Mission West Properties Announces Fourth Quarter and Full Year 2011 Operating Results

CUPERTINO, Calif., Feb. 2, 2011  /PRNewswire/ -- Mission West Properties, Inc. (Nasdaq: MSW) reported today that Funds From Operations ("FFO") for the quarter ended December 31, 2010 was approximately $11,182,000, or $0.11 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 $16,604,000, or $0.16 per diluted common share, for the same period in 2009. For the quarter ended December 31, 2009, a forfeited deposit of $2,000,000 under a contract for the sale of a McCandless property accounted for approximately $0.02 per diluted common share and unrealized gain from investment in marketable securities accounted for approximately $871,000, or less than $0.01 per diluted common share. On a sequential quarter basis, FFO for the quarter ended September 30, 2010 was approximately $0.11 per diluted common share. For the year ended December 31, 2010, FFO decreased to approximately $56,018,000, or $0.53 per diluted common share, from FFO of $60,467,000, or $0.57 per diluted common share, for the year ended December 31, 2009. For the year ended December 31, 2010, realized gain from investment in marketable securities and litigation proceeds accounted for approximately $0.05 per diluted common share. For the year ended December 31, 2009, unrealized gain from investment in marketable securities and a forfeited deposit accounted for approximately $0.07 per diluted common share.

Net income for the quarter ended December 31, 2010 was approximately $10,839,000 as compared to approximately $10,384,000 for the quarter ended December 31, 2009. Net income per diluted share available to common stockholders was approximately $0.10 for the quarter ended December 31, 2010 compared to $0.11 for the quarter ended December 31, 2009, a per share decrease of approximately 9%. For the quarter ended December 31, 2010, gain from the sale of an R&D property accounted for approximately $0.05 per diluted common share. For the quarter ended December 31, 2009, a forfeited deposit under a contract for the sale of a McCandless property accounted for approximately $0.02 per diluted common share. Net income for the year ended December 31, 2010 was approximately $36,495,000 as compared to approximately $34,449,000 for the year ended December 31, 2009. For each of the year ended December 31, 2010 and 2009, net income per diluted share available to common stockholders was approximately $0.38. For the year ended December 31, 2010, realized gain from investment in marketable securities and litigation proceeds accounted for approximately $0.05 per diluted common share. For the year ended December 31, 2009, unrealized gain from investment in marketable securities and a forfeited deposit accounted for approximately $0.07 per diluted common share.

Disposition Activity

On October 28, 2010, the Company disposed of one R&D property located at 1325-1375 McCandless Drive in Milpitas, California consisting of approximately 78,000 rentable square feet. A total net gain of approximately $6,199,000 was recognized and classified as discontinued operations on the total sales price of $14,123,000. The buyer issued a promissory note to the Company in the amount of $7,123,000 with an interest rate of 3.00% per annum. The principal amount of the note, together with accrued interest, will be due and payable on October 30, 2011.

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," "intends," 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 under the Berg Land Holdings Option Agreement with 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)



Three Months Ended

Dec 31, 2010


Three Months Ended

Dec 31, 2009


Twelve Months Ended

Dec 31, 2010


Twelve Months Ended

Dec 31, 2009

OPERATING REVENUES:








 Rental income

$19,657


$20,988


$81,715


$82,466

 Tenant reimbursements

3,527


5,036


15,094


18,668

 Other income

480


2,850


2,619


3,756

   Total operating revenues

23,664


28,874


99,428


104,890









OPERATING EXPENSES:








 Operating and maintenance

4,066


4,321


13,620


14,193

 Real estate taxes

3,077


3,447


12,780


13,339

 General and administrative

558


593


2,219


2,336

 Depreciation and amortization

5,869 (1)


5,829 (1)


23,466 (1)


23,786 (1)

   Total operating expenses

13,570


14,190


52,085


53,654









   Operating income

10,094


14,684


47,343


51,236









OTHER INCOME (EXPENSES):








 Equity in earnings of unconsolidated joint venture

33


72


303


309

 Interest and dividend income

51


151


102


1,309

 Realized gain from investment

-


-


8,800


-

 Unrealized gain (loss) from investment

-


871


(4,733)


5,011

 Interest expense

(5,304)


(5,046)


(20,069)


(22,117)

 Interest expense – related parties

(149)


(211)


(988)


(765)

   Net income from continuing operations

4,725


10,521


30,758


34,983









Discontinued operations:








Gain from disposal of discontinued operations

6,199


-


6,199


-

Loss attributable to discontinued operations

(85)


(137)


(462)


(534)

   Net income (loss) from discontinued

    operations

6,114


(137)


5,737


(534)









       Net income

10,839


10,384


36,495


34,449









Net income attributable to noncontrolling interests

(8,654)


(7,975)


(28,022)


(26,058)

Net income available to common stockholders

$2,185


$2,409


$8,473


$8,391









Income per share from continuing operations:








  Basic

$0.05


$0.11


$0.34


$0.39

  Diluted

$0.05


$0.11


$0.34


$0.39

Income per share from discontinued operations:








  Basic

$0.05


-


$0.04


-

  Diluted

$0.05


-


$0.04


-

Net income per share to common stockholders:








  Basic

$0.10


$0.11


$0.39


$0.39

  Diluted

$0.10


$0.11


$0.38


$0.38

Weighted average shares of common stock (basic)

22,076,694


21,793,037


21,973,599


21,736,699

Weighted average shares of common stock (diluted)

22,198,946


21,979,442


22,121,724


21,923,104

Weighted average O.P. units outstanding

83,209,341


83,482,139


83,310,364


83,538,477









FUNDS FROM OPERATIONS








Funds from operations

$11,182


$16,604


$56,018


$60,467

Funds from operations per share (2)

$0.11


$0.16


$0.53


$0.57

Outstanding common stock

22,135,770


21,870,211


22,135,770


21,870,211

Outstanding O.P. units

83,150,265


83,404,965


83,150,265


83,404,965

Weighted average O.P. units and common stock outstanding (diluted)

105,408,287


105,461,581


105,432,088


105,461,581



FUNDS FROM OPERATIONS CALCULATION

Three Months Ended

Dec 31, 2010


Three Months Ended

Dec 31, 2009


Twelve Months Ended

Dec 31, 2010


Twelve Months Ended

Dec 31, 2009

Net income

$10,839


$10,384


$36,495


$34,449

Add:








  Depreciation and amortization

6,526


6,391


25,840


26,187

  Depreciation and amortization in

    unconsolidated joint venture

60


60


238


238

Less:








  Noncontrolling interests in joint ventures

(44)


(231)


(356)


(407)

  Gain on sale of real estate

(6,199)


-


(6,199)


-

Funds from operations

$11,182


$16,604


$56,018


$60,467









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 nonreal 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

Dec 31, 2010


Three Months Ended

Dec 31, 2009


Twelve Months Ended

Dec 31, 2010


Twelve Months Ended

Dec 31, 2009

Total properties, end of period

111


111


111


111

Total square feet, end of period

8,011,026


8,047,569


8,011,026


8,047,569

Average monthly rental revenue per

   square foot (3)

$1.25


$1.33


$1.30


$1.30

Occupancy for leased properties

69.9%


65.5%


69.9%


65.5%

Straight-line rent

($481)


$195


($770)


$   870

Leasing commissions

$   812


$328


$1,753


$1,621

Non-recurring capital expenditures

$1,142


$  22


$2,841


$   178




LEASE ROLLOVER SCHEDULE:








Year


# of Leases


Rentable Square Feet


2010 Base Rent (5)

2010


-


-


$3,104,873

2011 (4)


13


691,304


10,301,766

2012


13


791,223


12,870,081

2013


7


401,645


5,626,016

2014


20


1,625,113


24,498,533

2015


8


587,437


9,309,659

2016


4


196,279


3,434,208

2017


9


543,035


6,771,073

2018


3


265,612


539,323

2019


1


165,000


2,862,504

Thereafter


3


208,768


3,203,912

   Total


81


5,475,416


$82,521,948





BALANCE SHEETS







December 31, 2010



December 31, 2009







Assets





Investments in real estate:





 Land

$322,076


$320,911


 Buildings and improvements

790,424


799,649


 Real estate related intangible assets

3,240


3,240


    Total investments in properties

1,115,740


1,123,800


 Accumulated depreciation and amortization

(224,027)


(204,153)


 Assets held for sale, net

3,267


-


     Net investments in properties

894,980


919,647


 Investment in unconsolidated joint venture

3,830


3,828


     Net investments in real estate

898,810


923,475


Cash and cash equivalents

3,988


986


Restricted cash

6,892


197


Restricted investment in marketable securities

-


12,069


Deferred rent receivables

17,941


18,711


Other assets, net

40,653


30,951


     Total assets

$968,284


$986,389







Liabilities and Equity





Liabilities:





 Mortgage notes payable

$345,770


$318,818


 Mortgage note payable – related parties

7,721


8,261


 Note payable – related parties

-


9,325


 Revolving line of credit

-


14,466


 Interest payable

1,659


1,573


 Security deposits

4,605


4,849


 Deferred rental income

6,526


6,539


 Dividends and distributions payable

15,793


15,791


 Accounts payable and accrued expenses

16,239


9,638


     Total liabilities

398,313


389,260







Commitments and contingencies.










Equity:





Stockholders' equity:





 Common stock, $.001 par value

22


22


 Additional paid-in capital

172,568


170,606


 Distributions in excess of accumulated earnings

(30,520)


(25,784)


     Total stockholders' equity

142,070


144,844


Noncontrolling interests in operating partnerships

427,901


452,285


     Total equity

569,971


597,129


     Total liabilities and equity

$968,284


$986,389




(1)

Includes approximately $124 and $159 in amortization expense for the three months ended December 31, 2010 and 2009, respectively, and $708 and $637 in amortization expense for the twelve months ended December 31, 2010 and 2009, 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 ("FASB ASC").



(2)

Calculated on a fully diluted basis. Assumes conversion of 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.



(4)

Excludes six month-to-month leases for approximately 63,000 rentable square feet and $270 cash rent.



(5)

Base rent reflects cash rent.



SOURCE Mission West Properties, Inc.



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