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 18, 2007
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 April 18, 2007, the Company issued a press release announcing its earnings
results for the first quarter ended March 31, 2007. 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: April 18, 2007 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 18, 2007
MISSION WEST PROPERTIES ANNOUNCES FIRST QUARTER 2007 OPERATING RESULTS
"We build the buildings for the high tech companies that build the internet"
Cupertino, CA - Mission West Properties, Inc. (AMEX: MSW) reported today that
Funds From Operations ("FFO") for the quarter ended March 31, 2007 was
approximately $23,905,000 or $0.23 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 approximately $34,526,000 or $0.33 per diluted
common share for the same period in 2006. On a sequential quarter basis, FFO for
the quarter ended December 31, 2006 was approximately $0.18 per diluted common
share. Termination fees and security deposit forfeitures income relating to
lease terminations accounted for approximately $10,109,000, or $0.10 per diluted
common share and $16,056,000, or $0.15 per diluted common share for the quarters
ended March 31, 2007 and 2006, respectively. Write-off of an above market lease
intangible asset against income relating to one lease termination accounted for
approximately $3,619,000, or $0.03 per diluted common share for the quarter
ended March 31, 2007.
Net income per diluted share to common stockholders was $0.17 for the quarter
ended March 31, 2007 compared to $0.28 for the quarter ended March 31, 2006, a
per share decrease of approximately 39.3%. Termination fees and security deposit
forfeitures income relating to lease terminations accounted for approximately
$0.10 and $0.16 per diluted common share for the quarters ended March 31, 2007
and 2006, respectively. Write-off of in-place lease intangible assets against
income relating to two lease terminations accounted for approximately $0.04 per
diluted common share for the quarter ended March 31, 2007.
ACQUISITION ACTIVITY
In March 2007, the Company acquired 50 acres of vacant land in Morgan Hill,
California, which could support approximately 725,000 rentable square feet of
space. The land is currently zoned for industrial use and a portion has the
potential to be rezoned for residential use. The acquisition price for this
property was approximately $25,543,000 and was funded from a portion of the
proceeds received from the Samaritan property sale, which was classified as
restricted cash as of December 31, 2006.
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 7.7 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
Ended Ended
Mar 31, 2007 Mar 31, 2006
---------------- ----------------
REVENUES:
Rental revenue from real estate $21,338 $24,788
Above market lease intangible asset amortization (4,091)(1) (472)(1)
Tenant reimbursements 3,227 3,309
Lease termination income 10,109 16,056
Other income, including interest 3,056 732
---------------- ----------------
Total revenues 33,639 44,413
---------------- ----------------
EXPENSES:
Operating expenses 1,968 2,056
Real estate taxes 2,578 2,625
Interest 5,069 5,215
Interest (related parties) 184 192
General and administrative 713 635
Depreciation and amortization of real estate 6,210(2) 5,479(2)
---------------- ----------------
Total expenses 16,722 16,202
---------------- ----------------
Income before equity in earnings of unconsolidated
joint venture and minority interests 16,917 28,211
Equity in earnings of unconsolidated joint venture 337 331
Minority interests (13,879) (23,390)
---------------- ----------------
Income from operations 3,375 5,152
Net income to common stockholders $ 3,375 $ 5,152
================ ================
Net income to minority interests $13,879 $23,390
================ ================
Net income per share to common stockholders:
Basic $0.17 $0.28
================ ================
Diluted $0.17 $0.28
================ ================
Weighted average shares of common stock (basic) 19,582,787 18,455,897
================ ================
Weighted average shares of common stock (diluted) 19,889,453 18,520,297
================ ================
Weighted average O.P. units outstanding 85,066,999 86,082,539
================ ================
FUNDS FROM OPERATIONS
Funds from operations $23,905 $34,526
================ ================
Funds from operations per share (3) $ 0.23 $ 0.33
================ ================
Outstanding common stock 19,625,587 18,511,291
================ ================
Outstanding O.P. units 85,024,199 86,038,095
================ ================
Weighted average O.P. units and common stock
outstanding (diluted) 104,956,452 104,602,836
================ ================
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Three Months Three Months
Ended Ended
FUNDS FROM OPERATIONS CALCULATION Mar 31, 2007 Mar 31, 2006
----------------- ---------------
Net income $ 3,375 $ 5,152
Add:
Minority interests (4) 13,755 23,256
Depreciation and amortization of real estate 6,586 5,907
Depreciation & amortization of real estate held in
unconsolidated joint venture 189 211
----------------- ---------------
Funds from operations $23,905 $34,526
================= ===============
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
Ended Ended
PROPERTY AND OTHER DATA: Mar 31, 2007 Mar 31, 2006
----------------- ---------------
Total properties, end of period 107 109
Total square feet, end of period 7,701,359 7,894,355
Average monthly rental revenue per square foot (5) $1.50 $1.63
Occupancy for leased properties 69.4% 67.3%
Straight-line rent ($1,595) ($677)
Leasing commissions $ 458 $ 270
Capital expenditures $ 863 $ 79
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BALANCE SHEET March 31, 2007 December 31, 2006
-------------------- --------------------
Assets:
Land $ 297,765 $ 272,223
Buildings and improvements 757,459 756,596
Real estate related intangible assets 6,422 19,529
-------------------- --------------------
Total investments in properties 1,061,646 1,048,348
Less accumulated depreciation and amortization (146,653) (149,459)
-------------------- --------------------
Net investments in properties 914,993 898,889
Cash and cash equivalents 45,703 33,785
Restricted cash 21,503 48,245
Deferred rent receivable 16,894 18,489
Investment in unconsolidated joint venture 3,155 3,468
Other assets, net 25,051 24,611
-------------------- --------------------
Total assets $1,027,299 $1,027,487
==================== ====================
Liabilities:
Mortgage notes payable $ 345,495 $ 348,101
Mortgage notes payable - related parties 9,549 9,654
Interest payable 1,366 1,375
Security deposits 6,798 6,977
Deferred rental income 7,915 6,874
Dividend/distribution payable 16,745 16,745
Accounts payable and accrued expenses 8,795 7,601
-------------------- --------------------
Total liabilities 396,663 397,327
-------------------- --------------------
Minority interests 498,970 501,282
-------------------- --------------------
Stockholders' equity:
Common stock, $.001 par value 20 19
Paid-in capital 152,094 149,541
Accumulated deficit (20,448) (20,682)
-------------------- --------------------
Total stockholders' equity 131,666 128,878
-------------------- --------------------
Total liabilities and stockholders' equity $1,027,299 $1,027,487
==================== ====================
(1) Amortization of an above-market lease intangible asset pursuant to
Statement of Financial Accounting Standard No. 141, "Business
Combinations."
(2) Includes approximately $1,193 and $340 in amortization expense for the
three months ended March 31, 2007 and 2006, 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.