e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2008
Commission file
number: 1-32261
BIOMED REALTY TRUST,
INC.
(Exact name of registrant as
specified in its charter)
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Maryland
(State or other jurisdiction
of
incorporation or organization)
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20-1142292
(I.R.S. Employer
Identification No.)
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17190 Bernardo Center Drive
San Diego, California
(Address of Principal
Executive Offices)
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92128
(Zip
Code)
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(858) 485-9840
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.01 Par Value
7.375% Series A Cumulative Redeemable Preferred Stock,
$0.01 Par Value
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New York Stock Exchange
New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act of
1933. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of
1934. Yes o No þ
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act 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 þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of the registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of the 71,411,694 shares of
common stock held by non-affiliates of the registrant was
$1,751,728,854 based upon the last reported sale price of $24.53
per share on the New York Stock Exchange on June 30, 2008,
the last business day of its most recently completed second
quarter.
The number of outstanding shares of the registrants common
stock, par value $0.01 per share, as of February 11, 2009
was 81,110,421.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the registrants Proxy Statement with respect
to its May 27, 2009 Annual Meeting of Stockholders to be
filed not later than 120 days after the end of the
registrants fiscal year are incorporated by reference into
Part III hereof.
BIOMED
REALTY TRUST, INC.
FORM 10-K
ANNUAL REPORT
FOR THE
YEAR ENDED DECEMBER 31, 2008
TABLE OF
CONTENTS
1
PART I
Forward-Looking
Statements
We make statements in this report that are forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of
the Securities Act of 1933, as amended, or the Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act). In particular, statements
pertaining to our capital resources, portfolio performance and
results of operations contain forward-looking statements.
Likewise, our statements regarding anticipated growth in our
funds from operations and anticipated market conditions,
demographics and results of operations are forward-looking
statements. Forward-looking statements involve numerous risks
and uncertainties, and you should not rely on them as
predictions of future events. Forward-looking statements depend
on assumptions, data or methods which may be incorrect or
imprecise, and we may not be able to realize them. We do not
guarantee that the transactions and events described will happen
as described (or that they will happen at all). You can identify
forward-looking statements by the use of forward-looking
terminology such as believes, expects,
may, will, should,
seeks, approximately,
intends, plans, estimates or
anticipates or the negative of these words and
phrases or similar words or phrases. You can also identify
forward-looking statements by discussions of strategy, plans or
intentions. The following factors, among others, could cause
actual results and future events to differ materially from those
set forth or contemplated in the forward-looking statements:
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adverse economic or real estate developments in the life science
industry or in our target markets, including the ability of our
tenants to obtain funding to run their businesses,
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our failure to obtain necessary outside financing on favorable
terms or at all, including the continued availability of our
unsecured line of credit,
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general economic conditions, including downturns in the national
and local economies,
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volatility in financial and securities markets,
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defaults on or non-renewal of leases by tenants,
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our ability to compete effectively,
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increased interest rates and operating costs,
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our ability to successfully complete real estate acquisitions,
developments and dispositions,
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risks and uncertainties affecting property development and
construction,
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our failure to successfully operate acquired properties and
operations,
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our failure to maintain our status as a real estate investment
trust, or REIT,
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government approvals, actions and initiatives, including the
need for compliance with environmental requirements, and
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changes in real estate, zoning and other laws and increases in
real property tax rates.
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While forward-looking statements reflect our good faith beliefs,
they are not guarantees of future performance. We disclaim any
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise. For a further discussion of these and other factors
that could impact our future results, performance or
transactions, see the section below entitled Item 1A.
Risk Factors.
General
As used herein, the terms we, us,
our or the Company refer to BioMed
Realty Trust, Inc., a Maryland corporation, and any of our
subsidiaries, including BioMed Realty, L.P., a Maryland limited
partnership (our Operating Partnership), and 201
Industrial Road, L.P., our predecessor. We are a REIT focused on
acquiring,
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developing, owning, leasing and managing laboratory and office
space for the life science industry. Our tenants primarily
include biotechnology and pharmaceutical companies, scientific
research institutions, government agencies and other entities
involved in the life science industry. Our properties are
generally located in markets with well established reputations
as centers for scientific research, including Boston,
San Diego, San Francisco, Seattle, Maryland,
Pennsylvania and New York/New Jersey.
We were incorporated in Maryland on April 30, 2004 and
commenced operations on August 11, 2004, after completing
our initial public offering. As of December 31, 2008, our
portfolio consisted of 69 properties, representing 112 buildings
with an aggregate of approximately 10.4 million rentable
square feet, including 1.4 million square feet of
development in progress. We also owned undeveloped land parcels
adjacent to existing properties that we estimate can support up
to 1.4 million rentable square feet of laboratory and
office space.
Our senior management team has significant experience in the
real estate industry, principally focusing on properties
designed for life science tenants. We operate as a fully
integrated, self-administered and self-managed REIT, providing
property management, leasing, development and administrative
services to our properties. As of February 12, 2009, we had
126 employees.
Our principal offices are located at 17190 Bernardo Center
Drive, San Diego, California 92128. Our telephone number at
that location is
(858) 485-9840.
Our website is located at www.biomedrealty.com. We make
available through our website our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to such reports filed or furnished pursuant to
Sections 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange
Commission. You can also access on our website our Code of
Business Conduct and Ethics, Corporate Governance Guidelines,
Audit Committee Charter, Compensation Committee Charter, and
Nominating and Corporate Governance Committee Charter.
2008
Highlights
Leasing
During 2008, we executed 46 leasing transactions representing
approximately 848,000 square feet, including 28 new leases
totaling approximately 527,000 square feet and 18 leases
amended to extend their terms, totaling approximately
321,000 square feet.
On April 14, 2008, we signed a new lease with Revance
Therapeutics, Inc. for approximately 90,000 square feet at
the Pacific Research Center in Newark, California.
On April 29, 2008, we signed a new ten-year lease with
DayStar Technologies, Inc. for approximately 144,000 square
feet of office and manufacturing space at our Pacific Research
Center in Newark, California.
On September 30, 2008, we amended an existing lease with
Regeneron Pharmaceuticals, Inc. for approximately
91,000 square feet at our Landmark at Eastview property in
New York. Under the amended lease, which expires in 2024,
Regeneron expanded their total long-term commitment at our
Landmark at Eastview property to over 348,000 square feet.
On October 22, 2008, we signed a new lease with a wholly
owned subsidiary of Novo Nordisk A/S for approximately
36,900 square feet of office and laboratory space at our
530 Fairview Avenue property in Seattle.
On November 17, 2008, we amended an existing lease with
Childrens Hospital Corporation, under which
Childrens Hospital Corporation agreed to take 49,286
additional square feet, bringing their total occupancy at our
Center for Life
Science | Boston
property to 150,215 square feet.
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Development
During 2008, we substantially completed core and shell
construction of approximately 1.2 million rentable square
feet of laboratory and office space, which was 81.1% leased or
pre-leased at December 31, 2008, at the following
properties:
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Rentable
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Percent
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Percent
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Property
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Square Feet
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In-Service
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Leased
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Center for Life
Science | Boston
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704,159
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87.1
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%
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87.1
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%
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530 Fairview Avenue
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96,188
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27.5
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65.9
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%
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Landmark at Eastview II
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360,520
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69.2
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9865 Towne Centre Drive
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83,866
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100.0
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%
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100.0
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%
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Total/Weighted-Average
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1,244,733
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58.1
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81.1
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%
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Financings
On February 13, 2008, a wholly owned subsidiary of one of
our joint ventures with Prudential Real Estate Investors, or
PREI, entered into a secured construction loan facility with
Wachovia Bank, National Association and certain other lenders to
provide borrowings of up to approximately $245.0 million in
connection with the construction of 650 East Kendall Street
(Kendall B), a life sciences building located in Cambridge,
Massachusetts. Proceeds from the secured construction loan were
used in part to repay a portion of the secured acquisition and
interim loan facility held by the PREI joint ventures and is
also being used to fund the balance of the cost to complete
construction of the project. In addition, on February 19,
2008, the PREI joint ventures extended the term of their secured
acquisition and interim loan facility by one year to
April 3, 2009, with no additional changes to the pricing or
terms of the facility. A portion of the secured acquisition and
interim loan facility was refinanced on February 11, 2009,
with a new maturity date of February 10, 2011 (the maturity
date may be further extended to February 10, 2012 after
satisfying certain conditions and paying an extension fee).
On April 22, 2008, we completed the issuance of
6,129,000 shares of common stock, including the exercise of
an over-allotment option of 429,000 shares, resulting in
net proceeds of approximately $149.6 million.
On October 6, 2008, we completed the issuance of
8,625,000 shares of common stock, including the exercise of
an over-allotment option of 1,125,000 shares, resulting in
net proceeds of approximately $212.4 million.
In November 2008, we completed the repurchase of approximately
$46.8 million face value of our exchangeable senior notes
for approximately $28.8 million.
Acquisitions
and Dispositions
On January 28, 2008, we completed the purchase of our 500
Fairview Avenue property, an approximately 22,000 square
foot building in Seattle, Washington for approximately
$4.0 million. The property is currently fully leased, and
we intend to redevelop it for life science use.
On June 2, 2008, we completed the purchase of the remaining
30% interest in the limited liability company that owns our
Waples Street property in San Diego for approximately
$1.8 million.
On October 3, 2008, we sold a portion of the parking spaces
at our Center for Life
Science | Boston
garage for approximately $28.8 million pursuant to an
agreement we assumed in connection with the acquisition of the
property in November 2006.
On October 14, 2008, we completed the purchase of the
remaining 30% interest in the limited liability company that
owns our 530 Fairview Avenue property in Seattle for
approximately $2.6 million.
Senior
Management
On April 14, 2008, we hired John Bonanno as Vice President,
Development.
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On December 15, 2008, we promoted Kent Griffin to the
position of President and Chief Operating Officer.
Mr. Griffin has served and continues to serve as our Chief
Financial Officer since March 2006. We also promoted Jonathan P.
Klassen to the position of Vice President, Legal and Secretary,
and Kevin M. Simonsen to the position of Vice President, Real
Estate Counsel.
Dividends
During 2008, we declared aggregate dividends on our common stock
of $1.34 per common share and aggregate dividends on our
preferred stock of $1.84376 per preferred share.
Growth
Strategy
Our success and future growth potential are based upon the
specialized real estate opportunities within the life science
industry. Our growth strategy is designed to meet the sizable
demand and specialized requirements of life science tenants by
leveraging the knowledge and expertise of a management team
focused on serving this large and growing industry.
Our internal growth strategy includes:
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negotiating leases with contractual rental rate increases in
order to provide predictable and consistent earnings growth,
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creating strong relationships with our tenants to enable us to
identify and capitalize on opportunities to renew or extend
existing leases or to provide expansion space,
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redeveloping currently owned non-laboratory space into higher
yielding laboratory facilities, and
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developing new laboratory and office space on land we have
acquired for development.
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Our external growth strategy includes:
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acquiring well-located properties leased to high-quality life
science tenants with attractive in-place yields and long-term
growth potential,
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investing in properties with leasing opportunities, capitalizing
on our industry relationships to enter into new leases, and
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investing in redevelopment and development projects,
capitalizing on our development platform that we believe will
serve as an additional catalyst for future growth.
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Target
Markets
Our target markets Boston, San Diego,
San Francisco, Seattle, Maryland, Pennsylvania, New
York/New Jersey and research parks near or adjacent to
universities have emerged as the primary hubs for
research, development and production in the life science
industry. Each of these markets benefits from the presence of
mature life science companies, which provide scale and stability
to the market, as well as academic and university environments
and government entities to contribute innovation, research,
personnel and capital to the private sector. In addition, the
clustered research environments within these target markets
typically provide a high quality of life for the research
professionals and a fertile ground for new life science ideas
and ventures.
Positive
Life Science Industry Trends
We expect continued long-term growth in the life science
industry due to several factors:
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the aging of the U.S. population resulting from the
transition of baby boomers to senior citizens, which has
increased the demand for new drugs and health care treatment
alternatives to extend, improve and enhance their quality of
life,
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the high level of research and development expenditures, as
represented by a Pharmaceutical Research and Manufacturers of
America (PhRMA) survey indicating that research and development
spending by its
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members climbed to a record $44.5 billion in 2007 from
$43.4 billion in the prior year, and when combined with
non-member companies, totaled a record $58.8 billion in
2007, and
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escalating health care costs, which drive the demand for better
drugs, less expensive treatments and more services in an attempt
to manage such costs.
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We are uniquely positioned to benefit from these favorable
long-term dynamics through the demand for space for research,
development and production by our life science industry tenants.
Experienced
Management
We have created and continue to develop a premier life science
real estate-oriented management team, dedicated to maximizing
current and long-term returns for our stockholders. Our
executive officers have acquired, developed, financed, owned,
leased or managed in excess of $4.3 billion in life science
real estate. Through this experience, our management team has
established extensive industry relationships among life science
tenants, property owners and real estate brokers. In addition,
our experienced independent board members provide management
with a broad range of knowledge in real estate, the sciences,
life science company operations, and large public company
finance and management.
Regulation
General
Our properties are subject to various laws, ordinances and
regulations, including regulations relating to common areas. We
believe that we have the necessary permits and approvals to
operate each of our properties.
Americans
with Disabilities Act
Our properties must comply with Title III of the Americans
with Disabilities Act, or ADA, to the extent that such
properties are public accommodations as defined by
the ADA. The ADA may require removal of structural barriers to
access by persons with disabilities in certain public areas of
our properties where such removal is readily achievable. We
believe that our properties are in substantial compliance with
the ADA and that we will not be required to make substantial
capital expenditures to address the requirements of the ADA. The
tenants are generally responsible for any additional amounts
required to conform their construction projects to the ADA.
However, noncompliance with the ADA could result in imposition
of fines or an award of damages to private litigants. The
obligation to make readily achievable accommodations is an
ongoing one, and we will continue to assess our properties and
to make alterations as appropriate in this respect.
Environmental
Matters
Under various federal, state and local environmental laws and
regulations, a current or previous owner, operator or tenant of
real estate may be required to investigate and remediate
releases or threats of releases of hazardous or toxic substances
or petroleum products at such property, and may be held liable
for property damage, personal injury damages and investigation,
clean-up and
monitoring costs incurred in connection with the actual or
threatened contamination. Such laws typically impose
clean-up
responsibility and liability without regard to fault, or whether
the owner, operator or tenant knew of or caused the presence of
the contamination. The liability under such laws may be joint
and several for the full amount of the investigation,
clean-up and
monitoring costs incurred or to be incurred or actions to be
undertaken, although a party held jointly and severally liable
may obtain contributions from the other identified, solvent,
responsible parties of their fair share toward these costs.
These costs may be substantial, and can exceed the value of the
property. The presence of contamination, or the failure to
properly remediate contamination, on a property may adversely
affect the ability of the owner, operator or tenant to sell or
rent that property or to borrow using such property as
collateral, and may adversely impact our investment in that
property.
Federal asbestos regulations and certain state laws and
regulations require building owners and those exercising control
over a buildings management to identify and warn, via
signs, labels or other notices, of potential hazards posed by
the actual or potential presence of asbestos-containing
materials, or ACMs, in their
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building. The regulations also set forth employee training,
record-keeping and due diligence requirements pertaining to ACMs
and potential ACMs. Significant fines can be assessed for
violating these regulations. Building owners and those
exercising control over a buildings management may be
subject to an increased risk of personal injury lawsuits by
workers and others exposed to ACMs and potential ACMs as a
result of these regulations. The regulations may affect the
value of a building containing ACMs and potential ACMs in which
we have invested. Federal, state and local laws and regulations
also govern the removal, encapsulation, disturbance, handling
and/or
disposal of ACMs and potential ACMs when such materials are in
poor condition or in the event of construction, remodeling,
renovation or demolition of a building. Such laws may impose
liability for improper handling or a release to the environment
of ACMs and potential ACMs and may provide for fines to, and for
third parties to seek recovery from, owners or operators of real
properties for personal injury or improper work exposure
associated with ACMs and potential ACMs. See Risk
Factors Risks Related to the Real Estate
Industry We could incur significant costs related to
governmental regulation and private litigation over
environmental matters involving asbestos-containing materials,
which could adversely affect our operations, the value of our
properties, and our ability to make distributions to our
stockholders under Item 1A. below.
Federal, state and local environmental laws and regulations also
require removing or upgrading certain underground storage tanks
and regulate the discharge of storm water, wastewater and other
pollutants; the emission of air pollutants; the generation,
management and disposal of hazardous or toxic chemicals,
substances or wastes; and workplace health and safety. Life
science industry tenants, including certain of our tenants,
engage in various research and development activities involving
the controlled use of hazardous materials, chemicals, biological
and radioactive compounds. Although we believe that the
tenants activities involving such materials comply in all
material respects with applicable laws and regulations, the risk
of contamination or injury from these materials cannot be
completely eliminated. In the event of such contamination or
injury, we could be held liable for any damages that result, and
any such liability could exceed our resources and our
environmental remediation insurance coverage. Licensing
requirements governing use of radioactive materials by tenants
may also restrict the use of or ability to transfer space in
buildings we own. See Risk Factors Risks
Related to the Real Estate Industry We could incur
significant costs related to government regulation and private
litigation over environmental matters involving the presence,
discharge or threat of discharge of hazardous or toxic
substances, which could adversely affect our operations, the
value of our properties, and our ability to make distributions
to our stockholders under Item 1A. below.
In addition, our leases generally provide that (1) the
tenant is responsible for all environmental liabilities relating
to the tenants operations, (2) we are indemnified for
such liabilities and (3) the tenant must comply with all
environmental laws and regulations. Such a contractual
arrangement, however, does not eliminate our statutory liability
or preclude claims against us by governmental authorities or
persons who are not parties to such an arrangement.
Noncompliance with environmental or health and safety
requirements may also result in the need to cease or alter
operations at a property, which could affect the financial
health of a tenant and its ability to make lease payments. In
addition, if there is a violation of such a requirement in
connection with a tenants operations, it is possible that
we, as the owner of the property, could be held accountable by
governmental authorities (or other injured parties) for such
violation and could be required to correct the violation and pay
related fines. In certain situations, we have agreed to
indemnify tenants for conditions preceding their lease term, or
that do not result from their operations.
Prior to closing any property acquisition, we obtain
environmental assessments in a manner we believe prudent in
order to attempt to identify potential environmental concerns at
such properties. These assessments are carried out in accordance
with an appropriate level of due diligence and generally include
a physical site inspection, a review of relevant federal, state
and local environmental and health agency database records, one
or more interviews with appropriate site-related personnel,
review of the propertys chain of title and review of
historic aerial photographs and other information on past uses
of the property. We may also conduct limited subsurface
investigations and test for substances of concern where the
results of the first phase of the environmental assessments or
other information indicate possible contamination or where our
consultants recommend such procedures.
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While we may purchase our properties on an as is
basis, most of our purchase contracts contain an environmental
contingency clause, which permits us to reject a property
because of any environmental hazard at such property. We receive
environmental reports on all prospective properties.
We believe that our properties comply in all material respects
with all federal and state regulations regarding hazardous or
toxic substances and other environmental matters.
Insurance
We carry comprehensive general liability, fire and extended
coverage, terrorism and loss of rental income insurance covering
all of our properties under a blanket portfolio policy, with the
exception of property insurance on our McKellar Court and
Science Center Drive properties in San Diego and 9911
Belward Campus Drive and Shady Grove Road properties in
Maryland, which is carried directly by the tenants in accordance
with the terms of their respective leases, and builders
risk policies for any projects under construction. In addition,
we carry workers compensation coverage for injury to our
employees. We believe the policy specifications and insured
limits are adequate given the relative risk of loss, cost of the
coverage and standard industry practice. We also carry
environmental remediation insurance for our properties. This
insurance, subject to certain exclusions and deductibles, covers
the cost to remediate environmental damage caused by
unintentional future spills or the historic presence of
previously undiscovered hazardous substances, as well as
third-party bodily injury and property damage claims related to
the release of hazardous substances. We intend to carry similar
insurance with respect to future acquisitions as appropriate. A
substantial portion of our properties are located in areas
subject to earthquake loss, such as San Diego and
San Francisco, California and Seattle, Washington. Although
we presently carry earthquake insurance on our properties, the
amount of earthquake insurance coverage we carry may not be
sufficient to fully cover losses from earthquakes. In addition,
we may discontinue earthquake, terrorism or other insurance, or
may elect not to procure such insurance, on some or all of our
properties in the future if the cost of the premiums for any of
these policies exceeds, in our judgment, the value of the
coverage discounted for the risk of loss. See Risk
Factors Risks Related to the Real Estate
Industry Uninsured and underinsured losses could
adversely affect our operating results and our ability to make
distributions to our stockholders under Item 1A.
below.
Competition
We face competition from various entities for investment
opportunities in properties for life science tenants, including
other REITs, such as health care REITs and suburban office
property REITs, pension funds, insurance companies, investment
funds and companies, partnerships, and developers. Because
properties designed for life science tenants typically contain
improvements that are specific to tenants operating in the life
science industry, we believe that we will be able to maximize
returns on investments as a result of:
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our expertise in understanding the real estate needs of life
science industry tenants,
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our ability to identify, acquire and develop properties with
generic laboratory infrastructure that appeal to a wide range of
life science industry tenants, and
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our expertise in identifying and evaluating life science
industry tenants.
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However, some of our competitors have greater financial
resources than we do and may be able to accept more risks,
including risks with respect to the creditworthiness of a tenant
or the geographic proximity of its investments. In the future,
competition from these entities may reduce the number of
suitable investment opportunities offered to us or increase the
bargaining power of property owners seeking to sell. Further, as
a result of their greater resources, those entities may have
more flexibility than we do in their ability to offer rental
concessions to attract tenants. These concessions could put
pressure on our ability to maintain or raise rents and could
adversely affect our ability to attract or retain tenants.
Additionally, our ability to compete depends upon, among other
factors, trends of the national and local economies, investment
alternatives, financial condition and operating results of
current and prospective tenants, availability and cost of
capital, construction and renovation costs, taxes, governmental
regulations, legislation and population trends.
8
Foreign
Operations
We do not engage in any foreign operations or derive any revenue
from foreign sources.
For purposes of this section, the term stockholders
means the holders of shares of our common stock and our
preferred stock.
Risks
Related to Our Properties, Our Business and Our Growth
Strategy
Because we lease our properties to a limited number of
tenants, and to the extent we depend on a limited number of
tenants in the future, the inability of any single tenant to
make its lease payments could adversely affect our business and
our ability to make distributions to our stockholders.
As of December 31, 2008, we had 124 tenants in 69 total
properties. Two of our tenants, Human Genome Sciences and Vertex
Pharmaceuticals, represented 15.0% and 10.5%, respectively, of
our annualized base rent as of December 31, 2008, and 11.9%
and 8.9%, respectively, of our total leased rentable square
footage. While we evaluate the creditworthiness of our tenants
by reviewing available financial and other pertinent
information, there can be no assurance that any tenant will be
able to make timely rental payments or avoid defaulting under
its lease. If a tenant defaults, we may experience delays in
enforcing our rights as landlord and may incur substantial costs
in protecting our investment.
In addition, certain of our life science tenants are development
stage companies, which have a history of recurring losses from
operations as they have devoted substantially all of their
efforts to developing and completing clinical trials for various
drug candidates. The development and approval process for these
drug candidates is uncertain and lengthy, and often requires
significant external access to capital. The sources of this
capital have historically included the capital markets; funding
through private and public agencies; and partnering, licensing
and other arrangements with larger pharmaceutical, healthcare
and biotechnology companies. The current economic environment
has significantly impacted the ability of these companies to
access the capital markets, including both equity financing
through public offerings and debt financing. The pace of venture
capital funding has also declined from previous levels, further
restricting access to capital for these companies. In addition,
state and federal government budgets have been negatively
impacted by the current economic environment and, as a result
certain programs, including grants related to biotechnology
research and development, may be at risk of being eliminated or
cut back significantly. Furthermore, partnering opportunities
with more established companies, as well as governmental agency
and university grants, have become more limited in the current
economic environment. If funding sources for these companies
remain significantly constrained, these companies may be forced
to curtail or suspend their operations, and may default on their
obligations to third parties, including their obligations to pay
rent.
Our revenue and cash flow, and consequently our ability to make
cash distributions to our stockholders, could be materially
adversely affected if any of our significant tenants were to
become bankrupt or insolvent, suffer a downturn in their
business, curtail or suspend their operations, or fail to renew
their leases at all or renew on terms less favorable to us than
their current terms.
Tenants in the life science industry face high levels of
regulation, expense and uncertainty that may adversely affect
their ability to pay us rent and consequently adversely affect
our business.
Life science entities comprise the vast majority of our tenant
base. Because of our dependence on a single industry, adverse
conditions affecting that industry will more adversely affect
our business, and thus our ability to make distributions to our
stockholders, than if our business strategy included a more
diverse tenant base. Life science industry tenants, particularly
those involved in developing and marketing drugs and drug
delivery technologies, fail from time to time as a result of
various factors. Many of these factors are particular to the
life science industry. For example:
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As discussed above, our tenants require significant outlays of
funds for the research and development and clinical testing of
their products and technologies. If private investors, the
government, public markets or other sources of funding are
unavailable to support such development, a tenants
business may fail.
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The research and development, clinical testing, manufacture and
marketing of some of our tenants products require federal,
state and foreign regulatory approvals. The approval process is
typically long, expensive and uncertain. Even if our tenants
have sufficient funds to seek approvals, one or all of their
products may fail to obtain the required regulatory approvals on
a timely basis or at all. Furthermore, our tenants may only have
a small number of products under development. If one product
fails to receive the required approvals at any stage of
development, it could significantly adversely affect our
tenants entire business and its ability to pay rent.
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Our tenants with marketable products may be adversely affected
by health care reform efforts and the reimbursement policies of
government or private health care payers.
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Our tenants may be unable to adequately protect their
intellectual property under patent, copyright or trade secret
laws. Failure to do so could jeopardize their ability to profit
from their efforts and to protect their products from
competition.
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Collaborative relationships with other life science entities may
be crucial to the development, manufacturing, distribution or
marketing of our tenants products. If these other entities
fail to fulfill their obligations under these collaborative
arrangements, our tenants businesses will suffer.
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We cannot assure you that our tenants in the life science
industry will be successful in their businesses. If our
tenants businesses are adversely affected, they may have
difficulty paying us rent.
The bankruptcy of a tenant may adversely affect the income
produced by and the value of our properties.
The bankruptcy or insolvency of a tenant may adversely affect
the income produced by our properties. If any tenant becomes a
debtor in a case under the Bankruptcy Code, we cannot evict the
tenant solely because of the bankruptcy. The bankruptcy court
also might authorize the tenant to reject and terminate its
lease with us, which would generally result in any unpaid,
pre-bankruptcy rent being treated as an unsecured claim. In
addition, our claim against the tenant for unpaid, future rent
would be subject to a statutory cap equal to the greater of
(1) one year of rent or (2) 15% of the remaining rent
on the lease (not to exceed three years of rent). This cap might
be substantially less than the remaining rent actually owed
under the lease. Additionally, a bankruptcy court may require us
to turn over to the estate all or a portion of any deposits,
amounts in escrow, or prepaid rents. Our claim for unpaid,
pre-bankruptcy rent, our lease termination damages and claims
relating to damages for which we hold deposits or other amounts
that we were forced to repay would likely not be paid in full.
We may be unable to acquire, develop or operate new
properties successfully, which could harm our financial
condition and ability to pay distributions to our
stockholders.
We continue to evaluate the market for available properties and
may acquire office, laboratory and other properties when
opportunities exist. We also may develop or substantially
renovate office and other properties. Acquisition, development
and renovation activities are subject to significant risks,
including:
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we may be unable to obtain financing on favorable terms (or at
all), including continued access to our unsecured line of credit,
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changing market conditions, including competition from others,
may diminish our opportunities for acquiring a desired property
on favorable terms or at all. Even if we enter into agreements
for the acquisition of properties, these agreements are subject
to customary conditions to closing, including completion of due
diligence investigations to our satisfaction,
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we may spend more time or money than we budget to improve or
renovate acquired properties or to develop new properties,
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we may be unable to quickly and efficiently integrate new
properties, particularly if we acquire portfolios of properties,
into our existing operations,
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we may fail to obtain the financial results expected from the
properties we acquire or develop, making them unprofitable or
less profitable than we had expected,
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market and economic conditions may result in higher than
expected vacancy rates and lower than expected rental rates,
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we may fail to retain tenants that have pre-leased our
properties under development if we do not complete the
construction of these properties in a timely manner or to the
tenants specifications,
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we have a limited history in conducting
ground-up
construction activities,
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if we develop properties, we may encounter delays or refusals in
obtaining all necessary zoning, land use, building, occupancy
and other required governmental permits and authorizations,
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acquired and developed properties may have defects we do not
discover through our inspection processes, including latent
defects that may not reveal themselves until many years after we
put a property in service, and
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we may acquire land, properties or entities owning properties,
which are subject to liabilities and for which, in the case of
unknown liabilities, we may have limited or no recourse.
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As of December 31, 2008, four of the properties we owned or
had interests in were under development, constituting
approximately 1.4 million square feet, and two additional
properties were under redevelopment, constituting approximately
1.5 million square feet. As a result of these projects, we
may face increased risk with respect to our development and
redevelopment activities.
The realization of any of the above risks could significantly
and adversely affect our financial condition, results of
operations, cash flow, per share trading price of our
securities, ability to satisfy our debt service obligations and
ability to pay distributions to our stockholders.
Because particular upgrades are required for life science
tenants, improvements to our properties involve greater
expenditures than traditional office space, which costs may not
be covered by the rents our tenants pay.
The improvements generally required for our properties
infrastructure are more costly than for other property types.
Typical infrastructural improvements include the following:
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reinforced concrete floors,
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upgraded roof structures for greater load capacity,
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increased floor-to-ceiling clear heights,
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heavy-duty HVAC systems,
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enhanced environmental control technology,
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significantly upgraded electrical, gas and plumbing
infrastructure, and
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laboratory benchwork.
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Our tenants generally pay higher rent on our properties than
tenants in traditional office space. However, we cannot assure
you that our tenants will continue to do so in the future or
that the rents paid will cover the additional costs of upgrading
the properties.
Because of the unique and specific improvements required for
our life science tenants, we may be required to incur
substantial renovation costs to make our properties suitable for
other life science tenants or other office tenants, which could
adversely affect our operating performance.
We acquire or develop properties that include laboratory space
and other features that we believe are generally desirable for
life science industry tenants. However, different life science
industry tenants may require different features in their
properties, depending on each tenants particular focus
within the life science industry. If a current tenant is unable
to pay rent and vacates a property, we may incur substantial
expenditures to modify the property before we are able to
re-lease the space to another life science industry tenant. This
could hurt our operating
11
performance and the value of your investment. Also, if the
property needs to be renovated to accommodate multiple tenants,
we may incur substantial expenditures before we are able to
re-lease the space.
Additionally, our properties may not be suitable for lease to
traditional office tenants without significant expenditures or
renovations. Accordingly, any downturn in the life science
industry may have a substantial negative impact on our
properties values.
Our success depends on key personnel with extensive
experience dealing with the real estate needs of life science
tenants, and the loss of these key personnel could threaten our
ability to operate our business successfully.
Our future success depends, to a significant extent, on the
continued services of our management team. In particular, we
depend on the efforts of Alan D. Gold, our Chairman and Chief
Executive Officer, Mr. Griffin, our President, Chief
Operating Officer and Chief Financial Officer, Gary A. Kreitzer,
our Executive Vice President and General Counsel, and Matthew G.
McDevitt, our Executive Vice President, Acquisitions and
Leasing. Among the reasons that Messrs. Gold, Griffin,
Kreitzer and McDevitt are important to our success are that they
have extensive real estate and finance experience, and strong
reputations within the life science industry. Our management
team has developed informal relationships through past business
dealings with numerous members of the scientific community, life
science investors, current and prospective life science industry
tenants, and real estate brokers. We expect that their
reputations will continue to attract business and investment
opportunities before the active marketing of properties and will
assist us in negotiations with lenders, existing and potential
tenants, and industry personnel. If we lost their services, our
relationships with such lenders, existing and prospective
tenants, and industry personnel could suffer. We have entered
into employment agreements with each of Messrs. Gold,
Griffin, Kreitzer and McDevitt, but we cannot guarantee that
they will not terminate their employment prior to the end of the
term.
We face risks associated with property acquisitions.
In addition to the 13 properties we acquired in connection with
our initial public offering in August 2004, as of
December 31, 2008, we had acquired or had acquired an
interest in an additional 56 properties (net of property
dispositions). We continue to evaluate the market of available
properties and may acquire properties when strategic
opportunities exist. We may not be able to quickly and
efficiently integrate any properties that we acquire into our
organization and manage and lease the new properties in a way
that allows us to realize the financial returns that we expect.
In addition, we may incur unanticipated costs to make necessary
improvements or renovations to acquired properties. Furthermore,
our efforts to integrate new property acquisitions may divert
managements attention away from or cause disruptions to
the operations at our existing properties. If we fail to
successfully operate new acquisitions or integrate them into our
portfolio, or if newly acquired properties fail to perform as we
expect, our results of operations, financial condition and
ability to pay distributions could suffer.
The geographic concentration of our properties in Boston,
Maryland and California makes our business particularly
vulnerable to adverse conditions affecting these markets.
Eighteen of our properties are located in the Boston area.
As of December 31, 2008, these properties represented 40.4%
of our annualized base rent and 27.6% of our total rentable
square footage. Five of our properties are located in Maryland.
As of December 31, 2008, these properties represented 16.7%
of our annualized base rent and 11.0% of our total rentable
square footage. In addition, 27 of our properties are located in
California, with 16 in San Diego and eleven in
San Francisco. As of December 31, 2008, these
properties represented 22.0% of our annualized base rent and
36.1% of our total rentable square footage. Because of this
concentration in three geographic regions, we are particularly
vulnerable to adverse conditions affecting Boston, Maryland and
California, including general economic conditions, increased
competition, a downturn in the local life science industry, real
estate conditions, terrorist attacks, earthquakes and wildfires
and other natural disasters occurring in these regions. In
addition, we cannot assure you that these markets will continue
to grow or remain favorable to the life science industry. The
performance of the life science industry and the economy in
general in these geographic markets may affect occupancy, market
rental rates and expenses, and thus may affect our performance
and the value of our properties. We are also subject to greater
risk of loss from earthquakes or wildfires because of our
properties concentration in California. The close
proximity of our eleven properties in San Francisco to a
fault line makes them
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more vulnerable to earthquakes than properties in many other
parts of the country. Likewise, the wildfires occurring in the
San Diego area, most recently in 2003 and in 2007, may make
the 16 properties we own in the San Diego area more
vulnerable to fire damage or destruction than properties in many
other parts of the country.
Our tax indemnification and debt maintenance obligations
require us to make payments if we sell certain properties or
repay certain debt, which could limit our operating
flexibility.
In our formation transactions, certain of our executive
officers, Messrs. Gold, Kreitzer and McDevitt, and certain
other individuals contributed six properties to our Operating
Partnership. If we were to dispose of these contributed assets
in a taxable transaction, Messrs. Gold, Kreitzer and
McDevitt and the other contributors of those assets would suffer
adverse tax consequences. In connection with these contribution
transactions, we agreed to indemnify those contributors against
such adverse tax consequences for a period of ten years. This
indemnification will help those contributors to preserve their
tax positions after their contributions. The tax indemnification
provisions were not negotiated in an arms length
transaction but were determined by our management team. We have
also agreed to use reasonable best efforts consistent with our
fiduciary duties to maintain at least $8.0 million of debt,
some of which must be property specific, that the contributors
can guarantee in order to defer any taxable gain they may incur
if our Operating Partnership repays existing debt. These tax
indemnification and debt maintenance obligations may affect the
way in which we conduct our business. During the indemnification
period, these obligations may impact the timing and
circumstances under which we sell the contributed properties or
interests in entities holding the properties. For example, these
tax indemnification payments could effectively reduce or
eliminate any gain we might otherwise realize upon the sale or
other disposition of the related properties. Accordingly, even
if market conditions might otherwise dictate that it would be
desirable to dispose of these properties, the existence of the
tax indemnification obligations could result in a decision to
retain the properties in our portfolio to avoid having to pay
the tax indemnity payments. The existence of the debt
maintenance obligations could require us to maintain debt at a
higher level than we might otherwise choose. Higher debt levels
could adversely affect our ability to make distributions to our
stockholders.
While we may seek to enter into tax-efficient joint ventures
with third-party investors, we currently have no intention of
disposing of these properties or interests in entities holding
the properties in transactions that would trigger our tax
indemnification obligations. The involuntary condemnation of one
or more of these properties during the indemnification period
could, however, trigger the tax indemnification obligations
described above. The tax indemnity would equal the amount of the
federal and state income tax liability the contributor would
incur with respect to the gain allocated to the contributor. The
calculation of the indemnity payment would not be reduced due to
the time value of money or the time remaining within the
indemnification period. The terms of the contribution agreements
also require us to gross up the tax indemnity payment for the
amount of income taxes due as a result of the tax indemnity
payment. Messrs. Gold, Kreitzer and McDevitt are potential
recipients of these indemnification payments. Because of these
potential payments their personal interests may diverge from
those of our stockholders.
Future acts of terrorism or war or the risk of war may have a
negative impact on our business.
The continued threat of terrorism and the potential for military
action and heightened security measures in response to this
threat may cause significant disruption to commerce. There can
be no assurance that the armed hostilities will not escalate or
that these terrorist attacks, or the United States
responses to them, will not lead to further acts of terrorism
and civil disturbances, which may further contribute to economic
instability. Any armed conflict, civil unrest or additional
terrorist activities, and the attendant political instability
and societal disruption, may adversely affect our results of
operations, financial condition and future growth.
Risks
Related to the Real Estate Industry
Our performance and value are subject to risks associated
with the ownership and operation of real estate assets and with
factors affecting the real estate industry.
Our ability to make expected distributions to our stockholders
depends on our ability to generate revenues in excess of
expenses, our scheduled principal payments on debt and our
capital expenditure requirements. Events and
13
conditions that are beyond our control may decrease our cash
available for distribution and the value of our properties.
These events include:
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local oversupply, increased competition or reduced demand for
life science office and laboratory space,
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inability to collect rent from tenants,
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vacancies or our inability to rent space on favorable terms,
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increased operating costs, including insurance premiums,
utilities and real estate taxes,
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the ongoing need for capital improvements, particularly in older
structures,
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unanticipated delays in the completion of our development or
redevelopment projects,
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costs of complying with changes in governmental regulations,
including tax laws,
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the relative illiquidity of real estate investments,
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changing submarket demographics, and
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civil unrest, acts of war and natural disasters, including
earthquakes, floods and fires, which may result in uninsured and
underinsured losses.
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In addition, we could experience a general decline in rents or
an increased incidence of defaults under existing leases if any
of the following occur:
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the continuation or worsening of the current economic
environment,
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future periods of economic slowdown or recession,
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rising interest rates,
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declining demand for real estate, or
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the public perception that any of these events may occur.
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Any of these events could adversely affect our financial
condition, results of operations, cash flow, per share trading
price of our common stock or preferred stock, ability to satisfy
our debt service obligations and ability to pay distributions to
our stockholders.
Illiquidity of real estate investments may make it difficult
for us to sell properties in response to market conditions and
could harm our financial condition and ability to make
distributions.
Equity real estate investments are relatively illiquid and
therefore will tend to limit our ability to vary our portfolio
promptly in response to changing economic or other conditions.
To the extent the properties are not subject to
triple-net
leases, some significant expenditures such as real estate taxes
and maintenance costs are generally not reduced when
circumstances cause a reduction in income from the investment.
Should these events occur, our income and funds available for
distribution could be adversely affected. If any of the parking
leases or licenses associated with our Cambridge portfolio were
to expire, or if we were unable to assign these leases to a
buyer, it would be more difficult for us to sell these
properties and would adversely affect our ability to retain
current tenants or attract new tenants at these properties. In
addition, as a REIT, we may be subject to a 100% tax on net
income derived from the sale of property considered to be held
primarily for sale to customers in the ordinary course of our
business. We may seek to avoid this tax by complying with
certain safe harbor rules that generally limit the number of
properties we may sell in a given year, the aggregate
expenditures made on such properties prior to their disposition,
and how long we retain such properties before disposing of them.
However, we can provide no assurance that we will always be able
to comply with these safe harbors. If compliance is possible,
the safe harbor rules may restrict our ability to sell assets in
the future and achieve liquidity that may be necessary to fund
distributions.
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We may be unable to renew leases, lease vacant space or
re-lease space as leases expire, which could adversely affect
our business and our ability to pay distributions to our
stockholders.
If we cannot renew leases, we may be unable to re-lease our
properties at rates equal to or above the current rate. Even if
we can renew leases, tenants may be able to negotiate lower
rates as a result of market conditions. Market conditions may
also hinder our ability to lease vacant space in newly developed
or redeveloped properties. In addition, we may enter into or
acquire leases for properties that are specially suited to the
needs of a particular tenant. Such properties may require
renovations, tenant improvements or other concessions in order
to lease them to other tenants if the initial leases terminate.
Any of these factors could adversely impact our financial
condition, results of operations, cash flow, per share trading
price of our common stock or preferred stock, our ability to
satisfy our debt service obligations and our ability to pay
distributions to our stockholders.
Significant competition may decrease or prevent increases in
our properties occupancy and rental rates and may reduce
our investment opportunities.
We face competition from various entities for investment
opportunities in properties for life science tenants, including
other REITs, such as health care REITs and suburban office
property REITs, pension funds, insurance companies, investment
funds and companies, partnerships, and developers. Many of these
entities have substantially greater financial resources than we
do and may be able to accept more risk than we can prudently
manage, including risks with respect to the creditworthiness of
a tenant or the geographic location of its investments. In the
future, competition from these entities may reduce the number of
suitable investment opportunities offered to us or increase the
bargaining power of property owners seeking to sell. Further, as
a result of their greater resources, those entities may have
more flexibility than we do in their ability to offer rental
concessions to attract tenants. This could put pressure on our
ability to maintain or raise rents and could adversely affect
our ability to attract or retain tenants. As a result, our
financial condition, results of operations, cash flow, per share
trading price of our common stock or preferred stock, ability to
satisfy our debt service obligations and ability to pay
distributions to our stockholders may be adversely affected.
Uninsured and underinsured losses could adversely affect our
operating results and our ability to make distributions to our
stockholders.
We carry comprehensive general liability, fire and extended
coverage, terrorism and loss of rental income insurance covering
all of our properties under a blanket portfolio policy, with the
exception of property insurance on our McKellar Court, Science
Center Drive, 9911 Belward Campus Drive and Shady Grove Road
locations, which is carried directly by the tenants in
accordance with the terms of their respective leases, and
builders risk policies for any projects under
construction. In addition, we carry workers compensation
coverage for injury to our employees. We believe the policy
specifications and insured limits are adequate given the
relative risk of loss, cost of the coverage and standard
industry practice. We also carry environmental remediation
insurance for our properties. This insurance, subject to certain
exclusions and deductibles, covers the cost to remediate
environmental damage caused by unintentional future spills or
the historic presence of previously undiscovered hazardous
substances, as well as third-party bodily injury and property
damage claims related to the release of hazardous substances. We
intend to carry similar insurance with respect to future
acquisitions as appropriate. A substantial portion of our
properties are located in areas subject to earthquake loss, such
as San Diego and San Francisco, California and
Seattle, Washington. Although we presently carry earthquake
insurance on our properties, the amount of earthquake insurance
coverage we carry may not be sufficient to fully cover losses
from earthquakes. In addition, we may discontinue earthquake,
terrorism or other insurance, or may elect not to procure such
insurance, on some or all of our properties in the future if the
cost of the premiums for any of these policies exceeds, in our
judgment, the value of the coverage discounted for the risk of
loss.
If we experience a loss that is uninsured or that exceeds policy
limits, we could lose the capital invested in the damaged
properties as well as the anticipated future cash flows from
those properties. In addition, if the damaged properties are
subject to recourse indebtedness, we would continue to be liable
for the indebtedness, even if these properties were irreparably
damaged.
While we evaluate the credit ratings of each of our insurance
companies at the time we enter into or renew our policies, the
financial condition of one or more of these insurance companies
could significantly deteriorate to the
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point that they may be unable to pay future insurance claims.
This risk has increased as a result of the current economic
environment and ongoing disruptions in the financial markets.
The inability of any of these insurance companies to pay future
claims under our policies may adversely affect our financial
condition and results of operations.
We could incur significant costs related to government
regulation and private litigation over environmental matters
involving the presence, discharge or threat of discharge of
hazardous or toxic substances, which could adversely affect our
operations, the value of our properties, and our ability to make
distributions to our stockholders.
Our properties may be subject to environmental liabilities.
Under various federal, state and local laws, a current or
previous owner, operator or tenant of real estate can face
liability for environmental contamination created by the
presence, discharge or threat of discharge of hazardous or toxic
substances. Liabilities can include the cost to investigate,
clean up and monitor the actual or threatened contamination and
damages caused by the contamination (or threatened
contamination). Environmental laws typically impose such
liability on the current owner regardless of:
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the owners knowledge of the contamination,
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the timing of the contamination,
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the cause of the contamination, or
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the party responsible for the contamination.
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The liability under such laws may be strict, joint and several,
meaning that we may be liable regardless of whether we knew of,
or were responsible for, the presence of the contaminants, and
the government entity or private party may seek recovery of the
entire amount from us even if there are other responsible
parties. Liabilities associated with environmental conditions
may be significant and can sometimes exceed the value of the
affected property. The presence of hazardous substances on a
property may adversely affect our ability to sell or rent that
property or to borrow using that property as collateral.
Some of our properties have had contamination in the past that
required cleanup. In most cases, we believe the contamination
has been effectively remediated, and that any remaining
contamination either does not require remediation or that the
costs associated with such remediation will not be material to
us. However, we cannot guarantee that additional contamination
will not be discovered in the future or any identified
contamination will not continue to pose a threat to the
environment or that we will not have continued liability in
connection with such prior contamination. Our Kendall Square
properties, in Cambridge, Massachusetts, are located on the site
of a former manufactured gas plant. Various remedial actions
were performed on these properties, including soil stabilization
to control the spread of oil and hazardous materials in the
soil. Another of our properties, Elliott Avenue, has known soil
contamination beneath a portion of the building located on the
property. Based on environmental consultant reports, management
does not believe any remediation of the Elliott Avenue property
would be required unless major structural changes were made to
the building that resulted in the soil becoming exposed. In
addition, the remediation of certain environmental conditions at
off-site parcels located in Cambridge, Massachusetts, which was
an assumed obligation of our joint venture, PREI II LLC, has
been substantially completed as of December 31, 2008. We do
not expect these matters to materially adversely affect such
properties value or the cash flows related to such
properties, but we can provide no assurances to that effect.
Environmental laws also:
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may require the removal or upgrade of underground storage tanks,
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regulate the discharge of storm water, wastewater and other
pollutants,
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regulate air pollutant emissions,
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regulate hazardous materials generation, management and
disposal, and
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regulate workplace health and safety.
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Life science industry tenants, our primary tenant industry
focus, frequently use hazardous materials, chemicals, heavy
metals, and biological and radioactive compounds. Our
tenants controlled use of these materials subjects us and
our tenants to laws that govern using, manufacturing, storing,
handling and disposing of such materials and certain byproducts
of those materials. We are unaware of any of our existing
tenants violating applicable laws and regulations, but we and
our tenants cannot completely eliminate the risk of
contamination or injury from these materials. If our properties
become contaminated, or if a party is injured, we could be held
liable for any damages that result. Such liability could exceed
our resources and any environmental remediation insurance
coverage we have, which could adversely affect our operations,
the value of our properties, and our ability to make
distributions to our stockholders. Licensing requirements
governing use of radioactive materials by tenants may also
restrict the use of or ability to transfer space in buildings we
own.
We could incur significant costs related to governmental
regulation and private litigation over environmental matters
involving asbestos-containing materials, which could adversely
affect our operations, the value of our properties, and our
ability to make distributions to our stockholders.
Environmental laws also govern the presence, maintenance and
removal of asbestos-containing materials, or ACMs, and may
impose fines and penalties if we fail to comply with these
requirements. Failure to comply with these laws, or even the
presence of ACMs, may expose us to third-party liability. Some
of our properties contain ACMs, and we could be liable for such
fines or penalties, as described above in Item 1.
Business Regulation Environmental
Matters.
Our properties may contain or develop harmful mold, which
could lead to liability for adverse health effects and costs of
remediating the problem, which could adversely affect the value
of the affected property and our ability to make distributions
to our stockholders.
When excessive moisture accumulates in buildings or on building
materials, mold growth may occur, particularly if the moisture
problem remains undiscovered or is not addressed over a period
of time. Some molds may produce airborne toxins or irritants.
Concern about indoor exposure to mold has been increasing
because exposure to mold may cause a variety of adverse health
effects and symptoms, including allergic or other reactions. As
a result, the presence of significant mold at any of our
properties could require us to undertake a costly remediation
program to contain or remove the mold from the affected
property. In addition, the presence of significant mold could
expose us to liability to our tenants, their or our employees,
and others if property damage or health concerns arise.
Compliance with the Americans with Disabilities Act and
similar laws may require us to make significant unanticipated
expenditures.
All of our properties are required to comply with the ADA. The
ADA requires that all public accommodations must meet federal
requirements related to access and use by disabled persons.
Although we believe that our properties substantially comply
with present requirements of the ADA, we have not conducted an
audit of all of such properties to determine compliance. If one
or more properties are not in compliance with the ADA, then we
would be required to bring the offending properties into
compliance. Compliance with the ADA could require removing
access barriers. Non-compliance could result in imposition of
fines by the U.S. government or an award of damages to
private litigants, or both. Additional federal, state and local
laws also may require us to modify properties or could restrict
our ability to renovate properties. Complying with the ADA or
other legislation could be very expensive. If we incur
substantial costs to comply with such laws, our financial
condition, results of operations, cash flow, per share trading
price of our common stock or preferred stock, our ability to
satisfy our debt service obligations and our ability to pay
distributions to our stockholders could be adversely affected.
We may incur significant unexpected costs to comply with
fire, safety and other regulations, which could adversely impact
our financial condition, results of operations, and ability to
make distributions.
Our properties are subject to various federal, state and local
regulatory requirements, such as state and local fire and safety
requirements, building codes and land use regulations. Failure
to comply with these requirements could subject us to
governmental fines or private litigant damage awards. We believe
that our properties are currently in material compliance with
all applicable regulatory requirements. However, we do not know
whether existing requirements will change or whether future
requirements, including any requirements that may emerge from
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pending or future climate change legislation, will require us to
make significant unanticipated expenditures that will adversely
impact our financial condition, results of operations, cash
flow, the per share trading price of our common stock or
preferred stock, our ability to satisfy our debt service
obligations and our ability to pay distributions to our
stockholders.
Risks
Related to Our Capital Structure
Debt obligations expose us to increased risk of property
losses and may have adverse consequences on our business
operations and our ability to make distributions.
We have used and will continue to use debt to finance property
acquisitions. Our use of debt may have adverse consequences,
including the following:
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We may not be able to refinance or extend our existing debt. If
we cannot repay, refinance or extend our debt at maturity, in
addition to our failure to repay our debt, we may be unable to
make distributions to our stockholders at expected levels or at
all.
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Even if we are able to refinance or extend our existing debt,
the terms of any refinancing or extension may not be as
favorable as the terms of our existing debt. If the refinancing
involves a higher interest rate, it could adversely affect our
cash flow and ability to make distributions to stockholders.
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One or more lenders under our $600.0 million unsecured line
of credit could refuse to fund their financing commitment to us
or could fail, and we may not be able to replace the financing
commitment of any such lenders on favorable terms, or at all.
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Required payments of principal and interest may be greater than
our cash flow from operations.
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We may be forced to dispose of one or more of our properties,
possibly on disadvantageous terms, to make payments on our debt.
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If we default on our debt obligations, the lenders or mortgagees
may foreclose on our properties that secure those loans.
Further, if we default under a mortgage loan, we will
automatically be in default on any other loan that has
cross-default provisions, and we may lose the properties
securing all of these loans.
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A foreclosure on one of our properties will be treated as a sale
of the property for a purchase price equal to the outstanding
balance of the secured debt. If the outstanding balance of the
secured debt exceeds our tax basis in the property, we would
recognize taxable income on foreclosure without realizing any
accompanying cash proceeds to pay the tax (or to make
distributions based on REIT taxable income).
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As of December 31, 2008, we had outstanding mortgage
indebtedness of $344.3 million, excluding $8.8 million
of debt premium; $250.0 million of borrowings under our
secured term loan, secured by twelve of our properties;
$2.2 million of mortgage indebtedness, $72.8 million
of borrowings under a secured loan, and $28.7 million of
borrowings under a secured construction loan representing our
proportionate share of indebtedness in our unconsolidated
partnerships; $128.3 million of outstanding aggregate
principal amount of exchangeable senior notes due 2026;
$108.8 million in outstanding borrowings under our
$600.0 million unsecured line of credit; and
$507.1 million in outstanding borrowings under our
$550.0 million secured construction loan, which is secured
by our Center for Life
Science | Boston
property. The secured construction loan matures on
November 16, 2009, but we may extend the maturity date to
November 16, 2010 after satisfying certain conditions and
paying an extension fee. We expect to incur additional debt in
connection with future acquisitions and development. Our
organizational documents do not limit the amount or percentage
of debt that we may incur. As of December 31, 2008, the
principal payments due for our consolidated indebtedness were
$512.2 million in 2009 (including the amounts outstanding
under our secured construction loan), $47.4 million in 2010
and $135.0 million in 2011. In addition, as of
December 31, 2008, our portion of the principal payments
due for our unconsolidated indebtedness relating to our PREI
joint ventures and McKellar Court partnership was
$72.8 million in 2009 and $30.8 million in 2010. The
secured acquisition and interim loan facility held by the PREI
joint ventures originally matured on April 3, 2009, but a
portion of the facility was refinanced on February 11,
2009, with a new maturity date of February 10, 2011. Given
current economic conditions including, but not limited to, the
credit crisis and related turmoil in the global financial
18
system, we may be unable to refinance these obligations when
due, which may negatively affect our ability to conduct
operations.
Recent disruptions in the financial markets and the downturn
of the broader U.S. economy could affect our ability to
obtain debt financing on reasonable terms and have other adverse
effects on us.
The U.S. credit markets in particular continue to
experience significant dislocations and liquidity disruptions
which have caused the spreads on prospective debt financings to
widen considerably. These circumstances have materially impacted
liquidity in the debt markets, making financing terms for
borrowers less attractive, and in certain cases have resulted in
the unavailability of certain types of debt financing. Continued
uncertainty in the credit markets may negatively impact our
ability to access additional debt financing or to refinance
existing debt maturities on favorable terms (or at all), which
may negatively affect our ability to conduct operations, make
acquisitions and fund current and future development and
redevelopment projects. In addition, the financial position of
the lenders under our credit facilities may worsen to the point
that they default on their obligations to make available to us
the funds under those facilities. A prolonged downturn in the
credit markets may cause us to seek alternative sources of
potentially less attractive financing, and may require us to
adjust our business plan accordingly. In addition, these factors
may make it more difficult for us to sell properties or may
adversely affect the price we receive for properties that we do
sell, as prospective buyers may experience increased costs of
debt financing or difficulties in obtaining debt financing.
These events in the credit markets have also had an adverse
effect on other financial markets in the United States and
globally, including the stock markets, which may make it more
difficult or costly for us to raise capital through the issuance
of common stock, preferred stock or other equity securities.
This reduced access to liquidity has had a negative impact on
the U.S. economy, affecting consumer confidence and
spending and negatively impacting the volume and pricing of real
estate transactions. If this downturn in the national economy
were to continue or worsen, the value of our properties, as well
as the income we receive from our properties, could be adversely
affected.
These disruptions in the financial markets may also have other
adverse effects on us or the economy generally, which could
cause our stock price to decline.
We have and may continue to engage in hedging transactions,
which can limit our gains and increase exposure to losses.
We have and may continue to enter into hedging transactions to
protect us from the effects of interest rate fluctuations on
floating rate debt. Our hedging transactions may include
entering into interest rate swap agreements or interest rate cap
or floor agreements, or other interest rate exchange contracts.
Hedging activities may not have the desired beneficial impact on
our results of operations or financial condition. No hedging
activity can completely insulate us from the risks associated
with changes in interest rates. Moreover, interest rate hedging
could fail to protect us or adversely affect us because, among
other things:
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Available interest rate hedging may not correspond directly with
the interest rate risk for which we seek protection.
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The duration or the amount of the hedge may not match the
duration or amount of the related liability.
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The party owing money in the hedging transaction may default on
its obligation to pay.
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The credit quality of the party owing money on the hedge may be
downgraded to such an extent that it impairs our ability to sell
or assign our side of the hedging transaction.
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The value of derivatives used for hedging may be adjusted from
time to time in accordance with accounting rules to reflect
changes in fair-value. Downward adjustments, or
mark-to-market losses, would reduce our
stockholders equity.
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Hedging involves risk and typically involves costs, including
transaction costs, that may reduce our overall returns on our
investments. These costs increase as the period covered by the
hedging increases and during periods of rising and volatile
interest rates. These costs will also limit the amount of cash
available for distribution to stockholders. We generally intend
to hedge as much of the interest rate risk as management
determines is in our best
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interests given the cost of such hedging transactions. The REIT
qualification rules may limit our ability to enter into hedging
transactions by requiring us to limit our income from hedges. If
we are unable to hedge effectively because of the REIT rules, we
will face greater interest rate exposure than may be
commercially prudent.
As of December 31, 2008, we had three interest rate swaps
with an aggregate notional amount of $400.0 million under
which, at each monthly settlement date, we either
(1) receive the difference between a fixed interest rate
(the Strike Rate) and one-month LIBOR if the Strike
Rate is less than LIBOR or (2) pay such difference if the
Strike Rate is greater than LIBOR. In addition, in connection
with entering into the acquisition and construction loan secured
by our Center for Life
Science | Boston
property, we entered into four forward starting interest rate
swap agreements, which are carried on the accompanying
consolidated balance sheets at fair-value, based on the net
present value of the expected future cash flows on the swaps. At
maturity of the forward starting interest rate swaps, we will
either (a) receive payment from the counterparties if the
accumulated balance is an asset, or (b) make payment to the
counterparties if the accumulated balance is a liability, with
the resulting receipt or payment deferred and amortized as an
increase or decrease to interest expense over the term of the
forecasted borrowing. Other than these interest rate swaps, we
have not entered into any hedging transactions. The fair-value
of our three interest rate swaps was a liability of
approximately $23.2 million at December 31, 2008 and
is included as a liability in the accompanying consolidated
balance sheets. The four forward starting swaps will require
cash settlement on or before April 30, 2009. Based upon the
fair-values of the forward starting swaps as of
December 31, 2008, such cash settlements would require us
to pay the counterparties approximately $34.3 million for
the $150.0 million notional amount swap with a Strike Rate
of 5.162%, $11.4 million for the $50.0 million
notional amount swap with a Strike Rate of 5.167%,
$22.9 million for the $100.0 million notional amount
swap with a Strike Rate of 5.167% and $34.2 million for the
$150.0 million notional amount swap with a Strike Rate of
5.152%, which totals $102.9 million. However, the actual
cash settlement amounts will depend on the values of the forward
starting swaps at the dates they are settled and the actual cash
settlement amounts may vary significantly from these amounts. If
we are required to make cash payments to the counterparties
under our forward starting swaps upon settlement, we plan to
utilize a portion of our unsecured line of credit to finance
those payments. However, given the current economic conditions,
including, but not limited to, the credit crisis and related
turmoil in the global financial system, one or more of our
lenders under our unsecured line of credit may default on their
obligations to make capital available to us. In addition, if
that occurs, we may not be able to access alternative sources of
liquidity needed to settle these forward starting swaps when
required to do so.
In addition, as of December 31, 2008, two of our forward
swaps, with an aggregate notional amount of $150.0 million,
were no longer considered highly effective as the expectation of
forecasted interest payments had changed, and we were required
to prospectively discontinue hedge accounting for these two
swaps. As a result, a portion of the unrealized losses related
to these forward starting swaps previously included in
accumulated other comprehensive loss, totaling
$18.2 million, was reclassified to the consolidated income
statement as loss on derivative instruments in the fourth
quarter of 2008. Prospective changes in the fair-value of these
two swaps will be recorded in the consolidated income statements
through the date the swaps are settled and we may incur
additional losses in future quarters to the extent we are not
able to refinance the secured construction loan in the timeframe
or for the amount that we expect, the risk of which has
increased given the current credit market uncertainty.
For further detail regarding our interest rate swaps and forward
starting swaps, see Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources.
Our credit facilities include restrictive covenants relating
to our operations, which could limit our ability to respond to
changing market conditions and our ability to make distributions
to our stockholders.
Our credit facilities impose restrictions on us that affect our
distribution and operating policies and our ability to incur
additional debt. For example, we are subject to a maximum
leverage ratio requirement (as defined) during the terms of the
loans, which could reduce our ability to incur additional debt
and consequently reduce our ability to make distributions to our
stockholders. Our credit facilities also contain limitations on
our ability to make distributions to our stockholders in excess
of those required to maintain our REIT status. Specifically, our
credit facilities limit distributions to 95% of funds from
operations, but not less than the minimum necessary to enable us
to meet our REIT income distribution requirements. In addition,
our credit facilities contain covenants that, among other
things, limit our ability to further mortgage our properties or
reduce insurance coverage, and that require us to
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maintain specified levels of net worth. These or other
limitations may adversely affect our flexibility and our ability
to achieve our operating plans.
If we fail to obtain external sources of capital, which is
outside of our control, we may be unable to make distributions
to our stockholders, maintain our REIT qualification, or fund
growth.
In order to maintain our qualification as a REIT and to avoid
incurring a nondeductible excise tax, we are required, among
other things, to distribute annually at least 90% of our REIT
taxable income, excluding any net capital gain. In addition, we
will be subject to income tax at regular corporate rates to the
extent that we distribute less than 100% of our net taxable
income, including any net capital gains. Because of these
distribution requirements, we may not be able to fund future
capital needs, including any necessary acquisition financing,
from operating cash flow. Consequently, we rely on third-party
sources to fund our capital needs. We may not be able to obtain
financings on favorable terms or at all. Our access to
third-party sources of capital depends, in part, on:
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general market conditions,
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the markets perception of our growth potential,
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with respect to acquisition financing, the markets
perception of the value of the properties to be acquired,
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our current debt levels,
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our current and expected future earnings,
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our cash flow and cash distributions, and
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the market price per share of our common stock or preferred
stock.
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Our inability to obtain capital from third-party sources will
adversely affect our business and limit our growth. Without
sufficient capital, we may not be able to acquire or develop
properties when strategic opportunities exist, satisfy our debt
service obligations or make the cash distributions to our
stockholders necessary to maintain our qualification as a REIT.
For distributions with respect to the taxable years ending on or
before December 31, 2009, recent Internal Revenue Service
guidance allows us to satisfy up to 90% of our distribution
requirements through the distribution of shares of our common
stock, provided certain conditions are met.
Increases in interest rates could increase the amount of our
debt payments and adversely affect our ability to pay
distributions to our stockholders.
Interest we pay could reduce cash available for distributions.
Additionally, if we incur variable rate debt, including
borrowings under our $550.0 million secured construction
loan, our $250.0 million secured term loan and our
$600.0 million unsecured line of credit, to the extent not
adequately hedged, increases in interest rates would increase
our interest costs. These increased interest costs would reduce
our cash flows and our ability to make distributions to our
stockholders. In addition, if we need to repay existing debt
during a period of rising interest rates, we could be required
to liquidate one or more of our investments in properties at
times that may not permit realization of the maximum return on
such investments.
Risks
Related to Our Organizational Structure
Our charter and Maryland law contain provisions that may
delay, defer or prevent a change of control transaction and may
prevent stockholders from receiving a premium for their
shares.
Our charter, including the articles supplementary with
respect to our preferred stock, contains ownership limits that
may delay, defer or prevent a change of control
transaction. Our charter, with certain
exceptions, authorizes our directors to take such actions as are
necessary and desirable to preserve our qualification as a REIT.
Unless exempted by our board of directors, no person may own
more than 9.8% of the value of our outstanding shares of capital
stock or more than 9.8% in value or number (whichever is more
restrictive) of the outstanding shares of our common stock or
Series A preferred stock. The board may not grant such an
exemption to any proposed transferee whose ownership of in
excess of 9.8% of the value of our outstanding shares would
result in the termination of our status as a REIT. These
restrictions on transferability and ownership will not apply if
our board of directors determines that it is no longer in our
best interests to attempt to qualify as a REIT. The ownership
limit may
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delay or impede a transaction or a change of control that might
involve a premium price for our common stock or otherwise be in
the best interests of our stockholders.
We could authorize and issue stock without stockholder
approval that may delay, defer or prevent a change of control
transaction. Our charter authorizes us to
issue additional authorized but unissued shares of our common
stock or preferred stock. In addition, our board of directors
may classify or reclassify any unissued shares of our common
stock or preferred stock and may set the preferences, rights and
other terms of the classified or reclassified shares. The board
may also, without stockholder approval, amend our charter to
increase the authorized number of shares of our common stock or
our preferred stock that we may issue. The board of directors
could establish a series of common stock or preferred stock that
could, depending on the terms of such series, delay, defer or
prevent a transaction or a change of control that might involve
a premium price for our common stock or otherwise be in the best
interests of our stockholders.
Certain provisions of Maryland law could delay, defer or
prevent a change of control
transaction. Certain provisions of the
Maryland General Corporation Law, or the MGCL, may have the
effect of inhibiting a third party from making a proposal to
acquire us or of impeding a change of control. In some cases,
such an acquisition or change of control could provide our
stockholders with the opportunity to realize a premium over the
then-prevailing market price of their shares. These MGCL
provisions include:
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business combination provisions that, subject to
limitations, prohibit certain business combinations between us
and an interested stockholder for certain periods.
An interested stockholder is generally any person
who beneficially owns 10% or more of the voting power of our
shares or an affiliate or associate of ours who, at any time
within the two-year period prior to the date in question, was
the beneficial owner of 10% or more of the voting power of our
then outstanding voting stock. A person is not an interested
stockholder under the statute if the board of directors approved
in advance the transaction by which he otherwise would have
become an interested stockholder. Business combinations with an
interested stockholder are prohibited for five years after the
most recent date on which the stockholder becomes an interested
stockholder. After that period, the MGCL imposes two
super-majority voting requirements on such combinations, and
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control share provisions that provide that
control shares of our company acquired in a
control share acquisition have no voting rights
unless holders of two-thirds of our voting stock (excluding
interested shares) consent. Control shares are
shares that, when aggregated with other shares controlled by the
stockholder, entitle the stockholder to exercise one of three
increasing ranges of voting power in electing directors. A
control share acquisition is the direct or indirect
acquisition of ownership or control of control
shares.
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In the case of the business combination provisions of the MGCL,
we opted out by resolution of our board of directors with
respect to any business combination between us and any person
provided such business combination is first approved by our
board of directors (including a majority of directors who are
not affiliates or associates of such person). In the case of the
control share provisions of the MGCL, we opted out pursuant to a
provision in our bylaws. However, our board of directors may by
resolution elect to opt in to the business combination
provisions of the MGCL. Further, we may opt in to the control
share provisions of the MGCL in the future by amending our
bylaws, which our board of directors can do without stockholder
approval.
The partnership agreement of our Operating Partnership, Maryland
law, and our charter and bylaws also contain other provisions
that may delay, defer or prevent a transaction or a change of
control that might involve a premium price for our common stock
or otherwise be in the best interest of our stockholders.
Our board of directors may amend our investing and financing
policies without stockholder approval, and, accordingly, our
stockholders would have limited control over changes in our
policies that could increase the risk we default under our debt
obligations or that could harm our business, results of
operations and share price.
Our board of directors has adopted a policy of targeting our
indebtedness at approximately 50% of our total asset book value.
However, our organizational documents do not limit the amount or
percentage of debt that we may incur, nor do they limit the
types of properties we may acquire or develop. Our board of
directors may alter or
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eliminate our current policy on borrowing or investing at any
time without stockholder approval. Changes in our strategy or in
our investment or leverage policies could expose us to greater
credit risk and interest rate risk and could also result in a
more leveraged balance sheet. These factors could result in an
increase in our debt service and could adversely affect our cash
flow and our ability to make expected distributions to our
stockholders. Higher leverage also increases the risk we would
default on our debt.
We may invest in properties with other entities, and our lack
of sole decision-making authority or reliance on a
co-venturers financial condition could make these joint
venture investments risky.
We have in the past and may continue in the future to co-invest
with third parties through partnerships, joint ventures or other
entities. We may acquire non-controlling interests or share
responsibility for managing the affairs of a property,
partnership, joint venture or other entity. In such events, we
would not be in a position to exercise sole decision-making
authority regarding the property or entity. Investments in
entities may, under certain circumstances, involve risks not
present were a third party not involved. These risks include the
possibility that partners or co-venturers:
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might become bankrupt or fail to fund their share of required
capital contributions,
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may have economic or other business interests or goals that are
inconsistent with our business interests or goals, and
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may be in a position to take actions contrary to our policies or
objectives.
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Such investments may also have the potential risk of impasses on
decisions, such as a sale, because neither we nor the partner or
co-venturer would have full control over the partnership or
joint venture. Disputes between us and partners or co-venturers
may result in litigation or arbitration that would increase our
expenses and prevent our officers
and/or
directors from focusing their time and effort on our business.
In addition, we may in certain circumstances be liable for the
actions of our third-party partners or co-venturers if:
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we structure a joint venture or conduct business in a manner
that is deemed to be a general partnership with a third party,
in which case we could be liable for the acts of that third
party,
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third-party managers incur debt or other liabilities on behalf
of a joint venture which the joint venture is unable to pay, and
the joint venture agreement provides for capital calls, in which
case we could be liable to make contributions as set forth in
any such joint venture agreement, or
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we agree to cross-default provisions or to cross-collateralize
our properties with the properties in a joint venture, in which
case we could face liability if there is a default relating to
those properties in the joint venture or the obligations
relating to those properties.
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We have investments in joint ventures with PREI, which were
formed in the second quarter of 2007. While we, as managing
member, are authorized to carry out the day-to-day management of
the business and affairs of the PREI joint ventures, PREIs
prior written consent is required for certain decisions,
including decisions relating to financing, budgeting and the
sale or pledge of interests in the properties owned by the PREI
joint ventures.
In addition, each of the PREI operating agreements includes a
put/call option whereby either member can cause the limited
liability company to sell certain properties in which it holds
leasehold interests to us at any time after the fifth
anniversary and before the seventh anniversary of the
acquisition date. The put/call option may be exercised at a time
we do not deem favorable for financial or other reasons,
including the availability of cash at such time and the impact
of tax consequences resulting from any sale.
Risks
Related to Our REIT Status
Our failure to qualify as a REIT under the Code would result
in significant adverse tax consequences to us and would
adversely affect our business and the value of our stock.
We believe that we have operated and intend to continue
operating in a manner intended to allow us to qualify as a REIT
for federal income tax purposes under the Internal Revenue Code
of 1986, as amended, or the Code. Qualification as a REIT
involves the application of highly technical and complex Code
provisions for which there
23
are only limited judicial and administrative interpretations.
The fact that we hold substantially all of our assets through a
partnership further complicates the application of the REIT
requirements. Even a seemingly minor technical or inadvertent
mistake could jeopardize our REIT status. Our REIT status
depends upon various factual matters and circumstances that may
not be entirely within our control. For example, in order to
qualify as a REIT, at least 95% of our gross income in any year
must be derived from qualifying sources, and we must satisfy a
number of requirements regarding the composition of our assets.
Also, we must make distributions to stockholders aggregating
annually at least 90% of our REIT taxable income, excluding
capital gains. In addition, new legislation, regulations,
administrative interpretations or court decisions, each of which
could have retroactive effect, may make it more difficult or
impossible for us to qualify as a REIT, or could reduce the
desirability of an investment in a REIT relative to other
investments. We have not requested and do not plan to request a
ruling from the IRS that we qualify as a REIT, and the
statements in this report are not binding on the IRS or any
court. Accordingly, we cannot be certain that we have qualified
or will continue to qualify as a REIT.
If we fail to qualify as a REIT in any taxable year, we will
face serious adverse tax consequences that would substantially
reduce the funds available to make payments of principal and
interest on the debt securities we issue and for distribution to
our stockholders. If we fail to qualify as a REIT:
|
|
|
|
|
we would not be allowed to deduct distributions to stockholders
in computing our taxable income and would be subject to federal
income tax at regular corporate rates,
|
|
|
|
we could also be subject to the federal alternative minimum tax
and possibly increased state and local taxes, and
|
|
|
|
unless we are entitled to relief under applicable statutory
provisions, we could not elect to be taxed as a REIT for four
taxable years following the year in which we were disqualified.
|
In addition, if we fail to qualify as a REIT, we will not be
required to make distributions to stockholders; however, all
distributions to our stockholders would be subject to tax as
qualifying corporate dividends to the extent of our current and
accumulated earnings and profits. As a result of all these
factors, our failure to qualify as a REIT could impair our
ability to expand our business and raise capital and would
adversely affect the value of our common stock and our preferred
stock.
To maintain our REIT status, we may be forced to borrow funds
during unfavorable market conditions to make distributions to
our stockholders.
To qualify as a REIT, we generally must distribute to our
stockholders at least 90% of our REIT taxable income each year,
determined by excluding any net capital gain, and we will be
subject to regular corporate income taxes to the extent that we
distribute less than 100% of our REIT taxable income each year.
In addition, we will be subject to a 4% nondeductible excise tax
on the amount, if any, by which distributions paid by us in any
calendar year are less than the sum of 85% of our ordinary
income, 95% of our capital gain net income and 100% of our
undistributed income from prior years. For distributions with
respect to taxable years ending on or before December 31,
2009, recent Internal Revenue Service guidance allows us to
satisfy up to 90% of these requirements through the distribution
of shares of our common stock, provided certain conditions are
met.. To maintain our REIT status and avoid the payment of
income and excise taxes we may need to borrow funds to meet the
REIT distribution requirements. These borrowing needs could
result from:
|
|
|
|
|
differences in timing between the actual receipt of cash and
inclusion of income for federal income tax purposes,
|
|
|
|
the effect of non-deductible capital expenditures,
|
|
|
|
the creation of reserves, or
|
|
|
|
required debt or amortization payments.
|
We may need to borrow funds at times when the then-prevailing
market conditions are not favorable for borrowing. These
borrowings could increase our costs or reduce our equity and
adversely affect the value of our common stock or preferred
stock.
24
To maintain our REIT status, we may be forced to forego
otherwise attractive opportunities.
To qualify as a REIT, we must satisfy tests concerning, among
other things, the sources of our income, the nature and
diversification of our assets, the amounts we distribute to our
stockholders and the ownership of our stock. We may be required
to make distributions to stockholders at times when it would be
more advantageous to reinvest cash in our business or when we do
not have funds readily available for distribution. Thus,
compliance with the REIT requirements may hinder our ability to
operate solely on the basis of maximizing profits.
Risks
Related to the Ownership of Our Stock
The market price and trading volume of our common stock may
be volatile.
The market price of our common stock has recently been, and may
continue to be, volatile. In addition, the trading volume in our
common stock may fluctuate and cause significant price
variations to occur. We cannot assure you that the market price
of our common stock will not fluctuate or decline significantly
in the future.
Some of the factors that could negatively affect our share price
or result in fluctuations in the price or trading volume of our
common stock include:
|
|
|
|
|
actual or anticipated variations in our quarterly operating
results or dividends,
|
|
|
|
changes in our funds from operations or earnings estimates,
|
|
|
|
publication of research reports about us or the real estate
industry,
|
|
|
|
increases in market interest rates that lead purchasers of our
shares to demand a higher yield,
|
|
|
|
changes in market valuations of similar companies,
|
|
|
|
adverse market reaction to any additional debt we incur or
acquisitions we make in the future,
|
|
|
|
additions or departures of key management personnel,
|
|
|
|
actions by institutional stockholders,
|
|
|
|
speculation in the press or investment community,
|
|
|
|
the realization of any of the other risk factors presented in
this report, and
|
|
|
|
general market and economic conditions.
|
Broad market fluctuations could negatively impact the market
price of our common stock or preferred stock.
The stock market has recently experienced extreme price and
volume fluctuations that have affected the market price of many
companies in industries similar or related to ours and that have
been unrelated to these companies operating performance.
These broad market fluctuations could reduce the market price of
our common stock or preferred stock. Furthermore, our operating
results and prospects may be below the expectations of public
market analysts and investors or may be lower than those of
companies with comparable market capitalizations. Either of
these factors could lead to a material decline in the market
price of our common stock or preferred stock.
Market interest rates may have an adverse effect on the
market price of our securities.
One of the factors that will influence the price of our common
stock and preferred stock will be the dividend yield on such
stock (as a percentage of the price of the stock) relative to
market interest rates. An increase in market interest rates may
lead prospective purchasers of our common stock or Series A
preferred stock to expect a higher dividend yield, and higher
interest rates would likely increase our borrowing costs and
potentially decrease funds available for distribution. Thus,
higher market interest rates could cause the market price of our
common stock and Series A preferred stock to fall.
25
Our distributions to stockholders may decline at any time.
We may not continue our current level of distributions to
stockholders. Our board of directors will determine future
distributions based on a number of factors, including:
|
|
|
|
|
cash available for distribution,
|
|
|
|
operating results,
|
|
|
|
our financial condition, especially in relation to our
anticipated future capital needs,
|
|
|
|
then current expansion plans,
|
|
|
|
the distribution requirements for REITs under the Code, and
|
|
|
|
other factors our board deems relevant.
|
The number of shares of our common stock available for future
sale could adversely affect the market price of our common
stock.
We cannot predict whether future issuances of shares of our
common stock or the availability of shares for resale in the
open market will decrease the market price per share of our
common stock. As of December 31, 2008,
80,757,421 shares of our common stock were issued and
outstanding, as well as our operating partnership units and long
term incentive plan, or LTIP, units which may be exchanged for
2,795,364 and 640,150 shares of our common stock,
respectively, based on the number of shares of common stock,
operating partnership units and LTIP units outstanding as of
December 31, 2008. In addition, as of December 31,
2008, we had reserved an additional 795,879 shares of
common stock for future issuance under our incentive award plan
and 3,438,831 shares potentially issuable upon exchange of
our 4.50% exchangeable senior notes. Sales of substantial
amounts of shares of our common stock in the public market, or
upon exchange of operating partnership units, LTIP units or our
4.50% exchangeable senior notes, or the perception that such
sales might occur, could adversely affect the market price of
our common stock.
Furthermore, under the rules adopted by the Securities and
Exchange Commission in December 2005 regarding registration and
offering procedures, if we meet the definition of a
well-known seasoned issuer under Rule 405 of
the Securities Act, we are permitted to file an automatic shelf
registration statement that will be immediately effective upon
filing. On September 15, 2006, we filed such an automatic
shelf registration statement, which may permit us, from time to
time, to offer and sell debt securities, common stock, preferred
stock, warrants and other securities to the extent necessary or
advisable to meet our liquidity needs.
Any of the following could have an adverse effect on the market
price of our common stock:
|
|
|
|
|
the exchange of operating partnership units, LTIP units or our
4.50% exchangeable senior notes for common stock,
|
|
|
|
additional grants of LTIP units, restricted stock or other
securities to our directors, executive officers and other
employees under our incentive award plan,
|
|
|
|
additional issuances of preferred stock with liquidation or
distribution preferences, and
|
|
|
|
other issuances of our common stock.
|
Additionally, the existence of operating partnership units, LTIP
units or our 4.50% exchangeable senior notes and shares of our
common stock reserved for issuance upon exchange of operating
partnership units, LTIP units or our 4.50% exchangeable senior
notes and under our incentive award plan may adversely affect
the terms upon which we may be able to obtain additional capital
through the sale of equity securities. In addition, future sales
of shares of our common stock may be dilutive to existing
stockholders.
From time to time we also may issue shares of our common stock
or operating partnership units in connection with property,
portfolio or business acquisitions. We may grant additional
demand or piggyback registration rights in connection with these
issuances. Sales of substantial amounts of our common stock, or
the perception that these sales could occur, may adversely
affect the prevailing market price of our common stock or may
adversely affect the terms upon which we may be able to obtain
additional capital through the sale of equity securities.
26
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
Existing
Portfolio
As of December 31, 2008, our portfolio consisted of 69
properties, representing 112 buildings with an aggregate of
approximately 10.4 million rentable square feet, including
approximately 1.4 million square feet of development in
progress. We also owned undeveloped land parcels adjacent to
existing properties that we estimate can support up to
approximately 1.4 million rentable square feet of
laboratory and office space.
The following reflects the classification of our properties
between stabilized properties (operating properties in which
more than 90% of the rentable square footage is under lease),
lease up properties (operating properties in which less than 90%
of the rentable square footage is under lease), repositioning
and redevelopment properties (properties that are currently
being prepared for their intended use), construction in progress
(properties that are currently under development through ground
up construction), and land parcels (representing
managements estimates of rentable square footage if
development of these properties was undertaken) at
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Portfolio
|
|
|
Unconsolidated Partnership Portfolio
|
|
|
Total Portfolio
|
|
|
|
|
|
|
Rentable
|
|
|
|
|
|
|
|
|
Rentable
|
|
|
|
|
|
|
|
|
Rentable
|
|
|
|
|
|
|
|
|
|
Square
|
|
|
Percent
|
|
|
|
|
|
Square
|
|
|
Percent
|
|
|
|
|
|
Square
|
|
|
Percent
|
|
|
|
Properties
|
|
|
Feet
|
|
|
Leased
|
|
|
Properties
|
|
|
Feet
|
|
|
Leased
|
|
|
Properties
|
|
|
Feet
|
|
|
Leased
|
|
|
Stabilized properties
|
|
|
43
|
|
|
|
5,339,903
|
|
|
|
99.6
|
%
|
|
|
4
|
|
|
|
257,308
|
|
|
|
100.0
|
%
|
|
|
47
|
|
|
|
5,597,211
|
|
|
|
99.6
|
%
|
Lease up properties
|
|
|
14
|
|
|
|
1,439,771
|
|
|
|
55.0
|
%
|
|
|
2
|
|
|
|
420,000
|
|
|
|
26.8
|
%
|
|
|
16
|
|
|
|
1,859,771
|
|
|
|
48.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating portfolio
|
|
|
57
|
|
|
|
6,779,674
|
|
|
|
90.1
|
%
|
|
|
6
|
|
|
|
677,308
|
|
|
|
54.6
|
%
|
|
|
63
|
|
|
|
7,456,982
|
|
|
|
86.9
|
%
|
Repositioning and redevelopment properties
|
|
|
2
|
|
|
|
1,524,506
|
|
|
|
22.1
|
%
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
2
|
|
|
|
1,524,506
|
|
|
|
22.1
|
%
|
Construction in progress(1)
|
|
|
3
|
|
|
|
1,160,867
|
|
|
|
79.8
|
%
|
|
|
1
|
|
|
|
280,000
|
|
|
|
|
|
|
|
4
|
|
|
|
1,440,867
|
|
|
|
64.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current portfolio
|
|
|
62
|
|
|
|
9,465,047
|
|
|
|
77.9
|
%
|
|
|
7
|
|
|
|
957,308
|
|
|
|
38.6
|
%
|
|
|
69
|
|
|
|
10,422,355
|
|
|
|
74.3
|
%
|
Land parcels
|
|
|
n/a
|
|
|
|
1,367,000
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
|
|
|
1,367,000
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total portfolio
|
|
|
62
|
|
|
|
10,832,047
|
|
|
|
n/a
|
|
|
|
7
|
|
|
|
957,308
|
|
|
|
n/a
|
|
|
|
69
|
|
|
|
11,789,355
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We are currently developing a portion of our Landmark at
Eastview property. However, we have not separated this
previously undeveloped portion into a separate property for
legal and accounting purposes. Therefore, we still classify our
Landmark at Eastview property as a stabilized property on the
above schedule although it is also included in our discussion of
development properties. |
Our current portfolio by market at December 31, 2008 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
Annualized
|
|
|
|
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
Base Rent
|
|
|
|
|
|
|
Number
|
|
|
Rentable
|
|
|
Rentable
|
|
|
|
|
|
Annualized
|
|
|
Annualized
|
|
|
per Leased
|
|
|
|
|
|
|
of
|
|
|
Square
|
|
|
Square
|
|
|
Percent
|
|
|
Base Rent
|
|
|
Base Rent
|
|
|
Square Foot
|
|
|
|
|
Market
|
|
Properties
|
|
|
Feet
|
|
|
Feet
|
|
|
Leased(1)
|
|
|
Current(2)
|
|
|
Current
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Boston
|
|
|
18
|
|
|
|
2,885,770
|
|
|
|
27.6
|
%
|
|
|
75.5
|
%
|
|
$
|
110,451
|
|
|
|
40.4
|
%
|
|
$
|
50.70
|
|
|
|
|
|
Maryland
|
|
|
5
|
|
|
|
1,144,968
|
|
|
|
11.0
|
%
|
|
|
100.0
|
%
|
|
|
45,794
|
|
|
|
16.7
|
%
|
|
|
40.00
|
|
|
|
|
|
San Francisco
|
|
|
11
|
|
|
|
2,644,488
|
|
|
|
25.4
|
%
|
|
|
49.2
|
%
|
|
|
30,349
|
|
|
|
11.0
|
%
|
|
|
23.35
|
|
|
|
|
|
San Diego
|
|
|
16
|
|
|
|
1,113,293
|
|
|
|
10.7
|
%
|
|
|
88.9
|
%
|
|
|
30,335
|
|
|
|
11.0
|
%
|
|
|
30.66
|
|
|
|
|
|
New York/New Jersey
|
|
|
4
|
|
|
|
1,233,889
|
|
|
|
11.8
|
%
|
|
|
82.1
|
%
|
|
|
27,515
|
|
|
|
10.0
|
%
|
|
|
27.15
|
|
|
|
|
|
Pennsylvania
|
|
|
7
|
|
|
|
778,251
|
|
|
|
7.5
|
%
|
|
|
88.3
|
%
|
|
|
14,934
|
|
|
|
5.4
|
%
|
|
|
21.73
|
|
|
|
|
|
Seattle
|
|
|
5
|
|
|
|
372,189
|
|
|
|
3.6
|
%
|
|
|
48.2
|
%
|
|
|
7,513
|
|
|
|
2.7
|
%
|
|
|
41.92
|
|
|
|
|
|
University Related Other
|
|
|
3
|
|
|
|
249,507
|
|
|
|
2.4
|
%
|
|
|
100.0
|
%
|
|
|
7,806
|
|
|
|
2.8
|
%
|
|
|
31.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Portfolio/Weighted-Average
|
|
|
69
|
|
|
|
10,422,355
|
|
|
|
100.0
|
%
|
|
|
74.3
|
%
|
|
$
|
274,697
|
|
|
|
100.0
|
%
|
|
$
|
35.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Percentage of leasable square footage in current portfolio
subject to an existing lease. |
27
|
|
|
(2) |
|
In this and other tables, annualized current base rent is the
monthly contractual rent under existing leases at
December 31, 2008, or if rent has not yet commenced, the
first monthly rent amount that will be due at rent commencement,
multiplied by 12 months. |
|
(3) |
|
Includes a portfolio of properties in Cambridge, Massachusetts
and the McKellar Court property in San Diego, California.
We are a member of the unconsolidated joint ventures that own a
portfolio of properties in Cambridge, Massachusetts, and we are
entitled to approximately 20% of the operating cash flows. We
also own the general partnership interest in the unconsolidated
limited partnership that owns the McKellar Court property, which
entitles us to 75% of the gains upon a sale of the property and
21% of the operating cash flows. |
Properties we owned, or had an ownership interest in, at
December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Rentable
|
|
|
Percent
|
|
|
|
Square Feet
|
|
|
Leased
|
|
|
Boston
|
|
|
|
|
|
|
|
|
Albany Street
|
|
|
75,003
|
|
|
|
100.0
|
%
|
Center for Life
Science | Boston(1)
|
|
|
704,159
|
|
|
|
87.1
|
%
|
Charles Street
|
|
|
47,912
|
|
|
|
100.0
|
%
|
Coolidge Avenue
|
|
|
37,400
|
|
|
|
100.0
|
%
|
21 Erie Street
|
|
|
48,627
|
|
|
|
100.0
|
%
|
40 Erie Street
|
|
|
100,854
|
|
|
|
100.0
|
%
|
47 Erie Street Parking Structure
|
|
|
447 Stalls
|
|
|
|
n/a
|
|
Fresh Pond Research Park
|
|
|
90,702
|
|
|
|
78.7
|
%
|
675 West Kendall Street (Kendall A)
|
|
|
302,919
|
|
|
|
98.5
|
%
|
500 Kendall Street (Kendall D)
|
|
|
349,325
|
|
|
|
98.6
|
%
|
Sidney Street
|
|
|
191,904
|
|
|
|
100.0
|
%
|
Vassar Street
|
|
|
52,520
|
|
|
|
100.0
|
%
|
Maryland
|
|
|
|
|
|
|
|
|
Beckley Street
|
|
|
77,225
|
|
|
|
100.0
|
%
|
9911 Belward Campus Drive
|
|
|
289,912
|
|
|
|
100.0
|
%
|
9920 Belward Campus Drive
|
|
|
51,181
|
|
|
|
100.0
|
%
|
Shady Grove Road
|
|
|
635,058
|
|
|
|
100.0
|
%
|
Tributary Street
|
|
|
91,592
|
|
|
|
100.0
|
%
|
San Francisco
|
|
|
|
|
|
|
|
|
Ardentech Court
|
|
|
55,588
|
|
|
|
100.0
|
%
|
Ardenwood Venture(2)
|
|
|
72,500
|
|
|
|
38.1
|
%
|
Bayshore Boulevard
|
|
|
183,344
|
|
|
|
100.0
|
%
|
Bridgeview Technology Park I
|
|
|
201,567
|
|
|
|
96.8
|
%
|
Bridgeview Technology Park II
|
|
|
50,400
|
|
|
|
100.0
|
%
|
Dumbarton Circle
|
|
|
44,000
|
|
|
|
100.0
|
%
|
Eccles Avenue
|
|
|
152,145
|
|
|
|
0.0
|
%
|
Forbes Boulevard
|
|
|
237,984
|
|
|
|
100.0
|
%
|
Industrial Road
|
|
|
169,490
|
|
|
|
100.0
|
%
|
Kaiser Drive
|
|
|
87,953
|
|
|
|
0.0
|
%
|
Pacific Research Center(3)
|
|
|
1,389,517
|
|
|
|
24.2
|
%
|
San Diego
|
|
|
|
|
|
|
|
|
Balboa Avenue
|
|
|
35,344
|
|
|
|
100.0
|
%
|
Bernardo Center Drive
|
|
|
61,286
|
|
|
|
100.0
|
%
|
Faraday Avenue
|
|
|
28,704
|
|
|
|
100.0
|
%
|
28
|
|
|
|
|
|
|
|
|
|
|
Rentable
|
|
|
Percent
|
|
|
|
Square Feet
|
|
|
Leased
|
|
|
John Hopkins Court
|
|
|
72,192
|
|
|
|
29.7
|
%
|
6114-6154
Nancy Ridge Drive
|
|
|
121,000
|
|
|
|
100.0
|
%
|
6828 Nancy Ridge Drive
|
|
|
42,138
|
|
|
|
58.0
|
%
|
Pacific Center Boulevard
|
|
|
66,745
|
|
|
|
100.0
|
%
|
Road to the Cure
|
|
|
67,998
|
|
|
|
54.4
|
%
|
San Diego Science Center
|
|
|
105,364
|
|
|
|
76.7
|
%
|
Science Center Drive
|
|
|
53,740
|
|
|
|
100.0
|
%
|
Sorrento Valley Boulevard
|
|
|
54,924
|
|
|
|
100.0
|
%
|
Torreyana Road
|
|
|
81,204
|
|
|
|
100.0
|
%
|
9865 Towne Centre Drive
|
|
|
83,866
|
|
|
|
100.0
|
%
|
9885 Towne Centre Drive
|
|
|
115,870
|
|
|
|
100.0
|
%
|
Waples Street
|
|
|
50,055
|
|
|
|
100.0
|
%
|
New York/New Jersey
|
|
|
|
|
|
|
|
|
Graphics Drive
|
|
|
72,300
|
|
|
|
25.7
|
%
|
Landmark at Eastview
|
|
|
751,648
|
|
|
|
99.1
|
%
|
Landmark at Eastview II(4)
|
|
|
360,520
|
|
|
|
69.2
|
%
|
One Research Way
|
|
|
49,421
|
|
|
|
0.0
|
%
|
Pennsylvania
|
|
|
|
|
|
|
|
|
Eisenhower Road
|
|
|
27,750
|
|
|
|
59.7
|
%
|
George Patterson Boulevard
|
|
|
71,500
|
|
|
|
100.0
|
%
|
King of Prussia
|
|
|
427,109
|
|
|
|
87.7
|
%
|
Phoenixville Pike
|
|
|
104,400
|
|
|
|
74.2
|
%
|
Spring Mill Drive
|
|
|
76,378
|
|
|
|
100.0
|
%
|
900 Uniqema Boulevard(5)
|
|
|
11,293
|
|
|
|
100.0
|
%
|
1000 Uniqema Boulevard(5)
|
|
|
59,821
|
|
|
|
100.0
|
%
|
Seattle
|
|
|
|
|
|
|
|
|
Elliott Avenue(3)
|
|
|
134,989
|
|
|
|
0.0
|
%
|
500 Fairview Avenue
|
|
|
22,213
|
|
|
|
100.0
|
%
|
530 Fairview Avenue(1)
|
|
|
96,188
|
|
|
|
65.9
|
%
|
Monte Villa Parkway
|
|
|
51,000
|
|
|
|
100.0
|
%
|
217th Place
|
|
|
67,799
|
|
|
|
62.9
|
%
|
University Related Other
|
|
|
|
|
|
|
|
|
Lucent Drive(6)
|
|
|
21,500
|
|
|
|
100.0
|
%
|
Trade Centre Avenue(7)
|
|
|
78,023
|
|
|
|
100.0
|
%
|
Walnut Street(8)
|
|
|
149,984
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Total Consolidated Portfolio/Weighted-Average
|
|
|
9,465,047
|
|
|
|
77.9
|
%
|
|
|
|
|
|
|
|
|
|
Unconsolidated Portfolio:
|
|
|
|
|
|
|
|
|
McKellar Court(9)
|
|
|
72,863
|
|
|
|
100.0
|
%
|
320 Bent Street(10)
|
|
|
184,445
|
|
|
|
100.0
|
%
|
301 Binney Street(10)
|
|
|
420,000
|
|
|
|
26.8
|
%
|
301 Binney Garage(10)
|
|
|
503 Stalls
|
|
|
|
n/a
|
|
650 E. Kendall Street (Kendall B)(1)(10)
|
|
|
280,000
|
|
|
|
0.0
|
%
|
350 E. Kendall Street Garage (Kendall F)(10)
|
|
|
1,409 Stalls
|
|
|
|
n/a
|
|
29
|
|
|
|
|
|
|
|
|
|
|
Rentable
|
|
|
Percent
|
|
|
|
Square Feet
|
|
|
Leased
|
|
|
Kendall Crossing Apartments(10)
|
|
|
37 Apts.
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
Total Portfolio/Weighted-Average
|
|
|
10,422,355
|
|
|
|
74.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The property or a portion of the property was under development
at December 31, 2008. |
|
(2) |
|
We own an 87.5% membership interest in the limited liability
company that owns this property. |
|
(3) |
|
The property or a portion of the property was under
redevelopment at December 31, 2008. |
|
(4) |
|
A previously undeveloped portion of the property was undergoing
development at December 31, 2008 and has been reflected
separately from the stabilized portion of the property. |
|
(5) |
|
Located in New Castle, Delaware. |
|
(6) |
|
Located in Lebanon, New Hampshire. |
|
(7) |
|
Located in Longmont, Colorado. |
|
(8) |
|
Located in Boulder, Colorado. |
|
(9) |
|
We own the general partnership interest in the limited
partnership that owns the McKellar Court property, which
entitles us to 75% of the gains upon a sale of the property and
21% of the operating cash flows. The property is located in
San Diego, California. |
|
(10) |
|
We are a member of the joint ventures that own a portfolio of
properties in Cambridge, Massachusetts, which entitles us to
approximately 20% of the operating cash flows. |
30
Tenant
Information
As of December 31, 2008, our consolidated and
unconsolidated properties were leased to 124 tenants, and 88% of
our annualized base rent was derived from tenants that were
public companies or government agencies or their subsidiaries.
The following is a summary of our ten largest tenants based on
percentage of our annualized base rent as of December 31,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
|
|
|
Base Rent
|
|
|
Annualized
|
|
|
|
|
|
|
|
|
Annualized
|
|
|
per Leased
|
|
|
Base Rent -
|
|
|
Lease
|
|
|
Leased
|
|
|
Base Rent
|
|
|
Square Foot
|
|
|
Current
|
|
|
Expiration
|
Tenant
|
|
Square Feet
|
|
|
Current
|
|
|
Current
|
|
|
Total Portfolio
|
|
|
Date(s)
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Human Genome Sciences, Inc.
|
|
|
924,970
|
|
|
$
|
41,096
|
|
|
$
|
44.43
|
|
|
|
15.0
|
%
|
|
May 2026
|
Vertex Pharmaceuticals Incorporated
|
|
|
685,286
|
|
|
|
28,875
|
|
|
|
42.14
|
|
|
|
10.5
|
%
|
|
Multiple(1)
|
Beth Israel Deaconess Medical Center, Inc.
|
|
|
362,364
|
|
|
|
25,543
|
|
|
|
70.49
|
|
|
|
9.3
|
%
|
|
June 2023
|
Genzyme Corporation
|
|
|
343,000
|
|
|
|
15,464
|
|
|
|
45.08
|
|
|
|
5.6
|
%
|
|
July 2018
|
Regeneron Pharmaceuticals, Inc.
|
|
|
477,257
|
|
|
|
14,115
|
|
|
|
29.58
|
|
|
|
5.1
|
%
|
|
Multiple(2)
|
Ironwood Pharmaceuticals, Inc.(3)
|
|
|
160,894
|
|
|
|
9,509
|
|
|
|
59.10
|
|
|
|
3.5
|
%
|
|
Multiple(4)
|
Childrens Hospital Corporation
|
|
|
150,215
|
|
|
|
8,750
|
|
|
|
58.25
|
|
|
|
3.2
|
%
|
|
April 2023
|
Centocor, Inc. (Johnson & Johnson)
|
|
|
374,387
|
|
|
|
8,428
|
|
|
|
22.51
|
|
|
|
3.1
|
%
|
|
March 2014
|
Schering Corporation(3)
|
|
|
136,067
|
|
|
|
7,609
|
|
|
|
55.92
|
|
|
|
2.8
|
%
|
|
August 2016
|
Array BioPharma, Inc.
|
|
|
228,007
|
|
|
|
7,258
|
|
|
|
31.83
|
|
|
|
2.6
|
%
|
|
Multiple(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted-Average(6)
|
|
|
3,842,447
|
|
|
$
|
166,647
|
|
|
$
|
43.37
|
|
|
|
60.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
191,904 square feet expires August 2010,
100,854 square feet expires December 2010,
20,608 square feet expires May 2012, 81,204 square
feet expires September 2013, and 290,716 square feet
expires April 2018. The maturity dates for 191,904 and
100,854 square feet originally expiring on August 31,
2010 and December 31, 2010, respectively, were extended
through December 31, 2015 pursuant to lease amendments
executed on January 12, 2009. |
|
(2) |
|
129,224 square feet expires June 2009, which will be
replaced with a
15-year
229,644 square foot lease at the new buildings under
construction at the Landmark at Eastview II property, and
118,389 square feet expires June 2024. |
|
(3) |
|
We own 20% of the limited liability company that owns the
property that this tenant occupies. |
|
(4) |
|
9,277 square feet expires June 2009, 39,101 square
feet expires December 2010 and 112,516 square feet expires
December 2013. |
|
(5) |
|
149,984 square feet expires July 2016 and
78,023 square feet expires August 2016. |
|
(6) |
|
Without regard to any lease terminations and/or renewal options. |
Lease
Terms
Our leases are typically structured for terms of five to
15 years, with extension options, and include a fixed
rental rate with scheduled annual escalations. The leases are
generally
triple-net.
Triple-net
leases are those in which tenants pay not only base rent, but
also some or all real estate taxes and operating expenses of the
leased property. Tenants typically reimburse us for the full
direct cost, without regard to a base year or expense stop, for
use of lighting, heating and air conditioning, and certain
capital improvements necessary to maintain the property in its
original condition. We are generally responsible for structural
repairs.
|
|
Item 3.
|
Legal
Proceedings
|
Although we are involved in legal proceedings arising in the
ordinary course of business, we are not currently a party to any
legal proceedings nor, to our knowledge, is any legal proceeding
threatened against us that we believe would have a material
adverse effect on our financial position, results of operations
or liquidity.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None.
31
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Our common stock has been listed on the New York Stock Exchange,
or NYSE, under the symbol BMR since August 6,
2004. On February 11, 2009, the reported closing sale price
per share for our common stock on the NYSE was $10.49 and there
were approximately 175 holders of record. The following table
sets forth, for the periods indicated, the high, low and last
sale prices in dollars on the NYSE for our common stock and the
distributions we declared per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend
|
|
Period
|
|
High
|
|
|
Low
|
|
|
Last
|
|
|
per Common Share
|
|
|
First Quarter 2007
|
|
$
|
31.20
|
|
|
$
|
25.59
|
|
|
$
|
26.30
|
|
|
$
|
0.310
|
|
Second Quarter 2007
|
|
$
|
29.94
|
|
|
$
|
24.13
|
|
|
$
|
25.12
|
|
|
$
|
0.310
|
|
Third Quarter 2007
|
|
$
|
26.20
|
|
|
$
|
21.00
|
|
|
$
|
24.10
|
|
|
$
|
0.310
|
|
Fourth Quarter 2007
|
|
$
|
26.25
|
|
|
$
|
20.89
|
|
|
$
|
23.17
|
|
|
$
|
0.310
|
|
First Quarter 2008
|
|
$
|
25.33
|
|
|
$
|
19.32
|
|
|
$
|
23.89
|
|
|
$
|
0.335
|
|
Second Quarter 2008
|
|
$
|
27.75
|
|
|
$
|
23.59
|
|
|
$
|
24.53
|
|
|
$
|
0.335
|
|
Third Quarter 2008
|
|
$
|
29.50
|
|
|
$
|
22.72
|
|
|
$
|
26.45
|
|
|
$
|
0.335
|
|
Fourth Quarter 2008
|
|
$
|
25.43
|
|
|
$
|
5.88
|
|
|
$
|
11.72
|
|
|
$
|
0.335
|
|
We intend to continue to declare quarterly distributions on our
common stock. The actual amount and timing of future
distributions will be at the discretion of our board of
directors and will depend upon our financial condition in
addition to the requirements of the Code, and no assurance can
be given as to the amounts or timing of future distributions. In
addition, our credit facilities limit our ability to pay
distributions to our common stockholders. The limitation is
based on 95% of funds from operations, but not less than the
minimum necessary to enable us to meet our REIT income
distribution requirements. We do not anticipate that our ability
to pay distributions will be impaired by the terms of our credit
facilities. However, there can be no assurances in that regard.
Information about our equity compensation plans is incorporated
by reference in Item 12 of Part III of this Annual
Report on
Form 10-K.
32
The following graph shows a comparison from August 6, 2004,
the first day of trading for our common stock, to
December 31, 2008 of cumulative total shareholder return,
calculated on a dividend reinvested basis, for our company, the
S&P 500 Stock Index, or the S&P 500, and the National
Association of Real Estate Investment Trusts, Inc. Equity REIT
Total Return Index, or the Industry Index, which includes all
tax-qualified equity REITs listed on the NYSE. The graph assumes
$100 was invested in each of our companys common stock,
the S&P 500 and the Industry Index on August 6, 2004.
Data points on the graph are annual. Note that historic stock
price performance is not necessarily indicative of future stock
price performance.
Source: SNL Financial
LC
|
|
Item 6.
|
Selected
Financial Data
|
The following sets forth selected consolidated financial and
operating information for BioMed Realty Trust, Inc. and for 201
Industrial Road, L.P., our predecessor, which are derived from
our audited consolidated financial statements. We have not
presented historical information for BioMed Realty Trust, Inc.
prior to August 11, 2004, the date on which we consummated
our initial public offering, because during the period from our
formation until our initial public offering, we did not have
material corporate activity. The following data should be read
in conjunction with our consolidated financial statements and
notes thereto and Managements Discussion and
Analysis of Financial Condition and Results of Operations
included in Item 7 of this report.
33
BIOMED
REALTY TRUST, INC. AND BIOMED REALTY TRUST, INC. PREDECESSOR
(Dollars in thousands, except share data)
|
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BioMed Realty Trust, Inc.
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Predecessor
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Period
|
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Period
|
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|
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|
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|
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August 11,
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January 1,
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2004 through
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2004 through
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Year Ended December 31,
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December 31,
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August 17,
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2008
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|
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2007
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2006
|
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2005
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2004
|
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2004
|
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|
Statements of Income:
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Revenues:
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Total revenues
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$
|
301,973
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|
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$
|
266,109
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|
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$
|
218,735
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|
$
|
138,784
|
|
|
$
|
28,654
|
|
|
$
|
3,714
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|
|
|
|
|
|
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|
|
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Expenses:
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
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Rental operations and real estate taxes
|
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84,729
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71,142
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60,999
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46,358
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|
|
|
11,619
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|
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|
353
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|
Depreciation and amortization
|
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|
84,227
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|
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|
72,202
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|
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65,063
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|
|
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39,378
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|
|
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7,853
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|
|
|
600
|
|
General and administrative
|
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22,834
|
|
|
|
21,870
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|
18,085
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|
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13,278
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|
|
3,130
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
191,790
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|
|
|
165,214
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|
144,147
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|
|
99,014
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|
|
|
22,602
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|
|
|
953
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Income from operations
|
|
|
110,183
|
|
|
|
100,895
|
|
|
|
74,588
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|
|
|
39,770
|
|
|
|
6,052
|
|
|
|
2,761
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|
Equity in net (loss)/income of unconsolidated partnerships
|
|
|
(1,200
|
)
|
|
|
(893
|
)
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|
83
|
|
|
|
119
|
|
|
|
(11
|
)
|
|
|
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Interest income
|
|
|
485
|
|
|
|
990
|
|
|
|
1,102
|
|
|
|
1,333
|
|
|
|
190
|
|
|
|
|
|
Interest expense
|
|
|
(39,612
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)
|
|
|
(27,654
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)
|
|
|
(40,672
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)
|
|
|
(23,226
|
)
|
|
|
(1,180
|
)
|
|
|
(1,760
|
)
|
Loss on derivative instruments
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|
|
(19,948
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Gain on extinguishment of debt
|
|
|
17,066
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Income from continuing operations before minority interests
|
|
|
66,974
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|
|
|
73,338
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|
|
|
35,101
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|
|
|
17,996
|
|
|
|
5,051
|
|
|
|
1,001
|
|
Minority interests in continuing operations of consolidated
partnerships
|
|
|
9
|
|
|
|
(45
|
)
|
|
|
137
|
|
|
|
267
|
|
|
|
145
|
|
|
|
|
|
Minority interests in continuing operations of operating
partnership
|
|
|
(2,086
|
)
|
|
|
(2,412
|
)
|
|
|
(1,670
|
)
|
|
|
(1,271
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)
|
|
|
(414
|
)
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Income from continuing operations
|
|
|
64,897
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|
|
|
70,881
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|
|
|
33,568
|
|
|
|
16,992
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|
|
|
4,782
|
|
|
|
1,001
|
|
Income from discontinued operations before gain on sale of
assets and minority interests
|
|
|
|
|
|
|
639
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|
|
|
1,542
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|
|
|
57
|
|
|
|
|
|
|
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Gain on sale of real estate assets
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|
|
|
|
|
|
1,087
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Minority interests attributable to discontinued operations
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|
|
|
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|
|
(74
|
)
|
|
|
(77
|
)
|
|
|
(3
|
)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
|
|
|
|
1,652
|
|
|
|
1,465
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
64,897
|
|
|
|
72,533
|
|
|
|
35,033
|
|
|
|
17,046
|
|
|
|
4,782
|
|
|
|
1,001
|
|
Preferred stock dividends
|
|
|
(16,963
|
)
|
|
|
(16,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
47,934
|
|
|
$
|
55,665
|
|
|
$
|
35,033
|
|
|
$
|
17,046
|
|
|
$
|
4,782
|
|
|
$
|
1,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations per share available to common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.67
|
|
|
$
|
0.83
|
|
|
$
|
0.60
|
|
|
$
|
0.44
|
|
|
$
|
0.15
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.67
|
|
|
$
|
0.83
|
|
|
$
|
0.60
|
|
|
$
|
0.43
|
|
|
$
|
0.15
|
|
|
|
|
|
Net income per share available to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.67
|
|
|
$
|
0.85
|
|
|
$
|
0.63
|
|
|
$
|
0.44
|
|
|
$
|
0.15
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.67
|
|
|
$
|
0.85
|
|
|
$
|
0.62
|
|
|
$
|
0.44
|
|
|
$
|
0.15
|
|
|
|
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
71,684,244
|
|
|
|
65,302,794
|
|
|
|
55,928,595
|
|
|
|
38,913,103
|
|
|
|
30,965,178
|
|
|
|
|
|
Diluted
|
|
|
74,831,483
|
|
|
|
68,269,985
|
|
|
|
59,018,004
|
|
|
|
42,091,195
|
|
|
|
33,767,575
|
|
|
|
|
|
Cash dividends declared per common share
|
|
$
|
1.34
|
|
|
$
|
1.24
|
|
|
$
|
1.16
|
|
|
$
|
1.08
|
|
|
$
|
0.4197
|
|
|
|
|
|
Cash dividends declared per preferred share
|
|
$
|
1.84
|
|
|
$
|
1.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in real estate, net
|
|
$
|
2,957,735
|
|
|
$
|
2,805,983
|
|
|
$
|
2,457,538
|
|
|
$
|
1,129,371
|
|
|
$
|
468,530
|
|
|
|
|
|
Total assets
|
|
|
3,226,799
|
|
|
|
3,057,268
|
|
|
|
2,692,642
|
|
|
|
1,337,310
|
|
|
|
581,723
|
|
|
|
|
|
Total indebtedness
|
|
|
1,347,306
|
|
|
|
1,500,787
|
|
|
|
1,343,356
|
|
|
|
513,233
|
|
|
|
102,236
|
|
|
|
|
|
Total liabilities
|
|
|
1,597,572
|
|
|
|
1,653,052
|
|
|
|
1,458,610
|
|
|
|
586,162
|
|
|
|
137,639
|
|
|
|
|
|
Minority interests
|
|
|
12,381
|
|
|
|
17,280
|
|
|
|
19,319
|
|
|
|
20,673
|
|
|
|
22,267
|
|
|
|
|
|
Stockholders equity and partners capital
|
|
|
1,616,846
|
|
|
|
1,386,936
|
|
|
|
1,214,713
|
|
|
|
730,475
|
|
|
|
421,817
|
|
|
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from/(used in)(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
115,046
|
|
|
|
114,965
|
|
|
|
101,588
|
|
|
|
54,762
|
|
|
|
14,497
|
|
|
|
|
|
Investing activities
|
|
|
(218,661
|
)
|
|
|
(409,301
|
)
|
|
|
(1,339,463
|
)
|
|
|
(601,805
|
)
|
|
|
(457,218
|
)
|
|
|
|
|
Financing activities
|
|
|
111,558
|
|
|
|
282,151
|
|
|
|
1,243,227
|
|
|
|
539,486
|
|
|
|
470,433
|
|
|
|
|
|
|
|
|
(1) |
|
Cash flow information for 2004 is combined for BioMed Realty
Trust, Inc. and our predecessor. |
34
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion should be read in conjunction with
the financial statements and notes thereto appearing elsewhere
in this report. We make statements in this section that are
forward-looking statements within the meaning of the federal
securities laws. For a complete discussion of forward-looking
statements, see the section above entitled Item 1.
Business Forward-Looking Statements. Certain
risk factors may cause our actual results, performance or
achievements to differ materially from those expressed or
implied by the following discussion. For a discussion of such
risk factors, see the section above entitled Item 1A.
Risk Factors.
Overview
As used herein, the terms we, us,
our or the Company refer to BioMed
Realty Trust, Inc., a Maryland corporation, and any of our
subsidiaries, including BioMed Realty, L.P., a Maryland limited
partnership (our Operating Partnership). We operate
as a fully integrated, self-administered and self-managed real
estate investment trust (REIT) focused on acquiring,
developing, owning, leasing and managing laboratory and office
space for the life science industry. Our tenants primarily
include biotechnology and pharmaceutical companies, scientific
research institutions, government agencies and other entities
involved in the life science industry. Our properties are
generally located in markets with well established reputations
as centers for scientific research, including Boston,
San Diego, San Francisco, Seattle, Maryland,
Pennsylvania and New York/New Jersey.
We were formed on April 30, 2004 and completed our initial
public offering on August 11, 2004.
As of December 31, 2008, our portfolio consisted of 69
properties, representing 112 buildings with an aggregate of
approximately 10.4 million rentable square feet, including
approximately 1.4 million square feet of development in
progress. We also owned undeveloped land parcels adjacent to
existing properties that we estimate can support up to
approximately 1.4 million rentable square feet of
laboratory and office space.
Factors
Which May Influence Future Operations
Our long-term corporate strategy is to continue to focus on
acquiring, developing, owning, leasing and managing laboratory
and office space for the life science industry. As of
December 31, 2008, our operating portfolio was 86.9% leased
to 115 tenants. As of December 31, 2007, our operating
portfolio was 93.8% leased to 112 tenants. The decrease in the
overall leasing percentage is a reflection of an increase in the
rentable square footage in our operating portfolio, which
increased by approximately 830,000 rentable square feet in
the year ended December 31, 2008 due to the completion of
development or redevelopment activities at a number of
properties. Total leased square footage during the same period
increased by approximately 261,000 square feet within the
operating portfolio.
Leases representing approximately 4.2% of our leased square
footage expire during 2009 and leases representing approximately
10.0% of our leased square footage expire during 2010. Our
leasing strategy for 2009 focuses on leasing currently vacant
space and negotiating renewals for leases scheduled to expire
during the year, and identifying new tenants or existing tenants
seeking additional space to occupy the spaces for which we are
unable to negotiate such renewals. We may proceed with
additional new developments, as real estate and capital market
conditions permit.
Redevelopment/Development
Properties
We are actively engaged in the redevelopment and development of
certain properties in our portfolio. We believe that these
activities will ultimately result in a return on our additional
investment once the redevelopment and development activities
have been completed and the properties are leased. However,
redevelopment and development activities involve inherent risks
and assumptions relating to our ability to fully lease the
properties. Our objective is that these properties will be fully
leased upon completion of the construction activities. However,
our ability to fully lease the properties may be adversely
affected by changing market conditions, including periods of
economic slowdown or recession, rising interest rates, declining
demand for life science office and laboratory space, local
oversupply of real estate assets, or competition from others,
which may diminish our opportunities for leasing the property on
favorable terms or at all. In addition, we may fail to retain
tenants that have pre-leased our
35
properties, or may face significant monetary penalties, if we do
not complete the construction of these properties in a timely
manner or to the tenants specifications. Further, our
competitors with greater resources may have more flexibility
than we do in their ability to offer rental concessions to
attract tenants to their properties, which could put pressure on
our ability to attract tenants at rental rates that will provide
an expected return on our additional investment in these
properties. As a result, we may be unable to fully lease some of
our redevelopment/development properties in a timely manner upon
the completion of major construction activities.
We also rely on external sources of debt and equity funding to
provide capital for our redevelopment and development projects.
Although we believe that we currently have sufficient borrowing
capacity and will be able to obtain additional funding as
necessary, we may be unable to obtain financing on favorable
terms (or at all) or we may be forced to seek alternative
sources of potentially less attractive financing, which may
require us to adjust our business and construction plans
accordingly. Further, we may spend more time or money than
anticipated to redevelop or develop our properties due to delays
or refusals in obtaining all necessary zoning, land use,
building, occupancy and other required governmental permits and
authorizations or other unanticipated delays in the construction.
The following summarizes our consolidated properties under
repositioning or redevelopment at December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property
|
|
|
|
|
|
Estimated Full
|
|
|
|
Rentable
|
|
|
Percent
|
|
|
In-Service
|
|
Property
|
|
Square Feet
|
|
|
Leased
|
|
|
Date(1)
|
|
|
Elliott Avenue
|
|
|
134,989
|
|
|
|
0.0
|
%
|
|
|
Q1 2010
|
|
Pacific Research Center
|
|
|
1,389,517
|
|
|
|
24.2
|
%
|
|
|
Q2 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted-Average
|
|
|
1,524,506
|
|
|
|
22.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Our estimate of the time in which redevelopment will be
substantially complete. We estimate that the projects will be
substantially complete and held available for their intended use
upon the completion of tenant improvements, but no later than
one year from the cessation of major construction activities. We
currently estimate that we will invest up to an additional
$145.0 million before the redevelopment on these properties
is substantially complete. |
The following summarizes our consolidated properties under
development at December 31, 2008 (portions of certain
development properties were delivered to tenants for their
intended use during the year ended December 31, 2008):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Estimated Full
|
|
|
|
Rentable
|
|
|
Percent
|
|
|
Investment
|
|
|
Total
|
|
|
In-Service
|
|
Property
|
|
Square Feet
|
|
|
Leased
|
|
|
to Date
|
|
|
Investment
|
|
|
Date(1)
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
Center for Life
Science | Boston
|
|
|
704,159
|
|
|
|
87.1
|
%
|
|
$
|
709,200
|
|
|
$
|
720,000
|
|
|
|
Q1 2009
|
|
530 Fairview Avenue
|
|
|
96,188
|
|
|
|
65.9
|
%
|
|
|
38,500
|
|
|
|
47,500
|
|
|
|
Q2 2009
|
|
Landmark at Eastview II(2)
|
|
|
360,520
|
|
|
|
69.2
|
%
|
|
|
85,000
|
|
|
|
145,000
|
|
|
|
Q2 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted-Average
|
|
|
1,160,867
|
|
|
|
79.8
|
%
|
|
$
|
832,700
|
|
|
$
|
912,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Our estimate of the time in which development will be
substantially complete. We estimate that the projects will be
substantially complete and held available for their intended use
upon the completion of tenant improvements, but no later than
one year from the cessation of major construction activities. |
|
(2) |
|
A previously undeveloped portion of the property was undergoing
development as of December 31, 2008 and has been reflected
separately from the stabilized portion of the property. However,
we have not separated this previously undeveloped portion into a
separate property for legal and accounting purposes. Therefore,
we still classify the Landmark at Eastview property as a
stabilized property although it is also included in our
discussion of development properties. |
36
Lease
Expirations
The following is a summary of lease expirations over the next
ten calendar years for leases in place at December 31,
2008. This table assumes that none of the tenants exercise
renewal options or early termination rights, if any, at or prior
to the scheduled expirations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
Base Rent
|
|
|
|
|
|
|
Percent of
|
|
|
Annualized
|
|
|
Annualized
|
|
|
per Leased
|
|
|
|
Leased
|
|
|
Leased
|
|
|
Base Rent
|
|
|
Base Rent
|
|
|
Square Foot
|
|
Year of Lease Expiration
|
|
Square Feet
|
|
|
Square Feet
|
|
|
Current
|
|
|
Current
|
|
|
Current
|
|
|
|
(In thousands)
|
|
|
2009(1)
|
|
|
323,554
|
|
|
|
4.2
|
%
|
|
$
|
7,045
|
|
|
|
2.6
|
%
|
|
$
|
21.77
|
|
2010(2)
|
|
|
771,082
|
|
|
|
10.0
|
%
|
|
|
17,861
|
|
|
|
6.5
|
%
|
|
|
23.16
|
|
2011
|
|
|
380,013
|
|
|
|
4.9
|
%
|
|
|
13,394
|
|
|
|
4.9
|
%
|
|
|
35.25
|
|
2012
|
|
|
469,936
|
|
|
|
6.1
|
%
|
|
|
11,182
|
|
|
|
4.1
|
%
|
|
|
23.79
|
|
2013
|
|
|
434,141
|
|
|
|
5.6
|
%
|
|
|
10,218
|
|
|
|
3.7
|
%
|
|
|
23.54
|
|
2014
|
|
|
617,695
|
|
|
|
8.0
|
%
|
|
|
14,051
|
|
|
|
5.1
|
%
|
|
|
22.75
|
|
2015
|
|
|
84,157
|
|
|
|
1.1
|
%
|
|
|
2,760
|
|
|
|
1.0
|
%
|
|
|
32.80
|
|
2016
|
|
|
623,067
|
|
|
|
8.0
|
%
|
|
|
23,803
|
|
|
|
8.7
|
%
|
|
|
38.20
|
|
2017
|
|
|
198,447
|
|
|
|
2.6
|
%
|
|
|
4,783
|
|
|
|
1.7
|
%
|
|
|
24.10
|
|
2018
|
|
|
1,085,616
|
|
|
|
14.0
|
%
|
|
|
47,159
|
|
|
|
17.2
|
%
|
|
|
43.44
|
|
Thereafter
|
|
|
2,754,580
|
|
|
|
35.5
|
%
|
|
|
122,441
|
|
|
|
44.5
|
%
|
|
|
44.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Portfolio/Weighted-Average
|
|
|
7,742,288
|
|
|
|
100.0
|
%
|
|
$
|
274,697
|
|
|
|
100.0
|
%
|
|
$
|
35.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes current month-to-month leases. |
|
(2) |
|
The maturity dates for approximately 192,000 and 100,000 leased
square feet originally expiring on August 31, 2010 and
December 31, 2010, respectively, were extended through
December 31, 2015 pursuant to lease amendments executed
with a tenant on January 12, 2009. |
The success of our leasing and development strategy will be
dependent upon the general economic conditions and more
specifically real estate market conditions and life science
industry trends in the United States and in our target markets
of Boston, San Diego, San Francisco, Seattle,
Maryland, Pennsylvania, New York/New Jersey and research parks
near or adjacent to universities. We cannot give any assurance
that leases will be renewed or that available space will be
released at rental rates equal to or above the current
contractual rental rates or at all.
Critical
Accounting Policies
The preparation of financial statements in conformity with GAAP
requires management to use judgment in the application of
accounting policies, including making estimates and assumptions.
We base our estimates on historical experience and on various
other assumptions believed to be reasonable under the
circumstances. These judgments affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the
reported amounts of revenue and expenses during the reporting
periods. If our judgment or interpretation of the facts and
circumstances relating to various transactions had been
different, it is possible that different accounting policies
would have been applied resulting in a different presentation of
our financial statements. On an ongoing basis, we evaluate our
estimates and assumptions. In the event estimates or assumptions
prove to be different from actual results, adjustments are made
in subsequent periods to reflect more current information. Below
is a discussion of accounting policies that we consider critical
in that they address the most material parts of our financial
statements, require complex judgment in their application or
require estimates about matters that are inherently uncertain.
37
Investments
in Real Estate
Investments in real estate are carried at depreciated cost.
Depreciation and amortization are recorded on a straight-line
basis over the estimated useful lives of the assets as follows:
|
|
|
Buildings and improvements
|
|
15-40 years
|
Ground lease
|
|
Term of the related lease
|
Tenant improvements
|
|
Shorter of the useful lives or the terms of the related leases
|
Furniture, fixtures, and equipment
|
|
3 to 5 years
|
Acquired in-place leases
|
|
Non-cancelable term of the related lease
|
Acquired management agreements
|
|
Non-cancelable term of the related agreement
|
Our estimates of useful lives have a direct impact on our net
income. If expected useful lives of our investments in real
estate were shortened, we would depreciate the assets over a
shorter time period, resulting in an increase to depreciation
expense and a corresponding decrease to net income on an annual
basis.
Management must make significant assumptions in determining the
value of assets and liabilities acquired. The use of different
assumptions in the allocation of the purchase cost of the
acquired properties would affect the timing of recognition of
the related revenue and expenses. The fair-value of tangible
assets of an acquired property (which includes land, buildings,
and improvements) is determined by valuing the property as if it
were vacant, and the as-if-vacant value is then
allocated to land, buildings and improvements based on
managements determination of the relative fair-value of
these assets. Factors considered by us in performing these
analyses include an estimate of the carrying costs during the
expected
lease-up
periods, current market conditions, and costs to execute similar
leases. In estimating carrying costs, we include real estate
taxes, insurance and other operating expenses, and estimates of
lost rental revenue during the expected
lease-up
periods based on current market demand.
The aggregate value of other acquired intangible assets
consisting of acquired in-place leases and acquired management
agreements are recorded based on a variety of considerations
including, but not necessarily limited to: (a) the value
associated with avoiding the cost of originating the acquired
in-place leases (i.e. the market cost to execute a lease,
including leasing commissions and legal fees, if any);
(b) the value associated with lost revenue related to
tenant reimbursable operating costs estimated to be incurred
during the assumed
lease-up
period (i.e. real estate taxes and insurance); and (c) the
value associated with lost rental revenue from existing leases
during the assumed
lease-up
period. The fair-value assigned to the acquired management
agreements are recorded at the present value (using a discount
rate which reflects the risks associated with the management
agreements acquired) of the acquired management agreements with
certain tenants of the acquired properties. The values of
in-place leases and management agreements are amortized to
expense over the remaining non-cancelable period of the
respective leases or agreements. If a lease were to be
terminated or if termination is determined to be likely (e.g.,
in the case of a tenant bankruptcy) prior to its contractual
expiration, amortization of all unamortized amounts related to
that lease would be accelerated and such amounts written off.
Costs incurred in connection with the acquisition, development
or construction of properties and improvements are capitalized.
Capitalized costs include pre-construction costs essential to
the development of the property, development costs, construction
costs, interest costs, real estate taxes, salaries and related
costs and other direct costs incurred during the period of
development. We capitalize costs on land and buildings under
development until construction is substantially complete and the
property is held available for occupancy. The determination of
when a development project is substantially complete and when
capitalization must cease involves a degree of judgment. We
consider a construction project as substantially complete and
held available for occupancy upon the completion of
landlord-owned tenant improvements or when the lessee takes
possession of the unimproved space for construction of its own
improvements, but no later than one year from cessation of major
construction activity. We cease capitalization on the portion
substantially completed and occupied or held available for
occupancy, and capitalize only those costs associated with any
remaining portion under construction. Capitalized costs
associated with unsuccessful acquisitions are charged to expense
when an acquisition is no longer considered probable.
Repair and maintenance costs are charged to expense as incurred
and significant replacements and betterments are capitalized.
Repairs and maintenance costs include all costs that do not
extend the useful life of an asset or
38
increase its operating efficiency. Significant replacement and
betterments represent costs that extend an assets useful
life or increase its operating efficiency.
When circumstances such as adverse market conditions indicate a
possible impairment of the value of a property, we review the
recoverability of the propertys carrying value. The review
of recoverability is based on an estimate of the future
undiscounted cash flows (excluding interest charges) expected to
result from the long-lived assets use and eventual
disposition. These cash flows consider factors such as expected
future operating income, trends and prospects, as well as the
effects of leasing demand, competition and other factors. If
impairment exists due to the inability to recover the carrying
value of a long-lived asset, an impairment loss is recorded to
the extent that the carrying value exceeds the estimated
fair-value of the property. We are required to make subjective
assessments as to whether there are impairments in the values of
our investments in long-lived assets. These assessments have a
direct impact on our net income because recording an impairment
loss results in an immediate negative adjustment to net income.
The evaluation of anticipated cash flows is highly subjective
and is based in part on assumptions regarding future occupancy,
rental rates and capital requirements that could differ
materially from actual results in future periods. Although our
strategy is to hold our properties over the long-term, if our
strategy changes or market conditions otherwise dictate an
earlier sale date, an impairment loss may be recognized to
reduce the property to the lower of the carrying amount or
fair-value less costs to sell, and such loss could be material.
If we determine that impairment has occurred, the affected
assets must be reduced to their fair-value.
Revenue
Recognition
We commence revenue recognition on our leases based on a number
of factors. In most cases, revenue recognition under a lease
begins when the lessee takes possession of or controls the
physical use of the leased asset. Generally, this occurs on the
lease commencement date. In determining what constitutes the
leased asset, we evaluate whether we or the lessee is the owner,
for accounting purposes, of the tenant improvements. If we are
the owner, for accounting purposes, of the tenant improvements,
then the leased asset is the finished space and revenue
recognition begins when the lessee takes possession of the
finished space, typically when the improvements are
substantially complete. If we conclude that we are not the
owner, for accounting purposes, of the tenant improvements (the
lessee is the owner), then the leased asset is the unimproved
space and any tenant improvement allowances funded under the
lease are treated as lease incentives, which reduce revenue
recognized on a straight-line basis over the remaining
non-cancelable term of the respective lease. In these
circumstances, we begin revenue recognition when the lessee
takes possession of the unimproved space for the lessee to
construct improvements. The determination of who is the owner,
for accounting purposes, of the tenant improvements determines
the nature of the leased asset and when revenue recognition
under a lease begins. We consider a number of different factors
to evaluate whether we or the lessee is the owner of the tenant
improvements for accounting purposes. These factors include:
|
|
|
|
|
whether the lease stipulates how and on what a tenant
improvement allowance may be spent;
|
|
|
|
whether the tenant or landlord retain legal title to the
improvements;
|
|
|
|
the uniqueness of the improvements;
|
|
|
|
the expected economic life of the tenant improvements relative
to the length of the lease;
|
|
|
|
the responsible party for construction cost overruns; and
|
|
|
|
who constructs or directs the construction of the improvements.
|
The determination of who owns the tenant improvements, for
accounting purposes, is subject to significant judgment. In
making that determination we consider all of the above factors.
However, no one factor is determinative in reaching a conclusion.
All leases are classified as operating leases and minimum rents
are recognized on a straight-line basis over the term of the
related lease. The excess of rents recognized over amounts
contractually due pursuant to the underlying leases is included
in accrued straight-line rents on the accompanying consolidated
balance sheets and contractually due but unpaid rents are
included in accounts receivable. Existing leases at acquired
properties are reviewed at the time of acquisition to determine
if contractual rents are above or below current market rents for
the acquired
39
property. An identifiable lease intangible asset or liability is
recorded based on the present value (using a discount rate that
reflects the risks associated with the acquired leases) of the
difference between (1) the contractual amounts to be paid
pursuant to the in-place leases and (2) our estimate of the
fair market lease rates for the corresponding in-place leases at
acquisition, measured over a period equal to the remaining
non-cancelable term of the leases and any fixed rate renewal
periods. The capitalized above-market lease values are amortized
as a reduction of rental income over the remaining
non-cancelable terms of the respective leases. The capitalized
below-market lease values are amortized as an increase to rental
income over the remaining non-cancelable terms of the respective
leases. If a lease were to be terminated or if termination were
determined to be likely (e.g., in the case of a tenant
bankruptcy) prior to its contractual expiration, amortization of
the related unamortized above or below market lease intangible
would be accelerated and such amounts written off.
Substantially all rental operations expenses, consisting of real
estate taxes, insurance and common area maintenance costs are
recoverable from tenants under the terms of our lease
agreements. Amounts recovered are dependent on several factors,
including occupancy and lease terms. Tenant recovery revenue is
recognized in the period the expenses are incurred. The
reimbursements are recognized and presented in accordance with
Emerging Issues Tax Force Issue (EITF)
No. 99-19,
Reporting Revenue Gross as a Principal versus Net as an Agent
(EITF 99-19).
EITF 99-19
requires that these reimbursements be recorded gross, as the
Company is generally the primary obligor with respect to
purchasing goods and services from third-party suppliers, has
discretion in selecting the supplier and bears the credit risk.
Lease termination fees are recognized when the related leases
are canceled, collectability is assured, and we have no
continuing obligation to provide space to former tenants.
We maintain an allowance for doubtful accounts for estimated
losses resulting from the inability of tenants to make required
rent and tenant recovery payments or defaults. We may also
maintain an allowance for accrued straight-line rents and
amounts due from lease terminations based on our assessment of
the collectability of the balance.
Payments received under master lease agreements entered into
with the sellers of properties to lease space that was not
producing rent at the time of the acquisition are recorded as a
reduction to buildings and improvements rather than as rental
income in accordance with
EITF 85-27,
Recognition of Receipts from
Made-Up
Rental Shortfalls.
Investments
in Partnerships
We evaluate our investments in limited liability companies and
partnerships under Financial Accounting Standards Board
(FASB) Interpretation No. 46 (revised December
2003), Consolidation of Variable Interest Entities
(FIN 46R), an interpretation of Accounting
Research Bulletin No. 51, Consolidated Financial
Statements. FIN 46R provides guidance on the
identification of entities for which control is achieved through
means other than voting rights (variable interest
entities) and the determination of which business
enterprise should consolidate the variable interest entity (the
primary beneficiary). Generally, FIN 46R
applies when either (1) the equity investors (if any) lack
one or more of the essential characteristics of a controlling
financial interest, (2) the equity investment at risk is
insufficient to finance that entitys activities without
additional subordinated financial support or (3) the equity
investors have voting rights that are not proportionate to their
economic interests and the activities of the entity involve or
are conducted on behalf of an investor with a disproportionately
small voting interest.
If FIN 46R does not apply, we consider EITF Issue
No. 04-5,
Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights
(EITF 04-5),
which provides guidance in determining whether a general partner
controls a limited partnership.
EITF 04-5 states
that the general partner in a limited partnership is presumed to
control that limited partnership. The presumption may be
overcome if the limited partners have either (1) the
substantive ability to dissolve the limited partnership or
otherwise remove the general partner without cause or
(2) substantive participating rights, which provide the
limited partners with the ability to effectively participate in
significant decisions that would be expected to be made in the
ordinary course of the limited partnerships business and
thereby preclude
40
the general partner from exercising unilateral control over the
partnership. If the criteria in
EITF 04-5
are met, the consolidation of the partnership or limited
liability company is required.
Except for investments that are consolidated in accordance with
FIN 46R or
EITF 04-5,
we account for investments in entities over which we exercise
significant influence, but do not control, under the equity
method of accounting. These investments are recorded initially
at cost and subsequently adjusted for equity in earnings and
cash contributions and distributions. Under the equity method of
accounting, our net equity in the investment is reflected in the
consolidated balance sheets and our share of net income or loss
is included in our consolidated statements of income.
On a periodic basis, we assess whether there are any indicators
that the carrying value of our investments in partnerships or
limited liability companies may be impaired on a more than
temporary basis. An investment is impaired only if our estimate
of the fair-value of the investment is less than the carrying
value of the investment on a more than temporary basis. To the
extent impairment has occurred, the loss shall be measured as
the excess of the carrying value of the investment over the
fair-value of the investment.
Assets
and Liabilities Measured at Fair-Value
On January 1, 2008, we adopted SFAS No. 157,
Fair Value Measurements (SFAS 157),
which defines fair-value, establishes a framework for measuring
fair-value, and expands disclosures about fair-value
measurements. SFAS 157 applies to reported balances that
are required or permitted to be measured at fair-value under
existing accounting pronouncements; accordingly, the standard
does not require any new fair-value measurements of reported
balances. As of December 31, 2008, we have applied the
provisions of SFAS 157 to the valuation of our interest
rate swaps, which are the only financial instruments measured at
fair-value on a recurring basis.
On January 1, 2008, we adopted SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities, which permits companies to choose to measure
certain financial instruments and other items at fair-value in
order to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently. However,
we have not elected to measure any additional financial
instruments and other items at fair-value (other than those
previously required under other GAAP rules or standards) under
the provisions of this standard.
SFAS 157 emphasizes that fair-value is a market-based
measurement, not an entity-specific measurement. Therefore, a
fair-value measurement should be determined based on the
assumptions that market participants would use in pricing the
asset or liability. As a basis for considering market
participant assumptions in fair-value measurements,
SFAS 157 establishes a fair-value hierarchy that
distinguishes between market participant assumptions based on
market data obtained from sources independent of the reporting
entity (observable inputs that are classified within
Levels 1 and 2 of the hierarchy) and the reporting
entitys own assumptions about market participant
assumptions (unobservable inputs classified within Level 3
of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active
markets for identical assets or liabilities that we have the
ability to access. Level 2 inputs are inputs other than
quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly.
Level 2 inputs may include quoted prices for similar assets
and liabilities in active markets, as well as inputs that are
observable for the asset or liability (other than quoted
prices), such as interest rates, foreign exchange rates, and
yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs for the asset or
liability, which are typically based on an entitys own
assumptions, as there is little, if any, related market
activity. In instances where the determination of the fair-value
measurement is based on inputs from different levels of the
fair-value hierarchy, the level in the fair-value hierarchy
within which the entire fair-value measurement falls is based on
the lowest level input that is significant to the fair-value
measurement in its entirety. Our assessment of the significance
of a particular input to the fair-value measurement in its
entirety requires judgment, and considers factors specific to
the asset or liability.
Currently, we use forward starting and interest rate swaps to
manage our interest rate risk. The valuation of these
instruments is determined using widely accepted valuation
techniques including discounted cash flow analysis on the
expected cash flows of each derivative. This analysis reflects
the contractual terms of the derivatives, including the period
to maturity, and uses observable market-based inputs, including
interest rate curves. The fair-
41
values of interest rate swaps are determined using the market
standard methodology of netting the discounted future fixed cash
receipts (or payments) and the discounted expected variable cash
payments (or receipts). The variable cash payments (or receipts)
are based on an expectation of future interest rates (forward
curves) derived from observable market interest rate curves. To
comply with the provisions of SFAS 157, we incorporate
credit valuation adjustments to appropriately reflect both our
own nonperformance risk and the respective counterpartys
nonperformance risk in the fair-value measurements. In adjusting
the fair-value of our derivative contracts for the effect of
nonperformance risk, we have considered the impact of netting
and any applicable credit enhancements, such as collateral
postings, thresholds, mutual puts, and guarantees.
Derivative
Instruments
We record all derivatives on the balance sheet at fair-value.
The accounting for changes in the fair-value of derivatives
depends on the intended use of the derivative and the resulting
designation. Derivatives used to hedge the exposure to changes
in the fair-value of an asset, liability, or firm commitment
attributable to a particular risk, such as interest rate risk,
are considered fair-value hedges. Derivatives used to hedge the
exposure to variability in expected future cash flows, or other
types of forecasted transactions, are considered cash flow
hedges.
For derivatives designated as cash flow hedges, the effective
portion of changes in the fair-value of the derivative is
initially reported in other comprehensive income (outside of
earnings) and subsequently reclassified to earnings when the
hedged transaction affects earnings, and the ineffective portion
of changes in the fair-value of the derivative is recognized
directly in earnings. We assess the effectiveness of each
hedging relationship by comparing the changes in cash flows of
the derivative hedging instrument with the changes in cash flows
of the designated hedged item or transaction.
Our objective in using derivatives is to add stability to
interest expense and to manage our exposure to interest rate
movements or other identified risks. To accomplish this
objective, we use interest rate swaps as part of our cash flow
hedging strategy. Interest rate swaps designated as cash flow
hedges involve the receipt of variable-rate amounts in exchange
for fixed-rate payments over the life of the agreements without
exchange of the underlying principal amount. During 2008 and
2007, such derivatives were used to hedge the variable cash
flows associated with existing variable-rate debt and future
variability in the interest related cash flows from forecasted
issuances of debt. We formally document the hedging
relationships for all derivative instruments, we have
historically accounted for all of our interest rate swap
agreements as cash flow hedges, and we have not used derivatives
for trading or speculative purposes. At December 31, 2008,
the hedging relationships for two of our four forward starting
swaps were no longer considered highly effective and we were
required to prospectively discontinue hedge accounting for these
two swaps under SFAS No. 133, Accounting for
Derivative Investment and Hedging Activities
(SFAS 133). See Note 12 to the
Consolidated Financial Statements.
Newly
Issued Accounting Pronouncements
See Notes to Consolidated Financial Statements included
elsewhere herein for disclosure and discussion of new accounting
standards.
Results
of Operations
The following is a comparison, for the years ended
December 31, 2008 and 2007 and for the years ended
December 31, 2007 and 2006, of the consolidated operating
results of BioMed Realty Trust, Inc.
Comparison
of the Year Ended December 31, 2008 to the Year Ended
December 31, 2007
The following table sets forth the basis for presenting the
historical financial information for same properties (all
properties except redevelopment/development, new properties, and
corporate and discontinued operations),
redevelopment/development properties (properties that were
entirely or primarily under redevelopment or development during
either of the years ended December 31, 2008 or 2007), new
properties (properties that were not owned for each of the full
years ended December 31, 2008 and 2007 and were not under
redevelopment/
42
development) and corporate entities (legal entities performing
general and administrative functions and fees received from our
PREI joint venture joint ventures), in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redevelopment/
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
|
|
|
|
Same Properties
|
|
|
Properties
|
|
|
New Properties
|
|
|
Corporate
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Rental
|
|
$
|
181,984
|
|
|
$
|
176,664
|
|
|
$
|
30,580
|
|
|
$
|
10,760
|
|
|
$
|
14,965
|
|
|
$
|
8,585
|
|
|
$
|
(65
|
)
|
|
$
|
(13
|
)
|
Tenant recoveries
|
|
|
57,963
|
|
|
|
55,016
|
|
|
|
11,853
|
|
|
|
5,583
|
|
|
|
1,780
|
|
|
|
966
|
|
|
|
570
|
|
|
|
170
|
|
Other income
|
|
|
313
|
|
|
|
516
|
|
|
|
2
|
|
|
|
7,182
|
|
|
|
|
|
|
|
|
|
|
|
2,028
|
|
|
|
680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
240,260
|
|
|
$
|
232,196
|
|
|
$
|
42,435
|
|
|
$
|
23,525
|
|
|
$
|
16,745
|
|
|
$
|
9,551
|
|
|
$
|
2,533
|
|
|
$
|
837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Revenues. Rental revenues increased
$31.5 million to $227.5 million for the year ended
December 31, 2008 compared to $196.0 million for the
year ended December 31, 2007. The increase was primarily
due to acquisitions during 2007 and 2008 and properties that
were under redevelopment or development for which partial
revenue recognition commenced during 2008 (principally at our
Center for Life
Science | Boston
property), partially offset by properties that generated rental
revenues in 2007, which subsequently entered redevelopment. Same
property rental revenues increased $5.3 million, or 3.0%,
for the year ended December 31, 2008 compared to the same
period in 2007. The increase in same property rental revenues
was primarily a result of the expansion of an existing lease at
our King of Prussia property, new leases at our Landmark at
Eastview, Road to the Cure and Phoenixville Pike properties, and
inflation-indexed rent increases at other properties, partially
offset by lease expirations and early lease terminations.
Tenant Recoveries. Revenues from tenant
reimbursements increased $10.5 million to
$72.2 million for the year ended December 31, 2008
compared to $61.7 million for the year ended
December 31, 2007. The increase was primarily due to the
commencement of new leases at a number of properties, increases
in utility usage and rates, acquisitions during 2007 and 2008,
properties that were under redevelopment or development for
which partial revenue recognition commenced during 2008
(principally at our Center for Life
Science | Boston
property), and an increase in property management fees earned
from our PREI joint ventures. Same property tenant recoveries
increased $2.9 million, or 5.4%, for the year ended
December 31, 2008 compared to the same period in 2007
primarily as a result of net increases in utility usage and
other recoverable costs compared to the prior year, partially
offset by a change in 2008 at a property at which the tenant
began to pay vendors directly for certain recoverable expenses.
Other Income. Other income was
$2.3 million for the year ended December 31, 2008
compared to $8.4 million for the year ended
December 31, 2007. Other income for the year ended
December 31, 2008 was primarily comprised of development
fees earned from our PREI joint ventures. Other income for the
year ended December 31, 2007 was primarily comprised of
$7.7 million of gains on the early termination of leases
and fees earned from our PREI joint ventures.
The following table shows operating expenses for same
properties, redevelopment/development properties, new
properties, and corporate entities, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redevelopment/
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
|
|
|
|
Same Properties
|
|
|
Properties
|
|
|
New Properties
|
|
|
Corporate
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Rental operations
|
|
$
|
45,860
|
|
|
$
|
44,360
|
|
|
$
|
10,593
|
|
|
$
|
3,684
|
|
|
$
|
2,148
|
|
|
$
|
344
|
|
|
$
|
2,999
|
|
|
$
|
2,401
|
|
Real estate taxes
|
|
|
18,005
|
|
|
|
17,369
|
|
|
|
4,023
|
|
|
|
2,247
|
|
|
|
1,151
|
|
|
|
737
|
|
|
|
(50
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
61,946
|
|
|
|
61,347
|
|
|
|
14,008
|
|
|
|
7,959
|
|
|
|
8,273
|
|
|
|
2,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
$
|
125,811
|
|
|
$
|
123,076
|
|
|
$
|
28,624
|
|
|
$
|
13,890
|
|
|
$
|
11,572
|
|
|
$
|
3,977
|
|
|
$
|
2,949
|
|
|
$
|
2,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Operations Expense. Rental operations
expense increased $10.8 million to $61.6 million for
the year ended December 31, 2008 compared to
$50.8 million for the year ended December 31, 2007.
The increase was primarily due to acquisitions during 2007 and
2008 and properties that were under redevelopment or development
43
for which partial revenue recognition commenced during 2008
(principally at our Center for Life
Science | Boston
property), partially offset by properties that generated rental
revenues in 2007, which subsequently entered redevelopment. Same
property rental operations expense increased $1.5 million,
or 3.4%, for the year ended December 31, 2008 compared to
2007 primarily due to the hiring of additional property
management personnel and related expansion of our operations in
2007 and 2008, and net increases in utility usage and other
recoverable costs compared to the same period in the prior year,
partially offset by a change in 2008 at a property at which the
tenant began to pay vendors directly for certain recoverable
expenses.
Real Estate Tax Expense. Real estate tax
expense increased $2.7 million to $23.1 million for
the year ended December 31, 2008 compared to
$20.4 million for the year ended December 31, 2007.
The increase was primarily due to acquisitions during 2007 and
2008 and properties that were under redevelopment or development
in the prior year for which partial revenue recognition
commenced during 2008 (principally at our Center for Life
Science | Boston
property). Same property real estate tax expense increased
$636,000, or 3.7%, for the year ended December 31, 2008
compared to 2007 primarily due to reassessments of the tax basis
at certain properties in 2008 and refunds of property taxes in
2007 (reducing property tax expense in 2007), partially offset
by a refund received at one property in 2008 and the continued
capitalization of property taxes in connection with construction
on our Landmark at Eastview II property.
Depreciation and Amortization
Expense. Depreciation and amortization expense
increased $12.0 million to $84.2 million for the year
ended December 31, 2008 compared to $72.2 million for
the year ended December 31, 2007. The increase was
primarily due to depreciation and amortization expense for the
properties acquired in 2007 and 2008 and the commencement of
partial operations and recognition of depreciation and
amortization expense at certain of our redevelopment and
development properties (principally at our Center for Life
Science | Boston
property), partially offset by the cessation of depreciation on
certain properties, or portions thereof, which entered
redevelopment in 2007 and 2008.
General and Administrative Expenses. General
and administrative expenses increased $964,000 to
$22.8 million for the year ended December 31, 2008
compared to $21.9 million for the year ended
December 31, 2007. The increase was primarily due to
continued growth in the corporate infrastructure necessary to
support our expanded property portfolio, additional salary and
stock compensation costs associated with the retirement of one
of our executive officers, and costs associated with our new
corporate headquarters, which was completed in the first quarter
of 2008, partially offset by lower bonuses for senior management.
Equity in Net Loss of Unconsolidated
Partnerships. Equity in net loss of
unconsolidated partnerships increased $307,000 to
$1.2 million for the year ended December 31, 2008
compared to $893,000 for the year ended December 31, 2007.
The increase was primarily due to cessation of the
capitalization of interest and operating expenses at certain
properties of our PREI joint ventures that were placed in
service in 2008, partially offset by commencement of leases at
those properties.
Interest Expense. Interest cost incurred for
the year ended December 31, 2008 totaled $80.9 million
compared to $84.4 million for the year ended
December 31, 2007. Total interest cost incurred decreased
primarily as a result of: (a) decreases in borrowings for
working capital purposes and (b) decreases in the average
interest rate on our outstanding borrowings, partially offset by
higher borrowings for development and redevelopment activities.
During the year ended December 31, 2008, we capitalized
$41.2 million of interest compared to $56.7 million
for the year ended December 31, 2007. The decrease reflects
the partial or complete cessation of capitalized interest at our
Center for Life
Science | Boston, 9865
Towne Centre Drive, and 530 Fairview Avenue development projects
and our Pacific Research Center redevelopment project due to the
commencement of certain leases at those properties. We expect
capitalized interest costs on these and other properties
currently under development or redevelopment to decrease as
rentable space at these properties are readied for their
intended uses through 2009. Net of capitalized interest and the
accretion of debt premium, interest expense increased
$11.9 million to $39.6 million for the year ended
December 31, 2008 compared to $27.7 million for the
year ended December 31, 2007. We expect interest expense to
continue to increase in 2009 as additional properties currently
under development or redevelopment are readied for their
intended uses and placed in service, and also due to the
adoption of a new accounting pronouncement on January 1,
2009, which will increase the amount of non-cash interest we
recognize related to the exchangeable senior notes.
44
Loss on derivative instruments. We have four
forward starting swaps that were acquired to mitigate our
exposure to the variability in expected future cash flows
attributable to changes in future interest rates associated with
a forecasted issuance of fixed rate debt by April 30, 2009.
Such fixed rate debt was generally expected to be issued in
connection with a refinancing of our secured construction loan.
The four forward starting swaps had an aggregate notional value
of $450.0 million. At December 31, 2008, the hedging
relationships for two of our four forward starting swaps, with
an aggregate notional amount of $150.0 million, were no
longer considered highly effective as the expectation of
forecasted interest payments had changed, and we were required
to prospectively discontinue hedge accounting for these two
swaps. As a result, a portion of the unrealized losses related
to these forward starting swaps previously included in
accumulated other comprehensive loss, totaling
$18.2 million, was reclassified to the consolidated income
statement as loss on derivative instruments in the fourth
quarter of 2008. Prospective changes in the fair-value of these
two swaps will be recorded in the consolidated income statements
through the date the swaps are settled. The loss on derivative
instruments for the year ended December 31, 2008 also
includes approximately $1.8 million of hedge
ineffectiveness on cash flow hedges due to mismatches in
forecasted debt issuance dates, maturity dates and interest rate
reset dates of the interest rate and forward starting swaps and
related debt.
Gain on Extinguishment of Debt. In November
2008, we repurchased approximately $46.8 million face value
of our exchangeable senior notes for approximately
$28.8 million. The repurchase resulted in the recognition
of a gain on extinguishment of debt of approximately
$17.1 million (net of the write-off of approximately
$858,000 in deferred loan fees), which is reflected in our
consolidated statements of income.
Minority Interests. Minority interests
increased $380,000 to $2.1 million for the year ended
December 31, 2008 compared to $2.5 million for the
year ended December 31, 2007. The increase in minority
interests was related to an increase in income before minority
interests allocable to minority interests in our Operating
Partnership, partially offset by a net loss in minority
interests in our consolidated partnerships for the year ended
December 31, 2008, compared to net income in minority
interests in our consolidated partnerships for the year ended
December 31, 2007.
Comparison
of the Year Ended December 31, 2007 to the Year Ended
December 31, 2006
The following table sets forth the basis for presenting the
historical financial information for same properties (all
properties except redevelopment/development, new properties, and
corporate and discontinued operations),
redevelopment/development properties (properties that were
entirely or primarily under redevelopment or development during
either of the years ended December 31, 2007 or 2006), new
properties (properties that were not owned for each of the full
years ended December 31, 2007 and 2006 and were not under
redevelopment/development) and corporate entities (legal
entities performing general and administrative functions and
fees received from our PREI joint ventures), in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redevelopment/
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
|
|
|
|
Same Properties
|
|
|
Properties
|
|
|
New Properties
|
|
|
Corporate
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Rental
|
|
$
|
109,498
|
|
|
$
|
107,395
|
|
|
$
|
16,957
|
|
|
$
|
21,944
|
|
|
$
|
69,554
|
|
|
$
|
35,176
|
|
|
$
|
(13
|
)
|
|
$
|
(28
|
)
|
Tenant recoveries
|
|
|
48,822
|
|
|
|
46,798
|
|
|
|
6,837
|
|
|
|
5,317
|
|
|
|
5,906
|
|
|
|
2,045
|
|
|
|
170
|
|
|
|
|
|
Other income
|
|
|
514
|
|
|
|
82
|
|
|
|
7,184
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
680
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
158,834
|
|
|
$
|
154,275
|
|
|
$
|
30,978
|
|
|
$
|
27,265
|
|
|
$
|
75,460
|
|
|
$
|
37,221
|
|
|
$
|
837
|
|
|
$
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Revenues. Rental revenues increased
$31.5 million to $196.0 million for the year ended
December 31, 2007 compared to $164.5 million for the
year ended December 31, 2006. The increase was primarily
due to acquisitions in 2006 and 2007, partially offset by
properties that generated revenues during 2006 and subsequently
entered into redevelopment. Same property rental revenues
increased $2.1 million, or 2.0%, for the year ended
December 31, 2007 compared to the same period in 2006. The
increase in same property rental revenues was primarily a result
of a full year of rental revenues in 2007 for new leases at our
21 Erie Street, Industrial Road, Landmark at Eastview, and 6828
Nancy Ridge Drive properties, partially offset by the loss of
rental revenues related to higher vacancy rates at certain
properties.
45
Tenant Recoveries. Revenues from tenant
reimbursements increased $7.5 million to $61.7 million
for the year ended December 31, 2007 compared to
$54.2 million for the year ended December 31, 2006.
The increase was primarily due to acquisitions during 2006 and
2007 and redevelopment properties that were placed in service in
2007. Same property tenant recoveries increased
$2.0 million, or 4.3%, for the year ended December 31,
2007 compared to the same period in 2006 primarily as a result
of tenant recoveries for new leases in 2007, partially offset by
a decrease in real estate tax expense at certain properties.
Other Income. Other income was
$8.4 million for the year ended December 31, 2007
compared to $88,000 for the year ended December 31, 2006.
Other income for the year ended December 31, 2007 included
$7.7 million of gains on early termination of leases and
$739,000 of development fees earned from our PREI joint ventures.
The following table shows operating expenses for same
properties, redevelopment/development properties, new
properties, and corporate entities, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redevelopment/
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
|
|
|
|
Same Properties
|
|
|
Properties
|
|
|
New Properties
|
|
|
Corporate
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Rental operations
|
|
$
|
40,056
|
|
|
$
|
37,360
|
|
|
$
|
5,236
|
|
|
$
|
2,596
|
|
|
$
|
3,096
|
|
|
$
|
671
|
|
|
$
|
2,401
|
|
|
$
|
(4
|
)
|
Real estate taxes
|
|
|
13,417
|
|
|
|
15,288
|
|
|
|
2,896
|
|
|
|
3,494
|
|
|
|
4,040
|
|
|
|
1,594
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
43,465
|
|
|
|
44,233
|
|
|
|
10,446
|
|
|
|
11,929
|
|
|
|
18,291
|
|
|
|
8,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
$
|
96,938
|
|
|
$
|
96,881
|
|
|
$
|
18,578
|
|
|
$
|
18,019
|
|
|
$
|
25,427
|
|
|
$
|
11,166
|
|
|
$
|
2,401
|
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Operations Expense. Rental operations
expense increased $10.2 million to $50.8 million for
the year ended December 31, 2007 compared to
$40.6 million for the year ended December 31, 2006.
The increase was primarily due to the inclusion of rental
operations expense for acquired and redevelopment properties
(net of amounts capitalized) during 2006 and 2007 and an
increase in same property rental operations expense of
$2.7 million, or 7.2%, for the year ended December 31,
2007 compared to 2006. The increase in same property rental
operations expense is primarily due to the hiring of additional
property management personnel and related expansion of our
operations in 2006 and 2007 and increased operating expenses at
certain properties.
Real Estate Tax Expense. Real estate tax
expense was $20.4 million for the years ended
December 31, 2007 and 2006. Real estate tax expense
increased as a result of the inclusion of property taxes for the
properties acquired in 2006 and 2007, but was offset by a
decrease in same property real estate tax expense of
$1.9 million, or 12.2%, for the year ended
December 31, 2007 compared to the same period in 2006. The
decrease in same property real estate tax expense is primarily
due to the capitalization of property taxes in connection with
properties that were operating in 2006 and subsequently entered
into redevelopment, the development of new buildings on a
portion of our Landmark at Eastview property, and a reassessment
of property taxes due to successful appeals at certain of our
properties.
Depreciation and Amortization
Expense. Depreciation and amortization expense
increased $7.1 million to $72.2 million for the year
ended December 31, 2007 compared to $65.1 million for
the year ended December 31, 2006. The increase was
primarily due to the inclusion of depreciation and amortization
expense for properties acquired in 2006 and 2007 and the
acceleration of depreciation on assets related to an early lease
termination in the amount of $1.6 million, which is
included as a redevelopment property. The increase was partially
offset by the cessation of depreciation on certain properties,
or portions thereof, currently under redevelopment, and the full
amortization of acquired intangible assets in 2007 and 2006 at
certain properties.
General and Administrative Expenses. General
and administrative expenses increased $3.8 million to
$21.9 million for the year ended December 31, 2007
compared to $18.1 million for the year ended
December 31, 2006. The increase was primarily due to growth
in the corporate infrastructure necessary to support our
expanded property portfolio and an increase in stock
compensation costs resulting from increased stock awards to
employees and the vesting of restricted stock from previous
years during 2007.
Equity in Net (Loss)/Income of Unconsolidated
Partnerships. Equity in net (loss)/income of
unconsolidated partnerships decreased $976,000 to a loss of
($893,000) for the year ended December 31, 2007 compared to
income of $83,000 for the year ended December 31, 2006. The
decrease was primarily due to our proportionate share of the
46
losses generated by our PREI joint ventures since formation in
April 2007, offset by our allocation of the net income in the
McKellar Court partnership for the year ended December 31,
2007.
Interest Expense. Interest cost incurred for
the year ended December 31, 2007 totaled $84.4 million
compared to $48.3 million for the year ended
December 31, 2006. Total interest cost incurred increased
primarily as a result of higher borrowings for development and
redevelopment activities, partially offset by decreases in
borrowings for working capital purposes and decreases in the
average interest rate on our outstanding borrowings. During the
year ended December 31, 2007, we capitalized
$56.7 million of interest compared to $7.6 million for
the year ended December 31, 2006. The increase in
capitalized interest reflects our increased development and
redevelopment activities. Capitalized interest for the year
ended December 31, 2007 was primarily comprised of amounts
relating to our Center for Life
Science | Boston
development and Pacific Research Center redevelopment projects,
which were acquired on November 17, 2006 and July 11,
2006, respectively. Net of capitalized interest and the
accretion of debt premium, interest expense decreased
$13.0 million to $27.7 million for the year ended
December 31, 2007 compared to $40.7 million for the
year ended December 31, 2006.
Minority Interests. Minority interests
increased $908,000 to ($2.5) million for the year ended
December 31, 2007 compared to ($1.6) million for year
ended December 31, 2006. The increase in minority interests
was related to an increase in income before minority interests
allocable to minority interests in our Operating Partnership and
net income in minority interests in our consolidated
partnerships for the year ended December 31, 2007 compared
to net losses in minority interests in our consolidated
partnerships for the year ended December 31, 2006.
Discontinued Operations. In May 2007, we
completed the sale of our Colorow property and recognized a gain
upon closing of approximately $1.1 million. The results of
operations and gain on sale of the property have been reported
as discontinued operations in the consolidated statements of
income for all periods presented. Income from discontinued
operations was approximately $1.7 million for the year
ended December 31, 2007 (representing the results of
operations through the date of sale in May and the gain on sale
of $1.1 million) compared to income of $1.5 million
from discontinued operations for the year ended
December 31, 2006.
Cash
Flows
The following summary discussion of our cash flows is based on
the consolidated statements of cash flows in Item 8.
Financial Statements and Supplementary Data and is not
meant to be an all inclusive discussion of the changes in our
cash flows for the periods presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net cash provided by operating activities
|
|
$
|
115,046
|
|
|
$
|
114,965
|
|
|
$
|
101,588
|
|
Net cash used in investing activities
|
|
|
(218,661
|
)
|
|
|
(409,301
|
)
|
|
|
(1,339,463
|
)
|
Net cash provided by financing activities
|
|
|
111,558
|
|
|
|
282,151
|
|
|
|
1,243,227
|
|
Ending cash and cash equivalents balance
|
|
|
21,422
|
|
|
|
13,479
|
|
|
|
25,664
|
|
Comparison
of the Year Ended December 31, 2008 to the Year Ended
December 31, 2007
Net cash provided by operating activities was
$115.0 million for the years ended December 31, 2008
and 2007. Net cash provided by operating activities increased
primarily due to the increases in operating income before
depreciation, amortization and gain on extinguishment of debt,
and loss on derivative instruments, which was offset by changes
in operating assets and liabilities.
Net cash used in investing activities decreased
$190.6 million to $218.7 million for the year ended
December 31, 2008 compared to $409.3 million for the
year ended December 31, 2007. The decrease was primarily
due to fewer property acquisitions, including those acquired
through investments in unconsolidated partnerships, and an
increase in proceeds from the sale of real estate assets,
partially offset by investments in non-real estate assets
(primarily related to our relocation to a new corporate
headquarters).
Net cash provided by financing activities decreased
$170.6 million to $111.6 million for the year ended
December 31, 2008 compared to $282.2 million for the
year ended December 31, 2007. The decrease primarily
47
reflects reduced financing requirements due to reduced
acquisition activity. Cash was generated from the sale of common
stock during the year ended December 31, 2008 and was used
principally to pay down our unsecured line of credit. In
addition, cash from financing activities was provided by our
unsecured line of credit and our secured construction loan
during the year ended December 31, 2008.
Comparison
of the Year Ended December 31, 2007 to the Year Ended
December 31, 2006
Net cash provided by operating activities increased
$13.4 million to $115.0 million for the year ended
December 31, 2007 compared to $101.6 million for the
year ended December 31, 2006. The increase was primarily
due to the increases in operating income before depreciation and
amortization, partially offset by changes in operating assets
and liabilities.
Net cash used in investing activities decreased
$930.2 million to $409.3 million for the year ended
December 31, 2007 compared to $1.3 billion for the
year ended December 31, 2006. The decrease reflects a
decrease in the cash used to acquire investments in real estate
and related intangible assets (reflecting reduced acquisition
activity) and cash received as proceeds from the sale of a
property, partially offset by cash used for the purchases of
interests in unconsolidated partnerships and funds held in
escrow for acquisitions at December 31, 2007.
Net cash provided by financing activities decreased
$961.1 million to $282.2 million for the year ended
December 31, 2007 compared to $1.2 billion for the
year ended December 31, 2006. The decrease reflects reduced
financing requirements due to reduced acquisition activity, as
well as an increase in dividends paid to common and preferred
stockholders. Cash generated from the sale of preferred stock
during the year ended December 31, 2007 was used
principally to pay down the unsecured line of credit. In
addition, cash from financing activities was provided by our
unsecured line of credit and our secured construction loan
during the year ended December 31, 2007.
Liquidity
and Capital Resources
Our short-term liquidity requirements consist primarily of funds
to pay for future distributions expected to be paid to our
stockholders, swap settlements, operating expenses and other
expenditures directly associated with our properties, interest
expense and scheduled principal payments on outstanding mortgage
indebtedness, general and administrative expenses, capital
expenditures, tenant improvements and leasing commissions. Debt
maturities through 2009 include our secured construction loan
and the secured acquisition and interim loan facility held by
our PREI joint ventures, in which we own a 20% interest and are
responsible for 20% of the associated debt, with outstanding
balances of $507.1 million and $364.1 million,
respectively, as of December 31, 2008. The secured
construction loan matures in November 2009, but we may extend
the maturity date for one year through November 16, 2010
after satisfying certain conditions and payment of an extension
fee. The secured acquisition and interim loan facility
originally matured in April 2009, but a portion of the facility
was refinanced on February 11, 2009, with a new maturity
date of February 10, 2011. We also have four forward
starting swaps that will require cash settlement on or before
April 30, 2009. Based upon the fair-values of the forward
starting swaps as of December 31, 2008, such cash
settlement would require us to pay the counterparties
approximately $34.3 million for the $150.0 million
notional amount swap with a Strike Rate of 5.162%,
$11.4 million for the $50.0 million notional amount
swap with a Strike Rate of 5.167%, $22.9 million for the
$100.0 million notional amount swap with a Strike Rate of
5.167% and $34.2 million for the $150.0 million
notional amount swap with a Strike Rate of 5.152%, which total
$102.9 million. However, the actual cash settlement amounts
will depend on the values of the forward starting swaps at the
dates they are settled and the actual cash settlement amounts
may vary significantly from these amounts. See Note 12 to
the consolidated financial statements for a discussion of the
accounting for the forward starting swaps. If we are required to
make cash payments to the counterparties under our forward
starting swaps upon settlement, we plan to utilize a portion of
our unsecured line of credit to finance those payments. However,
given the current economic conditions, including, but not
limited to, the credit crisis and related turmoil in the global
financial system, one or more of our lenders under our unsecured
line of credit may default on their obligations to make capital
available to us. In addition, if that occurs, we may not be able
to access alternative sources of liquidity needed to settle
these forward starting swaps when required to do so.
48
Our long-term liquidity requirements consist primarily of funds
to pay for scheduled debt maturities, construction obligations,
renovations, expansions, capital commitments and other
non-recurring capital expenditures that need to be made
periodically, and the costs associated with acquisitions of
properties that we pursue.
We expect to satisfy our short-term liquidity requirements
through our existing working capital and cash provided by our
operations, long-term secured and unsecured indebtedness, the
issuance of additional equity or debt securities and the use of
net proceeds from the disposition of non-strategic assets. Our
rental revenues, provided by our leases, generally provide cash
inflows to meet our debt service obligations, pay general and
administrative expenses, and fund regular distributions. We
expect to satisfy our long-term liquidity requirements through
our existing working capital, cash provided by operations,
long-term secured and unsecured indebtedness, the issuance of
additional equity or debt securities and the use of net proceeds
from the disposition of non-strategic assets. We also expect to
use funds available under our unsecured line of credit to
finance acquisition and development activities and capital
expenditures on an interim basis. Continued uncertainty in the
credit markets may negatively impact our ability to access
additional debt financing or to refinance existing debt
maturities on favorable terms (or at all), which may negatively
affect our ability to make acquisitions and fund current and
future development and redevelopment projects. In addition, the
financial positions of the lenders under our credit facilities
may worsen to the point that they default on their obligations
to make available to us the funds under those facilities. A
prolonged downturn in the credit markets may cause us to seek
alternative sources of potentially less attractive financing,
and may require us to adjust our business plans accordingly.
On February 11, 2009, our PREI joint ventures jointly
refinanced the outstanding balance of the secured acquisition
and interim loan facility, or approximately $364.1 million,
with the proceeds of a new loan totaling $203.3 million and
members capital contributions funding the balance due. The
new loan bears interest at a rate equal to, at the option of our
PREI joint ventures, either (1) reserve adjusted LIBOR plus 350
basis points or (2) the higher of (a) the prime rate then in
effect, (b) the federal funds rate then in effect plus 50 basis
points or (c) one-month LIBOR plus 450 basis points, and
requires interest only monthly payments until the maturity date,
February 10, 2011. The loan includes certain restrictions
and covenants that limit, among other things, the incurrence of
additional indebtedness and liens at our PREI joint ventures. In
addition, our PREI joint ventures may extend the maturity date
of the secured acquisition and interim loan facility to
February 10, 2012 after satisfying certain conditions and
paying an extension fee based on the then current facility
commitment.
We are presently in discussions with various financial
institutions regarding the refinancing of our secured
construction loan in an effort to complete a refinancing by
June 30, 2009. Given current uncertainty in the credit
markets there are no assurances that we will be able to complete
a refinancing in this time frame. We believe we can refinance at
least $400.0 million of the current loan balance with new
fixed rate, term debt in either a single transaction or a series
of transactions. We may be required to refinance amounts in
excess of $400.0 million, which could require us to obtain
other secured or unsecured financing, draw on our unsecured line
of credit or both to fund the excess. Although we are making
efforts to complete a refinancing by June 30, 2009, the
loan does not mature until November 2009. Further, we may extend
the maturity date for one year through November 16, 2010
after satisfying certain conditions and payment of an extension
fee.
Under the rules adopted by the Securities and Exchange
Commission regarding registration and offering procedures, if we
meet the definition of a well-known seasoned issuer
under Rule 405 of the Securities Act, we are permitted to
file an automatic shelf registration statement that will be
immediately effective upon filing. On September 15, 2006,
we filed such an automatic shelf registration statement, which
may permit us, from time to time, to offer and sell debt
securities, common stock, preferred stock, warrants and other
securities to the extent necessary or advisable to meet our
liquidity needs.
On April 22, 2008, we completed the issuance of
6,129,000 shares of common stock, including the exercise of
an over-allotment option of 429,000 shares, resulting in
net proceeds of approximately $149.6 million, after
deducting the underwriters discount and commissions and
offering expenses. The net proceeds to us were utilized to repay
a portion of the outstanding indebtedness on the unsecured line
of credit and for other general corporate and working capital
purposes.
49
On October 3, 2008, we sold a portion of the parking spaces
at our Center for Life
Science | Boston
garage for approximately $28.8 million pursuant to an
agreement we assumed in connection with the acquisition of the
property in November 2006.
On October 6, 2008, we completed the issuance of
8,625,000 shares of common stock, including the exercise of
an over-allotment option of 1,125,000 shares, resulting in
net proceeds of approximately $212.4 million, after
deducting the underwriters discount and commissions and
offering expenses. The net proceeds to us were utilized to repay
a portion of the outstanding indebtedness on the unsecured line
of credit and for other general corporate and working capital
purposes.
In November 2008, we completed the repurchase of approximately
$46.8 million face value of our exchangeable senior notes
for approximately $28.8 million.
Our total capitalization at December 31, 2008 was
approximately $2.6 billion and was comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
Shares/Units
|
|
|
Amount or
|
|
|
|
|
|
|
at December 31,
|
|
|
Dollar Value
|
|
|
Percent of Total
|
|
|
|
2008
|
|
|
Equivalent
|
|
|
Capitalization
|
|
|
|
(In thousands)
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable(1)
|
|
|
|
|
|
$
|
353,161
|
|
|
|
13.7
|
%
|
Secured construction loan
|
|
|
|
|
|
|
507,128
|
|
|
|
19.8
|
%
|
Secured term loan
|
|
|
|
|
|
|
250,000
|
|
|
|
9.8
|
%
|
Exchangeable notes
|
|
|
|
|
|
|
128,250
|
|
|
|
5.0
|
%
|
Unsecured line of credit
|
|
|
|
|
|
|
108,767
|
|
|
|
4.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
|
|
|
|
1,347,306
|
|
|
|
52.5
|
%
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding(2)
|
|
|
80,757,421
|
|
|
|
946,477
|
|
|
|
36.9
|
%
|
7.375% Series A Preferred shares outstanding(3)
|
|
|
9,200,000
|
|
|
|
230,000
|
|
|
|
9.0
|
%
|
Operating partnership units outstanding(4)
|
|
|
2,795,364
|
|
|
|
32,762
|
|
|
|
1.3
|
%
|
LTIP units outstanding(4)
|
|
|
640,150
|
|
|
|
7,503
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
1,216,742
|
|
|
|
47.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
|
|
|
|
$
|
2,564,048
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount includes debt premiums of $8.8 million recorded upon
the assumption of the outstanding indebtedness in connection
with our purchase of the corresponding properties. |
|
(2) |
|
Based on the market closing price of our common stock of $11.72
per share on the last trading day of the year (December 31,
2008). |
|
(3) |
|
Based on the liquidation preference of $25.00 per share for our
7.375% Series A preferred stock. |
|
(4) |
|
Our partnership and LTIP units are each individually convertible
into one share of common stock at the market closing price of
our common stock of $11.72 per share on the last trading day of
the year (December 31, 2008). |
Our board of directors has adopted a policy of targeting our
indebtedness at approximately 50% of our total asset book value.
At December 31, 2008, the ratio of debt to total asset book
value was approximately 41.8%. However, our board of directors
may from time to time modify our debt policy in light of current
economic or market conditions including, but not limited to, the
relative costs of debt and equity capital, market conditions for
debt and equity securities and fluctuations in the market price
of our common stock. Accordingly, we may increase or decrease
our debt to total asset book value ratio beyond the limit
described above.
Our second amended and restated unsecured credit agreement
provides for a borrowing capacity on our unsecured line of
credit of $600.0 million with a maturity date of
August 1, 2011. Subject to the administrative agents
reasonable discretion, we may increase the borrowing capacity of
the unsecured line of credit to $1.0 billion upon
satisfying certain conditions. In addition, we may, in our sole
discretion, extend the maturity date of the
50
unsecured line of credit to August 1, 2012 after satisfying
certain conditions and paying an extension fee based on the then
current facility commitment. The unsecured line of credit bears
interest at a floating rate equal to, at our option, either
(1) reserve-adjusted LIBOR plus a spread which ranges from
100 to 155 basis points, depending on our leverage, or
(2) the higher of (a) the prime rate then in effect
plus a spread which ranges from 0 to 25 basis points, or
(b) the federal funds rate then in effect plus a spread
which ranges from 50 to 75 basis points, in each case,
depending on our leverage. We have deferred the loan costs
associated with the amendments to the unsecured line of credit,
which are being amortized to expense with the unamortized loan
costs from the original unsecured line of credit over the
remaining term. At December 31, 2008, we had
$108.8 million in outstanding borrowings on our unsecured
line of credit, with a weighted-average interest rate of 2.4% on
the unhedged portion of the outstanding debt of approximately
$73.8 million.
Our first amended and restated $250.0 million secured term
loan agreement has a maturity date of August 1, 2012 and
bears interest at a floating rate equal to, at our option,
either (1) reserve-adjusted LIBOR plus 165 basis
points or (2) the higher of (a) the prime rate then in
effect plus 25 basis points and (b) the federal funds
rate then in effect plus 75 basis points. The secured term
loan was secured by our interests in twelve of our properties as
of December 31, 2008, and was also secured by our interest
in any distributions from these properties, a pledge of the
equity interests in a subsidiary owning one of these properties,
and a pledge of the equity interests in a subsidiary owning an
interest in another of these properties. At December 31,
2008, we had $250.0 million in outstanding borrowings on
our secured term loan.
The terms of the credit agreements for the unsecured line of
credit and secured term loan include certain restrictions and
covenants, which limit, among other things, the payment of
dividends and the incurrence of additional indebtedness and
liens. The terms also require compliance with financial ratios
relating to the minimum amounts of net worth, fixed charge
coverage, unsecured debt service coverage, the maximum amount of
secured, and secured recourse indebtedness, leverage ratio and
certain investment limitations. The dividend restriction
referred to above provides that, except to enable us to continue
to qualify as a REIT for federal income tax purposes, we will
not make distributions with respect to common stock or other
equity interests in an aggregate amount for the preceding four
fiscal quarters in excess of 95% of funds from operations, as
defined, for such period, subject to other adjustments. We
believe that we were in compliance with the covenants as of
December 31, 2008.
51
A summary of our outstanding consolidated mortgage notes payable
as of December 31, 2008 and 2007 is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
Principal Balance
|
|
|
|
|
|
Stated Fixed
|
|
|
Interest
|
|
|
December 31,
|
|
|
|
|
|
Interest Rate
|
|
|
Rate
|
|
|
2008
|
|
|
2007
|
|
|
Maturity Date
|
|
Ardentech Court
|
|
|
7.25
|
%
|
|
|
5.06
|
%
|
|
$
|
4,464
|
|
|
$
|
4,564
|
|
|
July 1, 2012
|
Bayshore Boulevard
|
|
|
4.55
|
%
|
|
|
4.55
|
%
|
|
|
14,923
|
|
|
|
15,335
|
|
|
January 1, 2010
|
Bridgeview Technology Park I
|
|
|
8.07
|
%
|
|
|
5.04
|
%
|
|
|
11,384
|
|
|
|
11,508
|
|
|
January 1, 2011
|
Eisenhower Road
|
|
|
5.80
|
%
|
|
|
4.63
|
%
|
|
|
|
|
|
|
2,113
|
|
|
May 5, 2008
|
40 Erie Street
|
|
|
7.34
|
%
|
|
|
4.90
|
%
|
|
|
|
|
|
|
17,625
|
|
|
August 1, 2008
|
500 Kendall Street (Kendall D)
|
|
|
6.38
|
%
|
|
|
5.45
|
%
|
|
|
67,810
|
|
|
|
69,437
|
|
|
December 1, 2018
|
Lucent Drive
|
|
|
5.50
|
%
|
|
|
5.50
|
%
|
|
|
5,341
|
|
|
|
5,543
|
|
|
January 21, 2015
|
Monte Villa Parkway
|
|
|
4.55
|
%
|
|
|
4.55
|
%
|
|
|
9,084
|
|
|
|
9,336
|
|
|
January 1, 2010
|
6828 Nancy Ridge Drive
|
|
|
7.15
|
%
|
|
|
5.38
|
%
|
|
|
6,694
|
|
|
|
6,785
|
|
|
September 1, 2012
|
Road to the Cure
|
|
|
6.70
|
%
|
|
|
5.78
|
%
|
|
|
15,200
|
|
|
|
15,427
|
|
|
January 31, 2014
|
Science Center Drive
|
|
|
7.65
|
%
|
|
|
5.04
|
%
|
|
|
11,148
|
|
|
|
11,301
|
|
|
July 1, 2011
|
Shady Grove Road
|
|
|
5.97
|
%
|
|
|
5.97
|
%
|
|
|
147,000
|
|
|
|
147,000
|
|
|
September 1, 2016
|
Sidney Street
|
|
|
7.23
|
%
|
|
|
5.11
|
%
|
|
|
29,184
|
|
|
|
29,986
|
|
|
June 1, 2012
|
9885 Towne Centre Drive
|
|
|
4.55
|
%
|
|
|
4.55
|
%
|
|
|
20,749
|
|
|
|
21,323
|
|
|
January 1, 2010
|
900 Uniqema Boulevard
|
|
|
8.61
|
%
|
|
|
5.61
|
%
|
|
|
1,357
|
|
|
|
1,509
|
|
|
May 1, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
344,338
|
|
|
|
368,792
|
|
|
|
Unamortized premiums
|
|
|
|
|
|
|
|
|
|
|
8,823
|
|
|
|
10,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
353,161
|
|
|
$
|
379,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums were recorded upon assumption of the mortgage notes
payable at the time of the related acquisition to account for
above-market interest rates. Amortization of these premiums is
recorded as a reduction to interest expense over the remaining
term of the respective note using a method that approximates the
effective-interest method.
As of December 31, 2008, principal payments due for our
indebtedness (mortgage notes payable excluding debt premium of
$8.8 million, secured term loan, secured construction loan,
the exchangeable senior notes, and unsecured line of credit,
excluding our proportionate share of the indebtedness of our
unconsolidated partnerships) were as follows (in thousands):
|
|
|
|
|
2009
|
|
$
|
512,154
|
|
2010
|
|
|
47,446
|
|
2011
|
|
|
134,988
|
|
2012
|
|
|
291,421
|
|
2013
|
|
|
4,862
|
|
Thereafter(1)
|
|
|
347,612
|
|
|
|
|
|
|
|
|
$
|
1,338,483
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $128.3 million in principal payments of the
exchangeable senior notes based on a contractual maturity date
of October 1, 2026. |
We are a party to three interest rate swaps, which hedge the
risk of increase in interest rates on our variable rate debt. In
addition, in connection with entering into the acquisition and
construction loan secured by our Center for Life
Science | Boston
property, we entered into four forward starting swap agreements,
which had the effect of fixing the interest rate on the
long-term debt that was expected to replace the secured
construction loan. We record all derivatives on the balance
sheet at fair-value. The accounting for changes in the
fair-value of derivatives depends
52
on the intended use of the derivative and the resulting
designation. Derivatives used to hedge the exposure to changes
in the fair-value of an asset, liability, or firm commitment
attributable to a particular risk, such as interest rate risk,
are considered fair-value hedges. Derivatives used to hedge the
exposure to variability in expected future cash flows, or other
types of forecasted transactions, are considered cash flow
hedges.
For derivatives designated as cash flow hedges, the effective
portion of changes in the fair-value of the derivative is
initially reported in other comprehensive income (outside of
earnings) and subsequently reclassified to earnings when the
hedged transaction affects earnings, and the ineffective portion
of changes in the fair-value of the derivative is recognized
directly in earnings. We assess the effectiveness of each
hedging relationship by comparing the changes in cash flows of
the derivative hedging instrument with the changes in cash flows
of the designated hedged item or transaction.
Our objective in using derivatives is to add stability to
interest expense and to manage its exposure to interest rate
movements or other identified risks. To accomplish this
objective, we primarily use interest rate swaps as part of our
cash flow hedging strategy. Interest rate swaps designated as
cash flow hedges involve the receipt of variable-rate amounts in
exchange for fixed-rate payments over the life of the agreements
without exchange of the underlying principal amount. During 2008
and 2007, such derivatives were used to hedge the variable cash
flows associated with existing variable-rate debt and future
variability in the interest related cash flows from forecasted
issuances of debt. We formally document the hedging
relationships for all derivative instruments, we have
historically accounted for all of our interest rate swap
agreements as cash flow hedges, and we have not used derivatives
for trading or speculative purposes.
As of December 31, 2008, we had four forward starting
swaps, with a total notional value of $450.0 million, that
were acquired to mitigate our exposure to the variability in
expected future cash flows attributable to changes in future
interest rates associated with a forecasted issuance of fixed
rate debt by April 30, 2009. The forward starting swaps are
carried on the accompanying consolidated balance sheets at
fair-value, based on the net present value of the expected
future cash flows on the swaps. At maturity (mandatory
settlement date of April 30, 2009, if not previously
settled), we will either (a) receive payment from the
counterparties if the accumulated balance is an asset, or
(b) make payment to the counterparties if the accumulated
balance is a liability with the resulting receipt or payment
deferred and amortized as an increase or decrease to interest
expense over the term of the forecasted borrowing. Based upon
the fair-values of the forward starting swaps as of
December 31, 2008, we would be required to pay the
counterparties approximately $102.9 million. The actual
cash settlement amounts will depend on the values of the forward
starting swaps at the dates they are settled and the actual cash
settlement amounts may vary significantly from this amount. No
initial net investment was made to enter into these agreements.
At December 31, 2008, the hedging relationships for two of
the forward starting swaps, with an aggregate notional amount of
$150.0 million, were no longer considered highly effective
as the expectation of forecasted interest payments had changed,
and we were required to prospectively discontinue hedge
accounting for these two swaps. As a result, a portion of the
unrealized losses related to these forward starting swaps
previously included in accumulated other comprehensive loss,
totaling $18.2 million, was reclassified to the
consolidated income statement as loss on derivative instruments
in the fourth quarter of 2008 and the two forward starting swaps
are no longer designated as cash flow hedges. Prospective
changes in the fair-value of these two swaps will be recorded in
the consolidated income statements through the date the swaps
are settled.
As of December 31, 2008, we also had three interest rate
swaps with an aggregate notional amount of $400.0 million
under which at each monthly settlement date we either
(1) receive the difference between the Strike Rate and
one-month LIBOR if the Strike Rate is less than LIBOR or
(2) pay such difference if the Strike Rate is greater than
LIBOR. One interest rate swap with a notional amount of
$250.0 million hedges our secured term loan. Each of the
remaining two interest rate swaps hedges the first interest
payments, due on the date that is on or closest after each
swaps settlement date, associated with the amount of
LIBOR-based debt equal to each swaps notional amount. One
of these interest rate swaps has a notional amount of
$35.0 million (interest rate of 5.9%, including the
applicable credit spread) and is currently intended to hedge
interest payments associated with our unsecured line of credit.
The remaining interest rate swap has a notional amount of
$115.0 million (interest rate of 5.9%, including the
applicable credit spread) and is currently intended to hedge
interest payments associated with our secured construction loan.
No initial investment was made to enter into the interest rate
swap agreements.
53
For the year ended December 31, 2008, approximately
$1.8 million of hedge ineffectiveness on cash flow hedges
due to mismatches in forecasted debt issuance dates, maturity
dates and interest rate reset dates of the interest rate swaps
and related debt was recognized in loss on derivative
instruments. For the years ended December 31, 2007, and
2006 an immaterial amount of hedge ineffectiveness on cash flow
hedges due to mismatches in maturity dates and interest rate
reset dates of the interest rate swaps and related debt was
recognized in interest expense. If we are unable to complete the
refinancing of our secured construction loan by June 30, 2009 or
we complete the refinancing by June 30, 2009 but in an
amount less than the $300.0 million in notional value
associated with the remaining two forward starting swaps
designated as cash flow hedges, additional ineffectiveness may
occur. The amount of ineffectiveness that we would be required
to record will depend on the value of the swaps, the timing of
the settlement of the swaps, the amount of debt refinanced and
the timing of the refinancing. It is possible that we could be
required to recognize an additional material amount of
ineffectiveness related to the forward starting swaps.
Amounts reported in accumulated other comprehensive loss related
to derivatives will be reclassified to earnings when the hedged
transaction affects earnings. The change in net unrealized
(loss)/gain on derivative instruments includes reclassifications
of net unrealized losses from accumulated other comprehensive
loss as (a) an increase to interest expense of
$7.1 million and (b) a loss on derivative instruments
of $19.9 million for the year ended December 31, 2008.
The change in net unrealized (loss)/gain on derivative
instruments includes reclassifications of net unrealized gains
and losses from accumulated other comprehensive loss as a
reduction to interest expense of $3.1 million and
$2.3 million for the years ended December 31, 2007,
and 2006, respectively. In addition, for the year ended
December 31, 2008, approximately $5.1 million of
settlement payments relating to our interest rate swaps were
deferred in accumulated other comprehensive loss related to our
Center for Life
Science | Boston,
Pacific Research Center, and other properties that had been or
are currently under development or redevelopment. During 2009,
we estimate that an additional $17.1 million will be
reclassified as an increase to interest expense.
The following table provides information with respect to our
contractual obligations at December 31, 2008, including
maturities and scheduled principal repayments, but excluding
related debt premiums. We were not subject to any material
capital lease obligations or unconditional purchase obligations
as of December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligation
|
|
2009
|
|
|
2010-2011
|
|
|
2012-2013
|
|
|
Thereafter
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Mortgage notes payable(1)
|
|
$
|
5,026
|
|
|
$
|
73,667
|
|
|
$
|
46,283
|
|
|
$
|
219,362
|
|
|
$
|
344,338
|
|
Secured term loan
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
250,000
|
|
Secured construction loan(2)
|
|
|
507,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
507,128
|
|
Exchangeable senior notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,250
|
|
|
|
128,250
|
|
Unsecured line of credit(3)
|
|
|
|
|
|
|
108,767
|
|
|
|
|
|
|
|
|
|
|
|
108,767
|
|
Share of debt of unconsolidated partnerships(4)
|
|
|
72,844
|
|
|
|
30,848
|
|
|
|
|
|
|
|
|
|
|
|
103,692
|
|
Interest payments on debt obligations(5)
|
|
|
47,738
|
|
|
|
68,689
|
|
|
|
45,325
|
|
|
|
113,015
|
|
|
|
274,767
|
|
Construction projects(6)
|
|
|
29,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,487
|
|
Tenant obligations(7)
|
|
|
109,075
|
|
|
|
3,838
|
|
|
|
|
|
|
|
|
|
|
|
112,913
|
|
Lease commissions
|
|
|
1,728
|
|
|
|
894
|
|
|
|
|
|
|
|
|
|
|
|
2,622
|
|
Forward starting swaps(8)
|
|
|
102,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
875,899
|
|
|
$
|
286,703
|
|
|
$
|
341,608
|
|
|
$
|
460,627
|
|
|
$
|
1,964,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balance excludes $8.8 million of unamortized debt premium. |
|
(2) |
|
The secured construction loan matures on November 16, 2009,
but we may extend the maturity date to November 16, 2010
after satisfying certain conditions and paying an additional fee. |
54
|
|
|
(3) |
|
The unsecured line of credit matures on August 1, 2011, but
we may extend the maturity date of the unsecured line of credit
to August 1, 2012 after satisfying certain conditions and
paying an extension fee based on the then current facility
commitment. |
|
(4) |
|
The maturity date of the secured acquisition and interim loan
held by our PREI joint ventures was extended by one year to
April 3, 2009 in February 2008 (a portion of the secured
acquisition and interim loan facility was refinanced on
February 11, 2009, with a new maturity date of
February 10, 2011). |
|
(5) |
|
Interest payments reflect cash payments that are based on the
interest rates in effect and debt balances outstanding on
December 31, 2008, excluding the effect of the interest
rate swaps on the underlying debt. |
|
(6) |
|
Balance includes our proportionate share of the remaining
construction project obligations of PREI I LLC. |
|
(7) |
|
Committed tenant-related obligations based on executed leases as
of December 31, 2008. |
|
(8) |
|
Balance based upon the fair-values of the forward starting swaps
as of December 31, 2008, which would require us to pay the
counterparties approximately $102.9 million by the
mandatory settlement date of April 30, 2009. However, the
actual cash settlement amounts will depend on the values of the
forward starting swaps at the dates they are settled and the
actual cash settlement amounts may vary significantly from these
amounts. |
Funds
from Operations
We present funds from operations, or FFO, available to common
shares and partnership and LTIP units because we consider it an
important supplemental measure of our operating performance and
believe it is frequently used by securities analysts, investors
and other interested parties in the evaluation of REITs, many of
which present FFO when reporting their results. FFO is intended
to exclude GAAP historical cost depreciation and amortization of
real estate and related assets, which assumes that the value of
real estate assets diminishes ratably over time. Historically,
however, real estate values have risen or fallen with market
conditions. Because FFO excludes depreciation and amortization
unique to real estate, gains and losses from property
dispositions and extraordinary items, it provides a performance
measure that, when compared year over year, reflects the impact
to operations from trends in occupancy rates, rental rates,
operating costs, development activities and interest costs,
providing perspective not immediately apparent from net income.
We compute FFO in accordance with standards established by the
Board of Governors of the National Association of Real Estate
Investment Trusts, or NAREIT, in its March 1995 White Paper (as
amended in November 1999 and April 2002). As defined by NAREIT,
FFO represents net income (computed in accordance with GAAP),
excluding gains (or losses) from sales of property, plus real
estate related depreciation and amortization (excluding
amortization of loan origination costs) and after adjustments
for unconsolidated partnerships and joint ventures. Our
computation 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 managements discretionary use
because of needed capital replacement or expansion, debt service
obligations, or other commitments and uncertainties. FFO should
not be considered as an alternative to net income (loss)
(computed in accordance with GAAP) as an indicator of our
financial performance or to cash flow from operating activities
(computed in accordance with GAAP) as an indicator of our
liquidity, nor is it indicative of funds available to fund our
cash needs, including our ability to pay dividends or make
distributions.
55
Our FFO available to common shares and partnership and LTIP
units and a reconciliation to net income for the years ended
December 31, 2008 and 2007 (in thousands, except share
data) was as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Net income available to common stockholders
|
|
$
|
47,934
|
|
|
$
|
55,665
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Minority interests in operating partnership
|
|
|
2,086
|
|
|
|
2,486
|
|
Gain on sale of real estate assets
|
|
|
|
|
|
|
(1,087
|
)
|
Depreciation and amortization unconsolidated
partnerships
|
|
|
2,100
|
|
|
|
1,139
|
|
Depreciation and amortization consolidated
entities-discontinued operations
|
|
|
|
|
|
|
228
|
|
Depreciation and amortization consolidated
entities-continuing operations
|
|
|
84,227
|
|
|
|
72,202
|
|
Depreciation and amortization allocable to minority
interest of consolidated joint ventures
|
|
|
(40
|
)
|
|
|
(285
|
)
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common shares and partnership
and LTIP units
|
|
$
|
136,307
|
|
|
$
|
130,348
|
|
|
|
|
|
|
|
|
|
|
Funds from operations per share diluted
|
|
$
|
1.82
|
|
|
$
|
1.91
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding diluted
|
|
|
74,831,483
|
|
|
|
68,269,985
|
|
|
|
|
|
|
|
|
|
|
Off
Balance Sheet Arrangements
As of December 31, 2008, we had investments in the
following unconsolidated partnerships: (1) McKellar Court
limited partnership, which owns a single tenant occupied
property located in San Diego; and (2) two limited
liability companies with PREI, which own a portfolio of
properties primarily located in Cambridge, Massachusetts (see
Note 10 in the accompanying consolidated financial
statements).
The McKellar Court partnership is a variable interest entity as
defined in FIN 46R; however, we are not the primary
beneficiary. The limited partner at McKellar Court is the only
tenant in the property and will bear a disproportionate amount
of any losses. We, as the general partner, will receive 21% of
the operating cash flows and 75% of the gains upon sale of the
property. We account for our general partner interest using the
equity method. The assets of the McKellar Court partnership were
$16.2 million and $16.5 million and the liabilities
were $10.6 million and $10.8 million at
December 31, 2008 and 2007, respectively. Our equity in net
income of the McKellar Court partnership was $82,000, $86,000
and $83,000 for the years ended December 31, 2008, 2007,
and 2006, respectively.
PREI II LLC is a variable interest entity as defined in
FIN 46R; however, we are not the primary beneficiary. PREI
will bear the majority of any losses incurred. PREI I LLC does
not qualify as a variable interest entity as defined in
FIN 46R. In addition, consolidation under
EITF 04-5
is not required as we do not control the limited liability
companies. In connection with the formation of the PREI joint
ventures in April 2007, we contributed 20% of the initial
capital. However, the amount of cash flow distributions that we
receive may be more or less based on the nature of the
circumstances underlying the cash distributions due to
provisions in the operating agreements governing the
distribution of funds to each member and the occurrence of
extraordinary cash flow events. We account for our member
interests using the equity method for both limited liability
companies. The assets of the PREI joint ventures were
$614.2 million and $540.3 million and the liabilities
were $532.1 million and $450.1 million at
December 31, 2008, and 2007, respectively. Our equity in
net loss of the PREI joint ventures was $1.3 million and
$988,000 for the years ended December 31, 2008 and 2007,
respectively.
We are the primary beneficiary in one other variable interest
entity, which we consolidate and which is reflected in our
consolidated financial statements.
56
Our proportionate share of outstanding debt related to our
unconsolidated partnerships is summarized below (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount(1)
|
|
|
|
|
|
Ownership
|
|
|
Interest
|
|
|
December 31,
|
|
|
|
Name
|
|
Percentage
|
|
|
Rate(2)
|
|
|
2008
|
|
|
2007
|
|
|
Maturity Date
|
|
PREI I LLC and PREI II LLC(3)
|
|
|
20
|
%
|
|
|
2.19
|
%
|
|
$
|
72,811
|
|
|
$
|
83,285
|
|
|
April 3, 2009
|
PREI I LLC(4)
|
|
|
20
|
%
|
|
|
4.19
|
%
|
|
|
28,706
|
|
|
|
|
|
|
August 13, 2010
|
McKellar Court(5)
|
|
|
21
|
%
|
|
|
4.63
|
%
|
|
|
2,175
|
|
|
|
2,203
|
|
|
January 1, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
103,692
|
|
|
$
|
85,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount represents our proportionate share of the total
outstanding indebtedness for each of the unconsolidated
partnerships. |
|
(2) |
|
Effective or weighted-average interest rate of the outstanding
indebtedness as of December 31, 2008, including the effect
of interest rate swaps. |
|
(3) |
|
Amount represents our proportionate share of the total draws
outstanding under a secured acquisition and interim loan
facility, which bears interest at a LIBOR-indexed variable rate.
The secured acquisition and interim loan facility was utilized
by both PREI I LLC and PREI II LLC to acquire a portfolio of
properties (initial borrowings of approximately
$427.0 million) on April 4, 2007 (see Note 10 in
the accompanying consolidated financial statements). The
remaining balance is being utilized to fund future construction
costs at certain properties currently under development. On
February 11, 2009, our PREI joint ventures jointly
refinanced the outstanding balance of the secured acquisition
and interim loan facility, or approximately $364.1 million,
with the proceeds of a new loan totaling $203.3 million and
members capital contributions funding the balance due. The
new loan bears interest at a rate equal to, at the option of our
PREI joint ventures, either (1) reserve adjusted LIBOR plus 350
basis points or (2) the higher of (a) the prime rate then in
effect, (b) the federal funds rate then in effect plus 50 basis
points or (c) one-month LIBOR plus 450 basis points, and
requires interest only monthly payments until the maturity date,
February 10, 2011. |
|
(4) |
|
Amount represents our proportionate share of a secured
construction loan, which bears interest at a LIBOR-indexed
variable rate. The secured construction loan was executed by a
wholly owned subsidiary of PREI I LLC in connection with the
construction of the 650 East Kendall Street property (initial
borrowings of $84.0 million on February 13, 2008 were
used in part to repay a portion of the secured acquisition and
interim loan facility). The remaining balance is being utilized
to fund construction costs at the property. |
|
(5) |
|
Amount represents our proportionate share of the principal
balance outstanding on a mortgage note payable, which is secured
by the McKellar Court property (excluding $106,000 of
unamortized debt premium). |
Inflation
Some of our leases contain provisions designed to mitigate the
adverse impact of inflation. These provisions generally increase
rental rates during the terms of the leases either at fixed
rates or indexed escalations (based on the Consumer Price Index
or other measures). We may be adversely impacted by inflation on
the leases that do not contain indexed escalation provisions. In
addition, most of our leases require the tenant to pay an
allocable share of operating expenses, including common area
maintenance costs, real estate taxes and insurance. This may
reduce our exposure to increases in costs and operating expenses
resulting from inflation, assuming our properties remain leased
and tenants fulfill their obligations to reimburse us for such
expenses.
Portions of our unsecured line of credit and secured
construction loan bear interest at a variable rate, which will
be influenced by changes in short-term interest rates, and will
be sensitive to inflation.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Our future income, cash flows and fair-values relevant to
financial instruments depend upon prevailing market interest
rates. Market risk is the exposure to loss resulting from
changes in interest rates, foreign currency exchange rates,
commodity prices and equity prices. The primary market risk to
which we believe we are exposed is interest rate risk. Many
factors, including governmental monetary and tax policies,
domestic and international economic and political considerations
and other factors that are beyond our control contribute to
interest rate risk.
57
As of December 31, 2008, our consolidated debt consisted of
the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
Percent of
|
|
|
Rate at
|
|
|
|
Principal Balance(1)
|
|
|
Total Debt
|
|
|
12/31/08
|
|
|
Fixed interest rate(2)
|
|
$
|
481,411
|
|
|
|
35.7
|
%
|
|
|
5.24
|
%
|
Variable interest rate(3)
|
|
|
865,895
|
|
|
|
64.3
|
%
|
|
|
3.62
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/weighted-average effective interest rate
|
|
$
|
1,347,306
|
|
|
|
100.0
|
%
|
|
|
4.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Principal balance includes only consolidated indebtedness. |
|
(2) |
|
Includes 13 mortgage notes payable secured by certain of our
properties (including $8.8 million of unamortized premium)
and our exchangeable senior notes. |
|
(3) |
|
Includes our unsecured line of credit, secured term loan, and
secured construction loan, which bear interest based on a
LIBOR-indexed variable interest rate, plus a credit spread. The
stated effective rate for the variable interest debt excludes
the impact of any interest rate swap agreements. We have entered
into two interest rate swaps, which were intended to have the
effect of initially fixing the interest rates on
$150.0 million of our variable rate debt at a weighted
average interest rate of 4.7% (excluding applicable credit
spreads for the underlying debt). We have entered into an
interest rate swap agreement that effectively fixes the interest
rate on the entire $250.0 million outstanding balance of
the secured term loan at a rate of 5.8% (including the credit
spread for the $250.0 million secured term loan) until the
interest rate swap expires in 2010. We have also entered into
two forward starting swap agreements designated as cash flow
hedges, which will have the effect of fixing the interest rate
on $300.0 million of forecasted debt issuance (after
retirement of the secured construction loan) at approximately
5.2%. |
To determine the fair-value of our outstanding indebtedness, the
fixed-rate debt is discounted at a rate based on an estimate of
current lending rates, assuming the debt is outstanding through
maturity and considering the notes collateral. At
December 31, 2008, the fair-value of the fixed-rate debt
was estimated to be $433.9 million compared to the net
carrying value of $481.4 million (includes
$8.9 million of debt premium with our proportionate share
of the debt premium related to our McKellar Court partnership).
We do not believe that the interest rate risk represented by our
fixed-rate debt was material as of December 31, 2008 in
relation to total assets of $3.2 billion and equity market
capitalization of $1.2 billion of our common stock,
operating partnership and LTIP units, and preferred stock.
Based on the outstanding unhedged balances of our unsecured line
of credit, secured construction loan, secured term loan, and our
proportionate share of the outstanding balance for the PREI
joint ventures secured acquisition and interim loan
facility and secured construction loan at December 31,
2008, a 1% change in interest rates would change our interest
costs by approximately $5.4 million per year. This amount
was determined by considering the impact of hypothetical
interest rates on our financial instruments. This analysis does
not consider the effect of any change in overall economic
activity that could occur in that environment. Further, in the
event of a change of the magnitude discussed above, we may take
actions to further mitigate our exposure to the change. However,
due to the uncertainty of the specific actions that would be
taken and their possible effects, this analysis assumes no
changes in our financial structure.
In order to modify and manage the interest rate characteristics
of our outstanding debt and to limit the effects of interest
rate risks on our operations, we may utilize a variety of
financial instruments, including interest rate swaps, caps and
treasury locks in order to mitigate our interest rate risk on a
related financial instrument. The use of these types of
instruments to hedge our exposure to changes in interest rates
carries additional risks, including counterparty credit risk,
the enforceability of hedging contracts and the risk that
unanticipated and significant changes in interest rates will
cause a significant loss of basis in the contract. To limit
counterparty credit risk we will seek to enter into such
agreements with major financial institutions with high credit
ratings. There can be no assurance that we will be able to
adequately protect against the foregoing risks and will
ultimately realize an economic benefit that exceeds the related
amounts incurred in connection with engaging in such hedging
activities. We do not enter into such contracts for speculative
or trading purposes.
58
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
60
|
|
|
|
|
62
|
|
|
|
|
63
|
|
|
|
|
64
|
|
|
|
|
65
|
|
|
|
|
66
|
|
|
|
|
68
|
|
|
|
|
98
|
|
59
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
BioMed Realty Trust, Inc.:
We have audited the accompanying consolidated balance sheets of
BioMed Realty Trust, Inc. and subsidiaries (the Company) as of
December 31, 2008 and 2007, and the related consolidated
statements of income, stockholders equity, comprehensive
(loss)/income and cash flows for each of the years in the
three-year period ended December 31, 2008. In connection
with our audits of the consolidated financial statements, we
have also audited the accompanying financial statement
schedule III of the Company. We have also audited the
Companys internal control over financial reporting as of
December 31, 2008, based on criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Companys management is responsible for these
consolidated financial statements and financial statement
schedule, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness
of internal control over financial reporting, included in the
accompanying Managements Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion
on these consolidated financial statements and financial
statement schedule, and an opinion on the Companys
internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the consolidated financial statements
included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
60
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2008 and 2007,
and the results of their operations and their cash flows for
each of the years in the three-year period ended
December 31, 2008, in conformity with U.S. generally
accepted accounting principles. Additionally, in our opinion,
the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein. Also in our opinion, the Company
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2008, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission.
KPMG LLP
San Diego, California
February 12, 2009
61
BIOMED
REALTY TRUST, INC.
(In
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
Investments in real estate, net
|
|
$
|
2,957,735
|
|
|
$
|
2,805,983
|
|
Investment in unconsolidated partnerships
|
|
|
18,173
|
|
|
|
22,588
|
|
Cash and cash equivalents
|
|
|
21,422
|
|
|
|
13,479
|
|
Restricted cash
|
|
|
7,877
|
|
|
|
8,867
|
|
Accounts receivable, net
|
|
|
9,417
|
|
|
|
4,457
|
|
Accrued straight-line rents, net
|
|
|
58,138
|
|
|
|
36,415
|
|
Acquired above-market leases, net
|
|
|
4,329
|
|
|
|
5,745
|
|
Deferred leasing costs, net
|
|
|
101,519
|
|
|
|
116,491
|
|
Deferred loan costs, net
|
|
|
9,933
|
|
|
|
15,567
|
|
Other assets
|
|
|
38,256
|
|
|
|
27,676
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,226,799
|
|
|
$
|
3,057,268
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Mortgage notes payable, net
|
|
$
|
353,161
|
|
|
$
|
379,680
|
|
Secured construction loan
|
|
|
507,128
|
|
|
|
425,160
|
|
Secured term loan
|
|
|
250,000
|
|
|
|
250,000
|
|
Exchangeable senior notes
|
|
|
128,250
|
|
|
|
175,000
|
|
Unsecured line of credit
|
|
|
108,767
|
|
|
|
270,947
|
|
Security deposits
|
|
|
7,623
|
|
|
|
7,090
|
|
Dividends and distributions payable
|
|
|
32,445
|
|
|
|
25,596
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
66,821
|
|
|
|
74,103
|
|
Derivative instruments
|
|
|
126,091
|
|
|
|
21,768
|
|
Acquired below-market leases, net
|
|
|
17,286
|
|
|
|
23,708
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,597,572
|
|
|
|
1,653,052
|
|
Minority interests
|
|
|
12,381
|
|
|
|
17,280
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 15,000,000 shares
authorized: 7.375% Series A cumulative redeemable preferred
stock, $230,000,000 liquidation preference ($25.00 per share),
9,200,000 shares issued and outstanding at
December 31, 2008 and 2007
|
|
|
222,413
|
|
|
|
222,413
|
|
Common stock, $.01 par value, 100,000,000 shares
authorized, 80,757,421 and 65,571,304 shares issued and
outstanding at December 31, 2008 and 2007, respectively
|
|
|
808
|
|
|
|
656
|
|
Additional paid-in capital
|
|
|
1,647,039
|
|
|
|
1,277,770
|
|
Accumulated other comprehensive loss
|
|
|
(112,126
|
)
|
|
|
(21,762
|
)
|
Dividends in excess of earnings
|
|
|
(141,288
|
)
|
|
|
(92,141
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,616,846
|
|
|
|
1,386,936
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,226,799
|
|
|
$
|
3,057,268
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
62
BIOMED
REALTY TRUST, INC.
(In
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
227,464
|
|
|
$
|
195,996
|
|
|
$
|
164,487
|
|
Tenant recoveries
|
|
|
72,166
|
|
|
|
61,735
|
|
|
|
54,160
|
|
Other income
|
|
|
2,343
|
|
|
|
8,378
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
301,973
|
|
|
|
266,109
|
|
|
|
218,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operations
|
|
|
61,600
|
|
|
|
50,789
|
|
|
|
40,623
|
|
Real estate taxes
|
|
|
23,129
|
|
|
|
20,353
|
|
|
|
20,376
|
|
Depreciation and amortization
|
|
|
84,227
|
|
|
|
72,202
|
|
|
|
65,063
|
|
General and administrative
|
|
|
22,834
|
|
|
|
21,870
|
|
|
|
18,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
191,790
|
|
|
|
165,214
|
|
|
|
144,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
110,183
|
|
|
|
100,895
|
|
|
|
74,588
|
|
Equity in net (loss)/income of unconsolidated partnerships
|
|
|
(1,200
|
)
|
|
|
(893
|
)
|
|
|
83
|
|
Interest income
|
|
|
485
|
|
|
|
990
|
|
|
|
1,102
|
|
Interest expense
|
|
|
(39,612
|
)
|
|
|
(27,654
|
)
|
|
|
(40,672
|
)
|
Loss on derivative instruments
|
|
|
(19,948
|
)
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
|
17,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before minority interests
|
|
|
66,974
|
|
|
|
73,338
|
|
|
|
35,101
|
|
Minority interests in continuing operations of consolidated
partnerships
|
|
|
9
|
|
|
|
(45
|
)
|
|
|
137
|
|
Minority interests in continuing operations of operating
partnership
|
|
|
(2,086
|
)
|
|
|
(2,412
|
)
|
|
|
(1,670
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
64,897
|
|
|
|
70,881
|
|
|
|
33,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before gain on sale of
assets and minority interests
|
|
|
|
|
|
|
639
|
|
|
|
1,542
|
|
Gain on sale of real estate assets
|
|
|
|
|
|
|
1,087
|
|
|
|
|
|
Minority interests attributable to discontinued operations
|
|
|
|
|
|
|
(74
|
)
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
|
|
|
|
1,652
|
|
|
|
1,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
64,897
|
|
|
|
72,533
|
|
|
|
35,033
|
|
Preferred stock dividends
|
|
|
(16,963
|
)
|
|
|
(16,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
47,934
|
|
|
$
|
55,665
|
|
|
$
|
35,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations per share available to common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
$
|
0.67
|
|
|
$
|
0.83
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
|
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share available to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.67
|
|
|
$
|
0.85
|
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.67
|
|
|
$
|
0.85
|
|
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
71,684,244
|
|
|
|
65,302,794
|
|
|
|
55,928,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
74,831,483
|
|
|
|
68,269,985
|
|
|
|
59,018,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
63
BIOMED
REALTY TRUST, INC.
(In
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Series A
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
Dividends in
|
|
|
|
|
|
|
Preferred
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Excess of
|
|
|
|
|
|
|
Stock
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
(Loss)/Income
|
|
|
Earnings
|
|
|
Total
|
|
|
Balance at December 31, 2005
|
|
$
|
|
|
|
|
46,634,432
|
|
|
$
|
466
|
|
|
$
|
757,591
|
|
|
$
|
5,922
|
|
|
$
|
(33,504
|
)
|
|
$
|
730,475
|
|
Net proceeds from sale of common stock
|
|
|
|
|
|
|
18,428,750
|
|
|
|
184
|
|
|
|
506,587
|
|
|
|
|
|
|
|
|
|
|
|
506,771
|
|
Net proceeds from exercise of warrant
|
|
|
|
|
|
|
270,000
|
|
|
|
3
|
|
|
|
4,047
|
|
|
|
|
|
|
|
|
|
|
|
4,050
|
|
Net issuances of unvested restricted common stock
|
|
|
|
|
|
|
92,416
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of share-based awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,019
|
|
|
|
|
|
|
|
|
|
|
|
4,019
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68,130
|
)
|
|
|
(68,130
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,033
|
|
|
|
35,033
|
|
Unrealized gain on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,495
|
|
|
|
|
|
|
|
2,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
|
|
|
|
65,425,598
|
|
|
|
654
|
|
|
|
1,272,243
|
|
|
|
8,417
|
|
|
|
(66,601
|
)
|
|
|
1,214,713
|
|
Net proceeds from sale of preferred stock
|
|
|
222,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,413
|
|
Net issuances of unvested restricted common stock
|
|
|
|
|
|
|
145,706
|
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of share-based awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,529
|
|
|
|
|
|
|
|
|
|
|
|
5,529
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(81,205
|
)
|
|
|
(81,205
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,533
|
|
|
|
72,533
|
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,868
|
)
|
|
|
(16,868
|
)
|
Unrealized loss on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,179
|
)
|
|
|
|
|
|
|
(30,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
222,413
|
|
|
|
65,571,304
|
|
|
|
656
|
|
|
|
1,277,770
|
|
|
|
(21,762
|
)
|
|
|
(92,141
|
)
|
|
|
1,386,936
|
|
Net proceeds from sale of common stock
|
|
|
|
|
|
|
14,754,000
|
|
|
|
147
|
|
|
|
361,983
|
|
|
|
|
|
|
|
|
|
|
|
362,130
|
|
Net issuances of unvested restricted common stock
|
|
|
|
|
|
|
363,917
|
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of operating partnership units to common stock
|
|
|
|
|
|
|
68,200
|
|
|
|
1
|
|
|
|
485
|
|
|
|
|
|
|
|
|
|
|
|
486
|
|
Vesting of share-based awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,805
|
|
|
|
|
|
|
|
|
|
|
|
6,805
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(97,081
|
)
|
|
|
(97,081
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,897
|
|
|
|
64,897
|
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,963
|
)
|
|
|
(16,963
|
)
|
Unrealized loss on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(90,364
|
)
|
|
|
|
|
|
|
(90,364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
222,413
|
|
|
|
80,757,421
|
|
|
$
|
808
|
|
|
$
|
1,647,039
|
|
|
$
|
(112,126
|
)
|
|
$
|
(141,288
|
)
|
|
$
|
1,616,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
64
BIOMED
REALTY TRUST, INC.
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net income
|
|
$
|
64,897
|
|
|
$
|
72,533
|
|
|
$
|
35,033
|
|
Preferred stock dividends
|
|
|
(16,963
|
)
|
|
|
(16,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
|
47,934
|
|
|
|
55,665
|
|
|
$
|
35,033
|
|
Other comprehensive (loss)/income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (loss)/gain on derivative instruments
|
|
|
(104,322
|
)
|
|
|
(30,179
|
)
|
|
|
2,495
|
|
Reclassification of unrealized losses on derivative instruments
|
|
|
18,167
|
|
|
|
|
|
|
|
|
|
Ineffectiveness on derivative instruments
|
|
|
1,781
|
|
|
|
|
|
|
|
|
|
Equity in other comprehensive loss of unconsolidated partnerships
|
|
|
(917
|
)
|
|
|
|
|
|
|
|
|
Deferred settlement payments derivative instruments, net
|
|
|
(5,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss)/income
|
|
$
|
(42,430
|
)
|
|
$
|
25,486
|
|
|
$
|
37,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
65
BIOMED
REALTY TRUST, INC.
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
64,897
|
|
|
$
|
72,533
|
|
|
$
|
35,033
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate assets
|
|
|
|
|
|
|
(1,087
|
)
|
|
|
|
|
Gain on extinguishment of debt
|
|
|
(17,066
|
)
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
84,227
|
|
|
|
72,429
|
|
|
|
65,610
|
|
Minority interests in consolidated partnerships
|
|
|
(9
|
)
|
|
|
45
|
|
|
|
(137
|
)
|
Minority interests in operating partnership
|
|
|
2,086
|
|
|
|
2,486
|
|
|
|
1,747
|
|
Allowance for doubtful accounts
|
|
|
796
|
|
|
|
232
|
|
|
|
193
|
|
Revenue reduction attributable to acquired above-market leases
|
|
|
1,416
|
|
|
|
2,451
|
|
|
|
2,471
|
|
Revenue recognized related to acquired below-market leases
|
|
|
(6,422
|
)
|
|
|
(5,859
|
)
|
|
|
(4,811
|
)
|
Revenue reduction attributable to lease incentives
|
|
|
2,006
|
|
|
|
205
|
|
|
|
|
|
Compensation expense related to restricted common stock and LTIP
units
|
|
|
6,106
|
|
|
|
6,229
|
|
|
|
4,019
|
|
Amortization of deferred loan costs
|
|
|
4,107
|
|
|
|
3,195
|
|
|
|
1,925
|
|
Amortization of debt premium on mortgage notes payable
|
|
|
(1,343
|
)
|
|
|
(827
|
)
|
|
|
(2,148
|
)
|
Loss/(income) from unconsolidated partnerships
|
|
|
1,200
|
|
|
|
893
|
|
|
|
(83
|
)
|
Distributions representing a return on capital received from
unconsolidated partnerships
|
|
|
687
|
|
|
|
357
|
|
|
|
130
|
|
Distributions to minority interest in consolidated partnerships
|
|
|
|
|
|
|
(108
|
)
|
|
|
|
|
Loss on derivative instruments
|
|
|
19,948
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
990
|
|
|
|
(2,441
|
)
|
|
|
(939
|
)
|
Accounts receivable
|
|
|
(5,319
|
)
|
|
|
1,296
|
|
|
|
3,695
|
|
Accrued straight-line rents
|
|
|
(22,160
|
)
|
|
|
(15,969
|
)
|
|
|
(11,715
|
)
|
Deferred leasing costs
|
|
|
(11,514
|
)
|
|
|
(9,664
|
)
|
|
|
(3,070
|
)
|
Other assets
|
|
|
(4,943
|
)
|
|
|
(2,314
|
)
|
|
|
(3,567
|
)
|
Security deposits
|
|
|
533
|
|
|
|
(587
|
)
|
|
|
79
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
(5,177
|
)
|
|
|
(8,530
|
)
|
|
|
13,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
115,046
|
|
|
|
114,965
|
|
|
|
101,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of interests in and additions to investments in real
estate and related intangible assets
|
|
|
(243,691
|
)
|
|
|
(394,504
|
)
|
|
|
(1,340,204
|
)
|
Purchases of interests in unconsolidated partnerships
|
|
|
|
|
|
|
(21,402
|
)
|
|
|
|
|
Proceeds from sale of real estate assets, net of selling costs
|
|
|
28,800
|
|
|
|
19,389
|
|
|
|
|
|
Distributions representing a return of capital received from
unconsolidated partnerships
|
|
|
1,373
|
|
|
|
|
|
|
|
|
|
Minority interest investment in consolidated partnerships
|
|
|
239
|
|
|
|
205
|
|
|
|
449
|
|
Receipts of master lease payments
|
|
|
373
|
|
|
|
928
|
|
|
|
726
|
|
Security deposits received from prior owners of rental properties
|
|
|
|
|
|
|
|
|
|
|
720
|
|
Funds held in escrow for acquisitions
|
|
|
|
|
|
|
(12,900
|
)
|
|
|
|
|
Additions to non-real estate assets
|
|
|
(5,755
|
)
|
|
|
(1,017
|
)
|
|
|
(1,154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(218,661
|
)
|
|
|
(409,301
|
)
|
|
|
(1,339,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
BIOMED
REALTY TRUST, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from common stock offerings
|
|
|
371,310
|
|
|
|
|
|
|
|
528,783
|
|
Proceeds from exercise of stock warrant
|
|
|
|
|
|
|
|
|
|
|
4,050
|
|
Proceeds from preferred stock offering
|
|
|
|
|
|
|
230,000
|
|
|
|
|
|
Payment of common stock offering costs
|
|
|
(9,180
|
)
|
|
|
|
|
|
|
(21,989
|
)
|
Payment of preferred stock offering costs
|
|
|
|
|
|
|
(7,587
|
)
|
|
|
|
|
Payment of deferred loan costs
|
|
|
(143
|
)
|
|
|
(3,856
|
)
|
|
|
(14,675
|
)
|
Unsecured line of credit proceeds
|
|
|
199,750
|
|
|
|
286,237
|
|
|
|
620,476
|
|
Unsecured line of credit repayments
|
|
|
(361,930
|
)
|
|
|
(243,455
|
)
|
|
|
(409,311
|
)
|
Secured bridge loan proceeds
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
Secured bridge loan payments
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
Exchangeable senior notes proceeds
|
|
|
|
|
|
|
|
|
|
|
175,000
|
|
Exchangeable senior notes repayments
|
|
|
(28,826
|
)
|
|
|
|
|
|
|
|
|
Secured construction loan proceeds
|
|
|
81,968
|
|
|
|
138,805
|
|
|
|
286,355
|
|
Mortgage notes proceeds
|
|
|
|
|
|
|
|
|
|
|
147,000
|
|
Principal payments on mortgage notes payable
|
|
|
(24,454
|
)
|
|
|
(21,579
|
)
|
|
|
(5,401
|
)
|
Tenant improvement loan
|
|
|
|
|
|
|
|
|
|
|
(2,000
|
)
|
Deferred settlement payments on derivative instruments, net
|
|
|
(5,073
|
)
|
|
|
|
|
|
|
|
|
Distributions to operating partnership unit and LTIP unit holders
|
|
|
(4,547
|
)
|
|
|
(3,936
|
)
|
|
|
(3,312
|
)
|
Dividends paid to common stockholders
|
|
|
(90,354
|
)
|
|
|
(79,851
|
)
|
|
|
(61,749
|
)
|
Dividends paid to preferred stockholders
|
|
|
(16,963
|
)
|
|
|
(12,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
111,558
|
|
|
|
282,151
|
|
|
|
1,243,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
7,943
|
|
|
|
(12,185
|
)
|
|
|
5,352
|
|
Cash and cash equivalents at beginning of year
|
|
|
13,479
|
|
|
|
25,664
|
|
|
|
20,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
21,422
|
|
|
$
|
13,479
|
|
|
$
|
25,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest (net of amounts capitalized of $41,243,
$56,699, and $7,614, respectively)
|
|
$
|
40,691
|
|
|
$
|
25,154
|
|
|
$
|
33,965
|
|
Supplemental disclosure of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for common stock dividends declared
|
|
|
27,053
|
|
|
|
20,326
|
|
|
|
18,973
|
|
Accrual for preferred stock dividends declared
|
|
|
4,241
|
|
|
|
4,241
|
|
|
|
|
|
Accrual for distributions declared for operating partnership
unit and LTIP unit holders
|
|
|
1,151
|
|
|
|
1,029
|
|
|
|
874
|
|
Mortgage loans assumed (includes premium of $11,312 in 2006)
|
|
|
|
|
|
|
|
|
|
|
18,460
|
|
Accrued additions to real estate and related intangible assets
|
|
|
37,828
|
|
|
|
46,783
|
|
|
|
29,680
|
|
See accompanying notes to consolidated financial statements.
67
BIOMED
REALTY TRUST, INC.
|
|
1.
|
Organization
and Description of Business
|
BioMed Realty Trust, Inc., a Maryland corporation (the
Company) was incorporated in Maryland on
April 30, 2004. On August 11, 2004, the Company
commenced operations after completing its initial public
offering. The Company operates as a fully integrated,
self-administered and self-managed real estate investment trust
(REIT) focused on acquiring, developing, owning,
leasing and managing laboratory and office space for the life
science industry principally through its subsidiary, BioMed
Realty, L.P., a Maryland limited partnership (its
Operating Partnership). The Companys tenants
primarily include biotechnology and pharmaceutical companies,
scientific research institutions, government agencies and other
entities involved in the life science industry. The
Companys properties are generally located in markets with
well established reputations as centers for scientific research,
including Boston, San Diego, San Francisco, Seattle,
Maryland, Pennsylvania and New York/New Jersey.
Information with respect to the number of properties, square
footage, and the percent of rentable square feet leased to
tenants is unaudited.
|
|
2.
|
Basis of
Presentation and Summary of Significant Accounting
Policies
|
Principles
of Consolidation
The consolidated financial statements include the accounts of
the Company, its wholly owned subsidiaries, partnerships and
limited liability companies it controls, and variable interest
entities for which the Company has determined itself to be the
primary beneficiary. All material intercompany transactions and
balances have been eliminated. The Company consolidates entities
the Company controls and records a minority interest for the
portions not owned by the Company. Control is determined, where
applicable, by the sufficiency of equity invested and the rights
of the equity holders, and by the ownership of a majority of the
voting interests, with consideration given to the existence of
approval or veto rights granted to the minority shareholder. If
the minority shareholder holds substantive participating rights,
it overcomes the presumption of control by the majority voting
interest holder. In contrast, if the minority shareholder simply
holds protective rights (such as consent rights over certain
actions), it does not overcome the presumption of control by the
majority voting interest holder.
Investments
in Partnerships
The Company evaluates its investments in limited liability
companies and partnerships under FASB Interpretation No. 46
(revised December 2003), Consolidation of Variable Interest
Entities (FIN 46R), an interpretation of
Accounting Research Bulletin No. 51, Consolidated
Financial Statements. FIN 46R provides guidance on the
identification of entities for which control is achieved through
means other than voting rights (variable interest
entities) and the determination of which business
enterprise should consolidate the variable interest entity (the
primary beneficiary). Generally, FIN 46R
applies when either (1) the equity investors (if any) lack
one or more of the essential characteristics of a controlling
financial interest, (2) the equity investment at risk is
insufficient to finance that entitys activities without
additional subordinated financial support or (3) the equity
investors have voting rights that are not proportionate to their
economic interests and the activities of the entity involve or
are conducted on behalf of an investor with a disproportionately
small voting interest.
If FIN 46R does not apply, the Company considers EITF Issue
No. 04-5,
Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights
(EITF 04-5),
which provides guidance in determining whether a general partner
controls a limited partnership.
EITF 04-5 states
that the general partner in a limited partnership is presumed to
control that limited partnership. The presumption may be
overcome if the limited partners have either (1) the
substantive ability to dissolve the limited partnership or
otherwise remove the general partner without cause or
(2) substantive participating rights, which provide the
limited partners with the ability to effectively participate in
significant decisions that would be expected to be made in the
ordinary course of the limited partnerships business
68
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and thereby preclude the general partner from exercising
unilateral control over the partnership. If the criteria in
EITF 04-5
are met, the consolidation of the partnership or limited
liability company is required.
Except for investments that are consolidated in accordance with
FIN 46R or
EITF 04-5,
the Company accounts for investments in entities over which it
exercises significant influence, but does not control, under the
equity method of accounting. These investments are recorded
initially at cost and subsequently adjusted for equity in
earnings and cash contributions and distributions. Under the
equity method of accounting, the Companys net equity in
the investment is reflected in the consolidated balance sheets
and its share of net income or loss is included in the
Companys consolidated statements of income.
On a periodic basis, management assesses whether there are any
indicators that the carrying value of the Companys
investments in partnerships or limited liability companies may
be impaired on a more than temporary basis. An investment is
impaired only if managements estimate of the fair-value of
the investment is less than the carrying value of the investment
on a more than temporary basis. To the extent impairment has
occurred, the loss shall be measured as the excess of the
carrying value of the investment over the fair-value of the
investment. Management does not believe that the value of any of
the Companys investments in partnerships or limited
liability companies was impaired as of and through
December 31, 2008.
Investments
in Real Estate
Investments in real estate are carried at depreciated cost.
Depreciation and amortization are recorded on a straight-line
basis over the estimated useful lives of the assets as follows:
|
|
|
Buildings and improvements
|
|
15-40 years
|
Ground lease
|
|
Term of the related lease
|
Tenant improvements
|
|
Shorter of the useful lives or the terms of the related leases
|
Furniture, fixtures, and equipment (other assets)
|
|
3 to 5 years
|
Acquired in-place leases
|
|
Non-cancelable term of the related lease
|
Acquired management agreements
|
|
Non-cancelable term of the related agreement
|
Investments in real estate, net consists of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Land
|
|
$
|
347,878
|
|
|
$
|
236,263
|
|
Land under development
|
|
|
69,529
|
|
|
|
181,165
|
|
Buildings and improvements
|
|
|
2,102,924
|
|
|
|
1,477,883
|
|
Construction in progress
|
|
|
437,675
|
|
|
|
948,107
|
|
Tenant improvements
|
|
|
161,839
|
|
|
|
67,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,119,845
|
|
|
|
2,910,427
|
|
Accumulated depreciation
|
|
|
(162,110
|
)
|
|
|
(104,444
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,957,735
|
|
|
$
|
2,805,983
|
|
|
|
|
|
|
|
|
|
|
Certain amounts included in investment in real estate, net at
December 31, 2007 have been reclassified in order to more
accurately reflect assets that were undergoing development or
redevelopment activities. Approximately $275.1 million was
reclassified from land or buildings and improvements to land
under development or construction in progress in order to
conform to the current year presentation.
On October 3, 2008, a portion of the parking spaces at the
garage located on the Companys Center for Life
Science | Boston
property was sold for approximately $28.8 million pursuant
to an agreement assumed by the
69
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company in connection with its acquisition of the property in
November 2006. The carrying value of the garage allocable to the
portion that was sold was approximately $28.8 million.
Purchase accounting was applied, on a pro-rata basis where
appropriate, to the assets and liabilities of real estate
properties in which the Company acquired an interest or a
partial interest. The fair-value of tangible assets of an
acquired property (which includes land, buildings, and
improvements) is determined by valuing the property as if it
were vacant, and the as-if-vacant value is then
allocated to land, buildings and improvements based on
managements determination of the relative fair-value of
these assets. Factors considered by the Company in performing
these analyses include an estimate of the carrying costs during
the expected
lease-up
periods, current market conditions and costs to execute similar
leases. In estimating carrying costs, the Company includes real
estate taxes, insurance and other operating expenses and
estimates of lost rental revenue during the expected
lease-up
periods based on current market demand.
The aggregate value of other acquired intangible assets
consisting of acquired in-place leases and acquired management
agreements (see deferred leasing costs below) are recorded based
on a variety of considerations including, but not necessarily
limited to: (a) the value associated with avoiding the cost
of originating the acquired in-place leases (i.e. the market
cost to execute a lease, including leasing commissions and legal
fees, if any); (b) the value associated with lost revenue
related to tenant reimbursable operating costs estimated to be
incurred during the assumed
lease-up
period (i.e. real estate taxes and insurance); and (c) the
value associated with lost rental revenue from existing leases
during the assumed
lease-up
period. The fair-value assigned to the acquired management
agreements are recorded at the present value (using a discount
rate which reflects the risks associated with the management
agreements acquired) of the acquired management agreements with
certain tenants of the acquired properties. The values of
in-place leases and management agreements are amortized to
expense over the remaining non-cancelable period of the
respective leases or agreements. If a lease were to be
terminated prior to its stated expiration, all unamortized
amounts related to that lease would be written off.
Costs incurred in connection with the acquisition, development
or construction of properties and improvements are capitalized.
Capitalized costs include pre-construction costs essential to
the development of the property, development costs, construction
costs, interest costs, real estate taxes, salaries and related
costs and other direct costs incurred during the period of
development. The Company capitalizes costs on land and buildings
under development until construction is substantially complete
and the property is held available for occupancy. Determination
of when a development project is substantially complete and when
capitalization must cease involves a degree of judgment. The
Company considers a construction project as substantially
complete and held available for occupancy upon the completion of
landlord-owned tenant improvements or when the lessee takes
possession of the unimproved space for construction of its own
improvements, but no later than one year from cessation of major
construction activity. The Company ceases capitalization on the
portion substantially completed and occupied or held available
for occupancy, and capitalizes only those costs associated with
any remaining portion under construction. Interest costs
capitalized for the years ended December 31, 2008, 2007,
and 2006 were $41.2 million, $56.7 million, and
$7.6 million, respectively. Capitalized costs associated
with unsuccessful acquisitions are charged to expense when an
acquisition is no longer considered probable.
Repair and maintenance costs are charged to expense as incurred
and significant replacements and betterments are capitalized.
Repairs and maintenance costs include all costs that do not
extend the useful life of an asset or increase its operating
efficiency. Significant replacement and betterments represent
costs that extend an assets useful life or increase its
operating efficiency.
Impairment
of Long-Lived Assets and Long-Lived Assets to be
Disposed
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. The review of recoverability is based on an
estimate of the future undiscounted cash flows (excluding
interest charges) expected to result from the long-lived
assets use and eventual disposition. These cash flows
consider factors such as expected
70
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
future operating income, trends and prospects, as well as the
effects of leasing demand, competition and other factors. If
impairment exists due to the inability to recover the carrying
value of a long-lived asset, an impairment loss is recorded to
the extent that the carrying value exceeds the estimated
fair-value of the property. The Company is required to make
subjective assessments as to whether there are impairments in
the values of its investments in long-lived assets. These
assessments have a direct impact on the Companys net
income because recording an impairment loss results in an
immediate negative adjustment to net income. The evaluation of
anticipated cash flows is highly subjective and is based in part
on assumptions regarding future occupancy, rental rates and
capital requirements that could differ materially from actual
results in future periods. Although the Companys strategy
is to hold its properties over the long-term, if the
Companys strategy changes or market conditions otherwise
dictate an earlier sale date, an impairment loss may be
recognized to reduce the property to the lower of the carrying
amount or fair-value less costs to sell, and such loss could be
material. If the Company determines that impairment has
occurred, the affected assets must be reduced to their
fair-value. As of and through December 31, 2008, no assets
have been identified as impaired and no such impairment losses
have been recognized.
Cash
and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments
with original maturities of three months or less. We maintain
our cash at insured financial institutions. The combined account
balances at each institution periodically exceed FDIC insurance
coverage, and, as a result, there is a concentration of credit
risk related to amounts in excess of FDIC limits. The Company
believes that the risk is not significant.
Restricted
Cash
Restricted cash primarily consists of cash deposits for real
estate taxes, insurance and capital expenditures as required by
certain mortgage notes payable.
Deferred
Leasing Costs
Leasing commissions and other direct costs associated with
obtaining new or renewal leases are recorded at cost and
amortized on a straight-line basis over the terms of the
respective leases, with remaining terms ranging from less than
one year to sixteen years as of December 31, 2008. Deferred
leasing costs also include the net carrying value of acquired
in-place leases and acquired management agreements.
Deferred leasing costs, net at December 31, 2008 consisted
of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Accumulated
|
|
|
|
|
|
|
December 31, 2008
|
|
|
Amortization
|
|
|
Net
|
|
|
Acquired in-place leases
|
|
$
|
168,390
|
|
|
$
|
(92,072
|
)
|
|
$
|
76,318
|
|
Acquired management agreements
|
|
|
12,921
|
|
|
|
(8,602
|
)
|
|
|
4,319
|
|
Deferred leasing and other direct costs
|
|
|
26,364
|
|
|
|
(5,482
|
)
|
|
|
20,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
207,675
|
|
|
$
|
(106,156
|
)
|
|
$
|
101,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred leasing costs, net at December 31, 2007 consisted
of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Accumulated
|
|
|
|
|
|
|
December 31, 2007
|
|
|
Amortization
|
|
|
Net
|
|
|
Acquired in-place leases
|
|
$
|
167,664
|
|
|
$
|
(71,412
|
)
|
|
$
|
96,252
|
|
Acquired management agreements
|
|
|
12,921
|
|
|
|
(6,603
|
)
|
|
|
6,318
|
|
Deferred leasing and other direct costs
|
|
|
15,541
|
|
|
|
(1,620
|
)
|
|
|
13,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
196,126
|
|
|
$
|
(79,635
|
)
|
|
$
|
116,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The estimated amortization expense during the next five years
for deferred leasing costs at December 31, 2008 was as
follows (in thousands):
|
|
|
|
|
2009
|
|
$
|
21,546
|
|
2010
|
|
|
14,654
|
|
2011
|
|
|
11,114
|
|
2012
|
|
|
10,014
|
|
2013
|
|
|
8,649
|
|
Thereafter
|
|
|
35,542
|
|
|
|
|
|
|
|
|
$
|
101,519
|
|
|
|
|
|
|
Deferred
Loan Costs
External costs associated with obtaining long-term financing are
capitalized and amortized to interest expense over the terms of
the related loans using the effective-interest method.
Unamortized financing costs are charged to expense upon the
early repayment or significant modification of the financing.
Fully amortized deferred loan costs are removed from the books
upon maturity of the debt. The balance is net of
$16.8 million and $11.0 million of accumulated
amortization at December 31, 2008 and 2007, respectively.
Revenue
Recognition
The Company commences revenue recognition on its leases based on
a number of factors. In most cases, revenue recognition under a
lease begins when the lessee takes possession of or controls the
physical use of the leased asset. Generally, this occurs on the
lease commencement date. In determining what constitutes the
leased asset, the Company evaluates whether the Company or the
lessee is the owner, for accounting purposes, of the tenant
improvements. If the Company is the owner, for accounting
purposes, of the tenant improvements, then the leased asset is
the finished space and revenue recognition begins when the
lessee takes possession of the finished space, typically when
the improvements are substantially complete. If the Company
concludes that it is not the owner, for accounting purposes, of
the tenant improvements (the lessee is the owner), then the
leased asset is the unimproved space and any tenant improvement
allowances funded under the lease are treated as lease
incentives, which reduce revenue recognized on a straight-line
basis over the remaining non-cancelable term of the respective
lease. In these circumstances, the Company begins revenue
recognition when the lessee takes possession of the unimproved
space for the lessee to construct improvements. The
determination of who is the owner, for accounting purposes, of
the tenant improvements determines the nature of the leased
asset and when revenue recognition under a lease begins. The
Company considers a number of different factors to evaluate
whether it or the lessee is the owner of the tenant improvements
for accounting purposes. These factors include:
|
|
|
|
|
whether the lease stipulates how and on what a tenant
improvement allowance may be spent;
|
|
|
|
whether the tenant or landlord retain legal title to the
improvements;
|
|
|
|
the uniqueness of the improvements;
|
|
|
|
the expected economic life of the tenant improvements relative
to the length of the lease;
|
|
|
|
the responsible party for construction cost overruns; and
|
|
|
|
who constructs or directs the construction of the improvements.
|
The determination of who owns the tenant improvements, for
accounting purposes, is subject to significant judgment. In
making that determination, the Company considers all of the
above factors. However, no one factor is determinative in
reaching a conclusion.
72
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
All leases are classified as operating leases and minimum rents
are recognized on a straight-line basis over the term of the
related lease. The excess of rents recognized over amounts
contractually due pursuant to the underlying leases are included
in accrued straight-line rents on the accompanying consolidated
balance sheets and contractually due but unpaid rents are
included in accounts receivable. Existing leases at acquired
properties are reviewed at the time of acquisition to determine
if contractual rents are above or below current market rents for
the acquired property. An identifiable lease intangible asset or
liability is recorded based on the present value (using a
discount rate that reflects the risks associated with the
acquired leases) of the difference between (1) the
contractual amounts to be paid pursuant to the in-place leases
and (2) the Companys estimate of the fair market
lease rates for the corresponding in-place leases at
acquisition, measured over a period equal to the remaining
non-cancelable term of the leases and any fixed rate renewal
periods (based on the Companys assessment of the
likelihood that the renewal periods will be exercised). The
capitalized above-market lease values are amortized as a
reduction of rental revenue on a straight-line basis over the
remaining non-cancelable terms of the respective leases. The
capitalized below-market lease values are amortized as an
increase to rental revenue on a straight-line basis over the
remaining non-cancelable terms of the respective leases. If a
tenant vacates its space prior to the contractual termination of
the lease and no rental payments are being made on the lease,
any unamortized balance of the related intangible will be
written off.
The impact of the straight-line rent adjustment increased
revenue for the Company by $22.2 million,
$16.5 million (including discontinued operations), and
$11.7 million for the years ended December 31, 2008,
2007, and 2006, respectively. Additionally, the impact of the
amortization of acquired above-market leases, acquired
below-market leases, and lease incentives increased rental
revenues by $3.0 million, $3.2 million, and
$2.3 million for the years ended December 31, 2008,
2007, and 2006, respectively.
Total estimated minimum rents under non-cancelable operating
tenant leases in effect at December 31, 2008 were as
follows (in thousands):
|
|
|
|
|
2009
|
|
$
|
241,199
|
|
2010
|
|
|
245,162
|
|
2011
|
|
|
236,269
|
|
2012
|
|
|
231,442
|
|
2013
|
|
|
222,872
|
|
Thereafter
|
|
|
1,774,297
|
|
|
|
|
|
|
|
|
$
|
2,951,241
|
|
|
|
|
|
|
Acquired above-market leases, net consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Acquired above-market leases
|
|
$
|
12,729
|
|
|
$
|
12,729
|
|
Accumulated amortization
|
|
|
(8,400
|
)
|
|
|
(6,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,329
|
|
|
$
|
5,745
|
|
|
|
|
|
|
|
|
|
|
Acquired below-market leases, net consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Acquired below-market leases
|
|
$
|
37,961
|
|
|
$
|
37,961
|
|
Accumulated amortization
|
|
|
(20,675
|
)
|
|
|
(14,253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,286
|
|
|
$
|
23,708
|
|
|
|
|
|
|
|
|
|
|
73
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Lease incentives, net included in other assets consisted of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Lease incentives
|
|
$
|
11,698
|
|
|
$
|
2,361
|
|
Accumulated amortization
|
|
|
(2,211
|
)
|
|
|
(205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,487
|
|
|
$
|
2,156
|
|
|
|
|
|
|
|
|
|
|
The estimated amortization during the next five years for
acquired above- and below-market leases and lease incentives at
December 31, 2008 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Thereafter
|
|
|
Total
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired above-market leases
|
|
$
|
(1,282
|
)
|
|
$
|
(1,222
|
)
|
|
$
|
(581
|
)
|
|
$
|
(314
|
)
|
|
$
|
(282
|
)
|
|
$
|
(648
|
)
|
|
$
|
(4,329
|
)
|
Acquired below-market leases
|
|
|
5,065
|
|
|
|
4,011
|
|
|
|
1,463
|
|
|
|
1,463
|
|
|
|
1,220
|
|
|
|
4,064
|
|
|
|
17,286
|
|
Lease incentive
|
|
|
(1,264
|
)
|
|
|
(1,264
|
)
|
|
|
(1,264
|
)
|
|
|
(1,152
|
)
|
|
|
(1,078
|
)
|
|
|
(3,465
|
)
|
|
|
(9,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net rental revenues increase/(decrease)
|
|
$
|
2,519
|
|
|
$
|
1,525
|
|
|
$
|
(382
|
)
|
|
$
|
(3
|
)
|
|
$
|
(140
|
)
|
|
$
|
(49
|
)
|
|
$
|
3,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substantially all rental operations expenses, consisting of real
estate taxes, insurance and common area maintenance costs are
recoverable from tenants under the terms of lease agreements.
Amounts recovered are dependent on several factors, including
occupancy and lease terms. Revenues are recognized in the period
the expenses are incurred. The reimbursements are recognized and
presented in accordance with
EITF 99-19,
Reporting Revenue Gross as a Principal versus Net as an Agent
(EITF 99-19).
EITF 99-19
requires that these reimbursements be recorded gross, as the
Company is generally the primary obligor with respect to
purchasing goods and services from third-party suppliers, has
discretion in selecting the supplier and bears the credit risk.
Lease termination fees are recognized when the related leases
are canceled, collectability is assured, and we have no
continuing obligation to provide space to former tenants. A gain
on early termination of leases of $7.7 million for the year
ended December 31, 2007 is included in other income on the
consolidated statements of income. Approximately
$4.8 million of the gain on early termination of a lease
was recognized in 2007 as it did not meet revenue recognition
criteria in 2006 due to the execution of the lease termination
agreement on January 1, 2007. However, certain intangible
assets related to the lease were fully amortized as of
December 31, 2006. Lease commissions and other intangible
assets related to early lease terminations in the amount of
$3.1 million, $1.6 million, and $947,000 were fully
amortized in the years ended December 31, 2008, 2007, and
2006, respectively.
Payments received under master lease agreements entered into
with the sellers of the Bayshore and King of Prussia properties
to lease space that was not producing rent at the time of the
acquisition are recorded as a reduction to buildings and
improvements rather than as rental income in accordance with
EITF 85-27,
Recognition of Receipts from
Made-Up
Rental Shortfalls. Receipts under these master lease
agreements totaled $373,000, $928,000, and $726,000 for the
years ended December 31, 2008, 2007, and 2006, respectively.
Allowance
for Doubtful Accounts
The Company maintains an allowance for doubtful accounts for
estimated losses resulting from the inability of tenants to make
required rent and tenant recovery payments or defaults. We may
also maintain an allowance for accrued straight-line rents. The
computation of this allowance is based on the tenants
payment history and current credit status. Bad debt expense
included in rental operations expenses was $796,000, $232,000,
and $193,000 for the years ended December 31, 2008, 2007,
and 2006, respectively. The Companys allowance for
doubtful accounts was $665,000 and $1.5 million as of
December 31, 2008 and 2007, respectively. Included in the
allowance for
74
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
doubtful accounts for the year ended December 31, 2007 was
$1.0 million related to master lease payments not expected
to be collected.
Share-Based
Payments
SFAS No. 123 (revised 2004), Share-Based
Payment, requires that all share-based payments to employees
be recognized in the income statement based on their fair-value.
The fair-value is recorded based on the market value of the
common stock on the grant date and is amortized to general and
administrative expense and rental operations expense over the
relevant service period, adjusted for anticipated forfeitures.
Through the year ended December 31, 2008, the Company only
awarded restricted stock and LTIP unit grants under its
incentive award plan (see Note 9), which are valued based
on the market value of the underlying common stock, and did not
grant any stock options.
Assets
and Liabilities Measured at Fair-Value
On January 1, 2008, the Company adopted SFAS 157,
which defines fair-value, establishes a framework for measuring
fair-value, and expands disclosures about fair-value
measurements. SFAS 157 applies to reported balances that
are required or permitted to be measured at fair-value under
existing accounting pronouncements; accordingly, the standard
does not require any new fair-value measurements of reported
balances. As of December 31, 2008, the Company has applied
the provisions of SFAS 157 to the valuation of its interest
rate swaps, which are the only financial instruments measured at
fair-value on a recurring basis.
On January 1, 2008, the Company adopted
SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities, which permits companies to
choose to measure certain financial instruments and other items
at fair-value in order to mitigate volatility in reported
earnings caused by measuring related assets and liabilities
differently. However, the Company has not elected to measure any
additional financial instruments and other items at fair-value
(other than those previously required under other GAAP rules or
standards) under the provisions of this standard.
SFAS 157 emphasizes that fair-value is a market-based
measurement, not an entity-specific measurement. Therefore, a
fair-value measurement should be determined based on the
assumptions that market participants would use in pricing the
asset or liability. As a basis for considering market
participant assumptions in fair-value measurements,
SFAS 157 establishes a fair-value hierarchy that
distinguishes between market participant assumptions based on
market data obtained from sources independent of the reporting
entity (observable inputs that are classified within
Levels 1 and 2 of the hierarchy) and the reporting
entitys own assumptions about market participant
assumptions (unobservable inputs classified within Level 3
of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active
markets for identical assets or liabilities that the Company has
the ability to access. Level 2 inputs are inputs other than
quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly.
Level 2 inputs may include quoted prices for similar assets
and liabilities in active markets, as well as inputs that are
observable for the asset or liability (other than quoted
prices), such as interest rates, foreign exchange rates, and
yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs for the asset or
liability, which are typically based on an entitys own
assumptions, as there is little, if any, related market
activity. In instances where the determination of the fair-value
measurement is based on inputs from different levels of the
fair-value hierarchy, the level in the fair-value hierarchy
within which the entire fair-value measurement falls is based on
the lowest level input that is significant to the fair-value
measurement in its entirety. The Companys assessment of
the significance of a particular input to the fair-value
measurement in its entirety requires judgment, and considers
factors specific to the asset or liability.
Currently, the Company uses forward starting and interest rate
swaps to manage its interest rate risk. The valuation of these
instruments is determined using widely accepted valuation
techniques including discounted cash flow analysis on the
expected cash flows of each derivative. This analysis reflects
the contractual terms of the derivatives, including the period
to maturity, and uses observable market-based inputs, including
interest rate
75
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
curves. The fair-values of interest rate swaps are determined
using the market standard methodology of netting the discounted
future fixed cash receipts (or payments) and the discounted
expected variable cash payments (or receipts). The variable cash
payments (or receipts) are based on an expectation of future
interest rates (forward curves) derived from observable market
interest rate curves. To comply with the provisions of
SFAS 157, the Company incorporates credit valuation
adjustments to appropriately reflect both its own nonperformance
risk and the respective counterpartys nonperformance risk
in the fair-value measurements. In adjusting the fair-value of
its derivative contracts for the effect of nonperformance risk,
the Company has considered the impact of netting and any
applicable credit enhancements, such as collateral postings,
thresholds, mutual puts, and guarantees.
Although the Company has determined that the majority of the
inputs used to value its derivatives fall within Level 2 of
the fair-value hierarchy, the credit valuation adjustments
associated with its derivatives utilize Level 3 inputs,
such as estimates of current credit spreads to evaluate the
likelihood of default by itself and its counterparties. However,
as of December 31, 2008, the Company has assessed the
significance of the impact of the credit valuation adjustments
on the overall valuation of its derivative positions and has
determined that the credit valuation adjustments are not
significant to the overall valuation of its derivatives. As a
result, the Company has determined that its derivative
valuations in their entirety are classified in Level 2 of
the fair-value hierarchy (see Note 12).
No other assets or liabilities are measured at fair-value on a
recurring basis, or have been measured at fair-value on a
non-recurring basis subsequent to initial recognition, in the
accompanying consolidated balance sheets as of December 31,
2008.
Derivative
Instruments
The Company records all derivatives on the balance sheet at
fair-value. The accounting for changes in the fair-value of
derivatives depends on the intended use of the derivative and
the resulting designation. Derivatives used to hedge the
exposure to changes in the fair-value of an asset, liability, or
firm commitment attributable to a particular risk, such as
interest rate risk, are considered fair-value hedges.
Derivatives used to hedge the exposure to variability in
expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges.
For derivatives designated as cash flow hedges, the effective
portion of changes in the fair-value of the derivative is
initially reported in other comprehensive income (outside of
earnings) and subsequently reclassified to earnings when the
hedged transaction affects earnings, and the ineffective portion
of changes in the fair-value of the derivative is recognized
directly in earnings. The Company assesses the effectiveness of
each hedging relationship by comparing the changes in cash flows
of the derivative hedging instrument with the changes in cash
flows of the designated hedged item or transaction.
The Companys objective in using derivatives is to add
stability to interest expense and to manage its exposure to
interest rate movements or other identified risks. To accomplish
this objective, the Company uses interest rate swaps as part of
its cash flow hedging strategy. Interest rate swaps designated
as cash flow hedges involve the receipt of variable-rate amounts
in exchange for fixed-rate payments over the life of the
agreements without exchange of the underlying principal amount.
During 2008 and 2007, such derivatives were used to hedge the
variable cash flows associated with existing variable-rate debt
and future variability in the interest related cash flows from
forecasted issuances of debt (see Notes 6 and 12). The
Company formally documents the hedging relationships for all
derivative instruments, the Company has historically accounted
for all of its interest rate swap agreements as cash flow
hedges, and the Company has not used derivatives for trading or
speculative purposes. At December 31, 2008, the hedging
relationships for two of four forward starting swaps were no
longer considered highly effective and the Company was required
to prospectively discontinue hedge accounting for these two
swaps under SFAS 133 (see Note 12).
Equity
Offering Costs
Underwriting commissions and offering costs are reflected as a
reduction of proceeds.
76
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income
Taxes
The Company has elected to be taxed as a REIT under
Sections 856 through 860 of the Internal Revenue Code of
1986, as amended. The Company believes it has qualified and
continues to qualify as a REIT. A REIT is generally not subject
to federal income tax on that portion of its taxable income that
is distributed to its stockholders. Accordingly, no provision
has been made for federal income taxes in the accompanying
consolidated financial statements. REITs are subject to a number
of organizational and operational requirements. If the Company
fails to qualify as a REIT in any taxable year, the Company will
be subject to federal income tax (including any applicable
alternative minimum tax) and, in most of the states, state
income tax on its taxable income at regular corporate tax rates.
The Company is subject to certain state and local taxes.
The Company has formed a taxable REIT subsidiary (the
TRS). In general, the TRS may perform non-customary
services for tenants, hold assets that we cannot hold directly
and, except for the operation or management of health care
facilities or lodging facilities or the providing of any person,
under a franchise, license or otherwise, rights to any brand
name under which any lodging facility or health care facility is
operated, may engage in any real estate or non-real estate
related business. The TRS is subject to corporate federal income
taxes on its taxable income at regular corporate tax rates.
There is no tax provision for the TRS for the periods presented
in the accompanying consolidated statements of income due to net
operating losses incurred. No tax benefits have been recorded
since it is not considered more likely than not that the
deferred tax asset related to the net operating loss
carryforwards will be utilized.
Dividends
and Distributions
Earnings and profits, which determine the taxability of
dividends and distributions to stockholders, will differ from
income reported for financial reporting purposes due to the
difference for federal income tax purposes in the treatment of
revenue recognition, compensation expense, and in the estimated
useful lives of real estate assets used to compute depreciation.
The income tax treatment for dividends was as follows
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
Per Share
|
|
|
%
|
|
|
Per Share
|
|
|
%
|
|
|
Per Share
|
|
|
%
|
|
|
Common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
1.09
|
|
|
|
82.58
|
%
|
|
$
|
0.98
|
|
|
|
80.52
|
%
|
|
$
|
1.06
|
|
|
|
99.07
|
%
|
Capital gain
|
|
|
|
|
|
|
0.00
|
%
|
|
|
0.02
|
|
|
|
1.38
|
%
|
|
|
|
|
|
|
0.00
|
%
|
Return of capital
|
|
|
0.23
|
|
|
|
17.42
|
%
|
|
|
0.22
|
|
|
|
18.10
|
%
|
|
|
0.01
|
|
|
|
0.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.32
|
|
|
|
100.00
|
%
|
|
$
|
1.22
|
|
|
|
100.00
|
%
|
|
$
|
1.07
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
1.84
|
|
|
|
100.00
|
%
|
|
$
|
1.35
|
|
|
|
98.54
|
%
|
|
$
|
|
|
|
|
0.00
|
%
|
Capital gain
|
|
|
|
|
|
|
0.00
|
%
|
|
|
0.02
|
|
|
|
1.46
|
%
|
|
|
|
|
|
|
0.00
|
%
|
Return of capital
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.84
|
|
|
|
100.00
|
%
|
|
$
|
1.37
|
|
|
|
100.00
|
%
|
|
$
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managements
Estimates
Management has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reporting of
revenue and expenses during the reporting period to prepare
these consolidated financial statements in conformity with
U.S. generally accepted accounting principles. The Company
bases its estimates on historical
77
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities and reported amounts of revenue and
expenses that are not readily apparent from other sources.
Actual results could differ from those estimates under different
assumptions or conditions.
Management considers those estimates and assumptions that are
most important to the portrayal of the Companys financial
condition and results of operations, in that they require
managements most subjective judgments, to form the basis
for the accounting policies used by the Company. These estimates
and assumptions of items such as market rents, time required to
lease vacant spaces, lease terms for incoming tenants, terminal
values and credit worthiness of tenants in determining the
as-if-vacant value, in-place lease value and above and
below-market rents value are utilized in allocating purchase
price to tangible and identified intangible assets upon
acquisition of a property. These accounting policies also
include managements estimates of useful lives in
calculating depreciation expense on its properties and the
ultimate recoverability (or impairment) of each property. If the
useful lives of buildings and improvements are different from
the original estimate, it could result in changes to the future
results of operations of the Company. Future adverse changes in
market conditions or poor operating results of our properties
could result in losses or an inability to recover the carrying
value of the properties that may not be reflected in the
properties current carrying value, thereby possibly
requiring an impairment charge in the future.
Segment
Information
The Companys properties share the following similar
economic and operating characteristics: (1) they have
similar forecasted returns (measured by capitalization rate at
acquisition), (2) they are generally occupied almost
exclusively by life science tenants that are public companies,
government agencies or their subsidiaries, (3) they are
generally located near areas of high life science concentrations
with similar demographics and site characteristics, (4) the
majority of properties are designed specifically for life
science tenants that require infrastructure improvements not
generally found in standard properties, and (5) the
associated leases are primarily
triple-net
leases, generally with a fixed rental rate and scheduled annual
escalations, that provide for a recovery of close to 100% of
operating expenses. Consequently, the Companys properties
qualify for aggregation into one reporting segment under the
provisions of SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information.
Reclassifications
Certain prior year amounts have been reclassified to conform to
the current year presentation.
Minority interests on the consolidated balance sheets relate
primarily to the partnership and LTIP units in the Operating
Partnership (collectively, the Units) that are not
owned by the Company. In conjunction with the formation of the
Company, certain persons and entities contributing interests in
properties to the Operating Partnership received partnership
units. In addition, certain limited partners of the Operating
Partnership have received LTIP units in connection with services
rendered or to be rendered to the Operating Partnership. Limited
partners who have been issued Units have the right to require
the Operating Partnership to redeem part or all of their Units
upon vesting of the Units, if applicable. The Company may elect
to acquire those Units in exchange for shares of the
Companys common stock on a one-for-one basis, subject to
adjustment in the event of stock splits, stock dividends,
issuance of stock rights, specified extraordinary distributions
and similar events, or pay cash based upon the fair market value
of an equivalent number of shares of the Companys common
stock at the time of redemption. The value of the Units not
owned by the Company, had such units been redeemed at
December 31, 2008, was approximately $35.7 million
based on the average closing price of the Companys common
stock of $10.38 per share for the ten consecutive trading
days immediately preceding December 31, 2008.
78
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Vested ownership interests in the Operating Partnership were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Partnership Units
|
|
|
Percentage of
|
|
|
Partnership Units
|
|
|
Percentage of
|
|
|
|
and LTIP Units
|
|
|
Total
|
|
|
and LTIP Units
|
|
|
Total
|
|
|
BioMed Realty Trust
|
|
|
80,208,533
|
|
|
|
96.3
|
%
|
|
|
65,308,702
|
|
|
|
95.7
|
%
|
Minority interest consisting of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership and LTIP units held by employees and related parties
|
|
|
2,961,369
|
|
|
|
3.5
|
%
|
|
|
2,726,172
|
|
|
|
4.0
|
%
|
Partnership units held by third parties
|
|
|
122,192
|
|
|
|
0.2
|
%
|
|
|
190,392
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
83,292,094
|
|
|
|
100.0
|
%
|
|
|
68,225,266
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying consolidated financial statements include
investments in one variable interest entity in which the Company
is considered to be the primary beneficiary under FIN 46R.
As of December 31, 2008, the Company had an 87.5% interest
in the limited liability company that owns the Ardenwood Venture
property. This entity is consolidated in the accompanying
consolidated financial statements. Equity interests in this
partnership not owned by the Company are classified as minority
interest on the consolidated balance sheets as of
December 31, 2008. Subject to certain conditions, the
Company has the right to purchase the other members
interest or sell its own interest in the Ardenwood limited
liability company (buy-sell option). The estimated
fair-value of this option is not material and the Company
believes that it will have adequate resources to settle the
option if exercised.
On October 1, 2007, pursuant to the exercise of a put
option by the minority interest limited partner in the limited
partnership that owned the King of Prussia property, the Company
completed the purchase of the remaining 11% interest for a
purchase price of approximately $1.8 million, excluding
closing costs. On June 2, 2008, pursuant to the exercise of
a put option by the minority interest member, the Company
completed the purchase of the remaining 30% interest in the
limited liability company that owns the Waples Street property
for consideration of approximately $1.8 million, excluding
closing costs. On October 14, 2008, the Company completed
the purchase of the remaining 30% interest in the limited
liability company that owns the 530 Fairview Avenue property for
consideration of approximately $2.6 million, excluding
closing costs.
During the year ended December 31, 2008, the Company issued
restricted common stock awards to employees and to the members
of its board of directors totaling 379,061 shares and
10,000 shares, respectively (25,144 shares were
forfeited during the same period), which are included in the
total of common stock outstanding as of the period end (see
Note 7). During the year ended December 31, 2008, the
Company also issued 185,434 LTIP units to employees, which are
included in the total of common stock outstanding as of the
period end (see Note 7).
On April 22, 2008, the Company completed the issuance of
6,129,000 shares of common stock, including the exercise of
an over-allotment option of 429,000 shares, resulting in
net proceeds of approximately $149.6 million, after
deducting the underwriters discount and commissions and
offering expenses. The net proceeds to the Company were utilized
to repay a portion of the outstanding indebtedness on the
unsecured line of credit and for other general corporate and
working capital purposes.
On October 6, 2008, the Company completed the issuance of
8,625,000 shares of common stock, including the exercise of
an over-allotment option of 1,125,000 shares, resulting in
net proceeds of approximately $212.4 million, after
deducting the underwriters discount and commissions and
offering expenses. The net proceeds to the Company were utilized
to repay a portion of the outstanding indebtedness on the
unsecured line of credit and for other general corporate and
working capital purposes.
79
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company also maintains a Dividend Reinvestment Program and a
Cash Option Purchase Plan (collectively, the DRIP
Plan) to provide existing stockholders of the Company with
an opportunity to invest automatically the cash dividends paid
upon shares of the Companys common stock held by them, as
well as permit existing and prospective stockholders to make
voluntary cash purchases. Participants may elect to reinvest a
portion of, or the full amount of cash dividends paid, whereas
optional cash purchases are normally limited to a maximum amount
of $10,000. In addition, the Company may elect to establish a
discount ranging from 0% to 5% from the market price applicable
to newly issued shares of common stock purchased directly from
the Company. The Company may change the discount, initially set
at 0%, at its discretion, but may not change the discount more
frequently than once in any three-month period. Shares purchased
under the DRIP Plan shall be, at the Companys option,
purchased from either (1) authorized, but previously
unissued shares of common stock, (2) shares of common stock
purchased in the open market or privately negotiated
transactions, or (3) a combination of both. As of and
through December 31, 2008, all shares issued to
participants in the DRIP Plan have been acquired through
purchases in the open market.
Common
Stock, Partnership Units and LTIP Units
As of December 31, 2008, the Company had outstanding
80,757,421 shares of common stock and 2,795,364 and 640,150
partnership and LTIP units, respectively. A share of the
Companys common stock and the partnership and LTIP units
have essentially the same economic characteristics as they share
equally in the total net income or loss and distributions of the
Operating Partnership. The partnership units are further
discussed in Note 3 and the LTIP units are discussed in
Notes 3 and 9.
7.375%
Series A Cumulative Redeemable Preferred
Stock
As of December 31, 2008, the Company had outstanding
9,200,000 shares of 7.375% Series A cumulative
redeemable preferred stock, or Series A preferred stock.
Dividends are cumulative on the Series A preferred stock
from the date of original issuance in the amount of $1.84375 per
share each year, which is equivalent to 7.375% of the $25.00
liquidation preference per share. Dividends on the Series A
preferred stock are payable quarterly in arrears on or about the
15th day of January, April, July and October of each year.
Following a change in control, if the Series A preferred
stock is not listed on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq Global Market, holders will be
entitled to receive (when and as authorized by the board of
directors and declared by the Company), cumulative cash
dividends from, but excluding, the first date on which both the
change of control and the delisting occurs at an increased rate
of 8.375% per annum of the $25.00 liquidation preference per
share (equivalent to an annual rate of $2.09375 per share) for
as long as the Series A preferred stock is not listed. The
Series A preferred stock does not have a stated maturity
date and is not subject to any sinking fund or mandatory
redemption provisions. Upon liquidation, dissolution or winding
up, the Series A preferred stock will rank senior to the
Companys common stock with respect to the payment of
distributions and other amounts. The Company is not allowed to
redeem the Series A preferred stock before January 18,
2012, except in limited circumstances to preserve its status as
a REIT. On or after January 18, 2012, the Company may, at
its option, redeem the Series A preferred stock, in whole
or in part, at any time or from time to time, for cash at a
redemption price of $25.00 per share, plus all accrued and
unpaid dividends on such Series A preferred stock up to,
but excluding the redemption date. Holders of the Series A
preferred stock generally have no voting rights except for
limited voting rights if the Company fails to pay dividends for
six or more quarterly periods (whether or not consecutive) and
in certain other circumstances. The Series A preferred
stock is not convertible into or exchangeable for any other
property or securities of the Company.
80
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Dividends
and Distributions
The following table lists the dividends and distributions made
by the Company and the Operating Partnership during the year
ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend and
|
|
|
|
|
|
|
|
Amount Per
|
|
|
|
|
Distribution
|
|
Dividend and
|
|
Declaration Date
|
|
Securities Class
|
|
Share/Unit
|
|
|
Period Covered
|
|
Payable Date
|
|
Distribution Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
March 14, 2008
|
|
Common stock
and partnership and LTIP units
|
|
$
|
0.33500
|
|
|
January 1, 2008 to March 31, 2008
|
|
April 15, 2008
|
|
$
|
23,145
|
|
March 14, 2008
|
|
Series A preferred stock
|
|
$
|
0.46094
|
|
|
January 16, 2008 to April 15, 2008
|
|
April 15, 2008
|
|
$
|
4,240
|
|
June 16, 2008
|
|
Common stock
and partnership
and LTIP units
|
|
$
|
0.33500
|
|
|
April 1, 2008 to June 30, 2008
|
|
July 15, 2008
|
|
$
|
25,200
|
|
June 16, 2008
|
|
Series A preferred stock
|
|
$
|
0.46094
|
|
|
April 16, 2008 to July 15, 2008
|
|
July 15, 2008
|
|
$
|
4,241
|
|
September 15, 2008
|
|
Common stock and partnership and LTIP units
|
|
$
|
0.33500
|
|
|
July 1, 2008 to September 30, 2008
|
|
October 15, 2008
|
|
$
|
25,200
|
|
September 15, 2008
|
|
Series A preferred stock
|
|
$
|
0.46094
|
|
|
July 16, 2008 to October 15, 2008
|
|
October 15, 2008
|
|
$
|
4,241
|
|
December 15, 2008
|
|
Common stock and partnership and LTIP units
|
|
$
|
0.33500
|
|
|
October 1, 2008 to December 31, 2008
|
|
January 15, 2009
|
|
$
|
28,204
|
|
December 15, 2008
|
|
Series A preferred stock
|
|
$
|
0.46094
|
|
|
October 16, 2008 to January 15, 2009
|
|
January 15, 2009
|
|
$
|
4,241
|
|
Total 2008 dividends and distributions declared through
December 31, 2008:
|
|
|
|
|
Common stock, partnership units, and LTIP units
|
|
$
|
101,749
|
|
Series A preferred stock
|
|
|
16,963
|
|
|
|
|
|
|
|
|
$
|
118,712
|
|
|
|
|
|
|
81
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5.
|
Mortgage
Notes Payable
|
A summary of the Companys outstanding consolidated
mortgage notes payable as of December 31, 2008 and 2007 was
as follows (principal balance in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
Principal Balance
|
|
|
|
|
|
Stated Fixed
|
|
|
Interest
|
|
|
December 31,
|
|
|
|
|
|
Interest Rate
|
|
|
Rate
|
|
|
2008
|
|
|
2007
|
|
|
Maturity Date
|
|
Ardentech Court
|
|
|
7.25
|
%
|
|
|
5.06
|
%
|
|
$
|
4,464
|
|
|
$
|
4,564
|
|
|
July 1, 2012
|
Bayshore Boulevard
|
|
|
4.55
|
%
|
|
|
4.55
|
%
|
|
|
14,923
|
|
|
|
15,335
|
|
|
January 1, 2010
|
Bridgeview Technology Park I
|
|
|
8.07
|
%
|
|
|
5.04
|
%
|
|
|
11,384
|
|
|
|
11,508
|
|
|
January 1, 2011
|
Eisenhower Road
|
|
|
5.80
|
%
|
|
|
4.63
|
%
|
|
|
|
|
|
|
2,113
|
|
|
May 5, 2008
|
40 Erie Street
|
|
|
7.34
|
%
|
|
|
4.90
|
%
|
|
|
|
|
|
|
17,625
|
|
|
August 1, 2008
|
500 Kendall Street (Kendall D)
|
|
|
6.38
|
%
|
|
|
5.45
|
%
|
|
|
67,810
|
|
|
|
69,437
|
|
|
December 1, 2018
|
Lucent Drive
|
|
|
5.50
|
%
|
|
|
5.50
|
%
|
|
|
5,341
|
|
|
|
5,543
|
|
|
January 21, 2015
|
Monte Villa Parkway
|
|
|
4.55
|
%
|
|
|
4.55
|
%
|
|
|
9,084
|
|
|
|
9,336
|
|
|
January 1, 2010
|
6828 Nancy Ridge Drive
|
|
|
7.15
|
%
|
|
|
5.38
|
%
|
|
|
6,694
|
|
|
|
6,785
|
|
|
September 1, 2012
|
Road to the Cure
|
|
|
6.70
|
%
|
|
|
5.78
|
%
|
|
|
15,200
|
|
|
|
15,427
|
|
|
January 31, 2014
|
Science Center Drive
|
|
|
7.65
|
%
|
|
|
5.04
|
%
|
|
|
11,148
|
|
|
|
11,301
|
|
|
July 1, 2011
|
Shady Grove Road
|
|
|
5.97
|
%
|
|
|
5.97
|
%
|
|
|
147,000
|
|
|
|
147,000
|
|
|
September 1, 2016
|
Sidney Street
|
|
|
7.23
|
%
|
|
|
5.11
|
%
|
|
|
29,184
|
|
|
|
29,986
|
|
|
June 1, 2012
|
9885 Towne Centre Drive
|
|
|
4.55
|
%
|
|
|
4.55
|
%
|
|
|
20,749
|
|
|
|
21,323
|
|
|
January 1, 2010
|
900 Uniqema Boulevard
|
|
|
8.61
|
%
|
|
|
5.61
|
%
|
|
|
1,357
|
|
|
|
1,509
|
|
|
May 1, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
344,338
|
|
|
|
368,792
|
|
|
|
Unamortized premiums
|
|
|
|
|
|
|
|
|
|
|
8,823
|
|
|
|
10,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
353,161
|
|
|
$
|
379,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net carrying value of properties (investments in real
estate) secured by our mortgage notes payable was
$572.6 million and $641.1 million at December 31,
2008 and 2007, respectively.
Premiums were recorded upon assumption of the mortgage notes
payable at the time of related acquisition to account for
above-market interest rates. Amortization of these premiums is
recorded as a reduction to interest expense over the remaining
term of the respective note using a method that approximates the
effective-interest method.
The Company intends to repay any principal and accrued interest
due in 2009 through the use of cash from operations or
borrowings from its unsecured line of credit.
|
|
6.
|
Credit
Facilities, Exchangeable Senior Notes, and Other Debt
Instruments
|
Unsecured
Line of Credit
The Companys unsecured line of credit with KeyBank
National Association (KeyBank) and other lenders was
amended on August 1, 2007 to increase the borrowing
capacity from $500.0 million to $600.0 million and
extend the maturity date to August 1, 2011. The unsecured
line of credit bears interest at a floating rate equal to, at
the Companys option, either (1) reserve adjusted
LIBOR plus a spread which ranges from 100 to 155 basis
points, depending on the Companys leverage, or
(2) the higher of (a) the prime rate then in effect
plus a spread which ranges from 0 to 25 basis points, or
(b) the federal funds rate then in effect plus a spread
which ranges from 50 to 75 basis points, in each case,
depending on the Companys leverage. Subject to the
administrative agents reasonable discretion, the Company
may increase the amount of the unsecured line of credit to
$1.0 billion upon satisfying certain conditions. In
addition, the Company, at its sole discretion, may extend the
maturity date of the unsecured line of credit to August 1,
2012 after satisfying certain conditions and paying an extension
fee based on
82
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the then current facility commitment. The Company has deferred
the loan costs associated with the subsequent amendments to the
unsecured line of credit, which are being amortized to expense
with the unamortized loan costs from the original debt facility
over the remaining term. At December 31, 2008, the Company
had $108.8 million in outstanding borrowings on its
unsecured line of credit, with a weighted-average interest rate
of 2.4% on the unhedged portion of the outstanding debt of
approximately $73.8 million.
Secured
Term Loan
The Companys $250.0 million secured term loan from
KeyBank and other lenders, which is secured by the
Companys interests in twelve of its properties, was
amended on August 1, 2007 and has a new maturity date of
August 1, 2012. The secured term loan bears interest at a
floating rate equal to, at the Companys option, either
(1) reserve-adjusted LIBOR plus 165 basis points or
(2) the higher of (a) the prime rate then in effect
plus 25 basis points or (b) the federal funds rate
then in effect plus 75 basis points. The secured term loan
is also secured by the Companys interest in any
distributions from these properties, a pledge of the equity
interests in a subsidiary owning one of these properties, and a
pledge of the equity interests in a subsidiary owning an
interest in another of these properties. At December 31,
2008, the Company had $250.0 million in outstanding
borrowings on its secured term loan, with an interest rate of
3.1% (excluding the effect of interest rate swaps).
The terms of the credit agreements for the unsecured line of
credit and secured term loan include certain restrictions and
covenants, which limit, among other things, the payment of
dividends and the incurrence of additional indebtedness and
liens. The terms also require compliance with financial ratios
relating to the minimum amounts of the Companys net worth,
fixed charge coverage, unsecured debt service coverage, the
maximum amount of secured, and secured recourse indebtedness,
leverage ratio and certain investment limitations. The dividend
restriction referred to above provides that, except to enable
the Company to continue to qualify as a REIT for federal income
tax purposes, the Company will not make distributions with
respect to common stock or other equity interests in an
aggregate amount for the preceding four fiscal quarters in
excess of 95% of funds from operations, as defined, for such
period, subject to other adjustments. Management believes that
it was in compliance with the covenants as of December 31,
2008.
Exchangeable
Senior Notes
On September 25, 2006, the Operating Partnership issued
$175.0 million aggregate principal amount of its
Exchangeable Senior Notes due 2026 (the Notes). The
Notes are general senior unsecured obligations of the Operating
Partnership and rank equally in right of payment with all other
senior unsecured indebtedness of the Operating Partnership.
Interest at a rate of 4.50% per annum is payable on April 1 and
October 1 of each year, beginning on April 1, 2007, until
the stated maturity date of October 1, 2026. The terms of
the Notes are governed by an indenture, dated September 25,
2006, among the Operating Partnership, as issuer, the Company,
as guarantor, and U.S. Bank National Association, as
trustee. The Notes contain an exchange settlement feature, which
provides that the Notes may, on or after September 1, 2026
or under certain other circumstances, be exchangeable for cash
(up to the principal amount of the Notes) and, with respect to
excess exchange value, into, at the Companys option, cash,
shares of the Companys common stock or a combination of
cash and shares of common stock at the then applicable exchange
rate. The initial exchange rate was 26.4634 shares per
$1,000 principal amount of Notes, representing an exchange price
of approximately $37.79 per share. If certain designated events
occur on or prior to October 6, 2011 and a holder elects to
exchange Notes in connection with any such transaction, the
Company will increase the exchange rate by a number of
additional shares of common stock based on the date the
transaction becomes effective and the price paid per share of
common stock in the transaction, as set forth in the indenture
governing the Notes. The exchange rate may also be adjusted
under certain other circumstances, including the payment of cash
dividends in excess of $0.29 per share of common stock. The
increase in the quarterly cash dividend to $0.335 per share of
common stock for 2008 resulted in an increase in the exchange
rate to 26.8135 effective as of December 29, 2008, the
Companys ex dividend date. The Operating Partnership may
redeem the Notes, in whole or in part, at any time to preserve
the Companys status as a REIT or at any time on or after
83
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
October 6, 2011 for cash at 100% of the principal amount
plus accrued and unpaid interest. The holders of the Notes have
the right to require the Operating Partnership to repurchase the
Notes, in whole or in part, for cash on each of October 1,
2011, October 1, 2016 and October 1, 2021, or upon the
occurrence of a designated event, in each case for a repurchase
price equal to 100% of the principal amount of the Notes plus
accrued and unpaid interest.
In November 2008, the Company completed the repurchase of
approximately $46.8 million face value of the Notes for
approximately $28.8 million. The repurchase of the Notes
resulted in the recognition of a gain on extinguishment of debt
of approximately $17.1 million (net of the write-off of
approximately $858,000 in deferred loan fees), which is
reflected in the consolidated statements of income. At
December 31, 2008, the Company had an aggregate principal
amount of $128.3 million outstanding under the Notes.
Secured
Construction Loan
The Companys $550.0 million secured construction loan
from KeyBank is secured by the Companys Center for Life
Science | Boston
property. The loan is separated into four tranches of notes,
tranches A, B-1, B-2 and C, and bears interest at a blended rate
equal to, at the Companys option, either (1) LIBOR
plus approximately 122.5 basis points or (2) the
higher of (a) the prime rate then in effect or (b) the
federal funds rate then in effect plus 50 basis points. The
loan matures on November 16, 2009, but the Company may
extend the maturity date to November 16, 2010 after
satisfying certain conditions and payment of an extension fee.
The construction loan requires interest only monthly payments
until the maturity date. The Company is presently in discussions
with various financial institutions regarding the refinancing of
its secured construction loan, which the Company is making
efforts to complete by June 30, 2009 (see Note 12).
The Company utilized a portion of the borrowing capacity on the
construction loan, along with borrowings on its unsecured line
of credit, to acquire the Center for Life
Science | Boston
property and to fund construction activities. The loan includes
certain restrictions and covenants, which limit, among other
things, the incurrence of additional indebtedness and liens. The
loan also requires compliance with financial covenants relating
to minimum amounts of net worth, fixed charge coverage, and
leverage ratio. Management believes that it was in compliance
with these covenants as of December 31, 2008. At
December 31, 2008, the Company had outstanding borrowings
on the secured construction loan of $507.1 million, with a
weighted-average interest rate of 1.8% on the unhedged portion
of the outstanding debt of approximately $392.1 million.
As of December 31, 2008, principal payments due for the
Companys consolidated indebtedness (mortgage notes payable
excluding debt premium of $8.8 million, unsecured line of
credit, secured term loan, the Notes, and the secured
construction loan, excluding the Companys proportionate
share of the indebtedness of its unconsolidated partnerships)
were as follows (in thousands):
|
|
|
|
|
2009
|
|
$
|
512,154
|
|
2010
|
|
|
47,446
|
|
2011
|
|
|
134,988
|
|
2012
|
|
|
291,421
|
|
2013
|
|
|
4,862
|
|
Thereafter(1)
|
|
|
347,612
|
|
|
|
|
|
|
|
|
$
|
1,338,483
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $128.3 million in principal payments of the Notes
based on a contractual maturity date of October 1, 2026. |
Earnings per share is calculated based on the weighted-average
number of shares of the Companys common stock outstanding
during the period. The effects of the outstanding Units, vesting
of unvested LTIP units and
84
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
restricted stock that have been granted, and a stock warrant
issued in connection with the Companys initial public
offering that was exercised in September 2006, using the
treasury method, were dilutive and included in the calculation
of diluted weighted-average shares for the year ended
December 31, 2008, 2007, and 2006. No shares were
contingently issuable upon settlement of the excess exchange
value pursuant to the exchange settlement feature of the Notes
(originally issued in 2006 see Note 6) as
the weighted-average common stock price of $21.99, $25.92, and
$28.97 for years ended December 31, 2008, 2007 and 2006,
respectively, did not exceed the initial exchange price of
$37.79 per share. Therefore, potentially issuable shares
resulting from settlement of the Notes were not included in the
calculation of diluted weighted-average shares. No other shares
were considered antidilutive for the years ended
December 31, 2008, 2007, and 2006.
Computations of basic and diluted earnings per share in
accordance with SFAS No. 128, Earnings per Share
(in thousands, except share data) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Income from continuing operations and net income available
for common stockholders (basic earnings per share):
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
64,897
|
|
|
$
|
70,881
|
|
|
$
|
33,568
|
|
Preferred stock dividends
|
|
|
(16,963
|
)
|
|
|
(16,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
stockholders
|
|
|
47,934
|
|
|
|
54,013
|
|
|
|
33,568
|
|
Income from discontinued operations
|
|
|
|
|
|
|
1,652
|
|
|
|
1,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
47,934
|
|
|
$
|
55,665
|
|
|
$
|
35,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations and net income available
for common stockholders (diluted earnings per share):
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
stockholders
|
|
$
|
47,934
|
|
|
$
|
54,013
|
|
|
$
|
33,568
|
|
Minority interests in continuing operations of operating
partnership
|
|
|
2,086
|
|
|
|
2,412
|
|
|
|
1,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
stockholders before minority interests in continuing operations
|
|
|
50,020
|
|
|
|
56,425
|
|
|
|
35,238
|
|
Income from discontinued operations
|
|
|
|
|
|
|
1,652
|
|
|
|
1,465
|
|
Minority interest in discontinued operations of operating
partnership
|
|
|
|
|
|
|
74
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders before minority
interests
|
|
$
|
50,020
|
|
|
$
|
58,151
|
|
|
$
|
36,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
71,684,244
|
|
|
|
65,302,794
|
|
|
|
55,928,595
|
|
Incremental shares from assumed conversion/exercise:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrant
|
|
|
|
|
|
|
|
|
|
|
94,155
|
|
Unvested restricted stock and LTIP units using the treasury
method
|
|
|
23,567
|
|
|
|
50,869
|
|
|
|
131,690
|
|
Operating partnership and LTIP units
|
|
|
3,123,672
|
|
|
|
2,916,322
|
|
|
|
2,863,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
74,831,483
|
|
|
|
68,269,985
|
|
|
|
59,018,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share from continuing operations available to common
stockholders
|
|
$
|
0.67
|
|
|
$
|
0.83
|
|
|
$
|
0.60
|
|
Income per share from discontinued operations
|
|
|
|
|
|
|
0.02
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share available to common stockholders
|
|
$
|
0.67
|
|
|
$
|
0.85
|
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share from continuing operations available to common
stockholders
|
|
$
|
0.67
|
|
|
$
|
0.83
|
|
|
$
|
0.60
|
|
Income per share from discontinued operations
|
|
|
|
|
|
|
0.02
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share available to common stockholders
|
|
$
|
0.67
|
|
|
$
|
0.85
|
|
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
Fair-Value
of Financial Instruments
|
SFAS No. 107, Disclosure about Fair-value of
Financial Instruments, requires the Company to disclose
fair-value information about all financial instruments, whether
or not recognized in the balance sheets, for which it is
practicable to estimate fair-value. The Companys
disclosures of estimated fair-value of financial instruments at
December 31, 2008 and 2007, respectively, were determined
using available market information and appropriate valuation
methods. Considerable judgment is necessary to interpret market
data and develop estimated fair-value. The use of different
market assumptions or estimation methods may have a material
effect on the estimated fair-value amounts.
The carrying amounts for cash and cash equivalents, restricted
cash, accounts receivable, security deposits, accounts payable,
accrued expenses and other liabilities approximate fair-value
due to the short-term nature of these instruments.
The Company utilizes quoted market prices to estimate the
fair-value of its fixed rate debt, when available. If quoted
market prices are not available, the Company calculates the
fair-value of its mortgage notes payable and other fixed rate
debt based on a currently available market rate assuming the
loans are outstanding through maturity and considering the
collateral. In determining the current market rate for fixed
rate debt, a market spread is added to the quoted yields on
federal government treasury securities with similar terms to
debt.
The fair-value of variable rate debt approximates book value
because the interest rate is based on LIBOR plus a spread, which
approximates a market interest rate. In accordance with
SFAS 133, the carrying value of interest rate swaps, as
well as the underlying hedged liability, if applicable, are
reflected at their fair-value. The Company relies on quotations
from a third party to determine these fair-values.
86
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2008 and 2007, the aggregate fair-value and
the carrying value of the Companys consolidated mortgage
notes payable, unsecured line of credit, secured construction
loan, Notes, and secured term loan were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Fair-value
|
|
|
Carrying Value
|
|
|
Fair-value
|
|
|
Carrying Value
|
|
|
Mortgage notes payable(1)
|
|
$
|
373,572
|
|
|
$
|
353,161
|
|
|
$
|
393,791
|
|
|
$
|
379,680
|
|
Unsecured line of credit
|
|
|
104,507
|
|
|
|
108,767
|
|
|
|
270,947
|
|
|
|
270,947
|
|
Secured construction loan
|
|
|
500,162
|
|
|
|
507,128
|
|
|
|
425,352
|
|
|
|
425,160
|
|
Exchangeable notes
|
|
|
60,278
|
|
|
|
128,250
|
|
|
|
150,889
|
|
|
|
175,000
|
|
Secured term loan
|
|
|
240,667
|
|
|
|
250,000
|
|
|
|
254,526
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,279,186
|
|
|
$
|
1,347,306
|
|
|
$
|
1,495,505
|
|
|
$
|
1,500,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Carrying value includes $8.8 million and $10.9 million
of debt premium as of December 31, 2008 and 2007,
respectively. |
The Company has adopted the BioMed Realty Trust, Inc. and BioMed
Realty, L.P. 2004 Incentive Award Plan (the Plan).
The Plan provides for grants to directors, employees and
consultants of the Company and the Operating Partnership (and
their respective subsidiaries) of stock options, restricted
stock, LTIP units, stock appreciation rights, dividend
equivalents, and other incentive awards. The Company has
reserved 2,500,000 shares of common stock for issuance
pursuant to the Plan, subject to adjustments as set forth in the
Plan. As of December 31, 2008, 795,879 shares of
common stock or awards convertible into or exchangeable for
common stock remained available for future issuance under the
Plan. Each LTIP unit issued will count as one share of common
stock for purposes of calculating the limit on shares that may
be issued. Compensation cost for these incentive awards is
measured based on the fair-value of the award on the grant date
(fair-value is calculated based on the closing price of the
Companys common stock on the date of grant) and is
recognized as expense over the respective vesting period, which
for restricted stock awards and LTIP units is generally two to
five years. Fully vested incentive awards may be settled for
either cash or stock depending on the Companys election
and the type of award granted. Participants are entitled to cash
dividends and may vote such awarded shares, but the sale or
transfer of such shares is limited during the restricted or
vesting period. Since inception, the Company has only awarded
restricted stock grants and LTIP units. The restricted stock
grants may only be settled for stock whereas the LTIP units may
be redeemed for either cash or common stock, at the
Companys election.
LTIP units represent a profits interest in the Operating
Partnership for services rendered or to be rendered by the LTIP
unit holder in its capacity as a partner, or in anticipation of
becoming a partner, in the Operating Partnership. Initially,
LTIP units do not have full parity with common units of the
Operating Partnership with respect to liquidating distributions,
although LTIP unit holders receive the same quarterly per unit
distributions as common units and may vote the LTIP units from
the date of issuance. The LTIP units are subject to vesting
requirements, which lapse over a specified period of time
(normally three to five years from the date of issuance). In
addition, the LTIP units are generally subject to a two-year
lock-up
period during which time the LTIP units may not be redeemed or
sold by the LTIP unit holder. Upon the occurrence of specified
events, LTIP units may over time achieve full parity with common
units of the Operating Partnership for all purposes. Upon
achieving full parity, and after the expiration of any vesting
and lock-up
periods, LTIP units may be redeemed for an equal number of the
Companys common stock or cash, at the Companys
election.
During the years ended December 31, 2008, 2007, and 2006
the Company granted 574,495, 458,015, and 243,232 shares of
unvested restricted stock and LTIP units with aggregate values
of $7.6 million, $12.9 million, and
87
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$6.7 million under the Plan, respectively. For the years
ended December 31, 2008, 2007, and 2006, a total of
312,828, 209,818, and 163,194 shares of restricted stock
and LTIP units vested, with fair-values of $6.3 million,
$6.0 million, and $4.0 million, respectively. For the
years ended December 31, 2008, 2007, and 2006,
$6.1 million, $6.2 million, and $4.0 million,
respectively, of stock-based compensation expense was recognized
in general and administrative expenses and rental operations
expense. On December 31, 2008, the Company accelerated the
vesting of 73,725 LTIP units for one employee (included in the
table below), resulting in a revaluation based on the fair-value
of the LTIP units on that date, and the recognition of
compensation expense of approximately $583,000 in 2008. As of
December 31, 2008, total compensation expense related to
unvested awards of $12.0 million will be recognized in the
future over a weighted-average period of 3.2 years.
A summary of the Companys unvested restricted stock and
LTIP units is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Unvested Restricted
|
|
|
Average Grant-
|
|
|
|
Shares/LTIP Units
|
|
|
Date Fair-Value
|
|
|
Balance at December 31, 2005
|
|
|
344,492
|
|
|
$
|
17.70
|
|
Granted
|
|
|
243,232
|
|
|
|
27.75
|
|
Vested
|
|
|
(163,194
|
)
|
|
|
16.82
|
|
Forfeited
|
|
|
(150
|
)
|
|
|
26.70
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
424,380
|
|
|
|
23.79
|
|
Granted
|
|
|
458,015
|
|
|
|
28.14
|
|
Vested
|
|
|
(209,818
|
)
|
|
|
20.37
|
|
Forfeited
|
|
|
(8,259
|
)
|
|
|
28.17
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
664,318
|
|
|
|
27.81
|
|
Granted
|
|
|
574,495
|
|
|
|
11.87
|
|
Vested
|
|
|
(312,828
|
)
|
|
|
25.13
|
|
Forfeited
|
|
|
(25,144
|
)
|
|
|
25.40
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
900,841
|
|
|
$
|
18.92
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
Investment
in Unconsolidated Partnerships
|
The accompanying consolidated financial statements include
investments in two limited liability companies with PREI, which
were formed in the second quarter of 2007, and in 10165 McKellar
Court, L.P. (McKellar Court), a limited partnership
with Quidel Corporation, the tenant which occupies the McKellar
Court property. One of the PREI joint ventures, PREI II LLC, is
a variable interest entity as defined in FIN 46R; however,
the Company is not the primary beneficiary. Upon formation of
the limited liability company, the Company determined that PREI
will bear the majority of the losses forecasted for the new
entity based on the governing operating agreements. The other
PREI limited liability company, PREI I LLC, does not qualify as
a variable interest entity as defined in FIN 46R. In
addition, consolidation under
EITF 04-5
is not required as the Company does not control the joint
ventures. The McKellar Court partnership is a variable interest
entity as defined in FIN 46R; however, the Company is not
the primary beneficiary. The limited partner at McKellar Court
is the only tenant in the property and will bear the majority of
any losses based on the governing operating agreement. As it
does not control the limited liability companies or the
partnership, the Company accounts for them under the equity
method of accounting. Significant accounting policies used by
the unconsolidated partnerships that own these properties are
similar to those used by the Company. General information on the
PREI joint ventures and the McKellar Court partnership
88
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(each referred to in this footnote individually as a
partnership and collectively as the
partnerships) as of December 31, 2008 (dollars
in thousands) was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companys
|
|
|
Companys
|
|
|
|
|
|
|
|
Ownership
|
|
|
Economic
|
|
|
|
Name
|
|
Partner
|
|
Interest
|
|
|
Interest
|
|
|
Date Acquired
|
|
PREI I(1)
|
|
PREI
|
|
|
20
|
%
|
|
|
20
|
%
|
|
April 4, 2007
|
PREI II(2)
|
|
PREI
|
|
|
20
|
%
|
|
|
20
|
%
|
|
April 4, 2007
|
McKellar Court(3)
|
|
Quidel Corporation
|
|
|
21
|
%
|
|
|
21
|
%(4)
|
|
September 30, 2004
|
|
|
|
(1) |
|
PREI I LLC acquired a portfolio of properties in Cambridge,
Massachusetts comprised of a stabilized laboratory/building
totaling 184,445 square feet located at 320 Bent Street, a
partially leased laboratory/office building totaling
420,000 square feet at 301 Binney Street, a
37-unit
apartment building, an operating garage facility on Rogers
Street with 503 spaces, an operating below grade garage facility
at Kendall Square with approximately 1,400 spaces, and a
building currently under construction at 650 East Kendall Street
that the Company believes can support up to
280,000 rentable square feet of laboratory and office
space. The 650 East Kendall Street site will also include a
below grade parking facility that the Company estimates can
support up to 560 spaces upon completion. |
|
|
|
Each of the PREI operating agreements includes a put/call option
whereby either member can cause the limited liability company to
sell certain properties in which it holds leasehold interests to
the Company at any time after the fifth anniversary and before
the seventh anniversary of the acquisition date. However, the
put/call option may be terminated prior to exercise under
certain circumstances. The put/call option purchase price is
based on a predetermined return on capital invested by PREI. If
the put/call option is exercised, the Company believes that it
would have adequate resources to fund the purchase price. |
|
|
|
The PREI joint ventures jointly entered into a secured
acquisition and interim loan facility with KeyBank in which the
partnerships utilized approximately $427.0 million to fund
a portion of the purchase price for the properties acquired in
April 2007. The remaining funds available will be utilized to
fund future construction costs at certain properties currently
under development. Pursuant to the loan facility, the Company
executed guaranty agreements in which it guaranteed the full
completion of the construction at the 301 Binney Street property
if PREI I LLC is unable or unwilling to complete the project.
The secured acquisition and interim loan facility matures on
April 3, 2009. At December 31, 2008, there were
$364.1 million in outstanding borrowings on the secured
acquisition and interim loan facility, with a contractual
interest rate of 2.2%. On February 11, 2009, the PREI joint
ventures jointly refinanced the outstanding balance of the
secured acquisition and interim loan facility, or approximately
$364.1 million, with the proceeds of a new loan totaling
$203.3 million and members capital contributions
funding the balance due. The new loan bears interest at a rate
equal to, at the option of the PREI joint ventures, either (1)
reserve adjusted LIBOR plus 350 basis points or (2) the higher
of (a) the prime rate then in effect, (b) the federal funds rate
then in effect plus 50 basis points or (c) one-month LIBOR plus
450 basis points, and requires interest only monthly payments
until the maturity date, February 10, 2011. In addition,
the PREI joint ventures may extend the maturity date of the
secured acquisition and interim loan facility to
February 10, 2012 after satisfying certain conditions and
paying an extension fee based on the then current facility
commitment. |
|
(2) |
|
PREI II LLC acquired a portfolio of properties comprised of a
development parcel in Houston, Texas; a laboratory/office
building totaling 259,706 rentable square feet and fee
simple and leasehold interests in surrounding land parcels
located at the Science Park at Yale in New Haven, Connecticut;
and 25,000 rentable square feet of retail space and
additional pad sites for future development in Cambridge,
Massachusetts. On August 2, 2007, PREI II LLC completed the
disposition of the 25,000 square feet of retail and
additional pad sites in Cambridge, Massachusetts. The total sale
price included approximately $4.0 million contingently
payable in June 2012 pursuant to a put/call option, exercisable
on the earlier of the extinguishment or expiration |
89
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
of development restrictions placed on a portion of the
development rights included in the disposition. On
September 28, 2007, PREI II LLC completed the disposition
of the laboratory/office building and the fee simple and
leasehold interests in surrounding land parcels in New Haven,
Connecticut. On December 28, 2007, PREI II LLC completed
the disposition of the development parcel in Houston, Texas.
None of the sales resulted in the recognition of a material gain
or loss. The Companys remaining investment in PREI II LLC
(maximum exposure to losses) was approximately $824,000 at
December 31, 2008. |
|
(3) |
|
The McKellar Court partnership holds a property comprised of a
two-story laboratory/office building totaling
72,863 rentable square feet located in San Diego,
California. The Companys investment in the McKellar Court
partnership (maximum exposure to losses) was approximately
$2.4 million at December 31, 2008. |
|
(4) |
|
The Companys economic interest in the McKellar Court
partnership entitles it to 75% of the gains upon a sale of the
property and 21% of the operating cash flows. |
The Company acts as the operating member or partner, as
applicable, and day-to-day manager for the partnerships. The
Company is entitled to receive fees for providing construction
and development services (as applicable) and management services
to the PREI joint ventures. The Company earned approximately
$2.5 million and $889,000 in fees for the years ended
December 31, 2008, and 2007 for services provided to the
PREI joint ventures, which are reflected in tenant recoveries
and other income in the consolidated statements of income.
The condensed combined balance sheets for all of the
Companys unconsolidated partnerships were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Investments in real estate, net
|
|
$
|
592,169
|
|
|
$
|
522,277
|
|
Cash and cash equivalents (including restricted cash)
|
|
|
6,757
|
|
|
|
8,430
|
|
Intangible assets, net
|
|
|
15,126
|
|
|
|
17,552
|
|
Other assets
|
|
|
16,373
|
|
|
|
8,488
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
630,425
|
|
|
$
|
556,747
|
|
|
|
|
|
|
|
|
|
|
Liabilities and members equity:
|
|
|
|
|
|
|
|
|
Mortgage notes payable and secured construction loan
|
|
$
|
517,938
|
|
|
$
|
426,914
|
|
Other liabilities
|
|
|
24,844
|
|
|
|
23,215
|
|
Members equity
|
|
|
87,643
|
|
|
|
106,618
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
630,425
|
|
|
$
|
556,747
|
|
|
|
|
|
|
|
|
|
|
Companys net investment in unconsolidated partnerships
|
|
$
|
18,173
|
|
|
$
|
22,588
|
|
|
|
|
|
|
|
|
|
|
On February 13, 2008, a wholly owned subsidiary of the
Companys joint venture with PREI I LLC entered into a
secured construction loan facility with certain lenders to
provide borrowings of up to approximately $245.0 million,
with a maturity date of August 13, 2010, in connection with
the construction of 650 East Kendall Street, a life sciences
building located in Cambridge, Massachusetts. Proceeds from the
secured construction loan were used in part to repay a portion
of the secured acquisition and interim loan facility held by the
PREI joint ventures and are being used to fund the balance of
the cost to complete construction of the project. In February
2008, the subsidiary entered into an interest rate swap
agreement, which is intended to have the effect of initially
fixing the interest rate on up to $163.0 million of the
secured construction loan facility at a weighted average rate of
4.4% through August 2010. The swap agreement had an original
notional amount of $84.0 million based on the initial
borrowing on the secured construction loan facility, which will
increase on a monthly basis at predetermined amounts as
additional borrowings are made. At December 31, 2008, there
were $143.5 million in outstanding borrowings on the
secured construction loan facility, with a contractual interest
rate of 2.7%.
90
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During 2008, the Company provided approximately $411,000 in
additional funding to the PREI joint ventures pursuant to
capital calls, primarily related to the working capital
requirements. In addition, the Company received distributions of
approximately $1.9 million, representing a return of
capital of approximately $1.4 million upon the execution of
the secured construction loan facility for the PREI I LLC entity.
The condensed combined statements of (loss)/income for the
unconsolidated partnerships were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Total revenues
|
|
$
|
30,598
|
|
|
$
|
18,945
|
|
|
$
|
1,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operations expenses and real estate taxes
|
|
|
15,531
|
|
|
|
8,854
|
|
|
|
197
|
|
Depreciation and amortization
|
|
|
10,483
|
|
|
|
5,674
|
|
|
|
381
|
|
Interest expense, net of interest income
|
|
|
10,759
|
|
|
|
8,946
|
|
|
|
928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
36,773
|
|
|
|
23,474
|
|
|
|
1,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
|
|
$
|
(6,175
|
)
|
|
$
|
(4,529
|
)
|
|
$
|
405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companys equity in net (loss)/income of unconsolidated
partnerships
|
|
$
|
(1,200
|
)
|
|
$
|
(893
|
)
|
|
$
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
Discontinued
Operations
|
During the year ended December 31, 2007, the Company sold
the following property (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original
|
|
|
|
|
|
|
|
Property
|
|
Date of Sale
|
|
|
Acquisition Date
|
|
|
Sales Price
|
|
|
Gain on Sale
|
|
|
Colorow Drive
|
|
|
May 30, 2007
|
|
|
|
December 22, 2005
|
|
|
$
|
20,000
|
|
|
$
|
1,087
|
|
The results of operations of the above property are reported as
discontinued operations for all periods presented in the
accompanying consolidated financial statements. The following is
a summary of the revenue and expense components that comprise
income from discontinued operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Total revenues
|
|
$
|
|
|
|
$
|
1,111
|
|
|
$
|
2,675
|
|
Total expenses
|
|
|
|
|
|
|
472
|
|
|
|
1,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interests and gain on sale
|
|
|
|
|
|
|
639
|
|
|
|
1,542
|
|
Gain on sale of real estate assets
|
|
|
|
|
|
|
1,087
|
|
|
|
|
|
Minority interests attributable to discontinued operations
|
|
|
|
|
|
|
(74
|
)
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$
|
|
|
|
$
|
1,652
|
|
|
$
|
1,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
Derivative
and Other Financial Instruments
|
As of December 31, 2008, the Company had four forward
starting swaps with a total notional value of
$450.0 million, which are carried on the accompanying
consolidated balance sheets at fair-value, based on the net
present value of the expected future cash flows on the swaps. At
maturity (mandatory settlement date of April 30, 2009, if
not previously settled), the Company will either
(a) receive payment from the counterparties if the
accumulated balance is an asset, or (b) make payment to the
counterparties if the accumulated balance is a liability with
the resulting receipt or payment deferred and amortized as an
increase or decrease to interest expense over the term of the
forecasted borrowing. Based upon the fair-values of the forward
starting swaps as of December 31, 2008, the Company would
be required to pay the counterparties approximately
$102.9 million.
91
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The four forward starting swaps were acquired to mitigate the
Companys exposure to the variability in expected future
cash flows attributable to changes in future interest rates
associated with a forecasted issuance of fixed rate debt by
April 30, 2009. Such fixed rate debt was generally expected
to be issued in connection with a refinancing of the
Companys secured construction loan. At December 31,
2008, the hedging relationships for two of the Companys
four forward starting swaps, with an aggregate notional amount
of $150.0 million, were no longer considered highly
effective as the expectation of forecasted interest payments had
changed, and the Company was required to prospectively
discontinue hedge accounting for these two swaps. As a result, a
portion of the unrealized losses related to these forward
starting swaps previously included in accumulated other
comprehensive loss, totaling $18.2 million, was
reclassified to the consolidated income statement as loss on
derivative instruments in the fourth quarter of 2008.
Prospective changes in the fair-value of these two swaps will be
recorded in the consolidated income statements through the date
the swaps are settled.
As of December 31, 2008, the Company also had three
interest rate swaps with an aggregate notional amount of
$400.0 million under which at each monthly settlement date
the Company either (1) receives the difference between a
fixed interest rate (the Strike Rate) and one-month
LIBOR if the Strike Rate is less than LIBOR or (2) pays
such difference if the Strike Rate is greater than LIBOR. One
interest rate swap with a notional amount of $250.0 million
(interest rate of 5.8%, including the applicable credit spread)
hedges the Companys secured term loan. Each of the
remaining two interest rate swaps hedges the first interest
payments, due on the date that is on or closest after each
swaps settlement date, associated with the amount of
LIBOR-based debt equal to each swaps notional amount. One
of these interest rate swaps has a notional amount of
$35.0 million (interest rate of 5.9%, including the
applicable credit spread) and is currently intended to hedge
interest payments associated with the Companys unsecured
line of credit. The remaining interest rate swap has a notional
amount of $115.0 million (interest rate of 5.9%, including
the applicable credit spread) and is currently intended to hedge
interest payments associated with the Companys secured
construction loan. No initial investment was made to enter into
the interest rate swap agreements.
The following is a summary of the terms of the forward starting
swaps and the interest rate swaps and their fair-values, which
are included in derivative instruments on the accompanying
consolidated balance sheets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Fair-Value (1)
|
|
|
|
Notional
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
Amount
|
|
|
Strike Rate
|
|
Effective Date
|
|
Expiration Date
|
|
2008
|
|
|
2007
|
|
|
|
|
$
|
250,000
|
|
|
4.157%
|
|
June 1, 2005
|
|
June 1, 2010
|
|
$
|
(11,011
|
)
|
|
$
|
(2,830
|
)
|
|
|
|
115,000
|
|
|
4.673%
|
|
October 1, 2007
|
|
August 1, 2011
|
|
|
(9,349
|
)
|
|
|
(3,261
|
)
|
|
|
|
35,000
|
|
|
4.700%
|
|
October 10, 2007
|
|
August 1, 2011
|
|
|
(2,858
|
)
|
|
|
(1,019
|
)
|
|
|
|
330,000
|
|
|
4.825%
|
|
September 25, 2007
|
|
September 25, 2008
|
|
|
|
|
|
|
(1,700
|
)
|
|
|
|
55,000
|
|
|
4.760%
|
|
September 20, 2007
|
|
September 20, 2008
|
|
|
|
|
|
|
(254
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
785,000
|
|
|
|
|
|
|
|
|
|
(23,218
|
)
|
|
|
(9,064
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
5.162%
|
|
December 30, 2008
|
|
December 30, 2018
|
|
|
(34,307
|
)
|
|
|
(4,254
|
)
|
|
|
|
50,000
|
|
|
5.167%
|
|
December 30, 2008
|
|
December 30, 2018
|
|
|
(11,449
|
)
|
|
|
(1,437
|
)
|
|
|
|
100,000
|
|
|
5.167%
|
|
December 30, 2008
|
|
December 30, 2018
|
|
|
(22,942
|
)
|
|
|
(2,874
|
)
|
|
|
|
150,000
|
|
|
5.152%
|
|
December 30, 2008
|
|
December 30, 2018
|
|
|
(34,175
|
)
|
|
|
(4,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward starting swaps
|
|
$
|
450,000
|
|
|
|
|
|
|
|
|
$
|
(102,873
|
)
|
|
$
|
(12,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative instruments
|
|
$
|
1,235,000
|
|
|
|
|
|
|
|
|
$
|
(126,091
|
)
|
|
$
|
(21,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On January 1, 2008, the Company adopted SFAS 157,
which requires the Company to disclose the framework utilized
for measuring the fair-value of assets and liabilities measured
at fair-value on a recurring basis (see Note 2). The
Company has determined that its derivative valuations for the
year ended December 31, 2008 in their entirety are
classified in Level 2 of the fair-value hierarchy. |
92
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The (decrease)/increase in net unrealized (losses)/gains of
($90.4) million, ($30.2) million, and
$2.5 million for the years ended December 31, 2008,
2007, and 2006, respectively, for derivatives designated as cash
flow hedges are separately disclosed in the consolidated
financial statements in stockholders equity as a component
of accumulated other comprehensive loss.
For the year ended December 31, 2008, approximately
$1.8 million of hedge ineffectiveness on cash flow hedges
due to mismatches in forecasted debt issuance dates, maturity
dates and interest rate reset dates of the interest rate swaps
and related debt was recognized in loss on derivative
instruments. For the years ended December 31, 2007 and 2006
an immaterial amount of hedge ineffectiveness on cash flow
hedges due to mismatches in maturity dates and interest rate
reset dates of the interest rate swaps and related debt was
recognized in interest expense. If the Company is unable to
complete the refinancing of the secured construction loan by
June 30, 2009 or completes the refinancing by June 30,
2009, but in an amount less than the $300.0 million in
notional value associated with the remaining two forward
starting swaps designated as cash flow hedges, additional
ineffectiveness may occur. The amount of ineffectiveness that
the Company would be required to record will depend on the value
of the swaps, the timing of the settlement of the swaps, the
amount of debt refinanced and the timing of the refinancing.
Amounts reported in accumulated other comprehensive loss related
to derivatives will be reclassified to earnings when the hedged
transaction affects earnings. The change in net unrealized
(loss)/gain on derivative instruments includes reclassifications
of net unrealized losses from accumulated other comprehensive
loss as (a) an increase to interest expense of
$7.1 million and (b) a loss on derivative instruments
of $19.9 million for the year ended December 31, 2008.
The change in net unrealized (loss)/gain on derivative
instruments includes reclassifications of net unrealized gains
and losses from accumulated other comprehensive loss as a
reduction to interest expense of $3.1 million and
$2.3 million for the years ended December 31, 2007 and
2006, respectively. In addition, for the year ended
December 31, 2008, approximately $5.1 million of
settlement payments relating to the Companys interest rate
swaps have been deferred in accumulated other comprehensive loss
related to the Companys Center for Life
Science | Boston,
Pacific Research Center, and other properties that have been or
are currently under development or redevelopment. During 2009,
the Company estimates that an additional $17.1 million will
be reclassified as an increase to interest expense.
The Company has the right to purchase the other members
interest or sell its own interest (collectively, the
Buy-Sell Option) in the Ardenwood limited liability
company at any time after the later of (1) the second
anniversary of the date that the related property is at least
ninety percent leased with remaining lease terms of at least
five years and (2) the date that a term loan is obtained
pursuant to the agreement. If the Buy-Sell Option is exercised
by the Company, the other member has the right to determine
whether to acquire the Companys membership interest or to
sell its own membership interest to the Company. The agreement
provides that the Buy-Sell Option price will be based on the
fair-value of the assets at the time of exercise. The Company
believes the fair-value of the project is equal to, or in excess
of, the carrying value of the project as of December 31,
2008. In addition, if the other member exercises the Buy-Sell
Option, the Company believes that it has adequate resources to
settle the option.
|
|
13.
|
Commitments
and Contingencies
|
Concentration
of Credit Risk
Life science entities comprise the vast majority of the
Companys tenant base. Because of the dependence on a
single industry, adverse conditions affecting that industry will
more adversely affect our business. Two of the Companys
tenants, Human Genome Sciences, Inc. and Vertex Pharmaceuticals
Incorporated, comprised 21.1% and 13.7%, or $48.0 million
and $31.3 million, respectively, of rental revenues for the
year ended December 31, 2008; 24.4% and 14.6%, or
$48.0 million and $28.8 million, respectively, of
rental revenues for the year ended December 31, 2007; and
17.4% and 15.7%, or $29.0 million and $26.1 million,
respectively, of rental revenues for the year ended
December 31, 2006. These tenants are located in the
Companys Maryland, and Boston and
93
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
San Diego markets, respectively. The inability of these
tenants to make lease payments could materially adversely affect
the Companys business.
The Company generally does not require collateral or other
security from our tenants, other than security deposits or
letters of credit in select cases.
Construction
and Other Related Commitments
As of December 31, 2008, the Company had approximately
$145.0 million outstanding in construction and other
related commitments related to construction, development, tenant
improvements, renovation costs, leasing commissions, and general
property-related capital expenditures, with approximately
$140.3 million expected to be paid in 2009 and
approximately $4.7 million expected to be paid in 2010 and
2011.
Insurance
The Company carries insurance coverage on its properties with
policy specifications and insured limits that it believes are
adequate given the relative risk of loss, cost of the coverage
and standard industry practice. However, certain types of losses
(such as from earthquakes and floods) may be either uninsurable
or not economically insurable. Further, certain of the
properties are located in areas that are subject to earthquake
activity and floods. Should a property sustain damage as a
result of an earthquake or flood, the Company may incur losses
due to insurance deductibles, co-payments on insured losses or
uninsured losses. Should an uninsured loss occur, the Company
could lose some or all of its capital investment, cash flow and
anticipated profits related to one or more properties.
Environmental
Matters
The Company follows a policy of monitoring its properties for
the presence of hazardous or toxic substances. The Company is
not aware of any environmental liability with respect to the
properties that would have a material adverse effect on the
Companys business, assets or results of operations. There
can be no assurance that such a material environmental liability
does not exist. The existence of any such material environmental
liability could have an adverse effect on the Companys
results of operations and cash flow. The Company carries
environmental remediation insurance for its properties. This
insurance, subject to certain exclusions and deductibles, covers
the cost to remediate environmental damage caused by future
spills or the historic presence of previously undiscovered
hazardous substances, as well as third-party bodily injury and
property damage claims related to the release of hazardous
substances.
Repurchase
Agreements
A lease at the King of Prussia Road property contains a
provision whereby the tenant, Centocor, Inc.
(Centocor), holds a right to purchase the property
(the Purchase Option) from the Company. The Purchase
Option is exercisable through the expiration of the underlying
lease in March 2014 (the purchase option may also be extended
for an additional ten years in the event that Centocor exercises
each of two five-year lease extension options). The purchase
price is a specified amount within the amended lease agreement
if the purchase option is exercised prior to March 31, 2012
(with an annual increase of 3% on April 1 of each subsequent
year), but may also be increased for costs incurred (with an
implied return to determine estimated triple net rental rates
with respect to the costs incurred) and a capitalization rate of
8% if the Company has begun construction of new buildings on the
property.
The acquisition of the Belward Campus Drive
(Belward) and Shady Grove Road (Shady
Grove) properties include provisions whereby the seller
could repurchase the properties from the Company (individually,
the Repurchase Option) under specific terms in the
future. The Belward Repurchase Option is exercisable at any time
during the first three years after the acquisition date, subject
to a twelve-month notice provision, at a to-be-
94
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
determined repurchase price that would result in a 15%
unleveraged internal rate of return for the Company (taking into
consideration all rents paid to the Company). The Shady Grove
Repurchase Option is a one-time option at approximately the
tenth anniversary of the acquisition date, subject to a
twelve-month notice provision, at a repurchase price of
approximately $300.0 million in cash. As each Repurchase
Option may be executed only by the seller and would exceed the
acquisition prices paid by the Company, no gain would be
recorded by the Company unless either Repurchase Option is
exercised.
Tax
Indemnification Agreements and Minimum Debt
Requirements
As a result of the contribution of properties to the Operating
Partnership, the Company has indemnified the contributors of the
properties against adverse tax consequences if it directly or
indirectly sells, exchanges or otherwise disposes of the
properties in a taxable transaction before the tenth anniversary
of the completion of the Companys initial public offering
(the Offering). The Company also has agreed to use
its reasonable best efforts to maintain at least
$8.0 million of debt, some of which must be property
specific, for a period of ten years following the date of the
Offering to enable certain contributors to guarantee the debt in
order to defer potential taxable gain they may incur if the
Operating Partnership repays the existing debt.
Legal
Proceedings
Although the Company is involved in legal proceedings arising in
the ordinary course of business, as of December 31, 2008,
the Company is not currently a party to any legal proceedings
nor, to its knowledge, is any legal proceeding threatened
against it that it believes would have a material adverse effect
on its financial position, results of operations or liquidity.
|
|
14.
|
Property
Acquisitions
|
The Company acquired the following property during the year
ended December 31, 2008 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
|
Investment in
|
|
|
In-Place
|
|
|
Total Cash
|
|
Property
|
|
Date
|
|
|
Real Estate
|
|
|
Lease
|
|
|
Consideration
|
|
|
500 Fairview Avenue
|
|
|
1/28/2008
|
|
|
$
|
3,286
|
|
|
$
|
727
|
|
|
$
|
4,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible amortization life (in months)
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
The Company acquired the following properties during the year
ended December 31, 2007 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired
|
|
|
|
|
|
|
|
|
Acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
Above
|
|
|
Deferred Leasing Costs
|
|
|
Below
|
|
|
|
|
|
|
Acquisition
|
|
|
Investment in
|
|
|
Market
|
|
|
In-Place
|
|
|
Management
|
|
|
Market
|
|
|
Total Cash
|
|
Property
|
|
Date
|
|
|
Real Estate
|
|
|
Lease
|
|
|
Lease
|
|
|
Fee
|
|
|
Lease
|
|
|
Consideration
|
|
|
Torreyana Road
|
|
|
3/22/2007
|
|
|
$
|
32,128
|
|
|
$
|
|
|
|
$
|
1,937
|
|
|
$
|
57
|
|
|
$
|
(1,082
|
)
|
|
$
|
33,040
|
|
6114-6154
Nancy Ridge Drive
|
|
|
5/2/2007
|
|
|
|
37,711
|
|
|
|
645
|
|
|
|
|
|
|
|
|
|
|
|
(126
|
)
|
|
|
38,230
|
|
9920 Belward Campus Drive
|
|
|
5/8/2007
|
|
|
|
15,141
|
|
|
|
|
|
|
|
1,282
|
|
|
|
145
|
|
|
|
(1,483
|
)
|
|
|
15,085
|
|
Pacific Center Boulevard
|
|
|
8/24/2007
|
|
|
|
16,893
|
|
|
|
|
|
|
|
623
|
|
|
|
118
|
|
|
|
(855
|
)
|
|
|
16,779
|
|
Forbes Boulevard
|
|
|
9/5/2007
|
|
|
|
32,584
|
|
|
|
|
|
|
|
886
|
|
|
|
|
|
|
|
(919
|
)
|
|
|
32,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
134,457
|
|
|
$
|
645
|
|
|
$
|
4,728
|
|
|
$
|
320
|
|
|
$
|
(4,465
|
)
|
|
$
|
135,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average intangible amortization life (in months)
|
|
|
|
|
|
|
|
|
|
|
241
|
|
|
|
42
|
|
|
|
58
|
|
|
|
54
|
|
|
|
|
|
95
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
15.
|
Newly
Issued Accounting Pronouncements
|
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS 141(R)). SFAS 141(R) retains the
fundamental requirements that purchase method of accounting be
used for all business combinations, for an acquirer to be
identified for each business combination, and retains the
guidance for identifying and recognizing intangible assets
separately from goodwill. SFAS 141(R) requires an acquirer
to recognize the assets acquired, liabilities assumed and any
noncontrolling interest in the acquiree at the acquisition date,
measured at their fair-values as of that date, changes the
recognition of assets acquired and liabilities assumed arising
from contingencies, and changes the recognition and measurement
of contingent consideration. In addition, SFAS 141(R)
requires that costs incurred to effect the acquisition and
restructuring costs that the acquirer expected, but is not
obligated to incur, be recognized as an expense separately from
the business combination. SFAS 141(R) will also require
additional disclosure of information surrounding a business
combination, including additional information regarding the
nature and financial impact of the business combination.
SFAS 141(R) applies prospectively to business combinations
for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after
December 15, 2008. The Company believes that the adoption
of SFAS 141(R) on January 1, 2009 will not have a
material impact on the consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements
(SFAS 160). SFAS 160 clarifies that a
noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity that should be reported as equity in
the consolidated financial statements. SFAS 160 also
requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the
noncontrolling interest and requires disclosure, on the face of
the consolidated statement of income, of the amounts of
consolidated net income attributable to the parent and to the
noncontrolling interest. In addition, SFAS 160 establishes
a single method of accounting for changes in a parents
ownership interest in a subsidiary that does not result in
deconsolidation and requires that a parent recognize a gain or
loss in net income when a subsidiary is deconsolidated.
SFAS 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after
December 15, 2008. SFAS 160 may only be applied
prospectively, except for the presentation and disclosure
requirements, which will be applied retrospectively for all
periods presented. The Company believes that the adoption of
SFAS 160 on January 1, 2009 will not have a material
impact on the consolidated financial statements.
In February 2008, the FASB issued Staff Position
No. FAS 157-2
(FSP 157-2),
which delayed the effective date of SFAS 157 for
non-financial assets and liabilities to fiscal years beginning
after November 15, 2008. The Company has applied
FSP 157-2
and has not measured any non-financial assets or liabilities at
fair-value as of and through the year ending December 31,
2008.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities (SFAS 161) as an amendment to
SFAS 133. SFAS 161 requires that objectives for using
derivative instruments be disclosed in terms of underlying risk
and accounting designation. SFAS 161 is effective for
financial statements issued for fiscal years beginning after
November 15, 2008. The Company believes that the adoption
of SFAS 161 on January 1, 2009 will not have a
material impact on the consolidated financial statements.
In May 2008, the FASB issued FASB Staff Position APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash Upon Conversion (Including Partial Cash
Settlement)
(FSP 14-1),
an interpretation of APB Opinion No. 14, Accounting
for Convertible Debt and Debt Issued with Stock Purchase
Warrants.
FSP 14-1
requires the issuer of certain convertible debt instruments that
may be settled in cash (or other assets) on conversion to
separately account for the liability (debt) and equity
(conversion option) components of the instrument in a manner
that reflects the issuers nonconvertible debt borrowing
rate. The equity component of the convertible debt will be
included in the paid-in capital section of stockholders
equity and the value of the equity component will be treated as
original issue discount for purposes of accounting for the debt
component of the debt security. The resulting debt discount will
be accreted as additional interest expense over the
non-cancellable term of the instrument.
FSP 14-1
is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2008, with early
adoption not permitted. Retrospective application is required
for all periods
96
BIOMED
REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
presented. The adoption of
FSP 14-1
on January 1, 2009 will result in a decrease to the gain on
extinguishment of debt recognized in 2008 of approximately
$2.3 million as a result of the retrospective application
of the standard to earlier periods. In addition, the Company
believes that
FSP 14-1
will result in an increase in the recognition of additional
non-cash interest expense of approximately $400,000 to $600,000
on a quarterly basis (net of capitalized interest).
In June 2008, the FASB issued FASB Staff Position
EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities
(FSP 03-6-1),
which addresses whether instruments granted in share-based
payment transactions are participating securities prior to
vesting and, therefore, need to be included in earnings
allocation in computing earnings per share under the two-class
method. The statement is effective for financial statements
issued for fiscal years beginning after December 15, 2008
and retrospective application is required for all periods
presented. The Company believes that the adoption of
FSP 03-6-1
on January 1, 2009 will not have a material impact on the
consolidated financial statements.
|
|
16.
|
Quarterly
Financial Information (unaudited)
|
The Companys selected quarterly information for the years
ended December 31, 2008 and 2007 (in thousands, except per
share data) was as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Quarter Ended(1)
|
|
|
|
December 31
|
|
|
September 30
|
|
|
June 30
|
|
|
March 31
|
|
|
Total revenues
|
|
$
|
83,033
|
|
|
$
|
80,811
|
|
|
$
|
70,771
|
|
|
$
|
67,358
|
|
Income from continuing operations before minority interests
|
|
|
12,847
|
|
|
|
17,793
|
|
|
|
18,946
|
|
|
|
17,389
|
|
Minority interests
|
|
|
(306
|
)
|
|
|
(570
|
)
|
|
|
(620
|
)
|
|
|
(581
|
)
|
Net income
|
|
|
12,541
|
|
|
|
17,223
|
|
|
|
18,326
|
|
|
|
16,808
|
|
Net income available to common stockholders
|
|
$
|
8,300
|
|
|
$
|
12,982
|
|
|
$
|
14,085
|
|
|
$
|
12,567
|
|
Net income per share available to common
stockholders basic and diluted
|
|
$
|
0.10
|
|
|
$
|
0.18
|
|
|
$
|
0.20
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Quarter Ended(1)
|
|
|
|
December 31
|
|
|
September 30
|
|
|
June 30
|
|
|
March 31
|
|
|
Total revenues
|
|
$
|
64,050
|
|
|
$
|
64,832
|
|
|
$
|
68,429
|
|
|
$
|
68,798
|
|
Income from continuing operations before minority interests
|
|
|
18,044
|
|
|
|
16,951
|
|
|
|
17,773
|
|
|
|
20,571
|
|
Minority interests
|
|
|
(574
|
)
|
|
|
(494
|
)
|
|
|
(690
|
)
|
|
|
(699
|
)
|
Income from continuing operations
|
|
|
17,470
|
|
|
|
16,457
|
|
|
|
17,083
|
|
|
|
19,872
|
|
(Loss)/income from discontinued operations
|
|
|
|
|
|
|
(1
|
)
|
|
|
1,283
|
|
|
|
371
|
|
Net income
|
|
|
17,470
|
|
|
|
16,456
|
|
|
|
18,366
|
|
|
|
20,243
|
|
Net income available to common stockholders
|
|
$
|
13,229
|
|
|
$
|
12,215
|
|
|
$
|
14,172
|
|
|
$
|
16,049
|
|
Income from continuing operations per share available to common
stockholders basic and diluted
|
|
$
|
0.20
|
|
|
$
|
0.19
|
|
|
$
|
0.20
|
|
|
$
|
0.24
|
|
Net income per share available to common
stockholders basic and diluted
|
|
$
|
0.20
|
|
|
$
|
0.19
|
|
|
$
|
0.22
|
|
|
$
|
0.25
|
|
|
|
|
(1) |
|
The sum of quarterly financial data may vary from the annual
data due to rounding. |
The quarterly financial information for the quarter ended
March 31, 2007 does not equal the amounts reported on the
Companys quarterly report on
Form 10-Q
due to the reclassification of net income to discontinued
operations.
97
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
As of December 31, 2008
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amount carried at December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Cost
|
|
|
Costs
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
Capitalized
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
|
|
|
|
Built/
|
|
|
|
|
|
|
|
|
Ground
|
|
|
and
|
|
|
Subsequent
|
|
|
|
|
|
and
|
|
|
|
|
|
Accumulated
|
|
|
|
|
Property
|
|
Renovated
|
|
|
Encumbrances
|
|
|
Land
|
|
|
Lease
|
|
|
Improvements
|
|
|
to Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
|
(3)
|
|
|
|
|
|
Albany Street
|
|
|
1922/1998
|
|
|
$
|
|
|
|
$
|
1,942
|
|
|
$
|
|
|
|
$
|
31,293
|
|
|
$
|
47
|
|
|
$
|
1,942
|
|
|
$
|
31,340
|
|
|
$
|
33,282
|
|
|
$
|
(2,826
|
)
|
|
$
|
30,456
|
|
Ardentech Court
|
|
|
1997/2008
|
|
|
|
4,464
|
|
|
|
2,742
|
|
|
|
|
|
|
|
5,379
|
|
|
|
6,919
|
|
|
|
2,742
|
|
|
|
12,298
|
|
|
|
15,040
|
|
|
|
(1,014
|
)
|
|
|
14,026
|
|
Ardenwood Venture
|
|
|
1985
|
|
|
|
|
|
|
|
3,550
|
|
|
|
|
|
|
|
10,603
|
|
|
|
1,553
|
|
|
|
3,550
|
|
|
|
12,156
|
|
|
|
15,706
|
|
|
|
(781
|
)
|
|
|
14,925
|
|
Balboa Avenue
|
|
|
1968/2000
|
|
|
|
|
|
|
|
1,316
|
|
|
|
|
|
|
|
9,493
|
|
|
|
414
|
|
|
|
1,316
|
|
|
|
9,907
|
|
|
|
11,223
|
|
|
|
(1,108
|
)
|
|
|
10,115
|
|
Bayshore Boulevard
|
|
|
2000
|
|
|
|
14,923
|
|
|
|
3,667
|
|
|
|
|
|
|
|
22,593
|
|
|
|
7,464
|
|
|
|
3,667
|
|
|
|
30,057
|
|
|
|
33,724
|
|
|
|
(4,337
|
)
|
|
|
29,387
|
|
Beckley Street
|
|
|
1999
|
|
|
|
|
|
|
|
1,480
|
|
|
|
|
|
|
|
17,590
|
|
|
|
|
|
|
|
1,480
|
|
|
|
17,590
|
|
|
|
19,070
|
|
|
|
(1,777
|
)
|
|
|
17,293
|
|
Bernardo Center Drive
|
|
|
1974/2008
|
|
|
|
|
|
|
|
2,580
|
|
|
|
|
|
|
|
13,714
|
|
|
|
6
|
|
|
|
2,580
|
|
|
|
13,720
|
|
|
|
16,300
|
|
|
|
(1,335
|
)
|
|
|
14,965
|
|
9911 Belward Campus Drive
|
|
|
2001
|
|
|
|
|
|
|
|
4,160
|
|
|
|
|
|
|
|
196,814
|
|
|
|
|
|
|
|
4,160
|
|
|
|
196,814
|
|
|
|
200,974
|
|
|
|
(13,318
|
)
|
|
|
187,656
|
|
9920 Belward Campus Drive
|
|
|
2000
|
|
|
|
|
|
|
|
3,935
|
|
|
|
|
|
|
|
11,206
|
|
|
|
|
|
|
|
3,935
|
|
|
|
11,206
|
|
|
|
15,141
|
|
|
|
(587
|
)
|
|
|
14,554
|
|
Center for Life
Science | Boston(4)
|
|
|
2008
|
|
|
|
507,128
|
|
|
|
60,000
|
|
|
|
|
|
|
|
407,747
|
|
|
|
245,505
|
|
|
|
60,000
|
|
|
|
653,252
|
|
|
|
713,252
|
|
|
|
(8,521
|
)
|
|
|
704,731
|
|
Bridgeview Technology Park I
|
|
|
1977/2002
|
|
|
|
11,384
|
|
|
|
1,315
|
|
|
|
|
|
|
|
14,716
|
|
|
|
5,951
|
|
|
|
2,500
|
|
|
|
19,482
|
|
|
|
21,982
|
|
|
|
(2,242
|
)
|
|
|
19,740
|
|
Bridgeview Technology Park II
|
|
|
1977/2002
|
|
|
|
|
|
|
|
1,522
|
|
|
|
|
|
|
|
13,066
|
|
|
|
|
|
|
|
1,522
|
|
|
|
13,066
|
|
|
|
14,588
|
|
|
|
(1,238
|
)
|
|
|
13,350
|
|
Charles Street
|
|
|
1986
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
7,033
|
|
|
|
29
|
|
|
|
5,000
|
|
|
|
7,062
|
|
|
|
12,062
|
|
|
|
(576
|
)
|
|
|
11,486
|
|
Coolidge Avenue
|
|
|
1962/1999
|
|
|
|
|
|
|
|
2,760
|
|
|
|
|
|
|
|
7,102
|
|
|
|
|
|
|
|
2,760
|
|
|
|
7,102
|
|
|
|
9,862
|
|
|
|
(658
|
)
|
|
|
9,204
|
|
Dumbarton Circle
|
|
|
1990
|
|
|
|
|
|
|
|
2,723
|
|
|
|
|
|
|
|
5,096
|
|
|
|
93
|
|
|
|
2,723
|
|
|
|
5,189
|
|
|
|
7,912
|
|
|
|
(1,447
|
)
|
|
|
6,465
|
|
Eccles Avenue(4)
|
|
|
1965/1995
|
|
|
|
|
|
|
|
21,257
|
|
|
|
|
|
|
|
608
|
|
|
|
1,770
|
|
|
|
21,257
|
|
|
|
2,378
|
|
|
|
23,635
|
|
|
|
(608
|
)
|
|
|
23,027
|
|
Eisenhower Road
|
|
|
1973/2000
|
|
|
|
|
|
|
|
416
|
|
|
|
|
|
|
|
2,614
|
|
|
|
724
|
|
|
|
416
|
|
|
|
3,338
|
|
|
|
3,754
|
|
|
|
(321
|
)
|
|
|
3,433
|
|
Elliott Avenue
|
|
|
1925/2004
|
|
|
|
|
|
|
|
10,124
|
|
|
|
|
|
|
|
38,911
|
|
|
|
20,364
|
|
|
|
10,124
|
|
|
|
59,275
|
|
|
|
69,399
|
|
|
|
(2,847
|
)
|
|
|
66,552
|
|
21 Erie Street
|
|
|
1925/2004
|
|
|
|
|
|
|
|
3,366
|
|
|
|
|
|
|
|
18,372
|
|
|
|
59
|
|
|
|
3,366
|
|
|
|
18,431
|
|
|
|
21,797
|
|
|
|
(1,660
|
)
|
|
|
20,137
|
|
40 Erie Street
|
|
|
1996
|
|
|
|
|
|
|
|
7,593
|
|
|
|
|
|
|
|
33,765
|
|
|
|
121
|
|
|
|
7,593
|
|
|
|
33,886
|
|
|
|
41,479
|
|
|
|
(3,039
|
)
|
|
|
38,440
|
|
500 Fairview Avenue
|
|
|
1959/1991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,285
|
|
|
|
13
|
|
|
|
|
|
|
|
3,298
|
|
|
|
3,298
|
|
|
|
(635
|
)
|
|
|
2,663
|
|
530 Fairview Avenue(4)
|
|
|
2008
|
|
|
|
|
|
|
|
2,703
|
|
|
|
|
|
|
|
694
|
|
|
|
36,000
|
|
|
|
2,703
|
|
|
|
36,694
|
|
|
|
39,397
|
|
|
|
(162
|
)
|
|
|
39,235
|
|
Faraday Avenue
|
|
|
1986
|
|
|
|
|
|
|
|
1,370
|
|
|
|
|
|
|
|
7,201
|
|
|
|
|
|
|
|
1,370
|
|
|
|
7,201
|
|
|
|
8,571
|
|
|
|
(593
|
)
|
|
|
7,978
|
|
Forbes Boulevard
|
|
|
1978
|
|
|
|
|
|
|
|
19,250
|
|
|
|
|
|
|
|
13,334
|
|
|
|
450
|
|
|
|
19,250
|
|
|
|
13,784
|
|
|
|
33,034
|
|
|
|
(444
|
)
|
|
|
32,590
|
|
Fresh Pond Research Park
|
|
|
1948/2002
|
|
|
|
|
|
|
|
3,500
|
|
|
|
|
|
|
|
18,322
|
|
|
|
250
|
|
|
|
3,500
|
|
|
|
18,572
|
|
|
|
22,072
|
|
|
|
(1,771
|
)
|
|
|
20,301
|
|
George Patterson Boulevard
|
|
|
1996/2005
|
|
|
|
|
|
|
|
1,575
|
|
|
|
|
|
|
|
11,029
|
|
|
|
275
|
|
|
|
1,575
|
|
|
|
11,304
|
|
|
|
12,879
|
|
|
|
(904
|
)
|
|
|
11,975
|
|
Graphics Drive
|
|
|
1992/2007
|
|
|
|
|
|
|
|
800
|
|
|
|
|
|
|
|
6,577
|
|
|
|
5,273
|
|
|
|
800
|
|
|
|
11,850
|
|
|
|
12,650
|
|
|
|
(1,560
|
)
|
|
|
11,090
|
|
Industrial Road
|
|
|
2001/2005
|
|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
41,718
|
|
|
|
14,081
|
|
|
|
12,000
|
|
|
|
55,799
|
|
|
|
67,799
|
|
|
|
(10,185
|
)
|
|
|
57,614
|
|
John Hopkins Court
|
|
|
1991/2008
|
|
|
|
|
|
|
|
3,560
|
|
|
|
|
|
|
|
19,526
|
|
|
|
10,243
|
|
|
|
3,560
|
|
|
|
29,769
|
|
|
|
33,329
|
|
|
|
(240
|
)
|
|
|
33,089
|
|
Kaiser Drive
|
|
|
1990
|
|
|
|
|
|
|
|
3,430
|
|
|
|
|
|
|
|
6,093
|
|
|
|
2,165
|
|
|
|
3,430
|
|
|
|
8,258
|
|
|
|
11,688
|
|
|
|
(461
|
)
|
|
|
11,227
|
|
500 Kendall Street (Kendall D)
|
|
|
2002
|
|
|
|
67,810
|
|
|
|
3,572
|
|
|
|
|
|
|
|
166,308
|
|
|
|
572
|
|
|
|
3,572
|
|
|
|
166,880
|
|
|
|
170,452
|
|
|
|
(15,030
|
)
|
|
|
155,422
|
|
King of Prussia Road
|
|
|
1954/2004
|
|
|
|
|
|
|
|
12,813
|
|
|
|
|
|
|
|
66,152
|
|
|
|
547
|
|
|
|
12,813
|
|
|
|
66,699
|
|
|
|
79,512
|
|
|
|
(7,359
|
)
|
|
|
72,153
|
|
Landmark at Eastview(4)(5)
|
|
|
1958/2008
|
|
|
|
|
|
|
|
|
|
|
|
14,210
|
|
|
|
61,996
|
|
|
|
106,912
|
|
|
|
14,356
|
|
|
|
168,762
|
|
|
|
183,118
|
|
|
|
(9,038
|
)
|
|
|
174,080
|
|
Lucent Drive
|
|
|
2004
|
|
|
|
5,341
|
|
|
|
265
|
|
|
|
|
|
|
|
5,888
|
|
|
|
|
|
|
|
265
|
|
|
|
5,888
|
|
|
|
6,153
|
|
|
|
(527
|
)
|
|
|
5,626
|
|
Monte Villa Parkway
|
|
|
1996/2002
|
|
|
|
9,084
|
|
|
|
1,020
|
|
|
|
|
|
|
|
10,711
|
|
|
|
|
|
|
|
1,020
|
|
|
|
10,711
|
|
|
|
11,731
|
|
|
|
(1,171
|
)
|
|
|
10,560
|
|
6114-6154
Nancy Ridge Drive
|
|
|
1994
|
|
|
|
|
|
|
|
10,100
|
|
|
|
|
|
|
|
28,611
|
|
|
|
|
|
|
|
10,100
|
|
|
|
28,611
|
|
|
|
38,711
|
|
|
|
(1,216
|
)
|
|
|
37,495
|
|
6828 Nancy Ridge Drive
|
|
|
1983/2001
|
|
|
|
6,694
|
|
|
|
2,344
|
|
|
|
|
|
|
|
9,611
|
|
|
|
484
|
|
|
|
2,344
|
|
|
|
10,095
|
|
|
|
12,439
|
|
|
|
(1,115
|
)
|
|
|
11,324
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amount carried at December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Cost
|
|
|
Costs
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
Capitalized
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
|
|
|
|
Built/
|
|
|
|
|
|
|
|
|
Ground
|
|
|
and
|
|
|
Subsequent
|
|
|
|
|
|
and
|
|
|
|
|
|
Accumulated
|
|
|
|
|
Property
|
|
Renovated
|
|
|
Encumbrances
|
|
|
Land
|
|
|
Lease
|
|
|
Improvements
|
|
|
to Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
|
(3)
|
|
|
|
|
|
One Research Way
|
|
|
1980/2008
|
|
|
|
|
|
|
|
1,813
|
|
|
|
|
|
|
|
6,454
|
|
|
|
2,937
|
|
|
|
1,813
|
|
|
|
9,391
|
|
|
|
11,204
|
|
|
|
(101
|
)
|
|
|
11,103
|
|
Pacific Center Boulevard
|
|
|
1991
|
|
|
|
|
|
|
|
5,400
|
|
|
|
|
|
|
|
11,493
|
|
|
|
422
|
|
|
|
5,400
|
|
|
|
11,915
|
|
|
|
17,315
|
|
|
|
(1,016
|
)
|
|
|
16,299
|
|
Pacific Research Center(4)
|
|
|
2000
|
|
|
|
|
|
|
|
74,147
|
|
|
|
|
|
|
|
142,437
|
|
|
|
52,164
|
|
|
|
74,147
|
|
|
|
194,601
|
|
|
|
268,748
|
|
|
|
(4,749
|
)
|
|
|
263,999
|
|
Phoenixville Pike
|
|
|
1989/2008
|
|
|
|
|
|
|
|
1,204
|
|
|
|
|
|
|
|
10,879
|
|
|
|
7,735
|
|
|
|
1,204
|
|
|
|
18,614
|
|
|
|
19,818
|
|
|
|
(1,737
|
)
|
|
|
18,081
|
|
Road to the Cure
|
|
|
1977
|
|
|
|
15,200
|
|
|
|
4,430
|
|
|
|
|
|
|
|
19,129
|
|
|
|
2,619
|
|
|
|
4,430
|
|
|
|
21,748
|
|
|
|
26,178
|
|
|
|
(634
|
)
|
|
|
25,544
|
|
San Diego Science Center
|
|
|
1973/2002
|
|
|
|
|
|
|
|
3,871
|
|
|
|
|
|
|
|
21,875
|
|
|
|
809
|
|
|
|
3,871
|
|
|
|
22,684
|
|
|
|
26,555
|
|
|
|
(2,395
|
)
|
|
|
24,160
|
|
Science Center Drive
|
|
|
1995
|
|
|
|
11,148
|
|
|
|
2,630
|
|
|
|
|
|
|
|
16,029
|
|
|
|
|
|
|
|
2,630
|
|
|
|
16,029
|
|
|
|
18,659
|
|
|
|
(1,761
|
)
|
|
|
16,898
|
|
Shady Grove Road
|
|
|
2003
|
|
|
|
147,000
|
|
|
|
28,601
|
|
|
|
|
|
|
|
197,548
|
|
|
|
2,165
|
|
|
|
28,601
|
|
|
|
199,713
|
|
|
|
228,314
|
|
|
|
(13,574
|
)
|
|
|
214,740
|
|
Sidney Street
|
|
|
2000
|
|
|
|
29,184
|
|
|
|
7,580
|
|
|
|
|
|
|
|
50,459
|
|
|
|
29
|
|
|
|
7,580
|
|
|
|
50,488
|
|
|
|
58,068
|
|
|
|
(4,533
|
)
|
|
|
53,535
|
|
Sorrento Valley Boulevard
|
|
|
1982
|
|
|
|
|
|
|
|
4,140
|
|
|
|
|
|
|
|
15,034
|
|
|
|
2
|
|
|
|
4,140
|
|
|
|
15,036
|
|
|
|
19,176
|
|
|
|
(982
|
)
|
|
|
18,194
|
|
Spring Mill Drive
|
|
|
1988
|
|
|
|
|
|
|
|
1,074
|
|
|
|
|
|
|
|
7,948
|
|
|
|
201
|
|
|
|
1,074
|
|
|
|
8,149
|
|
|
|
9,223
|
|
|
|
(756
|
)
|
|
|
8,467
|
|
Trade Centre Avenue
|
|
|
1997
|
|
|
|
|
|
|
|
3,275
|
|
|
|
|
|
|
|
15,404
|
|
|
|
|
|
|
|
3,275
|
|
|
|
15,404
|
|
|
|
18,679
|
|
|
|
(1,143
|
)
|
|
|
17,536
|
|
Torreyana Road
|
|
|
1980/1997
|
|
|
|
|
|
|
|
7,660
|
|
|
|
|
|
|
|
24,468
|
|
|
|
|
|
|
|
7,660
|
|
|
|
24,468
|
|
|
|
32,128
|
|
|
|
(1,176
|
)
|
|
|
30,952
|
|
9865 Towne Centre Drive
|
|
|
2008
|
|
|
|
|
|
|
|
5,738
|
|
|
|
|
|
|
|
2,991
|
|
|
|
20,270
|
|
|
|
5,738
|
|
|
|
23,261
|
|
|
|
28,999
|
|
|
|
(660
|
)
|
|
|
28,339
|
|
9885 Towne Centre Drive
|
|
|
2001
|
|
|
|
20,749
|
|
|
|
4,982
|
|
|
|
|
|
|
|
28,513
|
|
|
|
|
|
|
|
4,982
|
|
|
|
28,513
|
|
|
|
33,495
|
|
|
|
(3,118
|
)
|
|
|
30,377
|
|
Tributary Street
|
|
|
1983/1998
|
|
|
|
|
|
|
|
2,060
|
|
|
|
|
|
|
|
10,597
|
|
|
|
|
|
|
|
2,060
|
|
|
|
10,597
|
|
|
|
12,657
|
|
|
|
(1,071
|
)
|
|
|
11,586
|
|
900 Uniqema Boulevard
|
|
|
2000
|
|
|
|
1,357
|
|
|
|
404
|
|
|
|
|
|
|
|
3,692
|
|
|
|
|
|
|
|
404
|
|
|
|
3,692
|
|
|
|
4,096
|
|
|
|
(294
|
)
|
|
|
3,802
|
|
1000 Uniqema Boulevard
|
|
|
1999
|
|
|
|
|
|
|
|
1,350
|
|
|
|
|
|
|
|
13,229
|
|
|
|
|
|
|
|
1,350
|
|
|
|
13,229
|
|
|
|
14,579
|
|
|
|
(1,075
|
)
|
|
|
13,504
|
|
Vassar Street
|
|
|
1950/1998
|
|
|
|
|
|
|
|
2,040
|
|
|
|
|
|
|
|
13,841
|
|
|
|
|
|
|
|
2,040
|
|
|
|
13,841
|
|
|
|
15,881
|
|
|
|
(1,240
|
)
|
|
|
14,641
|
|
Waples Street
|
|
|
1983/2005
|
|
|
|
|
|
|
|
2,470
|
|
|
|
|
|
|
|
2,907
|
|
|
|
11,028
|
|
|
|
2,470
|
|
|
|
13,935
|
|
|
|
16,405
|
|
|
|
(3,323
|
)
|
|
|
13,082
|
|
Walnut Street
|
|
|
2004
|
|
|
|
|
|
|
|
5,200
|
|
|
|
|
|
|
|
36,068
|
|
|
|
|
|
|
|
5,200
|
|
|
|
36,068
|
|
|
|
41,268
|
|
|
|
(2,676
|
)
|
|
|
38,592
|
|
675 West Kendall Street (Kendall A)
|
|
|
2002
|
|
|
|
|
|
|
|
4,922
|
|
|
|
|
|
|
|
121,182
|
|
|
|
|
|
|
|
4,922
|
|
|
|
121,182
|
|
|
|
126,104
|
|
|
|
(10,856
|
)
|
|
|
115,248
|
|
217th Place
|
|
|
1987/2007
|
|
|
|
|
|
|
|
7,125
|
|
|
|
|
|
|
|
3,529
|
|
|
|
14,627
|
|
|
|
7,125
|
|
|
|
18,156
|
|
|
|
25,281
|
|
|
|
(589
|
)
|
|
|
24,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
851,466
|
|
|
$
|
401,866
|
|
|
$
|
14,210
|
|
|
$
|
2,120,477
|
|
|
$
|
583,292
|
|
|
$
|
417,407
|
|
|
$
|
2,702,438
|
|
|
$
|
3,119,845
|
|
|
$
|
(162,110
|
)
|
|
$
|
2,957,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes mortgage notes secured by various properties and the
construction loan secured by the Center for Life
Science | Boston
property, but excludes unamortized debt premium of $8,823. |
|
(2) |
|
The aggregate gross cost of the Companys rental property
for federal income tax purposes approximated $3.1 billion
as of December 31, 2008 (unaudited). |
|
(3) |
|
Depreciation of building and improvements is recorded on a
straight-line basis over the estimated useful lives ranging from
15 years to 40 years. |
|
(4) |
|
The property or a portion of the property was under development
or redevelopment as of December 31, 2008. |
|
(5) |
|
During 2007, the Company acquired a fee simple interest in the
land at its Landmark at Eastview property. The balance of
$14.2 million was subsequently reclassified from ground
lease to land. |
99
A reconciliation of historical cost and related accumulated
depreciation is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Investment in real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
2,910,427
|
|
|
$
|
2,518,117
|
|
|
$
|
1,151,275
|
|
Property acquisitions
|
|
|
3,286
|
|
|
|
134,457
|
|
|
|
1,296,134
|
|
Improvements
|
|
|
206,132
|
|
|
|
257,853
|
|
|
|
70,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
3,119,845
|
|
|
$
|
2,910,427
|
|
|
$
|
2,518,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
(104,444
|
)
|
|
$
|
(60,579
|
)
|
|
$
|
(21,904
|
)
|
Depreciation expense
|
|
|
(57,666
|
)
|
|
|
(43,865
|
)
|
|
|
(38,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
(162,110
|
)
|
|
$
|
(104,444
|
)
|
|
$
|
(60,579
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying report of independent registered public
accounting firm.
100
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed
to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commissions rules and forms, and that such
information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow for timely decisions regarding
required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognizes that any controls
and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired
control objectives, and management is required to apply its
judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Also, we have an investment in
unconsolidated entities. As we manage these entities, our
disclosure controls and procedures with respect to such entities
are essentially consistent with those we maintain with respect
to our consolidated entities. As required by
Rule 13a-15(b)
under the Exchange Act, we carried out an evaluation, under the
supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our
Chief Executive Officer and Chief Financial Officer concluded
that, as of the end of the period covered by this report, our
disclosure controls and procedures were effective and were
operating at a reasonable assurance level.
Managements
Report on Internal Control Over Financial Reporting
Internal control over financial reporting refers to the process
designed by, or under the supervision of, our Chief Executive
Officer and Chief Financial Officer, and effected by our board
of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with U.S. generally
accepted accounting principles, and includes those policies and
procedures that: (1) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
companys assets that could have a material effect on the
financial statements.
Internal control over financial reporting cannot provide
absolute assurance of achieving financial reporting objectives
because of its inherent limitations. Internal control over
financial reporting is a process that involves human diligence
and compliance and is subject to lapses in judgment and
breakdowns resulting from human failures. Internal control over
financial reporting also can be circumvented by collusion or
improper management override. Because of such limitations, there
is a risk that material misstatements may not be prevented or
detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is
possible to design into the process safeguards to reduce, though
not eliminate, this risk.
Management is responsible for establishing and maintaining
adequate internal control over financial reporting for the
company, as such term is defined in
Rule 13a-15(f)
under the Exchange Act. Under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we conducted an evaluation
of the effectiveness of our internal control over financial
reporting. Management has used the framework set forth in the
report entitled Internal Control Integrated
Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission to evaluate the
effectiveness of the companys internal control over
financial reporting. Based on its evaluation, management has
concluded that the companys internal control over
financial reporting was effective as of December 31, 2008,
the end of the
101
companys most recent fiscal year. Our independent
registered public accounting firm, KPMG LLP, has issued an
attestation report over our internal control over financial
reporting. Such report appears on page 60 of this report.
Changes
in Internal Control over Financial Reporting
There has been no change in our internal control over financial
reporting during the quarter ended December 31, 2008 that
has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
|
|
Item 9B.
|
Other
Information
|
None.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
As required by Section 303A.12(a) of the NYSE Listed
Company Manual, our Chief Executive Officer made his annual
certification to the NYSE on June 16, 2008 stating that he
was not aware of any violation by our company of the corporate
governance listing standards of the NYSE. In addition, we have
filed, as exhibits to this Annual Report on
Form 10-K,
the certifications of our Chief Executive Officer and Chief
Financial Officer required under Section 302 of the
Sarbanes-Oxley Act of 2002 to be filed with the Securities and
Exchange Commission regarding the quality of our public
disclosure.
The information concerning our directors, executive officers and
corporate governance required by Item 10 will be included
in the Proxy Statement to be filed relating to our 2009 Annual
Meeting of Stockholders and is incorporated herein by reference.
Pursuant to instruction G(3) to
Form 10-K,
information concerning audit committee financial expert
disclosure set forth under the heading Information
Regarding the Board Committees of the
Board Audit Committee will be included in the
Proxy Statement to be filed relating to our 2009 Annual Meeting
of Stockholders and is incorporated herein by reference.
Pursuant to instruction G(3) to
Form 10-K,
information concerning compliance with Section 16(a) of the
Exchange Act concerning our directors and executive officers set
forth under the heading entitled General
Section 16(a) Beneficial Ownership Reporting
Compliance will be included in the Proxy Statement to be
filed relating to our 2009 Annual Meeting of Stockholders and is
incorporated herein by reference.
|
|
Item 11.
|
Executive
Compensation
|
The information concerning our executive compensation required
by Item 11 will be included in the Proxy Statement to be
filed relating to our 2009 Annual Meeting of Stockholders and is
incorporated herein by reference.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information concerning the security ownership of certain
beneficial owners and management and related stockholder matters
required by Item 12 will be included in the Proxy Statement
to be filed relating to our 2009 Annual Meeting of Stockholders
and is incorporated herein by reference.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information concerning certain relationships and related
transactions and director independence required by Item 13
will be included in the Proxy Statement to be filed relating to
our 2009 Annual Meeting of Stockholders and is incorporated
herein by reference.
102
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information concerning our principal accountant fees and
services required by Item 14 will be included in the Proxy
Statement to be filed relating to our 2009 Annual Meeting of
Stockholders and is incorporated herein by reference.
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
3.1
|
|
Articles of Amendment and Restatement of BioMed Realty Trust,
Inc.(1)
|
3.2
|
|
Second Amended and Restated Bylaws of BioMed Realty Trust,
Inc.(2)
|
3.3
|
|
Articles Supplementary Classifying BioMed Realty Trust,
Inc.s 7.375% Series A Cumulative Redeemable Preferred
Stock.(3)
|
4.1
|
|
Form of Certificate for Common Stock of BioMed Realty Trust,
Inc.(4)
|
4.2
|
|
Form of Certificate for 7.375% Series A Cumulative
Redeemable Preferred Stock of BioMed Realty Trust, Inc.(3)
|
4.3
|
|
Indenture, dated September 25, 2006, among BioMed Realty,
L.P., BioMed Realty Trust, Inc. and U.S. Bank National
Association, as trustee, including the form of 4.50%
Exchangeable Senior Notes due 2026.(5)
|
10.1
|
|
Fourth Amended and Restated Agreement of Limited Partnership of
BioMed Realty, L.P. dated as of January 18, 2007.(6)
|
10.2
|
|
Registration Rights Agreement dated as of August 13, 2004
among BioMed Realty Trust, Inc. and the persons named therein.(1)
|
10.3
|
|
2004 Incentive Award Plan, as amended.(7)
|
10.4
|
|
Form of Restricted Stock Award Agreement under the 2004
Incentive Award Plan.(8)
|
10.5
|
|
Form of Long Term Incentive Plan Unit Award Agreement.(7)
|
10.6
|
|
Form of Indemnification Agreement between BioMed Realty Trust,
Inc. and each of its directors and officers.(4)
|
10.7
|
|
Amended and Restated Employment Agreement dated as of
December 14, 2007 between BioMed Realty Trust, Inc., BioMed
Realty, L.P. and Alan D. Gold.(9)
|
10.8
|
|
Amended and Restated Employment Agreement dated as of
December 14, 2007 between BioMed Realty Trust, Inc., BioMed
Realty, L.P. and Gary A. Kreitzer.(9)
|
10.9
|
|
Amended and Restated Employment Agreement dated as of
December 14, 2007 between BioMed Realty Trust, Inc., BioMed
Realty, L.P. and R. Kent Griffin, Jr.(9)
|
10.10
|
|
Amended and Restated Employment Agreement dated as of
December 14, 2007 between BioMed Realty Trust, Inc., BioMed
Realty, L.P. and John F. Wilson, II.(9)
|
10.11
|
|
Amended and Restated Employment Agreement dated as of
December 14, 2007 between BioMed Realty Trust, Inc., BioMed
Realty, L.P. and Matthew G. McDevitt.(9)
|
10.12
|
|
First Amendment to Amended and Restated Employment Agreement
effective as of December 15, 2008 by and among BioMed
Realty Trust, Inc., BioMed Realty, L.P. and Alan D. Gold.(10)
|
10.13
|
|
First Amendment to Amended and Restated Employment Agreement
effective as of December 15, 2008 by and among BioMed
Realty Trust, Inc., BioMed Realty, L.P. and Kent Griffin.(10)
|
10.14
|
|
First Amendment to Amended and Restated Employment Agreement
effective as of December 15, 2008 by and among BioMed
Realty Trust, Inc., BioMed Realty, L.P. and Gary A. Kreitzer.(10)
|
10.15
|
|
First Amendment to Amended and Restated Employment Agreement
effective as of December 15, 2008 by and among BioMed
Realty Trust, Inc., BioMed Realty, L.P. and Matthew G.
McDevitt.(10)
|
10.16
|
|
First Amendment to Amended and Restated Employment Agreement
effective as of December 15, 2008 by and among BioMed
Realty Trust, Inc., BioMed Realty, L.P. and John F. Wilson
II.(10)
|
103
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
10.17
|
|
Employment Transition and Consulting Agreement effective as of
December 31, 2008 between BioMed Realty Trust, Inc., BioMed
Realty, L.P. and John F. Wilson, II.(11)
|
10.18
|
|
Contribution Agreement between Alan D. Gold and BioMed Realty,
L.P. dated as of May 4, 2004.(4)
|
10.19
|
|
Contribution Agreement between Gary A. Kreitzer and BioMed
Realty, L.P. dated as of May 4, 2004.(4)
|
10.20
|
|
Contribution Agreement between John F. Wilson, II and
BioMed Realty, L.P. dated as of May 4, 2004.(4)
|
10.21
|
|
Contribution Agreement between Matthew G. McDevitt and BioMed
Realty, L.P. dated as of May 4, 2004.(4)
|
10.22
|
|
Form of Contribution Agreement between the additional
contributors and BioMed Realty, L.P. dated as of May 4,
2004.(4)
|
10.23
|
|
BioMed Realty 401(k) Retirement Savings Plan.(8)
|
10.24
|
|
First Amendment to the BioMed Realty 401(k) Retirement Savings
Plan.(8)
|
10.25
|
|
Second Amendment to the BioMed Realty 401(k) Retirement Savings
Plan.(8)
|
10.26
|
|
Good Faith Amendment to the BioMed Realty 401(k) Retirement
Savings Plan.(12)
|
10.27
|
|
Third Amendment to the BioMed Realty 401(k) Retirement Savings
Plan.(12)
|
10.28
|
|
Amendment to the BioMed Realty 401(k) Retirement Savings Plan.(6)
|
10.29
|
|
Form of Secured Term Loan Note.(13)
|
10.30
|
|
First Amended and Restated Secured Term Loan Agreement, dated as
of August 1, 2007, by and among BioMed Realty, L.P.,
KeyBank National Association, as Administrative Agent, and
certain lenders party thereto.(14)
|
10.31
|
|
Form of Line Note under Unsecured Credit Agreement.(13)
|
10.32
|
|
Form of Term Note under Unsecured Credit Agreement.(13)
|
10.33
|
|
Second Amended and Restated Unsecured Credit Agreement, dated as
of August 1, 2007, by and among BioMed Realty, L.P.,
KeyBank National Association, as Administrative Agent, and
certain lenders party thereto.(14)
|
10.34
|
|
Lease Agreement, dated as of May 24, 2006, between
BMR-Belward Campus Drive LSM LLC and Human Genome Sciences,
Inc.(15)
|
10.35
|
|
Lease Agreement, dated as of May 24, 2006, between
BMR-Shady Grove Road HQ LLC and Human Genome Sciences, Inc.(15)
|
10.36
|
|
Registration Rights Agreement, dated September 25, 2006,
among BioMed Realty Trust, Inc., BioMed Realty, L.P., Credit
Suisse Securities (USA) LLC and Morgan Stanley & Co.
Incorporated.(5)
|
10.37
|
|
Promissory Note, dated August 23, 2006, by BMR-Shady Grove
B LLC in favor of KeyBank National Association.(16)
|
10.38
|
|
Indemnity Deed of Trust, Assignment of Leases and Rents,
Security Agreement, and Fixture Filing, dated August 23,
2006, by BMR-Shady Grove Road HQ LLC in favor of KeyBank
National Association.(16)
|
10.39
|
|
Secured Acquisition and Construction Loan Agreement, dated as of
November 17, 2006, among BMR-Blackfan Circle LLC, KeyBank
National Association, as Administrative Agent, and certain other
lenders party thereto.(17)
|
10.40
|
|
Promissory Note, dated November 17, 2006, by BMR-Blackfan
Circle LLC in favor of KeyBank National Association.(17)
|
10.41
|
|
Amended and Restated Secured Acquisition and Construction Loan
Agreement, dated as of December 21, 2006, among
BMR-Blackfan Circle LLC, KeyBank National Association, as
Administrative Agent, and certain other lenders party
thereto.(18)
|
10.42
|
|
Purchase and Sale Agreement, dated as of January 29, 2007,
among Rogers Street, LLC, Lyme/Houston Development I, LP,
Kendall Square LLC and BioMed Realty, L.P.(6)
|
10.43
|
|
First Amendment to Real Estate Purchase and Sale Agreement,
dated as of February 16, 2007, among Rogers Street, LLC,
Lyme/Houston Development I, LP, Kendall Square LLC and
BioMed Realty, L.P.(6)
|
104
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
10.44
|
|
Purchase and Sale Agreement, dated as of January 29, 2007,
among SP-K Development, LLC, SP-B1 Development, LLC, SP-A
Development, LLC, SP-B2 Development, LLC, SP-D Development, LLC,
SP-E
Development, LLC, SP-J Development, LLC, 110 Munson Street, LLC,
SP-C Development, LLC, Lyme Properties LLC and BioMed Realty,
L.P.(6)
|
10.45
|
|
First Amendment to Real Estate Purchase and Sale Agreement,
dated as of February 16, 2007, among SP-K Development, LLC,
SP-B1 Development, LLC, SP-A Development, LLC, SP-B2
Development, LLC, SP-D Development, LLC, SP-E Development, LLC,
SP-J Development, LLC, 110 Munson Street, LLC, SP-C Development,
LLC, Lyme Properties LLC and BioMed Realty, L.P.(6)
|
10.46
|
|
Second Amendment to Real Estate Purchase and Sale Agreement,
dated as of April 3, 2007, among SP-K Development, LLC,
SP-B1 Development, LLC, SP-A Development, LLC, SP-B2
Development, LLC, SP-D Development, LLC, SP-E Development, LLC,
SP-J Development, LLC, 110 Munson Street, LLC, SP-C Development,
LLC, Lyme Properties LLC and BioMed Realty, L.P.(19)
|
10.47
|
|
Director Compensation Policy.(20)
|
10.48
|
|
Dividend Reinvestment and Stock Purchase Plan.(21)
|
12.1
|
|
Ratio of Earnings to Fixed Charges.(22)
|
21.1
|
|
List of Subsidiaries of BioMed Realty Trust, Inc.(22)
|
23.1
|
|
Consent of KPMG LLP.(22)
|
31.1
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.(22)
|
31.2
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.(22)
|
32.1
|
|
Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.(22)
|
|
|
|
(1) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
September 20, 2004. |
|
(2) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
October 30, 2008. |
|
(3) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Registration Statement on
Form 8-A
filed with the Securities and Exchange Commission on
January 17, 2007. |
|
(4) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Registration Statement of
Form S-11,
as amended (File No.
333-115204),
filed with the Securities and Exchange Commission on May 5,
2004. |
|
(5) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
September 26, 2006. |
|
(6) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
February 28, 2007. |
|
(7) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
January 5, 2007. |
|
(8) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
January 14, 2005. |
|
(9) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 18, 2007. |
|
(10) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 19, 2008. |
|
(11) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
January 2, 2009. |
|
(12) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 15, 2006. |
105
|
|
|
(13) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
June 3, 2005. |
|
(14) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
August 7, 2007. |
|
(15) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
May 26, 2006. |
|
(16) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
August 28, 2006. |
|
(17) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
November 20, 2006. |
|
(18) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 28, 2006. |
|
(19) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on May 4,
2007. |
|
(20) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
February 6, 2007. |
|
(21) |
|
Incorporated herein by reference to BioMed Realty Trust,
Inc.s Registration Statement on
Form S-3
(File No. 333-143658),
filed with the Securities and Exchange Commission on
June 11, 2007. |
|
(22) |
|
Filed herewith. |
106
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BioMed Realty Trust, Inc.
Alan D. Gold
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Kent Griffin
President, Chief Operating Officer and
Chief Financial Officer
(Principal Financial Officer)
Greg N. Lubushkin
Vice President, Chief Accounting Officer
(Principal Accounting Officer)
Dated: February 12, 2009
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ BARBARA
R. CAMBON
Barbara
R. Cambon
|
|
Director
|
|
February 12, 2009
|
|
|
|
|
|
/s/ EDWARD
A. DENNIS
Edward
A. Dennis
|
|
Director
|
|
February 12, 2009
|
|
|
|
|
|
/s/ RICHARD
I. GILCHRIST
Richard
I. Gilchrist
|
|
Director
|
|
February 12, 2009
|
|
|
|
|
|
/s/ GARY
A. KREITZER
Gary
A. Kreitzer
|
|
Executive Vice President, General Counsel and Director
|
|
February 12, 2009
|
|
|
|
|
|
/s/ THEODORE
D. ROTH
Theodore
D. Roth
|
|
Director
|
|
February 12, 2009
|
|
|
|
|
|
/s/ M.
FAYE WILSON
M.
Faye Wilson
|
|
Director
|
|
February 12, 2009
|
107