**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**Form
      10-Q**




QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





FOR
      THE
      QUARTERLY PERIOD ENDED MARCH 31, 2008





COMMISSION
      FILE NUMBER 1-8383





**Mission
      West Properties, Inc.**


(Exact
      name of registrant as specified in its charter)





**Maryland**
            
            **95-2635431***(State
                or other jurisdiction of incorporation or
                organization)*
            
            *(I.R.S.
                Employer Identification
                Number)*





**10050
      Bandley Drive**


**Cupertino,
      California 95014-2188**


*(Address
      of principal executive offices)*





**(408)
      725-0700**


*(Registrant's
      telephone number, including area code)*










Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. YES xNO o








Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.





Large
                accelerated filer ̈
            Accelerated
                filerx
            Non-accelerated
                filer ̈
            Smaller
                reporting company ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Exchange
      Act Rule 12b-2). Yes  ̈  No x





**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





Indicate
      the number of shares outstanding of each of the issuer’s classes of


common
      stock as of the latest practicable date:




19,694,807
      shares outstanding as of April 30, 2008







**Mission
      West Properties, Inc.**





**FORM
      10-Q**


**FOR
      THE QUARTER ENDED** **MARCH 31, 2008**





**INDEX**





Page**Part
                I**
            **Financial
                Information**Item
                1.
            Financial
                Statements:Condensed
                Consolidated Balance Sheets as of March 31, 2008 and December 31,
                2007
                (unaudited)
            2Condensed
                Consolidated Statements of Operations for the three months ended
                March 31,
                2008 and 2007 (unaudited)
            3Condensed
                Consolidated Statements of Cash Flows for the three months ended
                March 31,
                2008 and 2007 (unaudited)
            4Notes
                to Condensed Consolidated Financial Statements (unaudited)
            5Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            13Item
                3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            23Item
                4.
            Controls
                and Procedures
            24**Part
                II**
            **Other
                Information**Item
                1.
            Legal
                Proceedings
            24Item
                1A.
            Risk
                Factors
            24Item
                6.
            Exhibits
            24**Signatures**
            25





**Exhibits**


Exhibit
      10.55 - Heritage Bank of Commerce Revolving Credit Loan Agreement


Exhibit
      10.55.1 - Heritage Bank of Commerce Revolving Credit Loan Change in Terms
      Agreement


Exhibit
      31.1 - Certification Pursuant to Rule 13a-14(a) of the Securities Exchange
      Act
      of 1934


Exhibit
      31.2 - Certification Pursuant to Rule 13a-14(a) of the Securities Exchange
      Act
      of 1934


Exhibit
      31.3 - Certification Pursuant to Rule 13a-14(a) of the Securities Exchange
      Act
      of 1934


Exhibit
      32 - Certification of CEO and CFO Pursuant to 18 U.S.C. § 1350, as Adopted
      Pursuant to §
906
      of
      the Sarbanes-Oxley Act of 2002


-
          1
          -





**PART
      I – Financial Information**


**Item
      1.** **Condensed
      Consolidated Financial Statements**





**MISSION
      WEST PROPERTIES, INC.**


CONDENSED
      CONSOLIDATED BALANCE SHEETS


*(dollars
      in thousands, except share and per share amounts)*


(unaudited)








March 31, 2008
            
            December 31, 2007ASSETSReal
                estate:Land
            
            $
            320,911
            
            $
            312,152Buildings
                and improvements
            
            
            790,770
            
            
            764,665Real
                estate related intangible assets
            
            
            3,240
            
            
            2,119Total
                investments in properties
            
            
            1,114,921
            
            
            1,078,936Less
                accumulated depreciation and amortization
            
            
            (162,442
            )
            
            (156,819
            )Total
                investments in real estate, net
            
            
            952,479
            
            
            922,117Cash
                and cash equivalents
            
            
            21,611
            
            
            23,691Restricted
                cash
            
            
            48,640
            
            
            65,509Deferred
                rent receivable, net
            
            
            15,539
            
            
            14,833Investment
                in unconsolidated joint venture
            
            
            2,667
            
            
            2,735Other
                assets, net
            
            
            26,450
            
            
            25,000Total
                assets
            
            $
            1,067,386
            
            $
            1,053,885LIABILITIES
                AND STOCKHOLDERS’ EQUITYLiabilities:Mortgage
                notes payable
            
            $
            334,774
            
            $
            337,520Note
                payable (related parties)
            
            
            19,316
            
            
            -Mortgage
                note payable (related parties)
            
            
            9,112
            
            
            9,224Interest
                payable
            
            
            1,320
            
            
            1,331Security
                deposits
            
            
            4,793
            
            
            4,754Deferred
                rental income
            
            
            4,775
            
            
            3,302Dividends
                and distributions payable
            
            
            21,040
            
            
            16,832Accounts
                payable and accrued expenses
            
            
            18,925
            
            
            15,618Total
                liabilities
            
            
            414,055
            
            
            388,581Commitments
                and contingencies (Note 10)Minority
                interests
            
            
            516,504
            
            
            526,626Stockholders’
                equity:Preferred
                stock, $.001 par value, 20,000,000 shares authorized, none issued
                and
                outstanding
            
            
            -
            
            
            -Common
                stock, $.001 par value, 200,000,000 shares authorized, 19,669,807
                and
                19,664,087 shares issued and outstanding at March 31, 2008 and December
                31, 2007
            
            
            20
            
            
            20Additional
                paid-in capital
            
            
            153,224
            
            
            153,024Distributions
                in excess of accumulated earnings
            
            
            (16,417
            )
            
            (14,366
            )Total
                stockholders’ equity
            
            
            136,827
            
            
            138,678Total
                liabilities and stockholders’ equity
            
            $
            1,067,386
            
            $
            1,053,885





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.


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          2
          -





**MISSION
      WEST PROPERTIES, INC**


CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


*(dollars
      in thousands, except share and per share amounts)*


(unaudited)




Three months ended March 31,2008
            
            2007Revenues:Rental
                revenue from real estate
            
            $
            18,996
            
            $
            21,202Above
                market lease intangible asset amortization
            
            
            -
            
            
            (4,091
            )Tenant
                reimbursements
            
            
            3,583
            
            
            3,214Lease
                termination fees
            
            
            1,921
            
            
            10,109Other
                income, including interest
            
            
            786
            
            
            3,056Total
                revenues
            
            
            25,286
            
            
            33,490Expenses:Property
                operating, maintenance and real estate taxes
            
            
            4,888
            
            
            4,521Interest
            
            
            4,927
            
            
            5,069Interest
                (related parties)
            
            
            436
            
            
            184General
                and administrative
            
            
            673
            
            
            713Depreciation
                and amortization of real estate
            
            
            5,623
            
            
            6,154Total
                expenses
            
            
            16,547
            
            
            16,641Income
                before equity in earnings of unconsolidated joint venture and minority
                interests
            
            
            8,739
            
            
            16,849Equity
                in earnings of unconsolidated joint venture
            
            
            382
            
            
            337Minority
                interests
            
            
            (7,239
            )
            
            (13,820
            )Income
                from continuing operations
            
            
            1,882
            
            
            3,366Discontinued
                operations, net of minority interests:Income
                attributable to discontinued operations
            
            
            -
            
            
            9Income
                from discontinued operations
            
            
            -
            
            
            9Net
                income to common stockholders
            
            $
            1,882
            
            $
            3,375Net
                income to minority interests
            
            $
            7,239
            
            $
            13,879Income
                per common share from continuing operations:Basic
            
            $
            0.10
            
            $
            0.17Diluted
            
            $
            0.10
            
            $
            0.17Income
                per common share from discontinued operations:Basic
            
            
            -
            
            
            -Diluted
            
            
            -
            
            
            -Net
                income per common share to common stockholders:Basic
            
            $
            0.10
            
            $
            0.17Diluted
            
            $
            0.10
            
            $
            0.17Weighted
                average shares of common stock outstanding (basic)
            
            
            19,667,605
            
            
            19,582,787Weighted
                average shares of common stock outstanding (diluted)
            
            
            19,667,605
            
            
            19,889,453





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.


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          3
          -


**MISSION
      WEST PROPERTIES, INC.**


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


*(dollars
      in thousands)*


(unaudited)





Three months ended March 31,2008
            
            2007**Cash
                flows from operating activities:**Net
                income
            
            $
            1,882
            
            $
            3,375Adjustments
                to reconcile net income to net cash provided by operating
                activities:Minority
                interests income
            
            
            7,239
            
            
            13,879Minority
                interest distributions
            
            
            (7,239
            )
            
            (13,826
            )Depreciation
                and amortization of real estate and in-place leases
            
            
            5,623
            
            
            6,210Amortization
                of above market lease
            
            
            -
            
            
            4,091Equity
                in earnings of unconsolidated joint venture
            
            
            (382
            )
            
            (337
            )Distributions
                from unconsolidated joint venture
            
            
            450
            
            
            650Interest
                earned on restricted cash
            
            
            (487
            )
            
            (519
            )Lease
                termination fee related to restricted cash
            
            
            1,579
            
            
            1,635Stock-based
                compensation expense
            
            
            145
            
            
            159Other
            
            
            29
            
            
            20Changes
                in operating assets and liabilities:Deferred
                rent receivable
            
            
            (706
            )
            
            1,595Other
                assets
            
            
            (1,420
            )
            
            (364
            )Interest
                payable
            
            
            (11
            )
            
            (9
            )Security
                deposits
            
            
            39
            
            
            (179
            )Deferred
                rental income
            
            
            1,473
            
            
            1,041Accounts
                payable and accrued expenses
            
            
            3,307
            
            
            1,182Net
                cash provided by operating activities
            
            
            11,521
            
            
            18,603**Cash
                flows from investing activities:**Improvements
                to real estate assets
            
            
            (221
            )
            
            (863
            )Purchase
                of real estate
            
            
            (35,764
            )
            
            (25,626
            )Restricted
                cash released for purchase of real estate
            
            
            8,082
            
            
            25,626Excess
                restricted cash
            
            
            7,654
            
            
            -Net
                cash used in investing activities
            
            
            (20,249
            )
            
            (863
            )**Cash
                flows from financing activities:**Principal
                payments on mortgage notes payable
            
            
            (2,746
            )
            
            (2,606
            )Principal
                payments on mortgage note payable (related parties)
            
            
            (112
            )
            
            (105
            )Real
                estate purchase financing (related parties)
            
            
            19,316
            
            
            -Proceeds
                from note payable (related parties)
            
            
            3,000
            
            
            -Payment
                on note payable (related parties)
            
            
            (3,000
            )
            
            -Financing
                costs
            
            
            (18
            )
            
            -Minority
                interest distributions in excess of earnings
            
            
            (6,646
            )
            
            -Dividends
                paid to common stockholders
            
            
            (3,146
            )
            
            (3,111
            )Net
                cash provided/(used in) financing activities
            
            
            6,648
            
            
            (5,822
            )Net
                (decrease)/increase in cash and cash equivalents
            
            
            (2,080
            )
            
            11,918Cash
                and cash equivalents, beginning of period
            
            
            23,691
            
            
            33,785Cash
                and cash equivalents, end of period
            
            $
            21,611
            
            $
            45,703**Supplemental
                information:**Cash
                paid for interest
            
            $
            5,060
            
            $
            4,202**Supplemental
                schedule of non-cash investing and financing
                activities:**Debt
                from seller in connection with real estate purchase (related
                parties)
            
            $
            19,068
            
            
            -Issuance
                of common stock upon conversion of O.P. units
            
            $
            54
            
            $
            2,394





The
      accompanying notes are an integral part of these condensed
      consolidated financial statements.


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          4
          -





**MISSION
      WEST PROPERTIES, INC.**


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


*(dollars
      in thousands, except per share and per square footage)*


(unaudited)





**1.**
            **Organization
                and Formation of the
                Company**





Mission
      West Properties, Inc. (the “Company”) is a fully integrated, self-administered
      and self-managed real estate company that acquires and manages research and
      development (“R&D”)/office properties in the portion of the San Francisco
      Bay Area commonly referred to as Silicon Valley. In July 1998, the Company
      purchased an approximate 12.11% of four existing limited partnerships (referred
      to collectively as the “operating partnerships”) and obtained control of these
      partnerships by becoming the sole general partner in each one effective July
      1,
      1998 for financial accounting and reporting purposes. All limited partnership
      interests in the operating partnerships were converted into 59,479,633 operating
      partnership (“O.P.”) units, which represented a limited partnership ownership
      interest of approximately 87.89% of the operating partnerships. The operating
      partnerships are the vehicles through which the Company holds its real estate
      investments, makes real estate acquisitions, and generally conducts its
      business.





On
      December 30, 1998, the Company was reincorporated under the laws of the State
      of
      Maryland through a merger with and into Mission West Properties, Inc.
      Accordingly, shares of the former company, Mission West Properties, a California
      corporation (no par), which were outstanding at December 30, 1998, were
      converted into shares of common stock, $.001 par value per share, on a
      one-for-one basis.





As
      of March
      31,
      2008 ,
      the
      Company owns a controlling general partnership interest of 19.95%, 21.78%,
      16.26% and 12.48% in Mission West Properties, L.P., Mission West Properties,
      L.P. I, Mission West Properties, L.P. II and Mission West Properties, L.P.
      III,
      respectively, which represents an 18.70% general partnership interest in the
      operating partnerships, taken as a whole, on a consolidated weighted average
      basis.





Through
      the operating partnerships, the Company owns interests in 111 R&D/office
      properties, all of which are located in the Silicon Valley.





The
      Company has elected to be taxed as a real estate investment trust (“REIT”) under
      the Internal Revenue Code of 1986, as amended. Accordingly, no provision has
      been made for income taxes for the three months ended March 31, 2008 and
      2007.





*Business
      Segment Information*


The
      Company’s primary business is the ownership and management of R&D/office
      real estate with a geographic concentration in the Silicon Valley of the San
      Francisco Bay Area. Accordingly, the Company has concluded it currently has
      a
      single reportable segment for Statement of Financial Accounting Standards
      (“SFAS”) No. 131, *“Disclosures
      about Segments of an Enterprise and Related Information,”* purposes.




**2.**
            **Basis
                of Presentation**





*Principles
      of Consolidation and Financial Statement Presentation*


The
      accompanying unaudited interim condensed consolidated
      financial statements of the Company have been prepared in accordance with Rule
      10-01 of Regulation S-X promulgated by the Securities and Exchange Commission
      (“SEC”) and, therefore, do not include all information and footnotes necessary
      for a fair presentation of financial position, results of operations and cash
      flows in conformity with accounting principles generally accepted in the United
      States of America. In the opinion of the Company, however, the accompanying
      unaudited interim condensed consolidated financial statements contain all
      adjustments, consisting only of normal recurring adjustments, necessary to
      present fairly the Company’s consolidated financial position as of March 31,
      2008, their consolidated results of operations for the three months ended March
      31, 2008 and 2007, and their cash flows for the three months ended March 31,
      2008 and 2007. All significant inter-company balances have been eliminated
      in
      consolidation. The condensed consolidated financial statements as of March
      31,
      2008 and for the three months ended March 31, 2008 and 2007 and related footnote
      disclosures are unaudited. The results of operations for the three months ended
      March 31, 2008 are not necessarily indicative of the results to be expected
      for
      the entire year.





The
      December 31, 2007 condensed consolidated balance sheet data was derived from
      audited financial statements, but does not include all disclosures required
      by
      accounting principles generally accepted in the United States of
      America.





The
      Company consolidates all variable interest entities (“VIE”) in which it is
      deemed to be the primary beneficiary in accordance with FASB Interpretation
      No. 46R, *“Consolidation
      of Variable Interest Entities”* (“FIN
      46R”). As of March
      31, 2008 ,
      the
      Company consolidated one VIE in the accompanying condensed consolidated balance
      sheets in connection with an
      assignment of a lease agreement with an unrelated party, M&M Real Estate
      Control & Restructuring, LLC. See Note 5 for further discussion of this
      transaction .


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          5
          -


**MISSION
      WEST PROPERTIES, INC.**


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


*(dollars
      in thousands, except per share and per square footage)*


(unaudited)





*Stock-Based
      Option Compensation Accounting*


The
      FASB
      issued SFAS No. 123R, *“Share-Based
      Payment”* (“SFAS
      123R”), which addresses the accounting for stock options. SFAS 123R requires
      that the cost of all employee, director and consultant stock options, as well
      as
      other equity-based compensation arrangements, be reflected in the financial
      statements based on the estimated fair value of the awards. SFAS 123R is an
      amendment to SFAS 123, *“Accounting
      for Stock-Based Compensation,”*  and
      supersedes Accounting
      Principles Board Opinion No. 25, *“Accounting
      for Stock Issued to Employees”* (“APB
      25”) .
      SFAS
      123R is applicable to any award that is settled or measured in stock, including
      stock options, restricted stock, stock appreciation rights, stock units, and
      employee stock purchase plans. At March 31, 2008, the Company had one
      stock-based compensation plan. The Company adopted the requirements of SFAS
      123R
      effective January 1, 2006 using the modified prospective method of transition.
      The adoption
      of this standard did not have a material effect on the Company’s condensed
      consolidated statements of operations, cash flows or financial
      position.





In
      the
      first quarter of 2008, stock options to purchase 1,025,000 shares of common
      stock were granted to four employees, three non-employee directors and four
      consultants, which options vest monthly for 48 months from date of grant,
      subject to continued employment or other services to the Company. Each option
      grant has a term of six years from the date of grant, subject to earlier
      termination in certain events related to termination of employment or services
      to the Company. The options were granted at an exercise price of $9.51 per
      share. The estimated fair value of the options granted in the first quarter
      of
      2008 was $0.57 per share on the date of grant using the Black-Scholes option
      pricing model with the following assumptions: dividend yield of 8.41%,
      volatility of 20.43%, risk free rates of 3.45% and an expected life of six
      years. All options were granted at the fair market value at the date of
      grant.





The
      following table shows the activity and detail for the 2004 Equity Incentive
      Plan.





Weighted Average2004 Equity
            
            Option PriceIncentive Plan
            
            Per ShareBalance,
                December 31, 2007
            
            
            1,747,100
            
            $
            11.13Options
                granted
            
            
            1,025,000
            
            $
            9.51Balance,
                March 31, 2008
            
            
            2,772,100
            
            $
            10.53





The
      Company measures compensation cost for its stock options at fair value on the
      date of grant and recognizes compensation expense relating to the remaining
      unvested portion of outstanding stock options at the time of adoption ratably
      over the vesting period, generally four years. The fair value of the Company’s
      stock options is determined using the Black-Scholes option pricing model.
      Compensation expense related to the Company’s share-based awards is included in
      general and administrative expenses in the Company’s accompanying condensed
      consolidated statements of operations. Under SFAS 123R, the Company recorded
      approximately $145 and $159 of expense for the three months ended March
      31, 2008 and 2007, respectively, for
      share-based compensation relating to grants of stock options.





As
      of March
      31, 2008 ,
      there
      was approximately $929 of total unrecognized compensation cost related to
      unvested share-based compensation arrangements granted under the compensation
      plan. That cost is expected to be recognized over a weighted-average period
      of
      3.29 years.





*Minority
      Interests*


Minority
      interests represent the separate private ownership of the operating partnerships
      by the Berg Group (defined as Carl E. Berg, his brother Clyde J. Berg, members
      of their respective immediate families, and certain entities they control)
      and
      other non-affiliate interests. As of March 31, 2008, these interests accounted
      for approximately 81.3% of the ownership interests in the real estate operations
      of the Company on a consolidated weighted average basis. Minority interests
      in
      net income is calculated by taking the net income of the operating partnerships
      (on a stand-alone basis) multiplied by the respective weighted average minority
      interests ownership percentage.





Allocation
      of corporate general and administrative expenses to the operating partnerships
      is performed based upon shares and operating partnership units outstanding
      for
      each operating partnership in relation to the total for all four operating
      partnerships.





*Reclassifications*


Certain
      reclassifications have been made to the previously reported 2007 condensed
      consolidated financial statements in order to conform to the 2008
      presentation.





The
      following notes, which present interim disclosures as required by the SEC,
      highlight significant changes to the notes to the Company’s December 31, 2007
      audited consolidated financial statements and should be read together with
      the
      consolidated financial statements and notes thereto included in the Company’s
      2007 Annual Report on Form 10-K filed on March 14, 2008.


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          6
          -


**MISSION
      WEST PROPERTIES, INC.**


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


*(dollars
      in thousands, except per share and per square footage)*


(unaudited)





*Accounting
      Pronouncements*


In
      September 2006, the FASB issued SFAS 157, “ *Fair
      Value Measurements* ”
(“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value and expands disclosures about fair value measurements. SFAS 157 applies
      under other accounting pronouncements that require or permit fair value
      measurements. Accordingly, this statement does not require any new fair value
      measurements. This guidance was issued to increase consistency and comparability
      in fair value measurements and to expand disclosures about fair value
      measurements. SFAS 157 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007. Adoption on January 1, 2008
      did not have a material effect on the Company’s consolidated financial
      statements. The FASB has approved a one-year deferral for the implementation
      of
      the statement for non-financial assets and non-financial liabilities that are
      recognized or disclosed at fair value in the financial statements on a
      nonrecurring basis.





In
      February 2007, the FASB issued SFAS 159, *“The
      Fair Value Option for Financial Assets and Financial
      Liabilities”* (“SFAS
      159”). SFAS 159 provides
      companies with an option to report selected financial assets and liabilities
      at
      fair value. SFAS 159's objective is to reduce both complexity in accounting
      for
      financial instruments and the volatility in earnings caused by measuring related
      assets and liabilities differently. SFAS 159 is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007 .
      The
      Company adopted SFAS 159 on a prospective basis on January 1, 2008. The
      Company does not expect the implementation of SFAS 159 to have a material impact
      on its consolidated financial statements.





In
      December 2007, the FASB issued SFAS 141 (Revised 2007), “ *Business
      Combinations”* (“SFAS
      141R”). SFAS 141R will change the accounting for business combinations. Under
      SFAS 141R, an acquiring entity will be required to recognize all the assets
      acquired and liabilities assumed in a transaction at the acquisition date fair
      value with limited exceptions. SFAS 141R will change the accounting treatment
      and disclosure for certain specific items in a business combination. SFAS 141R
      applies prospectively to business combinations for which the acquisition date
      is
      on or after the beginning of the first annual reporting period beginning on
      or
      after December 15, 2008. Early adoption is prohibited. The Company is
      currently evaluating the impact SFAS 141R will have on its consolidated
      financial statements.





In
      December 2007, the FASB issued SFAS 160, “ *Noncontrolling
      Interests in Consolidated Financial Statements”* (“SFAS
      160”). SFAS 160 requires that noncontrolling interests be presented as a
      component of consolidated stockholders’ equity, eliminates “minority interest
      accounting” such that the amount of net income attributable to the
      noncontrolling interests will be presented as part of consolidated net income
      on
      the consolidated statement of operations and not as a separate component of
      income and expenses. SFAS 160 is effective for fiscal years beginning on or
      after December 15, 2008. Early
      adoption is prohibited. The
      Company is currently
      evaluating the impact SFAS 160 will have on its consolidated financial
      statements.





**3.**
            **Real
                Estate**





*Property
      Acquisition*


On
      January 1, 2008, the Company acquired an approximately 110,500 rentable square
      foot newly constructed R&D building located at 5981 Optical Court in San
      Jose, California from the Berg Group under the Berg Land Holdings Option
      Agreement. The total acquisition price for this property was approximately
      $19,068. The Company acquired this property by issuing a short-term note payable
      to the Berg Group, which is due September 30, 2008. The Company has allocated
      the purchase price to land and building based upon the estimated relative fair
      values of such assets. Because the acquired property was vacant, there was
      no
      purchase price allocation to lease intangible assets. The property was leased
      within several days after the acquisition date.





On
      February 29, 2008, the Company acquired a fully leased office/R&D building
      comprised of approximately 75,300 rentable square feet at 2904 Orchard Parkway
      in San Jose, California from an unrelated party for approximately $16,696.
      The
      acquisition was partially funded from the proceeds received from the 1170 Morse
      Avenue property sale, which was classified as restricted cash as of December
      31,
      2007. The purchase price of 2904 Orchard Parkway was allocated to long-lived
      assets and the value of an in-place lease. The in-place lease was valued at
      fair
      market so there was no intangible asset allocated to above-or-below market
      lease
      value. The Company recorded $1,121 of the purchase price as real estate related
      intangible asset in the accompanying condensed consolidated balance sheets
      for
      the value of an in-place lease. The intangible asset will be amortized over
      the
      applicable remaining lease term. Amortization expense of approximately $19
      was
      recorded for the three months ended March 31, 2008.





The
      purchase price allocation for this acquisition was determined in accordance
      with
      the following principles under SFAS No. 141:





The
      fair
      value of the tangible assets of an acquired property, which includes land,
      building and tenant improvements, is determined by valuing the property as
      if it
      were vacant, and the “as-if-vacant” value is then allocated to land, building
      and tenant improvements based on management’s determination of the relative fair
      values of these assets. Factors considered by management in performing these
      analyses include certain costs during the lease-up periods considering current
      market conditions and costs to execute similar leases. These costs include
      estimates of lost rental revenue, leasing commissions and tenant
      improvements.


-
          7
          -


**MISSION
      WEST PROPERTIES, INC.**


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


*(dollars
      in thousands, except per share and per square footage)*


(unaudited)





The
      capitalized in-place lease value, included in real estate related intangible
      assets in the accompanying condensed consolidated balance sheets, is amortized
      to expense as amortization of real estate over the remaining non-cancelable
      lease term. If a lease were to be terminated prior to its stated expiration,
      all
      unamortized amounts relating to that lease would be written off in the period
      that the lease is terminated.





**4.**
            **Restricted
                Cash**





Restricted
      cash totaled approximately $48,640 as of March 31, 2008. Of this amount,
      approximately $47,140 represents cash held by the Company’s consolidated VIE due
      to its adoption of FIN 46R and $1,500 represents a certificate of deposit
      relating to the Prudential Insurance loan. In the third quarter of 2007, the
      Company sold 45700 Northport Loop in Fremont, California and 1170 Morse Avenue
      in Sunnyvale, California, which were collateral properties under the Prudential
      Insurance loan. Prudential agreed to release these properties without delivery
      of substitute properties provided that the Company deposits $1,500 into escrow
      with Prudential for a full year. The funds are expected to be returned to the
      Company in October 2008. The Company does not have possession or control over
      these funds or any right to receive them except in accordance with the payment
      terms of the lease agreement that has been assigned to the VIE.





**5.**
            **Variable
                Interest Entity**





Under
      FIN
      46R, a variable interest entity must be consolidated by a company if that
      company is subject to a majority of the entity’s expected losses or entitled to
      receive a majority of the entity’s expected residual returns or both. FIN 46R
      requires disclosures about variable interest entities that a company is not
      required to consolidate, but in which it has a significant variable
      interest.





Under
      FIN
      46R, for an entity to qualify as a VIE one or more of the following three
      characteristics must exist:





1.
            The
                equity investment at risk is not sufficient to permit the entity
                to
                finance its activities without additional subordinated financial
                support
                by any parties, including the equity
                holders.


2.
            The
                equity investors lack one or more of the following essential
                characteristics of a controlling financial
                interest:





a.
            The
                direct or indirect ability to make decisions about the entity’s activities
                through voting or similar rights.


b.
            The
                obligation to absorb the expected loss of the
                entity.


c.
            The
                right to receive the expected residual returns of the
                entity.





3.
            The
                equity investors have voting rights that are not proportionate to
                their
                economic interests, and the activities of the entity involve or are
                conducted on behalf of an investor with a disproportionately small
                voting
                interest.





In
      August
      2007, one of the Company’s tenants, Ciena, entered into an assignment of lease
      agreement with an unrelated party, M&M Real Estate Control &
Restructuring, LLC (“M&M”), in connection with leases for approximately
      445,000 rentable square feet located in San Jose, California. As a result of
      the
      Assignment, M&M assumed all of Ciena’s remaining obligations under these
      leases and received a payment from Ciena of $53,000, of which $7,000 was
      reserved for tenant improvements. At the same time, the Company entered into
      a
      consent for assignment of lease with both parties and a mutual release agreement
      with Ciena, pursuant to which all of Ciena’s obligations under these leases were
      effectively transferred to M&M. M&M is obligated to continue to perform
      all of the obligations under the assumed Ciena leases and has the right to
      sublease any or all of the 445,000 rentable square feet vacated by Ciena for
      the
      remainder of the current lease term, which expire in 2011. Under
      the
      terms of the assignment of lease agreement, the Company will receive monthly
      rent payments of approximately $789 from July 2007 through June 2008, $818
      from
      July 2008 through June 2009, $849 from July 2009 through June 2010, $881 from
      July 2010 through June 2011 and $915 from July 2011 through December 2011. Based
      upon the provisions of FIN 46R, the Company determined that M&M is a
      variable interest entity. The Company further determined that it is the primary
      beneficiary of this variable interest entity, and therefore has consolidated
      this entity for financial reporting purposes. Upon consolidation, the Company
      recognized a gross lease termination fee of $46,000 in August 2007.





Factors
      considered by the Company in determining whether M&M should be considered a
      VIE for financial reporting purposes included the following:





·
            No
                equity was contributed by the partners in the formation of
                M&M.


·
            At
                present, the assigned leases are the only properties under management
                by
                M&M.


·
            Because
                M&M does not have an operating history that demonstrates its ability
                to finance its activities without additional subordinated financial
                support.


·
            All
                revenues, other than interest income, are generated by M&M from the
                Company in the form of fees or
                commissions.


-
          8
          -





**MISSION
      WEST PROPERTIES, INC.**


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


*(dollars
      in thousands, except per share and per square footage)*


(unaudited)





The Company remains at risk with
                respect
                to the assigned leases because if M&M’s operating expenses exceed its
                interest income, fees and commissions there would be insufficient
                funds to
                meet the assigned lease obligation without additional financial support
                from equity holders or other parties. The Company, which had released
                the
                original tenants from its obligations under the leases, would have
                to
                absorb the majority of any loss, making it the primary beneficiary
                of
                M&M’s activities.  **6.**
            **Stock
                Transactions**





During
      the three months ended March 31, 2008, two limited partners exchanged a total
      of
      5,720 O.P. units for 5,720 shares of the Company’s common stock under the terms
      of the Exchange Rights Agreement among the Company and all limited partners
      of
      the operating partnerships resulting in a reclassification of approximately
      $54
      from minority interests to paid-in capital. Neither
      the Company nor the operating partnerships received any proceeds from the
      issuance of the common stock in exchange for O.P. units.





**7.**
            **Discontinued
                Operations**





The
      Company adopted SFAS No. 144, “ *Accounting
      for the Impairment or Disposal of Long-Lived Assets* “
(“SFAS
      144”), which addresses financial accounting and reporting for the impairment and
      disposal of long lived assets. In general, income or loss attributable to the
      operations and sale of property and the operations related to property held
      for
      sale is classified as discontinued operations in the condensed consolidated statements of operations. Prior period condensed consolidated statements of operations presented in this report have been
      reclassified to reflect the income or loss related to properties that were
      sold
      and presented as discontinued operations in 2007. All periods presented in
      this
      report will likely require further reclassification in future periods if there
      are properties held for sale or property sales occur.





In
      the
      third quarter of 2007, the Company sold two R&D properties which qualified
      as discontinued operations. Condensed results of operations for these properties
      for the three months ended March 31, 2007 are as follows:





Three Months Ended March 31,2008
            
            2007*(dollars
                in thousands)**(unaudited)*RevenuesRental
                revenue from real estate
            
            
            -
            
            $
            135Tenant
                reimbursements
            
            
            -
            
            
            14Total
                revenues
            
            
            -
            
            
            149ExpensesProperty
                operating, maintenance and real estate taxes
            
            
            -
            
            
            25Depreciation
                of real estate
            
            
            -
            
            
            56Total
                expenses
            
            
            -
            
            
            81Income
                from discontinued operations
            
            
            -
            
            
            68Minority
                interest in earnings attributable to discontinued
                operations
            
            
            -
            
            
            (59
            )Income
                from discontinued operations
            
            
            -
            
            $
            9





**8.**
            **Net
                Income****Per
                Share**





Basic
      operating net income per share is computed by dividing net income by the
      weighted average number of common shares outstanding for the period. Diluted
      operating net income per share is computed by dividing net income by the sum
      of
      the weighted-average number of common shares outstanding for the period plus
      the
      assumed exercise of all dilutive securities using the treasury stock
      method.




The
      computation for weighted average shares is detailed below:





Three Months Ended March 31,2008
            
            2007Weighted
                average shares outstanding (basic)
            
            
            19,667,605
            
            
            19,582,787Incremental
                shares from assumed option exercise
            
            
            -
            
            
            306,666Weighted
                average shares outstanding (diluted)
            
            
            19,667,605
            
            
            19,889,453





Outstanding
      options to purchase 2,772,100 in 2008 were excluded from the computation of
      diluted net income per share under the treasury stock method because the option
      exercise price was greater than the weighted average closing price of the
      Company’s common stock during the period. The outstanding O.P. units, which are
      exchangeable at the unit holder’s option, subject to certain conditions, for
      shares of common stock on a one-for-one basis have been excluded from the
      diluted net income per share calculation, as there would be no effect on the
      calculation after adding the minority interests’ share of income back to net
      income. The total number of O.P. units outstanding at March
      31,
      2008 and
      2007
      was 85,528,215 and 85,024,199, respectively.


-
          9
          -


**MISSION
      WEST PROPERTIES, INC.**


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


*(dollars
      in thousands, except per share and per square footage)*


(unaudited)





**9.**
            **Related
                Party Transactions**





As
      of
      March 31, 2008, the Berg Group owned 77,902,384 O.P. units. The Berg Group’s
      combined ownership of O.P. units and shares of common stock as of March 31,
      2008
      represented approximately 74% of the total equity interests, assuming conversion
      of all O.P. units outstanding into the Company’s common stock.





On
      January 1, 2008, the Company acquired an approximately 110,500 rentable square
      foot newly constructed R&D building located at 5981 Optical Court in San
      Jose, California from the Berg Group under the Berg Land Holdings Option
      Agreement. The total acquisition price for this property was approximately
      $19,068 and was financed by a short-term note payable to the Berg Group, which
      is due September 30, 2008. The transaction was approved by the Independent
      Directors Committee of the Company’s Board of Directors.





On
      January 7, 2008, the Company borrowed $3,000 from Carl E. Berg on a short-term
      basis to fund an anticipated property acquisition. The $3,000 loan was repaid
      in
      full on January 30, 2008. Interest expense incurred in connection with the
      loan
      was approximately $12 for the three months ended March 31, 2008. The transaction
      was approved by the Independent Directors Committee of the Company’s Board of
      Directors.





As
      of
      March 31, 2008, debt in the amount of approximately $9,112 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 is due
      in
      June 2010 with principal payments amortized over 20 years. Interest expense
      incurred in connection with the mortgage note was approximately $176 and $184
      for the three months ended March 31, 2008 and 2007, respectively.





As
      of
      March 31, 2008, debt in the amount of approximately $19,316 was due the Berg
      Group under a short-term note payable established on January 1, 2008 in
      connection with the acquisition of 5981 Optical Court, as described above.
      The
      note payable bears interest at LIBOR plus 2% and is due by September 30, 2008.
      Interest expense incurred in connection with the note payable was approximately
      $248 for the three months ended March 31, 2008.





During
      the first three months of 2008 and 2007, Carl E. Berg or entities controlled
      by
      Mr. Berg 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 $307
      and
      $361 in rental revenue for the three months ended March
      31, 2008 and
      2007,
      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.





The
      Berg
      Group has an approximately $2,500 commitment to complete certain tenant
      improvements in connection with the Company’s 2002 acquisition of 5345 Hellyer
      Avenue in San Jose. The Company has recorded this portion of the purchase price
      paid to the Berg Group in “Other assets” on its condensed consolidated balance sheets. The Berg Group is in the process of satisfying
      this
      commitment to complete certain tenant improvements.





The
      Berg
      Group has an approximately $7,500 commitment to complete an approximately 75,000
      to 90,000 square foot building in connection with the Company’s 2001 acquisition
      of 245 Caspian in Sunnyvale which is comprised of approximately three acres
      of
      unimproved land. The Company has recorded this portion of the purchase price
      paid to the Berg Group in “Other assets” on its condensed consolidated balance sheets. The Berg Group plans to satisfy this commitment
      to
      construct a building when requested by the Company following the approval of
      the
      Independent Directors Committee.





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 approximately $24 and $23 for the three months
      ended March
      31,
      2008 and
      2007,
      respectively.


-
          10
          -





**MISSION
      WEST PROPERTIES, INC.**


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


*(dollars
      in thousands, except per share and per square footage)*


(unaudited)





**10.**
            **Commitments
                and Contingencies**




Neither
      the operating partnerships, the Company’s properties nor the Company are subject
      to any material litigation nor, to the Company’s knowledge, is any material
      litigation threatened against the operating partnerships, the properties or
      the
      Company. From time to time, the Company is engaged in legal proceedings arising
      in the ordinary course of business. The Company does not expect any of such
      proceedings to have a material adverse effect on its cash flows, financial
      condition or results of operations. The Company is currently involved in the
      following legal proceedings and it believes that the ultimate outcome of these
      proceedings will not have a material adverse effect on its operating results,
      cash flows or financial condition.





*Mission
      West Properties, L.P. v. Republic Properties Corporation, et al. Santa Clara
      County Superior Court, Case No. CV 796249.* Republic
      Properties Corporation (“RPC”) is a former 50% partner with Mission West
      Properties, L.P. in the Hellyer Avenue Limited Partnership (“Hellyer LP”), which
      was formed in July 2000. Under the terms of the Hellyer LP partnership agreement
      and other related contracts, Mission West Properties, L.P. (“MWP”) had the right
      to obtain RPC’s entire interest in Hellyer LP in the event of certain payment
      defaults which occurred in August 2000. Therefore, on September 1, 2000, MWP,
      as
      the general partner of Hellyer LP, ceased all allocations of income and cash
      flow to RPC and exercised the right under the partnership agreement to cancel
      RPC’s entire interest in the partnership. Following discussions with and
      approval by the Independent Directors Committee, the Company authorized the
      transfer of RPC’s interest in Hellyer LP to Berg & Berg Enterprises, Inc.
      Under the Berg Land Holdings Option Agreement and the Acquisition Agreement
      dated as of May 14, 1998, the Independent Directors Committee had the right,
      but
      not the obligation, to reacquire the property interest and the related
      distributions related to the property interest at any time. The transfer was
      effective as of September 1, 2000. On November 20, 2000, RPC commenced a lawsuit
      against MWP in the Circuit Court of Maryland for Baltimore City. After lengthy
      litigation, which included a trial on the merits and subsequent appeals, in
      April 2006 Maryland’s highest Court upheld an earlier Maryland Appeals Court
      ruling in favor of MWP, finding that the Circuit Court of Maryland could not
      assert personal jurisdiction over MWP in the RPC suit. The Court vacated the
      judgment and decision in the trial court and dismissed the entire Maryland
      suit.
      In February 2001, while the Maryland case was pending, the Company filed a
      suit
      against RPC in the Superior Court of the State of California for the County
      of
      Santa Clara. The case was stayed pending resolution of the Maryland case, and
      the Company dismissed its suit on March 4, 2005. In April 2005, RPC submitted
      a
      motion asking the Superior Court to reinstate the case, which the Court granted
      on May 25, 2005. On July 5, 2006, RPC filed a cross-complaint in the case
      seeking partnership distributions to which the Company demurred. The Court
      sustained the Company’s demurrer with leave to amend. Subsequently, RPC filed an
      amended complaint and the Company submitted another demurrer seeking dismissal
      of the claims on statute of limitations grounds. On February 20, 2007, the
      Court
      overruled the Company’s demurrer. The Company sought a writ from the California
      State Court of Appeal for the Sixth District to direct the lower court to
      reverse its decision, but the petition for the writ was denied. In April 2008,
      the Company filed a motion for summary judgment in the California Superior
      Court
      which was denied. A trial in the California Superior Court will commence in
      2008.





The
      Company has a receivable from a Berg Group affiliate for the amount of
      distributions it has received as the successor to RPC’s interest in Hellyer LP.
      Furthermore, the Company has never accounted for the 50% interest of RPC as
      its
      asset, and if it is ultimately determined that RPC should have retained that
      interest or it reacquires that interest, the Company’s balance sheet and
      financial condition would not be impacted adversely, although to date, the
      Company has consolidated the assets, liabilities and operating results of
      Hellyer LP and allocated 50% of the operating income to the minority interest
      holder.





*Guarantees
      and Indemnities*


Under
      its
      articles of incorporation and bylaws,
      the Company has agreed to indemnify its officers and directors for certain
      events or occurrences arising as a result of the officer or director’s serving
      in such capacity. The maximum potential amount of future payments the Company
      could be required to make under these indemnification agreements is unlimited.
      The Company believes the estimated fair value of these indemnification
      agreements is minimal and has recorded no liabilities for these agreements
      as of
      March 31, 2008.





The
      Company also enters into indemnification provisions under its agreements with
      other companies in the ordinary course of business, typically with lenders,
      joint venture partners, contractors, and tenants. Under these provisions the
      Company typically agrees to indemnify and hold harmless the indemnified party
      for losses suffered or incurred by the indemnified party as a result of certain
      kinds of activities or inactions of the Company. These indemnification
      provisions generally survive termination of the underlying agreement. The
      maximum potential amount of future payments the Company could be required to
      make under these indemnification provisions is unlimited. To date, the Company
      has not incurred material costs to defend lawsuits or settle claims related
      to
      these indemnification agreements. As a result, the Company believes the
      estimated fair value of these agreements is minimal. Accordingly, the Company
      has recorded no liabilities for these agreements as of March
      31, 2008 .





*Seismic
      Activity*


The
      Company’s properties are located in an active seismic area of Silicon Valley.
      Insurance policies currently maintained by the Company do not cover seismic
      activity, although they do cover losses from fires after an
      earthquake.


-
          11
          -





**MISSION
      WEST PROPERTIES, INC.**


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


*(dollars
      in thousands, except per share and per square footage)*


(unaudited)





*Environmental
      Issues*


The
      environmental investigations that have been conducted on the Company’s
      properties have not revealed any environmental liability that the Company
      believes would have a material adverse effect on its financial condition,
      results of operations and assets, and the Company is not aware of any such
      liability. Nonetheless, it is possible that there are material environmental
      liabilities of which the Company is unaware. In addition, the Company cannot
      assure that future laws, ordinances, or regulations will not impose any material
      environmental liability, or that the current environmental condition of the
      properties has not been, or will not be, affected by tenants and occupants
      of
      the properties, by the condition of properties in the vicinity of the
      properties, or by third parties unrelated to the Company.





*Asset
      Dispositions Subject to Certain Conditions*


The
      Company has entered into sales agreements with unrelated parties subject to
      numerous material conditions, including but not limited to re-zoning of the
      property and negotiating certain agreements with the local municipality
      acceptable to the buyer. As a result of the conditions agreed to by the Company
      and the respective buyers, these assets do not meet the criteria set forth
      in
      SFAS 144 to be classified as assets held for sale. The following summarizes
      the
      assets for which the Company has an executed sales contract as of March 31,
      2008
      that is subject to such material conditions:





Property
            
            Number of Buildings
            
            Rentable Square Feet
            
            Acres
            
            Sales PricesMcCandless
                Drive
              Milpitas,
                California
            
            
            8
            
            
            427,000
            
            
            23.03
            
            $
            76,500





**11.**
            **Subsequent
                Events**





On
      April
      3, 2008, the Company paid dividends of $0.20 per share of common stock to all
      common stockholders of record as of March 31, 2008. On the same date, the
      operating partnerships paid a distribution of $0.20 per O.P. unit to all holders
      of O.P. units. Aggregate dividends and distributions amounted to approximately
      $21,040.





On
      April
      17, 2008, the Company entered into a change in terms agreement with Heritage
      Bank of Commerce to amend the unsecured revolving line of credit from $10,000
      to
      $17,500.  The revolving line of credit carries a variable interest rate
      based on the one-month LIBOR plus 1.75% per annum, adjustable monthly, and
      matures June 15, 2009.  The revolving line of credit contains certain
      customary covenants as defined in the loan agreement. The Company paid
      approximately $26 in loan and legal fees in obtaining the revolving line of
      credit.


-
          12
          -


**Item
      2.** **Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**





This
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations should be read in conjunction with the accompanying condensed
      consolidated financial statements and notes thereto under Part I, Item 1 of
      this
      Report and our audited consolidated financial statements and notes thereto
      contained in our Annual Report on Form 10-K as of and for the year ended
      December 31, 2007. The results for the three months ended March 31, 2008 are
      not
      necessarily indicative of the results to be expected for the entire fiscal
      year
      ending December 31, 2008.





**Forward-Looking
      Information**





This
      quarterly report on Form 10-Q contains forward-looking statements within the
      meaning of the federal securities laws. We intend such forward-looking
      statements to be covered by the safe harbor provisions for forward-looking
      statements contained in the Private Securities Reform Act of 1995, and are
      including this statement for purposes of complying with these safe harbor
      provisions. Forward-looking statements, which are based on certain assumptions
      and describe future plans, strategies and expectations of the Company, are
      generally identifiable by use of the words "believe," "expect," "intend,"
      "anticipate," "estimate," "project" or similar expressions. Additionally, all
      disclosures under Part I, Item 3 constitute forward-looking statements. Our
      ability to predict results or the actual effect of future plans or strategies
      is
      inherently uncertain.





Factors
      that could have a material adverse effect on our operations and future prospects
      or would cause actual results in the future to differ materially from any of
      our
      forward-looking statements include, but are not limited to, the
      following:





·
            economic
                conditions generally and the real estate market
                specifically,


·
            the
                occupancy rates of the properties,


·
            rental
                rates on new and renewed leases,


·
            legislative
                or regulatory provisions (including changes to laws governing the
                taxation
                of REITs),


·
            availability
                of capital,


·
            interest
                rates,


·
            competition,


·
            supply
                of and demand for R&D, office and industrial properties in our current
                and proposed market areas,


·
            tenant
                defaults and bankruptcies,


·
            lease
                term expirations and renewals, and


·
            changes
                in general accounting principles, policies and guidelines applicable
                to
                REITs.





These
      risks and uncertainties, together with the other risks described under Part
      I,
      Item 1A - “Risk Factors” of our 2007 Annual Report on Form 10-K and from time to
      time in our other reports and documents filed with the Securities and Exchange
      Commission (“SEC”), should be considered in evaluating forward-looking
      statements and undue reliance should not be placed on such
      statements.





**Overview**





We
      acquire, market, lease, and manage R&D/office properties, primarily located
      in the Silicon Valley portion of the San Francisco Bay Area. As of March 31,
      2008, we owned and managed 111 properties totaling approximately 8.0 million
      rentable square feet through four limited partnerships, or operating
      partnerships, for which we are the sole general partner. This class of property
      is designed for research and development and office uses and, in some cases,
      includes space for light manufacturing operations with loading docks. We believe
      that we have one of the largest portfolios of R&D/office properties in the
      Silicon Valley. As of March 31, 2008, two tenants individually lease in excess
      of 300,000 rentable square feet from us: Microsoft Corporation and Apple, Inc.





For
      federal income tax purposes, we have operated as a self-managed,
      self-administered and fully integrated real estate investment trust (“REIT”)
      since the beginning of fiscal 1999.





Our
      acquisition, growth and operating strategy incorporates the following
      elements:





·
            working
                with the Berg Group to take advantage of their abilities and resources
                to
                pursue development opportunities which we have an option to acquire,
                on
                pre-negotiated terms, upon completion and
                leasing;


·
            capitalizing
                on opportunistic acquisitions from third parties of high-quality
                R&D/office properties that provide attractive initial yields and
                significant potential for growth in
                cash-flow;


·
            focusing
                on general purpose, single-tenant Silicon Valley R&D/office properties
                for information technology companies in order to maintain low operating
                costs, reduce tenant turnover and capitalize on our relationships
                with
                these companies and our extensive knowledge of their real estate
                needs;
                and


·
            maintaining
                prudent financial management principles that emphasize current cash
                flow
                while building long-term value, the acquisition of pre-leased properties
                to reduce development and leasing risks and the maintenance of sufficient
                liquidity to acquire and finance properties on desirable
                terms.


-
          13
          -





**Current
      Economic Environment**





All
      of
      our properties are located in the Northern California area known as Silicon
      Valley, which generally consists of portions of Santa Clara County, Southwestern
      Alameda County, Southeastern San Mateo County and Eastern Santa Cruz County.
      Historically, the Silicon Valley R&D property market has fluctuated with the
      local economy. The Silicon Valley economy and business activity have slowed
      markedly from 2001 through 2006 after fast-paced growth in 1999 and 2000, and
      have been growing steadily since then. According to a recent report by NAI
      BT
      Commercial Real Estate (the “BT Report”), the vacancy rate for Silicon Valley
      R&D property was approximately 16.6% in late 2007 and 16.1% at the end of
      the first quarter of 2008. Total vacant R&D square footage in Silicon Valley
      at the end of the first quarter of 2008 amounted to approximately 20.6 million
      square feet, of which 19.2%, or 4.0 million square feet, was being offered
      under
      subleases. According to the BT Report, total positive net absorption (which
      is
      the computation of gross square footage leased less gross new square footage
      vacated for the period presented) in 2007 amounted to approximately 3.5 million
      square feet, and in the first three months of 2008 there was total positive
      net
      absorption of approximately 0.2 million square
      feet. According to the BT Report, the
      average asking market rent per square foot at the end of the first quarter
      of
      2008 was $1.27 compared to $1.26 in late 2007. The Silicon Valley R&D
      property market is characterized by a substantial number of submarkets, with
      rent and vacancy rates varying by submarket and location within each submarket,
      however, and individual properties within any particular submarket presently
      may
      be leased above or below the current average asking market rental rates within
      that submarket and the region as a whole.





Our
      occupancy rate at March 31, 2008 was 64.4% compared to 69.4% at March 31, 2007.
      We believe that our occupancy rate could decline further going forward if key
      tenants seek the protection of bankruptcy laws, consolidate operations or
      discontinue operations. In addition, leases with respect to approximately
      204,000 rentable square feet are expiring prior to the end of 2008. The
      properties subject to these leases may take anywhere from 24 to 36 months or
      longer to re-lease. We
      believe that the average 2008 renewal rental rates for our properties will
      be
      approximately equal to, or perhaps below, current market rents, but we cannot
      give any assurance that leases will be renewed or that available space will
      be
      re-leased at rental rates equal to or above the current quoted market
      rates.





Despite
      our strategic focus on single tenant properties and leases, in order to meet
      market conditions, we have been, and expect to continue leasing less than the
      entire premises of some of our R&D properties to a single tenant from time
      to time. Leasing our R&D properties, which generally have been built for
      single tenant occupancy, to multiple tenants can increase our leasing costs
      and
      operating expenses and reduce the profitability of our leasing
      activities.





If
      we are
      unable to lease a significant portion of any vacant space or space subject
      to
      expiring leases; if we experience significant tenant defaults as a result of
      the
      current economic downturn; if we are not able to lease space at or above current
      market rates; if we restructure existing leases and lower existing rents in
      order to retain tenants for an extended term; or if we increase our lease costs
      and operating expenses substantially to accommodate multiple tenants in our
      R&D properties, our results of operations and cash flows will be affected
      adversely. Furthermore, in this event it is probable that our board of directors
      will reduce the quarterly dividend on the common stock and the outstanding
      O.P.
      units. Our
      operating results and ability to pay dividends at current levels remain subject
      to a number of material risks, as indicated under the caption “Forward-Looking
      Information” above and in the section entitled “Risk Factors” in our most recent
      Annual Report on Form 10-K.





**Critical
      Accounting Policies** **and Estimates**





We
      prepare the condensed consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      (“GAAP”), which requires us to make certain estimates, judgments and assumptions
      that affect the reported amounts in the accompanying condensed consolidated
      financial statements, disclosure of contingent assets and liabilities and
      related footnotes. Accounting and disclosure decisions with respect to material
      transactions that are subject to significant management judgments or estimates
      include impairment of long lived assets, deferred rent reserves, and allocation
      of purchase price relating to property acquisitions and the related depreciable
      lives assigned. Actual results may differ from these estimates under different
      assumptions or conditions.





Critical
      accounting policies are defined as those that require management to make
      estimates, judgments and assumptions, giving due consideration to materiality,
      in certain circumstances that affect amounts reported in the condensed
      consolidated financial statements, and potentially result in materially
      different results under different conditions and assumptions. We believe that
      the following best describe our critical accounting policies:





*Business
      Combinations* .
      Statement of Financial Accounting Standards (“SFAS”) No. 141, “ *Business
      Combinations”* (“SFAS
      141”), ** was
      effective July 1, 2001. The acquisition costs of each property acquired prior
      to
      July 1, 2001 were allocated only to building, land and leasing commissions
      with
      building depreciation being computed based on an estimated weighted average
      composite useful life of 40 years and leasing commission amortization being
      computed over the term of the lease. Acquisitions of properties made subsequent
      to the effective date of SFAS 141 are based on an allocation of the acquisition
      cost to land, building, tenant improvements, and intangibles for at market,
      including lease origination and lease up period costs, and above and below
      market in place leases, and the determination of their useful lives are guided
      by a combination of SFAS 141 and management’s estimates. Amortization expense of
      above and below market lease intangible asset is offset against rental revenue
      in the revenue section while amortization of in-place lease value intangible
      asset is included in depreciation and amortization of real estate in the expense
      section of our condensed consolidated statements of operations. If we do not
      appropriately allocate these components or we incorrectly estimate the useful
      lives of these components, our computation of depreciation and amortization
      expense may not appropriately reflect the actual impact of these costs over
      future periods, which will affect net income.


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          14
          -


*Impairment
      of Long-Lived Assets.* We
      review real estate assets for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable in accordance with SFAS No. 144, “ *Accounting
      for the Impairment and Disposal of Long-Lived Assets”* (“SFAS
      144”). If the carrying amount of the asset exceeds its estimated undiscounted
      net cash flow, before interest, we will recognize an impairment loss equal
      to
      the difference between its carrying amount and its estimated fair value. If
      impairment is recognized, the reduced carrying amount of the asset will be
      accounted for as its new cost. For a depreciable asset, the new cost will be
      depreciated over the asset’s remaining useful life. Generally, fair values are
      estimated using discounted cash flow, replacement cost or market comparison
      analyses. The process of evaluating for impairment requires estimates as to
      future events and conditions, which are subject to varying market factors,
      such
      as the vacancy rates, future rental rates, lease periods, deferred maintenance
      and operating costs for R&D facilities in the Silicon Valley area and
      related submarkets. Therefore, it is reasonably possible that a change in
      estimate resulting from judgments as to future events could occur which would
      affect the recorded amounts of the property.





*Allowance
      for Doubtful Accounts and Deferred Rent.* We must
      estimate the uncollectibility of our accounts receivable based on the evaluation
      of our tenants’ financial position, analyses of accounts receivable and current
      economic trends. We also make estimates for reserves against our deferred rent
      receivable for existing tenants with the potential of early termination,
      bankruptcy or ceasing operations. We charge or credit rental income for
      increases or decreases to our deferred rent reserves. Our estimates are based
      on
      our review of tenants’ payment histories, the remaining lease term, whether or
      not the tenant is currently occupying our building, publicly available financial
      information and such additional information about their financial condition
      as
      tenants provide to us. The information available to us might lead us to
      overstate or understate these reserve amounts. The use of different estimates
      or
      assumptions could produce different results. Moreover, actual future collections
      of accounts receivable or reductions in future reported rental income due to
      tenant bankruptcies or other business failures could differ materially from
      our
      estimates.





*Consolidated
      Joint Ventures.* We,
      through an operating partnership, own three properties that are in joint
      ventures of which we have controlling interests. We manage and operate all
      three
      properties. The recognition of these properties and their operating results
      are
      100% reflected on our condensed consolidated financial statements, with
      appropriate allocation to minority interests, because we have operational and
      financial control of the investments. We make judgments and assumptions about
      the estimated monthly payments made to our minority interest joint venture
      partners, which are reported with our periodic results of operations. Actual
      results may differ from these estimates under different assumptions or
      conditions.





*Investment
      in Unconsolidated Joint Venture.* We,
      through an operating partnership, have a 50% non-controlling limited partnership
      interest in one unconsolidated joint venture. This investment is not
      consolidated because we do not exercise significant control over major operating
      and financial decisions. We account for this joint venture interest using the
      equity method of accounting.





*Fair
      Value of Financial Instruments.* Our
      financial instruments include cash and cash equivalents, accounts receivable,
      accounts payable, and debt. Considerable judgment is required in interpreting
      market data to develop estimates of fair value. Our estimates of fair value
      are
      not necessarily indicative of the amounts that we could realize in a current
      market exchange. The use of different market assumptions and/or estimation
      methodologies may have a material effect on the estimated fair value amounts.
      Cash and cash equivalents, accounts receivable, and accounts payable are carried
      at amounts that approximate their fair values due to their short-term
      maturities. The carrying amounts of our variable rate debt approximate fair
      value since the interest rates on these instruments are equivalent to rates
      currently offered to us. For fixed rate debt, we estimate fair value by using
      discounted cash flow analyses based on borrowing rates for similar kinds of
      borrowing arrangements.





*Stock-Based
      Compensation.* In
      December 2004, the FASB issued SFAS 123R, which addresses the accounting for
      stock options. SFAS 123R requires that the cost of all employee, director and
      consultant stock options, as well as other equity-based compensation
      arrangements, be reflected in the financial statements based on the estimated
      fair value of the awards. SFAS 123R is an amendment to SFAS 123 and supersedes
      APB 25. SFAS 123R is applicable to any award that is settled or measured in
      stock, including stock options, restricted stock, stock appreciation rights,
      stock units, and employee stock purchase plans. We have adopted the requirements
      of SFAS 123R effective January 1, 2006 using the modified prospective method
      of
      transition. Accordingly, prior periods have not been restated. The adoption
      of this standard did not have a material effect on our condensed consolidated
      statements of operations or financial position. Compensation cost under SFAS
      123R may differ due to different assumptions and treatment of
      forfeitures.





*Revenue
      Recognition.* Rental
      revenue is recognized on the straight-line method of accounting required by
      GAAP
      under which contractual rent payment increases are recognized evenly over the
      lease term, regardless of when the rent payments are received by us. The
      difference between recognized rental income and rental cash receipts is recorded
      as “Deferred rent receivable” on the condensed consolidated balance sheets.





Rental
      revenue is affected if existing tenants terminate or amend their leases. We
      try
      to identify tenants who may be likely to declare bankruptcy, cease operations
      or
      are likely to seek a negotiated settlement of their obligation. By anticipating
      these events in advance, we expect to take steps to minimize their impact on
      our
      reported results of operations through lease renegotiations, reserves against
      deferred rent, and other appropriate measures. Our judgments and estimations
      about tenants’ capacity to continue to meet their lease obligations will affect
      the rental revenue recognized. Material differences may result in the amount
      and
      timing of our rental revenue for any period if we made different judgments
      or
      estimations.


-
          15
          -





SFAS
      No.
      66, “ *Accounting
      for Sales of Real Estate”* (“SFAS
      66”), establishes accounting standards for recognizing profit or loss on sales
      of real estate. The gain on the sale is only recognized proportionately as
      the
      seller receives payments from the purchaser. Interest income is recognized
      on an
      accrual basis, when appropriate.





Lease
      termination fees are recognized as other income when there is a signed
      termination letter agreement, all of the conditions of the agreement have been
      met, and when the tenant no longer has the right to occupy the property. These
      fees are paid by tenants who want to terminate their lease obligations before
      the end of the contractual term of the lease. We cannot predict or forecast
      the
      timing or amounts of future lease termination fees.





We
      recognize income from rent, tenant reimbursements and lease termination fees
      and
      other income once all of the following criteria are met in accordance with
      SEC
      Staff Accounting Bulletin 104:





·
            the
                agreement has been fully executed and
                delivered;


·
            services
                have been rendered;


·
            the
                amount is fixed and determinable;
                and


·
            collectibility
                is reasonably assured.





With
      regard to critical accounting policies, where applicable, we have explained
      and
      discussed the criteria for identification and selection, methodology in
      application and impact on the financial statements with the Audit Committee
      of
      our Board of Directors. The Audit Committee has reviewed the critical accounting
      policies we identified.





**Results
      of Operations** ****





*Comparison
      of the three months ended March 31, 2008 to the three months ended March 31,
      2007*





As
      of
      March 31, 2008, through our controlling interests in the operating partnerships,
      we owned 111 properties totaling approximately 8.0 million rentable square
      feet
      compared to 107 properties totaling approximately 7.7 million rentable square
      feet owned by us as of March 31, 2007. This represents a net increase of
      approximately 4.5% in total rentable square footage, as we acquired six
      R&D/office properties consisting of approximately 433,000 rentable square
      feet and sold two R&D/office properties consisting of approximately 86,800
      rentable square feet since the first quarter of 2007. Included in the 8.0
      million rentable square feet are approximately 854,000 rentable square feet
      (or
      16 buildings) that we are seeking to have rezoned for residential
      development.





Rental
      revenue from real estate for the three months ended March 31, 2008 compared
      to
      the same three-month period in 2007 was as follows:





Three Months Ended March 31,
            
            
            
            % Change by2008
            
            2007
            
            $ Change
            
            Property Group*(dollars
                in thousands)*Same
                Property(1)
            
            $
            18,312
            
            $
            21,202
            
            $
            (2,890
            )
            
            (13.6
            )%2008
                Acquisitions
            
            
            684
            
            
            -
            
            
            684
            
            
            100.0
            %Total
            
            $
            18,996
            
            $
            21,202
            
            $
            (2,206
            )
            
            (10.4
            )%





(1)
            “Same
                Property” is defined as properties owned by us prior to 2007 that we still
                owned as of March 31, 2008.





*Rental
      Revenue from Real Estate from Continuing Operations*


For
      the
      quarter ended March 31, 2008, rental revenue from real estate decreased by
      approximately ($2.2) million, or (10.4%), from $21.2 million for the three
      months ended March 31, 2007 to $19.0 million for the three months ended March
      31, 2008. The decline in rental revenue resulted primarily from renewing
      existing leases at lower rental rates and the loss of several tenants due to
      lease terminations, relocation or cessation of their operations since March
      31,
      2007, all of which resulted from current adverse market conditions. Total rental
      revenue was reduced by amortization expense of approximately ($4.1) million
      for
      the three months ended March 31, 2007 for an above-market lease intangible
      asset
      acquired pursuant to a lease termination. That resulted in the write-off of
      all
      remaining above-market lease intangible asset. Our occupancy rate at March
      31,
      2008 was approximately 64.4%, compared to approximately 69.4% at March 31,
      2007.





*Equity
      in Earnings from Unconsolidated Joint Venture*


As
      of
      March 31, 2008, we held investments in three R&D buildings totaling
      approximately 466,600 rentable square feet through an unconsolidated joint
      venture, TBI-MWP, in which we acquired a 50% interest in January 2003 from
      the
      Berg Group under the Berg Land Holdings Option Agreement. We have a
      non-controlling limited partnership interest in this joint venture, which we
      account for using the equity method of accounting. For the three months ended
      March 31, 2008, we recorded equity in earnings from the unconsolidated joint
      venture of approximately $0.38 million compared to equity in earnings of $0.34
      million for the same period in 2007. The occupancy rate for the properties
      owned
      by this joint venture at March 31, 2008 and 2007 was 100%.


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          16
          -


*Lease
      Termination Income*


Lease
      termination fees for the three months ended March
      31,
      2008 and
      2007
      were approximately $1.9 million and $10.1 million, respectively. These fees
      were
      paid by tenants who terminated their lease obligations before the end of the
      contractual term of the lease by agreement with us. We do not consider those
      transactions to be recurring items.





*Other
      Income from Continuing Operations*


Other
      income of approximately $0.8 million for the three months ended March 31, 2008
      included approximately $0.6 million from interest and $0.2 million from
      management fees. Other income of approximately $3.1 million for the three months
      ended March 31, 2007 included approximately $1.6 million from a forfeited
      deposit under a contract for the sale of property, $0.9 million from interest,
      $0.3 million from management fees, and $0.3 million from a bankruptcy settlement
      claim and miscellaneous income.




*Expenses
      from Continuing Operations*


Property
      operating expenses and real estate taxes during the first quarter of 2008
      increased by approximately $0.4 million, or 8.1%, from $4.5 million to $4.9
      million for the three months ended March 31, 2007 and 2008, respectively. The
      increase in 2008 is primarily attributable to increases in utility usage and
      repair and maintenance expenses. Tenant reimbursements increased by
      approximately $0.4 million, or 11.5%, from $3.2 million for the three months
      ended March 31, 2007 to $3.6 million for the three months ended March 31, 2008
      due to reimbursements of recurring operating expenses. Certain expenses such
      as
      property insurance, real estate taxes, and other fixed operating expenses are
      not recoverable from vacant properties. General and administrative expenses
      remained the same at approximately $0.7 million.





Real
      estate depreciation and amortization expense decreased by approximately ($0.5)
      million, or (8.6%), from $6.1 million to $5.6 million for the three months
      ended
      March 31, 2007 and 2008, respectively. Such expense in the first quarter of
      2007
      included additional amortization expense relating to in-place lease value
      intangible asset pursuant to SFAS 141 in connection with two lease terminations
      that did not recur in 2008.





Interest
      expense decreased by approximately ($0.1) million, or (2.8%), from $5.0 million
      for the three months ended March 31, 2007 to $4.9 million for the three months
      ended March 31, 2008 due to lower total debt in 2008. Interest expense (related
      parties) increased by approximately $0.2 million, or 137.0%, from $0.2 million
      for the three months ended March 31, 2007 to $0.4 million for the three months
      ended March 31, 2008 due to higher related party debt incurred in the quarter
      just ended. Total debt outstanding, including amounts due related parties,
      increased by approximately $8.2 million, or 2.3%, from $355.0 million as of
      March 31, 2007 to $363.2 million as of March 31, 2008.





*Income
      from Discontinued Operations*


The
      following table depicts the amounts of income from discontinued operations
      for
      the three and nine months ended March 31, 2008  and
      2007.





Three Months Ended March 31,2008
            
            2007*(dollars in thousands)**(unaudited)*Income
                attributable to discontinued operations
            
            
            -
            
            $
            68Minority
                interest in earnings attributable todiscontinued
                operations
            
            
            -
            
            
            (59
            )Income
                from discontinued operations
            
            
            -
            
            $
            9





In
      the
      third quarter of 2007, we sold two R&D properties, and in accordance with
      our adoption of SFAS 144, classified them as discontinued operations. The income
      to common stockholders attributable to discontinued operations from these
      properties for the three months ended March 31, 2007 was approximately
      $9,000.





*Net
      Income to Common Stockholders and Net Income to Minority
      Interests*


Net
      income to common stockholders decreased by approximately ($1.5) million, or
      (44.2%), from $3.4 million for the three months ended March 31, 2007  to
      $1.9
      million for the same period in 2008. The minority interest portion of income
      decreased by approximately ($6.7) million, or (47.8%), from $13.9 million for
      the three months ended March 31, 2007  to
      $7.2
      million for the three months ended March 31, 2008. The decrease in the quarter’s
      net income for both common stockholders and minority interests was primarily
      due
      to lower rental revenue and lease termination fee income in the first quarter
      of
      2008.





Minority
      interest in net income has been calculated by multiplying the net income of
      the
      operating partnerships (on a stand-alone basis) by the respective minority
      interest ownership percentage. Minority interests represent the ownership
      interest of all limited partners in the operating partnerships taken as a whole,
      which was approximately 81% as of March 31, 2008  and
      2007.


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          17
          -


**Changes
      in Financial Condition**





The
      most
      significant changes in our financial condition during the three months ended
      March 31, 2008  resulted
      from the acquisition of two R&D properties. At March 31, 2008, total
      investments in properties increased on a net basis by approximately $36.0
      million from December 31, 2007 primarily due to two R&D property
      acquisitions consisting of approximately 186,000 rentable square feet located
      in
      the Silicon Valley and the construction of additional tenant
      improvements.





Total
      stockholders’ equity, net, decreased by approximately ($1.9) million from
      December 31, 2007 as we obtained additional capital from the issuance of 5,720
      shares of our common stock for the exchange of O.P. units. The newly issued
      shares of common stock increased additional paid-in capital by approximately
      $0.1 million. S hare-based
      compensation relating to grants of stock options increased additional
      paid-in capital by approximately $0.1 million. Stockholders’ equity was reduced
      during the most recent quarter by the amount of distributions
      in excess of accumulated earnings of approximately ($2.1) million.





**Liquidity
      and Capital Resources**





We
      expect
      a slight increase in operating cash flows from our operating property portfolio
      in 2008 compared to 2007 primarily from new leases, periodic payments from
      M&M Real Estate Control & Restructuring relating to the Ciena lease
      termination in 2007 (see Note 5 above) and an additional early lease
      termination. If we are unable to lease a significant portion of the
      approximately 204,000 rentable square feet scheduled to expire during the
      remainder of 2008 or an equivalent amount of our currently available space
      of
      approximately 2.9 million rentable square feet, however, our operating cash
      flows after 2008 may be affected adversely. With the
      expectation of lower rental revenues for the remainder of 2008, we expect our
      properties’ net operating income to show a year-over-year decline when compared
      to 2007 driven
      by excess capacity of commercial office and R&D space in the Silicon Valley.
      We are also subject to risks of decreased occupancy through tenant defaults
      and
      bankruptcies and potential reduction in rental rates upon renewal of properties,
      which would result in reduced cash flow from operations. Cash flows from lease
      terminations are non-recurring and to maintain or increase cash flows in the
      future we must re-lease our vacant properties.





We
      expect
      our principal source of liquidity for distributions to stockholders and O.P.
      unit holders, debt service, leasing commissions and recurring capital
      expenditures to come from cash provided by operations and/or the borrowings
      under the line of credit with Heritage Bank of Commerce (“HBC”). We expect these
      sources of liquidity to be adequate to meet projected distributions to
      stockholders and other presently anticipated liquidity requirements in 2008.
      We
      expect to meet our long-term liquidity requirements for the funding of property
      development, property acquisitions and other material non-recurring capital
      improvements through cash and investments, long-term secured and unsecured
      indebtedness, and the issuance of additional equity securities by us. We have
      the ability to meet short-term obligations or other liquidity needs based on
      cash reserves and the line of credit with HBC. We expect our total interest
      expense to increase through new financing activities.





Cash
      and
      cash equivalents decreased by approximately $2.1 million from $23.7 million
      as
      of December 31, 2007 to $21.6 million as of March 31, 2008.





Restricted
      cash totaled approximately $48.6 million as of March 31, 2008. Of this amount,
      approximately $47.1 million represents cash held by our consolidated VIE from
      the Ciena lease termination in the third quarter of 2007. We include this in
      our
      restricted cash under the principles of FIN 46R. The remaining $1.5 million
      represents a certificate of deposit relating to the Prudential Insurance loan.
      In the third quarter of 2007, we sold 45700 Northport Loop in Fremont,
      California and 1170 Morse Avenue in Sunnyvale, California, which were collateral
      properties under the Prudential Insurance loan. Prudential agreed to release
      these properties without delivery of substitute properties provided that we
      deposit $1.5 million into escrow with Prudential for a full year. The funds
      from
      the CD are expected to be returned to us in October 2008. We do not possess
      or
      control these funds or have any rights to receive them except as provided in
      the
      applicable agreements, however. The restricted cash is not available for
      distribution to stockholders.





*Distributions*


On
      April
      3, 2008, we paid dividends of $0.20 per share of common stock to all common
      stockholders of record as of March 31, 2008. On the same date, the operating
      partnerships paid a distribution of $0.20 per O.P. unit to all holders of O.P.
      units. Aggregate dividends and distributions amounted to approximately $21.0
      million. For the remainder of 2008, we expect to maintain our current quarterly
      dividend payment rate to common stockholders and O.P. unit holders of
      $0.20 per share. However, distributions are declared at the discretion of
      our Board of Directors and are subject to actual cash available for
      distribution, our financial condition, capital requirements and such other
      factors, as our Board of Directors deems relevant.





*Debt*


On
      March
      4, 2008, we entered into an agreement with Heritage Bank of Commerce for an
      unsecured revolving line of credit of $10 million. The
      revolving line of credit carries a variable interest rate based on the one-month
      LIBOR plus 1.75% per annum, adjustable monthly, and matures on June 15,
      2009.  The revolving line of credit contains certain customary covenants as
      defined in the loan agreement. On April 17, 2008, we entered into a change
      in terms agreement with Heritage Bank of Commerce to increase the unsecured
      revolving line of credit from $10 million to $17.5 million.  We paid
      approximately $26,000 in loan and legal fees in connection with this
      loan.


-
          18
          -


At
      March
      31, 2008, we had total indebtedness of approximately $363.2 million, including
      $334.8 million of fixed rate mortgage debt, $19.3 million debt under the Berg
      Group note payable (related parties) and $9.1 million debt under the Berg Group
      mortgage note (related parties), as detailed in the table below. The Prudential
      Insurance, Northwestern Mutual, Allianz and HBC loans contain certain financial
      loan and reporting covenants as defined in the loan agreements. As of March
      31,
      2008, we were in compliance with these loan covenants.





Our
      mortgage loan from Prudential Insurance Company of America, which had a
      principal balance owed of approximately $111.9 million as of March 31, 2008,
      matures in October 2008. We are currently evaluating and examining the
      refinancing options available to us and are seeking proposals for replacement.
      We expect to be able to refinance this debt prior to maturity. We currently
      have
      not secured a commitment for replacement financing, however, replacement
      financing is not assured. Failure to refinance this debt prior to maturity,
      with
      either short-term or long-term borrowings, would have a material adverse effect
      on our financial conditions and would prevent the payment or distributions
      to
      stockholders and O.P unit holders until we have refinanced it.





*Contractual
      Obligations*


The
      following table identifies the contractual obligations as of March
      31,
      2008  that
      will
      impact our liquidity and cash flow in future periods:





2008
            
            2009
            
            2010
            
            2011
            
            2012
            
            Thereafter
            
            Total*(dollars
                in thousands)*Debt
                Obligations(1)
            
            $
            138,046
            
            $
            9,561
            
            $
            10,105
            
            $
            10,681
            
            $
            11,032
            
            $
            183,777
            
            $
            363,202Operating
                Lease Obligations(2)
            
            
            90
            
            
            30
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            120Total
            
            $
            138,136
            
            $
            9,591
            
            $
            10,105
            
            $
            10,681
            
            $
            11,032
            
            $
            183,777
            
            $
            363,322





(1)
            Our
                debt obligations are set forth in detail in the schedule
                below.


(2)
            Our
                operating lease obligations relate to a lease of our corporate office
                facility from a related party.


-
          19
          -


The
      following table sets forth information regarding debt outstanding as of March
      31, 2008:





**Debt Description**
            
            **Collateral Properties**
            
            **Balance**
            
            **Maturity**
              **Date**
            
            **Interest Rate***(dollars
                in thousands)***Line
                of Credit:**Heritage
                Bank of Commerce
            
            
            Not
                Applicable
            
            
            -
            
            
            6/09
            
            
            (3
            )**Note
                Payable (related parties):**
            
            
            Not
                Applicable
            
            $
            19,316
            
            
            9/08
            
            
            (4
            )**Mortgage
                Note Payable (related parties):**
            
            
            5300
                & 5350 Hellyer Avenue, San Jose, CA
            
            
            9,112
            
            
            6/10
            
            
            7.65
            %**Mortgage
                Notes Payable (1):**Prudential
                Insurance Company of America (2)
            
            
            10300
                Bubb Road, Cupertino, CA
            
            
            111,905
            
            
            10/08
            
            
            6.56
            %10500
                N. De Anza Boulevard, Cupertino, CA4050
                Starboard Drive, Fremont, CA45738
                Northport Loop, Fremont, CA450
                National Avenue, Mountain View, CA6311
                San Ignacio Avenue, San Jose, CA6321
                San Ignacio Avenue, San Jose, CA6325
                San Ignacio Avenue, San Jose, CA6331
                San Ignacio Avenue, San Jose, CA6341
                San Ignacio Avenue, San Jose, CA6351
                San Ignacio Avenue, San Jose, CA3236
                Scott Boulevard, Santa Clara, CA3560
                Bassett Street, Santa Clara, CA3570
                Bassett Street, Santa Clara, CA3580
                Bassett Street, Santa Clara, CA1135
                Kern Avenue, Sunnyvale, CA1212
                Bordeaux Lane, Sunnyvale, CA1230
                E. Arques, Sunnyvale, CA1250
                E. Arques, Sunnyvale, CA1600
                Memorex Drive, Santa Clara, CA1688
                Richard Avenue, Santa Clara, CA1700
                Richard Avenue, Santa Clara, CA3540
                Bassett Street, Santa Clara, CA3542
                Bassett Street, Santa Clara, CA3544
                Bassett Street, Santa Clara, CA3550
                Bassett Street, Santa Clara, CANorthwestern
                Mutual Life Insurance Company (5)
            
            
            1750
                Automation Parkway, San Jose, CA
            
            
            84,060
            
            
            1/13
            
            
            5.64
            %1756
                Automation Parkway, San Jose, CA1762
                Automation Parkway, San Jose, CA6320
                San Ignacio Avenue, San Jose, CA6540-6541
                Via Del Oro, San Jose, CA6385-6387
                San Ignacio Avenue, San Jose, CA2251
                Lawson Lane, Santa Clara, CA1325
                McCandless Drive, Milpitas, CA1650-1690
                McCandless Drive, Milpitas, CA20605-20705
                Valley Green Drive, Cupertino, CAAllianz
                Life Insurance Company (Allianz Loan I) (6)
            
            
            5900
                Optical Court, San Jose, CA
            
            
            23,625
            
            
            8/25
            
            
            5.56
            %Allianz
                Life Insurance Company (Allianz Loan II) (6)
            
            
            5325-5345
                Hellyer Avenue, San Jose, CA
            
            
            115,184
            
            
            8/25
            
            
            5.22
            %1768
                Automation Parkway, San Jose, CA2880
                Scott Boulevard, Santa Clara, CA2890
                Scott Boulevard, Santa Clara, CA2800
                Scott Boulevard, Santa Clara, CA20400
                Mariani Avenue, Cupertino, CA10450-10460
                Bubb Road, Cupertino, CA334,774**TOTAL**
            
            
            
            
            $
            363,202




(1)
            Mortgage
                notes payable generally require monthly installments of principal
                and
                interest ranging from approximately $177,000 to $840,000 over various
                terms extending through the year 2025. The weighted average interest
                rate
                of mortgage notes payable was 5.85% at March 31,
                2008.


(2)
            The
                Prudential Insurance loan is payable in monthly installments of
                approximately $827,000, which includes principal (based upon a 30-year
                amortization) and interest. A limited partner who is not a member
                of the
                Berg Group has guaranteed approximately $12,000,000 of this debt.
                Costs
                and fees incurred with obtaining this loan aggregated approximately
                $900,000, which were deferred and amortized over the loan
                period.


(3)
            Loan
                carries a variable interest rate equal to LIBOR plus 1.75%. The Heritage
                Bank of Commerce (“HBC”) line of credit contains certain financial loan
                and reporting covenants as defined in the loan agreements, including
                minimum tangible net worth and debt service coverage ratio. As of
                March
                31, 2008, we were in compliance with these loan
                covenants.


(4)
            Loan
                carries a variable interest rate equal to LIBOR plus 2.0%. The interest
                rate at March 31, 2008 was 4.81%.


(5)
            The
                Northwestern loan is payable in monthly installments of approximately
                $696,000, which includes principal (based upon a 20-year amortization)
                and
                interest. Costs and fees incurred with obtaining this loan aggregated
                approximately $675,000, which were deferred and amortized over the
                loan
                period.


(6)
            The
                Allianz loans are payable in monthly aggregate installments of
                approximately $1,017,000, which includes principal (based upon a
                20-year
                amortization) and interest. Costs and fees incurred with obtaining
                these
                loans aggregated approximately $1,089,000, which were deferred and
                amortized over the loan periods. The Allianz loans contain certain
                customary covenants as defined in the loan agreements. As of March
                31,
                2008, we were in compliance with these loan
                covenants.




-
          20
          -


At
      March
      31, 2008, our debt to total market capitalization ratio, which is computed
      as
      our total debt outstanding divided by the sum of total debt outstanding plus
      the
      market value of common stock (based upon the closing price of $9.45 per
      share
      on March 31, 2008) on a fully diluted basis, including the conversion of all
      O.P. units into common stock, was approximately
      26.7%. On March 31 ,
      2008 ,
      the last trading day in the quarter, total
      market capitalization was approximately $1.36 billion.





At
      March 31 ,
      2008 ,
      the outstanding balance remaining under certain notes that we owed to the
      operating partnerships was approximately $2.0
      million. The due date of these notes has been extended to September 30, 2009.
      The principal amount of these notes, along with the interest expense, which
      is
      interest income to the operating partnerships, is eliminated in consolidation
      and is not included in the corresponding line items within the condensed consolidated
      financial statements. However, the interest income earned by the operating
      partnerships, which is interest expense to us, in connection with this debt,
      is
      included in the calculation of minority interests as reported on the condensed consolidated statement of operations, thereby reducing our net income by this
      same amount. At present, our only means for repayment of this debt is through
      distributions that we receive from the operating partnerships that are in excess
      of the amount of dividends to be paid to our stockholders or by raising
      additional equity capital.





**Historical
      Cash Flows**





*Comparison
      of the three months ended March 31, 2008 to the three months ended March 31,
      2007*





Net
      cash
      provided by operating activities for the three months ended March
      31 ,
      2008
      was approximately $11.5 million compared to $18.6 million for the same period
      in
      2007. Cash flow decreases came primarily from lower lease termination fees,
      a
      forfeited deposit under a contract for the sale of property in 2007 that did
      not
      recur in 2008, and insurance premiums that were paid in full for the entire
      year
      2008 instead of through installment payments as in 2007.





Net
      cash
      used in investing activities was approximately ($20.2) million and ($0.9)
      million for the three months ended March
      31 ,
      2008
      and 2007, respectively. Cash used in investing activities during the three
      months ended March
      31 ,
      2008
      related principally to the acquisition of one R&D property at 5981 Optical
      Court in San Jose, California and one R&D property at 2904 Orchard Parkway
      in San Jose, California for approximately ($35.8) million. The acquisition
      at
      2904 Orchard Parkway was completed as a tax-deferred exchange transaction
      involving our former R&D property at 1170 Morse Avenue in Sunnyvale,
      California. The remaining excess restricted cash of approximately $7.7 million
      was transferred to our general cash account. Capital expenditures for real
      estate improvements were approximately ($0.2) million for the three months
      ended
      March 31, 2008.





Net
      cash
      used in investing activities for the three months ended March 31, 2007 related
      principally to the acquisition of 50 acres of vacant land at the Morgan Hill
      Ranch for approximately ($25.6) million. The Morgan Hill Ranch acquisition
      was
      completed as a tax-deferred exchange transaction involving our former R&D
      properties at 2033-2243 Samaritan Drive in San Jose, California. Capital
      expenditures for real estate improvements were approximately ($0.9) million
      for
      the three months ended March 31, 2007.





Net
      cash
      provided/(used in) financing activities was approximately $6.7 million for
      the
      three months ended March
      31 ,
      2008
      compared to approximately ($5.8) million for the three months ended March
      31 ,
      2007.
      During the first three months of 2008, we used approximately ($5.8) million
      to
      pay outstanding debt, paid approximately ($9.8) million of dividends to common
      stockholders and O.P unit holders and financed approximately $22.3 million
      in
      short-term debt. During the same period in 2007, we used approximately ($2.7)
      million to pay outstanding debt and paid approximately ($3.1) million of
      dividends to common stockholders.





**Funds** **From
      Operations (“FFO”)**





FFO
      is a
      non-GAAP financial measurement used by real estate investment trusts to measure
      and compare operating performance. As defined by NAREIT, FFO represents net
      income (loss) before minority interest of O.P. unit holders, computed in
      accordance with GAAP, plus non-recurring events other than “extraordinary items”
under GAAP, excluding gains and losses from sales of depreciable operating
      properties, 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. FFO does include impairment losses for properties held for sale and
      held for use. Management considers FFO to be an appropriate supplemental measure
      of our 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 our financial
      performance when compared to other REITs because FFO is generally recognized
      as
      the industry standard for reporting the operations of REITs. In addition to
      the
      disclosure of operating earnings per share, we will continue to use FFO as
      a
      measure of our performance. 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, nor is
      FFO
      necessarily indicative of funds available to meet our cash needs, including
      the
      need to make cash distributions to satisfy REIT requirements. For example,
      FFO
      is not adjusted for payments of debt principal required under our debt service
      obligations.





Our
      definition of FFO also assumes conversion at the beginning of the period of
      all
      convertible securities, including minority interests represented by O.P. Units
      that might be exchanged for common stock. FFO does not represent the amount
      available for management’s discretionary use; as such funds may be needed for
      capital replacement or expansion, debt service obligations or other commitments
      and uncertainties.


-
          21
          -





Furthermore,
      FFO is not comparable to similarly entitled items reported by other REITs that
      do not define FFO exactly as we do.





FFO
      for
      the three months ended March
      31 ,
      2008
      and 2007, as reconciled to net income to common stockholders, are summarized
      in
      the following table:





Three
                Months Ended March 31,2008
            
            2007*(dollars
                in thousands)*Net
                income to common stockholders
            
            $
            1,882
            
            $
            3,375Add:Minority
                interests(1)
            
            
            7,128
            
            
            13,755Depreciation
                and amortization of real estate(2)
            
            
            6,213
            
            
            6,775FFO
            
            $
            15,223
            
            $
            23,905





(1)
            Minority
                interests in net income is calculated by taking the net income of
                the
                operating partnerships (on a stand-alone basis) multiplied by the
                respective weighted average minority interests ownership percentage.
                Minority interests for third parties totaling approximately $111
                and $124
                for the three months ended March 31, 2008 and 2007, respectively,
                were
                deducted from total minority interests in calculating
                FFO.


(2)
            Includes
                our portion of depreciation and amortization of real estate and leasing
                commissions from our unconsolidated joint venture totaling approximately
                $189 for the three months ended March 31, 2008 and 2007. Also includes
                our
                amortization of leasing commissions of approximately $401 and $376
                for the
                three months ended March 31, 2008 and 2007, respectively. Amortization
                of
                leasing commissions is included in the property operating, maintenance
                and
                real estate taxes line item in the our condensed consolidated statements
                of operations.





The
      decrease in FFO year-over-year was primarily due to lower lease termination
      fee
      and rental income in 2008.





**Distribution
      Policy**





Our
      board
      of directors determines the amount and timing of distributions to our
      stockholders. The board of directors will consider many factors prior to making
      any distributions, including the following:




·
            the
                amount of cash available for
                distribution;


·
            our
                ability to refinance maturing debt
                obligations;


·
            our
                financial condition;


·
            whether
                to reinvest funds rather than to distribute such
                funds;


·
            our
                committed and projected capital
                expenditures;


·
            the
                amount of cash required for new property acquisitions, including
                acquisitions under existing agreements with the Berg
                Group;


·
            the
                amount of our annual debt service
                requirements;


·
            prospects
                of tenant renewals and re-leases of properties subject to expiring
                leases;


·
            cash
                required for re-leasing activities;


·
            the
                annual distribution requirements under the REIT provisions of the
                federal
                income tax laws; and


·
            such
                other factors as the board of directors deems
                relevant.




We
      cannot
      assure you that we will be able to meet or maintain our cash distribution
      objectives.


-
          22
          -


**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk**




We
      do not
      generally hold market risk sensitive instruments for trading purposes. We use
      fixed and variable rate debt to finance our operations. Our exposure to market
      risk for changes in interest rates relates primarily to our current variable
      rate debt and future debt obligations. We are vulnerable to significant
      fluctuations of interest rates on our floating rate debt and pricing on our
      future debt. We manage our market risk by monitoring interest rates where we
      try
      to recognize the unpredictability of the financial markets and seek to reduce
      potentially adverse effect on the results of our operations. This takes frequent
      evaluation of available lending rates and examination of opportunities to reduce
      interest expense through new sources of debt financing. Several factors
      affecting the interest rate risk include governmental monetary and tax policies,
      domestic and international economics and other factors that are beyond our
      control. The following table provides information about the principal cash
      flows, weighted average interest rates, and expected maturity dates for debt
      outstanding as of March 31, 2008. The current terms of this debt are described
      in Item 2, “Management’s Discussion and Analysis of Financial Condition and
      Results of Operations - Liquidity and Capital Resources.” For fixed rate debt,
      we estimate fair value by using discounted cash flow analyses based on borrowing
      rates for similar kinds of borrowing arrangements.





For
      fixed
      rate debt, the table presents the assumption that the outstanding principal
      balance at March 31, 2008 will be paid according to scheduled principal payments
      and that we will not prepay any of the outstanding principal
      balance.





For
      variable rate debt, the table presents the assumption that the outstanding
      principal balance at March 31, 2008 will be paid upon maturity.





Nine
              Months
              Remaining
            
            Year Ending December 31,2008
            
            2009
            
            2010
            
            2011
            
            2012
            
            Thereafter
            
            Total
            
            Fair Value*(dollars
                in thousands)****Fixed
                Rate Debt:***Secured
                notes payable
            
            $
            118,730
            
            $
            9,561
            
            $
            10,105
            
            $
            10,681
            
            $
            11,032
            
            $
            183,777
            
            $
            343,886
            
            $
            437,373Weighted
                average interest rate
            
            
            5.85
            %
            
            5.85
            %
            
            5.85
            %
            
            5.85
            %
            
            5.85
            %
            
            5.85
            %***Variable
                Rate Debt:***Unsecured
                debt
            
            $
            19,316
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            $
            19,316
            
            $
            19,316Weighted
                average interest rate
            
            
            5.28
            %





The
      primary market risks we face are interest rate fluctuations. As a result, we
      pay
      lower rates of interest in periods of decreasing interest rates and higher
      rates
      of interest in periods of increasing interest rates. We had no interest rate
      caps or interest rate swap contracts at March 31, 2008. The only variable debt
      that we had as of March 31, 2008 was approximately $19.3 million owed to the
      Berg Group. This represented 5.3% of the total $363.2 million of outstanding
      debt as of March 31, 2008. All of our debt is denominated in United States
      dollars.





The
      following discussion of market risk is based solely on a possible hypothetical
      change in future market conditions related to our variable-rate debt. It
      includes “forward-looking statements,” as previously defined, regarding market
      risk, but we are not forecasting the occurrence of these market changes.





Based
      on
      the amount of variable debt outstanding as of March 31, 2008, a 1% increase
      or
      decrease in interest rates on our approximately $19.3 million of floating rate
      debt would decrease or increase, respectively, three months earnings and cash
      flows by approximately $48,000, as a result of the increased or decreased
      interest expense associated with the change in rate, and would not have an
      impact on the fair value of the floating rate debt. This amount is determined
      by
      considering the impact of hypothetical interest rates on our borrowing cost.
      Due
      to the uncertainty of fluctuations in interest rates and the specific actions
      that might be taken by us to mitigate such fluctuations and their possible
      effects, the foregoing sensitivity analysis assumes no changes to our financial
      structure.


-
          23
          -


**Item
      4.**  **Controls
      and Procedures**





*Disclosure
      Controls and Procedures*


We
      strive
      to maintain disclosure controls and procedures that are designed to ensure
      that
      information required to be disclosed in our Exchange Act reports is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms, and that such information is accumulated and communicated
      to our management, including our chief executive officer and chief financial
      officer, as appropriate, to allow for timely decisions regarding required
      disclosure. In designing and evaluating the disclosure controls and procedures,
      management recognizes that any controls and procedures, no matter how well
      designed and operated, can provide only reasonable assurance of achieving the
      desired control objectives and management necessarily is required to apply
      its
      judgment in evaluating the cost-benefit relationship of possible controls and
      procedures.





As
      required by SEC Rule 13a-15(b) we conducted an evaluation, under the supervision
      and with the participation of our management, including our Chief Executive
      Officer, President and Vice President of Finance, of the effectiveness of the
      design and operation of our disclosure controls and procedures. Based upon
      that
      evaluation, the Chief Executive Officer, President and Vice President of Finance
      concluded that our disclosure controls and procedures (as defined in
      Rule 13a-15(e) or Rule 15d-15(e)) were effective as of March 31,
      2008.





*Changes
      in Internal Control over Financial Reporting*


There
      was
      no material change in our internal control over financial reporting during
      the
      last fiscal quarter that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.








**PART
      II - Other Information**





**ITEM
      1. Legal Proceedings**





Legal
      proceedings are incorporated herein by reference from Part I “Item 1. - Notes to
      Condensed Consolidated Financial Statements - Note 10 - Commitments and
      Contingencies.”





**ITEM
      1A. Risk Factors**





While
      we
      attempt to identify, manage and mitigate risks and uncertainties associated
      with
      our business to the extent practical under the circumstances, some level of
      risk
      and uncertainty will always be present. In addition to the other information
      contained in this report, you should carefully review the factors discussed
      under Item 1A of our 2007 Form 10-K which describes some of the risks and
      uncertainties associated with our business. These risks and uncertainties have
      the potential to materially affect our business, financial condition, results
      of
      operations, cash flows, and future prospects. Additional
      risks and uncertainties not presently known to us or that we currently deem
      immaterial also may impair our business operations.





**ITEM
      6. Exhibits**





10.55
            Heritage
                Bank of Commerce Revolving Credit Loan
                Agreement


10.55.1
            Heritage
                Bank of Commerce Revolving Credit Loan Change in Terms
                Agreement


31.1
            Section
                1350 Certificate of CEO


31.2
            Section
                1350 Certificate of President &
COO


31.3
            Section
                1350 Certificate of Principal Financial
                Officer


32
            Certification
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002


-
          24
          -


Signatures





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 thereto
      duly authorized.





**Mission
                West Properties, Inc.**(Registrant)Date:
                May 7, 2008
            By:
            /s/
                Carl E. BergCarl
                E. BergChief
                Executive Officer





Date:
                May 7, 2008
            By:
            /s/
                Wayne N. PhamWayne
                N. PhamVice
                President of Finance and Controller(Principal
                Accounting Officer and Duly Authorized
                Officer)


-
          25
          -