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): July 11, 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 July 11, 2012, the Company issued a press release announcing its earnings results for the second quarter ended June 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 July 11, 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: July 12, 2012
By:
/s/ Wayne N. Pham
   
Wayne N. Pham
   
Vice President of Finance

 
 
 
 


Exhibit 99.1

 
Press Release

For Immediate News Release
July 11, 2012

Mission West Properties Announces Second Quarter 2012 Operating Results

Cupertino, CA – Mission West Properties, Inc. (NASDAQ: MSW) reported today that Funds From Operations (“FFO”) for the quarter ended June 30, 2012, was approximately $12,153,000, or $0.11 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 $13,708,000, or $0.13 per diluted common share, for the same period in 2011. The decrease was primarily due to lower tenant reimbursement income and higher operating and general and administrative expenses. On a sequential quarter basis, FFO for the quarter ended March 31, 2012, was approximately $0.13 per diluted common share. For the six months ended June 30, 2012, FFO decreased to $26,303,000, or $0.25 per diluted common share, from FFO of $29,950,000, or $0.28 per diluted common share, for the six months ended June 30, 2011.

Net income for the quarter ended June 30, 2012, was approximately $13,709,000 as compared to approximately $7,370,000 for the quarter ended June 30, 2011. Net income per diluted share available to common stockholders was approximately $0.12 for the quarter ended June 30, 2012, compared to $0.08 for the quarter ended June 30, 2011, a per share increase of approximately 50%. The increase was primarily due to gains from sale of real estate, which accounted for approximately $0.06 per diluted share. Net income for the six months ended June 30, 2012, was approximately $26,962,000 as compared to approximately $17,305,000 for the six months ended June 30, 2011. For the six months ended June 30, 2012, net income per diluted share available to common stockholders was $0.24, up from $0.19 a year ago, a per share increase of approximately 26%.

Disposition Activity
On April 30, 2012, the Company disposed of four vacant R&D properties located at 1490-1520 McCandless Drive, 1525-1555 McCandless Drive, 1575-1595 McCandless Drive and 1600 McCandless Drive in Milpitas, California, consisting of approximately 145,000 rentable square feet. A total net gain of approximately $7,989,000 was recognized and classified as discontinued operations on the total cash sales price of $19,350,000.

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. An estimated total net gain of approximately $4,389,000 will be recognized and classified as discontinued operations in the third quarter on the total cash sales price of $18,500,000.

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 104 properties totaling approximately 7.8 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
Jun 30, 2012
   
Three Months Ended
Jun 30, 2011
   
Six Months Ended
Jun 30, 2012
   
Six Months Ended
Jun 30, 2011
 
OPERATING REVENUES:
                       
  Rental income
  $ 20,075     $ 20,354     $ 40,087     $ 42,077 (7)
  Tenant reimbursements
    2,967       4,119       6,914       8,728  
  Other income
    401       409       674       1,410  
    Total operating revenues
    23,443       24,882       47,675       52,215  
                                 
OPERATING EXPENSES:
                               
  Operating and maintenance
    2,863       2,489       5,272       4,999  
  Real estate taxes
    3,014       2,994       5,442       6,044  
  General and administrative
    911       522       1,562       1,043  
  Depreciation and amortization
    5,993 (1)     5,509 (1)     11,986       11,000  
    Total operating expenses
    12,781       11,514       24,262       23,086  
                                 
    Operating income
    10,662       13,368       23,413       29,129  
                                 
OTHER INCOME (EXPENSES):
                               
  Equity in earnings of unconsolidated joint venture
    60       27       174       18  
  Interest income
    58       57       151       126  
  Interest expense
    (4,833 )     (5,246 )     (9,755 )     (10,525 )
  Interest expense – related parties
    (146 )     (144 )     (292 )     (291 )
    Income from continuing operations
    5,801       8,062       13,691       18,457  
                                 
Discontinued operations:
                               
    Net gain from disposal of properties classified as
      discontinued operations
    7,989       -       13,508       -  
    Net loss from properties classified as
      discontinued operations
    (81 )     (692 )     (237 )     (1,152 )
        Income (loss) from discontinued operations
    7,908       (692 )     13,271       (1,152 )
                                 
        Net income
    13,709       7,370       26,962       17,305  
                                 
Net income attributable to noncontrolling interests
    (10,929 )     (5,491 )     (21,338 )     (13,027 )
Net income available to common stockholders
  $ 2,780     $ 1,879     $ 5,624     $ 4,278  
                                 
Income per share from continuing operations:
                               
   Basic
  $ 0.06     $ 0.09     $ 0.15     $ 0.20  
   Diluted
  $ 0.06     $ 0.09     $ 0.15     $ 0.20  
Income (loss) per share from discontinued operations:
                               
   Basic
  $ 0.06     $ (0.01 )   $ 0.10     $ (0.01 )
   Diluted
  $ 0.06     $ (0.01 )   $ 0.09     $ (0.01 )
Net income per share to common stockholders:
                               
   Basic
  $ 0.12     $ 0.08     $ 0.25     $ 0.19  
   Diluted
  $ 0.12     $ 0.08     $ 0.24     $ 0.19  
Weighted average shares of common stock (basic)
    22,668,020       22,495,605       22,652,844       22,392,427  
Weighted average shares of common stock (diluted)
    23,079,739       22,756,006       23,110,364       22,583,358  
Weighted average O.P. units outstanding
    82,618,015       82,790,430       82,633,191       82,893,608  
                                 

 
 
 
 



 
 
FUNDS FROM OPERATIONS
 
Three Months Ended
Jun 30, 2012
   
Three Months Ended
Jun 30, 2011
   
Six Months Ended
Jun 30, 2012
   
Six Months Ended
Jun 30, 2011
 
Funds from operations
  $ 12,153     $ 13,708     $ 26,303     $ 29,950  
Funds from operations per share (2)
  $ 0.11     $ 0.13     $ 0.25     $ 0.28  
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)
    105,697,754       105,546,436       105,743,555       105,476,966  
                                 
 
 
FUNDS FROM OPERATIONS CALCULATION
 
Three Months Ended
Jun 30, 2012
   
Three Months Ended
Jun 30, 2011
   
Six Months Ended
Jun 30, 2012
   
Six Months Ended
Jun 30, 2011
 
Net income
  $ 13,709     $ 7,370     $ 26,962     $ 17,305  
Add:
                               
   Depreciation and amortization
    6,445       6,384       12,911       12,736  
   Depreciation and amortization in
     unconsolidated joint venture
    60       60       119       119  
Less:
                               
   Noncontrolling interests in joint ventures
    (72 )     (106 )     (181 )     (210 )
   Gain on sale of real estate
    (7,989 )     -       (13,508 )     -  
Funds from operations
  $ 12,153     $ 13,708     $ 26,303     $ 29,950  
                                 
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
Jun 30, 2012
   
Three Months Ended
Jun 30, 2011
   
Six Months Ended
Jun 30, 2012
   
Six Months Ended
Jun 30, 2011
 
Total properties, end of period
    104       111       104       111  
Total square feet, end of period
    7,840,477       8,011,026       7,840,477       8,011,026  
Average monthly rental revenue per square foot (3)
  $ 1.26     $ 1.29     $ 1.27     $ 1.34 (8)
Occupancy for leased properties (6)
    70.3 %     66.5 %     70.3 %     66.5 %
Straight-line rent
  $ (25 )   $ 260     $ (226 )   $ (375 )
Leasing commissions
    -     $ 128     $ 26     $ 323  
Non-recurring capital expenditures
    -     $ 613       -     $ 1,539  


LEASE ROLLOVER SCHEDULE:
                   
Year
 
# of Leases
   
Rentable Square Feet
   
2012 Base Rent (5)
 
2012 (4)
    4       132,710     $ 1,486  
2013
    9       376,683       5,436  
2014
    19       1,774,442       28,532  
2015
    7       427,437       5,007  
2016
    8       394,806       4,552  
2017
    12       727,552       9,817  
2018
    8       480,839       6,133  
2019
    2       232,480       3,731  
2020
    3       208,768       4,471  
Thereafter
    3       476,000       11,023  
    Total
    75       5,231,717     $ 80,188  

 
 
 
 


BALANCE SHEETS
           
   
June 30, 2012
   
December 31, 2011
 
             
Assets
           
Investments in real estate:
           
     Land
  $ 323,173     $ 306,474  
     Buildings and improvements
    757,453       745,962  
     Real estate related intangible assets
    3,561       3,561  
         Total investments in properties
    1,084,187       1,055,997  
     Accumulated depreciation and amortization
    (241,196 )     (229,211 )
     Assets held for sale, net
    21,574       54,361  
         Net investments in properties
    864,565       881,147  
     Investment in unconsolidated joint venture
    3,540       3,557  
         Net investments in real estate
    868,105       884,704  
Cash and cash equivalents
    3,114       -  
Deferred rent
    16,424       16,650  
Other assets, net
    31,173       35,133  
      Total assets
  $ 918,816     $ 936,487  
                 
Liabilities and Equity
               
Liabilities:
               
     Mortgage notes payable
  $ 323,550     $ 331,166  
     Mortgage note payable – related parties
    6,831       7,139  
     Revolving line of credit
    -       3,305  
     Interest payable
    1,543       1,606  
     Security deposits
    4,333       4,317  
     Prepaid rent and deferred revenue
    11,375       5,836  
     Dividends and distributions payable
    13,687       13,687  
     Accounts payable and accrued expenses
    15,193       16,344  
         Total liabilities
    376,512       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
    (35,271 )     (32,962 )
         Total stockholders’ equity
    141,475       142,961  
Noncontrolling interests in operating partnerships
    400,829       410,126  
         Total equity
    542,304       553,087  
         Total liabilities and equity
  $ 918,816     $ 936,487  
 

 

(1)  
Includes approximately $406 and $56 in amortization expense for the three months ended June 30, 2012 and 2011, respectively, and $813 and $180 in amortization expense for the six months ended June 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 six month-to-month leases for approximately 80,000 rentable square feet and approximately $188 in cash rent.

(5)  
Base rent reflects cash rent.

(6)  
The occupancy rate at June 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.

(8)  
Includes a one-time rent adjustment of approximately $1,638. Excluding the adjustment, the average monthly rental revenue per square foot would have been $1.29.



The following information was filed by Mission West Properties Inc (MSW) on Thursday, July 12, 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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