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

CUPERTINO, Calif., Feb. 1, 2012 /PRNewswire/ -- Mission West Properties, Inc. (NASDAQ: MSW) reported today that Funds From Operations ("FFO") for the quarter ended December 31, 2011, was approximately $16,624,000, or $0.16 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 $11,182,000, or $0.11 per diluted common share, for the same period in 2010. The increase was primarily due to higher operating revenues from new leases and lower operating expenses. On a sequential quarter basis, FFO for the quarter ended September 30, 2011, was approximately $0.13 per diluted common share. For the year ended December 31, 2011, FFO increased to $60,693,000, or $0.57 per diluted common share, from FFO of $56,018,000, or $0.53 per diluted common share, for the year ended December 31, 2010. Realized and unrealized gain from investment in marketable securities and litigation proceeds accounted for approximately $0.05 per diluted common share for the year ended December 31, 2010.

Net income for the quarter ended December 31, 2011, was approximately $14,159,000 as compared to approximately $10,839,000 for the quarter ended December 31, 2010. Net income per diluted share available to common stockholders was approximately $0.14 for the quarter ended December 31, 2011, compared to $0.10 for the quarter ended December 31, 2010, a per share increase of approximately 40%. The increase was primarily due to higher operating revenues from new leases and lower operating expenses. For the quarters ended December 31, 2011 and 2010, gain from the sale of real estate accounted for approximately $0.03 and $0.05 per diluted common share, respectively. Net income for the year ended December 31, 2011, was approximately $38,901,000 as compared to approximately $36,495,000 for the year ended December 31, 2010. For the year ended December 31, 2011, net income per diluted share available to common stockholders was $0.40, up from $0.38 a year ago, a per share increase of approximately 5%. Realized and unrealized gain from investment in marketable securities and litigation proceeds accounted for approximately $0.05 per diluted common share for the year ended December 31, 2010.

Disposition Activity

On October 28, 2011, the Company disposed of one R&D property located at 1425-1455 McCandless Drive in Milpitas, California consisting of approximately 39,000 rentable square feet. A total net gain of approximately $3,891,000 was recognized and classified as discontinued operations on the total sales price of $7,320,000. The buyer issued a promissory note secured by a deed of trust on the property sold to the Company in the amount of $3,660,000 with an interest rate of 6.00% per annum. The principal amount of the note, together with accrued interest, will be due and payable on October 30, 2012.

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 $8,350,000 will be recognized and classified as discontinued operations on the total sales price of $21,780,000. 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.

Company Profile

Mission West Properties, Inc. operates as a selfmanaged, selfadministered 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 108 properties totaling approximately 7.9 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

Dec 31, 2011


Three Months Ended

Dec 31, 2010


Twelve Months Ended

Dec 31, 2011


Twelve Months Ended

Dec 31, 2010

OPERATING REVENUES:








 Rental income

$20,608


$19,487


$83,574 (6)


$81,037

 Tenant reimbursements

4,704


3,467


17,701


14,868

 Other income

1,666


472


3,581


2,590

   Total operating revenues

26,978


23,426


104,856


98,495









OPERATING EXPENSES:








 Operating and maintenance

3,079


3,910


11,174


13,020

 Real estate taxes

2,195


2,903


10,980


12,084

 General and administrative

831


558


2,378


2,219

 Depreciation and amortization

5,923 (1)


5,533 (1)


22,839 (1)


22,122 (1)

   Total operating expenses

12,028


12,904


47,371


49,445









   Operating income

14,950


10,522


57,485


49,050









OTHER INCOME (EXPENSES):








 Equity in (loss) earnings of unconsolidated joint venture

(4)


33


27


303

 Interest income

334


51


515


102

 Realized gain and unrealized loss from investment, net

-


-


-


4,067

 Interest expense

(4,725)


(5,304)


(20,505)


(20,068)

 Interest expense – related parties

(152)


(149)


(631)


(988)

   Income from continuing operations

10,403


5,153


36,891


32,466









Discontinued operations:








   Gain from disposal of discontinued operations

3,891


6,199


3,891


6,199

   Loss from discontinued operations

(135)


(513)


(1,881)


(2,170)

       Income from discontinued operations

3,756


5,686


2,010


4,029









       Net income

14,159


10,839


38,901


36,495









Net income attributable to noncontrolling interests

(11,038)


(8,654)


(29,626)


(28,022)

Net income available to common stockholders

$3,121


$2,185


$9,275


$8,473









Income per share from continuing operations:








  Basic

$0.11


$0.06


$0.40


$0.36

  Diluted

$0.11


$0.06


$0.39


$0.35

Income per share from discontinued operations:








  Basic

$0.03


$0.04


$0.01


$0.03

  Diluted

$0.03


$0.04


$0.01


$0.03

Net income per share to common stockholders:








  Basic

$0.14


$0.10


$0.41


$0.39

  Diluted

$0.14


$0.10


$0.40


$0.38

Weighted average shares of common stock (basic)

22,585,110


22,076,694


22,489,475


21,973,599

Weighted average shares of common stock (diluted)

23,013,187


22,198,946


22,917,552


22,121,724

Weighted average O.P. units outstanding

82,700,925


83,209,341


82,796,560


83,310,364















FUNDS FROM OPERATIONS

Three Months
Ended

Dec 31, 2011


Three Months
Ended

Dec 31, 2010


Twelve Months
Ended

Dec 31, 2011


Twelve Months
Ended

Dec 31, 2010

Funds from operations

$16,624


$11,182


$60,693


$56,018

Funds from operations per share (2)

$0.16


$0.11


$0.57


$0.53

Outstanding common stock

22,586,020


22,135,770


22,586,020


22,135,770

Outstanding O.P. units

82,700,015


83,150,265


82,700,015


83,150,265

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

105,714,112


105,408,287


105,714,112


105,432,088











FUNDS FROM OPERATIONS CALCULATION

Three Months
Ended

Dec 31, 2011


Three Months
Ended

Dec 31, 2010


Twelve Months
Ended

Dec 31, 2011


Twelve Months
Ended

Dec 31, 2010

Net income

$14,159


$10,839


$38,901


$36,495

Add:








  Depreciation and amortization

6,399


6,526


25,859


25,840

  Depreciation and amortization in

    unconsolidated joint venture

60


60


238


238

Less:








  Noncontrolling interests in joint ventures

(103)


(44)


(414)


(356)

  Gain on sale of real estate

(3,891)


(6,199)


(3,891)


(6,199)

Funds from operations

$16,624


$11,182


$60,693


$56,018









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, 2011


Three Months
Ended

Dec 31, 2010


Twelve Months
Ended

Dec 31, 2011


Twelve Months
Ended

Dec 31, 2010

Total properties, end of period

111


111


111


111

Total square feet, end of period

8,039,947


8,011,026


8,039,947


8,011,026

Average monthly rental revenue per square foot (3)

$1.34


$1.25


$1.25


$1.30

Occupancy for leased properties (7)

72.6%


69.9%


72.6%


69.9%

Straight-line rent

($877)


($481)


($1,291)


($770)

Leasing commissions

$679


$812


$1,087


$1,753

Non-recurring capital expenditures

$670


$1,142


$2,442


$2,841




LEASE ROLLOVER SCHEDULE:








Year


# of Leases


Rentable Square Feet


2011 Base Rent (5)

2011


-


-


$3,745,880

2012 (4)


9


425,587


6,754,892

2013


7


361,923


5,217,260

2014


22


1,823,675


30,259,873

2015


8


587,437


9,178,835

2016


8


394,806


5,957,657

2017


12


727,552


7,831,158

2018


5


431,606


4,058,174

2019


2


212,480


3,567,224

2020


3


208,768


4,327,563

Thereafter


1


105,000


3,809,319

   Total


77


5,278,834


$84,707,835




BALANCE SHEETS






December 31, 2011


December 31, 2010







Assets





Investments in real estate:





    Land

$306,474


$322,076


    Buildings and improvements

745,962


790,424


    Real estate related intangible assets

3,561


3,240


        Total investments in properties

1,055,997


1,115,740


    Accumulated depreciation and amortization

(229,221)


(224,027)


    Assets held for sale, net

54,361


3,267


        Net investments in properties

881,137


894,980


    Investment in unconsolidated joint venture

3,558


3,830


        Net investments in real estate

884,695


898,810


Cash and cash equivalents

-


3,988


Restricted cash

-


6,892


Deferred rent

16,650


17,941


Other assets, net

35,142


40,653


     Total assets

$936,487


$968,284







Liabilities and Equity





Liabilities:





    Mortgage notes payable

$331,166


$345,770


    Mortgage note payable – related parties

7,139


7,721


    Revolving line of credit

3,305


-


    Interest payable

1,606


1,659


    Security deposits

4,317


4,605


    Prepaid rent

5,836


6,526


    Dividends and distributions payable

13,687


15,793


    Accounts payable and accrued expenses

16,344


16,239


        Total liabilities

383,400


398,313







Commitments and contingencies.










Equity:





Stockholders' equity:





    Common stock, $.001 par value

23


22


    Additional paid-in capital

175,900


172,568


    Distributions in excess of accumulated earnings

(32,962)


(30,520)


        Total stockholders' equity

142,961


142,070


Noncontrolling interests in operating partnerships

410,126


427,901


        Total equity

553,087


569,971


        Total liabilities and equity

$936,487


$968,284





(1)

Includes approximately $406 and $124 in amortization expense for the three months ended December 31, 2011 and 2010, respectively, and $981 and $708 in amortization expense for the years ended December 31, 2011 and 2010, 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 2011 calculation.

(4)

Excludes seven month-to-month leases for approximately 88,000 rentable square feet and approximately $494 in cash rent.

(5)

Base rent reflects cash rent.

(6)

Includes a one-time rent adjustment of approximately $1,638 from a tenant dispute resolution.

(7)

The occupancy rate at December 31, 2011, excludes properties classified as assets held for sale.



SOURCE Mission West Properties, Inc.



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