8-K
1
msw8k020409.txt
8-K 2-5-09

                                  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 4, 2009

                          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))





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 4, 2009, the Company issued a press release  announcing its earnings
results for the fourth  quarter and full year ended December 31, 2008. 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 5, 2009                      By: /s/ Wayne N. Pham
                                               ---------------------------------
                                               Wayne N. Pham
                                               Vice President of Finance and
                                               Controller




Exhibit 99.1


                                                                   PRESS RELEASE

For Immediate News Release
February 4, 2009


              MISSION WEST PROPERTIES ANNOUNCES FOURTH QUARTER AND
                        FULL YEAR 2008 OPERATING RESULTS

  "We build the buildings for the high tech companies that build the internet"

Cupertino, CA - Mission West Properties,  Inc. (NASDAQ: MSW) reported today that
Funds From  Operations  ("FFO")  for the  quarter  ended  December  31, 2008 was
approximately  $12,863,000,  or $0.12 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  $13,992,000,  or $0.13 per diluted
common share,  for the same period in 2007. Net  termination fee income relating
to lease  terminations  for the fourth quarter ended December 31, 2008 accounted
for  approximately  $833,000,  or less than $0.01 per diluted common share. On a
sequential  quarter  basis,  FFO for the quarter  ended  September  30, 2008 was
approximately  $0.13 per  diluted  common  share.  For the twelve  months  ended
December 31, 2008,  FFO decreased to  $55,334,000,  or $0.52 per diluted  common
share, from FFO of $114,867,000, or $1.09 per diluted common share, for the same
period in 2007. Net termination  fees and security  deposit  forfeitures  income
relating to lease terminations accounted for approximately  $2,754,000, or $0.03
per diluted common share,  and  $51,721,000,  or $0.49 per diluted common share,
for the twelve months ended December 31, 2008 and 2007, respectively.

Net income per diluted  share to common  stockholders  was $0.26 for the quarter
ended  December 31, 2008  compared to $0.08 for the quarter  ended  December 31,
2007, a per share increase of approximately 225%. Gains from the sale of two R&D
properties in the Company's unconsolidated joint venture, TBI-MWP, accounted for
approximately  $0.20 per diluted common share for the quarter ended December 31,
2008.  The gains are  recorded  under the line  item,  "Equity  in  earnings  of
unconsolidated  joint  venture,"  using the  equity  method of  accounting.  Net
termination   fee  income   relating  to  lease   terminations   accounted   for
approximately  less than $0.01 per  diluted  common  share for the three  months
ended  December 31, 2008.  For the twelve  months ended  December 31, 2008,  net
income per diluted  share to common  stockholders  was $0.50,  down from $0.95 a
year ago, a per share decrease of approximately  47%. Gains from the sale of two
R&D properties in the Company's unconsolidated joint venture, TBI-MWP, accounted
for approximately $0.20 per diluted common share for the year ended December 31,
2008. Net termination fees and security deposit  forfeitures  income relating to
lease  terminations  accounted  for  approximately  $0.03 and $0.52 per  diluted
common  share  for  the  twelve  months  ended   December  31,  2008  and  2007,
respectively.

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 111
properties  totaling  approximately  8.0 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.





                          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, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 ---------------- ---------------- ---------------- ---------------- OPERATING REVENUES: Rental revenue from real estate $20,464 $18,986 $79,075 $80,337 Above market lease intangible asset - - - (4,091) (1) amortization Tenant reimbursements 4,505 3,447 16,406 13,355 Lease termination and settlement income 1,087 - 3,007 57,515 Other income 446 659 1,216 4,467 ---------------- ---------------- ---------------- ---------------- Total operating revenues 26,502 23,092 99,704 151,583 ---------------- ---------------- ---------------- ---------------- OPERATING EXPENSES: Operating and maintenance 3,410 2,632 11,404 9,791 Real estate taxes 3,812 2,433 12,056 10,580 General and administrative 684 666 2,635 3,035 Depreciation and amortization of real estate 6,160 (2) 5,503 (2) 23,224 (2) 22,588 (2) ---------------- ---------------- ---------------- ---------------- Total operating expenses 14,066 11,234 49,319 45,994 ---------------- ---------------- ---------------- ---------------- Operating income 12,436 11,858 50,385 105,589 OTHER INCOME (EXPENSES): Equity in earnings of unconsolidated joint 18,701 350 19,617 1,408 venture Interest income 164 985 1,128 3,086 Dividend income 607 - 607 - Unrealized loss from investment (278) - (278) - Interest expense (4,880) (4,956) (19,787) (20,131) Interest expense - related parties (307) (178) (1,332) (724) ---------------- ---------------- ---------------- ---------------- Income from continuing operations before minority interests 26,443 8,059 50,340 89,228 Minority interests from continuing operations (21,186) (6,491) (40,206) (71,471) ---------------- ---------------- ---------------- ---------------- Income from continuing operations 5,257 1,568 10,134 17,757 Discontinued operations, net of minority interests: Gain from disposal of discontinued operations - - - 1,126 Income attributable to discontinued operations - - - 5 ---------------- ---------------- ---------------- ---------------- Income from discontinued operations - - - 1,131 ---------------- ---------------- ---------------- ---------------- Net income to common stockholders $ 5,257 $1,568 $10,134 $18,888 ================ ================ ================ ================ Net income to minority interests $21,186 $6,491 $40,206 $76,960 ================ ================ ================ ================ Income per share from continuing operations: Basic $0.27 $0.08 $0.51 $0.90 ================ ================ ================ ================ Diluted $0.26 $0.08 $0.50 $0.89 ================ ================ ================ ================ Basic - - - $0.06 ================ ================ ================ ================ Diluted - - - $0.06 ================ ================ ================ ================ Net income per share to common stockholders: Basic $0.27 $0.08 $0.51 $0.96 ================ ================ ================ ================ Diluted $0.26 $0.08 $0.50 $0.95 ================ ================ ================ ================ Weighted average shares of common stock (basic) 19,748,211 19,645,304 19,714,414 19,627,234 ================ ================ ================ ================ Weighted average shares of common stock (diluted) 20,018,836 19,710,909 20,226,385 19,854,411 ================ ================ ================ ================ Weighted average O.P. units outstanding 85,526,965 85,552,718 85,528,329 85,162,240 ================ ================ ================ ================
FUNDS FROM OPERATIONS Funds from operations $12,863 $13,992 $55,334 $114,867 ================ ================ ================ ================ Funds from operations per share (3) $0.12 $0.13 $0.52 $1.09 ================ ================ ================ ================ Outstanding common stock 19,748,211 19,664,087 19,748,211 19,664,087 ================ ================ ================ ================ Outstanding O.P. units 85,526,965 85,533,935 85,526,965 85,533,935 ================ ================ ================ ================ Weighted average O.P. units and common stock outstanding (diluted) 105,545,801 105,263,627 105,754,713 105,016,651 ================ ================ ================ ================ Three Months Three Months Twelve Months Twelve Months Ended Ended Ended Ended FUNDS FROM OPERATIONS CALCULATION Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 ---------------- ---------------- ---------------- ---------------- Net income $ 5,257 $1,568 $10,134 $ 18,888 Add: Minority interests (4) 21,125 6,360 39,838 76,458 Depreciation and amortization of real estate from continuing operations 6,620 5,875 24,933 25,043 Depreciation and amortization of real estate from discontinued operations - - - 250 Depreciation and amortization of real estate held in unconsolidated joint venture 332 189 900 757 Less: Gain on sale of real estate (20,471) - (20,471) (6,529) ---------------- ---------------- ---------------- ---------------- Funds from operations $12,863 $13,992 $55,334 $114,867 ================ ================ ================ ================
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 neither be considered as an alternative for net income as a measure of profitability nor 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, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 ---------------- ---------------- ---------------- ---------------- Total properties, end of period 111 109 111 109 Total square feet, end of period 8,047,569 7,861,692 8,047,569 7,861,692 Average monthly rental revenue per square foot (5) $1.26 $1.28 $1.25 $1.42 Occupancy for leased properties 66.4% 61.7% 66.4% 61.7% Straight-line rent $563 $310 $3,008 ($3,656) Leasing commissions $458 $352 $1,699 $3,000 Capital expenditures $305 $257 $6,468 $4,878
LEASE ROLLOVER SCHEDULE: Year # of Leases Rentable Square Feet ---------------- ------------- --------------------- 2009 22 369,613 2010 12 572,000 2011 15 827,605 2012 13 1,001,452 2013 6 459,737 2014 11 1,281,952 2015 4 328,211 2016 2 144,600 2017 3 241,089 Thereafter 1 119,756 ------------- --------------------- Total 89 5,346,015 ============= ===================== BALANCE SHEETS
December 31, 2008 December 31, 2007 -------------------- -------------------- Assets Investments in real estate: Land $ 320,911 $ 312,152 Buildings and improvements 799,471 764,665 Real estate related intangible assets 3,240 2,119 -------------------- -------------------- Total investments in properties 1,123,622 1,078,936 Accumulated depreciation and amortization (180,043) (156,819) -------------------- -------------------- Net investments in properties 943,579 922,117 Investment in unconsolidated joint venture 3,768 2,735 -------------------- -------------------- Net investments in real estate 947,347 924,852 Cash and cash equivalents - 23,691 Restricted cash 39,478 65,509 Investment in marketable securities 3,368 - Deferred rent 17,841 14,833 Other assets, net 26,251 25,000 -------------------- -------------------- Total assets $1,034,285 $1,053,885 ==================== ==================== Liabilities and Stockholders' Equity Liabilities: Mortgage notes payable $ 330,908 $ 337,520 Mortgage note payable - related parties 8,761 9,224 Revolving line of credit 13,079 - Interest payable 1,596 1,331 Security deposits 5,272 4,754 Deferred rental income 3,964 3,302 Dividends and distributions payable 21,055 16,832 Accounts payable and accrued expenses 17,747 15,618 -------------------- -------------------- Total liabilities 402,382 388,581 -------------------- -------------------- Commitments and contingencies. Minority interests in operating partnerships 497,485 526,626 -------------------- -------------------- Stockholders' equity: Common stock, $.001 par value 20 20 Additional paid-in capital 154,412 153,024 Distributions in excess of accumulated (20,014) (14,366) earnings -------------------- -------------------- Total stockholders' equity 134,418 138,678 -------------------- -------------------- Total liabilities and stockholders' equity $1,034,285 $1,053,885 ==================== ====================
(1) Amortization of an above-market lease intangible asset pursuant to Statement of Financial Accounting Standard No. 141, "Business Combinations." (2) Includes approximately $159 and $267 in amortization expense for the three months ended December 31, 2008 and 2007, respectively, and $600 and $2,153 in amortization expense for the twelve months ended December 31, 2008 and 2007, 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.

The following information was filed by Mission West Properties Inc (MSW) on Thursday, February 5, 2009 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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