Note 6 - Related Party Transactions

3 Months Ended

Mar. 31, 2012

Related Party Transactions Disclosure [Text Block]

6.    Related Party Transactions

As of March 31, 2012, the Berg Group owned 75,769,684 O.P. units. The Berg Group’s combined ownership of O.P. units and shares of common stock as of March 31, 2012, represented approximately 74% of the total equity interests, assuming conversion of all O.P. units outstanding into the Company’s common stock.

As of March 31, 2012, debt in the amount of approximately $6,986 was due the Berg Group under a mortgage note established May 15, 2000, in connection with the acquisition of a 50% interest in Hellyer Avenue Limited Partnership, the obligor under the mortgage note. The mortgage note bears interest at 7.65% and principal payments are amortized over 20 years. Interest expense incurred in connection with the mortgage note was approximately $136 and $146 for the three months ended March 31, 2012 and 2011, respectively.

In September 2009, the superior court issued a final decision in the Mission West Properties, L.P. v. Republic Properties Corporation litigation (the “Republic Litigation”) and entry of judgment in favor of Republic Properties Corporation (“RPC”) that RPC is and at all times was a partner in Hellyer Avenue Limited Partnership (“Hellyer LP”) and was entitled to receive all past distributions from profits that were paid to Berg & Berg Enterprises, Inc. (“BBE”) plus accrued interest. The Company filed an appeal. In October 2009, the Company deposited with the clerk of the Santa Clara County Superior Court a check in the amount of approximately $13,975. Of this amount, $9,317 represented the amount owed to RPC and $4,658 million represented a deposit to appeal the court’s final decision in the litigation. The Company accrued approximately $4,389 in interest expense since September 2009 on the amount of past distributions that would be payable to RPC by Hellyer LP based on the amount of the judgment at the legal rate of interest of 10%.  In addition, because RPC’s interest in the Hellyer LP was transferred to BBE and past distributions from profits were paid to BBE, the Company accrued approximately $1,300 in interest receivable due from BBE. The $1,300 interest income accrual was calculated at an interest rate of LIBOR plus 1.25%. The Company’s appeal was unsuccessful, and in December 2011, the Company finalized the details with its legal counsel to arrange for the transfer of funds held by the California Superior Court to pay off the judgment plus accrued interest, and coordinate with the Independent Directors Committee of the Board of Directors and BBE on the transfer of the former RPC interest from BBE to RPC. The amount of approximately $9,217, consisting of the aggregate distributions and accrued interest, is owed by BBE to the Company. In February 2012, the $9,217 owed by the Berg Group was applied towards the purchase price for properties acquired from the Berg Group. See Note 3, “Real Estate” above for details of the acquisitions.

As disclosed under Note 3, “Real Estate,” on February 1, 2012, the Company acquired three vacant R&D buildings located at 5901, 5921 and 5961 Optical Court in San Jose, California, from the Berg Group consisting of approximately 202,500 rentable square feet for a total purchase price of $18,000. The Company also acquired approximately ten acres of raw land at Hellyer Avenue and Embedded Way for approximately $5,313 and nine acres of raw land at Hellyer Avenue and Piercy Road for approximately $4,877 from the Berg Group. The combined purchase price for the three R&D buildings and raw land totaled approximately $28,190. The Company acquired these properties by offsetting the purchase price by approximately $9,217, the amount of the prior distributions received by BBE that had been paid to RPC by the Company and accrued interest pursuant to the judgment in the Republic Litigation, and approximately $7,494, the amount the Berg Group was obligated to pay toward the construction of an R&D building in connection with the Company’s 2001 acquisition of 245 Caspian Drive in Sunnyvale, California. The Company issued an unsecured short-term note payable in the principal amount of approximately $11,479 representing the remaining portion of the purchase price. The note had an interest rate of LIBOR plus 1.75%, and matures July 15, 2012. The Company paid the note in full in March 2012. Total interest expense on the note was approximately $9 for the three months ended March 31, 2012. The transaction was approved by the Independent Directors Committee of the Company’s Board of Directors.

During the first three months of 2012, the Company issued two short-term notes payable to the Berg Group in connection with property acquisitions and quarterly dividend distributions. The interest rate on the two notes was LIBOR plus 1.75%. The aggregate loan amount totaled approximately $13,446. The Company repaid approximately $13,457 to the Berg Group, which included accrued interest. For the three months ended March 31, 2012, interest expense incurred in connection with those short-term notes payable was approximately $11.

During the first three months of 2012 and 2011, Carl E. Berg or entities controlled by him held financial interests in several companies that lease space from the operating partnerships, which include companies where Mr. Berg has a greater than 10% ownership interest. These related tenants contributed approximately $424 and $256 in rental income for the three months ended March 31, 2012 and 2011, respectively.

Under the Company’s charter, bylaws and agreements with the Berg Group, the individual members of the Berg Group are prohibited from acquiring or holding shares of the Company’s common stock if such acquisition would result in their beneficial ownership percentage of the Company’s common stock causing the Company to violate any REIT qualification requirement. Currently their share ownership is below a level at which rent from related tenants would be excluded in determining compliance with REIT qualification tests.

Until February 2012, the Berg Group had an obligation to pay approximately $7,494 toward the construction of  an approximately 75,000 to 90,000 square foot building in connection with the Company’s 2001 acquisition of 245 Caspian in Sunnyvale, which consists of approximately three acres of unimproved land. In connection with the Company’s multiple property acquisitions from the Berg Group on February 1, 2012 (see above), that obligation was applied to partially offset the purchase price, as described above.

The Company currently leases office space owned by Berg & Berg Enterprises for the Company’s headquarters. Rental amounts and overhead reimbursements paid to Berg & Berg Enterprises were $30 for the three months ended March 31, 2012 and 2011.