ALEXANDRIA REAL ESTATE EQUITIES, INC. (ARE:NYSE) is the largest owner and Alexandria Real pre-eminent first-in-class inter - national real estate operator focused principally on the Estate Equities, Inc. ownership, operation, redevelopment, selective development and acquisition of properties containing office 2006 Annual Report and laboratory space. Alexan - dria is the leading provider of real estate to the life science industry and has an outstand - ing almost ten-year track record as a NYSE listed company with an approximate $5.1 billion total market capi - talization as of December 31, 2006. Alexandria provides high quality real estate, techni - cal infrastructure, services, and capital to the broad and diverse life science sector. Client tenants include universities and not-for-profit institutions, pharmaceutical, biotechnology, medical device, life science product, service, biodefense and translational research entities, as well as governmental agencies. Alexandria’s international operating platform is based on the principle of “clustering” with assets and operations strategically located and dominant in each key life science cluster submarket. Total return performance reflects the performance of Alexandria Real Estate Equities, Inc., compared to NAREIT All Equity, Russell 2000 and S&P 500 indices (total return performance from IPO on May 28, 1997 to December 31, 2006, assuming the reinvestment of all dividends). “The most powerful ideas are simple, and brands adhere to the same rules. Creating simple, but powerful differentiation in the minds of your customers, your staff, indeed all of your stakeholders, requires a clear and compelling vision that is expressed in everything you do; from product to service, through environments, to the people you hire and the way you talk about yourself.” Jez Frampton, CEO , INTERBRAND BusinessWeek/Interbrand Best Global Brands 2006 The Science of Building a Dominant Brand Leader Campus of Technology Square @ MIT Cambridge, Massachusetts Pictured Right Alexandria = = Labspac e® On the eve of our tenth anniversary as a NY SE listed company, the critical components of Alexandria’s enduring success are aligned with the distinguishable characteristics that define pre-eminent international brands Knowledge of the Customer Superior Product Focused Niche Global Reach Sustainability To Fellow Alexandria Real Estate ON THE EVE of our tenth virtues and progress our anniversary as a public mission, the core of our culture Equities, Inc. Owners company, Alexandria has, once is defined by unparalleled again, posted one of the best excellence, earnest service, operational and financial cutting edge innovation, inter - performances of any REIT dependent team work, mutual since we came public in 1997. respect, responsibility, and Alexandria’s proprietary oper - unwavering integrity. At ating platform and Unique Alexandria, we define success Roadmap for Growth ® by what we do and accomplish continue to enable us to as much as who we are and provide strong, consistent, what we stand for. and predictable investment We have been able to returns for all investor styles. generate a “compounded We manage Alexandria with annual growth rate” (from our a long-term focus and are initial public offering on May convinced this is the best way 28, 1997 (“IPO”) through to run our business. We devote December 31, 2006) of approxi - extraordinary efforts to find the mately 23.8% (assuming most talented people and offer reinvestment of all dividends), them the tools they need to approximately 33.6% in total make a significant improve - assets, approximately 34.5% in ment in the human condition. total market capitalization, and We develop the best environ - approximately 23.7% in funds ments for the best scientific from operations, demon - people and entities, which in strating one of the real estate turn enhances health and industry’s top growth rates. extends life for the inhabitants Other key financial metrics of our planet. included our total shareholder We are the Landlord and return (assuming reinvestment Developer of Choice to the Life of all dividends) from our IPO Science Industry ®, a coveted through December 31, 2006, leadership position that we which approximated 677%, intend to maintain. Our brand significantly outperforming the is powerful, relevant, impor - NAREIT Index which increased tant, and impactful to our life approximately 284%, the science constituency, whom Russell 2000 Index which we deeply respect and increased approximately 133%, consider an integral part of our and the S&P 500 Index which complete team. Recently, one increased approximately 94%. of our most important client These are truly remarkable tenant relationships, The Bill accomplishments achieved and Melinda Gates Founda - through challenging and tion, in referring to Alexandria varying economic cycles. stated, “Thanks for being such Our focus is clear, our a collaborative partner to the expertise and experience in Foundation.” Our mission to both the real estate and life continue to be the dominant science industries are unparal - real estate provider to the life leled, and our unique and science industry necessitates highly focused strategy care - Jerry M. Sudarsky constant communication and fully crafted and executed. Chairman of the Board coherence with all of our stake - During 2006, and continuously Joel S. Marcus holders. To uphold these vital every quarter since our IPO, Chief Executive Officer 14 Alexandria Real Estate Equities, Inc. Alexandria has reported partnering transactions among multinational pharmaceutical and State of New York. The East consistent, stable, and solid and between pharmaceutical companies and larger biotech - River Science Park sits on a growth in funds from opera - and biotechnology companies. nology companies showed an prime site along the East tions per share (diluted). This Medicare prescription appetite for the acquisition of River consisting of 4.5 acres growth has been driven by the drug coverage was introduced companies with promising comprising approximately successful day-to-day execu - for the first time in history, products and technologies. 1.1 million gross square feet. tion of our differentiated and our nation’s life science Several of Alexandria’s client The East River Science Park is strategy, multi-faceted busi - industry demonstrated another tenants were acquired by phar - destined to become the pre- ness model and highly efficient year of growth. Despite the maceutical companies at eminent life science center in strategic operating platform leveled-off National Institutes significant premiums last year, New York City. focused on dominating our key of Health’s funding for the including a $1.1 billion acquisi - life science cluster markets. industry now at a record tion of Sirna Therapeutics, Inc., Operational Review Our client tenant base is the annual pace of almost $29 by Merck & Co., Inc. The And Financial Highlights most exceptional and notable billion, the pharmaceutical industry observers anticipate Once again, and for every it has ever been with Novartis and biotechnology industries similar acquisition trends at quarter as a public company, AG, one of the world’s leading combined invested a record least for the next few years. our full-year growth in GAAP pharmaceutical companies, as $55.2 billion in research and net operating income for our our largest client tenant. The development activities in 2006, Technology Square @ MIT static pool of “same proper - strength and diversity of our representing an almost 8% In the summer of 2006, Alexan - ties” has been positive and client tenants, coupled with increase over the 2005 industry dria and The Massachusetts approximated 2.1%, and cash their average lease durations expenditures. This significant Institute o f Technology (“MIT”) net operating income for these in excess of 7 years, provide investment indicates the indus - formed a 90/10 joint venture properties grew approximately Alexandria with long-term tries’ fundamental stability, for the Technology Square @ 4.1%. These internal growth quality cash flow. These enabling them to continue MIT project comprising nearly metrics represent broad-based combined attributes should to discover, develop, and 1.2 million square feet of office solid performance in our enable continued growth commercialize new products and laboratory space situated markets. Contributing to this during both positive and to service the world’s growing immediately adjacent to the growth is the fact that approxi - challenging economic demands for safe and effective MIT campus on Main Street in mately 89% of our leases have environments. healthcare products. Today, Kendall Square, Cambridge. annual rental rate increases, During 2006, we raised more than 2,300 drug candi - This signature campus is generally with minimum our quarterly cash dividend dates are in clinical trials or at anchored by Novartis AG and annual increases approxi - per common share approxi - the Food and Drug Administra - MIT. Our strategic venture also mating three plus percent. mately 6%. This increase tion for review. provides significant upside due Rental rate increases on the reflects our policy to seek Indeed, in 2006, we to the redevelopment opportu - rollover of leases in our asset managed growth in dividends witnessed many key events nities of two key buildings on base which have been positive while retaining a significant that evidenced the pharmaceu - the seven building campus. every year as a publicly traded level of free