Please stand by. We are about to begin. Good day and welcome, everyone, to the Alexandria Real Estate Equities’ fourth quarter 2007 conference call. Today’s call is being recorded. At this time for opening remarks and introductions I’d like to turn the call over to Rhonda Chiger. Please go ahead, Ma’am.

Good morning and thank you for joining us today. This conference call contains forward-looking statements, including earnings guidance within the meaning of the federal securities laws. Actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our annual report on Form 10K and other periodic reports filed with the Securities and Exchange Commission. And now I would like to turn the call over to Joel Marcus. Please go ahead.

Thanks, Rhonda. Welcome, everybody. With me today are Jim Richardson, Dean Shigenaga, and Pete Nelson. I’m going to skip my macro comments on the broad life science industry and try to get right into the meat of the presentation. Starting with earnings guidance and dividend policy, we’re pleased with a truly stellar operating performance for the company in 2007 given, obviously, the macro-economic environment, the residential real estate sub-prime prices, the broad debt crisis, creeping inflation, the economic slow-down, and what now appears to be a recessionary bear stock market. Our total return performance of over 711% from the IPO through the 12/31/07 is among the best in the REIT universe and we’re very, very honoured and pleased about that. We’re also pleased about our total positive return performance in 2007 of over 4% when REITs were down approximately 20%. Similar to 1998 when we were one of the few companies to post positive return, Dean will talk about our unbroken streak of positive same-store results quarterly and our positive GAAP rental rate increases on an annual basis. We’re enormously proud of these accomplishments and I think we believe and have continued to believe that ARE is a safe haven for all investor styles with our really unique business model and multiple platforms for growth, continuing high operating margins, excellent collectability of rents, no bad debts, strong tenant base with substantial credit, a well-diversified tenant base within the broad life science sector, and, I think, AAA quality buildings and AAA quality locations in the best diversified coastal sub-markets, and now with increasingly international exposure. Our FFO increased 9% in the fourth quarter and overall about 10% last year. I wanted to get to initial guidance right away. I would consider this initial guidance in light of the deteriorating macro situation,…

Thanks, Joel. Again, our results for the fourth quarter and year ended December 31, 2007, reflect the strength of our unique road map for growth in our continued ability to execute and deliver consistent and predictable results period after period. The fourth quarter of 2007 represents our 42nd consecutive quarter in growth in FFO per share diluted; excluding D42 charges our 42nd consecutive quarter of positive same-property growth on a GAAP basis, and our 10th full calendar year with positive leasing activity. As Joel had highlighted, our fourth quarter FFO per share diluted results were $1.46, up 9% over the fourth quarter of ’06. Let me quickly cover a few important items starting with our guidance for 2008, then our balance sheet, then our 2008 capital plan, and then I’ll cover our solid fundamental operating results. First with our guidance. Our guidance for 2008 was based on various assumptions and is reflective of the ongoing strength of our core operations balanced by our cautious tone on the overall macro-environment. Our cautious view of the volatility in interest rates, including LIBOR in the forward-LIBOR curve, and the impact of asset sales since January 1 of 2007 through this month. As I’ll highlight shortly, our unique (inaudible) for growth continues to generate insistent and predictable operating results, which is a key component to our guidance for 2008. From our solid leasing activity year after year to positive same-property performance quarter after quarter, to our solid quadruple net lease structure that provides for the recovery of the majority of our off-backs and major cap-backs, to our unique ability to underwrite the life science industry and client tenants. These key attributes have proven to be an important component to our strong and consistent operating performance and will provide for a solid base for our…

Thanks, Dean. I’ll start with some brief comments on the overall health of our markets. The conditions in our core markets continue to be generally strong and are trending positively. Vacancy rates are low and continue to move incrementally downward as new supply remains very modest. Threats to supply shock appear to be very nominal, as well, absent, obviously, a major farm restructuring or a merger. New development opportunities are really limited in these core locations. Tenant demand is very diverse and fairly robust. Much of ’07 and a current activity thus far is in the 5,000 to 30,000 square foot range. Each of the markets do have larger requirements in the 100,000-square-foot-plus range and with the limited opportunities in the Class A sector we expect a number of these transactions to land in 2008. Rents are also expected to continually and generally rise on an incremental basis and are either stable or increasing in every one of our core submarkets. User activity has also continued to increased in the academic, institutional, and governmental realms of our client base. There is a continued migration of technology companies to the brain trust cluster locations. A recent substantial commitment to the South Lake Union area by both Amazon and Microsoft are great examples of this phenomenon. Values remain high with very few land opportunities in these core markets subtracting substantial interest and pricing power. I guess finally, kind of a broader comment, the market conditions in the Class A or high-end tech space sectors in our core markets have really seemed to maintain their relative strength, although transaction velocity appears to have slowed on both the leasing and sales side. Turning to leasing performance in the fourth quarter, this, as highlighted by both Joel and Dean, represented a continuation of our very…

To the operator for Q&A, please.

Thank you, Sir. (Operator Instructions). And we’ll go to Steve Sakwa with Merrill Lynch. Steve Sakwa – Merrill Lynch: Good morning. I just want to circle back on the disposition question just to make sure I understand it. You sold $136 million since the beginning of ’07 and it sounds like 64, so that was in 1Q ’08. Does your guidance of 210 assume additional acquisitions and, if so, can you just give us kind of a range of what you think that dollar figure may be this year?

Steve, could you clarify that? There was some static when you asked your question whether it was acquisitions or dispositions that you referred. Steve Sakwa – Merrill Lynch: Sorry. On the disposition front. You said you sold $136 million since the beginning of 2007, some of which occurred in the beginning part of ’08. I’m just trying to figure out whether your expectations of 610 include further dispositions to be on the $64 million.

Yeah. The answer is absolutely yes. I’m not sure we can easily quantify that for you, especially given some of the accounting rules related to assets held for sale. So I’m not sure I want to give precise numbers, but I would say it is significant. Steve Sakwa – Merrill Lynch: Okay.

So the answer is yes. Steve Sakwa – Merrill Lynch: Okay. And then maybe just talk a little bit more about kind of what you’re hearing from tenants just in terms of the decision-making process, Joel. It sounds like maybe in some cases things are taking a bit longer or at least we’re hearing that in other sectors. What is your experience in dealing with folks trying to commit the space and if they are pushing out maybe just give us a little bit of colour there?

Well, let me give you a couple of my impressions and ask Jim to maybe give you maybe more specific ones. I think we’re still seeing pretty good velocity and decision making and transactions regarding, I would say, more institutional-type users, but I would say the smaller size tenants probably have taken a little bit more time. But I would say fundamentally we haven’t seen a significant shift in slow down. But I think there is clearly a focus on cost issues given the macro markets that Jim can highlight more in-depth.

Yeah, I think that’s right. I think, Steve, as I look back at our stats over the last several years it’s been strikingly stable how consistently we’ve done these leasing transactions in the size range I’ve described. I would say that there really hasn’t been a significant slow down there. There’s a steady state of those transactions. We have the right kinds of spaces and the right locations for those tenants and so I haven’t seen a dramatic slow down there. I think on the larger tenant front Joel’s exactly right. Cost is a key consideration. The flip side is that there are few legitimate Class A opportunities where these tenants want to be, so all the transactions seem to be taking longer. They’re not evaporating and ultimately, as I indicated in my remarks, I think they’re going to be done and I think you’ll see a number of large institutional transactions done this year in our markets by us as well as others. Steve Sakwa – Merrill Lynch: Okay. And then if I can just ask one final question of Dean. Can you just maybe in summary format walk through the exact capital needs this year and the sources? If you could just put them in buckets given the large development and redevelopment pipeline you’ve got. If you can kind of sum it all together.

Yeah, I think one of my comments during the call, Steve, was our fourth quarter run rate on construction spending was approximately $90 million. I think if you had to forecast out into 2008 that that number will grow through the four quarters to slightly above $100 million a quarter. As far as sources of capital, I think we’ve touched on it in different aspects during the call, but asset sales will continue to provide some important capital for us to recycle into the company. We’ve got our credit facility, which is $1.9 billion, plus a $500 million accordion that will provide important capital. I mentioned loans that we are in the process of refinancing that over the next four quarters looks like we can tap about $200 million of additional equity which is in excess. So proceeds in excess of current loan balances and that will also provide an additional source of capital. Joel had highlighted our ongoing efforts with joint venture opportunities with New York. And project financing will also play an important source of capital for us. I think that is the menu that we’re looking at at the moment and we’ll continue to pursue all aspects of that capital plan. Steve Sakwa – Merrill Lynch: Okay. That’s helpful. Thanks.

We’ll go to Anthony Paolone with J. P. Morgan. Anthony Paolone – J. P. Morgan: Thank you. Just following up on what you’re seeing in the environment out there and how that ties into your guidance. Can you put some parameters around – you talked about your 610 being cautious? What do you think are the biggest drivers, either on the up side or down side, to that number as you look at the environment out there?

Well, I think it’s pretty clear that interest rates could be an important driver and my sense is if inflation starts to ramp up the fed has got to address that in a reversal of its current thinking. So that’s certainly an important factor. I think a dominant factor is asset sales that we’re looking at. I think we’ve had very good success over the past couple of months, especially with stabilized assets. As Jim mentioned, we exited a market that we’ve long been thinking about, but we short kind of an opportune time in the East Bay, we think, which has the possibility to be a little weaker than some of our strong core markets at cap rates we felt were very, very acceptable. So I think the asset sale program and velocity is something that certainly has a material impact on that issue. And then, I think as Jim said, clearly leasing issues to be a little cautious on the rate of leasing. Not necessarily the success of leasing, but kind of how we are leasing both in roles and on delivery. So I think those are several components that certainly make some sense. But if you look at core growth, we feel very good about the same-store growth, very good about lease role growth, very good about, again, the core operating fundamentals of what the company’s trying to do. And really, I view 2007 and 2008 as kind of transition years where we are really exiting a number of non-core assets and some non-core submarkets and really putting much more emphasis on capital into critical core locations. For example, Cambridge, Longwood Medical Centre, our international operations, Mission Bay, etcetera. So those are just kind of a potpourri of items. Anthony Paolone – J. P. Morgan: I mean, it sounds as if variable rate debt or interest rates are a big factor. Can you give us what your LIBOR assumption is in your 610?

Tony, it’s Dean here. As we’ve all witnessed, LIBOR has moved so dramatically in 2008 it’s actually been very surprising for most of us. So we’re not any better honestly at forecasting the curve, so we tend to watch the LIBOR curve that’s forecasted out by others and make some adjustments to that. So we tend to be close to that and from time to time we’ll make different assumptions to soften that impact.

Yeah, keep in mind that some of our assumptions are based on a, were into a, we believe a, at least the knowledgeable people on the economy believe we’re into a recession. We can’t be so foolish as to believe that can’t help, well, it will clearly impact everybody’s operating assumption. So we’d rather be cautious than overly optimistic. Anthony Paolone – J. P. Morgan: Okay. In terms of the portfolio in light of substantial dispositions. Can you characterize what portion of the portfolio is kind of in that $200 a square foot roughly price point that seems to be more akin to conventional office versus some of the stuff you’ve bought or have developed in recent years which seems to be double or so that in many instances in terms of per pound pricing?

Well, that would be hard to do without going building by building. A lot of it really is driven of of market rents so that the markets that have the highest triple net rents in those properties are the ones that drive the highest values. So I’d say generally, whether they’re core or non-core, suburban markets, truly suburban markets have lower valuations. That doesn’t mean that they’re either core or non-core, it’s just the reality of kind of the real estate economics. So yeah, it would be hard to tell you that all of our non-core assets would fall into that pricing range or the converse. Anthony Paolone – J. P. Morgan: Maybe a different way to think about it then, what about just, say, non-core assets or say assets that are still heavily weighted toward conventional office that you might contemplate selling. What portion of the portfolio is that?

Well, I wouldn’t think that is significant. I think the sale decision actually relates. Sometimes we may have assets we think are important in somewhat of a more suburban environment, but have made a decision or are thinking, I have to be careful here on discontinued operations accounting, or are thinking of a decision-making tree that would enable us to, say, exit maybe a suburban or non-dense urban market because we feel the future is brighter in the dense urban market than it is in the suburban market as far as future increases in rental rates and valuations. I think that maybe is more the analysis. As opposed to, I mean, we don’t have a huge number of pure offices. The buildings we sold in the East Bay were by and large all large lab/office buildings. But we’ve looked at the overall submarket as one we felt the timing was right to exit. I think in some of our markets that are not necessarily the ones that we are as highly focused on, like Mission Bay, like East Cambridge, like Longwood Medical Centre. I think we’re more likely to think about alternatives in those markets over the coming quarters than we would have in past, but that doesn’t mean they weren’t historically maybe relatively core, if you follow my kind of thinking. Anthony Paolone – J. P. Morgan: Okay. And then just last question. I know the China project is fairly small in terms of dollars, but I just want to reconcile. I think in your commentary you mentioned a 40,000-square-foot lease and then the rest of it as being marketed.

A 50,000-square-foot requirement which may expand, but that’s the current tenant requirement with the joint venture tenant we have. So that’s 50 out 280. Anthony Paolone – J. P. Morgan: I thought, did something change there? I was under the impression that it was majority committed with only a small amount that you had to go out and market.

No. No. I don’t think we ever said that. We always had a 50,000-square-foot requirement from our joint venture partner. That could grow over time, but that was the initial situation. Anthony Paolone – J. P. Morgan: Okay. Thanks.

You’re welcome. Thank you.

We’ll go next to Michael Bilerman with Citi. Michael Bilerman – Citigroup: Good morning. Irwin Gusman (sic) is on the phone with me as well. I want to go back to sort of the guidance question. At 610 it sounds like your interest rate forecast, given with current LIBOR at 3% you have $350 million of hedges that are coming due this year at LIBOR at 50. Then you have $650 million of pure floating rate debt, which obviously just went down 200 basis points. Granted, some of that positively affects cap interest. But I’m trying to understand why, how much higher are you expecting LIBOR to go in your forecast for you to be more cautious on your guidance? I would think this would be a huge boon for your guidance.

Well, actually, Michael, those are good questions. I think if you look at our LIBOR schedule, I’m sorry, our swap schedule in our press release, whatever is burning off in the current year has already been extended with a replacement contract and that does show up in the swap disclosures in our supplemental. So there’s no real benefit anticipated by swaps burning off.

And in point of fact, there will likely be, as Dean said, additional swaps placed on the un-hedged variable rate portion, which would then limit our exposure either positively or negative to future swings in interest rates. Michael Bilerman – Citigroup: But what are you assuming in your guidance for LIBOR? What sort of curve are you using for the year? It obviously has a dramatic effect on underlying FFO.

We’re staying very close to the curve, Michael. I don’t have the curve that’s in our model with me, but we’ve taken the curve and, honestly, and like every company you’ve probably spoken to in this earning season, I think from what we hear from the companies that were providing us the curve, they were getting calls daily trying to figure out where the curve was headed because it was moving significantly through the month of January. And we were monitoring that very closely. So we’ve taken one of the curves that were provided most recently before we finalized our release and have used that as a basis for our model and have adjusted that back just slightly. Michael Bilerman – Citigroup: Okay. Maybe we can talk a little bit more offline because I’m still a little bit confused as to why it wouldn’t be a big benefit for you given relative to where you were in 2007.

Well, I think relative year to year there’s been an improvement, but also keep in mind, Michael, that 100% of changes in our borrowing costs do not drop 100% dollar for dollar to the bottom line results as a result of our capitalized interest and our ongoing construction activities. Whether it’s a benefit in interest rates or a detriment to rates, it doesn’t drop one to one to the bottom line. Michael Bilerman – Citigroup: Right, but it does drop. And I can understand that, but there should be some hiccup that you’re getting.

Yeah, and I think what we were also highlighting, there is a pick-up in interest rates, but what we also highlighted very carefully was the take away that our asset sales have been diluted to our FFO results for 2008. Or will be diluted for our guidance for 2008. Michael Bilerman – Citigroup: Well, I guess this, it may circling back on guidance here, 90% of your leases are triple net. You only have 8% rolling this year and 70% of that’s already put away. We’ve had a discussion about interest rates. What else are you being cautious on and what else may have you pulled back for your growth forecast to be lower than your sort of high single-digit, low double-digit growth?

Well, let me say this. I think that at 610 we’re looking at guiding the street, as we said, initially and cautiously at about 7% core growth. Now what could add to core growth or above core growth would be obviously redevelopment and development, deliveries obviously the impact of leasing. But I think as initial cautious guidance this year in a market that is frankly one that not too many people have seen before, if ever, we thought it’s important to be more cautious than less cautious as our initial guidance here. So people could second guess should the company be guiding at 8% or 9% in a recessionary year in a bear market. I would argue that I’d rather be at 7% and as the quarters go on and the year matures that we have up side benefit as opposed to down side guidance. So that’s just how our thinking is at a 30,000-foot level. Michael Bilerman – Citigroup: Right. Joel, who’s the buyer of stabilized lab space assets today and what sort of cap rates are people buying at?

Yeah, I mean, the example of the East Bay sale was, I think, a cap rate that was in the seven range and it was a very well known, well respected local developer that teamed up with a pension fund and I think we’ve seen that in other locations in that combination. I think similar in San Diego as well. So I think it may be less for the product type, although this particular developer has had some experience with the product type, but I think looking for assets that had good income, there is decent credit there although there are maybe medium term or short to medium term roles that we were not interested in absorbing. I think they felt comfortable and maybe going into the market with that thinking. Michael Bilerman – Citigroup: Thank you. Irwin has some questions. Irwin Gusman – Citigroup: Good morning. My question is on the redevelopment pipeline. Could you disclose what percentage of it is pre-leased? Specifically for the part that’s delivering in the next 12 to 18 months.

I’m not sure I can, I think, I don’t know that we have time to go through each of those. Irwin Gusman – Citigroup: Well, maybe another way of asking it is it looks like the deliveries of your new redevelopment pipeline are now a little bit more weighted toward 2009 whereas before they were sort of an even split between ’09 and ’08 and I’m wondering if that’s –

Well that, I think that’s simply because we’ve added a couple that will come through in ’09, but I think by and large, well, Jim can give you some highlight there.

Yeah, I think again through ’08 and ’09 we’ve got probably a third of it that we’re negotiating or are committed on and the balance of it is too early to say at this stage. Irwin Gusman – Citigroup: Okay. And my last question is, you have disclose the $1.1 billion of debt principle that’s been capitalized; can you break that out into the components of land development PIP and redevelopment spent?

Well, we would just refer you to the number on the balance sheet, which is kind of an aggregate number and I think that’s what we’d like to just leave it at that. Irwin Gusman – Citigroup: Okay. Thank you.

Thank you.

We’ll go to Philip Martin with Cantor Fitzgerald. Philip Martin – Cantor Fitzgerald: Good morning. I just want to talk a little bit about the international portfolio. I mean, obviously you’ve seen some incremental growth over the last 12 to 18 months. I would have to assume tenants and countries must be getting more comfortable with your capabilities, they’re getting more comfortable with you as a company. Is this generating better than expected opportunities for you than you thought?

Yeah, the answer, Philip, to that question is there are, I guess, the good news and the bad news. The good news is there are more opportunities out there on the horizon. The bad news is there are more opportunities out there on the horizon. So we have to be I think pretty judicious and disciplined about which ones we go after. We felt Scotland was a big advantage both cost-wise and ultimately yield-wise because there is a significant scientific capability and commercial capability and government investment in the sector and an ability to acquire just absolute AAA location at a very low cost basis. So we felt that was compelling. The other transaction in Europe we’re looking at is a city-center location where we were actually invited in based on our reputation and brand. So we feel very good about it. We’ve had dozens of inquiries come to us from multiple locations, many of which we’ve just either turned down or deferred. In Asia, as I say, we’ve been working kind of long and hard on the South China transaction because of our tenant relationships. We’ve been working long and hard for well over a year now on India. It’s just a challenging and difficult process there, but we hope to be successful. And then we have some new opportunities emerging that are significantly in different key locations in China which we believe those two countries contributing one half of the world’s population to be not only huge ultimate consumer markets, but obviously a great demand market. So we’re trying to be judicious and thoughtful about how we choose our spots and clearly we’re focused on Canada as well. Philip Martin – Cantor Fitzgerald: Does it sound at some point in the next year or so to have a larger Alexandria presence in terms of an office internationally? Are those in your plans?

Well, we do. We have an operating office in the ground in South China. We will have an office on the ground in Scotland. We will have an office on the ground in Canada. So I think in locations where we are developing and really have a base of operations as opposed to a passive investment we’ll definitely have a carefully, in the Alexandria-style, you know, efficient overhead kind of operation, but one that is hopefully highly effective. I think Dean has taken account of that when he gave his guidance in G&A of about 7% to 8%. So I think that’s correct. Philip Martin – Cantor Fitzgerald: Okay. And is a tougher credit and financing market leading at this point to, it doesn’t sound like it right now in your guidance, but do you see it leading to a potential increase in acquisition opportunities in your core markets? Or is the demand from, well, do you see the disruption in the credit markets leading to some better opportunities here for you?

Yeah, I don’t know, Phil, if I feel like we’ll see more of them. It’s certainly conceivable if things continue this way that yields will improve to the buyer, so that could in fact, so the spreads basically will improve as there’s less demand for product. I haven’t seen that manifest itself yet at all. The sale that Joel gave a little bit more colour on that we did in the East Bay and San Francisco I think is evidence of that. Kind of a secondary submarket with leases that were relatively short term and the cap rate is down in the 7% range I think shows that there’s still a lot of demand notwithstanding uncertainty in the credit markets. So yeah, in another 12 months or so that will be different, but I haven’t seen a significant shift yet. Philip Martin – Cantor Fitzgerald: Okay. Okay. And my last question and, Jim, you did explain this pretty well. In terms of leasing in the fourth quarter the average lease term was 2.8 years. That was one larger lease. But you’re not seeing any trend towards shorter leases in this environment here that was just really an exception?

Exactly. You could go quarter to quarter, I think you have to look at maybe a longer term horizon to evaluate that in our case because there are unique situations that arise, but that is exactly the right analysis. Philip Martin – Cantor Fitzgerald: Okay. Okay. Thank you, all.

Thank you very much.

And with no other questions in cue I’d like to turn the call back to Joel Marcus for any additional or closing comments.

Yeah, we just thank you very much for taking time this morning. We’ll look forward to giving you further updates on our first quarter call in early May. Thanks everybody.

And that does conclude today’s call. Again, thank you for your participation. Have a good day.