Mission West Properties Announces Third Quarter 2011 Operating Results

CUPERTINO, Calif., Oct. 12, 2011 /PRNewswire/ -- Mission West Properties, Inc. (NASDAQ: MSW) reported today that Funds From Operations ("FFO") for the quarter ended September 30, 2011, was approximately $14,120,000, 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 $11,770,000, or $0.11 per diluted common share, for the same period in 2010. On a sequential quarter basis, FFO for the quarter ended June 30, 2011, was approximately $0.13 per diluted common share. For the nine months ended September 30, 2011, FFO decreased to $44,069,000, or $0.42 per diluted common share, from FFO of $44,836,000, or $0.43 per diluted common share, for the nine months ended September 30, 2010. Realized and unrealized gain from investment in marketable securities and litigation proceeds accounted for approximately $0.05 per diluted common share for the nine months ended September 30, 2010.

Net income for the quarter ended September 30, 2011, was approximately $7,436,000 as compared to approximately $5,471,000 for the quarter ended September 30, 2010. Net income per diluted share available to common stockholders was approximately $0.08 for the quarter ended September 30, 2011, compared to $0.06 for the quarter ended September 30, 2010, a per share increase of approximately 33%. Net income for the nine months ended September 30, 2011, was approximately $24,741,000 as compared to approximately $25,655,000 for the nine months ended September 30, 2010. For the nine months ended September 30, 2011, net income per diluted share available to common stockholders was $0.27, down from $0.29 a year ago, a per share decrease of approximately 7%. Realized and unrealized gain from investment in marketable securities and litigation proceeds accounted for approximately $0.05 per diluted common share for the nine months ended September 30, 2010.

On July 1, 2011, the Company acquired an approximately 67,500 rentable square foot R&D building located at 5941 Optical Court in San Jose, California from the Berg Group. The total acquisition price for this property was approximately $10,825,000. The first year unleveraged cash return for this acquisition is 8.50%. The Company acquired this property by paying $2,000,000 in cash and issuing an unsecured short-term note payable in the amount of approximately $8,825,000 with an interest rate of 3.50%, which is due October 31, 2011. As of September 30, 2011, the remaining balance on the note payable was approximately $305,000.

On September 1, 2011, the Company entered into a change in terms agreement with Heritage Bank of Commerce to amend the maturity date of the $17,500,000 revolving line of credit to September 15, 2013. The interest rate on the revolving line of credit is the greater of LIBOR plus 1.75% or 4.00% per annum. The Heritage Bank of Commerce loan is secured by three properties consisting of approximately 219,000 rentable square feet. The Company paid approximately $21,000 in loan and legal fees in renewing the revolving line of credit.

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 112 properties totaling approximately 8.1 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

Sept 30, 2011


Three Months

Ended

Sept 30, 2010


Nine Months

Ended

Sept 30, 2011


Nine Months

Ended

Sept 30, 2010

OPERATING REVENUES:








 Rental income

$20,913


$20,596


$62,985 (6)


$62,058

 Tenant reimbursements

4,273


3,114


12,963


11,567

 Other income

508


276


2,070


2,138

   Total operating revenues

25,694


23,986


78,018


75,763









OPERATING EXPENSES:








 Operating and maintenance

3,220


3,583


8,469


9,554

 Real estate taxes

2,896


3,131


9,250


9,703

 General and administrative

504


580


1,547


1,661

 Depreciation and amortization

6,249 (1)


5,781 (1)


17,920 (1)


17,597 (1)

   Total operating expenses

12,869


13,075


37,186


38,515









   Operating income

12,825


10,911


40,832


37,248









OTHER INCOME (EXPENSES):








 Equity in earnings of unconsolidated joint venture

13


46


31


270

 Interest income

54


1


180


51

 Realized and unrealized gain from investment

-


-


-


4,067

 Interest expense

(5,255)


(5,138)


(15,780)


(14,765)

 Interest expense – related parties

(188)


(214)


(479)


(839)

   Income from continuing operations

7,449


5,606


24,784


26,032









Discontinued operations:








   Loss from discontinued operations

(13)


(135)


(43)


(377)









       Net income

7,436


5,471


24,741


25,655









Net income attributable to noncontrolling interests

(5,561)


(4,101)


(18,588)


(19,367)

Net income available to common stockholders

$1,875


$1,370


$6,153


$6,288









Income per share from continuing operations:








  Basic

$0.08


$0.06


$0.27


$0.29

  Diluted

$0.08


$0.06


$0.27


$0.29

Income per share from discontinued operations:








  Basic

-


-


-


-

  Diluted

-


-


-


-

Net income per share to common stockholders:








  Basic

$0.08


$0.06


$0.27


$0.29

  Diluted

$0.08


$0.06


$0.27


$0.28

Weighted average shares of common stock (basic)

22,584,770


21,976,679


22,457,246


21,938,857

Weighted average shares of common stock (diluted)

22,878,981


22,109,391


22,685,314


22,095,602

Weighted average O.P. units outstanding

82,701,265


83,309,356


82,828,789


83,344,408













FUNDS FROM OPERATIONS

Three Months

Ended

Sept 30, 2011


Three Months

Ended

Sept 30, 2010


Nine Months

Ended

Sept 30, 2011


Nine Months

Ended

Sept 30, 2010

Funds from operations

$14,120


$11,770


$44,069


$44,836

Funds from operations per share (2)

$0.13


$0.11


$0.42


$0.43

Outstanding common stock

22,584,770


22,013,070


22,584,770


22,013,070

Outstanding O.P. units

82,701,265


83,272,965


82,701,265


83,272,965

Weighted average O.P. units and common stock

  outstanding (diluted)

105,580,246


105,418,747


105,514,103


105,440,010



















FUNDS FROM OPERATIONS CALCULATION

Three Months

Ended

Sept 30, 2011


Three Months

Ended

Sept 30, 2010


Nine Months

Ended

Sept 30, 2011


Nine Months

Ended

Sept 30, 2010

Net income

$7,436


$5,471


$24,741


$25,655

Add:








  Depreciation and amortization

6,724


6,350


19,460


19,314

  Depreciation and amortization in

    unconsolidated joint venture

60


60


179


179

Less:








  Noncontrolling interests in joint ventures

(100)


(111)


(311)


(312)

Funds from operations

$14,120


$11,770


$44,069


$44,836









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

Sept 30, 2011


Three Months

Ended

Sept 30, 2010


Nine Months

Ended

Sept 30, 2011


Nine Months

Ended

Sept 30, 2010

Total properties, end of period

112


112


112


112

Total square feet, end of period

8,078,526


8,088,923


8,078,526


8,088,923

Average monthly rental revenue per square foot (3)

$1.33


$1.29


$1.33


$1.31

Occupancy for leased properties

66.7%


67.8%


66.7%


67.8%

Straight-line rent

($39)


($61)


($414)


($289)

Leasing commissions

$85


$495


$407


$940

Non-recurring capital expenditures

$233


$1,699


$1,772


$1,699




Lease Rollover Schedule:









Year


# of Leases


Rentable Square Feet


2011 Base Rent (5)

2011 (4)


6


284,099


$7,747,028

2012


13


820,987


15,244,279

2013


6


339,123


4,971,350

2014


20


1,653,136


26,393,533

2015


8


587,437


9,178,835

2016


8


330,685


4,586,353

2017


10


606,553


7,831,158

2018


4


289,606


1,339,644

2019


1


165,000


2,931,834

Thereafter


3


208,768


4,327,563

   Total


79


5,285,394


$84,551,577





BALANCE SHEETS









September 30, 2011


December 31, 2010













Assets








Investments in real estate:








    Land

$323,884


$322,076





    Buildings and improvements

798,772


790,424





    Real estate related intangible assets

3,561


3,240





        Total investments in properties

1,126,217


1,115,740





    Accumulated depreciation and amortization

(239,827)


(224,027)





    Assets held for sale, net

3,267


3,267





        Net investments in properties

889,657


894,980





    Investment in unconsolidated joint venture

3,636


3,830





        Net investments in real estate

893,293


898,810





Cash and cash equivalents

329


3,988





Restricted cash

-


6,892





Deferred rent

17,527


17,941





Other assets, net

41,952


40,653





     Total assets

$953,101


$968,284













Liabilities and Equity








Liabilities:








    Mortgage notes payable

$334,897


$345,770





    Mortgage note payable – related parties

7,289


7,721





    Note payable – related parties

305


-





    Revolving line of credit

11,624


-





    Interest payable

1,597


1,659





    Security deposits

4,353


4,605





    Prepaid rent

5,387


6,526





    Liabilities related to assets held for sale

8


-





    Dividends and distributions payable

13,687


15,793





    Accounts payable and accrued expenses

21,073


16,239





        Total liabilities

400,220


398,313













Commitments and contingencies.
















Equity:








Stockholders' equity:








    Common stock, $.001 par value

22


22





    Additional paid-in capital

175,877


172,568





    Distributions in excess of accumulated earnings

(33,147)


(30,520)





        Total stockholders' equity

142,752


142,070





Noncontrolling interests in operating partnerships

410,129


427,901





        Total equity

552,881


569,971





        Total liabilities and equity

$953,101


$968,284











(1)


Includes approximately $395 and $124 in amortization expense for the three months ended September 30, 2011 and 2010, respectively, and $575 and $584 in amortization expense for the nine months ended September 30, 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.




(4)


Excludes four month-to-month leases for approximately 69,000 rentable square feet and approximately $159 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.



SOURCE Mission West Properties, Inc.



RELATED LINKS
http://www.missionwest.com

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