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 23, 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 (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)
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 October 23, 2006, the Company issued a press release announcing its earnings
results for the third quarter ended September 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: October 23, 2006 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
October 23, 2006
MISSION WEST PROPERTIES ANNOUNCES THIRD 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 September 30, 2006 was
$16,567,000 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 $18,528,000 or $0.18 per diluted common share for the same period in
2005. On a sequential quarter basis, FFO for the quarter ended June 30, 2006 was
$0.16 per diluted common share. For the nine months ended September 30, 2006,
FFO increased to $68,047,000 or $0.65 per diluted common share from FFO of
$59,977,000 or $0.57 per diluted common share for the same period in 2005.
Excluding termination fees and security deposit forfeitures relating to lease
terminations, FFO for the nine months ended September 30, 2006 and 2005 was
$0.50 and $0.55 per diluted common share, respectively.
Net income per diluted share to common stockholders was $0.11 for the quarter
ended September 30, 2006 compared to $0.13 for the quarter ended September 30,
2005, a per share decrease of approximately 15.4%. For the nine months ended
September 30, 2006, net income per diluted share to common stockholders was
$0.49, up from $0.41 one year ago, a per share increase of approximately 19.5%.
Excluding termination fees and security deposit forfeitures relating to lease
terminations, net income per diluted share to common stockholders for the nine
months ended September 30, 2006 and 2005 was $0.34 and $0.39, respectively.
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 Nine Months Nine Months
Ended Ended Ended Ended
Sept 30, 2006 Sept 30, 2005 Sept 30, 2006 Sept 30, 2005
----------------- --------------- --------------- ---------------
REVENUES:
Rental revenue from real estate $22,362 (1) $24,692 (1) $69,005 (1) $76,043 (1)
Tenant reimbursements 3,311 4,031 9,686 11,254
Lease termination income - - 16,068 478
Other income, including interest 1,068 426 2,890 2,540
----------------- --------------- --------------- ---------------
Total revenues 26,741 29,149 97,649 90,315
----------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 2,253 2,497 6,345 6,635
Real estate taxes 2,921 2,804 7,821 7,466
Interest 5,172 5,494 15,580 16,046
Interest (related parties) 188 229 569 779
General and administrative 531 424 1,803 1,542
Depreciation and amortization of real estate 5,727 (2) 5,268 (2) 16,632 (2) 16,005 (2)
----------------- --------------- --------------- ---------------
Total expenses 16,792 16,716 48,750 48,473
----------------- --------------- --------------- ---------------
Income before equity in earnings of unconsolidated
joint venture and minority interests 9,949 12,433 48,899 41,842
Equity in earnings of unconsolidated joint venture 857 291 1,538 677
Minority interests (8,700) (10,551) (41,057) (35,172)
----------------- --------------- --------------- ---------------
Income from continuing operations 2,106 2,173 9,380 7,347
----------------- --------------- --------------- ---------------
Discontinued operations, net of minority interests:
Gain from disposal of discontinued operations - 291 - 305
Loss from discontinued operations - (13) - (98)
----------------- --------------- --------------- ---------------
(Loss)/income from discontinued operations - 278 - 207
----------------- --------------- --------------- ---------------
Net income to common stockholders $2,106 $2,451 $9,380 $7,554
================= =============== =============== ===============
Net income to minority interests $8,700 $11,541 $41,057 $35,823
================= =============== =============== ===============
Income per share from continuing operations:
Basic $0.11 $0.12 $0.50 $0.40
Diluted $0.11 $0.12 $0.49 $0.40
Income per share from discontinued operations:
Basic - $0.01 - $0.01
Diluted - $0.01 - $0.01
----------------- --------------- --------------- ---------------
Net income per share to common stockholders:
Basic $0.11 $0.13 $0.50 $0.41
================= =============== =============== ===============
Diluted $0.11 $0.13 $0.49 $0.41
================= =============== =============== ===============
Weighted average shares of common stock (basic) 19,350,672 18,356,278 18,948,214 18,242,495
================= =============== =============== ===============
Weighted average shares of common stock (diluted) 19,418,884 18,407,891 19,024,662 18,289,699
================= =============== =============== ===============
Weighted average O.P. units outstanding 85,233,964 86,169,195 85,609,739 86,254,519
================= =============== =============== ===============
FUNDS FROM OPERATIONS
Funds from operations $16,567 $18,528 $68,047 $59,977
================= =============== =============== ===============
Funds from operations per share (3) $ 0.16 $ 0.18 $ 0.65 $ 0.57
================= =============== =============== ===============
Outstanding common stock 19,397,287 18,367,691 19,397,287 18,367,691
================= =============== =============== ===============
Outstanding O.P. units 85,231,199 86,169,195 85,231,199 86,169,195
================= =============== =============== ===============
Weighted average O.P. units and common stock
outstanding (diluted) 104,652,848 104,577,086 104,634,401 104,544,218
================= =============== =============== ===============
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Three Months Three Months Nine Months Nine Months
FUNDS FROM OPERATIONS CALCULATION Ended Ended Ended Ended
Sept 30, 2006 Sept 30, 2005 Sept 30, 2006 Sept 30, 2005
----------------- --------------- --------------- ---------------
Net income $ 2,106 $ 2,451 $ 9,380 $ 7,554
Add:
Minority interests (4) 8,566 11,414 40,676 35,441
Depreciation and amortization of real estate
from continuing operations 6,095 5,721 17,769 17,301
Depreciation and amortization of real estate
from discontinued operations - 77 - 315
Depreciation & amortization of real estate
held in unconsolidated joint venture 238 210 660 774
Less:
Gain on sale of JV real estate or real estate (438) (1,345) (438) (1,408)
----------------- --------------- --------------- ---------------
Funds from operations $16,567 $18,528 $68,047 $59,977
================= =============== =============== ===============
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, 2006 Sept 30, 2005 Sept 30, 2006 Sept 30, 2005
--------------- --------------- --------------- ---------------
Total properties, end of period 110 107 110 107
Total square feet, end of period 7,936,481 7,780,082 7,936,481 7,780,082
Average monthly rental revenue per square foot(5) $1.55 $1.57 $1.59 $1.56
Occupancy for leased properties 64.2% 67.5% 64.2% 67.5%
Straight-line rent ($ 218) ($ 99) ($1,048) $ 791
Leasing commissions $ 500 $ 37 $ 815 $3,990
Capital expenditures $1,186 $234 $1,349 $ 871
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BALANCE SHEET September 30, 2006 December 31, 2005
-------------------- --------------------
Assets:
Land $ 277,269 $ 273,933
Buildings and improvements 778,378 766,457
Real estate related intangible assets 19,529 17,410
-------------------- --------------------
Total investments in properties 1,075,176 1,057,800
Less accumulated depreciation and amortization (148,468) (130,419)
-------------------- --------------------
Net investments in properties 926,708 927,381
Cash and cash equivalents 42,443 31,441
Restricted cash 6,893 16,712
Deferred rent receivable 18,170 19,218
Investment in unconsolidated joint venture 3,472 3,263
Other assets, net 25,537 25,362
-------------------- --------------------
Total assets $1,023,223 $1,023,377
==================== ====================
Liabilities:
Mortgage notes payable $ 350,000 $ 357,481
Mortgage notes payable - related parties 9,756 10,051
Interest payable 321 321
Security deposits 6,804 8,047
Deferred rental income 9,288 6,103
Dividend/distribution payable 16,741 16,725
Accounts payable and accrued expenses 14,000 8,952
-------------------- --------------------
Total liabilities 406,910 407,680
-------------------- --------------------
Minority interests 490,122 500,682
-------------------- --------------------
Stockholders' equity:
Common stock, $.001 par value 19 18
Paid-in capital 148,993 138,038
Accumulated deficit (22,821) (23,041)
-------------------- --------------------
Total stockholders' equity 126,191 115,015
-------------------- --------------------
Total liabilities and stockholders' equity $1,023,223 $1,023,377
==================== ====================
(1) Includes approximately $472 in amortization expense for the three months
ended September 30, 2006 and 2005 and $1,416 in amortization expense for
the nine months ended September 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 $321 in amortization expense for the three
months ended September 30, 2006 and 2005, respectively, and $1,189 and
$1,123 in amortization expense for the nine months ended September 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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