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): October 19, 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 (I.R.S. Employer
of 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 October 19, 2005, the Company issued a press release announcing its earnings
results for the quarter ended September 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.
- --------------------------------------------------------------------------------
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: October 20, 2005 By: /s/ Wayne N. Pham
----------------------------------------
Wayne N. Pham
Vice President of Finance and Controller
EXHIBIT 99.1
PRESS RELEASE
For Immediate News Release
October 19, 2005
MISSION WEST PROPERTIES ANNOUNCES THIRD 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 September 30, 2005 was
$18,528,000 or $0.18 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 $24,519,000 or $0.23 per diluted common share for the same period in
2004. On a sequential quarter basis, FFO per diluted common share decreased
$0.02 compared to the previous quarter ended June 30, 2005. Settlements of
former tenant breach of lease and termination fees accounted for approximately
$0.02 per diluted share in the second quarter 2005. For the nine months ended
September 30, 2005, FFO decreased to $59,977,000 or $0.57 per diluted share from
FFO of $80,338,000 or $0.77 per diluted share for the same period in 2004.
Net income to common stockholders per diluted share was $0.13 for the quarter
ended September 30, 2005 compared to $0.18 for the same period in 2004, a per
share decrease of approximately 27.8%. For the nine months ended September 30,
2005, net income to common stockholders per diluted share was $0.41, down from
$0.58 one year ago, a per share decrease of approximately 29.3%.
FINANCING ACTIVITY
In July 2005, the Company obtained a $125 million secured fully amortizing 20
year mortgage loan from Allianz Life Insurance Company of North America that
bears annual fixed interest rate of 5.22%. The mortgage loan is secured by eight
properties. The Company paid approximately $838,000 in loan fees and financing
costs and used the proceeds to primarily pay off short-term debt and the Berg
Group line of credit.
DISPOSITION ACTIVITY
In October 2005, the Company completed the sale of a 239,000 rentable square
foot R&D property at 800 Embedded Way, San Jose, California. A gain of
approximately $0.8 million will be realized on the total sales price of $15.1
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 107
properties totaling approximately 7.8 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.
MISSION WEST PROPERTIES, INC.
SELECTED FINANCIAL DATA
(In thousands, except share, per share and property data amounts)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Sept 30, 2005 Sept 30, 2004 Sept 30, 2005 Sept 30, 2004
----------------- --------------- --------------- ---------------
REVENUES:
Rental revenue from real estate $24,692 (1) $29,494 (1) $76,043 (1) $ 90,526 (1)
Tenant reimbursements 4,031 3,740 11,254 11,623
Other income, including lease terminations,
settlements and interest 426 396 3,018 5,401
----------------- --------------- --------------- ---------------
Total revenues 29,149 33,630 90,315 107,550
----------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 2,497 2,246 6,635 6,877
Real estate taxes 2,804 2,559 7,466 8,364
Interest 5,494 4,468 16,046 13,051
Interest (related parties) 229 256 779 760
General and administrative 424 395 1,542 1,628
Depreciation and amortization of real estate 5,268 (2) 5,269 (2) 16,005 (2) 16,168 (2)
----------------- --------------- --------------- ---------------
Total expenses 16,716 15,193 48,473 46,848
----------------- --------------- --------------- ---------------
Income before equity in earnings of unconsolidated
joint venture and minority interests 12,433 18,437 41,842 60,702
Equity in earnings of unconsolidated joint venture 291 345 677 1,564
Minority interests (10,551) (15,590) (35,172) (51,757)
----------------- --------------- --------------- ---------------
Income from continuing operations 2,173 3,192 7,347 10,509
----------------- --------------- --------------- ---------------
Discontinued operations, net of minority interests:
Gain from disposal of discontinued operations 291 - 305 -
(Loss)/income from discontinued operations (13) (19) (98) (18)
----------------- --------------- --------------- ---------------
Income from discontinued operations 278 (19) 207 (18)
----------------- --------------- --------------- ---------------
Net income to common stockholders $2,451 $3,173 $7,554 $10,491
================= =============== =============== ===============
Net income to minority interests $11,541 $15,488 $35,823 $51,596
================= =============== =============== ===============
Income per share from continuing operations:
Basic $0.12 $0.18 $0.40 $0.58
Diluted $0.12 $0.18 $0.40 $0.58
Income per share from discontinued operations:
Basic $0.01 - $0.01 -
Diluted $0.01 - $0.01 -
----------------- --------------- --------------- ---------------
Net income per share to common stockholders:
Basic $0.13 $0.18 $0.41 $0.58
================= =============== =============== ===============
Diluted $0.13 $0.18 $0.41 $0.58
=============== ===============
Weighted average shares of common stock (basic) 18,356,278 18,071,484 18,242,495 18,019,277
================= =============== =============== ===============
Weighted average shares of common stock (diluted) 18,407,891 18,098,174 18,289,699 18,077,854
================= =============== =============== ===============
Weighted average O.P. units outstanding 86,169,195 86,410,402 86,254,519 86,459,617
================= =============== =============== ===============
FUNDS FROM OPERATIONS
Funds from operations $18,528 $24,519 $59,977 $80,338
================= =============== =============== ===============
Funds from operations per share (3) $ 0.18 $ 0.23 $ 0.57 $ 0.77
================= =============== =============== ===============
Outstanding common stock 18,367,691 18,077,191 18,367,691 18,077,191
================= =============== =============== ===============
Outstanding O.P. units 86,169,195 86,404,695 86,169,195 86,404,695
================= =============== =============== ===============
Weighted average O.P. units and common stock
outstanding (diluted) 104,577,086 104,508,576 104,544,218 104,537,470
================= =============== =============== ===============
Three Months Three Months Nine Months Nine Months
FUNDS FROM OPERATIONS CALCULATION Ended Ended Ended Ended
Sept 30, 2005 Sept 30, 2004 Sept 30, 2005 Sept 30, 2004
----------------- --------------- --------------- ---------------
Net income $ 2,451 $ 3,173 $ 7,554 $10,491
Add:
Minority interests (4) 11,414 15,377 35,441 51,228
Depreciation and amortization of real estate
from 5,721 5,592 17,301 17,488
continuing operations
Depreciation and amortization of real estate
from 77 159 315 476
discontinued operations
Depreciation & amortization of real estate
held in 210 218 774 655
unconsolidated joint venture
Less:
Gain on sale of real estate (1,345) - (1,408) -
----------------- --------------- --------------- ---------------
Funds from operations $18,528 $24,519 $59,977 $80,338
================= =============== =============== ===============
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.
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
PROPERTY AND OTHER DATA: Sept 30, 2005 Sept 30, 2004 Sept 30, 2005 Sept 30, 2004
--------------- --------------- ----------------- ---------------
Total properties, end of period 107 109 107 109
Total square feet, end of period 7,780,082 7,917,262 7,780,082 7,917,262
Average monthly rental revenue per square foot (5) $1.57 $1.81 $1.56 $1.79
Average occupancy 67.5% 69.2% 68.3% 72.2%
Actual occupancy 67.5% 69.0% 67.5% 69.0%
Straight-line rent ($ 99) $289 $ 791 $ 141
Leasing commissions $ 37 $216 $3,990 $1,391
Capital expenditures $234 $ 1 $ 871 $ 371
BALANCE SHEET September 30, 2005 December 31, 2004
-------------------- --------------------
Assets:
Land $ 273,933 $ 273,663
Buildings and improvements 766,209 770,757
Real estate related intangible assets 17,410 18,284
-------------------- --------------------
Total investments in properties 1,057,552 1,062,704
Less accumulated depreciation and (124,670) (110,062)
amortization
Assets held for sale, net of accumulated
depreciation of $1,770 and $1,578 at 9/30/05
and 12/31/04, respectively 14,245 8,221
-------------------- --------------------
Net investments in properties 947,127 960,863
Cash and cash equivalents 40,443 1,519
Restricted cash 1,551 1,551
Deferred rent receivable 19,302 18,511
Investment in unconsolidated joint venture 3,472 3,559
Other assets 24,812 19,653
-------------------- --------------------
Total assets $1,036,707 $1,005,656
==================== ====================
Liabilities:
Mortgage notes payable $ 359,891 $ 292,822
Mortgage notes payable - related parties 10,146 10,420
Line of credit - related parties - 9,560
Revolving line of credit - 24,208
Interest payable 327 327
Security deposits 8,434 8,544
Deferred rental income 11,691 11,038
Liabilities related to assets held for sale 80 14
Dividend/distribution payable 16,727 16,718
Accounts payable and accrued expenses 10,971 6,704
-------------------- --------------------
Total liabilities 418,267 380,355
Minority interests 503,769 512,089
Stockholders' equity:
Common stock, $.001 par value 18 18
Paid in capital 137,217 134,539
Accumulated deficit (22,564) (21,345)
-------------------- --------------------
Total stockholders' equity 114,671 113,212
-------------------- --------------------
Total liabilities and stockholders' equity $1,036,707 $1,005,656
==================== ====================
(1) Includes approximately $472 in amortization expense for the three months
ended September 30, 2005 and 2004 and approximately $1,416 in amortization
expense for the nine months ended September 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 No. 141, "Business Combinations."
(2) Includes approximately $321 and $440 in amortization expense for the three
months ended September 30, 2005 and 2004, respectively, and approximately
$1,122 and $1,732 in amortization expense for the nine months ended
September 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 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.