The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this annual report on Form 10-K. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions, and financial trends that may affect our future plans of operation, business strategy, results of operations, and financial position. A number of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking statements, including, but not limited to, those described under "Item 1. Business" in this annual report on Form 10-K. We do not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document, whether as a result of new information, future events, or otherwise.

Overview

We are a Maryland corporation formed in October 1994 that has elected to be taxed as a REIT for federal income tax purposes. We are the largest owner, preeminent REIT, and leading life science real estate company focused principally on science-driven cluster development through the ownership, operation, management, selective acquisition, development, and redevelopment of properties containing life science laboratory space. We are the leading provider of high-quality environmentally sustainable real estate, technical infrastructure, and services to the broad and diverse life science industry. Client tenants include leading multinational pharmaceutical companies, academic and medical institutions, public and private biotechnology entities, U.S. government research agencies, medical device companies, industrial biotech companies, venture capital firms, and life science product and service companies. Our primary business objective is to maximize stakeholder value by providing our debt and equity stakeholders with the greatest possible total return based on a multifaceted platform of internal and external growth. Our operating platform is based on the principle of "clustering," with assets and operations located adjacent to life science entities, and in close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses, driving growth and technological advances within each cluster.

Our average occupancy rate of operating properties as of December 31 of each year from 2000 to 2012 was approximately 95.0%. Our average occupancy rate of operating and redevelopment properties as of December 31 of each year from 2000 to 2012 was approximately 88.8%. Investment-grade client tenants represented 47% of our total annualized base rent as of December 31, 2012.

Results

Core operations

The key elements to our strategy include our consistent focus on high-quality assets and operations in the top life science cluster locations with our properties located adjacent to life science entities, driving growth and technological advances within each cluster. These adjacency locations are characterized by high barriers to entry for new landlords, high barriers to exit for client tenants, limited supply of available space, and represent highly desirable locations for tenancy by life science entities because of the close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Our strategy also includes drawing upon our deep and broad life science and real estate relationships in order to attract new and leading life science client tenants and value-added real estate.

The following table presents information regarding our asset base and value-added projects as of December 31, 2012, 2011, and 2010:

                                                                      December 31,
Rentable square feet                                       2012           2011           2010
Rentable square feet of operating properties             14,953,968     13,583,993     12,445,754
Development properties                                    1,566,774        818,020        475,818
Redevelopment properties                                    547,092        919,857        755,463
Rentable square feet of total properties                 17,067,834     15,321,870     13,677,035

Number of properties                                            178            173            167
Occupancy - operating                                         93.4%          94.9%          94.3%
Occupancy - operating and redevelopment                       89.8%          88.5%          88.9%
Annualized base rent per leased rentable square foot   $      34.59   $      34.39   $      33.95

Leasing

For the year ended December 31, 2012, we executed a total of 187 leases for approximately 3,281,000 rentable square feet at 84 different properties (excluding month-to-month leases). Of this total, approximately 1,475,000 rentable square feet related to new or renewal leases of previously leased space (renewed/re-leased space), and approximately 1,806,000 rentable square feet related to developed, redeveloped, or previously vacant space. Of the 1,806,000 rentable square feet, approximately 1,135,000 rentable square feet related to our development or redevelopment programs, and the remaining approximately 671,000 rentable square feet related to previously vacant space. Rental rates for this renewed/re-leased space were, on average, approximately 2.0% lower on a cash basis and approximately 5.2% higher on a GAAP basis than rental rates for the respective expiring leases. Additionally, we granted tenant concessions, including free rent averaging approximately 1.6 months, with respect to the 3,281,000 rentable square feet leased during the year ended December 31, 2012. Approximately 71% of the number of leases executed during the year ended December 31, 2012, did not include concessions for free rent. Weighted average lease term for the leases executed during the year ended December 31, 2012, was 7.1 years.

As of December 31, 2012, approximately 94% of our leases (on a rentable square footage basis) were triple net leases, requiring client tenants to pay substantially all real estate taxes, insurance, utilities, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Additionally, approximately 96% of our leases (on a rentable square footage basis) contained effective annual rent escalations that were either fixed or indexed based on a consumer price index or another index, and approximately 92% of our leases (on a rentable square footage basis) provided for the recapture of certain capital expenditures.

The following chart presents development/redevelopment space leased and renewed/re-leased/previously vacant space leased:

[[Image Removed: GRAPHIC]]

Value-added opportunities and external growth

As of December 31, 2012, we had six ground-up development projects in process aggregating approximately 1,566,774 rentable square feet. We also had 10 projects undergoing conversion into laboratory space through redevelopment aggregating approximately 547,092 rentable square feet. These projects, along with recently delivered projects, certain future projects, and contribution from same properties, are expected to contribute significant increases in rental income, net operating income, and cash flows.

As of December 31, 2012, 96% of our leases contained annual rent escalations that were either fixed or based on a consumer price index or another index. Our initial stabilized yield on a cash basis reflects cash rents at date of stabilization and does not reflect contractual rent escalations beyond the stabilization date. We expect, on average, our contractual cash rents related to our value-added projects to increase over time. Initial stabilized yield is calculated as the quotient of the estimated amounts of net operating income and our investment in the property at stabilization ("Initial Stabilized Yield").

During the year ended December 31, 2012, we executed leases aggregating 699,000 and 436,000 rentable square feet, respectively, related to our development and redevelopment projects.

The following table summarizes the commencement of key development and redevelopment projects (dollars in thousands, except per square foot amounts):

                                                                          Investment                      Initial
                            Commencement     Rentable       Pre-Leased        at            Per       Stabilized Yield              Key
     Address/Market             Date        Square Feet         %         Completion        RSF       Cash        GAAP         Client Tenant
Development
75/125 Binney Street,           1Q13            386,275 (1)    63% (1)   $    351,439     $   910       8.0%        8.2%           ARIAD
Greater Boston                                                                                                             Pharmaceuticals, Inc.
430 East 29th Street,       November 2012       419,806        14% (2)   $    463,245     $ 1,103       6.6%        6.5%           Roche
Greater NYC
360 Longwood Avenue,         April 2012         414,000        37% (3)   $    350,000 (4) $   845       8.3%        8.9%    Dana-Farber Cancer
Greater Boston                                                                                                                Institute, Inc.

Redevelopment
4757 Nexus Center Drive,    October 2012         68,423        100%      $     34,829     $   509       7.6%        7.8%     Genomatica, Inc.
San Diego
1616 Eastlake Avenue,       October 2012         66,776         61%      $     37,816     $   566       8.4%        8.6%    Infectious Disease
Seattle                                                                                                                     Research Institute

(1) Represents a one-building project with two towers totaling 386,275 rentable square feet. ARIAD Pharmaceuticals, Inc. leased 100% of the 216,926 rentable square feet at 125 Binney Street and 27,197 rentable square feet at 75 Binney Street, with additional potential expansion opportunities through June 30, 2014. See "Development and Redevelopment Projects in North America" table in "Item 2. Properties - Value-Added Projects" section for additional details on current assumptions included in our guidance for funding the cost to complete the development of 75/125 Binney Street.
(2) We have an additional 40% of the 419,806 rentable square feet that are at the letter of intent stage.
(3) Dana-Farber Cancer Institute, Inc. also has an option to lease an additional two floors of approximately 99,000 rentable square feet, or an additional 24% of the total rentable square feet of our unconsolidated joint venture development project through June 2014.
(4) Represents the total venture cost at completion. As of December 31, 2012, our equity investment was approximately $28.7 million related to our 27.5% ownership interest in the unconsolidated real estate entity. Our expected remaining cash commitment to the venture of approximately $16.9 million is less than the $22.3 million received in March 2012 from an in-substance partial sale of our interest in the underlying real estate.

The following table summarizes the delivery of key development and redevelopment projects during the year ended December 31, 2012 (dollars in thousands, except per square foot amounts):

                                         Portion Delivered                                 Total Project
                                                            Occupancy     Investment                Total Project Initial
                               Completion      Rentable       as of           at          Per         Stabilized Yield                   Key
      Address/Market              Date        Square Feet   12/31/2012    Completion      RSF       Cash            GAAP          Client Tenant(s)
Development
259 East Grand Avenue, San   November 2012      170,618           100%   $     74,090   $   434       8.7%  (1)       8.6%  (1)         Onyx
Francisco Bay Area                                                                                                              Pharmaceuticals, Inc.
400/450 East Jamie Court,     October 2012      163,036            80%   $    112,106   $   688       4.9%  (2)       4.9%  (2)   Stem CentRx, Inc.
San Francisco Bay Area
5200 Illumina Way, San        October 2012      127,373           100%   $     46,978   $   369        7.0%           11.2%        Illumina, Inc.
Diego
4755 Nexus Center Drive,     September 2012     45,255            100%   $     23,084   $   510        6.8%            7.5%            Optimer
San Diego                                                                                                                       Pharmaceuticals, Inc.
Canada                         April 2012       26,426            100%   $      8,883   $   336        7.7%            8.3%      GlaxoSmithKline plc

Redevelopment
400 Technology Square,         November -     140,532 (3)         100%   $    144,688   $ 1,030        8.1%            8.9%      Ragon Institute of
Greater Boston               December 2012                                                                                      MGH, MIT and Harvard;
                                                                                                                                Epizyme, Inc.; Aramco
                                                                                                                                      Services
                                                                                                                                    Company, Inc.
10300 Campus Point Drive,    November 2011    279,138 (4)          96%   $    131,649   $   472        7.9%            7.7%      The Regents of the
San Diego                     - September                                                                                           University of
                                  2012                                                                                           California; Celgene
                                                                                                                                     Corporation
3530/3550 John Hopkins         June 2012        98,320            100%   $     50,898   $   518        8.9%            9.1%     Genomics Institute of
Court, San Diego                                                                                                                the Novartis Research
                                                                                                                                Foundation; Verenium
                                                                                                                                     Corporation

(1) The Initial Stabilized Yield on a cash and GAAP basis for this project was approximately 8.7% and 8.6%, respectively, or approximately 0.7% and 0.6% higher than the mid-point of our previous Initial Stabilized Yield estimates of 8.0%, on a cash and GAAP basis, respectively.
(2) The Initial Stabilized Yield on a cash and GAAP basis for this project was approximately 4.9% and 4.9%, respectively, or approximately 0.7% and 0.6% higher than our previous Initial Stabilized Yield estimate of 4.2% and 4.3%, on a cash and GAAP basis, respectively.
(3) In November and December 2012, we partially completed the redevelopment of 140,532 rentable square feet at 400 Technology Square, a building with 212,124 total rentable square feet.
(4) Includes 189,562 rentable square feet delivered in September 2012, and 89,576 rentable square feet delivered in November 2011.

Balance sheet

Over the past several years, we successfully completed important steps in order to enhance our ability to access the debt capital markets on favorable terms, including (1) receiving our investment-grade ratings, (2) retiring certain debt and deleveraging our balance sheet, (3) generating significant cash flows from the completion and occupancy of key development and redevelopment projects from our non-income-producing assets, and (4) amending our unsecured senior line of credit and unsecured senior bank term loans to increase the amounts available and increase liquidity, extend the maturity dates, and decrease interest rates applicable to outstanding borrowings. We have also strived to maintain and improve the key strengths of our balance sheet and business, which include, among others, balance sheet liquidity, a diverse and creditworthy client tenant base, well-located properties proximate to leading research institutions, favorable lease terms, stable occupancy and cash flows, and demonstrated life science and real estate expertise.

We expect to continue the transition of our balance sheet debt from short-term and medium-term bank debt to long-term unsecured fixed rate debt over the next several years. However, some bank debt will remain a component of our long-term capital structure, primarily consisting of an unsecured senior line of credit for liquidity and flexibility, and when appropriate unsecured senior bank term loans. The transition from unhedged variable rate bank debt to longer-term fixed rate unsecured bonds is expected to significantly increase our interest costs. The increase in interest costs in the near to medium term as we transition bank debt to unsecured bonds will be offset by the long-term benefits of longer dated debt maturities, less LIBOR-based variable interest rate risk, and access to more sources of capital. While this transition from unhedged variable rate bank debt is in process, we expect to utilize interest rate swap agreements to reduce our interest rate risk. We expect to keep our unhedged variable rate debt at approximately 30% or less of our total debt over the long term. The transition of unhedged variable rate bank debt to longer-term fixed rate unsecured bonds is not expected to impact the "highly effective" designation of the existing interest rate swap agreements as of December 31, 2012. Our forecasts assume outstanding unhedged variable rate debt in an amount at least equal to our effective notional amount of interest rate swap agreements in effect at any point in time.

Secured mortgage notes payable will remain part of our capital structure; however, we do not anticipate our secured notes payable becoming a significant percentage of total debt outstanding. We believe perpetual preferred stock should remain as a component of our long-term capital structure.

As of December 31, 2012, we had four assets held for sale. We may identify additional assets for potential sale in 2013 and thereafter. We expect to invest net proceeds from asset sales into construction projects located in key "brain trust" cluster markets.

As of December 31, 2012, approximately 23% of our gross real estate represented non-income-producing assets (land, preconstruction, development, redevelopment, projects in India and China, and investment in unconsolidated real estate entity). Our active development and redevelopment projects represented 12% of our gross investments in real estate, a significant amount of which is pre-leased and expected to be delivered over the next one to eight quarters. The completion and delivery of these projects will significantly reduce our non-income-producing assets as a percentage of gross investments in real estate. Over the next few years, we may also identify certain land parcels for potential sale. Our goal is to reduce non-income-producing assets as a percentage of our gross investments in real estate to 15% to 17% by December 31, 2013, and 15% or less for the subsequent periods.

The chart below shows the historical trend of non-income-producing assets as a percentage of our gross investments in real estate:

[[Image Removed: GRAPHIC]]

Balance sheet strategy and significant milestones

Execution of capital strategy in 2012

During 2012, we successfully executed our capital strategy and proved that we have access to diverse sources of capital, which we believe is strategically important to our long-term capital structure. These sources of capital included
1) real estate asset dispositions, 2) secured construction project financing, 3) unsecured senior line of credit, 4) unsecured senior note payable, 5) joint venture capital, 6) preferred stock, and 7) common stock sales through our "at the market" common stock offering program. By accessing all of these capital sources combined with our significant increase in NOI from completion of many development and redevelopment projects, we were able to fund our approximately $577 million in construction activity during the year ended December 31, 2012, on a relatively leverage-neutral basis with minimal issuance of common equity. During the year ended December 31, 2012, net proceeds from issuance of common stock were $97.9 million. Net debt to Adjusted EBITDA as of December 31, 2012 was 7.3x compared to 7.1x as of December 31, 2011. See "Non-GAAP measures - Net Debt to Adjusted EBITDA" for further information.

Our various capital market transactions and proceeds from our assets sales for 2012 are more fully described in the "Cash Flows - Investing Activities and Financing Activities" sections.

Capital strategy for 2013

Our balance sheet capital strategy in 2013 will continue to focus on funding our significant development and redevelopment projects in 2013 with leverage-neutral sources of capital and by continuing to execute our asset recycling program while reducing our net debt to adjusted EBITDA to approximately 6.5x by December 31, 2013.

We expect to source capital in excess of our projected construction spending for 2013. As more fully described in our "Sources and Uses of Capital", we estimate at the mid-point of our disclosed sources of capital that our capital recycling program will generate approximately $377 million as we execute on the sale of operating and non-income producing assets. Our projected cash flows from operating activities after payment of dividends will generate approximately $140 million of capital. Projected common stock offering proceeds under our "at the market" common stock offering program are projected to be approximately $150 million. These proceeds aggregate approximately $667 million and will fund our projected $570 million in projected construction spending. We project this excess capital, combined with projected growth in NOI from development and redevelopment projects described in our table at "Item 2. Properties - Development Projects in North America", will improve our net debt to Adjusted EBITDA to approximately 6.5x.

Milestones (in thousands) (1)                           Transaction Date    Amount (2)
Completion of asset sales                                March 2012 to      $    75,080
                                                         September 2012
Repayment of two secured notes payable                   December 2012      $   (15,513 )
Issuance of common stock under "at the market"            June 2012 to      $    97,890
common stock offering program (3)                        September 2012
Secured construction loan with aggregate commitment        June 2012        $    55,000
of $55.0 million (4)
Amendment of $1.5 billion unsecured senior line of         April 2012       $ 1,500,000
credit (5)
Redemption of 8.375% Series C Preferred Stock              April 2012       $  (129,638 )
Issuance of 6.45% Series E Preferred Stock                 March 2012       $   124,868
Sale of interest in land parcel to joint venture           March 2012       $    31,360
partner
Repayment of 2012 Unsecured Senior Bank Term Loan        February 2012      $  (250,000 )
4.60% unsecured senior notes payable offering            February 2012      $   544,649
Repurchase of 3.70% Unsecured Senior Convertible       January/April 2012   $   (84,801 )
Notes

(1) Refer to "Liquidity and Capital Resources - Sources and Uses of Capital" section for further discussion of the items above.

(2) Net of discounts and offering costs, as applicable.

(3) As of December 31, 2012, approximately $150.0 million of our common stock remained available for issuance under the "at the market" common stock offering program.

(4) Outstanding balance of secured construction loan as of December 31, 2012, was approximately $16.9 million.

(5) Outstanding balance of unsecured senior line of credit as of December 31, 2012, was approximately $566 million.

Investment-grade ratings and key credit metrics

In July 2011, we received investment-grade ratings from two major rating agencies. Receipt of our investment-grade ratings was a significant milestone that we believe will provide long-term value to our debt and equity stakeholders. Key strengths of our balance sheet and business that highlight our investment-grade credit profile include balance sheet liquidity, a diverse and creditworthy client tenant base, well-located properties proximate to leading research institutions, favorable lease terms, stable occupancy and cash flows, and demonstrated life science and real estate expertise. This significant milestone broadens our access to another key source of debt capital and allows us to continue to pursue our long-term capital, investment, and operating strategies. The issuance of investment-grade unsecured senior notes payable has allowed us to begin the transition from bank debt financing to unsecured senior notes payable, from variable rate debt to fixed rate debt, and from short-term debt to long-term debt. While this transition of bank debt is in process, we will utilize interest rate swap agreements to reduce our interest rate risk. We expect, over the near term while we transition from bank debt to unsecured senior notes payable, to keep our unhedged variable rate debt at less than 30% of our total debt.

                                                              Year Ended December 31,
Key Credit Metrics (1)                                          2012            2011
Net debt to adjusted EBITDA (2)                                     7.3x            7.1x
Net debt to gross assets (excluding cash and restricted              38%             37%
cash) (3)
Fixed charge coverage ratio (2)                                     2.8x            2.7x
Interest coverage ratio (2)                                         3.4x            3.4x
Unencumbered net operating income as a percentage of                 71%             65%
total net operating income (2)
Liquidity - unsecured senior line of credit availability
and unrestricted cash (3)                                   $1.1 billion    $1.2 billion
Non-income-producing assets as a percentage of gross                 23%             24%
real estate (3)
Unhedged variable rate debt as a percentage of total                 30%             21%
debt (3)
Investment-grade client tenants as a percentage of total             47%             45%
annualized base rent (3)

(1) These metrics reflect certain non-GAAP financial measures. See "Non-GAAP Measures" for more information, including definitions and reconciliations to . . .