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 13, 2004
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)
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 October 13, 2004, the Company issued a press release announcing its earnings
results for the quarter ended September 30, 2004. 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.
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EXHIBIT 99.1
Press Release
For Immediate News Release
October 13, 2004
MISSION WEST PROPERTIES, INC. ANNOUNCES THIRD QUARTER 2004 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 September 30, 2004 was
$24,519,000 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 $29,110,000 or $0.28 per diluted common share for the same period in
2003. On a sequential quarter basis, FFO per diluted common share decreased
$0.04 over the previous quarter ended June 30, 2004. Lease termination fees and
a settlement of a tenant breach of lease lawsuit accounted for approximately
$0.04 per diluted share in the second quarter 2004.
Net income to common stockholders per diluted share was $0.18 for the quarter
ended September 30, 2004 compared to $0.22 for the same period in 2003, a per
share decrease of approximately 18.2%. For the nine months ended September 30,
2004, net income to common stockholders per diluted share was $0.58, down from
$0.68 per diluted share from one year ago, which included $0.01 gain from the
sale of joint venture real estate included in equity in earnings of
unconsolidated joint venture, a per share decrease of approximately 14.7%. Net
income per diluted share for first nine months of 2004 included $0.04 per share
from lease termination fees and a tenant breach of lease lawsuit settlement.
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
(In thousands, except share, per share and property data amounts)
Three Months Nine Months
Three Months Ended Nine Months Ended
Ended Sept 30, 2003 Ended Sept 30, 2003
Sept 30, 2004 (As Restated) Sept 30, 2004 (As Restated)
----------------- --------------- --------------- ---------------
REVENUES:
Rental revenue from real estate $29,580 $33,310 $91,057 $97,464
Tenant reimbursements 3,766 4,796 11,722 14,360
Other income, including interest 397 567 5,404(5) 1,871
----------------- --------------- --------------- ---------------
Total revenues 33,743 38,673 108,183 113,695
----------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 2,295 2,683 6,964 6,349
Real estate taxes 2,585 2,876 8,613 9,391
Interest 4,468 4,335 13,051 12,097
Interest (related parties) 256 280 760 830
General and administrative 395 360 1,628 1,039
Depreciation & amortization of real estate 5,428(1) 5,497 16,644(1) 15,273
----------------- --------------- --------------- ---------------
Total expenses 15,427 16,031 47,660 44,979
----------------- --------------- --------------- ---------------
Income before equity in earnings of unconsolidated
joint venture & minority interests 18,316 22,642 60,523 68,716
Equity in earnings of unconsolidated joint venture 345 599 1,564 3,358
----------------- --------------- --------------- ---------------
Income before minority interests 18,661 23,241 62,087 72,074
Minority interests 15,488 19,348 51,596 60,081
----------------- --------------- --------------- ---------------
Income from operations 3,173 3,893 10,491 11,993
----------------- --------------- --------------- ---------------
Net income to common stockholders $3,173 $3,893 $10,491 $11,993
================= =============== =============== ===============
Net income to minority interests $15,488 $19,348 $51,596 $60,081
================= =============== =============== ===============
Net income per share to common stockholders:
Basic $0.18 $0.22 $0.58 $0.68
================= =============== =============== ===============
Diluted $0.18 $0.22 $0.58 $0.68
================= =============== =============== ===============
Weighted average shares of common stock 18,071,484 17,747,293 18,019,277 17,695,920
(basic) ================= =============== =============== ===============
Weighted average shares of common stock 18,098,174 17,817,917 18,077,854 17,757,461
(diluted) ================= =============== =============== ===============
Weighted average O.P. units outstanding 86,410,402 86,498,064 86,459,617 86,502,555
================= =============== =============== ===============
FUNDS FROM OPERATIONS
Funds from operations $24,519 $29,110 $80,338 $87,054
================= =============== =============== ===============
Funds from operations per share (2) $ 0.23 $ 0.28 $ 0.77 $ 0.83
================= =============== =============== ===============
Outstanding common stock 18,077,191 17,754,691 18,077,191 17,754,691
================= =============== =============== ===============
Outstanding O.P. units 86,404,695 86,498,064 86,404,695 86,498,064
================= =============== =============== ===============
Weighted average O.P. units & common stock
outstanding (diluted) 104,508,576 104,315,981 104,537,470 104,260,016
================= =============== =============== ===============
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Three Months Nine Months
Three Months Ended Nine Months Ended
FUNDS FROM OPERATIONS CALCULATION Ended Sept 30, 2003 Ended Sept 30, 2003
Sept 30, 2004 (As Restated) Sept 30, 2004 (As Restated)
----------------- --------------- --------------- ---------------
Net income $3,173 $3,893 $10,491 $11,993
Add:
Minority interests (3) 15,377 19,225 51,228 59,627
Depreciation and amortization of real estate 5,969 5,992 18,619 16,834
Less:
Gain on sale of unconsolidated JV real estate - - - 1,400
----------------- --------------- --------------- ---------------
Funds from operations $24,519 $29,110 $80,338 $87,054
================= =============== =============== ===============
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 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 Nine Months Nine Months
Ended Ended Ended Ended
PROPERTY AND OTHER DATA: Sept 30, 2004 Sept 30, 2003 Sept 30, 2004 Sept 30, 2003
--------------- --------------- ----------------- ---------------
Total properties, end of period 109 108 109 108
Total square feet, end of period 7,917,262 7,788,742 7,917,262 7,788,742
Average monthly rental revenue per square foot(4) $1.81 $1.81 $1.79 $1.76
Average occupancy 69.2% 78.4% 72.2% 81.3%
Actual occupancy 69.0% 78.3% 69.0% 78.3%
Straight-line rent $289 $596 $ 141 $1,046
Capital expenditures $217 $492 $1,762 $1,901
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BALANCE SHEET September 30, 2004 December 31, 2003
-------------------- --------------------
Assets:
Land $ 275,707 $ 275,707
Buildings and improvements 779,558 779,636
Real estate related intangible assets 18,284 19,651
-------------------- --------------------
Total investments in properties 1,073,549 1,074,994
Less accumulated depreciation and amortization (105,936) (89,243)
-------------------- --------------------
Net investments in properties 967,613 985,751
Cash and cash equivalents 1,597 4,129
Restricted cash 1,551 -
Deferred rent receivable 19,111 18,970
Investments in unconsolidated joint venture 2,431 2,285
Other assets 20,240 21,497
-------------------- --------------------
Total assets $1,012,543 $1,032,632
==================== ====================
Liabilities:
Line of credit - related parties $ 1,105 $ 6,320
Revolving line of credit 26,492 23,965
Mortgage notes payable 295,284 299,858
Mortgage notes payable - related parties 10,508 10,762
Interest payable 330 332
Security deposits 8,771 10,248
Deferred rental income 11,622 12,723
Dividend/distribution payable 25,076 25,031
Accounts payable and accrued expenses 8,482 5,085
-------------------- --------------------
Total liabilities 387,670 394,324
Minority interests 511,777 524,918
Stockholders' equity:
Common stock, $.001 par value 18 18
Paid in capital 134,348 132,136
Accumulated deficit (21,270) (18,764)
-------------------- --------------------
Total stockholders' equity 113,096 113,390
-------------------- --------------------
Total liabilities and stockholders' equity $1,012,543 $1,032,632
==================== ====================
(1) Includes approximately $440 and $1,732 in amortization expense for the
three and nine months ended September 30, 2004, respectively, for the
amortization of in-place lease value of the San Tomas Technology Park
acquisition pursuant to Statement of Financial Accounting Standard ("SFAS")
No. 141, "Business Combinations."
(2) Calculated on a fully diluted basis. Assumes conversion of O.P. units
outstanding into the Company's common stock.
(3) The minority interest for third parties has been deducted from total
minority interest in calculating FFO.
(4) 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.
(5) Includes approximately $3.7 million from termination fees and a tenant
breach of lease lawsuit settlement.
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