2014

Mission West Properties Announces First Quarter 2012 Operating Results

CUPERTINO, Calif., April 11, 2012 /PRNewswire/ -- Mission West Properties, Inc. (NASDAQ: MSW) reported today that Funds From Operations ("FFO") for the quarter ended March 31, 2012, was approximately $14,149,000, or $0.13 per diluted common share, (considering the potential effect of all O.P. units being exchanged for shares of the Company's common stock) as compared to approximately $16,240,000, or $0.15 per diluted common share, for the same period in 2011. The decrease was primarily due to lower rental revenues. On a sequential quarter basis, FFO for the quarter ended December 31, 2011, was approximately $0.16 per diluted common share.

Net income for the quarter ended March 31, 2012, was approximately $13,253,000 as compared to approximately $9,936,000 for the quarter ended March 31, 2011. Net income per diluted share available to common stockholders was approximately $0.12 for the quarter ended March 31, 2012, compared to $0.11 for the quarter ended March 31, 2011, a per share increase of approximately 9%. The increase was primarily due to gains from sale of real estate, which accounted for approximately $0.04 per diluted share.

Acquisition Activity

On February 1, 2012, the Company acquired the following properties from the Berg Group: three vacant R&D buildings located at 5901, 5921 and 5961 Optical Court in San Jose, California, consisting of approximately 202,500 rentable square feet for a total purchase price of $18,000,000; approximately ten acres of raw land at Hellyer Avenue and Embedded Way for approximately $5,313,000; and approximately nine acres of raw land at Hellyer Avenue and Piercy Road for approximately $4,877,000. The combined purchase price for the three R&D buildings and raw land totaled approximately $28,190,000. The Company acquired these properties by offsetting the purchase price with approximately $9,217,000, the amount the Berg Group owed to the Company from the outcome of the Hellyer Avenue Limited Partnership litigation and approximately $7,494,000, the amount the Berg Group was obligated to pay toward the construction of an R&D building in connection with the Company's 2001 acquisition of 245 Caspian Drive in Sunnyvale, California. The Company issued an unsecured short-term note payable for the remaining amount of approximately $11,479,000. As of March 31, 2012, the note payable and accrued interest had been fully repaid.

Disposition Activity

On January 9, 2012, the Company disposed of three R&D properties located at 1680-1690 McCandless Drive, 1740-1768 McCandless Drive and 1810-1830 McCandless Drive in Milpitas, California, consisting of approximately 165,000 rentable square feet. A total net gain of approximately $7,479,000 will be recognized in installments and classified as discontinued operations on the total sales price of $21,780,000. For the quarter ended March 31, 2012, approximately $1,629,000 was recognized as gain and classified as discontinued operations on sale of real estate under the installment method. The buyer issued an unsecured promissory note to the Company in the amount of $18,780,000 with an interest rate of 0% per annum. The total sales price encompasses the sum of the following amounts: a) The down payment price of $3,000,000; b) Yearly payments of $3,000,000 on the anniversary of the effective date for four years; and c) On the fifth year anniversary of the effective date, the buyer will pay the amount remaining of the unpaid portion of the total sales price.

On February 14, 2012, the Company disposed of three R&D properties located at 1625-1657 McCandless Drive, 1725-1745 McCandless Drive and 1815-1845 McCandless Drive in Milpitas, California, consisting of approximately 112,000 rentable square feet. Only 36.04% of property 1815-1845 McCandless Drive was sold in this phase and the remaining 63.96% will be sold in the second phase at a later date. A total net gain of approximately $3,890,000 was recognized and classified as discontinued operations on the total cash sales price of approximately $13,613,000.

Company Profile

Mission West Properties, Inc. operates as a self‑managed, self‑administered and fully integrated REIT engaged in the management, leasing, marketing, development and acquisition of commercial R&D properties, primarily located in the Silicon Valley portion of the San Francisco Bay Area. Currently, the Company manages 111 properties totaling approximately 8.0 million rentable square feet. For additional information, please contact Investor Relations at 408-725-0700.

The matters described herein contain forward-looking statements. Such statements can be identified by the use of forward-looking terminology such as "will," "anticipate," "estimate," "expect," "intend," or similar words. Forward-looking statements involve a number of risks, uncertainties or other factors beyond the Company's control, which may cause material differences in actual results, performance or other expectations. These factors include, but are not limited to, the ability to complete acquisitions from the Berg Group and other factors detailed in the Company's registration statements, and periodic filings with the Securities & Exchange Commission.

 

MISSION WEST PROPERTIES, INC.
SELECTED FINANCIAL DATA
(In thousands, except share, per share and property data amounts)

 





STATEMENTS OF OPERATIONS









Three Months
Ended

Mar 31, 2012


Three Months
Ended

Mar 31, 2011





OPERATING REVENUES:








  Rental income

$20,012


$21,723





  Tenant reimbursements

3,948


4,618





  Other income

272


1,002





    Total operating revenues

24,232


27,343













OPERATING EXPENSES:








  Operating and maintenance

2,409


2,512





  Real estate taxes

2,428


3,049





  General and administrative

651


521





  Depreciation and amortization

5,993 (1)


5,491 (1)





    Total operating expenses

11,481


11,573













    Operating income

12,751


15,770













OTHER INCOME (EXPENSES):








  Equity in earnings (loss) of unconsolidated joint venture

114


(9)





  Interest income

93


70





  Interest expense

(4,921)


(5,279)





  Interest expense – related parties

(146)


(147)





    Income from continuing operations

7,891


10,405













Discontinued operations:








    Net gain from disposal of properties classified as

      discontinued operations

5,519


-





    Net loss from properties classified as

      discontinued operations

(157)


(469)





        Income (loss) from discontinued operations

5,362


(469)













        Net income

13,253


9,936













Net income attributable to noncontrolling interests

(10,409)


(7,536)





Net income available to common stockholders

$2,844


$2,400













Income per share from continuing operations:








   Basic

$0.09


$0.11





   Diluted

$0.08


$0.11





Income (loss) per share from discontinued operations:








   Basic

$0.04


-





   Diluted

$0.04


-





Net income per share to common stockholders:








   Basic

$0.13


$0.11





   Diluted

$0.12


$0.11





Weighted average shares of common stock (basic)

22,637,668


22,288,103





Weighted average shares of common stock (diluted)

23,157,454


22,405,276





Weighted average O.P. units outstanding

82,648,367


82,997,932














 

 

 

FUNDS FROM OPERATIONS

Three Months
Ended

Mar 31, 2012


Three Months
Ended

Mar 31, 2011





Funds from operations

$14,149


$16,240





Funds from operations per share (2)

$0.13


$0.15





Outstanding common stock

22,668,020


22,370,770





Outstanding O.P. units

82,618,015


82,915,265





Weighted average O.P. units and common stock

   outstanding (diluted)

 

105,805,821


 

105,403,208













 

 

FUNDS FROM OPERATIONS CALCULATION

Three Months
Ended

Mar 31, 2012


Three Months
Ended

Mar 31, 2011





Net income

$13,253


$9,936





Add:








   Depreciation and amortization

6,465


6,351





   Depreciation and amortization in

     unconsolidated joint venture

 

60


 

60





Less:








   Noncontrolling interests in joint ventures

(110)


(107)





   Gain on sale of real estate

(5,519)


-





Funds from operations

$14,149


$16,240













Funds From Operations ("FFO") is a non-GAAP financial measurement used by real estate investment trusts ("REITs") to measure and compare operating performance. As defined by NAREIT, FFO represents net income (loss) (computed in accordance with GAAP, accounting principles generally accepted in the United States of America), excluding gains (or losses) from debt restructuring and sales of property, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non‑real estate assets) and after adjustments for unconsolidated partnerships and joint ventures. Management considers FFO to be an appropriate supplemental measure of the Company's operating and financial performance because when compared year over year, it reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, providing a perspective not immediately apparent from net income.  In addition, management believes that FFO provides useful information about the Company's financial performance when compared to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs. FFO should neither be considered as an alternative for net income as a measure of profitability nor is it comparable to cash flows provided by operating activities determined in accordance with GAAP. FFO is not comparable to similarly entitled items reported by other REITs that do not define them exactly as we define FFO.


 

 

PROPERTY AND OTHER DATA:

Three Months
Ended

Mar 31, 2012


Three Months
Ended

Mar 31, 2011





Total properties, end of period

111


111





Total square feet, end of period

7,985,569


8,011,026





Average monthly rental revenue per square foot (3)

$1.28


$1.39





Occupancy for leased properties (6)

71.3%


68.5%





Straight-line rent

($201)


($635)





Leasing commissions

$26


$194





Non-recurring capital expenditures

$176


$926





 

LEASE ROLLOVER SCHEDULE:


 

Year


# of Leases


Rentable Square Feet


2012 Base Rent (5)

2012 (4)


9


419,767


$3,349

2013


8


367,683


5,418

2014


22


1,823,675


29,384

2015


8


587,437


9,334

2016


8


394,806


4,551

2017


12


727,552


9,817

2018


5


431,606


5,281

2019


2


232,480


3,731

2020


3


208,768


4,471

Thereafter


1


105,000


2,441

    Total


78


5,298,774


$77,777


 

BALANCE SHEETS









March 31, 2012


December 31, 2011













                                  Assets








Investments in real estate:








     Land

$323,173


$306,474





     Buildings and improvements

757,631


745,962





     Real estate related intangible assets

3,561


3,561





         Total investments in properties

1,084,365


1,055,997





     Accumulated depreciation and amortization

(235,204)


(229,211)





     Assets held for sale, net

31,804


54,361





         Net investments in properties

880,965


881,147





     Investment in unconsolidated joint venture

3,575


3,557





         Net investments in real estate

884,540


884,704





Cash and cash equivalents

2,850


-





Deferred rent

16,449


16,650





Other assets, net

31,629


35,133





      Total assets

$935,468


$936,487













                       Liabilities and Equity








Liabilities:








     Mortgage notes payable

$327,380


$331,166





     Mortgage note payable – related parties

6,986


7,139





     Revolving line of credit

-


3,305





     Interest payable

1,577


1,606





     Security deposits

4,366


4,317





     Prepaid rent and deferred revenue

11,185


5,836





     Dividends and distributions payable

23,163


13,687





     Accounts payable and accrued expenses

18,238


16,344





         Total liabilities

392,895


383,400













Commitments and contingencies.
















Equity:








Stockholders' equity:








     Common stock, $.001 par value

23


23





     Additional paid-in capital

176,722


175,900





     Distributions in excess of accumulated earnings

(35,104)


(32,962)





         Total stockholders' equity

141,641


142,961





Noncontrolling interests in operating partnerships

400,932


410,126





         Total equity

542,573


553,087





         Total liabilities and equity

$935,468


$936,487






(1)

Includes approximately $406 and $124 in amortization expense for the three months ended March 31, 2012 and 2011, respectively, for the


amortization of in-place lease value intangible asset pursuant to the Business Combinations Topic of the Financial Accounting Standards Board Accounting Standards Codification.

(2)

Calculated on a fully diluted basis. Assumes conversion of all O.P. units outstanding into the Company's common stock.

(3)

Average monthly rental revenue per square foot has been determined by taking the cash base rent for the period divided by the number of months


in the period, and then divided by the average occupied square feet in the period. Properties classified as assets held for sale were excluded from the 2012 calculation.

(4)

Excludes seven month-to-month leases for approximately 88,000 rentable square feet and approximately $107 in cash rent.

(5)

Base rent reflects cash rent.

(6)

The occupancy rate at March 31, 2012, excludes properties classified as assets held for sale.


SOURCE Mission West Properties, Inc.



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