Mission West Properties Announces Second Quarter 2012 Operating Results

CUPERTINO, Calif., July 11, 2012 /PRNewswire/ -- Mission West Properties, Inc. (NASDAQ: MSW) reported today that Funds From Operations ("FFO") for the quarter ended June 30, 2012, was approximately $12,153,000, 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 $13,708,000, or $0.13 per diluted common share, for the same period in 2011. The decrease was primarily due to lower tenant reimbursement income and higher operating and general and administrative expenses. On a sequential quarter basis, FFO for the quarter ended March 31, 2012, was approximately $0.13 per diluted common share. For the six months ended June 30, 2012, FFO decreased to $26,303,000, or $0.25 per diluted common share, from FFO of $29,950,000, or $0.28 per diluted common share, for the six months ended June 30, 2011.

Net income for the quarter ended June 30, 2012, was approximately $13,709,000 as compared to approximately $7,370,000 for the quarter ended June 30, 2011. Net income per diluted share available to common stockholders was approximately $0.12 for the quarter ended June 30, 2012, compared to $0.08 for the quarter ended June 30, 2011, a per share increase of approximately 50%. The increase was primarily due to gains from sale of real estate, which accounted for approximately $0.06 per diluted share. Net income for the six months ended June 30, 2012, was approximately $26,962,000 as compared to approximately $17,305,000 for the six months ended June 30, 2011. For the six months ended June 30, 2012, net income per diluted share available to common stockholders was $0.24, up from $0.19 a year ago, a per share increase of approximately 26%.

Disposition Activity
On April 30, 2012, the Company disposed of four vacant R&D properties located at 1490-1520 McCandless Drive, 1525-1555 McCandless Drive, 1575-1595 McCandless Drive and 1600 McCandless Drive in Milpitas, California, consisting of approximately 145,000 rentable square feet. A total net gain of approximately $7,989,000 was recognized and classified as discontinued operations on the total cash sales price of $19,350,000.

On July 10, 2012, the Company disposed of three vacant R&D properties located at 300 Montague Expressway, 324-368 Montague Expressway and 337 Trade Zone Boulevard in Milpitas, California, consisting of approximately 149,000 rentable square feet. An estimated total net gain of approximately $4,389,000 will be recognized and classified as discontinued operations in the third quarter on the total cash sales price of $18,500,000.

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 104 properties totaling approximately 7.8 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

Jun 30, 2012


Three Months

Ended

Jun 30, 2011


Six Months
Ended

Jun 30, 2012


Six Months
Ended

Jun 30, 2011

OPERATING REVENUES:








  Rental income

$20,075


$20,354


$40,087


$42,077 (7)

  Tenant reimbursements

2,967


4,119


6,914


8,728

  Other income

401


409


674


1,410

    Total operating revenues

23,443


24,882


47,675


52,215









OPERATING EXPENSES:








  Operating and maintenance

2,863


2,489


5,272


4,999

  Real estate taxes

3,014


2,994


5,442


6,044

  General and administrative

911


522


1,562


1,043

  Depreciation and amortization

5,993 (1)


5,509 (1)


11,986


11,000

    Total operating expenses

12,781


11,514


24,262


23,086









    Operating income

10,662


13,368


23,413


29,129









OTHER INCOME (EXPENSES):








  Equity in earnings of unconsolidated joint venture

60


27


174


18

  Interest income

58


57


151


126

  Interest expense

(4,833)


(5,246)


(9,755)


(10,525)

  Interest expense – related parties

(146)


(144)


(292)


(291)

    Income from continuing operations

5,801


8,062


13,691


18,457









Discontinued operations:








    Net gain from disposal of properties classified as

      discontinued operations

7,989


-


13,508


-

    Net loss from properties classified as

      discontinued operations

(81)


(692)


(237)


(1,152)

        Income (loss) from discontinued operations

7,908


(692)


13,271


(1,152)









        Net income

13,709


7,370


26,962


17,305









Net income attributable to noncontrolling interests

(10,929)


(5,491)


(21,338)


(13,027)

Net income available to common stockholders

$2,780


$1,879


$5,624


$4,278









Income per share from continuing operations:








   Basic

$0.06


$0.09


$0.15


$0.20

   Diluted

$0.06


$0.09


$0.15


$0.20

Income (loss) per share from discontinued operations:








   Basic

$0.06


($0.01)


$0.10


($0.01)

   Diluted

$0.06


($0.01)


$0.09


($0.01)

Net income per share to common stockholders:








   Basic

$0.12


$0.08


$0.25


$0.19

   Diluted

$0.12


$0.08


$0.24


$0.19

Weighted average shares of common stock (basic)

22,668,020


22,495,605


22,652,844


22,392,427

Weighted average shares of common stock (diluted)

23,079,739


22,756,006


23,110,364


22,583,358

Weighted average O.P. units outstanding

82,618,015


82,790,430


82,633,191


82,893,608

































 

 

FUNDS FROM OPERATIONS

Three Months
Ended

Jun 30, 2012


Three Months
Ended

Jun 30, 2011


Six Months
Ended

Jun 30, 2012


Six Months
Ended

Jun 30, 2011

Funds from operations

$12,153


$13,708


$26,303


$29,950

Funds from operations per share (2)

$0.11


$0.13


$0.25


$0.28

Outstanding common stock

22,668,020


22,584,770


22,668,020


22,584,770

Outstanding O.P. units

82,618,015


82,701,265


82,618,015


82,701,265

Weighted average O.P. units and common stock

   outstanding (diluted)

 

105,697,754


 

105,546,436


 

105,743,555


 

105,476,966









 

 

FUNDS FROM OPERATIONS CALCULATION

Three Months Ended

Jun 30, 2012


Three Months Ended

Jun 30, 2011


Six Months Ended

Jun 30, 2012


Six Months Ended

Jun 30, 2011

Net income

$13,709


$7,370


$26,962


$17,305

Add:








   Depreciation and amortization

6,445


6,384


12,911


12,736

   Depreciation and amortization in

     unconsolidated joint venture

 

60


 

60


 

119


 

119

Less:








   Noncontrolling interests in joint ventures

(72)


(106)


(181)


(210)

   Gain on sale of real estate

(7,989)


-


(13,508)


-

Funds from operations

$12,153


$13,708


$26,303


$29,950









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

Jun 30, 2012


Three Months Ended

Jun 30, 2011


Six Months Ended

Jun 30, 2012


Six Months Ended

Jun 30, 2011

Total properties, end of period

104


111


104


111

Total square feet, end of period

7,840,477


8,011,026


7,840,477


8,011,026

Average monthly rental revenue per square foot (3)

$1.26


$1.29


$1.27


$1.34 (8)

Occupancy for leased properties (6)

70.3%


66.5%


70.3%


66.5%

Straight-line rent

($25)


$260


($226)


($375)

Leasing commissions

-


$128


$26


$323

Non-recurring capital expenditures

-


$613


-


$1,539









Lease Rollover Schedule:








Year


# of Leases


Rentable Square Feet


2012 Base Rent (5)

2012 (4)


4


132,710


$1,486

2013


9


376,683


5,436

2014


19


1,774,442


28,532

2015


7


427,437


5,007

2016


8


394,806


4,552

2017


12


727,552


9,817

2018


8


480,839


6,133

2019


2


232,480


3,731

2020


3


208,768


4,471

Thereafter


3


476,000


11,023

    Total


75


5,231,717


$80,188






















BALANCE SHEETS









June 30, 2012


December 31, 2011













Assets








Investments in real estate:








     Land

$323,173


$306,474





     Buildings and improvements

757,453


745,962





     Real estate related intangible assets

3,561


3,561





         Total investments in properties

1,084,187


1,055,997





     Accumulated depreciation and amortization

(241,196)


(229,211)





     Assets held for sale, net

21,574


54,361





         Net investments in properties

864,565


881,147





     Investment in unconsolidated joint venture

3,540


3,557





         Net investments in real estate

868,105


884,704





Cash and cash equivalents

3,114


-





Deferred rent

16,424


16,650





Other assets, net

31,173


35,133





      Total assets

$918,816


$936,487













Liabilities and Equity








Liabilities:








     Mortgage notes payable

$323,550


$331,166





     Mortgage note payable – related parties

6,831


7,139





     Revolving line of credit

-


3,305





     Interest payable

1,543


1,606





     Security deposits

4,333


4,317





     Prepaid rent and deferred revenue

11,375


5,836





     Dividends and distributions payable

13,687


13,687





     Accounts payable and accrued expenses

15,193


16,344





         Total liabilities

376,512


383,400













Commitments and contingencies.
















Equity:








Stockholders' equity:








     Common stock, $.001 par value

23


23





     Additional paid-in capital

176,723


175,900





     Distributions in excess of accumulated earnings

(35,271)


(32,962)





         Total stockholders' equity

141,475


142,961





Noncontrolling interests in operating partnerships

400,829


410,126





         Total equity

542,304


553,087





         Total liabilities and equity

$918,816


$936,487





























(1)

Includes approximately $406 and $56 in amortization expense for the three months ended June 30, 2012 and 2011, respectively, and $813 and $180 in amortization expense for the six months ended June 30, 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 six month-to-month leases for approximately 80,000 rentable square feet and approximately $188 in cash rent.

(5)

Base rent reflects cash rent.

(6)

The occupancy rate at June 30, 2012, excludes properties classified as assets held for sale.

(7)

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

(8)

Includes a one-time rent adjustment of approximately $1,638. Excluding the adjustment, the average monthly rental revenue per square foot would have been $1.29.

SOURCE Mission West Properties, Inc.



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