UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (date of earliest event reported): April 13, 2005
MISSION WEST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland Commission File Number: 95-2635431
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(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification)
10050 Bandley Drive, Cupertino, CA 95014
(Address of principal executive offices)
(408) 725-0700
(Registrant's telephone number, including area code)
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
(a) The following information is being furnished by the Company as required for
Item 2.02(a) of this report and shall not be deemed to be "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934:
On April 13, 2005, the Company issued a press release announcing its earnings
results for the quarter ended March 31, 2005. The press release is attached to
this Current Report as Exhibit 99.1 and is incorporated by reference in response
to Item 2.02(a) of this report.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be filed on its behalf by the
undersigned hereunto duly authorized.
MISSION WEST PROPERTIES, INC.
Date: April 14, 2005 By: /s/ Wayne N. Pham
--------------------------------
Wayne N. Pham
Vice President of Finance and Controller
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Exhibit 99.1
Press Release
For Immediate News Release
April 13, 2005
MISSION WEST PROPERTIES ANNOUNCES FIRST QUARTER 2005 OPERATING RESULTS
"We build the buildings for the high tech companies that build the internet"
Cupertino, CA - Mission West Properties, Inc. (AMEX/PCX: MSW) reported today
that Funds From Operations ("FFO") for the quarter ended March 31, 2005 was
$20,308,000 or $0.19 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 $27,078,000 or $0.26 per diluted common share for the same period in
2004. On a sequential quarter basis, FFO per diluted common share decreased
$0.03 compared to the previous quarter ended December 31, 2004. Settlements of
former tenants breach of lease lawsuit accounted for approximately $0.01 per
diluted share in the fourth quarter 2004.
Net income to common stockholders per diluted share was $0.13 for the quarter
ended March 31, 2005 compared to $0.19 for the same period in 2004, a per share
decrease of approximately 31.6%.
Disposition Activity
During the first quarter 2005, the Company completed the sale of two R&D
properties consisting of 103,000 rentable square feet, which include the R&D
properties at 3120 Scott Boulevard, Santa Clara, California and 405 Tasman
Drive, Sunnyvale, California. A loss of approximately $2.2 million was realized
on the total sales price of $8.5 million for the 3120 Scott property and was
recorded in the fourth quarter 2004 as an asset impairment charge under
discontinued operations. An estimated gain of approximately $1.4 million will be
realized on the total sales price of $4.25 million for the 405 Tasman property.
The recorded gain will be based on the installment method of profit recognition
since the buyer has not made a sufficient down payment. The Company recorded a
$63,000 gain in the first quarter 2005, and the balance of the expected gain is
deferred.
ACQUISITION ACTIVITY
In the first quarter 2005, the Company acquired a 203,800 rentable square foot
vacant R&D property located at 5521 Hellyer Avenue in San Jose, California. The
total acquisition price for the property was approximately $14.0 million.
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 108
properties totaling approximately 8.0 million 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", "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 Three Months
Ended Ended
March 31, 2005 March 31, 2004
------------------ ------------------
REVENUES:
Rental revenue from real estate $26,247 (5) $31,210 (5)
Tenant reimbursements 3,628 4,168
Other income, including lease terminations,
settlements and interest 303 394
------------------ ------------------
Total revenues 30,178 35,772
------------------ ------------------
EXPENSES:
Operating expenses 2,173 2,504
Real estate taxes 2,716 2,951
Interest 4,647 4,363
Interest (related parties) 307 252
General and administrative 675 348
Depreciation and amortization of real estate 5,574 (1) 5,440 (1)
------------------ ------------------
Total expenses 16,092 15,858
------------------ ------------------
Income before equity in earnings of
unconsolidated joint venture and minority interests 14,086 19,914
Equity in (loss)/earnings of unconsolidated
joint venture (6) 591
Minority interests (11,677) (17,044)
------------------ ------------------
Income from continuing operations 2,403 3,461
------------------ ------------------
Discontinued operations, net of minority interests:
Gain from disposal of discontinued operations 14 -
(Loss)/income from discontinued operations (9) 62
------------------ ------------------
Income from discontinued operations 5 62
------------------ ------------------
Net income to common stockholders $2,408 $3,523
================== ==================
Net income to minority interests $11,902 $17,269
================== ==================
Income per share from continuing operations:
Basic $0.13 $0.19
Diluted $0.13 $0.19
Income per share from discontinued operations:
Basic - $0.01
Diluted - -
Net income per share to common stockholders:
Basic $0.13 $0.20
================== ==================
Diluted $0.13 $0.19
================== ==================
Weighted average shares of common stock (basic) 18,110,524 17,969,416
================== ==================
Weighted average shares of common stock (diluted) 18,136,797 18,075,262
================== ==================
Weighted average O.P. units outstanding 86,371,362 86,503,459
================== ==================
FUNDS FROM OPERATIONS
Funds from operations $20,308 $27,078
================== ==================
Funds from operations per share (2) $ 0.19 $ 0.26
================== ==================
Outstanding common stock 18,147,191 18,014,691
================== ==================
Outstanding O.P. units 86,334,695 86,467,195
================== ==================
Weighted average O.P. units and common stock
outstanding (diluted) 104,508,159 104,578,721
================== ==================
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Three Months Three Months
FUNDS FROM OPERATIONS CALCULATION Ended Ended
March 31, 2005 March 31, 2004
------------------ ------------------
Net income $ 2,408 $ 3,523
Add:
Minority interests (3) 11,574 17,145
Depreciation and amortization of real estate
from continuing operations 6,001 6,110
Depreciation and amortization of real estate
from discontinued operations 33 82
Depreciation & amortization of real estate
held in unconsolidated joint venture 355 218
Less:
Gain on sale of real estate (63) -
------------------ ------------------
Funds from operations $20,308 $27,078
================== ==================
Funds From Operations ("FFO") is a non-GAAP financial measurement used by real
estate investment trusts 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 an appropriate measure
of performance of an equity REIT because, along with cash flows from operating
activities, financing activities and investing activities, it provides investors
with an understanding of our ability to incur and service debt, and make capital
expenditures. 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.
Three Months Three Months
Ended Ended
PROPERTY AND OTHER DATA: March 31, 2005 March 31, 2004
---------------- ----------------
Total properties, end of period 108 109
Total square feet, end of period 8,019,082 7,917,262
Average monthly rental revenue per square foot (4) $1.59 $1.78
Average occupancy 68.1% 75.8%
Actual occupancy 67.7% 75.3%
Straight-line rent $ 615 ($ 68)
Leasing commissions $3,584 $924
Capital expenditures $ 285 $115
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BALANCE SHEET March 31, 2005 December 31, 2004
------------------ -------------------
Assets:
Land $ 277,647 $ 273,663
Buildings and improvements 777,925 770,757
Real estate related intangible assets 18,284 18,284
------------------ -------------------
Total investments in properties 1,073,856 1,062,704
Less accumulated depreciation and amortization (115,655) (110,062)
Assets held for sale, net of accumulated
depreciation of $1,578 at December 31, 2004 - 8,221
------------------ -------------------
Net investments in properties 958,201 960,863
Cash and cash equivalents 2,561 1,519
Restricted cash 1,551 1,551
Note receivable, net of deferred gain on
sale of real estate of $1,345 2,714 -
Deferred rent receivable 19,126 18,511
Investment in unconsolidated joint venture 3,298 3,559
Other assets 24,130 19,653
------------------ -------------------
Total assets $1,011,581 $1,005,656
================== ===================
Liabilities:
Line of credit - related parties $ 7,910 $ 9,560
Revolving line of credit 32,504 24,208
Mortgage notes payable 290,855 292,822
Mortgage notes payable - related parties 10,330 10,420
Interest payable 327 327
Security deposits 8,101 8,544
Deferred rental income 12,659 11,038
Liabilities related to assets held for sale - 14
Dividend/distribution payable 16,718 16,718
Accounts payable and accrued expenses 9,670 6,704
------------------ -------------------
Total liabilities 389,074 380,355
Minority interests 509,255 512,089
Stockholders' equity:
Common stock, $.001 par value 18 18
Paid in capital 135,075 134,539
Accumulated deficit (21,841) (21,345)
------------------ -------------------
Total stockholders' equity 113,252 113,212
------------------ -------------------
Total liabilities and stockholders' equity $1,011,581 $1,005,656
================== ===================
(1) Includes approximately $440 and $577 in amortization expense for the three
months ended March 31, 2005 and 2004, respectively, for the amortization of
in-place lease value of the San Tomas Technology Park acquisition pursuant
to Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations."
(2) Calculated on a fully diluted basis. Assumes conversion of O.P. units
outstanding into the Company's common stock.
(3) The minority interest for third parties has been deducted from total
minority interest in calculating FFO.
(4) 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.
(5) Includes approximately $472 in amortization expense for the three months
ended March 31, 2005 and 2004 for the amortization of the above-market
lease intangible asset of the San Tomas Technology Park acquisition
pursuant to Statement of Financial Accounting Standard ("SFAS") No. 141,
"Business Combinations."
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