Good day, everyone and welcome to the Alexandria Real Estate Equities second quarter 2008 conference call. Today's call is being recorded. Now for our opening remarks, I'd like to turn the call over to Ms. Rhonda Chiger. Please go ahead.

Thank you, and thank you for joining us. 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 annual report on Form 10-K and our other periodic reports filed with Securities and Exchange Commission. And now, I would like to turn the call over to Joel Marcus. Please go ahead.

Thanks, Rhonda and welcome everybody. With me today, are Dean Shigenaga, Senior VP and Chief Financial Officer; and Pete Nelson, Secretary; and Jim Richardson's on vacation at the moment. I want to take this opportunity to recognize and thank the insider team in Alexandria that I always considered to be the best of the best for superbly solid quarter, in a highly uncertain and financially challenging macro environment. The experience and expertise of this team is truly unmatched. Pretty much was a picture perfect quarter with all operating and financial metrics really humming, and I continue to always believe A.R.E. can reinforced by the release on the operating and financial stats for the quarter that A.R.E. continues to be safe haven and sanctuary for all investor styles. A.R.E.'s unique new strategy which we pioneered really concentrates us in the absolute dislocations at the top end of the market with significant barriers to supply and significant barriers to tell and exit. For example on the San Francisco Bay area, we were pleased this week to have a major ground breaking with Corey Goodmen and the mayor of San Francisco on the Mission Bay North anchored by Pfizer's very innovative bio-therapeutics unit and it also confirmed that our strategy in exiting the weaker secondary East Bay market in the first quarter in a successful fashion was really the thing to do. We did it at a very good price and it did $20 million gain. We have also now brought, kind of, what we consider to be mission critical research units of both Pfizer and Merck to Mission Bay and I think, at least the mayor said on the podium on Tuesday, that we did what we promised and I would say stay tune for more good things to come. We concentrate…

Thanks Joel. Let me review our second quarter results and as Joel highlighted. Our second quarter 2008 reflects the strength of our unique road map for growth, and our continued ability to execute, and deliver consistent, and predictable results period-after-period. The second quarter of 2008 represents our 44th consecutive quarter in growth and FFO per share. Diluted 44th consecutive quarter of positive same property growth on a GAAP basis, and outstanding progress toward our 11 full-calendar year with positive lease and activity. FFO per share for the second quarter was reported at $1.51, diluted up 6.3% over the second quarter of 2007. Let me next quickly cover a few important items starting with our consistent and solid operating results, our balance sheet, and our capital plan, and our guidance for 2008. Once again, our same property results continue to reflect stable and positive results and an overall challenging macro environment. Same property results have been positive quarter-after-quarter for about 44 consecutive quarters and with 3.7% on the GAAP basis, and 7.1% on the cash basis, with the increase in same property results driven by both increases in rental rates and occupancy. Same property occupancy was solid at approximately 95.9% a quarter end up from 95.3%. Our policy has been to exclude 100% of properties under partial or full-redevelopment from our same property statistics. We believe that this methodology is appropriate in order to prevent significant increases in same property performance as a result of redevelopment activities. Our leases contain key provisions that contribute to our strong and consistent operating results quarter-after-quarter. As of quarter end, approximately 89% of our leases were triple net leases, and an additional 8% of our leases require our tenants to pay the majority of operating expenses. Guidance for same property performance for 2008 remains in…

Operator, we could go to Q&A. That would be great.

Thank you. (Operator instructions) And we'll turn first to Michael Bilerman with Citi. Irwin Guzman – Citigroup: Alright, good morning, it's Irwin Guzman. Michael Bilerman is on the phone as well.

Hey there. Irwin Guzman – Citigroup: Can you talk about the – you talked about the rents that are already committed on or in weight stages for the second half of this year, are there any significant leases where you expect the spreads to be wide? Because it looks like your forecasting 10% spreads but it's been about 6% year-to-date.

Well, (inaudible) within 16% year-to-date and our forecast of 10% on the year, I think, is just our usual conservative projection on total steps. I think that it's reasonable to believe that well ahead of the 12% mark when we get to the end of the year. I mean the 10% mark. Irwin Guzman – Citigroup: And that hold true for 2009 as well? I mean, considering like you said you have, 73% already sort of in process.

Yes. I think we're coming off the base of – I mentioned about 2,561 in '09 and if we look at Maryland (inaudible) 25%, Southeast 13, Eastern mass 16. Again we're trying to strike a reasonable balance of what we think a conservative rent roll will be. Just to give you some highlight, the Maryland leases are rolling which is the biggest at $21.52 and clearly market's above that next year. San Diego's rolling at about $31.13, 205,000 square feet to 206,000 square feet market is above that. San Francisco 104,000 rolling at $30. Our market is above that in Eastern mass, rolling at 100,000 square feet at about 2,360 market is well above that. So we think 10% is a conservative and baseline but we hope to exceed that. Irwin Guzman – Citigroup: But does that mean – I mean if you look at the spread between GAAP and cash, 6.5? Are you respectly saying these are flat, potentially negative cash roll – cash roll down? If you're forecasting 10%, and there's a 10% spread between your GAAP in your cash today, you're respectively saying cash runs are flat.

No. It's sometimes difficult to put a simple analysis between the cash and GAAP rents, I know we do that – about every quarter to try to take a– what do the cash and GAAP statistics really say every time we publish them and I can tell you there's a good mix between the results on a GAAP basis and a cash basis and a lot of it is due to the length of the lease and the mix of the leases that are executed during the period. So, I would not project that cash rents would be flat. I would expect cash rents site for the year. Michael Bilerman – Citigroup: On the Pfizer lease you just announced. Where are those rents relative to your sort of 12%-ish typical development yield?

They fall very well into that fairway [ph]. I think our total construction cost, ex-land will be roughly in the $200 to $350 a foot. So, I think we will be able to achieve our 10% to 12% return on that lease plus Pfizer's committed I think something like $200 a foot on top of what we're putting in. Michael Bilerman – Citigroup: And lastly, can you just give an update on (inaudible) partner on East River Science Park and maybe weave in how much leasing you're going to get done in advance that actually getting an evaluation.

Well, we certainly have a variety of discussions ongoing but it's clear to us that what we have to attend to first is, as you just mentioned, one is the leasing because that's going to drive our ultimate decision. Well, it drives two critical decisions. One, is our construction financing will be much– the terms will be better and obviously, recourse versus non-recourse will make a difference depending upon the amount of pre-leasing we're able to sign and then obviously, ultimately a decision of go-no-go on a joint venture partner will be dependent upon the quality and character of the leasing. From the beginning, we said if we could keep it on balance sheet and not do a JV, we'd like to do that, but if the capital markets and the environment was such that it makes sense to do it, we would certainly do it. So we have a number of discussions ongoing and I think our options are open and we'll continue to keep them open until we tie down some significant pre-leasing which we hope we're on track for and then we'll make a go-or-no-go decision about that. Michael Bilerman – Citigroup: You also talked about that project– about it– being the large– largest projects in your pipeline and doing a joint venture test that are [ph] reduce that risk that you have, so I'm just trying to think about relative to your just promise.

Yeah. Well, I mean the risks are as you well know, obviously the capital risk, the– another critical risk is leasing risk, another risk is clearly construction delivery and construction cost risk, and we think we've got the delivery and the construction cost risk in check. But in any joint venture obviously there are issues that the joint venture partner doesn't just assume those risks so, joint venture is not a panacea for everything But clear our decision would be based on really the capital environment and as it make sense to bring in a partner for the capital reasons that we stated again – this is a minority partner. This isn't a typical REIT JV where we would put up 20% – we'd be a 20% partner and the JB partner would be 80. This more like a 55 on our side, a 45 on the capital partner's side. So I think, we have a number of discussions, we have, I think some folks that are highly interested in this but we don't have to make any decisions yet and I think, we need to do two things. One is achieve substantial pre-leasing and two, tie down the construction loan. Irwin Guzman – Citigroup: And how much capital have you spent already on the project?

On East River, Dean will have to check that out. But $500 a foot were – I would say we're still early on in that because the East Tower seal is just going up and the West Tower, there is just site work going on. So we're early on the construction dollar. Irwin Guzman – Citigroup: Would you consider two separate construction facilities so you can get pre-leasing on the tower first?

I don't know. That may not be so easy because it's a single Europe [ph] entitlement. It's – everything is so bound together with state and federal, or state end city obligations and financing and so forth. I think that would be practically very hard to do. Irwin Guzman – Citigroup: Okay. Thank you.

Yes. Thanks, Guys.

(Operator instructions) Now, well turn to Anthony Paolone with JP Morgan. Anthony Paolone – JP Morgan: Thank you. Joel, have you seen any changes out there leasing due to the economic backdrop whether the – on longer time to get leases signed up or more concessions in the form of TIs or whatever the case maybe?

I think, as Jim said last time, we still haven't seen any material or significant change. It's clear, people are clearly mindful of the current capital and economic environment, if you'd have to be dumb and blind and deaf not to know that as a tenant out there. So, I think, everyone is aware of the current environment but I think, the difference is, in this industry and, in again as I indicated, if you got the best assets, and the best locations, you're dealing with a level of tenancy and a level of decision making that is pretty core and fundamental to the mission of these companies. It's not so economically driven like a company deciding, “Gee, we want to save money, we're going to move to that office building rather than this office building”, and I think we still have not seen anything that would be materially degrading markets in the – you know, vis-a-vis the characterizations you just highlighted. It doesn't mean it won't happen but we haven't really seen it in any dramatic fashion at all. Anthony Paolone – JP Morgan: Have you seen any impact from the consolidation that you talked about earlier? It goes upgrading it credit quality on some of your tenants maybe but what about reducing some demand in different markets?

I think if you look, so far we've been very, very fortunate again, great assets, and great locations, and great tenants tend to make the difference between secondary market, secondary quality tenants, and maybe secondary quality assets. I think if you look at the Roche's announcement and tender on Genentech, they did announced that they were going to consolidate some of their Bay Area assets more down on the peninsula or space in a SG&A and research in around the Genentech campus as opposed to having multiple locations, so I think you may see some fall-out from that, and that's down much farther south. I don't know whether that would mean any incremental increase for south San Francisco, because Genentechs don't have a lot on campus that they've got in hand, but I think that's the one dramatic we seen. I think if you go to ImClone in New York City it's certainly a client we've talked to about the East Riverside's project, the tender buy Bristol [ph] which actually isn't all that surprising. I kind of hit that thought it would happen earlier than now, but that could mean a number of different things. I think the Corral Icon response indicated that not only was the offer too low, but there may be a thought of splitting up the company, once spinning off the Urbatech's franchising to the development pipeline, that's been done very successfully in a number of other biotech companies with actually pretty great value, so if that's the case, there may be some opportunities in New York City because they currently occupy some pretty awful state on Barac Street. So I think on balance, what we've seen out there so far has been generally pretty good and Metamune in Maryland was a huge boost to us last quarter when signed some lease expansions, we actually assumed we're going to roll But who knows about the future, although I think we're well-positioned because the tenants that we've tend to focus on and that make up our tenant base, tend to be– look like the survivors as opposed to the ones who might be more irrelevant. Anthony Paolone – JP Morgan: Okay. On the development side, what's your appetite to start new projects without any pre-leasing at this point?

We don't have any appetite to do that but when we're committed, we're committed and if we are, then we clearly would try not to do that. But again, this industry is a little different because it is sometimes hard to sign a lease for a mission critical unit before you've done any work on a site as oppose to office tenants or industrial tenants. But in general, we're not looking to create a more further pipeline development with no pre-leasing. Anthony Paolone – JP Morgan: Okay and what about in Toronto, you talked about that project a few times in the past but hasn't made it to – into development sheet yet?

Right. It probably will over the next quarter or two when actual construction begins. We're still doing a lot of pre-site work and a lot of final plans and specs on that, but that's obviously will come into the development at some point, probably later in the year. And we're working very hard, our team, up in Toronto is working very hard to tie down a significant lease as we speak, in fact which we may have some news next quarter on. Anthony Paolone – JP Morgan: Okay. Last question for Dean. Can you just give us some details on the types of debt terms that you're seeing in the market right now, loan devalue and rates? Look in the context does some of your maturities in the next 18 months?

You know, Tony, it's difficult as most as would probably describe to broadly talk about terms because until you're done, you're really not done but I – maybe if could comment at all, I guess, what I would expect to see is that whether it's project financing or fixed rate financing that I would imagine that deal and rate would probably fall in the 6% range. And that's just very broadly speaking. We all know that leverage, whether it's loan to cost or loan to value, whether project or stabilized fixed rate secured debt, is – have come in from the relative highs about 24 months ago. But I'm still pushing pretty hard on pricing and leverage given the quality of the projects' development or stabilized income producing assets, so I guess, stay tuned, we are working ahead of our schedule of maturities for 2009, we've got about $280 or so million maturing, and we are working very diligently to take care of those much earlier than their maturities, so– Anthony Paolone – JP Morgan: Okay. Thank you.

Thank you.

Now, we move to Dave Aubuchon with Baird. Dave Aubuchon – Robert W. Baird: Thank you. The Pfizer lease that you just announced well to do [ph] your supplemental disclosure, where would that lease step?

It would step in the campus that, Dave, I don't know if you recall of that what's called Mission Day North. So we've got the West parcels which we have 1,700 was the first building, 14 or 1,500 is now under construction. This is across the other side of the UCSF campus closest to the Giants Ball Park, and it's a campus that could be somewhere north of 600,000 or 700,000 square feet in total, and that's where Pfizer has chosen to be. Dave Aubuchon – Robert W. Baird: But it's not– But if they're not leasing space at the project you already have on your supplemental?

That's correct. Dave Aubuchon – Robert W. Baird: Okay. Got it. I have a few questions about the redevelopment pipeline. Can you (inaudible) on the development supplemental, you talked about A.R.E. construction cost today. Can you give that number on the 789,000 square feet that is undergoing redevelopment right now? And then, I guess you're initial cost on those, on that, on those?

Yeah, it looks like its in the mid to upper $200 a foot, roughly? Dave Aubuchon – Robert W. Baird: So in total you spent 200 –.

I'm sorry, let me clarify what I'm saying, Dave, because it is – what I'm talking about is are all in basis plus the dollars we've spent to date.

Okay.

So we increment our cost tend to be around $125 a foot, cost on crude to date tend to be around maybe a little south of 50% of that. Dave Aubuchon – Robert W. Baird: Got it and then, can you talk, Joel, just about leasing progress that's in that pipeline in general?

Yes. I think, if you look at the big ones, there's a lot of small ones. But if you look at the big ones, we mentioned tech square which is clearly a big one. I think, we'll have a significant announcement next quarter to make on the favorable resolution there. That's really, I think, by far and away, the biggest and I think, we're making good progress on most of the others. It's hard to pick out because, again, we have quite a few of the smaller ones. But I would say –.

I'd say, let me add one other comment. The redevelopments, actually in pretty good shape but I think if you look at the square footage that we've actually leased over the last six months related to redevelopment is probably getting close to 150,000 square feet if I'm not mistaken. And I believe also, the leasing activity to what we have scheduled for 2008 is pretty much substantially resolved where at least 75% of that for 2008 delivers up and taken care of. Dave Aubuchon – Robert W. Baird: The '08 delivery's 75% leased of the 789, you said 150,000 leased the last 6 months or in total?

About 150,000 over the last 6 months was leased on the redevelopments. Dave Aubuchon – Robert W. Baird: And then just looking at the entire bucket, do you have a number that is close being either leased or committed?

On all of our redevelopments? Dave Aubuchon – Robert W. Baird: Yes sir.

Give me one second. Yes. It looks like its – I don't know roughly 45% to 50% would be my guess. About the remainder, too early to tell. Dave Aubuchon – Robert W. Baird: And Joel, I forget sort on Tech square, Joel, of 124,000 square feet is that the goal that it was multi-tenant strategy?

Oh, for sure. And in RDS we've got Sirtrust [ph] is one of the anchors there and we've made a number of other leases and than will have a big lease to announce next quarter. Dave Aubuchon – Robert W. Baird: Okay. And then my last question is, convertible preferred balance increased to 250 million this quarter from last? What am I missing there?

Yes. That just had to do with the timing, I think our issuance on the first quarter straggled the quarter where the shoe was just days into the next quarter. So we raised in the shoe probably about $30 million in net proceeds Dave Aubuchon – Robert W. Baird: Got it. Thank you guys.

Yes. Thanks Dave.

Now we'll move to Philip Martin with Cantor Fitzgerald. Philip Martin – Cantor Fitzgerald: Good morning.

Hey there. Philip Martin – Cantor Fitzgerald: I guess I'll start on the leasing front first and for Jim [ph] but the better than the forecasted rent gross is that is just the evolution of this portfolio and some newer assets out there, or is a different tenant mix? This is a pretty good beat versus forecasted and “knock on wood” hopefully, it continues but are you finding anything at the asset level where it is a different tenant mix I know, the last couple of years, we've seen slightly different tenants come in whether it's the c-firms [ph] etc., or is it – I'm just trying to nail down little more specifically what might be driving those rent throws [ph]. Besides the very good location.

Yes. I think if you just look at '08 and '09, Philip, it just tends to be existing rents in place, just our well below market, and some of that is historical because we've had long term leases at low lease rates that are beginning to roll. Some of that would be historical acquisitions with well under market leases. So, it's kind of a combination of those factors and I think, Jims pretty conservative, he's on vacation at the moment, when he's given 5% to 10% rent growth, I think, he's being conservative generally as we always try to do on guidance. But I think, it's fair to say, we're pretty comfortable with the 10% number obviously for the balance of this year and '09. And we think maybe that's even conservative. So that's all kind of good news. And remember, this is in an environment where I would say, they can see rates in most of the markets are still bank in sub-double digit. There is not any dramatic rent growth going on in this economic environment, but we haven't seen rents fall dramatically in the best locations and for the best assets. We just haven't seen that. So, again, kind of, our thesis is stability is what's key here and we're just benefited by historical leases rolling. Philip Martin – Cantor Fitzgerald: Are you also seeing and again its so much dependent to on where your tenants are in their life cycle, on research and development and other factors, but are you also saying that the tenants – I lost my trend of thought there, but–

Well, we're seeing better quality in– if you look at some of the different markets. We're just saying better quality tenants where we're able to capture in some of the secondary markets. If you look at– takeout San Francisco and Massachusetts, the two dominant life science markets and go to Seattle, San Diego, Maryland and North Carolina, we're seeing much stronger we're actually able to capture much stronger tenants today than, say over the past few years, again I think part of that is brand and reputation, franchise, asset location, asset quality and I think that all augers for good solid rental rates on renewals, and– Philip Martin – Cantor Fitzgerald: Are you seeing greater tenants demand? Are you seeing more tenants chasing individual spaces or is it then, pretty consistent with historical averages?

Yeah. So dependent on buildings and locations because if you got the right building in the right location, you do have that impact that you described. If you've got maybe not the AAA but the AA location, I think it's normal demand. Philip Martin – Cantor Fitzgerald: Okay. Okay.

You know, it's interesting because no matter what people say or write, it's clear to me and if you were standing there with the mayor and Corey Goodman who was a– is a very famous member of the Academy– the National Academy of Sciences. He's run Biotech companies and then Pfizer asked him to become Head of Research which he turned down and they ultimately offered him to be Head of the Biotherapeutics and Bioinnovation group which he did ultimately agreed to because of the entrepreneurial nature of that group. It's pretty clear that decision and so many of its decisions by the more dominant entities around the country in the world, location matters a whole lot. Because he could have stayed in South San Francisco where they acquired Renault [ph], and it would have been all fine and happy and they could have just gone on the freeway. But in his remarks, he said the ability to literally walk across the street and collaborate a Genentech hall at QB3 at the Neuroscience Center, the Cardiovascular Center made such a huge difference for Pfizer, that's why they made the decision and I think, we're seeing that in spades about great locations. Philip Martin – Cantor Fitzgerald: Okay. And shifting gears a little bit over to East River. In terms of the pre-leasings, are you satisfied to-date with the amount of pre-leasing or the terms that are being negotiated? Is everything more or less inline with the expectations, and again, from the tenant demand standpoint, are you dealing with – still trying to figure out the proper tenant mix? Are you – is there demand for multiple tenants – I'm just trying to get a sense of just that project because it is a big project and its an interesting one?

Yes. Well, let me say I'm never satisfied ever because once I'm satisfied, then you lose your edge. Philip Martin – Cantor Fitzgerald: That's right.

I would say, the challenge of New York is, nobody's ever done this before, so it's not like having a great asset in Cambridge where you got an established market, you've got established clients or potential tenants, you've got an established rental rate scheme, you've got on established confluence of how a market just operates. This just is new. There are nine great world class academic institutions in New York. They garner about the highest amount of NIH funding of any one location, in any given year, so there are a lot of great attributes plus New York is just a great place to be, but the fact that nobody has ever done it before, there is no template that you can say, “This is the way it should be or ought to be.” But I think, and again, we've done nothing yet, so I can't get on this call and say, “Gee, we should be proud of what we've done.” We got a ground, we got selected, we got a ground-lease signed, we got $40 million from the city and the state, we're under construction, we're on budget, and on time. Those are all good things, but at the end of the day, its the cash flow that counts and the quality of the leases, and the quality of the tenants. So we haven't accomplished any of that yet, so that's yet to remain but we're working hard, and we're trying to put together a highly talented team to execute that. So I guess, I would say, “Stay tuned and it's a work in process.” Philip Martin – Cantor Fitzgerald: Okay. Alright. Thank you for the additional comments.

Yeah, thanks for your questions. Good as always.

Now go back to Michael Bilerman with Citi. Michael Bilerman – Citigroup: Dean, just a follow-up on the capital capacity that you outlined. What is the churns on the $500 million accordion feature on your credit facility and how flexible [ph] is that next year?

That's a good question. All accordions that I am aware of actually are generally structured where the existing bank group approves the company's ability to raise their credit facility, meaning the commitments available, so from $1.9 to $2.4 billion in our case, and that additional capacity would actually have to be raised either from your existing bank group or with new lenders. But the banks have approved the increase, but the commitments actually have to be raised. Michael Bilerman – Citigroup: And just on the redevelopment pipeline. Can you tell us what your basis is to date on the 18,000 square including lands.

Yes. It's in the all land – you know our allocated basis plus any dollars we spend is in the mid to just right above the mid $200 per foot range. Michael Bilerman – Citigroup: Including land?

Yes. All in. Michael Bilerman – Citigroup: It may just be helpful because these questions every quarter just add-in a column and we certainly appreciate the new addition on the leasing. It's just to add in investment to date for your redevelopment, and your development, so that we just capture the dollars being spent quarter-to-quarter.

That's a good idea Michael. We appreciate your comments and suggestions on disclosures and we'll take a look at that over the next quarter. Michael Bilerman – Citigroup: Thank you.

Thanks guys. Operator?

And that will conclude the question-and-answer session. Gentlemen, I'll turn the conference back to you.

Okay. We'll thank you very, very much. We did it in just a little more than 50 minutes which is I guess a record. Thanks so much. Have a great rest of the summer. We look forward to talking to you on the third quarter.