8-K
1
q48k2005.txt
Q4 8-K 2005


                                  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 6, 2006

                          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))



                                     - 1 -




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 6, 2006, the Company issued a press release  announcing its earnings
results for the fourth  quarter and full year ended December 31, 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: February 6, 2006                  By: /s/ Wayne N. Pham
                                        ------------------------------
                                        Wayne N. Pham
                                        Vice President of Finance and Controller

                                     - 2 -



Exhibit 99.1

                                                                   PRESS RELEASE

For Immediate News Release
February 6, 2006


       MISSION WEST PROPERTIES ANNOUNCES FOURTH QUARTER AND FULL YEAR 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 December 31, 2005 was
$19,173,000 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 $22,982,000 or $0.22 per diluted common share for the same period in
2004.  On a sequential  quarter  basis,  FFO per diluted  common share  remained
evenly compared to the previous quarter ended September 30, 2005. For the twelve
months ended  December  31, 2005,  FFO  decreased  to  $79,152,000  or $0.76 per
diluted share from FFO of  $103,320,000  or $0.99 per diluted share for the same
period in 2004.

Net income to common  stockholders  per diluted  share was $0.13 for the quarter
ended  December 31, 2005  compared to $0.16 for the quarter  ended  December 31,
2004, a per share decrease of  approximately  18.8%. For the twelve months ended
December  31,  2005,  net income to common  stockholders  per diluted  share was
$0.55,  down from  $0.74 one year ago,  a per share  decrease  of  approximately
25.7%.

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.

                                     - 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, 2005 Dec 31, 2004 Dec 31, 2005 Dec 31, 2004 ----------------- --------------- --------------- --------------- REVENUES: Rental revenue from real estate $24,722 (1) $28,814 (1) $100,765 (1) $119,339 (1) Tenant reimbursements 3,508 3,295 14,762 14,919 Other income, including lease terminations, settlements and interest 1,588 1,512 4,606 6,913 ----------------- --------------- --------------- --------------- Total revenues 29,818 33,621 120,133 141,171 ----------------- --------------- --------------- --------------- EXPENSES: Operating expenses 2,585 2,139 9,219 9,016 Real estate taxes 2,792 2,666 10,259 11,030 Interest 5,249 4,530 21,295 17,581 Interest (related parties) 193 317 972 1,077 General and administrative 368 382 1,910 2,011 Depreciation and amortization of real estate 5,278 (2) 5,180 (2) 21,283 (2) 21,347 (2) ----------------- --------------- --------------- --------------- Total expenses 16,465 15,214 64,938 62,062 ----------------- --------------- --------------- --------------- Income before equity in earnings of unconsolidated joint venture and minority interests 13,353 18,407 55,195 79,109 Equity in earnings of unconsolidated joint 46 1,383 724 2,947 venture Minority interests (11,062) (16,442) (46,234) (68,199) ----------------- --------------- --------------- --------------- Income from continuing operations 2,337 3,348 9,685 13,857 ----------------- --------------- --------------- --------------- Discontinued operations, net of minority interests: Gain from disposal of discontinued operations 140 - 445 - (Loss)/income from discontinued operations (4) (527) (103) (545) ----------------- --------------- --------------- --------------- Income from discontinued operations 136 (527) 342 (545) ----------------- --------------- --------------- --------------- Net income to common stockholders $2,473 $2,821 $10,027 $13,312 ================= =============== =============== =============== Net income to minority interests $11,701 $14,504 $47,524 $66,100 ================= =============== =============== =============== Income per share from continuing operations: Basic $0.13 $0.19 $0.53 $0.77 Diluted $0.13 $0.19 $0.53 $0.77 Income per share from discontinued operations: Basic - ($0.03) $0.02 ($0.03) Diluted - ($0.03) $0.02 ($0.03) ----------------- --------------- --------------- --------------- Net income per share to common stockholders: Basic $0.13 $0.16 $0.55 $0.74 ================= =============== =============== =============== Diluted $0.13 $0.16 $0.55 $0.74 ================= =============== =============== =============== Weighted average shares of common stock (basic) 18,418,855 18,081,321 18,286,947 18,034,873 ================= =============== =============== =============== Weighted average shares of common stock (diluted) 18,432,819 18,104,454 18,325,659 18,076,498 ================= =============== =============== =============== Weighted average O.P. units outstanding 86,118,031 86,400,565 86,220,117 86,444,773 ================= =============== =============== =============== FUNDS FROM OPERATIONS Funds from operations $19,173 $22,982 $79,152 $103,320 ================= =============== =============== =============== Funds from operations per share (3) $ 0.18 $ 0.22 $ 0.76 $ 0.99 ================= =============== =============== =============== Outstanding common stock 18,437,791 18,097,191 18,437,791 18,097,191 ================= =============== =============== =============== Outstanding O.P. units 86,099,095 86,384,695 86,099,095 86,384,695 ================= =============== =============== =============== Weighted average O.P. units and common stock outstanding (diluted) 104,550,850 104,505,019 104,545,776 104,521,271 ================= =============== =============== ===============
- 4 -
Three Months Three Months Twelve Months Twelve Months FUNDS FROM OPERATIONS CALCULATION Ended Ended Ended Ended Dec 31, 2005 Dec 31, 2004 Dec 31, 2005 Dec 31, 2004 ----------------- --------------- --------------- --------------- Net income $2,473 $2,821 $10,027 $ 13,312 Add: Minority interests (4) 11,602 14,387 47,045 65,614 Depreciation and amortization of real estate from continuing operations 5,686 5,503 22,987 22,991 Depreciation and amortization of real estate from discontinued operations - 53 315 529 Depreciation & amortization of real estate held in 210 218 984 874 unconsolidated joint venture Less: Gain on sale of real estate (798) - (2,206) - ----------------- --------------- --------------- --------------- Funds from operations $19,173 $22,982 $79,152 $103,320 ================= =============== =============== ===============
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 Twelve Months Twelve Months Ended Ended Ended Ended PROPERTY AND OTHER DATA: Dec 31, 2005 Dec 31, 2004 Dec 31, 2005 Dec 31, 2004 --------------- --------------- ----------------- --------------- Total properties, end of period 107 109 107 109 Total square feet, end of period 7,780,084 7,917,262 7,780,084 7,917,262 Average monthly rental revenue per square foot $1.62 $1.80 $1.58 $1.80 (5) Average occupancy 67.0% 70.0% 67.9% 71.7% Actual occupancy 66.7% 70.7% 66.7% 70.7% Leased properties 68.9% 71.2% 68.9% 71.2% Straight-line rent ($ 84) ($ 600) $ 707 ($ 460) Leasing commissions $1,306 $ 410 $5,296 $1,801 Capital expenditures $ 267 $1,148 $1,138 $1,519
- 5 -
BALANCE SHEET December 31, 2005 December 31, 2004 -------------------- -------------------- Assets: Land $ 273,933 $ 273,663 Buildings and improvements 766,457 770,757 Real estate related intangible assets 17,410 18,284 -------------------- -------------------- Total investments in properties 1,057,800 1,062,704 Less accumulated depreciation and (130,419) (110,062) amortization Assets held for sale, net of accumulated depreciation of $1,578 at 12/31/04 - 8,221 -------------------- -------------------- Net investments in properties 927,381 960,863 Cash and cash equivalents 31,441 1,519 Restricted cash 16,712 1,551 Deferred rent receivable 19,218 18,511 Investment in unconsolidated joint venture 3,263 3,559 Other assets 25,362 19,653 -------------------- -------------------- Total assets $1,023,377 $1,005,656 ==================== ==================== Liabilities: Mortgage notes payable $ 357,481 $ 292,822 Mortgage notes payable - related parties 10,051 10,420 Line of credit - related parties - 9,560 Revolving line of credit - 24,208 Interest payable 321 327 Security deposits 8,047 8,544 Deferred rental income 6,103 11,038 Liabilities related to assets held for sale - 14 Dividend/distribution payable 16,725 16,718 Accounts payable and accrued expenses 8,952 6,704 -------------------- -------------------- Total liabilities 407,680 380,355 Minority interests 500,682 512,089 Stockholders' equity: Common stock, $.001 par value 18 18 Paid in capital 138,038 134,539 Accumulated deficit (23,041) (21,345) -------------------- -------------------- Total stockholders' equity 115,015 113,212 -------------------- -------------------- Total liabilities and stockholders' equity $1,023,377 $1,005,656 ==================== ====================
(1) Includes approximately $472 in amortization expense for the three months ended December 31, 2005 and 2004 and approximately $1,888 in amortization expense for the twelve months ended December 31, 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 December 31, 2005 and 2004, respectively, and approximately $1,444 and $2,172 in amortization expense for the twelve months ended December 31, 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. - 6 -

The following information was filed by Mission West Properties Inc (MSW) on Tuesday, February 7, 2006 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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