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): January 27, 2004
MISSION WEST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland Commission File Number: 95-2635431
(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)
--------------------------------------------------------------------------------
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 January 27, 2004, the Company issued a press release announcing its earnings
results for the quarter and year ended December 31, 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: January 27, 2004 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
January 27, 2004
Mission West Properties, Inc. Announces Fourth 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 December 31, 2003 was
$30,948,000 or $0.30 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 $29,676,000 or $0.28 per diluted common share for the same period in
2002, a per share increase of approximately 7.1%. Settlements received from
prior bankrupted tenants accounted for approximately $0.02 per diluted share in
the fourth quarter 2003. On a sequential quarter basis, FFO per diluted common
share increased $0.02 over the previous quarter ended September 30, 2003. For
the year ended December 31, 2003, FFO increased to $117,769,000 or $1.13 per
diluted share from FFO of $117,360,000 or $1.13 per diluted share for the same
period in 2002.
Net income to common stockholders per diluted share was $0.24 for the quarter
ended December 31, 2003 compared to $0.21 for the same period in 2002, a per
share increase of 14.3%. For the twelve months ended December 31, 2003, net
income to common stockholders per diluted share was $0.92, down from $0.98 per
diluted share from one year ago, which included $0.06 from the sale of real
estate included in discontinued operations, a per share decrease of 6.1%. Fourth
quarter and full year 2003 net income per diluted share included $0.02 per share
from bankrupted tenant settlements.
INVESTMENT ACTIVITY
On December 15, 2003, the Company acquired one R&D property consisting of
approximately 129,000 rentable square feet located at 5970 Optical Court in San
Jose, CA from the Berg Group under the Berg Land Holdings Option Agreement for
an acquisition cost of approximately $11.2 million. The first year anticipated
unleveraged cash return for this property is approximately 11.5%.
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 109
properties totaling approximately 7.9 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
UNAUDITED
(In thousands, except share, per share and property data amounts)
Three Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
Dec 31, 2003 Dec 31, 2002 Dec 31, 2003 Dec 31, 2002
----------------- --------------- --------------- ---------------
REVENUES:
Rental revenues from real estate $33,747 $32,378 $132,155 $129,781 (1)
Tenant reimbursements 4,511 4,677 18,871 20,097
Other income, including interest 2,656 (2) 2,989 (3) 4,527 (2) 4,250 (3)
----------------- --------------- --------------- ---------------
Total revenues 40,914 40,044 155,553 154,128
----------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 2,410 3,611 8,376 9,781
Real estate taxes 3,087 3,083 12,477 12,234
Depreciation & amortization of real estate 5,798 (4) 4,565 21,556 (4) 17,928
General and administrative 285 298 1,325 1,488
Interest 4,350 2,542 16,446 9,588
Interest (related parties) 234 652 1,064 3,422
----------------- --------------- --------------- ---------------
Total expenses 16,164 14,751 61,244 54,441
----------------- --------------- --------------- ---------------
Income before minority interests & equity in
earnings of unconsolidated joint venture 24,750 25,293 94,309 99,687
Equity in earnings of unconsolidated joint venture 526 - 3,885 -
----------------- --------------- --------------- ---------------
Income before minority interests 25,276 25,293 98,194 99,687
Minority interests 21,007 21,623 81,792 83,251
----------------- --------------- --------------- ---------------
Income from continuing operations 4,269 3,670 16,402 16,436
----------------- --------------- --------------- ---------------
Discontinued operations, net of minority
interests:
Gain from disposal of discontinued operations - - - 1,018
Income attributable to discontinued operations - - - 47
----------------- --------------- --------------- ---------------
Income from discontinued operations - - - 1,065
----------------- --------------- --------------- ---------------
Net income to common stockholders $4,269 $3,670 $16,402 $17,501
================= =============== =============== ===============
Net income to minority interests $21,007 $21,623 $81,792 $88,576
================= =============== =============== ===============
Income per share from continuing operations:
Basic $0.24 $0.21 $0.92 $0.94
================= =============== =============== ===============
Diluted $0.24 $0.21 $0.92 $0.92
================= =============== =============== ===============
Income per share from discontinued operations:
Basic - - - $0.06
================= =============== =============== ===============
Diluted - - - $0.06
================= =============== =============== ===============
Net income per share to common stockholders:
Basic $0.24 $0.21 $0.92 $1.00
================= =============== =============== ===============
Diluted $0.24 $0.21 $0.92 $0.98
================= =============== =============== ===============
Weighted average shares of common stock (basic) 17,869,252 17,485,590 17,739,609 17,455,799
================= =============== =============== ===============
Weighted average shares of common stock (diluted) 17,972,706 17,800,971 17,802,947 17,854,892
================= =============== =============== ===============
Weighted average O.P. units outstanding 86,398,064 86,475,771 86,476,217 86,334,548
================= =============== =============== ===============
FUNDS FROM OPERATIONS
Funds from operations $30,948 $29,676 $117,769 $117,360
================= =============== =============== ===============
Funds from operations per share (5) $ 0.30 $ 0.28 $ 1.13 $ 1.13
================= =============== =============== ===============
Outstanding common stock 17,894,691 17,487,329 17,894,691 17,487,329
================= =============== =============== ===============
Outstanding O.P. units 86,398,064 86,474,032 86,398,064 86,474,032
================= =============== =============== ===============
Weighted average O.P. units & common stock
outstanding (diluted) 104,370,770 104,276,742 104,279,165 104,189,440
================= =============== =============== ===============
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Three Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
FUNDS FROM OPERATIONS CALCULATION Dec 31, 2003 Dec 31, 2002 Dec 31, 2003 Dec 31, 2002
----------------- --------------- --------------- ---------------
Net income $ 4,269 $ 3,670 $16,402 $17,501
Add:
Minority interests (6) 20,881 21,441 81,211 87,988
Depreciation and amortization of real 5,798 4,565 21,556 17,974
estate
Less:
Gain on sale of JV assets / assets - - 1,400 6,103
----------------- --------------- --------------- ---------------
Funds from operations $30,948 $29,676 $117,769 $117,360
================= =============== =============== ===============
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 Twelve Months Twelve Months
Ended Ended Ended Ended
PROPERTY AND OTHER DATA: Dec 31, 2003 Dec 31, 2002 Dec 31, 2003 Dec 31, 2002
----------------- --------------- --------------- ---------------
Total properties, end of period 109 101 109 101
Total square feet, end of period 7,917,262 7,163,930 7,917,262 7,163,930
Average monthly rental revenue per square foot $1.80 $1.75 $1.76 $1.71
(7)
Average occupancy 77.9% 85.2% 80.5% 90.0%
Actual occupancy 77.3% 83.8% 77.3% 83.8%
Straight-line rent $924 $1,166 $1,970 $ 78
Capital expenditures $277 $ 218 $2,178 $1,195
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BALANCE SHEET (UNAUDITED)
December 31, 2003 December 31, 2002
-------------------- --------------------
Assets:
Land $ 279,163 $234,707
Buildings and improvements 785,660 726,581
Real estate related intangible assets 18,284 (8) -
-------------------- --------------------
Total investments in properties 1,083,107 961,288
Less accumulated depreciation (88,116) (66,560)
-------------------- --------------------
Net investments in properties 994,991 894,728
Investments in unconsolidated joint venture 2,285 -
-------------------- --------------------
Net investments in real estate assets 997,276 894,728
Cash 4,129 4,479
Deferred rent 18,970 17,001
Other assets 16,025 13,198
-------------------- --------------------
Total assets $1,036,400 $929,406
==================== ====================
Liabilities:
Line of credit - related parties $ 6,320 $ 58,792
Revolving line of credit 23,965 23,839
Loan payable - 20,000
Mortgage notes payable 299,858 125,062
Mortgage notes payable - related parties 10,762 11,078
Interest payable 332 337
Security deposits 10,248 11,184
Prepaid rental income 12,723 9,876
Dividend/distribution payable 25,031 24,951
Accounts payable and accrued expenses 5,085 4,698
-------------------- --------------------
Total liabilities 394,324 289,817
Minority interests 528,062 528,768
Stockholders' equity:
Common stock, $.001 par value 18 17
Paid in capital 132,136 128,295
Accumulated deficit (18,140) (17,491)
-------------------- --------------------
Total stockholders' equity 114,014 110,821
-------------------- --------------------
Total liabilities and stockholders' equity $1,036,400 $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 $2.2 million received from bankrupted tenant
settlements.
(3) Includes approximately $2.4 million in termination fees, net of straight
line rent adjustment and write-off of unamortized leasing commissions.
(4) Includes approximately $912 and $2,297 in amortization expense for the
three and twelve months ended December 31, 2003, respectively, for the
amortization of the origination value and fair market value of acquired
leases of the San Tomas Technology Park acquisition pursuant to Statement
of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations."
(5) Calculated on a fully diluted basis. Assumes conversion of O.P. units
outstanding into the Company's common stock.
(6) The minority interest for third parties has been deducted from total
minority interest in calculating FFO.
(7) 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.
(8) The Company applied the provisions of SFAS No. 141 to the San Tomas
Technology Park acquisition. The amount allocated to intangible assets
pursuant to SFAS No. 141 was approximately $18.3 million, which will be
amortized over the remaining lease terms.
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