-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SdyVhjhNbw66sC6bXbRqWJimzHN+rhQH/+3w9P3mLI1LlhYJ9sK3xPzFwLs9BXfX USlLHUY48OGpx7GPB3OfwQ== 0001067419-05-000052.txt : 20051020 0001067419-05-000052.hdr.sgml : 20051020 20051020120256 ACCESSION NUMBER: 0001067419-05-000052 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20050930 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20051020 DATE AS OF CHANGE: 20051020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSION WEST PROPERTIES INC CENTRAL INDEX KEY: 0001067419 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 952635431 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25235 FILM NUMBER: 051146709 BUSINESS ADDRESS: STREET 1: 10050 BANDLEY DRIVE CITY: CUPERTINO STATE: CA ZIP: 95014 BUSINESS PHONE: 4087250700 MAIL ADDRESS: STREET 1: 10050 BANDLEY DR CITY: CUPERTINO STATE: CA ZIP: 95014 8-K 1 q38k102005.txt 8-K Q3 2005 FFO 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 19, 2005 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 (I.R.S. Employer of incorporation) Identification) 10050 Bandley Drive, Cupertino, CA 95014 (Address of principal executive offices) (408) 725-0700 (Registrant's telephone number, including area code) 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 19, 2005, the Company issued a press release announcing its earnings results for the quarter ended September 30, 2005. 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 filed on its behalf by the undersigned hereunto duly authorized. MISSION WEST PROPERTIES, INC. Date: October 20, 2005 By: /s/ Wayne N. Pham ---------------------------------------- Wayne N. Pham Vice President of Finance and Controller EXHIBIT 99.1 PRESS RELEASE For Immediate News Release October 19, 2005 MISSION WEST PROPERTIES ANNOUNCES THIRD QUARTER 2005 OPERATING 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, 2005 was $18,528,000 or $0.18 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 $24,519,000 or $0.23 per diluted common share for the same period in 2004. On a sequential quarter basis, FFO per diluted common share decreased $0.02 compared to the previous quarter ended June 30, 2005. Settlements of former tenant breach of lease and termination fees accounted for approximately $0.02 per diluted share in the second quarter 2005. For the nine months ended September 30, 2005, FFO decreased to $59,977,000 or $0.57 per diluted share from FFO of $80,338,000 or $0.77 per diluted share for the same period in 2004. Net income to common stockholders per diluted share was $0.13 for the quarter ended September 30, 2005 compared to $0.18 for the same period in 2004, a per share decrease of approximately 27.8%. For the nine months ended September 30, 2005, net income to common stockholders per diluted share was $0.41, down from $0.58 one year ago, a per share decrease of approximately 29.3%. FINANCING ACTIVITY In July 2005, the Company obtained a $125 million secured fully amortizing 20 year mortgage loan from Allianz Life Insurance Company of North America that bears annual fixed interest rate of 5.22%. The mortgage loan is secured by eight properties. The Company paid approximately $838,000 in loan fees and financing costs and used the proceeds to primarily pay off short-term debt and the Berg Group line of credit. DISPOSITION ACTIVITY In October 2005, the Company completed the sale of a 239,000 rentable square foot R&D property at 800 Embedded Way, San Jose, California. A gain of approximately $0.8 million will be realized on the total sales price of $15.1 million. 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 107 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. 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, 2005 Sept 30, 2004 Sept 30, 2005 Sept 30, 2004 ----------------- --------------- --------------- --------------- REVENUES: Rental revenue from real estate $24,692 (1) $29,494 (1) $76,043 (1) $ 90,526 (1) Tenant reimbursements 4,031 3,740 11,254 11,623 Other income, including lease terminations, settlements and interest 426 396 3,018 5,401 ----------------- --------------- --------------- --------------- Total revenues 29,149 33,630 90,315 107,550 ----------------- --------------- --------------- --------------- EXPENSES: Operating expenses 2,497 2,246 6,635 6,877 Real estate taxes 2,804 2,559 7,466 8,364 Interest 5,494 4,468 16,046 13,051 Interest (related parties) 229 256 779 760 General and administrative 424 395 1,542 1,628 Depreciation and amortization of real estate 5,268 (2) 5,269 (2) 16,005 (2) 16,168 (2) ----------------- --------------- --------------- --------------- Total expenses 16,716 15,193 48,473 46,848 ----------------- --------------- --------------- --------------- Income before equity in earnings of unconsolidated joint venture and minority interests 12,433 18,437 41,842 60,702 Equity in earnings of unconsolidated joint venture 291 345 677 1,564 Minority interests (10,551) (15,590) (35,172) (51,757) ----------------- --------------- --------------- --------------- Income from continuing operations 2,173 3,192 7,347 10,509 ----------------- --------------- --------------- --------------- Discontinued operations, net of minority interests: Gain from disposal of discontinued operations 291 - 305 - (Loss)/income from discontinued operations (13) (19) (98) (18) ----------------- --------------- --------------- --------------- Income from discontinued operations 278 (19) 207 (18) ----------------- --------------- --------------- --------------- Net income to common stockholders $2,451 $3,173 $7,554 $10,491 ================= =============== =============== =============== Net income to minority interests $11,541 $15,488 $35,823 $51,596 ================= =============== =============== =============== Income per share from continuing operations: Basic $0.12 $0.18 $0.40 $0.58 Diluted $0.12 $0.18 $0.40 $0.58 Income per share from discontinued operations: Basic $0.01 - $0.01 - Diluted $0.01 - $0.01 - ----------------- --------------- --------------- --------------- Net income per share to common stockholders: Basic $0.13 $0.18 $0.41 $0.58 ================= =============== =============== =============== Diluted $0.13 $0.18 $0.41 $0.58 =============== =============== Weighted average shares of common stock (basic) 18,356,278 18,071,484 18,242,495 18,019,277 ================= =============== =============== =============== Weighted average shares of common stock (diluted) 18,407,891 18,098,174 18,289,699 18,077,854 ================= =============== =============== =============== Weighted average O.P. units outstanding 86,169,195 86,410,402 86,254,519 86,459,617 ================= =============== =============== =============== FUNDS FROM OPERATIONS Funds from operations $18,528 $24,519 $59,977 $80,338 ================= =============== =============== =============== Funds from operations per share (3) $ 0.18 $ 0.23 $ 0.57 $ 0.77 ================= =============== =============== =============== Outstanding common stock 18,367,691 18,077,191 18,367,691 18,077,191 ================= =============== =============== =============== Outstanding O.P. units 86,169,195 86,404,695 86,169,195 86,404,695 ================= =============== =============== =============== Weighted average O.P. units and common stock outstanding (diluted) 104,577,086 104,508,576 104,544,218 104,537,470 ================= =============== =============== ===============
Three Months Three Months Nine Months Nine Months FUNDS FROM OPERATIONS CALCULATION Ended Ended Ended Ended Sept 30, 2005 Sept 30, 2004 Sept 30, 2005 Sept 30, 2004 ----------------- --------------- --------------- --------------- Net income $ 2,451 $ 3,173 $ 7,554 $10,491 Add: Minority interests (4) 11,414 15,377 35,441 51,228 Depreciation and amortization of real estate from 5,721 5,592 17,301 17,488 continuing operations Depreciation and amortization of real estate from 77 159 315 476 discontinued operations Depreciation & amortization of real estate held in 210 218 774 655 unconsolidated joint venture Less: Gain on sale of real estate (1,345) - (1,408) - ----------------- --------------- --------------- --------------- Funds from operations $18,528 $24,519 $59,977 $80,338 ================= =============== =============== ===============
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, 2005 Sept 30, 2004 Sept 30, 2005 Sept 30, 2004 --------------- --------------- ----------------- --------------- Total properties, end of period 107 109 107 109 Total square feet, end of period 7,780,082 7,917,262 7,780,082 7,917,262 Average monthly rental revenue per square foot (5) $1.57 $1.81 $1.56 $1.79 Average occupancy 67.5% 69.2% 68.3% 72.2% Actual occupancy 67.5% 69.0% 67.5% 69.0% Straight-line rent ($ 99) $289 $ 791 $ 141 Leasing commissions $ 37 $216 $3,990 $1,391 Capital expenditures $234 $ 1 $ 871 $ 371
BALANCE SHEET September 30, 2005 December 31, 2004 -------------------- -------------------- Assets: Land $ 273,933 $ 273,663 Buildings and improvements 766,209 770,757 Real estate related intangible assets 17,410 18,284 -------------------- -------------------- Total investments in properties 1,057,552 1,062,704 Less accumulated depreciation and (124,670) (110,062) amortization Assets held for sale, net of accumulated depreciation of $1,770 and $1,578 at 9/30/05 and 12/31/04, respectively 14,245 8,221 -------------------- -------------------- Net investments in properties 947,127 960,863 Cash and cash equivalents 40,443 1,519 Restricted cash 1,551 1,551 Deferred rent receivable 19,302 18,511 Investment in unconsolidated joint venture 3,472 3,559 Other assets 24,812 19,653 -------------------- -------------------- Total assets $1,036,707 $1,005,656 ==================== ==================== Liabilities: Mortgage notes payable $ 359,891 $ 292,822 Mortgage notes payable - related parties 10,146 10,420 Line of credit - related parties - 9,560 Revolving line of credit - 24,208 Interest payable 327 327 Security deposits 8,434 8,544 Deferred rental income 11,691 11,038 Liabilities related to assets held for sale 80 14 Dividend/distribution payable 16,727 16,718 Accounts payable and accrued expenses 10,971 6,704 -------------------- -------------------- Total liabilities 418,267 380,355 Minority interests 503,769 512,089 Stockholders' equity: Common stock, $.001 par value 18 18 Paid in capital 137,217 134,539 Accumulated deficit (22,564) (21,345) -------------------- -------------------- Total stockholders' equity 114,671 113,212 -------------------- -------------------- Total liabilities and stockholders' equity $1,036,707 $1,005,656 ==================== ====================
(1) Includes approximately $472 in amortization expense for the three months ended September 30, 2005 and 2004 and approximately $1,416 in amortization expense for the nine months ended September 30, 2005 and 2004 for the amortization of the above-market lease intangible asset of the San Tomas Technology Park acquisition pursuant to Statement of Financial Accounting Standard No. 141, "Business Combinations." (2) Includes approximately $321 and $440 in amortization expense for the three months ended September 30, 2005 and 2004, respectively, and approximately $1,122 and $1,732 in amortization expense for the nine months ended September 30, 2005 and 2004, respectively, for the amortization of in-place lease value of the San Tomas Technology Park acquisition 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. -----END PRIVACY-ENHANCED MESSAGE-----