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): February 4, 2009
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))
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 February 4, 2009, the Company issued a press release announcing its earnings
results for the fourth quarter and full year ended December 31, 2008. 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 signed on its behalf by the
undersigned hereunto duly authorized.
MISSION WEST PROPERTIES, INC.
Date: February 5, 2009 By: /s/ Wayne N. Pham
---------------------------------
Wayne N. Pham
Vice President of Finance and
Controller
Exhibit 99.1
PRESS RELEASE
For Immediate News Release
February 4, 2009
MISSION WEST PROPERTIES ANNOUNCES FOURTH QUARTER AND
FULL YEAR 2008 OPERATING RESULTS
"We build the buildings for the high tech companies that build the internet"
Cupertino, CA - Mission West Properties, Inc. (NASDAQ: MSW) reported today that
Funds From Operations ("FFO") for the quarter ended December 31, 2008 was
approximately $12,863,000, or $0.12 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 $13,992,000, or $0.13 per diluted
common share, for the same period in 2007. Net termination fee income relating
to lease terminations for the fourth quarter ended December 31, 2008 accounted
for approximately $833,000, or less than $0.01 per diluted common share. On a
sequential quarter basis, FFO for the quarter ended September 30, 2008 was
approximately $0.13 per diluted common share. For the twelve months ended
December 31, 2008, FFO decreased to $55,334,000, or $0.52 per diluted common
share, from FFO of $114,867,000, or $1.09 per diluted common share, for the same
period in 2007. Net termination fees and security deposit forfeitures income
relating to lease terminations accounted for approximately $2,754,000, or $0.03
per diluted common share, and $51,721,000, or $0.49 per diluted common share,
for the twelve months ended December 31, 2008 and 2007, respectively.
Net income per diluted share to common stockholders was $0.26 for the quarter
ended December 31, 2008 compared to $0.08 for the quarter ended December 31,
2007, a per share increase of approximately 225%. Gains from the sale of two R&D
properties in the Company's unconsolidated joint venture, TBI-MWP, accounted for
approximately $0.20 per diluted common share for the quarter ended December 31,
2008. The gains are recorded under the line item, "Equity in earnings of
unconsolidated joint venture," using the equity method of accounting. Net
termination fee income relating to lease terminations accounted for
approximately less than $0.01 per diluted common share for the three months
ended December 31, 2008. For the twelve months ended December 31, 2008, net
income per diluted share to common stockholders was $0.50, down from $0.95 a
year ago, a per share decrease of approximately 47%. Gains from the sale of two
R&D properties in the Company's unconsolidated joint venture, TBI-MWP, accounted
for approximately $0.20 per diluted common share for the year ended December 31,
2008. Net termination fees and security deposit forfeitures income relating to
lease terminations accounted for approximately $0.03 and $0.52 per diluted
common share for the twelve months ended December 31, 2008 and 2007,
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 111
properties totaling approximately 8.0 million rentable square feet, which
includes approximately 854,000 rentable square feet (or 16 buildings) that are
in the process of being rezoned for residential development. 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 Twelve Months Twelve Months
Ended Ended Ended Ended
Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007
---------------- ---------------- ---------------- ----------------
OPERATING REVENUES:
Rental revenue from real estate $20,464 $18,986 $79,075 $80,337
Above market lease intangible asset - - - (4,091) (1)
amortization
Tenant reimbursements 4,505 3,447 16,406 13,355
Lease termination and settlement income 1,087 - 3,007 57,515
Other income 446 659 1,216 4,467
---------------- ---------------- ---------------- ----------------
Total operating revenues 26,502 23,092 99,704 151,583
---------------- ---------------- ---------------- ----------------
OPERATING EXPENSES:
Operating and maintenance 3,410 2,632 11,404 9,791
Real estate taxes 3,812 2,433 12,056 10,580
General and administrative 684 666 2,635 3,035
Depreciation and amortization of real estate 6,160 (2) 5,503 (2) 23,224 (2) 22,588 (2)
---------------- ---------------- ---------------- ----------------
Total operating expenses 14,066 11,234 49,319 45,994
---------------- ---------------- ---------------- ----------------
Operating income 12,436 11,858 50,385 105,589
OTHER INCOME (EXPENSES):
Equity in earnings of unconsolidated joint 18,701 350 19,617 1,408
venture
Interest income 164 985 1,128 3,086
Dividend income 607 - 607 -
Unrealized loss from investment (278) - (278) -
Interest expense (4,880) (4,956) (19,787) (20,131)
Interest expense - related parties (307) (178) (1,332) (724)
---------------- ---------------- ---------------- ----------------
Income from continuing operations before
minority interests 26,443 8,059 50,340 89,228
Minority interests from continuing operations (21,186) (6,491) (40,206) (71,471)
---------------- ---------------- ---------------- ----------------
Income from continuing operations 5,257 1,568 10,134 17,757
Discontinued operations, net of minority interests:
Gain from disposal of discontinued operations - - - 1,126
Income attributable to discontinued operations - - - 5
---------------- ---------------- ---------------- ----------------
Income from discontinued operations - - - 1,131
---------------- ---------------- ---------------- ----------------
Net income to common stockholders $ 5,257 $1,568 $10,134 $18,888
================ ================ ================ ================
Net income to minority interests $21,186 $6,491 $40,206 $76,960
================ ================ ================ ================
Income per share from continuing operations:
Basic $0.27 $0.08 $0.51 $0.90
================ ================ ================ ================
Diluted $0.26 $0.08 $0.50 $0.89
================ ================ ================ ================
Basic - - - $0.06
================ ================ ================ ================
Diluted - - - $0.06
================ ================ ================ ================
Net income per share to common stockholders:
Basic $0.27 $0.08 $0.51 $0.96
================ ================ ================ ================
Diluted $0.26 $0.08 $0.50 $0.95
================ ================ ================ ================
Weighted average shares of common stock (basic) 19,748,211 19,645,304 19,714,414 19,627,234
================ ================ ================ ================
Weighted average shares of common stock (diluted) 20,018,836 19,710,909 20,226,385 19,854,411
================ ================ ================ ================
Weighted average O.P. units outstanding 85,526,965 85,552,718 85,528,329 85,162,240
================ ================ ================ ================
FUNDS FROM OPERATIONS
Funds from operations $12,863 $13,992 $55,334 $114,867
================ ================ ================ ================
Funds from operations per share (3) $0.12 $0.13 $0.52 $1.09
================ ================ ================ ================
Outstanding common stock 19,748,211 19,664,087 19,748,211 19,664,087
================ ================ ================ ================
Outstanding O.P. units 85,526,965 85,533,935 85,526,965 85,533,935
================ ================ ================ ================
Weighted average O.P. units and common stock
outstanding (diluted) 105,545,801 105,263,627 105,754,713 105,016,651
================ ================ ================ ================
Three Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
FUNDS FROM OPERATIONS CALCULATION Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007
---------------- ---------------- ---------------- ----------------
Net income $ 5,257 $1,568 $10,134 $ 18,888
Add:
Minority interests (4) 21,125 6,360 39,838 76,458
Depreciation and amortization of real estate
from continuing operations 6,620 5,875 24,933 25,043
Depreciation and amortization of real estate
from discontinued operations - - - 250
Depreciation and amortization of real estate
held in unconsolidated joint venture 332 189 900 757
Less:
Gain on sale of real estate (20,471) - (20,471) (6,529)
---------------- ---------------- ---------------- ----------------
Funds from operations $12,863 $13,992 $55,334 $114,867
================ ================ ================ ================
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 neither be considered
as an alternative for net income as a measure of profitability nor 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 Twelve Months Twelve Months
Ended Ended Ended Ended
PROPERTY AND OTHER DATA: Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007
---------------- ---------------- ---------------- ----------------
Total properties, end of period 111 109 111 109
Total square feet, end of period 8,047,569 7,861,692 8,047,569 7,861,692
Average monthly rental revenue per square foot (5) $1.26 $1.28 $1.25 $1.42
Occupancy for leased properties 66.4% 61.7% 66.4% 61.7%
Straight-line rent $563 $310 $3,008 ($3,656)
Leasing commissions $458 $352 $1,699 $3,000
Capital expenditures $305 $257 $6,468 $4,878
LEASE ROLLOVER SCHEDULE:
Year # of Leases Rentable Square Feet
- ---------------- ------------- ---------------------
2009 22 369,613
2010 12 572,000
2011 15 827,605
2012 13 1,001,452
2013 6 459,737
2014 11 1,281,952
2015 4 328,211
2016 2 144,600
2017 3 241,089
Thereafter 1 119,756
------------- ---------------------
Total 89 5,346,015
============= =====================
BALANCE SHEETS
December 31, 2008 December 31, 2007
-------------------- --------------------
Assets
Investments in real estate:
Land $ 320,911 $ 312,152
Buildings and improvements 799,471 764,665
Real estate related intangible assets 3,240 2,119
-------------------- --------------------
Total investments in properties 1,123,622 1,078,936
Accumulated depreciation and amortization (180,043) (156,819)
-------------------- --------------------
Net investments in properties 943,579 922,117
Investment in unconsolidated joint venture 3,768 2,735
-------------------- --------------------
Net investments in real estate 947,347 924,852
Cash and cash equivalents - 23,691
Restricted cash 39,478 65,509
Investment in marketable securities 3,368 -
Deferred rent 17,841 14,833
Other assets, net 26,251 25,000
-------------------- --------------------
Total assets $1,034,285 $1,053,885
==================== ====================
Liabilities and Stockholders' Equity
Liabilities:
Mortgage notes payable $ 330,908 $ 337,520
Mortgage note payable - related parties 8,761 9,224
Revolving line of credit 13,079 -
Interest payable 1,596 1,331
Security deposits 5,272 4,754
Deferred rental income 3,964 3,302
Dividends and distributions payable 21,055 16,832
Accounts payable and accrued expenses 17,747 15,618
-------------------- --------------------
Total liabilities 402,382 388,581
-------------------- --------------------
Commitments and contingencies.
Minority interests in operating partnerships 497,485 526,626
-------------------- --------------------
Stockholders' equity:
Common stock, $.001 par value 20 20
Additional paid-in capital 154,412 153,024
Distributions in excess of accumulated (20,014) (14,366)
earnings
-------------------- --------------------
Total stockholders' equity 134,418 138,678
-------------------- --------------------
Total liabilities and stockholders' equity $1,034,285 $1,053,885
==================== ====================
(1) Amortization of an above-market lease intangible asset pursuant to
Statement of Financial Accounting Standard No. 141, "Business
Combinations."
(2) Includes approximately $159 and $267 in amortization expense for the three
months ended December 31, 2008 and 2007, respectively, and $600 and $2,153
in amortization expense for the twelve months ended December 31, 2008 and
2007, 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.