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 EXCHANGE
     ACT OF 1934

                  For the quarterly period ended March 31, 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
    incorporation or organization)                        Identification No.)

         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 [ ] 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 May 8, 2009, there were 21,748,211 shares of common stock outstanding, par
value $.001 per share.


<PAGE>


                          MISSION WEST PROPERTIES, INC.

                                    FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2009


<TABLE>
<CAPTION>
                                      INDEX

                                                                                                                     Page
<S>          <C>                                                                                                    <C>
Part I        Financial Information

   Item 1.    Condensed Consolidated Financial Statements:

              Condensed Consolidated Balance Sheets as of March 31, 2009 (unaudited)
              and December 31, 2008...................................................................................2

              Condensed Consolidated Statements of Operations for the three
              months ended March 31, 2009 and 2008 (unaudited)........................................................3

              Condensed Consolidated Statements of Cash Flows for the
              three months ended March 31, 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 6.    Exhibits...............................................................................................25

   Signatures........................................................................................................26
</TABLE>

   Exhibits
               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>
                                                                                    March 31, 2009         December 31, 2008
                                                                                 ---------------------   ----------------------
                                                                                     (unaudited)
                                     ASSETS
Investments in real estate:
<S>                                                                                  <C>                     <C>
    Land                                                                              $  320,911              $  320,911
    Buildings and improvements                                                           799,469                 799,471
    Real estate related intangible assets                                                  3,240                   3,240
                                                                                 ---------------------   ----------------------
       Total investments in properties                                                 1,123,620               1,123,622
    Accumulated depreciation and amortization                                           (185,987)               (180,043)
                                                                                 ---------------------   ----------------------
       Net investments in properties                                                     937,633                 943,579
    Investment in unconsolidated joint venture                                             3,832                   3,768
                                                                                 ---------------------   ----------------------
       Net investments in real estate                                                    941,465                 947,347
Cash and cash equivalents                                                                      -                       -
Restricted cash                                                                           22,048                  39,478
Restricted investment in marketable securities                                             4,078                       -
Investment in marketable securities                                                            -                   3,368
Deferred rent receivables                                                                 18,164                  17,841
Other assets, net                                                                         26,114                  26,251
                                                                                 ---------------------   ----------------------
       Total assets                                                                   $1,011,869              $1,034,285
                                                                                 =====================   ======================

                             LIABILITIES AND EQUITY
Liabilities:
    Mortgage notes payable                                                            $  327,933              $  330,908
    Mortgage note payable (related parties)                                                8,639                   8,761
    Revolving line of credit                                                               5,456                  13,079
    Interest payable                                                                       1,583                   1,596
    Security deposits                                                                      5,122                   5,272
    Deferred rental income                                                                 5,735                   3,964
    Dividends and distributions payable                                                   21,055                  21,055
    Accounts payable and accrued expenses                                                 20,063                  17,747
                                                                                 ---------------------   ----------------------
       Total liabilities                                                                 395,586                 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,
       21,748,211 and 19,748,211 shares issued and outstanding
       at March 31, 2009 and December 31, 2008                                                22                      20
   Additional paid-in capital                                                            169,415                 154,412
   Distributions in excess of accumulated earnings                                       (22,932)                (20,014)
                                                                                 ---------------------   ----------------------
      Total stockholders' equity                                                         146,505                 134,418
 Noncontrolling interests                                                                469,778                 497,485
                                                                                 ---------------------   ----------------------
        Total equity                                                                     616,283                 631,903
                                                                                 ---------------------   ----------------------
        Total liabilities and equity                                                  $1,011,869              $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 March 31,
                                                           ---------------------------------------
                                                                             -
                                                                 2009                2008
                                                           ------------------ --------------------
Operating revenues:
<S>                                                          <C>                <C>
   Rental revenue from real estate                               $20,655            $18,996
   Tenant reimbursements                                           4,800              3,583
   Lease termination income                                            -              1,921
   Other income                                                      320                228
                                                           ------------------ --------------------
        Total operating revenues                                  25,775             24,728
                                                           ------------------ --------------------
Operating expenses:
   Property operating, maintenance and real estate taxes           5,952              4,887
   General and administrative                                        531                673
   Depreciation and amortization of real estate                    5,944              5,623
                                                           ------------------ --------------------
        Total operating expenses                                  12,427             11,183
                                                           ------------------ --------------------

        Operating income                                          13,348             13,545

Other income (expenses):
   Equity in earnings of unconsolidated joint venture                 89                382
   Interest and dividend income                                      (59)               558
   Unrealized loss from investment                                (2,757)                 -
   Interest expense                                               (4,806)            (4,928)
   Interest expense - related parties                               (181)              (436)
                                                           ------------------ --------------------
        Net income                                                 5,634              9,121

Net income attributable to noncontrolling interests               (4,202)            (7,239)
                                                           ------------------ --------------------
Net income attributable to common stockholders                   $ 1,432            $ 1,882
                                                           ================== ====================

Net income per common share to common stockholders:
   Basic                                                         $0.07               $0.10
                                                           ================== ====================
   Diluted                                                       $0.07               $0.10
                                                           ================== ====================
Weighted average shares of common stock outstanding (basic)   21,614,878          19,667,605
                                                           ================== ====================
Weighted average shares of common stock outstanding (diluted) 21,770,489          19,667,605
                                                           ================== ====================
</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>
                                                                                                   Three months ended March 31,
                                                                                              --------------------------------------
                                                                                                     2009                2008
                                                                                              ------------------- ------------------
Cash flows from operating activities:
<S>                                                                                                <C>                 <C>
     Net income                                                                                     $ 5,634             $ 9,121
     Adjustments to reconcile net income to net cash provided by operating activities:
            Depreciation and amortization of real estate and in-place leases                          5,944               5,623
            Unrealized loss from restricted investment in marketable securities                       2,757                   -
            Dividend income from restricted investment in marketable securities                        (503)                  -
            Equity in earnings of unconsolidated joint venture                                          (89)               (382)
            Distributions from unconsolidated joint venture                                              25                 450
            Interest earned on restricted cash                                                          (44)               (487)
            Lease termination fee related to restricted cash                                         10,864               1,579
            Stock-based compensation expense                                                             25                 145
            Other                                                                                         3                  29
     Changes in operating assets and liabilities:
            Deferred rent                                                                              (323)               (706)
            Other assets                                                                                138              (1,420)
            Interest payable                                                                            (13)                (11)
            Security deposits                                                                          (150)                 39
            Deferred rental income                                                                    1,771               1,473
            Accounts payable and accrued expenses                                                     2,316               3,307
                                                                                              ------------------- ------------------
     Net cash provided by operating activities                                                       28,355              18,760
                                                                                              ------------------- ------------------

Cash flows from investing activities:
     Improvements to real estate assets                                                                   -                (221)
     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                                                3,645                   -
                                                                                              ------------------- ------------------
     Net cash provided by (used in) investing activities                                              3,645             (20,249)
                                                                                              ------------------- ------------------

Cash flows from financing activities:
    Principal payments on mortgage notes payable                                                     (2,975)             (2,746)
    Principal payments on mortgage note payable (related parties)                                      (122)               (112)
    Proceeds from real estate purchase financing (related parties)                                        -              19,316
    Proceeds from note payable (related parties)                                                     10,775               3,000
    Payment on note payable (related parties)                                                       (10,775)             (3,000)
    Payment on line of credit                                                                        (7,623)                  -
    Payment of loan fees and costs                                                                        -                 (18)
    Distributions to noncontrolling interests                                                       (17,330)            (13,885)
    Dividends paid to common stockholders                                                            (3,950)             (3,146)
                                                                                              ------------------- ------------------
     Net cash used in financing activities                                                          (32,000)               (591)
                                                                                              ------------------- ------------------
     Net decrease in cash and cash equivalents                                                            -              (2,080)
Cash and cash equivalents, beginning of period                                                            -              23,691
                                                                                              ------------------- ------------------
Cash and cash equivalents, end of period                                                            $     -             $21,611
                                                                                              =================== ==================
Supplemental information:
    Cash paid for interest                                                                          $ 4,920             $ 5,060
                                                                                              =================== ==================
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                                          $14,978             $    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 March 31, 2009,  the Company owns a controlling  general  partnership
     interest of 23.79%,  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 20.53%
     general  partnership  interest in the  operating  partnerships,  taken as a
     whole, on a consolidated weighted average basis.

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

     The  Company  has  elected to be taxed as a real  estate  investment  trust
     ("REIT") under the Internal Revenue Code of 1986, as amended.  Accordingly,
     no  provision  has been made for income  taxes for the three  months  ended
     March 31, 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 March 31, 2009, their  consolidated
     results of  operations  for the three months ended March 31, 2009 and 2008,
     and their cash flows for the three  months  ended  March 31, 2009 and 2008.
     All   significant   inter-company   balances   have  been   eliminated   in
     consolidation.  The condensed consolidated financial statements as of March
     31, 2009 and for the three months ended March 31, 2009 and 2008 and related
     footnote disclosures are unaudited. The results of operations for the three
     months ended March 31, 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 March  31,  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.

                                     - 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 an
     amendment  to SFAS 123,  "Accounting  for  Stock-Based  Compensation,"  and
     supersedes  Accounting  Principles  Board Opinion No. 25,  "Accounting  for
     Stock Issued to Employees" ("APB 25"). SFAS 123R is applicable to any award
     that is settled or measured in stock,  including stock options,  restricted
     stock, stock appreciation  rights, stock units, and employee stock purchase
     plans.  At March 31,  2009,  the Company had one  stock-based  compensation
     plan.  The adoption of this standard did not have a material  effect on the
     Company's condensed  consolidated  statements of operations,  cash flows or
     financial position.

     In  the  first  quarter  of  2009,  the  Company's  Compensation  Committee
     rescinded the options to purchase a total of 650,000 shares of common stock
     granted to an employee in November  2008.  The  rescission was made because
     the option grant exceeded the maximum number of options that can be granted
     by the Company in any calendar year under its 2004 Equity Incentive Plan.

     In the first quarter of 2009,  stock options to purchase  500,000 shares of
     common stock were granted to one employee.  Of this total grant, options to
     purchase  175,000 shares vested  immediately,  options to purchase  100,000
     shares vest monthly for nine months and options to purchase  225,000 shares
     vest  monthly  for 36 months,  subject  to  continued  employment  with the
     Company.  This option grant has a term of six years from the date of grant,
     subject to earlier  termination in certain events related to termination of
     employment with the Company. The option was granted at an exercise price of
     $5.99 per share.  The estimated fair value of the options granted was $0.14
     per share on the date of grant using the Black-Scholes option pricing model
     with the following  assumptions:  dividend  yield of 13.36%,  volatility of
     23.77%,  risk free rates of 1.83% and an  expected  life of 5.5 years.  The
     options were granted at the fair market value on the date of grant and were
     approved by the Compensation Committee.

     In the first quarter of 2009,  options to purchase 200,000 shares of common
     stock held by an employee of the Company expired.

     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 canceled                    (200,000)             $9.51
                                               ---------------
          Balance, March 31, 2009                3,632,500              $9.13
                                               ===============
</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 $25 and $145 of expense
     for the three  months  ended  March 31,  2009 and 2008,  respectively,  for
     share-based compensation relating to grants of stock options.

     As of March 31, 2009, the total amount of  unrecognized  compensation  cost
     related to unvested share-based compensation arrangements granted under the
     compensation  plan was  approximately  $515.  This cost is  expected  to be
     recognized over a weighted-average period of 2.43 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.

                                     - 6 -

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

     The following table presents a reconciliation  of the December 31, 2008 and
     March 31,  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                                                                     1,432                  4,202              5,634
    Amortization of previously granted share awards                 25                                                          25
    Conversions of operating partnership units         2        14,978                                  (14,980)                 -
    Cash dividends/distributions                                                  (4,350)               (16,929)           (21,279)
                                                   ---------------------------------------------------------------------------------
    Balance, March 31, 2009                          $22      $169,415          ($22,932)              $469,778           $616,283
                                                   =================================================================================
</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  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 March 31, 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
     In  September  2006,  the FASB issued SFAS 157,  "Fair Value  Measurements"
     ("SFAS  157").  SFAS 157 defines fair value,  establishes  a framework  for
     measuring fair value and expands disclosures about fair value measurements.
     SFAS 157 applies  under other  accounting  pronouncements  that  require or
     permit  fair  value  measurements.  Accordingly,  this  statement  does not
     require  any new fair  value  measurements.  This  guidance  was  issued to
     increase  consistency and  comparability in fair value  measurements and to
     expand  disclosures  about fair value  measurements.  SFAS  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.

     In February  2007,  the FASB issued  SFAS 159,  "The Fair Value  Option for
     Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 provides
     companies  with  an  option  to  report  selected   financial   assets  and
     liabilities  at  fair  value.  SFAS  159's  objective  is  to  reduce  both
     complexity in accounting  for financial  instruments  and the volatility in
     earnings caused by measuring  related assets and  liabilities  differently.
     SFAS 159 is  effective  for  financial  statements  issued for fiscal years
     beginning after

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


     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. 51." 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
     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.

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  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, is receiving $818 from
     July 2008 through  June 2009,  and will receive $849 from July 2009 through
     June 2010,  $881 from July 2010  through  June 2011 and $915 from July 2011
     through  December  2011.  Based upon the provisions of FIN 46R, the Company
     determined that M&M is a 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.

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

     -    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 $22,048 on March 31, 2009. The entire
     amount  represents  cash held by M&M Real Estate  Control &  Restructuring,
     LLC, 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.

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 March 31,
     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 $4,078
     on March 31,  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 March 31,
     2009, the Company  recorded net  unrealized  loss of  approximately  $2,757
     related to the decrease in fair value of the marketable securities.

6.   STOCK TRANSACTIONS

     During the three months ended March 31, 2009, one limited partner exchanged
     a total of  2,000,000  O.P.  units for  2,000,000  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  $14,978 from noncontrolling  interests
     to  additional  paid-in  capital.  Neither the  Company  nor the  operating
     partnerships received any proceeds from the issuance of the common stock in
     exchange for O.P. units.

7.   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 March 31,
                                                         ---------------------------------
                                                               2009              2008
                                                         ---------------    --------------
<S>                                                       <C>               <C>
         Weighted average shares outstanding (basic)       21,614,878        19,667,605
         Incremental shares from assumed option exercise      155,611                 -
                                                         ---------------    --------------
         Weighted average shares outstanding (diluted)     21,770,489        19,667,605
                                                         ===============    ==============
</TABLE>

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

     At March 31,  2009,  outstanding  options to purchase  2,427,500  shares of
     common stock were excluded from the  computation  of diluted net income per
     share under the treasury  stock method for the three months ended March 31,
     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 March 31, 2009 and 2008 was 83,526,965
     and 85,528,215, respectively.

8.   RELATED PARTY TRANSACTIONS

     As of March 31, 2009, the Berg Group owned  75,902,384 O.P. units. The Berg
     Group's  combined  ownership of O.P. units and shares of common stock as of
     March 31, 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 March 31, 2009,  debt in the amount of  approximately  $8,639 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  $167 and $176 for the
     three months ended March 31, 2009 and 2008, respectively.

     During  the first  quarter  of 2009,  debt in the  amount of  approximately
     $10,760 was borrowed  and repaid to the Berg Group under a short-term  note
     payable  established  on  January  8, 2009 in  connection  with the  fourth
     quarter  2008  dividend  distributions.   The  note  payable  interest  was
     calculated at LIBOR plus 2%. Interest  expense  incurred in connection with
     the loan was approximately $14 for the three months ended March 31, 2009.

     During the first  three  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  interest.  These  related  tenants
     contributed  approximately  $293 and $307 in rental  revenue  for the three
     months ended March 31, 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  approximately  $30 and $24 for the
     three months ended March 31, 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

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

     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. On July 5, 2006,  RPC filed a  cross-complaint  in
     the case seeking  partnership  distributions to which the Company demurred.
     The  Court   sustained  the   Company's   demurrer  with  leave  to  amend.
     Subsequently,  RPC filed an amended  complaint  and the  Company  submitted
     another demurrer seeking  dismissal of the claims on statute of limitations
     grounds.  On February 20, 2007, the Court overruled the Company's demurrer.
     The Company sought a writ from the California State Court of Appeal for the
     Sixth  District to direct the lower court to reverse its decision,  but the
     petition for the writ was denied. In April 2008, the Company filed a motion
     for summary judgment in the California  Superior Court which was denied. In
     October 2008, a motion filed by RPC for summary  judgment in the California
     Superior  Court was denied.  A trial in the  California  Superior  Court is
     scheduled  to commence  in late 2008.  A trial in the  California  Superior
     Court commenced in February 2009 and is expected to conclude in May 2009.

     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  interest  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  $0.2 million in the first
     three months of 2009 and 2008. As of March 31, 2009,  accumulated cash flow
     distributions  from  Hellyer LP totaling  approximately  $5.5  million 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 has exercised
     the 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 March 31, 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 March 31,
     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.

                                     - 11 -

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

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

     ASSET DISPOSITIONS SUBJECT TO CERTAIN CONDITIONS
     The  Company has  entered  into sales  agreements  with  unrelated  parties
     subject to  numerous  material  conditions,  including  but not  limited to
     re-zoning of the property and negotiating certain agreements with the local
     municipality  acceptable to the buyer. As a result of the conditions agreed
     to by the Company and the respective  buyers,  these assets do not meet the
     criteria  set forth in SFAS 144 to be  classified  as assets held for sale.
     The following  summarizes  the assets for which the Company has an executed
     sales  contract  as of March 31,  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 April 9, 2009,  the Company paid  dividends of $0.20 per share of common
     stock to all common  stockholders  of record as of March 31,  2009.  On the
     same date, the operating partnerships paid a distribution of $0.20 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 $21,055.

     On April 9, 2009,  the Company issued a short-term  note for  approximately
     $12,360  to the  Berg  Group in  connection  with the  first  quarter  2009
     dividend  distributions.  The note  interest rate was LIBOR plus 2% and was
     fully repaid in April 2009.

     In April 2009,  the Company  issued two  short-term  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. The proceeds were used to pay an outstanding  short-term
     note issued to the Berg Group and general corporate purposes.

                                     - 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 months ended March 31, 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 March 31,
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 March 31, 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 first  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 18.0% at the end of the first quarter
of 2009.  Total  vacant R&D square  footage in Silicon  Valley at the end of the
first quarter of 2009  amounted to  approximately  27.8 million  square feet, of
which 17.2%,  or 4.8 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 three months of 2009 there was total negative net absorption of
approximately  2.6 million  square feet.  Also  according to the BT Report,  the
average  asking  market rent per square foot at the end of the first  quarter of
2009 was $1.17 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 March 31, 2009 was 65.3% compared with 64.4% at March 31,
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  140,000 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 will
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 March 31, 2009,  we had  approximately  $4.1
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 MONTHS ENDED MARCH 31, 2009 WITH THE THREE MONTHS ENDED
MARCH 31, 2008

As of  March  31,  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.

Rental  revenue  from real  estate for the three  months  ended  March 31,  2009
compared with the same three-month period in 2008 was as follows:

<TABLE>
<CAPTION>
                                  Three Months Ended March 31,
                                 --------------------------------
                                                                                           % Change by
                                     2009              2008              $ Change         Property Group
                                 -------------     --------------     ---------------     ---------------
                                               (dollars in thousands)

<S>                                <C>               <C>                 <C>                   <C>
       Same Property (1)            $20,327           $18,887             $1,440                7.6%
       2008 Acquisitions                328               109                219              200.0%
                                 -------------     --------------     ---------------
          Total                     $20,655           $18,996             $1,659                8.7%
                                 =============     ==============     ===============
</TABLE>

(1)  "Same Property" is defined as properties  owned by us prior to 2008 that we
     still owned as of March 31, 2009.

RENTAL REVENUE FROM REAL ESTATE OPERATIONS
For the quarter ended March 31, 2009,  rental revenue from real estate increased
by approximately $1.7 million,  or 8.7%, from $19.0 million for the three months
ended March 31, 2008 to $20.7 million for the three months ended March 31, 2009.
The increase in rental  revenue  resulted  primarily from new leases since March
31,  2008,  renewing  existing  leases at slightly  higher  rental rates and the
absence of  significant  lease  terminations  during the quarter ended March 31,
2009. Our occupancy  rate at March 31, 2009 was  approximately  65.3%,  compared
with 64.4% at March 31, 2008.

LEASE TERMINATION INCOME
We had no lease  termination  fee  income in the first  quarter  of 2009.  Lease
termination   fee  income  for  the  three  months  ended  March  31,  2008  was
approximately  $1.9 million that 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 $0.32 million for the three months ended March 31,
2009 included approximately $0.25 million from management fees and $0.07 million
from miscellaneous  income.  Other income of approximately $0.23 million for the
three months ended March 31, 2008 was from management fees.

EXPENSES FROM OPERATIONS
Property  operating  expenses and real estate taxes during the first  quarter of
2009 increased by  approximately  $1.1 million,  or 21.8%,  from $4.9 million to
$6.0 million for the three  months ended March 31, 2008 and 2009,  respectively.
The increase was  primarily  attributable  to higher real estate tax expense and
property tax refunds in 2008 that did not recur in 2009.  Tenant  reimbursements
increased by  approximately  $1.2 million,  or 34.0%,  from $3.6 million for the
three  months  ended March 31, 2008 to $4.8  million for the three  months ended
March 31, 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.

General and administrative  expenses decreased by approximately ($0.14) million,
or (21.1%), from $0.67 million to $0.53 million for the three months ended March
31, 2008 and 2009,  respectively.  During the three months ended March 31, 2009,
we adjusted stock  compensation  expense relating to consultant share awards and
performance  share awards in the amount of  approximately  ($0.07) million which
did not occur during the three months ended March 31, 2008.

Real estate  depreciation  and amortization  expense  increased by approximately
$0.3  million,  or 5.7%,  from $5.6 million to $5.9 million for the three months
ended  March  31,  2008 and  2009,  respectively.  The  increase  resulted  from
additional tenant improvements since March 31, 2008.

EQUITY IN EARNINGS FROM UNCONSOLIDATED JOINT VENTURE
As of  March  31,  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
March 31, 2009,  we recorded  equity in earnings from the  unconsolidated  joint
venture of approximately $0.09 million compared with equity in earnings of $0.38
million for the same period in 2008. The decrease was  attributable  to the sale
of two R&D  properties  subsequent to March 31, 2008. The occupancy rate for the
properties owned by this joint venture at March 31, 2009 and 2008 was 100%.

                                     - 17 -
<PAGE>

INTEREST AND DIVIDEND INCOME
Interest and dividend  income  decreased by  approximately  ($0.6)  million,  or
(110.6%),  from $0.6 million to ($0.06) million for the three months ended March
31, 2008 and 2009,  respectively.  The decrease was  primarily due to lower cash
reserve on hand in 2009 and the reversal of an accrual from 2008.

INTEREST EXPENSE
Interest expense was  approximately  $4.8 million and $4.9 million for the three
months ended March 31, 2009 and 2008,  respectively.  Interest  expense (related
parties)  decreased  by  approximately  ($0.2)  million,  or (58.5%),  from $0.4
million for the three  months ended March 31, 2008 to $0.2 million for the three
months  ended March 31, 2009 due to higher  related  party debt  incurred in the
quarter ended March 31, 2008. Total debt outstanding, including debt due related
parties,  decreased by  approximately  ($21.2) million,  or (5.8%),  from $363.2
million as of March 31, 2008 to $342.0 million as of March 31, 2009.

NET INCOME  ATTRIBUTABLE TO COMMON  STOCKHOLDERS AND NET INCOME  ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
Net income to common stockholders  decreased by approximately ($0.5) million, or
(23.9%),  from $1.9  million for the three  months  ended March 31, 2008 to $1.4
million for the same period in 2009.  The  noncontrolling  interests  portion of
income decreased by approximately ($3.0) million, or (42.0%),  from $7.2 million
for the three  months  ended March 31, 2008 to $4.2 million for the three months
ended March 31, 2009.  The decrease in the  quarter's net income for both common
stockholders  and  noncontrolling  interests  was primarily due to an unrealized
loss from  investment,  higher operating  expenses,  lower equity in earnings of
unconsolidated joint venture and lower interest and dividend income.

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   interest  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 March 31, 2009 and 2008, respectively.

CHANGES IN FINANCIAL CONDITION

Total  stockholders'  equity, net, increased by approximately $12.1 million from
December 31, 2008. We obtained additional capital from the issuance of 2,000,000
shares of our common  stock for the  exchange  of O.P.  units,  which  increased
additional paid-in capital by approximately $15.0 million.  Stockholders' equity
was  reduced  during  the first  quarter of 2009 by  distributions  in excess of
accumulated earnings of approximately ($2.9) 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  140,000  rentable square feet scheduled to expire during the
remainder of 2009 or an equivalent  amount of our currently  available  space of
approximately  2.8 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 to 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 would 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.

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 March 31, 2009,  restricted cash totaled  approximately $22.0 million. The
entire amount  represents cash 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 under the principles of FIN 46R.
The restricted cash is not available for distribution to stockholders.

DISTRIBUTIONS
On April 9, 2009,  we paid  dividends  of $0.20 per share of common stock to all
common  stockholders  of record  as of March 31,  2009.  On the same  date,  the
operating partnerships paid a distribution of $0.20 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  $21.1  million.  On April 9, 2009, we
issued a short-term  note for  approximately  $12.4 million to the Berg Group in
connection with the first quarter 2009 dividend distributions.  This note had an
interest rate of LIBOR plus 2% and was fully repaid on April 21, 2009.

                                     - 18 -
<PAGE>

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.  We  expect  to renew  the HBC line of  credit  in June  2009 when it
matures.

On January 8, 2009, we issued a short-term note for approximately  $10.8 million
to  the  Berg  Group  in  connection  with  the  fourth  quarter  2008  dividend
distributions.  The note interest rate was LIBOR plus 2% and was fully repaid in
February 2009.

At March 31, 2009, we had total  indebtedness of  approximately  $342.0 million,
including $327.9 million of fixed rate mortgage debt, $5.5 million under the HBC
line of credit and $8.6 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 March 31, 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, Note, Credit
Facility and scheduled  interest  payments of our fixed-rate  and  variable-rate
debt at March  31,  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
                                   ------------- ------------- ------------- -------------- ------------- ------------- ------------
<S>                                  <C>          <C>           <C>            <C>            <C>          <C>           <C>
Principal payments(1)                 $14,950      $13,327       $14,109        $14,935        $81,269      $203,438      $342,028
Interest payments-fixed rate debt(2)   14,326       18,433        17,652         16,826         12,820        62,288       142,345
Interest payments-variable rate debt(3)    25            -             -              -              -             -            25
Operating lease obligations(4)             90           30             -              -              -             -           120
                                   ------------- ------------- ------------- -------------- ------------- ------------- ------------
    Total                             $29,391      $31,790       $31,761        $31,761        $94,089      $265,726      $484,518
                                   ============= ============= ============= ============== ============= ============= ============
</TABLE>

(1)  As of March 31, 2009, 98.4% of our debt was contractually fixed and 1.6% 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 a spread
     that ranged from 1.75% to 2.00% at March 31, 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 sets forth  information  regarding  debt  outstanding as of
March 31, 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                                $  5,456        June 2009        (1)
                                                                                        ------------------

Mortgage Note Payable (related parties) (2) :   5300 & 5350 Hellyer Avenue, San Jose, CA         8,639        June 2013      7.65%
                                                                                        ------------------

Mortgage Notes Payable (2):
Hartford Life Insurance Company                 5981 Optical Court, San Jose, CA               113,774      October 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           80,347      January 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                22,797       August 2025     5.56%


Allianz Life Ins. Co. (Allianz Loan II) (5)     5325-5345 Hellyer Avenue, San Jose, CA         111,015       August 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
                                                                                        ------------------
                                                                                               327,933
                                                                                        ------------------
TOTAL                                                                                         $342,028
                                                                                        ==================
</TABLE>


(1)  Loan  carries a  variable  interest  rate equal to LIBOR  plus  1.75%.  The
     interest  rate at March 31, 2009 was 2.21%.  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 March 31, 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 March 31, 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 March 31,  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 March 31, 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 March 31, 2009, we were
     in compliance with these loan covenants.

                                     - 20 -
<PAGE>


At March 31,  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 $6.40 per share on March 31, 2009) on a fully  diluted  basis,  including the
conversion of all O.P.  units into common stock,  was  approximately  33.2%.  On
March 31, 2009, the last trading day in the quarter, total market capitalization
was approximately $1.03 billion.

At March 31, 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 THREE MONTHS ENDED MARCH 31, 2009 WITH THE THREE MONTHS ENDED
MARCH 31, 2008

Net cash provided by operating  activities  for the three months ended March 31,
2009 was  approximately  $28.4 million  compared with $18.8 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 ($20.2)  million for the three months ended March 31, 2009 and 2008,
respectively.  Cash  provided by  investing  activities  during the three months
ended March 31, 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 three months ended March 31,
2008 related  principally to the acquisition of one R&D property at 5981 Optical
Court in San Jose,  California  and one R&D property at 2904 Orchard  Parkway in
San Jose,  California for approximately  $35.8 million.  The acquisition at 2904
Orchard Parkway was completed as a tax-deferred  exchange transaction  involving
our former R&D  property  at 1170 Morse  Avenue in  Sunnyvale,  California.  The
remaining excess  restricted cash of approximately  $7.7 million was transferred
to our general cash account.  Capital  expenditures for real estate improvements
were approximately $0.2 million.

Net cash used in financing  activities was  approximately  $32.0 million for the
three months ended March 31, 2009 compared with  approximately  $0.6 million for
the three months ended March 31, 2008. During the first three months of 2009, we
financed  approximately  $10.8 million in short-term  debt,  paid  approximately
$21.5 million  towards  outstanding  debt, paid  approximately  $17.3 million to
noncontrolling  interests  and paid  approximately  $4.0 million of dividends to
common stockholders.  During the same period in 2008, we financed  approximately
$22.3  million in  short-term  debt,  paid  approximately  $5.9 million  towards
outstanding debt, paid approximately  $13.9 million to noncontrolling  interests
and paid approximately $3.1 million of dividends to common stockholders.

FUNDS FROM OPERATIONS ("FFO")

FFO is a non-GAAP financial measurement used by real estate investment trusts to
measure and compare operating performance.  As defined by NAREIT, FFO represents
net income (loss) before noncontrolling interest of O.P. unit holders,  computed
in accordance with GAAP,  plus  non-recurring  events other than  "extraordinary
items"  under  GAAP,  excluding  gains  and  losses  from  sales of  depreciable
operating  properties,  plus real estate related  depreciation and amortization,
excluding  amortization of deferred financing costs and depreciation of non-real
estate assets, and after adjustments for  unconsolidated  partnerships and joint
ventures.  FFO does include  impairment  losses for properties held for sale and
held for use. Management considers FFO to be an appropriate supplemental measure
of our operating and financial performance because when compared year over year,
it reflects  the impact to  operations  from trends in occupancy  rates,  rental
rates, operating costs, general and administrative  expenses and interest costs,
providing a perspective not immediately  apparent from net income.  In addition,
management  believes that FFO provides  useful  information  about our financial
performance  when compared 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 months  ended March 31, 2009 and 2008,  as  reconciled  to net
income to common stockholders, are summarized in the following table:

<TABLE>
<CAPTION>
                                                    Three Months Ended March 31,
                                             -----------------------------------------
                                                    2009                   2008
                                             ------------------     ------------------
                                                        (dollars in thousands)
<S>                                             <C>                    <C>
Net income                                       $ 5,634                $ 9,121
Add:
  Depreciation and amortization of real estate(1)  6,475                  6,213
Less:
  Noncontrolling interests in joint ventures         (39)                  (111)
                                             ------------------     ------------------
FFO                                              $12,070                $15,223
                                             ==================     ==================
</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 March 31, 2009 and
     2008,  respectively.  Also includes our amortization of leasing commissions
     of  approximately  $472 and $401 for the three  months ended March 31, 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.

The  decrease in FFO  year-over-year  was  primarily  due to a  recording  of an
unrealized loss from investment in 2009.

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 March 31, 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  March  31,  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 March 31, 2009 will be paid upon maturity.


<TABLE>
<CAPTION>
                                         Nine
                                        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                 $9,494     $13,327     $14,109     $14,935     $81,269     $203,438   $336,572    $488,143
   Weighted average interest rate         5.74%       5.74%       5.74%       5.74%       5.74%        5.74%

 Variable Rate Debt:
   Unsecured debt                        $5,456        -           -           -           -           -         $5,456      $5,456
   Weighted average interest rate         2.21%
</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 March 31, 2009.  The only variable
debt that we had as of March 31, 2009 was approximately $5.5 million owed to the
Heritage  Bank of Commerce.  This  represented  approximately  1.6% of the total
$342.0  million of  outstanding  debt as of March 31,  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 March 31,  2009,  a 1%
increase  or decrease in interest  rates on our  approximately  $5.5  million of
floating rate debt would decrease or increase,  respectively,  earnings and cash
flows for the  three-month  period  then ended by  approximately  $14,000,  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 March 31, 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 and the risk factor listed below, 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 6.  Exhibits

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: May 8, 2009                       By:    /s/ Carl E. Berg
                                           -------------------------------------
                                           Carl E. Berg
                                           Chief Executive Officer


Date: May 8, 2009                       By:    /s/ Wayne N. Pham
                                           -------------------------------------
                                           Wayne N. Pham
                                           Vice President of Finance
                                           (Principal Accounting Officer and
                                           Duly Authorized Officer)

                                     - 26 -