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): July 20, 2005
MISSION WEST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland Commission File Number: 95-2635431
-------- 1-8383 ----------
(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 July 20, 2005, the Company issued a press release announcing its earnings
results for the quarter ended June 30, 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: July 21, 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
July 20, 2005
MISSION WEST PROPERTIES ANNOUNCES SECOND 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 June 30, 2005 was
$21,141,000 or $0.20 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 $28,741,000 or $0.27 per diluted common share for the same period in
2004. On a sequential quarter basis, FFO per diluted common share increased
$0.01 compared to the previous quarter ended March 31, 2005. Settlements of
former tenant breach of lease and termination fees accounted for approximately
$0.01 and $0.04 per diluted share in the second quarter 2005 and 2004,
respectively. For the six months ended June 30, 2005, FFO decreased to
$41,449,000 or $0.40 per diluted share from FFO of $55,818,000 or $0.53 per
diluted share for the same period in 2004.
Net income to common stockholders per diluted share was $0.15 for the quarter
ended June 30, 2005 compared to $0.21 for the same period in 2004, a per share
decrease of approximately 28.6%. For the six months ended June 30, 2005, net
income to common stockholders per diluted share was $0.28, down from $0.40 one
year ago, a per share decrease of approximately 30.0%.
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 Six Months Six Months
Ended Ended Ended Ended
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004
----------------- --------------- --------------- ---------------
REVENUES:
Rental revenue from real estate $25,104 (1) $29,821 (1) $51,351 (1) $61,032 (1)
Tenant reimbursements 3,594 3,716 7,222 7,883
Other income, including lease terminations,
settlements and interest 2,289 4,612 2,592 5,005
----------------- --------------- --------------- ---------------
Total revenues 30,987 38,149 61,165 73,920
----------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 2,049 2,142 4,222 4,645
Real estate taxes 2,080 2,991 4,797 5,941
Interest 5,905 4,220 10,552 8,583
Interest (related parties) 243 252 549 504
General and administrative 443 885 1,118 1,233
Depreciation and amortization of real estate 5,369 (2) 5,611 (2) 10,942 (2) 11,052 (2)
----------------- --------------- --------------- ---------------
Total expenses 16,089 16,101 32,180 31,958
----------------- --------------- --------------- ---------------
Income before equity in earnings of unconsolidated
joint venture and minority interests 14,898 22,048 28,985 41,962
Equity in earnings of unconsolidated joint venture 393 627 387 1,218
Minority interests (12,594) (18,871) (24,272) (35,915)
----------------- --------------- --------------- ---------------
Income from continuing operations 2,697 3,804 5,100 7,265
----------------- --------------- --------------- ---------------
Discontinued operations, net of minority interests:
Gain from disposal of discontinued operations - - 14 -
(Loss)/income from discontinued operations (2) (9) (12) 53
----------------- --------------- --------------- ---------------
Income from discontinued operations (2) (9) 2 53
----------------- --------------- --------------- ---------------
Net income to common stockholders $2,695 $3,795 $5,102 $7,318
================= =============== =============== ===============
Net income to minority interests $12,587 $18,838 $24,282 $36,108
================= =============== =============== ===============
Income per share from continuing operations:
Basic $0.15 $0.21 $0.28 $0.40
Diluted $0.15 $0.21 $0.28 $0.40
Income per share from discontinued operations:
Basic - - - $0.01
Diluted - - - -
Net income per share to common stockholders:
Basic $0.15 $0.21 $0.28 $0.41
================= =============== =============== ===============
Diluted $0.15 $0.21 $0.28 $0.40
================= =============== =============== ===============
Weighted average shares of common stock (basic) 18,257,982 18,016,356 18,184,661 17,992,886
================= =============== =============== ===============
Weighted average shares of common stock (diluted) 18,283,058 18,079,139 18,229,245 18,075,734
================= =============== =============== ===============
Weighted average O.P. units outstanding 86,225,222 86,465,530 86,297,888 86,484,494
================= =============== =============== ===============
FUNDS FROM OPERATIONS
Funds from operations $21,141 $28,741 $41,449 $55,818
================= =============== =============== ===============
Funds from operations per share (3) $0.20 $0.27 $0.40 $0.53
================= =============== =============== ===============
Outstanding common stock 18,352,691 18,063,691 18,352,691 18,063,691
================= =============== =============== ===============
Outstanding O.P. units 86,169,195 86,418,195 86,169,195 86,418,195
================= =============== =============== ===============
Weighted average O.P. units and common stock
outstanding (diluted) 104,508,281 104,544,669 104,527,133 104,560,229
================= =============== =============== ===============
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Three Months Three Months Six Months Six Months
FUNDS FROM OPERATIONS CALCULATION Ended Ended Ended Ended
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004
----------------- --------------- --------------- ---------------
Net income $ 2,695 $ 3,795 $ 5,102 $ 7,318
Add:
Minority interests (4) 12,453 18,706 24,028 35,850
Depreciation and amortization of real estate
from continuing operations 5,783 5,940 11,785 12,049
Depreciation and amortization of real estate
from discontinued operations - 82 33 164
Depreciation & amortization of real estate
held in unconsolidated joint venture 210 218 564 437
Less:
Gain on sale of real estate - - (63) -
----------------- --------------- --------------- ---------------
Funds from operations $21,141 $28,741 $41,449 $55,818
================= =============== =============== ===============
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 Six Months Six Months
Ended Ended Ended Ended
PROPERTY AND OTHER DATA: June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004
--------------- --------------- ----------------- ---------------
Total properties, end of period 108 109 108 109
Total square feet, end of period 8,019,082 7,917,262 8,019,082 7,917,262
Average monthly rental revenue per square foot (5) $1.59 $1.79 $1.60 $1.79
Average occupancy 66.2% 71.6% 67.0% 73.7%
Actual occupancy 65.7% 71.6% 65.7% 71.6%
Straight-line rent $275 ($81) $ 890 ($ 149)
Leasing commissions $369 $252 $3,953 $1,175
Capital expenditures $352 $255 $ 637 $ 370
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BALANCE SHEET June 30, 2005 December 31, 2004
-------------------- --------------------
Assets:
Land $ 277,647 $ 273,663
Buildings and improvements 778,277 770,757
Real estate related intangible assets 17,410 18,284
-------------------- --------------------
Total investments in properties 1,073,334 1,062,704
Less accumulated depreciation and amortization (120,623) (110,062)
Assets held for sale, net of accumulated
depreciation of $1,578 at December 31, 2004 - 8,221
-------------------- --------------------
Net investments in properties 952,711 960,863
Cash and cash equivalents 1,565 1,519
Restricted cash 1,551 1,551
Note receivable, net of deferred gain on sale of
real estate of $1,345 2,715 -
Deferred rent receivable 19,401 18,511
Investment in unconsolidated joint venture 3,436 3,559
Other assets 26,258 19,653
-------------------- --------------------
Total assets $1,007,637 $1,005,656
==================== ====================
Liabilities:
Line of credit - related parties $ 444 $ 9,560
Revolving line of credit 19,172 24,208
Mortgage notes payable 314,506 292,822
Mortgage notes payable - related parties 10,239 10,420
Interest payable 327 327
Security deposits 8,509 8,544
Deferred rental income 9,290 11,038
Liabilities related to assets held for sale - 14
Dividend/distribution payable 16,718 16,718
Accounts payable and accrued expenses 7,215 6,704
-------------------- --------------------
Total liabilities 386,420 380,355
Minority interests 506,208 512,089
Stockholders' equity:
Common stock, $.001 par value 18 18
Paid in capital 137,067 134,539
Accumulated deficit (22,076) (21,345)
-------------------- --------------------
Total stockholders' equity 115,009 113,212
-------------------- --------------------
Total liabilities and stockholders' equity $1,007,637 $1,005,656
==================== ====================
(1) Includes approximately $472 in amortization expense for the three months
ended June 30, 2005 and 2004 and approximately $944 in amortization expense
for the six months ended June 30, 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."
(2) Includes approximately $361 and $714 in amortization expense for the three
months ended June 30, 2005 and 2004, respectively, and approximately $801
and $1,291 in amortization expense for the six months ended June 30, 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."
(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. 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) 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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