Good day ladies and gentlemen, and welcome to the Alexandria Real Estate Equities Incorporated Fourth Quarter and Year End 2011 Results Conference Call. My name is Tisha, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Rhonda Chiger. Please proceed.

Good afternoon. This conference call contains forward-looking statements within the meaning of the federal securities laws. Actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's Form 10-K Annual Report and other periodic reports filed with the Securities and Exchange Commission. And now, I would like to turn the call over to Mr. Joel Marcus. Please go ahead.

Thanks, Rhonda, and good afternoon everybody. Happy New Year and thank you for joining us today for the fourth quarter and 2011 year end call. With me today are Dean Shigenaga and Krupal Raval. We hope that you like the new format and content of our press release and supplement. Hopefully, it will be very informative as well as a more user-friendly and simpler to follow document. As we look forward to 2012, it appears promising as the Dow reached 12,878 yesterday at the close, the highest since pre-Lehman in May 2008. 2012 will be an important year for Alexandria. We will begin the transition of our balance sheet from the bank debt – the long-term unsecured bank debt – I’m sorry, long-term unsecured bond debt having received our investment grade ratings in mid-2011 from Moody's and S&P. As many of you remember, the keys to the ratings by the two agencies were the size and leadership within our life science sector and our markets, a well diversified asset base by geography and tenant, modest leverage, and the size and quality of our unencumbered asset pool, our ability to manage liquidity, our ability to handle higher funding costs and the health of our operations and leasing, all of which I think have proved true in this reporting period. We will continue our expansion domination of our key urban and CBD adjacency cluster markets with our unique and important first-in-class and first mover advantage. This was clearly demonstrated by the breadth and depth of our fourth quarter of 2011 and 2011 full year leasing success. We look forward to onboarding significant cash flows later in 2012, as we move strategic non-income producing assets to cash flowing operating assets. From fourth quarter 2010 to fourth quarter 2011, the board increased the dividend approximately 40%. It’s likely the board will continue that approach of sharing increasing cash flows with our shareholders. As we proceed through 2012, it appears the fundamental drivers are in place to enable the continued expansion of the life science industry in our key cluster markets and for us to take advantage of that and certainly for Alexandria to continue to dominate and capture the significant requirements which we’ve done in San Diego, Greater Boston, and South San Francisco this past year. We currently have more requirements in some of our key cluster markets than we can actually handle; however, as we reduce our non-income producing assets, this will enable us to pursue more of these key opportunities. We hope investors focus on the fundamentals of ARE as a very high quality, innovative company with a uniquely built-in platform for growth in net operating income, earnings best-in-class assets in irreplaceable locations with solid tenant demand for our unique lab space. For 2011, we are very pleased and proud to report the highest leasing quarter and year in the history of the company. This confirms, I believe, the importance and impact of our leading franchise in the life science industry. For the fourth quarter, we leased over 1.1 million square feet and for the year about 3.4 million square feet, and nearly 1 million square feet out of development and redevelopment. We have a solid flow of requirements. This past year, the three biggest leases for development and redevelopment space were two in San Diego and one in Cambridge. Of the 650,000 square feet of renewals and re-leases space, San Diego, where we clearly dominate, contributed about 50% and Greater Boston about 23%. For the 492,000 square feet of redevelopment and development space, San Diego contributed 51% and 21% for Greater Boston. Some of the most notable leasing accomplishments during the last quarter included the leasing of our new 43,000 square foot University Town Center Drive property. The initiation of our build-to-suit for Biogen Idec in East Cambridge and the 100% pre-leasing of a small build-to-suit for a top pharma, which we were compelled to do in Canada. We also saw the lease-up from 43% to 91% of our flagship Campus Pointe asset in UTC, San Diego with an existing credit tenant in another market, but now one of our dominant tenants in San Diego is Celgene. We like to address the fundamentals of three of our key life science cluster markets and our expectations for 2012. Starting in San Francisco, Mission Bay remains tight with Nektar and Bayer exercising their options for a total of 30,000 square feet at our 455 Mission Bay property. Bayer’s expansion was especially noteworthy as it again marks an overwhelming trend for big pharma to establish tight networks and close physical proximity to leading intellectual centers. As you remember, they exited the East Bay to move their R&D to Mission Bay. Life science rates in Mission Bay remain strong in the low 40s with about $125 per square foot of generic infrastructure allowance over a shell, and tenants contributing significant capital to complete their mission critical fit-ups. Lease rollovers in 2012 are minimal with almost about 13,000 square feet of space and we’re in discussions for about 9,000 square feet. Regarding our flagship 499 Illinois project, we’re engaged in serious discussions and negotiations with a variety of technology companies and life science institutions, both seeking large blocks of space. I’m hopeful we’ll be able to meet both the time and the returns of our acquisition pro forma. South San Francisco is growing a bit stronger incrementally. We’ve captured the majority of the market demand in the fourth quarter, including a significant expansion at the Gateway project. Additionally, a new cleantech company is leasing a block of space at our East Jamie Court project. We’re also engaged in final negotiations with two tenants that will stabilize the West building of the East Jamie and early negotiations with an existing tenant to take another floor in the East building, putting us on track to stabilize that building in the second half of 2012. South San Francisco lease rates remain in the low 30s. Our lease rollovers in the submarket are about 100,000 square feet and we are working on negotiations regarding 75% of that space. The Stanford, Palo Alto, Mountain View market remains very tight and the overwhelming technology demand has really made that market quite hot these days. If we move to the Cambridge market, it has been relatively steady and stable all year, with vacancy down to about 10% for Class A space. Although Class A second-generation space is quite scarce. Our major recent deals as you may know were Pfizer committing to MIT. We couldn’t accommodate their size since we did not have the space available. We did sign an important requirement for Mass General, a 15-year lease of 75,000 square feet at 400 Tech Square, and hopefully, we are on our way to stabilizing that building before we deliver it. Some other significant leases have been signed with strong tech demand in that market. Currently, we are tracking over 2.4 million square feet of demand in both the lab and office sectors in Cambridge. The Cambridge office market remains in the low 40s to mid-50s on a gross basis. East Cambridge Class A ranges from the mid-50s to mid-60s, while East Cambridge Class B and C ranges from the low 40s to high 40s; with the suburbs in the low 20s to mid-30s. This market stays healthy, with a continuing flight to core cluster markets such as Cambridge benefiting significantly from larger tenants. Finally, in San Diego, as we indicated, Celgene more than doubled their footprint in San Diego and we successfully leased 172,000 square feet to them at Campus Pointe. At the end of 2011, Alexandria was responsible for well over half of San Diego's annual lab space leasing activity. If we look at Torrey Pines today, our almost 0.75 million square feet has a vacancy rate of 10% and is headed down; rental rates are in the mid to high 30s; in the University Town Center, our 1.3 million square feet has a vacancy rate of about 3.4%, indicating a very strong and solid market. So with that color and a little preview of 2012 and a review of 2011, let me turn it over to Dean to provide detailed insights on the quarter.

Thanks, Joel. Let me open with results. FFO per share diluted was reported at $1.10 for the fourth quarter and overall in line with our expectations. Earnings per share diluted was $0.44. Total revenues were up $14 million over the fourth quarter of 2010 and almost $88 million over 2010. NOI for the fourth quarter was $101.8 million. It was up about $7.3 million over the fourth quarter of 2010 and about $0.01 over the third quarter of 2011; this was reflective of the expected decline in NOI related to the completed rollover and start of the full redevelopment of two assets: 1551 Eastlake in Seattle and 400 Technology Square in Cambridge. Looking forward into the first quarter of 2012, NOI is expected to be flat when compared to the fourth quarter of 2011 for the following reasons: Overall, we’re expecting a 100 basis point to 150 basis point decline in overall occupancy by March 31, primarily driven by occupancy dips in South San Francisco, Boston and Suburban Washington D.C. Occupancy in South San Francisco and Boston are expected to recover by Q3, with occupancy gains in Maryland taking a little bit more time. Overall, we anticipate our total occupancy by December 31, 2012 to be in the range of 94% to 95%. In summary, NOI is expected to remain flat from Q4 into Q1, increase slightly into Q2 and Q3, and experience a significant increase in Q4 of 2012 as anticipated. G&A was about $10.6 million and above our expectations for the fourth quarter. The higher G&A was primarily related to professional fees and consulting, some of which involved training for new systems placed into service related to paperless invoice processing software, GO and property management, and ADP payroll-related software implementations. We also had a small amount of dead deal costs during the quarter, some domestic and some international. Shifting to the balance sheet briefly, with some comments on our overall balance sheet strategy and capital strategy: To start with bank debt, over the next few years we remain focused on transitioning from variable-rate medium-term bank debt to longer-term fixed-rate unsecured bonds. However, long-term, some bank debt will remain a component of our capital structure, primarily consisting of our unsecured line of credit for liquidity, flexibility, and bank term loans when appropriate. Variable-rate debt from our unsecured line of credit will be used to fund construction activity short-term and ultimately financed with longer-term capital. Construction loans may be utilized from time to time. In the interim, like we did in December, interest rate hedge agreements will be employed to mitigate interest rate risk. In the near and medium term, we will transition variable-rate bank debt to fixed-rate debt. A small amount of secured debt will always be part of our long-term capital structure. Current pricing remains very attractive and will remain part of our sources of capital when appropriate. With our investment-grade ratings, we can tap into an important new source of longer-term fixed-rate capital, and accordingly, we expect to periodically issue unsecured notes. Perpetual preferred stock will remain a key component of our long-term capital structure. However, we also believe that our 8.375% Series E preferred stock can ultimately be refinanced with lower-cost long-term capital. Joint venture capital has not been a significant component of our capital structure, but remains a real opportunity for the right transaction. However, we do not expect this to become a significant component of our capital structure. Asset dispositions will continue to provide capital for reinvestment. Common equity, whether through traditional follow-on or an ATM type program, will be considered as necessary to balance our use of incremental capital over time. We remain committed to lowering leverage. Our debt-to-EBITDA is projected to be slightly above or below seven times for Q4 of 2012. This leverage metric will benefit from a significant amount of NOI and EBITDA contribution beginning in Q3 of 2012 and ramping up in Q4, driven by the delivery of our leased redevelopment and development projects. We expect over time to improve our debt-to-EBITDA to a target of 6.5 times. Our goal is to maintain greater than 50% availability under our $1.5 billion unsecured line of credit. Over the long term, we expect our outstanding balance under our line of credit to move closer to 25% or less, similar to most investment-grade rates. Our objective is also to maintain a laddered maturity profile. Our current debt maturities over the next four years are very manageable. Additionally, our goal is to reduce non-income producing assets to 15% or less of our gross investment in real estate. Our current active development and redevelopment projects aggregate about 7% of our gross investment in real estate. The completion and delivery of these projects, many of which are scheduled for delivery in Q4, will transition these into income-producing assets. Briefly commenting on the bond market: As we all know, 2012 to date has shown several positive trends in the investment-grade unsecured bond market. The Fed recently announced their commitment to keep interest rates low until 2014. The European headlines have not spooked the market as frequently as in the second half of 2011. Treasuries have rallied and dropped meaningfully. REIT bond spreads have also tightened significantly. As a result, a few REITs had very successful bond deals this year. We remain optimistic given recent market trends and would like our bond offering to occur sooner rather than later. However, we are cautious that the market remains subject to volatility from the European crisis and other major headline news. Our guidance for FFO per share and EPS does not include a bond offering since it’s difficult to predict the timing and pricing of a debut issuer. All indications support a meaningful tightening of pricing for ARE, but ultimately pricing will be determined based on market conditions at the time of the event. In December, we executed interest rate swaps, lowering our unhedged variable-rate debt from 51% as of 9/30 to 21%. Our goal was to reduce our exposure to interest rate risk in the interim while also leaving an appropriate amount of unhedged variable-rate debt in our projections in order to allow for the transition from bank debt to longer-term fixed-rate debt. The $1 billion in additional swaps executed in 2012 fixed one month LIBOR at approximately 48-49 basis points. When combined with the existing $450 million in swaps in effect, the aggregate $1.45 billion of notional amount of swaps in effect for 2012 fixed one month LIBOR at 1.5% until September 30, at which point certain swap contracts terminate. Going forward, our unhedged variable-rate debt may hover around 20% and occasionally approach the high 20% range. This will provide us the flexibility to transition from variable-rate bank debt to longer-term fixed-rate debt. Subsequent to December, in January we retired about $84 million of our 3.7% convertible notes, leaving us with approximately $1 million outstanding today. Moving to our value-added opportunities, we hope you've noted that our revised supplemental presents value-added development and redevelopment projects, providing detailed information on key projects that constitute the majority of our projected construction spend for 2012. As shown in our supplemental, approximately 80% of our 2012 projected redevelopment and development construction costs relate to specific developments and urban redevelopment projects with an estimated stabilized yield of around 7.5% on a cash basis and 8.2% on a GAAP basis. The remaining 20% comprises suburban and other redevelopment projects that will generate stabilized yields ranging up to 8% on a cash basis. Our total estimate of construction costs for completion related to our projects increased about $15 million since our Investor Day on December 7. We updated the timing of certain payments between 2012 and beyond, resulting in a shift of approximately $25 million of anticipated costs forward into 2012. Additionally, any amounts presented at Investor Day separated in indirect project costs, such as capitalized interest, were included in our estimates of total construction costs to complete. In our supplemental package, we added these indirect costs to our total construction cost to complete. This update has only impacted our projected spend in aggregate. In putting the numbers together, our estimates of stabilized yields for active redevelopment and development projects included indirect project costs and have not changed since our Investor Day presentation. Lastly, let me cover our guidance for 2012. We updated FFO per share diluted to $4.50-$4.54, with no change since our previous guidance. Earnings per share diluted was updated to $1.73-$1.77. Our guidance includes the following assumptions, all of which are highlighted on page 16: Same property NOI performance, cash, is expected to increase 3%-5%; GAAP up 0%-2%. Rental rate steps on lease renewals and re-leasing of space, cash, is expected to be slightly negative to slightly positive; GAAP up 0%-5%. Straight-line rents are averaging $6.5 million per quarter, with amounts each quarter declining from the $9.6 million run rate in Q4 of 2011. The largest single property decline in straight-line rent from Q4 to Q1 is related to the East Tower in New York, which generates about a $1.2 million decline in straight-line rent, but with a corresponding increase in cash rents that is really tied to the burn-off of free rent due on that project. FAS 141 amortization is projected to be around $800,000 per quarter. G&A expenses overall for 2012, compared to 2011, will rise about 5%-8%. Capped interest is expected in the range of $54 million-$60 million, dependent on timing of construction activities. Interest expenses, net of capped interest, will range from $68 million-$75 million. Again, due to the significant amount of rentable square feet under redevelopment and development that is projected to be leased, placed in service, and contributing to NOI and EBITDA by Q4 of 2012, we have also provided a range of guidance for certain items for the fourth quarter. Our guidance is as follows: NOI in the range of $111 million-$113 million, up from the $101.8 million reported in Q4; G&A in the range of $10 million-$11 million; net interest costs in the range of $20.1 million-$23.1 million; aggregate FFO in the range of $71.7 million-$74.1 million; and an FFO per share diluted in the range of $1.16-$1.20. In closing, I want to clearly remind everyone that our projected NOI is flat into Q1 of 2012, with a nominal increase into Q2 and Q3, and with most of the increase in NOI occurring in Q4 of 2012. With that, I’ll turn it back over to Joel.

Thanks, Dean. Operator, we’ll be happy to open up for Q&A.

Sure, no problem. Your first question comes from the line of Sheila McGrath from KBW. Please proceed.

Yes, good afternoon. Joel, you provided a lot of detail on the markets, but I wondered if you could characterize the demand picture, how you see it now compared to a year ago and which markets you would categorize as strongest and which weakest.

Yeah, Sheila, I'm happy to try to do that. In Seattle, it’s been rather quiet; demand has been selective, mostly focused on the institutional side. That said, it has been bustling for tech, with Amazon leading the way. Overall, I’d rate that market as average. In the San Francisco Bay Area, Mission Bay is seeing more tech and institutional demand, while South San Francisco has been more focused on the biotech sector. We have managed to capture most requirements there despite a slower market due to Roche's re-evaluation. The Palo Alto area is full, and Mountain View has been strong for tech and some life sciences. Down in San Diego, the market has come back dramatically over the last 12 months, and the integration of the Veralliance team has benefited us greatly. We’re seeing strong demand in biotech, cleantech, and service companies, although pharma remains slower. Cambridge has stayed strong; we are tracking big tech and life sciences demands and expect that market to hold well. New York is fully occupied and we are considering potential West Tower kick-off discussions as we look into the future. Suburban D.C. is challenging, given the cuts in the budget with NIH being flat for the year, leading to fewer tenants in that space. Research Triangle Park remains quiet, but there's potential on the institutional side. That would be a summary of the current landscape.

That's great. One other question for Dean, I guess. Same-store expenses in the quarter were pretty high and I was just wondering if you could give us more detail on what was driving that and your outlook for 2012?

Well, OpEx has been quite high primarily due to utilities and some winter-related matters, whether it was the storm on the East Coast or other snow removal matters. Most of those costs, because of our triple net nature, are passed through to our tenants, so it's largely recovered. Although OpEx may highlight a significant increase in same-store pool on a year-over-year basis, those costs are fundamentally borne by the tenants. This trend is expected to continue in 2012, but it’s hard to predict how weather will impact utility costs.

Okay. Thank you.

Thank you, Sheila.

Your next question comes from the line of Jay Habermann from Goldman Sachs. Please proceed.

Good afternoon. Dean, starting with the occupancy: you mentioned the decline at the start of the year. Can you talk about the expected pickup? Should we assume it recovers evenly throughout the year, or will it be more back-end weighted?

I expect some occupancy improvement in South San Francisco and Boston going into Q2, with both markets expected to recover significantly in Q3. Maryland's improvement will likely take more time, but we expect total occupancy by year-end around 94%-95%.

Part of this is driven by several significant rollovers in the Maryland market coming in Q2. So, there are a number of leases that have contributed to Dean's guidance on occupancy flow throughout the year. We are confident outside of the Maryland market that we will manage to re-lease or backfill space successfully.

Additionally, we had temporary downtime on some space that rolled and was re-leased. It’s subject to a lease today and will be delivered in September.

Okay. Following on that, could you discuss your outlook for CapEx, specifically tenant improvement and leasing costs for the year?

In terms of our leasing activity, we indicated average $6 per foot on TIs and leasing commissions for renewals and closer to $13 on previously vacant space. I expect those dollars to stay consistent and do not foresee any meaningful deviation from historical averages for 2012.

Okay. On 499 Illinois, are you expecting to make an announcement in the first half of the year about tenants for that space?

That is certainly our hope, although it's uncertain. Our initial tenant would occupy three floors, and potentially another tenant would take the rest of the building. So we are looking at two tenants.

Thank you.

Your next question comes from the line of Jamie Feldman from Bank of America. Please proceed.

Great. Can you discuss the recent trends in tech demand versus life sciences demand in your main markets and if you are considering tips towards tech given the demand prospects?

That's an excellent question. While we are fundamentally a life science niche focused REIT, we are observing significant tech demand in several markets. For example, in the Binney Street development, there’s over 1 million square feet of current tech demand. However, we aim to maintain the integrity of our lab-focused portfolio while taking advantage of these opportunities on a building-by-building basis. We are also cognizant of potential market overheating as we have seen with the tech market historically. Our strategy remains focused; we will remain open to high-quality tenant opportunities.

One last point: do you perceive potential bubble-like situations, noting tech valuations with respect to fundamentals?

I maintain that the valuation landscape is quite unusual; tech firms are often priced exceptionally based on metrics that differ from traditional valuation standards. The merging of tech and biotech sectors continues to be significant, with opportunities arising from that intersection; we aim to remain present while not fundamentally shifting our tenant diversification strategy.

What’s the difference in yields based on tech rents versus biotech overall?

Indeed, Mission Bay and Cambridge show favorable numbers. Not much yield difference has been noted elsewhere in markets like Seattle or San Diego. In the Bay Area and Cambridge, those yields collectively seem promising, reflecting sustained interest.

Thank you.

On our straight-line rent assumptions we've slightly altered our guidance based on rounding; nothing drove this change significantly.

Thanks again.

Your next question comes from the line of Philip Martin from Morningstar. Please proceed.

Good afternoon. Joel, have you noticed any meaningful changes in leasing terms, given the difficult environment?

In larger build-to-suits or redevelopments, we’re observing longer lease terms. We’re able to achieve 10-20 year leases with bigger entities. For smaller tenants, terms remain relatively unchanged at three, five, or seven years. I wouldn’t say there’s been a drastic change overall as we adapt to the current environment and market demands.

How would you characterize leasing leverage currently?

I’d say we continue to see pressures in negotiating leverage compared to 2006-2007; while we had a fantastic quarter and a great year from a leasing standpoint, it’s always competitive, and we must remain cautious and mindful while staying focused.

In terms of tenant confidence, do you notice any incremental discussions regarding redevelopment or expansion?

Yes, unequivocally, we see that as a strong point of inquiry.

Your next question comes from the line of Ross Nussbaum from UBS. Please proceed.

Thanks for taking my questions. I appreciated the new disclosure. On page 33, the redevelopment schedule lists approximately $215 million in suburban and other redevelopment projects, yet doesn’t list a stabilized yield. Can you provide a sense of the expected returns on that capital?

Those projects generally have mid-single to high-single-digit returns on capital. We expect more detailed disclosure as we progress.

Further information on the status of India and China investments would help. The square footage from September down to December decreased by 100,000 square feet; can you clarify?

Some of that transition related to moving certain bases into land as projects completed. Most of the $41.3 million investment expected in 2012 relates to construction of laboratory facilities in India, with some final interior improvements for China as well.

If I incorporate the $148 million in total aggregates, what should we be examining for returns on these current projects?

In India, we generally aim for a 500 basis point return over what we would achieve in the U.S. on a net after-tax basis; China’s returns will need more time to be evaluated.

Thank you very much.

Your next question comes from the line of Quentin Velleley from Citi. Please proceed.

As a follow-up to Ross, could you present the yield for the remaining that was completed? It’d help us evaluate the effect on your returns?

We can provide that information shorty. Just give us a moment and we can follow up post-call on that.

Thanks for the clarifications, thinking specifically about the nature of your guidance on sources and uses: $700 million seems rather rigidly identified for different sectors: equity, debt, etc. Can you talk about how you're thinking sourcing funds?

A significant portion of our sources will be derived from the bond market when conditions allow. We are optimistic for an opportunity to execute sooner rather than later, taking into account a significant amount of non-income producing assets, which we seek to monetize as we transition to income-generating assets.

Should the market conditions improve for our capital requirements, we will have options available for each segment appropriately.

Understood; that's helpful guidance. We see your current guidance of over $102 million was pretty good. Can you speak to the NOI increase from Q4?

We had a favorable impact resulting from recoveries not fully captured, which often manifests within the operational highlights. Generally, we expect a smooth readjustment of tenants to deliver during the quarter.

In terms of tenants, as you’ve highlighted improving, do you anticipate further inquiries for redevelopment opportunities? Do those trends continue?

Indeed, we have seen an uptick in inquiries, and we expect an increase in opportunities moving forward.

Your next question comes from the line of Jason Ren from Morningstar. Please proceed.

In the third quarter, you indicated reluctance to raise equity with your stock price around $66. Following significant debt funding, would your sentiment on equity issuance remain unchanged if your stock price persists?

I won't speculate on equity moves from here. At present, our priority remains strongly fixing the balance sheet without issuing equity at current levels.

We are strategically positioned and would keep everyone posted if any movements arise.

Ladies and gentlemen, there are no more questions in the queue. I would now like to turn the conference over to Mr. Joel Marcus for any closing remarks.

Thank you for your participation today. I look forward to speaking with you again in early May for our first quarter results. Thanks once more.

Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.