EX-99.1 2 v081374_ex99-1.htm
Exhibit 99.1
 
Press Release

For Immediate News Release
July 18, 2007
 
Mission West Properties Announces Second Quarter 2007 Operating Results

“We build the buildings for the high tech companies that build the internet”

Cupertino, CA - Mission West Properties, Inc. (AMEX: MSW) reported today that Funds From Operations (“FFO”) for the quarter ended June 30, 2007 was approximately $15,954,000 or $0.15 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 $16,954,000 or $0.16 per diluted common share for the same period in 2006. On a sequential quarter basis, FFO for the quarter ended March 31, 2007 was approximately $0.23 per diluted common share. For the six months ended June 30, 2007, FFO decreased to $39,859,000 or $0.38 per diluted common share from FFO of $51,480,000 or $0.49 per diluted common share for the same period in 2006. Termination fees and security deposit forfeitures income relating to lease terminations accounted for approximately $10,475,000 or $0.10 per diluted common share and $16,068,000 or $0.15 per diluted common share for the six months ended June 30, 2007 and 2006, respectively. Write-off of an above market lease intangible asset against income relating to one lease termination accounted for approximately $3,619,000, or $0.03 per diluted common share, for the six months ended June 30, 2007.

Net income per diluted share to common stockholders was $0.10 for the quarter ended June 30, 2007 compared to $0.11 for the quarter ended June 30, 2006, a per share decrease of approximately 9.1%. For the six months ended June 30, 2007, net income per diluted share to common stockholders was $0.27, down from $0.38 a year ago, a per share decrease of approximately 28.9%. Termination fees and security deposit forfeitures income relating to lease terminations accounted for approximately $0.10 and $0.16 per diluted common share for the six months ended June 30, 2007 and 2006, respectively. Write-off of in-place lease intangible assets against income relating to two lease terminations accounted for approximately ($0.04) per diluted common share for the six months ended June 30, 2007.

Acquisition Activity

On April 20, 2007, the Company acquired three office/R&D buildings comprised of approximately 149,000 rentable square feet at Montague Expressway in Milpitas, California for approximately $15,351,000. The acquisition was funded from a portion of the proceeds received from the Samaritan property sale, which was classified as restricted cash as of March 31, 2007. With the exception of one lease, the property was purchased without any long-term tenants.

On April 27, 2007, the Company acquired approximately five acres of vacant land in Morgan Hill, California, which could support approximately 73,000 rentable square feet of space. The land is currently zoned for industrial use. The acquisition price for this property was approximately $2,297,000 and was funded from the remaining proceeds received from the Samaritan property sale, which was classified as restricted cash as of March 31, 2007.
 
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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 110 properties totaling approximately 7.8 million rentable square feet, which includes approximately 894,000 rentable square feet (or 17 buildings) that are in the process of being rezoned for residential development. 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,” “intends,” 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 under the Berg Land Holdings Option Agreement with the Berg Group and other factors detailed in the Company’s registration statements, and periodic filings with the Securities & Exchange Commission.
 
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MISSION WEST PROPERTIES, INC.
SELECTED FINANCIAL DATA
(In thousands, except share, per share and property data amounts)

   
 
 
Three Months Ended
Jun 30, 2007
  
 
 
Three Months Ended
Jun 30, 2006
  
 
 
Six Months Ended
Jun 30, 2007
  
 
 
Six Months Ended
Jun 30, 2006
  
REVENUES:
                  
Rental revenue from real estate
  
$
21,283
  
$
22,060
  
$
42,621
  
$
46,108
  
Above market lease intangible asset amortization
    
-
     (472 )(1)    (4,091 )(1)    (944 )(1) 
Tenant reimbursements
    
3,254
    
2,954
    
6,482
    
6,151
  
Lease termination income
    
168
    
12
    
10,277
    
16,068
  
Other income, including interest
    
959
   
1,085
   
4,014
    
1,814
  
Total revenues
    
25,664
    
25,639
    
59,303
    
69,197
  
                           
EXPENSES:
                          
Operating expenses
    
1,850
    
1,948
    
3,818
    
3,887
  
Real estate taxes
    
2,766
    
2,216
    
5,343
    
4,784
  
Interest
    
5,046
    
5,193
    
10,115
    
10,408
  
Interest (related parties)
    
182
    
190
    
366
    
381
  
General and administrative
    
673
    
637
    
1,387
    
1,272
  
Depreciation and amortization of real estate
    5,454 (2)   5,269 (2)    11,664 (2)    10,591 (2) 
Total expenses
    
15,971
    
15,453
    
32,693
    
31,323
  
Income before equity in earnings of unconsolidated
                          
joint venture and minority interests
    
9,693
    
10,186
    
26,610
    
37,874
  
Equity in earnings of unconsolidated joint venture
    
350
    
351
    
687
    
682
  
Minority interests
    
(8,039
)
  
(8,505
)
  
(21,918
)
  
(31,456
)
Income from continuing operations
    
2,004
    
2,032
    
5,379
    
7,100
  
                           
Discontinued operations, net of minority interests:
                          
Income attributable to discontinued operations
    
-
    
89
    
-
    
174
  
Income from discontinued operations
    
-
    
89
    
-
    
174
  
                           
Net income to common stockholders
  
$
2,004
  
$
2,121
  
$
5,379
  
$
7,274
  
Net income to minority interests
  
$
8,039
  
$
8,968
  
$
21,918
  
$
32,358
  
                           
Income per share from continuing operations:
                          
Basic
  
$
0.10
  
$
0.11
  
$
0.27
  
$
0.38
  
Diluted
  
$
0.10
  
$
0.11
  
$
0.27
  
$
0.38
  
Income per share from discontinued operations:
                          
Basic
    
-
    
-
    
-
  
$
0.01
  
Diluted
    
-
    
-
    
-
  
$
0.01
  
Net income per share to common stockholders:
                          
Basic
  
$
0.10
  
$
0.11
  
$
0.27
  
$
0.39
  
Diluted
  
$
0.10
  
$
0.11
  
$
0.27
  
$
0.39
  
Weighted average shares of common stock (basic)
    
19,639,928
    
19,028,240
    
19,611,515
    
18,743,649
  
Weighted average shares of common stock (diluted)
    
20,020,596
    
19,123,945
    
19,956,752
    
18,824,340
  
Weighted average O.P. units outstanding
    
85,009,858
    
85,522,039
    
85,038,271
    
85,800,741
  
                           
FUNDS FROM OPERATIONS
                          
Funds from operations
 
$
15,954
  
$
16,954
  
$
39,859
  
$
51,480
  
Funds from operations per share (3)  
$
0.15
  
$
0.16
  
$
0.38
  
$
0.49
  
Outstanding common stock
     19,640,087    
19,342,187
    
19,640,087
     19,342,187  
Outstanding O.P. units
     85,009,699    
85,235,999
     85,009,699     85,235,999  
Weighted average O.P. units and common stock
 outstanding (diluted)
    
105,030,454
    
104,645,984
     104,995,023     104,625,081  
 
 
 
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FUNDS FROM OPERATIONS CALCULATION
    
Three Months Ended
Jun 30, 2007
    
Three Months Ended
Jun 30, 2006
    
Six Months Ended
Jun 30, 2007
    
Six Months Ended
Jun 30, 2006
  
Net income
  
$
2,004
  
$
2,121
  
$
5,379
  
$
7,274
  
Add:
                          
Minority interests (4)
    
7,922
    
8,855
    
21,677
    
32,110
  
Depreciation and amortization of real estate
    
5,839
    
5,767
    
12,424
    
11,674
  
Depreciation & amortization of real estate held in
unconsolidated joint venture
    
189
    
211
    
379
    
422
  
Funds from operations
  
$
15,954
  
$
16,954
  
$
39,859
  
$
51,480
  
                           
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) before minority interest of unit holders (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 not be considered as an alternative for net income as a measure of profitability or 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, 2007
    
Three Months Ended
Jun 30, 2006
    
Six Months Ended
Jun 30, 2007
    
Six Months Ended
Jun 30, 2006
  
Total properties, end of period
    
110
    
110
    
110
    
110
  
Total square feet, end of period
    
7,849,993
    
7,936,481
    
7,849,993
    
7,936,481
  
Average monthly rental revenue per square foot (5)
  
$
1.40
  
$
1.60
  
$
1.46
  
$
1.61
  
Occupancy for leased properties
    
67.8
%
  
63.0
%
  
67.8
%
  
63.0
%
Straight-line rent
    
($ 106
)
  
($152
)
  
($1,701
)
  
($830
)
Leasing commissions
  
$
1,444
  
$
46
  
$
1,901
  
$
316
  
Capital expenditures
  
$
1,546
  
$
85
  
$
2,409
  
$
163
  


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BALANCE SHEET
  
June 30, 2007 
  
December 31, 2006 
  
Assets:
          
Land
  
$
307,903
  
$
272,223
  
Buildings and improvements
    
766,515
    
756,596
  
Real estate related intangible assets
    
6,422
    
19,529
  
Total investments in properties
    
1,080,840
    
1,048,348
  
Less accumulated depreciation and amortization
    
(152,107
)
  
(149,459
)
Net investments in properties
    
928,733
    
898,889
  
Cash and cash equivalents
    
39,053
    
33,785
  
Restricted cash
    
1,640
    
48,245
  
Deferred rent receivable
    
16,788
    
18,489
  
Investment in unconsolidated joint venture
    
2,914
    
3,468
  
Other assets, net
    
26,015
    
24,611
  
Total assets
  
$
1,015,143
  
$
1,027,487
  
               
Liabilities:
              
Mortgage notes payable
  
$
342,879
  
$
348,101
  
Mortgage notes payable - related parties
    
9,443
    
9,654
  
Interest payable
    
1,343
    
1,375
  
Security deposits
    
6,595
    
6,977
  
Deferred rental income
    
6,891
    
6,874
  
Dividend/distribution payable
    
16,745
    
16,745
  
Accounts payable and accrued expenses
    
7,346
    
7,601
  
Total liabilities
    
391,242
    
397,327
  
               
Minority interests
    
493,004
    
501,282
  
               
Stockholders’ equity:
              
Common stock, $.001 par value
    
20
    
19
  
Paid-in capital
    
152,463
    
149,541
  
Accumulated deficit
    
(21,586
)
  
(20,682
)
Total stockholders’ equity
    
130,897
    
128,878
  
Total liabilities and stockholders’ equity
  
$
1,015,143
  
$
1,027,487
  


(1)  
Amortization of an above-market lease intangible asset pursuant to Statement of Financial Accounting Standard No. 141, “Business Combinations.”

(2)  
Includes approximately $347 and $425 in amortization expense for the three months ended June 30, 2007 and 2006, respectively, and $1,540 and $764 in amortization expense for the six months ended June 30, 2007 and 2006, respectively, for the amortization of in-place lease value intangible asset pursuant to Statement of Financial Accounting Standard No. 141, “Business Combinations.”

(3)  
Calculated on a fully diluted basis. Assumes conversion of O.P. units outstanding into the Company’s common stock.

(4)  
The minority interest for third parties has been deducted from total minority interest in calculating FFO.

(5)  
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.

 
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