Filed Pursuant to Rule 424(b)(3)
Registration No. 333-133335
PROSPECTUS
86,088,095 Shares of Common Stock
$.001 par value
MISSION WEST PROPERTIES, INC.
10050 Bandley Drive
Cupertino, California 95014-2102
(408) 725-0700
This prospectus relates to the public offering of up to 86,088,095 shares
of common stock which we may issue to the holders of units of limited
partnership interests, or O.P. units, in our four controlled operating
partnerships, in exchange or redemption for an equal number of O.P. units under
the terms of existing agreements between us and these holders who we refer to as
the "selling stockholders." We will not receive any proceeds from any possible
sale of the common shares by the selling stockholders. For information regarding
the selling stockholders, see "Selling Stockholders" beginning on page 2 of this
prospectus.
We are registering the shares of common stock being offered by this
prospectus in order to permit the selling stockholders to sell them without
restriction, in the open market or otherwise. However, the registration of such
shares does not necessarily mean that any of the O.P. units will be submitted
for exchange or redemption or that any of the shares of common stock to be
issued in exchange or redemption for the O.P. units will be offered or sold by
the selling stockholders.
The selling stockholders may offer their shares of common stock through
public or private transactions, on or off the United States exchanges, at
prevailing market prices, or at privately negotiated prices. This offering is
not being underwritten.
The common stock is listed on the American Stock Exchange and the Pacific
Exchange and trades on these stock exchanges with the symbol "MSW". On April 28,
2006 the closing price of one share of common stock, as quoted on the American
Stock Exchange, was $11.90.
----------------
THE SHARES OF COMMON STOCK INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 1.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SHARES OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is April 28, 2006.
Table of Contents
Page
Our Company...................................................................................... 1
Risk Factors..................................................................................... 1
Use of Proceeds.................................................................................. 2
The Selling Stockholders......................................................................... 2
Plan of Distribution............................................................................. 4
Where You Can Find More Information.............................................................. 5
Incorporation by Reference....................................................................... 6
Legal Matters.................................................................................... 6
Recent Developments.............................................................................. 6
Experts.......................................................................................... 7
In this prospectus, "Mission West," "we," "us," and "our" refer to Mission
West Properties, Inc.
You should rely only on information contained or incorporated by reference
in this prospectus. We have not authorized any person to provide you with
information that differs from what is contained or incorporated by reference in
this prospectus. If any person does provide you with information that differs
from what is contained or incorporated by reference in this prospectus, you
should not rely on it. This prospectus is not an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates, or an offer of solicitation in any jurisdiction where offers
or sales are not permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, even though this prospectus may
be delivered or shares may be sold under this prospectus on a later date.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus contain 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 Litigation 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 us, are generally
identifiable by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project" or similar expressions.
Our ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material adverse
effect on our operations and future prospects include, but are not limited to,
changes in economic conditions generally and the real estate market
specifically, legislative or regulatory provisions affecting us (including
changes to laws governing the taxation of Real Estate Investment Trusts
("REITs")), availability of capital, interest rates, competition, supply of and
demand for office and industrial properties in our current and proposed market
areas, tenant defaults and bankruptcies, and general accounting principles,
policies and guidelines applicable to REITs. These risks and uncertainties,
together with the other risks incorporated by reference under "Risk Factors"
below or described from time to time in our reports and documents filed with the
Securities and Exchange Commission (the "SEC" or the "Commission"), should be
considered in evaluating forward-looking statements, and undue reliance should
not be placed on such statements.
Moreover, neither we nor any other person assumes responsibility for the
accuracy and completeness of these statements. We undertake no obligation to
update or revise any of the forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law. In light
of these risks, uncertainties and assumptions, the forward-looking events
discussed or incorporated by reference in this prospectus may not occur.
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OUR COMPANY
Mission West acquires, markets, leases, and manages research and
development ("R&D") properties primarily located in the Silicon Valley portion
of the San Francisco Bay Area. As of December 31, 2005, we owned and managed 107
properties totaling approximately 7.8 million rentable square feet through four
limited partnerships, or operating partnerships, for which we are the sole
general partner. R&D 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 properties in the Silicon Valley. For federal income tax
purposes we have operated as a self-managed, self-administered and fully
integrated REIT since fiscal 1999.
In May 1998, Mission West, Carl E. Berg, his brother Clyde J. Berg, certain
members of their respective immediate families, and certain entities in which
Carl E. Berg and/or Clyde J. Berg held controlling or other ownership interests
(collectively referred to as the "Berg Group") and certain other persons,
including John T. Kontrabecki, entered into an acquisition agreement to effect
an UPREIT transaction, which provided among other things, for our acquisition of
interests as the sole general partner in each of the four operating partnerships
named Mission West Properties, L.P., Mission West Properties, L.P. I, Mission
West Properties, L.P. II, and Mission West Properties, L.P. III. In July 1998,
the parties amended the acquisition agreement and agreed to consummate our
acquisition of the general partner interests in each of the operating
partnerships effective for financial and income tax accounting and reporting
purposes as of July 1, 1998. At that time, all existing limited partnership
interests in the operating partnerships were reclassified into 59,479,633 O.P.
units which could be exchanged for shares of our common stock pursuant to the
terms of an exchange rights agreement. Under the terms of the acquisition
agreement, the operating partnerships and we also agreed to enter into a Pending
Projects Acquisition Agreement, which permitted the acquisition by the operating
partnerships of approximately 1.0 million additional rentable square feet upon
the completion and leasing of a number of the pending development projects owned
by certain members of the Berg Group. The acquisition agreement also gave us an
option to acquire, through the operating partnerships, future R&D Property
developments on Silicon Valley land owned by members of the Berg Group under the
terms of the Berg Land Holdings Option Agreement and provided that the Berg
Group members could elect to receive cash or O.P. units upon our exercise of the
option. Since July 1, 1998, we have acquired approximately 3.1 million
additional rentable square feet of R&D properties from the Berg Group under the
Pending Projects Acquisition Agreement and the Berg Land Holdings Option
Agreement for a total cost of approximately $633.0 million. We have issued a
total of 27,962,025 O.P. units and assumed debt totaling approximately $308.0
million to acquire these properties.
Our principal executive offices are located at 10050 Bandley Drive,
Cupertino, California 95014, and our telephone number is (408) 725-0700.
RISK FACTORS
An investment in our common stock is risky. Prior to making a decision
about investing in our common stock, you should carefully consider the specific
risks discussed under Item 1A. "Risk Factors" in our Annual Report on Form 10-K
for the year ended December 31, 2005, filed on March 16, 2006, and in our other
filings with the SEC, which are incorporated by reference in this prospectus,
together with all of the other information contained in this prospectus, any
applicable prospectus supplement, or otherwise incorporated by reference in this
prospectus. The risks and uncertainties described in our SEC filings are not the
only ones facing us. Additional risks and uncertainties not presently known to
us, or that we currently see as immaterial, may also harm our business. If any
of the risks or uncertainties described in the applicable prospectus supplement
or our SEC filings or any such additional risks and uncertainties actually
occur, our business, results of operations, cash flows and financial condition
could be materially and adversely affected. In that case, the trading price of
our common stock could decline, and you might lose all or part of your
investment.
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USE OF PROCEEDS
All net proceeds from the sale of the shares of common stock will go to the
stockholders who offer and sell their shares. Accordingly, we will not receive
any of the proceeds from sales of their shares by the selling stockholders.
THE SELLING STOCKHOLDERS
This prospectus relates to the resale of shares of common stock that we
might issue to the selling stockholders in exchange or redemption for O.P. units
they held at the time of the UPREIT transaction or acquired subsequently under
the Pending Projects Acquisition Agreement or the Berg Land Holdings Option
Agreement. Most of the selling stockholders are members of the Berg Group. We
might issue such shares under two alternatives. First, the exchange rights
agreement permits every limited partner in the operating partnerships to tender
O.P. units to us, and, at our election, to receive in exchange common stock on a
one-for-one basis at then-current market value, an equivalent amount of cash, or
a combination of cash and common stock, subject to the 9% overall ownership
limit imposed on non-Berg Group stockholders under our charter document, or the
overall 20% Berg Group ownership limit contained in the acquisition agreement,
as the case may be. This exchange ratio is subject to adjustment for stock
splits, stock dividends, recapitalizations of our common stock and similar types
of corporate actions. In addition, once in each 12-month period beginning each
December 29, the limited partners, other than Carl E. Berg and Clyde J. Berg,
may exercise a put right to sell their O.P. units to the operating partnerships
at a price equal to the average market price of the common stock for the
10-trading day period immediately preceding the date of tender. Upon any
exercise of the put rights, we will have the opportunity for a period of 15 days
to elect to fund the purchase of the O.P. units and purchase additional general
partner interests in the operating partnerships for cash, unless the purchase
price exceeds $1.0 million in the aggregate for all tendering limited partners,
in which case, the operating partnerships or we will be entitled, but not
required, to reduce proportionally the number of O.P. units to be acquired from
each tendering limited partner so that the total purchase price is not more than
$1 million.
Under the exchange rights agreement, the holders of not less than 5% of the
O.P. units are able to request resale registrations of shares of common stock
acquired on exchange of O.P. units on a Form S-3, or any equivalent form of
registration statement. We are obligated to effect no more than two such
registrations in any 12-month period. We are obligated to assist the O.P. Unit
holders in obtaining a firm commitment underwriting agreement for such resale
from a qualified investment-banking firm. If registration on Form S-3, or an
equivalent form, is not available for any reason, we are obligated to effect a
registration of the shares to be acquired on exercise of the exchange rights on
a Form S-11 registration statement, or an equivalent form, in an underwritten
public offering, upon demand by the holders of no fewer than 500,000 O.P. units.
All holders of O.P. units are entitled to participate in such registration. We
have agreed to bear all costs of such registrations other than selling expenses,
including commissions and separate counsels' fees of the O.P. unit holders. We
are not required to effect any registration for resale on Form S-3, or
equivalent form of shares of common stock issuable to the holders of O.P. units
if the request is for less than 250,000 shares.
If we determine, in our sole discretion, that it would be detrimental to us
or our stockholders to offer or sell, or continue to offer or sell, any shares
of common stock under this prospectus, we may deliver to the selling
stockholders a certificate to this effect signed by the President of Mission
West Properties stating that in the good faith judgment of our board of
directors, and specifying a period of between 10 and 120 days in which the
selling stockholders must suspend sales of common stock under this prospectus
(though not necessarily by other means). We may exercise this right just once
during any 12-month period.
A total of 93,398,705 shares of our common stock issuable in exchange for
the O.P. units outstanding at July 1, 1998 and the O.P. units to be issued
pursuant to the pending projects acquisition agreement were registered under the
Securities Act pursuant to a registration statement on Form S-4 filed with the
SEC on May 15, 1998 and declared effective on November 23, 1998 (the "S-4
Registration Statement"). The following table sets forth certain information
regarding the selling stockholders and the shares of common stock beneficially
owned by each of them. Except as otherwise described below, none of the selling
stockholders has held any office with, been employed by, or otherwise had a
material relationship with us or our affiliates within the past three years, and
the address of each selling stockholder is c/o Mission West Properties, Inc.,
10050 Bandley Drive, Cupertino, California 95014.
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Number of Shares
Number of and Percentage of
Shares of Common Shares of Common Stock
Name of Selling Stockholder Stock Beneficially Common Stock Beneficially
Owned before Being Offered Owned after
Offering (1) (2) Offering (1)
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Carl E. Berg(3) 33,646,499 33,646,499 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Clyde J. Berg(4) 19,436,162 19,436,162 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Clyde J. Berg, Trustee 13,252,925 13,252,925 0
1981 Kara Ann Berg Trust
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Berg & Berg Enterprises, LLC(5) 196,428 196,428 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Berg & Berg Enterprises, Inc.(6) 10,789,383 10,789,383 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
West Coast Venture Capital, Inc.(7) 169,131 169,131 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Kara Ann Berg(8) 966,614 965,614 1,000
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Sonya L. O'Rosky 1,890,168 1,890,168 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Sherri L. Zorn 1,740,168 1,740,168 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Thelmer G. Aalgaard 1,891,785 1,854,225 37,560
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Brian Aalgaard 83,291 72,179 11,112
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Myron Crawford 40,000 40,000 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Steve Aberle 17,900 17,900 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Leighton Fargher 30,000 30,000 0
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Michael L. Knapp(9) 243,502 200,114 43,388
- ---------------------------------------------------------- --------------------- ----------------- -------------------
Knapp Investments, L.P. (9) 40,438 31,438 9,000
- ---------------------------------------------------------- --------------------- ----------------- -------------------
JTK Trust 1,755,761 1,755,761 0
2929 Campus Drive, Suite 150
San Mateo, CA 94403
- ---------------------------------------------------------- --------------------- ----------------- -------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission, which generally attribute beneficial ownership of securities to
persons who possess sole or shared voting power and/or investment power
with respect to those securities and include securities which such person
has the right to acquire within 60 days of February 28, 2006. Unless
otherwise indicated, the persons or entities identified in this table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them. Common stock percentage ownership interest
calculations are based on 18,448,791 shares outstanding as of February 28,
2006 and exclude all shares of common stock issuable upon the exercise of
outstanding options other than the shares so issuable within 60 days under
options held by the named person. Based on this determination of beneficial
ownership, all of the persons or entities in the table hold less than one
percent of the common stock before and after the offering.
(2) Assumes O.P. units are exchanged for shares of common stock without regard
to (i) whether the selling stockholder has the right to exchange such O.P.
units for shares of common stock within 60 days of February 28, 2006, and
(ii) certain ownership limit provisions set forth in the Company's Articles
of Amendment and Restatement and the acquisition agreement.
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(3) Carl E. Berg is and has been our Chairman of the Board of Directors and
Chief Executive Officer since 1997. This amount does not include any O.P.
units or shares deemed beneficially owned by Mr. Berg that are held by any
of the Berg Group entities listed in this table. Mr. Berg disclaims
beneficial interest in any shares or O.P. units deemed beneficially owned
by Kara Ann Berg, his daughter, and the 1981 Kara Ann Berg Trust.
(4) Clyde J. Berg is the brother of Carl E. Berg. This amount excludes O.P.
units held by Mr. Berg as trustee of the 1981 Kara Ann Berg Trust and
shares beneficially owned by Sonya L. O'Rosky and Sherri L. Zorn, his
daughters, as to which he disclaims beneficial ownership. This amount does
not include any O.P. units or shares deemed beneficially owned by Mr. Berg
that are held by any of the Berg Group Entities listed in this table.
(5) Berg & Berg Enterprises, LLC is owned 15% by Carl E. Berg and 85% by the
1981 Kara Ann Berg Trust.
(6) Carl E. Berg is an executive officer and director, and Clyde J. Berg is a
director, of Berg & Berg Enterprises, Inc. With members of their immediate
families, Messrs. Berg beneficially own, directly and indirectly, all of
the O.P. units held by Berg & Berg Enterprises, Inc.
(7) Carl E. Berg and Berg & Berg Enterprises LLC own 100% of the outstanding
stock of West Coast Venture Capital, Inc.
(8) This amount does not include any O.P. units indirectly and/or beneficially
owned by Kara Ann Berg through the 1981 Kara Ann Berg Trust or other Berg
Group entities.
(9) Mike Knapp is the Director of Operations of the Company.
PLAN OF DISTRIBUTION
Each selling stockholder and any of his or her pledgees, donees,
transferees, assignees and successors-in-interest may, from time to time, sell
any or all of their shares of common stock on any stock exchange, market or
trading facility on which our common stock is traded or in private transactions.
These sales may be at fixed or negotiated prices. The selling stockholder may
use any one or more of the following methods when selling shares of common
stock:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately negotiated transactions;
- broker-dealers may agree with the selling stockholder to sell a
specified number of such shares at a stipulated price per share;
- through options;
- by pledge to secure debts and other obligations;
- to cover short sales made pursuant to this prospectus;
- a combination of any such methods of sale; or
- any other method permitted pursuant to applicable law.
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Broker-dealers engaged by the selling stockholder may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholder (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholder does not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholder may from time to time pledge or grant a security
interest in some or all of the shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of common stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act amending the selling security holder
list to include the pledgee, transferee or other successors in interest as
selling stockholder under this prospectus.
The selling stockholder also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus. This prospectus may also be used by transferees of the selling
stockholder, including broker-dealers or other transferees who borrow or
purchase the shares to settle or close out short sales of shares of common
stock. The selling stockholder will act independently of us in making decisions
with respect to the timing, manner, and size of each sale or non-sale related
transfer.
The selling stockholder may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers or other financial institutions may engage in
short sales of the shares in the course of hedging the positions they assume
with the selling stockholder. The selling stockholder may also sell shares short
and deliver the shares to close out such short positions. The selling
stockholder may also enter into option or other transactions with
broker-dealers, which require the delivery to the broker-dealer of the shares.
The broker-dealer may then resell or otherwise transfer such shares pursuant to
this prospectus. The selling stockholder may also pledge or loan the shares to a
broker-dealer. The broker-dealer may sell the shares so loaned, or upon a
default, the broker-dealer may sell the pledged shares pursuant to this
prospectus. In addition, any shares that qualify for sale pursuant to Rule 144
may be sold under Rule 144 rather than pursuant to this prospectus.
The selling stockholder and any broker-dealers or agents that are involved
in selling the shares of common stock may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales. In such event,
any commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Discounts, concessions,
commissions and similar selling expenses, if any, attributable to the sale of
shares will be borne by the selling stockholder.
If the selling stockholder uses this prospectus for any sale of the common
stock, they will be subject to the prospectus delivery requirements of the
Securities Act. The selling stockholder will be responsible to comply with the
applicable provisions of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations thereunder
promulgated, including, without limitation, Regulation M, as applicable to the
selling stockholder in connection with resales of its shares under this
registration statement.
We are required to pay all fees and expenses incident to the registration
of the shares of common stock, but we will not receive any proceeds from the
sale of the common stock. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is filed as a part of a Form S-3 Registration Statement,
which also amends and updates the registration statement on Form S-4,
(Registration No. 333-52835-99). This prospectus does not contain all the
information set forth in this registration statement, the Form S-4 registration
statement or the exhibits and schedules thereto filed in accordance with the
rules and regulations of the SEC, and we are incorporating omitted information
by this reference. Statements made in this prospectus concerning the contents of
any contract, agreement or other document filed as an exhibit to the
registration statement are summaries of the terms of the contracts, agreements
or
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documents and are not necessarily complete. You should read each exhibit for a
more complete description of the matters involved.
The registration statement and the exhibits filed with the SEC may be
inspected, without charge, and copies may be obtained at prescribed rates, at
the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. The registration statement and other information
filed by the Company with the SEC also are available at the SEC's web site at
http://www.sec.gov, which contained reports, proxy statements and other
information about us filed electronically. Material filed by us may also be
inspected at the offices of the American Stock Exchange, 86 Trinity Place, New
York, New York.
INCORPORATION BY REFERENCE
Under SEC rules we are disclosing additional information to you by
referring to documents that we have filed previously with the SEC. Information
that we incorporate by reference into this prospectus is considered to be part
of this prospectus, and information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below:
1. Registration Statement filed on May 15, 1998 and declared effective on
November 23, 1998 (Registration No. 333-52835-99) (the "S-4 Registration
Statement"), and the prospectus dated November 23, 1998 filed pursuant to SEC
Rule 424(b)(3).
2. Our Annual Report on Form 10-K for fiscal year ended December 31, 2005
filed with the SEC on March 16, 2006.
3. The description of the common stock contained in the S-4 Registration
Statement.
4. Our current report on Form 8-K dated April 4, 2006 and filed with the
SEC on April 10, 2006.
In addition, all documents filed by us with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
prospectus and prior to the filing of a post-effective amendment to the
registration statement containing this prospectus, which indicates that all
securities offered have been sold or which deregisters all of such securities
then remaining unsold, shall be deemed to be incorporated by reference in this
prospectus and to be a part hereof from the respective dates of filing of such
documents.
You may request a copy of these filings, at no cost upon written or oral
request by writing or telephoning us at the following address or telephone
number: Mission West Properties, Inc., 10050 Bandley Drive, Cupertino,
California 95014; Attention: President; Telephone: (408) 725-0700.
In addition, you may obtain a copy of these filings from the SEC as
described above in the section entitled "Where You Can Find More Information."
LEGAL MATTERS
We have received an opinion of counsel from Bingham, McCutchen, LLP, East
Palo Alto, California concerning the validity of the shares of common stock
offered for sale by this prospectus. A partner of Bingham, McCutchen, LLP who
rendered services with respect to this opinion indirectly owns 6,667 shares of
common stock.
RECENT DEVELOPMENTS
In March 2006, we entered into a lease termination agreement with one
tenant with respect to a lease for approximately 92,692 rentable square feet
that expires in 2006. The tenant paid us a termination fee of approximately
$676,000, which we have recorded as revenue in the current period.
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Also, in March 2006, one of our tenants, JDS Uniphase, 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
252,332 rentable square feet located in San Jose, California. M&M assumed all of
JDS Uniphase's remaining obligations under these leases, acquired certain
personal property of JDS Uniphase located on the premises and received a payment
of approximately $11,147,000. At the same time, we entered into a consent for
assignment of lease with both parties, and a mutual release agreement with JDS
Uniphase, pursuant to which all of the JDS Uniphase's obligations under these
leases have been effectively transferred to M&M. For financial accounting
purposes, we will report this transaction as a lease termination and record
approximately $11,147,000 as revenue in 2006. JDS Uniphase continues to be a
tenant with respect to 80,641 rentable square feet at the same location. M&M
must continue to perform all of the obligations under the assumed JDS Uniphase
leases and has the right to sublease any or all of the 252,332 square feet
vacated by JDS Uniphase for the remainder of the current lease terms, which
expire in 2006 and 2007.
On April 4, 2006, the Audit Committee of the Board of Directors of the
Company determined not to renew its engagement of BDO Seidman, LLP ("BDO") as
the Company's independent registered public accounting firm, and decided to
engage Burr, Pilger & Mayer LLP ("BPM") to serve as the Company's independent
registered public accounting firm for the fiscal year ending December 31, 2006.
BDO's audit reports on the Company's consolidated financial statements and
management's assessment of the effectiveness of internal control over financial
reporting and the effectiveness of internal control over financial reporting as
of and for the years ended December 31, 2005 and 2004 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. In connection with the audits
of the Company's consolidated financial statements for each of the two most
recent fiscal years ended December 31, 2005 and 2004 and through March 31, 2006,
there were no disagreements between the Company and BDO on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
BDO, would have caused BDO to make reference in connection with their opinion to
the subject matter of the disagreement. During the two most recent fiscal years
and through March 31, 2006, there have been no "reportable events" as defined in
Regulation S-K, Item 304(a)(1)(v).
In April 2006 the Maryland Supreme Court issued its ruling in Republic
Properties Corporation ("RPC") v. Mission West Properties, L.P. ("MWP"), in the
Circuit Court of Maryland for Baltimore City Case No. 24-C-00-005675. The ruling
upheld an earlier Maryland Appeals Court ruling in favor of MWP, finding that
the Circuit Court of Maryland could not assert personal jurisdiction in the RPC
suit. All litigation in the Maryland portion of this dispute over the Hellyer
Avenue limited partnership is now concluded in our favor. A lawsuit in the Santa
Clara County, California Superior Court is still unresolved, as disclosed under
Part I, Item 3 "Legal Proceedings" in our Annual Report on Form 10-K filed with
the SEC on March 16, 2006.
EXPERTS
The financial statements, schedules and management's report on the
effectiveness of internal control over financial reporting incorporated by
reference in this prospectus have been audited by BDO Seidman, LLP, an
independent registered public accounting firm, to the extent and for the periods
set forth in their reports incorporated herein by reference, and are
incorporated herein in reliance upon such reports given upon the authority of
said firm as experts in auditing and accounting.
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