Future distributions on our common stock will be determined by and at the discretion of our Board of Directors and will be dependent upon a number of factors, including actual cash available for distribution, our financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our Board of Directors deems relevant. To maintain our qualification as a REIT, we must make annual distributions to stockholders of at least 90% of our taxable income for the current taxable year, determined without regard to deductions for dividends paid and excluding any net capital gains. Under certain circumstances, we may be required to make distributions in excess of cash flow available for distributions to meet these distribution requirements. In such a case, we may borrow funds or may raise funds through the issuance of additional debt or equity capital. We cannot assure you that we will make any future distributions.

The terms "we", "our", "ours" and "us" as used in this Form 10-K refer to Alexandria Real Estate Equities, Inc. and its subsidiaries. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Form 10-K.

We are a publicly-traded real estate operating company focused principally on the ownership, operation, management, acquisition, expansion and selective redevelopment and development of high quality, strategically located properties containing a combination of office and laboratory space leased principally to tenants in the life science industry. We refer to these properties as "life science facilities".

In 2003, we:

Acquired four properties with an aggregate of approximately 267,000 rentable square feet.

Expanded our unsecured line of credit from $425 million to $440 million and extended its term to November 2006, which may be further extended at our sole option for an additional one-year period.

Obtained an unsecured term loan for $150 million that is due November 2008.

Sold three properties with an aggregate of approximately 289,000 rentable square feet.

Our primary source of revenue is rental income and tenant recoveries from leases at the properties we own. Of the 89 properties we owned as of December 31, 2003, four were acquired in 1994, nine in 1996, nine in 1997, 27 in 1998, six in 1999, 11 in 2000, five in 2001, four in 2002 and four in 2003. In addition, we completed the development of one property in 1999, five properties in 2000 (together with the 11 properties acquired in 2000, the "2000 Properties"), two properties in 2001 (together with the five properties acquired in 2001, the "2001 Properties") and two properties in 2002 (together with the four properties acquired in 2002, the "2002 Properties"). As a result of these acquisition and development activities, as well as our ongoing leasing and redevelopment activities, there have been significant increases in total revenues and expenses, including significant increases in total revenues and expenses for 2003 as compared to 2002, and for 2002 as compared to 2001.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). Our significant accounting policies are described in the notes to our consolidated financial statements. The preparation of these financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates, judgments and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

We have elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code. Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code to our operations and financial results and the determination of various factual matters and circumstances not entirely within our control. We believe that our current organization and method of operation comply with the rules and regulations promulgated under the Internal Revenue Code to enable us to qualify, and continue to qualify, as a REIT. However, it is possible that we have been organized or have operated in a manner that would not allow us to qualify as a REIT, or that our future operations could cause us to fail to qualify.

If we fail to qualify as a REIT in any taxable year, then we will be required to pay federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. If we lose our REIT status, then our net earnings available for investment or distribution to stockholders would be significantly reduced for each of the years involved and we would no longer be required to make distributions to our stockholders.

In accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), we perform the following procedures when making an allocation of the purchase price of real estate: 1) estimate the value of the real estate as of the acquisition date on an "as if vacant" basis, 2) allocate the "as if vacant" value among land, land improvements, buildings, building improvements, tenant improvements and equipment, 3) calculate the value of the intangibles as the difference between the "as if vacant" value and the purchase price, and 4) allocate the intangible value to above, below and at market leases, origination costs associated with in-place leases, tenant relationships and other intangible assets.

The values allocated to land improvements, buildings, building improvements, tenant improvements and equipment are depreciated on a straight-line basis using an estimated life of 20 years for land improvements, 40 years for buildings and building improvements, the respective lease term for tenant improvements and the estimated useful life of equipment. The values of above and below market leases are amortized over the life of the related lease and recorded as either an increase (for below market leases) or a decrease (for above market leases) to rental income. The values of at-market leases and origination costs are classified as leasing costs, included in other assets on our balance sheets and amortized over the remaining life of the lease. The values of other intangible assets are amortized over the estimated useful life.

Rental properties and properties under development are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future undiscounted cash flows is less than its carrying amount. Upon determination that an impairment has occurred, a write- down is recorded to reduce the carrying amount of the property to its estimated fair value.

We capitalize direct construction and development costs, including predevelopment costs, interest, property taxes, insurance and indirect project costs, including payroll and other costs directly associated with the acquisition, development or construction of a project. Payroll costs not related to the construction, development or redevelopment of a project, or acquisition of a property that will be classified as operating at the date of acquisition, are expensed as incurred. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Costs previously capitalized related to abandoned acquisition or development opportunities are written-off. Should development activity cease, a portion of interest, property taxes, insurance and certain costs would no longer be eligible for capitalization, and would be expensed as incurred.

We also capitalize costs directly related and essential to our leasing activities, including broker fees and certain costs related to our leasing personnel. These costs are amortized on a straight-line basis over the terms of the related leases. Costs previously capitalized related to unsuccessful leasing opportunities are written-off.

We hold equity investments in certain publicly-traded companies and privately held entities primarily involved in the life science industry. All of our investments in publicly-traded companies are considered "available for sale" under the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"), and are recorded at fair value. Fair value has been determined by the closing trading price at the balance sheet date, with unrealized gains and losses shown as a separate component of stockholders' equity. The classification of investments under SFAS 115 is determined at the time each investment is made, and such determination is reevaluated at each balance sheet date. The cost of investments sold is determined by the specific identification method, with realized gains and losses included in other income.

Investments in privately held entities are generally accounted for under the cost method because we do not influence any operating or financial policies of the entities in which we invest. Certain investments are accounted for under the equity method of accounting under the provisions of Accounting Principles Board Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock" ("APB 18") and Emerging Issues Task Force ("EITF") Topic D-46, "Accounting for Limited Partnership Investments". Pursuant to APB 18, the equity method of accounting should be used when an investor has "the ability to exercise significant influence over operating and financial policies of an investee even though the investor holds 50% or less of the voting stock". EITF- D-46 further clarifies the Securities and Exchange Commission's position on the accounting for limited partnerships and provides that the equity method of accounting be used unless the investor's interest "is so minor that the limited partner may have virtually no influence over partnership operating and financial policies". Under the equity method of accounting, we record our investment initially at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment.

For all of our investments, if a decline in the fair value of an investment below its carrying value is determined to be other than temporary, such investment is written down to its estimated fair value with a non-cash charge to current earnings.

The factors that we consider in making these assessments include, but are not limited to, market prices, market conditions, prospects for favorable or unfavorable clinical trial results, new product initiatives and new collaborative agreements.

We utilize interest rate swap agreements to hedge a portion of our exposure to variable interest rates associated with our unsecured line of credit and unsecured term loan. These agreements involve an exchange of fixed and floating interest payments without the exchange of the underlying principal 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 the interest received is reflected as an adjustment to interest expense.

We reflect our interest rate swap agreements on the balance sheet at their estimated fair values. We use a variety of methods and assumptions based on market conditions and risks existing at each balance sheet date to determine the fair values of our interest rate swap agreements. These methods of assessing fair value result in a general approximation of value, and such value may never be realized.

All of our interest rate swap agreements meet the criteria to be deemed "highly effective" under Statement of Financial Accounting Standards No. 133 in reducing our exposure to variable interest rates. Accordingly, we have categorized these instruments as cash flow hedges. While we intend to continue to meet the conditions for such hedge accounting, if hedges did not qualify as "highly effective", the changes in the fair value of the derivatives used as hedges would be reflected in earnings.

We do not believe we are exposed to more than a nominal amount of credit risk in our interest rate swap agreements as our counterparties are established, well-capitalized financial institutions.

Rental income from leases with scheduled rent increases, free rent and other rent adjustments are recognized on a straight-line basis over the respective lease terms. We maintain an allowance for estimated losses that may result from the inability of our tenants to make required payments. If a tenant fails to make contractual payments beyond any allowance, we may recognize additional bad debt expense in future periods equal to the amount of unpaid rent and deferred rent.

The determination of whether a property qualifies as an asset "held for sale" and should be classified as discontinued operations requires an evaluation of certain criteria, some of which require the use of judgment. A property is classified as "held for sale" when all of the following criteria for a plan of sale have been met: 1) management, having the authority to approve the action, commits to a plan to sell the property, 2) the property is available for immediate sale in its present condition, subject only to the terms that are usual and customary, 3) an active program to locate a buyer, and other actions required to complete the plan to sell, have been initiated, 4) the sale of the property is probable and is expected to be completed within one year, 5) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and 6) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When all of these criteria have been met, the property is classified as "held for sale" and its operations are classified as discontinued operations in our consolidated statements of income. When a property is designated as "held for sale", amounts for all prior periods presented are reclassified from continuing operations to discontinued operations. A loss is recognized for any initial adjustment of the asset's carrying amount to fair value less costs to sell in the period the asset qualifies as "held for sale". Depreciation of assets is discontinued commencing on the date they are designated as "held for sale".

Rental revenue increased by $14.7 million, or 13%, to $126.4 million for 2003 compared to $111.7 million for 2002. The increase resulted primarily from the 2002 Properties being owned for a full year and the addition of the 2003 Properties. Rental revenue from properties operating for a full year during 2003 and 2002 (the "2003 Same Properties") increased by $1.7 million, or 2.1%, due to increases in rental rates and offset by a slight decrease in occupancy. The average occupancy level of the 2003 Same Properties was 96.7% as of December 31, 2003, compared to 97.2% as of December 31, 2002.

Tenant recoveries increased by $3.1 million, or 11%, to $32.1 million for 2003 compared to $29.0 million for 2002. The increase resulted primarily from the 2002 Properties being owned for a full year and the addition of the 2003 Properties. Tenant recoveries for the 2003 Same Properties increased by $659,000, or 2.9%, primarily due to increases in certain recoverable operating expenses.

Other income increased by $511,000, or 33%, to $2.1 million for 2003 compared to $1.6 million for 2002, primarily due to an increase in realized gains on investments and from a general increase in miscellaneous sources of income.

Rental operating expenses increased by $3.7 million, or 13%, to $32.8 million for 2003 compared to $29.1 million for 2002. The increase resulted primarily from the 2002 Properties being owned for a full year and the addition of the 2003 Properties. Operating expenses for the 2003 Same Properties increased by $871,000, or 4.1%, primarily due to an increase in property insurance and property taxes (substantially all of which are recoverable from our tenants through tenant recoveries).

General and administrative expenses increased by $775,000, or 6%, to $14.2 million for 2003 compared to $13.4 million for 2002, mainly due to general increases in administrative costs, primarily payroll and related expenses.

Interest expense increased by $1.4 million, or 6%, to $26.4 million for 2003 compared to $25.0 million for 2002. The increase resulted primarily from an increase in indebtedness on our unsecured line of credit, unsecured term loan and secured notes payable. These borrowings were utilized to finance the acquisition of the 2002 and 2003 Properties and the development and redevelopment of properties. The increase in interest expense was partially offset by a decrease in the floating interest rate on our unsecured line of credit and unsecured term loan. The weighted average effective interest rate on our borrowings (not including the effect of swap agreements) decreased from 3.07% as of December 31, 2002 to 2.64% as of December 31, 2003. We have entered into certain swap agreements to hedge a portion of exposure to variable interest rates with our unsecured line of credit and unsecured term loan (see "Liquidity and Capital Resources - Unsecured Line of Credit and Unsecured Term Loan").

Depreciation and amortization increased by $5.7 million, or 17%, to $38.6 million for 2003 compared to $32.9 million for 2002. The increase resulted primarily from depreciation associated with the 2002 Properties being owned for a full year and the addition of the 2003 Properties.

Income from discontinued operations of $11.1 million for 2003 reflects the results of operations of one property that was designated as "held for sale" as of December 31, 2003 and three properties that were sold during 2003. In the fourth quarter of 2003, we sold one property in the Suburban Washington D.C. market. In the third quarter of 2003, we sold one property in the Eastern Massachusetts market. In the first quarter of 2003, we sold one property in the San Francisco Bay market. In connection with these sales, we recorded a net gain of approximately $8.3 million during 2003.

Rental revenue increased by $18.1 million, or 19%, to $111.7 million for 2002 compared to $93.6 million for 2001. The increase resulted primarily from the 2001 Properties being owned for a full year and the addition of the 2002 Properties. Rental revenue from properties operating for a full year during 2002 and 2001 (the "2002 Same Properties") increased by $2.7 million, or 3.7%, due to increases in rental rates and offset by a slight decrease in occupancy. The average occupancy level of the 2002 Same Properties was 97.6% as of December 31, 2002, compared to 98.2% as of December 31, 2001.

Tenant recoveries increased by $4.9 million, or 20%, to $29.0 million for 2002 compared to $24.1 million for 2001. The increase resulted primarily from the 2001 Properties being owned for a full year and the addition of the 2002 Properties. Tenant recoveries for the 2002 Same Properties increased by $915,000, or 4.6%, generally due to an increase in certain recoverable operating expenses.

Other income decreased by $1.6 million, or 50%, to $1.6 million for 2002 compared to $3.1 million for 2001, primarily due to a decrease in interest income resulting from a decline in interest rates, the repayment of a $6 million secured note receivable in 2002 and a decrease in realized gains on investments.

Rental operating expenses increased by $4.5 million, or 18%, to $29.1 million for 2002 compared to $24.7 million for 2001. The increase resulted primarily from the 2001 Properties being owned for a full year and the addition of the 2002 Properties. Operating expenses for the 2002 Same Properties increased by $1.2 million, or 6.4%, primarily due to an increase in property insurance and property taxes (substantially all of which are recoverable from our tenants through tenant recoveries).

General and administrative expenses increased by $1.7 million, or 15%, to $13.4 million for 2002 compared to $11.7 million for 2001 due to the continued increase in the scope of our operations. From January 1, 2001 to December 31, 2002, we expanded our scope of operations to include an additional 13 properties containing approximately 880,000 rentable square feet for a total of 89 properties located in nine states with approximately 5.7 million rentable square feet as of December 31, 2002. To assist in managing this increase in the size of the operating portfolio, we added personnel and offices in certain of the markets where we have properties.

Interest expense decreased by $2.7 million, or 10%, to $25.0 million for 2002 compared to $27.7 million for 2001. The decrease resulted primarily from a reduction in the floating interest rate on our unsecured line of credit. The weighted average interest rate on our borrowings (not including the effect of swap agreements) decreased from 3.92% as of December 31, 2001 to 3.07% as of December 31, 2002. We have entered into certain swap agreements to hedge a portion of our borrowings at variable interest rates (see "Liquidity and Capital Resources - Unsecured Line of Credit and Unsecured Term Loan"). The decrease in interest expense caused by this factor was partially offset by an increase in indebtedness incurred to acquire the 2001 and 2002 Properties and indebtedness incurred to finance the development and redevelopment of properties.

Depreciation and amortization increased by $3.6 million, or 12%, to $32.9 million for 2002 compared to $29.3 million for 2001. The increase resulted primarily from depreciation associated with the 2001 Properties being owned for a full year and the addition of the 2002 Properties.

During 2002, we recognized a non-cash impairment charge of $2.5 million associated with a decline in the value of certain investments below their carrying value determined to be other than temporary.

Loss on early extinguishment of debt of $1.0 million was incurred as the result of the early retirement of a $7.2 million secured loan in connection with a refinancing of an asset. This loss is related to prepayment penalties and the write-off of loan costs. In 2002, this loss was classified as an extraordinary item as previously required under SFAS 4, "Reporting Gains and Losses from Extinguishment of Debt". In 2003, pursuant to SFAS 145, "Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections", we reclassified the 2002 loss on early extinguishment of debt to continuing operations.

Income from discontinued operations decreased by $934,000, or 35%, to $1.8 million for 2002 compared to $2.7 million for 2001. Income from discontinued operations reflects the results of operations of four properties that have been designated as "held for sale". In connection with these prospective sales, we recorded a non-cash impairment charge of $1,150,000 related to a property in the San Francisco Bay market which cannot be redeveloped pursuant to its original strategic objectives. This charge has been included in income from discontinued operations for 2002.

Net cash provided by operating activities for 2003 increased by $7.8 million to $74.8 million compared to $67.1 million for 2002. The increase resulted primarily from increases in cash flows from our portfolio of operating properties, partially offset by the net gain on sales of property.

Net cash used in investing activities decreased by $88.0 million to $139.8 million for 2003 compared to $227.8 million for 2002. This decrease was primarily due to proceeds from the sales of rental properties and a lower level of property acquisitions in 2003.

Net cash provided by financing activities decreased by $96.0 million to $66.2 million for 2003 compared to $162.2 million for 2002. Cash provided by financing activities decreased primarily due to the net proceeds from our common stock and preferred stock offerings in 2002, partially offset by net proceeds from our unsecured line of credit and unsecured term loan and from secured notes payable.

As of December 31, 2003, we have no off-balance sheet arrangements.

Contractual obligations as of December 31, 2003, consists of the following (dollars in thousands):

                                                   Payments by Period
                                        ---------------------------------------------
                              Total        2004    2005-2006    2007-2008 Thereafter
                         ------------------------------------------------------------
Secured notes payable (1) $   319,755 $     9,415 $    53,941 $   52,982 $   203,417

Ground lease obligations       65,420       1,666       3,529      3,631      56,594

Other obligations                 737         495         242          -           -
                         ------------------------------------------------------------
Total                    $    385,912 $    11,576 $    57,712 $   56,613 $   260,011
                         ============================================================

__________

Secured notes payable as of December 31, 2003 includes 16 notes secured by 39 properties.

Ground lease obligations as of December 31, 2003 include leases at six of our properties and one land development parcel. These lease obligations have remaining lease terms of 29 to 51 years, exclusive of extension options.

In addition to the above, we were committed under the terms of construction contracts to complete the construction of properties under development at a remaining aggregate cost of $11.7 million.

As of December 31, 2003, we were also committed to fund approximately $12.5 million for the construction of building infrastructure improvements under the terms of leases and/or construction contracts and approximately $19.5 million for certain investments.

Tenant security deposits and other restricted cash consists of the following (in thousands):

                                                            December 31,
                                                       ----------------------
                                                          2003        2002
                                                       ----------  ----------
Funds held in trust under the terms of
    certain secured notes payable                     $    8,665  $    5,692

Security deposit funds based on the terms
    of certain lease agreements                            2,029       1,967

Other funds held in escrow                                   363         361
                                                       ----------  ----------
                                                      $   11,057  $    8,020
                                                       ==========  ==========

Secured debt as of December 31, 2003, consists of the following (dollars in thousands):

                                            Balance at       Stated
                                           December 31,     Interest
Collateral                                     2003           Rate        Maturity Date
- ------------------------------------------ ------------   -------------  ---------------

Lexington, MA                                   $3,342            8.45%  August 2004

San Francisco, CA (two properties)              22,520     LIBOR + 1.70% January 2005 (1)

Worcester, MA                                    9,735 (2)        8.75%  January 2006

Durham, NC (two properties)                     11,880            8.68%  December 2006

Gaithersburg, MD (three properties)              9,700            8.25%  August 2007

Chantilly, VA and Seattle, WA                   34,410            7.22%  May 2008

San Diego, CA (four properties)                 40,225            6.95%  July 2009

Worcester, MA and San Diego, CA                 18,396            8.71%  January 2010

Gaithersburg, MD (two properties)               24,131            8.33%  November 2010

San Diego, CA (six properties)                  23,633            7.75%  July 2011

Gaithersburg, MD (three properties)             27,778            7.40%  January 2012

Alameda, CA (three properties) and San Dieg     33,564            6.21%  March 2013

Rockville, MD (two properties) and Beltsvil     29,898            6.36%  September 2013

Alameda, CA                                      2,138           7.165%  January 2014

Seattle, WA  (two properties)                   17,318            7.75%  June 2016

San Diego, CA                                   11,339            7.50%  August 2021
                                           ------------
                                              $320,007
                                           ============

__________

The loan may be extended, at our option, for an additional year.

The balance shown includes an unamortized premium of $252,000. The effective interest rate of the loan is 7.25%.

The following is a summary of the scheduled principal payments for our secured debt and the weighted average interest rates as of December 31, 2003 (in thousands):

                                               Weighted
                                                Average
                   Year            Amount    Interest Rates
            ------------------   ----------- -------------

            2004                $     9,415          7.69%
            2005                     28,370          3.82%(1)
            2006                     25,571          7.89%(1)
            2007                     15,123          7.86%
            2008                     37,859          7.22%
            Thereafter              203,417          7.29%
                                 ----------- -------------
            Subtotal                319,755          7.06%
            Unamortized premium         252  =============
                                 -----------
                                $   320,007
                                 ===========

__________

We have an unsecured line of credit that provides for borrowings of up to $440 million. Borrowings under our unsecured line of credit, as amended, 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 a LIBOR period of one, two, three or six months.

Our unsecured 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 unsecured line of credit restrict, among other things, certain investments, indebtedness, distributions and mergers. The unsecured line of credit expires November 2006 and may be extended at our sole option for an additional one-year period. As of December 31, 2003, borrowings outstanding on the unsecured line of credit carried a weighted average interest rate of 2.65%.

In November 2003, we obtained a $150 million unsecured term loan which bears 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 for a period of one, two, three or six months. The unsecured term loan contains financial covenants substantially similar to those in our unsecured line of credit. The unsecured term loan expires in November 2008. As of December 31, 2003, the unsecured term loan carried a weighted average interest rate of 2.62%.

Aggregate borrowings under the unsecured line of credit and unsecured term loan may be limited to an amount based on the net operating income derived from a pool of unencumbered properties. Accordingly, as we acquire or complete the development or redevelopment of additional unencumbered properties, aggregate borrowings available under the unsecured line of credit and unsecured term loan will increase up to a maximum of $590 million. Under these provisions, as of December 31, 2003, aggregate borrowings under our unsecured line of credit and unsecured term loan were limited to $479 million.

We utilize interest rate swap agreements to hedge a portion of our exposure to variable interest rates associated with our unsecured line of credit and unsecured term loan. 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 the interest received is reflected as an adjustment to interest expense.

The following table summarizes our interest rate swap agreements (dollars in thousands):

                                   Notional     Effective at   Interest    Termination      Fair
Transaction Dates Effective Dates  Amounts  December 31, 2003  Pay Rates      Dates        Values
- ---------------- ---------------- --------- ----------------- --------  ----------------  --------
Hedges for Unsecured Line of Credit
- ---------------------------------

March 2002      December 31, 2002   $50,000  $     50,000        5.364%  December 31, 2004 $(2,004)

July 2002         January 1, 2003    25,000        25,000        3.855%   June 30, 2005       (805)

July 2002         January 1, 2003    25,000        25,000        3.865%   June 30, 2005       (809)

December 2002     January 2, 2003    25,000        25,000        3.285%   June 30, 2006       (567)

December 2002     January 2, 2003    25,000        25,000        3.285%   June 30, 2006       (567)

November 2002        June 1, 2003    25,000        25,000        3.115%  December 31, 2005    (523)

November 2002        June 1, 2003    25,000        25,000        3.155%  December 31, 2005    (543)
                                            -----------------
                                            $    200,000
Hedges for Unsecured Term Loan
- -----------------------------
December 2003    December 31, 2003  $50,000  $     50,000         1.53%  December 31, 2004     (74)

December 2003    December 31, 2004   50,000          -            3.00%  December 30, 2005    (119)

December 2003    December 30, 2005   50,000          -            4.15%  December 29, 2006    (121)

December 2003    December 29, 2006   50,000          -            5.09%  October 31, 2008     (167)
                                            -----------------                              --------
                                            $      50,000                                  $(6,299)
                                            -----------------                              ========
Total Interest Rate Swap Agreements in
   Effect at December 31, 2003              $     250,000
                                            =================

We do not believe we are exposed to more than a nominal amount of credit risk in our interest rate swap agreements as our counterparties are established, well-capitalized financial institutions. In addition, we have entered into master derivative agreements with each counterparty. These master derivative agreements (all of which are on the standard International Swaps & Derivatives Association, Inc. form) define certain terms between us and each counterparty to address and minimize certain risks associated with our swap agreements, including a default by a counterparty.

As of December 31, 2003 and 2002, our interest rate swap agreements have been reported in the accompanying balance sheets at their fair value as other liabilities of approximately $6.3 million and $9.0 million, respectively. The offsetting adjustments were reflected as deferred losses in accumulated other comprehensive income of $6.3 million and $9.0 million, respectively. Balances in accumulated other comprehensive income are recognized in earnings as swap payments are made.

In January 2002, we completed a public offering of 2,300,000 shares of our 9.10% Series B cumulative redeemable preferred stock. The shares were issued at a price of $25.00 per share, resulting in aggregate proceeds of approximately $55.1 million, net of offering costs. In February 2002, we sold 418,970 shares of our common stock. The shares were issued at a price of $39.46 per share, resulting in aggregate proceeds of approximately $16.1 million, net of offering costs. In July 2002, we sold 2,000,000 shares of our common stock. The shares were issued at a price of $41.07 per share, resulting in aggregate proceeds of approximately $81.4 million, net of offering costs.

We expect to continue meeting our short-term liquidity and capital requirements generally through our working capital and net cash provided by operating activities. We believe that the net cash provided by operating activities will continue to be sufficient to enable us to make distributions necessary to continue qualifying as a REIT. We also believe that net cash provided by operating activities will be sufficient to fund our recurring non- revenue enhancing capital expenditures, tenant improvements and leasing commissions.

We expect to meet certain long-term liquidity requirements, such as property acquisitions, property development and redevelopment activities, scheduled debt maturities, expansions and other non-recurring capital improvements, through excess net cash provided by operating activities, long-term secured and unsecured borrowings, including borrowings under the unsecured line of credit and unsecured term loan and the issuance of additional debt and/or equity securities.

In connection with the acquisition of all of our properties, we have obtained Phase I environmental assessments to ascertain the existence of any environmental liabilities or other issues. The Phase I environmental assessments of our properties have not revealed any environmental liabilities that we believe would have a material adverse effect on our financial condition or results of operations taken as a whole, nor are we aware of any material environmental liabilities that have occurred since the Phase I environmental assessments were completed. In addition, we carry a policy of pollution legal liability insurance covering exposure to certain environmental losses at all of our properties.

The following table shows total and weighted average per square foot property related capital expenditures, tenant improvements and leasing costs (all of which are added to the basis of the properties) related to our life science facilities (excluding capital expenditures and tenant improvements that are recoverable from tenants, revenue-enhancing or related to properties that have undergone redevelopment) for the years ended December 31, 2003, 2002, 2001, 2000 and 1999, attributable to leases that commenced at our properties after our acquisition.

                                      Total/
                                     Weighted
                                      Average       2003           2002          2001          2000         1999
                                    -----------  -----------    ----------    ----------    ----------   ----------
Capital expenditures:
   Major capital expenditures (1)  $ 3,346,000  $ 1,632,000(2) $  959,000    $  616,000    $  139,000   $        -
   Recurring capital expenditures  $ 4,056,000  $   853,000    $1,472,000(3) $  614,000    $  639,000   $  478,000
   Weighted average square feet
     in portfolio                   24,611,677    5,708,635     5,499,660     5,131,176     4,448,916    3,823,290
   Per weighted average square
     foot in portfolio
   Major capital expenditures (1)  $      0.14  $      0.29(2) $     0.17    $     0.12    $     0.03   $        -
   Recurring capital expenditures  $      0.16  $      0.15    $     0.27(3) $     0.12    $     0.14   $     0.13


Tenant improvements and leasing
costs:
  Retenanted space (4)
    Tenant improvements and
      leasing costs                $ 6,104,000  $ 2,890,000    $  498,000    $  466,000    $  796,000   $1,454,000
    Retenanted square feet           1,050,974      248,488       318,642       151,161(4)    112,286(4)   220,397
    Per square foot leased of
      retenanted space             $      5.81  $     11.63    $     1.56    $     3.08    $     7.09   $     6.60

  Renewal space
    Tenant improvements and
      leasing costs                $ 1,355,000  $   105,000    $  526,000    $  451,000    $  124,000   $  149,000
    Renewal square feet              1,286,615      271,236       255,978       432,717       233,017       93,667
    Per square foot leased of
      renewal space                $      1.05  $      0.39    $     2.05    $     1.04    $     0.53   $     1.59

__________

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 91% 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 age, location and 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, 2003, approximately 88% 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 7% of our leases (on a square footage basis) require the tenants to pay a majority of operating expenses. Approximately 93% of our leases (on a square footage basis) contain effective annual rent escalations that are either fixed (generally ranging from 3% to 3.5%) 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 and unsecured term loan.

GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the miscorrelation between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") established the measurement tool of funds from operations ("FFO"). Since its introduction, FFO has become a widely used non-GAAP financial measure by REITs. We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT. We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its April 2002 White Paper (the "White Paper") and related implementation guidance, which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs. In 2003, NAREIT issued guidance which modifies the calculation of FFO for both past and future periods. In accordance with NAREIT's revised guidance, we now include losses from early extinguishment of debt and real estate impairment charges in our calculation of FFO. As such, the reported amounts of FFO for the year ended December 31, 2002 have been modified from those previously reported. The White Paper defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. While FFO is a relevant and widely used measure of operating performance for REITs, it should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of 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.) We believe that net income is the most directly comparable GAAP financial measure to FFO.

The following table presents our FFO for the years ended December 31 (in thousands):

                                                Year Ended December 31,
                                          -----------------------------------
                                             2003         2002        2001
                                          -----------  ----------  ----------

Net income                                   $59,643     $40,032     $30,277
Add:
   Depreciation and amortization (1)          38,901      34,071      30,578
   Impairment on investments                       -       2,545           -
Less:
   Dividends on preferred stock               (8,898)     (8,579)     (3,666)
   Net gain on sales of property (2)          (8,286)          -           -
                                          -----------  ----------  ----------
Funds from operations                        $81,360     $68,069     $57,189
                                          ===========  ==========  ==========

__________

Property and Lease Information

The following table is a summary of our property portfolio as of December 31, 2003 (dollars in thousands):

                                                  Rentable   Annualized
                                       Number of   Square       Base     Occupancy
                                      Properties    Feet        Rent     Percentage(1)
                                      ---------- -----------  --------- -----------

California - Pasadena                         1      31,343       $393        45.8%(2)
California - San Diego                       23   1,027,546     28,988        94.9%
California - San Francisco Bay               10     642,578     19,918       100.0%
Eastern Massachusetts                         9     598,894     21,247        88.3%
New Jersey/Suburban Philadelphia              6     346,919      6,251       100.0%
Southeast                                     5     259,414      3,778        74.1%(2)
Suburban Washington D.C.                     20   1,552,238     27,033        94.0%(3)
Washington - Seattle                          5     439,964     16,165        99.8%
                                      ---------- -----------  --------- -----------
Total  (1)                                   79   4,898,896   $123,773        93.9%(3)
                                      ========== ===========  ========= ===========

__________

The following table summarizes certain information with respect to the lease expirations of our properties as of December 31, 2003:

                                       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)
          ----------   -----------   ----------   --------------   ---------------

          2004                 67      614,052             12.3%           $21.30
          2005                 28      318,596              6.4%           $28.00
          2006                 34      809,876             16.2%           $24.21
          2007                 15      340,068              6.8%           $24.16
          2008                 14      391,070              7.8%           $29.10
          Thereafter           50    2,535,437             50.6%           $28.43

The following table is a summary of our lease activity for the year ended December 31, 2003, computed on a GAAP Basis and on a Cash Basis:

                                                                               Rental       TI's/Lease    Average
                                    Number     Square    Expiring      New      Rate       Commissions     Lease
                                   of Leases   Footage     Rates      Rates    Changes       Per Foot      Terms
                                  ----------- ---------  ---------  --------- ---------    ------------ -----------
Lease Activity

Lease Expirations
    Cash Basis                            76   882,564     $23.44       -         -             -            -
    GAAP Basis                            76   882,564     $22.80       -         -             -            -
Renewed / Releasable Space Leased
    Cash Basis                            37   519,724     $24.32     $23.78      -2.2%(1)    $5.76        4.1 Years
    GAAP Basis                            37   519,724     $23.60     $24.97       5.8%(1)    $5.76        4.1 Years
Month-to-Month Leases In Effect
    Cash Basis                            17    64,510     $19.95     $20.04       0.5%         -            -
    GAAP Basis                            17    64,510     $19.75     $20.04       1.5%         -            -

Redeveloped/Developed/
Vacant Space Leased
    Cash Basis                            29   265,366       -        $22.43      -           $6.40        4.5 Years
    GAAP Basis                            29   265,366       -        $23.77      -           $6.40        4.5 Years

Leasing Activity Summary

Excluding Month-to-Month Leases
    Cash Basis                            66   785,090       -        $23.32      -             -            -
    GAAP Basis                            66   785,090       -        $24.56      -             -            -

Including Month-to-Month Leases
    Cash Basis                            83   849,600       -        $23.07      -             -            -
    GAAP Basis                            83   849,600       -        $24.22      -             -            -

__________

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risk to which we believe we are exposed is interest rate risk, which may result from many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control.

In order to modify and manage the interest rate characteristics of our outstanding debt and to limit the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate swaps, caps, floors and other interest rate exchange contracts. The use of these types of instruments to hedge our exposure to changes in interest rates carries additional risks, such as counter-party credit risk and the legal enforceability of hedging contracts.

Our future earnings, cash flows and fair values relating to financial instruments are primarily dependent upon prevalent market rates of interest, such as LIBOR. However, our interest rate swap agreements are intended to reduce the effects of interest rate changes. Based on interest rates at, and our swap agreements in effect on, December 31, 2003, we estimate that a 1% increase in interest rates on our unsecured line of credit and unsecured term loan, after considering the effect of our interest rate swap agreements, would decrease annual future earnings and cash flows by approximately $1.4 million. We further estimate that a 1% decrease in interest rates on our unsecured line of credit and unsecured term loan, after considering the effect of our interest rate swap agreements in effect December 31, 2003, would increase annual future earnings and cash flows by approximately $1.4 million. A 1% increase in interest rates on our secured debt and interest rate swap agreements would decrease their aggregate fair value by approximately $15.3 million. A 1% decrease in interest rates on our secured debt and interest rate swap agreements would increase their aggregate fair value by approximately $16.4 million.

These amounts are determined by considering the impact of the hypothetical interest rates on our borrowing cost and our interest rate swap agreements in effect on December 31, 2003. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, we would consider taking actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our capital structure.

We have exposure to equity price market risk because of our equity investments in certain publicly-traded companies and privately held entities. We classify investments in publicly-traded companies as available-for-sale and, consequently, record them on our balance sheet at fair value with unrealized gains or losses reported as a component of comprehensive income or loss. Investments in privately held entities are generally accounted for under the cost method because we do not influence any of the operating or financial policies of the entities in which we invest. For all investments, we recognize other than temporary declines in value against earnings in the same period the decline in value was deemed to have occurred. In 2002, we recorded non-cash impairment charges of $2,545,000 to write down certain investments for which we deemed the decline in fair value to be other than temporary. There is no assurance that future declines in values will not have a material adverse impact on our future results of operations. By way of example, a 10% decrease in the fair value of our equity investments as of December 31, 2003 would decrease their fair value by approximately $4.7 million.

None.

We filed a Current Report on Form 8-K, dated November 5, 2003, pursuant to which we furnished the Securities and Exchange Commission our earnings release dated November 5, 2003, regarding our third quarter 2003 financial results.

Alexandria Real Estate Equities, Inc. and Subsidiaries

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

                                                                  December 31,
                                                             ----------------------
                                                                2003        2002
                                                             ----------  ----------
                          Assets
Rental properties, net                                      $  982,297  $  976,422
Properties under development                                   153,379      68,386
Cash and cash equivalents                                        4,985       3,790
Tenant security deposits and other restricted cash              11,057       8,020
Tenant receivables                                               1,969       2,641
Deferred rent                                                   31,503      26,063
Investments                                                     47,126      39,650
Other assets                                                    40,261      34,271
                                                             ----------  ----------
Total assets                                                $1,272,577  $1,159,243
                                                             ==========  ==========

           Liabilities and Stockholders' Equity
Secured notes payable                                       $  320,007  $  276,878
Unsecured line of credit and unsecured term loan               389,000     338,000
Accounts payable, accrued expenses and tenant security
  deposits                                                      43,408      47,118
Dividends payable                                               13,027      11,394
                                                             ----------  ----------
                                                               765,442     673,390

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, 2003 and 2002; $25.00
     liquidation value                                          38,588      38,588
   9.10% Series B cumulative redeemable preferred
     stock, $0.01 par value per share, 2,300,000
     shares authorized; 2,300,000 shares issued and
     outstanding at December 31, 2003 and 2002; $25.00
     liquidation value                                          57,500      57,500
   Common stock, $0.01 par value per share, 100,000,000
     shares authorized; 19,264,023 and 18,973,957 shares
     issued and outstanding at December 31, 2003
     and 2002, respectively                                        193         190
   Additional paid-in capital                                  409,926     399,831
   Deferred compensation                                        (2,232)     (1,432)
   Retained earnings                                             8,635           -
   Accumulated other comprehensive income                       (5,475)     (8,824)
                                                             ----------  ----------
Total stockholders' equity                                     507,135     485,853
                                                             ----------  ----------
Total liabilities and stockholders' equity                  $1,272,577  $1,159,243
                                                             ==========  ==========

Alexandria Real Estate Equities, Inc. and Subsidiaries

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

                                                        Year Ended December 31,
                                                --------------------------------------
                                                   2003         2002         2001
                                                -----------  -----------  -----------
Revenues
   Rental                                      $   126,414  $   111,694  $    93,596
   Tenant recoveries                                32,076       29,020       24,143
   Other income                                      2,068        1,557        3,122
                                                -----------  -----------  -----------
                                                   160,558      142,271      120,861
Expenses
   Rental operations                                32,794       29,135       24,655
   General and administrative                       14,211       13,436       11,694
   Interest                                         26,416       24,984       27,666
   Depreciation and amortization                    38,633       32,898       29,264
   Impairment on investments                             -        2,545            -
   Loss on early extinguishment of debt                  -        1,002            -
                                                -----------  -----------  -----------
                                                   112,054      104,000       93,279
                                                -----------  -----------  -----------
Income from continuing operations                   48,504       38,271       27,582

Income from discontinued operations, net            11,139        1,761        2,695
                                                -----------  -----------  -----------
Net income                                     $    59,643  $    40,032  $    30,277
                                                ===========  ===========  ===========

Dividends on preferred stock                   $     8,898  $     8,579  $     3,666
                                                -----------  -----------  -----------
Net income allocated to common stockholde      $    50,745  $    31,453  $    26,611
                                                ===========  ===========  ===========
Basic income per common share:
   Income from continuing operations           $      2.55  $      2.18  $      1.73
   Income from discontinued operations                0.59         0.10         0.17
   Net income                                         3.14         2.28         1.90
   Net income available to common stockholders $      2.67  $      1.79  $      1.67

Diluted income per common share:
   Income from continuing operations           $      2.52  $      2.14  $      1.70
   Income from discontinued operations                0.58         0.10         0.17
   Net income                                         3.10         2.24         1.87
   Net income available to common stockholders $      2.64  $      1.76  $      1.64

Weighted average shares of common
   stock outstanding:
   Basic                                        18,993,856   17,594,228   15,953,459
                                               ============  ===========  ===========
   Diluted                                      19,247,790   17,859,787   16,208,178
                                               ============  ===========  ===========

Alexandria Real Estate Equities, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity
(Dollars In Thousands)

                                                                                                                                          Accumulated
                                                          Series A   Series B   Number of            Additional                              Other
                                                         Preferred  Preferred    Common     Common    Paid-In    Deferred     Retained    Comprehensive
                                                           Stock      Stock      Shares      Stock    Capital   Compensation  Earnings       Income       Total
                                                         ---------- ---------- -----------  -------  ---------  -----------  -----------  ------------  ----------
Balance at December 31, 2000                            $   38,588          -  15,548,356  $   155  $ 278,868  $      (296) $         -  $      1,837  $  319,152
   FAS 133 transition adjustment                                 -          -           -        -          -            -            -        (3,461)     (3,461)
   Net income                                                    -          -           -        -          -            -       30,277             -      30,277
   Unrealized loss on marketable securities                      -          -           -        -          -            -            -        (1,008)     (1,008)
   Unrealized loss on swap agreements                            -          -           -        -          -            -            -        (3,517)     (3,517)
                                                                                                                                                        ----------
   Comprehensive income                                          -          -           -        -          -            -            -             -      25,752
   Issuance of common stock, net of offering costs               -          -     500,000        5     16,746            -            -             -      16,751
   Stock compensation expense                                    -          -     122,555        1      4,326       (4,327)           -             -           -
   Amortization of stock compensation expense                    -          -           -        -          -        2,841            -             -       2,841
   Exercise of stock options                                     -          -     183,630        2      5,198            -            -             -       5,200
   Dividends declared on preferred stock                         -          -           -        -          -            -       (3,666)            -      (3,666)
   Dividends declared on common stock                            -          -           -        -     (3,320)           -      (26,611)            -     (29,931)
                                                         ---------- ---------- -----------  -------  ---------  -----------  -----------  ------------  ----------
Balance at December 31, 2001                                38,588          -  16,354,541      163    301,818       (1,782)           -        (6,149)    332,638
   Net income                                                    -          -           -        -          -            -       40,032             -      40,032
   Reclassification adjustment                                   -          -           -        -          -            -            -            96          96
   Unrealized loss on marketable securities                      -          -           -        -          -            -            -          (712)       (712)
   Unrealized loss on swap agreements                            -          -           -        -          -            -            -        (2,059)     (2,059)
                                                                                                                                                        ----------
   Comprehensive income                                          -          -           -        -          -            -            -             -      37,357
   Issuance of common stock, net of offering costs               -          -   2,418,970       25     97,521            -            -             -      97,546
   Issuance of Series B preferred stock, net of offering         -     57,500           -        -     (2,371)           -            -             -      55,129
   Stock compensation expense                                    -          -      76,075        1      3,642       (3,643)           -             -           -
   Amortization of stock compensation expense                    -          -           -        -          -        3,993            -             -       3,993
   Exercise of stock options                                     -          -     124,371        1      3,693            -            -             -       3,694
   Dividends declared on preferred stock                         -          -           -        -          -            -       (8,625)            -      (8,625)
   Dividends declared on common stock                            -          -           -        -     (4,472)           -      (31,407)            -     (35,879)
                                                         ---------- ---------- -----------  -------  ---------  -----------  -----------  ------------  ----------
Balance at December 31, 2002                                38,588     57,500  18,973,957  $   190  $ 399,831  $    (1,432) $         -  $     (8,824) $  485,853
   Net income                                                    -          -           -        -          -            -       59,643             -      59,643
   Unrealized gain on marketable securities                      -          -           -        -          -            -            -           610         610
   Unrealized gain on swap agreements                            -          -           -        -          -            -            -         2,739       2,739
                                                                                                                                                        ----------
   Comprehensive income                                          -          -           -        -          -            -            -             -      62,992
   Stock compensation expense                                    -          -      92,483        1      4,153       (4,154)           -             -           -
   Amortization of stock compensation expense                    -          -           -        -          -        3,354            -             -       3,354
   Exercise of stock options                                     -          -     197,583        2      5,942            -            -             -       5,944
   Dividends declared on preferred stock                         -          -           -        -          -            -       (8,898)            -      (8,898)
   Dividends declared on common stock                            -          -           -        -          -            -      (42,110)            -     (42,110)
                                                         ---------- ---------- -----------  -------  ---------  -----------  -----------  ------------  ----------
Balance at December 31, 2003                            $   38,588 $   57,500  19,264,023  $   193  $ 409,926  $    (2,232) $     8,635  $     (5,475) $  507,135
                                                         ========== ========== ===========  =======  =========  ===========  ===========  ============  ==========

Alexandria Real Estate Equities, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(In Thousands)

                                                                               Year Ended December 31,
                                                                         ----------- ------------- -----------
                                                                            2003         2002         2001
                                                                         -----------  -----------  -----------
Operating Activities
Net income                                                                   59,643  $    40,032  $    30,277
Adjustments to reconcile net income to net cash
     provided by operating activities:
Loss on early extinguishment of debt                                              -        1,002            -
Non-cash impairment charges                                                       -        3,695            -
Net gain on sales of property                                                (8,286)           -            -
Depreciation and amortization                                                38,901       34,071       30,578
Amortization of loan fees and costs                                           2,133        2,379        1,275
Amortization of premiums on secured notes payable                              (290)        (360)        (343)
Stock compensation expense                                                    2,734        3,651        2,841
Changes in operating assets and liabilities:
     Tenant security deposits and other restricted cash                      (3,037)       3,508       (4,533)
     Tenant receivables                                                         672          482         (288)
     Deferred rent                                                           (6,826)      (5,470)      (5,648)
     Other assets                                                           (10,828)     (12,942)     (11,774)
     Accounts payable, accrued expenses and tenant
        security deposits                                                        31       (2,998)      17,955
                                                                         -----------  -----------  -----------
Net cash provided by operating activities                                    74,847       67,050       60,340

Investing Activities
Purchase of rental properties                                               (48,729)    (103,295)     (55,746)
Proceeds from sales of rental properties                                     42,376            -            -
Additions to rental properties                                              (48,264)     (61,695)     (69,530)
Additions to properties under development                                   (78,327)     (48,479)     (57,390)
Additions to investments, net                                                (6,866)     (14,371)      (9,513)
                                                                         -----------  -----------  -----------
Net cash used in investing activities                                      (139,810)    (227,840)    (192,179)

Financing Activities
Proceeds from secured notes payable                                          64,667       44,663       57,293
Net proceeds from issuances of common stock                                       -       97,546       16,751
Net proceeds from issuance of preferred stock                                     -       55,129            -
Exercise of stock options                                                     5,941        3,693        5,200
Net borrowings from unsecured line of credit
     and unsecured term loan                                                 51,000       10,000       97,000
Principal reductions on secured notes payable                                (6,125)     (13,427)     (12,042)
Proceeds from repayment of note receivable                                        -        6,000            -
Dividends paid on common stock                                              (40,427)     (33,912)     (29,097)
Dividends paid on preferred stock                                            (8,898)      (7,488)      (3,666)
Repurchase of common stock                                                        -            -            -
                                                                         -----------  -----------  -----------
Net cash provided by financing activities                                    66,158      162,204      131,439

Net increase (decrease) in cash and cash equivalents                          1,195        1,414         (400)
Cash and cash equivalents at beginning of year                                3,790        2,376        2,776
                                                                         -----------  -----------  -----------
Cash and cash equivalents at end of year                                $     4,985  $     3,790  $     2,376
                                                                         ===========  ===========  ===========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest, net of interest capitalized     $    28,143  $    28,130  $    29,447
                                                                         ===========  ===========  ===========

                                       December 31,
                                 -----------------------
                                     2003        2002
                                 ----------- -----------
Unrealized gain on marketable
   securities                    $      824  $      214
Unrealized loss on interest rate
   swap agreements                   (6,299)     (9,038)
                                 ----------- -----------
                                 $   (5,475) $   (8,824)
                                 =========== ===========

                                  Year Ended December 31,
                                  -----------------------
                                      2003        2002
                                  ----------- -----------

Net income                        $   59,643  $   40,032
Reclassification adjustment                -          96
Unrealized gain (loss) on
   marketable securities                 610        (712)
Unrealized gain (loss) on interest
   rate swap agreements                2,739      (2,059)
                                  ----------- -----------
Comprehensive income              $   62,992  $   37,357
                                  =========== ===========

                                                            December 31,
                                                       ----------------------
                                                          2003        2002
                                                       ----------  ----------
Funds held in trust under the terms of
    certain secured notes payable                     $    8,665  $    5,692

Security deposit funds based on the terms
    of certain lease agreements                            2,029       1,967

Other funds held in escrow                                   363         361
                                                       ----------  ----------
                                                      $   11,057  $    8,020
                                                       ==========  ==========

                                                   Year Ended December 31,
                                           ------------------------------------
                                              2003         2002        2001
                                           -----------  ----------- -----------
                                    (Dollars in thousands, except per share amounts)

Net income available to common
   stockholders                          $     50,745  $    31,453 $    26,611
                                           ===========  =========== ===========
Weighted average shares of common stock
   outstanding - basic                     18,993,856   17,594,228  15,953,459
Add: dilutive effect of stock op              253,934      265,559     254,719
                                           -----------  ----------- -----------
Weighted average shares of common stock
   outstanding - diluted                   19,247,790   17,859,787  16,208,178
                                           ===========  =========== ===========
Net income per common share -
   basic                                 $       2.67  $      1.79 $      1.67
                                           ===========  =========== ===========
Net income per common share -
   diluted                               $       2.64  $      1.76 $      1.64
                                           ===========  =========== ===========

Common dividends declared per sh         $       2.20  $      2.00 $      1.84
                                           ===========  =========== ===========

                                                 December 31,
                                           ------------------------
                                              2003         2002
                                           -----------  -----------

Land                                     $    147,425  $   151,297
Building and improvements                     854,152      829,739
Tenant and other improvements                 122,280      108,863
                                           -----------  -----------
                                            1,123,857    1,089,899
Less accumulated depreciation                (141,560)    (113,477)
                                           -----------  -----------
                                         $    982,297  $   976,422
                                           ===========  ===========

Year                                         Amount
- -------------------------                -------------
2004                                     $    118,729
2005                                          114,490
2006                                          106,551
2007                                           90,799
2008                                           82,476
Thereafter                                    338,122
                                           -----------
                                         $    851,167
                                           ===========

                                      December 31,
                                  --------------------
                                     2003       2002
                                  ---------  ---------
Adjusted cost of available-for-   $  1,257   $  3,210
   securities

Non-cash impairment charges              -     (1,334)

Gross unrealized gains                 837        214

Gross unrealized losses                (13)         -
                                  ---------  ---------
Fair value of
   available-for-sale securities  $  2,081   $  2,090
                                  =========  =========

                                   Notional    Effective at   Interest    Termination      Fair
Transaction Dates Effective Dates  Amounts  December 31, 2003 Pay Rates      Dates        Values
- ---------------- ---------------- --------- ----------------- --------  ---------------- --------
Hedges for Unsecured Line of Credit
- ---------------------------------

March 2002        December 31, 2002  $50,000  $     50,000      5.364%  December 31,2004  $(2,004)

July 2002           January 1, 2003   25,000        25,000      3.855%   June 30, 2005      (805)

July 2002           January 1, 2003   25,000        25,000      3.865%   June 30, 2005      (809)

December 2002       January 2, 2003   25,000        25,000      3.285%   June 30, 2006      (567)

December 2002       January 2, 2003   25,000        25,000      3.285%   June 30, 2006      (567)

November 2002          June 1, 2003   25,000        25,000      3.115%  December 31, 2005   (523)

November 2002          June 1, 2003   25,000        25,000      3.155%  December 31, 2005   (543)
                                              -----------------
                                              $    200,000
Hedges for Unsecured Term Loan
- -----------------------------
December 2003     December 31, 2003  $50,000  $     50,000       1.53%  December 31, 2004    (74)

December 2003     December 31, 2004   50,000          -          3.00%  December 30, 2005   (119)

December 2003     December 30, 2005   50,000          -          4.15%  December 29, 2006   (121)

December 2003     December 29, 2006   50,000          -          5.09%  October 31, 2008    (167)
                                              -----------------                           --------
                                              $     50,000                                $(6,299)
                                              -----------------                           ========
Total Interest Rate Swap Agreements in
   Effect at December 31, 2003                $    250,000
                                              =================

                                                                                 December 31,
                                                                             ---------------------
                                                                                2003       2002
                                                                             ---------- ----------
8.45% note, due in August 2004, secured by one property in Lexington, MA     $    3,342 $        -
Loan at LIBOR plus 1.7%, due January 2005, secured by two properties in
   San Francisco, CA                                                             22,520     21,853
8.75% note, due January 2006, with an effective interest rate of 7.25%
   (includes unamortized premium of $252 and $374 at December 31, 2003
   and 2002, respectively), secured by one property in Worcester, MA              9,735     10,286
8.68% note, due December 2006, secured by two properties in Durham, NC           11,880     12,038
8.25% note, due August 2007, secured by three properties in Gaithersburg, MD      9,700      9,808
9.125% note, due October 2007, with an effective interest rate of 7.25%
   (includes unamortized premium of $1,379 at December 31, 2002), secured
   by one property in Cambridge, MA                                                   -     18,777
7.22% note, due May 2008, secured by two properties, one in Chantilly, VA
   and the other in Seattle, WA                                                  34,410     34,852
6.95% note, due July 2009, secured by four properties in San Diego, CA           40,225     41,259
8.71% note, due January 2010, secured by two properties, one in Worcester,
   MA and the other in San Diego, CA                                             18,396     18,542
8.33% note, due November 2010, secured by two properties in Gaithersburg, MD     24,131     24,327
7.75% note, due July 2011, secured by six properties in San Diego, CA            23,633     23,839
7.40% note, due January 2012, secured by three properties in Gaithersburg, MD    27,778     28,031
6.21% note, due March 2013, secured by four properties, three in Alameda, CA
   and one in San Diego, CA                                                      33,564          -
6.36% note, due in September 2013, secured by three properties, two in
   Rockville, MD and one in Beltsville, MD                                       29,898          -
7.165% note, due January 2014, secured by one property in Alameda, CA             2,138      3,520
7.75% note, due June 2016, secured by two properties in Seattle, WA              17,318     18,109
7.50% note, due August 2021, secured by one property in San Diego, CA            11,339     11,637
                                                                             ----------------------

                                                                              $ 320,007  $ 276,878

                                                                             ======================

                                               Weighted
                                                Average
                   Year            Amount    Interest Rates
            ------------------   ----------- -------------

            2004                $     9,415          7.69%
            2005                     28,370          3.82%(1)
            2006                     25,571          7.89%(1)
            2007                     15,123          7.86%
            2008                     37,859          7.22%
            Thereafter              203,417          7.29%
                                 ----------- -------------
            Subtotal                319,755          7.06%
            Unamortized premium         252  =============
                                 -----------
                                $   320,007
                                 ===========

                                           -----------
                                              2003
                                           -----------

Aggregate purchase price                 $      6,900
Secured note payable assumed                    3,384
                                           -----------
Cash paid for the property               $      3,516
                                           ===========

                                                  Year Ended December 31,
                                           ------------------------------------
                                              2003         2002        2001
                                           -----------  ----------- -----------

Risk-free interest rate                          3.65%        2.69%       4.68%
Dividend yield                                   3.95%        4.04%       4.49%
Volatility factor of the expected
  market price                                  21.20%       22.04%      22.37%
Weighted average expected life of
  the options                               7.0 years    4.8 years   5.2 years

                                                Year Ended December 31,
                                           ----------- ------------ -----------
                                              2003         2002        2001
                                           -----------  ----------- -----------

Pro forma net income available to common
     stockholders                        $     49,422  $    30,279 $    25,690
Pro forma net income per common share:
     - Basic                             $       2.60  $      1.72 $      1.61
     - Diluted                           $       2.57  $      1.70 $      1.59

                                         2003                   2002                   2001
                               ---------------------- ---------------------- -----------------------

                                            Weighted               Weighted                Weighted
                                            Average                Average                 Average
                                 Stock      Exercise    Stock      Exercise    Stock       Exercise
                                Options      Price     Options      Price     Options       Price
                               ----------  ---------- ----------  ---------- ----------   ----------
Outstanding-beginning of year  1,011,166  $    34.39    849,870  $    29.68    901,000  $     27.73
Granted                                 -           -   337,000       44.44    193,500        38.27
Exercised                       (197,583)      30.08   (124,371)      29.70   (183,630)       27.58
Forfeited                         (4,000)      43.23    (51,333)      33.75    (61,000)       34.48
                               ----------  ---------- ----------  ---------- ----------   ----------
Outstanding-end of year          809,583  $    35.39  1,011,166  $    34.39    849,870  $     29.68
                               ==========  ========== ==========  ========== ==========   ==========

Exercisable at end of year       533,420  $    31.35    514,169  $    26.89    497,040  $     25.29
                               ==========  ========== ==========  ========== ==========   ==========
Weighted average fair value of
options granted                           $         -            $     6.05             $      6.19
                                           ==========             ==========              ==========

                     Options Outstanding           Options Exercisable
              ----------------------------------  -----------------------
                            Weighted
                            Average     Weighted               Weighted
Range of      Number        Remaining   Average    Number      Average
Exercise      Outstanding   Contractual Exercise   Exercisable Exercise
Prices        at 12/31/03   Life        Price      at 12/31/03 Price
- ------------- ------------- ----------  --------   ----------- ---------
$20.00-$32.06  290,550          3.84    $24.07      290,550    $24.07
$32.94-$43.00  281,033          7.47    $38.70      175,536    $37.93
$43.24-$47.69  238,000          8.35    $45.31       67,334    $45.60

                                                                            Quarter
                                                    ----------------------------------------------------------
                                                        First         Second          Third         Fourth
                                                    -------------  -------------  -------------  -------------
                                                               (In thousands, except per share amounts)

2003
- ----
Revenues                                           $      40,039  $      39,455  $      40,085  $      40,979
Net income available to common
   stockholders                                    $       9,925  $      10,324  $      19,369  $      11,127

  Basic income per share:
    Income from continuing operations              $        0.62  $        0.61  $        0.63  $        0.69
    Income from discontinued operations, net       $        0.03  $        0.05  $        0.50  $        0.01
    Net income                                     $        0.64  $        0.66  $        1.14  $        0.70
    Net income available to common stockholders    $        0.53  $        0.54  $        1.02  $        0.58
  Diluted income per share:
    Income from continuing operations              $        0.61  $        0.60  $        0.63  $        0.68
    Income  from discontinued operations, net      $        0.03  $        0.05  $        0.49  $        0.01
    Net income                                     $        0.63  $        0.65  $        1.12  $        0.69
    Net income available to common stockholders    $        0.52  $        0.54  $        1.00  $        0.57


2002
- ----
Revenues                                           $      33,098  $      34,253  $      36,236  $      38,684
Net income available to common
   stockholders                                    $       7,698  $       7,996  $       8,530  $       7,229

  Basic income per share:
    Income from continuing operations              $        0.54  $        0.57  $        0.55  $        0.52
    Income (loss) from discontinued operations,net $        0.04  $        0.04  $        0.04  $       (0.02)
    Net income                                     $        0.59  $        0.61  $        0.59  $        0.50
    Net income available to common stockholders    $        0.47  $        0.48  $        0.47  $        0.38

   Diluted income per share:
    Income from continuing operations              $        0.53  $        0.56  $        0.54  $        0.51
    Income (loss) from discontinued operations,net $        0.04  $        0.04  $        0.04  $       (0.02)
    Net income                                     $        0.57  $        0.60  $        0.58  $        0.50
    Net income available to common stockholders    $        0.46  $        0.47  $        0.46  $        0.38

                                                Year Ended December 31,
                                           ------------------------------------
                                              2003         2002        2001
                                           -----------  ----------- -----------
Total revenue                            $      5,449  $     7,207 $     6,929
Operating expenses                              1,404        1,692       1,460
                                           -----------  ----------- -----------
Revenue less operating expenses                 4,045        5,515       5,469
Interest                                          924        1,431       1,460
Depreciation                                      268        1,173       1,314
Income before net gain on sales of         -----------  ----------- -----------
   property and non-cash impairment charge      2,853        2,911       2,695
Net gain on sales of property                   8,286            -           -
Non-cash impairment charge                          -       (1,150)          -
Income from discontinued                   -----------  ----------- -----------
  operations                             $     11,139  $     1,761 $     2,695
                                           ===========  =========== ===========


                                                  December 31,
                                           -------------------------
                                              2003         2002
                                           -----------  -----------
Properties held for sale, net            $      3,518  $    55,539
Cash and cash equivalents                           -            3
Tenant security deposits and other
   restricted cash                                  6          121
Tenant receivables                                 82           94
Deferred rent                                       8        1,348
Other assets                                       66          308
                                           -----------  -----------
Total assets                             $      3,680  $    57,413

Secured note payable                     $          -  $    18,777
Accounts payable, accrued expenses
   and tenant security deposits                    79        1,266
                                           -----------  -----------
Total liabilities                                  79       20,043
                                           -----------  -----------
Net assets of discontinued operations    $      3,601  $    37,370
                                           ============ ============

                                                 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
         -------------          ----------  --------  -------------  ------------  --------  ------------  ---------  ----------------  -----------     -------------------
North Torrey Pines Road #1        107,710  $  1,321  $       5,960  $      5,698  $  1,321  $     11,658  $  12,979  $          2,484  $         -      1971/2003
Science Park Road                  74,557     1,013              -        16,755     1,013        16,755     17,768             2,787            -      2000
North Torrey Pines Road #2         86,962     2,663         10,649         4,677     2,663        15,326     17,989             4,506            -      1986/1996
General Atomics Court #1           76,084     2,651         18,046         1,447     2,651        19,493     22,144             5,740       40,225 (2)  1986/2000
General Atomics Court #2           43,600     1,227          9,554            18     1,227         9,572     10,799             2,891            - (2)  1991
Roselle Street #1                  18,173       463          1,840           850       463         2,690      3,153             1,058            - (3)  1983/1998
Nexus Centre Drive                 67,050     2,548         13,638            31     2,548        13,669     16,217             3,719       33,564 (4)  1989
Nancy Ridge Drive #1               29,333       733          2,273         1,867       733         4,140      4,873             1,208            - (5)  1997
Roselle Street #2                  17,603       444          1,699         1,798       444         3,497      3,941               773            -      late 1970's/1999
Tansy Street                       15,410       651          1,375         1,886       651         3,261      3,912               901            -      1978/1999
John Hopkins Court #1              34,723     1,122              -         3,882     1,122         3,882      5,004               362            - (2)  2000
John Hopkins Court #2              55,200     1,683              -         5,648     1,683         5,648      7,331               749            - (2)  1999
Towne Centre Drive #1              45,030       275          8,621         3,502       275        12,123     12,398             1,106            -      1987/2003
Towne Centre Drive #2              52,228       320         10,070           836       320        10,906     11,226             1,629            -      1987/2000
Towne Centre Drive #3              41,780       258          8,170         7,490       258        15,660     15,918             1,720            -      1987/2000
Roselle Street #3                  17,590       455          2,581           688       455         3,269      3,724               174       23,633 (3)  1981
Roselle Street #4                  30,147       754          4,288           134       754         4,422      5,176               392            - (3)  1981/1998
Roselle Street #5                  22,577       564          3,224            20       564         3,244      3,808               316            - (3)  1981/1995
Roselle Street #6                  17,433       436          2,480            21       436         2,501      2,937               239            - (3)  1981/1999
Roselle Street #7                  24,208       605          3,459            20       605         3,479      4,084               339            - (3)  1981/1995
Nancy Ridge Drive #2               21,940       515          1,566         2,399       515         3,965      4,480               445            -      early 1980's/2001
Campus Point Drive                 71,510     4,246         16,165           125     4,246        16,290     20,536             1,091       11,339      1986/1998
Nancy Ridge Drive #3               56,698     1,984         10,397              -    1,984        10,397     12,381                  -           -      1987/2001
North Hill Avenue                  31,343     2,172            812         9,045     2,172         9,857     12,029               870            -      1940's/2002
Harbor Bay Parkway #1              61,015     1,506          5,357         2,324     1,506         7,681      9,187             2,325            - (4)  1983/1999
Harbor Bay Parkway #2              27,745       775          1,917         1,525       775         3,442      4,217               796            - (4)  1984/2000
Harbor Bay Parkway #3              47,777     1,200          3,880           444     1,200         4,324      5,524               766            - (4)  1986/1994
Harbor Bay Parkway #4              68,711     1,800          9,731           490     1,800        10,221     12,021             1,818        2,138      1985/1994
Mitten Road & Malcolm Road        153,837     4,751         12,612        10,432     4,751        23,044     27,795             3,044            -      1962/2002
Hanover Street                     32,074         -          6,628         5,169         -        11,797     11,797             3,405            -      1968/2000
Garcia Avenue & Bayshore
   Parkway                         98,964         -         21,323         5,397         -        26,720     26,720             4,541            -      1980/2003
Oyster Point Boulevard #1          53,980     3,519              -        12,933     3,519        12,933     16,452             1,822       22,520 (6)  2001
Oyster Point Boulevard #2          53,980     3,519              -         7,665     3,519         7,665     11,184               781            - (6)  2001
Gateway Boulevard #1              110,428     7,730         24,397            11     7,730        24,408     32,138             1,041            -      2002
Gateway Boulevard #2               59,816     4,187         14,020            12     4,187        14,032     18,219               910            -      2000
Harbor Bay Parkway #5              67,482     1,349          9,915             -     1,349         9,915     11,264                30            -      1984/2001
Porter Drive                       91,644         -         19,154             -         -        19,154     19,154                18            -      1962/2002
Columbia Street #1                163,235     5,654         22,916        11,419     5,654        34,335     39,989             7,847       17,318 (7)  1975/1997
Columbia Street #2                 46,303       912            612         2,370       912         2,982      3,894                12            - (7)  1975/1997
Western Avenue                     47,746     1,432          7,497         2,381     1,432         9,878     11,310             2,328       34,410 (8)  1929/2000
First Avenue                       70,647     2,119         11,275         4,580     2,119        15,855     17,974             3,337            -      1980/2000
Eastlake Avenue #1                106,003     4,240         31,232            12     4,240        31,244     35,484               976            -      1997
Eastlake Avenue #2                 52,333     1,570         15,917         8,083     1,570        24,000     25,570               497            -      1997
Professional Drive #1              47,558       871          5,362         3,046       871         8,408      9,279             1,809            -      1989/1999
Professional Drive #2              62,739     1,129          6,940            48     1,129         6,988      8,117             1,318            -      1987
West Watkins Mill Road #1         138,938     3,281         14,416           189     3,281        14,605     17,886             2,758       24,131 (9)  1989/1997
Quince Orchard Road #1             49,225     1,267          3,031         5,168     1,267         8,199      9,466             3,486            - (9)  1982/1997
Clopper Road #1                    44,464       900          2,732         1,519       900         4,251      5,151             1,578            - (10) 1989
East Gude Drive #1                 45,989       748          3,609         1,095       748         4,704      5,452               899            - (11) 1981/1986
Research Boulevard                105,000     1,733          9,611           590     1,733        10,201     11,934             2,000            -      1967/2000
East Gude Drive #2                 44,500       775          4,122           329       775         4,451      5,226               767            - (11) 1981/2003
Piccard Drive                     131,415     2,800         11,533         6,603     2,800        18,136     20,936             1,548            -      1978/1994
Newbrook Drive                    248,186     4,800         27,639           390     4,800        28,029     32,829             4,797            - (8)  1992
Virginia Manor Road               191,884         -         13,679           558         -        14,237     14,237             2,431       29,898 (11) 1990/2003
Old Columbia Road                  75,500     1,510          5,210         1,627     1,510         6,837      8,347             1,688            -      1983/1997
Firstfield Road #1                 25,175       376          3,192         2,107       376         5,299      5,675               628            -      1974/2000
Shady Grove Road                   42,142       840          3,115           116       840         3,231      4,071               553            -      1987
West Watkins Mill Road #2          57,410       859          4,149         1,544       859         5,693      6,552               896            -      1988/2000
Clopper Road #2                    92,990     2,463            493        17,893     2,463        18,386     20,849             4,783       27,778 (10) 2000
Firstfield Road #2                 53,599       971          5,141         4,886       971        10,027     10,998             1,099            - (12) 1980/2001
Firstfield Road #3                 53,595       947          5,092         2,751       947         7,843      8,790               571            - (12) 1980/2003
Quince Orchard Road #2             54,874       970          5,138         1,387       970         6,525      7,495               504        9,700 (12) 1981/2003
Clopper Road #3                    59,838       983          6,638            90       983         6,728      7,711               655            - (10) 1989/1992
Research Place                     58,632     1,466          5,708         3,641     1,466         9,349     10,815               156            -      1972/2003
Charlestown Navy Yard              24,940         -          6,247           389         -         6,636      6,636               995            -      1880/1991
Pond Street                        24,867       622          3,053            58       622         3,111      3,733               353            -      1965/1990
Westview Street                    40,000       960          3,032         4,703       960         7,735      8,695               313            -      1975
Plantation Street #1               92,711     2,352         14,173           651     2,352        14,824     17,176             2,067       18,396 (5)  1993
Innovation Drive                  113,956     2,734         14,567         1,833     2,734        16,400     19,134             2,391        9,735 (13) 1991
Plantation Street #2               92,423       651              -        15,727       651        15,727     16,378             5,268            -      2000
Arsenal Street #1                  92,500     3,360          7,316        14,440     3,360        21,756     25,116             2,698            -      1978/2001
Hartwell Avenue #1                 59,000     1,475          7,194        11,370     1,475        18,564     20,039             1,139            -      1972/2002
Arsenal Street #2                  96,150     6,413          5,457        18,045     6,413        23,502     29,915               115            -      1980/2003
Memorial Drive #1                  51,000     6,507              -        21,605     6,507        21,605     28,112             1,023            -      2002
Memorial Drive #2                  47,497     6,058              -        20,977     6,058        20,977     27,035               800            -      2002
Hartwell Avenue #2                 51,340     2,567          4,522           442     2,567         4,964      7,531                52        3,342      1972
College Road                      106,036     1,943          9,764         1,444     1,943        11,208     13,151             1,900            -      1968/1984
Williams Drive                     37,000       740          4,506            62       740         4,568      5,308               690            -      1982/1994
Phillips Parkway                   78,501     1,840          2,298        11,076     1,840        13,374     15,214             2,370            -      late 1960's/1999
Campus Drive                       42,782       654          4,234           302       654         4,536      5,190               736            -      1989
Electronic Drive                   40,000       600          3,110         3,289       600         6,399      6,999             2,172            -      1983/1998
Princeton Road                     42,600     1,075          1,438         2,973     1,075         4,411      5,486             2,252            -      1984/1999
Capitola Drive #1                  65,114       337          5,795           482       337         6,277      6,614             1,134            - (14) 1986
Capitola Drive #2                 119,916       577         11,688         7,256       577        18,944     19,521             3,155       11,880 (14) 1985
Technology Parkway                 37,080       370          4,191           684       370         4,875      5,245               671            -      1976/1993
Triangle Drive                     32,120       161          3,410           202       161         3,612      3,773               559            -      1981
Alexander Road                     86,239         -            376        11,630         -        12,006     12,006             1,252            -      2000
Kit Creek Road                     38,861       374          3,383         5,577       374         8,960      9,334               738            -      1995/2003
                                ----------  --------  -------------  ------------  --------  ------------  ---------  ----------------  -----------
                                5,668,895  $147,425  $     621,554  $    354,878  $ 147,425  $   976,432  $1,123,857  $       141,560  $   320,007
                                ==========  ========  =============  ============  ========  ============  =========  ================  ===========

                                                 Rental Properties
                                                Year Ended December 31,
                                           ------------------------------------
                                              2003         2002        2001
                                           -----------  ----------- -----------
Balance at beginning of period           $  1,089,899  $   880,716 $   737,207
Purchase of rental properties                  48,729      103,295      55,746
Sale of properties                            (56,741)           -           -
Additions to rental properties                 48,264       61,695      69,530
Transfer of costs (to) from properties
   under development                           (6,294)      44,193      18,233
                                           -----------  ----------- -----------
Balance at end of period                 $  1,123,857  $ 1,089,899 $   880,716
                                           ===========  =========== ===========

                                                Accumulated Depreciation
                                                        December 31,
                                           ------------------------------------
                                              2003         2002        2001
                                           -----------  ----------- -----------

Balance at beginning of period               $113,477      $84,090     $57,554
Depreciation expense on rental properties      32,786       29,387      26,536
Accumulated depreciation on properties sold    (4,703)           -           -
                                           -----------  ----------- -----------
Balance at end of period                     $141,560     $113,477     $84,090
                                           ===========  =========== ===========