Mission West Properties Announces Third Quarter 2012 Operating Results

CUPERTINO, Calif., Oct. 10, 2012 /PRNewswire/ -- Mission West Properties, Inc. (NASDAQ: MSW) reported today that Funds From Operations ("FFO") for the quarter ended September 30, 2012, was approximately $14,604,000, or $0.14 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 $14,120,000, or $0.13 per diluted common share, for the same period in 2011. On a sequential quarter basis, FFO for the quarter ended June 30, 2012, was approximately $0.11 per diluted common share. For the nine months ended September 30, 2012, FFO decreased to $40,907,000, or $0.39 per diluted common share, from FFO of $44,069,000, or $0.42 per diluted common share, for the nine months ended September 30, 2011.

Net income for the quarter ended September 30, 2012, was approximately $13,506,000 as compared to approximately $7,436,000 for the quarter ended September 30, 2011. Net income per diluted share available to common stockholders was approximately $0.13 for the quarter ended September 30, 2012, compared to $0.08 for the quarter ended September 30, 2011, a per share increase of approximately 62%. The increase was primarily due to gains from sale of real estate, which accounted for approximately $0.04 per diluted share. Net income for the nine months ended September 30, 2012, was approximately $40,468,000 as compared to approximately $24,741,000 for the nine months ended September 30, 2011. For the nine months ended September 30, 2012, net income per diluted share available to common stockholders was $0.37, up from $0.27 a year ago, a per share increase of approximately 37%.

Disposition Activity

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. A total net gain of approximately $3,389,000 was recognized and classified as discontinued operations on the total cash sales price of $18,500,000.

On August 9, 2012, the Company disposed of the remaining 64% of the vacant R&D property at 1815-1845 McCandless Drive in Milpitas, California, consisting of approximately 76,000 rentable square feet. A total net gain of approximately $1,387,000 was recognized and classified as discontinued operations on the total cash sales price of $8,987,000. The other 36% of the property was sold during the first quarter of 2012.

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 101 properties totaling approximately 7.6 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, 2012


Three Months

Ended

Sept 30, 2011


Nine Months

Ended

Sept 30, 2012


Nine Months

Ended

Sept 30, 2011

OPERATING REVENUES:








  Rental income

$20,471


$20,890


$60,558


$62,967 (7)

  Tenant reimbursements

4,047


4,268


10,962


12,996

  Other income

667


505


1,340


1,915

    Total operating revenues

25,185


25,663


72,860


77,878









OPERATING EXPENSES:








  Operating and maintenance

2,654


3,081


7,907


8,053

  Real estate taxes

2,696


2,748


8,136


8,723

  General and administrative

880


504


2,442


1,547

  Depreciation and amortization

5,858 (1)


5,857 (1)


17,844


16,739

    Total operating expenses

12,088


12,190


36,329


35,062









    Operating income

13,097


13,473


36,531


42,816









OTHER INCOME (EXPENSES):








  Equity in earnings of unconsolidated joint venture

41


13


215


31

  Interest income

55


54


207


180

  Interest expense

(4,698)


(5,255)


(14,453)


(15,780)

  Interest expense – related parties

(130)


(188)


(422)


(479)

    Income from continuing operations

8,365


8,097


22,078


26,768









Discontinued operations:








    Net gain from disposal of properties classified as discontinued operations

5,191


-


18,699


-

    Net loss from properties classified as discontinued operations

(50)


(661)


(309)


(2,027)

        Income (loss) from discontinued operations

5,141


(661)


18,390


(2,027)









        Net income

13,506


7,436


40,468


24,741









Net income attributable to noncontrolling interests

(10,587)


(5,561)


(31,925)


(18,588)

Net income available to common stockholders

$2,919


$1,875


$8,543


$6,153









Income per share from continuing operations:








   Basic

$0.09


$0.09


$0.24


$0.29

   Diluted

$0.09


$0.09


$0.24


$0.29

Income (loss) per share from discontinued operations:








   Basic

$0.04


-


$0.13


($0.01)

   Diluted

$0.04


-


$0.13


($0.01)

Net income per share to common stockholders:








   Basic

$0.13


$0.08


$0.38


$0.27

   Diluted

$0.13


$0.08


$0.37


$0.27

Weighted average shares of common stock (basic)

22,668,020


22,584,770


22,657,940


22,457,246

Weighted average shares of common stock (diluted)

23,075,572


22,878,981


23,099,310


22,685,314

Weighted average O.P. units outstanding

82,618,015


82,701,265


82,628,095


82,828,789

































FUNDS FROM OPERATIONS

Three Months Ended

Sept 30, 2012


Three Months Ended

Sept 30, 2011


Nine Months Ended

Sept 30, 2012


Nine Months Ended

Sept 30, 2011

Funds from operations

$14,604


$14,120


$40,907


$44,069

Funds from operations per share (2)

$0.14


$0.13


$0.39


$0.42

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)

105,693,587


105,580,246


105,727,405


105,514,103









FUNDS FROM OPERATIONS CALCULATION

Three Months Ended

Sept 30, 2012


Three Months Ended

Sept 30, 2011


Nine Months Ended

Sept 30, 2012


Nine Months Ended

Sept 30, 2011

Net income

$13,506


$7,436


$40,468


$24,741

Add:








   Depreciation and amortization

6,315


6,724


19,226


19,460

   Depreciation and amortization in unconsolidated joint venture

60


60


179


179

Less:








   Noncontrolling interests in joint ventures

(86)


(100)


(267)


(311)

   Gain on sale of real estate

(5,191)


-


(18,699)


-

Funds from operations

$14,604


$14,120


$40,907


$44,069









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

Sept 30, 2012


Three Months Ended

Sept 30, 2011


Nine Months Ended

Sept 30, 2012


Nine Months Ended

Sept 30, 2011

Total properties, end of period

101


112


101


112

Total square feet, end of period

7,615,915


8,078,526


7,615,915


8,078,526

Average monthly rental revenue per square foot (3)

$1.26


$1.33


$1.26


$1.33

Occupancy for leased properties (6)

70.6%


66.7%


70.6%


66.7%

Straight-line rent

$329


($39)


$103


($414)

Leasing commissions

$351


$85


$377


$407

Non-recurring capital expenditures

$718


$233


$717


$1,772

 








Lease Rollover Schedule:








Year


# of Leases


Rentable Square Feet


2012 Base Rent (5)

2012 (4)


1


40,527


$1,003

2013


9


376,683


5,436

2014


21


1,800,895


29,172

2015


8


442,347


5,243

2016


8


396,206


4,553

2017


12


727,552


9,817

2018


9


542,244


6,142

2019


2


232,480


3,731

2020


3


208,768


4,471

Thereafter


3


476,000


11,023

    Total


76


5,243,702


$80,591













BALANCE SHEETS





September 30, 2012


December 31, 2011





Assets




Investments in real estate:




     Land

$321,235


$306,474

     Buildings and improvements

748,740


745,962

     Real estate related intangible assets

3,561


3,561

         Total investments in properties

1,073,536


1,055,997

     Accumulated depreciation and amortization

(243,747)


(229,211)

     Assets held for sale, net

8,064


54,361

         Net investments in properties

837,853


881,147

     Investment in unconsolidated joint venture

3,487


3,557

         Net investments in real estate

841,340


884,704

Cash and cash equivalents

26,905


-

Deferred rent

16,753


16,650

Other assets, net

30,138


35,133

      Total assets

$915,136


$936,487





Liabilities and Equity




Liabilities:




     Mortgage notes payable

$319,665


$331,166

     Mortgage note payable – related parties

6,672


7,139

     Revolving line of credit

-


3,305

     Interest payable

1,524


1,606

     Security deposits

3,865


4,317

     Prepaid rent and deferred revenue

10,285


5,836

     Dividends and distributions payable

13,687


13,687

     Accounts payable and accrued expenses

17,681


16,344

         Total liabilities

373,379


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

(35,299)


(32,962)

         Total stockholders' equity

141,447


142,961

Noncontrolling interests in operating partnerships

400,310


410,126

         Total equity

541,757


553,087

         Total liabilities and equity

$915,136


$936,487



(1)

Includes approximately $301 and $395 in amortization expense for the three months ended September 30, 2012 and 2011, respectively, and $1,114 and $575 in amortization expense for the nine months ended September 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 four month-to-month leases for approximately 71,000 rentable square feet and approximately $176 in cash rent.



(5)

Base rent reflects cash rent.



(6)

The occupancy rate at September 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.



SOURCE Mission West Properties, Inc.



RELATED LINKS
http://www.missionwest.com

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