Impairment of assets from casualty loss
    
    
    
    
    
    
    
    
    
    
    72Stock compensation expense
    
    
    2,813
    
    
    
    2,845
    
    
    
    1,060Increase in receivables and other assets
    
    
    (1,015
    )
    
    
    (3,741
    )
    
    
    (5,004
    )Increase (decrease) in accrued and other liabilities
    
    
    2,482
    
    
    
    1,111
    
    
    
    (3,724
    )Total adjustments
    
    
    115,428
    
    
    
    101,554
    
    
    
    73,534Net cash provided by operating activities
    
    
    184,094
    
    
    
    166,134
    
    
    
    148,828Cash flows from investing activities:Capital improvements to real estate facilities
    
    
    (42,601
    )
    
    
    (39,227
    )
    
    
    (40,340
    )Acquisition of real estate facilities
    
    
    (138,936
    )
    
    
    (138,973
    )
    
    
    (20,073
    )Proceeds from disposition of real estate
    
    
    
    
    
    
    7,714
    
    
    
    84,802Insurance proceeds from casualty loss
    
    
    1,349
    
    
    
    500
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (180,188
    )
    
    
    (169,986
    )
    
    
    24,389Cash flows from financing activities:Principal payments on mortgage notes payable
    
    
    (1,126
    )
    
    
    (762
    )
    
    
    (472
    )Repayment of mortgage note payable
    
    
    (4,950
    )
    
    
    
    
    
    
    Net proceeds from the issuance of preferred stock
    
    
    139,567
    
    
    
    92,448
    
    
    
    79,627Net proceeds from the issuance of preferred units
    
    
    11,665
    
    
    
    
    
    
    
    19,465Exercise of stock options
    
    
    1,468
    
    
    
    1,367
    
    
    
    1,937Shelf registration costs
    
    
    (88
    )
    
    
    
    
    
    
    Repurchase of common stock
    
    
    (28,551
    )
    
    
    (16,117
    )
    
    
    (14,465
    )Redemption of preferred units
    
    
    
    
    
    
    (53,000
    )
    
    
    (12,000
    )Redemption of preferred stock
    
    
    (50,000
    )
    
    
    (65,850
    )
    
    
    Distributions paid to preferred shareholders
    
    
    (50,937
    )
    
    
    (44,799
    )
    
    
    (43,011
    )Distributions paid to minority interests  preferred units
    
    
    (6,854
    )
    
    
    (9,789
    )
    
    
    (10,350
    )Distributions paid to common shareholders
    
    
    (34,315
    )
    
    
    (24,718
    )
    
    
    (25,315
    )Distributions paid to minority interests  common units
    
    
    (11,761
    )
    
    
    (8,474
    )
    
    
    (8,474
    )Net cash used in financing activities
    
    
    (35,882
    )
    
    
    (129,694
    )
    
    
    (13,058
    )Net (decrease) increase in cash and cash equivalents
    
    
    (31,976
    )
    
    
    (133,546
    )
    
    
    160,159Cash and cash equivalents at the beginning of the period
    
    
    67,017
    
    
    
    200,563
    
    
    
    40,404Cash and cash equivalents at the end of the period
    
    $
    35,041
    
    
    $
    67,017
    
    
    $
    200,563Supplemental disclosures:Interest paid, net of interest capitalized
    
    $
    4,145
    
    
    $
    2,575
    
    
    $
    1,330
 59




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##### Table of Contents



PS BUSINESS PARKS, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Supplemental schedule of non cash investing and
financing activities:Adjustment to minority interest to underlying ownership:Minority interest  common units
    
    $
    (5,391
    )
    
    $
    (1,182
    )
    
    $
    (2,240
    )Paid-in capital
    
    $
    5,391
    
    
    $
    1,182
    
    
    $
    2,240Effect of EITF Topic D-42
Cumulative distributions
    
    $
    
    
    
    $
    (3,380
    )
    
    $
    Minority interest  common units
    
    $
    
    
    
    $
    (1,366
    )
    
    $
    (301
    )Paid-in capital
    
    $
    
    
    
    $
    4,746
    
    
    $
    301Mortgage note payable assumed in property acquisition:Real estate facilities
    
    $
    
    
    
    $
    (41,993
    )
    
    $
    (14,998
    )Mortgage notes payable
    
    $
    
    
    
    $
    41,993
    
    
    $
    14,998Accrued lease inducements:Other assets
    
    $
    
    
    
    $
    
    
    
    $
    (1,985
    )Accrued and other liabilities
    
    $
    
    
    
    $
    
    
    
    $
    1,985Accrued stock repurchase:Paid-in capital
    
    $
    (3,302
    )
    
    $
    
    
    
    $
    (2,167
    )Accrued and other liabilities
    
    $
    3,302
    
    
    $
    
    
    
    $
    2,167Preferred stock called for redemption:Preferred stock
    
    $
    
    
    
    $
    (50,000
    )
    
    $
    Preferred stock called for redemption
    
    $
    
    
    
    $
    50,000
    
    
    $
    
  60




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##### Table of Contents



PS BUSINESS PARKS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2007
 1. Organization and description of business
 Organization
  Description of business
   2. Summary of significant accounting policies
 Basis of presentation
  Use of estimates
  Allowance for doubtful accounts
  61




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##### Table of Contents



Financial instruments
    Real estate facilities
   Properties held for disposition
  Intangible assets/liabilities
 62
    Table of Contents   Evaluation of asset impairment
  Asset impairment due to casualty loss
     Stock-based compensation
  63




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##### Table of Contents



Revenue and expense recognition
   Gains from sales of real estate
  General and administrative expense
  Income taxes
   64




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##### Table of Contents



Accounting for preferred equity issuance costs
  Net income per common share
 (in thousands, except per share data)
 2007
    
    
    2006
    
    
    2005Net income allocable to common shareholders
    
    $
    17,729
    
    
    $
    16,647
    
    
    $
    32,283Weighted average common shares outstanding:Basic weighted average common shares outstanding
    
    
    21,313
    
    
    
    21,335
    
    
    
    21,826Net effect of dilutive stock compensation  based
on treasury stock method using average market
price
    
    
    321
    
    
    
    311
    
    
    
    192Diluted weighted average common shares outstanding
    
    
    21,634
    
    
    
    21,646
    
    
    
    22,018Net income per common share  Basic
    
    $
    0.83
    
    
    $
    0.78
    
    
    $
    1.48Net income per common share  Diluted
    
    $
    0.82
    
    
    $
    0.77
    
    
    $
    1.47
  Segment reporting
  Reclassifications
  65




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##### Table of Contents



3. Real estate facilities
 (in thousands)
 Buildings and
    
    
    AccumulatedLand
    
    
    Equipment
    
    
    Depreciation
    
    
    TotalBalances at December 31, 2004
    
    $
    368,388
    
    
    $
    1,132,405
    
    
    $
    (279,076
    )
    
    $
    1,221,717Acquisition of real estate
    
    
    15,129
    
    
    
    20,054
    
    
    
    
    
    
    
    35,183Disposition of real estate
    
    
    
    
    
    
    (1,526
    )
    
    
    1,135
    
    
    
    (391
    )Asset impairment due to
casualty loss
    
    
    
    
    
    
    (1,135
    )
    
    
    
    
    
    
    (1,135
    )Capital improvements, net
    
    
    
    
    
    
    40,132
    
    
    
    
    
    
    
    40,132Depreciation expense
    
    
    
    
    
    
    
    
    
    
    (77,420
    )
    
    
    (77,420
    )Transfer to properties held
for Disposition
    
    
    (209
    )
    
    
    (115
    )
    
    
    133
    
    
    
    (191
    )Balances at December 31, 2005
    
    
    383,308
    
    
    
    1,189,815
    
    
    
    (355,228
    )
    
    
    1,217,895Acquisition of real estate
    
    
    56,469
    
    
    
    124,774
    
    
    
    
    
    
    
    181,243Disposition of real estate
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    27Asset impairment due to
casualty loss
    
    
    
    
    
    
    (374
    )
    
    
    108
    
    
    
    (266
    )Capital improvements, net
    
    
    
    
    
    
    39,227
    
    
    
    
    
    
    
    39,227Depreciation expense
    
    
    
    
    
    
    
    
    
    
    (86,243
    )
    
    
    (86,243
    )Balances at December 31, 2006
    
    
    439,777
    
    
    
    1,353,442
    
    
    
    (441,336
    )
    
    
    1,351,883Acquisition of real estate
    
    
    53,930
    
    
    
    88,006
    
    
    
    
    
    
    
    141,936Capital improvements, net
    
    
    
    
    
    
    42,601
    
    
    
    
    
    
    
    42,601Depreciation expense
    
    
    
    
    
    
    
    
    
    
    (98,521
    )
    
    
    (98,521
    )Transfer from land held for
development
    
    
    1,142
    
    
    
    
    
    
    
    
    
    
    
    1,142Balances at December 31, 2007
    
    $
    494,849
    
    
    $
    1,484,049
    
    
    $
    (539,857
    )
    
    $
    1,439,041
    66




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##### Table of Contents



(in thousands)
 2007
    
    
    2006
    
    
    2005Land
    
    $
    53,930
    
    
    $
    56,469
    
    
    $
    15,129Buildings and equipment
    
    
    88,006
    
    
    
    124,774
    
    
    
    20,054In-place leases
    
    
    (1,357
    )
    
    
    433
    
    
    
    Total purchase price
    
    
    140,579
    
    
    
    181,676
    
    
    
    35,183Mortgages assumed
    
    
    
    
    
    
    (41,993
    )
    
    
    (14,998
    )Net operating assets and liabilities acquired
    
    
    (1,643
    )
    
    
    (710
    )
    
    
    (112
    )Total cash paid
    
    $
    138,936
    
    
    $
    138,973
    
    
    $
    20,073
       67




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##### Table of Contents



4. Leasing activity
 (in thousands)
 2008
    
    $
    211,2052009
    
    
    163,2892010
    
    
    117,3022011
    
    
    79,2292012
    
    
    50,824Thereafter
    
    
    76,118Total
    
    $
    697,967
   5. Bank loans
   68




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##### Table of Contents



6. Mortgage notes payable
 (in thousands)
 December 31,
    
    
    December 31,2007
    
    
    20067.29% mortgage note, secured by one
commercial property with a net book
value of $6.4 million, principal and
interest payable monthly, due February,
2009
    
    $
    5,323
    
    
    $
    5,4905.73% mortgage note, secured by one
commercial property with a net book
value of $30.4 million, principal and
interest payable monthly, due March,
2013
    
    
    14,510
    
    
    
    14,7436.15% mortgage note, secured by one
commercial property with a net book
value of $31.0 million, principal and
interest payable monthly, due November,
2031 (1)
    
    
    17,348
    
    
    
    17,7595.52% mortgage note, secured by one
commercial property with a net book
value of $15.1 million, principal and
interest payable monthly, due May, 2013
    
    
    10,274
    
    
    
    10,4835.68% mortgage note, secured by one
commercial property with a net book
value of $17.9 million, principal and
interest payable monthly, due May, 2013
    
    
    10,281
    
    
    
    10,4865.61% mortgage note, secured by one
commercial property with a net book
value of $3.4 million, principal and
interest payable monthly, due January,
2011 (2)
    
    
    2,989
    
    
    
    3,0858.19% mortgage note, secured by one
commercial property with a net book
value of $10.7 million, principal and
interest payable monthly, repaid March,
2007
    
    
    
    
    
    
    5,002Total
    
    $
    60,725
    
    
    $
    67,048
 
 (1)
    
    The mortgage note has a principal balance of $16.5 million and a stated interest rate
of 7.20%. Based on the fair market value at the time of assumption, a mortgage premium was
computed based on an effective interest rate of 6.15%. The unamortized premiums were
$834,000 and $1.0 million as of December 31, 2007 and 2006, respectively. This mortgage is
repayable without penalty beginning November, 2011.(2)
    
    The mortgage note has a principal balance of $2.8 million and a stated interest rate of
7.61%. Based on the fair market value at the time of assumption, a mortgage premium was
computed based on an effective interest rate of 5.61%. The unamortized premiums were
$198,000 and $256,000 as of December 31, 2007 and 2006, respectively. (in thousands)
 2008
    
    $
    1,3962009
    
    
    6,4422010
    
    
    1,3762011
    
    
    19,4282012
    
    
    855Thereafter
    
    
    31,228Total
    
    $
    60,725
 69




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##### Table of Contents



7. Minority interests
 Common partnership units
     Preferred partnership units
 (in thousands)
 December 31, 2007
    
    
    December 31, 2006Earliest Potential
    
    Dividend

    
    Shares
    
    
    
    
    
    
    SharesSeries
    
    Issuance Date
    
    Redemption Date
    
    Rate

    
    Outstanding
    
    
    Amount
    
    
    Outstanding
    
    
    AmountSeries G
    
    October, 2002
    
    October, 2007
    
    
    7.950
    %
    
    
    800
    
    
    $
    20,000
    
    
    
    800
    
    
    $
    20,000Series J
    
    May & June, 2004
    
    May, 2009
    
    
    7.500
    %
    
    
    1,710
    
    
    
    42,750
    
    
    
    1,710
    
    
    
    42,750Series N
    
    December, 2005
    
    December, 2010
    
    
    7.125
    %
    
    
    800
    
    
    
    20,000
    
    
    
    800
    
    
    
    20,000Series Q
    
    March, 2007
    
    March, 2012
    
    
    6.550
    %
    
    
    480
    
    
    
    12,000
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    3,790
    
    
    $
    94,750
    
    
    
    3,310
    
    
    $
    82,750
   70




---



##### Table of Contents



8. Related party transactions
         71




---



##### Table of Contents



9. Shareholders equity
 Preferred stock
 (in thousands, except share data)
 December 31, 2007
    
    
    December 31, 2006Earliest Potential
    
    Dividend

    
    Shares
    
    
    
    
    
    
    SharesSeries
    
    Issuance Date
    
    Redemption Date
    
    Rate

    
    Outstanding
    
    
    Amount
    
    
    Outstanding
    
    
    AmountSeries H
    
    January & October, 2004
    
    January, 2009
    
    
    7.000
    %
    
    
    8,200
    
    
    $
    205,000
    
    
    
    8,200
    
    
    $
    205,000Series I
    
    April, 2004
    
    April, 2009
    
    
    6.875
    %
    
    
    3,000
    
    
    
    75,000
    
    
    
    3,000
    
    
    
    75,000Series K
    
    June, 2004
    
    June, 2009
    
    
    7.950
    %
    
    
    2,300
    
    
    
    57,500
    
    
    
    2,300
    
    
    
    57,500Series L
    
    August, 2004
    
    August, 2009
    
    
    7.600
    %
    
    
    2,300
    
    
    
    57,500
    
    
    
    2,300
    
    
    
    57,500Series M
    
    May, 2005
    
    May, 2010
    
    
    7.200
    %
    
    
    3,300
    
    
    
    82,500
    
    
    
    3,300
    
    
    
    82,500Series O
    
    June & August, 2006
    
    June, 2011
    
    
    7.375
    %
    
    
    3,800
    
    
    
    95,000
    
    
    
    3,800
    
    
    
    95,000Series P
    
    January, 2007
    
    January, 2012
    
    
    6.700
    %
    
    
    5,750
    
    
    
    143,750
    
    
    
    
    
    
    
    Series F
    
    January, 2002
    
    January, 2007
    
    
    8.750
    %
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    50,000Total
    
    
    
    
    
    
    
    
    
    
    28,650
    
    
    $
    716,250
    
    
    
    24,900
    
    
    $
    622,500
        72




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##### Table of Contents



Common stock
     Equity Stock
  10. Stock-based compensation
    73




---



##### Table of Contents



Weighted
    
    
    AggregateWeighted
    
    
    Average
    
    
    IntrinsicNumber of
    
    
    Average
    
    
    Remaining
    
    
    ValueOptions:
    
    Options
    
    
    Exercise Price
    
    
    Contract Life
    
    
    (in thousands)Outstanding at December 31, 2004
    
    
    594,235
    
    
    $
    34.23Granted
    
    
    85,000
    
    
    $
    42.41Exercised
    
    
    (70,364
    )
    
    $
    27.96Forfeited
    
    
    (9,000
    )
    
    $
    31.66Outstanding at December 31, 2005
    
    
    599,871
    
    
    $
    36.25Granted
    
    
    32,000
    
    
    $
    56.73Exercised
    
    
    (37,900
    )
    
    $
    36.07Forfeited
    
    
    (5,000
    )
    
    $
    44.20Outstanding at December 31, 2006
    
    
    588,971
    
    
    $
    35.89Granted
    
    
    32,000
    
    
    $
    68.90Exercised
    
    
    (43,384
    )
    
    $
    33.84Forfeited
    
    
    (5,000
    )
    
    $
    39.18Outstanding at December 31, 2007
    
    
    572,587
    
    
    $
    37.86
    
    
    5.41 Years
    
    $
    9,083Exercisable at December 31, 2007
    
    
    414,987
    
    
    $
    33.47
    
    
    4.60 Years
    
    $
    7,949WeightedNumber of
    
    
    Average GrantRestricted Stock Units:
    
    Units
    
    
    Date Fair ValueNonvested at December 31, 2004
    
    
    120,100
    
    
    $
    37.02Granted
    
    
    38,200
    
    
    $
    41.43Vested
    
    
    (19,250
    )
    
    $
    30.61Forfeited
    
    
    (11,050
    )
    
    $
    37.98Nonvested at December 31, 2005
    
    
    128,000
    
    
    $
    39.27Granted
    
    
    133,950
    
    
    $
    55.12Vested
    
    
    (24,000
    )
    
    $
    36.06Forfeited
    
    
    (10,750
    )
    
    $
    40.91Nonvested at December 31, 2006
    
    
    227,200
    
    
    $
    48.88Granted
    
    
    47,300
    
    
    $
    67.88Vested
    
    
    (29,723
    )
    
    $
    40.62Forfeited
    
    
    (16,550
    )
    
    $
    48.69Nonvested at December 31, 2007
    
    
    228,227
    
    
    $
    53.91
    74




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##### Table of Contents



11. Supplementary quarterly financial data (unaudited)
 Three Months EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2006
    
    
    2006
    
    
    2006
    
    
    2006(In thousands, except per share data)Revenues (1)
    
    $
    58,903
    
    
    $
    59,305
    
    
    $
    61,842
    
    
    $
    62,789Cost of operations (1)
    
    $
    17,946
    
    
    $
    18,195
    
    
    $
    19,213
    
    
    $
    19,317Net income allocable
to common
shareholders
    
    $
    5,062
    
    
    $
    4,395
    
    
    $
    3,478
    
    
    $
    3,712Net income per share:Basic
    
    $
    0.24
    
    
    $
    0.21
    
    
    $
    0.16
    
    
    $
    0.17Diluted
    
    $
    0.23
    
    
    $
    0.20
    
    
    $
    0.16
    
    
    $
    0.17
 Three Months EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2007
    
    
    2007
    
    
    2007
    
    
    2007(In thousands, except per share data)Revenues (1)
    
    $
    65,307
    
    
    $
    67,457
    
    
    $
    68,707
    
    
    $
    70,028Cost of operations (1)
    
    $
    20,439
    
    
    $
    21,022
    
    
    $
    21,204
    
    
    $
    21,695Net income allocable
to common
shareholders
    
    $
    5,923
    
    
    $
    3,781
    
    
    $
    4,267
    
    
    $
    3,758Net income per share:Basic
    
    $
    0.28
    
    
    $
    0.18
    
    
    $
    0.20
    
    
    $
    0.18Diluted
    
    $
    0.27
    
    
    $
    0.17
    
    
    $
    0.20
    
    
    $
    0.17
 
 (1)
    
    Discontinued operations are excluded. 75




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##### Table of Contents



12. Commitments and contingencies
   13. 401(K) Plan
  76




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##### Table of Contents



PS BUSINESS PARKS, INC.
 SCHEDULE
III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2007
(DOLLARS IN THOUSANDS)
 CostCapitalizedSubsequentto
    
    
    Gross Amount at Which Carried atInitial Cost to Company
    
    
    Acquisition
    
    
    December 31, 2007Buildings
    
    
    Buildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciableand
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    Accumulated
    
    
    Date
    
    LivesDescription
    
    Location
    
    Encumbrances
    
    
    Land
    
    
    Improvements
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation
    
    
    Acquired
    
    (Years)Produce
    
    San Francisco, CA
    
    
    
    
    
    $
    776
    
    
    $
    1,886
    
    
    $
    299
    
    
    $
    776
    
    
    $
    2,185
    
    
    $
    2961
    
    
    $
    735
    
    
    03/17/98
    
    5-30Crenshaw II
    
    Torrance, CA
    
    
    
    
    
    
    2,318
    
    
    
    6,069
    
    
    
    1,714
    
    
    
    2,318
    
    
    
    7,783
    
    
    
    10,101
    
    
    
    3,269
    
    
    04/12/97
    
    5-30Airport
    
    San Francisco, CA
    
    
    
    
    
    
    899
    
    
    
    2,387
    
    
    
    490
    
    
    
    899
    
    
    
    2,877
    
    
    
    3,776
    
    
    
    1,048
    
    
    04/12/97
    
    5-30Christopher Ave
    
    Gaithersburg, MD
    
    
    
    
    
    
    475
    
    
    
    1,203
    
    
    
    383
    
    
    
    475
    
    
    
    1,586
    
    
    
    2,061
    
    
    
    664
    
    
    04/12/97
    
    5-30Monterey Park
    
    Monterey Park, CA
    
    
    
    
    
    
    3,078
    
    
    
    7,862
    
    
    
    1037
    
    
    
    3,078
    
    
    
    8,899
    
    
    
    11,977
    
    
    
    3,568
    
    
    01/01/97
    
    5-30Calle Del Oaks
    
    Monterey, CA
    
    
    
    
    
    
    288
    
    
    
    706
    
    
    
    235
    
    
    
    288
    
    
    
    941
    
    
    
    1,229
    
    
    
    407
    
    
    01/01/97
    
    5-30Milwaukie I
    
    Milwaukie, OR
    
    
    
    
    
    
    1,125
    
    
    
    2,857
    
    
    
    1083
    
    
    
    1,125
    
    
    
    3,940
    
    
    
    5,065
    
    
    
    1,647
    
    
    01/01/97
    
    5-30Edwards Road
    
    Cerritos, CA
    
    
    
    
    
    
    450
    
    
    
    1,217
    
    
    
    757
    
    
    
    450
    
    
    
    1,974
    
    
    
    2,424
    
    
    
    749
    
    
    01/01/97
    
    5-30Rainier
    
    Renton, WA
    
    
    
    
    
    
    330
    
    
    
    889
    
    
    
    417
    
    
    
    330
    
    
    
    1,306
    
    
    
    1,636
    
    
    
    514
    
    
    01/01/97
    
    5-30Lusk
    
    San Diego, CA
    
    
    
    
    
    
    1,500
    
    
    
    3,738
    
    
    
    1,689
    
    
    
    1,500
    
    
    
    5,427
    
    
    
    6,927
    
    
    
    2,268
    
    
    01/01/97
    
    5-30Eisenhower
    
    Alexandria, VA
    
    
    
    
    
    
    1,440
    
    
    
    3,635
    
    
    
    1,909
    
    
    
    1,440
    
    
    
    5,544
    
    
    
    6,984
    
    
    
    2,424
    
    
    01/01/97
    
    5-30McKellips
    
    Tempe, AZ
    
    
    
    
    
    
    195
    
    
    
    522
    
    
    
    509
    
    
    
    195
    
    
    
    1,031
    
    
    
    1,226
    
    
    
    528
    
    
    01/01/97
    
    5-30Old Oakland Rd
    
    San Jose, CA
    
    
    
    
    
    
    3,458
    
    
    
    8,765
    
    
    
    2,298
    
    
    
    3,458
    
    
    
    11,063
    
    
    
    14,521
    
    
    
    4,453
    
    
    01/01/97
    
    5-30Junipero
    
    Signal Hill, CA
    
    
    
    
    
    
    900
    
    
    
    2,510
    
    
    
    378
    
    
    
    900
    
    
    
    2,888
    
    
    
    3,788
    
    
    
    1,131
    
    
    01/01/97
    
    5-30Northgate Blvd.
    
    Sacramento, CA
    
    
    
    
    
    
    1,710
    
    
    
    4,567
    
    
    
    2,636
    
    
    
    1,710
    
    
    
    7,203
    
    
    
    8,913
    
    
    
    3,239
    
    
    01/01/97
    
    5-30Uplander
    
    Culver City, CA
    
    
    
    
    
    
    3,252
    
    
    
    8,157
    
    
    
    4,314
    
    
    
    3,252
    
    
    
    12,471
    
    
    
    15,723
    
    
    
    5,532
    
    
    01/01/97
    
    5-30University
    
    Tempe, AZ
    
    
    
    
    
    
    2,160
    
    
    
    5,454
    
    
    
    3,844
    
    
    
    2,160
    
    
    
    9,298
    
    
    
    11,458
    
    
    
    4,643
    
    
    01/01/97
    
    5-30E. 28th Street
    
    Signal Hill, CA
    
    
    
    
    
    
    1,500
    
    
    
    3,749
    
    
    
    946
    
    
    
    1,500
    
    
    
    4,695
    
    
    
    6,195
    
    
    
    2,033
    
    
    01/01/97
    
    5-30W. Main
    
    Mesa, AZ
    
    
    
    
    
    
    675
    
    
    
    1,692
    
    
    
    2,342
    
    
    
    675
    
    
    
    4,034
    
    
    
    4,709
    
    
    
    1,503
    
    
    01/01/97
    
    5-30S. Edward
    
    Tempe, AZ
    
    
    
    
    
    
    645
    
    
    
    1,653
    
    
    
    1,570
    
    
    
    645
    
    
    
    3,223
    
    
    
    3,868
    
    
    
    1,599
    
    
    01/01/97
    
    5-30Leapwood Ave
    
    Carson, CA
    
    
    
    
    
    
    990
    
    
    
    2,496
    
    
    
    1,020
    
    
    
    990
    
    
    
    3,516
    
    
    
    4,506
    
    
    
    1,561
    
    
    01/01/97
    
    5-30Great Oaks
    
    Woodbridge, VA
    
    
    
    
    
    
    1,350
    
    
    
    3,398
    
    
    
    1,151
    
    
    
    1,350
    
    
    
    4,549
    
    
    
    5,899
    
    
    
    2,038
    
    
    01/01/97
    
    5-30Ventura Blvd. II
    
    Studio City, CA
    
    
    
    
    
    
    621
    
    
    
    1,530
    
    
    
    253
    
    
    
    621
    
    
    
    1,783
    
    
    
    2,404
    
    
    
    730
    
    
    01/01/97
    
    5-30Gunston
    
    Lorton, VA
    
    
    
    
    
    
    4,146
    
    
    
    17,872
    
    
    
    2,936
    
    
    
    4,146
    
    
    
    20,808
    
    
    
    24,954
    
    
    
    8,789
    
    
    06/17/98
    
    5-30Canada
    
    Lake Forest, CA
    
    
    
    
    
    
    5,508
    
    
    
    13,785
    
    
    
    3,919
    
    
    
    5,508
    
    
    
    17,704
    
    
    
    23,212
    
    
    
    6,942
    
    
    12/23/97
    
    5-30Ridge Route
    
    Laguna Hills, CA
    
    
    
    
    
    
    16,261
    
    
    
    39,559
    
    
    
    3,128
    
    
    
    16,261
    
    
    
    42,687
    
    
    
    58,948
    
    
    
    15,220
    
    
    12/23/97
    
    5-30Lake Forest Commerce
Park
    
    Laguna Hills, CA
    
    
    
    
    
    
    2,037
    
    
    
    5,051
    
    
    
    3,390
    
    
    
    2,037
    
    
    
    8,441
    
    
    
    10,478
    
    
    
    4,176
    
    
    12/23/97
    
    5-30Buena Park Industrial
Center
    
    Buena Park, CA
    
    
    
    
    
    
    3,245
    
    
    
    7,703
    
    
    
    1,534
    
    
    
    3,245
    
    
    
    9,237
    
    
    
    12,482
    
    
    
    3,698
    
    
    12/23/97
    
    5-30Cerritos Business Center
    
    Cerritos, CA
    
    
    
    
    
    
    4,218
    
    
    
    10,273
    
    
    
    2,895
    
    
    
    4,218
    
    
    
    13,168
    
    
    
    17,386
    
    
    
    5,123
    
    
    12/23/97
    
    5-30Parkway Commerce
Center
    
    Hayward, CA
    
    
    
    
    
    
    4,398
    
    
    
    10,433
    
    
    
    3,556
    
    
    
    4,398
    
    
    
    13,989
    
    
    
    18,387
    
    
    
    5,070
    
    
    12/23/97
    
    5-30Northpointe E
    
    Sterling, VA
    
    
    
    
    
    
    1,156
    
    
    
    2,957
    
    
    
    795
    
    
    
    1,156
    
    
    
    3,752
    
    
    
    4,908
    
    
    
    1,613
    
    
    12/10/97
    
    5-30Ammendale
    
    Beltsville, MD
    
    
    
    
    
    
    4,278
    
    
    
    18,380
    
    
    
    6,591
    
    
    
    4,278
    
    
    
    24,971
    
    
    
    29,249
    
    
    
    12,601
    
    
    01/13/98
    
    5-30Shaw Road
    
    Sterling, VA
    
    
    
    
    
    
    2,969
    
    
    
    10,008
    
    
    
    3,282
    
    
    
    2,969
    
    
    
    13,290
    
    
    
    16,259
    
    
    
    6,817
    
    
    03/09/98
    
    5-30Creekside-Phase 1
    
    Beaverton, OR
    
    
    
    
    
    
    1,852
    
    
    
    4,821
    
    
    
    1,555
    
    
    
    1,852
    
    
    
    6,376
    
    
    
    8,228
    
    
    
    2,849
    
    
    05/04/98
    
    5-30Creekside-Phase 2
Bldg-4
    
    Beaverton, OR
    
    
    
    
    
    
    807
    
    
    
    2,542
    
    
    
    1,558
    
    
    
    807
    
    
    
    4,100
    
    
    
    4,907
    
    
    
    2,005
    
    
    05/04/98
    
    5-30Creekside-Phase 2
Bldg-5
    
    Beaverton, OR
    
    
    
    
    
    
    521
    
    
    
    1,603
    
    
    
    778
    
    
    
    521
    
    
    
    2,381
    
    
    
    2,902
    
    
    
    1,179
    
    
    05/04/98
    
    5-30
 77




---



##### Table of Contents



CostCapitalizedSubsequentto
    
    
    Gross Amount at Which Carried atInitial Cost to Company
    
    
    Acquisition
    
    
    December 31, 2007Buildings
    
    
    Buildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciableand
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    Accumulated
    
    
    Date
    
    LivesDescription
    
    Location
    
    Encumbrances
    
    
    Land
    
    
    Improvements
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation
    
    
    Acquired
    
    (Years)Creekside-Phase 2
Bldg-1
    
    Beaverton, OR
    
    
    
    
    
    
    1,326
    
    
    
    4,035
    
    
    
    1,274
    
    
    
    1,326
    
    
    
    5,309
    
    
    
    6,635
    
    
    
    2,619
    
    
    05/04/98
    
    5-30Creekside-Phase 3
    
    Beaverton, OR
    
    
    
    
    
    
    1,353
    
    
    
    4,101
    
    
    
    1,142
    
    
    
    1,353
    
    
    
    5,243
    
    
    
    6,596
    
    
    
    2,636
    
    
    05/04/98
    
    5-30Creekside-Phase 5
    
    Beaverton, OR
    
    
    
    
    
    
    1,741
    
    
    
    5,301
    
    
    
    1,581
    
    
    
    1,741
    
    
    
    6,882
    
    
    
    8,623
    
    
    
    3,269
    
    
    05/04/98
    
    5-30Creekside-Phase 6
    
    Beaverton, OR
    
    
    
    
    
    
    2,616
    
    
    
    7,908
    
    
    
    2,371
    
    
    
    2,616
    
    
    
    10,279
    
    
    
    12,895
    
    
    
    5,094
    
    
    05/04/98
    
    5-30Creekside-Phase 7
    
    Beaverton, OR
    
    
    
    
    
    
    3,293
    
    
    
    9,938
    
    
    
    4,101
    
    
    
    3,293
    
    
    
    14,039
    
    
    
    17,332
    
    
    
    6,982
    
    
    05/04/98
    
    5-30Creekside-Phase 8
    
    Beaverton, OR
    
    
    
    
    
    
    1,140
    
    
    
    3,644
    
    
    
    732
    
    
    
    1,140
    
    
    
    4,376
    
    
    
    5,516
    
    
    
    1,972
    
    
    05/04/98
    
    5-30Northpointe G
    
    Sterling, VA
    
    
    
    
    
    
    824
    
    
    
    2,964
    
    
    
    1,298
    
    
    
    824
    
    
    
    4,262
    
    
    
    5,086
    
    
    
    2,343
    
    
    06/11/98
    
    5-30Las Plumas
    
    San Jose, CA
    
    
    
    
    
    
    4,379
    
    
    
    12,889
    
    
    
    4,236
    
    
    
    4,379
    
    
    
    17,125
    
    
    
    21,504
    
    
    
    8,722
    
    
    12/31/98
    
    5-30Lafayette
    
    Chantilly, VA
    
    
    
    
    
    
    671
    
    
    
    4,179
    
    
    
    492
    
    
    
    671
    
    
    
    4,671
    
    
    
    5,342
    
    
    
    1,920
    
    
    01/29/99
    
    5-30CreeksideVII
    
    Beaverton, OR
    
    
    
    
    
    
    358
    
    
    
    3,232
    
    
    
    142
    
    
    
    358
    
    
    
    3,374
    
    
    
    3,732
    
    
    
    943
    
    
    04/17/00
    
    5-30Dulles South
    
    Chantilly, VA
    
    
    
    
    
    
    599
    
    
    
    3,098
    
    
    
    677
    
    
    
    599
    
    
    
    3,775
    
    
    
    4,374
    
    
    
    1,596
    
    
    06/30/99
    
    5-30Sullyfield Circle
    
    Chantilly, VA
    
    
    
    
    
    
    774
    
    
    
    3,712
    
    
    
    944
    
    
    
    774
    
    
    
    4,656
    
    
    
    5,430
    
    
    
    1,993
    
    
    06/30/99
    
    5-30Park East I & II
    
    Chantilly, VA
    
    
    
    
    
    
    2,324
    
    
    
    10,875
    
    
    
    2,928
    
    
    
    2,324
    
    
    
    13,803
    
    
    
    16,127
    
    
    
    5,381
    
    
    06/30/99
    
    5-30Park East III
    
    Chantilly, VA
    
    $
    5,323
    
    
    
    1,527
    
    
    
    7,154
    
    
    
    913
    
    
    
    1,527
    
    
    
    8,067
    
    
    
    9,594
    
    
    
    3,219
    
    
    06/30/99
    
    5-30Northpointe Business
Center A
    
    Sacramento, CA
    
    
    
    
    
    
    729
    
    
    
    3,324
    
    
    
    1,104
    
    
    
    729
    
    
    
    4,428
    
    
    
    5,157
    
    
    
    1,991
    
    
    07/29/99
    
    5-30Corporate Park Phoenix
    
    Phoenix, AZ
    
    
    
    
    
    
    2,761
    
    
    
    10,269
    
    
    
    1,430
    
    
    
    2,761
    
    
    
    11,699
    
    
    
    14,460
    
    
    
    4,470
    
    
    12/30/99
    
    5-30Santa Clara Technology
Park
    
    Santa Clara, CA
    
    
    
    
    
    
    7,673
    
    
    
    15,645
    
    
    
    724
    
    
    
    7,673
    
    
    
    16,369
    
    
    
    24,042
    
    
    
    6,257
    
    
    03/28/00
    
    5-30Corporate Pointe
    
    Irvine, CA
    
    
    
    
    
    
    6,876
    
    
    
    18,519
    
    
    
    4,520
    
    
    
    6,876
    
    
    
    23,039
    
    
    
    29,915
    
    
    
    8,963
    
    
    09/22/00
    
    5-30Lafayette II/Pleasant
Valley Rd
    
    Chantilly, VA
    
    
    
    
    
    
    1,009
    
    
    
    9,219
    
    
    
    2,278
    
    
    
    1,009
    
    
    
    11,497
    
    
    
    12,506
    
    
    
    5,974
    
    
    08/15/01
    
    5-30Northpointe Business
Center B
    
    Sacramento, CA
    
    
    
    
    
    
    717
    
    
    
    3,269
    
    
    
    1,626
    
    
    
    717
    
    
    
    4,895
    
    
    
    5,612
    
    
    
    2,222
    
    
    07/29/99
    
    5-30Northpointe Business
Center C
    
    Sacramento, CA
    
    
    
    
    
    
    726
    
    
    
    3,313
    
    
    
    1,074
    
    
    
    726
    
    
    
    4,387
    
    
    
    5,113
    
    
    
    2,167
    
    
    07/29/99
    
    5-30Northpointe Business
Center D
    
    Sacramento, CA
    
    
    
    
    
    
    427
    
    
    
    1,950
    
    
    
    507
    
    
    
    427
    
    
    
    2,457
    
    
    
    2,884
    
    
    
    1,015
    
    
    07/29/99
    
    5-30Northpointe Business
Center E
    
    Sacramento, CA
    
    
    
    
    
    
    432
    
    
    
    1,970
    
    
    
    192
    
    
    
    432
    
    
    
    2,162
    
    
    
    2,594
    
    
    
    883
    
    
    07/29/99
    
    5-30I-95 Building I
    
    Springfield, VA
    
    
    
    
    
    
    1,308
    
    
    
    5,790
    
    
    
    550
    
    
    
    1,308
    
    
    
    6,340
    
    
    
    7,648
    
    
    
    2,467
    
    
    12/20/00
    
    5-30I-95 Building II
    
    Springfield, VA
    
    
    
    
    
    
    1,308
    
    
    
    5,790
    
    
    
    965
    
    
    
    1,308
    
    
    
    6,755
    
    
    
    8,063
    
    
    
    2,984
    
    
    12/20/00
    
    5-30I-95 Building III
    
    Springfield, VA
    
    
    
    
    
    
    919
    
    
    
    4,092
    
    
    
    7,337
    
    
    
    919
    
    
    
    11,429
    
    
    
    12,348
    
    
    
    8,155
    
    
    12/20/00
    
    5-302700 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    3,404
    
    
    
    9,883
    
    
    
    425
    
    
    
    3,404
    
    
    
    10,308
    
    
    
    13,712
    
    
    
    3,711
    
    
    06/01/01
    
    5-302701 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    2,199
    
    
    
    6,374
    
    
    
    1,122
    
    
    
    2,199
    
    
    
    7,496
    
    
    
    9,695
    
    
    
    2,976
    
    
    06/01/01
    
    5-302710 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    969
    
    
    
    2,844
    
    
    
    495
    
    
    
    969
    
    
    
    3,339
    
    
    
    4,308
    
    
    
    1,260
    
    
    06/01/01
    
    5-302711 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    1,047
    
    
    
    3,099
    
    
    
    632
    
    
    
    1,047
    
    
    
    3,731
    
    
    
    4,778
    
    
    
    1,510
    
    
    06/01/01
    
    5-302720 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    1,898
    
    
    
    5,502
    
    
    
    966
    
    
    
    1,898
    
    
    
    6,468
    
    
    
    8,366
    
    
    
    2,635
    
    
    06/01/01
    
    5-302721 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    576
    
    
    
    1,673
    
    
    
    788
    
    
    
    576
    
    
    
    2,461
    
    
    
    3,037
    
    
    
    1,332
    
    
    06/01/01
    
    5-302730 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    3,011
    
    
    
    8,841
    
    
    
    2,599
    
    
    
    3,011
    
    
    
    11,440
    
    
    
    14,451
    
    
    
    4,290
    
    
    06/01/01
    
    5-302731 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    524
    
    
    
    1,521
    
    
    
    369
    
    
    
    524
    
    
    
    1,890
    
    
    
    2,414
    
    
    
    790
    
    
    06/01/01
    
    5-302740 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    890
    
    
    
    2,732
    
    
    
    202
    
    
    
    890
    
    
    
    2,934
    
    
    
    3,824
    
    
    
    1,110
    
    
    06/01/01
    
    5-302741 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    786
    
    
    
    2,284
    
    
    
    335
    
    
    
    786
    
    
    
    2,619
    
    
    
    3,405
    
    
    
    1,010
    
    
    06/01/01
    
    5-302750 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    4,203
    
    
    
    12,190
    
    
    
    3,577
    
    
    
    4,203
    
    
    
    15,767
    
    
    
    19,970
    
    
    
    6,776
    
    
    06/01/01
    
    5-302751 Prosperity Avenue
    
    Fairfax, VA
    
    
    
    
    
    
    3,640
    
    
    
    10,632
    
    
    
    2,177
    
    
    
    3,640
    
    
    
    12,809
    
    
    
    16,449
    
    
    
    4,150
    
    
    06/01/01
    
    5-30Greenbrier Court
    
    Beaverton, OR
    
    
    
    
    
    
    2,771
    
    
    
    8,403
    
    
    
    1,333
    
    
    
    2,771
    
    
    
    9,736
    
    
    
    12,507
    
    
    
    3,899
    
    
    11/20/01
    
    5-30
 78




---



##### Table of Contents



CostCapitalizedSubsequentto
    
    
    Gross Amount at Which Carried atInitial Cost to Company
    
    
    Acquisition
    
    
    December 31, 2007Buildings
    
    
    Buildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciableand
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    Accumulated
    
    
    Date
    
    LivesDescription
    
    Location
    
    Encumbrances
    
    
    Land
    
    
    Improvements
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation
    
    
    Acquired
    
    (Years)Parkside
    
    Beaverton, OR
    
    
    
    
    
    
    4,348
    
    
    
    13,502
    
    
    
    1,432
    
    
    
    4,348
    
    
    
    14,934
    
    
    
    19,282
    
    
    
    5,940
    
    
    11/20/01
    
    5-30The Atrium
    
    Beaverton, OR
    
    
    
    
    
    
    5,535
    
    
    
    16,814
    
    
    
    2,050
    
    
    
    5,535
    
    
    
    18,864
    
    
    
    24,399
    
    
    
    7,103
    
    
    11/20/01
    
    5-30Waterside
    
    Beaverton, OR
    
    
    
    
    
    
    4,045
    
    
    
    12,419
    
    
    
    1,924
    
    
    
    4,045
    
    
    
    14,343
    
    
    
    18,388
    
    
    
    5,829
    
    
    11/20/01
    
    5-30Ridgeview
    
    Beaverton, OR
    
    
    
    
    
    
    2,478
    
    
    
    7,531
    
    
    
    269
    
    
    
    2,478
    
    
    
    7,800
    
    
    
    10,278
    
    
    
    2,805
    
    
    11/20/01
    
    5-30The Commons
    
    Beaverton, OR
    
    
    
    
    
    
    1,439
    
    
    
    4,566
    
    
    
    2,045
    
    
    
    1,439
    
    
    
    6,611
    
    
    
    8,050
    
    
    
    3,021
    
    
    11/20/01
    
    5-30OCBC Center 1
    
    Santa Ana, CA
    
    
    
    
    
    
    734
    
    
    
    2,752
    
    
    
    590
    
    
    
    734
    
    
    
    3,342
    
    
    
    4,076
    
    
    
    1,744
    
    
    06/10/03
    
    5-30OCBC Center 2
    
    Santa Ana, CA
    
    
    
    
    
    
    2,154
    
    
    
    8,093
    
    
    
    1,506
    
    
    
    2,154
    
    
    
    9,599
    
    
    
    11,753
    
    
    
    5,164
    
    
    06/10/03
    
    5-30OCBC Center 3
    
    Santa Ana, CA
    
    
    
    
    
    
    3,019
    
    
    
    11,348
    
    
    
    5,607
    
    
    
    3,019
    
    
    
    16,955
    
    
    
    19,974
    
    
    
    8,460
    
    
    06/10/03
    
    5-30OCBC Center 4
    
    Santa Ana, CA
    
    
    
    
    
    
    1,655
    
    
    
    6,243
    
    
    
    6,017
    
    
    
    1,655
    
    
    
    12,260
    
    
    
    13,915
    
    
    
    7,441
    
    
    06/10/03
    
    5-30OCBC Center 5
    
    Santa Ana, CA
    
    
    
    
    
    
    1,843
    
    
    
    7,310
    
    
    
    793
    
    
    
    1,843
    
    
    
    8,103
    
    
    
    9,946
    
    
    
    4,331
    
    
    06/10/03
    
    5-30Metro Business Park
    
    Phoenix, AZ
    
    
    
    
    
    
    2,369
    
    
    
    7,245
    
    
    
    570
    
    
    
    2,369
    
    
    
    7,815
    
    
    
    10,184
    
    
    
    2,282
    
    
    12/17/03
    
    5-30Orangewood Corporate.
Plaza
    
    Orange, CA
    
    
    
    
    
    
    2,637
    
    
    
    12,291
    
    
    
    2,178
    
    
    
    2,637
    
    
    
    14,469
    
    
    
    17,106
    
    
    
    4,111
    
    
    12/24/03
    
    5-30Fairfax Executive Park
    
    Fairfax, VA
    
    
    
    
    
    
    4,647
    
    
    
    19,492
    
    
    
    2,851
    
    
    
    4,647
    
    
    
    22,343
    
    
    
    26,990
    
    
    
    5,887
    
    
    05/27/04
    
    5-30Rose Canyon
    
    San Diego, CA
    
    
    14,510
    
    
    
    15,129
    
    
    
    20,054
    
    
    
    943
    
    
    
    15,129
    
    
    
    20,997
    
    
    
    36,126
    
    
    
    5,769
    
    
    10/25/05
    
    5-30Signal Hill Commerce
Center
    
    Signal Hill, CA
    
    
    
    
    
    
    1,542
    
    
    
    2,314
    
    
    
    46
    
    
    
    1,542
    
    
    
    2,360
    
    
    
    3,902
    
    
    
    310
    
    
    06/14/06
    
    5-30Walnut Industrial Park
    
    Signal Hill, CA
    
    
    
    
    
    
    1,417
    
    
    
    2,125
    
    
    
    118
    
    
    
    1,417
    
    
    
    2,243
    
    
    
    3,660
    
    
    
    301
    
    
    06/14/06
    
    5-30Rose Avenue-Signal Hill
    
    Signal Hill, CA
    
    
    
    
    
    
    1,334
    
    
    
    2,001
    
    
    
    115
    
    
    
    1,334
    
    
    
    2,116
    
    
    
    3,450
    
    
    
    303
    
    
    06/14/06
    
    5-30Beaumont at Lafayette
    
    Chantilly, VA
    
    
    
    
    
    
    4,736
    
    
    
    11,051
    
    
    
    1,300
    
    
    
    4,736
    
    
    
    12,351
    
    
    
    17,087
    
    
    
    1,829
    
    
    06/20/06
    
    5-30Meadows Corporate Park I
    
    Silver Spring, CA
    
    
    17,348
    
    
    
    5,881
    
    
    
    25,070
    
    
    
    2,604
    
    
    
    5,881
    
    
    
    27,674
    
    
    
    33,555
    
    
    
    2,586
    
    
    06/29/06
    
    5-30WesTech-Allegany
    
    Silver Spring, MD
    
    
    
    
    
    
    2,944
    
    
    
    7,519
    
    
    
    397
    
    
    
    2,944
    
    
    
    7,916
    
    
    
    10,860
    
    
    
    1,177
    
    
    02/08/06
    
    5-30WesTech-Dorchester
    
    Silver Spring, MD
    
    
    
    
    
    
    2,073
    
    
    
    5,296
    
    
    
    366
    
    
    
    2,073
    
    
    
    5,662
    
    
    
    7,735
    
    
    
    850
    
    
    02/08/06
    
    5-30WesTech-Garrett I
    
    Silver Spring, MD
    
    
    
    
    
    
    1,733
    
    
    
    4,426
    
    
    
    73
    
    
    
    1,733
    
    
    
    4,499
    
    
    
    6,232
    
    
    
    687
    
    
    02/08/06
    
    5-30WesTech-Garrett II
    
    Silver Spring, MD
    
    
    
    
    
    
    2,442
    
    
    
    6,238
    
    
    
    43
    
    
    
    2,442
    
    
    
    6,281
    
    
    
    8,723
    
    
    
    970
    
    
    02/08/06
    
    5-30WesTech-Harford West
    
    Silver Spring, MD
    
    
    
    
    
    
    1,549
    
    
    
    3,955
    
    
    
    24
    
    
    
    1,549
    
    
    
    3,979
    
    
    
    5,528
    
    
    
    613
    
    
    02/08/06
    
    5-30WesTech-Harford East
    
    Silver Spring, MD
    
    
    
    
    
    
    1,385
    
    
    
    3,539
    
    
    
    4
    
    
    
    1,385
    
    
    
    3,543
    
    
    
    4,928
    
    
    
    546
    
    
    02/08/06
    
    5-30WesTech-Garrett III
    
    Silver Spring, MD
    
    
    
    
    
    
    3,374
    
    
    
    8,618
    
    
    
    73
    
    
    
    3,374
    
    
    
    8,691
    
    
    
    12,065
    
    
    
    1,338
    
    
    02/08/06
    
    5-30WesTech-Talbot
    
    Silver Spring, MD
    
    
    
    
    
    
    2,016
    
    
    
    5,151
    
    
    
    390
    
    
    
    2,016
    
    
    
    5,541
    
    
    
    7,557
    
    
    
    810
    
    
    02/08/06
    
    5-30WesTech-Harford III
    
    Silver Spring, MD
    
    
    
    
    
    
    1,864
    
    
    
    4,760
    
    
    
    304
    
    
    
    1,864
    
    
    
    5,064
    
    
    
    6,928
    
    
    
    778
    
    
    02/08/06
    
    5-30Rogers Avenue-San Jose
    
    San Jose, CA
    
    
    
    
    
    
    3,540
    
    
    
    4,896
    
    
    
    333
    
    
    
    3,540
    
    
    
    5,229
    
    
    
    8,769
    
    
    
    365
    
    
    10/27/06
    
    5-30Boca Commerce Park
    
    Boca Raton, FL
    
    
    10,274
    
    
    
    7,436
    
    
    
    8,055
    
    
    
    283
    
    
    
    7,436
    
    
    
    8,338
    
    
    
    15,774
    
    
    
    637
    
    
    12/08/06
    
    5-30Boca Commerce Mini
    
    Boca Raton, FL
    
    
    
    
    
    
    359
    
    
    
    1,203
    
    
    
    
    
    
    
    359
    
    
    
    1,203
    
    
    
    1,562
    
    
    
    43
    
    
    12/08/06
    
    5-30Wellington Commerce
Park III
    
    Wellington, FL
    
    
    
    
    
    
    1,132
    
    
    
    1,847
    
    
    
    286
    
    
    
    1,132
    
    
    
    2,133
    
    
    
    3,265
    
    
    
    174
    
    
    12/08/06
    
    5-30Wellington Commerce
Park II
    
    Wellington, FL
    
    
    10,281
    
    
    
    7,130
    
    
    
    11,633
    
    
    
    86
    
    
    
    7,130
    
    
    
    11,719
    
    
    
    18,849
    
    
    
    958
    
    
    12/08/06
    
    5-30Wellington Commerce
Park I
    
    Wellington, FL
    
    
    2,989
    
    
    
    1,350
    
    
    
    2,203
    
    
    
    33
    
    
    
    1,350
    
    
    
    2,236
    
    
    
    3,586
    
    
    
    181
    
    
    12/08/06
    
    5-30Wellington Commerce
Mini III
    
    Wellington, FL
    
    
    
    
    
    
    194
    
    
    
    453
    
    
    
    
    
    
    
    194
    
    
    
    453
    
    
    
    647
    
    
    
    16
    
    
    12/08/06
    
    5-30Wellington Commerce
Mini II
    
    Wellington, FL
    
    
    
    
    
    
    217
    
    
    
    507
    
    
    
    
    
    
    
    217
    
    
    
    507
    
    
    
    724
    
    
    
    18
    
    
    12/08/06
    
    5-30Wellington Commerce
Mini I
    
    Wellington, FL
    
    
    
    
    
    
    822
    
    
    
    1,917
    
    
    
    
    
    
    
    822
    
    
    
    1,917
    
    
    
    2,739
    
    
    
    69
    
    
    12/08/06
    
    5-30Overlake Business Park
North
    
    Redmond, WA
    
    
    
    
    
    
    8,732
    
    
    
    15,524
    
    
    
    930
    
    
    
    8,732
    
    
    
    16,454
    
    
    
    25,186
    
    
    
    1,726
    
    
    02/16/07
    
    5-30
 79




---



##### Table of Contents



CostCapitalizedSubsequentto
    
    
    Gross Amount at Which Carried atInitial Cost to Company
    
    
    Acquisition
    
    
    December 31, 2007Buildings
    
    
    Buildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciableand
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    Accumulated
    
    
    Date
    
    LivesDescription
    
    Location
    
    Encumbrances
    
    
    Land
    
    
    Improvements
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation
    
    
    Acquired
    
    (Years)Overlake South-Bldg 1-8
    
    Redmond, WA
    
    
    
    
    
    
    7,913
    
    
    
    14,067
    
    
    
    352
    
    
    
    7,913
    
    
    
    14,419
    
    
    
    22,332
    
    
    
    1,886
    
    
    02/16/07
    
    5-30Overlake South-Bldg 9-13
    
    Redmond, WA
    
    
    
    
    
    
    4,639
    
    
    
    8,247
    
    
    
    161
    
    
    
    4,639
    
    
    
    8,408
    
    
    
    13,047
    
    
    
    1,074
    
    
    02/16/07
    
    5-30Overlake South-Bldg
14-16
    
    Redmond, WA
    
    
    
    
    
    
    4,265
    
    
    
    7,583
    
    
    
    254
    
    
    
    4,265
    
    
    
    7,837
    
    
    
    12,102
    
    
    
    1,137
    
    
    02/16/07
    
    5-30Overlake South-Bldg 17
    
    Redmond, WA
    
    
    
    
    
    
    1,564
    
    
    
    2,781
    
    
    
    50
    
    
    
    1,564
    
    
    
    2,831
    
    
    
    4,395
    
    
    
    421
    
    
    02/16/07
    
    5-30Overlake South-Retail
    
    Redmond, WA
    
    
    
    
    
    
    648
    
    
    
    1,151
    
    
    
    13
    
    
    
    648
    
    
    
    1,164
    
    
    
    1,812
    
    
    
    100
    
    
    02/16/07
    
    5-30Commerce Campus
    
    Santa Clara, CA
    
    
    
    
    
    
    17,218
    
    
    
    21,914
    
    
    
    1,187
    
    
    
    17,218
    
    
    
    23,101
    
    
    
    40,319
    
    
    
    3,341
    
    
    03/27/07
    
    5-30Fairoaks Corporate
Center
    
    Fairfax, VA
    
    
    
    
    
    
    8,951
    
    
    
    16,740
    
    
    
    123
    
    
    
    8,951
    
    
    
    16,863
    
    
    
    25,814
    
    
    
    701
    
    
    08/03/07
    
    5-30Westwood
    
    Farmers Branch, TX
    
    
    
    
    
    
    941
    
    
    
    6,884
    
    
    
    1,306
    
    
    
    941
    
    
    
    8,190
    
    
    
    9,131
    
    
    
    2,521
    
    
    02/12/03
    
    5-30MICC-Center 1
    
    Miami, FL
    
    
    
    
    
    
    6,502
    
    
    
    7,409
    
    
    
    1,259
    
    
    
    6,502
    
    
    
    8,668
    
    
    
    15,170
    
    
    
    2,867
    
    
    12/30/03
    
    5-30MICC-Center 2
    
    Miami, FL
    
    
    
    
    
    
    6,502
    
    
    
    7,409
    
    
    
    1,622
    
    
    
    6,502
    
    
    
    9,031
    
    
    
    15,533
    
    
    
    2,891
    
    
    12/30/03
    
    5-30MICC-Center 3
    
    Miami, FL
    
    
    
    
    
    
    7,015
    
    
    
    7,993
    
    
    
    2,389
    
    
    
    7,015
    
    
    
    10,382
    
    
    
    17,397
    
    
    
    3,022
    
    
    12/30/03
    
    5-30MICC-Center 4
    
    Miami, FL
    
    
    
    
    
    
    4,837
    
    
    
    5,511
    
    
    
    1,449
    
    
    
    4,837
    
    
    
    6,960
    
    
    
    11,797
    
    
    
    2,291
    
    
    12/30/03
    
    5-30MICC-Center 5
    
    Miami, FL
    
    
    
    
    
    
    6,209
    
    
    
    5,940
    
    
    
    2,744
    
    
    
    6,209
    
    
    
    8,684
    
    
    
    14,893
    
    
    
    2,626
    
    
    12/30/03
    
    5-30MICC-Center 6
    
    Miami, FL
    
    
    
    
    
    
    6,371
    
    
    
    7,259
    
    
    
    939
    
    
    
    6,371
    
    
    
    8,198
    
    
    
    14,569
    
    
    
    2,649
    
    
    12/30/03
    
    5-30MICC-Center 7
    
    Miami, FL
    
    
    
    
    
    
    5,011
    
    
    
    5,710
    
    
    
    688
    
    
    
    5,011
    
    
    
    6,398
    
    
    
    11,409
    
    
    
    2,046
    
    
    12/30/03
    
    5-30MICC-Center 8
    
    Miami, FL
    
    
    
    
    
    
    5,398
    
    
    
    6,150
    
    
    
    1,046
    
    
    
    5,398
    
    
    
    7,196
    
    
    
    12,594
    
    
    
    2,318
    
    
    12/30/03
    
    5-30MICC-Center 9
    
    Miami, FL
    
    
    
    
    
    
    7,392
    
    
    
    8,424
    
    
    
    1,006
    
    
    
    7,392
    
    
    
    9,430
    
    
    
    16,822
    
    
    
    2,918
    
    
    12/30/03
    
    5-30MICC-Center 10
    
    Miami, FL
    
    
    
    
    
    
    9,341
    
    
    
    10,644
    
    
    
    2,507
    
    
    
    9,341
    
    
    
    13,151
    
    
    
    22,492
    
    
    
    3,917
    
    
    12/30/03
    
    5-30MICC-Center 12
    
    Miami, FL
    
    
    
    
    
    
    3,025
    
    
    
    3,447
    
    
    
    580
    
    
    
    3,025
    
    
    
    4,027
    
    
    
    7,052
    
    
    
    1,219
    
    
    12/30/03
    
    5-30MICC-Center 13
    
    Miami, FL
    
    
    
    
    
    
    2,342
    
    
    
    2,669
    
    
    
    217
    
    
    
    2,342
    
    
    
    2,886
    
    
    
    5,228
    
    
    
    921
    
    
    12/30/03
    
    5-30MICC-Center 14
    
    Miami, FL
    
    
    
    
    
    
    5,900
    
    
    
    6,723
    
    
    
    2,270
    
    
    
    5,900
    
    
    
    8,993
    
    
    
    14,893
    
    
    
    2,818
    
    
    12/30/03
    
    5-30MICC-Center 15
    
    Miami, FL
    
    
    
    
    
    
    3,295
    
    
    
    3,755
    
    
    
    699
    
    
    
    3,295
    
    
    
    4,454
    
    
    
    7,749
    
    
    
    1,464
    
    
    12/30/03
    
    5-30MICC-Center 16
    
    Miami, FL
    
    
    
    
    
    
    1,263
    
    
    
    1,439
    
    
    
    1,790
    
    
    
    1,263
    
    
    
    3,229
    
    
    
    4,492
    
    
    
    1,130
    
    
    12/30/03
    
    5-30MICC-Center 17
    
    Miami, FL
    
    
    
    
    
    
    2,400
    
    
    
    1,249
    
    
    
    419
    
    
    
    2,400
    
    
    
    1,668
    
    
    
    4,068
    
    
    
    464
    
    
    12/30/03
    
    5-30MICC-Center 18
    
    Miami, FL
    
    
    
    
    
    
    322
    
    
    
    367
    
    
    
    90
    
    
    
    322
    
    
    
    457
    
    
    
    779
    
    
    
    136
    
    
    12/30/03
    
    5-30MICC-Center 19
    
    Miami, FL
    
    
    
    
    
    
    2,335
    
    
    
    2,662
    
    
    
    839
    
    
    
    2,335
    
    
    
    3,501
    
    
    
    5,836
    
    
    
    1,331
    
    
    12/30/03
    
    5-30MICC-Center 20
    
    Miami, FL
    
    
    
    
    
    
    2,674
    
    
    
    3,044
    
    
    
    399
    
    
    
    2,674
    
    
    
    3,443
    
    
    
    6,117
    
    
    
    1,128
    
    
    12/30/03
    
    5-30Lamar Boulevard
    
    Austin, TX
    
    
    
    
    
    
    2,528
    
    
    
    6,596
    
    
    
    3,641
    
    
    
    2,528
    
    
    
    10,237
    
    
    
    12,765
    
    
    
    4,651
    
    
    01/01/97
    
    5-30N. Barkers Landing
    
    Houston, TX
    
    
    
    
    
    
    1,140
    
    
    
    3,003
    
    
    
    4,283
    
    
    
    1,140
    
    
    
    7,286
    
    
    
    8,426
    
    
    
    3,445
    
    
    01/01/97
    
    5-30La Prada
    
    Mesquite, TX
    
    
    
    
    
    
    495
    
    
    
    1,235
    
    
    
    547
    
    
    
    495
    
    
    
    1,782
    
    
    
    2,277
    
    
    
    644
    
    
    01/01/97
    
    5-30NW Highway
    
    Garland, TX
    
    
    
    
    
    
    480
    
    
    
    1,203
    
    
    
    500
    
    
    
    480
    
    
    
    1,703
    
    
    
    2,183
    
    
    
    638
    
    
    01/01/97
    
    5-30Quail Valley
    
    Missouri City, TX
    
    
    
    
    
    
    360
    
    
    
    918
    
    
    
    541
    
    
    
    360
    
    
    
    1,459
    
    
    
    1,819
    
    
    
    670
    
    
    01/01/97
    
    5-30Business Parkway I
    
    Richardson, TX
    
    
    
    
    
    
    799
    
    
    
    3,568
    
    
    
    1,956
    
    
    
    799
    
    
    
    5,524
    
    
    
    6,323
    
    
    
    2,465
    
    
    05/04/98
    
    5-30The Summit
    
    Plano, TX
    
    
    
    
    
    
    1,536
    
    
    
    6,654
    
    
    
    3,380
    
    
    
    1,536
    
    
    
    10,034
    
    
    
    11,570
    
    
    
    4,204
    
    
    05/04/98
    
    5-30Northgate II
    
    Dallas, TX
    
    
    
    
    
    
    1,274
    
    
    
    5,505
    
    
    
    2,219
    
    
    
    1,274
    
    
    
    7,724
    
    
    
    8,998
    
    
    
    3,352
    
    
    05/04/98
    
    5-30Empire Commerce
    
    Dallas, TX
    
    
    
    
    
    
    304
    
    
    
    1,545
    
    
    
    655
    
    
    
    304
    
    
    
    2,200
    
    
    
    2,504
    
    
    
    921
    
    
    05/04/98
    
    5-30Royal Tech-Digital
    
    Irving, TX
    
    
    
    
    
    
    319
    
    
    
    1,393
    
    
    
    345
    
    
    
    319
    
    
    
    1,738
    
    
    
    2,057
    
    
    
    872
    
    
    05/04/98
    
    5-30Royal Tech-Springwood
    
    Irving, TX
    
    
    
    
    
    
    894
    
    
    
    3,824
    
    
    
    1,808
    
    
    
    894
    
    
    
    5,632
    
    
    
    6,526
    
    
    
    2,584
    
    
    05/04/98
    
    5-30Royal Tech-Regent
    
    Irving, TX
    
    
    
    
    
    
    606
    
    
    
    2,615
    
    
    
    1,800
    
    
    
    606
    
    
    
    4,415
    
    
    
    5,021
    
    
    
    2,291
    
    
    05/04/98
    
    5-30Royal Tech-Bldg 7
    
    Irving, TX
    
    
    
    
    
    
    246
    
    
    
    1,061
    
    
    
    137
    
    
    
    246
    
    
    
    1,198
    
    
    
    1,444
    
    
    
    566
    
    
    05/04/98
    
    5-30Royal Tech-NFTZ
    
    Irving, TX
    
    
    
    
    
    
    1,517
    
    
    
    6,499
    
    
    
    1,690
    
    
    
    1,517
    
    
    
    8,189
    
    
    
    9,706
    
    
    
    4,032
    
    
    05/04/98
    
    5-30Royal Tech-Olympus
    
    Irving, TX
    
    
    
    
    
    
    1,060
    
    
    
    4,531
    
    
    
    527
    
    
    
    1,060
    
    
    
    5,058
    
    
    
    6,118
    
    
    
    2,158
    
    
    05/04/98
    
    5-30Royal Tech-Honeywell
    
    Irving, TX
    
    
    
    
    
    
    548
    
    
    
    2,347
    
    
    
    452
    
    
    
    548
    
    
    
    2,799
    
    
    
    3,347
    
    
    
    1,187
    
    
    05/04/98
    
    5-30Royal Tech-Bldg 12
    
    Irving, TX
    
    
    
    
    
    
    1,466
    
    
    
    6,263
    
    
    
    2,052
    
    
    
    1,466
    
    
    
    8,315
    
    
    
    9,781
    
    
    
    3,529
    
    
    05/04/98
    
    5-30Royal Tech-Bldg 13
    
    Irving, TX
    
    
    
    
    
    
    955
    
    
    
    4,080
    
    
    
    1,111
    
    
    
    955
    
    
    
    5,191
    
    
    
    6,146
    
    
    
    1,959
    
    
    05/04/98
    
    5-30
 80




---



##### Table of Contents



CostCapitalizedSubsequentto
    
    
    Gross Amount at Which Carried atInitial Cost to Company
    
    
    Acquisition
    
    
    December 31, 2007Buildings
    
    
    Buildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciableand
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    Accumulated
    
    
    Date
    
    LivesDescription
    
    Location
    
    Encumbrances
    
    
    Land
    
    
    Improvements
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation
    
    
    Acquired
    
    (Years)Royal Tech-Bldg 14
    
    Irving, TX
    
    
    
    
    
    
    2,010
    
    
    
    10,242
    
    
    
    2,162
    
    
    
    2,010
    
    
    
    12,404
    
    
    
    14,414
    
    
    
    5,133
    
    
    05/04/98
    
    5-30Royal Tech-Bldg 15
    
    Irving, TX
    
    
    
    
    
    
    1,307
    
    
    
    5,600
    
    
    
    1,574
    
    
    
    1,307
    
    
    
    7,174
    
    
    
    8,481
    
    
    
    2,685
    
    
    11/04/98
    
    5-30Westchase Corporate Park
    
    Houston, TX
    
    
    
    
    
    
    2,173
    
    
    
    7,338
    
    
    
    1,338
    
    
    
    2,173
    
    
    
    8,676
    
    
    
    10,849
    
    
    
    3,144
    
    
    12/30/99
    
    5-30Ben White 1
    
    Austin, TX
    
    
    
    
    
    
    789
    
    
    
    3,571
    
    
    
    271
    
    
    
    789
    
    
    
    3,842
    
    
    
    4,631
    
    
    
    1,685
    
    
    12/31/98
    
    5-30Ben White 5
    
    Austin, TX
    
    
    
    
    
    
    761
    
    
    
    3,444
    
    
    
    396
    
    
    
    761
    
    
    
    3,840
    
    
    
    4,601
    
    
    
    1,623
    
    
    12/31/98
    
    5-30McKalla 3
    
    Austin, TX
    
    
    
    
    
    
    662
    
    
    
    2,994
    
    
    
    691
    
    
    
    662
    
    
    
    3,685
    
    
    
    4,347
    
    
    
    1,727
    
    
    12/31/98
    
    5-30McKalla 4
    
    Austin, TX
    
    
    
    
    
    
    749
    
    
    
    3,390
    
    
    
    742
    
    
    
    749
    
    
    
    4,132
    
    
    
    4,881
    
    
    
    1,889
    
    
    12/31/98
    
    5-30Waterford A
    
    Austin, TX
    
    
    
    
    
    
    597
    
    
    
    2,752
    
    
    
    930
    
    
    
    597
    
    
    
    3,682
    
    
    
    4,279
    
    
    
    1,622
    
    
    01/06/99
    
    5-30Waterford B
    
    Austin, TX
    
    
    
    
    
    
    367
    
    
    
    1,672
    
    
    
    387
    
    
    
    367
    
    
    
    2,059
    
    
    
    2,426
    
    
    
    898
    
    
    05/20/99
    
    5-30Waterford C
    
    Austin, TX
    
    
    
    
    
    
    1,144
    
    
    
    5,225
    
    
    
    806
    
    
    
    1,144
    
    
    
    6,031
    
    
    
    7,175
    
    
    
    2,377
    
    
    05/20/99
    
    5-30McNeil 6
    
    Austin, TX
    
    
    
    
    
    
    437
    
    
    
    2,013
    
    
    
    957
    
    
    
    437
    
    
    
    2,970
    
    
    
    3,407
    
    
    
    1,469
    
    
    01/06/09
    
    5-30Rutland 11
    
    Austin, TX
    
    
    
    
    
    
    325
    
    
    
    1,536
    
    
    
    122
    
    
    
    325
    
    
    
    1,658
    
    
    
    1,983
    
    
    
    658
    
    
    01/06/99
    
    5-30Rutland 12
    
    Austin, TX
    
    
    
    
    
    
    535
    
    
    
    2,487
    
    
    
    313
    
    
    
    535
    
    
    
    2,800
    
    
    
    3,335
    
    
    
    1,248
    
    
    01/06/99
    
    5-30Rutland 13
    
    Austin, TX
    
    
    
    
    
    
    469
    
    
    
    2,190
    
    
    
    346
    
    
    
    469
    
    
    
    2,536
    
    
    
    3,005
    
    
    
    1,029
    
    
    01/06/99
    
    5-30Rutland 14
    
    Austin, TX
    
    
    
    
    
    
    535
    
    
    
    2,422
    
    
    
    278
    
    
    
    535
    
    
    
    2,700
    
    
    
    3,235
    
    
    
    1,183
    
    
    12/31/98
    
    5-30Rutland 19
    
    Austin, TX
    
    
    
    
    
    
    158
    
    
    
    762
    
    
    
    1,741
    
    
    
    158
    
    
    
    2,503
    
    
    
    2,661
    
    
    
    1,107
    
    
    01/06/99
    
    5-30Royal Tech-Bldg 16
    
    Irving, TX
    
    
    
    
    
    
    2,464
    
    
    
    2,703
    
    
    
    3,162
    
    
    
    2,464
    
    
    
    5,865
    
    
    
    8,329
    
    
    
    1,661
    
    
    07/01/99
    
    5-30Royal Tech-Bldg 17
    
    Irving, TX
    
    
    
    
    
    
    1,832
    
    
    
    6,901
    
    
    
    1,621
    
    
    
    1,832
    
    
    
    8,522
    
    
    
    10,354
    
    
    
    2,363
    
    
    08/15/01
    
    5-30Monroe Business Center
    
    Herndon, VA
    
    
    
    
    
    
    5,926
    
    
    
    13,944
    
    
    
    6,454
    
    
    
    5,926
    
    
    
    20,398
    
    
    
    26,324
    
    
    
    8,987
    
    
    08/01/97
    
    5-30Lusk II-R&D
    
    San Diego, CA
    
    
    
    
    
    
    1,077
    
    
    
    2,644
    
    
    
    424
    
    
    
    1,077
    
    
    
    3,068
    
    
    
    4,145
    
    
    
    1,134
    
    
    03/17/98
    
    5-30Lusk II-Office
    
    San Diego, CA
    
    
    
    
    
    
    1,230
    
    
    
    3,005
    
    
    
    1,370
    
    
    
    1,230
    
    
    
    4,375
    
    
    
    5,605
    
    
    
    1,785
    
    
    03/17/98
    
    5-30Norris Cn-Office
    
    San Ramon, CA
    
    
    
    
    
    
    1,486
    
    
    
    3,642
    
    
    
    859
    
    
    
    1,486
    
    
    
    4,501
    
    
    
    5,987
    
    
    
    1,819
    
    
    03/17/98
    
    5-30Northpointe D
    
    Sterling, VA
    
    
    
    
    
    
    787
    
    
    
    2,857
    
    
    
    1,389
    
    
    
    787
    
    
    
    4,246
    
    
    
    5,033
    
    
    
    2,416
    
    
    06/11/98
    
    5-30Monroe II
    
    Herndon, VA
    
    
    
    
    
    
    811
    
    
    
    4,967
    
    
    
    970
    
    
    
    811
    
    
    
    5,937
    
    
    
    6,748
    
    
    
    2,560
    
    
    01/29/99
    
    5-30Metro Park I
    
    Rockville, MD
    
    
    
    
    
    
    5,383
    
    
    
    15,404
    
    
    
    2,748
    
    
    
    5,383
    
    
    
    18,152
    
    
    
    23,535
    
    
    
    6,716
    
    
    12/27/01
    
    5-30Metro Park I R&D
    
    Rockville, MD
    
    
    
    
    
    
    5,404
    
    
    
    15,748
    
    
    
    4,610
    
    
    
    5,404
    
    
    
    20,358
    
    
    
    25,762
    
    
    
    8,570
    
    
    12/27/01
    
    5-30Metro Park II
    
    Rockville, MD
    
    
    
    
    
    
    1,223
    
    
    
    3,490
    
    
    
    623
    
    
    
    1,223
    
    
    
    4,113
    
    
    
    5,336
    
    
    
    1,708
    
    
    12/27/01
    
    5-30Metro Park II
    
    Rockville, MD
    
    
    
    
    
    
    2,287
    
    
    
    6,533
    
    
    
    1,706
    
    
    
    2,287
    
    
    
    8,239
    
    
    
    10,526
    
    
    
    3,483
    
    
    12/27/01
    
    5-30Metro Park III
    
    Rockville, MD
    
    
    
    
    
    
    4,555
    
    
    
    13,039
    
    
    
    4,120
    
    
    
    4,555
    
    
    
    17,159
    
    
    
    21,714
    
    
    
    7,336
    
    
    12/27/01
    
    5-30Metro Park IV
    
    Rockville, MD
    
    
    
    
    
    
    4,188
    
    
    
    12,035
    
    
    
    834
    
    
    
    4,188
    
    
    
    12,869
    
    
    
    17,057
    
    
    
    4,541
    
    
    12/27/01
    
    5-30Metro Park V
    
    Rockville, MD
    
    
    
    
    
    
    9,813
    
    
    
    28,214
    
    
    
    4,273
    
    
    
    9,813
    
    
    
    32,487
    
    
    
    42,300
    
    
    
    12,047
    
    
    12/27/01
    
    5-30Kearny Mesa-Office
    
    San Diego, CA
    
    
    
    
    
    
    785
    
    
    
    1,933
    
    
    
    1,187
    
    
    
    785
    
    
    
    3,120
    
    
    
    3,905
    
    
    
    1,296
    
    
    03/17/98
    
    5-30Kearny Mesa-R&D
    
    San Diego, CA
    
    
    
    
    
    
    2,109
    
    
    
    5,156
    
    
    
    628
    
    
    
    2,109
    
    
    
    5,784
    
    
    
    7,893
    
    
    
    2,137
    
    
    03/17/98
    
    5-30Bren Mar-Office
    
    Alexandria, VA
    
    
    
    
    
    
    572
    
    
    
    1,401
    
    
    
    1,909
    
    
    
    572
    
    
    
    3,310
    
    
    
    3,882
    
    
    
    1,627
    
    
    03/17/98
    
    5-30Lusk III
    
    San Diego, CA
    
    
    
    
    
    
    1,904
    
    
    
    4,662
    
    
    
    922
    
    
    
    1,904
    
    
    
    5,584
    
    
    
    7,488
    
    
    
    2,079
    
    
    03/17/98
    
    5-30Bren Mar-R&D
    
    Alexandria, VA
    
    
    
    
    
    
    1,625
    
    
    
    3,979
    
    
    
    596
    
    
    
    1,625
    
    
    
    4,575
    
    
    
    6,200
    
    
    
    1,694
    
    
    03/17/98
    
    5-30Alban Road-Office
    
    Springfield, VA
    
    
    
    
    
    
    988
    
    
    
    2,418
    
    
    
    3,055
    
    
    
    988
    
    
    
    5,473
    
    
    
    6,461
    
    
    
    2,524
    
    
    03/17/98
    
    5-30Alban Road-R&D
    
    Springfield, VA
    
    
    
    
    
    
    947
    
    
    
    2,318
    
    
    
    543
    
    
    
    947
    
    
    
    2,861
    
    
    
    3,808
    
    
    
    1,155
    
    
    03/17/98
    
    5-30Guide Drive
    
    Rockville, MD
    
    
    
    
    
    
    1,142
    
    
    
    
    
    
    
    328
    
    
    
    1,142
    
    
    
    328
    
    
    
    1,470
    
    
    
    14
    
    
    02/27/01
    
    5-30$
    60,725
    
    
    $
    494,849
    
    
    $
    1,208,690
    
    
    $
    275,359
    
    
    $
    494,849
    
    
    $
    1,484,049
    
    
    $
    1,978,898
    
    
    $
    539,857
 81




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##### Table of Contents



SIGNATURES
  Dated: February 27, 2008PS Business Parks, Inc.By:
    
    /s/ Joseph D. Russell, Jr.

Joseph D. Russell, Jr.President and Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ Ronald L. Havner, Jr.

Ronald L. Havner, Jr.
    
    Chairman of the Board
    
    February 27, 2008/s/ Joseph D. Russell, Jr.

Joseph D. Russell, Jr.
    
    President, Director and Chief
Executive Officer (principal
executive officer)
    
    February 27, 2008/s/ Edward A. Stokx

Edward A. Stokx
    
    Chief Financial Officer (principal
financial officer and principal
accounting officer)
    
    February 27, 2008/s/ Arthur M. Friedman

Arthur M. Friedman
    
    Director
    
    February 27, 2008/s/ James H. Kropp

James H. Kropp
    
    Director
    
    February 27, 2008/s/ Harvey Lenkin

Harvey Lenkin
    
    Director
    
    February 27, 2008/s/ Alan K. Pribble

Alan K. Pribble
    
    Director
    
    February 27, 2008/s/ R. Wesley Burns

R. Wesley Burns
    
    Director
    
    February 27, 2008/s/ Michael V. McGee

Michael V. McGee
    
    Director
    
    February 27, 2008
 82




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##### Table of Contents



PS BUSINESS PARKS, INC.
 
 EXHIBIT INDEX
(Items 15(a)(3) and 15(b))
 3.1
    
    
    Restated Articles of Incorporation. Filed with Registrants
Registration Statement on Form S-3 (No. 333-78627) and
incorporated herein by reference.3.2
    
    
    Certificate of Determination of Preferences of 8.75% Series C
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999 (SEC File No.
001-10709) and incorporated herein by reference.3.3
    
    
    Certificate of Determination of Preferences of 8.875% Series
X Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999 (SEC File No.
001-10709) and incorporated herein by reference.3.4
    
    
    Amendment to Certificate of Determination of Preferences of
8.875% Series X Cumulative Redeemable Preferred Stock of PS
Business Parks, Inc. Filed with Registrants Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999 (SEC
File No. 001-10709) and incorporated herein by reference.3.5
    
    
    Certificate of Determination of Preferences of 8.875% Series
Y Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000 (SEC File No. 001-10709)
and incorporated herein by reference.3.6
    
    
    Certificate of Determination of Preferences of 9.50% Series D
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K dated
May 7, 2001 (SEC File No. 001-10709) and incorporated herein
by reference.3.7
    
    
    Amendment to Certificate of Determination of Preferences of
9.50% Series D Cumulative Redeemable Preferred Stock of PS
Business Parks, Inc. Filed with Registrants Quarterly Report
on Form 10-Q for the quarter ended September 30, 2001 (SEC
File No. 001-10709) and incorporated herein by reference.3.8
    
    
    Certificate of Determination of Preferences of 91/4% Series E
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Quarterly Report on Form 10-Q
for the quarter ended September 30, 2001 (SEC File No.
001-10709) and incorporated herein by reference.3.9
    
    
    Certificate of Determination of Preferences of 8.75% Series F
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K dated
January 18, 2002 (SEC File No. 001-10709) and incorporated
herein by reference.3.10
    
    
    Certificate of Determination of Preferences of 7.95% Series G
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Annual Report on Form 10-K for
the year ended December 31, 2003 and incorporated herein by
reference.3.11
    
    
    Certificate of Determination of Preferences of 7.00% Series H
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. filed with Registrants Current Report on Form 8-K dated
January 16, 2004 and incorporated herein by reference.3.12
    
    
    Certificate of Determination of Preferences of 6.875% Series
I Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K dated
March 31, 2004 and incorporated herein by reference.3.13
    
    
    Certificate of Determination of Preferences of 7.50% Series J
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Quarterly Report on Form 10-Q
for the quarter ended June 30, 2004 and incorporated herein
by reference.3.14
    
    
    Certificate of Determination of Preferences of 7.950% Series
K Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K dated
June 24, 2004 and incorporated herein by reference.
 83




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##### Table of Contents



3.15
    
    
    Certificate of Determination of Preferences of 7.60% Series L
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K dated
August 23, 2004 and incorporated herein by reference.3.16
    
    
    Certificate of Correction of Certificate of Determination of
Preferences for the 7.00% Cumulative Preferred Stock, Series
H of PS Business Parks, Inc. Filed with Registrants Current
Report on Form 8-K dated October 18, 2004 and incorporated
herein by reference.3.17
    
    
    Amendment to Certificate of Determination of Preferences for
the 7.00% Cumulative Preferred Stock, Series H of PS Business
Parks, Inc. Filed with Registrants Current Report on Form
8-K dated October 18, 2004 and incorporated herein by
reference.3.18
    
    
    Certificate of Determination of Preferences of 7.20%
Cumulative Preferred Stock, Series M of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K dated
April 29, 2005 and incorporated herein by reference.3.19
    
    
    Certificate of Determination of Preferences of 71/8% Series N
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K dated
December 16, 2005 and incorporated herein by reference.3.20
    
    
    Certificate of Determination of Preferences of 7.375% Series
O Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K
dated May 18, 2006 and incorporated herein by reference.3.21
    
    
    Certificate of Correction of Certificate of Determination of
Preferences of 7.375% Cumulative Preferred Stock, Series O of
PS Business Parks, Inc. Filed with Registrants Current
Report on Form 8-K dated August 10, 2006 and incorporated
herein by reference.3.22
    
    
    Amendment to Certificate of Determination of Preferences of
7.375% Series O Cumulative Redeemable Preferred Stock of PS
Business Parks, Inc. Filed with Registrants Current Report
on Form 8-K dated August 10, 2006 and incorporated herein by
reference.3.23
    
    
    Certificate of Determination of Preferences of 6.70% Series P
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K dated
January 9, 2007 and incorporated herein by reference.3.24
    
    
    Certificate of Determination of Preferences of 6.55% Series Q
Cumulative Redeemable Preferred Stock of PS Business Parks,
Inc. Filed with Registrants Current Report on Form 8-K dated
March 16, 2007 and incorporated herein by reference.3.25
    
    
    Restated Bylaws. Filed with Registrants Quarterly Report on
Form 10-Q for the quarter ended September 30, 2006 and
incorporated herein by reference4.1
    
    
    Deposit Agreement Relating to 7.00% Cumulative Preferred
Stock, Series H of PS Business Parks, Inc., dated as of
January 15, 2004. Filed with Registrants Current Report on
Form 8-K dated January 15, 2004 and incorporated herein by
reference.4.2
    
    
    Specimen Stock Certificate for Registrants 7.00% Cumulative
Preferred Stock, Series H. Filed with Registrants Current
Report on Form 8-K dated January 15, 2004 and incorporated
herein by reference.4.3
    
    
    Deposit Agreement Relating to 6.875% Cumulative Preferred
Stock, Series I of PS Business Parks, Inc., dated as of March
31, 2004. Filed with Registrants Current Report on Form 8-K
dated March 31, 2004 and incorporated herein by reference.4.4
    
    
    Specimen Stock Certificate for Registrants 6.875% Cumulative
Preferred Stock, Series I. Filed with Registrants Current
Report on Form 8-K dated March 31, 2004 and incorporated
herein by reference.4.5
    
    
    Deposit Agreement Relating to 7.95% Cumulative Preferred
Stock, Series K of PS Business Parks, Inc., dated as of June
24, 2004. Filed with Registrants Current Report on Form 8-K
dated June 24, 2004 and incorporated herein by reference.
 84




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##### Table of Contents



4.6
    
    
    Specimen Stock Certificate for Registrants 7.95% Cumulative
Preferred Stock, Series K. Filed with Registrants Current
Report on Form 8-K dated June 24, 2004 and incorporated
herein by reference.4.7
    
    
    Deposit Agreement Relating to 7.60% Cumulative Preferred
Stock, Series L of PS Business Parks, Inc., dated as of
August 23, 2004. Filed with Registrants Current Report on
Form 8-K dated August 23, 2004 and incorporated herein by
reference.4.8
    
    
    Specimen Stock Certificate for Registrants 7.60% Cumulative
Preferred Stock, Series L. Filed with Registrants Current
Report on Form 8-K dated August 23, 2004 and incorporated
herein by reference.4.9
    
    
    Deposit Agreement Relating to 7.20% Cumulative Preferred
Stock, Series M of PS Business Parks, Inc., dated as of April
27, 2005. Filed with Registrants Current Report on Form 8-K
dated April 27, 2005 and incorporated herein by reference.4.10
    
    
    Specimen Stock Certificate for Registrants 7.20% Cumulative
Preferred Stock, Series M. Filed with Registrants Current
Report on Form 8-K dated April 27, 2005 and incorporated
herein by reference.4.11
    
    
    Deposit Agreement Relating to 7.375% Cumulative Preferred
Stock, Series O of PS Business Parks, Inc., dated as of May
18, 2006. Filed with Registrants Current Report on Form 8-K
dated May 18, 2006 and incorporated herein by reference.4.12
    
    
    Specimen Stock Certificate for Registrants 7.375% Cumulative
Preferred Stock, Series O. Filed with Registrants Current
Report on Form 8-K dated May 18, 2006 and incorporated herein
by reference.4.13
    
    
    Deposit Agreement Relating to 6.70% Cumulative Preferred
Stock, Series P of PS Business Parks, Inc., dated as of
January 9, 2007. Filed with Registrants Current Report on
Form 8-K dated January 9, 2007 and incorporated herein by
reference.4.14
    
    
    Specimen Stock Certificate for Registrants 6.70% Cumulative
Preferred Stock, Series P. Filed with Registrants Current
Report on Form 8-K dated January 9, 2007 and incorporated
herein by reference.10.1
    
    
    Amended Management Agreement between Storage Equities, Inc.
and Public Storage Commercial Properties Group, Inc. dated as
of February 21, 1995. Filed with PSs Annual Report on Form
10-K for the year ended December 31, 1994 (SEC File No.
001-08389) and incorporated herein by reference.10.2
    
    
    Agreement of Limited Partnership of PS Business Parks, L.P.
Filed with Registrants Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 (SEC File No. 001-10709) and
incorporated herein by reference.10.3
    
    
    Agreement Among Shareholders and Company dated as of December
23, 1997 among Acquiport Two Corporation, AOPP, American
Office Park Properties, L.P. (AOPP LP) and PS. Filed with
Registrants Registration Statement on Form S-4 (No.
333-45405) and incorporated herein by reference.10.4
    
    
    Amendment to Agreement Among Shareholders and Company dated
as of January 21, 1998 among Acquiport Two Corporation, AOPP,
AOPP LP and PS. Filed with Registrants Registration
Statement No. on Form S-4 (333-45405) and incorporated herein
by reference.10.5
    
    
    Non-Competition Agreement dated as of December 23, 1997 among
PS, AOPP, AOPP LP and Acquiport Two Corporation. Filed with
Registrants Registration Statement on Form S-4 (No.
333-45405) and incorporated herein by reference.10.6
    *
    
    Offer Letter/ Employment Agreement between Registrant and
Joseph D. Russell, Jr., dated as of September 6, 2002. Filed
with Registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003 and incorporated herein by
reference.
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10.7
    
    
    Form of Indemnity Agreement. Filed with Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 (SEC File No. 001-10709) and incorporated herein by
reference.10.8
    *
    
    Form of Indemnification Agreement for Executive Officers.
Filed with Registrants Annual Report on Form 10-K for the
year ended December 31, 2004 and incorporated herein by
reference.10.9
    
    
    Cost Sharing and Administrative Services Agreement dated as
of November 16, 1995 by and among PSCC, Inc. and the owners
listed therein. Filed with Registrants Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998 (SEC File No.
001-10709) and incorporated herein by reference.10.10
    
    
    Amendment to Cost Sharing and Administrative Services
Agreement dated as of January 2, 1997 by and among PSCC, Inc.
and the owners listed therein. Filed with Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 (SEC File No. 001-10709) and incorporated herein by
reference.10.11
    
    
    Accounts Payable and Payroll Disbursement Services Agreement
dated as of January 2, 1997 by and between PSCC, Inc. and
AOPP LP. Filed with Registrants Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 (SEC File No.
001-10709) and incorporated herein by reference.10.12
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 8.875% Series B Cumulative Redeemable
Preferred Units, dated as of April 23, 1999. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 (SEC File No. 001-10709) and
incorporated herein by reference.10.13
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 9.25% Series A Cumulative Redeemable
Preferred Units, dated as of April 30, 1999. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 (SEC File No. 001-10709) and
incorporated herein by reference.10.14
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 8.75% Series C Cumulative Redeemable
Preferred Units, dated as of September 3, 1999. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 (SEC File No. 001-10709) and
incorporated herein by reference.10.15
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 8.875% Series X Cumulative Redeemable
Preferred Units, dated as of September 7, 1999. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 (SEC File No. 001-10709) and
incorporated herein by reference.10.16
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to Additional 8.875% Series X Cumulative
Redeemable Preferred Units, dated as of September 23, 1999.
Filed with Registrants Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 (SEC File No. 001-10709) and
incorporated herein by reference.10.17
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 8.875% Series Y Cumulative Redeemable
Preferred Units, dated as of July 12, 2000. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000 (SEC File No. 001-10709) and incorporated
herein by reference.10.18
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 9.50% Series D Cumulative Redeemable
Preferred Units, dated as of May 10, 2001. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001 (SEC File No. 001-10709) and
incorporated herein by reference.10.19
    
    
    Amendment No. 1 to Amendment to Agreement of Limited
Partnership of PS Business Parks, L.P. Relating to 9.50%
Series D Cumulative Redeemable Preferred Units, dated as of
June 18, 2001. Filed with Registrants Quarterly Report on
Form 10-Q for the quarter ended September 30, 2001 (SEC File
No. 001-10709) and incorporated herein by reference.
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10.20
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 91/4% Series E Cumulative Redeemable
Preferred Units, dated as of September 21, 2001. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001 (SEC File No. 001-10709) and
incorporated herein by reference.10.21
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 8.75% Series F Cumulative Redeemable
Preferred Units, dated as of January 18, 2002. Filed with
Registrants Annual Report on Form 10-K for the year ended
December 31, 2001 (SEC File No. 001-10709) and incorporated
herein by reference.10.22
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 7.95% Series G Cumulative Redeemable
Preferred Units, dated as of October 30, 2002. Filed with
Registrants Annual Report on Form 10-K for the year ended
December 31, 2003 and incorporated herein by reference.10.23
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 7.00% Series H Cumulative Redeemable
Preferred Units, dated as of January 16, 2004. Filed with
Registrants Annual Report on Form 10-K for the year ended
December 31, 2003 and incorporated herein by reference.10.24
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 6.875% Series I Cumulative Redeemable
Preferred Units, dated as of April 21, 2004. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004 and incorporated herein by reference.10.25
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 7.50% Series J Cumulative Redeemable
Preferred Units, dated as of May 27, 2004. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004 and incorporated herein by reference.10.26
    
    
    Amendment No. 1 to Amendment to Agreement of Limited
Partnership of PS Business Parks, L.P. Relating to 7.50% Series
J Cumulative Redeemable Preferred Units, dated as of June 17,
2004. Filed with Registrants Quarterly Report on Form 10-Q for
the quarter ended June 30, 2004 and incorporated herein by
reference.10.27
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 7.95% Series K Cumulative Redeemable
Preferred Units, dated as of June 30, 2004, filed with
Registrants Annual Report on Form 10-K for the year ended
December 31, 2004 and incorporated herein by reference.10.28
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 7.60% Series L Cumulative Redeemable
Preferred Units, dated as of August 31, 2004. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004 and incorporated herein by reference.10.29
    
    
    Amendment No. 1 to Amendment to Agreement of Limited
Partnership of PS Business Parks, L.P. Relating to 7.00% Series
H Cumulative Redeemable Preferred Units, dated as of October
25, 2004. Filed with Registrants Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004 and incorporated
herein by reference.10.30
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 7.20% Series M Cumulative Redeemable
Preferred Units, dated as of May 2, 2005. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2005 and incorporated herein by reference.10.31
    
    
    Amendment No. 1 to Amendment to Agreement of Limited
Partnership Relating to 7.20% Series M Cumulative Redeemable
Preferred Units, dated as of May 9, 2005. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2005 and incorporated herein by reference.
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10.32
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 71/8% Series N Cumulative Redeemable
Preferred Units, dated as of December 12, 2005. Filed with
Registrants Current Report on Form 8-K dated December 16, 2005
and incorporated herein by reference.10.33
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 7.375% Series O Cumulative Redeemable
Preferred Units, dated as of June 16, 2006. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006 and incorporated herein by reference.10.34
    
    
    Amendment No. 1 to Amendment to Agreement of Limited
Partnership of PS Business Parks, L.P. Relating to 7.375%
Series O Cumulative Redeemable Preferred Units, dated as of
August 16, 2006. Filed with Registrants Annual Report on Form
10-K for the year ended December 31, 2006 and incorporated
herein by reference.10.35
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 6.70% Series P Cumulative Redeemable
Preferred Units, dated as of January 9, 2007. Filed with
Registrants Annual Report on Form 10-K for the year ended
December 31, 2006 and incorporated herein by reference.10.36
    
    
    Amendment to Agreement of Limited Partnership of PS Business
Parks, L.P. Relating to 6.55% Series Q Cumulative Redeemable
Preferred Units, dated as of March 12, 2007. Filed with
Registrants Current Report on Form 8-K dated March 16, 2007
and incorporated herein by reference.10.37
    
    
    Registration Rights Agreement by and between PS Business Parks,
Inc. and GSEP 2002 Realty Corp., dated as of October 30, 2002,
relating to 7.95% Series G Cumulative Redeemable Preferred
Units. Filed with Registrants Annual Report on Form 10-K for
the year ended December 31, 2005 and incorporated herein by
reference.10.38
    
    
    Amended and Restated Registration Rights Agreement by and
between PS Business Parks, Inc. and GSEP 2004 Realty Corp.,
dated as of June 17, 2004, relating to 7.50% Series J
Cumulative Redeemable Preferred Units. Filed with Registrants
Annual Report on Form 10-K for the year ended December 31, 2005
and incorporated herein by reference.10.39
    
    
    Registration Rights Agreement by and between PS Business Parks,
Inc. and GSEP 2005 Realty Corp., dated as of December 12, 2005.
Filed with Registrants Current Report on Form 8-K dated
December 16, 2005 and incorporated herein by reference.10.40
    
    
    Registration Rights Agreement by and between PS Business Parks,
Inc. and GSEP 2006 Realty Corp., dated as of March 12, 2007.
Filed with Registrants Current Report on Form 8-K dated March
16, 2007 and incorporated herein by reference.10.41
    
    
    Amended and Restated Revolving Credit Agreement dated as of
October 29, 2002 among PS Business Parks, L.P., Wells Fargo
Bank, National Association, as Agent, and the Lenders named
therein. Filed with Registrants Annual Report on Form 10-K for
the year ended December 31, 2002 (SEC File No. 001-10709) and
incorporated herein by reference.10.42
    
    
    Modification Agreement, dated as of December 29, 2003. Filed
with the Registrants Annual Report on Form 10-K for the year
ended December 31, 2003 and incorporated herein by reference.
This exhibit modifies the Amended and Restated Revolving Credit
Agreement dated as of October 29, 2002 and filed with the
Registrants Annual Report on Form 10-K for the year ended
December 31, 2002 (SEC File No. 001-10709) and incorporated
herein by reference.10.43
    
    
    Modification Agreement, dated as of January 23, 2004. Filed
with the Registrants Annual Report on Form 10-K for the year
ended December 31, 2003 and incorporated herein by reference.
This exhibit modifies the Modification Agreement dated as of
December 29, 2003 and filed with the Registrants Annual Report
on Form 10-K for the year ended December 31, 2003 and
incorporated herein by reference.
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10.44
    
    
    Third Modification Agreement, dated as of August 5, 2005. Filed with the
Registrants Current Report on Form 8-K dated August 5, 2005 and incorporated
herein by reference. This exhibit modifies the Modification Agreement dated as
of January 23, 2004 and filed with the Registrants Annual Report on Form 10-K
for the year ended December 31, 2003 and incorporated herein by reference.10.45
    
    
    Letter Agreement, dated as of December 29, 2003, between Public Storage, Inc.
and PS Business Parks, L.P. Filed with the Registrants Current Report on Form
8-K dated January 14, 2004 and incorporated herein by reference.10.46
    *
    
    Registrants 1997 Stock Option and Incentive Plan. Filed with Registrants
Registration Statement on Form S-8 (No. 333-48313) and incorporated herein by
reference.10.47
    *
    
    Registrants 2003 Stock Option and Incentive Plan. Filed with Registrants
Registration Statement on Form S-8 (No. 333-104604) and incorporated herein by
reference.10.48
    *
    
    Retirement Plan for Non-Employee Directors. Filed with Registrants
Registration Statement on Form S-8 (No. 333-129463) and incorporated herein by
reference.10.49
    *
    
    Form of PS Business Parks, Inc. Restricted Stock Unit Agreement. Filed with
Registrants Quarterly Report on Form 10-Q for the quarter ended September 30,
2004 and incorporated herein by reference.10.50
    *
    
    Form of PS Business Parks, Inc. 2003 Stock Option and Incentive Plan
Non-Qualified Stock Option Agreement. Filed with Registrants Quarterly Report
on Form 10-Q for the quarter ended September 30, 2004 and incorporated herein
by reference.10.51
    *
    
    Form of PS Business Parks, Inc. 2003 Stock Option and Incentive Plan Stock
Option Agreement. Filed with Registrants Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004 and incorporated herein by reference.12
    
    
    Statement re: Computation of Ratio of Earnings to Fixed Charges. Filed herewith.21
    
    
    List of Subsidiaries. Filed herewith.23
    
    
    Consent of Independent Registered Public Accounting Firm. Filed herewith.31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. Filed herewith.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. Filed herewith.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
 *
    
    Management contract or compensatory plan or arrangement 89