8-K
1
msw8k020608.txt
8-K 02-06-08


                                  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, 2008

                          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, 2008, the Company issued a press release  announcing its earnings
results for the fourth  quarter and full year ended December 31, 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.



--------------------------------------------------------------------------------
                                    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: February 7, 2008               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, 2008


  MISSION WEST PROPERTIES ANNOUNCES FOURTH QUARTER AND FULL YEAR 2007 OPERATING
                  RESULTS AND 25.0% INCREASE IN COMMON DIVIDEND

  "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  December  31, 2007 was
approximately  $13,992,000  or $0.13 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  $18,538,000  or $0.18 per diluted
common share for the same period in 2006. On a sequential quarter basis, FFO for
the quarter ended September 30, 2007 was approximately  $0.58 per diluted common
share, which included  approximately  $0.44 from termination fee income. For the
twelve  months  ended  December  31,  2007,   FFO  increased  to   approximately
$114,867,000  or $1.09 per diluted common share from FFO of $86,585,000 or $0.83
per diluted common share for the same period in 2006. Net termination fee 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 twelve months ended December 31, 2007 and 2006, respectively.

Net income per diluted  share to common  stockholders  was $0.08 for the quarter
ended  December 31, 2007  compared to $0.27 for the quarter  ended  December 31,
2006, a per share decrease of approximately  70.4%.  Gain on sale of real estate
accounted for approximately  $0.15 per diluted common share for the three months
ended  December 31, 2006.  For the twelve  months ended  December 31, 2007,  net
income per diluted share to common  stockholders was $0.95, up from $0.76 a year
ago, a per share  increase of  approximately  25%.  Net  termination  fee income
relating to lease terminations  accounted for approximately  $0.52 and $0.15 per
diluted  common share for the twelve  months  ended  December 31, 2007 and 2006,
respectively.

The Company  announced  today that its Board of  Directors  declared its regular
quarterly  dividend on the Company's Common Stock for the first quarter of 2008.
The declared dividend represents a 25.0%, or $0.04 per share,  increase over the
Company's prior quarterly dividend of $0.16 per share. The Common Stock dividend
is $0.20 per share and is payable on April 3, 2008 to all Common Stockholders of
Record as of March 31,  2008.  The dividend is  equivalent  to an annual rate of
$0.80 per share,  which represents an 8.4 percent  annualized yield based on the
latest  closing  price of $9.53 per share.  The Company  intends to make regular
quarterly  distributions  to  holders of its  Common  Stock  based upon its cash
avaliable for distribution.

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.

                                     - 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, 2007 Dec 31, 2006 Dec 31, 2007 Dec 31, 2006 ----------------- --------------- --------------- --------------- REVENUES: Rental revenue from real estate $18,986 $23,175 $80,337 $91,457 Above market lease intangible asset amortization - (472) (1) (4,091) (1) (1,888) (1) Tenant reimbursements 3,447 3,678 13,355 13,061 Lease termination income - - 57,515 16,068 Other income, including interest 1,644 1,673 7,553 4,498 ----------------- --------------- --------------- --------------- Total revenues 24,077 28,054 154,669 123,196 ----------------- --------------- --------------- --------------- EXPENSES: Operating expenses 2,631 2,273 9,791 8,282 Real estate taxes 2,433 2,673 10,580 10,222 Interest 4,956 5,129 20,131 20,709 Interest (related parties) 178 186 724 755 General and administrative 667 445 3,035 2,248 Depreciation and amortization of real estate 5,503 (2) 5,586 (2) 22,588 (2) 21,579 (2) ----------------- --------------- --------------- --------------- Total expenses 16,368 16,292 66,849 63,795 ----------------- --------------- --------------- --------------- Income before equity in earnings of unconsolidated joint venture and minority interests 7,709 11,762 87,820 59,401 Equity in earnings of unconsolidated joint venture 350 447 1,408 1,985 Minority interests (6,491) (9,930) (71,471) (49,928) ----------------- --------------- --------------- --------------- Income from continuing operations 1,568 2,279 17,757 11,458 ----------------- --------------- --------------- --------------- Discontinued operations, net of minority interests: Gain from disposal of discontinued operations - 2,935 1,126 2,935 (Loss)/income attributable to discontinued operations - 36 5 237 ----------------- --------------- --------------- --------------- Income from discontinued operations - 2,971 1,131 3,172 ----------------- --------------- --------------- --------------- Net income to common stockholders $1,568 $ 5,250 $18,888 $14,630 ================= =============== =============== =============== Net income to minority interests $6,491 $25,301 $76,960 $66,358 ================= =============== =============== =============== Income per share from continuing operations: Basic $0.08 $0.12 $0.90 $0.60 ================= =============== =============== =============== Diluted $0.08 $0.12 $0.89 $0.59 ================= =============== =============== =============== Income per share from discontinued operations: Basic - $0.15 $0.06 $0.17 ================= =============== =============== =============== Diluted - $0.15 $0.06 $0.17 ================= =============== =============== =============== Net income per share to common stockholders: Basic $0.08 $0.27 $0.96 $0.77 ================= =============== =============== =============== Diluted $0.08 $0.27 $0.95 $0.76 ================= =============== =============== =============== Weighted average shares of common stock (basic) 19,645,304 19,417,823 19,627,234 19,066,581 ================= =============== =============== =============== Weighted average shares of common stock (diluted) 19,710,909 19,630,674 19,854,411 19,298,664 ================= =============== =============== =============== Weighted average O.P. units outstanding 85,552,718 85,215,982 85,162,240 85,510,491 ================= =============== =============== =============== FUNDS FROM OPERATIONS Funds from operations $13,992 $18,538 $114,867 $86,585 ================= =============== =============== =============== Funds from operations per share (3) $ 0.13 $ 0.18 $ 1.09 $ 0.83 ================= =============== =============== =============== Outstanding common stock 19,664,087 19,443,587 19,664,087 19,443,587 ================= =============== =============== =============== Outstanding O.P. units 85,533,935 85,206,199 85,533,935 85,206,199 ================= =============== =============== =============== Weighted average O.P. units and common stock outstanding (diluted) 105,263,627 104,846,655 105,016,651 104,809,155 ================= =============== =============== =============== - 4 - Three Months Three Months Twelve Months Twelve Months Ended Ended Ended Ended FUNDS FROM OPERATIONS CALCULATION Dec 31, 2007 Dec 31, 2006 Dec 31, 2007 Dec 31, 2006 ----------------- --------------- --------------- --------------- Net income $ 1,568 $ 5,250 $ 18,888 $14,630 Add: Minority interests (4) 6,360 25,184 76,458 65,859 Depreciation and amortization of real estate from continuing operations 5,875 5,961 25,043 23,092 Depreciation and amortization of real estate from discontinued operations - 56 250 695 Depreciation & amortization of real estate held in unconsolidated joint venture 189 189 757 849 Less: Gain on sale of real estate - (18,102) (6,529) (18,540) ----------------- --------------- --------------- --------------- Funds from operations $13,992 $18,538 $114,867 $86,585 ================= =============== =============== ===============
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, 2007 Dec 31, 2006 Dec 31, 2007 Dec 31, 2006 --------------- --------------- ----------------- --------------- Total properties, end of period 109 107 109 107 Total square feet, end of period 7,861,692 7,701,359 7,861,692 7,701,359 Average monthly rental revenue per square foot (5) $1.28 $1.54 $1.42 $1.57 Occupancy for leased properties 61.7% 69.5% 61.7% 69.5% Straight-line rent $310 $ 318 ($3,656) ($ 729) Leasing commissions $352 $ 342 $ 3,000 $1,157 Capital expenditures $257 $2,928 $ 4,878 $4,278
- 5 -
BALANCE SHEET December 31, 2007 December 31, 2006 -------------------- -------------------- Assets: Land $ 312,152 $ 272,223 Buildings and improvements 764,665 756,596 Real estate related intangible assets 2,119 19,529 -------------------- -------------------- Total investments in properties 1,078,936 1,048,348 Less accumulated depreciation and amortization (156,819) (149,459) -------------------- -------------------- Net investments in properties 922,117 898,889 Cash and cash equivalents 23,691 33,785 Restricted cash 65,509 48,245 Deferred rent receivable 14,833 18,489 Investment in unconsolidated joint venture 2,735 3,468 Other assets, net 25,000 24,611 -------------------- -------------------- Total assets $1,053,885 $1,027,487 ==================== ==================== Liabilities: Mortgage notes payable $ 337,520 $ 348,101 Mortgage notes payable - related parties 9,224 9,654 Interest payable 1,331 1,375 Security deposits 4,754 6,977 Deferred rental income 3,302 6,874 Dividend/distribution payable 16,832 16,745 Accounts payable and accrued expenses 15,618 7,601 -------------------- -------------------- Total liabilities 388,581 397,327 -------------------- -------------------- Minority interests 526,626 501,282 -------------------- -------------------- Stockholders' equity: Common stock, $.001 par value 20 19 Paid-in capital 153,024 149,541 Distributions in excess of accumulated earnings (14,366) (20,682) -------------------- -------------------- Total stockholders' equity 138,678 128,878 -------------------- -------------------- Total liabilities and stockholders' equity $1,053,885 $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 $267 and $425 in amortization expense for the three months ended December 31, 2007 and 2006, respectively, and $2,153 and $1,613 in amortization expense for the twelve months ended December 31, 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. - 6 -

The following information was filed by Mission West Properties Inc (MSW) on Thursday, February 7, 2008 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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