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): July 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 July 16, 2008, the Company issued a press release announcing its earnings
results for the second quarter ended June 30, 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: July 16, 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
July 16, 2008
MISSION WEST PROPERTIES ANNOUNCES SECOND 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 June 30, 2008 was
approximately $13,049,000, 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 $15,954,000, or $0.15 per diluted
common share, for the same period in 2007. On a sequential quarter basis, FFO
for the quarter ended March 31, 2008 was approximately $0.14 per diluted common
share. For the six months ended June 30, 2008, FFO decreased to $28,272,000, or
$0.27 per diluted common share, from FFO of $39,859,000, or $0.38 per diluted
common share, for the same period in 2007. 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 $10,475,000 (including
$198,000 of security deposit forfeitures), or $0.10 per diluted common share,
for the six months ended June 30, 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 six months ended June 30, 2007.
Net income per diluted share to common stockholders was $0.07 for the quarter
ended June 30, 2008 compared to $0.10 for the quarter ended June 30, 2007, a per
share decrease of approximately 30%. For the six months ended June 30, 2008, net
income per diluted share to common stockholders was $0.16, down from $0.27 a
year ago, a per share decrease of approximately 40.7%. 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 six months ended
June 30, 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 six months ended June 30,
2007.
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 Six Months Six Months
Ended Ended Ended Ended
Jun 30, 2008 Jun 30, 2007 Jun 30, 2008 Jun 30, 2007
---------------- ---------------- ---------------- ----------------
REVENUES:
Rental revenue from real estate $19,359 $21,148 $38,356 $42,350
Above market lease intangible asset amortization - - - (4,091) (1)
Tenant reimbursements 3,710 3,240 7,293 6,454
Lease termination income - 168 1,921 10,277
Other income, including interest 464 958 1,249 4,015
---------------- ---------------- ---------------- ----------------
Total revenues 23,533 25,514 48,819 59,005
---------------- ---------------- ---------------- ----------------
EXPENSES:
Operating expenses 2,566 1,819 5,042 3,777
Real estate taxes 2,945 2,739 5,356 5,301
Interest 4,956 5,045 9,884 10,114
Interest (related parties) 280 182 716 366
General and administrative 674 673 1,347 1,387
Depreciation and amortization of real estate 5,682 (2) 5,398 (2) 11,305 (2) 11,552 (2)
---------------- ---------------- ---------------- ----------------
Total expenses 17,103 15,856 33,650 32,497
---------------- ---------------- ---------------- ----------------
Income before equity in earnings of unconsolidated
joint venture and minority interests 6,430 9,658 15,169 26,508
Equity in earnings of unconsolidated joint venture 407 350 789 686
Minority interests (5,478) (8,007) (12,717) (21,827)
---------------- ---------------- ---------------- ----------------
Income from continuing operations 1,359 2,001 3,241 5,367
---------------- ---------------- ---------------- ----------------
Discontinued operations, net of minority interests:
Income attributable to discontinued operations - 3 - 12
---------------- ---------------- ---------------- ----------------
Income from discontinued operations - 3 - 12
---------------- ---------------- ---------------- ----------------
Net income to common stockholders $1,359 $2,004 $ 3,241 $ 5,379
================ ================ ================ ================
Net income to minority interests $5,478 $8,039 $12,717 $21,918
================ ================ ================ ================
Income per share from continuing operations:
Basic $0.07 $0.10 $0.16 $0.27
================ ================ ================ ================
Diluted $0.07 $0.10 $0.16 $0.27
================ ================ ================ ================
Income per share from discontinued operations:
Basic - - - -
================ ================ ================ ================
Diluted - - - -
================ ================ ================ ================
Net income per share to common stockholders:
Basic $0.07 $0.10 $0.16 $0.27
================ ================ ================ ================
Diluted $0.07 $0.10 $0.16 $0.27
================ ================ ================ ================
Weighted average shares of common stock (basic) 19,695,988 19,639,928 19,681,797 19,611,515
================ ================ ================ ================
Weighted average shares of common stock (diluted) 19,902,304 20,020,596 19,766,535 19,956,752
================ ================ ================ ================
Weighted average O.P. units outstanding 85,528,215 85,009,858 85,529,316 85,038,271
================ ================ ================ ================
FUNDS FROM OPERATIONS
Funds from operations $13,049 $15,954 $28,272 $39,859
================ ================ ================ ================
Funds from operations per share (3) $0.12 $0.15 $0.27 $0.38
================ ================ ================ ================
Outstanding common stock 19,743,557 19,640,087 19,743,557 19,640,087
================ ================ ================ ================
Outstanding O.P. units 85,528,215 85,009,699 85,528,215 85,009,699
================ ================ ================ ================
Weighted average O.P. units and common stock
outstanding (diluted) 105,430,519 105,030,454 105,295,851 104,995,023
================ ================ ================ ================
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Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
FUNDS FROM OPERATIONS CALCULATION Jun 30, 2008 Jun 30, 2007 Jun 30, 2008 Jun 30, 2007
---------------- ---------------- ---------------- ----------------
Net income $ 1,359 $ 2,004 $ 3,241 $ 5,379
Add:
Minority interests (4) 5,415 7,922 12,543 21,677
Depreciation and amortization of real estate
from continuing operations 6,086 5,783 12,110 12,312
Depreciation and amortization of real estate
from discontinued operations - 56 - 112
Depreciation & amortization of real estate
held in unconsolidated joint venture 189 189 378 379
---------------- ---------------- ---------------- ----------------
Funds from operations $13,049 $15,954 $28,272 $39,859
================ ================ ================ ================
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 Six Months Six Months
Ended Ended Ended Ended
PROPERTY AND OTHER DATA: Jun 30, 2008 Jun 30, 2007 Jun 30, 2008 Jun 30, 2007
---------------- ---------------- ---------------- ----------------
Total properties, end of period 111 110 111 110
Total square feet, end of period 8,047,569 7,849,993 8,047,569 7,849,993
Average monthly rental revenue per square foot (5) $1.24 $1.40 $1.24 $1.46
Occupancy for leased properties 64.9% 67.8% 64.9% 67.8%
Straight-line rent $ 882 ($ 106) $1,587 ($1,701)
Leasing commissions $ 318 $1,444 $ 634 $1,901
Capital expenditures $2,116 $1,546 $2,337 $2,409
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BALANCE SHEET June 30, 2008 December 31, 2007
-------------------- --------------------
Assets
Real estate:
Land $ 320,911 $ 312,152
Buildings and improvements 792,886 764,665
Real estate related intangible assets 3,240 2,119
-------------------- --------------------
Total investments in real estate, net 1,117,037 1,078,936
Less accumulated depreciation and amortization (168,124) (156,819)
-------------------- --------------------
Net investments in properties 948,913 922,117
Cash and cash equivalents 769 23,691
Restricted cash 45,535 65,509
Deferred rent receivable, net 16,420 14,833
Investment in unconsolidated joint venture 2,625 2,735
Other assets, net 25,588 25,000
-------------------- --------------------
Total assets $1,039,850 $1,053,885
==================== ====================
Liabilities and Stockholders' Equity
Liabilities:
Mortgage notes payable $ 332,001 $ 337,520
Note payable - related parties 1,923 -
Mortgage note payable - related parties 8,997 9,224
Revolving line of credit 8,244 -
Interest payable 1,360 1,331
Security deposits 4,977 4,754
Deferred rental income 5,383 3,302
Dividends and distributions payable 21,054 16,832
Accounts payable and accrued expenses 16,174 15,618
-------------------- --------------------
Total liabilities 400,113 388,581
-------------------- --------------------
Minority interests 504,668 526,626
-------------------- --------------------
Stockholders' equity:
Common stock, $.001 par value 20 20
Additional paid-in capital 154,056 153,024
Distributions in excess of accumulated earnings (19,007) (14,366)
-------------------- --------------------
Total stockholders' equity 135,069 138,678
-------------------- --------------------
Total liabilities and stockholders' equity $1,039,850 $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 $347 in amortization expense for the three
months ended June 30, 2008 and 2007, respectively, and $281 and $1,540 in
amortization expense for the six months ended June 30, 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.
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