Mission West Properties Announces Third Quarter 2012 Operating Results

10 Oct, 2012, 16:15 ET from Mission West Properties, Inc.

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