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 16, 2008
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 16, 2008, the Company issued a press release announcing its earnings
results for the first quarter ended March 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.
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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 17, 2008 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 16, 2008
MISSION WEST PROPERTIES ANNOUNCES FIRST QUARTER 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 March 31, 2008 was
approximately $15,223,000 or $0.14 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 $23,905,000 or $0.23 per diluted
common share for the same period in 2007. On a sequential quarter basis, FFO for
the quarter ended December 31, 2007 was approximately $0.13 per diluted common
share. Termination fees and security deposit forfeitures income relating to
lease terminations accounted for approximately $1,921,000, or $0.02 per diluted
common share and $10,109,000, or $0.10 per diluted common share for the quarters
ended March 31, 2008 and 2007, 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 $0.10 for the quarter
ended March 31, 2008 compared to $0.17 for the quarter ended March 31, 2007, a
per share decrease of approximately 41.1%. Termination fees and security deposit
forfeitures income relating to lease terminations accounted for approximately
$0.02 and $0.10 per diluted common share for the quarters ended March 31, 2008
and 2007, 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 January 2008, the Company acquired a vacant R&D property consisting of
approximately 110,500 rentable square feet located at 5981 Optical Court in San
Jose, California from the Berg Group under the Berg Land Holdings Option
Agreement for an acquisition cost of approximately $19,068,000. The building was
leased within several days of the acquisition. The first year anticipated
un-leveraged cash return for this property is approximately 11.5%.
In February 2008, the Company acquired a fully leased office/R&D property with
approximately 75,300 rentable square feet located at 2904 Orchard Parkway in San
Jose, California from an unrelated third party. The total acquisition price for
this property was approximately $16,696,000 and was partially funded from the
proceeds received from the 1170 Morse Avenue property sale in September 2007,
which was classified as restricted cash as of December 31, 2007. The first year
anticipated un-leveraged cash return for this property is approximately 7.3%.
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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 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.
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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, 2008 Mar 31, 2007
---------------- ----------------
REVENUES:
Rental revenue from real estate $18,996 $21,202
Above market lease intangible asset amortization - (4,091) (1)
Tenant reimbursements 3,583 3,214
Lease termination income 1,921 10,109
Other income, including interest 786 3,056
---------------- ----------------
Total revenues 25,286 33,490
---------------- ----------------
EXPENSES:
Operating expenses 2,477 1,959
Real estate taxes 2,411 2,562
Interest 4,927 5,069
Interest (related parties) 436 184
General and administrative 673 713
Depreciation and amortization of real estate 5,623 (2) 6,154 (2)
---------------- ----------------
Total expenses 16,547 16,641
---------------- ----------------
Income before equity in earnings of unconsolidated
joint venture and minority interests 8,739 16,849
Equity in earnings of unconsolidated joint venture 382 337
Minority interests (7,239) (13,820)
---------------- ----------------
Income from continuing operations 1,882 3,366
---------------- ----------------
Discontinued operations, net of minority interests:
Income attributable to discontinued operations - 9
---------------- ----------------
Income from discontinued operations - 9
---------------- ----------------
Net income to common stockholders $1,882 $ 3,375
================ ================
Net income to minority interests $7,239 $13,879
================ ================
Income per share from continuing operations:
Basic $0.10 $0.17
================ ================
Diluted $0.10 $0.17
================ ================
Income per share from discontinued operations:
Basic - -
================ ================
Diluted - -
================ ================
Net income per share to common stockholders:
Basic $0.10 $0.17
================ ================
Diluted $0.10 $0.17
================ ================
Weighted average shares of common stock (basic) 19,667,605 19,582,787
================ ================
Weighted average shares of common stock (diluted) 19,667,605 19,889,453
================ ================
Weighted average O.P. units outstanding 85,530,417 85,066,999
================ ================
FUNDS FROM OPERATIONS
Funds from operations $15,223 $23,905
================ ================
Funds from operations per share (3) $0.14 $0.23
================ ================
Outstanding common stock 19,669,807 19,625,587
================ ================
Outstanding O.P. units 85,528,215 85,024,199
================ ================
Weighted average O.P. units and common stock
outstanding (diluted) 105,198,022 104,956,452
================ ================
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Three Months Three Months
Ended Ended
FUNDS FROM OPERATIONS CALCULATION Mar 31, 2008 Mar 31, 2007
---------------- ----------------
Net income $ 1,882 $ 3,375
Add:
Minority interests (4) 7,128 13,755
Depreciation and amortization of real estate from
continuing operations 6,024 6,530
Depreciation and amortization of real estate from
discontinued operations - 56
Depreciation & amortization of real estate held in
unconsolidated joint venture 189 189
---------------- ----------------
Funds from operations $15,223 $23,905
================ ================
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, 2008 Mar 31, 2007
---------------- ----------------
Total properties, end of period 111 107
Total square feet, end of period 8,047,569 7,701,359
Average monthly rental revenue per square foot (5) $1.23 $1.50
Occupancy for leased properties 64.4% 69.4%
Straight-line rent $705 ($1,595)
Leasing commissions $316 $ 458
Capital expenditures $221 $ 863
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BALANCE SHEET March 31, 2008 December 31, 2007
-------------------- --------------------
Assets:
Land $ 320,911 $ 312,152
Buildings and improvements 790,770 764,665
Real estate related intangible assets 3,240 2,119
-------------------- --------------------
Total investments in properties 1,114,921 1,078,936
Less accumulated depreciation and amortization (162,442) (156,819)
-------------------- --------------------
Net investments in properties 952,479 922,117
Cash and cash equivalents 21,611 23,691
Restricted cash 48,640 65,509
Deferred rent receivable 15,539 14,833
Investment in unconsolidated joint venture 2,667 2,735
Other assets, net 26,450 25,000
-------------------- --------------------
Total assets $ 1,067,386 $ 1,053,885
==================== ====================
Liabilities:
Mortgage notes payable $ 334,774 $ 337,520
Note payable - related parties 19,316 -
Mortgage note payable - related parties 9,112 9,224
Interest payable 1,320 1,331
Security deposits 4,793 4,754
Deferred rental income 4,775 3,302
Dividend/distribution payable 21,040 16,832
Accounts payable and accrued expenses 18,925 15,618
-------------------- --------------------
Total liabilities 414,055 388,581
-------------------- --------------------
Minority interests 516,504 526,626
-------------------- --------------------
Stockholders' equity:
Common stock, $.001 par value 20 20
Additional paid-in capital 153,224 153,024
Distributions in excess of accumulated earnings (16,417) (14,366)
-------------------- --------------------
Total stockholders' equity 136,827 138,678
-------------------- --------------------
Total liabilities and stockholders' equity $ 1,067,386 $ 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 $122 and $1,193 in amortization expense for the
three months ended March 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.