The terms "Company", "we", "our" 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.

• Changes in general economic conditions or in the real estate and life science industries;
• Risks and uncertainties related to how successful our tenants are in discovering, developing, making or selling their products and technologies;
• Potential liability for damages resulting from our tenant's use of hazardous materials;
• Adverse changes in the annual appropriations received by our government tenants;
• Economic conditions in our markets could adversely affect our business;
• Loss of a tenant could have a negative impact on our business;
• We may have difficulty managing our growth;
• Our debt service obligations may have adverse consequences on our business operations;
• Our unsecured line of credit and unsecured term loan restrict our ability to engage in some business activities;
• Ability to obtain additional capital to further our business objectives;
• Difficulties in identifying properties for acquisition or operating them successfully;
• Risks associated with completing developments and redevelopments;
• Our failure to qualify and maintain our status as a real estate investment trust under the Internal Revenue Code of 1986;
• Losses in excess of our insurance coverage;
• Environmental uncertainties;
• Failure to comply with laws, including the Americans with Disabilities Act and similar laws; and
• Ability to retain our senior executives.

Our success also depends upon economic trends generally and various market conditions. We caution you not to place undue reliance on forward-looking statements, which reflect our analysis only and speak as of the date of this report or, if different, as of the dates indicated in the statements. We assume no obligation to update or supplement forward-looking statements.

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

In 2004, we:

• Acquired 23 properties with an aggregate of approximately 1,630,000 rentable square feet. In addition, we completed the development of a property with an aggregate of approximately 104,000 rentable square feet.
• Expanded our unsecured line of credit from $440 million to $500 million and extended its term to December 2007, which may be further extended at our sole option for an additional one-year period.
• Expanded our unsecured term loan from $150 million to $250 million and extended its term to December 2009.
• Sold one property with approximately 42,000 rentable square feet.
• Completed a public offering of 5,185,500 shares of our 8.375% Series C cumulative redeemable preferred stock ("Series C preferred stock").
• Redeemed all of the outstanding shares of our 9.50% Series A cumulative preferred stock with proceeds from the Series C preferred stock offering.

Our primary source of revenue is rental income and tenant recoveries from leases at the properties we own. Of the 112 properties we owned as of December 31, 2004, four were acquired in 1994, nine in 1996, nine in 1997, 26 in 1998, six in 1999, 11 in 2000, five in 2001, four in 2002, four in 2003 (the "2003 Properties") and 23 in 2004. 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"), two properties in 2002 (together with the four properties acquired in 2002, the "2002 Properties") and one property in 2004 (together with the 23 properties acquired in 2004, the "2004 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 2004 as compared to 2003, and for 2003 as compared to 2002.

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", 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 for 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.

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 the carrying amount of the property. Upon determination that impairment has occurred, a write-down is recorded to reduce the carrying amount of the property to its estimated fair value.

In accordance with Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost" ("SFAS 34") and Statement of Financial Accounting Standards No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects" ("SFAS 67"), we capitalize direct construction and development costs, including predevelopment costs, interest, property taxes, insurance and other costs directly related and essential to the acquisition, development or construction of a project. Pursuant to SFAS 34 and SFAS 67, capitalization of construction and development costs is required while activities are ongoing to prepare an asset for its intended use. 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. Expenditures for repairs and maintenance are expensed as incurred.

We also capitalize costs directly related and essential to our leasing activities. These costs are amortized on a straight-line basis over the terms of the related leases. Costs that were previously capitalized and which 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" in accordance with 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 as 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 net realized gains 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 in accordance with Accounting Principles Board Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock" and Emerging Issues Task Force Topic D-46, "Accounting for Limited Partnership Investments". 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, financial condition, prospects for favorable or unfavorable clinical trial results, new product initiatives and/or sales, 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 (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.

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 the provisions of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" 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 is recognized on a straight-line basis over the respective lease terms. We include amounts currently recognized as income, and expected to be received in later years, in deferred rent in the accompanying consolidated balance sheets. Amounts received currently, but recognized as income in future years, are included as unearned rent in accounts payable, accrued expenses and tenant security deposits in the accompanying consolidated balance sheets. Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred.

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.

We follow the provisions of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" in determining whether a property qualifies as an asset "held for sale" and should be classified as "discontinued operations". 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 revenues increased by $17.5 million, or 14%, to $143.9 million for 2004 compared to $126.4 million for 2003. The increase resulted primarily from the 2003 Properties being owned for a full year and the addition of the 2004 Properties. Rental revenues from properties operating for a full year during 2004 and 2003 (the "2004 Same Properties") increased by $2.2 million, or 2.2%, primarily due to increases in rental rates and a slight increase in occupancy. The average occupancy level of the 2004 Same Properties was 97.1% as of December 31, 2004, compared to 96.6% as of December 31, 2003.

Tenant recoveries increased by $3.8 million, or 12%, to $35.9 million for 2004 compared to $32.1 million for 2003. The increase resulted primarily from the 2003 Properties being owned for a full year and the addition of the 2004 Properties. Tenant recoveries for the 2004 Same Properties increased by $575,000, or 2.3%, primarily due to increases in certain recoverable operating expenses during 2004.

Other income increased by $1.5 million, or 71%, to $3.5 million for 2004 compared to $2.1 million for 2003, 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 $5.6 million, or 17%, to $38.4 million for 2004 compared to $32.8 million for 2003. The increase resulted primarily from the 2003 Properties being owned for a full year and the addition of the 2004 Properties. Operating expenses for the 2004 Same Properties increased by $398,000, or 1.6%, primarily due to increases in salaries for property engineers, property taxes and repair and maintenance expenses offset slightly by a decrease in property insurance expenses (substantially all of which are recoverable from our tenants through tenant recoveries).

General and administrative expenses increased by $894,000, or 6%, to $15.1 million for 2004 compared to $14.2 million for 2003, mainly due to compliance with Section 404 of the Sarbanes-Oxley Act, Operation Outreach and general increases in administrative costs. Our Operation Outreach program provides financial assistance to families of activated and deployed soldiers that faced significant financial challenges and had significant financial needs.

Interest expense increased by $2.3 million, or 9%, to $28.7 million for 2004 compared to $26.4 million for 2003. The increase resulted primarily from increases in indebtedness on our unsecured line of credit, unsecured term loan and secured notes payable, and to increases in the floating interest rates on our unsecured line of credit and unsecured term loan. These borrowings were utilized to finance the acquisition of the 2003 and 2004 Properties, and the development and redevelopment of properties. The weighted average effective interest rate on these borrowings (not including the effect of interest rate swap agreements) increased from 2.64% as of December 31, 2003 to 3.72% as of December 31, 2004. 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 $3.9 million, or 10%, to $42.5 million for 2004 compared to $38.6 million for 2003. The increase resulted primarily from depreciation associated with the 2003 Properties being owned for a full year and the addition of the 2004 Properties.

Income from discontinued operations of $1.6 million for 2004 reflects the results of operations of one property that was designated as "held for sale" as of December 31, 2003. In connection with this sale, we recorded a gain of approximately $1.6 million during 2004. Income from discontinued operations of $11.1 million for 2003 reflects the results of operations of three properties that were designated as "held for sale" as of December 31, 2002. In connection with the sale of these properties, we recorded a net gain of approximately $8.3 million during 2003.

Rental revenues 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 revenues 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 these borrowings (not including the effect of interest rate 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 three properties that were designated as "held for sale" as of December 31, 2002. In connection with the sale of these properties, we recorded a net gain of approximately $8.3 million during 2003. Income from discontinued operations of $1.8 million for 2002 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 that could not 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 2004 decreased by $7.1 million to $67.8 million compared to $74.8 million for 2003. An increase in cash flows from our portfolio of operating properties was offset by a decrease in net cash provided by operating activities primarily from changes in operating assets (tenant security deposits and other restricted cash, deferred rent and other assets).

Net cash used in investing activities for 2004 increased by $310.9 million to $450.7 million compared to $139.8 million for 2003. This increase was primarily due to an increase in property acquisitions, increases in additions to rental properties and properties under development, and a decrease in proceeds from sales of rental properties.

Net cash provided by financing activities for 2004 increased by $315.0 million to $381.1 million compared to $66.2 million for 2003. This increase was primarily due to the net proceeds from our Series C preferred stock offering, increases in borrowings from our unsecured line of credit and unsecured term loan, and an increase in proceeds from secured notes payable. This was partially offset by the redemption of our Series A cumulative redeemable preferred stock.

As of December 31, 2004, we had no off-balance sheet arrangements.

Contractual obligations as of December 31, 2004, consist of the following (in thousands):

                                                       Payments by Period
                                          -----------------------------------------------
                               Total          2005     2006-2007   2008-2009   Thereafter
- -----------------------------------------------------------------------------------------
Secured notes payable(1)     $   635,432   $  23,227   $ 223,598   $ 157,724   $  230,883

Unsecured line of credit and
  unsecured term loan            548,000          --     298,000     250,000           --

Ground lease obligations          65,346       1,805       3,683       3,801       56,057

Other obligations                  4,814         425       1,277       1,208        1,904
                            ------------  ----------  ----------  ----------  -----------
Total                        $ 1,253,592   $  25,457   $ 526,558   $ 412,733   $  288,844
                            ============  ==========  ==========  ==========  ===========

(1) Excludes unamortized premium of $3.5 million as of December 31, 2004.

Secured notes payable as of December 31, 2004 included 26 notes secured by 54 properties and seven land development parcels.

In December 2004, we amended our unsecured line of credit and our unsecured term loan (see "Unsecured Line of Credit and Unsecured Term Loan " below). The unsecured line of credit expires December 2007 and may be extended at our sole option for an additional one-year period. The unsecured term loan expires December 2009.

Ground lease obligations as of December 31, 2004 included leases at seven of our properties and one land development parcel. These lease obligations have remaining lease terms of 28 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 $18.3 million.

As of December 31, 2004, we were also committed to fund approximately $23.2 million for the construction of building infrastructure improvements under the terms of leases and/or construction contracts and approximately $17.2 million for certain investments.

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

                                                            December 31,
                                                       ----------------------
                                                          2004         2003
                                                       ----------   ----------
Funds held in trust under the terms of
    certain secured notes payable                      $  11,241    $   8,665

Security deposit funds based on the terms
    of certain lease agreements                            2,045        2,029

Other funds held in escrow                                 4,383          363
                                                       ----------   ----------
                                                       $  17,669    $  11,057
                                                       ==========   ==========

Secured debt as of December 31, 2004, consists of the following (dollars in thousands):

                                                                            December 31,
                                                                       ---------------------
                                                                          2004       2003
                                                                       ---------- ----------
Secured debt, interest rates varying from 3.69% to 8.71%,
   (weighted average effective interest rate of 6.12% and 7.06%       $  635,432  $  319,755
    at December 31, 2004 and 2003, respectively), maturity
    dates ranging from September 2005 to August 2021
Unamortized premiums                                                       3,514         252
                                                                      ----------- ----------
Total secured debt                                                    $  638,946  $  320,007
                                                                      =========== ==========

Our secured notes payable generally require monthly payments of principal and interest. The total book value of properties securing debt was $776,342,000 and $369,731,000 at December 31, 2004 and 2003, respectively. At December 31, 2004, our secured notes payable were comprised of $437.2 million and $201.7 million of fixed and variable rate debt, respectively, compared to $297.5 million and $22.5 million of fixed and variable rate debt, respectively, at December 31, 2003.

The following is a summary of the scheduled principal payments for our secured debt and the weighted average interest rates as of December 31, 2004 (in thousands):

                                                    Weighted
                                                    Average
                   Year             Amount       Interest Rate(1)
            ------------------    -----------    ---------------

                  2005             $   23,227          5.67%
                  2006                206,889          5.69%
                  2007                 16,709          6.35%
                  2008                115,514          6.30%
                  2009                 42,210          6.89%
               Thereafter             230,883          6.90%
                                  -----------    ---------------
            Subtotal                  635,432          6.12%
            Unamortized premium         3,514    ===============
                                  -----------
                                   $  638,946
                                  ===========

In December 2004, we amended our unsecured term loan to increase the loan from $150 million to $250 million. The unsecured term loan 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 expires in December 2009. As of December 31, 2004, we had borrowings of $250.0 million outstanding on the unsecured term loan with a weighted average interest rate of 3.72%.

Our unsecured line of credit and unsecured term loan contain financial covenants, including, among other things, maintenance of minimum net worth, a leverage ratio and a fixed charge coverage ratio. In addition, the terms of the unsecured line of credit and unsecured term loan restrict, among other things, certain investments, indebtedness, distributions and mergers.

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 combined amount of $750 million. Under these provisions as of December 31, 2004, aggregate borrowings under our unsecured line of credit and unsecured term loan were limited to $666 million. Under the amended and restated unsecured line of credit and unsecured term loan, we have an option to increase our maximum available commitment by an additional $100 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 as of December 31, 2004 (dollars in thousands):

                                     Notional     Effective at     Interest     Termination        Fair
Transaction Dates  Effective Dates   Amounts   December 31, 2004   Pay Rates       Dates          Values
- ---------------- ----------------   ---------  -----------------   ---------  ----------------  ---------

July 2002          January 1, 2003     25,000  $     25,000          3.855%     June 30, 2005    $  (142)

July 2002          January 1, 2003     25,000        25,000          3.865%     June 30, 2005       (143)

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

November 2002      June 1, 2003        25,000        25,000          3.155%    December 31, 2005     (41)

December 2002      January 2, 2003     25,000        25,000          3.285%     June 30, 2006        (35)

December 2002      January 2, 2003     25,000        25,000          3.285%     June 30, 2006        (35)

December 2003      December 31, 2004   50,000        50,000          3.000%    December 30, 2005      (4)

December 2003      December 30, 2005   50,000         --             4.150%    December 29, 2006    (219)

December 2003      December 29, 2006   50,000         --             5.090%     October 31, 2008    (795)

March 2004         December 31, 2004   25,000        25,000          2.956%    December 31, 2006     186

March 2004         December 31, 2004   25,000        25,000          2.956%    December 31, 2006     186

April 2004         April 30, 2004      50,000        50,000          1.550%     April 29, 2005       173

April 2004         April 29, 2005      50,000         --             3.140%     April 28, 2006        81

April 2004         April 28, 2006      50,000         --             4.230%     April 30, 2007      (205)

April 2004         April 30, 2007      50,000         --             4.850%     April 30, 2008      (333)

June 2004          June 30, 2005       50,000         --             4.343%     June 30, 2007       (679)

December 2004      December 31, 2004   50,000        50,000          3.590%    January 2, 2008       (57)

December 2004      January 3, 2006     50,000         --             3.927%     July 1, 2008           3
                                               -----------------                                 --------
Total Interest Rate Swap Agreements in         $    350,000                                      $(2,090)
   Effect at December 31, 2004                 =================                                 ========

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, 2004 and 2003, our interest rate swap agreements have been classified at their fair values of approximately $2.1 million and $6.3 million, respectively, in accounts payable, accrued expenses and tenant security deposits in our consolidated balance sheets. The offsetting adjustments of $2.1 million and $6.3 million, respectively, were reflected as deferred losses in accumulated other comprehensive income (loss) in the stockholders' equity section of our consolidated balance sheets. Balances in accumulated other comprehensive income (loss) are recognized in earnings as swap payments are made.

Other Resources and Liquidity Requirements

In June 2004, we completed a public offering of 5,185,500 shares of our 8.375% Series C cumulative redeemable preferred stock (including the shares issued upon exercise of the underwriters' over-allotment option). The shares were issued at a price of $25.00 per share, resulting in aggregate proceeds of approximately $124.0 million (after deducting underwriters' discounts and other offering costs).

In December 2004, we amended and restated our existing unsecured line of credit and unsecured term loan. The maximum permitted borrowings under the unsecured line of credit and unsecured term loan increased to $500 million and $250 million, respectively. We may in the future elect to increase commitments under the unsecured line of credit by up to an additional $100 million.

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 recurring non- revenue enhancing capital expenditures, tenant improvements and leasing commissions.

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

Exposure to Environmental Liabilities

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 properties (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, 2004, 2003, 2002, 2001 and 2000, attributable to leases that commenced at our properties after our acquisition.

                                      Total/
                                     Weighted
                                      Average       2004           2003            2002          2001         2000
                                    -----------  -----------    -----------     ----------    ----------   ----------
Capital expenditures:
   Major capital expenditures(1)    $5,974,000   $2,628,000(2)  $1,632,000(3)   $  959,000     $  616,000   $  139,000
   Recurring capital expenditures   $4,821,000   $1,243,000     $  853,000      $1,472,000(4)  $  614,000   $  639,000
   Weighted average square feet
     in portfolio                   26,912,194    6,123,807      5,708,635       5,499,660      5,131,176    4,448,916
   Per weighted average square
     foot in portfolio
   Major capital expenditures(1)    $     0.22   $     0.43(2)   $    0.29(3)    $    0.17      $    0.12    $    0.03
   Recurring capital expenditures   $     0.18   $     0.20      $    0.15       $    0.27(4)   $    0.12    $    0.14


Tenant improvements and leasing
costs:
  Retenanted space(5)
    Tenant improvements and
      leasing costs                 $5,363,000   $  713,000      $2,890,000      $  498,000     $ 466,000    $  796,000
    Retenanted square feet             973,391      142,814         248,488         318,642       151,161(5)    112,286(5)
    Per square foot leased of
      retenanted space              $     5.51   $     4.99      $    11.63      $     1.56     $    3.08    $     7.09

  Renewal space
    Tenant improvements and
      leasing costs                 $2,143,000   $  937,000      $  105,000      $  526,000     $ 451,000    $  124,000
    Renewal square feet              1,751,822      558,874         271,236         255,978       432,717       233,017
    Per square foot leased of
      renewal space                 $     1.22   $     1.68      $     0.39      $     2.05     $    1.04     $    0.53

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, 2004 and 2003, approximately 83% and 88%, respectively, 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. The decrease in tripe net leases from 2003 to 2004 is primarily due to gross leases added to the portfolio from properties acquired in 2004. Gross leases are generally converted to triple net leases upon renewal or rollover. In addition, as of December 31, 2004, approximately 7% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses. Approximately 89% of our leases (on a square footage basis) contained 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 from 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 related 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 "Liquidity and Capital Resources - Cash Flows" above 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 a reconciliation of net income to funds from operations for the years ended December 31, (in thousands):

                                           Year Ended December 31,
                                          ------------------------
                                             2004         2003
                                          -----------  -----------

Net income                                $   60,195   $   59,643
Add:
   Depreciation and amortization(1)           42,523       38,901
Less:
   Dividends on preferred stock              (12,595)      (8,898)
   Preferred stock redemption charge(2)       (1,876)          --
   Gain/loss on sales of property(3)          (1,627)      (8,286)
                                          -----------  -----------
Funds from operations                     $   86,620   $   81,360
                                          ===========  ===========

The following table is a summary of our operating property portfolio as of December 31, 2004 (dollars in thousands):

                                      Number of    Rentable     Annualized
                                      Operating     Square         Base        Occupancy
                                      Properties     Feet          Rent        Percentage
                                      ----------  -----------  -----------     ----------

California - Pasadena                       1         31,343    $     524          62.2%(1)
California - San Diego                     21      1,007,571       28,171          96.3%
California - San Francisco Bay             10        642,578       19,940         100.0%
Eastern Massachusetts                      13        710,794       21,251          89.2%
New Jersey/Suburban Philadelphia            7        458,623        7,820         100.0%
Southeast                                   6        340,994        5,439          81.8%(1)
Suburban Washington D.C.                   28      2,203,252       40,073          95.2%
Washington - Seattle                        9        740,503       24,806          99.9%
                                      ---------- -----------   -----------     ----------
Total                                      95      6,135,658    $ 148,024          95.2%(2)
                                      ========== ===========   ===========     ==========

The following table summarizes certain information with respect to the lease expirations of our properties as of December 31, 2004:

                             Square     Percentage of     Annualized Base
 Year of      Number of    Footage of     Aggregate       Rent of Expiring
  Lease       Expiring      Expiring    Portfolio Leased    Leases (per
Expiration     Leases        Leases      Square Feet       square foot)
- ----------   -----------   ----------   --------------    ---------------

2005             74 (1)     471,854           7.3%            $25.58
2006             44         880,169          13.6%            $24.43
2007             26         660,500          10.2%            $24.50
2008             17         409,580           6.3%            $26.78
2009             20         516,954           8.0%            $21.95
Thereafter       68       3,527,566          54.6%            $27.04

(1) Includes 22 month-to-month leases for approximately 39,000 square feet.

The following table is a summary of our lease activity for the year ended December 31, 2004, computed on a Cash Basis and on a GAAP Basis:

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

Lease Expirations
    Cash Basis                          81      1,160,728     $24.24       --          --          --            --
    GAAP Basis                          81      1,160,728     $25.23       --          --          --            --
Renewed/Releasable Space Leased
    Cash Basis                          40        701,688     $23.84     $24.69       3.6%       $ 2.35       4.7 Years
    GAAP Basis                          40        701,688     $25.26     $27.46       8.7%       $ 2.35       4.7 Years
Month-to-Month Leases In Effect
    Cash Basis                          22         39,115     $19.56     $19.58       0.1%         --            --
    GAAP Basis                          22         39,115     $19.50     $19.58       0.4%         --            --

Redeveloped/Developed/
Vacant Space Leased
    Cash Basis                          38        444,231         --     $24.34        --        $18.06       7.7 Years
    GAAP Basis                          38        444,231         --     $28.91        --        $18.06       7.7 Years

Leasing Activity Summary

Excluding Month-to-Month Leases
    Cash Basis                          78      1,145,919         --     $24.55        --        $ 8.44       5.9 Years
    GAAP Basis                          78      1,145,919         --     $28.02        --        $ 8.44       5.9 Years

Including Month-to-Month Leases
    Cash Basis                         100      1,185,034         --     $24.39        --          --            --
    GAAP Basis                         100      1,185,034         --     $27.74        --          --            --

The information required by this Item is included as a separate section in this Annual Report on Form 10-K. See "Item 15. Exhibits, Financial Statement Schedules".

None. 

As of December 31, 2004, we performed an evaluation, under the supervision of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures. These controls and procedures have been designed to ensure that information required for disclosure is recorded, processed, summarized and reported within the requisite time periods. Based on our evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2004.

                                                                  December 31,
                                                            -------------------------
                                                                2004        2003
                                                            -----------   -----------
                          Assets
Rental properties, net                                      $1,427,853    $  982,297
Properties under development                                   252,249       153,379
Cash and cash equivalents                                        3,158         4,985
Tenant security deposits and other restricted cash              17,669        11,057
Tenant receivables                                               2,542         1,969
Deferred rent                                                   43,166        31,503
Investments                                                     67,419        47,126
Other assets                                                    58,228        40,261
                                                            -----------   -----------
Total assets                                                $1,872,284    $1,272,577
                                                            ===========   ===========

           Liabilities and Stockholders' Equity
Secured notes payable                                       $  638,946    $  320,007
Unsecured line of credit and unsecured term loan               548,000       389,000
Accounts payable, accrued expenses and tenant security
  deposits                                                      48,581        43,408
Dividends payable                                               16,284        13,027
                                                            -----------   -----------
                                                             1,251,811       765,442

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; $25.00
     liquidation value                                                -       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, 2004 and 2003; $25.00
     liquidation value                                          57,500        57,500
   8.375% Series C cumulative redeemable preferred
     stock, $0.01 par value per share, 5,750,000
     shares authorized; 5,185,500 shares issued and
     outstanding at December 31, 2004; $25.00
     liquidation value                                         129,638             -
   Common stock, $0.01 par value per share, 100,000,000
     shares authorized; 19,594,418 and 19,264,023 shares
     issued and outstanding at December 31, 2004
     and 2003, respectively                                        196           193
   Additional paid-in capital                                  421,835       409,926
   Deferred compensation                                        (7,807)       (2,232)
   Retained earnings                                             5,267         8,635
   Accumulated other comprehensive income (loss)                13,844        (5,475)
                                                            -----------   -----------
Total stockholders' equity                                     620,473       507,135
                                                            -----------   -----------
Total liabilities and stockholders' equity                  $1,872,284    $1,272,577
                                                            ===========   ===========

                                                             Year Ended December 31,
                                                     --------------------------------------
                                                        2004          2003          2002
                                                     -----------   -----------   -----------
Revenues
   Rental                                            $  143,879    $  126,414    $  111,694
   Tenant recoveries                                     35,864        32,076        29,020
   Other income                                           3,541         2,068         1,557
                                                     -----------   -----------   -----------
                                                        183,284       160,558       142,271
Expenses
   Rental operations                                     38,417        32,794        29,135
   General and administrative                            15,105        14,211        13,436
   Interest                                              28,670        26,416        24,984
   Depreciation and amortization                         42,523        38,633        32,898
   Impairment of investments                                  -             -         2,545
   Loss on early extinguishment of debt                       -             -         1,002
                                                     -----------   -----------   -----------
                                                        124,715       112,054       104,000
                                                     -----------   -----------   -----------
Income from continuing operations                        58,569        48,504        38,271

Income from discontinued operations, net                  1,626        11,139         1,761
                                                     -----------   -----------   -----------
Net income                                           $   60,195    $   59,643    $   40,032

Dividends on preferred stock                             12,595         8,898         8,579

Preferred stock redemption charge                         1,876             -             -
                                                     -----------   -----------   -----------
Net income available to common stockholders          $   45,724    $   50,745    $   31,453
                                                     ===========   ===========   ===========
Basic income per common share:
   Income from continuing operations (net of
      preferred stock dividends and preferred
      stock redemption charge)                        $   2.28      $   2.09      $   1.69
                                                      =========     =========     =========
   Income from discontinued operations, net           $   0.08      $   0.59      $   0.10
                                                      =========     =========     =========
   Net income available to common stockholders        $   2.37      $   2.67      $   1.79
                                                      =========     =========     =========
Diluted income per common share:
   Income from continuing operations (net of
      preferred stock dividends and preferred
      stock redemption charge)                        $   2.24      $   2.06      $   1.66
                                                      =========     =========     =========
   Income from discontinued operations, net           $   0.08      $   0.58      $   0.10
                                                      =========     =========     =========
   Net income available to common stockholders        $   2.33      $   2.64      $   1.76
                                                      =========     =========     =========


Weighted average shares of common stock outstanding:
   Basic                                             19,315,364    18,993,856    17,594,228
                                                     ===========   ===========   ===========
   Diluted                                           19,658,759    19,247,790    17,859,787
                                                     ===========   ===========   ===========

                                                                                                                                                            Accumulated
                                                                Series A   Series B   Series C   Number of            Additional                               Other
                                                               Preferred  Preferred  Preferred    Common     Common    Paid-In    Deferred      Retained    Comprehensive
                                                                 Stock      Stock      Stock      Shares      Stock    Capital   Compensation   Earnings    Income (Loss)    Total
                                                               ---------- ---------- ---------- -----------  -------  ----------  -----------  -----------  ------------  ----------
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 costs         -     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
   Net income                                                          -          -          -           -        -           -            -       60,195             -      60,195
   Unrealized gain on marketable securities                            -          -          -           -        -           -            -            -        15,110      15,110
   Unrealized gain on swap agreements                                  -          -          -           -        -           -            -            -         4,209       4,209
                                                                                                                                                                          ----------
   Comprehensive income                                                -          -          -           -        -           -            -            -             -      79,514
   Issuance of Series C preferred stock, net of offering costs         -          -    129,638           -        -      (5,629)           -            -             -     124,009
   Redemption of Series A preferred stock                        (38,588)         -          -           -        -       1,876            -       (1,876)            -     (38,588)
   Stock compensation expense                                          -          -          -     130,143        1       8,731       (8,732)           -             -           -
   Amortization of stock compensation expense                          -          -          -           -        -           -        3,157            -             -       3,157
   Exercise of stock options                                           -          -          -     200,252        2       6,931            -            -             -       6,933
   Dividends declared on preferred stock                               -          -          -           -        -           -            -      (12,595)            -     (12,595)
   Dividends declared on common stock                                  -          -          -           -        -           -            -      (49,092)            -     (49,092)
                                                               ---------- ---------- ---------- -----------  -------  ----------  -----------  -----------  ------------  ----------
Balance at December 31, 2004                                   $       -  $  57,500  $ 129,638  19,594,418   $  196   $ 421,835   $   (7,807)  $    5,267   $    13,844  $  620,473
                                                               ========== ========== ========== ===========  =======  ==========  ===========  ===========  ============  ==========

                                                                                  Year Ended December 31,
                                                                         -------------------------------------
                                                                            2004         2003         2002
                                                                         -----------  -----------  -----------
Operating Activities
Net income                                                               $   60,195  $    59,643  $    40,032
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                                                (1,627)      (8,286)           -
Depreciation and amortization                                                42,523       38,901       34,071
Amortization of loan fees and costs                                           2,374        2,133        2,379
Amortization of premiums on secured notes payable                              (161)        (290)        (360)
Stock compensation expense                                                    2,470        2,734        3,651
Changes in operating assets and liabilities:
     Tenant security deposits and other restricted cash                      (6,612)      (3,037)       3,508
     Tenant receivables                                                        (573)         672          482
     Deferred rent                                                          (11,671)      (6,826)      (5,470)
     Other assets                                                           (18,261)     (10,828)     (12,942)
     Accounts payable, accrued expenses and tenant
        security deposits                                                      (905)          31       (2,998)
                                                                         -----------  -----------  -----------
Net cash provided by operating activities                                    67,752       74,847       67,050

Investing Activities
Purchase of rental properties                                              (251,091)     (48,729)    (103,295)
Proceeds from sales of rental properties                                      5,454       42,376            -
Additions to rental properties                                              (70,248)     (48,264)     (61,695)
Additions to properties under development                                  (129,620)     (78,327)     (48,479)
Additions to investments, net                                                (5,183)      (6,866)     (14,371)
                                                                         -----------  -----------  -----------
Net cash used in investing activities                                      (450,688)    (139,810)    (227,840)

Financing Activities
Proceeds from secured notes payable                                         198,400       64,667       44,663
Net proceeds from issuances of common stock                                       -            -       97,546
Proceeds from issuance of preferred stock                                   124,009            -       55,129
Redemption of Series A preferred stock                                      (38,588)           -            -
Proceeds from exercise of stock options                                       7,094        5,941        3,693
Net borrowings from unsecured line
     of credit and unsecured term loan                                      159,000       51,000       10,000
Principal reductions of secured notes payable                               (10,376)      (6,125)     (13,427)
Proceeds from repayment of note receivable                                        -            -        6,000
Dividends paid on common stock                                              (47,333)     (40,427)     (33,912)
Dividends paid on preferred stock                                           (11,097)      (8,898)      (7,488)
Repurchase of common stock                                                        -            -            -
                                                                         -----------  -----------  -----------
Net cash provided by financing activities                                   381,109       66,158      162,204
                                                                         -----------  -----------  -----------
Net (decrease) increase in cash and cash equivalents                         (1,827)       1,195        1,414
Cash and cash equivalents at beginning of year                                4,985        3,790        2,376
                                                                         -----------  -----------  -----------
Cash and cash equivalents at end of year                                 $    3,158   $    4,985   $    3,790
                                                                         ===========  ===========  ===========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest, net of interest capitalized      $   28,714   $   28,143   $   28,130
                                                                         ===========  ===========  ===========

                                        December 31,
                                  -----------------------
                                       2004        2003
                                  -----------  ----------
Unrealized gain on marketable
   securities                     $   15,934   $     824
Unrealized loss on interest rate
   swap agreements                    (2,090)     (6,299)
                                  -----------  ----------
                                  $   13,844   $  (5,475)
                                  ===========  ==========

                                                  December 31,
                                           --------------------------
                                              2004          2003
                                           -----------  -------------
Funds held in trust under the terms
  of certain secured notes payable         $   11,241    $     8,665
Security deposit funds based on the
  terms of certain lease agreements             2,045          2,029
Other funds held in escrow                      4,383            363
                                           -----------  -------------
                                           $   17,669    $    11,057
                                           ===========  =============

                                                   Year Ended December 31,
                                           --------------------------------------
                                              2004          2003         2002
                                           -----------  ------------- -----------
                                      (Dollars in thousands, except per share amounts)

Net income available to common
   stockholders                            $    45,724   $     50,745   $    31,453
                                           ===========   ============   ===========
Weighted average shares of common stock
   outstanding - basic                      19,315,364     18,993,856    17,594,228
Add: dilutive effect of stock options
   and stock grants                            343,395        253,934       265,559
                                           -----------  -------------   -----------
Weighted average shares of common stock
   outstanding - diluted                    19,658,759     19,247,790    17,859,787
                                           ===========  =============   ===========
Net income available to common
   stockholders - basic                    $     2.37    $      2.67    $     1.79
Net income available to common             ===========   ============   ===========
   stockholders - diluted                  $     2.33    $      2.64    $     1.76
                                           ===========   ============   ===========

Dividends declared per common share        $     2.52    $      2.20    $     2.00
                                           ===========   ============   ===========

                                                     Year Ended December 31,
                                             ----------- --------------------------
                                                 2004          2003         2002
                                             -----------  ------------- -----------

Net income available to common
  stockholders, as reported                  $    45,724   $    50,745   $   31,453
Fair value of stock-based compensation cost       (1,323)       (1,323)      (1,174)
                                              -----------   -----------   ----------
Pro forma net income available to common
  stockholders                               $    44,401   $    49,422   $   30,279
Income per common share:

  Basic - as reported                        $      2.37   $      2.67   $     1.79
  Basic - pro forma                          $      2.30   $      2.60   $     1.72

  Diluted - as reported                      $      2.33   $      2.64   $     1.76
  Diluted - pro forma                        $      2.26   $      2.57   $     1.70

                                                 December 31,
                                           --------------------------
                                               2004            2003
                                           -------------  -------------

Land                                       $    217,201   $    147,425
Buildings and improvements                    1,246,888        854,152
Tenant and other improvements                   139,823        122,280
                                           -------------  -------------
                                              1,603,912      1,123,857
Less accumulated depreciation                  (176,059)      (141,560)
                                           -------------  -------------
                                           $  1,427,853   $    982,297
                                           =============  =============

Year                                         Amount
- --------------------------------------     -----------
2005                                       $  148,234
2006                                          142,641
2007                                          124,599
2008                                          116,317
2009                                          109,283
Thereafter                                    406,214
                                           -----------
                                           $1,047,288
                                           ===========

                                               December 31,
                                           --------------------
                                              2004       2003
                                           ---------  ---------
Adjusted cost of available-for-sale
    securities                             $  3,190   $  1,257

Gross unrealized gains                       16,110        837

Gross unrealized losses                        (176)       (13)
                                           ---------  ---------
Fair value of
    available-for-sale securities          $ 19,124   $  2,081
                                           =========  =========

                                     Notional     Effective at     Interest     Termination        Fair
Transaction Dates  Effective Dates   Amounts   December 31, 2004   Pay Rates       Dates          Values
- ---------------- ----------------   ---------  -----------------   ---------  ----------------  ---------

July 2002          January 1, 2003     25,000  $     25,000          3.855%     June 30, 2005    $  (142)

July 2002          January 1, 2003     25,000        25,000          3.865%     June 30, 2005       (143)

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

November 2002      June 1, 2003        25,000        25,000          3.155%    December 31, 2005     (41)

December 2002      January 2, 2003     25,000        25,000          3.285%     June 30, 2006        (35)

December 2002      January 2, 2003     25,000        25,000          3.285%     June 30, 2006        (35)

December 2003      December 31, 2004   50,000        50,000          3.000%    December 30, 2005      (4)

December 2003      December 30, 2005   50,000         --             4.150%    December 29, 2006    (219)

December 2003      December 29, 2006   50,000         --             5.090%     October 31, 2008    (795)

March 2004         December 31, 2004   25,000        25,000          2.956%    December 31, 2006     186

March 2004         December 31, 2004   25,000        25,000          2.956%    December 31, 2006     186

April 2004         April 30, 2004      50,000        50,000          1.550%     April 29, 2005       173

April 2004         April 29, 2005      50,000         --             3.140%     April 28, 2006        81

April 2004         April 28, 2006      50,000         --             4.230%     April 30, 2007      (205)

April 2004         April 30, 2007      50,000         --             4.850%     April 30, 2008      (333)

June 2004          June 30, 2005       50,000         --             4.343%     June 30, 2007       (679)

December 2004      December 31, 2004   50,000        50,000          3.590%    January 2, 2008       (57)

December 2004      January 3, 2006     50,000         --             3.927%     July 1, 2008           3
                                               -----------------                                 --------
Total Interest Rate Swap Agreements in         $    350,000                                      $(2,090)
   Effect at December 31, 2004                 =================                                 ========

                                                                            December 31,
                                                                       ---------------------
                                                                          2004       2003
                                                                       ---------- ----------
Secured debt, interest rates varying from 3.69% to 8.71%,
   (weighted average effective interest rate of 6.12% and 7.06%       $  635,432  $  319,755
    at December 31, 2004 and 2003, respectively), maturity
    dates ranging from September 2005 to August 2021
Unamortized premiums                                                       3,514         252
                                                                      ----------- ----------
Total secured debt                                                    $  638,946  $  320,007
                                                                      =========== ==========

                                                           Weighted
                                                           Average
              Year                           Amount     Interest Rate(1)
- --------------------------------           -----------  -------------
2005                                       $   23,227           5.67%
2006                                          206,889           5.69%
2007                                           16,709           6.35%
2008                                          115,514           6.30%
2009                                           42,210           6.89%
Thereafter                                    230,883           6.90%
                                           -----------  -------------
Subtotal                                      635,432           6.12%
Unamortized premium                             3,514   =============
                                           -----------
                                           $  638,946
                                           ===========

                                               2004          2003         2002
                                           -----------  -------------  -----------
Aggregate purchase price                   $  185,912   $     6,900    $       -
Secured notes payable assumed                 127,653         3,384            -
                                           -----------  -------------  -----------
Cash paid for the properties               $   58,259   $     3,516    $       -
                                           ===========  =============  ===========

                                                   Year Ended December 31,
                                           --------------------------------------
                                              2004          2003         2002
                                           -----------  ------------- -----------

Risk-free interest rate                       3.94%          3.65%       2.69%
Dividend yield                                3.79%          3.95%       4.04%
Volatility factor of the expected
  market price                               21.50%         21.20%      22.04%
Weighted average expected life of
  the options                              6.7 years      7.0 years    4.8 years

                                        2004                   2003                   2002
                               ---------------------- ---------------------- -----------------------

                                            Weighted               Weighted                Weighted
                                            Average                Average                 Average
                                 Stock      Exercise    Stock      Exercise    Stock       Exercise
                                Options      Price     Options      Price     Options       Price
                               ----------  ---------- ----------  ---------- ----------   ----------
Outstanding-beginning of year    809,583   $   35.39  1,011,166   $   34.39    849,870    $   29.68
Granted                                -           -          -           -    337,000        44.44
Exercised                       (200,252)      35.44   (197,583)      30.08   (124,371)       29.70
Forfeited                         (2,000)      42.15     (4,000)      43.23    (51,333)       33.75
                               ----------  ---------- ----------  ---------- ----------   ----------
Outstanding-end of year          607,331   $   35.36    809,583   $   35.39  1,011,166    $   34.39
                               ==========  ========== ==========  ========== ==========   ==========

Exercisable at end of year       500,000   $   33.38    533,420   $   31.35    514,169    $   26.89

Weighted average fair value of
options granted                            $       -              $       -               $    6.05
                                           ==========             ==========              ==========

                        Options Outstanding            Options Exercisable
                -----------------------------------   ----------------------
                               Weighted
                               Average    Weighted                 Weighted
   Range of       Number      Remaining    Average       Number     Average
   Exercise     Outstanding  Contractual  Exercise    Exercisable  Exercise
    Prices      at 12/31/04      Life       Price     at 12/31/04    Price
- --------------- ------------ ------------ ---------   ------------ ---------
$20.00-$32.06       243,325      2.92      $24.77        243,325     $24.77
$32.94-$43.50       260,006      6.70      $40.36        189,007     $39.35
$44.99-$47.69       104,000      7.47      $47.63         67,668     $47.68

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

2004
- ----
Revenues                                                   $   42,775     $   43,523     $    46,510     $   50,476

Net income available to common stockholders                $   13,115     $    9,757     $    11,370     $   11,482

  Income per common share:
    Net income available to common stockholders - basic    $     0.68     $     0.51     $      0.59     $     0.59
    Net income available to common stockholders - diluted  $     0.67     $     0.50     $      0.58     $     0.58



                                                                                  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

  Income per common share:
    Net income available to common stockholders - basic    $     0.53     $     0.54     $     1.02     $     0.58
    Net income available to common stockholders - diluted  $     0.52     $     0.54     $     1.00     $     0.57

                                                   Year Ended December 31,
                                            ------------------------------------
                                              2004         2003         2002
                                            ----------   ----------   ----------
Total revenue                               $     14     $  5,449     $  7,207
Operating expenses                                15        1,404        1,692
                                            -----------  ----------   ----------
Revenue less operating expenses                   (1)       4,045        5,515
Interest                                          --          924        1,431
Depreciation                                      --          268        1,173
(Loss) income before gain/loss on sales of  -----------  ----------   ----------
   property and non-cash impairment charge        (1)       2,853        2,911
Gain/loss on sales of property                 1,627        8,286           --
Non-cash impairment charge                        --           --       (1,150)
                                            -----------  ----------   ----------
Income from discontinued operations, net    $  1,626     $ 11,139     $  1,761
                                            ===========  ==========   ==========


                                                 December 31,
                                            -----------------------
                                              2004          2003
                                            -----------  ----------
Properties held for sale, net               $     --     $  3,518
Cash and cash equivalents                         --           --
Tenant security deposits and other
   restricted cash                                --            6
Tenant receivables                                --           82
Deferred rent                                     --            8
Other assets                                      --           66
                                            -----------  ----------
Total assets                                $     --     $  3,680
                                            ===========  ==========
Secured note payable                        $     --     $     --
Accounts payable, accrued expenses
   and tenant security deposits                   --           79
                                            -----------  ----------
Total liabilities                                 --           79
                                            -----------  ----------
Net assets of discontinued operations       $     --     $  3,601
                                            ============ ==========

                                                 Initial Costs          Costs           Total Costs
                                  Square    -----------------------  Capitalized   ----------------------
                                  Footage             Buildings and  Subsequent to           Buildings and              Accumulated                        Year Built/
       Property Name            (unaudited)   Land    Improvements   Acquisition     Land    Improvements    Total(19)  Depreciation(1)  Encumbrances       Renovated
       -------------            ----------  --------  -------------  ------------  --------  ------------  ----------  ---------------   -----------     ---------------
North Torrey Pines Road #1        107,710  $  1,321   $      5,960   $     6,040  $  1,321   $    12,000   $   13,321     $     2,690    $       -         1971/2003
Science Park Road                  74,557     1,013              -        16,755     1,013        16,755       17,768           3,730            -         2000
North Torrey Pines Road #2         86,962     2,663         10,649         4,708     2,663        15,357       18,020           4,926            -         1986/1996
General Atomics Court #1           76,084     2,651         18,046         1,447     2,651        19,493       22,144           6,373       39,116(2)      1986/2000
General Atomics Court #2           43,600     1,227          9,554            18     1,227         9,572       10,799           3,210            -(2)      1991
Roselle Street #1                  18,173       463          1,840         1,074       463         2,914        3,377           1,075            -(3)      1983/1998
Nexus Centre Drive                 67,050     2,548         13,638            45     2,548        13,683       16,231           4,022       32,949(4)      1989
Nancy Ridge Drive #1               29,333       733          2,273         1,867       733         4,140        4,873           1,431            -(5)      1997
Roselle Street #2                  17,603       444          1,699         1,828       444         3,527        3,971             942            -         late 1970's/1999
Tansy Street                       15,410       651          1,375         1,899       651         3,274        3,925           1,170            -         1978/1999
John Hopkins Court #1              34,723     1,122              -         3,881     1,122         3,881        5,003             461            -(2)      2000
John Hopkins Court #2              55,200     1,683              -         5,647     1,683         5,647        7,330             916            -(2)      1999
Towne Centre Drive #1              45,030       275          8,621         3,319       275        11,940       12,215           1,439            -         1987/2003
Towne Centre Drive #2              52,228       320         10,070         2,581       320        12,651       12,971           1,930            -         1987/2000
Towne Centre Drive #3              41,780       258          8,170         7,864       258        16,034       16,292           2,145            -         1987/2000
Roselle Street #3                  17,590       455          2,581           992       455         3,573        4,028             174       23,416(3)      1981
Roselle Street #4                  30,147       754          4,288           143       754         4,431        5,185             512            -(3)      1981/1998
Roselle Street #5                  22,577       564          3,224            31       564         3,255        3,819             407            -(3)      1981/1995
Roselle Street #6                  17,433       436          2,480            31       436         2,511        2,947             308            -(3)      1981/1999
Roselle Street #7                  24,208       605          3,459            30       605         3,489        4,094             438            -(3)      1981/1995
Nancy Ridge Drive #2               21,940       515          1,566         2,502       515         4,068        4,583             608            -         early 1980's/2001
Campus Point Drive                 71,510     4,246         16,165         2,505     4,246        18,670       22,916           1,158       11,019         1986/1998
Nancy Ridge Drive #3               56,698     1,984         10,397            37     1,984        10,434       12,418             261            -         1987/2001
Torreyana Road                     87,140     9,980          9,448           301     9,980         9,749       19,729             102            -         1980
Nancy Ridge Drive #4               87,298     3,492         18,285             -     3,492        18,285       21,777               -       16,049(18)     1999/2000
North Hill Avenue                  31,343     2,172            812         9,839     2,172        10,651       12,823           1,135            -         1940's/2002
Harbor Bay Parkway #1              61,015     1,506          5,357         3,622     1,506         8,979       10,485           2,682            -(4)      1983/1999
Harbor Bay Parkway #2              27,745       775          1,917         1,632       775         3,549        4,324           1,027            -(4)      1984/2000
Harbor Bay Parkway #3              47,777     1,200          3,880           448     1,200         4,328        5,528             943            -(4)      1986/1994
Harbor Bay Parkway #4              68,711     1,800          9,731           556     1,800        10,287       12,087           2,076        1,352         1985/1994
Mitten Road & Malcolm Road        153,837     4,751         12,612        12,672     4,751        25,284       30,035           3,867            -         1962/2002
Hanover Street                     32,074         -          6,628         7,550         -        14,178       14,178           3,662            -         1968/2000
Garcia Avenue & Bayshore
   Parkway                         98,964         -         21,323        14,531         -        35,854       35,854           4,990            -         1980/2003
Oyster Point Boulevard #1          53,980     3,519              -        12,942     3,519        12,942       16,461           2,565       22,144(6)      2001
Oyster Point Boulevard #2          53,980     3,519              -         7,671     3,519         7,671       11,190           1,107            -(6)      2001
Gateway Boulevard #1              110,428     7,730         24,397            24     7,730        24,421       32,151           1,665            -         2000
Gateway Boulevard #2               59,816     4,187         14,020            25     4,187        14,045       18,232           1,457            -         2002
Harbor Bay Parkway #5              67,482     1,349          9,915            59     1,349         9,974       11,323             279            -         1984/2001
Porter Drive                       91,644         -         19,154           838         -        19,992       19,992             502            -         1962/2002
Shoreline Court                   140,143     7,038         39,704             -     7,038        39,704       46,742             281            -         2001
Columbia Street #1                162,394     5,654         22,916        11,759     5,654        34,675       40,329           9,143       16,462(7)      1975/1997
Columbia Street #2                 46,303       912            612         2,666       912         3,278        4,190              23            -(7)      1975/1997
Western Avenue                     47,746     1,432          7,497         2,997     1,432        10,494       11,926           2,582       33,941(8)      1929/2000
First Avenue                       70,647     2,119         11,275         4,707     2,119        15,982       18,101           4,041            -         1980/2000
Eastlake Avenue #1                106,003     4,240         31,232            25     4,240        31,257       35,497           1,757            -         1997
Eastlake Avenue #2                 97,366     1,570         15,917        14,929     1,570        30,846       32,416           1,143            -         1997
Eastlake Avenue #3                114,847     4,816              -        29,555     4,816        29,555       34,371             391            -         2004
Harrison Street                    32,279     2,097          1,645         3,164     2,097         4,809        6,906               -            -         1962
Elliot Avenue West                  2,896     1,700            344            92     1,700           436        2,136               6            -         1951
Eastlake Avenue #4                 16,814     3,647             21             1     3,647            22        3,669               -        2,400         1966/1973
Eastlake Avenue #5                121,790     8,525         20,064             -     8,525        20,064       28,589               -       13,000         1962/2000
Professional Drive #1              47,558       871          5,362         3,095       871         8,457        9,328           2,302            -         1989/1999
Professional Drive #2              62,739     1,129          6,940            48     1,129         6,988        8,117           1,492            -         1987
West Watkins Mill Road #1         138,938     3,281         14,416           189     3,281        14,605       17,886           3,133       23,923(9)      1989/1997
Quince Orchard Road #1             49,225     1,267          3,031         5,168     1,267         8,199        9,466           4,096            -(9)      1982/1997
Clopper Road #1                    44,464       900          2,732         1,519       900         4,251        5,151           1,714            -(10)     1989
East Gude Drive #1                 45,989       748          3,609         1,617       748         5,226        5,974           1,093            -(11)     1981/2003
Research Boulevard                105,000     1,733          9,611           796     1,733        10,407       12,140           2,278            -         1967/2000
East Gude Drive #2                 44,500       775          4,122           329       775         4,451        5,226             879            -(11)     1981/1995
Piccard Drive                     131,415     2,800         11,533        11,462     2,800        22,995       25,795           1,776            -         1978/1994
Newbrook Drive                    248,186     4,800         27,639           390     4,800        28,029       32,829           5,493            -(8)      1992
Virginia Manor Road               191,884         -         13,679           820         -        14,499       14,499           2,841       29,580(11)     1990/2003
Old Columbia Road                  75,500     1,510          5,210         1,627     1,510         6,837        8,347           1,973            -         1983/1997
Firstfield Road #1                 25,175       376          3,192         2,107       376         5,299        5,675             765            -         1974/2000
West Watkins Mill Road #2          57,410       859          4,149         1,617       859         5,766        6,625           1,139            -         1988/2000
Clopper Road #2                   109,750     2,463            493        17,893     2,463        18,386       20,849           5,972       27,512(10)     2000
Firstfield Road #2                 53,599       971          5,141         6,628       971        11,769       12,740           1,583            -(12)     1980/2001
Firstfield Road #3                 53,595       947          5,092         4,262       947         9,354       10,301             811            -(12)     1980/2003
Quince Orchard Road #2             54,874       970          5,138         1,519       970         6,657        7,627             667        9,585(12)     1981/2003
Clopper Road #3                    59,838       983          6,638            90       983         6,728        7,711             880            -(10)     1989/1992
Research Place                     58,632     1,466          5,708         4,182     1,466         9,890       11,356             560            -         1972/2003
West Watkins Mill Road #3          92,449     2,773         23,906           949     2,773        24,855       27,628              44            -         1999
Parklawn Drive                     49,185     1,476          7,267            24     1,476         7,291        8,767              61            -         1963/1979
Broschart Road                     37,861     2,576          5,661            18     2,576         5,679        8,255              47            -         1999
Medical Center Drive #1            69,427         -          8,070           201         -         8,271        8,271              51        3,584         1998
Research Court                     54,906     1,647         13,258             -     1,647        13,258       14,905              55            -         1970/1992
Clopper Road #4                   180,650     5,527         26,365             -     5,527        26,365       31,892              55       15,604         1982
Medical Center Drive #2            41,887     1,480         14,532             -     1,480        14,532       16,012               -       77,604(15)     1996/2002
Medical Center Drive #3            60,485     2,138         20,868             -     2,138        20,868       23,006               -            -(15)     1996/2002
Medical Center Drive #4           125,008     4,419         43,110             -     4,419        43,110       47,529               -            -(15)     1996/2002
Medical Center Drive #5            56,987     2,015         19,660             -     2,015        19,660       21,675               -            -(15)     1996/2002
Charlestown Navy Yard              24,940         -          6,247           389         -         6,636        6,636           1,165            -(16)     1880/1991
Pond Street                        24,867       622          3,053            58       622         3,111        3,733             353            -         1965/1990
Westview Street                    40,200       960          3,032         8,194       960        11,226       12,186             539            -         1975
Plantation Street #1               92,711     2,352         14,173           656     2,352        14,829       17,181           2,533       18,241(5)      1993
Innovation Drive                  115,179     2,734         14,567         1,896     2,734        16,463       19,197           2,987        9,142(13)     1991
Plantation Street #2               92,423       651              -        15,728       651        15,728       16,379           6,057            -         2000
Arsenal Street #1                  92,500     3,360          7,316        14,441     3,360        21,757       25,117           4,027            -         1978/2001
Hartwell Avenue #1                 59,000     1,475          7,194        11,399     1,475        18,593       20,068           2,089       37,617(16)     1972/2002
Arsenal Street #2                  96,150     6,413          5,457        19,611     6,413        25,068       31,481             709            -         1980/2003
Memorial Drive #1                  51,000     6,507              -        21,688     6,507        21,688       28,195           2,078            -         2002
Memorial Drive #2                  47,497     6,058              -        20,998     6,058        20,998       27,056           1,357            -         2002
Hartwell Avenue #2                 46,700     2,567          4,522         8,533     2,567        13,055       15,622              81            -         1972
Belmont Street                     78,916     1,578         10,195            18     1,578        10,213       11,791             170        9,433(17)     1929/2003
Plantation Street #3               11,400       228          1,501            42       228         1,543        1,771              11            -(17)     1940/2003
Wiggins Avenue                     48,640       876          5,033             -       876         5,033        5,909              21            -         1975/1997
College Road                      107,874     1,943          9,764         1,552     1,943        11,316       13,259           2,224            -         1968/1984
Williams Drive                     37,000       740          4,506           443       740         4,949        5,689             744            -         1982/1994
Phillips Parkway                   78,501     1,840          2,298        13,684     1,840        15,982       17,822           3,360            -(16)     late 1960's/1999
Campus Drive                       42,782       654          4,234           302       654         4,536        5,190             863            -(16)     1989
Electronic Drive                   40,000       600          3,110         3,289       600         6,399        6,999           2,561            -         1983/1998
Princeton Road                     42,600     1,075          1,438         3,449     1,075         4,887        5,962           2,298            -         1984/1999
Welsh Pool Road                    41,015       621          4,258            18       621         4,276        4,897              44            -         1968
Lawrence Road                     111,451     1,289         12,039            57     1,289        12,096       13,385              84            -         1997/2004
Capitola Drive #1                  65,114       337          5,795           593       337         6,388        6,725           1,318            -(14)     1986
Capitola Drive #2                 119,916       577         11,688         9,000       577        20,688       21,265           4,448       11,709(14)     1985
Technology Parkway                 37,080       370          4,191           684       370         4,875        5,245             802            -         1976/1993
Triangle Drive                     32,120       161          3,410           219       161         3,629        3,790             646            -         1981
Alexander Road                     86,239         -            376        11,630         -        12,006       12,006           1,600            -         2000
Kit Creek Road                     38,861       339          3,383         7,158       339        10,541       10,880           1,270            -         1995/2003
State Highway 54                   81,580       713         12,827            83       713        12,910       13,623             108        8,564         1995
                                ----------  --------  -------------  ------------  --------  ------------  ----------  ---------------  -----------
                                7,431,380  $217,201   $    936,500   $   450,211  $217,201   $ 1,386,711   $1,603,912     $   176,059   $  493,946
                                ==========  ========  =============  ============  ========  ============  ==========  ===============  ===========

                                                     Rental Properties
                                                  Year Ended December 31,
                                           --------------------------------------
                                                2004         2003         2002
                                           -----------   -----------   -----------
Balance at beginning of period             $ 1,123,857   $ 1,089,899   $   880,716
Purchase of rental properties                  383,350        48,729       103,295
Sale of properties                              (4,084)      (56,741)            -
Additions to rental properties                  70,248        48,264        61,695
Transfer of costs (to) from properties
   under development                            30,541        (6,294)       44,193
                                           -----------  ------------- -----------
Balance at end of period                   $ 1,603,912   $ 1,123,857   $ 1,089,899
                                           ===========   ============  ===========

                                                    Accumulated Depreciation
                                                        December 31,
                                             --------------------------------------
                                                2004          2003         2002
                                             -----------   -----------  -----------

Balance at beginning of period               $  141,560    $  113,477    $  84,090
Depreciation expense on rental properties        35,052        32,786       29,387
Accumulated depreciation on properties sold        (553)       (4,703)           -
                                             -----------   -----------  -----------
Balance at end of period                     $  176,059    $  141,560    $ 113,477
                                             ===========   ===========  ===========