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, 1999

                          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              (I.R.S. EMPLOYER IDENTIFICATION
  INCORPORATION OR ORGANIZATION)                          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 [X]  NO [ ]


                      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:

                 8,115,454 shares outstanding as of May 10, 1999

                                     - 1 -

<PAGE>



                          MISSION WEST PROPERTIES, INC.

                                    FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 1999




                                      INDEX


                                                                   
PART I  FINANCIAL INFORMATION                                        PAGE
                                                                     ----
  Item 1  Financial Statements:

          Consolidated Balance Sheets as of March 31, 1999
          and December 31, 1998........................................3

          Consolidated Statements of Operations for the three
          months ended March 31, 1999 and 1998.........................4

          Consolidated Statements of Cash Flows for the
          three months ended March 31, 1999 and 1998...................5

          Notes to Consolidated Financial Statements...................6

  Item 2  Management's Discussion and Analysis of Financial
          Condition and Results of Operations.........................10


PART II  OTHER INFORMATION

  Item 5  Other Information...........................................18

  Item 6  Exhibits and Reports on Form 8-K............................18


SIGNATURES............................................................19

                                     - 2 -
<PAGE>



===============================================================================
Part I - Financial Information

ITEM 1
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                          MISSION WEST PROPERTIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)
                                  ------------
                                             March 31,        December 31,
                                               1999              1998
                                           --------------    --------------
                                             (Unaudited)
<S>                                       <C>               <C>    
                  ASSETS
Real estate assets, at cost
   Land                                        $93,496         $  90,929
   Buildings and improvements                  436,608           430,510
                                           --------------    --------------
                                               530,104           521,439
   Less accumulated depreciation                (8,113)           (5,410)
                                           --------------    --------------
    Net real estate assets                     521,991           516,029

Cash and cash equivalents                          134               246
Deferred rent                                    2,377             1,624
Other assets                                     2,304             1,967
                                           --------------    --------------
    Total assets                              $526,806         $ 519,866
                                           ==============    ==============

   LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Line of credit                            $  18,523         $  27,201
   Mortgage notes payable                      156,656           157,188
   Mortgage notes payable (related parties)     24,080            20,752
   Interest payable                                458               632
   Interest payable (related parties)              416                 -
   Security deposits                             2,060             2,061
   Prepaid rental income                         3,018             3,246
   Accounts payable and accrued expenses         2,357             2,154
                                           --------------    --------------
    Total liabilities                          207,568           213,234

Commitments and contingencies (Note 7)

Minority interest                              285,037           273,379

Stockholders' equity:
   Preferred stock, no par value, 200,000
    shares authorized, none issued and
    outstanding                                      -                 -
   Common stock, $.001 par value, 200,000,000
    shares authorized 8,233,583 and
    8,218,594 shares issued and outstanding          
    at March 31, 1999 and December 31,
    1998, respectively                               8                 8
   Paid-in capital                              55,595            55,528
   Less amounts receivable on private            
    placement                                     (900)             (900)
   Accumulated deficit                         (20,502)          (21,383)
                                           --------------    --------------
    Total stockholders' equity                  34,201            33,253
                                           --------------    --------------
    Total liabilities and stockholders'        
     equity                                   $526,806         $ 519,866
                                           ==============    ==============
</TABLE>

                 See notes to consolidated financial statements

                                     - 3 -

<PAGE>


                          MISSION WEST PROPERTIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                   (unaudited)
                                  ------------
<TABLE>
<CAPTION>

                                         Three months ended March 31,
                                        ------------------------------
                                             1999            1998
<S>                                      <C>              <C>   
                                        --------------  --------------
Revenue:
  Rental revenues from real estate        $   14,027               -
  Tenant reimbursements                        2,236               -
  Other income, including interest               149      $       77
                                        --------------  --------------
                                              16,412              77
                                        --------------  --------------

Expenses:
  Operating expenses                             782               -
  Real estate taxes                            1,529               -
  Depreciation of real estate                  2,703               -
  General and administrative                     406             230
  Interest                                     2,971               -
  Interest (related parties)                     416               -
                                        --------------  --------------
    Total expenses                             8,807             230
                                        --------------  --------------
 
Income/(loss) before minority                  7,605            (153)
interest
Minority interest                              6,724               -
                                        --------------  --------------
  Net income/(loss)                       $      881      $     (153)
                                        ==============  ==============
Basic net income / (loss) per share       $     0.11      $     (.10)
                                        ==============  ==============
Diluted net income / (loss) per share     $     0.10      $     (.10)
                                        ==============  ==============
Weighted average number of common
 shares outstanding (basic)                8,227,261       1,503,933
                                        ==============  ==============
Weighted average number of common
 shares outstanding (diluted)              8,415,412       1,503,933
                                        ==============  ==============

</TABLE>









                 See notes to consolidated financial statements

                                     - 4 -

<PAGE>


                          MISSION WEST PROPERTIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
                                  ------------
<TABLE>
<CAPTION>

                                                      Three months ended
                                                           March 31,
                                                    ----------------------
                                                       1999           1998
                                                    ---------      ---------
<S>                                                <C>             <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                 $   881         $ (153)
  Adjustments to reconcile net income to net cash
     used in operating activities:
    Minority interest                                 6,724              -
    Depreciation of real estate                       2,703              -
   Changes in assets and liabilities:
    Deferred rent                                      (753)             -
    Other assets                                       (337)          (135)
    Interest payable                                   (174)             -
    Interest payable (related parties)                  416              -
    Security deposits                                   (89)             -
    Prepaid rental income                              (228)             -
    Accounts payable and accrued liabilities            203           (117)
                                                    ---------      ---------
   Net cash provided by (used in) operating           9,346           (405)
    activities
                                                    ---------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Improvements to real estate assets                   (107)             -
                                                    ---------      ---------
   Net cash used in investing activities               (107)             -
                                                    ---------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net principal payments on line of credit           (8,678)
  Principal payments on mortgage notes payable         (532)             -
  Principal payments on mortgage notes payable         (196)             -
   (related parties)
  Proceeds from stock options exercised                  67              -
  Repurchase of common stock                              -            (11)
  Minority interest distributions                       (12)             -
                                                    ---------      ---------
   Net cash used in financing activities             (9,351)           (11)
                                                    ---------      ---------

   Net decrease in cash and cash equivalents           (112)          (416)
Cash and cash equivalents, beginning                    246          5,569
                                                    ---------      ---------
Cash and cash equivalents, ending                   $   134        $ 5,153
                                                    =========      =========

Supplemental information:
  Cash paid for interest                            $ 3,139              -
                                                    =========      =========
  Cash paid for income taxes                        $     -        $   115
                                                    =========      =========
Supplemental schedule of non-cash investing
and financing activities:
   Note receivable in connection with issuance 
   of common stock                                  $             $   900
   Assumption of debt in connection with
   property acquisition                              $ 3,525       $
   Assumption of other liabilities in connection
   with property acquisition                         $    88       $
   Issuance of limited partnership units in
   connection with property acquisition             $ 4,945       $                 
</TABLE>


                 See notes to consolidated financial statements

                                     - 5 -

<PAGE>


                          MISSION WEST PROPERTIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       (in thousands, except per share amounts, limited partnership units
                              and square footage)
                                   (unaudited)
                                  ------------


1.    PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

      The accompanying consolidated financial statements include the accounts of
      the Company  and its  controlled  subsidiaries,  including  the  operating
      partnerships.  All significant  intercompany balances have been eliminated
      in consolidation.

      Minority  interest  represents  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.  In
      total, these interests account for 88.08%, on a weighted average basis, of
      the ownership interests in the real estate operations of the Company as of
      March 31,  1999.  Minority  interest in earnings  has been  calculated  by
      taking  the net income of the  operating  partnerships  (on a  stand-alone
      basis)   multiplied  by  the  respective   minority   interest   ownership
      percentage.

      The financial  statements  have been prepared in accordance with generally
      accepted accounting principles applicable to interim financial information
      and pursuant to the rules and  regulations  of the Securities and Exchange
      Commission.  Accordingly,  certain  information  and footnote  disclosures
      normally  included in financial  statements  prepared in  accordance  with
      generally  accepted  accounting  principles have been condensed or omitted
      pursuant  to such  rules  and  regulations.  However,  in the  opinion  of
      management,   all   adjustments,   consisting  only  of  normal  recurring
      adjustments,  necessary for a fair  presentation  have been included.  The
      Company presumes that users of the interim  financial  information  herein
      have  read or have  access to the  audited  financial  statements  for the
      preceding  fiscal  year and that the  adequacy  of  additional  disclosure
      needed for a fair  presentation  may be determined  in that  context.  The
      results of  operations  for the three  months ended March 31, 1999 are not
      necessarily indicative of the results to be expected for the entire year.

      The  Company  intends  to qualify  and elect to be taxed as a real  estate
      investment  trust under the  Internal  Revenue  Code of 1986,  as amended,
      commencing with the taxable year ending December 31, 1999. Accordingly, no
      provision  has been made for  federal  income  taxes for the three  months
      ended March 31, 1999.

2.   REAL ESTATE

     PENDING PROJECTS ACQUISITION AGREEMENT
     --------------------------------------
     The Company has entered into a Pending Projects Acquisition Agreement which
     permits the acquisition by the Company  through the operating  partnerships
     of  approximately  one  million  additional  rentable  square feet upon the
     completion and leasing of a number of pending development projects owned by
     certain  members of the Berg Group and other sellers.  The agreement  fixes
     the  acquisition  value  to be  received  by the  sellers  based  upon  the
     capitalized  rental value of the  property  when fully  leased.  During the
     first  quarter of 1999,  the Company  completed an  additional  acquisition
     under  the  Pending  Projects  Acquisition  Agreement  representing  54,996
     rentable square feet (see PROPERTY  ACQUISITIONS below). In April 1999, the
     Company acquired the L'Avenida project consisting of approximately  515,700
     rentable  square  feet  currently  being  constructed  and  under  lease to
     Microsoft  Corporation  ("Microsoft")  - SEE NOTE 6 SUBSEQUENT  EVENTS.  At
     March 31, 1999,  excluding the Microsoft  project at L'Avenida,  there were
     two remaining  projects  comprising  approximately  395,104 rentable square
     feet  which the  Company  expects  to acquire  under the  Pending  Projects
     Acquisition Agreement.

     The sellers of the pending  development  projects may elect to receive cash
     or limited  partnership units ("O.P.  Units") at a value of $4.50 per unit,
     which  was set in May  1998  based  on the  $4.50  per  share  price of the
     Company's common stock paid in private placement transactions at that time.
     As the current  market value price of a share of common  stock  exceeds the
     $4.50 price,  this  valuation  represents a  substantial  discount from the
     current market value of the common stock that may be issued in exchange for
     these O.P. Units. Under generally accepted  accounting  principles ("GAAP")
     the acquisition  cost in the form of O.P. Units issued will be valued based
     upon the current market value of the Company's common stock on the date the
     acquisition closes. Consequently, the Company's actual cost of these future
     acquisitions  will  depend  in large  part on the  percentage  of the fixed
     acquisition  value paid for by the issuance of O.P.  Units and the price of
     the Company's common stock on the closing of the acquisition.

                                     - 6 -
<PAGE>
     BERG LAND  HOLDINGS  OPTION  AGREEMENT
     --------------------------------------
     Through the  operating  partnerships,  the  Company  also has the option to
     acquire any future R&D property  developments on approximately 154 acres of
     Silicon  Valley  Land owned by certain  members of the Berg Group under the
     terms of the Berg Land Holdings Option Agreement.  The owners of the future
     R&D property  developments may obtain cash or, at their option, O.P. Units.
     To date,  the Company has  completed  one  acquisition  under the Berg Land
     Holdings  Option  Agreement  representing  approximately  110,000  rentable
     square feet.  Upon the  Company's  exercise of an option to purchase any of
     the future R&D property developments,  the acquisition price will equal the
     sum of (a) the full construction cost of the building;  (b) 10% of the full
     construction cost of the building;  (c) the acquisition value of the parcel
     as defined in the agreement  upon which the  improvements  are  constructed
     (ranging  from $8.50 to $20.00 per square  foot);  (d) 10% per annum of the
     acquisition  value of the parcel for the period from January 1, 1998 to the
     close of escrow;  and e) interest at LIBOR  (London  Interbank  Offer Rate)
     plus 1.65% per annum on the full construction costs of the building for the
     period from the date funds were  distributed  by the developer to the close
     of escrow; less (f) any debt encumbering the property.

     No  estimate  can be given at this time as to the total cost to the Company
     to acquire projects under the Berg Land Holdings Agreement,  nor the timing
     as to when the Company will acquire such projects.  However, the Berg Group
     is currently  constructing  two properties with a total of 388,000 rentable
     square feet that the Company has the right to acquire under this agreement.
     As of March 31, 1999,  the  estimated  acquisition  value to the  operating
     partnerships for these two projects is $32,226. The final acquisition price
     of these two properties could differ significantly from this estimate.

     PROPERTY ACQUISITIONS
     ---------------------
     Effective  March 1, 1999,  the  Company  acquired a newly  constructed  R&D
     property  located on Santa Teresa  Boulevard in San Jose,  California  (the
     "Santa Teresa  Property').  This  acquisition  added  approximately  54,996
     square feet of rentable  space and was  acquired  from the Berg Group under
     the Pending Projects Acquisition Agreement. The total acquisition price for
     this property was $8,558. In connection with this acquisition,  the Company
     assumed  $3,525 of debt due Berg & Berg  Enterprises,  Inc. an affiliate of
     Carl E. Berg and Clyde J. Berg,  as well as other  liabilities  of $88, and
     issued 694,030 O.P. Units to various members of the Berg Group.

3.    STOCK TRANSACTIONS

      In February 1999, a former officer of the Company  purchased 15,000 shares
      pursuant  to an option at $4.50 per share.  Total  proceeds to the Company
      were $68.

      On March 30, 1998,  the Company  issued  200,000 shares of common stock at
      $4.50 per share to an  executive  officer of the Company in exchange for a
      $900 note receivable  payable to the Company.  The note is a full recourse
      promissory  note  bearing  interest  at 5.59% and is  collateralized  by a
      pledge of the shares.  Interest is payable  annually and  principal is due
      March 30, 2003. SEE NOTE 6 SUBSEQUENT EVENTS


4.    NET INCOME PER SHARE

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

                                     - 7 -
<PAGE>



      The computation for weighted average shares is detailed below:
<TABLE>
<CAPTION>


                                                           Three Months Ended March 31,
                                                          ------------------------------
                                                                1999          1998
                                                             -----------   -----------
       <S>                                                   <C>           <C>      
        Weighted average share outstanding (basic)            8,227,261     1,503,933
        Incremental shares from assumed option exercise         188,151             -
                                                             -----------   -----------
        Weighted average shares outstanding (diluted)         8,415,412     1,503,933
                                                             ===========   ===========
</TABLE>

     The  outstanding  O.P. Units have been excluded from the diluted net income
     per share  calculation  as there would be no effect on the amounts  because
     the  minority  interests'  share of income  would also be added back to net
     income. O.P. Units outstanding at March 31, 1999 were 60,845,727.


5.    RELATED PARTY TRANSACTIONS

     As of March 31, 1999,  the Berg Group owned  57,158,653  O.P.  Units of the
     total  60,845,727  O.P.  Units  issued  and  outstanding.  Along  with  the
     Company's  common shares owned by the Berg Group, the Berg Group's interest
     in the Company  represents  approximately  82.9% of the equity interests of
     the Company,  assuming  conversion of the  60,845,727  O.P.  Units into the
     common stock of the Company.

     As of March 31,  1999,  debt in the amount of  $24,080  was due Berg & Berg
     Enterprises, Inc. This amount includes $3,525 of debt assumed in connection
     with  the  acquisition  of the  Santa  Teresa  property.  Interest  expense
     incurred in connection with debt due Berg & Berg Enterprises, Inc. was $416
     for the three months ended March 31, 1999.

     Carl E. Berg has a substantial  financial  interest in two  companies  that
     lease space from the operating partnerships. These companies occupy, in the
     aggregate, 35,862 square feet at a weighted average of $.63 per square foot
     per month.  These leases were in effect prior to the Company's  acquisition
     of its general  partnership  interests in July 1998.  The leases  expire in
     2001 (5,862 square feet) and 2002 (30,000 square feet).

     The Company currently leases space owned by Berg & Berg  Enterprises,  Inc.
     Rental amounts and overhead reimbursements paid to Berg & Berg Enterprises,
     Inc. were $20 for the three months ended March 31, 1999.


6.    SUBSEQUENT EVENTS

     Effective  April 1, 1999,  the Company  acquired an  approximately  515,700
     square foot  five-building  R&D complex  located on  L'Avenida  in Mountain
     View,  California,  which has been fully  leased to  Microsoft  Corporation
     under the terms of the Company's  Pending  Projects  Acquisition  Agreement
     with the Berg Group  members and other  owners of  projects  subject to the
     agreement.
    
     Under  the  terms  of  the  Pending  Projects  Acquisition  Agreement,  the
     L'Avenida  project had an  acquisition  value of $116,487,  which was to be
     funded with cash, assumption of liabilities,  and/or O.P. Units (at a value
     of $4.50  per  unit  which  was the  market  value at the time the  Company
     entered into the Pending Projects Acquisition  Agreement).  The acquisition
     value of $116,487 was funded by a)  assumption by the Company of $25,000 of
     mortgage  debt due Berg & Berg  Enterprises,  Inc.;  b)  assumption  of the
     sellers'   obligation   to  reimburse   Microsoft   for  shell  and  tenant
     improvements  of $32,057 and; c) the  issuance of  13,206,629  O.P.  Units,
     including  12,467,058  O.P.  Units  issued to  various  members of the Berg
     Group,  based upon a value of $4.50 per unit, or $59,430.  Under GAAP,  the
     O.P.  Units issued in connection  with this  acquisition  were valued based
     upon the closing price of the Company's common stock on April 30, 1999 (the
     date the acquisition  closed),  or $7.50 per share as reported on the AMEX,
     resulting in a valuation for GAAP purposes of $156,107.
 
     In  accordance  with the terms of the lease,  on April 1,  1999,  Microsoft
     began paying  monthly  base rent of  approximately  $1,226  million for the
     first four buildings,  which consist of approximately  415,700 square feet.
     On June 1, 1999, Microsoft begins paying monthly rent of approximately $295
     for the fifth building,  which consists of  approximately  100,000 rentable
     square feet. Microsoft controls the construction of this facility, which is
     currently  scheduled to be  completed  and ready for  occupancy  during the
     second half of 1999.  Microsoft has signed a seven-year lease that provides
     for  a  first  year's  rent  of  $2.95  per  square  foot  per  month  with
     approximately 4% annual rent increases.

     On April 8, 1999,  the Company  declared a $0.12 per share  dividend on its
     common  stock.  The  dividend  was paid on  April  30,  1999 to all  common
     stockholders  of  record  as of  April  15,  1999.  At the same  time,  the
     operating  partnerships paid a distribution of $0.12 per O.P. Unit on April
     30, 1999, as well.  The amount of this  distribution  payable to members of
     the Berg Group in the amount of $6,859 was  converted to related party debt
     on April 30, 1999.

     Michael  Anderson,  Chief Operating  Officer and a director of the Company,
     resigned  from the  Company  effective  April 30,  1999.  The  Company  had
     previously  issued  200,000  shares of its common stock to Mr.  Anderson in
     exchange for a note  receivable  payable to the Company for $900.  Upon Mr.
     Anderson's  resignation,  the Company,  in accordance with the terms of its
     agreements  with  Mr.  Anderson,  repurchased  and  subsequently  cancelled
     117,361 of the 200,000  shares of common  stock,  representing  $528 of the
     original $900 note receivable. The remaining portion of the note receivable
     in the amount of $372 remains outstanding and is collateralized by a pledge
     of 82,639 shares of common stock.  The Company  believes that the remaining
     outstanding  balance on the note receivable will be paid in full during the
     second  quarter of 1999.  The Company also waived  interest  expense in the
     amount of $32 due the  Company on the portion of the note  receivable
     relating to the cancelled shares.

                                     - 8 -
<PAGE>



7.    COMMITMENTS AND CONTINGENCIES

      The Company and the operating partnerships, from time to time, are parties
      to  litigation  arising out of the normal  course of business.  Management
      does not expect that such matters would have a material  adverse effect on
      the  consolidated  financial  position  or  results of  operations  of the
      Company.

      Insurance  policies  currently  maintained  by the  Company  do not  cover
      seismic  activity,  although  they do cover  losses  from  fires  after an
      earthquake.

                                     - 9 -
<PAGE>



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
  (in thousands, except share, square footage and limited partnership amounts)

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  contained  herein and the
Company's  consolidated  financial statements and notes thereto contained in the
Company's  Annual Report on Form 10-K as of and for the year ended  December 31,
1998.  The  results  for the three  month  period  ended  March 31, 1999 are not
necessarily  indicative of the results to be expected for the entire fiscal year
ending  December 31, 1999.  The following  discussion  includes  forward-looking
statements,  including  but  not  limited  to  statements  with  respect  to the
Company's future financial performance, operating results, plans and objectives.
Actual results may differ materially from those currently  anticipated depending
upon  a  variety  of  factors,   including   those  described  below  under  the
sub-heading, "Forward-Looking Information."

OVERVIEW

Mission West Properties,  Inc. is engaged in the management,  leasing, marketing
and  acquisition  of R&D office  properties,  primarily  located in the "Silicon
Valley" portion of the San Francisco Bay Area. As of March 31, 1999, the Company
managed 72 properties  totaling  approximately  4.57 million square feet through
its  controlling   interests  in  four  separate  partnerships  (the  "operating
partnerships")  in which the Company is the sole general  partner.  For the year
ending  December  31,  1999,  we  intend  to elect to be taxed as a real  estate
investment  trust ("REIT") for federal income tax purposes and will operate as a
self-managed, self-administered, self-advised and fully integrated REIT.

RESULTS OF OPERATIONS

COMPARISON  OF THE THREE  MONTHS  ENDED MARCH 31, 1999 TO THE THREE MONTHS ENDED
MARCH 31, 1998.

The Company's  acquisition of the general partnership interests in the operating
partnerships  during  the  third  quarter  of  1998  substantially  altered  the
Company's operations.  As a consequence,  operating results for the three months
ended March 31, 1999 are not  meaningfully  comparable to operating  results for
the same period of 1998.

For the three months ended March 31, 1999, rental revenues from real estate were
$14,027, which included a positive adjustment of $753 in order to reflect rental
revenues on a straight-line basis. Tenant  reimbursements were $2,236, and other
income,  including interest, was $149. Total expenses for the three months ended
March 31, 1999, were $8,807, of which $8,401 related directly to its real estate
operations.  General and administrative  expenses accounted for the remainder of
the expenses.

The minority  interest portion of income was $6,724,  resulting in net income of
$881 for the three months ended March 31, 1999. Minority interest represents the
limited partners'  ownership interest of 88.08%, on a weighted average basis (as
of March 31, 1999), in the operating partnerships.

During the three  months ended March 31, 1998,  the  Company's  only assets were
cash  and   receivables,   and   therefore,   the  Company   had   insignificant
revenue-generating  and  cash-generating  capabilities  and minimal  operations,
aside from interest income and general and administrative expenses.


CHANGES IN FINANCIAL CONDITION

During the first quarter of 1999, the Company  acquired a newly  constructed R&D
property  located  on Santa  Teresa  Boulevard  in San  Jose,  California.  This
acquisition  added  approximately  54,996 square feet of rentable  space and was
acquired from the Berg Group under the Pending Projects  Acquisition  Agreement.
The total  acquisition  price for this property was $8,558.  The Company assumed
$3,525 of debt due Berg & Berg  Enterprises,  Inc., as well as other liabilities
of $88,  and issued  694,030 O.P.  Units  issued to various  members of the Berg
Group.

In February  1999,  a former  officer of the  Company  purchased  15,000  shares
pursuant to an option at $4.50 per share.  Total  proceeds  to the Company  were
$68.

                                     - 10 -
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

GENERAL
-------
We expect funds from operations  ("FFO") to be the principal source of liquidity
for  distributions,  debt service,  leasing  commissions  and recurring  capital
expenditures.  Based solely upon past  operating  results for the properties and
the results of  operations  for the three months ended March 31, 1999, we expect
FFO for 1999 to be adequate to meet projected  distributions to stockholders and
other anticipated liquidity  requirements in 1999 (see "Funds From Operations").
The Company expects to meet its other liquidity needs with debt financing.

DEBT
----
At March 31, 1999,  the Company had total  indebtedness  of $199,259,  including
$153,551 of fixed rate  mortgage  debt,  $27,185 of variable  rate mortgage debt
(including  $24,080 of related party debt),  and $18,523 of credit facility debt
with Wells Fargo Bank, N.A. (the "Wells Fargo line"). Additionally,  as of March
31, 1999, the Company had available borrowing capacity under the credit facility
of $81,477.

Of total  fixed debt,  the loan with  Prudential  Insurance  Company of America
represents  $129 million.  The loan bears interest at a rate of 6.56% per annum,
maturing  October 15, 2008, and is payable in monthly  installments of principal
(based upon 30-year  amortization)  and interest of approximately  $0.8 million.
The Company paid total fees of  approximately  $0.9 million in  connection  with
this loan.

There is a  significant  prepayment  penalty  if the  loan is paid  prior to the
maturity date. The loan is  nonrecourse  to the operating  partnerships  and the
Company,  except with respect to certain matters such as environmental liability
relating to the encumbered properties, the payment of taxes and assessments with
respect to the encumbered  properties,  the  responsibility  to return  security
deposits to the tenants of the encumbered properties,  insurance or condemnation
proceeds that are not properly applied under the terms of the loan, damages that
result from early  termination or amendment to specified major leases,  waste of
the  subject  properties,  bankruptcy  or  insolvency  of any  of the  operating
partnerships or the Company, and any fraud or  misrepresentations by the Company
or the operating partnerships in connection with the loan. In addition, portions
of the  loan  are  guaranteed  by  certain  limited  partners  in the  operating
partnerships.

The Wells Fargo Line expires in October  1999 and will need to be replaced.  The
Wells Fargo line of credit is currently  collateralized  by 14 properties and is
guaranteed by Mr. Berg and certain other members of the Berg Group.  The Company
is currently reviewing alternative credit facilities.  There can be no assurance
that the Company  will be able to obtain a line of credit with terms  similar to
the Wells Fargo line of credit.  The  Company's  cost of  borrowing  funds could
increase  substantially  after the Wells Fargo line of credit expires in October
1999.



                                     - 11 -
<PAGE>



The following table sets forth certain information regarding debt outstanding as
of March 31, 1999:
<TABLE>
<CAPTION>


                                                             MATURITY INTEREST
   DEBT DESCRIPTION                                        COLLATERAL PROPERTIES               BALANCE     DATE     RATE
------------------------------------------------- ------------------------------------------ ----------- -------- --------
                                                                                                ($ IN
                                                                                              THOUSANDS)
<S>                                               <C>                                        <C>         <C>      <C>    
LINE OF CREDIT:
Wells Fargo Bank, N.A.                             1810 McCandless Drive, Milpitas, CA        $ 18,523    10/99    (1)
                                                   1740 McCandless Drive, Milpitas, CA  
                                                   1680 McCandless Drive, Milpitas, CA  
                                                   1600 McCandless Drive, Milpitas, CA  
                                                   1500 McCandless Drive, Milpitas, CA 
                                                   1450 McCandless Drive, Milpitas, CA
                                                   1350 McCandless Drive, Milpitas, CA 
                                                   1325 McCandless Drive, Milpitas, CA  
                                                   1425 McCandless Drive, Milpitas, CA 
                                                   1526 McCandless Drive, Milpitas, CA
                                                   1575 McCandless Drive, Milpitas, CA 
                                                   1625 McCandless Drive, Milpitas, CA  
                                                   1745 McCandless Drive, Milpitas, CA 
                                                   1765 McCandless Drive, Milpitas, CA

MORTGAGE NOTES PAYABLE
 (RELATED PARTIES):
                                                   2033-2043 Samaritan Drive, San Jose, CA      24,080    12/99    (1)
                                                   2133 Samaritan Drive, San Jose, CA
                                                   2233-2243 Samaritan Drive, San Jose, CA

MORTGAGE NOTES PAYABLE:
Great West Life & Annuity Insurance Company        6320 San Ignacio Ave, San Jose, CA            7,697    2/04     7.0%
Great West Life & Annuity Insurance Company        6540 Via del Oro, San Jose, CA                3,672    5/04     7.0%
                                                   6385 San Ignacio Ave., San Jose, CA
Prudential Capital Group                           20400 Mariani, Cupertino, CA                  2,002    3/09     8.75%
New York Life Insurance Company                    10440 Bubb Road, Cupertino, CA                  424    8/09     9.625%
Home Savings & Loan Association                    10460 Bubb Road, Cupertino, CA                  513    1/07     9.5%
Amdahl Corporation                                 3120 Scott, Santa Clara, CA                   6,895    3/14     9.42%
Citicorp U.S.A. Inc.                               2800 Bayview  Drive, Fremont, CA              3,105    4/00     (2)
Mellon Mortgage Company                            3530 Bassett, Santa Clara, CA                 2,935    6/01     8.125%
Prudential Insurance Company of America            10300 Bubb, Cupertino, CA                   129,413    10/08    6.56%
                                                   10500 N. DeAnza, Cupertino, CA 
                                                   4050 Starboard, Fremont, CA 
                                                   45700 Northpoint Loop, Fremont, CA
                                                   45738 Northpoint Loop, Fremont, CA  
                                                   450-460 National, Mountain View, CA 
                                                   4949 Hellyer, San Jose, CA 
                                                   6311 San Ignacio, San Jose, CA 
                                                   6321 San Ignacio, San Jose, CA 
                                                   6325 San Ignacio, San Jose, CA 
                                                   6331 San Ignacio, San Jose, CA 
                                                   6341 San Ignacio, San Jose, CA
                                                   6351 San Ignacio, San Jose, CA 
                                                   3236 Scott, Santa Clara, CA 
                                                   3560 Bassett, Santa Clara, CA 
                                                   3570 Bassett, Santa Clara, CA 
                                                   3580 Bassett, Santa Clara, CA  
                                                   1135 Kern, Sunnyvale, CA  
                                                   1212 Bordeaux, Sunnyvale, CA 
                                                   1230 E. Arques, Sunnyvale, CA 
                                                   1250 E. Arques, Sunnyvale, CA 
                                                   1170 Morse, Sunnyvale, CA
                                                   3540 Bassett, Santa Clara, CA 
                                                   3542 Bassett, Santa Clara, CA  
                                                   3544 Bassett, Santa Clara, CA  
                                                   3550 Bassett, Santa Clara, CA
                                                                                             -----------
Mortgage Notes Payable Subtotal                                                                156,656
                                                                                             -----------
                       TOTAL                                                                  $199,259
                                                                                             ===========
</TABLE>


(1)  The lesser of (a) Wells Fargo prime rate in effect on the first day of each
     calendar  month;  (b) LIBOR plus 1.65%;  or (c) the Wells  Fargo  Purchased
     Funds Rate quoted on the first day of each calendar month plus 1.65%.  Rate
     in effect as of March 31,  1999 was 6.49%.  
(2)  One month  LIBOR plus 1.625% adjusted monthly.  Rate in effect at March 31,
     1999 was 6.46%.

                                     - 12 -
<PAGE>




As of  March  31,  1999,  Debt to Total  Market  Capitalization  ratio  which is
computed as the  Company's  total debt  outstanding  divided by the sum of total
debt  outstanding  plus the market value of the common stock on a fully  diluted
basis,  including  the  conversion  of all O.P.  Units  into  common  stock, was
approximately  29%  based  upon an  estimated  total  market  capitalization  of
approximately $691,449.

ACQUISITION OF PROPERTY 
----------------------- 
The Company has entered into the Pending  Projects  Acquisition  Agreement which
provides for the  acquisition  by the operating  partnerships  of  approximately
1,000,000  additional  rentable  square feet upon the  completion and leasing of
five  pending  development  projects owned by certain members of the Berg Group.
The owners of the  pending  development  projects  may obtain  cash or, at their
option,  O.P.  Units. A total of 33,919,072 O.P. Units may be issued in exchange
for the pending  development  projects.  As of March 31,  1999,  the Company has
completed two acquisitions under this agreement. 

The Company also has the option to acquire,  through the operating partnerships,
any future R&D property  developments on approximately  154 net acres of Silicon
Valley  Land owned by certain  members of the Berg Group  under the terms of the
Berg Land  Holdings  Option  Agreement.  The Company would acquire such projects
upon their  completion  and  leasing.  The  owners of the  future  R&D  property
developments  may obtain cash or, at their  option,  O.P.  Units.  To date,  the
Company  has  completed  one   acquisition   under  this  agreement   comprising
approximately 110,000 rentable square feet on 9 acres.

THE MICROSOFT PROJECT  ACQUISITION
----------------------------------
Effective April 1, 1999, the Company  acquired an  approximately  515,700 square
foot  five-building  R&D complex  located on L'Avenida  Avenue in Mountain View,
California,  which has been fully leased to Microsoft Corporation  ("Microsoft")
under the terms of the Company's Pending Projects Acquisition Agreement with the
Berg Group members and other owners of projects  subject to the  agreement.  The
total  acquisition  cost for  financial  accounting  and  reporting  purposes is
$156,107.

Under the terms of the Pending  Projects  Acquisition  Agreement,  the L'Avenida
project had an acquisition value of $116,487,  which was to be funded with cash,
assumption of liabilities, and/or O.P. Units (at a value of $4.50 per unit which
was the market value at the time the Company  entered into the Pending  Projects
Acquisition  Agreement).  The  acquisition  value of  $116,487  was funded by a)
assumption  by  the  Company  of  $25,000  of  mortgage  debt  due  Berg  & Berg
Enterprises,  Inc.;  b)  assumption  of the  sellers'  obligation  to  reimburse
Microsoft for shell and tenant  improvements  of $32,057 and; c) the issuance of
13,206,629 O.P. Units, including 12,467,058 O.P. Units issued to various members
of the Berg Group,  based upon a value of $4.50 per unit,  or $59,430.  However,
under generally accepted accounting  principles (GAAP), the O.P. Units issued in
connection with this acquisition were valued based upon the closing price of the
Company's common stock on April 30, 1999 (the date the acquisition  closed),  or
$7.50 per share as  reported  on the AMEX,  resulting  in a  valuation  for GAAP
purposes of $156,107.

The debt owed to Berg & Berg Enterprises, Inc. carries a variable interest rate,
which was 6.49%  annually  at March 31,  1999 and is  payable in full on demand.
Interest  accrues on the amount owed by the Company to  Microsoft at a 7% annual
rate from April 1, 1999. The Company  expects to pay this  obligation in full by
August 31,  1999.The  Company  will use  proceeds  from the Wells  Fargo line of
credit to repay this  additional  debt as it comes due,  unless it first obtains
proceeds from the sale of equity securities or other credit facilities.

In accordance  with the terms of the lease,  on April 1, 1999,  Microsoft  began
paying monthly base rent of  approximately  $1,226 for the first four buildings,
which consist of  approximately  415,700  rentable square feet. On June 1, 1999,
Microsoft  begins  paying  monthly  rent of  approximately  $295  for the  fifth
building,   which  consists  of  approximately  100,000  rentable  square  feet.
Microsoft  controls  the  construction  of this  facility,  which  is  currently
scheduled  to be  completed  and ready for  occupancy  during the second half of
1999.  Microsoft has signed a seven-year  lease that provides for a first year's
rent of $2.95  per  square  foot per month  with  approximately  4% annual  rent
increases.

The following table presents certain  information  concerning projects for which
the Company, through its interests in the operating partnerships,  has the right
to acquire  under the Pending  Projects  Acquisition  Agreement or the Berg Land
Holdings  Option  Agreement.  The table  includes only those  projects for which
construction  has  commenced.   Excluding  the  Fontanosa  and   Branham/Hellyer
projects,  there are still 116 acres of land which is to be developed  under the
Berg Land Holdings Agreement.

<TABLE>
<CAPTION>


                                  APPROXIMATE      
                                    RENTABLE                           TOTAL
PROPERTY                             AREA          ANTICIPATED       ESTIMATED
                                   (SQUARE         ACQUISITION      ACQUISITION
                                     FEET)            DATE           VALUE (1)
---------------------------------------------------------------------------------
PENDING PROJECTS                                                   (dollars in
                                                                    thousands)
<S>                             <C>              <C>             <C>        
Richard Avenue                      58,740          July 1999          3,745
Automation (1 building)             80,640           May 1999          9,677
Automation (2 buildings)           141,696        September 1999      15,789
Automation (1 building)            114,028         April 2000         12,706
                                 ---------                        ----------
              SUBTOTAL             395,104                          $ 41,917


BERG LAND HOLDINGS
Fontanosa                           77,000         August 1999       $ 7,226
Hellyer/Branham                    311,000        February 2000       25,000
                                 ---------                        ----------
              SUBTOTAL             388,000                          $ 32,226


TOTAL                              783,104                          $ 74,143
                                 =========                        ==========
</TABLE>


     (1) The Estimated  Acquisition  Value  which  represents  the economics for
     acquiring  the pending  projects  under the terms of the  Pending  Projects
     Acquisition  Agreement,  will  differ from the actual  acquisition  cost as
     determined under GAAP.

     For example,  the estimated  acquisition  value of the 515,700  square foot
     Microsoft  project  located on L'Avenida was $116,487.  The estimated value
     was the sum of a) assumed mortgage debt of $25,000;  b) assumed  obligation
     to reimburse Microsoft for shell and tenant improvements of $32,057 and; c)
     the issuance of 13,206,629  O.P.  Units,  including  12,467,058  O.P. Units
     issued to various  members of the Berg  Group,  based upon a value of $4.50
     per  unit,  or  $59,430.  Under  GAAP  however,  the O.P.  Units  issued in
     connection with this  acquisition  were valued based upon the closing price
     of the Company's  common stock on April 30, 1999 (the date the  acquisition
     closed),  or $7.50 per share as reported on the AMEX,  resulting in a value
     for GAAP purposes of $156,107.

                                     - 13 -
<PAGE>

The time required to complete the leasing of developments varies from project to
project. Generally, the Company will not acquire any of the above projects until
they  are  fully  completed  and  leased.  There  can be no  assurance  that the
acquisition  date and final  cost to the  Company  as  indicated  above  will be
realized

Although we expect to acquire the new properties available to us under the terms
of the Pending Projects Acquisition  Agreement and the Berg Land Holdings Option
Agreement, there can be no assurance that we actually will consummate any of the
intended transactions,  including all of those discussed above. Furthermore,  we
have not yet determined the means by which we would acquire and pay for any such
properties or the impact of any of the acquisitions on our business,  results of
operations, financial condition, Funds from Operations ("FFO") or available cash
for distribution.

HISTORICAL CASH FLOWS

Net cash provided by operating  activities  for the three months ended March 31,
1999 was $9,346  compared to net cash used in operating  activities  of $405 for
the same  period  in 1998.  The  change  was a direct  result  of the  Company's
acquisition of its general partnership  interests in the operating  partnerships
during the third quarter of 1998.

Net cash used in  investing  activities  was $107 and zero for the three  months
ended March 31, 1999 and 1998,  respectively.  Cash used in investing activities
during the quarter ended March 31, 1999 related solely to  improvements  made to
existing real estate assets acquired as part of the Company's  investment in the
operating partnerships.

Net cash used in  financing  activities  was $9,351 for the three  months  ended
March 31, 1999  compared to $11 for the same period in 1998.  During the quarter
ended March 31, 1999,  the Company  reduced debt  outstanding  by utilizing cash
generated from operating activities.

CAPITAL EXPENDITURES

The  properties  require  periodic  investments  of capital  for  tenant-related
capital expenditures and for general capital  improvements.  For the years ended
December 31, 1994 through  December 31, 1998, the recurring  tenant  improvement
costs and  leasing  commissions  incurred  with  respect to new leases and lease
renewals of the properties previously owned or controlled by members of the Berg
Group averaged  approximately $1.5 million annually.  We will have approximately
865,000  rentable square feet under expiring leases from January 1, 1999 through
December 31, 2000.  We expect that the average  annual cost of recurring  tenant
improvements  and  leasing  commissions,  related  to the  properties,  will  be
approximately  $1.5  million.  We believe we will recover  substantially  all of
these sums from the tenants under the new or renewed leases through increases in
rental rates.  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  long-term  secured and  unsecured
indebtedness and the issuance of additional equity securities by the Company.

FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR DISTRIBUTION

As  defined  by the  National  Association  of  Real  Estate  Investment  Trusts
("NAREIT"),  FFO represents net income (loss) before  minority  interest of unit
holders  (computed in accordance  with GAAP),  excluding  gains (or losses) from
debt restructuring and sales of property,  plus real estate related depreciation
and  amortization  (excluding  amortization  of  deferred  financing  costs  and
depreciation of non-real estate assets) and after adjustments for unconsolidated
partnerships and joint ventures. Management considers FFO an appropriate measure
of performance  of an equity REIT because,  along with cash flows from operating
activities, financing activities and investing activities, it provides investors
with an  understanding  of the Company's  ability to incur and service debt, and
make capital  expenditures.  FFO should not be considered as an alternative  for
net  income as a measure of  profitability  nor is it  comparable  to cash flows
provided by operating activities  determined in accordance with GAAP. FFO is not
comparable  to  similarly  entitled  items  reported  by other REITs that do not
define them exactly as the Company defines FFO.
<TABLE>
<CAPTION>

                                      For the Three
                                      Months Ended
                                      March 31, 1999
                                     ----------------
<S>                                     <C>   
     FFO:
     Net income/(loss)                    $   881 
        Add back: 
          Minority Interest                 6,724
          Real estate depreciation          2,703
                                         ---------
     Total FFO                            $10,308
                                         =========
</TABLE>
The Company intends to pay distributions to stockholders  based upon total Funds
Available   for   Distribution   ("FAD"),   which  is  calculated  as  FFO  less
straight-line  rents,  leasing  commissions paid and capital  expenditures  made
during the respective period. The calculation of FAD is as follows:

     FFO:                                 $10,308
        Less:                         
          Straight-line rents                (753)
          Leasing commissions                 (78)
          Capital expenditures               (108)
                                         ---------
     FAD                                  $ 9,369
                                         =========

On April 8, 1999, the Company  declared a $0.12 per share dividend on its common
stock payable on April 30, 1999 to all common stockholders of record as of April
15, 1999.

The Company intends to make regular  quarterly  distributions  to holders of its
common stock based upon its cash available for distribution. The Company expects
that  it  will  declare   quarterly   distributions   during  1999   aggregating
approximately $.50 per share of its common stock.

                                     - 14 -
<PAGE>

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The Company does not believe that  recently  issued  accounting  standards  will
materially impact the Company's financial statements.

YEAR 2000

Forward  Looking  Information.  The statements in the following  section include
Year 2000 readiness  disclosure  within the meaning of the Year 2000 Information
and Readiness  Disclosure Act. The Company intends such statements to be covered
by the safe harbor provisions for  forward-looking  statements  contained in the
Private  Securities  Reform Act of 1995,  and is including  this  statement  for
purposes of complying with these safe harbor  provisions.  See "FORWARD  LOOKING
INFORMATION".  

INTRODUCTION

The term "Year 2000 issue" is a general term used to describe  various  problems
that may result from the improper  processing by computer systems of dates after
1999. These problems could result in a system failure or miscalculations causing
disruptions of operations.

The Company's  efforts to address its Year 2000 issues  consist of reviewing the
Company's computer information  systems,  evaluating other computer systems that
do not relate to the Company's internal information systems but include embedded
technology at its  properties,  such as security,  heating,  ventilation and air
conditioning,  elevator, fire and safety systems, and communicating with certain
significant third-party service providers to determine whether there will be any
interruption in their systems that could affect the Company.

THE COMPANY'S STATE OF READINESS

INFORMATION  TECHNOLOGY  SYSTEMS.  The  Company  has  reviewed  its  information
technology  systems and has contacted  vendors to determine whether such systems
are Year 2000  compliant.  Based upon the Company's  inquiries,  the Company has
determined that its primary network operating system, Windows NT Server 4.0, and
all of its desktop  personal  computers are Year 2000 compliant.  The vendor for
the  Company's  property  management  and  accounting  software  has advised the
Company  that it will  provide a Year 2000  compliant  software  upgrade  to the
Company during third quarter 1999.

EMBEDDED SYSTEMS.  The Company believes that in most cases under the lease terms
it is the  tenant's  sole  responsibility  to ensure that the  embedded  systems
(e.g., security,  heating,  ventilation and air conditioning,  fire and elevator
systems)  are Year 2000  compliant.  The Company has made  limited  inquiries to
various  vendors  concerning  embedded  systems used on some of its  properties.
Based upon responses to its  inquiries,  the Company is not aware of any systems
that are not Year 2000 compliant.

THIRD PARTY  RELATIONSHIPS.  The Company  plans to contact third  parties,  like
utility  companies,  financial  institutions and its transfer agent that provide
important services to the Company and will ascertain whether those third parties
are  aware of Year  2000  issues  that  would  adversely  impact  the  Company's
operations.  At this time,  the  Company  does not intend to contact  all of its
third party service providers, however.

                                     - 15 -
<PAGE>

COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES

The Company has not budgeted any amount to address Year 2000 issues. Because the
Company's Year 2000  assessment is ongoing and additional  funds may be required
as a result of future findings, the Company may need to add accrual amounts as a
result of  unanticipated  delays or  preparedness  issues.  While the  Company's
efforts to  address  its Year 2000  issues may  involve  additional  costs,  the
Company believes, based on available information, that these costs will not have
a material  adverse  effect on its business,  financial  condition or results of
operations.  Although  the  Company has  concluded  that many of its tenants are
responsible for certain Year 2000 compliance costs,  there is a possibility that
certain tenants will not agree with such conclusions.

RISKS PRESENTED BY YEAR 2000 ISSUES AND THE COMPANY'S CONTINGENCY PLAN

At this time,  the Company has not identified  any specific  business  functions
that are likely to suffer material  disruption as a result of Year  2000-related
events. Due to the unique and pervasive nature of the Year 2000 issue, it is not
possible  to  anticipate   each  of  the  wide  variety  of  Year  2000  events,
particularly  outside of the Company,  that might arise in a worst case scenario
which might have a material adverse impact on the Company's business,  financial
condition  and results of  operations.  A reasonably  likely worst case scenario
might be the  failure  of an  energy  management  system in a  building.  Such a
failure  could  adversely  affect the  environmental  conditions of the occupied
space,  thus  creating  discomfort  and  inconvenience  to the tenants until the
condition  could be manually  corrected.  Persistence of this problem for a long
period of time could result in an increase in  operating  costs for the building
until the energy management system is restored to proper operations.

The Company  utilizes  computer  software for its  corporate  and real  property
accounting records and to prepare its financial  statements.  If necessary,  the
Company could prepare all required accounting entries manually without incurring
material additional operating expenses.

Conceivably,  tenants of the properties  could  experience  delays in processing
their accounting  records and making required lease payments,  if they encounter
Year 2000 compliance problems. The Company does not believe that any such delays
would have a material adverse effect on the Company.

Although  the  Company  believes  that  the   expectations   reflected  in  such
forward-looking  statements are based on reasonable  assumptions,  the Company's
actual  costs,  progress and  expenses  with respect to its plan to address Year
2000 issues could differ materially from those set forth in the  forward-looking
statements.  Factors which could have a material adverse effect on the Company's
results and progress include, but are not limited to, changes in the expenses of
or delays in: the  identification  and upgrade or  replacement by the Company of
computer  systems  that do not  relate to  information  technology  but  include
embedded technology;  and the Year 2000 compliance of vendors (including vendors
of the Company's computer  information systems) or third-party service providers
(including the Company's primary bank). These risks and uncertainties  should be
considered in evaluating  forward-looking  statements and undue reliance  should
not be placed on such statements.

FORWARD LOOKING INFORMATION

This quarterly report contains forward-looking  statements within the meaning of
the federal securities laws. The Company intends 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 is 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.  The Company's ability to predict
results  or the  actual  effect  of future  plans or  strategies  is  inherently
uncertain.  Factors which could have a material adverse effect on the operations
and future prospects of the Company include, but are not limited to, changes in:
economic  conditions   generally  and  the  real  estate  market   specifically,
legislative or regulatory provisions affecting the Company (including changes to
laws governing the taxation of REITs),  availability of capital, interest rates,
competition,  supply of and demand for office and  industrial  properties in the
Company's current and proposed market areas, and general accounting  principles,
policies and guidelines  applicable to REITs. In addition,  the acquisition cost
of projects acquired from the Berg Group under the Pending Projects  Acquisition
Agreement  will vary based upon the number of O.P.  Units issued in exchange for
the property and the price of common stock, which is issuable upon conversion of
O.P. Units under certain  circumstances,  at the time of the acquisition.  These
risks and  uncertainties,  together with the other risks  described from time to
time in the  Company's  reports  and  documents  filed with the  Securities  and
Exchange  Commission,   should  be  considered  in  evaluating   forward-looking
statements and undue reliance should not be placed on such statements.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

No material  changes have occurred  since our Annual Report on Form 10-K for the
year ended December 31, 1998.

                                     - 16 -
<PAGE>



===============================================================================
Part II - Other Information

ITEM 2
CHANGES IN SECURITIES AND USE OF PROCEEDS

The  information  provided in Part I,  "Management's  Discussion and Analysis of
Financial  Condition  and Results of Operations - Overview" is  incorporated  by
reference in response to this item.

ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K

      a.  EXHIBITS

          27.1 Financial Data Schedule.

      b.  REPORTS ON FORM 8-K

          During the quarter ended March 31, 1999, the Company filed a report on
          Form 8-K on January 4, 1999 to report the December  28, 1998  approval
          and ratification by stockholders of transactions  with the Berg Group,
          private   placements   to   accredited   investors,    the   Company's
          reincorporation  in  Delaware,  and  the  Company's  execution  of the
          Pending Projects Acquisition Agreement,  the Berg Land Holdings Option
          Agreement and the Exchange Rights Agreement.

          During the quarter  ended  March 31,  1999,  the Company  also filed a
          report on FOrm 8-K 12G3 to report that Mission West Properties  Inc.,
          a  Maryland   corporation,   became  the  successor  to  Mission  West
          Properties, a California corporation, on December 30, 1998.


                                     - 17 -
<PAGE>


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 17, 1999               By: /s/ Marianne K. Aguiar
                                     ---------------------------
                                    Marianne K. Aguiar
                                    Vice President of Finance and Controller
                                    (Principal Accounting Officer)



                                     - 18 -