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): February 1, 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 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)
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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 February 1, 2005, the Company issued a press release announcing its earnings
results for the quarter and full year ended December 31, 2004. 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 filed on its behalf by the
undersigned hereunto duly authorized.
MISSION WEST PROPERTIES, INC.
Date: February 1, 2005 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
February 1, 2005
MISSION WEST PROPERTIES ANNOUNCES FOURTH QUARTER AND FULL YEAR 2004
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 December 31, 2004 was
$22,982,000 or $0.22 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 $30,864,000 or $0.30 per diluted common share for the same period in
2003. On a sequential quarter basis, FFO per diluted common share decreased
$0.01 compared to the previous quarter ended September 30, 2004. The net effect
of a lease termination fee from a joint venture tenant and an impairment charge
in the fourth quarter 2004 accounted for the $0.01 decrease. For the year ended
December 31, 2004, FFO decreased to $103,320,000 or $0.99 per diluted share from
FFO of $117,918,000 or $1.13 per diluted share for the same period in 2003.
Net income to common stockholders per diluted share was $0.16 for the quarter
ended December 31, 2004 compared to $0.23 for the same period in 2003, a per
share decrease of approximately 30.4%. For the year ended December 31, 2004, net
income to common stockholders per diluted share was $0.74, down from $0.91 per
diluted share one year ago, which included $0.01 gain from the sale of joint
venture real estate included in equity in earnings of unconsolidated joint
venture, a per share decrease of approximately 18.7%. Net income per diluted
share for the year ended 2004 included $0.03 per share from lease termination
fees, settlement claims and an impairment charge.
DISPOSITION ACTIVITY
In January 2005, the Company completed the sale of 75,000 rentable square feet
of the R&D property at 3120 Scott Boulevard, Santa Clara, California. A loss of
approximately $2.2 million was realized on the total sale price of $8.5 million
and is recorded in 2004 as an asset impairment charge under 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 Twelve Months Twelve Months
Ended Ended Ended Ended
Dec 31, 2004 Dec 31, 2003 Dec 31, 2004 Dec 31, 2003
----------------- --------------- --------------- ---------------
REVENUES:
Rental revenue from real estate $28,820 $32,968 $119,523 (6) $129,511
Tenant reimbursements 3,298 4,474 14,946 18,726
Other income, including lease terminations,
settlements and interest 1,512 2,656 6,914 (5) 4,527
----------------- --------------- --------------- ---------------
Total revenues 33,630 40,098 141,383 152,764
----------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses 2,296 2,538 9,212 8,887
Real estate taxes 2,740 3,050 11,328 12,333
Interest 4,530 4,350 17,581 16,446
Interest (related parties) 317 234 1,077 1,064
General and administrative 382 285 2,011 1,324
Depreciation and amortization of real estate 5,212 (1) 5,438 21,669 (1) 20,525
----------------- --------------- --------------- ---------------
Total expenses 15,477 15,895 62,878 60,579
----------------- --------------- --------------- ---------------
Income before equity in earnings of unconsolidated
joint venture and minority interests 18,153 24,203 78,505 92,185
Equity in earnings of unconsolidated joint venture 1,383 526 2,947 3,885
Minority interests 16,237 20,563 67,699 80,069
----------------- --------------- --------------- ---------------
Income from continuing operations 3,299 4,166 13,753 16,001
----------------- --------------- --------------- ---------------
Discontinued operations, net of minority interests:
(Loss)/income from discontinued operations (478) (7) 53 (441) 211
----------------- --------------- --------------- ---------------
Net income to common stockholders $ 2,821 $ 4,219 $13,312 $16,212
================= =============== =============== ===============
Net income to minority interests $14,504 $20,755 $66,100 $80,836
================= =============== =============== ===============
Income per share from continuing operations:
Basic $0.18 $0.23 $0.76 $0.90
Diluted $0.18 $0.23 $0.76 $0.90
Income per share from discontinued operations:
Basic ($0.02) $0.01 ($0.02) $0.01
Diluted ($0.02) - ($0.02) $0.01
Net income per share to common stockholders
Basic $0.16 $0.24 $0.74 $0.91
================= =============== =============== ===============
Diluted $0.16 $0.23 $0.74 $0.91
================= =============== =============== ===============
Weighted average shares of common stock (basic) 18,081,321 17,869,252 18,034,873 17,739,609
================= =============== =============== ===============
Weighted average shares of common stock(diluted) 18,104,454 17,972,706 18,076,498 17,802,947
================= =============== =============== ===============
Weighted average O.P. units outstanding 86,400,565 86,398,064 86,444,773 86,476,217
================= =============== =============== ===============
FUNDS FROM OPERATIONS
Funds from operations $22,982 $30,864 $103,320 $117,918
================= =============== =============== ===============
Funds from operations per share (2) $ 0.22 $ 0.30 $ 0.99 $1.13
================= =============== =============== ===============
Outstanding common stock 18,097,191 17,894,691 18,097,191 17,894,691
================= =============== =============== ===============
Outstanding O.P. units 86,384,695 86,398,064 86,384,695 86,398,064
================= =============== =============== ===============
Weighted average O.P. units and common stock
outstanding (diluted) 104,505,019 104,370,770 104,521,271 104,279,165
================= =============== =============== ===============
- 4 -
FUNDS FROM OPERATIONS CALCULATION
Three Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
Dec 31, 2004 Dec 31, 2003 Dec 31, 2004 Dec 31, 2003
----------------- --------------- --------------- ---------------
Net income $ 2,821 $ 4,219 $ 13,312 $ 16,212
Add:
Minority interests (3) 14,387 20,629 65,614 80,255
Depreciation and amortization of real estate
from continuing operations 5,535 5,736 23,313 21,728
Depreciation and amortization of real estate
from discontinued operations 21 62 207 249
Depreciation & amortization of real estate
held in unconsolidated joint venture 218 218 874 874
Less:
Gain on sale of unconsolidated JV real estate - - - 1,400
----------------- --------------- --------------- ---------------
Funds from operations $22,982 $30,864 $103,320 $117,918
================= =============== =============== ===============
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 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 Twelve Months Twelve Months
Ended Ended Ended Ended
PROPERTY AND OTHER DATA: Dec 31, 2004 Dec 31, 2003 Dec 31, 2004 Dec 31, 2003
--------------- --------------- ----------------- ---------------
Total properties, end of period 109 109 109 109
Total square feet, end of period 7,917,262 7,917,262 7,917,262 7,917,262
Average monthly rental revenue per square foot (4) $1.80 $1.80 $1.80 $1.77
Average occupancy 70.0% 77.9% 71.7% 80.5%
Actual occupancy 70.7% 77.3% 70.7% 77.3%
Straight-line rent ($ 600) $924 ($ 460) $1,970
Capital expenditures $1,558 $277 $3,320 $2,178
- 5 -
BALANCE SHEET
December 31, 2004 December 31, 2003
-------------------- --------------------
Assets:
Land $ 273,663 $ 275,707
Buildings and improvements 770,757 779,636
Real estate related intangible assets 18,284 19,651
-------------------- --------------------
Total investments in properties 1,062,704 1,074,994
Less accumulated depreciation and amortization (110,062) (89,243)
Assets held for sale, net of accumulated
depreciation of $1,578 at December 31, 2004 8,221 -
-------------------- --------------------
Net investments in properties 960,863 985,751
Cash and cash equivalents 1,519 4,129
Restricted cash 1,551 -
Deferred rent receivable 18,511 18,970
Investment in unconsolidated joint venture 3,559 2,285
Other assets 19,653 21,497
-------------------- --------------------
Total assets $1,005,656 $1,032,632
==================== ====================
Liabilities:
Line of credit - related parties $ 9,560 $ 6,320
Revolving line of credit 24,208 23,965
Mortgage notes payable 292,822 299,858
Mortgage notes payable - related parties 10,420 10,762
Interest payable 327 332
Security deposits 8,544 10,248
Deferred rental income 11,038 12,723
Liabilities related to assets held for sale 14 -
Dividend/distribution payable 16,718 25,031
Accounts payable and accrued expenses 6,704 5,085
-------------------- --------------------
Total liabilities 380,355 394,324
Minority interests 512,089 524,918
Stockholders' equity:
Common stock, $.001 par value 18 18
Paid in capital 134,539 132,136
Accumulated deficit (21,345) (18,764)
-------------------- --------------------
Total stockholders' equity 113,212 113,390
-------------------- --------------------
Total liabilities and stockholders' equity $1,005,656 $1,032,632
==================== ====================
(1) Includes approximately $440 and $2,172 in amortization expense for the
three and twelve months ended December 31, 2004, respectively, for the
amortization of in-place lease value of the San Tomas Technology Park
acquisition pursuant to Statement of Financial Accounting Standard ("SFAS")
No. 141, "Business Combinations."
(2) Calculated on a fully diluted basis. Assumes conversion of O.P. units
outstanding into the Company's common stock.
(3) The minority interest for third parties has been deducted from total
minority interest in calculating FFO.
(4) 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.
(5) Includes approximately $5.4 million from termination fees and tenant breach
of lease lawsuit settlements for the year ended December 31, 2004.
(6) Includes approximately $1.9 million in amortization expense for the twelve
months ended December 31, 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 ("SFAS") No. 141,
"Business Combinations."
(7) The Company recorded an asset impairment charge of approximately $2.2
million in the fourth quarter 2004 relating to the sale of the property at
3120 Scott Boulevard in January 2005. Of this amount, approximately $474
was charged against net income to common stockholders.