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 19, 2006
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)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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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 19, 2006, the Company issued a press release announcing its earnings
results for the second quarter ended June 30, 2006. 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 signed on its behalf by the
undersigned hereunto duly authorized.
MISSION WEST PROPERTIES, INC.
Date: July 19, 2006 By: /s/ Wayne N. Pham
----------------------------------
Wayne N. Pham
Vice President of Finance
and Controller
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PRESS RELEASE
For Immediate News Release
July 19, 2006
MISSION WEST PROPERTIES ANNOUNCES SECOND QUARTER 2006 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, 2006 was
$16,954,000 or $0.16 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 $21,141,000 or $0.20 per diluted common share for the same period in
2005. On a sequential quarter basis, excluding termination fees and security
deposit forfeitures from lease terminations, FFO for the quarter ended March 31,
2006 was $0.18 per diluted common share. Termination fees and security deposit
forfeitures relating to lease terminations accounted for approximately
$16,056,000, or $0.15 per diluted common share for the period ended March 31,
2006. For the six months ended June 30, 2006, FFO increased to $51,480,000 or
$0.49 per diluted share from FFO of $41,449,000 or $0.40 per diluted share for
the same period in 2005.
Net income to common stockholders per diluted share was $0.11 for the quarter
ended June 30, 2006 compared to $0.15 for the quarter ended June 30, 2005, a per
share decrease of approximately 26.7%. For the six months ended June 30, 2006,
net income to common stockholders per diluted share was $0.39, up from $0.28 one
year ago, a per share increase of approximately 39.3%. Excluding termination
fees and security deposit forfeitures relating to lease terminations, net income
to common stockholders per diluted share for the six months ended June 30, 2006
was $0.23 per diluted share.
ACQUISITION ACTIVITY
In April 2006, the Company acquired a fully leased office/R&D building with
approximately 42,100 rentable square feet located at 1875 Charlston Road in
Mountain View, California by purchasing Mission West Charlston, LLC, an entity
controlled by Carl E. Berg. The acquisition was completed in accordance with the
Berg Land Holdings Option Agreement. The total acquisition price for this entity
was approximately $2,615,000, which is subject to a ground lease with an
unrelated party running through June 2057 for the land. The first year cash
return for this acquisition is 17%.
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 7.9 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", "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, 2006 June 30, 2005 June 30, 2006 June 30, 2005
----------------- --------------- --------------- ---------------
REVENUES:
Rental revenue from real estate $22,327 (1) $25,104 (1) $46,643 (1) $51,351 (1)
Tenant reimbursements 3,066 3,594 6,375 7,222
Other income, including lease terminations
and interest 1,101 2,289 17,889 2,592
----------------- --------------- --------------- ---------------
Total revenues 26,494 30,987 70,907 61,165
----------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 2,037 2,049 4,092 4,222
Real estate taxes 2,274 2,080 4,900 4,797
Interest 5,193 5,905 10,408 10,552
Interest (related parties) 190 243 381 549
General and administrative 637 443 1,272 1,118
Depreciation and amortization of real estate 5,425 (2) 5,369 (2) 10,904 (2) 10,942 (2)
----------------- --------------- --------------- ---------------
Total expenses 15,756 16,089 31,957 32,180
----------------- --------------- --------------- ---------------
Income before equity in earnings of
unconsolidated joint venture and minority interests 10,738 14,898 38,950 28,985
Equity in earnings of unconsolidated joint venture 351 393 682 387
Minority interests (8,968) (12,594) (32,358) (24,272)
----------------- --------------- --------------- ---------------
Income from continuing operations 2,121 2,697 7,274 5,100
----------------- --------------- --------------- ---------------
Discontinued operations, net of minority interests:
Gain from disposal of discontinued operations - - - 14
Loss from discontinued operations - (2) - (12)
----------------- --------------- --------------- ---------------
(Loss)/income from discontinued operations - (2) - 2
----------------- --------------- --------------- ---------------
Net income to common stockholders $2,121 $2,695 $7,274 $5,102
================= =============== =============== ===============
Net income to minority interests $8,968 $12,587 $32,358 $24,282
================= =============== =============== ===============
Income per share from continuing operations:
Basic $0.11 $0.15 $0.39 $0.28
Diluted $0.11 $0.15 $0.39 $0.28
Income per share from discontinued operations:
Basic - - - -
Diluted - - - -
----------------- --------------- --------------- ---------------
Net income per share to common stockholders:
Basic $0.11 $0.15 $0.39 $0.28
================= =============== =============== ===============
Diluted $0.11 $0.15 $0.39 $0.28
================= =============== =============== ===============
Weighted average shares of common stock (basic) 19,028,240 18,257,982 18,743,649 18,184,661
================= =============== =============== ===============
Weighted average shares of common stock (diluted) 19,123,945 18,283,058 18,824,340 18,229,245
================= =============== =============== ===============
Weighted average O.P. units outstanding 85,522,039 86,225,222 85,800,741 86,297,888
================= =============== =============== ===============
FUNDS FROM OPERATIONS
Funds from operations $16,954 $21,141 $51,480 $41,449
================= =============== =============== ===============
Funds from operations per share (3) $ 0.16 $ 0.20 $ 0.49 $ 0.40
================= =============== =============== ===============
Outstanding common stock 19,342,187 18,352,691 19,342,187 18,352,691
================= =============== =============== ===============
Outstanding O.P. units 85,235,999 86,169,195 85,235,999 86,169,195
================= =============== =============== ===============
Weighted average O.P. units and common stock
outstanding (diluted) 104,645,984 104,508,281 104,625,081 104,527,133
================= =============== =============== ===============
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Three Months Three Months Six Months Six Months
FUNDS FROM OPERATIONS CALCULATION Ended Ended Ended Ended
June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005
----------------- --------------- --------------- ---------------
Net income $2,121 $2,695 $7,274 $5,102
Add:
Minority interests (4) 8,855 12,453 32,110 24,028
Depreciation and amortization of real estate
from continuing operations 5,767 5,783 11,674 11,785
Depreciation and amortization of real estate
from discontinued operations - - - 33
Depreciation & amortization of real estate
held in unconsolidated joint venture 211 210 422 564
Less:
Gain on sale of real estate - - - (63)
----------------- --------------- --------------- ---------------
Funds from operations $16,954 $21,141 $51,480 $41,449
================= =============== =============== ===============
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 Six Months Six Months
Ended Ended Ended Ended
June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005
--------------- --------------- ----------------- ---------------
Total properties, end of period 110 108 110 108
Total square feet, end of period 7,936,481 8,019,082 7,936,481 8,019,082
Average monthly rental revenue per square foot (5) $1.60 $1.59 $1.61 $1.60
Occupancy for leased properties 63.0% 65.7% 63.0% 65.7%
Straight-line rent ($152) $275 ($830) $ 890
Leasing commissions $ 46 $369 $ 316 $3,953
Capital expenditures $ 85 $352 $ 163 $ 637
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BALANCE SHEET
June 30, 2006 December 31, 2005
-------------------- --------------------
Assets:
Land $ 277,269 $ 273,933
Buildings and improvements 777,192 766,457
Real estate related intangible assets 19,529 17,410
-------------------- --------------------
Total investments in properties 1,073,990 1,057,800
Less accumulated depreciation and amortization (142,268) (130,419)
-------------------- --------------------
Net investments in properties 931,722 927,381
Cash and cash equivalents 39,470 31,441
Restricted cash 10,626 16,712
Deferred rent receivable 18,388 19,218
Investment in unconsolidated joint venture 3,435 3,263
Other assets, net 25,028 25,362
-------------------- --------------------
Total assets $1,028,669 $1,023,377
==================== ====================
Liabilities:
Mortgage notes payable $ 352,515 $ 357,481
Mortgage notes payable - related parties 9,856 10,051
Interest payable 321 321
Security deposits 6,681 8,047
Deferred rental income 9,846 6,103
Dividend/distribution payable 16,733 16,725
Accounts payable and accrued expenses 10,747 8,952
-------------------- --------------------
Total liabilities 406,699 407,680
-------------------- --------------------
Minority interests 495,318 500,682
-------------------- --------------------
Stockholders' equity:
Common stock, $.001 par value 19 18
Paid-in capital 148,457 138,038
Accumulated deficit (21,824) (23,041)
-------------------- --------------------
Total stockholders' equity 126,652 115,015
-------------------- --------------------
Total liabilities and stockholders' equity $1,028,669 $1,023,377
==================== ====================
(1) Includes approximately $472 in amortization expense for the three months
ended June 30, 2006 and 2005 and $944 in amortization expense for the six
months ended June 30, 2006 and 2005 for the amortization of an above-market
lease intangible asset pursuant to Statement of Financial Accounting
Standard No. 141, "Business Combinations."
(2) Includes approximately $425 and $361 in amortization expense for the three
months ended June 30, 2006 and 2005, respectively, and $764 and $801 in
amortization expense for the six months ended June 30, 2006 and 2005,
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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