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 17, 2007
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 October 17, 2007, the Company issued a press release announcing its earnings
results for the third quarter ended September 30, 2007. 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: October 18, 2007 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
October 17, 2007
MISSION WEST PROPERTIES ANNOUNCES THIRD QUARTER 2007 OPERATING RESULTS
"We build the buildings for the high tech companies that build the internet"
CUPERTINO, CA - MISSION WEST PROPERTIES, INC. (AMEX: MSW) reported today that
Funds From Operations ("FFO") for the quarter ended September 30, 2007 was
approximately $61,016,000 or $0.58 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 $16,567,000 or $0.16 per diluted
common share for the same period in 2006. Net termination fee income relating to
lease terminations for the third quarter ended September 30, 2007 accounted for
approximately $46,340,000, or $0.44 per diluted common share. On a sequential
quarter basis, FFO for the quarter ended June 30, 2007 was approximately $0.15
per diluted common share. For the nine months ended September 30, 2007, FFO
increased to $100,875,000 or $0.96 per diluted common share from FFO of
$68,047,000 or $0.65 per diluted common share for the same period in 2006. Net
termination fees and security deposit forfeitures income relating to lease
terminations accounted for approximately $51,721,000 or $0.49 per diluted common
share and $14,784,000 or $0.14 per diluted common share for the nine months
ended September 30, 2007 and 2006, respectively.
Net income per diluted share to common stockholders was $0.60 for the quarter
ended September 30, 2007 compared to $0.11 for the quarter ended September 30,
2006, a per share increase of approximately 445.5%. Net termination fee income
relating to lease terminations accounted for approximately $0.47 per diluted
common share for the three months ended September 30, 2007. For the nine months
ended September 30, 2007, net income per diluted share to common stockholders
was $0.87, up from $0.49 a year ago, a per share increase of approximately
77.6%. Net termination fees and security deposit forfeitures income relating to
lease terminations accounted for approximately $0.52 and $0.15 per diluted
common share for the nine months ended September 30, 2007 and 2006,
respectively.
STATUS OF PENDING MERGER
Three parties are actively evaluating the Company data under non-disclosure
agreements and have all the data necessary to make a reasonable decision. The
Company hopes to conclude this process by the end of October 2007. If an
acceptable offer is not received, the Company will end all active interest in a
merger and actively pursue its efforts to expand and grow the Company as it has
in the past.
ACQUISITION ACTIVITY
On September 30, 2007, the Company acquired one vacant R&D property consisting
of approximately 98,500 rentable square feet located at 5845 Hellyer Avenue in
San Jose, California from the Berg Group under the Berg Land Holdings Option
Agreement for an acquisition cost of approximately $10.9 million.
DISPOSITION ACTIVITY
During the third quarter of 2007, the Company completed the sale of two R&D
properties, which include 45700 Northport Loop, Fremont, California consisting
of approximately 47,600 rentable square feet and 1170 Morse Avenue, Sunnyvale,
California consisting of approximately 39,200 rentable square feet. Gains of
approximately $1.7 million and $4.8 million were realized on the total sale
prices of $7.7 million and $8.3 million for 45700 Northport Loop and 1170 Morse
Avenue, respectively.
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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 109
properties totaling approximately 7.9 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 Nine Months Nine Months
Ended Ended Ended Ended
Sept 30, 2007 Sept 30, 2006 Sept 30, 2007 Sept 30, 2006
----------------- --------------- --------------- ---------------
REVENUES:
Rental revenue from real estate $19,000 $22,444 $61,350 $68,281
Above market lease intangible asset amortization - (472)(1) (4,091)(1) (1,416)(1)
Tenant reimbursements 3,454 3,260 9,908 9,383
Lease termination income 47,238 - 57,515 16,068
Other income, including interest 1,895 1,011 5,909 2,826
----------------- --------------- --------------- ---------------
Total revenues 71,587 26,243 130,591 95,142
----------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 3,383 2,141 7,160 6,009
Real estate taxes 2,846 2,814 8,147 7,549
Interest 5,061 5,172 15,175 15,580
Interest (related parties) 180 188 546 569
General and administrative 982 531 2,369 1,803
Depreciation and amortization of real estate 5,532(2) 5,513(2) 17,084(2) 15,993(2)
----------------- --------------- --------------- ---------------
Total expenses 17,984 16,359 50,481 47,503
----------------- --------------- --------------- ---------------
Income before equity in earnings of
unconsolidated joint venture and minority
interests 53,603 9,884 80,110 47,639
Equity in earnings of unconsolidated joint venture 371 856 1,058 1,538
Minority interests (43,153) (8,644) (64,980) (39,997)
----------------- --------------- --------------- ---------------
Income from continuing operations 10,821 2,096 16,188 9,180
----------------- --------------- --------------- ---------------
Discontinued operations, net of minority interests:
Gain from disposal of discontinued operations 1,127 - 1,127 -
(Loss)/income attributable to discontinued operations (7) 10 5 200
----------------- --------------- --------------- ---------------
Income from discontinued operations 1,120 10 1,132 200
----------------- --------------- --------------- ---------------
Net income to common stockholders $11,941 $2,106 $17,320 $9,380
================= =============== =============== ===============
Net income to minority interests $48,550 $8,700 $70,469 $41,057
================= =============== =============== ===============
Income per share from continuing operations:
Basic $0.55 $0.11 $0.82 $0.49
================= =============== =============== ===============
Diluted $0.54 $0.11 $0.81 $0.48
================= =============== =============== ===============
Income per share from discontinued operations:
Basic $0.06 - $0.06 $0.01
================= =============== =============== ===============
Diluted $0.06 - $0.06 $0.01
================= =============== =============== ===============
Net income per share to common stockholders:
Basic $0.61 $0.11 $0.88 $0.50
================= =============== =============== ===============
Diluted $0.60 $0.11 $0.87 $0.49
================= =============== =============== ===============
Weighted average shares of common stock (basic) 19,640,087 19,350,672 19,621,144 18,948,214
================= =============== =============== ===============
Weighted average shares of common stock (diluted) 19,818,806 19,418,884 19,914,374 19,024,662
================= =============== =============== ===============
Weighted average O.P. units outstanding 85,015,658 85,233,964 85,030,650 85,609,739
================= =============== =============== ===============
FUNDS FROM OPERATIONS
Funds from operations $61,016 $16,567 $100,875 $68,047
================= =============== =============== ===============
Funds from operations per share (3) $ 0.58 $ 0.16 $ 0.96 $ 0.65
================= =============== =============== ===============
Outstanding common stock 19,640,087 19,397,287 19,640,087 19,397,287
================= =============== =============== ===============
Outstanding O.P. units 85,557,935 85,231,199 85,557,935 85,231,199
================= =============== =============== ===============
Weighted average O.P. units and common stock
outstanding (diluted) 104,834,464 104,652,848 104,945,024 104,634,401
================= =============== =============== ===============
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Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
FUNDS FROM OPERATIONS CALCULATION Sept 30, 2007 Sept 30, 2006 Sept 30, 2007 Sept 30, 2006
----------------- --------------- --------------- ---------------
Net income $11,941 $2,106 $17,320 $9,380
Add:
Minority interests (4) 48,420 8,566 70,098 40,676
Depreciation and amortization of real estate
from continuing operations 6,856 5,881 19,168 17,130
Depreciation and amortization of real estate
from discontinued operations 139 214 250 639
Depreciation & amortization of real estate
held in unconsolidated joint venture 189 238 568 660
Less:
Gain on sale of real estate (6,529) (438) (6,529) (438)
----------------- --------------- --------------- ---------------
Funds from operations $61,016 $16,567 $100,875 $68,047
================= =============== =============== ===============
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 Nine Months Nine Months
Ended Ended Ended Ended
PROPERTY AND OTHER DATA: Sept 30, 2007 Sept 30, 2006 Sept 30, 2007 Sept 30, 2006
--------------- --------------- ----------------- ---------------
Total properties, end of period 109 110 109 110
Total square feet, end of period 7,861,692 7,936,481 7,861,692 7,936,481
Average monthly rental revenue per square foot (5) $1.47 $1.55 $1.47 $1.59
Occupancy for leased properties 62.6% 64.2% 62.6% 64.2%
Straight-line rent ($2,265) ($ 218) ($3,966) ($1,048)
Leasing commissions $ 746 $ 500 $2,647 $ 815
Capital expenditures $2,212 $1,186 $4,621 $1,349
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BALANCE SHEET September 30, 2007 December 31, 2006
-------------------- --------------------
Assets:
Land $ 312,152 $ 272,223
Buildings and improvements 764,408 756,596
Real estate related intangible assets 6,422 19,529
-------------------- --------------------
Total investments in properties 1,082,982 1,048,348
Less accumulated depreciation and amortization (155,619) (149,459)
-------------------- --------------------
Net investments in properties 927,363 898,889
Cash and cash equivalents 37,800 33,785
Restricted cash 65,468 48,245
Deferred rent receivable 14,523 18,489
Investment in unconsolidated joint venture 2,835 3,468
Other assets, net 25,522 24,611
-------------------- --------------------
Total assets $1,073,511 $1,027,487
==================== ====================
Liabilities:
Mortgage notes payable $ 340,225 $ 348,101
Mortgage notes payable - related parties 9,335 9,654
Interest payable 1,334 1,375
Security deposits 4,738 6,977
Deferred rental income 4,021 6,874
Dividend/distribution payable 16,832 16,745
Accounts payable and accrued expenses 22,906 7,601
-------------------- --------------------
Total liabilities 399,391 397,327
-------------------- --------------------
Minority interests 534,268 501,282
-------------------- --------------------
Stockholders' equity:
Common stock, $.001 par value 20 19
Paid-in capital 152,619 149,541
Accumulated deficit (12,787) (20,682)
-------------------- --------------------
Total stockholders' equity 139,852 128,878
-------------------- --------------------
Total liabilities and stockholders' equity $1,073,511 $1,027,487
==================== ====================
(1) Amortization of an above-market lease intangible asset pursuant to
Statement of Financial Accounting Standard No. 141, "Business
Combinations."
(2) Includes approximately $347 and $425 in amortization expense for the three
months ended September 30, 2007 and 2006, respectively, and $1,886 and
$1,189 in amortization expense for the nine months ended September 30, 2007
and 2006, 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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