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.

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