UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   -----------

                                    Form 10-Q


[X]  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES  E
     XCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2009

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934

                  For the transition period from _____ to _____

                          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 No.)
  incorporation or organization)

          10050 Bandley Drive
         Cupertino, California                            95014
(Address of principal executive offices)                (Zip Code)

                                 (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. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files). [ ] Yes [ ] No

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
the definitions of "large accelerated  filer,"  "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
<TABLE>
<CAPTION>


<S>                           <C>                      <C>                           <C>
Large accelerated filer [ ]    Accelerated filer [X]    Non-accelerated filer [ ]     Smaller reporting company [ ]
                                                        (Do not check if a smaller
                                                        reporting company)
</TABLE>

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] 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.

As of August 7, 2009, there were 21,770,211 shares of common stock  outstanding,
par value $.001 per share.



<PAGE>



                          Mission West Properties, Inc.

                                    FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 2009


                                      INDEX
<TABLE>
<CAPTION>

                                                                                                                     PAGE
PART I        FINANCIAL INFORMATION                                                                                  ----

   Item 1.    Condensed Consolidated Financial Statements:

<S>          <C>                                                                                                    <C>
              Condensed Consolidated Balance Sheets as of June 30, 2009 (unaudited)
              and December 31, 2008...................................................................................2

              Condensed Consolidated Statements of Operations for the three
              and six months ended June 30, 2009 and 2008 (unaudited).................................................3

              Condensed Consolidated Statements of Cash Flows for the
              six months ended June 30, 2009 and 2008 (unaudited).....................................................4

              Notes to Condensed Consolidated Financial Statements (unaudited)........................................5

   Item 2.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations....................................................................13

   Item 3.    Quantitative and Qualitative Disclosures about Market Risk.............................................23

   Item 4.    Controls and Procedures................................................................................24


PART II       OTHER INFORMATION

   Item 1.    Legal Proceedings......................................................................................25

   Item 1A.   Risk Factors...........................................................................................25

   Item 4.    Submission of Matters to a Vote of Security Voters.....................................................25

   Item 6.    Exhibits...............................................................................................25

   SIGNATURES........................................................................................................26
</TABLE>

   EXHIBITS

          Exhibit 10.56   -  Heritage  Bank of  Commerce  Revolving  Credit Loan
                             Agreement
          Exhibit 10.56.1 -  Heritage  Bank of  Commerce  Revolving Credit  Loan
                             Change in Terms Agreement, dated April 17, 2008
          Exhibit 10.56.2 -  Heritage Bank of  Commerce  Revolving  Credit  Loan
                             Change in Terms Agreement, dated June 5, 2009
          Exhibit 10.57   -  M&M  Real  Estate  Control  &  Restructuring,   LLC
                             Promissory  Note,  dated April 14, 2009
          Exhibit 10.58   -  M&M  Real  Estate  Control  &  Restructuring,   LLC
                             Promissory Note, dated April 21, 2009
          Exhibit 10.59   -  M&M  Real  Estate  Control  &  Restructuring,   LLC
                             Promissory Note, dated July 1, 2009
          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.
                             ss. 1350,  as Adopted  Pursuant  to ss. 906  of the
                             Sarbanes-Oxley Act of 2002

                                     - 1 -
<PAGE>

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)
                                    ---------
<TABLE>
<CAPTION>
                                                                                    June 30, 2009          December 31, 2008
                                                                                 ---------------------   ----------------------
                                                                                     (unaudited)
                                     ASSETS
Investments in real estate:
<S>                                                                                  <C>                     <C>
    Land                                                                              $  320,911              $  320,911
    Buildings and improvements                                                           799,471                 799,471
    Real estate related intangible assets                                                  3,240                   3,240
                                                                                 ---------------------   ----------------------
       Total investments in properties                                                 1,123,622               1,123,622
    Accumulated depreciation and amortization                                           (192,322)               (180,043)
                                                                                 ---------------------   ----------------------
       Net investments in properties                                                     931,300                 943,579
    Investment in unconsolidated joint venture                                             3,833                   3,768
                                                                                 ---------------------   ----------------------
       Net investments in real estate                                                    935,133                 947,347
Restricted cash                                                                            7,078                  39,478
Restricted investment in marketable securities                                             6,585                       -
Investment in marketable securities                                                            -                   3,368
Deferred rent receivables                                                                 18,401                  17,841
Other assets, net                                                                         26,241                  26,251
                                                                                 ---------------------   ----------------------
       Total assets                                                                   $  993,438              $1,034,285
                                                                                 =====================   ======================

                             LIABILITIES AND EQUITY
Liabilities:
    Mortgage notes payable                                                            $  324,941              $  330,908
    Mortgage note payable (related parties)                                                8,516                   8,761
    Revolving line of credit                                                               3,892                  13,079
    Interest payable                                                                       1,556                   1,596
    Security deposits                                                                      5,125                   5,272
    Deferred rental income                                                                 6,372                   3,964
    Dividends and distributions payable                                                   15,791                  21,055
    Accounts payable and accrued expenses                                                 19,631                  17,747
                                                                                 ---------------------   ----------------------
       Total liabilities                                                                 385,824                 402,382
                                                                                 ---------------------   ----------------------

Commitments and contingencies (Note 9)

Equity:
 Stockholders' 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,
       21,770,211 and 19,748,211 shares issued and outstanding
       at June 30, 2009 and December 31, 2008                                                 22                      20
   Additional paid-in capital                                                            169,682                 154,412
   Distributions in excess of accumulated earnings                                       (24,413)                (20,014)
                                                                                 ---------------------   ----------------------
      Total stockholders' equity                                                         145,291                 134,418
 Noncontrolling interests                                                                462,323                 497,485
                                                                                 ---------------------   ----------------------
        Total equity                                                                     607,614                 631,903
                                                                                 ---------------------   ----------------------
        Total liabilities and equity                                                  $  993,438              $1,034,285
                                                                                 =====================   ======================
</TABLE>

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

                                     - 2 -
<PAGE>



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

                                                               Three months ended June 30,            Six months ended June 30,
                                                           ----------------------------------- -----------------------------------
                                                                 2009              2008               2009              2008
                                                           ---------------- ------------------ ----------------- -----------------
Operating revenues:
<S>                                                          <C>                <C>                <C>               <C>
   Rental revenue from real estate                             $20,424            $19,359            $41,080           $38,356
   Tenant reimbursements                                         4,315              3,710              9,115             7,293
   Lease termination income                                          -                  -                  -             1,921
   Other income                                                    302                249                622               477
                                                           ---------------- ------------------ ----------------- -----------------
        Total operating revenues                                25,041             23,318             50,817            48,047
                                                           ---------------- ------------------ ----------------- -----------------
Operating expenses:
   Property operating, maintenance and real estate taxes         7,272              5,511             13,223            10,398
   General and administrative                                      623                674              1,154             1,347
   Depreciation and amortization of real estate                  6,334              5,682             12,279            11,305
                                                           ---------------- ------------------ ----------------- -----------------
        Total operating expenses                                14,229             11,867             26,656            23,050
                                                           ---------------- ------------------ ----------------- -----------------
        Operating income                                        10,812             11,451             24,161            24,997

Other income (expenses):
   Equity in earnings of unconsolidated joint venture               75                407                164               789
   Interest and dividend income                                  1,125                215              1,065               772
   Unrealized gain (loss) from investment                        2,433                  -               (324)                -
   Interest expense                                             (7,085)            (4,956)           (11,891)           (9,884)
   Interest expense - related parties                             (171)              (280)              (352)             (716)
                                                           ---------------- ------------------ ----------------- -----------------
        Net income                                               7,189              6,837             12,823            15,958

Net income attributable to noncontrolling interests             (5,404)            (5,478)            (9,607)          (12,717)
                                                           ---------------- ------------------ ----------------- -----------------
Net income attributable to common stockholders                  $1,785             $1,359             $3,216            $3,241
                                                           ================ ================== ================= =================

Net income per common share to common stockholders:
   Basic                                                         $0.08              $0.07              $0.15             $0.16
                                                           ================ ================== ================= =================
   Diluted                                                       $0.08              $0.07              $0.15             $0.16
                                                           ================ ================== ================= =================
Weighted average shares of common stock outstanding (basic)   21,766,343         19,695,988         21,691,029        19,681,797
                                                           ================ ================== ================= =================
Weighted average shares of common stock outstanding (diluted) 21,899,906         19,902,304         21,835,545        19,766,535
                                                           ================ ================== ================= =================
</TABLE>

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

                                     - 3 -
<PAGE>

                          MISSION WEST PROPERTIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)
                                   (unaudited)
                                    ---------
<TABLE>
<CAPTION>
                                                                                                   Six months ended June 30,
                                                                                             ---------------------------------------
                                                                                                    2009                2008
                                                                                             ------------------- -------------------
Cash flows from operating activities:
<S>                                                                                                <C>                 <C>
     Net income                                                                                     $12,823             $15,958
     Adjustments to reconcile net income to net cash provided by operating activities:
            Depreciation and amortization of real estate and in-place leases                         12,279              11,305
            Unrealized loss from restricted investment in marketable securities                         324                   -
            Dividend income from restricted investment in marketable securities                        (577)                  -
            Equity in earnings of unconsolidated joint venture                                         (164)               (789)
            Distributions from unconsolidated joint venture                                             100                 900
            Interest earned on restricted cash                                                          (74)               (633)
            Lease termination fee related to restricted cash                                         10,864               4,830
            Stock-based compensation expense                                                            134                 242
            Other                                                                                         -                  66
     Changes in operating assets and liabilities:
            Deferred rent receivables                                                                  (560)             (1,587)
            Other assets                                                                                 10                (588)
            Interest payable                                                                            (40)                 29
            Security deposits                                                                          (147)                223
            Deferred rental income                                                                    2,408               2,081
            Accounts payable and accrued expenses                                                     1,884                 556
                                                                                             ------------------- -------------------
     Net cash provided by operating activities                                                       39,264              32,593
                                                                                             ------------------- -------------------

Cash flows from investing activities:
     Improvements to real estate assets                                                                   -              (2,337)
     Purchase of real estate                                                                              -             (35,764)
     Restricted cash released for purchase of real estate                                                 -               8,082
     Excess restricted cash                                                                               -               7,654
     Proceeds from investment in marketable securities                                                3,646                   -
                                                                                             ------------------- -------------------
     Net cash provided by (used in) investing activities                                              3,646             (22,365)
                                                                                             ------------------- -------------------

Cash flows from financing activities:
    Principal payments on mortgage notes payable                                                     (5,967)             (5,519)
    Principal payments on mortgage note payable (related parties)                                      (245)               (227)
    Proceeds from real estate purchase financing (related parties)                                        -              19,423
    Payments on real estate purchase financing (related parties)                                          -             (17,500)
    Proceeds from note payable (related parties)                                                     23,141               3,000
    Payments on note payable (related parties)                                                      (23,141)             (3,000)
    Proceeds from note payable                                                                       15,000                   -
    Net (repayments) borrowings on revolving line of credit                                          (9,187)              8,244
    Debt issuance costs                                                                                   -                 (26)
    Net proceeds from exercise of stock options                                                           -                 735
    Distributions paid to noncontrolling interests                                                  (34,212)            (31,200)
    Dividends paid to common stockholders                                                            (8,299)             (7,080)
                                                                                             ------------------- -------------------
     Net cash used in financing activities                                                          (42,910)            (33,150)
                                                                                             ------------------- -------------------
     Net decrease in cash and cash equivalents                                                            -             (22,922)
Cash and cash equivalents, beginning of period                                                            -              23,691
                                                                                             ------------------- -------------------
Cash and cash equivalents, end of period                                                            $     -             $   769
                                                                                             =================== ===================
Supplemental information:
    Cash paid for interest                                                                          $ 9,809             $10,572
                                                                                             =================== ===================
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                                          $15,138             $    54
                                                                                             =================== ===================
</TABLE>

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

                                     - 4 -
<PAGE>


                          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 June 30, 2009,  the Company owned a controlling  general  partnership
     interest of 23.95%,  21.85%,  16.31% and 12.52% 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 a 20.60%
     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 and six months
     ended June 30, 2009 and 2008.

     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 BASIS OF 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 June 30, 2009,  their  consolidated
     results of operations  for the three and six months ended June 30, 2009 and
     2008, and their cash flows for the six months ended June 30, 2009 and 2008.
     All   significant   inter-company   balances   have  been   eliminated   in
     consolidation.  The condensed  consolidated financial statements as of June
     30, 2009 and for the three and six months  ended June 30, 2009 and 2008 and
     related footnote  disclosures are unaudited.  The results of operations for
     the three and six months ended June 30, 2009 are not necessarily indicative
     of the results to be expected for the entire year.

     The December 31, 2008 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 ("GAAP").

     The Company evaluates all joint venture arrangements for consolidation. The
     percentage interest in the joint venture, evaluation of control and whether
     a variable interest entity ("VIE") exists are all considered in determining
     if the  arrangement  qualifies for  consolidation  in accordance  with FASB
     Interpretation No. 46R, "Consolidation of Variable Interest Entities" ("FIN
     46R").  As of  June  30,  2009,  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 3 for further  discussion  of this
     transaction.

     The Company has  evaluated  events  subsequent to June 30, 2009 through the
     time of the filing of this Form 10Q.

                                     - 5 -

<PAGE>


                          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
     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 June 30, 2009, the Company had one
     stock-based compensation plan.

     In the second quarter of 2009, options to purchase 375,000 shares of common
     stock held by an employee of the Company lapsed without exercise.

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

<TABLE>
<CAPTION>
                                                                  Weighted Average
                                                  Options           Option Price
                                                Outstanding           Per Share
                                               ---------------   ------------------
<S>                                              <C>                   <C>
          Balance, December 31, 2008              3,332,500             $9.62
              Options granted                       500,000             $5.99
              Options forfeited                    (375,000)           $11.33
              Options canceled                     (200,000)            $9.51
                                               ---------------
          Balance, June 30, 2009                  3,257,500             $8.87
                                               ===============
</TABLE>

     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 $109 and $96 of expense
     for the  three  months  ended  June 30,  2009 and 2008,  respectively,  and
     approximately  $134  and  $242  of  expense  for  share-based  compensation
     relating to grants of stock  options for the six months ended June 30, 2009
     and 2008, respectively.

     As of June 30, 2009,  the total amount of  unrecognized  compensation  cost
     related to unvested share-based compensation arrangements granted under the
     compensation  plan was  approximately  $416.  This cost is  expected  to be
     recognized over a weighted-average period of 2.18 years.

     NONCONTROLLING INTERESTS
     The Company adopted the provisions of SFAS 160,  "Noncontrolling  Interests
     in Consolidated  Financial  Statements - an amendment of ARB No. 51" ("SFAS
     160"),  effective January 1, 2009. SFAS 160 clarifies that a noncontrolling
     interest in a subsidiary is an ownership interest in a consolidated entity,
     which should be reported as equity in the parent's  consolidated  financial
     statements.  SFAS 160 requires disclosure,  on the face of the consolidated
     income  statement,  of those amounts of  consolidated  net income and other
     comprehensive  other income  attributable to controlling and noncontrolling
     interests,  eliminating  the past  practice of reporting  amounts of income
     attributable  to  noncontrolling  interest as an  adjustment in arriving at
     consolidated net income.

     In connection with the adoption of SFAS 160, the Company  reclassified into
     the Company's condensed consolidated equity the historical balances related
     to noncontrolling interests in the consolidated operating partnerships.  At
     December 31, 2008, the carrying amount of  noncontrolling  interests in the
     consolidated operating partnerships was approximately $497,485.

     The following table presents a reconciliation  of the December 31, 2008 and
     June 30,  2009,  carrying  amounts  for equity and the  related  amounts of
     equity attributable to stockholders' equity and noncontrolling interests:

<TABLE>
<CAPTION>
                                                                                       Equity
                                                   --------------------------------------------------------------------------------
                                                               Additional     Distributions in
                                                     Common      Paid-in         Excess of           Noncontrolling
                                                     Stock       Capital    Accumulated Earnings       Interests          Total
                                                   ---------- ------------- --------------------- -------------------- ------------
                                                                                 (dollars in thousands)
<S>                                                  <C>       <C>               <C>                    <C>               <C>
    Balance, December 31, 2008                        $20       $154,412          ($20,014)              $497,485          $631,903
    Net income                                          -              -             3,216                  9,607            12,823
    Amortization of previously granted share awards     -            134                 -                      -               134
    Conversions of operating partnership units          2         15,136                 -                (15,138)                -
    Cash dividends/distributions                        -              -            (7,615)               (29,631)          (37,246)
                                                   ---------- ------------- --------------------- -------------------- ------------
    Balance, June 30, 2009                            $22       $169,682          ($24,413)              $462,323          $607,614
                                                   ========== ============= ===================== ==================== ============
</TABLE>

     Noncontrolling  interests represent the aggregate  partnership  interest in
     the operating partnership held by the operating partnership limited partner
     unit holders. Income allocated to noncontrolling  interests is based on the
     unit holders' ownership percentage of the operating partnership. Because an
     O.P.  unit is generally  redeemable  for cash or a share of common stock at
     the  option of the

                                     - 6 -
<PAGE>
                          MISSION WEST PROPERTIES, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
         (dollars in thousands, except per share and per square footage)
                                   (unaudited)

     Company,  it is  deemed  to be  equivalent  to a  share  of  common  stock.
     Therefore, such transactions are treated as capital transactions and result
     in an allocation between stockholders' equity and noncontrolling  interests
     in the accompanying  condensed  balance sheets to account for the change in
     the ownership of the underlying equity in the operating  partnerships.  The
     Company's noncontrolling 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
     June 30, 2009,  these interests  accounted for  approximately  79.3% of the
     ownership  interests  in the real  estate  operations  of the  Company on a
     consolidated weighted average basis. The amount of noncontrolling 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 noncontrolling interests' ownership percentage.

     Allocation  of  corporate  general  and  administrative   expenses  to  the
     operating  partnerships  is  performed  based  upon  shares and O. P. 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 2008
     condensed consolidated financial statements in order to conform to the 2009
     presentation.  The  reclassifications  were to  reflect  the  retrospective
     adoption   of  SFAS  160.   The   reclassification   resulted  in  (i)  the
     reclassification  of the Company's  minority  interests in the consolidated
     operating partnerships to "noncontrolling interests," a component of equity
     on the  Company's  condensed  consolidated  balance  sheets,  and  (ii) the
     reclassification  of  minority  interests  to "net income  attributable  to
     noncontrolling   interests"   on  the  Company's   condensed   consolidated
     statements of operations. The reclassifications had no impact on previously
     reported net income  attributable to common  stockholders or net income per
     common share to common stockholders.

     The following notes,  which present interim  disclosures as required by the
     SEC, highlight  significant  changes to the notes to the Company's December
     31,  2008  audited  consolidated  financial  statements  and should be read
     together  with the  consolidated  financial  statements  and notes  thereto
     included in the  Company's  2008 Annual  Report on Form 10-K filed on March
     16, 2009.

     ACCOUNTING PRONOUNCEMENTS
     SFAS 157,  "Fair Value  Measurements"  ("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
     establishes   and  requires   disclosure  of  fair  value   hierarchy  that
     distinguishes  between  data  obtained  from  sources  independent  of  the
     reporting  entity and the reporting  entity's own assumptions  about market
     participant assumptions.  The three levels of hierarchy are 1) using quoted
     prices  in  active  markets  for  identical  assets  and  liabilities,   2)
     "significant  other  observable  inputs" and 3)  "significant  unobservable
     inputs".  "Significant  other observable  inputs" can include quoted prices
     for similar assets or liabilities in active markets, as well as inputs that
     are observable for the asset or liability,  such as interest rates, foreign
     exchange  rates and yield  curves that are  observable  at commonly  quoted
     intervals.  "Significant  unobservable  inputs" are  typically  based on an
     entity's  own  assumptions,  as there is  little,  if any,  related  market
     activity.  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.

     SFAS 159,  "The Fair  Value  Option  for  Financial  Assets  and  Financial
     Liabilities"  ("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
     implementation  of SFAS 159 did not have a material impact on the Company's
     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  requires  that
     acquisition-related  costs and restructuring costs be recognized separately
     from the business  combination and expensed as incurred.  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. Based on historical acquisition costs and activity
     levels,  the  adoption  of SFAS  141R on  January  1,  2009  did not have a
     significant  impact on the Company's  results of  operations  and financial
     position.

     In December  2007, the FASB issued SFAS 160,  "Noncontrolling  Interests in
     Consolidated  Financial  Statements  - an  amendment  of ARB No.  5" ("SFAS
     160"). SFAS 160 requires that noncontrolling interests (previously referred
     to as minority  interests)  be  presented  as a component  of  consolidated
     equity,  eliminates  "minority interest accounting" such that the amount of
     net income

                                     - 7 -
<PAGE>
                          MISSION WEST PROPERTIES, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
         (dollars in thousands, except per share and per square footage)
                                   (unaudited)

     attributable  to  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  requires  a
     reconciliation  of equity  attributable  to  noncontrolling  interests  and
     disclosure  of those amounts of  consolidated  net income  attributable  to
     noncontrolling  interests. SFAS 160 is effective for fiscal years beginning
     on or after December 15, 2008. The adoption of SFAS 160 on January 1, 2009,
     which  required  retroactive  adoption of the  presentation  and disclosure
     requirements for existing minority  interests,  had a significant impact on
     the Company's computation of net income and its presentation of the balance
     sheet.

     In April 2009,  the FASB issued  Statement  FSP No. FAS 107-1 and APB 28-1,
     "Interim  Disclosures about Fair Value of Financial  Instruments" ("FSP FAS
     107-1"),  which  requires (i) disclosure of the fair value of all financial
     instruments  for which it is  practicable to estimate that value in interim
     period financial statements as well as in annual financial statements, (ii)
     that the fair value  information  be  presented  together  with the related
     carrying  amount of the asset or  liability,  and (iii)  disclosure  of the
     methods and  significant  assumptions  used to estimate  the fair value and
     changes, if any, to the methods and significant assumptions used during the
     period.  The FSP is  effective  for interim  periods  ending after June 15,
     2009.

     In May 2009,  the FASB issued SFAS 165,  "Subsequent  Events" ("SFAS 165").
     SFAS 165 sets forth the period  after the balance  sheet date during  which
     management of a reporting  entity should  evaluate  events or  transactions
     that may occur for  potential  recognition  or  disclosure in the financial
     statements, the circumstances under which an entity should recognize events
     or  transactions  occurring  after the balance  sheet date in its financial
     statements,  and  disclosures  that an entity  should make about  events or
     transactions  that occurred after the balance sheet date. SFAS 165 requires
     the disclosure of the date through which an entity has evaluated subsequent
     events and the basis for that date.  SFAS 165 is  effective  for  financial
     statements issued for fiscal years and interim periods beginning after June
     15, 2009 and will be applied  prospectively.  The  adoption of SFAS 165 did
     not have an impact on the  Company's  results of  operations  or  financial
     condition.

     In June 2009, the FASB issued SFAS 167,  "Amendments to FASB Interpretation
     No.  46(R)"  ("SFAS  167").  SFAS 167 modifies  the  existing  quantitative
     guidance used in determining the primary beneficiary of a variable interest
     entity  ("VIE") by requiring  entities to  qualitatively  assess whether an
     enterprise  is a primary  beneficiary,  based on whether the entity has (i)
     power over the significant activities of the VIE, and (ii) an obligation to
     absorb losses or the right to receive  benefits  that could be  potentially
     significant to the VIE. SFAS 167 becomes effective for all new and existing
     VIEs on January 1, 2010. The adoption of SFAS 167 is not expected to have a
     material  impact  on the  Company's  results  of  operations  or  financial
     condition.

     In June 2009, the FASB issued SFAS 168, "The FASB  Accounting  Codification
     and Hierarchy of Generally Accepted Accounting Principles- a replacement of
     FASB No. 162" ("SFAS 168"). The FASB Accounting  Standards  Codification TM
     ("Codification")  does not change U.S. GAAP, but combines all authoritative
     standards  such as those  issued  by the  FASB,  AICPA,  and  EITF,  into a
     comprehensive,  topically  organized online database.  The Codification was
     released on July 1, 2009 and will become the single source of authoritative
     U. S. GAAP applicable for all  nongovernmental  entities,  except for rules
     and interpretive releases of the SEC. The Codification is effective for all
     interim  periods and year ends  subsequent  to September  15, 2009.  As the
     Codification was not intended to change or alter existing GAAP, it will not
     have any impact on the Company's consolidated financial statements.

3.   VARIABLE INTEREST ENTITY

     Under FIN 46R, a VIE must be  consolidated by a company if it is subject to
     a majority  of the  entity's  expected  losses or is  entitled to receive a
     majority of the entity's  expected  residual  returns or both. In addition,
     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

                                     - 8 -
<PAGE>
                          MISSION WEST PROPERTIES, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
         (dollars in thousands, except per share and per square footage)
                                   (unaudited)

     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 received monthly rent payments of approximately $789 from July 2007
     through  June 2008,  received  $818 from July 2008  through  June 2009,  is
     receiving $849 from July 2009 through June 2010, and will receive $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
     VIE. The Company further  determined that it is the primary  beneficiary of
     this  VIE,  and  therefore  has  consolidated  this  entity  for  financial
     reporting purposes.

     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.
     -    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.

     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.

4.   RESTRICTED CASH

     Restricted cash totaled  approximately  $7,078 on June 30, 2009. The entire
     amount  represents  cash held by M&M, a consolidated  VIE. 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 and any other additional  agreements with
     the VIE.

     As of March 31, 2009,  restricted cash totaled  approximately  $22,048.  In
     April 2009, the Company issued two notes in the aggregate amount of $15,000
     to M&M. The notes bear  interest at LIBOR plus 2% and are due June 30, 2009
     and subsequently extended to December 31, 2010. The proceeds were primarily
     used for quarterly distributions to the Company's  noncontrolling interests
     and general corporate purposes.

5.   RESTRICTED INVESTMENT IN MARKETABLE SECURITIES

     In accordance with SFAS 115,  "Accounting  for Certain  Investments in Debt
     and  Equity  Securities,"  investments  in  debt  and  equity  "marketable"
     securities  are  classified at  acquisition,  and on  subsequent  reporting
     dates, into one of the following categories:  (a) Trading Securities - debt
     and equity  securities  purchased and held  principally  for the purpose of
     selling them in the near future. (b)  Available-for-Sale  Securities - debt
     securities  not  classified  as  held-to-maturity,   and  debt  and  equity
     securities not classified as trading securities.  (c) Held-to-Maturity Debt
     Securities - those debt  securities for which the company has the "positive
     intent and ability to hold the securities to maturity."

     The Company's  restricted  investment in marketable  securities on June 30,
     2009 was  classified as trading  securities,  whereas  unrealized  holdings
     gains and losses  (differences  between the initial cost and the fair value
     at the  balance  sheet  date) are  included  in net  income of the  current
     period,  and interest and dividend  revenue,  as well as realized gains and
     losses on sales,  are  included  in net income of the current  period.  The
     marketable securities are classified as Level 1 of the fair value hierarchy
     in  accordance  with SFAS 157 and thus  measured at fair value using quoted
     market  prices  for  identical   instruments  in  active  markets  from  an
     independent  third  party  source.   See  Note  2  above  under  Accounting
     Pronouncements for further discussion of SFAS 157.

     Restricted investment in marketable securities totaled approximately $6,585
     on June 30, 2009, which was funded by the Company's restricted cash through
     its VIE. The amount represents an investment in marketable  securities of a
     real estate  investment trust company traded on the New York Stock Exchange
     Euronext.  The marketable  securities are adjusted to fair value at the end
     of each accounting period, with the corresponding loss and gain recorded in
     unrealized  loss or gain  from  investment  in the  Company's  consolidated
     statement of  operations.  For the three  months  ended June 30, 2009,  the
     Company recorded net unrealized gain of approximately $2,433 related to the
     increase  in fair value of the  marketable  securities.  For the six months
     ended  June  30,  2009,  the  Company   recorded  net  unrealized  loss  of
     approximately $324.

                                     - 9 -
<PAGE>
                          MISSION WEST PROPERTIES, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
         (dollars in thousands, except per share and per square footage)
                                   (unaudited)

6.   STOCK TRANSACTIONS

     During the six months ended June 30, 2009, one limited partner  exchanged a
     total of 2,022,000 O.P. units for 2,022,000  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 $15,138 from noncontrolling  interests to
     stockholders'  equity.  Neither the Company nor the operating  partnerships
     received any proceeds from the issuance of the common stock in exchange for
     O.P.  units.  Under the limited  partnership  agreements,  each exchange is
     treated as the purchase of  additional  O.P.  units of the general  partner
     interest by the  Company in exchange  for stock,  and the  contribution  of
     additional capital to the partnership by the Company equal in amount to the
     value  of  the  stock  issued  in  exchange  for  the  limited  partnership
     interests.

7.   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:

<TABLE>
<CAPTION>
                                                            Three Months Ended June 30,            Six Months Ended June 30,
                                                         ---------------------------------     ---------------------------------
                                                               2009              2008               2009               2008
                                                         ---------------    --------------     --------------    ---------------
<S>                                                       <C>               <C>                <C>                <C>
         Weighted average shares outstanding (basic)       21,766,343        19,695,988         21,691,029         19,681,797
         Incremental shares from assumed option exercise      133,563           206,316            144,516             84,738
                                                         ---------------    --------------     --------------    ---------------
         Weighted average shares outstanding (diluted)     21,899,906        19,902,304         21,835,545         19,766,535
                                                         ===============    ==============     ==============    ===============
</TABLE>

     At June 30,  2009,  outstanding  options to  purchase  2,052,500  shares of
     common stock were excluded from the  computation  of diluted net income per
     share under the  treasury  stock  method for the three and six months ended
     June 30,  2009  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  noncontrolling  interests'  share of income back to net income.
     The total number of O.P.  units  outstanding  at June 30, 2009 and 2008 was
     83,504,965 and 85,528,215, respectively.

8.   RELATED PARTY TRANSACTIONS

     As of June 30, 2009, the Berg Group owned  75,880,384 O.P. units.  The Berg
     Group's  combined  ownership of O.P. units and shares of common stock as of
     June 30, 2009 represented  approximately 74% of the total equity interests,
     assuming conversion of all O.P. units outstanding into the Company's common
     stock.

     As of June 30, 2009, debt in the amount of approximately $8,516 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. On October 1, 2008, the Company and the Berg Group agreed to
     extend the maturity  due date to June 2013.  Interest  expense  incurred in
     connection with the mortgage note was  approximately  $164 and $174 for the
     three months ended June 30, 2009 and 2008, respectively,  and $331 and $349
     for the six months ended June 30, 2009 and 2008, respectively.

     On June 11, 2009,  the  superior  court  issued a tentative  decision  that
     concluded  Republic  Properties  Corporation  is a partner  in the  Hellyer
     Avenue Limited Partnership relating to the Mission West Properties, L.P. v.
     Republic Properties  Corporation litigation (see Note 9 below for details).
     Because Republic  Properties  Corporation's  interest in the Hellyer Avenue
     Limited  Partnership was transferred to Berg & Berg  Enterprises,  Inc. and
     past distributions from profits were paid to Berg & Berg Enterprises, Inc.,
     the Company accrued  approximately  $1,000 in interest  receivable due from
     Berg & Berg  Enterprises,  Inc.  The $1,000  interest  income  accrual  was
     calculated at an interest rate of LIBOR plus 1.25%.

     During  the first six months of 2009,  debt in the amount of  approximately
     $23,120 was  borrowed and repaid to the Berg Group under  short-term  notes
     payable in connection  with the fourth  quarter 2008 and first quarter 2009
     dividend distributions.  The notes payable interest was calculated at LIBOR
     plus 2%.  Interest  expense  incurred  in  connection  with the  loans  was
     approximately  $6 and $21 for the three and six months ended June 30, 2009,
     respectively.

     During  the first six  months  of 2009 and 2008,  Carl E. Berg or  entities
     controlled by him held financial  interests in several companies that lease
     space from the operating  partnerships,  which include  companies where Mr.
     Berg has a greater  than 10%  ownership

                                     - 10 -
<PAGE>
                          MISSION WEST PROPERTIES, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
         (dollars in thousands, except per share and per square footage)
                                   (unaudited)

     interest. These related tenants contributed  approximately $279 and $307 in
     rental  revenue  for the  three  months  ended  June  30,  2009  and  2008,
     respectively,  and $572 and $614 in rental revenue for the six months ended
     June 30, 2009 and 2008, 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  $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 $30 for the three  months ended June
     30, 2009 and 2008,  respectively,  and $60 and $54 for the six months ended
     June 30, 2009 and 2008, respectively.

9.   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  its 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. ("BBE"). Under the Berg Land
     Holdings Option Agreement and the Acquisition Agreement dated as of May 14,
     1998, the Company acting through 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  Maryland.  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.  A trial  in the  superior  court  commenced  in
     February  2009.  On June 11, 2009,  the  superior  court issued a tentative
     decision that  concluded RPC is a partner in the Hellyer LP and is entitled
     to  distribution  of  profits  of the  Hellyer  LP in  accordance  with its
     percentage   interest   together   with   pre-judgment   interest  on  each
     distribution  from the date it was due and payable.  The Company intends to
     file an appeal following the court's issuance of a final decision and entry
     of  judgment.  Pending  the  outcome of the  appeal,  the  Company  accrued
     approximately  $2,300 in interest  payable  based on the court's  tentative
     decision.  The $2,300 interest expense accrual represents the interest owed
     on the amount of past distributions that would be payable to RPC by Hellyer
     LP based on the tentative decision determined at the legal rate of interest
     of 10%. In  addition,  the Company  also  accrued  approximately  $1,000 in
     interest  receivable due from BBE since past  distributions from Hellyer LP
     were paid to BBE. The $1,000  interest  income accrual was calculated at an
     interest rate of LIBOR plus 1.25%.

     Since the  inception  of Hellyer  LP, the  Company  has  accounted  for the
     properties  owned  by  the  partnership  on  a  consolidated   basis,  with
     reductions  for the  noncontrolling  interests  held by the  noncontrolling
     partner  (first RPC and then BBE). In each period,  the Company has accrued
     amounts  payable  by  Hellyer LP to the  noncontrolling  interest  partner,
     including  BBE prior to payment.  BBE's share of earnings  allocated to its
     50%  noncontrolling  interest was approximately  $381 and $389 in the first
     six months of 2009 and

                                     - 11 -
<PAGE>
                          MISSION WEST PROPERTIES, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
         (dollars in thousands, except per share and per square footage)
                                   (unaudited)

     2008,   respectively.   As  of  June  30,  2009,   accumulated   cash  flow
     distributions  from Hellyer LP totaling  approximately  $5,648 were accrued
     and distributed to BBE. If the Company's  litigation with RPC is ultimately
     decided in RPC's favor, the Company anticipates that BBE may be required to
     return RPC's former interest in Hellyer LP and all prior  distributions  to
     RPC. As a result of this uncertainty, in October 2003, the Company recorded
     such  distributions as an account receivable from BBE, which is included in
     "Other  assets"  on the  Company's  consolidated  balance  sheets,  with an
     offsetting account payable to BBE.

     The Independent Directors Committee of the Board of Directors will exercise
     its right to acquire on behalf of the Company the former RPC  interest  and
     related distributions from Berg & Berg Enterprises, Inc. under the terms of
     the Berg Land Holdings  Option  Agreement  between the Company and the Berg
     Group, if the litigation is ultimately decided in favor of the Company.

     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 its  obligations  under these
     indemnification  agreements is minimal and has recorded no liabilities  for
     these agreements as of June 30, 2009.

     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 June 30,
     2009.

     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.

     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 June  30,  2009  that is  subject  to such  material
     conditions:

<TABLE>
<CAPTION>
        Property                   Number of Buildings   Rentable Square Feet          Acres              Sales Price
        --------                   -------------------   --------------------          -----              -----------
        McCandless Drive
<S>                                        <C>                 <C>                    <C>                  <C>
        Milpitas, California                8                   427,000                23.03                $76,500
</TABLE>

10.  SUBSEQUENT EVENTS

     On July 9, 2009,  the Company  paid  dividends of $0.15 per share of common
     stock to all common stockholders of record as of June 30, 2009. On the same
     date, the operating partnerships paid a distribution of $0.15 per O.P. unit
     to all  holders  of O.P.  units,  with the  exception  of the  Berg  Group.
     Aggregate dividends and distributions amounted to approximately $15,791.

     On July 9, 2009,  the Company  issued a short-term  note for  approximately
     $11,517  to the Berg  Group in  connection  with the  second  quarter  2009
     dividend distributions. The note's interest rate is LIBOR plus 1.75%.

                                     - 12 -
<PAGE>



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, 2008.  The results for the three and six months ended June 30, 2009
are not  necessarily  indicative  of the results to be  expected  for the entire
fiscal year ending December 31, 2009.

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:

-    the current  turmoil in the credit  markets could limit the demands for R&D
     space and affect the overall availability and cost of credit,
-    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,
-    changes  in  general   accounting   principles,   policies  and  guidelines
     applicable to REITs, and
-    ability to timely refinance  maturing debt obligations and the terms of any
     such refinancing.

These risks and  uncertainties,  together with the other risks  described  under
Part I, Item 1A - "Risk Factors" of our 2008 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 June 30,
2009, 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 June 30, 2009, 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

                                     - 13 -
<PAGE>

-    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.

CURRENT ECONOMIC ENVIRONMENT

In the second  quarter of 2009,  the  overall  U.S.  economy  weakened  further,
particularly  with the  increased  turmoil in the credit  markets,  the  housing
recession   and  growing   unemployment.   These  factors  have  resulted  in  a
considerable  reduction  in  business  spending.  As  credit  requirements  have
tightened  with many financial  institutions,  current  tenants and  prospective
tenants may find it more difficult to obtain credit. In effect,  this may impact
the stability of our current tenants' financial  condition and limit our ability
to lease spaces to credit worthy prospective tenants.

Given the current  financial  markets  crisis and general  economic  conditions,
there can be no assurances that our operating results will not decrease. We have
a strong balance sheet and have  maintained one of the lowest levels of leverage
in the REIT industry.  The current crisis in the financial  markets has resulted
in de-leveraging  throughout the global finance system.  The displacement in the
current financing market has resulted in a very difficult borrowing 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 slowed
markedly  from 2001  through 2006 and grew slowly until the second half of 2008.
Since  September  2008,  the impact of the  worldwide  recession  has  adversely
affected the local  economy.  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  16.3% in late 2008 and 18.6% at the end of the second quarter
of 2009.  Total  vacant R&D square  footage in Silicon  Valley at the end of the
second  quarter of 2009 amounted to  approximately  28.9 million square feet, of
which 17.4%,  or 5.0 million  square feet,  was being offered  under  subleases.
According  to the  BT  Report,  total  negative  net  absorption  (which  is the
computation of gross square footage leased less gross new square footage vacated
for the period presented) in 2008 amounted to approximately  33,000 square feet,
and in the first six months of 2009 there was total  negative net  absorption of
approximately  3.9 million  square feet.  Also  according to the BT Report,  the
average  asking market rent per square foot at the end of the second  quarter of
2009 was $1.11 compared with $1.26 in late 2008. 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 June 30, 2009 was 66.1%  compared with 64.9% at June 30,
2008. We believe that our  occupancy  rate could decline if key tenants seek the
protection of bankruptcy laws, consolidate operations or discontinue operations.
In addition,  leases with respect to approximately  114,000 rentable square feet
are expiring prior to the end of 2009.  The  properties  subject to these leases
may take  anywhere  from 24 to 40 months or longer to re-lease.  We believe that
the average 2009 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.

                                     - 14 -
<PAGE>

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. We
account for  acquisitions  of properties  prior to January 1, 2009 in accordance
with SFAS 141. For  acquisitions  consummated  after  January 1, 2009, we follow
SFAS 141R, "Business  Combinations".  The fair value of the real estate acquired
is allocated  to acquired  tangible  assets,  consisting  of land,  building and
tenant   improvements,   and  identified   intangible  assets  and  liabilities,
consisting  of the  value of  above-market  and  below-market  leases,  acquired
in-place  leases  and the value of tenant  relationships,  based in each case on
their fair values.  The  determination  of the tangible and  intangible  assets'
useful  lives  are  guided  by a  combination  of  SFAS  141R  and  management's
estimates.  SFAS 141R requires that acquisition-related  costs and restructuring
costs be recognized  separately  from the business  combination  and expensed as
incurred.

The capitalized above-market lease values and the capitalized below-market lease
values are  amortized as an  adjustment  to rental income over the initial lease
term 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.

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"). We evaluate the
recoverability of our investments in real estate assets to be held and used each
quarter and record an impairment charge when there is an indicator of impairment
and the undiscounted  projected cash flows are less than the carrying amount for
a particular property. 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 the our views of market and economic  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.  We recognize these properties and 100%
of their operating results in our condensed  consolidated  financial statements,
with  appropriate  allocation  to  noncontrolling  interests,  because  we  have
operational  and financial  control of the  investments.  We make  judgments and
assumptions  about the estimated  monthly  payments  made to our  noncontrolling
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 evaluate  all joint  venture
arrangements for  consolidation.  The percentage  interest in the joint venture,
evaluation of control and whether a variable  interest entity ("VIE") exists are
all considered in determining if the arrangement  qualifies for consolidation in
accordance with FASB Interpretation No. 46R, "Consolidation of Variable Interest
Entities".  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.  On January  1,  2008,  we  adopted  the
provisions of SFAS 157, "Fair Value Measurements" ("SFAS 157") for our financial
assets and  liabilities  measured at fair value on a recurring  basis.  SFAS 157
defines  fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction  between market  participants.
SFAS 157 also specifies a three-level  hierarchy of valuation  techniques  based
upon whether the inputs reflect  assumptions other market participants would use
based upon market data obtained from independent  sources (observable inputs) or
reflect  its own  assumptions  of  market  participant  valuation  (unobservable
inputs) and  requires  the use of  observable  inputs if such data is  available
without  undue cost and effort.  At June 30,  2009,  we had  approximately  $6.6
million of  financial  assets  classified  as Level 1 and thus  measured at fair
value using quoted  market prices for identical  instruments  in active  markets
from an independent third party source.

                                     - 15 -
<PAGE>

The only financial asset or liability recorded at fair value in our consolidated
financial statements is the restricted investment in marketable  securities.  We
determined the fair value for the marketable  securities  using quoted prices in
active markets for identical securities.

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.  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 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.
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.

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.

                                     - 16 -

<PAGE>


RESULTS OF OPERATIONS

COMPARISON  OF THE THREE AND SIX MONTHS  ENDED JUNE 30,  2009 WITH THE THREE AND
SIX MONTHS ENDED JUNE 30, 2008

As of June 30, 2009 and 2008, through our controlling interests in the operating
partnerships,  we  owned  111  properties  totaling  approximately  8.0  million
rentable  square  feet.  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.

Comparison of rental revenue from real estate for the three and six months ended
June 30, 2009 and 2008 are as follows:

<TABLE>
<CAPTION>
                                   Three Months Ended June 30,
                                 --------------------------------
                                                                                           % Change by
                                     2009              2008              $ Change         Property Group
                                 -------------     --------------     ---------------     ---------------
                                               (dollars in thousands)
<S>                                <C>               <C>                 <C>                  <C>
       Same Property (1)            $20,096           $19,031             $1,065                5.6%
       2008 Acquisitions                328               328                  -                -
                                 -------------     --------------     ---------------
          Total                     $20,424           $19,359             $1,065                5.5%
                                 =============     ==============     ===============

                                    Six Months Ended June 30,
                                 --------------------------------
                                                                                           % Change by
                                     2009              2008              $ Change         Property Group
                                 -------------     --------------     ---------------     ---------------
                                               (dollars in thousands)
       Same Property (1)            $40,424           $37,919             $2,505                6.6%
       2008 Acquisitions                656               437                219               50.0%
                                 -------------     --------------     ---------------
          Total                     $41,080           $38,356             $2,724                7.1%
                                 =============     ==============     ===============
</TABLE>

(1)  "Same Property" is defined as properties  owned by us prior to 2008 that we
     still owned as of June 30, 2009.

RENTAL REVENUE FROM REAL ESTATE OPERATIONS
For the quarter ended June 30, 2009,  rental revenue from real estate  increased
by approximately $1.1 million,  or 5.5%, from $19.3 million for the three months
ended June 30, 2008 to $20.4  million for the three  months ended June 30, 2009.
For the six  months  ended  June 30,  2009,  rental  revenue  from  real  estate
increased by approximately $2.7 million, or 7.1%, from $38.4 million for the six
months  ended June 30, 2008 to $41.1  million for the six months  ended June 30,
2009. In both periods,  the increase in rental revenue  resulted  primarily from
new  leases  since  June 30,  2008.  Our  occupancy  rate at June  30,  2009 was
approximately 66.1%, compared with 64.9% at June 30, 2008.

LEASE TERMINATION INCOME
We had no lease  termination  fee income in the second quarter of 2009 and 2008.
Lease  termination  fee  income  for the  six  months  ended  June  30,  2008 of
approximately  $1.9  million  was  paid by a tenant  who  terminated  its  lease
obligations  before  the  end  of  the  lease  term.  We do  not  consider  that
transaction to be a recurring item.

OTHER INCOME
Other income of approximately  $0.30 million for the three months ended June 30,
2009 included approximately $0.24 million from management fees and $0.06 million
from an insurance  claim.  Other income of  approximately  $0.25 million for the
three  months  ended June 30, 2008  included  approximately  $0.24  million from
management fees and $0.01 million from miscellaneous  income. For the six months
ended June 30,  2009,  other  income of  approximately  $0.62  million  included
approximately  $0.49  million  from  management  fees,  $0.06  million  from  an
insurance claim and $0.07 million from miscellaneous  income. For the six months
ended June 30,  2008,  other  income of  approximately  $0.48  million  included
approximately  $0.46  million  from  management  fees  and  $0.02  million  from
miscellaneous income.

EXPENSES FROM OPERATIONS
Property  operating  expenses and real estate taxes during the second quarter of
2009 increased by  approximately  $1.8 million,  or 32.0%,  from $5.5 million to
$7.3 million for the three  months  ended June 30, 2008 and 2009,  respectively.
The increase was primarily  attributable  to increases in utility usage,  repair
and maintenance and real estate tax expenses. Tenant reimbursements increased by
approximately  $0.6  million,  or 16.3%,  from $3.7 million for the three months
ended June 30, 2008 to $4.3 million for the three months ended June 30, 2009 due
to reimbursements of recurring operating expenses,  including real estate taxes.
The level of tenant  reimbursements  is affected by  vacancies  because  certain
recurring  expenses such as property  insurance,  real estate  taxes,  and other
fixed operating expenses are not recoverable from vacant properties. For the six
months ended June 30, 2009,  property  operating  expenses and real estate taxes
increased by approximately  $2.8 million,  or 27.2%,  from $10.4 million for the
six months  ended June 30, 2008 to $13.2  million for the six months  ended June
30, 2009.

General and administrative  expenses decreased by approximately ($0.05) million,
or (7.6%),  from $0.67  million to $0.62 million for the three months ended June
30,  2008 and 2009,  respectively.  For the six months  ended June 30,  2008 and
2009,  general and administrative  expenses  decreased by approximately  ($0.20)
million,  or (14.3%),  from $1.35 million to $1.15  million,  respectively.  The
decrease was  primarily  the result of higher legal fees and stock  compensation
expense in 2008.

                                     - 17 -
<PAGE>

Real estate  depreciation  and amortization  expense  increased by approximately
$0.6 million,  or 11.5%,  from $5.7 million to $6.3 million for the three months
ended June 30, 2008 and 2009,  respectively.  The increase resulted from a lease
termination  in the first  quarter of 2009 and  additional  tenant  improvements
since June 30, 2008. Real estate depreciation and amortization expense increased
by approximately $1.0 million,  or 8.6%, from $11.3 million to $12.3 million for
the six months ended June 30, 2008 and 2009, respectively.

EQUITY IN EARNINGS FROM UNCONSOLIDATED JOINT VENTURE
As of  June  30,  2009,  we  held  investments  in  one  R&D  building  totaling
approximately  155,500  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
June 30, 2009,  we recorded  equity in earnings  from the  unconsolidated  joint
venture of approximately $0.08 million compared with equity in earnings of $0.41
million for the same period in 2008. The decrease was  attributable  to the sale
of two R&D  properties  subsequent to June 30, 2008.  For the six-month  periods
ended June 30, 2009 and 2008, equity in earnings from the  unconsolidated  joint
venture was  approximately  $0.16 million and $0.79 million,  respectively.  The
occupancy rate for the  properties  owned by this joint venture at June 30, 2009
and 2008 was 100%.

INTEREST AND DIVIDEND INCOME
Interest and dividend income increased by approximately $0.9 million, or 423.3%,
from $0.2  million to $1.1  million for the three months ended June 30, 2008 and
2009,   respectively.   The  increase  was   primarily  due  to  an  accrual  of
approximately  $1.0  million in interest  income  related to the Hellyer  Avenue
Limited Partnership  litigation (see Note 9 above for further discussion of this
litigation).  Interest  and dividend  income  increased  by  approximately  $0.3
million,  or 38.0%,  from $0.8  million to $1.1 million for the six months ended
June 30, 2008 and 2009, respectively.

INTEREST EXPENSE
Interest expense  increased by approximately  $2.1 million,  or 43.0%, from $5.0
million for the three  months  ended June 30, 2008 to $7.1 million for the three
months  ended  June 30,  2009 due to an accrual of  approximately  $2.3  million
related to the Hellyer Avenue Limited  Partnership  litigation (see Note 9 above
for details).  Interest  expense  (related  parties)  decreased by approximately
($0.1)  million,  or (38.9%),  from $0.3 million for the three months ended June
30, 2008 to $0.2  million for the three months ended June 30, 2009 due to higher
related party debt incurred in the quarter ended June 30, 2008. Interest expense
increased by approximately $2.0 million, or 20.3%, from $9.9 million for the six
months  ended June 30, 2008 to $11.9  million for the six months  ended June 30,
2009.  Interest expense  (related  parties)  decreased by  approximately  ($0.4)
million, or (50.8%), from $0.7 million for the six months ended June 30, 2008 to
$0.3  million for the six months ended June 30,  2009.  Total debt  outstanding,
including debt due related parties,  decreased by approximately ($13.8) million,
or (3.9%),  from $351.2 million as of June 30, 2008 to $337.3 million as of June
30, 2009 because of principal repayments.

NET INCOME  ATTRIBUTABLE TO COMMON  STOCKHOLDERS AND NET INCOME  ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
Net income to common  stockholders  increased by approximately $0.4 million,  or
31.3%,  from $1.4  million  for the three  months  ended  June 30,  2008 to $1.8
million for the same period in 2009.  The  noncontrolling  interests  portion of
income decreased by approximately ($0.07) million, or (1.4%), from $5.47 million
for the three months  ended June 30, 2008 to $5.40  million for the three months
ended June 30, 2009. For the six months ended June 30, 2009 and 2008, net income
to common  stockholders was approximately  $3.2 million,  and the noncontrolling
interests  portion of income was  approximately  $9.6 million and $12.7 million,
respectively.

The amount of  noncontrolling  interests  in net income has been  calculated  by
multiplying  the net  income of the  operating  partnerships  (on a  stand-alone
basis)  by  the  respective   noncontrolling   interests  ownership  percentage.
Noncontrolling  interests  represent  the  ownership  interest  of  all  limited
partners in the operating partnerships taken as a whole, which was approximately
79% and 81% as of June 30, 2009 and 2008, respectively.

CHANGES IN FINANCIAL CONDITION

Total  stockholders'  equity, net, increased by approximately $10.9 million from
December 31, 2008. We obtained additional capital from the issuance of 2,022,000
shares of our common  stock for the  exchange  of O.P.  units,  which  increased
additional paid-in capital by approximately $15.1 million.  Stockholders' equity
was  reduced  during  the most  recent  quarter  by  distributions  in excess of
accumulated earnings of approximately $4.4 million.

LIQUIDITY AND CAPITAL RESOURCES

We expect an  increase  in  operating  cash  flows from our  operating  property
portfolio in 2009 compared with 2008 primarily from new leases and payments from
M&M Real Estate Control & Restructuring  relating to the Ciena lease termination
in 2007 (see Note 3 above).  If we are unable to lease a significant  portion of
the  approximately  114,000  rentable square feet scheduled to expire during the
remainder of 2009 or an equivalent  amount of our currently  available  space of
approximately  2.7 million  rentable  square feet,  however,  our operating cash
flows  after 2009 may be  affected  adversely.  With the  expectation  of higher
rental revenues for the remainder of 2009, we expect our  properties'  operating
income  to show a  year-over-year  increase  compared  with  2008  driven by new
leases.  We are also  subject to risks of  decreased  occupancy  through  tenant
defaults and bankruptcies  and potential  reduction in rental rates upon renewal
of properties,  however, which could result in reduced cash flow from operations
instead. 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.

                                     - 18 -
<PAGE>

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,  as well as borrowings
under our 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 2009. 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 potentially,  the issuance of additional equity securities by
us.

As of June 30,  2009,  restricted  cash totaled  approximately  $7.1 million and
restricted  investment  in  marketable  securities  totaled  approximately  $6.6
million.  The entire  amount  represents  cash and  investment  held by M&M Real
Estate  Control &  Restructuring,  LLC, a  consolidated  VIE involving the Ciena
lease  termination in 2007. We do not possess or control these funds or have any
rights to receive them except as provided in the  applicable  agreements and any
other additional agreements with the VIE. We include this in our restricted cash
and  investment  under  the  principles  of FIN  46R.  The  restricted  cash and
investment is not available for distribution to stockholders.

In April 2009, we issued two notes in the aggregate amount of $15 million to M&M
Real Estate  Control &  Restructuring,  LLC for funds  borrowed from  restricted
cash.  The notes bear  interest  at LIBOR plus 2% and are due June 30,  2009 and
subsequently  extended to December  31, 2010.  The proceeds  were used to pay an
outstanding  short-term note issued to the Berg Group and for general  corporate
purposes.

DISTRIBUTIONS
On July 9, 2009,  we paid  dividends  of $0.15 per share of common  stock to all
common  stockholders  of  record  as of June 30,  2009.  On the same  date,  the
operating partnerships paid a distribution of $0.15 per O.P. unit to all holders
of O.P. units, with the exception of the Berg Group. The aggregate dividends and
distributions  amounted to  approximately  $15.8  million.  On July 9, 2009,  we
issued a short-term  note for  approximately  $11.5 million to the Berg Group in
connection with the second quarter 2009 dividend distributions. This note had an
interest rate of LIBOR plus 1.75% and is due September 30, 2009.

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
We currently  have a $17.5 million  unsecured  revolving line of credit with HBC
established  in April  2008.  The  revolving  line of credit  carries a variable
interest rate based on the one-month LIBOR plus 1.75% per annum and matures June
15,  2009.  In June 2009,  we executed an  amendment to the terms of the line of
credit that extended the maturity date to September 15, 2009. We are  discussing
with HBC to renew the unsecured revolving line of credit for at least 12 months.

In  the  first  six  months  of  2009,  we  issued  two  short-term   notes  for
approximately  $23.1  million  to the Berg Group in  connection  with the fourth
quarter 2008 and first quarter 2009 dividend distributions.  The notes' interest
rates were LIBOR plus 2% and were fully repaid.

At June 30, 2009, we had total  indebtedness  of  approximately  $337.3 million,
including $324.9 million of fixed rate mortgage debt, $3.9 million under the HBC
line of credit and $8.5 million debt under the Berg Group mortgage note (related
parties),  as detailed in the table below. The Northwestern,  Allianz,  Hartford
and HBC loans contain certain financial loan and reporting  covenants as defined
in the loan  agreements.  As of June 30, 2009, we were in compliance  with these
loan covenants.

CONTRACTUAL OBLIGATIONS
The following table  identifies the contractual  obligations with respect to the
maturities  and scheduled  principal  repayments of our secured debt,  unsecured
notes,  credit  facility and scheduled  interest  payments of our fixed-rate and
variable-rate debt at June 30, 2009 and provides information about our operating
lease  obligations  that  will  impact  our  liquidity  and cash  flow in future
periods.

<TABLE>
<CAPTION>
                                   ------------- ------------- ------------- -------------- ------------- ------------- ------------
                                        2009          2010         2011           2012           2013      Thereafter      Total
                                   ------------- ------------- ------------- -------------- ------------- ------------- ------------
                                                                          (dollars in thousands)
<S>                                  <C>          <C>           <C>            <C>            <C>          <C>          <C>
 Principal payments (1)               $10,270      $13,328       $14,109        $14,935        $81,269      $203,438     $337,349
 Interest payments-fixed rate debt(2)   9,502       18,433        17,652         16,825         12,820        62,288      137,520
 Interest payments-variable rate debt(3)   17            -             -              -              -             -           17
 Operating lease obligations (4)           60           30             -              -              -             -           90
                                   ------------- ------------- ------------- -------------- ------------- ------------- ------------
    Total                             $19,849      $31,791       $31,761        $31,760        $94,089      $265,726     $474,976
                                   ============= ============= ============= ============== ============= ============= ============
</TABLE>

(1)  As of June 30, 2009, 98.9% of our debt was contractually  fixed and 1.1% of
     our debt bore  interest at variable  rates.  Our debt  obligations  are set
     forth in detail in the table below.
(2)  The  information  in the table above  reflects our projected  interest rate
     obligations for the fixed-rate  payments based on the contractual  interest
     rates, interest payment dates and scheduled maturity dates.
(3)  The  information  in the table above  reflects our projected  interest rate
     obligations  for the  variable-rate  payments  based on LIBOR plus 1.75% at
     June 30, 2009, the scheduled interest payment dates and maturity dates.
(4)  Our operating lease  obligations  relate to a lease of our corporate office
     facility from a related party.

                                     - 19 -
<PAGE>


The following table and notes set forth  information  regarding debt outstanding
as of June 30, 2009:


<TABLE>
<CAPTION>
                                                                                                             Maturity     Interest
             Debt Description                           Collateral Properties                 Balance          Date         Rate
---------------------------------------------- ------------------------------------------  --------------  ------------- -----------
                                                                                        (dollars in thousands)
Line of Credit:
<S>                                           <C>                                            <C>            <C>             <C>
Heritage Bank of Commerce                      Not Applicable                                 $  3,892       Sept 2009        (1)
                                                                                           --------------

Mortgage Note Payable (related parties)(2):    5300 & 5350 Hellyer Avenue, San Jose, CA          8,516        Jun 2013       7.65%
                                                                                           --------------

Mortgage Notes Payable(2):
Hartford Life Insurance Company                5981 Optical Court, San Jose, CA                113,022        Oct 2018       6.21%
Hartford Life and Accident Insurance Company   5500 Hellyer Avenue, San Jose, CA
Hartford Life and Annuity Insurance Company    5550 Hellyer Avenue, San Jose, CA
(collectively known as the "Hartford Loan")(3) 4050 Starboard Drive, Fremont, CA
                                               45738 Northport Loop, Fremont, CA
                                               233 South Hillview Drive, Milpitas, CA
                                               10300 Bubb Road, Cupertino, CA
                                               1230 E. Arques, Sunnyvale, CA
                                               1250-1280 E. Arques, Sunnyvale, CA
                                               1212 Bordeaux Lane, Sunnyvale, CA
                                               2904 Orchard Parkway, San Jose, CA
                                               3236 Scott Blvd, Santa Clara, CA
                                               6311 San Ignacio Avenue, San Jose, CA
                                               6321-6325 San Ignacio Avenue, San Jose, CA
                                               6331 San Ignacio Avenue, San Jose, CA
                                               6341-6351 San Ignacio Avenue, San Jose, CA
                                               3540-3580 Bassett Street, Santa Clara, CA

Northwestern Mutual Life Insurance Company(4)  1750 Automation Parkway, San Jose, CA            79,397        Jan 2013       5.64%
                                               1756 Automation Parkway, San Jose, CA
                                               1762 Automation Parkway, San Jose, CA
                                               6320 San Ignacio Avenue, San Jose, CA
                                               6540-6541 Via Del Oro, San Jose, CA
                                               6385-6387 San Ignacio Avenue, San Jose, CA
                                               20605-20705 Valley Green Drive, Cupertino, CA
                                               2001 Walsh Avenue, Santa Clara, CA
                                               2220 Central Expressway, Santa Clara, CA
                                               2300 Central Expressway, Santa Clara, CA
                                               2330 Central Expressway, Santa Clara, CA

Allianz Life Ins. Co. (Allianz Loan I)(5)      5900 Optical Court, San Jose, CA                 22,583        Aug 2025       5.56%

Allianz Life Ins. Co. (Allianz Loan II)(5)     5325-5345 Hellyer Avenue, San Jose, CA          109,939        Aug 2025       5.22%
                                               1768 Automation Parkway, San Jose, CA
                                               2880 Scott Boulevard, Santa Clara, CA
                                               2890 Scott Boulevard, Santa Clara, CA
                                               2800 Scott Boulevard, Santa Clara, CA
                                               10450-10460 Bubb Road, Cupertino, CA
                                               6800-6810 Santa Teresa Blvd., San Jose, CA
                                               6850 Santa Teresa Blvd., San Jose, CA
                                               4750 Patrick Henry Drive, Santa Clara, CA
                                                                                           --------------
                                                                                               324,941
                                                                                           --------------
TOTAL                                                                                         $337,349
                                                                                           ==============
</TABLE>


(1)  Loan  carries a  variable  interest  rate equal to LIBOR  plus  1.75%.  The
     interest  rate at June 30, 2009 was 2.09%.  The  Heritage  Bank of Commerce
     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 June 30, 2009,  we were in compliance
     with these loan covenants.
(2)  Mortgage notes payable generally require monthly  installments of principal
     and interest  ranging  from  approximately  $96 to $840 over various  terms
     extending  through the year 2025.  The weighted  average  interest  rate of
     mortgage notes payable was 5.74% at June 30, 2009.
(3)  The Hartford loan is payable in monthly installments of approximately $838,
     which includes principal (based upon a 20-year  amortization) and interest.
     Costs and fees incurred with obtaining this loan  aggregated  approximately
     $1,058,  which  were  deferred  and  amortized  over the loan  period.  The
     Hartford loan contains certain  customary  covenants as defined in the loan
     agreement.  As of June 30,  2009,  we were in  compliance  with  these loan
     covenants.
(4)  The Northwestern  loan is payable in monthly  installments of approximately
     $696,  which includes  principal  (based upon a 20-year  amortization)  and
     interest.  Costs and fees  incurred  with  obtaining  this loan  aggregated
     approximately $675, which were deferred and amortized over the loan period.
     The Northwestern  loan contains certain  customary  covenants as defined in
     the loan  agreement.  As of June 30, 2009, we were in compliance with these
     loan covenants.
(5)  The  Allianz  loans  are  payable  in  monthly  aggregate  installments  of
     approximately  $1,017,  which  includes  principal  (based  upon a  20-year
     amortization)  and interest.  Costs and fees incurred with obtaining  these
     loans aggregated  approximately  $1,089,  which were deferred and amortized
     over  the  loan  periods.  The  Allianz  loans  contain  certain  customary
     covenants as defined in the loan  agreements.  As of June 30, 2009, we were
     in compliance with these loan covenants.

                                     - 20 -
<PAGE>


At June 30,  2009,  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 $6.83 per share on June 30, 2009) on a fully  diluted  basis,  including  the
conversion of all O.P. units into common stock, was approximately 31.9%. On June
30, 2009, the last trading day in the quarter,  total market  capitalization was
approximately $1.06 billion.

At June 30, 2009, the outstanding  balance remaining under certain notes that we
owed to the operating  partnerships was approximately $2.2 million. The due date
of these notes has been extended to September 30, 2010. 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  noncontrolling  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 SIX MONTHS ENDED JUNE 30, 2009 WITH THE SIX MONTHS ENDED JUNE
30, 2008

Net cash provided by operating activities for the six months ended June 30, 2009
was approximately  $39.3 million compared with $32.6 million for the same period
in 2008.  Cash flow  increases came primarily from payment by our VIE of prepaid
rent for one year with respect to the Ciena lease  termination in 2007. See Note
3 above for further discussion of this transaction.

Net cash  provided by (used in)  investing  activities  was  approximately  $3.6
million  and ($22.4)  million  for the six months  ended June 30, 2009 and 2008,
respectively.  Cash provided by investing activities during the six months ended
June  30,  2009  related  principally  to the  reimbursement  of  investment  in
marketable  securities  from our VIE through  restricted  cash. Net cash used in
investing  activities  during  the  six  months  ended  June  30,  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 $2.3 million.

Net cash used in financing  activities was  approximately  $42.9 million for the
six months ended June 30, 2009 compared with approximately $33.1 million for the
six months ended June 30, 2008. During the first six months of 2009, we financed
approximately $23.1 million in short-term debt, received $15 million from a loan
with our VIE, paid  approximately  $38.5 million towards  outstanding debt, paid
approximately  $34.2 million of  distributions to  noncontrolling  interests and
paid approximately $8.3 million of dividends to common stockholders.  During the
same period in 2008, we financed approximately $22.4 million in short-term debt,
received   approximately  $8.2  million  from  our  line  of  credit,   received
approximately $0.7 million from stock option exercises, paid approximately $26.2
million  towards   outstanding  debt,  paid   approximately   $31.2  million  of
distributions to noncontrolling interests and paid approximately $7.0 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),  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 with
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  noncontrolling  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.  Furthermore,  FFO is not comparable to similarly
entitled items reported by other REITs that do not define FFO exactly as we do.

                                     - 21 -
<PAGE>

FFO for the three and six months ended June 30, 2009 and 2008,  as reconciled to
net income, are summarized in the following table:

<TABLE>
<CAPTION>
                                                    Three Months Ended June 30,                    Six Months Ended June 30,
                                             -----------------------------------------     -----------------------------------------
                                                    2009                   2008                   2009                   2008
                                             -----------------------------------------     -----------------------------------------
                                                       (dollars in thousands)                        (dollars in thousands)
<S>                                             <C>                    <C>                    <C>                    <C>
Net income                                       $ 7,189                $ 6,837                $12,823                $15,958
Add:
  Depreciation and amortization of real estate(1)  7,054                  6,275                 13,530                 12,488
Less:
  Noncontrolling interests in joint ventures         (54)                   (63)                   (94)                  (174)
                                             ------------------     ------------------     ------------------     ------------------
FFO                                              $14,189                $13,049                $26,259                $28,272
                                             ==================     ==================     ==================     ==================
</TABLE>

(1)  Includes our portion of  depreciation  and  amortization of real estate and
     leasing   commissions  from  our  unconsolidated   joint  venture  totaling
     approximately  $60 and $189 for the three  months  ended June 30,  2009 and
     2008,  respectively,  and $119 and $379 for the six  months  ended June 30,
     2009 and 2008,  respectively.  Also  includes our  amortization  of leasing
     commissions of approximately  $660 and $404 for the three months ended June
     30,  2009 and 2008,  respectively,  and  $1,132 and $805 for the six months
     ended  June 30,  2009  and  2008,  respectively.  Amortization  of  leasing
     commissions  is included in the property  operating,  maintenance  and real
     estate  taxes  line  item  in  the  condensed  consolidated  statements  of
     operations.

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 -


<PAGE>


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 June 30, 2009. 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 June 30, 2009 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 June 30, 2009 will be paid upon maturity.

<TABLE>
<CAPTION>

                                      Six Months           Year Ending December 31,
                                      Remaining -----------------------------------------------
                                        2009       2010        2011         2012        2013     Thereafter    Total     Fair Value
                                    ------------------------------------------------------------------------------------------------
                                                                         (dollars in thousands)
 Fixed Rate Debt:
<S>                                   <C>        <C>         <C>         <C>         <C>         <C>        <C>         <C>
   Secured notes payable               $6,378     $13,328     $14,109     $14,935     $81,269     $203,438   $333,457    $479,970
   Weighted average interest rate       5.74%       5.74%       5.74%       5.74%       5.74%        5.74%

 Variable Rate Debt:
   Unsecured debt                      $3,892        -           -           -           -           -         $3,892      $3,892
   Weighted average interest rate       2.09%
</TABLE>

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 June 30, 2009.  The only variable
debt that we had as of June 30, 2009 was approximately  $3.9 million owed to the
Heritage  Bank of Commerce.  This  represented  approximately  1.1% of the total
$337.3  million  of  outstanding  debt as of June 30,  2009.  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 June 30,  2009,  a 1%
increase  or decrease in interest  rates on our  approximately  $3.9  million of
floating rate debt would decrease or increase,  respectively,  earnings and cash
flows for the six-month period then ended by approximately  $20,000, 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 -

<PAGE>


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 June 30, 2009.

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.


                                     - 24 -

<PAGE>


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The  discussion of legal  proceedings is  incorporated  herein by reference from
Part I "Item 1. - Notes to Condensed  Consolidated Financial Statements - Note 9
- 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 annual report on Form 10-K for the year
ended  December  31, 2008 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     a)   The 2009 Annual Meeting of Stockholders of the Company was held on May
          20, 2009 in which  proxies  representing  21,020,016  shares of common
          stocks,  or 96.7% of the total  outstanding  shares,  were present and
          voted.

     b)   At the 2009 Annual Meeting of Stockholders,  Carl E. Berg,  William A.
          Hasler, Lawrence B. Helzel, Raymond V. Marino and Martin S. Roher were
          elected as directors for the ensuing year, all of whom were serving on
          the board of directors at the time of the meeting.

     c)   The following proposals were voted upon at the meeting:

          Proposal No. 1: Election of Directors
<TABLE>
<CAPTION>

                                         Total Vote for Each      Total Vote Withheld
          Directors                          Director              from Each Director         Total Abstentions
          ---------------------------- ----------------------     ----------------------    ----------------------
<S>      <C>                               <C>                       <C>                             <C>
          Carl E. Berg                      20,344,655                  675,361                       -
          William A. Hasler                 19,983,900                1,036,116                       -
          Lawrence B. Helzel                20,158,917                  861,099                       -
          Raymond V. Marino                 20,551,889                  468,127                       -
          Martin S. Roher                   20,105,313                  914,703                       -
</TABLE>


Proposal No. 2:  Ratification  of the selection of the accounting  firm of Burr,
Pilger & Mayer, LLP as the Company's  independent  registered  public accounting
firm for the year ending December 31, 2009. There were 20,994,604 votes in favor
of the proposal, 8,847 votes against the proposal and 16,565 abstentions.

ITEM 6. EXHIBITS

     10.56    Heritage Bank of Commerce Revolving Credit Loan Agreement
     10.56.1  Heritage  Bank of Commerce  Revolving  Credit Loan Change in Terms
              Agreement, dated April 17, 2008
     10.56.2  Heritage  Bank of  Commerce Revolving Credit Loan  Change in Terms
              Agreement, dated June 5, 2009
     10.57    M&M Real  Estate  Control &  Restructuring,  LLC Promissory  Note,
              dated April 14, 2009
     10.58    M&M Real  Estate  Control &  Restructuring,  LLC Promissory  Note,
              dated April 21, 2009
     10.59    M&M Real  Estate  Control &  Restructuring,  LLC Promissory  Note,
              dated July 1, 2009
     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

                                     - 25 -


<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: August 7, 2009                      By:    /s/ Carl E. Berg
                                             -----------------------------------
                                             Carl E. Berg
                                             Chief Executive Officer


Date: August 7, 2009                      By:    /s/ Wayne N. Pham
                                             -----------------------------------
                                             Wayne N. Pham
                                             Vice President of Finance
                                             (Principal Accounting Officer and
                                             Duly Authorized Officer)

                                     - 26 -