P 26 Year Ended December 31, (In thousands) 2004 2003 2002 OPERATING ACTIVITIES Net income $ 60,195  $ 59,643  $ 40,032  Adjustments to reconcile net income to net cash provided by operating activities: Loss on early extinguishment of debt - - 1,002  Non-cash impairment charges - - 3,695  Net gain on sales of property (1,627) (8,286) - Depreciation and amortization 42,523 38,901  34,071  Amortization of loan fees and costs 2,374 2,133  2,379  Amortization of premiums on secured notes payable (161) (290) (360) Stock compensation expense 2,470  2,734  3,651  Changes in operating assets and liabilities: Tenant security deposits and other restricted cash (6,612) (3,037) 3,508  Tenant receivables (573) 672  482  Deferred rent (11,671) (6,826) (5,470) Other assets (18,261) (10,828) (12,942) Accounts payable, accrued expenses and tenant security deposits (905) 31  (2,998) Net cash provided by operating activities 67,752 74,847  67,050  INVESTING ACTIVITIES Purchase of rental properties (251,091) (48,729) (103,295) Proceeds from sales of rental properties 5,454 42,376  - Additions to rental properties (70,248) (48,264) (61,695) Additions to properties under development (129,620) (78,327) (48,479) Additions to investments, net (5,183) (6,866) (14,371) Net cash used in investing activities (450,688) (139,810) (227,840) C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S Alexandria Real Estate Equities, Inc. and Subsidiaries