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, 2012

MISSION WEST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)

Maryland
 
001-34000
 
95-2635431
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)



10050 Bandley Drive, Cupertino, CA 95014
(Address of principal executive offices, zip code)

 Registrant’s telephone number, including area code: (408) 725-0700

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:

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o 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 1, 2012, the Company issued a press release announcing its earnings results for the fourth quarter and full year ended December 31, 2011. 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.

ITEM 9.01.    FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

Exhibit No.
 
Description
99.1
 
Mission West Properties, Inc. Press Release dated February 1, 2012
     







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 2, 2012
By:
/s/ Wayne N. Pham
   
Wayne N. Pham
   
Vice President of Finance

 
 
 
 


Exhibit 99.1

 

 
 
 
Press Release

For Immediate News Release
February 1, 2012


Mission West Properties Announces Fourth Quarter and Full Year 2011 Operating Results


Cupertino, CA – Mission West Properties, Inc. (NASDAQ: MSW) reported today that Funds From Operations (“FFO”) for the quarter ended December 31, 2011, was approximately $16,624,000, or $0.16 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 $11,182,000, or $0.11 per diluted common share, for the same period in 2010. The increase was primarily due to higher operating revenues from new leases and lower operating expenses. On a sequential quarter basis, FFO for the quarter ended September 30, 2011, was approximately $0.13 per diluted common share. For the year ended December 31, 2011, FFO increased to $60,693,000, or $0.57 per diluted common share, from FFO of $56,018,000, or $0.53 per diluted common share, for the year ended December 31, 2010. Realized and unrealized gain from investment in marketable securities and litigation proceeds accounted for approximately $0.05 per diluted common share for the year ended December 31, 2010.

Net income for the quarter ended December 31, 2011, was approximately $14,159,000 as compared to approximately $10,839,000 for the quarter ended December 31, 2010. Net income per diluted share available to common stockholders was approximately $0.14 for the quarter ended December 31, 2011, compared to $0.10 for the quarter ended December 31, 2010, a per share increase of approximately 40%. The increase was primarily due to higher operating revenues from new leases and lower operating expenses. For the quarters ended December 31, 2011 and 2010, gain from the sale of real estate accounted for approximately $0.03 and $0.05 per diluted common share, respectively. Net income for the year ended December 31, 2011, was approximately $38,901,000 as compared to approximately $36,495,000 for the year ended December 31, 2010. For the year ended December 31, 2011, net income per diluted share available to common stockholders was $0.40, up from $0.38 a year ago, a per share increase of approximately 5%. Realized and unrealized gain from investment in marketable securities and litigation proceeds accounted for approximately $0.05 per diluted common share for the year ended December 31, 2010.

Disposition Activity

On October 28, 2011, the Company disposed of one R&D property located at 1425-1455 McCandless Drive in Milpitas, California consisting of approximately 39,000 rentable square feet. A total net gain of approximately $3,891,000 was recognized and classified as discontinued operations on the total sales price of $7,320,000. The buyer issued a promissory note secured by a deed of trust on the property sold to the Company in the amount of $3,660,000 with an interest rate of 6.00% per annum. The principal amount of the note, together with accrued interest, will be due and payable on October 30, 2012.

On January 9, 2012, the Company disposed of three R&D properties located at 1680-1690 McCandless Drive, 1740-1768 McCandless Drive and 1810-1830 McCandless Drive in Milpitas, California consisting of approximately 165,000 rentable square feet. A total net gain of approximately $8,350,000 will be recognized and classified as discontinued operations on the total sales price of $21,780,000. The buyer issued an unsecured promissory note to the Company in the amount of $18,780,000 with an interest rate of 0% per annum. The total sales price encompasses the sum of the following amounts: a) The down payment price of $3,000,000; b) Yearly payments of $3,000,000 on the anniversary of the effective date for four years; and c) On the fifth year anniversary of the effective date, the buyer will pay the amount remaining of the unpaid portion of the total sales price.

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 7.9 million rentable 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,” “intend,” 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 from 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)

STATEMENTS OF OPERATIONS
                       
   
Three Months Ended
Dec 31, 2011
   
Three Months Ended
Dec 31, 2010
   
Twelve Months Ended
Dec 31, 2011
   
Twelve Months Ended
Dec 31, 2010
 
OPERATING REVENUES:
                       
  Rental income
  $ 20,608     $ 19,487     $ 83,574 (6)   $ 81,037  
  Tenant reimbursements
    4,704       3,467       17,701       14,868  
  Other income
    1,666       472       3,581       2,590  
    Total operating revenues
    26,978       23,426       104,856       98,495  
                                 
OPERATING EXPENSES:
                               
  Operating and maintenance
    3,079       3,910       11,174       13,020  
  Real estate taxes
    2,195       2,903       10,980       12,084  
  General and administrative
    831       558       2,378       2,219  
  Depreciation and amortization
    5,923 (1)     5,533 (1)     22,839 (1)     22,122 (1)
    Total operating expenses
    12,028       12,904       47,371       49,445  
                                 
    Operating income
    14,950       10,522       57,485       49,050  
                                 
OTHER INCOME (EXPENSES):
                               
  Equity in (loss) earnings of unconsolidated joint venture
    (4 )     33       27       303  
  Interest income
    334       51       515       102  
  Realized gain and unrealized loss from investment, net
    -       -       -       4,067  
  Interest expense
    (4,725 )     (5,304 )     (20,505 )     (20,068 )
  Interest expense – related parties
    (152 )     (149 )     (631 )     (988 )
    Income from continuing operations
    10,403       5,153       36,891       32,466  
                                 
Discontinued operations:
                               
    Gain from disposal of discontinued operations
    3,891       6,199       3,891       6,199  
    Loss from discontinued operations
    (135 )     (513 )     (1,881 )     (2,170 )
        Income from discontinued operations
    3,756       5,686       2,010       4,029  
                                 
        Net income
    14,159       10,839       38,901       36,495  
                                 
Net income attributable to noncontrolling interests
    (11,038 )     (8,654 )     (29,626 )     (28,022 )
Net income available to common stockholders
  $ 3,121     $ 2,185     $ 9,275     $ 8,473  
                                 
Income per share from continuing operations:
                               
   Basic
  $ 0.11     $ 0.06     $ 0.40     $ 0.36  
   Diluted
  $ 0.11     $ 0.06     $ 0.39     $ 0.35  
Income per share from discontinued operations:
                               
   Basic
  $ 0.03     $ 0.04     $ 0.01     $ 0.03  
   Diluted
  $ 0.03     $ 0.04     $ 0.01     $ 0.03  
Net income per share to common stockholders:
                               
   Basic
  $ 0.14     $ 0.10     $ 0.41     $ 0.39  
   Diluted
  $ 0.14     $ 0.10     $ 0.40     $ 0.38  
Weighted average shares of common stock (basic)
    22,585,110       22,076,694       22,489,475       21,973,599  
Weighted average shares of common stock (diluted)
    23,013,187       22,198,946       22,917,552       22,121,724  
Weighted average O.P. units outstanding
    82,700,925       83,209,341       82,796,560       83,310,364  
                                 

 
 
 
 



 
 
FUNDS FROM OPERATIONS
 
Three Months Ended
Dec 31, 2011
   
Three Months Ended
Dec 31, 2010
   
Twelve Months Ended
Dec 31, 2011
   
Twelve Months Ended
Dec 31, 2010
 
Funds from operations
  $ 16,624     $ 11,182     $ 60,693     $ 56,018  
Funds from operations per share (2)
  $ 0.16     $ 0.11     $ 0.57     $ 0.53  
Outstanding common stock
    22,586,020       22,135,770       22,586,020       22,135,770  
Outstanding O.P. units
    82,700,015       83,150,265       82,700,015       83,150,265  
Weighted average O.P. units and common stock
   outstanding (diluted)
    105,714,112       105,408,287       105,714,112       105,432,088  
                                 
 
 
FUNDS FROM OPERATIONS CALCULATION
 
Three Months Ended
Dec 31, 2011
   
Three Months Ended
Dec 31, 2010
   
Twelve Months Ended
Dec 31, 2011
   
Twelve Months Ended
Dec 31, 2010
 
Net income
  $ 14,159     $ 10,839     $ 38,901     $ 36,495  
Add:
                               
   Depreciation and amortization
    6,399       6,526       25,859       25,840  
   Depreciation and amortization in
     unconsolidated joint venture
    60       60       238       238  
Less:
                               
   Noncontrolling interests in joint ventures
    (103 )     (44 )     (414 )     (356 )
   Gain on sale of real estate
    (3,891 )     (6,199 )     (3,891 )     (6,199 )
Funds from operations
  $ 16,624     $ 11,182     $ 60,693     $ 56,018  
                                 
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) (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.
 
   
 
 
PROPERTY AND OTHER DATA:
 
Three Months Ended
Dec 31, 2011
   
Three Months Ended
Dec 31, 2010
   
Twelve Months Ended
Dec 31, 2011
   
Twelve Months Ended
Dec 31, 2010
 
Total properties, end of period
    111       111       111       111  
Total square feet, end of period
    8,039,947       8,011,026       8,039,947       8,011,026  
Average monthly rental revenue per square foot (3)
  $ 1.34     $ 1.25     $ 1.25     $ 1.30  
Occupancy for leased properties (7)
    72.6 %     69.9 %     72.6 %     69.9 %
Straight-line rent
  $ (877 )   $ (481 )   $ (1,291 )   $ (770 )
Leasing commissions
  $ 679     $ 812     $ 1,087     $ 1,753  
Non-recurring capital expenditures
  $ 670     $ 1,142     $ 2,442     $ 2,841  


LEASE ROLLOVER SCHEDULE:
             
Year
 
# of Leases
 
Rentable Square Feet
 
2011 Base Rent (5)
2011
 
-
 
-
 
$3,745,880
2012 (4)
 
9
 
425,587
 
6,754,892
2013
 
7
 
361,923
 
5,217,260
2014
 
22
 
1,823,675
 
30,259,873
2015
 
8
 
587,437
 
9,178,835
2016
 
8
 
394,806
 
5,957,657
2017
 
12
 
727,552
 
7,831,158
2018
 
5
 
431,606
 
4,058,174
2019
 
2
 
212,480
 
3,567,224
2020
 
3
 
208,768
 
4,327,563
Thereafter
 
1
 
105,000
 
3,809,319
    Total
 
77
 
5,278,834
 
$84,707,835

 
 
 
 


BALANCE SHEETS
           
   
December 31, 2011
   
December 31, 2010
 
             
Assets
           
Investments in real estate:
           
     Land
  $ 306,474     $ 322,076  
     Buildings and improvements
    745,962       790,424  
     Real estate related intangible assets
    3,561       3,240  
         Total investments in properties
    1,055,997       1,115,740  
     Accumulated depreciation and amortization
    (229,221 )     (224,027 )
     Assets held for sale, net
    54,361       3,267  
         Net investments in properties
    881,137       894,980  
     Investment in unconsolidated joint venture
    3,558       3,830  
         Net investments in real estate
    884,695       898,810  
Cash and cash equivalents
    -       3,988  
Restricted cash
    -       6,892  
Deferred rent
    16,650       17,941  
Other assets, net
    35,142       40,653  
      Total assets
  $ 936,487     $ 968,284  
                 
Liabilities and Equity
               
Liabilities:
               
     Mortgage notes payable
  $ 331,166     $ 345,770  
     Mortgage note payable – related parties
    7,139       7,721  
     Revolving line of credit
    3,305       -  
     Interest payable
    1,606       1,659  
     Security deposits
    4,317       4,605  
     Prepaid rent
    5,836       6,526  
     Dividends and distributions payable
    13,687       15,793  
     Accounts payable and accrued expenses
    16,344       16,239  
         Total liabilities
    383,400       398,313  
                 
Commitments and contingencies.
               
                 
Equity:
               
Stockholders’ equity:
               
     Common stock, $.001 par value
    23       22  
     Additional paid-in capital
    175,900       172,568  
     Distributions in excess of accumulated earnings
    (32,962 )     (30,520 )
         Total stockholders’ equity
    142,961       142,070  
Noncontrolling interests in operating partnerships
    410,126       427,901  
         Total equity
    553,087       569,971  
         Total liabilities and equity
  $ 936,487     $ 968,284  



(1)  
Includes approximately $406 and $124 in amortization expense for the three months ended December 31, 2011 and 2010, respectively, and $981 and $708 in amortization expense for the years ended December 31, 2011 and 2010, respectively, for the amortization of in-place lease value intangible asset pursuant to the Business Combinations Topic of the Financial Accounting Standards Board Accounting Standards Codification.

(2)  
Calculated on a fully diluted basis. Assumes conversion of all O.P. units outstanding into the Company’s common stock.

(3)  
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. Properties classified as assets held for sale were excluded from the 2011 calculation.

(4)  
Excludes seven month-to-month leases for approximately 88,000 rentable square feet and approximately $494 in cash rent.

(5)  
Base rent reflects cash rent.

(6)  
Includes a one-time rent adjustment of approximately $1,638 from a tenant dispute resolution.

(7)  
The occupancy rate at December 31, 2011, excludes properties classified as assets held for sale.



The following information was filed by Mission West Properties Inc (MSW) on Thursday, February 2, 2012 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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