ALEXANDRIA REAL ESTATE EQUITIES INC, 10-Q, 1998-08-14

ALEXANDRIA REAL ESTATE EQUITIES INC
10-Q, 1998-08-14
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________

Commission file number 1-12993

ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)

Maryland 95-4502084
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)

135 North Los Robles Avenue, Suite 250, Pasadena, California 91101
(Address of principal executive offices)

(626) 578-0777
(Registrant's telephone number, including area code)

N/A
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

Yes /X/ No / /

As of August 13, 1998, 12,564,631 shares of common stock, par value $.01 per
share, were outstanding.

<PAGE>
TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets of Alexandria Real Estate
Equities, Inc. and Subsidiaries as of June 30, 1998 and December 31,
1997

Condensed Consolidated Statements of Operations of Alexandria Real
Estate Equities, Inc. and Subsidiaries for the three months ended
June 30, 1998 and 1997 and the six months ended June 30, 1998 and
1997

Condensed Consolidated Statement of Stockholders' Equity of Alexandria
Real Estate Equities, Inc. and Subsidiaries for the six months ended
June 30, 1998

Condensed Consolidated Statements of Cash Flows of Alexandria Real
Estate Equities, Inc. and Subsidiaries for the six months ended
June 30, 1998 and 1997

Notes to Condensed Consolidated Financial Statements

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
Item 2. CHANGES IN SECURITIES
Item 3. DEFAULTS UPON SENIOR SECURITIES
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K

2
<PAGE>

Alexandria Real Estate Equities, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Rental properties, net $376,195 $225,551
Land under development 14,281 4,419
Cash and cash equivalents 2,010 2,060
Tenant security deposits and other restricted cash 7,831 6,799
Secured note receivable 6,000 -
Tenant receivables and deferred rent 5,751 3,630
Other assets 8,829 5,995
-------- --------
Total assets $420,897 $248,454
-------- --------
-------- --------

LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $ 96,409 $ 47,817
Unsecured line of credit 110,200 23,000
Accounts payable, accrued expenses and tenant
security deposits 9,360 6,158
Dividends payable 5,022 4,562
-------- --------
Total liabilities 220,991 81,537

Stockholders' equity:
Common stock, $0.01 par value per share,
100,000,000 shares authorized; 12,554,631 and
11,404,631 shares issued and outstanding at
June 30, 1998 and December 31, 1997,
respectively 126 114
Additional paid-in capital 199,780 173,735
Retained earnings (accumulated deficit) - (6,932)
-------- --------
Total stockholders' equity 199,906 166,917

Total liabilities and stockholders' equity $420,897 $248,454
-------- --------
-------- --------
</TABLE>

SEE ACCOMPANYING NOTES.

3
<PAGE>

Alexandria Real Estate Equities, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental $ 11,903 $ 5,725 $ 21,043 $ 10,900
Tenant recoveries 2,949 1,806 5,312 3,703
Interest and other income 308 212 501 301
----------- --------- ----------- ----------
15,160 7,743 26,856 14,904
Expenses:
Rental operations 3,620 2,003 6,124 3,833
General and administrative 882 593 1,633 1,176
Stock compensation - 3,768 - 4,162
Post retirement benefit - - - 632
Special bonus - - - 353
Interest 3,478 2,066 5,563 4,575
Acquisition LLC financing costs - 6,973 - 6,973
Write-off of unamortized loan costs - 2,146 - 2,146
Depreciation and amortization 2,456 1,106 4,177 2,109
----------- --------- ----------- ----------
10,436 18,655 17,497 25,959
----------- --------- ----------- ----------
Net income (loss) $ 4,724 $ (10,912) $ 9,359 $ (11,055)
----------- --------- ----------- ----------
----------- --------- ----------- ----------

Net income allocated to preferred stockholders $ - 1,459 $ - $ 3,036
----------- --------- ----------- ----------
----------- --------- ----------- ----------

Net income (loss) allocated to common stockholders $ 4,724 $ (12,371) $ 9,359 $ (14,091)
----------- --------- ----------- ----------
----------- --------- ----------- ----------
Net income (loss) per share of common stock
(pro forma for 1997):
-Basic $ 0.40 $ (1.79) $ 0.81 $ (2.27)
----------- --------- ----------- ----------
----------- --------- ----------- ----------
-Diluted $ 0.39 $ (1.79) $ 0.79 $ (2.27)
----------- --------- ----------- ----------
----------- --------- ----------- ----------
Weighted average shares of common stock outstanding
(pro forma for 1997):
-Basic 11,821,664 6,098,381 11,614,300 4,870,256
----------- --------- ----------- ----------
----------- --------- ----------- ----------
-Diluted 12,053,983 6,098,381 11,854,843 4,870,256
----------- --------- ----------- ----------
----------- --------- ----------- ----------
</TABLE>

SEE ACCOMPANYING NOTES.

4
<PAGE>

Alexandria Real Estate Equities, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity
Six months ended June 30, 1998
(Unaudited)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
RETAINED
NUMBER OF ADDITIONAL EARNINGS
COMMON COMMON PAID-IN (ACCUMULATED
SHARES STOCK CAPITAL DEFICIT) TOTAL
------------ ------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 11,404,631 $114 $173,735 $(6,932) $166,917
Issuance of common stock 1,150,000 12 33,202 - 33,214
Dividends declared on common stock - - (7,157) (2,427) (9,584)
Net income - - - 9,359 9,359
---------- ---- -------- ------- ---------
Balance at June 30, 1998 12,554,631 $126 $199,780 $ - $199,906
---------- ---- -------- ------- ---------
---------- ---- -------- ------- ---------

</TABLE>

SEE ACCOMPANYING NOTES.

5
<PAGE>

Alexandria Real Estate Equities, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows
(Unaudited)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1998 1997
--------- --------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 10,580 $ (662)

INVESTING ACTIVITIES
Purchase of rental properties (145,345) (52,102)
Additions to rental properties (9,305) (1,720)
Additions to land under development (9,862) -
Note receivable (6,000) -
--------- --------
Net cash used in investing activities (170,512) (53,822)

FINANCING ACTIVITIES
Proceeds from secured notes payable 49,132 15,360
Net borrowings on unsecured line of credit 87,200 2,500
Proceeds from issuance of common stock 33,214 139,185
Redemption of Series T preferred stock - (1)
Decrease in due to Health Science Properties Holding
Corporation - (2,525)
Principal reductions of secured notes payable (540) (73,391)
Common dividends paid (9,124) (2,785)
Preferred dividends paid - (1,126)
--------- --------
Net cash provided by financing activities 159,882 74,717

Net (decrease) increase in cash and cash equivalents (50) 20,233
Cash and cash equivalents at beginning of period 2,060 1,696
--------- --------
Cash and cash equivalents at end of period $ 2,010 $ 21,929
--------- --------
--------- --------
</TABLE>

SEE ACCOMPANYING NOTES.

6
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. BACKGROUND AND BASIS OF PRESENTATION

BACKGROUND

Alexandria Real Estate Equities, Inc., a Maryland corporation (the
"Company"), was formed in October 1994 to acquire, manage, and selectively
develop properties for lease principally to the life science industry ("Life
Science Facilities"). As of June 30, 1998 and December 31, 1997, the Company
owned 41 and 22 Life Science Facilities, respectively.

The accompanying interim financial statements have been prepared by the
Company's management in accordance with generally accepted accounting
principles and in conformity with the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the interim financial
statements presented herein reflect all adjustments of a normal and recurring
nature that are necessary to fairly state the interim financial statements. The
results of operations for the interim period are not necessarily indicative of
the results that may be expected for the year ended December 31, 1998. These
financial statements should be read in conjunction with the financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.

BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, which own, directly
or indirectly, Life Science Facilities. All significant intercompany balances
and transactions have been eliminated.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current
period presentation.

7
<PAGE>

2. RENTAL PROPERTIES

Rental properties consist of the following:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land $ 60,854 $ 41,970
Buildings and improvements 315,833 189,518
Tenant and other improvements 12,318 2,867
---------- --------
389,005 234,355
Less accumulated depreciation (12,810) (8,804)
---------- --------
$ 376,195 $225,551
---------- --------
---------- --------
</TABLE>

During the six months ended June 30, 1998, the Company acquired 19 Life Science
Facilities from various unrelated third parties for an aggregate purchase price
(including closing and transaction costs) of $145,345,000.

3. SECURED NOTE RECEIVABLE

In connection with the acquisition of a Life Science Facility in San Diego,
California in March 1998, the Company made a $6,000,000 loan to the sole tenant
of the property, fully secured by a first deed of trust on certain improvements
at the property. The loan bears interest at a rate of 11% per year, payable
monthly, and matures in March 2002. The loan is cross-defaulted to the lease
with the sole tenant. Under certain circumstances, the Company may obtain
title to the improvements that secure the loan, and, in such event, the Company
may also require the sole tenant at the property to lease such improvements
back from the Company for an additional rental amount.

4. UNSECURED LINE OF CREDIT

The Company has an unsecured line of credit providing for borrowings of up to
$150,000,000. Borrowings under the line of credit bear interest at a floating
rate based on the Company's 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, the Company must elect to fix the rate for a period of
one, two, three or six months.

8
<PAGE>

4. UNSECURED LINE OF CREDIT (CONTINUED)

The line of credit contains financial covenants, including, among other things,
maintenance of minimum market net worth, a total liabilities to gross asset
value ratio, and a fixed charge coverage ratio. In addition, the terms of the
line of credit restrict, among other things, certain investments, indebtedness,
distributions and mergers. Borrowings under the line of credit are limited to
an amount based on a pool of unencumbered assets. Accordingly, as the Company
acquires additional unencumbered properties, borrowings available under the
line of credit will increase. As of June 30, 1998, borrowings under the line
of credit were limited to approximately $150,000,000, and $110,200,000 was
outstanding (leaving $39,800,000 available) at a weighted average interest rate
of 7.16%.

The line of credit expires May 31, 2000 and provides for annual extensions
(provided there is no default) for one-year periods upon notice by the Company
and consent of the participating banks.

In August 1998, the Company amended its unsecured line of credit to provide
for borrowings of up to $250 million. As under the original line, borrowings
under the line of credit, as amended, bear interest at a floating rate based
on the Company's election of either a LIBOR based rate or the higher of the
bank's reference rate and the Federal Funds rate plus 0.5%. However, under
the line, as amended, the LIBOR based rate has been reduced, resulting in a
rate of 6.91% as of August 5, 1998. Financial covenants for the line of
credit, as amended, are substantially similar to those under the original
line. The line, as amended, expires May 31, 2000 and provides for annual
extensions (provided there is no default) for two additional one-year periods
upon notice by the Company and consent of the participating banks.

5. SECURED NOTES PAYABLE

As of June 30, 1998, the Company had five notes payable to certain banks and an
insurance company, secured by first deeds of trust on eight Life Science
Facilities. The notes bear interest at fixed rates ranging from 7.17% to 9.00%
and are due at various dates through 2016.

6. STOCKHOLDERS EQUITY

On May 29, 1998, the Company sold 1,150,000 shares of common stock to
PaineWebber Incorporated for inclusion in the PaineWebber Equity Trust REIT
Series I, a unit investment trust. The shares were issued at a price of
$30.5625 per share (before discounts and commissions). The aggregate proceeds
to the Company, net of offering costs of $1.9 million, were approximately
$33.2 million.

On June 1, 1998, the Company declared a cash dividend on its common stock of
$5,022,000 ($ 0.40 per share) for the calendar quarter ended June 30, 1998. The
dividend was paid on July 17, 1998.

9
<PAGE>

7. COMMITMENTS

The Company is committed to complete the construction of a building and
certain improvements thereto in San Diego, California at a remaining cost of
approximately $4.8 million under the terms of two leases. In addition, the
Company is committed to complete the construction of a building and certain
improvements thereto in Gaithersburg, Maryland at a remaining cost of between
$9.1 million and $18.1 million (depending on the level of improvements to the
facility elected by the tenant) under the terms of a lease. Under the terms
of the lease, the tenant's rental rate will be adjusted depending on the
ultimate cost of the improvements.

The Company is also committed under the terms of various leases to construct
improvements for certain tenants totaling approximately $11.9 million. Of
this amount, approximately $5.3 million has been set aside in restricted cash
accounts to complete the conversion of existing space into higher rent
generic laboratory space (as well as certain related improvements to the
property) at 1102/1124 Columbia Street and 3000/3018 Western Avenue.

8. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of net income (loss) per pro
forma share of common stock outstanding.

THREE MONTHS ENDED JUNE 30,
1998 1997
------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net income (loss) $ 4,724 $ (10,912)
----------- ----------
----------- ----------
Weighted average shares of common stock
(pro forma for 1997) - basic 11,821,664 6,098,381

Add: dilutive effect of stock options 232,319 -
----------- ----------
Weighted average shares of common stock
(pro forma for 1997) - diluted 12,053,983 6,098,381
----------- ----------
----------- ----------

Net income (loss) per share - basic $ 0.40 $ (1.79)
----------- ----------
----------- ----------

Net income (loss) per share - diluted $ 0.39 $ (1.79)
----------- ----------
----------- ----------
</TABLE>

10
<PAGE>

8. NET INCOME (LOSS) PER SHARE (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1997
------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>

Net income (loss) $ 9,359 $ (11,055)
----------- ----------
----------- ----------
Weighted average shares of common stock
(pro forma for 1997) - basic 11,614,300 4,870,256

Add: dilutive effect of stock options 240,543 -
----------- ----------
Weighted average shares of common stock
(pro forma for 1997) - diluted 11,854,843 4,870,256
----------- ----------
----------- ----------

Net income (loss) per share - basic $ 0.81 $ (2.27)
----------- ----------
----------- ----------

Net income (loss) per share - diluted $ 0.79 $ (2.27)
----------- ----------
----------- ----------
</TABLE>

Historical per share data has not been presented for the three or six months
ended June 30, 1997 because it is not meaningful due to the various changes in
the Company's capital structure in connection with the Company's initial
public offering on June 2, 1997 (the "Offering").

Pro forma shares of common stock outstanding for the three and six months
ended June 30, 1997 include all shares of common stock outstanding after
giving effect to a 1,765.923 to 1 stock split, the issuance of certain stock
grants, the issuance and exercise of substitute stock options and conversions
of preferred stock, each of which occurred in connection with the Offering.
In addition, shares issued to the public in connection with the Offering have
been weighted for the period of time they were outstanding.

11
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain information and statements included in this Quarterly Report on
Form 10-Q, including, without limitation, statements containing the words
"believes," "anticipates," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve known and unknown risks and
uncertainties that could result in actual results of the Company differing
materially from expected results expressed or implied by such forward-looking
information and statements. In the context of forward-looking information and
statements provided in this Form 10-Q and in other reports, please refer to
the discussion of risk factors detailed in, as well as the other information
contained in, the Company's filings with the Securities and Exchange
Commission, including but not limited to, those risk factors set forth under
the caption "Risk Factors" in the Company's Registration Statement on Form
S-11 (File No. 333-23545) initially filed with the Securities and Exchange
Commission on March 18, 1997.

The following discussion should be read in conjunction with the financial
statements and notes appearing elsewhere in this report.

OVERVIEW

Since its formation in October 1994, the Company has devoted substantially all
of its resources to the acquisition and management of high quality,
strategically located Life Science Facilities leased principally to tenants in
the life science industry in its target markets.

The Company's primary source of income is rental revenue (including tenant
recoveries) from its properties (the "Properties"). The Company has acquired
its current portfolio since the beginning of 1994, with four of the Properties
acquired in calendar year 1994, eight acquired in 1996, three acquired in 1997
in connection with the Offering, seven acquired in 1997 after the Offering
(together, the "1997 Acquired Properties") and 19 acquired in 1998 (the "1998
Acquired Properties"). As a result of the Company's acquisition activities in
1997 and 1998, the financial data shows significant increases in total revenue
and expenses for the 1998 periods compared to the 1997 periods.

12
<PAGE>

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 ("SECOND QUARTER 1998") TO THREE
MONTHS ENDED JUNE 30, 1997 ("SECOND QUARTER 1997")

Rental revenue increased by $6.2 million, or 109%, to $11.9 million for
Second Quarter 1998 compared to $5.7 million for Second Quarter 1997. The
increase resulted primarily from rental revenue from the 1997 Acquired
Properties purchased after April 1, 1997 and from the 1998 Acquired
Properties, which together added an additional $6.2 million of rental
revenue. Of this amount, $155,000 represents the receipt of a rental
termination payment associated with a lease at one of the Properties. Rental
revenue from the Properties acquired before April 1, 1997 (the "Second
Quarter Same Properties") increased by $28,000, or 1%, generally due to
increases in rental rates. Results for the Second Quarter Same Properties
for Second Quarter 1998 were impacted by the vacancy of approximately 68,000
square feet at 1102/1124 Columbia Street beginning May 31, 1998. The Company
is currently negotiating with tenants for substantially all of this vacant
space. Rental revenue for the Second Quarter Same Properties (excluding
1102/1124 Columbia Street) increased by $85,000, or 2%.

Tenant recoveries increased by $1.1 million, or 61%, to $2.9 million for
Second Quarter 1998 compared to $1.8 million for Second Quarter 1997. The
increase resulted primarily from the 1997 Acquired Properties purchased after
April 1, 1997 and the 1998 Acquired Properties, which together added an
additional $1.0 million of tenant recoveries. Tenant recoveries from the
Second Quarter Same Properties increased by $107,000, or 6%, primarily due to
an increase in rental operating expenses, improved identification and recovery
of costs at certain properties, and adjustments to tenant recoveries relating
to operating expenses for prior periods. Tenant recoveries for the Second
Quarter Same Properties (excluding 1102/1124 Columbia Street) increased by
$287,000, or 24%.

Interest and other income increased by $96,000, or 45%, to $308,000 for
Second Quarter 1998 compared to $212,000 for Second Quarter 1997, resulting
primarily from interest income from the secured note receivable.

Rental operating expenses increased by $1.6 million, or 80%, to $3.6 million
for Second Quarter 1998 compared to $2.0 million for Second Quarter 1997. The
increase resulted primarily from the 1997 Acquired Properties purchased after
April 1, 1997 and the 1998 Acquired Properties, which together added an
additional $1.6 million of rental operating expenses. Operating expenses for
the Second Quarter Same Properties increased by approximately $55,000, or 3%,
primarily due to an increase in utility expenses (due to greater usage) that
are passed through to the tenants. Rental operating expenses for the Second
Quarter Same Properties (excluding 1102/1124 Columbia Street) increased by
$37,000, or 3%.

General and administrative expenses increased by $289,000, or 49%, to $882,000
for Second Quarter 1998 compared to $593,000 for Second Quarter 1997, due to
the Company's larger scope of operations and increased costs incurred as a
result of being a public company in 1998.

13
<PAGE>

Stock compensation expense of $3.8 million was recorded for Second Quarter 1997
for the non-recurring, non-cash expense related to the issuance of stock grants
and options to officers, directors and certain employees of the Company,
principally in connection with the Offering.

Interest expense increased by $1.4 million, or 67%, to $3.5 million for
Second Quarter 1998 compared to $2.1 million for Second Quarter 1997. The
increase resulted primarily from the indebtedness incurred to acquire the
1997 Acquired Properties purchased after April 1, 1997 and the 1998 Acquired
Properties, offset by the decrease in interest expense due to the
indebtedness related to the Second Quarter Same Properties paid off in June
1997 with proceeds from the Offering.

Acquisition LLC financing costs of $6,973,000 were expensed in Second Quarter
1997, representing the portion of the purchase price of ARE Acquisitions, LLC
(the "Acquisition LLC") in excess of the cost incurred by it to acquire its
three Life Science Facilities.

Write-off of unamortized loan costs in Second Quarter 1997 represents the write-
off of loan costs associated with $72,698,000 of secured notes repaid with
proceeds of the Offering.

Depreciation and amortization increased by $1.4 million, or 127%, to $2.5
million for Second Quarter 1998 compared to $1.1 million for Second Quarter
1997. The increase resulted primarily from depreciation associated with the
1997 Acquired Properties purchased after April 1, 1997, and the addition of
the 1998 Acquired Properties.

As a result of the foregoing, there was net income of $4.7 million for Second
Quarter 1998 compared to a net loss of $10.9 million for Second Quarter 1997.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 ("SIX MONTHS 1998") TO SIX MONTHS
ENDED JUNE 30, 1997 ("SIX MONTHS 1997")

Rental revenue increased by $10.1 million, or 93%, to $21.0 million for Six
Months 1998 compared to $10.9 million for Six Months 1997. The increase
resulted primarily from the 1997 Acquired Properties purchased after January
1, 1997 and the 1998 Acquired Properties, which together added an additional
$10.0 million of rental revenue. Of this amount, $277,000 represents the
receipt of rental termination payments associated with leases at two of the
Properties. Rental revenue from the Properties acquired before January 1,
1997 (the "Same Properties") increased by $115,000, or 1%, generally due to
increases in rental rates. Results for the Same Properties for Six Months
1998 were impacted by the vacancy of approximately 68,000 square feet at
1102/1124 Columbia Street beginning May 31, 1998. The Company is currently
negotiating with tenants for substantially all of this vacant space. Rental
revenue for the Same Properties (excluding 1102/1124 Columbia Street)
increased by $165,000, or 2%.

14
<PAGE>

Tenant recoveries increased by $1.6 million, or 43%, to $5.3 million for Six
Months 1998 compared to $3.7 for Six Months 1997. The increase resulted
primarily from the 1997 Acquired Properties purchased after January 1, 1997
and the 1998 Acquired Properties, which together added an additional $1.5
million of tenant recoveries. Tenant recoveries for the Same Properties
increased by $96,000, or 2.6%, generally due to an increase in rental
operating expenses, improved identification and recovery of costs at certain
properties, and adjustments to tenant recoveries relating to operating
expenses for prior periods. Tenant recoveries for the Same Properties
(excluding 1102/1124 Columbia Street) increased by $292,000, or 11%.

Interest and other income increased by $200,000, or 66%, to $501,000 for Six
Months 1998 compared to $301,000 for Six Months 1997, resulting primarily
from interest income from the secured note receivable.

Rental operating expenses increased by $2.3 million, or 61%, to $6.1 million
for Six Months 1998 compared to $3.8 million for Six Months 1997. The
increases resulted primarily from the 1997 Acquired Properties purchased
after January 1, 1997 and the 1998 Acquired Properties, which together added
an additional $2.2 million of rental operating expenses. Operating expenses
for the Same Properties increased by $97,000, or 2.6%, primarily due to an
increase in utility expenses (due to greater usage) that are passed through
to the tenants. Rental operating expenses for the Same Properties (excluding
1102/1124 Columbia Street) increased by $141,000, or 5%.

General and administrative expenses increased by $457,000, or 39%, to
$1.6 million for Six Months 1998 compared to $1.2 million for Six Months 1997
due to the Company's larger scope of operations and increased costs incurred as
a result of being a public company in 1998.

The special bonus of $353,000 in Six Months 1997 was awarded to an officer of
the Company in connection with the Offering and accrued for the period ended
March 31, 1997. Post-retirement benefit expense of $632,000 in Six Months 1997
reflects an adjustment for the non-cash accrual associated with a one-time post
retirement benefit for an officer of the Company. Stock compensation expense of
$4.2 million was recorded in Six Months 1997 for the non-recurring, non-cash
expense related to the issuance of stock grants and options to officers,
directors and certain employees of the Company, principally in connection with
the Offering.

Interest expense increased by $1.0 million, or 22%, to $5.6 million for Six
Months 1998 compared to $4.6 million for Six Months 1997. The increase
resulted primarily from indebtedness incurred to acquire the 1997 Acquired
Properties purchased after January 1, 1997 and the 1998 Acquired Properties.

Acquisition LLC financing costs of $6,973,000 were expensed in Six Months
1997, representing the portion of the purchase price of the Acquisition LLC
in excess of the cost incurred by it to acquire its three Life Science
Facilities.

Write-off of unamortized loan costs in Six Months 1997 represents the write-off
of loan costs associated with $72,698,000 of secured notes repaid with proceeds
of the Offering.

15
<PAGE>

Depreciation and amortization increased by $2.1 million, or 100%, to $4.2
million for Six Months 1998 compared to $2.1 million for Six Months 1997. The
increase resulted primarily from depreciation associated with the 1997
Acquired Properties purchased after January 1, 1997 and the 1998 Acquired
Properties.

As a result of the foregoing, there was net income of $9.4 million for Six
Months 1998 compared to a net loss of $11.1 million for Six Months 1997.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

Net cash provided by operating activities for Six Months 1998 increased by
$11.2 million to $10.6 million compared to net cash used in operating
activities of $662,000 for Six Months 1997. The increase resulted primarily
from operating cash flows from the 1997 Acquired Properties purchased after
January 1, 1997 and the 1998 Acquired Properties.

Net cash used in investing activities increased by $116.7 million to
$170.5 million for Six Months 1998 compared to net cash used in investing
activities of $53.8 million for Six Months 1997. The increase resulted
primarily from the costs associated with the acquisition of the 1998 Acquired
Properties.

Net cash provided by financing activities increased by $85.2 million to
$159.9 million for Six Months 1998 compared to net cash provided by financing
activities of $74.7 million for Six Months 1997. The increase resulted
primarily from $49.1 million in proceeds from secured debt, $87.2 million in
net borrowings under the unsecured line of credit and $33.2 million in net
proceeds from the issuance of common stock, partially offset by payments of
$9.1 million in dividends payable on common stock.

CAPITAL COMMITMENTS

16
<PAGE>

The Company is also committed under terms of various leases to construct
improvements for tenants totaling approximately $11.9 million. Of this
amount, approximately $5.3 million has been set aside in restricted cash
accounts to complete the conversion of existing space into higher rent
generic laboratory space (as well as certain related improvements to the
property) at 1102/1124 Columbia Street and 3000/3018 Western Avenue.

RESTRICTED CASH

As of June 30, 1998, the Company had $9.8 million in cash and cash
equivalents, including $7.8 million in restricted cash accounts. Of the $7.8
million in restricted cash accounts, approximately $5.3 million has been set
aside to complete the conversions described under "--Capital Commitments",
approximately $1.7 million is held in trust as additional security required
under the terms of the Company's secured notes payable, and approximately
$850,000 is held in security deposit reserve accounts based on the terms of
certain lease agreements.

SECURED DEBT

As of June 30, 1998, the Company's secured debt is as follows:

<TABLE>
<CAPTION>
PRINCIPAL
BALANCE AT INTEREST MATURITY
COLLATERAL JUNE 30, 1998 RATE DATE
- -------------------------- --------------- --------- --------------
<S> <C> <C> <C>
3535/3565 General Atomics
Court, San Diego, CA $17,819,000 9.00% December 2014
1431 Harbor Bay Parkway
Alameda, CA 8,500,000 7.17% January 2014
1102/1124 Columbia Street
Seattle, WA 21,003,000 7.75% May 2016
100/800/801 Capitola Drive,
Durham, NC 12,608,000 8.68% December 2006
14225 Newbrook Drive,
Chantilly, VA and 3000/3018
Western Avenue, Seattle, WA 36,479,000 7.22% May 2008
-----------
$96,409,000
-----------
-----------
</TABLE>

UNSECURED LINE OF CREDIT

17
<PAGE>

The line of credit expires May 31, 2000 and provides for annual extensions
(provided there is no default) for one-year periods upon notice by the Company
and consent of the participating banks.

LIQUIDITY AND CAPITAL RESOURCES

On May 29, 1998, the Company sold 1,150,000 shares of common stock to
PaineWebber Incorporated for inclusion in the PaineWebber Equity Trust REIT
Shares I, a unit investment trust. The shares were issued at a price of
$30.5625 per share (before discounts and commissions). The aggregate
proceeds to the Company, net of offering costs of $1.9 million, were
approximately $33.2 million.

The Company expects to continue meeting its short-term liquidity and capital
requirements generally through its working capital and net cash provided by
operating activities. The Company believes that the net cash provided by
operating activities will continue to be sufficient to pay any distributions
necessary to enable the Company to continue qualifying as a real estate
investment trust. The Company also believes that net cash provided by
operations will be sufficient to fund its recurring non-revenue enhancing
capital expenditures, tenant improvements and leasing commissions.

The Company expects to meet certain long-term liquidity requirements, such as
property acquisitions, property development activities, scheduled debt
maturities, renovations, expansions and other non-recurring capital
improvements, through long-term secured and unsecured indebtedness, including
borrowings under the unsecured line of credit, and the issuance of additional
debt and/or equity securities.

18
<PAGE>

EXPOSURE TO ENVIRONMENTAL LIABILITIES

In connection with the acquisition of all of the Properties, the Company has
obtained Phase I environmental assessments to ascertain the existence of any
environmental liabilities or other issues. The Phase I environmental
assessments of the properties have not revealed any environmental liabilities
that the Company believes would have a material adverse effect on the Company's
financial condition or results of operations taken as a whole, nor is the
Company aware of any such material environmental liabilities.

INFLATION

More than 70% of the Company's leases (on a square footage basis) are triple
net leases, requiring tenants to pay substantially all real estate taxes and
insurance, common area and other operating expenses (including increases
thereto). In addition, a majority of the Company's leases (on a square footage
basis) contain effective annual rent escalations that are either fixed (ranging
from 2.5% to 4.0%) or indexed based on a CPI or other index. Accordingly, the
Company does not believe that its earnings or cash flow are subject to any
significant risk of inflation. An increase in inflation, however, could result
in an increase in the Company's variable rate borrowing cost, including
borrowings under the unsecured line of credit.

IMPACT OF YEAR 2000

The Year 2000 Issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send tenant invoices, or engage in similar normal business activities.

The Company has evaluated the significance of the change from the year 1999
to the year 2000 on its existing computer system and has taken steps to
ensure that its computer system will not be adversely affected thereby. The
financial impact of steps taken to accommodate the change for the year 2000
to date has not been material, and future impacts are not anticipated to be
material. The Company relies in part on the computer systems of its vendors
and other companies. If any such company failed to become Year 2000
compliant, the Company could be adversely affected thereby. The Company has
surveyed several of its larger vendors, and all have responded that they
either are currently Year 2000 compliant, or are actively taking steps to
become Year 2000 compliant.

FUNDS FROM OPERATIONS

Management believes that funds from operations (FFO) is helpful to investors as
a measure of the performance of an equity REIT because, along with cash flows
from operating activities, financing activities and investing activities, it
provides investors with

19
<PAGE>

an understanding of the ability of the Company to incur and service debt, to
make capital expenditures and to make distributions. The Company computes FFO
in accordance with standards established by the Board of Governors of NAREIT
in its March 1995 White Paper (the "White Paper"), which may differ from the
methodology for calculating FFO utilized by other equity REITs, and,
accordingly, may not be comparable to such other REITs. Further, FFO does not
represent amounts available for management's discretionary use because of
needed capital replacement or expansion, debt service obligations, or other
commitments and uncertainties. The White Paper defines FFO as net income
(loss) (computed in accordance with generally accepted accounting principles
("GAAP")), excluding gains (or losses) from debt restructuring, sales of
property and unusual items, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of the Company's
financial performance or to cash flows from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including its
ability to make distributions.

The following tables present the Company's FFO on a historical basis (in
thousands):

<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>

Net income (loss) $4,724 $(10,912)
Add:
Stock compensation - 3,768
Acquisition LLC financing costs - 6,973
Write off of unamortized loan fees - 2,146
Depreciation and amortization 2,456 1,106
------ --------
FFO $7,180 $ 3,081
------ --------
------ --------

Six Months Ended June 30,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Net income (loss) $ 9,359 $(11,055)
Add:
Stock compensation - 4,162
Post retirement benefit - 632
Special bonus - 353
Acquisition LLC financing costs - 6,973
Write off of unamortized loan fees - 2,146
Depreciation and amortization 4,177 2,109
------- --------
FFO $13,536 $ 5,320
------- --------
------- --------
</TABLE>

20
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Not applicable.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Since early 1998, the Company and its President, Alan D. Gold, have engaged
in discussions regarding the potential termination of Mr. Gold's full-time
employment and his entering into a consulting arrangement with the Company.
While these discussions were ongoing, the Company gave Mr. Gold written
notice that it did not wish to extend the term of his employment agreement
past its December 31, 1998 expiration date. On July 16, 1998, Mr. Gold gave
the Company written notice that he intended to terminate his employment
agreement, allegedly for "good reason," on or before August 16, 1998. The
Company disputes Mr. Gold's contention that he has "good reason" to terminate
his employment agreement and has submitted the disputes between the parties
to binding arbitration pursuant to the terms of Mr. Gold's employment
agreement. Mr. Gold has asserted claims against the Company that also will be
considered in the arbitration. The Company currently anticipates that Mr.
Gold will leave as of August 16, 1998 and that other executives of the
Company will assume Mr. Gold's responsibilities.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On May 27, 1998, the Company privately placed 1,150,000 shares of its common
stock, par value $.01 per share (the "Shares"), with PaineWebber Incorporated
at a price before discounts and commissions of $30.5625 per Share, resulting
in aggregate proceeds to the Company of approximately $33.2 million. Such
proceeds were used to repay borrowings under the Company's unesecured line of
credit. PaineWebber deposited the Shares with the trustee of PaineWebber
Equity Trust REIT Series I (A Unit Investment Trust) (the "Trust"), a
registered unit investment trust under the Investment Company Act of 1940, as
amended, for which PaineWebber acted as sponsor and depositor, in exchange
for units in the Trust. The issuance of the Shares was effected in reliance
upon an exemption from registration under Section 4(2) of the Securities Act
as a transaction by an issuer not involving a public offering. On June 9,
1998, the Company filed a Registration Statement (File No. 333-56449) on Form
S-3 with the Securities and Exchange Commission to register the Shares under
the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 15, 1998, the Company held its Annual Meeting of Stockholders.

At the meeting, eight directors were elected to serve for a one-year term and
until their successors are duly elected and qualify. The directors elected
were: Jerry M. Sudarsky, Joel S. Marcus, Alan D. Gold, Richard Jennings,
Joseph Elmaleh, Viren Mehta, David M. Petrone and Anthony Solomon. There are
no other directors of the Company. A total of 10,902,809 shares voted "for"
each of the directors, 0 voted "against" and 16,180 shares abstained.

21
<PAGE>

In addition, the stockholders voted to ratify the selection of Ernst & Young
LLP as the Company's independent public accountants for the fiscal year
ending December 31, 1998. A total of 10,906,149 shares voted "for" the
ratification, 7,300 voted "against" and 5,540 shares abstained.

The stockholders also voted to amend the Company's 1997 Stock Award and
Incentive Plan (the "Plan") to increase the number of shares of common stock
of the Company available for issuance thereunder from 900,000 shares to that
number of shares equal to 10% of the number of shares of common stock
outstanding at any time, PROVIDED, that in no event shall the number of
shares available for issuance under the Plan exceed 3,000,000 shares of
common stock. A total of 6,308,959 shares voted "for" the amendment,
3,803,380 voted "against" and 17,982 shares abstained.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.20 Amended and Restated 1997 Stock Award and Incentive Plan

27.1 Financial Data Schedule

(b) Reports on Form 8-K.

On April 9, 1998, the Company filed a Current Report on Form 8-K, dated March
26, 1998, to report the acquisition of one Life Science Facility and certain
vacant land in San Diego, California.

On May 27, 1998, the Company filed a Current Report on Form 8-K, dated May 27,
1998, to report the acquisition of fourteen Life Science Facilities.

On June 23, 1998, the Company filed a Current Report on Form 8-K, dated May
27, 1998, to report the sale of 1,150,000 shares of common stock to
PaineWebber Incorporated for inclusion in the PaineWebber Equity Trust REIT
Series I, a unit investment trust.

22
<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on August 14, 1998.

ALEXANDRIA REAL ESTATE EQUITIES, INC.

-------------------------------------------------
Joel S. Marcus
Chief Executive Officer
(Principal Executive Officer)

-------------------------------------------------
Peter J. Nelson
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)

<PAGE>

ALEXANDRIA REAL ESTATE EQUITIES, INC.

AMENDED AND RESTATED
1997 STOCK AWARD AND INCENTIVE PLAN

As approved by the Stockholders
of the Company on May 15, 1998

<PAGE>

ALEXANDRIA REAL ESTATE EQUITIES, INC.

AMENDED AND RESTATED
1997 STOCK AWARD AND INCENTIVE PLAN

Section Page

1. Purpose; Types of Awards; Construction. . . . . . . . . . . . . . . . . 1

2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

3. Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

4. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

5. Stock Subject to the Plan . . . . . . . . . . . . . . . . . . . . . . . 8

6. Specific Terms of Awards. . . . . . . . . . . . . . . . . . . . . . . . 9

7. Change of Control Provisions. . . . . . . . . . . . . . . . . . . . . 13

8. Loan Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

9. General Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . 14

i
<PAGE>

ALEXANDRIA REAL ESTATE EQUITIES, INC.

AMENDED AND RESTATED
1997 STOCK AWARD AND INCENTIVE PLAN

1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.

The purpose of the Alexandria Real Estate Equities, Inc. Amended and
Restated 1997 Stock Award and Incentive Plan (the "Plan") is to afford an
incentive to selected officers, employees and independent contractors (including
non-employee directors) of Alexandria Real Estate Equities, Inc. (the
"Company"), or any Subsidiary or Affiliate that now exists or hereafter is
organized or acquired, to acquire a proprietary interest in the Company, to
continue as employees or independent contractors (including non-employee
directors), as the case may be, to increase their efforts on behalf of the
Company and to promote the success of the Company's business. Pursuant to
Section 6 of the Plan, there may be granted Options (including "incentive stock
options" and "nonqualified stock options"), Stock Appreciation Rights,
Restricted Stock, and Other Stock-Based Awards or Other Cash-Based Awards. The
Plan also provides the authority to make loans to purchase shares of Stock.
From and after the consummation of the Initial Public Offering, the Plan is
designed to comply with the requirements of Regulation G (12 C.F.R. Section
207) regarding the purchase of shares on margin, the requirements for
"performance-based compensation" under Section 162(m) of the Code and the
conditions for exemption from short-swing profit recovery rules under Rule 16b-3
of the Exchange Act, and shall be interpreted in a manner consistent with the
requirements thereof.

2. DEFINITIONS.

2.1 For purposes of the Plan, the following terms shall be
defined as set forth below:

(a) "Affiliate" means any entity if, at the time of granting
of an Award or a Loan, (i) the Company, directly or indirectly, owns at least
20% of the combined voting power of all classes of stock of such entity or at
least 20% of the ownership interests in such entity or (ii) such entity,
directly or indirectly, owns at least 20% of the combined voting power of all
classes of stock of the Company.

<PAGE>

(b) "Award" means any Option, SAR, Restricted Stock, or
Other Stock-Based Award or Other Cash-Based Award granted under the Plan.

(d) "Beneficiary" means the person, persons, trust or trusts
that have been designated by a Grantee in his or her most recent written
beneficiary designation filed with the Company to receive the benefits specified
under the Plan upon his or her death, or, if there is no designated Beneficiary
or surviving designated Beneficiary, then the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive such
benefits.

(e) "Board" means the Board of Directors of the Company.

(f) "Change of Control" shall mean the occurrence of any of
the following events:

(i) Any Person (as such term is used in section
3(a)(9) of the Exchange Act, as modified and used in sections 13(d) and 14(d)
thereof, except that such term shall not include (A) the Company or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its affiliates, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities, (D) a corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, or (E) a person or group as used in Rule 13d-1(b) under the
Exchange Act) that is or becomes the Beneficial Owner, as such term is defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such Person
any securities acquired directly from the Company or its affiliates other than
in connection with the acquisition by the Company or its affiliates of a
business) representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities; or

(ii) The following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals

2
<PAGE>

who, on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; or

(iii) There is consummated a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation that would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company, at least
seventy-five percent (75%) of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its affiliates other
than in connection with the acquisition by the Company or its affiliates of a
business) representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities; or

(iv) The stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets, other than a sale or disposition by the Company of all
or substantially all of the Company's assets to an entity, at least seventy-five
(75%) of the combined voting power of the voting securities of which are owned
by stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.

3
<PAGE>

(g) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.

(h) "Committee" means the Board or the committee designated
or established by the Board to administer the Plan from and after the
consummation of the Initial Public Offering, the composition of which shall at
all times satisfy the provisions of Rule 16b-3. With respect to the period
prior to consummation of the Initial Public Offering, references to the
"Committee" shall be deemed to refer to the Board or to the Compensation
Committee of the Board.

(i) "Company" means Alexandria Real Estate Equities, Inc., a
corporation organized under the laws of the State of Maryland, or any successor
corporation.

(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and as now or hereafter construed,
interpreted and applied by regulations, rulings and cases.

(k) "Fair Market Value" means, with respect to Stock or
other property, the fair market value of such Stock or other property determined
by such methods or procedures as shall be established from time to time by the
Committee. Unless otherwise determined by the Committee in good faith, the per
share Fair Market Value of Stock as of a particular date shall mean (i) the
closing sales price per share of Stock on the national securities exchange on
which the Stock is principally traded for the last preceding date on which there
was a sale of such Stock on such exchange, or (ii) if the shares of Stock are
then traded in an over-the-counter market, the average of the closing bid and
ask prices for the shares of Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Stock in such market, or (iii)
if the shares of Stock are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Committee, in its sole
discretion, shall determine.

(l) "Grantee" means a person who, as an employee or
independent contractor of the Company, a Subsidiary or an Affiliate, has been
granted an Award or Loan under the Plan.

(m) "Initial Public Offering" shall mean the initial public
offering of shares of Stock of the Company, as more fully described in the

4
<PAGE>

Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on March 18, 1997, as such Registration Statement may be amended from
time to time.

(n) "Incentive Stock Option" or "ISO" means any Option
intended to be and designated as an incentive stock option within the meaning of
Section 422 of the Code.

(o) "Loan" means the proceeds from the Company borrowed by a
Plan participant under Section 8 of the Plan.

(p) "Non-Employee Director" means any director who is not an
employee of the Company or any of its subsidiaries or affiliates. For purposes
of this Plan, such non-employee director shall be treated as an independent
contractor.

(q) "Nonqualified Stock Option" or "NQSO" means any Option
that is designated as a nonqualified stock option.

(r) "Option" means a right, granted to a Grantee under
Section 6.2, to purchase shares of Stock. An Option may be either an ISO or an
NQSO; PROVIDED THAT ISOs may be granted only to employees of the Company or of a
Subsidiary.

(s) "Other Cash-Based Award" means cash awarded to a Grantee
under Section 6.6, including cash awarded as a bonus or upon the attainment of
specified performance objectives or otherwise as permitted under the Plan.

(t) "Other Stock-Based Award" means a right or other
interest granted to a Grantee under Section 6.6 that may be denominated or
payable in, valued in whole or in part by reference to, or otherwise based on,
or related to, Stock, including, but not limited to (1) unrestricted Stock
awarded as a bonus or upon the attainment of specified performance objectives or
otherwise as permitted under the Plan and (2) a right granted to a Grantee to
acquire Stock from the Company for cash and/or a promissory note containing
terms and conditions prescribed by the Committee.

5
<PAGE>

(u) "Plan" means this Alexandria Real Estate Equities, Inc.
Amended and Restated 1997 Stock Award and Incentive Plan, as amended from time
to time.

(v) "Restricted Stock" means an Award of shares of Stock to
a Grantee under Section 6.4 that may be subject to certain restrictions and to a
risk of forfeiture.

(w) "Rule 16b-3" means Rule 16b-3, as from time to time in
effect promulgated by the Securities and Exchange Commission under Section 16 of
the Exchange Act, including any successor to such Rule.

(x) "Securities Act" means the Securities Act of 1933, as
amended from time to time, and as now or hereafter construed, interpreted and
applied by the regulations, rulings and cases.

(y) "Stock" means shares of the common stock, par value $.01
per share, of the Company.

(z) "Stock Appreciation Right" or "SAR" means the right,
granted to a Grantee under Section 6.3, to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant to the
date of exercise of the right, with payment to be made in cash, Stock, or
property as specified in the Award or determined by the Committee.

(aa) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of granting of an Award, each of the corporations (other than the last
corporation in the unbroken chain) owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.

3. ADMINISTRATION.

The Plan shall be administered by the Committee. The Committee shall
have the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan including, without
limitation, the

6
<PAGE>

authority to grant Awards and make Loans; to determine the persons to whom
and the time or times at which Awards shall be granted and Loans shall be
made; to determine the type and number of Awards to be granted and the amount
of any Loan, the number of shares of Stock to which an Award may relate and
the terms, conditions, restrictions and performance criteria relating to any
Award or Loan; and to determine whether, to what extent, and under what
circumstances an Award may be settled, cancelled, forfeited, exchanged, or
surrendered; to make adjustments in the terms and conditions of, and the
criteria and performance objectives (if any) included in, Awards and Loans in
recognition of unusual or non-recurring events affecting the Company or any
Subsidiary or Affiliate or the financial statements of the Company or any
Subsidiary or Affiliate, or in response to changes in applicable laws,
regulations, or accounting principles; to designate Affiliates; to construe
and interpret the Plan and any Award or Loan; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of the Award Agreements and any promissory note or agreement
related to any Loan (which need not be identical for each Grantee); and to
make all other determinations deemed necessary or advisable for the
administration of the Plan.

The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary, Affiliate or Grantee (or any person
claiming any rights under the Plan from or through any Grantee) and any
stockholder.

No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Award
granted or Loan made hereunder.

7
<PAGE>

4. ELIGIBILITY.

Subject to the provisions set forth below, Awards and Loans may be
granted to selected employees, officers and independent contractors (including
Non-Employee Directors) of the Company and its present or future Subsidiaries
and Affiliates, in the discretion of the Committee; PROVIDED THAT ISOs may be
granted only to employees of the Company or of a Subsidiary. In determining the
persons to whom Awards and Loans shall be granted and the type (including the
number of shares to be covered) of any Award or the amount of any Loan, the
Committee shall take into account such factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan.

5. STOCK SUBJECT TO THE PLAN.

The maximum number of shares of Stock reserved for the grant of Awards
under the Plan shall be, subject to adjustment as provided herein, that number
of shares equal to 10% of the number of shares of Stock outstanding at any time,
PROVIDED THAT in no event shall the number of shares available for issuance
under the Plan exceed 3,000,000 shares of Stock at any time. No more than 100%
of the total shares available for grant may be awarded to a single individual in
a single year. Such shares may, in whole or in part, be authorized but unissued
shares or shares that shall have been or may be reacquired by the Company in the
open market, in private transactions or otherwise. If any shares subject to an
Award are forfeited, cancelled, exchanged or surrendered, or if an Award
otherwise terminates or expires without a distribution of shares to the Grantee,
the shares of stock with respect to such Award shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration, again
be available for Awards under the Plan; PROVIDED THAT, in the case of
forfeiture, cancellation, exchange or surrender of shares of Restricted Stock
with respect to which dividends have been paid or accrued, the number of shares
with respect to such Awards shall not be available for Awards hereunder unless,
in the case of shares with respect to which dividends were accrued but unpaid,
such dividends are also forfeited, cancelled, exchanged or surrendered. Upon
the exercise of any Award granted in tandem with any other Awards or awards,
such related Awards or awards shall be cancelled to the extent of the number of
shares of Stock as to which the Award is exercised and, notwithstanding the
foregoing, such number of shares shall no longer be available for Awards under
the Plan.

8
<PAGE>

In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Stock, or other property),
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (a)
the number and kind of shares of Stock which may thereafter be issued in
connection with Awards, (b) the number and kind of shares of Stock issued or
issuable in respect of outstanding Awards, and (c) the exercise price, grant
price, or purchase price relating to any Award; PROVIDED THAT, with respect to
ISOs, such adjustment shall be made in accordance with Section 424(h) of the
Code.

6. SPECIFIC TERMS OF AWARDS.

6.1 GENERAL. The term of each Award shall be for such period as
may be determined by the Committee. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a Subsidiary
or Affiliate upon the grant, maturation, or exercise of an Award may be made in
such forms as the Committee shall determine at the date of grant or thereafter,
including, without limitation, cash, Stock, or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
Committee may make rules relating to installment or deferred payments with
respect to Awards, including the rate of interest to be credited with respect to
such payments. In addition to the foregoing, the Committee may impose on any
Award or the exercise thereof, at the date of grant or thereafter, such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine .

6.2 OPTIONS. The Committee is authorized to grant Options to
Grantees on the following terms and conditions:

(a) TYPE OF AWARD. The Award Agreement evidencing the grant
of an Option under the Plan shall designate the Option as an ISO or an NQSO.

(b) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee; PRO-

9
<PAGE>

VIDED THAT, in the case of an ISO, such exercise price shall be not less than
the Fair Market Value of a share on the date of grant of such Option, and in
no event shall the exercise price for the purchase of shares be less than par
value. The exercise price for Stock subject to an Option may be paid in cash
or subject to the approval of the Committee, by an exchange of Stock
previously owned by the Grantee, or a combination of both, in an amount
having a combined value equal to such exercise price. Subject to the
approval of the Committee, a Grantee may pay all or a portion of the
aggregate exercise price by having shares of Stock with a Fair Market Value
on the date of exercise equal to the aggregate exercise price withheld by the
Company or sold by a broker-dealer under circumstances meeting the
requirements of 12 C.F.R. Section 220 or any successor thereof.

(c) TERM AND EXERCISABILITY OF OPTIONS. The date on which
the Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted. Options shall be
exercisable over the exercise period (which shall not exceed ten years from the
date of grant), at such times and upon such conditions as the Committee may
determine, as reflected in the Award Agreement; PROVIDED THAT, the Committee
shall have the authority to accelerate the exercisability of any outstanding
Option at such time and under such circumstances as it, in its sole discretion,
deems appropriate. An Option may be exercised to the extent of any or all full
shares of Stock as to which the Option has become exercisable, by giving written
notice of such exercise to the Committee or its designated agent.

(d) TERMINATION OF EMPLOYMENT, ETC. An Option may not be
exercised unless the Grantee is then in the employ of, or then maintains an
independent contractor relationship with, the Company or a Subsidiary or an
Affiliate (or a company or a parent or Subsidiary company of such company
issuing or assuming the Option in a transaction to which Section 424(a) of the
Code applies); PROVIDED THAT ISOs may be granted only to employees of the
Company or of a Subsidiary, and may not be exercised unless the Grantee has
remained continuously so employed, or has continuously maintained such
relationship, since the date of grant of the Option; PROVIDED THAT, the Award
Agreement may contain provisions extending the exercisability of Options, in the
event of specified terminations, to a date not later than the expiration date of
such Option.

(e) OTHER PROVISIONS. Options may be subject to such other
conditions including, but not limited to, restrictions on transferability of the
shares acquired upon exercise of such Options, as the Committee may pre-

10
<PAGE>

scribe in its discretion or as may be required by applicable law, including
but not limited to the requirements respecting ISOs set forth in Section 422
of the Code.

6.3 SARS. The Committee is authorized to grant SARs to Grantees
on the following terms and conditions:

(a) IN GENERAL. Unless the Committee determines otherwise,
(i) an SAR granted in tandem with an NQSO may be granted at the time of grant of
the related NQSO or at any time thereafter or (ii) an SAR granted in tandem with
an ISO may only be granted at the time of grant of the related ISO. An SAR
granted in tandem with an Option shall be exercisable only to the extent the
underlying Option is exercisable.

(b) SARS. An SAR shall confer on the Grantee a right to
receive an amount with respect to each share subject thereto, upon exercise
thereof, equal to the excess of (i) the Fair Market Value of one share of Stock
on the date of exercise over (ii) the grant price of the SAR (which in the case
of an SAR granted in tandem with an Option shall be equal to the exercise price
of one share of Stock underlying the Option, and which in the case of any other
SAR shall be such price as the Committee may determine).

6.4 RESTRICTED STOCK. The Committee is authorized to grant
Restricted Stock to Grantees on the following terms and conditions:

(a) ISSUANCE AND RESTRICTIONS. Restricted Stock shall be
subject to such restrictions on transferability and other restrictions, if any,
as the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under such
circumstances, in such installments, or otherwise, as the Committee may
determine. Such restrictions may include factors relating to the increase in
the value of the Stock or to individual or Company performance such as the
attainment of certain specified individual or Company-wide performance goals or
earnings per share. Except to the extent restricted under the Award Agreement
relating to the Restricted Stock, a Grantee granted Restricted Stock shall have
all of the rights of a stockholder including, without limitation, the right to
vote Restricted Stock and the right to receive dividends thereon.

(b) FORFEITURE. Upon termination of employment with or
service to the Company and any Subsidiary, or upon termination of the

11
<PAGE>

independent contractor relationship, as the case may be, during the applicable
restriction period, Restricted Stock and any accrued but unpaid dividends that
are at that time subject to restrictions shall be forfeited; PROVIDED THAT, the
Committee may provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture conditions
relating to Restricted Stock will be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of Restricted Stock.

(c) CERTIFICATES FOR STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of the
Grantee, such certificates shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock, and the
Company shall retain physical possession of the certificate.

(d) DIVIDENDS. Dividends paid on Restricted Stock shall
either be paid at the dividend payment date, or be deferred for payment to such
date as determined by the Committee, in cash or in shares of unrestricted Stock
having a Fair Market Value equal to the amount of such dividends. Stock
distributed in connection with a stock split or stock dividend, and other
property distributed as a dividend, shall be subject to restrictions and a risk
of forfeiture to the same extent as the Restricted Stock with respect to which
such Stock or other property has been distributed.

6.5 STOCK AWARDS IN LIEU OF CASH AWARDS. The Committee is
authorized to grant Stock to Grantees as a bonus, or to grant other Awards, in
lieu of Company commitments to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall have such other terms as
shall be determined by the Committee.

6.6 OTHER STOCK-BASED OR CASH-BASED AWARDS. The Committee is
authorized to grant to Grantees Other Stock-Based Awards or Other Cash-Based
Awards alone or in addition to any other Award under the Plan, as deemed by the
Committee to be consistent with the purposes of the Plan. Such Awards may be
granted with value and payment contingent upon performance of the Company or any
other factors designated by the Committee, or valued by reference to the
performance of specified Subsidiaries or Affiliates.

12
<PAGE>

The Committee shall determine the terms and conditions of such Awards
at the date of grant or thereafter; PROVIDED, THAT performance objectives for
each year shall be established by the Committee not later than the latest date
permissible under Section 162(m) of the Code. Such performance objectives may
be expressed in terms of one or more financial or other objective goals.
Financial goals may be expressed, for example, in terms of earnings per share,
stock price, return on equity, net earnings growth, net earnings, related return
ratios, cash flow, earnings before interest, taxes, depreciation and
amortization (EBITDA), return on assets or total stockholder return. Other
objective goals may include the attainment of various productivity and long-term
growth objectives. Any criteria may be measured in absolute terms or as
compared to another corporation or corporations. To the extent applicable, any
such performance objective shall be determined (a) in accordance with the
Company's audited financial statements and generally accepted accounting
principles and reported upon by the Company's independent accountants or (b) so
that a third party having knowledge of the relevant facts could determine
whether such performance objective is met. Performance objectives shall include
a threshold level of performance below which no Award payment shall be made,
levels of performance above which specified percentages of target Awards shall
be paid, and a maximum level of performance above which no additional Award
shall be paid. Performance objectives established by the Committee may be
(but need not be) different from year-to-year and different performance
objectives may be applicable to different Grantees.

7. CHANGE OF CONTROL PROVISIONS. The following provisions shall
apply in the event of a Change of Control, unless otherwise determined by the
Committee or the Board in writing at or after grant (including under any
individual agreement), but prior to the occurrence of such Change of Control:

7.1 any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and vested;

7.2 the restrictions, deferral limitations, payment conditions,
and forfeiture conditions applicable to any other Award granted under the Plan
shall lapse and such Awards shall be deemed fully vested, and any performance
conditions imposed with respect to Awards shall be deemed to be fully achieved;
and

13
<PAGE>

7.3 any indebtedness incurred pursuant to Section 8 of this Plan
shall be forgiven and the collateral pledged in connection with any such Loan
shall be released.

8. LOAN PROVISIONS. Subject to the provisions of the Plan and all
applicable federal and state laws, rules and regulations (including the
requirements of Regulation G (12 C.F.R. Section 207)), the Committee shall have
the authority to make Loans to Grantees (on such terms and conditions as the
Committee shall determine), to enable such Grantees to purchase shares in
connection with the Initial Public Offering or otherwise in connection with the
realization of Awards under the Plan. Loans shall be evidenced by a promissory
note or other agreement, signed by the borrower, which shall contain provisions
for repayment and such other terms and conditions as the Committee shall
determine.

9. GENERAL PROVISIONS.

9.1 EFFECTIVE DATE; APPROVAL BY STOCKHOLDERS. The Plan shall
take effect upon its adoption by the Board (the "Effective Date"), but the Plan
(and any grants of Awards made prior to the stockholder approval mentioned
herein), shall be subject to the approval of the holder(s) of a majority of the
issued and outstanding shares of voting securities of the Company entitled to
vote, which approval must occur within twelve (12) months of the date the Plan
is adopted by the Board. In the absence of such approval, such Awards shall be
null and void. Notwithstanding the foregoing, the effectiveness of the Plan is
conditioned upon the consummation of the Initial Public Offering, and shall be
of no force and effect if the Initial Public Offering is not consummated.

9.2 NONTRANSFERABILITY. Awards shall not be transferable by a
Grantee except by will or the laws of descent and distribution or, if then
permitted under Rule 16b-3, pursuant to a qualified domestic relations order as
defined under the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder, and shall be exercisable during
the lifetime of a Grantee only by such Grantee or his guardian or legal
representative.

9.3 NO RIGHT TO CONTINUED EMPLOYMENT, ETC. Nothing in the Plan
or in any Award or Loan granted or any Award Agreement, promissory note or other
agreement entered into pursuant hereto shall confer upon any Grantee the right
to continue in the employ of or to continue as an independent contractor of the
Company, any Subsidiary or any Affiliate, or to be entitled to any remunera-

14
<PAGE>

tion or benefits not set forth in the Plan or such Award Agreement,
promissory note, or other agreement or to interfere with or limit in any way
the right of the Company or any such Subsidiary or Affiliate to terminate
such Grantee's employment or independent contractor relationship.

9.4 TAXES. The Company or any Subsidiary or Affiliate is
authorized to withhold from any Award granted, any payment relating to an Award
under the Plan, including from a distribution of Stock, or any other payment to
a Grantee, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Grantees to satisfy obligations for
the payment of withholding taxes and other tax obligations relating to any
Award. This authority includes the authority to withhold or receive Stock or
other property and to make cash payments in respect thereof in satisfaction of a
Grantee's tax obligations.

9.5 AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any
time and from time to time alter, amend, suspend, or terminate the Plan in whole
or in part; PROVIDED THAT, if the Committee determines that stockholder approval
of an amendment is necessary and desirable in order for the Plan to comply or
continue to comply with any applicable law, such amendment shall not be
effective unless the same shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of any Grantee,
without such Grantee's consent, under any Award or Loan theretofore granted
under the Plan.

9.6 NO RIGHTS TO AWARDS OR LOANS; NO STOCKHOLDER RIGHTS. No
Grantee shall have any claim to be granted any Award or Loan under the Plan, and
there is no obligation for uniformity of treatment of Grantees. Except as
provided specifically herein, a Grantee or a transferee of an Award shall have
no rights as a stockholder with respect to any shares covered by the Award until
the date of the issuance of a stock certificate to him for such shares.

9.7 UNFUNDED STATUS OF AWARDS. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Grantee any rights that
are greater than those of a general creditor of the Company.

15
<PAGE>

9.8 NO FRACTIONAL SHARES. No fractional shares of Stock shall
be issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.

9.9 REGULATIONS AND OTHER APPROVALS.

(a) The obligation of the Company to sell or deliver Stock
with respect to any Award granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.

(b) Each Award is subject to the requirement that, if at
any time the Committee determines, in its absolute discretion, that the
listing, registration or qualification of Stock issuable pursuant to the Plan
is required by any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Award or
the issuance of Stock, no such Award shall be granted or payment made or
Stock issued, in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions not acceptable to the Committee.

(c) In the event that the disposition of Stock acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act and is not otherwise exempt from such registration,
such Stock shall be restricted against transfer to the extent required by the
Securities Act or regulations thereunder, and the Committee may require a
Grantee receiving Stock pursuant to the Plan, as a condition precedent to
receipt of such Stock, to represent to the Company in writing that the Stock
acquired by such Grantee is acquired for investment only and not with a view to
distribution.

9.10 GOVERNING LAW. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of
Maryland without giving effect to the conflict of laws principles thereof.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
6/30/98 10Q OF ALEXANDRIA REAL ESTATE EQUITIES, INC.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,010
<SECURITIES> 0
<RECEIVABLES> 8,308
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 389,005
<DEPRECIATION> (12,810)
<TOTAL-ASSETS> 420,897
<CURRENT-LIABILITIES> 14,382
<BONDS> 206,609
0
0
<COMMON> 126
<OTHER-SE> 199,780
<TOTAL-LIABILITY-AND-EQUITY> 420,897
<SALES> 0
<TOTAL-REVENUES> 15,160
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<TOTAL-COSTS> 3,620
<OTHER-EXPENSES> 3,338
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</TABLE>