UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
AMENDMENT TO CURRENT REPORT
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 14, 2003
MISSION WEST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland Commission File Number: 95-2635431
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(State or other jurisdiction 1-8383 (I.R.S. Employer
of incorporation) Identification)
10050 Bandley Drive, Cupertino, California 95014
(Address of principal executive offices)
(408) 725-0700
(Registrant's telephone number, including area code)
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ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS.
(a) The following information is being furnished by the Company as required for
Item 12(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 14, 2003, the Company issued a press release announcing its earnings
results for the quarter ended June 30, 2003. The press release is attached to
this Current Report as Exhibit 99.1 and is incorporated by reference in response
to Item 12(a) of this report.
SIGNATURES
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 14, 2003 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
July 14, 2003
Mission West Properties, Inc. Announces Second Quarter 2003 Earnings 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, 2003 was
$28,952,000 or $0.28 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 $29,199,000 or $0.28 per diluted common share for the same period in
2002. On a sequential quarter basis, FFO per diluted common share remained the
same compared to the previous quarter ended March 31, 2003.
In addition to FFO for the quarter ended June 30, 2003, the Company recognized a
gain of $1,400,000 from the sale of joint venture real estate, which was
recorded as equity in earnings of unconsolidated joint venture.
Net income per diluted share was $0.23 for the quarters ended June 30, 2003 and
2002. For the six months ended June 30, 2003, net income per diluted share was
$0.46, down from $0.52 per diluted share in the first half of 2002, which
included $0.06 gain from sale of real estate.
INVESTMENT ACTIVITY
On April 1, 2003, the Company obtained a 50% interest in a 60,000 rentable
square foot shell building in Morgan Hill, California from the Berg Group under
the Berg Land Holdings Option Agreement in connection with its joint venture
with TBI. The joint venture financed 100% of the cost of the building. The shell
building was sold and the Company recognized a gain of approximately $1.4
million.
On April 9, 2003, the Company acquired a 36 acre seven building campus style
office/R&D project comprised of approximately 625,000 rentable square feet at
San Tomas and Central Expressway in Santa Clara, California, which is adjacent
to Nvidia Corporation's headquarters campus. The project was acquired for $110
million from an unrelated third party and financed with a combination of debt
and cash reserves. The debt component is comprised of a new short term mortgage
note with a commercial bank secured by the assets in the acquisition for the sum
of $80 million at LIBOR plus 200 basis points and matures in April 2004. In
addition, the Company utilized approximately $19.2 million of its operating line
of credit with Cupertino National Bank in connection with this acquisition.
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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 108
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.
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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, 2003 June 30, 2002 June 30, 2003 June 30, 2002
----------------- --------------- --------------- ---------------
REVENUES:
Rental revenues from real estate $33,194 $32,753 $64,626 $65,238(1)
Tenant reimbursements 4,990 4,875 9,565 10,201
Other income, including interest 569 278 1,303 774
----------------- --------------- --------------- ---------------
Total revenues 38,753 37,906 75,494 76,213
----------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 1,891 1,921 3,410 4,196
Real estate taxes 3,440 3,003 6,515 6,060
Depreciation & amortization of real estate 5,397(2) 4,455 9,961(2) 8,811
General and administrative 322 370 680 804
Interest 4,356 2,362 7,761 4,633
Interest (related parties) 256 899 550 1,909
----------------- --------------- --------------- ---------------
Total expenses 15,662 13,010 28,877 26,413
----------------- --------------- --------------- ---------------
Income before minority interests & equity in
earnings of unconsolidated joint venture 23,091 24,896 46,617 49,800
Equity in earnings of unconsolidated joint
venture 2,023 - 2,760 -
----------------- --------------- --------------- ---------------
Income before minority interests 25,114 24,896 49,377 49,800
Minority interests 20,958 20,823 41,187 41,591
----------------- --------------- --------------- ---------------
Income from continuing operations 4,156 4,073 8,190 8,209
----------------- --------------- --------------- ---------------
Discontinued operations, net of minority interests:
Gain from disposal of discontinued operations - - - 1,017
Income attributable to discontinued operations - - - 48
----------------- --------------- --------------- ---------------
Income from discontinued operations - - - 1,065
----------------- --------------- --------------- ---------------
Net income to common stockholders $ 4,156 $ 4,073 $ 8,190 $ 9,274
================= =============== =============== ===============
Net income to minority interests $20,958 $20,823 $41,187 $46,917
================= =============== =============== ===============
Income per share from continuing operations:
Basic $0.23 $0.23 $0.46 $0.47
================= =============== =============== ===============
Diluted $0.23 $0.23 $0.46 $0.46
================= =============== =============== ===============
Income per share from discontinued operations:
Basic - - - $0.06
================= =============== =============== ===============
Diluted - - - $0.06
================= =============== =============== ===============
Net income per share to common stockholders:
Basic $0.23 $0.23 $0.46 $0.53
================= =============== =============== ===============
Diluted $0.23 $0.23 $0.46 $0.52
================= =============== =============== ===============
Weighted average shares of common stock (basic) 17,701,999 17,464,692 17,669,808 17,434,796
================= =============== =============== ===============
Weighted average shares of common stock 17,762,773 17,902,853 17,728,638 17,878,483
(diluted) ================= =============== =============== ===============
Weighted average O.P. units outstanding 86,498,064 86,163,983 86,504,837 86,181,702
================= =============== =============== ===============
FUNDS FROM OPERATIONS
Funds from operations $28,952 $29,199 $57,607 $58,632
================= =============== =============== ===============
Funds from operations per share (3) $ 0.28 $ 0.28 $ 0.55 $ 0.56
================= =============== =============== ===============
Outstanding common stock 17,739,691 17,467,329 17,739,691 17,467,329
================= =============== =============== ===============
Outstanding O.P. units 86,498,064 86,161,346 86,498,064 86,161,346
================= =============== =============== ===============
Weighted average O.P. units & common stock
outstanding (diluted) 104,260,837 104,066,836 104,233,476 104,060,185
================= =============== =============== ===============
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Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
FUNDS FROM OPERATIONS CALCULATION June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
----------------- --------------- --------------- ---------------
Net income $ 4,156 $ 4,073 $ 8,190 $ 9,273
Add:
Minority interests (4) 20,799 20,671 40,856 46,605
Depreciation and amortization of real 5,397 4,455 9,961 8,857
estate
Less:
Gain on sale of JV assets / assets 1,400 - 1,400 6,103
----------------- --------------- --------------- ---------------
Funds from operations $28,952 $29,199 $57,607 $58,632
================= =============== =============== ===============
Funds From Operations ("FFO") is a non-GAAP financial measurement used by real
estate investment trusts 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, amortization
of commission and depreciation of non-real estate assets) and after adjustments
for unconsolidated partnerships and joint ventures. Management considers FFO an
appropriate measure of performance of an equity REIT because, along with cash
flows from operating activities, financing activities and investing activities,
it provides investors with an understanding of our ability to incur and service
debt, and make capital expenditures. 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
PROPERTY AND OTHER DATA: June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
----------------- --------------- --------------- ---------------
Total properties, end of period 108 100 108 100
Total square feet, end of period 7,788,742 6,998,930 7,788,742 6,998,930
Average monthly rental revenue per square foot (5) $ 1.73 $ 1.69 $ 1.73 $ 1.69
Average occupancy 81.5% 90.9% 82.6% 93.1%
Actual occupancy 80.2% 90.3% 80.2% 90.3%
Straight-line rent $206 $176 $ 450 ($ 605)
Capital expenditures $756 $217 $1,409 $358
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BALANCE SHEET
June 30, 2003 December 31, 2002
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Assets:
Land $ 276,405 $234,707
Buildings and improvements 795,415(6) 726,581
----------------- --------------------
Total investments in properties 1,071,820 961,288
Less accumulated depreciation (76,049) (66,560)
----------------- --------------------
Net investments in properties 995,771 894,728
Investments in unconsolidated joint venture 2,159 -
----------------- --------------------
Net investments in real estate assets 997,930 894,728
Cash 2,745 4,479
Deferred rent 17,451 17,001
Other assets 13,477 13,198
----------------- --------------------
Total assets $1,031,603 $929,406
================= ====================
Liabilities:
Line of credit - related parties $ 4,185 $ 58,792
Revolving line of credit 18,431 23,839
Loan payable - 20,000
Mortgage notes payable 302,352 125,062
Mortgage notes payable - related parties 10,923 11,078
Interest payable 335 337
Security deposits 10,664 11,184
Prepaid rental income 14,056 9,876
Dividend/distribution payable 25,017 24,951
Accounts payable and accrued expenses 4,672 4,698
----------------- --------------------
Total liabilities 390,635 289,817
Minority interests 528,317 528,768
Stockholders' equity:
Common stock, $.001 par value 18 17
Paid in capital 130,429 128,295
Accumulated deficit (17,796) (17,491)
----------------- --------------------
Total stockholders' equity 112,651 110,821
----------------- --------------------
Total liabilities and stockholders' equity $1,031,603 $929,406
================= ====================
(1) The Company recorded an adjustment of $1.4 million to establish a reserve
relating to the recapture of straight-line revenues and other tenant
related items for the quarter ended March 31, 2002.
(2) Includes approximately $472 in amortization expense from the adoption of
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations," which requires the purchase price allocation and
amortization of the origination value and fair market value of the acquired
leases associated with properties acquired after July 1, 2001.
(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 unrelated 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.
(6) Effective January 1, 2003, the Company adopted SFAS No. 141, which was
applied to the San Tomas Technology Park acquisition. The amount allocated,
in accordance with SFAS No. 141, was approximately $11.2 million, which
will be amortized over six years.
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