The company says it will meet third quarter FFO estimates, but will fall short of year-end and 2002 estimates due to problems with its Berg Land Holdings Option Agreement. The Company says it was recently informed by the Berg Group that five properties leased by three companies in the development pipeline under the Berg Land Holdings Option Agreement "are subject to cancellation, major modification or litigation."

The Berg Group has advised Mission West it is negotiating with two of the lessees for substantially smaller and less expensive space and have filed a $100 million counter suit against the third lessee. Mission West says it does not own these properties and has no obligation to purchase these properties, so the effect on the Company will be a loss of $2 million in projected revenues from the development pipeline in the 4th Quarter 2001 and approximately $18.5 million in 2002. The FFO estimates by analysts covering Mission West will need to be reduced by approximately 2 cents per share for the 4th quarter 2001 and approximately 14 cents per share for 2002.

During the second quarter, Mission West added three R&D properties located in San Jose and Sunnyvale, adding 206,000 sf of rentable space. The combined acquisition price was approximately $30.3 million, and the combined first year un-leveraged cash return is estimated at 18.4%. One property was acquired from the Berg Group under the Berg Land Holdings Option Agreement for $7.1 million. Two properties were acquired for $23.2 million in a tax-deferred exchange.