8-K 1 q38k2003.txt 2003 Q3 8-K 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 15, 2003 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 October 15, 2003, the Company issued a press release announcing its earnings results for the quarter ended September 30, 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: October 16, 2003 By: /s/ Wayne N. Pham --------------------------------------- Wayne N. Pham Vice President of Finance and Controller - 2 - Exhibit 99.1 [GRAPHIC OMITTED] PRESS RELEASE For Immediate News Release October 15, 2003 MISSION WEST PROPERTIES, INC. ANNOUNCES THIRD 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 September 30, 2003 was $29,214,000 or $0.28 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 $29,051,000 or $0.28 per diluted common share for the same period in 2002. On a sequential quarter basis, FFO per diluted common share remained the same compared to the previous quarter ended June 30, 2003. Net income to common stockholders per diluted share was $0.22 for the quarter ended September 30, 2003 compared to $0.26 for the same period in 2002. For the nine months ended September 30, 2003, net income to common stockholders per diluted share was $0.68, down from $0.77 per diluted share from one year ago, which included $0.06 from the sale of real estate included in discontinued operations. 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 108 properties totaling approximately 7.8 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. - 3 - 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, 2003 Sept 30, 2002 Sept 30, 2003 Sept 30, 2002 ----------------- --------------- --------------- --------------- REVENUES: Rental revenues from real estate $33,782 $32,165 $ 98,408 $ 97,403(1) Tenant reimbursements 4,796 5,219 14,360 15,420 Other income, including interest 567 487 1,871 1,261 ----------------- --------------- --------------- --------------- Total revenues 39,145 37,871 114,639 114,084 ----------------- --------------- --------------- --------------- EXPENSES: Operating expenses 2,555 1,974 5,965 6,170 Real estate taxes 2,876 3,091 9,391 9,152 Depreciation & amortization of real estate 5,797(2) 4,552 15,758(2) 13,363 General and administrative 360 386 1,039 1,190 Interest 4,335 2,413 12,097 7,045 Interest (related parties) 280 861 830 2,770 ----------------- --------------- --------------- --------------- Total expenses 16,203 13,277 45,080 39,690 ----------------- --------------- --------------- --------------- Income before minority interests & equity in earnings of unconsolidated joint venture 22,942 24,594 69,559 74,394 Equity in earnings of unconsolidated joint venture 599 - 3,358 - ----------------- --------------- --------------- --------------- Income before minority interests 23,541 24,594 72,917 74,394 Minority interests 19,598 20,036 60,785 61,629 ----------------- --------------- --------------- --------------- Income from continuing operations 3,943 4,558 12,132 12,765 ----------------- --------------- --------------- --------------- Discontinued operations, net of minority interests: Gain from disposal of discontinued operations - - - 1,018 Income attributable to discontinued operations - - - 49 ----------------- --------------- --------------- --------------- Income from discontinued operations - - - 1,067 ----------------- --------------- --------------- --------------- Net income to common stockholders $3,943 $4,558 $12,132 $13,832 ================= =============== =============== =============== Net income to minority interests $19,598 $20,036 $60,785 $66,952 ================= =============== =============== =============== Income per share from continuing operations: Basic $0.22 $0.26 $0.68 $0.73 ================= =============== =============== =============== Diluted $0.22 $0.26 $0.68 $0.71 ================= =============== =============== =============== Income per share from discontinued operations: Basic - - - $0.06 ================= =============== =============== =============== Diluted - - - $0.06 ================= =============== =============== =============== Net income per share to common stockholders: Basic $0.22 $0.26 $0.68 $0.79 ================= =============== =============== =============== Diluted $0.22 $0.26 $0.68 $0.77 ================= =============== =============== =============== Weighted average shares of common stock (basic) 17,747,293 17,467,329 17,695,920 17,445,759 ================= =============== =============== =============== Weighted average shares of common stock 17,817,917 17,856,688 17,757,461 17,872,108 (diluted) ================= =============== =============== =============== Weighted average O.P. units outstanding 86,498,064 86,494,032 86,502,555 86,286,956 ================= =============== =============== =============== FUNDS FROM OPERATIONS Funds from operations $29,214 $29,051 $86,821 $87,684 ================= =============== =============== =============== Funds from operations per share (3) $ 0.28 $ 0.28 $ 0.83 $ 0.84 ================= =============== =============== =============== Outstanding common stock 17,754,691 17,467,329 17,754,691 17,467,329 ================= =============== =============== =============== Outstanding O.P. units 86,498,064 86,494,032 86,498,064 86,494,032 ================= =============== =============== =============== Weighted average O.P. units & common stock outstanding (diluted) 104,315,981 104,350,720 104,260,016 104,159,065 ================= =============== =============== =============== - 4 - Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended FUNDS FROM OPERATIONS CALCULATION Sept 30, 2003 Sept 30, 2002 Sept 30, 2003 Sept 30, 2002 ----------------- --------------- --------------- --------------- Net income $ 3,943 $ 4,558 $12,132 $13,832 Add: Minority interests (4) 19,474 19,941 60,331 66,546 Depreciation and amortization of real estate 5,797 4,552 15,758 13,409 Less: Gain on sale of JV assets / assets - - 1,400 6,103 ----------------- --------------- --------------- --------------- Funds from operations $29,214 $29,051 $86,821 $87,684 ================= =============== =============== ===============
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 Nine Months Nine Months Ended Ended Ended Ended PROPERTY AND OTHER DATA: Sept 30, 2003 Sept 30, 2002 Sept 30, 2003 Sept 30, 2002 ----------------- --------------- --------------- --------------- Total properties, end of period 108 101 108 101 Total square feet, end of period 7,788,742 7,163,930 7,788,742 7,163,930 Average monthly rental revenue per square foot(5) $1.81 $1.72 $1.76 $1.70 Average occupancy 78.4% 88.3% 81.3% 91.8% Actual occupancy 78.3% 85.8% 78.3% 85.8% Straight-line rent $596 ($484) $1,046 ($1,088) Capital expenditures $492 $586 $1,901 $699
- 5 - BALANCE SHEET
Sept 30, 2003 December 31, 2002 ----------------- -------------------- Assets: Land $ 276,405 $234,707 Buildings and improvements 777,156 726,581 Real estate related intangible assets 18,284(6) - ----------------- -------------------- Total investments in properties 1,071,845 961,288 Less accumulated depreciation (82,318) (66,560) ----------------- -------------------- Net investments in properties 989,527 894,728 Investments in unconsolidated joint venture 2,258 - ----------------- -------------------- Net investments in real estate assets 991,785 894,728 Cash 5,096 4,479 Deferred rent 18,047 17,001 Other assets 15,463 13,198 ----------------- -------------------- Total assets $1,030,391 $929,406 ================= ==================== Liabilities: Line of credit - related parties $ 769 $ 58,792 Revolving line of credit 19,966 23,839 Loan payable - 20,000 Mortgage notes payable 301,115 125,062 Mortgage notes payable - related parties 10,843 11,078 Interest payable 335 337 Security deposits 10,389 11,184 Prepaid rental income 15,003 9,876 Dividend/distribution payable 25,021 24,951 Accounts payable and accrued expenses 7,471 4,698 ----------------- -------------------- Total liabilities 390,912 289,817 Minority interests 527,023 528,768 Stockholders' equity: Common stock, $.001 par value 18 17 Paid in capital 130,552 128,295 Accumulated deficit (18,114) (17,491) ----------------- -------------------- Total stockholders' equity 112,456 110,821 ----------------- -------------------- Total liabilities and stockholders' equity $1,030,391 $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 $912 and $1,385 in amortization expense for the three and nine months ended September 30, 2003, respectively, for the amortization of the origination value and fair market value of acquired leases of the San Tomas property pursuant to Statement of Financial Accounting Standard ("SFAS") 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 unrelated 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. (6) 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. - 6 -