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): October 10, 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 October 10, 2012, the Company issued a press release announcing its earnings results for the third quarter ended September 30, 2012. 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 October 10, 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: October 11, 2012
By:
/s/ Wayne N. Pham
   
Wayne N. Pham
   
Vice President of Finance

 
 
 
 


Exhibit 99.1

Mission West Properties, Inc. Logo
 
Press Release

For Immediate News Release
October 10, 2012

Mission West Properties Announces Third Quarter 2012 Operating Results

Cupertino, CA – Mission West Properties, Inc. (NASDAQ: MSW) reported today that Funds From Operations (“FFO”) for the quarter ended September 30, 2012, was approximately $14,604,000, or $0.14 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 $14,120,000, or $0.13 per diluted common share, for the same period in 2011. On a sequential quarter basis, FFO for the quarter ended June 30, 2012, was approximately $0.11 per diluted common share. For the nine months ended September 30, 2012, FFO decreased to $40,907,000, or $0.39 per diluted common share, from FFO of $44,069,000, or $0.42 per diluted common share, for the nine months ended September 30, 2011.

Net income for the quarter ended September 30, 2012, was approximately $13,506,000 as compared to approximately $7,436,000 for the quarter ended September 30, 2011. Net income per diluted share available to common stockholders was approximately $0.13 for the quarter ended September 30, 2012, compared to $0.08 for the quarter ended September 30, 2011, a per share increase of approximately 62%. The increase was primarily due to gains from sale of real estate, which accounted for approximately $0.04 per diluted share. Net income for the nine months ended September 30, 2012, was approximately $40,468,000 as compared to approximately $24,741,000 for the nine months ended September 30, 2011. For the nine months ended September 30, 2012, net income per diluted share available to common stockholders was $0.37, up from $0.27 a year ago, a per share increase of approximately 37%.

Disposition Activity
On July 10, 2012, the Company disposed of three vacant R&D properties located at 300 Montague Expressway, 324-368 Montague Expressway and 337 Trade Zone Boulevard in Milpitas, California, consisting of approximately 149,000 rentable square feet. A total net gain of approximately $3,389,000 was recognized and classified as discontinued operations on the total cash sales price of $18,500,000.

On August 9, 2012, the Company disposed of the remaining 64% of the vacant R&D property at 1815-1845 McCandless Drive in Milpitas, California, consisting of approximately 76,000 rentable square feet. A total net gain of approximately $1,387,000 was recognized and classified as discontinued operations on the total cash sales price of $8,987,000. The other 36% of the property was sold during the first quarter of 2012.

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 101 properties totaling approximately 7.6 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
Sept 30, 2012
   
Three Months Ended
Sept 30, 2011
   
Nine Months Ended
Sept 30, 2012
   
Nine Months Ended
Sept 30, 2011
 
OPERATING REVENUES:
                       
  Rental income
  $ 20,471     $ 20,890     $ 60,558     $ 62,967 (7)
  Tenant reimbursements
    4,047       4,268       10,962       12,996  
  Other income
    667       505       1,340       1,915  
    Total operating revenues
    25,185       25,663       72,860       77,878  
                                 
OPERATING EXPENSES:
                               
  Operating and maintenance
    2,654       3,081       7,907       8,053  
  Real estate taxes
    2,696       2,748       8,136       8,723  
  General and administrative
    880       504       2,442       1,547  
  Depreciation and amortization
    5,858 (1)     5,857 (1)     17,844       16,739  
    Total operating expenses
    12,088       12,190       36,329       35,062  
                                 
    Operating income
    13,097       13,473       36,531       42,816  
                                 
OTHER INCOME (EXPENSES):
                               
  Equity in earnings of unconsolidated joint venture
    41       13       215       31  
  Interest income
    55       54       207       180  
  Interest expense
    (4,698 )     (5,255 )     (14,453 )     (15,780 )
  Interest expense – related parties
    (130 )     (188 )     (422 )     (479 )
    Income from continuing operations
    8,365       8,097       22,078       26,768  
                                 
Discontinued operations:
                               
    Net gain from disposal of properties classified as
      discontinued operations
    5,191       -       18,699       -  
    Net loss from properties classified as
      discontinued operations
    (50 )     (661 )     (309 )     (2,027 )
        Income (loss) from discontinued operations
    5,141       (661 )     18,390       (2,027 )
                                 
        Net income
    13,506       7,436       40,468       24,741  
                                 
Net income attributable to noncontrolling interests
    (10,587 )     (5,561 )     (31,925 )     (18,588 )
Net income available to common stockholders
  $ 2,919     $ 1,875     $ 8,543     $ 6,153  
                                 
Income per share from continuing operations:
                               
   Basic
  $ 0.09     $ 0.09     $ 0.24     $ 0.29  
   Diluted
  $ 0.09     $ 0.09     $ 0.24     $ 0.29  
Income (loss) per share from discontinued operations:
                               
   Basic
  $ 0.04       -     $ 0.13     $ (0.01 )
   Diluted
  $ 0.04       -     $ 0.13     $ (0.01 )
Net income per share to common stockholders:
                               
   Basic
  $ 0.13     $ 0.08     $ 0.38     $ 0.27  
   Diluted
  $ 0.13     $ 0.08     $ 0.37     $ 0.27  
Weighted average shares of common stock (basic)
    22,668,020       22,584,770       22,657,940       22,457,246  
Weighted average shares of common stock (diluted)
    23,075,572       22,878,981       23,099,310       22,685,314  
Weighted average O.P. units outstanding
    82,618,015       82,701,265       82,628,095       82,828,789  
                                 

 
 
 
 



 
 
FUNDS FROM OPERATIONS
 
Three Months Ended
Sept 30, 2012
   
Three Months Ended
Sept 30, 2011
   
Nine Months Ended
Sept 30, 2012
   
Nine Months Ended
Sept 30, 2011
 
Funds from operations
  $ 14,604     $ 14,120     $ 40,907     $ 44,069  
Funds from operations per share (2)
  $ 0.14     $ 0.13     $ 0.39     $ 0.42  
Outstanding common stock
    22,668,020       22,584,770       22,668,020       22,584,770  
Outstanding O.P. units
    82,618,015       82,701,265       82,618,015       82,701,265  
Weighted average O.P. units and common stock
   outstanding (diluted)
    105,693,587       105,580,246       105,727,405       105,514,103  
                                 
 
 
FUNDS FROM OPERATIONS CALCULATION
 
Three Months Ended
Sept 30, 2012
   
Three Months Ended
Sept 30, 2011
   
Nine Months Ended
Sept 30, 2012
   
Nine Months Ended
Sept 30, 2011
 
Net income
  $ 13,506     $ 7,436     $ 40,468     $ 24,741  
Add:
                               
   Depreciation and amortization
    6,315       6,724       19,226       19,460  
   Depreciation and amortization in
     unconsolidated joint venture
    60       60       179       179  
Less:
                               
   Noncontrolling interests in joint ventures
    (86 )     (100 )     (267 )     (311 )
   Gain on sale of real estate
    (5,191 )     -       (18,699 )     -  
Funds from operations
  $ 14,604     $ 14,120     $ 40,907     $ 44,069  
                                 
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
Sept 30, 2012
   
Three Months Ended
Sept 30, 2011
   
Nine Months Ended
Sept 30, 2012
   
Nine Months Ended
Sept 30, 2011
 
Total properties, end of period
    101       112       101       112  
Total square feet, end of period
    7,615,915       8,078,526       7,615,915       8,078,526  
Average monthly rental revenue per square foot (3)
  $ 1.26     $ 1.33     $ 1.26     $ 1.33  
Occupancy for leased properties (6)
    70.6 %     66.7 %     70.6 %     66.7 %
Straight-line rent
  $ 329     $ (39 )   $ 103     $ (414 )
Leasing commissions
  $ 351     $ 85     $ 377     $ 407  
Non-recurring capital expenditures
  $ 718     $ 233     $ 717     $ 1,772  


LEASE ROLLOVER SCHEDULE:
                 
Year
 
# of Leases
 
Rentable Square Feet
 
2012 Base Rent (5)
2012 (4)
 
1
 
40,527
   
$1,003
 
2013
 
9
 
376,683
   
5,436
 
2014
 
21
 
1,800,895
   
29,172
 
2015
 
8
 
442,347
   
5,243
 
2016
 
8
 
396,206
   
4,553
 
2017
 
12
 
727,552
   
9,817
 
2018
 
9
 
542,244
   
6,142
 
2019
 
2
 
232,480
   
3,731
 
2020
 
3
 
208,768
   
4,471
 
Thereafter
 
3
 
476,000
   
11,023
 
    Total
 
76
 
5,243,702
   
$80,591
 

 
 
 
 


BALANCE SHEETS
           
   
September 30, 2012
   
December 31, 2011
 
             
Assets
           
Investments in real estate:
           
     Land
  $ 321,235     $ 306,474  
     Buildings and improvements
    748,740       745,962  
     Real estate related intangible assets
    3,561       3,561  
         Total investments in properties
    1,073,536       1,055,997  
     Accumulated depreciation and amortization
    (243,747 )     (229,211 )
     Assets held for sale, net
    8,064       54,361  
         Net investments in properties
    837,853       881,147  
     Investment in unconsolidated joint venture
    3,487       3,557  
         Net investments in real estate
    841,340       884,704  
Cash and cash equivalents
    26,905       -  
Deferred rent
    16,753       16,650  
Other assets, net
    30,138       35,133  
      Total assets
  $ 915,136     $ 936,487  
                 
Liabilities and Equity
               
Liabilities:
               
     Mortgage notes payable
  $ 319,665     $ 331,166  
     Mortgage note payable – related parties
    6,672       7,139  
     Revolving line of credit
    -       3,305  
     Interest payable
    1,524       1,606  
     Security deposits
    3,865       4,317  
     Prepaid rent and deferred revenue
    10,285       5,836  
     Dividends and distributions payable
    13,687       13,687  
     Accounts payable and accrued expenses
    17,681       16,344  
         Total liabilities
    373,379       383,400  
                 
Commitments and contingencies.
               
                 
Equity:
               
Stockholders’ equity:
               
     Common stock, $.001 par value
    23       23  
     Additional paid-in capital
    176,723       175,900  
     Distributions in excess of accumulated earnings
    (35,299 )     (32,962 )
         Total stockholders’ equity
    141,447       142,961  
Noncontrolling interests in operating partnerships
    400,310       410,126  
         Total equity
    541,757       553,087  
         Total liabilities and equity
  $ 915,136     $ 936,487  



(1)  
Includes approximately $301 and $395 in amortization expense for the three months ended September 30, 2012 and 2011, respectively, and $1,114 and $575 in amortization expense for the nine months ended September 30, 2012 and 2011, 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 2012 calculation.

(4)  
Excludes four month-to-month leases for approximately 71,000 rentable square feet and approximately $176 in cash rent.

(5)  
Base rent reflects cash rent.

(6)  
The occupancy rate at September 30, 2012, excludes properties classified as assets held for sale.

(7)  
Includes a one-time rent adjustment of approximately $1,638 from a tenant dispute resolution.




The following information was filed by Mission West Properties Inc (MSW) on Thursday, October 11, 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-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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