Alexandria Real Estate Equities, Inc. is a Maryland corporation formed in October 1994 that has elected to be taxed as a real estate investment trust ("REIT") for federal income tax purposes. We are engaged primarily in the ownership, operation, management, acquisition, conversion, retrofitting, expansion and selective development and redevelopment of high quality, strategically located properties containing office and laboratory space designed and improved for lease principally to pharmaceutical, biotechnology, diagnostic and personal care products companies, major scientific research institutions, universities and related government agencies (collectively, the "Life Science Industry"). Properties leased to tenants in the Life Science Industry typically consist of suburban office buildings containing scientific research and development laboratories and other improvements that are generic to tenants operating in the Life Science Industry. We call such properties "Life Science Facilities." As of December 31, 2000, we owned 75 properties (collectively, the "Properties"), containing approximately 4.9 million rentable square feet of office and laboratory space.

We focus our operations and investment activities principally in the following cluster markets:

California (in the San Diego, Pasadena and San Francisco Bay areas);

Seattle;

suburban Washington, D.C. (including Maryland and Virginia);

eastern Massachusetts;

New Jersey and suburban Philadelphia; and

the Southeast (including Georgia and North Carolina).

Our tenant base is broad and diverse within the Life Science Industry and reflects our focus on regional, national and international tenants with substantial financial and operational resources. For a detailed description of our Properties and tenants, see "Item 2. Properties." We are led by a senior management team with extensive experience in both the real estate and Life Science industries and are supported by a highly experienced Board of Directors.

We seek to maximize growth in funds from operations ("FFO") and cash available for distribution to stockholders through effective ownership, operation, management, acquisition, conversion, retrofitting, expansion and selective development and redevelopment of Life Science Facilities. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Funds from Operations" for a complete discussion of how we compute and view FFO, as well as a discussion of other measures of cash flow. In particular, we seek to increase the per share amounts of our FFO and cash available for distribution by:

acquiring high quality Life Science Facilities at prices that will enable us to realize attractive returns in our cluster markets;

selectively redeveloping or developing properties on a retrofit or build-to-suit basis;

realizing contractual rental rate escalations;

retenanting and releasing space within our portfolio at higher rental rates and with minimal non-revenue enhancing tenant improvement costs;

expanding existing or newly acquired Properties or converting existing office or warehouse space to generic laboratory space that can be leased at higher rental rates; and

continuing to implement effective cost control measures, including negotiating pass-through provisions in tenant leases for operating expenses and certain capital expenditures.

Internal Growth. We seek to achieve internal growth from several sources. For example, we seek to:

include rental rate escalation provisions in our leases;

acquire undervalued or underperforming properties where we can improve investment returns through releasing of vacant space and replacement of existing tenants with new tenants at higher rental rates;

achieve higher rental rates as existing leases expire; and

expand existing facilities that are fully leased and/or redevelop, retrofit and convert existing and/or newly acquired space to higher rent, generic laboratory space.

Our ability to negotiate contractual rent escalations in future leases and to achieve increases in rental rates will depend upon market conditions and the demand for Life Science Facilities at the time the leases are negotiated and the increases are proposed.

Acquisitions. We seek to identify and acquire high quality Life Science Facilities in our cluster markets. Critical evaluation of prospective property acquisitions is an essential component of our acquisition strategy. When evaluating acquisition opportunities, we assess a full range of matters relating to the properties, including the:

location of the property and our strategy in the market;

quality of existing and prospective tenants;

condition and capacity of the building infrastructure;

quality and generic characteristics of laboratory facilities;

physical condition of the shell structure and common area improvements;

opportunities available for leasing vacant space and for retenanting occupied space;

opportunities to convert existing office space to higher rent generic laboratory space; and

opportunities to expand the existing facility.

Development. Although we have historically emphasized acquisitions over development in pursuing our growth objectives, completed development projects are anticipated to represent a more significant portion of our growth in the future. Our strategy is to selectively pursue build-to-suit development projects where we expect to achieve investment returns that will equal or exceed our returns on acquisitions. We generally have undertaken build-to-suit projects only if our investment in infrastructure will be substantially made for generic, rather than tenant specific, improvements.

Financing/Working Capital. We believe that cash provided by operations and our unsecured line of credit will be sufficient to fund our working capital requirements. We generally expect to finance future retrofit development projects, acquisitions and development projects through our unsecured line of credit and, then, to periodically refinance some or all of that indebtedness with additional equity or debt capital. We may also issue shares of our common stock, preferred stock or interests in our subsidiaries to fund future operations. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" for a complete discussion of our unsecured line of credit and other outstanding indebtedness.

We Are Largely Dependent on the Life Sciences Industry for Revenues from Lease Payments

In general, our strategy is to invest primarily in properties used by tenants in the Life Science Industry. If the Life Science Industry experiences an economic downturn, our business could be adversely affected. Events within the Life Science Industry may have a more pronounced effect on our ability to make distributions to our stockholders than if we had diversified investments. Also, our Properties may be better suited for a particular Life Science Industry tenant and could require modification before we could release vacant space to another Life Science Industry tenant. Generally, our Properties also may not be suitable for lease to traditional office tenants without significant expenditures on renovations.

Our Life Science Industry tenants are subject to a number of risks, any one or more of which may adversely affect their ability to make rental payments to us:

Some of our tenants require significant funding to develop and commercialize their products and technologies, which is obtained from private investors, the public market, companies in the Life Science Industry or federal, state and local governments. Such funding may be unavailable, decreased or discontinued in the future which could adversely affect the ability of a tenant to successfully discover, develop, make, market or sell its products and technologies, to generate revenues or to make rental payments to us;

Even with sufficient funding, some of our tenants may not be able to successfully discover or identify potential drug targets in humans, or potential drugs for use in humans, or to create tools or technologies which are commercially useful in the discovery or identification of potential drug targets or drugs;

Some of our tenants developing potential drugs may find that their drugs are not effective, or may even be harmful, when tested in humans;

Some of our tenants may not be able to manufacture their drugs economically, even if such drugs are proven through human clinical trials to be safe and effective in humans;

Drugs which are developed and manufactured by some of our tenants require regulatory approval prior to being made, marketed, sold and used. The regulatory approval process to manufacture and market drugs is costly, typically takes several years, requires the expenditure of substantial resources, is often unpredictable and a tenant may fail or experience significant delays in obtaining these approvals;

Some of our tenants and their licensors require patent, copyright or trade secret protection to successfully develop, make, market and sell their products and technologies. A tenant may be unable to commercialize its products or technologies if patents covering such products or technologies do not issue, or are successfully challenged, narrowed, invalidated or circumvented by third parties, or if a tenant fails to successfully obtain licenses to the discoveries of third parties necessary to commercialize its products or technologies; and

A drug made by a tenant may not be well accepted by doctors and patients, or may be less effective or accepted than competing drugs made by others, or may be subsequently recalled from the market, even if it is successfully developed, proven safe and effective in human clinical trials, manufactured and the requisite regulatory approvals obtained.

We cannot assure you that our tenants will be able to successfully develop, make, market or sell their products and technologies due to the risks inherent in the Life Science Industry. Any tenant that is unable to successfully avoid, or sufficiently mitigate, the risks described above, may have difficulty making rental payments to us.

Some of our Life Science Industry tenants engage in research and development activities that involve the controlled use of hazardous materials, chemicals and biological and radioactive compounds. In the event of contamination or injury from the use of these hazardous materials, we could be held liable for damages that result. This liability could exceed our resources and environmental remediation coverage and could adversely affect our ability to make distributions to our stockholders.

Along with our tenants, we must comply with federal, state and local laws and regulations that govern the use, manufacture, storage, handling and disposal of hazardous materials and waste products. Failure to comply with, or changes in, these laws and regulations could adversely affect our business or our tenants' business and their ability to make rental payments to us.

Our revenues are derived primarily from rental payments and reimbursement of operating expenses under our leases. Therefore, if our tenants, especially significant tenants, failed to make rental payments under their leases, our financial condition and our ability to make distributions to our stockholders could be adversely affected.

As of December 31, 2000, we had 173 leases with a total of 155 tenants. Of our 75 properties, 40 were occupied by a single tenant. Three of our tenants accounted for approximately 16.6% of our aggregate Annualized Base Rent, or approximately 7.2%, 4.8% and 4.6%, respectively. "Annualized Base Rent" means the annualized fixed base rental amount in effect as of December 31, 2000, using rental revenue calculated on a straight-line basis in accordance with generally accepted accounting principles ("GAAP"). Annualized Base Rent does not include real estate taxes and insurance, common area and other operating expenses, substantially all of which are borne by the tenants in the case of triple net leases.

The bankruptcy or insolvency of a major tenant may also adversely affect the income produced by a Property. If any of our tenants becomes a debtor in a case under the U.S. Bankruptcy Code, we cannot evict that tenant solely because of its bankruptcy. The bankruptcy court might authorize the tenant to reject and terminate its lease with us. Our claim against such a tenant for unpaid, future rent would be subject to a statutory limitation that might be substantially less than the remaining rent actually owed to us under the tenant's lease. Any shortfall in rent payments could adversely affect our cash flow and our ability to make distributions to our stockholders.

U.S. government tenants are subject to annual appropriations. If one of our U.S. government tenants fails to receive its annual appropriation, it might not be able to make its lease payments to us. In addition, defaults under leases with federal government tenants are governed by federal statute and not by state eviction or rent deficiency laws. All of our leases with U.S. government tenants provide that the government tenant may terminate the lease under certain circumstances. As of December 31, 2000, leases with U.S. government tenants at our Properties accounted for approximately 7.5% of our aggregate Annualized Base Rent.

A lessee may not renew its lease upon the expiration of the initial term. In addition, we may not be able to locate a qualified replacement tenant upon expiration or termination of a lease. Consequently, we could lose the cash flow from the affected Property, which could negatively impact our business. We may have to divert cash flow generated by other Properties to meet our mortgage payments, if any, or to pay other expenses related to owning the affected Property. As of December 31, 2000, leases at our Properties representing approximately 14.8% and 9.9% of the square footage of our Properties were scheduled to expire in 2001 and 2002, respectively.

Our Properties are located only in the following markets:

California (in the San Diego, Pasadena and San Francisco Bay areas);

Seattle;

suburban Washington, D.C. (including Maryland and Virginia);

eastern Massachusetts;

New Jersey and suburban Philadelphia; and

the Southeast (including North Carolina and Georgia).

As a result of this geographic concentration, we are dependent upon the local economic conditions in each of these markets, including local real estate conditions. Our operations may also be affected if too many competing properties are built in any of these markets. If there is a downturn in the economy in any of these markets, our operations and our ability to make distributions to stockholders could be adversely affected. We cannot assure you that these markets will continue to grow or will remain favorable to the Life Science Industry.

We have grown rapidly and expect to continue to grow by acquiring, redeveloping and selectively developing additional properties. To manage our growth effectively, we must successfully integrate new acquisitions into our existing operations. We may not succeed with the integration. In addition, we may not effectively manage new properties, and new properties may not perform as expected. If we are unsuccessful in managing our growth, our business could be adversely affected.

We use debt to finance our operations, including acquisitions of properties. Our incurrence of debt may have consequences, including the following:

our cash flow from operations may be not be sufficient to meet required payments of principal and interest;

we may be forced to dispose of one or more of our Properties, possibly on disadvantageous terms, to make payments on our debt;

we may default on our debt obligations, and the lenders or mortgagees may foreclose on our Properties that secure those loans;

a foreclosure on one of our Properties could create taxable income without any accompanying cash proceeds to pay the tax;

we may default under a mortgage loan that has cross default provisions, causing us to automatically default on another loan;

we may not be able to refinance or extend our existing debt; and

the terms of any refinancing or extension may not be as favorable as the terms of our existing debt.

As of December 31, 2000, we had outstanding mortgage indebtedness of approximately $200.3 million, secured by nineteen Properties, and outstanding debt under our unsecured line of credit of approximately $231.0 million.

Our unsecured revolving credit facility contains customary negative covenants and other financial and operating covenants that, among other things:

restrict our ability to incur additional indebtedness;

restrict our ability to make certain investments;

restrict our ability to merge with another company;

restrict our ability to make distributions to stockholders;

require us to maintain financial coverage ratios; and

require us to maintain a pool of unencumbered assets approved by the lenders.

These restrictions could cause a default on our line of credit or have a negative effect on our operations and our ability to make distributions to our stockholders.

Our ability to acquire or develop properties is dependent upon our ability to obtain capital. An inability to obtain capital on acceptable terms could delay or prevent us from acquiring, structuring and closing desirable investments, which would adversely affect our business. Also, the issuance of additional shares of capital stock or interests in subsidiaries to fund future operations could result in a dilution of ownership for the then existing stockholders.

Borrowings outstanding under our unsecured line of credit and certain other borrowings bear interest at a variable rate, and we may incur additional variable rate debt in the future. Increases in market interest rates would increase our interest expenses under these debt instruments and would increase the costs of refinancing existing indebtedness or obtaining new debt. Accordingly, these increases could adversely affect our financial position and our ability to make distributions to stockholders.

Our success depends in large part upon our ability to acquire additional properties on satisfactory terms and to operate them successfully. If we are unable to do so, our business could be adversely affected. In addition, the acquisition of Life Science Facilities generally involves a higher per square foot price than the acquisition of traditional suburban office properties.

The acquisition, ownership and operation of real estate is subject to many risks, including:

our Properties may not perform as we expect;

we may not be able to acquire a desired property because of competition from other real estate investors with significant capital;

we may lease space at rates below our expectations;

we may not be able to obtain financing on acceptable terms;

we may overpay for new acquisitions; and

we may underestimate the cost of improvements required to bring an acquired property up to standards established for the market position intended for that property.

If we encounter any of these risks, our business and our ability to make payments to stockholders could be adversely affected.

Our redevelopment and development activities subject us to many risks, including:

possible delays in construction;

budget overruns;

increasing costs of materials;

financing availability;

volatility in interest rates;

labor availability;

timing of the commencement of rental payments;

other property development uncertainties; and

entitlement and permitting delay or denial.

In addition, expansion and development activities, regardless of whether they are ultimately successful, typically require a substantial portion of management's time and attention. This may distract management from focusing on other operational activities. If we are unable to successfully complete expansion and development projects, our business may be adversely affected.

If our Properties do not generate revenues sufficient to meet our operating expenses, including debt service and other capital expenditures, we may have to borrow additional amounts to cover fixed costs and cash flow needs. This could adversely affect our ability to make distributions to our stockholders. Factors that could adversely affect the revenues from and the value of our Properties include:

national and local economic conditions;

competition from other Life Science Facilities;

changes within the Life Science Industry;

real estate conditions in our target markets;

our ability to collect rent payments;

availability of financing;

changes in interest rate levels;

vacancies at our Properties and our ability to release space;

changes in tax or other regulatory laws;

cost of compliance with government regulation;

illiquidity of real estate investments; and

increased operating costs.

In addition, if a lease at a Property is not a triple net lease, we will have greater expenses associated with that Property and greater exposure to increases in such expenses. Significant expenditures, such as mortgage payments, real estate taxes, insurance and maintenance costs, generally are fixed and do not decrease when revenues at the related property decrease.

Our Properties contain generic infrastructure improvements that are more costly than other property types. These improvements include:

reinforced concrete floors;

upgraded roof loading capacity;

increased floor to ceiling height;

heavy-duty HVAC systems;

enhanced environmental control technology;

significantly upgraded electrical, gas and plumbing infrastructure; and

laboratory benches.

Although we have historically been able to reflect the additional investment in generic infrastructure improvements in higher rental rates, we are not sure that we will be able to continue to do so in the future.

Investments in real estate are relatively illiquid. Accordingly, we may not be able to sell our Properties when we desire or at acceptable prices in response to changes in economic or other conditions. In addition, the Internal Revenue Code limits our ability to sell properties held for fewer than four years. These limitations on our ability to sell our Properties may adversely affect our cash flows and our ability to make distributions to stockholders.

The significant competition for business in our target markets could have an adverse effect on our operations. We compete for investment opportunities with:

insurance companies;

pension and investment funds;

partnerships;

developers;

investment companies; and

other REITs.

Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can manage. These entities may be less sensitive to risks with respect to the creditworthiness of a tenant or the geographic proximity of its investments. Competition from other entities also may reduce the number of suitable investment opportunities offered to us or may increase the bargaining power of property owners seeking to sell.

Although we review the physical condition of our Properties before they are acquired, and on a periodic basis after acquisition, any of our Properties may have characteristics or deficiencies unknown to us that could adversely affect the Property's valuation or revenue potential.

If in any taxable year we fail to qualify as a REIT:

we would be subject to federal income tax on our taxable income at regular corporate rates;

we would not be allowed a deduction for distributions to stockholders in computing taxable income;

unless we were entitled to relief under the Internal Revenue Code, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which we lost qualification; and

we would no longer be required by the Internal Revenue Code to make any distributions to our stockholders.

As a result of the additional tax liability, we might need to borrow funds or liquidate certain investments in order to pay the applicable tax. Accordingly, funds available for investment or distribution to our stockholders would be reduced for each of the years involved.

Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code to our operations and the determination of various factual matters and circumstances not entirely within our control. There are only limited judicial or administrative interpretations of these provisions. Although we believe that we have operated since January 1996 in a manner so as to qualify as a REIT, we cannot assure you that we are or will remain so qualified.

In addition, although we are not aware of any pending tax legislation that would adversely affect our ability to operate as a REIT, new legislation, regulations, administrative interpretations or court decisions could change the tax laws or interpretations of the tax laws regarding qualification as a REIT, or the federal income tax consequences of that qualification, in an adverse manner.

Although certain of our officers and directors have extensive experience in the acquisition, leasing, operation, financing and development of real properties, prior to commencement of our operations, no officer had significant experience in operating a business in accordance with the requirements for maintaining qualification as a REIT under the Internal Revenue Code.

The Internal Revenue Code provides that, in order for us to maintain our qualification as a REIT, not more than 50% of the value of our outstanding capital stock may be owned, directly or constructively, by five or fewer individuals or entities.

In addition, our charter prohibits, with certain limited exceptions, direct or constructive ownership of shares of our capital stock representing more than 9.8% of the combined total value of outstanding shares of our capital stock by any person (the "Ownership Limit"). Our Board of Directors may exempt a stockholder from the Ownership Limit if, prior to the exemption, our Board of Directors receives all information it deems necessary to determine or ensure our status as a REIT.

The constructive ownership rules are complex and may cause shares of our common stock owned directly or constructively by a group of related individuals or entities to be constructively owned by one individual or entity. A transfer of shares to a person who, as a result of the transfer, violates the Ownership Limit may be void or may be transferred to a trust, for the benefit of one or more qualified charitable organizations designated by us. In that case, the intended transferee will have only a right to share, to the extent of the transferee's original purchase price for such shares, in proceeds from the trust's sale of those shares.

The Ownership Limit may have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Our charter allows our Board of Directors to cause us to issue additional authorized but unissued shares of our common stock or preferred stock without any stockholder approval. The issuance of preferred stock could make it more difficult for another party to gain control of Alexandria. In addition, our Board of Directors could establish a series of preferred stock that could delay, defer or prevent a transaction that might involve a premium price for our common stock or otherwise be in the best interest of our common stockholders. Our Board of Directors could also establish one or more additional series of preferred stock that has a dividend preference, which may adversely affect our ability to pay dividends on our common stock.

Under our Stockholder Rights Plan, if a stockholder acquires beneficial ownership of 15% or more of our common stock, other stockholders would become entitled to purchase our common stock at half the market price, which would likely result in substantial dilution to the 15% or greater stockholder. This, as well as the Ownership Limit described above and the additional provisions of our charter and bylaws described below, could have the effect of delaying or preventing a change in control or other transaction that might involve a premium price for our common stock or otherwise be considered by stockholders to be in their best interest.

As authorized by Maryland law, our charter permits our Board of Directors to authorize the issuance of additional authorized but unissued shares of our common or preferred stock, and to classify or reclassify unissued shares of common or preferred stock, without obtaining stockholder approval. The issuance of preferred stock could, in addition to reducing our ability to pay dividends on our common stock, make it more difficult for another party to gain control of Alexandria. In addition, our charter permits the removal of a director only upon two-thirds vote of the votes entitled to be cast at a meeting of stockholders and our bylaws require advance notice of a stockholder's intention to nominate directors or present business for consideration by stockholders at an annual meeting of our stockholders.

Our Insurance May Not Adequately Cover All Potential Losses

If we experience a loss at any of our Properties that is not covered by insurance or that exceeds our insurance policy limits, we could lose the capital invested in the affected Property and, possibly, future revenues from that Property. In addition, we would continue to be obligated on any mortgage indebtedness or other obligations related to the affected Properties.

We carry comprehensive liability, fire, extended coverage and rental loss insurance with respect to our Properties. We have obtained earthquake insurance for all of our Properties because many of them are located in the vicinity of active earthquake faults. We also carry environmental remediation insurance and have title insurance policies on all of our Properties. We obtain our title insurance policies when we acquire the Property. As a result, each policy covers an amount equal to the initial purchase price of each Property. Any of our title insurance policies may be in an amount less than the current value of the related Property.

We believe that our insurance policy specifications, insured limits and deductibles are consistent with or superior to those customarily carried for similar properties. In addition, we require our tenants to maintain comprehensive insurance, including liability and casualty insurance, that is customarily obtained for similar properties. There are, however, certain types of losses that we and our tenants do not generally insure against because they are uninsurable or because it is not economical to insure against them.

We Could Incur Significant Costs Complying With Environmental Laws

Federal, state and local environmental laws and regulations may require us, as a current or prior owner or operator of real estate, to investigate and clean up hazardous or toxic substances or petroleum products released at or from any of our Properties. The cost of investigating and cleaning up contamination could be substantial. In addition, the presence of contamination, or the failure to properly clean it up, may adversely affect our ability to sell or rent an affected Property or to borrow funds using that Property as collateral.

Under environmental laws and regulations, we may have to pay governmental entities or third parties for property damage and for investigation and clean-up costs incurred by those parties relating to contaminated Properties regardless of whether we knew of or caused the contamination. Even if more than one person may have been responsible for the contamination, we may be held responsible for all of the clean-up costs. In addition, third parties may sue us for damages and costs resulting from environmental contamination or jointly responsible parties may contest their responsibility or be financially unable to pay their share of such costs.

Environmental laws also govern the presence, maintenance and removal of asbestos-containing materials. These laws may impose fines and penalties on us for the release of asbestos-containing materials and may allow third parties to seek recovery from us for personal injury from exposure to asbestos fibers. We have detected asbestos-containing materials at some of our Properties, but we do not expect that it will result in material environmental costs or liabilities to us.

Environmental laws and regulations also require the removal or upgrading of certain underground storage tanks and regulate:

the discharge of storm water, wastewater and any water pollutants;

the emission of air pollutants;

the generation, management and disposal of hazardous or toxic chemicals, substances or wastes; and

workplace health and safety.

 

Some of our tenants routinely handle hazardous substances and wastes as part of their operations at our Properties. Environmental laws and regulations subject our tenants, and potentially us, to liability resulting from these activities. Environmental liabilities could also affect a tenant's ability to make rental payments to us. We require our tenants to comply with these environmental laws and regulations and to indemnify us for any related liabilities.

 

Independent environmental consultants have conducted Phase I or similar environmental assessments at all of our Properties. We intend to use consultants to conduct similar environmental assessments on our future acquisitions. This type of assessment generally includes a site inspection, interviews and a public records review, but no subsurface sampling. These assessments and certain additional investigations of our Properties have not to date revealed any environmental liability that we believe would have a material adverse effect on our business or results of operations.

The additional investigations included, as appropriate:

asbestos surveys;

radon surveys;

lead surveys;

additional public records review;

subsurface sampling; and

other testing.

 

Nevertheless, it is possible that the assessments on our Properties have not revealed, or that the assessments on future acquisitions will not reveal, all environmental liabilities. Consequently, there may be material environmental liabilities of which we are unaware that may result in substantial costs to us or our tenants and that could have a material adverse effect on our business.

We May Incur Significant Costs Complying With the American With Disabilities Act and Similar Laws

Under the Americans with Disabilities Act, places of public accommodation and/or commercial facilities are required to meet federal requirements related to access and use by disabled persons. We may be required to make substantial capital expenditures at our Properties to comply with this law. In addition, our noncompliance could result in the imposition of fines or an award of damages to private litigants.

A number of additional federal, state and local laws and regulations exist regarding access by disabled persons. These regulations may require modifications to our Properties or may affect future renovations. This may limit the overall returns on our investments.

We believe that our Properties are substantially in compliance with the present requirements of the Americans with Disabilities Act and similar laws. We have not, however, conducted an audit or an investigation of all of our Properties to determine our compliance.

We May Incur Significant Costs If We Fail to Comply With Laws or If Laws Change

Our Properties are subject to many federal, state and local regulatory requirements and to state and local fire and life-safety requirements. If we do not comply with all of these requirements, we may have to pay fines to governmental authorities or damage awards to private litigants.

We believe that our Properties are currently in compliance with all of these regulatory requirements. We do not know whether these requirements will change or whether new requirements will be imposed. Changes in these regulatory requirements could require us to make significant unanticipated expenditures. These expenditures could have an adverse effect on us and our ability to make distributions to stockholders.

The Loss of Services of Any of Our Executive Officers Could Adversely Affect Us

We depend upon the services of relatively few executive officers. The loss of services of any one of our executive officers could have an adverse effect on our business, financial condition and prospects. We use the extensive personal and business relationships that members of our management have developed over time with owners of Life Science Facilities and with major Life Science Industry tenants. We have employment agreements with most of our executive officers, but we cannot assure you that our executive officers will remain employed with us.

We May Change Our Business Policies Without Stockholder Approval

Our Board of Directors determines all of our business policies, with management's input, including our:

status as a REIT;

investment initiatives;

growth management;

debt incurrence;

general financing;

acquisition and selective development activities;

shareholder distributions; and

operations.

 

Our Board of Directors may amend or revise these policies at any time without a vote of our stockholders. A change in these policies could adversely affect our business and our ability to make distributions to our stockholders.

We Could Become Highly Leveraged and Our Debt Service Obligations Could Increase

Our organizational documents do not limit the amount of debt that we may incur. Therefore, we could become highly leveraged. This would result in an increase in our debt service obligations that could adversely affect our cash flow and our ability to make distributions to our stockholders.

We have adopted a policy of incurring debt only if upon such incurrence our debt to total market capitalization ratio would not exceed 57.5%. Our total market capitalization is the market value of our capital stock, including interests exchangeable for shares of capital stock, plus total debt. Our Board of Directors could, however, change or eliminate this policy at any time. Higher leverage also increases the risk of default on our debt obligations.

Our Distributions to Stockholders May Decline At Any Time

We may not continue our current level of distributions to stockholders. Our Board of Directors will determine future distributions based on a number of factors, including:

our amount of cash available for distribution;

our financial condition;

any decision by our Board of Directors to reinvest funds rather than to distribute such funds;

our capital expenditures;

the annual distribution requirements under the REIT provisions of the Internal Revenue Code; and

other factors our Board of Directors deems relevant.

 

Possible Future Sales of Shares of Our Common Stock Could Adversely Affect the Market Price of Our Common Stock

We cannot predict the effect, if any, of future sales of shares of our common stock on the market price of our common stock prevailing from time to time. Sales of substantial amounts of capital stock (including common stock issued upon the exercise of stock options), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.

We have reserved for issuance to our officers, directors and employees pursuant to our Amended and Restated 1997 Stock Award and Incentive Plan (the "Plan") that number of shares of our common stock equal to 12% of the total number of shares outstanding at any time, provided that in no event may the number of shares of our common stock available for issuance under the Plan exceed 3,000,000 shares at any time.

 

As of December 31, 2000, there were options outstanding to purchase 901,000 shares of our common stock, of which options to purchase 519,001 shares of our common stock were exercisable. We have filed a registration statement with respect to the issuance of shares of our common stock pursuant to grants under the stock option plan. In addition, any shares issued under our stock option plan will be available for sale in the public market from time to time without restriction by persons who are not our Affiliates (as defined in Rule 144 adopted under the Securities Act). Affiliates will be able to sell shares of our common stock pursuant to exemptions from the registration requirements or upon registration.

Employees

As of December 31, 2000, we had 51 full-time employees and one part-time employee. We believe that we have good relations with our employees.

 

Item 2. Properties.

General.

Our Properties range in size from approximately 15,000 to 250,000 square feet, are built to accommodate single or multiple tenants and are generally one or two story concrete tilt-up, block and/or steel frame structures. The exteriors typically resemble traditional suburban office properties, but interior infrastructures are designed to accommodate the needs of Life Science Industry tenants. These improvements typically are generic to Life Science Industry tenants rather than specific to a particular tenant. As a result, we believe that the improvements have long-term value and utility and are usable by a wide range of Life Science Industry tenants. Generic infrastructure improvements include:

reinforced concrete floors;

upgraded roof loading capacity;

increased floor to ceiling heights;

heavy-duty HVAC systems;

enhanced environmental control technology;

significantly upgraded electrical, gas and plumbing infrastructure; and

laboratory benches.

 

We own fee simple title in each of our Properties, except with respect to:

1311, 1401 and 1431 Harbor Bay Parkway, in which we own a commercial condominium interest, together with an undivided interest in the common areas of the project of which the Property is a part; and

2425 Garcia Avenue, 2400/2450 Bayshore Parkway, 2625/2627/2631 Hanover Street, 108 Alexander Road, Buildings 79 & 96, Charlestown Navy Yard, and 8000/9000/10000 Virginia Manor Road, in which we own ground leasehold interests.

 

As of December 31, 2000, we had 173 leases with a total of 155 tenants, and 40 of our Properties were single-tenant properties. Leases in our multi-tenant buildings typically have terms of three to seven years, while the single-tenant building leases typically have initial terms of 10 to 20 years. As of December 31, 2000:

approximately 83% of our leases (on a square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses (including increases thereto) in addition to base rent;

approximately 12% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses;

approximately 92% of our leases (on a square footage basis) contained effective annual rent escalations that are either fixed (generally ranging from 3% to 4%) or indexed based on a consumer price index or other index; and

approximately 84% of our leases (on a square footage basis) provided for the recapture of certain capital expenditures (such as HVAC systems maintenance and/or replacement, roof replacement and parking lot resurfacing), which we believe would typically be borne by the landlord in traditional office leases.

Our leases also typically give us the right to review and approve tenant alterations to the Property. Generally, tenant-installed improvements to the facilities remain our property after termination of the lease at our election. However, we are permitted under the terms of most of our leases to require that the tenant remove the improvements and restore the premises to their original condition.

As of December 31, 2000, we managed all of our Properties.

The following table sets forth information with respect to our Properties as of December 31, 2000:

Annualized
PercentageAnnualized Net
of Base Effective
Aggregate Rent Per Rent Per
Rentable Annualized Portfolio Leased Leased
Year Built/ Square Percentage Base Annualized Square Square Major
Properties Renovated (1) Feet Leased (2) Rent (2) (3) Base Rent Foot (3) Foot (4) Tenants
---------- ------------ ---------- ---------- ------------ --------- --------- --------- ---------------------------------------
San Diego
10933 North Torrey Pines 1971/1994 107,753 100% $2,678,591 2.9% $24.86 $20.17 The Scripps Research Institute
Road Advanced Tissue Sciences, Inc.
San Diego, CA
3010 Science Park Road 2000 74,557 100% 2,311,352 2.5% 31.00 24.79 IDEC Pharmaceuticals Corporation
San Diego, CA
11099 North Torrey Pines 1986/1996 86,962 100% 2,385,064 2.6% 27.43 24.53 Pfizer, Inc.
Road Senomyx, Inc.
San Diego, CA
3535 General Atomics Court 1986/1991 76,084 100% 2,683,633 2.9% 35.27 34.34 Merck & Co., Inc.
San Diego, CA
3565 General Atomics Court 1991 43,600 100% 1,526,949 1.6% 35.02 35.02 Pfizer, Inc.
San Diego, CA
11025 Roselle Street 1983/1998 18,173 100% 401,568 0.4% 22.10 17.24 Collateral Therapeutics, Inc.
San Diego, CA Ciblex Corporation
4757 Nexus Centre Drive 1989 67,050 100% 2,107,557 2.3% 31.43 24.53 Matrix Pharmaceutical, Inc.
San Diego, CA
6166 Nancy Ridge Drive 1997 29,333 100% 638,606 0.7% 21.77 15.44 Arena Pharmaceuticals, Inc.
San Diego, CA
10505 Roselle Street late 17,603 100% 434,473 0.5% 24.68 19.47 Structural GenomiX, Inc.
San Diego, CA 1970's/1999
3770 Tansy Street 1978/1999 15,410 100% 409,171 0.4% 26.55 21.35 Structural GenomiX, Inc.
San Diego, CA
3530 John Hopkins Court 2000 34,723 100% 671,101 0.7% 19.33 17.39 Merck & Co., Inc.
San Diego, CA
3550 John Hopkins Court 1999 55,200 100% 1,096,769 1.2% 19.87 18.38 Merck & Co., Inc.
San Diego, CA
9363 Towne Centre Drive 1987 45,030 100% 864,871 0.9% 19.21 19.16 Orincon Industries, Inc.
San Diego, CA
9373 Towne Centre Drive 1987 52,228 100% 1,330,673 1.4% 25.48 21.99 Amylin Pharmaceuticals, Inc.
San Diego, CA Vical Incorporated
9393 Towne Centre Drive 1987/2000 41,794 39% 395,601 0.4% 24.00 20.49 Arizeke Pharmaceuticals, Inc.
San Diego, CA Nereus Pharmaceuticals, Inc.
11035 Roselle Street 1981 18,193 100% 447,548 0.5% 24.60 24.32 Selective Genetics, Inc.
San Diego, CA
11045 Roselle Street 1981/1998 30,147 100% 741,901 0.8% 24.61 24.56 Integra Life Science Holdings Corporation
San Diego, CA Universal Preservation Technologies, Inc.
11055 Roselle Street 1981/1995 22,577 100% 452,443 0.5% 20.04 20.04 Chiron Corporation
San Diego, CA
11065 Roselle Street 1981/1999 17,433 100% 234,822 0.2% 13.47 13.47 Biosite Diagnostics Incorporated
San Diego, CA
11075 Roselle Street 1981/1995 24,208 100% 485,128 0.5% 20.04 20.04 Chiron Corporation
San Diego, CA
6146 Nancy Ridge Drive early 1980's 23,391 - - - - - Vacant(5)
San Diego, CA
Pasadena
129/153/161 North Hill Street 1940's/1950's 33,954 - - - - - Vacant(5)
Pasadena, CA 1960's
San Francisco Bay Area
1201 Harbor Bay Parkway 1983/1999 61,015 100% 1,003,690 1.1% 16.45 10.70 Avigen, Inc.
Alameda, CA Lucent Technologies Inc.
1311 Harbor Bay Parkway 1984/2000 27,745 99% 494,190 0.5% 17.94 15.70 Berkeley Heartlab, Inc.
Alameda, CA Pfizer, Inc.
1401 Harbor Bay Parkway 1986/1994 47,777 100% 757,820 0.8% 15.86 14.85 GeneTrace Systems Inc.
Alameda, CA
1431 Harbor Bay Parkway 1985/1994 68,711 100% 1,413,968 1.5% 20.58 16.57 U.S. Food & Drug Administration
Alameda, CA
819-863 Mitten Road & 866 1962/1997 153,584 83% 2,394,116 2.6% 18.86 16.23 Valentis, Inc.
Malcolm Road Mills Peninsula Medical Group, Inc.
Burlingame, CA U.S. Federal Aviation Administration
2625/2627/2631 Hanover Street 1968/1985/ 32,074 74% 993,177 1.1% 41.99 31.57 Xenoport, Inc.
Palo Alto, CA 2000
2425 Garcia Avenue & 1980/2000 98,964 100% 3,892,447 4.2% 39.33 37.53 Equinix, Inc.
2400/2450 Bayshore Parkway Google Inc.
Mountain View, CA
2140 Durant Avenue 1930 25,000 - - - - - Vacant(5)
Berkeley, CA
Seattle
1102/1124 Columbia Street 1975/1997 209,361 100% 5,580,570 6.0% 26.66 23.88 Corixa Corporation
Seattle, WA Fred Hutchinson Cancer Research Center
3000/3018 Western Avenue 1929/1990/ 47,746 100% 1,458,386 1.6% 30.54 25.95 University of Washington
Seattle, Washington 2000
3005 First Avenue 1980/1990/ 70,647 100% 2,313,877 2.5% 32.75 27.97 Dendreon Corporation
Seattle, Washington 2000
Suburban Washington, D.C.
300 Professional Drive 1989/1999 47,558 100% 1,318,581 1.4% 27.73 22.66 Antex Biologics Inc.
Gaithersburg, MD Sciencewise, Inc.
401 Professional Drive 1987 62,739 100% 1,038,585 1.1% 16.55 16.55 The Gillette Company
Gaithersburg, MD
25/35/45 West Watkins Mill 1989/1997 138,938 100% 1,984,161 2.1% 14.28 13.98 MedImmune, Inc.
Road Genetic Therapy, Inc.(6)
Gaithersburg, MD
708 Quince Orchard Road 1982/1997 49,225 100% 1,461,699 1.6% 29.69 18.33 Gene Logic Inc.
Gaithersburg, MD
940 Clopper Road 1989 44,464 84% 717,123 0.8% 19.11 17.05 Advanced Pharma, Inc.
Gaithersburg, MD BHC Securities, Inc.
1401 Research Boulevard 1966 48,800 100% $722,904 0.8% 14.81 14.03 U.S. Bureau of Alcohol Tobacco and
Rockville, MD Firearms
1500 East Gude Drive 1981/1986 45,989 100% 662,570 0.7% 14.41 13.25 bioMerieux Vitek, Inc.
Rockville, MD MacroGenics, Inc.
1413 Research Boulevard 1967/1996/ 105,000 100% 1,815,917 1.9% 17.29 15.65 U.S. Army Corps of Engineers
Rockville, MD 2000
1550 East Gude Drive 1981/1995 44,500 100% 735,374 0.8% 16.53 16.07 Shire Pharmaceuticals Group plc
Rockville, MD
1330 Piccard Drive 1978/1994 131,511 100% 1,903,653 2.0% 14.48 14.43 Intracel Corporation
Rockville, MD
14225 Newbrook Drive 1992 248,186 100% 4,341,125 4.7% 17.49 17.49 American Medical Laboratories, Inc.
Chantilly, VA
8000/9000/10000 Virginia 1990 191,886 100% 2,178,585 2.3% 11.35 9.29 Neocera, Inc.
Manor Road Baxter International Inc.
Beltsville, MD
10150 Old Columbia Road 1983/1997 75,500 100% 1,087,343 1.2% 14.40 11.37 Baxter International Inc.
Columbia, MD
19 Firstfield Road 1974/2000 25,175 100% 622,955 0.7% 24.75 19.81 Psychiatric Genomics, Inc.
Gaithersburg, MD Avalon Pharmaceuticals, Inc.
15020 Shady Grove Road 1987 41,062 100% 759,723 0.8% 18.50 10.29 Human Genome Sciences, Inc.
Gaithersburg, MD
2001 Aliceanna Street early 179,397 84% 864,230 0.9% 5.75 5.73 Maryland Economic Development Corporation
Baltimore, MD 1950's/1995 The National Aquarium of Baltimore, Inc.
50 West Watkins Mill Road 1988/2000 57,410 100% 873,058 0.9% 15.21 13.37 Gene Logic Inc.
Gaithersburg, MD
1201 Clopper Road 2000 92,990 100% 2,671,063 2.9% 28.72 17.60 Digene Corporation
Gaithersburg, MD
20 Firstfield Road 1980 54,918 - - - - - Vacant(5)
Gaithersburg, MD
22 Firstfield Road 1980 53,595 39% 439130 0.5% 20.75 20.74 Provident Bank of Maryland
Gaithersburg, MD
1300 Quince Orchard Road 1981 54,874 100% 812584 0.9% 14.81 14.73 Montgomery County, Maryland
Gaithersburg, MD
Eastern Massachuetts
Buildings 79 & 96 Charlestown 1880/1991 24,940 100% 710,000 0.8% 28.47 26.34 Diacrin, Inc.
Navy Yard
Boston, MA
280 Pond Street 1965/1990 24,867 100% 434,368 0.5% 17.47 17.47 Ares Advanced Technology, Inc.
Randolph, MA
60 Westview Street 1975 32,000 100% 960,000 1.0% 30.00 27.55 U.S. Environmental Protection Agency
Lexington, MA
377 Plantation Street 1993 92,711 100% 2,185,082 2.3% 23.57 23.49 University of Massachusetts
Worcester, MA Phytera, Inc.
Elan Corporation plc
620 Memorial Drive 1920's/1997/ 96,500 100% 3,947,688 4.2% 40.91 40.86 Pfizer, Inc.
Cambridge, MA 1999
One Innovation Drive 1991 113,956 100% 2,324,462 2.5% 20.40 19.41 AstraZeneca plc
Worcester, MA ViaCell, Inc.
GL Synthesis, Inc.
381 Plantation Street 2000 92,245 69% 1,986,880 2.1% 31.32 24.65 AstraZeneca plc
Worcester, MA
500 Arsenal Street 1978/1984 84,000 - - - - - Vacant(5)
Watertown, MA
New Jersey/Suburban Philadelphia
215 College Road 1968/1974/ 106,036 100% 1,704,824 1.8% 16.08 14.64 Synaptic Pharmaceutical Corporation
Paramus, NJ 1984 Gryphon Development, Inc.
170 Williams Drive 1982/1994 37,000 100% 536,500 0.6% 14.50 14.49 Alteon Inc.
Ramsey, NJ
100 Phillips Parkway late 1960's/ 74,000 70% 1,297,613 1.4% 24.95 24.09 Memory Pharmaceuticals Corp.
Montvale, NJ 1999
5100/5110 Campus Drive 1989 42,782 100% 585,624 0.6% 13.69 12.70 Genaera Corporation
Plymouth Meeting, PA Pharmerica, Inc.
702 Electronic Drive 1983/1998 40,000 100% 937,527 1.0% 23.44 15.86 Cell Pathways, Inc.
Horsham, PA
279 Princeton Parkway 1984/1999 42,600 100% 530,182 0.6% 12.45 8.45 Coelacanth Corporation
Princeton, NJ
Southeast
100 Capitola Drive 1986 65,114 100% 962,454 1.0% 14.89 9.29 American Social Health Association, Inc.
Durham, NC Batelle Survey Research, Inc.
800/801 Capitola Drive 1985 119,916 89% 1,579,971 1.7% 14.72 12.62 Triangle Laboratories, Inc.
Durham, NC Ventana Communications Group
Integrated Laboratory Systems, Inc.
150/154 Technology Parkway 1976/1985/ 37,080 44% 178,541 0.2% 10.82 10.51 CytRx Corporation
Norcross, GA 1993
5 Triangle Drive 1981 32,120 100% 486,825 0.5% 15.16 14.85 Mantech Environmental Technology, Inc.
Research Triangle Park, NC
108 Alexander Road 2000 86,239 100% 2,032,996 2.2% 23.57 22.54 Paradigm Genetics, Inc.
Research Triangle Park, NC
7030 Kit Creek Road 1995 40,800 75% 204,000 0.2% 6.67 6.64 Larscom Incorporated
Research Triangle Park, NC
Total/Weighted Average (7): 4,856,650 90.8% $93,195,962 100% $21.12 $18.68
========== ========== ============ ========= ========= =========

________________

(1) Includes year in which construction was completed and, where applicable, year of most recent major renovation.

(2) Based on all leases at the respective Property in effect as of December 31, 2000.

(3) Annualized Base Rent means the annualized fixed base rental amount in effect as of December 31, 2000 (using rental revenue computed on a straight-line basis in accordance with GAAP) paid by tenants under the terms of their leases. This amount, divided by the rentable square feet leased at the Property as of December 31, 2000, is the Annualized Base Rent per Leased Square Foot.

(4) Annualized Net Effective Rent is the Annualized Base Rent in effect as of December 31, 2000, less (for gross leases) real estate taxes and insurance, common area and other operating expenses and (for all leases) amortized tenant improvements and leasing commissions. This amount, divided by the rentable square feet leased at the Property as of December 31, 2000, is the Annualized Net Effective Rent per Leased Square Foot.

(5) All or a significant portion of this Property is currently under redevelopment.

(6) Genetic Therapy, Inc. is a wholly owned subsidiary of Novartis AG.

(7) Weighted Average based on a percentage of aggregate leased square feet.

 

Location of Properties

The following table sets forth, as of December 31, 2000, the total rentable square footage and annualized base rent of our Properties in each of our existing markets.

Total Rentable % of Total Rentable Annualized % of Annualized
Geographic Area Square Footage Square Footage Base Rent (1) Base Rent
- --------------- -------------- ------------------- -------------- ----------------
San Diego 901,449 18.5% $22,297,822 23.9%
Pasadena 33,954 0.7% - 0.0%
San Francisco Bay Area 514,870 10.6% 10,949,408 11.7%
Seattle 327,754 6.7% 9,352,833 10.0%
Suburban Washington, D.C 1,793,717 36.9% 27,010,362 29.0%
Eastern Massachusetts 561,219 11.6% 12,548,481 13.5%
New Jersey/Suburban Philadelphi 342,418 7.1% 5,592,270 6.0%
Southeast 381,269 7.9% 5,444,787 5.9%
-------------- ------------------- -------------- ----------------
Total 4,856,650 100.0% $93,195,963 100.0%
============== =================== ============== ================

________________

(1) Annualized Base Rent means the annualized fixed base rental amount in effect as of December 31, 2000 (using rental revenue computed on a straight-line basis in accordance with GAAP) paid by tenants under the terms of their leases.

 

Tenants

Our Properties are leased principally to tenants in a broad spectrum of sectors within the Life Science Industry. The following table sets forth information regarding leases with our 20 largest tenants based upon Annualized Base Rent as of December 31, 2000.

20 Largest Tenants

Remaining Percentage
Initial Percentage of Aggregate
Lease Approximate Percentage of Aggregate Annualized Portfolio
Number Term Aggregate of Aggregate Annualized Portfolio Net Effective Annualized
of in Rentable Leased Base Rent (in Annualized Rent (in Net Effective
Tenant Leases Years Square Feet Square Feet thousands) (1) Base Rent thousands) (2) Rent
------ ------- -------- ------------ ------------ -------------- ------------ -------------- -------------
Pfizer, Inc. 4 11.3 185,429 4.2% $6,672 7.2% $6,652 8.1%
4.8
0.8
Merck & Co., Inc. 3 9.8 166,007 3.8% 4,451 4.8% 4,231 5.1%
American Medical 1 16.0 248,186 5.6% 4,341 4.6% 4,341 5.3%
Laboratories, Inc.
AstraZeneca plc 2 2.2 117,509 2.7% 3,070 3.3% 2,712 3.3%
1.4
Digene Corporation 1 9.0 92,990 2.1% 2,671 2.9% 1,637 2.0%
Corixa Corporation 1 4.0 69,997 1.6% 2,648 2.8% 2,404 2.9%
Equinix, Inc. 1 6.3 56,332 1.3% 2,457 2.6% 2,394 2.9%
Gene Logic Inc. 2 10.0 106,635 2.4% 2,335 2.5% 1,670 2.0%
6.9
Dendreon Corporation 1 8.0 70,647 1.6% 2,314 2.5% 1,976 2.4%
IDEC Pharmaceuticals 1 9.5 74,557 1.7% 2,311 2.5% 1,848 2.2%
Corporation
Matrix Pharmaceutical, Inc. 1 10.2 67,050 1.5% 2,107 2.3% 1,644 2.0%
Paradigm Genetics, Inc. 2 9.9 86,239 2.0% 2,033 2.2% 1,944 2.4%
9.8
Advanced Tissue 2 5.0 84,524 1.9% 2,030 2.2% 1,775 2.2%
Sciences, Inc.
Intracel Corporation 1 6.1 131,511 3.0% 1,904 2.1% 1,898 2.3%
U.S. Army Corps of 1 1.4 105,000 2.4% 1,816 1.9% 1,643 2.0%
Engineers
Baxter International Inc. 3 7.2 130,313 3.0% 1,813 1.9% 1,255 1.5%
0.2
Senomyx, Inc. 1 1.0 60,056 1.4% 1,531 1.6% 1,279 1.6%
University of Washington 1 13.1 47,746 1.1% 1,458 1.6% 1,239 1.5%
Google Inc. 1 3.6 42,632 1.0% 1,436 1.5% 1,320 1.6%
U.S. Food & Drug 1 13.1 68,711 1.6% 1,414 1.5% 1,138 1.4%
Administration
------- -------- ------------ ------------ -------------- ------------ -------------- -------------
Total/Weighted Average (3): 31 3.6 2,012,071 45.9% $50,812 54.5% $45,000 54.7%
======= ======== ============ ============ ============== ============ ============== =============

________________

(1) Annualized Base Rent means the annualized fixed base rental amount in effect as of December 31, 2000 (using rental revenue computed on a straight-line basis in accordance with GAAP) paid by tenants under the terms of their leases.

(2) Annualized Net Effective Rent is the Annualized Base Rent in effect as of December 31, 2000 (using rental revenue computed on a straight-line basis in accordance with GAAP), less (for gross leases) real estate taxes and insurance, common area and other operating expenses and (for all leases) amortized tenant improvements and leasing commissions.

(3) Weighted Average based on percentage of aggregate leased square feet.

Item 3. Legal Proceedings

To our knowledge, no litigation is pending against us, other than routine actions and administrative proceedings, substantially all of which are expected to be covered by liability insurance or which, in the aggregate, are not expected to have a material adverse effect on our financial condition, results of operations or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders

We did not submit any matters to a vote of security holders in the fourth quarter of the fiscal year ended December 31, 2000.

Our common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "ARE". On March 28, 2001, the last reported sales price per share of our common stock was $37.20, and there were approximately 241 holders of record of our common stock (excluding beneficial owners whose shares are held in the name of Cede & Co.). The following table sets forth the quarterly high and low sales prices per share of our common stock as reported on the NYSE and the distributions paid by us with respect to each such period.

Per Share
Period High Low Disribution
- ------ ---- --- ------------
1999
First Quarter......................... 31-9/16 25-1/8 $0.40
Second Quarter........................ 33 24-7/8 $0.43
Third Quarter......................... 31-7/16 28-7/8 $0.43
Fourth Quarter........................ 32 27-3/4 $0.43
2000
First Quarter......................... 32 29 $0.43
Second Quarter........................ 34-7/8 30 $0.43
Third Quarter......................... 37-1/8 31-1/2 $0.43
Fourth Quarter........................ 38-9/16 33-1/8 $0.43

Year Ended December 31
---------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share amounts)
Operating Data:
Total revenue ....................................... $ $106,910 $ $86,262 $ $61,016 $ $34,846 $ $17,673
Total expenses ...................................... 80,901 64,209 41,613 37,643 15,498
----------- ----------- ----------- ----------- -----------
Net income (loss).................................... $ 26,009 $ 22,053 $ 19,403 $ (2,797) $ 2,175
=========== =========== =========== =========== ===========
Net income (loss) per share of common stock (pro
forma for 1997, pro forma and restated for 1996)
- Basic ........................................ $ 1.55 $ 1.48 $ 1.60 $ (0.35) $ 0.60
=========== =========== =========== =========== ===========
- Diluted ...................................... $ 1.52 $ 1.46 $ 1.58 $ (0.35) $ 0.60
=========== =========== =========== =========== ===========
Weighted average shares of common stock
outstanding (pro forma for 1997, pro forma
and restated for 1996) (1)
- Basic ........................................ 14,460,711 13,525,840 12,098,959 8,075,864 3,642,131
=========== =========== =========== =========== ===========
- Diluted ...................................... 14,699,478 13,670,568 12,306,470 8,075,864 3,642,131
=========== =========== =========== =========== ===========
Cash dividends declared per share of common
stock (pro forma for 1997, pro forma and
restated for 1996) ............................... $ 1.72 $ 1.69 $ 1.60 $ 1.60 $ 0.87
=========== =========== =========== =========== ===========
Balance Sheet Data (at year end):
Rental properties - net of accumulated depreciation.. $ 679,653 554,706 471,907 227,076 146,960
Total assets ........................................ $ 780,984 643,118 530,296 248,454 160,480
Secured notes payable and unsecured line of credit .. $ 431,256 350,512 309,829 70,817 113,182
Total liabilities ................................... $ 461,832 380,535 330,527 81,537 120,907
Mandatorily redeemable Series V preferred stock ..... $ - $ - $ - $ - 25,042
Stockholders' equity ................................ $ 319,152 262,583 199,769 166,917 14,531
Other Data:
Net income (loss) ................................... $ 26,009 22,053 19,403 (2,797) 2,175
Less:
Dividends on preferred stock ........................ (3,666) (2,036) - - -
Add:
Depreciation and amortization ....................... 24,251 18,532 10,296 4,866 2,405
----------- ------------ ------------ ------------ -----------
Funds from operations (2) ........................... $ 46,594 38,549 29,699 2,069 4,580
=========== ============ ============ ============ ===========
Cash flows from operating activities ................ $ 32,931 46,011 26,111 3,883 (1,646)
Cash flows from investing activities ................ $ (132,480) (113,549) (246,753) (87,620) (94,900)
Cash flows from financing activities ................ $ 98,879 69,430 220,136 84,101 97,323
Number of properties owned at year end .............. 75 58 51 22 12
Rentable square feet of properties owned
at year end ...................................... 4,856,650 4,046,126 3,588,154 1,747,837 1,031,070
Occupancy of properties owned at year end ........... 91% (3) 92% (3) 93% (3) 0.97 0.97

For the Year Ended
December 31,
----------------------
2000 1999 Change
---------- ---------- ----------
GAAP Basis:
Revenue $ 74,620 $ 70,210 6.3%
Rental operating expenses 17,070 16,116 5.9%
---------- ---------- ----------
Net operating income $ 57,550 $ 54,094 6.4%
========== ========== ==========
Cash Basis:
Revenue $ 73,097 $ 68,065 7.4%
Rental operating expenses 17,070 16,116 5.9%
---------- ---------- ----------
Net operating income $ 56,027 $ 51,949 7.9%
========== ========== ==========

As a result of the foregoing, net income was $26.0 million for 2000 compared to $22.1 million for 1999.

Rental revenue increased by $19.9 million, or 41%, to $68.4 million for 1999 compared to $48.5 million for 1998. The increase resulted primarily from the 1998 Properties being owned for a full period and the addition of the 1999 Properties. Rental revenue from properties operating for a full year during 1998 and 1999 (the "1999 Same Properties") increased by $1.1 million, or 3.8%, due to increases in rental rates and occupancy.

Tenant recoveries increased by $5.0 million, or 44%, to $16.3 million for 1999 compared to $11.3 million for 1998. The increase resulted primarily from the 1998 Properties being owned for a full period and the addition of the 1999 Properties. Tenant recoveries for the 1999 Same Properties increased by $838,000, or 11.7%, generally due to an increase in recoverable operating expenses.

Interest and other income increased by $298,000, or 24%, to $1.5 million for 1999 compared to $1.2 million for 1998. The increase resulted from an increase in storage and parking income at certain of our properties and from the increase in interest income from our secured note receivable, which was funded in March 1998.

Rental operating expenses increased by $5.6 million, or 42%, to $19.0 million for 1999 compared to $13.4 million for 1998. The increase resulted primarily from the 1998 Properties being owned for a full period and the addition of the 1999 Properties. Operating expenses for the 1999 Same Properties increased by $711,000, or 9.2%, primarily due to the increase in property taxes. The increase in property taxes, substantially all of which was recoverable from the tenants at the respective properties, was partially offset by lower premiums on our blanket property and liability insurance policies for all of our properties.

The following is a comparison of property operating data computed on a GAAP Basis and on a Cash Basis for the 1999 Same Properties (dollars in thousands):

For the Year Ended
December 31,
----------------------
1999 1998 Change
---------- ---------- ----------
GAAP Basis:
Revenue $ 37,109 $ 35,244 5.3%
Rental operating expenses 8,435 7,724 9.2%
---------- ---------- ----------
Net operating income $ 28,674 $ 27,520 4.2%
========== ========== ==========
Cash Basis (1):
Revenue $ 34,427 $ 31,839 8.1%
Rental operating expenses 7,902 7,176 10.1%
---------- ---------- ----------
Net operating income $ 26,525 $ 24,663 7.5%
========== ========== ==========

December 31,
----------------------
2000 1999
---------- ----------
Funds held in trust as additional security
required under the terms of certain
secured notes payable $ 5,103 $ 2,982
Security deposit funds based on the terms
of certain lease agreements 1,892 1,699
---------- ----------
$ 6,995 $ 4,681
========== ==========

Balance at Stated
December 31, Interest
Collateral 2000 Rate Maturity Date
- ------------------------------------ ------------ ------------- ---------------
One Innovation Drive,
Worcester, MA (1) $11,276 8.75% January 2006
100/800/801 Capitola Drive,
Durham, NC 12,314 8.68% December 2006
20/22 Firstfield Road, Gaithersburg,
MD and 1300 Quince Orchard Road,
Gaithersburg, MD 9,998 8.25% August 2007
620 Memorial Drive,
Cambridge, MA (2) 19,513 9.125% October 2007
14225 Newbrook Drive, Chantilly,
VA and 3000/3018 Western
Avenue, Seattle, WA 35,646 7.22% May 2008
377 Plantation Street, Worcester,
MA and 6166 Nancy Ridge Drive,
San Diego, CA 18,798 8.71% December 2009
25/35/45 W. Watkins Mill Road,
Gaithersburg, MD and 708 Quince
Orchard Road, Gaithersburg, MD 24,675 8.33% November 2010
1431 Harbor Bay Parkway,
Alameda, CA 6,018 7.165% January 2014
3535/3565 General Atomics Court,
San Diego, CA 16,499 9.00% December 2014
1102/1124 Columbia Street,
Seattle, WA 19,520 7.75% May 2016
1201 Clopper Road,
Gaithersburg, MD (3) 18,981 LIBOR + 1.75% January 2002
341/343 Oyster Point Boulevard
(development project),
San Francisco, CA (4) 7018 LIBOR + 1.70% June 2003
------------
$200,256
============

Year Amount
----------------------- -----------
2001 $ 3,885
2002 23,183
2003 11,563
2004 4,199
2005 12,361
Thereafter 142,609
-----------
Subtotal 197,800
Unamortized premium 2,456
-----------
$ 200,256
===========

Notional Interest
Transaction Date Effective Date Termination Date Amount Pay Rate
- ---------------- ---------------- ---------------- ------------ --------
October 1999 December 8, 1999 May 31, 2001 $50,000,000 6.500%
January 2000 (1) January 31, 2000 December 31, 2001 $50,000,000 7.250%(2)
April 2000 May 20, 2000 January 2, 2003 $50,000,000 6.995%
July 2000 May 31, 2001 May 31, 2003 $50,000,000 7.070%
January 2001 January 31, 2001 December 31, 2002 $50,000,000 6.350%

Total/
Weighted
Average 2000 1999 1998 1997 1996
----------- ----------- ---------- ---------- ---------- ----------
Capital expenditures:
Weighted average square feet
in portfolio 13,070,186 4,448,916 3,823,290 2,891,863 1,342,216 563,901
Property related capital
expenditures $ 2,325,000 $ 778,000 $ 478,000 $ 341,000 $ 547,000 $ 181,000
Per weighted average square
foot in portfolio $ 0.18 $ 0.17 $ 0.13 $ 0.12 $ 0.41 $ 0.32
Tenant improvements and leasing
costs:
Retenanted space (1):
Retenanted square feet 642,215 112,286 220,397 88,181 40,953 180,398
Tenant improvements and
leasing costs $ 4,112,000 $ 796,000 $1,454,000 $ 478,000 $ 164,000 $1,220,000
Per square foot leased $ 6.40 $ 7.09 $ 6.60 $ 5.42 $ 4.00 $ 6.76
Renewal space:
Renewal square feet 430,017 233,017 93,667 77,038 1,232 25,063
Tenant improvements and
leasing costs $ 342,000 $ 124,000 $ 149,000 $ 69,000 $ -- $ --
Per square foot leased $ 0.80 $ 0.53 $ 1.59 $ 0.90 $ -- $ --

Excludes space that has undergone redevelopment before retenanting. If redevelopment space was included as retenanted space, retenanted square feet for 2000 would be 266,163, tenant improvements and leasing costs would be $5,375,000 and costs per square foot would be $20.19.

Capital expenditures fluctuate in any given period due to the nature, extent and timing of improvements required and the extent to which they are recoverable from our tenants. Approximately 84% of our leases provide for the recapture of certain capital expenditures (such as HVAC systems maintenance and/or replacement, roof replacement and parking lot resurfacing). In addition, we maintain an active preventative maintenance program at each of our properties to minimize capital expenditures required.

Tenant improvements and leasing costs also fluctuate in any given year depending upon factors such as the timing and extent of vacancies, property characteristics, the type of lease (renewal tenant or retenanted space), the involvement of external leasing agents and overall competitive market conditions.

As of December 31, 2000, approximately 83% of our leases (on a square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses (including increases thereto). In addition, approximately 12% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses. Approximately 92% of our leases (on a square footage basis) contain effective annual rent escalations that are either fixed (generally ranging from 3% to 4%) or indexed based on the consumer price index or another index. Accordingly, we do not believe that our earnings or cash flow from real estate operations are subject to any significant risk of inflation. An increase in inflation, however, could result in an increase in the cost of our variable rate borrowings, including our unsecured line of credit.

We believe that funds from operations ("FFO") is helpful to investors as a measure of the performance of an equity REIT because, along with cash flows from operating activities, financing activities and investing activities, it provides investors with an understanding of our ability to incur and service debt, to make capital expenditures and to make distributions. We compute FFO in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") in its October 1999 White Paper (the "White Paper"), which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs. Further, FFO does not represent amounts available for our discretionary use because a portion of FFO is needed for capital replacement or expansion, debt service obligations or other commitments and uncertainties. The White Paper defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. (See "Cash Flows" for information regarding these measures of cash flow.)

The following table presents our FFO for the years ended December 31, 2000, 1999 and 1998 (in thousands):

Year Ended December 31,
----------------------------------
2000 1999 1998
---------- ---------- ----------
Net income $26,009 $22,053 $19,403
Less:
Dividends on preferred stock (3,666) (2,036) -
Add:
Depreciation and amortization 24,251 18,532 10,296
---------- ---------- ----------
Funds from operations $46,594 $38,549 $29,699
========== ========== ==========

Rentable Annualized
Number of Square Base Occupancy
Properties Feet Rent Percentage
---------- ----------- --------- -----------
Suburban Washington D.C. 19 1,685,204 $ 26,571 97.9%(1)
California - San Diego 19 836,264 21,902 100.0%
California - San Francisco Bay 6 399,424 9,115 99.8%(1)
Southeast 5 340,469 5,241 90.3%(1)
New Jersey/Suburban Philadelphia 5 268,418 4,295 100.0%
Eastern Massachusetts 6 384,974 10,561 100.0%
Washington - Seattle 3 327,754 9,353 100.0%
---------- ----------- --------- -----------
Subtotal 63 4,242,507 87,038 98.4%
Redevelopment Properties 12 614,143 6,158 39.0%
---------- ----------- --------- -----------
Total 75 4,856,650 $ 93,196 90.8%
========== =========== ========= ===========

(1) Substantially all of the vacant space is office or warehouse space.

Square Square Footage Annualized Base
Year of Number of Footage of as a Percentage Rent of Expiring
Lease Expiring Expiring of Leased Leases (Per
Expiration Leases Leases Portfolio Square Foot)
---------- ----------- ---------- -------------- ---------------
2001 48 651,925 14.8% $19.86
2002 26 436,759 9.9% $18.72
2003 22 462,864 10.5% $19.39
2004 19 378,109 8.6% $19.32
2005 15 308,470 7.0% $25.70
Thereafter 43 2,174,133 49.2% $22.02

Rental TI's/Lease Average
Number Square Expiring New Rate Commissions Lease
of Leases Footage Rate Rate Increase per foot Term
----------- --------- --------- --------- --------- ------------ -----------
Lease Activity - Expired Leases
Lease Expirations
Cash Rent 63 616,313 $21.57 - - - -
GAAP Rent 63 616,313 $21.29 - - - -
Renewed / Released Space
Cash Rent 40 499,180 $22.21 $24.44 10.0% $11.02 4.5 Years
GAAP Rent 40 499,180 $21.92 $25.40 15.9% $11.02 4.5 Years
Month-to-Month Leases
Cash Rent 11 63,100 $12.11 $12.41 2.5% - -
GAAP Rent 11 63,100 $11.71 $12.41 6.0% - -
Total Leasing
Cash Rent 51 562,280 $21.07 $23.09 9.6% - -
GAAP Rent 51 562,280 $20.77 $23.91 15.3% - -
Vacant Space Leased
Cash Rent 13 345,660 - $22.88 - $15.10 7.6 Years
GAAP Rent 13 345,660 - $24.75 - $15.10 7.6 Years
All Lease Activity
Cash Rent 64 907,940 - $23.01 - - -
GAAP Rent 64 907,940 - $24.25 - - -

Alexandria did not file any reports on Form 8-K during the fourth quarter of the fiscal year ended December 31, 2000.

___________________

+ Incorporated by reference to Alexandria's Registration Statement on Form S-11 (No. 333-23545), declared effective by the Commission on May 27, 1997

++ Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended June 30, 1997, filed with the Commission on August 14, 1997

+++ Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended September 30, 1997, filed with the Commission on November 14, 1997

* Incorporated by reference to Alexandria's Annual Report on Form 10-K for the year ended December 31, 1997, filed with the Commission on March 31, 1998

** Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended June 30, 1998, filed with the Commission on August 14, 1998

*** Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q/A for the period ended June 30, 1998, filed with the Commission on August 18, 1998

**+ Incorporated by reference to Alexandria's Annual Report on Form 10-K for the year ended December 31, 1998, filed with the Commission on March 15, 1999

+* Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended March 31, 1999, filed with the Commission on May 17, 1999

+** Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended June 30, 1999, filed with the Commission on August 13, 1999

*+ Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended September 30, 1999, filed with the Commission on November 15, 1999

*++ Incorporated by reference to Alexandria's Current Report on Form 8-K, filed with the Commission on February 10, 2000

+*+ Incorporated by reference to Alexandria's Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Commission on March 29, 2000

++* Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended March 31, 2000, filed with the Commission on May 15, 2000

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

KNOW ALL THOSE BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jerry M. Sudarsky, Joel S. Marcus and Peter J. Nelson, and each of them, as his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, if any, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents of their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

___________________

+ Incorporated by reference to Alexandria's Registration Statement on Form S-11 (No. 333-23545), declared effective by the Commission on May 27, 1997

++ Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended June 30, 1997, filed with the Commission on August 14, 1997

+++ Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended September 30, 1997, filed with the Commission on November 14, 1997

* Incorporated by reference to Alexandria's Annual Report on Form 10-K for the year ended December 31, 1997, filed with the Commission on March 31, 1998

** Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended June 30, 1998, filed with the Commission on August 14, 1998

*** Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q/A for the period ended June 30, 1998, filed with the Commission on August 18, 1998

**+ Incorporated by reference to Alexandria's Annual Report on Form 10-K for the year ended December 31, 1998, filed with the Commission on March 15, 1999

+* Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended March 31, 1999, filed with the Commission on May 17, 1999

+** Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended June 30, 1999, filed with the Commission on August 13, 1999

*+ Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended September 30, 1999, filed with the Commission on November 15, 1999

*++ Incorporated by reference to Alexandria's Current Report on Form 8-K, filed with the Commission on February 10, 2000

+*+ Incorporated by reference to Alexandria's Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Commission on March 29, 2000

++* Incorporated by reference to Alexandria's Quarterly Report on Form 10-Q for the period ended March 31, 2000, filed with the Commission on May 15, 2000

To the Board of Directors and Stockholders of
Alexandria Real Estate Equities, Inc.

We have audited the accompanying consolidated balance sheets of Alexandria Real Estate Equities, Inc. and subsidiaries (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the index at item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Alexandria Real Estate Equities, Inc. and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Los Angeles, California
January 26, 2001

Alexandria Real Estate Equities, Inc. and Subsidiaries

Consolidated Balance Sheets
(Dollars In Thousands, Except Per Share Amounts)

December 31,
--------------------
2000 1999
--------- ---------
Assets
Rental properties, net $ 679,653 $ 554,706
Property under development 26,092 44,121
Cash and cash equivalents 2,776 3,446
Tenant security deposits and other restricted cash 6,995 4,681
Secured note receivable 6,000 6,000
Tenant receivables 2,835 3,432
Deferred rent 14,945 9,014
Other assets 41,688 17,718
--------- ---------
Total assets $ 780,984 $ 643,118
========= =========
Liabilities and Stockholders' Equity
Secured notes payable (includes unamortized
premium of $2,456 and $2,787 at December 31,
2000 and 1999, respectively) $ 200,256 $ 158,512
Unsecured line of credit 231,000 192,000
Accounts payable, accrued expenses and tenant security
deposits 23,123 23,349
Dividends payable 7,453 6,674
--------- ---------
461,832 380,535
Commitments and contingencies
Stockholders' equity:
9.50% Series A cumulative redeemable preferred
stock, $0.01 par value per share, 1,610,000
shares authorized; 1,543,500 shares issued and
outstanding at December 31, 2000 and 1999; $25.00
liquidation value 38,588 38,588
Common stock, $0.01 par value per share, 100,000,000
shares authorized; 15,548,356 and 13,745,622 shares
issued and outstanding at December 31, 2000
and 1999, respectively 155 137
Additional paid-in capital 278,868 225,180
Deferred compensation (296) (1,494)
Retained earnings - -
Accumulated other comprehensive income 1,837 172
--------- ---------
Total stockholders' equity 319,152 262,583
--------- ---------
Total liabilities and stockholders' equity $ 780,984 $ 643,118
========= =========

See accompanying notes.

Alexandria Real Estate Equities, Inc. and Subsidiaries

Consolidated Statements of Income
(Dollars In Thousands, Except Per Share Amounts)

Year Ended December 31,
-------------------------------------
2000 1999 1998
----------- ----------- -----------
Revenues:
Rental $ 82,499 $ 68,425 $ 48,469
Tenant recoveries 20,905 16,305 11,313
Interest and other income 3,506 1,532 1,234
----------- ----------- -----------
106,910 86,262 61,016
Expenses:
Rental operations 21,873 19,003 13,390
General and administrative 8,986 6,977 3,894
Interest 25,791 19,697 14,033
Depreciation and amortization 24,251 18,532 10,296
----------- ----------- -----------
80,901 64,209 41,613
----------- ----------- -----------
Net income $ 26,009 $ 22,053 $ 19,403
=========== =========== ===========
Dividends on preferred stock $ 3,666 $ 2,036 $ -
=========== =========== ===========
Net income allocated to common
stockholders $ 22,343 $ 20,017 $ 19,403
=========== =========== ===========
Net income per share of common stock:
- Basic $ 1.55 $ 1.48 $ 1.60
=========== =========== ===========
- Diluted $ 1.52 $ 1.46 $ 1.58
=========== =========== ===========
Weighted average shares of common
stock outstanding:
- Basic 14,460,711 13,525,840 12,098,959
=========== =========== ===========
- Diluted 14,699,478 13,670,568 12,306,470
=========== =========== ===========

See accompanying notes.

Alexandria Real Estate Equities, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity
(Dollars In Thousands)

Accumulated
Series A Number of Additional Other
Preferred Common Common Paid-In Deferred Retained Comprehensive
Stock Shares Stock Capital Compensation Earnings Income Total
---------- ----------- ------- --------- ----------- ----------- ------------ ----------
Balance at December 31, 1997 $ - 11,404,631 $ 114 $ 173,735 $ - $ (6,932) $ - $ 166,917
Issuance of common stock, net of offering costs - 1,150,000 12 32,701 - - - 32,713
Exercise of stock options, net - 31,632 - 386 - - - 386
Dividends declared on common stock - - - (7,179) - (12,471) - (19,650)
Net income - - - - - 19,403 - 19,403
---------- ----------- ------- --------- ----------- ----------- ------------ ----------
Balance at December 31, 1998 - 12,586,263 126 199,643 - - - 199,769
Net income - - - - - 22,053 - 22,053
Unrealized gain on marketable securities - - - - - - 172 172
----------
Comprehensive income - - - - - - - 22,225
Issuance of common stock, net of offering costs - 1,150,000 11 29,818 - - - 29,829
Repurchase of common stock - (145,343) (1) (3,458) - - - (3,459)
Issuance of preferred stock, net of offering costs 38,588 - - (1,712) - - - 36,876
Stock compensation expense - 105,800 1 3,151 (3,152) - - -
Amortization of stock compensation expense - - - - 1,658 - - 1,658
Exercise of stock options - 48,902 - 874 - - - 874
Dividends declared on preferred stock - - - - - (2,036) - (2,036)
Dividends declared on common stock - - - (3,136) - (20,017) - (23,153)
---------- ----------- ------- --------- ----------- ----------- ------------ ----------
Balance at December 31, 1999 38,588 13,745,622 137 225,180 (1,494) - 172 262,583
Net income - - - - - 26,009 - 26,009
Unrealized gain on marketable securities - - - - - - 1,665 1,665
----------
Comprehensive income - - - - - - - 27,674
Issuances of common stock, net of offering costs - 1,625,000 16 52,101 - - - 52,117
Stock compensation expense - 18,400 - 633 (633) - - -
Amortization of stock compensation expense - - - - 1,831 - - 1,831
Exercise of stock options - 159,334 2 4,113 - - - 4,115
Dividends declared on preferred stock - - - - - (3,666) - (3,666)
Dividends declared on common stock - - - (3,159) - (22,343) - (25,502)
---------- ----------- ------- --------- ----------- ----------- ------------ ----------
Balance at December 31, 2000 $ 38,588 15,548,356 $ 155 $ 278,868 $ (296) $ - $ 1,837 $ 319,152
========== =========== ======= ========= =========== =========== ============ ==========

See accompanying notes.

Alexandria Real Estate Equities, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(In Thousands)

Year Ended December 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
Operating Activities
Net income $ 26,009 $ 22,053 $ 19,403
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 24,251 18,532 10,296
Amortization of loan fess and costs 1,021 748 451
Amortization of premiums on secured notes (331) (310) (32)
Stock compensation expense 1,831 1,658 -
Changes in operating assets and liabilities:
Tenant security deposits and other restricted cash (2,314) 2,810 (692)
Tenant receivables 597 (548) (1,752)
Deferred rent (5,931) (3,419) (3,097)
Other assets (11,976) (3,199) (7,971)
Accounts payable, accrued expenses and tenant
security deposits (226) 7,686 9,505
--------- --------- ---------
Net cash provided by operating activities 32,931 46,011 26,111
Investing Activities
Purchase of rental properties (48,584) (63,896) (200,590)
Additions to rental properties (40,539) (16,807) (21,218)
Additions to property under development (29,813) (29,130) (18,945)
Additions to investments, net (13,544) (3,716) -
Issuance of note receivable - - (6,000)
--------- --------- ---------
Net cash used in investing activities (132,480) (113,549) (246,753)
Financing Activities
Proceeds from secured notes payable 38,061 34,163 36,500
Net proceeds from issuances of common stock 52,117 29,829 32,713
Net proceeds from issuance of preferred stock - 36,876 -
Exercise of stock options 4,115 874 386
Net borrowings from (principal reductions to) unsecured
line of credit 39,000 (2,000) 171,000
Principal reductions on secured notes payable (6,026) (3,303) (1,286)
Dividends paid on common stock (24,722) (22,278) (19,177)
Dividends paid on preferred stock (3,666) (1,272) -
Repurchase of common stock - (3,459) -
--------- --------- ---------
Net cash provided by financing activities 98,879 69,430 220,136
Net (decrease) increase in cash and cash equivalents (670) 1,892 (506)
Cash and cash equivalents at beginning of year 3,446 1,554 2,060
--------- --------- ---------
Cash and cash equivalents at end of year $ 2,776 $ 3,446 $ 1,554
========= ========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest, net of interest capitalized $ 25,315 $ 23,512 $ 12,778
========= ========= =========

See accompanying notes.

In connection with the acquisition of a Life Science Facility in San Diego, California in March 1998, we made a $6,000,000 loan to the sole tenant of the property, fully secured by a first deed of trust on certain improvements at the property. The loan bears interest at a rate of 11% per year, payable monthly, and matures in March 2002. The loan is cross-defaulted to the lease with the sole tenant. Under certain circumstances, we may obtain title to the improvements that secure the loan, and, in such event, we may also require the sole tenant at the property to lease such improvements back from us for an additional rental amount.

We have an unsecured line of credit that provides for borrowings of up to $325 million. Borrowings under the line of credit bear interest at a floating rate based on our election of either a LIBOR based rate or the higher of the bank's reference rate and the Federal Funds rate plus 0.5%. For each LIBOR based advance, we must elect to fix the rate for a period of one, two, three or six months.

The line of credit contains financial covenants, including, among other things, maintenance of minimum net worth, a total liabilities to gross asset value ratio and a fixed charge coverage ratio. In addition, the terms of the line of credit restrict, among other things, certain investments, indebtedness, distributions and mergers. Borrowings under the line of credit are limited to an amount based on a pool of unencumbered assets. Accordingly, as we acquire or complete the development of additional unencumbered properties, borrowings available under the line of credit will increase up to the maximum of $325 million. As of December 31, 2000, borrowings under the line of credit were limited to approximately $303 million and carried a weighted average interest rate of 8.32%.

The line of credit expires February 2003 and provides for annual extensions (provided there is no default) for two additional one-year periods upon notice by the company and consent of the participating banks.

We utilize interest rate swap agreements to hedge our exposure to variable interest rates associated with our unsecured line of credit. These agreements involve an exchange of fixed and floating interest payments without the exchange of the underlying principal amount (the "notional amount"). Interest received under all of our swap agreements is based on the one-month LIBOR rate. The net difference between the interest paid and interest received is reflected as an adjustment to interest expense.

The following table summarizes our interest rate swap agreements.

Notional Interest
Transaction Date Effective Date Termination Date Amount Pay Rate
- ---------------- ---------------- ---------------- ------------ --------
October 1999 December 8, 1999 May 31, 2001 $50,000,000 6.500%
January 2000 (1) January 31, 2000 December 31, 2001 $50,000,000 7.250%(2)
April 2000 May 20, 2000 January 2, 2003 $50,000,000 6.995%
July 2000 May 31, 2001 May 31, 2003 $50,000,000 7.070%
January 2001 January 31, 2001 December 31, 2002 $50,000,000 6.350%

(1) This interest rate swap agreement was terminated and replaced with another interest rate swap agreement in January 2001.

(2) The interest pay rate from December 30, 2000 through December 31, 2001 is 7.25%. The interest pay rate prior to December 30, 2000 was 6.5% from February 1, 2000 to March 31, 2000, 6.75% from April 1, 2000 to July 31, 2000 and 7.00% from August 1, 2000 to December 29, 2000.

With respect to our swap agreements, we are exposed to losses in the event the financial institution is unable to perform under the agreements, or in the event one-month LIBOR is less than the agreed-upon fixed interest rates. The fair value of the swap agreements outstanding as of December 31, 2000 and changes in their fair value as a result of changes in market interest rates are not recognized in the financial statements.

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 133) "Accounting for Derivative Instruments and Hedging Activities," and its amendments Statements 137 and 138, in June 1999 and June 2000, respectively. This statement requires us to reflect all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged asset, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The adoption of SFAS 133, as amended, on January 1, 2001 will result in a reduction in other comprehensive income of approximately $3.5 million.

Secured notes payable consists of the following (in thousands):

December 31,
-------------------
2000 1999
--------- ---------
8.75% note, due January 2006, with an effective interest rate of 7.25%
(includes unamortized premium of $611 and $725 at December 31, 2000
and 1999, respectively), secured by One Innovation Drive, Worcester, MA $ 11,276 $ 11,720
8.68% note, due December 2006, secured by 100/800/801 Capitola Drive,
Durham, NC 12,314 12,435
8.25% note, due August 2007, secured by 20/22 Firstfield Road, Gaithersburg,
MD and 1300 Quince Orchard Road, Gaithersburg, MD 9,998 _
9.125% note, due October 2007, with an effective interest rate of 7.25%
(includes unamortized premium of $1,845 and $2,062 at December 31, 2000
and 1999, respectively), secured by 620 Memorial Drive, Cambridge, MA 19,513 19,842
7.22% note, due May 2008, secured by 14225 Newbrook Drive, Chantilly,
VA and 3000/3018 Western Avenue, Seattle, WA 35,646 35,995
8.71% note, due December 2009, secured by 377 Plantation Street, Worcester,
MA and 6166 Nancy Ridge Drive, San Diego, CA 18,798 18,900
8.33% note, due November 2010, secured by 25/35/45 W. Watkins Mill Road,
Gaithersburg, MD and 708 Quince Orchard Road, Gaithersburg, MD 24,675 _
7.165% note, due January 2014, secured by 1431 Harbor Bay Parkway,
Alameda, CA 6,018 7,146
9.00% note, due December 2014, secured by 3535/3565 General Atomics Court,
San Diego, CA 16,499 17,063
7.75% note, due May 2016, secured by 1102/1124 Columbia Street,
Seattle, WA 19,520 20,148
9.00% note, due October 2000, secured by 381 Plantation Street,
Worcester, MA _ 2,625
Construction loan at LIBOR plus 1.75%, due January 2002, providing for
borrowings of up to $19,000,000, secured by 1201 Clopper Road,
Gaithersburg, MD 18,981 12,638
Construction loan at LIBOR plus 1.70%, due June 2003, providing for
borrowings of up to $25,175,000, secured by 341/343 Oyster Point
Boulevard, San Francisco, CA 7,018 _
--------- ---------
$ 200,256 $ 158,512
========= =========

All of our secured notes payable, except for the notes secured by 1431 Harbor Bay Parkway, 1201 Clopper Road and 341/343 Oyster Point Boulevard, require monthly payments of principal and interest. The note secured by 1431 Harbor Bay Parkway requires monthly payments of interest and semi-annual payments of principal. The notes secured by 1201 Clopper Road and 341/343 Oyster Point Boulevard require monthly payments of interest only.

Future principal payments due on secured notes payable as of December 31, 2000, are as follows (in thousands):

Year Amount
----------------------- -----------
2001 $ 3,885
2002 23,183
2003 11,563
2004 4,199
2005 12,361
Thereafter 142,609
-----------
Subtotal 197,800
Unamortized premium 2,456
-----------
$ 200,256
===========

2000 1999
----------- -----------
Aggregate purchase price $ 18,000 $ 17,294
Secured notes payable assumed 10,040 11,297
----------- -----------
Cash paid for the properties $ 7,960 $ 5,997
=========== ===========

Year Ended December 31,
------------------------------------
2000 1999 1998
----------- ----------- -----------
Risk-free interest rate 5.15% 6.48% 4.66%
Dividend yield 4.78% 5.66% 5.20%
Volatility factor of the expected
market price 23.2% 24.6% 24.5%
Weighted average expected life of
the options 4.7 years 5.8 years 5.0 years

Year Ended December 31,
----------- ------------------------
2000 1999 1998
----------- ----------- -----------
Pro forma net income available to
common stockholders $ 21,532 $ 19,083 $ 18,299
Pro forma net income per common share:
- Basic $ 1.49 $ 1.41 $ 1.51
- Diluted $ 1.46 $ 1.40 $ 1.49

2000 1999 1998
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Stock Exercise Stock Exercise Stock Exercise
Options Price Options Price Options Price
--------- --------- --------- --------- --------- ---------
Outstanding-beginning of year 785,000 $ 25.37 821,500 $ 24.49 701,000 $ 20.80
Granted 316,000 33.78 70,500 29.56 290,500 31.00
Exercised (145,334) 26.38 (75,000) 20.11 (57,333) 20.00
Forfeited (54,666) 32.45 (32,000) 23.98 (112,667) 20.64
--------- --------- --------- --------- --------- ---------
Outstanding-end of year 901,000 $ 27.73 785,000 $ 25.37 821,500 $ 24.49
========= ========= ========= ========= ========= =========
Exercisable at end of year 519,001 $ 23.94 426,003 $ 24.36 252,834 $ 23.33
========= ========= ========= ========= ========= =========
Weighted average fair value of
options granted $ 5.51 $ 5.28 $ 4.88
========= ========= =========

Quarter
------------------------------------------
First Second Third Fourth
--------- --------- --------- ---------
(In thousands, except per share amounts)
2000
----
Revenues $ 23,962 $ 24,910 $ 28,475 $ 29,563
Net income available to common
stockholders $ 4,821 $ 5,425 $ 5,615 $ 6,484
Net income per share:
- Basic $ 0.35 $ 0.38 $ 0.39 $ 0.42
- Diluted $ 0.35 $ 0.38 $ 0.38 $ 0.41
1999
----
Revenues $ 19,539 $ 21,094 $ 22,395 $ 23,234
Net income available to common
stockholders $ 5,298 $ 5,613 $ 4,933 $ 4,173
Net income per common share:
- Basic $ 0.41 $ 0.41 $ 0.36 $ 0.30
- Diluted $ 0.40 $ 0.41 $ 0.36 $ 0.30

Initial Costs Costs Total Costs
----------------------- Capitalized ----------------------
Square Buildings and Subsequent to Buildings and Accumulated Year Built/
Property Name Footage Land Improvements Acquisition Land Improvements Total Depreciation (1) Encumbrances Renovated
------------- ---------- -------- ------------- ------------ -------- ------------ --------- ---------------- ----------- -------------------
129/153/161 N. Hill Street 33,954 $ 2,172 $ 812 $ 959 $ 2,172 $ 1,771 $ 3,943 $ 10 $ _ 1940's/1950's/1960's
10933 N. Torrey Pines Road 107,753 3,903 5,960 1,078 3,903 7,038 10,941 1,817 _ 1971/1994
3010 Science Park Road 74,557 _ _ 14,678 _ 14,678 14,678 334 _ 2000
11099 N. Torrey Pines Road 86,962 2,663 10,649 2,118 2,663 12,767 15,430 3,050 _ 1986/1996
3535 General Atomics Court 76,084 2,651 18,046 1,355 2,651 19,401 22,052 3,828 10,848 1986/1991
3565 General Atomics Court 43,600 1,227 9,554 1 1,227 9,555 10,782 1,924 5,651 1991
11025 Roselle Street 18,173 463 1,840 833 463 2,673 3,136 499 _ 1983/1998
4757 Nexus Centre Drive 67,050 2,548 13,638 _ 2,548 13,638 16,186 2,258 _ 1989
3530 John Hopkins Court 34,723 1,122 _ 3,843 1,122 3,843 4,965 57 _ 2000
3550 John Hopkins Court 55,200 1,683 _ 5,554 1,683 5,554 7,237 239 _ 1999
6166 Nancy Ridge Drive 29,333 733 2,273 1,851 733 4,124 4,857 519 _ (2) 1997
10505 Roselle Street 17,603 444 1,699 1,699 444 3,398 3,842 233 _ late 1970's/1999
3770 Tansy Street 15,410 650 1,375 1,776 650 3,151 3,801 80 _ 1978/1999
9363 Towne Centre Drive 45,030 275 8,621 21 275 8,642 8,917 308 _ 1987
9373 Towne Centre Drive 52,228 320 10,070 708 320 10,778 11,098 472 _ 1987
9393 Towne Centre Drive 41,794 258 8,170 2,510 258 10,680 10,938 291 _ 1987/2000
11035 Roselle Street 18,193 455 2,581 3 455 2,584 3,039 29 _ 1981
11045 Roselle Street 30,147 754 4,288 3 754 4,291 5,045 49 _ 1981/1998
11055 Roselle Street 22,577 564 3,224 3 564 3,227 3,791 38 _ 1981/1995
11065 Roselle Street 17,433 436 2,480 3 436 2,483 2,919 28 _ 1981/1999
11075 Roselle Street 24,208 605 3,459 2 605 3,461 4,066 41 _ 1981/1995
6146 Nancy Ridge Drive 23,391 515 1,566 _ 515 1,566 2,081 7 _ early 1980's
1311 Harbor Bay Parkway 27,745 775 1,917 804 775 2,721 3,496 254 _ 1984/2000
1401 Harbor Bay Parkway 47,777 1,200 3,880 121 1,200 4,001 5,201 424 _ 1986/1994
1431 Harbor Bay Parkway 68,711 1,800 9,731 88 1,800 9,819 11,619 1,044 6,018 1985/1994
1201 Harbor Bay Parkway 61,015 1,507 5,357 2,280 1,507 7,637 9,144 952 _ 1983/1999
819/863 Mitten Road 153,584 4,751 12,612 726 4,751 13,338 18,089 1,164 _ 1962/1997
2625/2627/263 Hanover Street 32,074 _ 6,628 1,329 _ 7,957 7,957 2,037 _ 1968/1985/2000
2425 Garcia Avenue & 2400/2425
Bayshore Parkway 98,964 _ 21,323 1,404 _ 22,727 22,727 1,773 _ 1980/2000
2140 Durant Avenue 25,000 3,313 966 350 3,313 1,316 4,629 _ _ 1930
1102/1124 Columbia Street 209,361 6,566 23,528 9,075 6,566 32,603 39,169 3,990 19,520 1975/1997
3005 First Avenue 70,647 2,119 11,275 3,894 2,119 15,169 17,288 1,187 _ 1980/1990/2000
3000/3018 Western Avenue 47,746 1,432 7,497 2,099 1,432 9,596 11,028 1,097 35,646 (3) 1929/1990/2000
150/154 Technology Parkway 37,080 370 4,191 122 370 4,313 4,683 317 _ 1976/1985/1993
100 Capitola Drive 65,114 334 5,795 167 334 5,962 6,296 559 _ (4) 1986
800/801 Capitola Drive 119,916 570 11,688 416 570 12,104 12,674 1,056 12,314 (4) 1985
5 Triangle Drive 32,120 161 3,410 31 161 3,441 3,602 251 _ 1981
108 Alexander Road 86,239 _ 376 10,070 _ 10,446 10,446 62 _ 2000
7030 Kit Creek Road 40,800 374 3,383 120 374 3,503 3,877 48 _ 1995
1413 Research Boulevard 105,000 1,733 9,611 545 1,733 10,156 11,889 1,137 _ 1967/1996/2000
300 Professional Drive 47,558 871 5,362 2,957 871 8,319 9,190 751 _ 1989/1999
401 Professional Drive 62,739 1,129 6,940 20 1,129 6,960 8,089 791 _ 1987
25/35/45 W. Watkins
Mill Road 138,938 3,281 14,416 160 3,281 14,576 17,857 1,624 24,675 (5) 1989/1997
1550 East Guide Drive 44,500 775 4,122 164 775 4,286 5,061 422 _ 1981/1995
1330 Piccard Drive 131,511 2,800 11,533 197 2,800 11,730 14,530 1,101 _ 1978/1994
708 Quince Orchard Road 49,225 1,267 3,031 5,147 1,267 8,178 9,445 1,645 _ (5) 1982/1997
940 Clopper Road 44,464 900 2,732 1,398 900 4,130 5,030 404 _ 1989
1401 Research Boulevard 48,800 602 4,391 148 602 4,539 5,141 420 _ 1966
1500 East Gude Drive 45,989 748 3,609 1,058 748 4,667 5,415 444 _ 1981/1986
8000/9000/10000 Virginia
Manor Road 191,886 _ 13,679 304 _ 13,983 13,983 1,170 _ 1990
10150 Old Columbia Road 75,500 1,510 5,210 1,612 1,510 6,822 8,332 732 _ 1983/1997
1201 Clopper Road 92,990 2,463 493 17,875 2,463 18,368 20,831 1,196 18,981 2000
19 Firstfield Road 25,175 376 3,192 1,926 376 5,118 5,494 245 _ 1974/2000
15020 Shady Grove Road 41,062 840 3,115 36 840 3,151 3,991 267 _ 1987
2001 Aliceanna Street 179,397 1,848 6,120 726 1,848 6,846 8,694 446 _ early 1950's/1995
50 West Watkins Mill Road 57,410 859 4,149 240 859 4,389 5,248 270 _ 1988/2000
20 Firstfield Road 54,918 971 5,141 402 971 5,543 6,514 _ _ (6) 1980
22 Firstfield Road 53,595 947 5,092 264 947 5,356 6,303 72 _ (6) 1980
1300 Quince Orchard Road 54,874 970 5,138 57 970 5,195 6,165 66 9,998 (6) 1981
14225 Newbrook Drive 248,186 4,800 27,639 369 4,800 28,008 32,808 2,649 _ (3) 1992
5100/5110 Campus Drive 42,782 654 4,234 119 654 4,353 5,007 340 _ 1989
702 Electronic Drive 40,000 600 3,110 3,065 600 6,175 6,775 986 _ 1983/1998
215 College Road 106,036 1,943 9,764 605 1,943 10,369 12,312 867 _ 1968/1974/1984
170 Williams Drive 37,000 740 4,506 47 740 4,553 5,293 320 _ 1982/1994
100 Phillips Parkway 74,000 1,840 2,298 9,672 1,840 11,970 13,810 105 _ late 1960's/1999
279 Princeton Road 42,600 1,075 1,438 2,131 1,075 3,569 4,644 639 _ 1984/1999
79/96 Charlestown Navy Yard 24,940 _ 6,247 13 _ 6,260 6,260 492 _ 1880/1991
280 Pond Street 24,867 622 3,053 38 622 3,091 3,713 230 _ 1965/1990
60 Westview Street 32,000 960 3,032 36 960 3,068 4,028 208 _ 1975
One Innovation Drive 113,956 2,734 14,567 562 2,734 15,129 17,863 826 11,276 1991
377 Plantation Street 92,711 2,352 14,173 167 2,352 14,340 16,692 881 18,798 (2) 1993
620 Memorial Drive 96,500 2,440 37,754 63 2,440 37,817 40,257 2,095 19,513 1920's/1997/1999
381 Plantation Street 92,245 650 _ 12,994 650 12,994 13,644 1,387 _ 2000
500 Arsenal Street 84,000 3,360 7,316 554 3,360 7,870 11,230 _ _ 1978/1984
---------- -------- ------------- ------------ -------- ------------ --------- ---------------- -----------
4,856,650 $ 99,373 $ 500,069 $ 137,765 $ 99,373 $ 637,834 $ 737,207 $ 57,554 $ 193,238
========== ======== ============= ============ ======== ============ ========= ================ ===========

Rental Properties
Year Ended December 31,
------------------------------------
2000 1999 1998
----------- ----------- -----------
Balance at beginning of period $ 590,202 $ 490,518 $ 235,880
Improvements 40,539 16,807 21,218
Acquisition of land, buildings and
improvements 106,466 82,877 233,420
----------- ----------- -----------
Balance at end of period $ 737,207 $ 590,202 $ 490,518
=========== =========== ===========

Accumulated Depreciation
December 31,
------------------------------------
2000 1999 1998
----------- ----------- -----------
Balance at beginning of period $35,496 $18,611 $8,804
Depreciation expense 22,058 16,885 9,807
----------- ----------- -----------
Balance at end of period $57,554 $35,496 $18,611
=========== =========== ===========