Thank you. Good afternoon, and thank you for joining us. This conference call includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2009 earnings per share diluted attributable to Alexandria Real Estate Equities common stockholders, 2009 FFO per share diluted attributable to Alexandria Real Estate Equities common stockholders, and our redevelopment and development projects. Our actual results may differ materially from those projected in such forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate development in our markets, our failure to successfully complete and lease our existing space held for redevelopment and new properties acquired for that purpose and any properties undergoing development, our failure to successfully operate or lease acquired properties to increase rental rates or increase vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, general and local economic conditions, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission. All forward-looking statements are made as of today, and we assume no obligation to update this information. Now, I would like to turn the call over to Joel Marcus. Please go ahead.

Thank you, Rhonda, and welcome everybody. I'm here with Dean Shigenaga, Pete Nelson, and Steve Richardson. We are proud that this is our 48th reporting quarter, and as of the benchmark year-end 12/31/08, we were the number four total return performer out of all publicly traded equity REITs. Let us get right to the second quarter 2009 operation and financial report. At Mayor Bloomberg's press conference on July 22 with the CEO of Eli Lilly, our anchor tenant at the Alexandria Center in New York City, the mayor got into a heated discussion with several reporters about the need to invest in this downturn. We agree with the mayor and have moved forward on several domestic and international projects funded by non-diluted government infrastructure money with high-quality credit tenants. This is true in each of our worldwide markets. We are also having a series of discussions with a number of world-class institutions regarding the monetization of selected assets, and you may also see the return of some fee development income to Dean and his superb team to assist analysts and investors in understanding the significant underlying value of various assets. Much of which are held at a very low underlying basis, enabling future growth. These are true both on the operating side and the important value creation pipeline. We hope that the supplemental puts to rest any issues regarding the health, strength, and flexibility of ARE's balance sheet and its ability to maintain earnings and dividends over the long term. We are in excellent shape to handle all of our debt maturities through at least 2013. Looking at our world-class client tenant base, led by Novartis, Glaxo, and Roche, we will also be welcoming Pfizer and Lilly in the not-too-distant future. We clearly have one of the strongest and most creditworthy client tenant bases of any publicly traded REIT. If I refer back to a comment that Mort Zuckerman likes to make, when you have the understated best regional teams, the highest quality assets, and the best adjacency locations, success in leasing will be more achievable during the varying cycles we’re witnessing, with almost one million square feet of leasing achieved in the first two quarters of 2009. We are also making great progress in bringing our redevelopment and development projects online, which will generate future net operating income for the company. Again, we are pleased to report continued positive same-store property revenue, being the only office REIT never to have a negative same-store quarter. Likewise, we continue our streak of year-to-year positive rental rate increases unique among all office REITs for 2009. Our margin remains strong at 74%, with over 60% of our NOI unencumbered. We also put into discontinued operations during this quarter one asset held for sale to a life science user, with possibilities for others to follow. Let me talk a little bit about occupancy since that is a key focus during these particular times. Steve Richardson, Senior VP, who runs the San Francisco Bay area region, will detail San Francisco in a moment. Fortunately, San Francisco, being one of the two large anchor markets, has held steady with a very slight decline to 96.5% occupancy. Massachusetts, the other big anchor region, has seen a slight increase to about 95.7%. We are seeing significant gains in suburban DC and Maryland on the back of substantial increased NIH funding and a large stimulus package passed by Congress in the first quarter. Unfortunately, we have seen weakness in San Diego, which we hope will turn around in the upcoming quarters, but it is a noticeably weak market currently for all life science space there. Continued strong occupancy has been observed in Seattle and internationally. We are still operating in a very dangerous and volatile macroeconomic environment with rising unemployment and debt markets challenged in many sectors. Coming back to the balance sheet, we are working to manage and contain the cost of our critically important debt capital in various ways, as the cost of borrowing for all borrowers is on the rise from previous levels. This will remain a significant focus for the company during the coming quarters. Turning to leasing, it is clear we have real high-quality demand for our best-in-class spaces. The second quarter was a strong leasing quarter with 473,000 square feet leased at a 3.3% increase in GAAP rental rates—936,000 square feet for the first two quarters at about 4%. We expect rental rate increases to be in the 5% range for 2009 and 2010, due to low expiring lease rates. For the remainder of 2009, about 557,000 square feet are essentially two-thirds spoken for, with about one third still too early to call. We have lower expiring rents on this set of rules at around 28 bucks. For 2010, we have a rollover of about 990,000 square feet, with very low expiring average rents at about 24.99 bucks. We expect to complete around 51% of this, with 13% going into development and 36% still a bit too early to call. Turning to development leasing, which has been a key focus for analysts and investors, we are very comfortable with the progress we have made on our development pipeline. But it is essential to remember that this is a deliberate, steady, and consistent process and lab space is considerably more complicated to build and deliver to a sophisticated market than traditional generic office space. Therefore, instant gratification is not part of the deal. Yet, we are fortunate as ARE provides a premium, non-commodity product that is much steadier than generic offerings during these difficult macroeconomic times. When you assemble a highly talented team with a great company like ours, superior results will follow long term, but patience and belief in the consistency of that differentiated business model and strategy is required. The intervention of the structural economic earthquake should not shake the foundation of this belief. If you turn to page 27 of the supplemental and the development summary, we are very pleased to take you through that list in more depth. The first project we've discussed before is now fully leased and committed to UCSF and a significant capitalized science company, which will begin generating net operating income in the coming quarters. The second project that has received considerable attention is the Mission Bay building we built for Pfizer, which has a 15-year lease with an option after ten years and is fully committed for that period. They are exploring subleasing opportunities and may be close to achieving their goal, but we still have Pfizer's cash and credit on lease for ten years. The next building is a 162,000 square foot complex that we think is essentially complete. Additionally, we have a 130,000 square foot building in San Francisco leased to Exelixis, which has an option through the end of the year, and we will have to wait a couple of quarters to see where that leads. As you may know from our press release and the mayor's news conference on July 22, we signed the anchor lease that we have been working on for quite a while with Eli Lilly. This is a very sophisticated project with a very sophisticated company that has made a significant acquisition, which will centralize their oncology practice at East River and we will build a cluster around that. We are currently in lease negotiations for significant space with a world-class brand name food group. We are also working with a conference coordinator for a world-class conference center and core services, which will be used by many of the tenants in the office. We're also pursuing several important additional requirements for office lab space, so we feel very good about where we are on the East Tower. In Seattle, there are no changes; we will deliver in the first quarter. That building is essentially fully leased, minus a bit of additional space for retail to Gilead, a top-tier life science company that has performed well over the past few years. Overall, we aim to ensure that the report card this quarter will be very encouraging, but this takes a lot of work over time.

Hello everyone. My name is Steve Richardson, and I am responsible for the San Francisco Bay Area region as Senior Vice President and Regional Market Director. Over the next few minutes, I will provide an overview of this Bay Area's life science market and how aspects of Alexandria's overall corporate strategy, as outlined by Joel and Dean, are being executed on the ground in this region. First, let me set the context of the Bay Area's life science market against the broader office and R&D markets. As many of you know from senior management team earnings calls such as Boston Properties and others, the office and R&D markets in the Bay Area have weakened since their peaks several quarters ago, resulting in increasing vacancies and declining rents. There are indications that this weakening is reaching its bottom, but I will leave those predictions to other experts in the field. In contrast, the life science market has not experienced the same steep price increases and trading values during 2006 to early 2008, nor has it faced the same severity of decline that has affected other sectors similar to the downturns seen in 1998 and 2002. For example, vacancy rates in the region's core life science corridor, stretching from San Francisco, anchored by UCSF's Mission Bay campus to South San Francisco, anchored by Genentech and Roche, down to Stanford Research Park, currently hold at its full 20% vacancy rate. We are tracking demand in this corridor, which should reduce that vacancy rate to approximately 8.8% by the end of 2009. This rough equilibrium in the market will help stabilize rents and enable them to return to historic norms during 2010 and into 2011. In contrast, the East Bay life science market, which runs from Richmond to the north to Ardenwood in the south, has been experiencing severe vacancy rates in the range of 28%, with heightened free rent and broker concessions now at record highs. Fortunately for Alexandria, we exited this East Bay market entirely during 2007, at a strong cap rate with high-quality tenants from our core position who are looking to avoid relocation in the East Bay markets except for a few in manufacturing. Alexandria's Bay Area asset base, similar to our other key cluster regions, is characterized by the highest quality assets in the best AAA adjacency locations. These premier locations and facilities enable our regional team to consistently maintain high occupancy rates, even during challenging market conditions. We've also observed the inquisitive nature of the life science industry positively impacting our asset base, providing us with high-quality tenants over time. For example, our top tenants in the region now include Pfizer, Roche, Merck, and Celgene - all of which are multi-billion dollar pharmaceutical enterprises, in addition to world-class institutions such as UCSF. These entities have acquired and/or displaced other life science businesses. Our regional team is making substantial progress in negotiating leases for 75% of the 24,000 square feet currently vacant, and we also have over 60% of the 34,000 square feet in 2009 rollover in process, with up to 85% of the 300,000 square feet in the 2010 rollover also being negotiated. Importantly, echoing Joel's earlier comments, we are advancing on 180,000 square feet in the development and redevelopment pipeline in South San Francisco, making solid progress as we speak. Looking forward, we are poised to capture future growth in our core clusters with substantial pre-construction activities that enable us to meet a broad range of tenant timing needs. To conclude, we have also implemented unprecedented cost control measures in the region.

Thank you, Steve. Let me jump right into our guidance for 2009. Our guidance for the year was updated from $5.43 per share diluted to $5.63 per share diluted, primarily due to a $7.2 million payment we received in the second quarter of 2009. This cash payment is related to an asset acquired in late 2007 and effectively is a purchase price adjustment on the original purchase accounting resulting in a gain. Such items are included in FFO, pursuant to NAREIT's white paper on FFO, and we have treated these nonrecurring items accordingly. Our guidance also includes the final calculation associated with the gain from the early extinguishment of debt. In April, we repurchased $75 million of par value of our 3.7% notes. We engaged a third-party firm to help evaluate the gain and recognized approximately $11.3 million. During the first quarter of 2009 earnings call, I mentioned the estimated gain included in our guidance of $5.43. Our actual gain was approximately $0.01 lower than the estimate provided in our first quarter conference call. Nevertheless, we made no reduction in our full-year 2009 guidance for FFO per share diluted. Our press release and supplemental package includes two tables on FFO. The first table on page nine shows the roll forward of our full-year 2009 guidance as reported at various points in 2009. This highlights the key changes in our guidance that relate to capital transactions and most recently, a purchase price adjustment paid in cash on the asset acquired in 2007. The second table on page 10 highlights our fourth quarter 2008, first quarter, and second-quarter 2009 FFO per share diluted, as reported and adjusted for certain items. This table should clarify specific items included in our reported FFO per share diluted results this year. It also highlights the results within our nonrecurring transactions and adjusts for full weighting of our 8% convertible notes. The sum of our quarterly FFO per share diluted results will be higher than our full-year 2009 FFO per share diluted results due to the partial weighting of our shares from the capital transactions this year. The overall sum of FFO per share diluted results for the four quarters of 2009 is expected to be approximately $0.14 higher than our full-year 2009 guidance of $5.63. We reported $1.89 and $1.59 for the first and second quarters of 2009, leaving approximately $1.13 per share diluted for each of the last two quarters in the latter half of 2009. Allow me to provide more detail on our guidance for 2009. I want to remind everyone that our guidance is based on various underlying assumptions. Some of these assumptions include the projection of same-property results in the 2% range, leasing activity projected to generate 5% increases in rental rates on new and renewals previously leased space, margins estimated to be in the 73% to 74% range, G&A expenses projected to decline over the next two quarters, and capped interest projected to decline to approximately $16.5 million in the fourth quarter of 2009. Other income is estimated to be approximately $1.5 million per quarter. Now I want to briefly discuss our value-added investments and related activities. As of June 30, our value-added investments and related activities totaled approximately $1.4 billion and represent all construction in progress, including around $150 million related to redevelopments, $410 million for developments, $597 million for significant value-added reconstruction activities primarily associated with our entitlement efforts at Mission Bay and Cambridge, along with approximately $249 million for new markets and other projects. Certain projects, especially our redevelopment and development projects, are projected to contribute significantly to revenue and NOI, effectively countering the reduction in capitalized interest associated with these projects. Over the past few years, we have completed redevelopment and development projects with substantial stabilization that we are currently working diligently to deliver to stabilize current projects. Our entitlement efforts, especially at Mission Bay and Cambridge, include regulatory approval, mapping, conceptual design, schematic design, permitting, construction drawings, costing, and many other critical items. Due to the significance of our entitlement efforts at Mission Bay and Cambridge, we expect these efforts to continue into 2010 and 2011, in addition to ongoing construction activities in new markets. We also have several projects, including two above-ground parking structures at Mission Bay that will generate parking revenues, along with ongoing activities at the Alexandria Center for Science and Technology in New York City surrounding the first building, including underground parking, site plaza construction activities. We expect certain value-added activities to be completed over the next few years. Our projections for capitalized interest, as noted earlier, will be approximately $16.5 million in the fourth quarter of 2009 and a quarterly average of around $14 million throughout 2010. Now briefly, let me cover taxable income and dividends. During the quarter, our Board of Directors authorized a reduction in our quarterly dividend to $0.35 per share. This dividend rate is projected to meet our distribution and taxable income requirements to maintain our REIT status. We are fortunate to have an asset base with significant cost basis that we can accelerate through cost segregation studies, resulting in significant tax reductions anticipated over the next 7 to 10 years. Consistent with historical dividend increases, our core operations will drive growth in quarterly dividends at the appropriate times in the future, as authorized by our Board of Directors. We continue to maintain a low payout ratio within the real estate sector, allowing us to retain and reinvest valuable capital. Now shifting to sources and uses of capital, in 2009, we made substantial progress in executing our capital plan, including deleveraging, extending, or refinancing debt obligations, along with completing new long-term debt. Our execution plan clearly highlights that it is unrealistic to assume all debt maturities will be repaid; rather, it is more real to consider that we will continue to execute on our multi-year capital plan that includes refinancing and sourcing new loans over the next few years, opportunistic sales of assets, including non-income generating land parcels primarily to users, along with potential equity capital including possible joint venture capital. Our projected balance sheet capital capacity and annotated sources and uses of capital, assuming reasonable extensions, refinancings, and additional debt, will enable us to manage our balance sheet capacity through 2012 and beyond. As of June 30, we had approximately $557 million outstanding under our unsecured line of credit, with nearly $600 million available. Additionally, our supplemental package notes around $100 million in cash on hand, including $29 million of restricted cash for construction projects. Two-thirds of our secured debt consists of non-CMBS debt with insurance companies and banks, and the remaining corresponds to traditional CMBS loans. We believe these attributes are positive for our maturing secured debt, as CMBS loans are challenging to extend or refinance under current conditions. We anticipate being able to extend or refinance a substantial portion of our secured debt maturities through 2013. To remind everyone, since January 2008, we have extended or refinanced numerous loans amounting to well over $400 million. We are also diligently working on extending or refinancing remaining debt maturing in 2010 and 2011, while also pursuing several new loans, potentially generating aggregate proceeds over $200 million, including a roughly $120 million loan with an insurance company with a term of about 10 years, as well as another loan in the $75 to $120 million range in early discussions with insurance company lenders. Our asset base mainly comprises high-quality and well-located real estate with top-tier client tenants. Over 60% of our asset base is unencumbered as of June 30. This asset pool will provide us with considerable financing opportunities in the future. To summarize, our projected sources of capital over the next few years include approximately $70 to $80 million in free cash flows, around $600 million in availability under our credit facility, about $100 million in cash on hand, another approximately $120 million contributed through new secured loans, along with roughly $50 million from asset sales this year and an expectation to close additional secured loans in the future. A reasonable and prudent estimate for the next several years includes around $50 million in secured debt and asset sales each year, aggregating up to about $1.55 billion through 2013. Ultimately, be mindful that this list is not exhaustive; we may utilize additional sources of capital to meet our capital plan while making necessary adjustments as required. Moving on to uses of capital, we have committed around $177 million for redevelopment, development, and other project costs. This number excludes capped interest. We also have $125 million in secured debt obligations, net of $255 million in anticipated refinancing or extensions. Furthermore, we assume the successful renewal of our credit facility at about two-thirds to three-fourths of its current capacity. Our assumptions include repayment of our 3.7% convertible notes, with some repurchases being completed at a discount. Total uses of capital through 2013 will be significantly less than the estimated sources highlighted earlier. Additionally, we are seeing a couple of significant credit facility amendments nearing completion, with the general sense of these deals indicating positive signs for borrowers, alongside potential significant increases from relationship banks. This marks a positive trend within the lending landscape and a promising sign for our ability to successfully amend our credit facility in the future. Let me quickly cover credit metrics. Our debt to gross assets standing at approximately 47.5% remains solid, while fixed charges stand at nearly 3 times today based on traditional calculations used by many real estate companies. Our facility covenants are specific to each organization and are contingent on the specific terms and definitions within their facilities' agreements. Consequently, the calculations and compliance relating to covenants will vary across companies. As expected, we have operated in compliance with our debt covenants over many years, believing that our credit metrics are robust for our business. Current leverage is low, with the range around 40%. Our facility covenant limit is set at 65%, and our secured debt percentage is below 15%, with a facility limit at 55%. As such, fixed charges remain strong for our business at approximately 2 times under definitions stipulated within our credit facility. Lastly, let me address our core operating results for the quarter. Our first-class team continues to deliver solid operating statistics in this challenging macro environment. We consistently report positive same-property results quarter over quarter and maintain leasing activity year on year for over ten years now. Same-property results were up 2.2%. This matches Joel's note that leasing activity was very solid at 473,000 rentable square feet, with GAAP increases of 3.3%. Combining these results with the previous quarter's leasing of 463,000 square feet, our leasing for the first half of 2009 totals 936,000 rentable square feet, with an average annualized activity of approximately 1.9 million square feet, surpassing the 1.7 million square feet average seen over the last four calendar years. This is an impressive achievement in our challenging macro environment. Margins remain strong at 74% for the quarter, with accounts receivable at the lowest level observed since mid-2006 at about $4.7 million and no allowance for doubtful accounts. We are forecasting delivery of various spaces in our redevelopment and development projects over 2009 and 2010, adding to our revenue and cash flows from operations. Our development projects anticipated for delivery in 2009 and 2010 aggregate roughly 770,000 rentable square feet and are approximately 92% leased or committed. Our construction in progress for value-added activities stands at approximately $1.4 billion, in line with the balance recorded as of March 31, though the weighted average interest rate required under GAAP increased by about 40 basis points, raising the amount of capitalized interest in the second quarter to around $18.2 million, following the assumed conversion of the over 8% notes. We aim for aggressive reduction in capitalized interest as we complete various construction activities generating significant revenue and NOI. With that, I will turn it back over to Joel.

Yes, operator. We could transition to Q&A, please.

Thank you. Operator instructions. And we will take our first question with Will Marks from JMP Securities. Please go ahead.

Hello Joel, hello Dean.

Good afternoon.

Good afternoon. I wanted to dig a little deeper into a couple of your markets. First, your comments on San Diego, the softness there—can you talk about? My understanding is that there are considerable barriers to entry with land, and just talk about potential supply there as a benefit to you? And second, on the Mission Bay and South San Francisco markets, can you comment also on what Shorenstein and others have in terms of availability? I know there's not a whole lot of construction. And then lastly in South San Francisco, what—if there is any action there? I know that the Amgen sublease has put some pressure, maybe a cap on rents there. Any thoughts on if there is action on that space?

Well, actually three good questions. I will take the first and ask Steve to take the two San Francisco questions. Yes, I think what we're seeing in San Diego is that there is not particularly a large excess supply, and there is obviously a highly constrained land situation. Rental rates aren’t plummeting; they've kind of settled down as in San Francisco. The land market hasn’t increased as steeply as office nor declined as deeply as office. But what is missing in San Diego that we see in other clusters, though they are all a little different, is that big pharma is not growing or focusing on San Diego for the past number of years. Pfizer has slimmed down, Merck has exited that market, and a number of others like J&J and Novartis have maintained presence but clearly not expansion. This is considerably different from the Bay Area or Massachusetts. Secondly, the biotech side of things has been pretty quiet in San Diego, partly due to a lack of robust venture capital that you see more traditionally in regions like the Bay Area or Massachusetts. Lastly, institutions that act as the backbone of the market have not seen huge expansion. They have spent significant time for growth in Florida over the past couple of years. Now, Steve, can you talk about Mission Bay and South San Francisco?

Yes, well, starting with your last question first, we have a reasonably healthy vacancy rate of 12.8%, and we're seeing legitimate activity in the market that should drive that to single digits by year-end. That's really a function of a couple of factors. You do have capital continuing to flow for promising companies from a variety of sources, as well as institutions and big pharma increasing their presence in both Mission Bay and South San Francisco. As for your comment about Shorenstein, they are currently undergoing a multi-year entitlement process in South San Francisco, which is further out in the future and really comprises industrial product that doesn’t compete with us. Meanwhile, in Mission Bay, the buildings are either occupied or tied up with options that do not represent significant competition for us.

On specifically Amgen, I don't know if you can share any comments, but my understanding is that there is still 250,000 or 300,000 square feet available in your South San Francisco market sublease space. Do you consider that competitive, and any thoughts on if there is any action on that value?

Sure. Yes, it is most definitely direct competitive space. It is the largest block of space out there in that market and, you know, again there is activity. I think we’ll be capturing our fair share, if not more, and ultimately they will capture a piece of the market as well. Once that happens, the market will become very tight, probably approaching around 5%.

To keep things in perspective here, the Amgen sublease space has been on the market for a while now, and we successfully back-filled the property that we rolled over in the fourth quarter with a large termination payment and leased it to a credit tenant who took down the 155,000 square foot building. I believe, as Steve pointed out, sublease space pops up from time to time and becomes competitive product, but we have quite a few advantages through our markets regarding the strategic locations of our real estate and the demand that comes from the quality locations that we hold in most of our markets. And as I previously mentioned, the Pfizer space in Mission Bay that is leased will likely not generate sublease competition for us, which is good news as well.

Great, thanks Joel. Thanks Steve.

And we'll take our next question with Mark Biffert from Oppenheimer. Please go ahead.

Good afternoon. I was wondering if you could quantify how much sublease space is in your portfolio, and what occupancy would you see as sublease?

We don't have that information with us, Mark.

Okay. And then I guess maybe you can tell me, in order to be competitive in this market, what type of concessions are you offering to attract these tenants?

I don't think there are any particular concessions. Where are you asking about?

Well, I mean in terms of the New York lease with Eli Lilly, maybe some of the things that you're looking to lease up in San Francisco. Are you offering six months free rent, are you providing assistance with the build-out?

Well, the build-out is an issue that we generally prefer to undertake ourselves because that infrastructure is a long-term high-value asset, and we receive a high-quality return on that investment. For the Pfizer building, they opted not to have us do the build-out, so they receive a shell. However, in many instances, we like to get involved in the build-out, but again that depends on negotiation. I wouldn't consider that a concession; it is something we generally prefer. Broker giveaways or similar are not something we have needed to offer because of the modest vacancy rates in most of our markets. We aren't operating in sub-markets where vacancy is in the mid-to-high teens or 20s, like some of the East Bay markets referred to by Steve, and Steve can provide more detail on that.

Yes. As you examine our leasing statistics on page 20, you'll find that the TIs and leasing commissions per square foot have not largely differed from reported amounts in previous years for the 12-month period. The GAAP rents, if you inquire about significant concessions regarding free rent, would be reflected in the GAAP rent statistic. Therefore, if we give away too much free rent, it will affect overall GAAP rent figures. This quarter we delivered a 4% rental rate change on 600,000 square feet year to date in 2009.

Okay, great. And thanks for the added color on the pre-construction pipeline. I'm just curious if you could discuss some of the projects that were added that weren't on the previous quarter. I believe the only ones that were on it before were Eastern Mass and San Francisco. What are the other projects? Is that just pure land?

They have been on this list historically; we tried to address them in a more detailed way due to requests from investors and analysts. If you refer to page 28, the spreadsheet we have provided for clarity shows that, yes, there is land as well. We hold land in Mission Bay, and we are the largest landholder there to be built, along with our significant project in Cambridge; others have been on there too. But nothing recently has been added.

Okay. And Dean, I may have missed this, but what was the carry cost on those projects?

We outlined it on page 25. For the 5.6 million pre-construction square footage, around $597 million of basis is associated with that.

Remember that, by and large, our basis is relatively low compared to current market values in each location. We still hold a basis that might be a third or even a quarter of what prior market values were, even in the wake of a significant drop in the market post-September. For Massachusetts, our basis in East Cambridge is around a hundred bucks per foot, while netting approximately $6 million of cash flow from low-rise structures.

Okay. And just one other question on the gain that you booked during the quarter. How did you assess that evaluation to book that gain, and where was that recorded in the income statement?

This is regarding the $7.2 million gain.

The $7.2 million was calculated using the cash paid to us, leading to a straightforward calculation reflected under other income.

Thanks.

Thank you.

We will take our next question with Anthony Paolone from J.P. Morgan.

Good afternoon. It is actually Joe Dazzio here.

Hi, Joe.

Hi, Joe.

A question about bad debt expense. From the 2008 K, it looks like it has run at zero for 2007 and 2008. Do you see any reason to change that at this point?

No. I would say—in my comments, I highlighted that we don't have any allowance for doubtful accounts on our books as of June 30. I don't anticipate any surprises on that front general.

Okay. And then Joel, one question regarding the mark-to-market. You mentioned a 5% increase on the lease expirations for 2010. If you look at the schedule, the 2010 expirations are maybe $3 to $4 below where they are in 2009?

That is correct.

And even further below into the low to mid-30s where you have been signing leases today, is there a— is that just a matter of the market mix or something else?

No. That is just historical. If you look at that, we thought that would be helpful; it is a matter of historical leases in place; and you know we benefit from that. So if you look at the bigger ones—San Francisco at 26 bucks is decent for 2010. In Massachusetts, we are up to 29.90, so we feel good about achieving that 5% number.

Okay, and then a couple of questions on development. The Lilly lease at East River, you have been negotiating that for a while—did the rent change during the negotiating period at all as the market had deteriorated?

No. Actually, Peter Mugway, who negotiated that lease, is sitting right here. No, it was one of the least combative and most reliable leases to negotiate overall—very complex lease, very complicated building in a market lacking real-life science. Also, the demands by big pharma become quite extraordinary when timed; overall it takes a substantial amount of time.

Okay, and then a couple of things.

Nothing unusual happened, nor was there a re-trade on economics overall. This was a very straightforward experience—our experiences were primarily with the companies, and Lilly’s good people.

Okay, and then a couple of questions on the 162,000 square foot development—South San Francisco. Is that being leased to one tenant that is still being negotiated, or are they multi-tenants?

It is one.

Last quarter it was listed as 16% free leased; did that tenant just decide to take it all down, or do you have a whole new tenant?

A whole new tenant.

Okay. And how do the returns on those two developments in South San Francisco compare to your typical projects—are they about in line or a little more, a little less?

I would say a little less than our typical expected returns of 10% to 12%. You're welcome.

We will take our next question with Michael Bilerman from Citi. Please go ahead.

Yes, good afternoon.

Hi, Michael.

Just checking on the construction in progress, the $1.4 billion. Do you not have any capital outside of that that is not being capitalized for land and other things?

Yes, the $1.4 billion represents our cost basis for construction activities and is applicable as of June 30 in accordance with FAS 34 for interest capitalization calculations.

Right. And you look on the balance sheet; the same $1.4 billion effectively represents the properties under development and land, and you are capitalizing on your entire bank, correct?

Yes. The 1.4 billion on page 25 titled pre-construction projects correlates to the first column on page 28 under development reconstruction totaling 5.6 million. The second column is a 215 million, and it refers back to page 25.

Right. In the first column it is 597 million, and the second column is a 215 million. So how much is that, and where is that on the balance sheet on page 6?

That is included under rental properties.

You're including land in the rental properties net number?

It is in their net. I mean short of putting a separate line somewhere in other assets, that's where we are holding it.

And how much do you have in non-income-producing assets outside of the $1.4 billion?

Yes, I don't have that number at hand, Michael.

Okay. 100 million? 200 million? Just to get a ballpark.

Yes, I don’t want to guess; we will aim to get that factored into our next quarterly supplemental, so you have this information.

And what does the $250 million then relate to specifically?

It is a good question, Michael. And you're referring just so I can clarify. On page 25, the 250 million labeled new markets and other projects. Yes. It indicates two parking lots in Mission Bay. These are above-ground parking structures that will support operating assets there shortly, which will generate revenue. You also have two buildings in South San Francisco and some components of our New York project, which include the West Tower site.

Okay.

Deliveries of these various projects will take place as the construction activities progress.

Okay. And the additions to the supplemental work were helpful, so I thank you for that. Not to look a gift horse in the mouth, but it would be great to get the CIP listed on the development page so we understand how much is to be spent on other redevelopment for more accurate tracking of returns. Going back to East River, there has been some discussion because ImClone is a New York-based tenant already; that it is now short of one of the goals to really bring new tenants to New York. I would like to hear your response to some of that criticism.

That was, in fact, the first question asked at Mayor Bloomberg's press conference. If you had been there, he would have jumped down your throat.

Yes.

He pointed out, number one, that they are operating in pretty shabby spaces down on Barrack Street, which is more akin to a quasi-garment district area. They are consolidating the oncology group of ImClone, which boasts a robust pipeline. Without the takeover by Lilly, they were headed to Branchburg, New Jersey. There’s a manufacturing campus there for Erbitux and sufficient land for development. In a context, there were traditional suburban office lab buildings at significantly lower costs than East River. That was the original plan prior to the Icahn takeover. Lilly members from Indianapolis are anchored in those jobs.

It's an interesting discussion.

However, is it a win for New York? If East River did not exist, New York would have lost virtually all these jobs. We also understand that Lilly is setting a large investment arm that would be housed at East River, potentially with a combination of office and lab space invested upwards of a hundred million dollars.

Got it. So that is a significant opportunity as well. Just moving over to Mission Bay for a second on the Pfizer base, I believe you mentioned that they're making progress with a sublease. How do those rents compare on the sublease market to your lease? Is there a desire to do a transaction where you would step in and do a direct lease with the tenant?

Yes, our lease with Pfizer yields a very attractive return on our shell cost, so we have no incentive to pursue that. Moreover, we have a 15-year lease with them, providing security if they exercise their right to terminate at the ten-year mark. Pfizer’s credit and cash is reassuring to us.

We have seen considerable enterprise activity in both Mission Bay and South San Francisco. Pfizer has engaged a broker and is actively pursuing future tenants. Our expectations, given the current analysis, are that they will be successful soon.

Additionally, we've observed that Jeff Kinny is personally dedicated to this effort.

Okay, thanks.

Thank you.

And we'll take our next question from Anthony Paolone with J.P. Morgan.

Thank you. On page 25, the $177 million you note that is required to finish all the CIT. Is that all in, or is that just hard cost and capped interest to be added?

That number accounts only for construction costs; capped interest is not included.

Okay. So if I look at a three-year outlook, that aggregates closely to $300 million, I guess?

No. Most of the $177 million will be required over the next four quarters; the three-year costs are relatively minimal.

So, consider overall weight—take four quarters and add capped interest on top of the $177 million. Is that a fair model?

That is a fair estimate.

Okay, and just to clarify on the $250 million of additional items on that page where you mention parking garages. Do those actually generate revenue or merely enhance the asset's value?

No, these do generate revenue.

Okay, that clears it up. Thank you.

You're welcome.

This concludes our question-and-answer session. I would like to turn the call back over to Joel Marcus for any additional or closing remarks.

Thank you for your time today, and we look forward to our third-quarter report.

Once again, ladies and gentlemen, this will conclude today's conference. We thank you for your participation.