Form 8-K BioMed Realty Trust Inc For: Jul 28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 28, 2015

BioMed Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

 

Maryland		1-32261		20-1142292
(State or Other Jurisdiction of Incorporation)		(Commission File No.)		(I.R.S. Employer Identification No.)

17190 Bernardo Center Drive

San Diego, California 92128

(Address of principal executive offices, including zip code)

 

 

Registrant’s telephone number, including area code: (858) 485-9840

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02 Results of Operations and Financial Condition.

On July 28, 2015, BioMed Realty Trust, Inc. issued a press release regarding its financial results for the second quarter ended June 30, 2015 which referred to certain supplemental information that is available on BioMed Realty’s website at www.biomedrealty.com. Copies of the press release and supplemental information are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated by reference herein.

The information contained in this Current Report, including the exhibits referenced herein, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Such information shall not be incorporated by reference into any filing of BioMed Realty, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

 

(d)	The following exhibits are furnished herewith:

 

Exhibit Number		Description of Exhibit
99.1		Press release issued by BioMed Realty Trust, Inc. on July 28, 2015.
99.2		BioMed Realty Trust, Inc. Supplemental Operating and Financial Data for the quarter ended June 30, 2015.

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SIGNATURES

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

 

Date: July 29, 2015		BIOMED REALTY TRUST, INC.
		By:		/s/ Greg N. Lubushkin
		Name: Greg N. Lubushkin
		Title:   Chief Financial Officer

Exhibit 99.1

 

 

CONTACT:		Rick Howe
		Senior Director, Corporate Communications
		858.207.5859
		[email protected]

BIOMED REALTY TRUST REPORTS SECOND QUARTER 2015 FINANCIAL RESULTS

Company Reports FFO and Core FFO of $0.58 for Second Quarter Driven by Accelerating Cash Flows from Strong Leasing Momentum and Investment Returns

SAN DIEGO, Calif. – July 28, 2015 – BioMed Realty Trust, Inc. (NYSE: BMR), investing in the highest quality institutional real estate to meet growing demand across the life science industry, today reported funds from operations (FFO) and core FFO (CFFO) per diluted share of $0.58 for the second quarter ended June 30, 2015, driven by the company’s strong leasing, development deliveries, and investment acumen over the past four quarters.

The company’s unique platform, anchored by a deep team of life science real estate professionals, delivered a new record for gross leasing in the quarter with 1.3 million square feet led by new leases with Eli Lilly and Alnylam Pharmaceuticals in Cambridge, Massachusetts, Regeneron Pharmaceuticals in New York, and Illumina in Cambridge, United Kingdom, as well as leases to top tier research institutions Duke University and Wake Forest University. Total gross leasing in the second quarter resulted in approximately 218,400 square feet of positive net absorption in the operating portfolio and an additional 370,300 square feet of absorption across the company’s development portfolio.

Second Quarter Highlights

The company:

 

•

Continued to leverage its well-leased development pipeline, comprising approximately 2.3 million rentable square feet, by delivering two Class A life science buildings during the quarter: 430 Cambridge Science Park in Cambridge, United Kingdom, which is 100% leased to Takeda, and 450 Kendall Street in Cambridge, Massachusetts. The 450 Kendall Street property, in the heart of Kendall Square, is approximately 66% leased as of today, including Eli Lilly and MPM Capital, with ongoing discussions and negotiations for the remainder of the space;

 

•

Added two new projects totaling approximately 439,500 rentable square feet to its development pipeline with the start of construction on a 155,000 square foot build-to-suit for Illumina at Granta Park in Cambridge, United Kingdom and approximately 284,500 square feet at the Chesterfield Building in Durham, North Carolina, which is anchored by a 100,000 square foot lease to Duke University.

 

•

Expanded its presence and value creation opportunity in the growing and supply-constrained University Towne Centre submarket of San Diego with the acquisition of Towne Centre Technology Park, comprising approximately 182,900 square feet of laboratory and office space and additional development potential of 104,500 square feet, for approximately $84.0 million;

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•

Generated net gains totaling approximately $50.5 million, primarily from the sale of an equity investment in a single life science company; and

 

•

Earned an upgrade to its investment grade corporate credit rating from Moody’s Investors Service to Baa2 from Baa3.

Alan Gold, Chairman, President and Chief Executive Officer of BioMed Realty, commented, “The health and strength of the life science industry continues to drive robust growth and demand for high quality real estate. This growth and demand that we are seeing further validates our strategy of staying focused on the entire continuum of the life science real estate sector.”

Second Quarter 2015 Portfolio Update

During the quarter ended June 30, 2015, the company executed 46 leasing transactions representing a record 1.3 million square feet of gross leasing, driving positive net absorption for the quarter of 218,400 square feet within the operating portfolio, and an additional 370,300 square feet of absorption across the company’s development portfolio. As of June 30, 2015, the operating portfolio leased percentage based on square footage improved 180 basis points from 89.2% to 91.0%. The active new construction portfolio now comprises eight projects totaling over 2.3 million square feet. At quarter end, five of the eight projects are 100% pre-leased with a weighted-average lease term in excess of 15 years, and the entire portfolio is 75.0% pre-leased.

Second quarter leasing was comprised of:

 

•

28 new leases totaling approximately 1.0 million square feet, highlighted by new and expanded tenant relationships with:

 

•

Alnylam Pharmaceuticals for approximately 295,000 square feet at the 675 West Kendall Street property in Cambridge, Massachusetts;

 

•

Illumina for a 155,000 square foot build-to-suit lease transaction at Granta Park in Cambridge, United Kingdom;

 

•

Regeneron Pharmaceuticals for approximately 116,200 square feet at the Landmark at Eastview campus in Tarrytown, New York;

 

•

Wake Forest University for approximately 115,300 square feet at the Wake 60 property in Winston-Salem, North Carolina;

 

•

Duke University for 100,000 square feet at the Chesterfield Building in Durham, North Carolina; and

 

•

Eli Lilly for approximately 22,400 square feet at the 450 Kendall Street and 60 Hampshire properties in Cambridge, Massachusetts.

 

•

18 lease renewals and extensions totaling approximately 264,800 square feet.

 

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During the second quarter, the company completed construction of two development projects, which were delivered on time and on budget, including:

 

•

An approximately 63,500 square foot laboratory and office building at 450 Kendall Street in Cambridge, Massachusetts, located in close proximity to three of the company’s properties in the heart of the Kendall Square: 500 Kendall Street, 675 West Kendall Street and 650 East Kendall Street.

 

•

An approximately 42,400 square foot laboratory and office build-to-suit development which is 100% leased to a subsidiary of Takeda Pharmaceutical Company at 430 Cambridge Science Park in Cambridge, United Kingdom.

Also during the second quarter, the company acquired the Towne Centre Technology Park for $84.0 million to meet the strong and growing demand in the expanding core life science submarket of University Towne Centre in San Diego. The three-building property, comprised of approximately 182,900 square feet, is part of the active redevelopment pipeline and includes additional potential development of 104,500 square feet in the company’s land bank.

In the quarter, the company recorded an impairment loss of $35.1 million, primarily as a result of the sale of its King of Prussia property in Radnor, Pennsylvania for approximately $35.2 million in gross proceeds.

Subsequent to the end of the second quarter, the company:

 

•

Completed the acquisition of a historical rehabilitation development project in Providence, Rhode Island which is expected to comprise approximately 267,000 square feet and is 100% leased to Brown University, the University of Rhode Island and Rhode Island College for expected use as office space and a nursing school. The project also includes development of 172 residential units primarily for use by Brown University graduate school students and a 750-space parking garage; and

 

•

Executed three new leases at the Pacific Research Center aggregating approximately 102,800 square feet, including new leases with Stanford Health Care and Carbylan Therapeutics. As a result of these three leases, the Pacific Research Center is now approximately 88% leased.

Second Quarter 2015 Financial Results

Total revenues for the second quarter were approximately $158.0 million, compared to approximately $171.2 million for the same period in 2014. Rental revenues for the second quarter were approximately $116.3 million, compared to $120.9 million for the same period in 2014.

CFFO and FFO, calculated in accordance with standards established by NAREIT, for the second quarter were $0.58 per diluted share. This amount includes realized gains totaling $50.5 million, or $0.24 per diluted share, net of an allocation of income attributable to noncontrolling interests, primarily from the sale of equity investments in a single life science company. CFFO and FFO for the same period in 2014 were $0.40 per diluted share.

Adjusted funds from operations (AFFO) was $0.48 per diluted share for the quarter, compared to $0.32 per diluted share for the same period in 2014. The company reported net income attributable to common stockholders for the quarter of approximately $23.6 million, or $0.11 per diluted share, compared to $18.6 million, or $0.10 per diluted share, for the same period in 2014.

 

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“The combination of extraordinary leasing success and value creation from strategic investments throughout the past few quarters generated strong top and bottom line results for the second quarter and first half of 2015,” said Greg Lubushkin, BioMed Realty’s Chief Financial Officer. “Equally important is that we are successfully expanding the platform for our future growth by reinvesting proceeds from strategic asset recycling and direct investments in the robust life science industry into world-class laboratory and office facilities in the core centers of life science innovation, in particular Boston/Cambridge, the San Francisco Bay Area and San Diego. These growth opportunities are, and will continue to be, funded by a sound, pro-actively managed capital structure, which was further validated during the quarter with the upgrade to our investment grade corporate credit rating from Moody’s.”

FFO, CFFO and AFFO are supplemental non-GAAP financial measures used in the real estate industry to measure and compare the operating performance of real estate companies. A complete reconciliation containing adjustments from GAAP net income available to common stockholders to FFO, CFFO and AFFO and definitions of terms are included at the end of this release.

Financing Activity

During the second quarter, the company’s investment grade corporate credit rating was upgraded by Moody’s Investors Service to Baa2 from Baa3. The upgrades came approximately one year after Standard & Poor’s Ratings Services upgraded the company’s rating to BBB with a stable outlook.

Subsequent to the end of the second quarter, the company refinanced the loan secured by its PREI joint venture’s 650 East Kendall Street property which was scheduled to mature on August 13, 2015. Under the terms of the new loan, the amount financed was increased to $160 million from approximately $139 million and the applicable credit spread over LIBOR was reduced from 205 basis points to 140 basis points over a new five-year term. The facility matures in August 2020, with two one-year extension options exercisable at the joint venture’s discretion.

Earnings Guidance

The company’s updated 2015 guidance for net income per diluted share and FFO (and CFFO) per diluted share are set forth and reconciled below. Projected net income per diluted share and FFO (and CFFO) per diluted share are based upon estimated, weighted-average diluted common shares outstanding of approximately 208.0 million and 209.0 million, respectively.

 

		2015
		(Low - High)
Projected net income per diluted share attributable to common stockholders		$	0.36 - $0.42
Add:
Impairment of real estate, net			0.16
Real estate depreciation and amortization			1.21
Noncontrolling interests in operating partnership			0.01
Projected FFO per diluted share		$	1.74 - $1.80
Add:
Acquisition-related expenses			0.01
Projected CFFO per diluted share		$	1.75 - $1.81

 

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Key assumptions underlying the company’s updated projections of 2015 net income per diluted share and FFO (and CFFO) per diluted share are included in the company’s Supplemental Operating and Financial Data for the three months ended June 30, 2015 available on the company’s website. In addition, the company has posted an updated slide presentation for the second quarter on its website under the title “Investor Presentation – July 2015”.

The company’s 2015 FFO and CFFO estimates reflect the impact of previously announced new investments and dispositions. The foregoing estimates also include the impact of: (i) lease terminations recorded through the six months ended June 30, 2015, aggregating $16.2 million, or $0.08 per diluted share, (ii) investment gains and losses, net of an allocation of income attributable to noncontrolling interests, estimated for the full year 2015 to be approximately $76.7 million, or $0.37 per diluted share, and (iii) the impact of the new development project in Providence, Rhode Island. These estimates also do not include the effect of any other lease termination revenue or investment gains or losses.

The company continues to target new investment opportunities, including acquisitions and new development projects; however, the company’s 2015 FFO and CFFO estimates do not reflect the impact of any other future new investments (acquisitions or development), or related financing activity, as the impact of such investments may vary significantly based on the nature of these investments, timing and other factors.

The foregoing estimates are forward-looking and reflect management’s view of current and future market conditions, including certain assumptions with respect to leasing activity, rental rates, occupancy levels, timing of revenue recognition, interest rates, financings, acquisitions, dispositions, development and redevelopment and the amount and timing of acquisitions, development and redevelopment activities. The company’s actual results may differ materially from these estimates.

Supplemental Information

Supplemental operating and financial data are available in the Investor Relations section of the company’s website at www.biomedrealty.com.

 

5

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Teleconference and Webcast

BioMed Realty will conduct a conference call and webcast at 10:00 a.m. Pacific Time (1:00 p.m. Eastern Time) on Wednesday, July 29, 2015 to discuss the company’s financial results and operations for the quarter. The call will be open to all interested investors through a live audio web cast at the Investor Relations section of the company’s web site at www.biomedrealty.com, which will include an online slide presentation to accompany the call, or live by calling (888) 895-5479 (domestic) or (847) 619-6250 (international) with call ID number 40272432. The complete webcast will be archived for 30 days on both web sites. A telephone playback of the conference call will also be available from 12:30 p.m. Pacific Time on Wednesday, July 29, 2015 until midnight Pacific Time on Tuesday, August 4, 2015 by calling (888) 843-7419 (domestic) or (630) 652-3042 (international) and using access code 40272432#.

About BioMed Realty Trust

BioMed Realty, with its trusted expertise and valuable relationships, delivers optimal real estate solutions for biotechnology and pharmaceutical companies, scientific research institutions, government agencies and other entities involved in the life science industry. BioMed Realty owns or has interests in properties comprising approximately 18.7 million rentable square feet. Additional information is available at www.biomedrealty.com. Follow us on Twitter @biomedrealty.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, without limitation: general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate); adverse economic or real estate developments in the life science industry or the company’s target markets; risks associated with the availability and terms of financing, the use of debt to fund acquisitions, developments and other investments, and the ability to refinance indebtedness as it comes due; failure to maintain the company’s investment grade credit ratings with the ratings agencies; failure to manage effectively the company’s growth and expansion into new markets, or to complete or integrate acquisitions and developments successfully; reductions in asset valuations and related impairment charges; risks and uncertainties affecting property development and construction; risks associated with tax credits, grants and other subsidies to fund development activities; risks associated with downturns in foreign, domestic and local economies, changes in interest rates and foreign currency exchange rates, and volatility in the securities markets; ownership of properties outside of the United States that subject the company to different and potentially greater risks than those associated with the company’s domestic operations; risks associated with the company’s investments in loans, including borrower defaults and potential principal losses; potential liability for uninsured losses and environmental contamination; risks associated with security breaches and other disruptions to the company’s information technology networks and related systems; risks associated with the company’s potential failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended, and possible adverse changes in tax and environmental laws; and risks associated with the company’s dependence on key personnel whose continued service is not guaranteed. For a further list and description of such risks and uncertainties, see the reports filed by the company with the Securities and Exchange Commission, including the company’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

#  #  #

(Financial Tables Follow)

 

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BIOMED REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

		June 30, 2015				December 31, 2014
		(Unaudited)
ASSETS
Land		$	651,201			$	704,958
Building and improvements			4,956,823				4,877,135
Land under development			248,225				151,242
Construction in progress			777,766				629,679
Investments in real estate, gross			6,634,015				6,363,014
Accumulated depreciation			(1,026,103	)			(946,439	)
Investments in real estate, net			5,607,912				5,416,575
Investments in unconsolidated partnerships			34,469				35,291
Cash and cash equivalents			45,329				46,659
Accounts receivable, net			10,740				14,631
Accrued straight-line rents, net			169,592				163,716
Deferred leasing costs, net			229,290				219,713
Other assets			240,877				274,301
Total assets		$	6,338,209			$	6,170,886
LIABILITIES AND EQUITY
Mortgage notes payable, net		$	488,945			$	496,757
Exchangeable senior notes			—				95,678
Unsecured senior notes, net			1,294,614				1,293,903
Unsecured senior term loans			750,856				749,326
Unsecured line of credit			369,000				84,000
Accounts payable, accrued expenses and other liabilities			353,947				381,280
Total liabilities			3,257,362				3,100,944
Equity:
Stockholders’ equity:
Common stock, $.01 par value, 250,000,000 shares authorized, 203,567,974 shares and 197,442,432 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively			2,036				1,975
Additional paid-in capital			3,750,959				3,649,235
Accumulated other comprehensive loss, net			(24,544	)			(2,214	)
Dividends in excess of earnings			(710,913	)			(645,983	)
Total stockholders’ equity			3,017,538				3,003,013
Noncontrolling interests			63,309				66,929
Total equity			3,080,847				3,069,942
Total liabilities and equity		$	6,338,209			$	6,170,886

 

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BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)

(Unaudited)

 

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Revenues:
Rental		$	116,260			$	120,924			$	233,780			$	240,950
Tenant recoveries			41,573				40,280				85,529				79,015
Other revenue			141				9,957				16,675				20,072
Total revenues			157,974				171,161				335,984				340,037
Expenses:
Rental operations			55,270				53,636				113,917				106,159
Depreciation and amortization			61,272				62,736				128,352				125,145
General and administrative			12,531				12,443				25,320				24,385
Executive severance			—				—				9,891				—
Acquisition-related expenses			1,100				1,134				1,564				2,384
Total expenses			130,173				129,949				279,044				258,073
Income from operations			27,801				41,212				56,940				81,964
Equity in net income / (loss) of unconsolidated partnerships			139				(10	)			292				(148	)
Interest expense, net			(19,315	)			(23,131	)			(40,710	)			(51,141	)
Impairment of real estate			(35,071	)			—				(35,071	)			—
Other income			64,021				1,027				76,905				9,190
Net income			37,575				19,098				58,356				39,865
Net income attributable to noncontrolling interests			(13,997	)			(462	)			(17,433	)			(2,396	)
Net income attributable to the Company			23,578				18,636				40,923				37,469
Net income per share attributable to common stockholders:
Basic and diluted earnings per share		$	0.11			$	0.10			$	0.20			$	0.19
Weighted-average common shares outstanding:
Basic			202,055,325				191,003,248				201,423,721				190,954,827
Diluted			207,458,236				196,800,354				206,997,405				196,673,649

 

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BIOMED REALTY TRUST, INC.

CONSOLIDATED FUNDS FROM OPERATIONS

(In thousands, except share data)

(Unaudited)

Our FFO and CFFO attributable to common shares and OP units and a reconciliation to net income for the three and six months ended June 30, 2015 and 2014 (in thousands, except per share and share data) were as follows:

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Net income attributable to the Company		$	23,578			$	18,636			$	40,923			$	37,469
Adjustments:
Impairment of real estate			35,071				—				35,071				—
Noncontrolling interests in operating partnership			613				514				1,070				1,035
Depreciation and amortization – unconsolidated partnerships			1,050				403				2,056				776
Depreciation and amortization – consolidated entities			61,272				62,736				128,352				125,145
Depreciation and amortization – allocable to noncontrolling interest of consolidated joint ventures			(773	)			(599	)			(1,585	)			(1,040	)
FFO attributable to common shares and units – basic			120,811				81,690				205,887				163,385
Interest expense on Exchangeable Senior Notes			—				1,688				183				3,375
FFO attributable to common shares and units – diluted			120,811				83,378				206,070				166,760
Acquisition-related expenses			1,100				1,134				1,564				2,384
CFFO attributable to common shares and units – diluted		$	121,911			$	84,512			$	207,634			$	169,144
FFO per share – diluted		$	0.58			$	0.40			$	0.99			$	0.80
CFFO per share – diluted		$	0.58			$	0.40			$	0.99			$	0.81
Weighted-average common shares and units outstanding – diluted (1)			208,969,199				208,887,941				209,100,647				208,761,935

 

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Our AFFO available to common shares and partnership and LTIP units and a reconciliation of CFFO to AFFO for the three and six months ended June 30, 2015 and 2014 was as follows:

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
CFFO – diluted		$	121,911			$	84,512			$	207,634			$	169,144
Adjustments:
Recurring capital expenditures and second generation tenant improvements			(21,600	)			(21,553	)			(37,382	)			(29,284	)
Leasing commissions			(2,205	)			(1,929	)			(5,761	)			(3,839	)
Non-cash revenue adjustments			(5,405	)			(1,830	)			(8,641	)			(4,752	)
Deferred revenue			520				311				863				590
Non-cash debt adjustments			2,482				3,376				5,442				6,501
Non-cash equity compensation			3,347				3,729				11,354				7,479
Depreciation included in general and administrative expenses			838				757				1,682				1,497
Share of non-cash unconsolidated partnership adjustments			(90	)			18				(44	)			36
Adjustments for noncontrolling interests			420				80				775				121
AFFO available to common shares and units		$	100,218			$	67,471			$	175,992			$	147,493
AFFO per share – diluted		$	0.48			$	0.32			$	0.84			$	0.71
Weighted-average common shares and units outstanding – diluted (1)			208,969,199				208,887,941				209,100,647				208,761,935

 

(1)

The six months ended June 30, 2015 includes 593,709 shares of common stock potentially issuable pursuant to the exchange feature of the Exchangeable Senior Notes based on the “if converted” method. The three and six months ended June 30, 2014 both include 10,578,132 shares of common stock potentially issuable pursuant to the exchange feature of the Exchangeable Senior Notes based on the “if converted” method. The three months ended June 30, 2015 and 2014 include 1,510,963 and 1,590,455 shares of unvested restricted stock, respectively, which are considered anti-dilutive for purposes of calculating diluted earnings per share. The six months ended June 30, 2015 and 2014 include 1,509,533 and 1,510,154 shares of unvested restricted stock, respectively, which are considered anti-dilutive for purposes of calculating diluted earnings per share.

 

10

Exhibit 99.2

 

Supplemental Operating and Financial Data : June 30, 2015

 

BioMed Realty Trust, Inc.		Investor Relations
17190 Bernardo Center Drive		Corporate Communications Contact:
San Diego, CA 92128		Rick Howe
t 858.485.9840 f 858.485.9843		Senior Director, Corporate Communications
biomedrealty.com		[email protected]

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TABLE OF CONTENTS

JUNE 30, 2015

 

 

		Page						Page
Second Quarter Highlights			3			Debt Summary			20
Investor Information			4			Debt Analysis			21	*
Equity Research Coverage			5			Debt Maturities			22	*
Financial and Operating Highlights			6	*		Market Summary			23	*
2015 Guidance			7	*		Property Listing			24-27	*
Portfolio Summary			8	*		Development and Redevelopment			28	*
Consolidated Balance Sheets			9			Capital Expenditures			29	*
Consolidated Statements of Income			10			Lease Expirations			30
Balance Sheet / Income Statement Detail			11			Expirations by Market			31
FFO, CFFO and AFFO			12	*		Future Lease Commencements			32
FFO, CFFO and AFFO per Share			13	*		20 Largest Tenants			33
Reconciliation of EBITDA and Adjusted EBITDA			14			Leasing Activity			34	*
Reconciliation of Net Operating Income			15			Leasing Data			35	*
Same Property Analysis - Three Months Ended			16	*		Acquisitions and Dispositions			36
Same Property Analysis - Six Months Ended			17	*		Non-GAAP Financial Measure Definitions			37	*
Interest Expense and Coverage Ratios			18	*		Definitions			38
Capital Structure			19

This Supplemental Operating and Financial Data package contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, without limitation: general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate); adverse economic or real estate developments in the life science industry or the company’s target markets; risks associated with the availability and terms of financing, the use of debt to fund acquisitions, developments and other investments, and the ability to refinance indebtedness as it comes due; failure to maintain the company’s investment grade credit ratings with the ratings agencies; failure to manage effectively the company’s growth and expansion into new markets, or to complete or integrate acquisitions and developments successfully; reductions in asset valuations and related impairment charges; risks and uncertainties affecting property development and construction; risks associated with tax credits, grants and other subsidies to fund development activities; risks associated with downturns in foreign, domestic and local economies, changes in interest rates and foreign currency exchange rates, and volatility in the securities markets; ownership of properties outside of the United States that subject the company to different and potentially greater risks than those associated with the company’s domestic operations; risks associated with the company’s investments in loans, including borrower defaults and potential principal losses; potential liability for uninsured losses and environmental contamination; risks associated with security breaches and other disruptions to the company’s information technology networks and related systems; risks associated with the company’s potential failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended, and possible adverse changes in tax and environmental laws; and risks associated with the company’s dependence on key personnel whose continued service is not guaranteed. For a further list and description of such risks and uncertainties, see the reports filed by the company with the Securities and Exchange Commission, including the company’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

All amounts shown in this report are unaudited.

This Supplemental Operating and Financial Data package is not an offer to sell or solicitation to buy securities of BioMed Realty Trust, Inc. Any offers to sell or solicitations to buy securities of BioMed Realty Trust, Inc. shall be made only by means of a prospectus approved for that purpose.

 

*	New or changed page for Q2 2015 Supplement

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SECOND QUARTER HIGHLIGHTS

JUNE 30, 2015

 

Financial Results

 

•

Core Funds from Operations (CFFO) and Funds from Operations (FFO), calculated in accordance with standards established by NAREIT, for the second quarter were $0.58 per diluted share. These amounts include realized gains totaling $50.5 million, or $0.24 per diluted share, net of an allocation of income attributable to noncontrolling interests, primarily from the sale of equity investments in a single life science company. CFFO and FFO for the same period in 2014 were $0.40 per diluted share.

 

•

Total revenues for the second quarter were approximately $158.0 million, compared to approximately $171.2 million for the same period in 2014. Rental revenues for the second quarter were approximately $116.3 million, compared to $120.9 million for the same period in 2014.

 

•

Adjusted funds from operations (AFFO) was $0.48 per diluted share for the quarter, compared to $0.32 per diluted share for the same period in 2014. The company reported net income attributable to common stockholders for the quarter of approximately $23.6 million, or $0.11 per diluted share, compared to $18.6 million, or $0.10 per diluted share, for the same period in 2014.

Portfolio Highlights

Second quarter leasing was comprised of:

 

•

28 new leases totaling approximately 1.0 million square feet, highlighted by new and expanded tenant relationships with:

 

•

Alnylam Pharmaceuticals for approximately 295,000 square feet at the 675 West Kendall Street property in Cambridge, Massachusetts;

 

•

Illumina for a 155,000 square foot build-to-suit lease transaction at Granta Park in Cambridge, United Kingdom;

 

•

Regeneron Pharmaceuticals for approximately 116,200 square feet at the Landmark at Eastview campus in Tarrytown, New York;

 

•

Wake Forest University for approximately 115,300 square feet at the Wake 60 property in Winston-Salem, North Carolina;

 

•

Duke University for 100,000 square feet at the Chesterfield Building in Durham, North Carolina; and

 

•

Eli Lilly for approximately 22,400 square feet at the 450 Kendall Street and 60 Hampshire properties in Cambridge, Massachusetts.

 

•

18 lease renewals and extensions totaling approximately 264,800 square feet.

During the second quarter, the company completed construction of two development projects, which were delivered on time and on budget, including:

 

•

An approximately 63,500 square foot laboratory and office building at 450 Kendall Street in Cambridge, Massachusetts, located in close proximity to three of the company’s properties in the heart of the Kendall Square: 500 Kendall Street, 675 West Kendall Street and 650 East Kendall Street.

 

•

An approximately 42,400 square foot laboratory and office build-to-suit development which is 100% leased to a subsidiary of Takeda Pharmaceutical Company at 430 Cambridge Science Park in Cambridge, United Kingdom.

About BioMed Realty Trust

 

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INVESTOR INFORMATION

JUNE 30, 2015

 

(In thousands, except per share amounts)

 

Company Information
Corporate Headquarters		Trading Symbol		Transfer Agent		Stock Exchange Listing
17190 Bernardo Center Drive		BMR		Computershare Shareowner Services LLC		New York Stock Exchange
San Diego, CA 92128				250 Royall Street
(858) 485-9840				Canton, MA 02021
(858) 485-9843 (fax)				(877) 296-3711
Please visit our corporate website at: www.biomedrealty.com
Board of Directors		Executive Leadership Team
Alan D. Gold		Alan D. Gold		Karen A. Sztraicher		John P. Bonanno
Chairman		Chairman, President and		Executive Vice President,		Executive Vice President,
Daniel M. Bradbury		Chief Executive Officer		Asset Management		Development & Investments
William R. Brody, M.D., Ph.D.		Gary A. Kreitzer		Jonathan P. Klassen		James R. Berens
Gary A. Kreitzer		Executive Vice President, Director		Executive Vice President,		President
Theodore D. Roth		Greg N. Lubushkin		General Counsel		Wexford Science & Technology
Janice. L. Sears		Chief Financial Officer

 

Common Stock Data (NYSE: BMR)		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
High price		$	22.93			$	25.11			$	22.03			$	22.62			$	22.47
Low price		$	19.16			$	20.26			$	19.87			$	19.92			$	19.94
Average closing price		$	20.71			$	22.97			$	21.30			$	21.73			$	21.24
Closing price		$	19.34			$	22.66			$	21.54			$	20.20			$	21.83
Dividends per share - annualized		$	1.04			$	1.04			$	1.04			$	1.00			$	1.00
Closing dividend yield - annualized			5.4	%			4.6	%			4.8	%			5.0	%			4.6	%
Total common shares and units outstanding			208,966				208,968				202,847				202,860				197,931
Closing market value of outstanding shares and units		$	4,041,402			$	4,735,215			$	4,369,337			$	4,097,785			$	4,320,839
Consolidated Debt			2,897,073				2,758,530				2,712,900				2,845,686				2,841,063
Total market capitalization		$	6,938,475			$	7,493,745			$	7,082,237			$	6,943,471			$	7,161,902

 

Tentative Schedule for Quarterly Results
Third Quarter 2015		October 28, 2015
Fourth Quarter 2015		February 3, 2016
First Quarter 2016		May 4, 2016
Second Quarter 2016		August 3, 2016

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EQUITY RESEARCH COVERAGE

JUNE 30, 2015

 

 

Canaccord Genuity		Paul Morgan Joseph Ng		(415) 310-7269 (212) 389-8096		[email protected] [email protected]
Cowen and Company		James Sullivan Tom Catherwood		(646) 562-1380 (646) 562-1382		[email protected] [email protected]
Green Street Advisors		Michael Knott Kevin Tyler		(949) 640-8780 (949) 640-8780		[email protected] [email protected]
Jefferies & Co.		Omotayo Okusanya		(212) 336-7076		[email protected]
KeyBanc Capital Markets		Jordan Sadler Craig Mailman		(917) 368-2280 (917) 368-2316		[email protected] [email protected]
Mizuho Securities		Richard Anderson		(212) 205-8445		[email protected]
Morgan Stanley		Vikram Malhotra Landon Park		(212) 761-7064 (212) 761-6368		[email protected] [email protected]
Raymond James		Paul Puryear William Crow		(727) 567-2253 (727) 567-2594		[email protected] [email protected]
Robert W. Baird & Co.		David Rodgers Stephen Dye		(216) 737-7341 (312) 609-5480		[email protected] [email protected]
Stifel, Nicolaus & Company, Inc.		Daniel Bernstein Elizabeth Moran		(443) 224-1351 (443) 224-1353		[email protected] [email protected]
UBS Securities		Ross Nussbaum Nick Yulico		(212) 713-2484 (212) 713-3402		[email protected] [email protected]
Wells Fargo Securities		Brendan Maiorana Young Ku		(443) 263-6516 (443) 263-6564		[email protected] [email protected]

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FINANCIAL AND OPERATING HIGHLIGHTS

JUNE 30, 2015

 

(In thousands, except per share and ratio amounts)

 

		Three Months Ended																				Six Months Ended
		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14				6/30/15				6/30/14
Selected Operating Data:
Rental revenues		$	116,260			$	117,520			$	121,973			$	122,838			$	120,924			$	233,780			$	240,950
Other revenues			141				16,534				2,930				3,452				9,957				16,675				20,072
Total revenues			157,974				178,010				165,656				168,916				171,161				335,984				340,037
Net operating income - GAAP (1)			102,704				119,363				112,212				114,017				117,525				222,067				233,878
Net operating income - cash basis (1)			98,681				116,766				111,439				113,662				115,995				215,448				230,233
Other income/(expense)			64,021				12,884				(184	)			2,148				1,027				76,905				9,190
General and administrative expense			12,531				12,789				12,162				12,768				12,443				25,320				24,385
Interest expense, net			19,315				21,395				21,924				22,215				23,131				40,710				51,141
Capitalized interest			8,191				6,781				6,143				6,120				5,423				14,971				9,614
General and administrative expense / Total revenues			7.9	%			7.2	%			7.3	%			7.6	%			7.3	%			7.5	%			7.2	%
Net income available to common stockholders (2)			23,578				17,345				140,349				15,960				18,636				40,923				37,469
FFO - diluted (3)			120,811				85,259				73,157				83,695				83,378				206,070				83,383
CFFO - diluted (3)			121,911				85,723				74,117				84,182				84,512				207,634				84,633
AFFO - diluted (3)			100,218				75,704				56,962				73,121				67,471				175,922				79,400
Selected Balance Sheet Data:
Investments in real estate, gross		$	6,634,014			$	6,517,174			$	6,363,014			$	6,473,731			$	6,362,100			$	6,634,014			$	6,362,100
Investments in real estate, net			5,607,912				5,517,629				5,416,575				5,535,115				5,474,648				5,607,912				5,474,648
Cash and cash equivalents			45,329				64,958				46,659				33,864				39,004				45,329				39,004
Total assets			6,338,209				6,308,418				6,170,886				6,238,312				6,159,737				6,338,209				6,159,737
Total debt			2,897,073				2,758,530				2,712,900				2,845,686				2,841,063				2,897,073				2,841,063
Total liabilities			3,257,362				3,151,340				3,100,944				3,228,602				3,207,344				3,257,362				3,207,344
Profitability Measures:
Net income per share - diluted		$	0.11			$	0.08			$	0.70			$	0.08			$	0.10			$	0.20			$	0.19
FFO per share - diluted (3)		$	0.58			$	0.41			$	0.35			$	0.40			$	0.40			$	0.99			$	0.80
CFFO per share - diluted (3)		$	0.58			$	0.41			$	0.36			$	0.40			$	0.40			$	0.99			$	0.81
AFFO per share - diluted (3)		$	0.48			$	0.36			$	0.27			$	0.35			$	0.32			$	0.84			$	0.71
Dividend per share - common stock		$	0.26			$	0.26			$	0.26			$	0.25			$	0.25			$	0.52			$	0.50
CFFO payout ratio (4)			44.8	%			63.4	%			72.2	%			62.5	%			62.5	%			52.5	%			61.7	%
AFFO payout ratio (4)			54.2	%			72.2	%			96.3	%			71.4	%			78.1	%			61.9	%			70.4	%
Financial Ratios:
EBITDA (5)		$	105,615			$	107,159			$	229,158			$	105,677			$	104,445
Adjusted EBITDA (5)			141,299				117,508				100,712				106,103				104,940
Net Debt / Adjusted EBITDA (5) (6)			5.0				5.7				6.5				6.6				6.7
Interest coverage			8.4				6.2				5.2				5.4				5.2
Fixed charge coverage			7.3				5.5				4.7				4.9				4.7
Debt / Total assets			45.7	%			43.7	%			44.0	%			45.6	%			46.1	%
Debt / Total gross assets			39.3	%			37.7	%			38.1	%			39.7	%			40.3	%
Debt / Total capitalization			41.8	%			36.8	%			38.3	%			41.0	%			39.7	%

 

(1)	See page 15 for detail of net operating income - GAAP and net operating income - cash basis. For definitions and discussions see page 37.

(2)	For the three months ended December 31, 2014, amount includes $136.6 million related to the gain on sale of the Company’s 9911 Belward Campus Drive property in Rockville, Maryland.

(3)	For definitions and discussion of FFO, CFFO and AFFO, see page 37. For a quantitative reconciliation of the differences between FFO, CFFO, AFFO and net income available to common stockholders, see page 12.

(4)	See page 13 for detail of the CFFO and AFFO payout ratios.

(5)	For definitions and discussion of EBITDA and Adjusted EBITDA, see page 37. For a quantitative reconciliation of the differences between EBITDA, Adjusted EBITDA and net income available to common stockholders, page 14.

(6)

Adjusted EBITDA is calculated by adding to EBITDA: (a) noncontrolling interests in our operating partnership, (b) non-cash adjustments for securities, (c) losses from sales of real estate and (d) executive severance and by subtracting from EBITDA gains from sales of real estate, on an annualized basis. See page 14 for detail.

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2015 GUIDANCE

JUNE 30, 2015

 

(Dollars in thousands)

 

		FFO and CFFO Per Diluted Share Guidance
		(low to high)
Projected Net Income per Diluted Share Available to Common Stockholders		$0.36 - $0.42
Add: Impairment of real estate, net		$0.16
Real estate depreciation and amortization		$1.21
Noncontrolling interests in operating partnership		$0.01
Projected FFO per diluted Share		$1.74 - $1.80
Add: Acquisition-related expenses		$0.01
Projected CFFO per diluted Share		$1.75 - $1.81
Weighted-average common shares - EPS		208.0 million
Weighted-average common shares - FFO		209.0 million
		Major Assumptions
GAAP Rental Revenues		$475,000 - $505,000
Interest Expense		$81,000 - $91,000
Capitalized Interest		$27,000 - $31,000
General & Administrative Expense		$49,000 - $51,000
Tenant Recovery Percentage		75% - 78%
BioMed Ventures Investment Gains, net (1)		$76,700
Termination Income, net (2)		$16,200
2015 FY Leasing
FY Net Absorption Operating Portfolio Target		350,000 - 600,000 SF
(Less: Q1 / Q2 Actual) (3)		(100,000 SF)
Implied Q3 / Q4 Net Absorption		250,000 - 500,000 SF
Add: Q3 / Q4 Expirations (excludes month-to-month)		369,000 SF
(Less: Q3 / Q4 Forward Leasing Deliveries)		(110,000 SF)
Implied Q3 / Q4 Gross Leasing Operating Portfolio		509,000 - 759,000 SF
Add: Q1 / Q2 Actual Gross Leasing (3)		1.7 million SF
Impled FY Gross Leasing Operating Portfolio		2.2 - 2.45 million SF
Development Portfolio Gross Leasing		150,000 - 250,000 SF
Subsequent Development / Redevelopment Gross Leasing		255,000 - 355,000 SF
FY Total Gross Leasing		2.6 - 3.05 million SF
Same Property Assumptions (Rolling Four Quarters)
Q3 2015 Cash NOI YOY Comparison		(6%) - (4%)
Q4 2015 Cash NOI YOY Comparison		(2%) - 0%
Q1 2016 Cash NOI YOY Comparison		5% - 7%
Q2 - Q4 2016 Cash NOI YOY Comparison		10%+/-
Capital Assumptions (4)
Dispositions
Q3 / Q4 2015		$15,000 - $40,000
2016		$125,000 - $150,000
Unsecured Bond Issuance (Second Half of 2015)		$400,000 - $600,000
Unsecured Bond Issuance (First Half of 2016)		$400,000 - $600,000
2015 Future Development/Redevelopment Portfolio Funding Estimate (4) (5)		$200 - $250 million
Operating Portfolio - Leasing Capital (4)		$70 - $95 million
Signed Leases		$50 - $60 million
Speculative		$20 - $35 million

Note: The company’s 2015 FFO and CFFO estimates reflect the impact of previously announced new investments and dispositions. The foregoing estimates also include the impact of: (i) lease terminations recorded through the six months ended June 30, 2015, aggregating $16.2 million, or $0.08 per diluted share, (ii) investment gains and losses, net of an allocation of income attributable to noncontrolling interests, estimated for the full year 2015 to be approximately $76.7 million, or $0.37 per diluted share, and (iii) the impact of the new development project in Providence, Rhode Island. These estimates also do not include the effect of any other lease termination revenue or investment gains or losses. The company continues to target new investment opportunities, including acquisitions and new development projects; however, the company’s 2015 FFO and CFFO estimates do not reflect the impact of any other future new investments (acquisitions or development), or related financing activity, as the impact of such investments may vary significantly based on the nature of these investments, timing and other factors. The foregoing estimates are forward-looking and reflect management’s view of current and future market conditions, including certain assumptions with respect to leasing activity, rental rates, occupancy levels, timing of revenue recognition, interest rates, financings, acquisitions, dispositions, development and redevelopment and the amount and timing of acquisitions, development and redevelopment activities. The company’s actual results may differ materially from these estimates.

 

(1)	Represents the impact of gains recorded during the six months ended June 30, 2015 and expected sales in the second half of 2015 from the sale of investments in life science companies, net of an allocation of income attributable to noncontrolling interests.

(2)	Does not include the effect of any other revenue or income (or losses) that might arise from lease terminations other than the impact of lease termination revenue recorded during the six months ended June 30, 2015.

(3)	Excludes 16,798 SF at 450 Kendall from the totals on pg. 34. The property was placed into the operating portfolio in 2Q15, but was a development asset as of 1/1/15 for the purposes of gross leasing and net absorption assumptions.

(4)	Represents the period covering July through December 2015.

(5)	Excludes capitalized interest and capitalized operating expenses.

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PORTFOLIO SUMMARY

JUNE 30, 2015

 

 

						Current
		Gross				Annualized				Percent of								Rentable				Leased
		Book Value				Base Rent (1)				CABR				Buildings				Square Feet				Square Feet				Leased %
		(In thousands)				(In thousands)
Operating portfolio
Boston		$	1,863,823			$	156,152				28.0	%			27				3,088,594				2,689,900				87.1	%
San Francisco			845,115				62,003				11.1	%			30				2,861,061				2,505,129				87.6	%
San Diego			779,450				62,159				11.1	%			40				1,918,547				1,815,609				94.6	%
Maryland			546,101				50,209				9.0	%			19				1,689,783				1,587,548				93.9	%
New York			413,115				46,490				8.3	%			15				1,490,461				1,460,321				98.0	%
Cambridge, UK			192,189				18,283				3.3	%			12				514,644				512,425				99.6	%
North Carolina			186,982				14,588				2.6	%			5				858,328				843,477				98.3	%
Pennsylvania
Philadelphia			190,227				13,282				2.4	%			2				489,098				481,781				98.5	%
Suburban PA			83,601				6,194				1.1	%			5				393,149				263,974				67.1	%
Seattle
Downtown Seattle			253,757				14,033				2.5	%			3				368,526				314,434				85.3	%
Suburban Seattle			38,546				2,197				0.4	%			2				118,799				97,966				82.5	%
University Related (2)			439,361				40,559				7.3	%			14				1,773,415				1,597,386				90.1	%
Total operating portfolio		$	5,832,267			$	486,148				87.1	%			174				15,564,405				14,169,950				91.0	%
Active Redevelopment (4)
San Diego		$	54,907			$	—				—				3				182,866				—				—
Active new construction
New York		$	167,351			$	13,369				2.4	%			2				297,000				297,000				100.0	%
San Francisco			34,855				11,829				2.1	%			2				360,000				360,000				100.0	%
San Diego			62,024				—				—				3				316,000				—				—
Cambridge, UK			351				6,508				1.2	%			1				155,000				155,000				100.0	%
North Carolina			25,823				7,647				1.4	%			3				567,712				383,250				67.5	%
Seattle			36,373				2,161				0.4	%			1				122,702				46,407				37.8	%
University Related (2)			145,801				12,241				2.2	%			1				510,419				505,683				99.1	%
Total active new construction		$	472,578			$	53,756				9.6	%			13				2,328,833				1,747,340				75.0	%
Total Consolidated Portfolio		$	6,359,752			$	539,904				96.8	%			190				18,076,104				15,917,290				88.1	%
Unconsolidated partnership portfolio (3)
Boston		$	22,579			$	16,083				2.9	%			2				282,217				281,987				99.9	%
San Diego			11,744				2,037				0.4	%			1				72,863				72,863				100.0	%
Maryland			146				—				—				—				—				—				—
Total unconsolidated partnership portfolio		$	34,469			$	18,120				3.2	%			3				355,080				354,850				99.9	%
Total Portfolio		$	6,394,221			$	558,024				100.0	%			193				18,431,184				16,272,140				88.3	%
Total Land bank		$	274,263				—				—				—				6,231,500				—				—
Total Portfolio Including Land Bank		$	6,668,484																24,662,684

 

(1)	Current annualized base rent is the monthly contractual rent as of the current quarter ended, or if rent has not yet commenced, the first monthly rent payment due at each rent commencement date, multiplied by 12 months.

(2)	Includes properties within our University platform that are not located in other markets noted above. See pages 24 - 27 for property listing.

(3)	See page 27 for detail of the unconsolidated partnership portfolio.

(4)	Includes Towne Centre Technology Park, which was acquired in May 2015. Sidney Reseach Park properties remain within the operating portfolio.

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CONSOLIDATED BALANCE SHEETS

JUNE 30, 2015

 

(In thousands)

 

		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Assets
Investments in real estate:
Land		$	651,201			$	643,041			$	704,958			$	701,977			$	706,887
Buildings and improvements			4,956,823				4,909,684				4,877,135				5,018,091				4,957,038
Land under development			248,225				225,846				151,242				158,389				155,206
Construction in progress			777,766				738,603				629,679				595,273				542,970
Investments in real estate, gross			6,634,015				6,517,174				6,363,014				6,473,730				6,362,101
Accumulated depreciation			(1,026,103	)			(999,545	)			(946,439	)			(938,615	)			(887,453	)
Investments in real estate, net			5,607,912				5,517,629				5,416,575				5,535,115				5,474,648
Investments in unconsolidated partnerships			34,469				34,978				35,291				36,275				32,440
Cash and cash equivalents			45,329				64,958				46,659				33,864				39,004
Accounts receivable, net			10,740				13,518				14,631				18,843				9,686
Accrued straight-line rents, net			169,592				164,049				163,716				183,904				181,705
Deferred leasing costs, net			229,290				219,549				219,713				224,824				236,848
Other assets			240,877				293,737				274,301				205,487				185,406
Total assets		$	6,338,209			$	6,308,418			$	6,170,886			$	6,238,312			$	6,159,737
Liabilities and Equity
Liabilities:
Mortgage notes payable, net		$	488,945			$	503,200			$	496,757			$	478,543			$	456,034
Exchangeable senior notes, net			—				—				95,678				95,678				180,000
Unsecured senior notes, net			1,294,614				1,294,255				1,293,903				1,293,572				1,293,246
Unsecured senior term loans			750,856				741,626				749,326				755,876				764,106
Unsecured line of credit			369,000				226,000				84,000				229,000				155,000
Accounts payable, accrued expenses, and other liabilities			353,947				386,259				381,280				375,933				358,958
Total liabilities			3,257,362				3,151,340				3,100,944				3,228,602				3,207,344
Equity:
Stockholders’ equity:
Common stock			2,036				2,036				1,975				1,975				1,925
Additional paid-in capital			3,750,959				3,746,823				3,649,235				3,643,957				3,557,886
Accumulated other comprehensive loss, net			(24,544	)			14,804				(2,214	)			(20,915	)			(24,088	)
Dividends in excess of earnings			(710,913	)			(681,564	)			(645,983	)			(675,763	)			(642,360	)
Total stockholders’ equity			3,017,538				3,082,099				3,003,013				2,949,254				2,893,363
Noncontrolling interests			63,309				74,979				66,929				60,456				59,030
Total equity			3,080,847				3,157,078				3,069,942				3,009,710				2,952,393
Total liabilities and equity		$	6,338,209			$	6,308,418			$	6,170,886			$	6,238,312			$	6,159,737

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CONSOLIDATED STATEMENTS OF INCOME

JUNE 30, 2015

 

(In thousands, except share and per share data)

 

		Three Months Ended																				Six Months Ended
		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14				6/30/15				6/30/14
Revenues:
Rental		$	116,260			$	117,520			$	121,973			$	122,838			$	120,924			$	233,780			$	240,950
Tenant recoveries			41,573				43,956				40,753				42,626				40,280				85,529				79,015
Other revenue			141				16,534				2,930				3,452				9,957				16,675				20,072
Total revenues			157,974				178,010				165,656				168,916				171,161				335,984				340,037
Expenses:
Rental operations			55,270				58,647				53,444				54,899				53,636				113,917				106,159
Depreciation and amortization			61,272				67,080				64,744				64,452				62,736				128,352				125,145
General and administrative			12,531				12,789				12,162				12,768				12,443				25,320				24,385
Executive severance			—				9,891				4,380				—				—				9,891				—
Acquisition-related expenses			1,100				464				960				487				1,134				1,564				2,384
Total expenses			130,173				148,871				135,690				132,606				129,949				279,044				258,073
Income from operations			27,801				29,139				29,966				36,310				41,212				56,940				81,964
Equity in net income/(loss) of unconsolidated partnerships			139				153				160				733				(10	)			292				(148	)
Interest expense, net			(19,315	)			(21,395	)			(21,924	)			(22,215	)			(23,131	)			(40,710	)			(51,141	)
Impairment of real estate (1)			(35,071	)			—				—				—				—				(35,071	)			—
Gain on sale of real estate (2)			—				—				136,609				—				—				—				—
Other income/(expense) (3)			64,021				12,884				(184	)			2,148				1,027				76,905				9,190
Net income			37,575				20,781				144,627				16,976				19,098				58,356				39,865
Net income attributable to noncontrolling interests			(13,997	)			(3,436	)			(4,278	)			(1,016	)			(462	)			(17,433	)			(2,396	)
Net income available to common stockholders		$	23,578			$	17,345			$	140,349			$	15,960			$	18,636			$	40,923			$	37,469
Net income per share available to common stockholders:
Basic earnings per share		$	0.11			$	0.08			$	0.71			$	0.08			$	0.10			$	0.20			$	0.19
Diluted earnings per share		$	0.11			$	0.08			$	0.70			$	0.08			$	0.10			$	0.20			$	0.19
Weighted-average common shares outstanding:
Basic			202,055,325				200,789,795				196,017,579				194,022,619				191,003,248				201,423,721				190,954,827
Diluted			207,458,236				206,536,148				208,528,196				199,574,893				196,800,354				206,997,405				196,673,649

 

(1)	Includes impairment of King of Prussia property that was sold in May 2015.

(2)	Includes gain on sale of 9911 Belward Campus Drive property in December 2014.

(3)	See page 11 for detail.

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BALANCE SHEET/INCOME STATEMENT DETAIL

JUNE 30, 2015

 

(In thousands)

 

		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Investment in equity securities, cost basis		$	68,276			$	58,204			$	53,708			$	38,334			$	30,250
Unrealized gain on equity securities (1)			17,857				71,662				48,341				22,001				18,451
Investment in equity securities, net			86,133				129,866				102,049				60,335				48,701
Restricted cash			18,202				24,019				30,057				8,297				9,096
Acquired above-market leases, net			10,240				10,692				11,207				12,197				13,262
Acquired below-market ground lease, net			21,569				24,669				24,975				25,256				25,575
Deferred loan costs, net			13,683				14,851				16,154				16,997				18,652
Lease incentives, net			23,090				23,790				24,414				23,907				19,988
Prepaid ground rent			18,286				18,333				18,380				18,380				18,206
Other			49,674				47,517				47,065				40,118				31,926
Other assets		$	240,877			$	293,737			$	274,301			$	205,487			$	185,406
Security deposits		$	14,649			$	14,312			$	14,931			$	14,766			$	14,348
Dividends and distributions payable			54,331				54,332				52,740				50,715				49,483
Accounts payable, accrued expenses and other liabilities			247,266				278,553				276,176				271,634				253,259
Derivative instruments			2,256				2,632				1,635				1,328				2,909
Acquired below-market leases, net			35,445				36,430				35,798				37,490				38,959
Accounts payable, accrued expenses and other liabilities		$	353,947			$	386,259			$	381,280			$	375,933			$	358,958
		Three Months Ended
		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Lease termination revenue		$	28			$	16,150			$	2,801			$	3,300			$	1,023
Construction loan revenue (2)			—				—				—				—				8,653
Other revenue			113				384				129				152				281
Other revenue		$	141			$	16,534			$	2,930			$	3,452			$	9,957
Rental operations expenses		$	40,983			$	44,904			$	38,902			$	39,359			$	39,511
Real estate taxes			14,287				13,743				14,542				15,540				14,125
Rental operations		$	55,270			$	58,647			$	53,444			$	54,899			$	53,636
Gain on extinguishment of debt		$	15			$	—			$	—			$	—			$	—
Gain/(loss) on derivative instruments			189				(170	)			276				(190	)			(270	)
Income on investment securities, net			63,814				13,412				843				2,972				496
Realized gain/(loss) on foreign currency transactions			218				(211	)			(167	)			(96	)			100
Income tax (expense)/benefit			(215	)			(147	)			(1,136	)			(538	)			701
Other income/(expense)		$	64,021			$	12,884			$	(184	)		$	2,148			$	1,027

 

(1)	Includes $15.8 million in unrealized gains that increased by $3.6 million after June 30, 2015.

(2)	Construction loan revenue for the three months ended June 30, 2014 includes a prepayment fee of approximately $7.5 million, net of deferred loan fees write-offs.

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FFO, CFFO AND AFFO (1)

JUNE 30, 2015

 

(In thousands)

 

		Three Months Ended																				Six Months Ended
		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14				6/30/15				6/30/14
Reconciliation of net income available to common stockholders to funds from operations excluding acquisition-related expenses (CFFO):
Net income available to common stockholders		$	23,578			$	17,345			$	140,349			$	15,960			$	18,636			$	40,923			$	37,469
Adjustments:
Gain on sale of real estate (2)			—				—				(136,609	)			—				—				—				—
Impairment of real estate (3)			35,071				—				—				—				—				35,071				—
Noncontrolling interests in operating partnership			613				457				3,782				429				514				1,070				1,035
Depreciation & amortization - unconsolidated partnerships			1,050				1,006				821				2,312				403				2,056				776
Depreciation & amortization - consolidated entities			61,272				67,080				64,744				64,452				62,736				128,352				125,145
Depreciation & amortization - allocable to noncontrolling interests of consolidated joint ventures			(773	)			(812	)			(847	)			(699	)			(599	)			(1,585	)			(1,040	)
Funds from operations (FFO) - basic		$	120,811			$	85,076			$	72,240			$	82,454			$	81,690			$	205,887			$	163,385
Interest expense - exchangeable senior notes due 2030 (4)			—				183				917				1,241				1,688				183				3,375
FFO - diluted		$	120,811			$	85,259			$	73,157			$	83,695			$	83,378			$	206,070			$	166,760
Acquisition-related expenses			1,100				464				960				487				1,134				1,564				2,384
CFFO - diluted		$	121,911			$	85,723			$	74,117			$	84,182			$	84,512			$	207,634			$	169,144
Reconciliation of CFFO to adjusted funds from operations (AFFO):
Adjustments:
Recurring capital expenditures and second generation tenant improvements			(21,600	)			(15,782	)			(22,591	)			(17,007	)			(21,553	)			(37,382	)			(29,284	)
Leasing commissions (5)			(2,205	)			(3,556	)			(2,078	)			(1,741	)			(1,929	)			(5,761	)			(3,839	)
Gain on extinguishment of debt			(15	)			—				—				—				—				(15	)			—
Non-cash debt adjustments			2,686				2,790				2,950				2,850				3,106				5,476				6,393
(Gain)/loss on derivative instruments			(189	)			170				(276	)			190				270				(19	)			108
Depreciation included in general and administrative expense			838				844				771				848				757				1,682				1,497
Non-cash equity compensation			3,347				8,007				4,625				3,658				3,729				11,354				7,479
Straight line rents			(5,889	)			(3,781	)			(1,941	)			(1,174	)			(1,949	)			(9,670	)			(5,143	)
Amortization of lease incentives			1,004				1,016				910				656				561				2,020				1,118
Fair-value lease revenue			(520	)			(471	)			(506	)			(184	)			(442	)			(991	)			(727	)
Deferred revenue (6)			520				343				395				379				311				863				590
Share of unconsolidated partnership adjustments (7)			(90	)			46				281				218				18				(44	)			36
Adjustments for noncontrolling interests			420				355				305				246				80				775				121
AFFO - diluted		$	100,218			$	75,704			$	56,962			$	73,121			$	67,471			$	175,922			$	147,493

 

(1)	For definitions and discussion of FFO, CFFO and AFFO, see page 37.

(2)	Includes gain on sale of 9911 Belward Campus Drive property in December 2014.

(3)	Includes impairment of King of Prussia property that was sold in May 2015.

(4)

The calculations of FFO, CFFO and AFFO per share diluted include the assumed issuance of common stock pursuant to the exchange provision of the exchangeable senior notes due 2030, which is dilutive based on the “if converted” method for all periods presented since the original issuance in January 2010. Under the if converted method, if the add back of interest charges relating to the exchangeable senior notes due 2030 divided by the corresponding number of common shares issuable upon exchange is dilutive, the potentially issuable shares are included in the calculations of FFO, CFFO and AFFO per diluted share.

(5)	Leasing commissions 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 for AFFO purposes.

(6)	Consists of rental cash receipts deferred for GAAP purposes.

(7)	Share of unconsolidated partnership adjustments includes the Company’s share of amortization of deferred loan costs, lease incentives, straight line rents and fair-value lease revenue.

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FFO, CFFO AND AFFO PER SHARE (1)

JUNE 30, 2015

 

(In thousands, except share, per share and ratio amounts)

 

		Three Months Ended																				Six Months Ended
		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14				6/30/15				6/30/14
FFO - basic		$	120,811			$	85,076			$	72,240			$	82,454			$	81,690			$	205,887			$	163,385
FFO - diluted			120,811				85,259				73,157				83,695				83,378				206,070				166,760
CFFO - diluted			121,911				85,723				74,117				84,182				84,512				207,634				169,144
AFFO - diluted			100,218				75,704				56,962				73,121				67,471				175,922				147,493
FFO per share - basic		$	0.58			$	0.41			$	0.36			$	0.41			$	0.41			$	0.99			$	0.82
FFO per share - diluted (2)			0.58				0.41				0.35				0.40				0.40				0.99				0.80
CFFO per share - diluted (2)			0.58				0.41				0.36				0.40				0.40				0.99				0.81
AFFO per share - diluted (2)			0.48				0.36				0.27				0.35				0.32				0.84				0.71
Dividends and distributions declared per common share (4)		$	0.26			$	0.26			$	0.26			$	0.25			$	0.25			$	0.52			$	0.50
CFFO payout ratio			44.8	%			63.4	%			72.2	%			62.5	%			62.5	%			52.5	%			61.7	%
AFFO payout ratio			54.2	%			72.2	%			96.3	%			71.4	%			78.1	%			61.9	%			70.4	%
CFFO payout ratio - trailing twelve months			58.9	%			65.0	%			64.3	%			64.1	%			66.6	%
AFFO payout ratio - trailing twelve months			70.1	%			77.9	%			75.9	%			73.0	%			75.2	%
Weighted-average common shares and units outstanding diluted (3)			208,969,199				208,039,538				202,850,109				201,059,541				198,309,809				208,506,938				198,183,803
Weighted-average common shares and units outstanding diluted - FFO, CFFO and AFFO			208,969,199				209,233,553				208,528,196				208,649,141				208,887,941				209,100,647				208,761,935

 

(1)	For definitions and discussion of FFO, CFFO and AFFO, see page 37.

(2)

The calculations of FFO, CFFO and AFFO per share diluted include the assumed issuance of common stock pursuant to the exchange provision of the exchangeable senior notes due 2030, which is dilutive based on the “if converted” method for all periods presented since the original issuance in January 2010. Under the if converted method, if the add back of the exchangeable senior notes due 2030 divided by the corresponding number of common shares issuable upon exchange is dilutive, the potentially issuable shares are included in the interest charges relating to calculations of FFO, CFFO and AFFO per diluted share.

(3)

The three months ended June 30, 2015, March 31, 2015, September 30, 2014 and June 30, 2014 include 1,510,963, 1,503,390, 1,484,648, and 1,509,455 shares of unvested restricted stock, respectively, which are considered anti-dilutive for purposes of calculating diluted earnings per share. The three months ended December 31, 2014 include 1,427,056 shares of unvested restricted stock which are considered dilutive for purposes of calculating diluted earnings per share. The six months ended June 30, 2015 and June 30, 2014 include 1,509,533 and 1,510,154 shares of unvested restricted stock, respectively, which are considered anti-dilutive for purposes of calculating diluted earnings per share.

(4)	Excludes the special dividend of $0.30 per share paid on December 29, 2014 to stockholders of record as of the close of business on December 22, 2014.

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RECONCILIATION OF EBITDA AND ADJUSTED EBITDA (1)

JUNE 30, 2015

 

(In thousands)

 

		Three Months Ended
		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Reconciliation of net income available to common stockholders to earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA:
Net income available to common stockholders		$	23,578			$	17,345			$	140,349			$	15,960			$	18,636
Interest expense, net			19,315				21,395				21,924				22,215				23,131
Interest expense - unconsolidated partnerships			185				186				184				200				240
Income tax expense/(benefit)			215				147				1,136				538				(701	)
Depreciation & amortization - consolidated entities			61,272				67,080				64,744				64,452				62,736
Depreciation & amortization - unconsolidated partnerships			1,050				1,006				821				2,312				403
EBITDA			105,615				107,159				229,158				105,677				104,445
Noncontrolling interests (2)			613				458				3,783				426				495
Gain on sale of real estate (3)			—				—				(136,609	)			—				—
Impairment of real estate (4)			35,071				—				—				—				—
Executive severance			—				9,891				4,380				—				—
Adjusted EBITDA		$	141,299			$	117,508			$	100,712			$	106,103			$	104,940

 

(1)	For definitions and discussion of EBITDA and Adjusted EBITDA, see page 37.

(2)	Includes noncontrolling interests of operating partnership units, consolidated joint ventures with debt and investment in equity securities.

(3)	Includes gain on sale of 9911 Belward Campus Drive property in December 2014.

(4)	Includes impairment of King of Prussia property that was sold in May 2015.

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RECONCILIATION OF NET OPERATING INCOME (1)

JUNE 30, 2015

 

(In thousands, except ratio amounts)

 

		Three Months Ended
		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Net income		$	37,575			$	20,781			$	144,627			$	16,976			$	19,098
Equity in net (income)/loss of unconsolidated partnerships			(139	)			(153	)			(160	)			(733	)			10
Interest expense, net			19,315				21,395				21,924				22,215				23,131
Gain on sale of real estate (2)			—				—				(136,609	)			—				—
Impairment of real estate (3)			35,071				—				—				—				—
Other (income)/expense			(64,021	)			(12,884	)			184				(2,148	)			(1,027	)
Income from operations			27,801				29,139				29,966				36,310				41,212
Depreciation and amortization			61,272				67,080				64,744				64,452				62,736
General and administrative			12,531				12,789				12,162				12,768				12,443
Executive severance			—				9,891				4,380				—				—
Acquisition-related expenses			1,100				464				960				487				1,134
Consolidated net operating income		$	102,704			$	119,363			$	112,212			$	114,017			$	117,525
Revenues:
Rental		$	116,260			$	117,520			$	121,973			$	122,838			$	120,924
Tenant recoveries			41,573				43,956				40,753				42,626				40,280
Other revenue (4)			141				16,534				2,930				3,452				9,957
Total revenues			157,974				178,010				165,656				168,916				171,161
Expenses:
Rental operations			55,270				58,647				53,444				54,899				53,636
Consolidated net operating income (5)		$	102,704			$	119,363			$	112,212			$	114,017			$	117,525
Consolidated net operating income - cash basis (5) (6)		$	98,681			$	116,766			$	111,439			$	113,662			$	115,995
Operating expense recovery (7)			75.2	%			75.0	%			76.3	%			77.6	%			75.1	%

 

(1)	For a definition and discussion of net operating income and net operating income - cash basis, see page 37.

(2)	Includes gain on sale of 9911 Belward Campus Drive property in December 2014.

(3)	Includes impairment of King of Prussia property that was sold in May 2015.

(4)	Includes lease termination income, see page 11 for detail.

(5)	For discussion of Net Operating Income and Net Operating Income - cash basis, see page 37.

(6)	Consolidated net operating income - cash basis is calculated as (consolidated net operating income - straight line rents - fair value lease revenue - lease incentive revenue - bad debt expense + rental cash receipts deferred for GAAP purposes).

(7)	Operating expense recovery is calculated as (tenant recovery revenues / rental operations).

---

 

SAME PROPERTY ANALYSIS - THREE MONTHS ENDED

JUNE 30, 2015

 

(Dollars in thousands)

 

		Same Property (1)				Previous Same (2)				Total				Development (3)				New Properties (4)				Other (5)				Total
Three Months Ended		6/30/15				6/30/15				6/30/15				6/30/15				6/30/15				6/30/15				6/30/15
Rentable square feet			14,447,759				—				14,447,759				2,810,325				818,020				—				18,076,104
Percent of total portfolio			79.9	%			—				79.9	%			15.5	%			4.5	%			—				100.0	%
Percent leased			90.6	%			—				90.6	%			78.2	%			76.7	%			—				88.1	%
Revenues:
Rental		$	108,781			$	32			$	108,813			$	3,274			$	4,175			$	(2	)		$	116,260
Tenant recoveries			38,374				—				38,374				704				2,209				286				41,573
Other revenues			—				—				—				—				—				141				141
Total revenues			147,155				32				147,187				3,978				6,384				425				157,974
Expenses:
Rental operations			50,047				—				50,047				2,244				2,691				288				55,270
Net operating income / (loss) (8)		$	97,108			$	32			$	97,140			$	1,734			$	3,693			$	137			$	102,704
Less adjustments to cash basis (7)			(2,623	)			—				(2,623	)			(1,064	)			(347	)			11				(4,023	)
Net operating income - cash basis (8)		$	94,485			$	32			$	94,517			$	670			$	3,346			$	148			$	98,681
Rental revenue - cash basis (8)		$	103,991			$	32			$	104,023			$	2,046			$	3,828			$	8			$	109,905
		Same Property (1)				Previous Same (2)				Total				Development (3)				New Properties (4)				Other (5)				Total
Three Months Ended		6/30/14				6/30/14				6/30/14				6/30/14				6/30/14				6/30/14				6/30/14
Rentable square feet			14,447,759				107,231				14,554,990				1,409,960				518,940				—				16,483,890
Percent of total portfolio			87.6	%			—				88.3	%			8.6	%			3.1	%			—				100.0	%
Percent leased			89.6	%			—				89.5	%			83.4	%			98.7	%			—				87.3	%
Revenues:
Rental		$	111,284			$	791			$	112,075			$	5			$	2,631			$	6,213			$	120,924
Tenant recoveries			37,786				219				38,005				—				1,901				374				40,280
Other revenues (6)			—				—				—				—				—				9,957				9,957
Total revenues			149,070				1,010				150,080				5				4,532				16,544				171,161
Expenses:
Rental operations			48,282				517				48,799				595				2,162				2,080				53,636
Net operating income / (loss) (8)		$	100,788			$	493			$	101,281			$	(590	)		$	2,370			$	14,464			$	117,525
Less adjustments to cash basis (7)			(1,824	)			623				(1,201	)			160				(129	)			(360	)			(1,530	)
Net operating income - cash basis (8)		$	98,964			$	1,116			$	100,080			$	(430	)		$	2,241			$	14,104			$	115,995
Rental revenue - cash basis (8)		$	108,263			$	1,414			$	109,677			$	5			$	2,502			$	5,853			$	118,037
Rental Revenues - GAAP basis			(2.2	%)			—				(2.9	%)
Rental Revenues - Cash basis (9)			(3.9	%)			—				(5.2	%)
NOI - GAAP basis			(3.7	%)			—				(4.1	%)
NOI - Cash basis			(4.5	%)			—				(5.6	%)

 

(1)	The Same Property portfolio includes properties in the operating portfolio that were not under development or redevelopment for any part of the quarter in both the current and the prior year.

(2)	Properties previously included in same property portfolio in prior year quarters that are now in the Land Bank, comprised of 700 and 750 Gateway properties.

(3)	Development includes properties that were entirely or primarily under active new construction during the quarter for the current or prior year.

(4)	New Properties include properties that were not owned for the full quarter in the prior year.

(5)

Other includes legal entities performing corporate level functions and properties that were sold during, or in between the comparative periods, which includes revenue and operating expenses relating to 9911 Belward Campus Drive, which was sold on December 9, 2014, and King of Prussia, which was sold on May 29, 2015.

(6)	Includes construction loan revenue of $8.7 million and lease termination revenue of $1.0 million for the three months ended June 30, 2014.

(7)	Adjustments to cash basis exclude adjustments to expenses accrued in rental operations, but include straight line rents, fair-value lease revenue, lease incentive revenue, bad debt expense and rental cash receipts deferred for GAAP purposes.

(8)	For discussion of Net Operating Income and Net Operating Income - cash basis, see page 37.

(9)	Rental revenues - cash basis calculated by adjusting for straight-line rents, lease incentives, fair value lease revenue and rental cash receipts deferred for GAAP purposes.

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SAME PROPERTY ANALYSIS - SIX MONTHS ENDED

JUNE 30, 2015

 

(Dollars in thousands)

 

		Same Property (1)				Previous Same (2)				Total				Development (3)				New Properties (4)				Other (5)				Total
Six Months Ended		6/30/15				6/30/15				6/30/15				6/30/15				6/30/15				6/30/15				6/30/15
Rentable square feet			14,343,016				—				14,343,016				2,915,068				818,020				—				18,076,104
Percent of total portfolio			79.3	%			—				79.3	%			16.1	%			4.5	%			—				100.0	%
Percent leased			90.6	%			—				90.6	%			78.9	%			76.7	%			—				88.1	%
Revenues:
Rental		$	218,126			$	122			$	218,248			$	7,835			$	7,718			$	(21	)		$	233,780
Tenant recoveries			79,140				—				79,140				1,550				4,438				401				85,529
Other revenues (6)			—				—				—				—				—				16,675				16,675
Total revenues			297,266				122				297,388				9,385				12,156				17,055				335,984
Expenses:
Rental operations			100,762				—				100,762				4,636				5,164				3,355				113,917
Net operating income / (loss) (8)		$	196,504			$	122			$	196,626			$	4,749			$	6,992			$	13,700			$	222,067
Less adjustments to cash basis (7)			(4,556	)			—				(4,556	)			(1,867	)			(604	)			408				(6,619	)
Net operating income - cash basis (8)		$	191,948			$	122			$	192,070			$	2,882			$	6,388			$	14,108			$	215,448
Rental revenue - cash basis (9)		$	210,315			$	122			$	210,437			$	5,637			$	7,114			$	26			$	223,214
		Same Property (1)				Previous Same (2)				Total				Development (3)				New Properties (4)				Other (5)				Total
Six Months Ended		6/30/14				6/30/14				6/30/14				6/30/14				6/30/14				6/30/14				6/30/14
Rentable square feet			14,343,016				107,231				14,450,247				1,514,703				518,940				—				16,483,890
Percent of total portfolio			87.0	%			—				87.7	%			9.2	%			3.1	%			—				100.0	%
Percent leased			89.5	%			—				89.5	%			84.5	%			98.7	%			—				87.3	%
Revenues:
Rental		$	221,149			$	1,610			$	222,759			$	947			$	2,631			$	14,613			$	240,950
Tenant recoveries			75,354				424				75,778				—				1,901				1,336				79,015
Other revenues (6)			—				—				—				—				—				20,072				20,072
Total revenues			296,503				2,034				298,537				947				4,532				36,021				340,037
Expenses:
Rental operations			96,596				1,004				97,600				1,207				2,162				5,190				106,159
Net operating income / (loss) (8)		$	199,907			$	1,030			$	200,937			$	(260	)		$	2,370			$	30,831			$	233,878
Less adjustments to cash basis (7)			(4,392	)			1,242				(3,150	)			158				(129	)			(625	)			(3,746	)
Net operating income - cash basis (8)		$	195,515			$	2,272			$	197,787			$	(102	)		$	2,241			$	30,206			$	230,132
Rental revenue - cash basis (9)		$	213,838			$	2,853			$	216,691			$	792			$	2,502			$	13,988			$	233,973
Rental Revenues - GAAP basis			(1.4	%)			—				(2.0	%)
Rental Revenues - Cash basis (9)			(1.6	%)			—				(2.9	%)
NOI - GAAP basis			(1.7	%)			—				(2.1	%)
NOI - Cash basis			(1.8	%)			—				(2.9	%)

 

(1)	The Same Property portfolio includes properties in the operating portfolio that were not under development or redevelopment for any part of the six months ended June 30, 2015 and June 30, 2014.

(2)	Properties previously included in same property portfolio in the six months ended June 30, 2014 that are now in the Land Bank, comprised of 700 and 750 Gateway properties.

(3)	Development includes properties that were entirely or primarily under active new construction during the six months ended June 30, 2015 or June 30, 2014.

(4)	New Properties include properties that were not owned for the six months ended June 30, 2014.

(5)

Other includes legal entities performing corporate level functions and properties that were sold during, or in between the comparative periods, which includes revenue and operating expenses relating to 9911 Belward Campus Drive, which was sold on December 9, 2014, and King of Prussia, which was sold on May 29, 2015.

(6)	Includes lease termination revenue of $16.2 million and $6.5 million in the six months ended June 30, 2015 and June 30, 2014, respectively. Also includes construction loan revenue of $11.4 million in the six months ended June 30, 2014, net of deferred loan fees write-offs.

(7)	Adjustments to cash basis exclude adjustments to expenses accrued in rental operations, but include straight line rents, fair-value lease revenue, lease incentive revenue, bad debt expense and rental cash receipts deferred for GAAP purposes.

(8)	For discussion of Net Operating Income and Net Operating Income - cash basis, see page 37.

(9)	Rental revenues - cash basis calculated by adjusting for straight-line rents, lease incentives, fair value lease revenue and rental cash receipts deferred for GAAP purposes.

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INTEREST EXPENSE & COVERAGE RATIOS (1)

JUNE 30, 2015

 

(In thousands, except ratio amounts)

 

		Three Months Ended
		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Mortgage notes payable		$	6,293			$	6,220			$	6,253			$	6,156			$	5,982
Exchangeable senior notes			—				183				917				1,241				1,688
Unsecured senior notes			12,991				12,959				12,959				12,959				12,288
Unsecured senior term loan			1,705				1,653				1,717				1,785				1,791
Unsecured line of credit			1,997				1,577				1,786				1,793				2,112
Line of credit fees			455				450				460				460				471
Derivative instruments			883				844				860				895				923
Preferred returns on tax credits			496				1,500				165				196				193
Interest expense - cash basis		$	24,820			$	25,386			$	25,117			$	25,485			$	25,448
Non-cash interest expense:
Amortization of fair-value of debt acquired			(565	)			(569	)			(548	)			(665	)			(631	)
Amortization of debt discounts			358				351				331				327				302
Amortization of deferred loan costs			1,183				1,214				1,433				1,451				1,707
Amortization of deferred interest costs			1,656				1,662				1,670				1,677				1,684
Amortization of put/call			54				132				64				60				44
Non-cash debt adjustments			2,686				2,790				2,950				2,850				3,106
Capitalized interest			(8,191	)			(6,781	)			(6,143	)			(6,120	)			(5,423	)
Interest expense, net		$	19,315			$	21,395			$	21,924			$	22,215			$	23,131
Interest coverage ratio
Adjusted EBITDA		$	141,299			$	117,508			$	100,712			$	106,103			$	104,940
Interest expense:
Interest expense, net			19,315				21,395				21,924				22,215				23,131
Interest expense - unconsolidated partnerships			185				186				184				200				240
Amortization of deferred interest costs			(1,655	)			(1,662	)			(1,670	)			(1,677	)			(1,684	)
Amortization of deferred loan costs			(1,183	)			(1,214	)			(1,433	)			(1,451	)			(1,707	)
Amortization of debt discounts			(358	)			(351	)			(331	)			(327	)			(302	)
Amortization of fair-value of debt acquired			565				569				548				665				631
Total interest expense		$	16,869			$	18,923			$	19,222			$	19,625			$	20,309
Interest coverage ratio			8.4				6.2				5.2				5.4				5.2
Interest coverage ratio - trailing twelve months			6.2				5.5				5.0				4.7				4.3
Fixed charge coverage ratio
Adjusted EBITDA		$	141,299			$	117,508			$	100,712			$	106,103			$	104,940
Fixed charges:
Interest expense, net			19,315				21,395				21,924				22,215				23,131
Interest expense - unconsolidated partnerships			185				186				184				200				240
Amortization of deferred interest costs			(1,655	)			(1,662	)			(1,670	)			(1,677	)			(1,684	)
Amortization of deferred loan costs			(1,183	)			(1,214	)			(1,433	)			(1,451	)			(1,707	)
Amortization of debt discounts			(358	)			(351	)			(331	)			(327	)			(302	)
Amortization of fair-value of debt acquired			565				569				548				665				631
Principal payments			2,499				2,514				2,080				2,020				1,977
Total fixed charges		$	19,368			$	21,437			$	21,302			$	21,645			$	22,286
Fixed charge coverage ratio			7.3				5.5				4.7				4.9				4.7
Fixed charge coverage ratio - trailing twelve months			5.6				5.0				4.6				4.2				3.9

 

(1)	For a discussion of coverage ratios, see page 37.

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CAPITAL STRUCTURE

JUNE 30, 2015

 

(In thousands, except per share amounts)

 

Consolidated Debt		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Mortgage notes payable, net		$	488,945			$	503,200			$	496,757			$	478,543			$	456,034
Exchangeable senior notes, net			—				—				95,678				95,678				180,000
Unsecured senior notes, net			1,294,614				1,294,255				1,293,903				1,293,572				1,293,246
Unsecured senior term loans			750,856				741,626				749,326				755,876				764,106
Unsecured line of credit			369,000				226,000				84,000				229,000				155,000
Total Debt			2,903,415				2,765,081				2,719,664				2,852,669				2,848,386
Premium on consolidated debt, net			(6,342	)			(6,551	)			(6,764	)			(6,983	)			(7,323	)
Total Consolidated Debt		$	2,897,073			$	2,758,530			$	2,712,900			$	2,845,686			$	2,841,063

 

Equity		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Closing share price		$	19.34			$	22.66			$	21.54			$	20.20			$	21.83
Total common shares and units outstanding			208,966				208,968				202,847				202,860				197,931
Total Equity Value		$	4,041,402			$	4,735,215			$	4,369,337			$	4,097,785			$	4,320,839
Total consolidated debt			2,897,073				2,758,530				2,712,900				2,845,686				2,841,063
Total Market Capitalization		$	6,938,475			$	7,493,745			$	7,082,237			$	6,943,471			$	7,161,902

 

		Three Months Ended
Summary of Common Shares		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Earnings per share
Weighted-average common shares outstanding			202,055				200,790				196,018				194,023				191,003
Weighted-average OP and LTIP units outstanding			5,399				5,405				5,405				5,405				5,405
Dilutive effect of performance units			4				341				—				147				392
Dilutive effect of restricted stock			—				—				1,427				—				—
Dilutive effect of exchangeable senior notes due 2030			—				—				5,678				—				—
Diluted common shares - EPS			207,458				206,536				208,528				199,575				196,800
Funds from operations
Weighted-average common shares outstanding			202,055				200,790				196,018				194,023				191,003
Weighted-average OP and LTIP units outstanding			5,399				5,405				5,405				5,405				5,405
Dilutive effect of performance units			4				341				—				147				392
Dilutive effect of restricted stock			1,511				1,503				1,427				1,485				1,509
Dilutive effect of exchangeable senior notes due 2030			—				1,194				5,678				7,590				10,579
Diluted common shares - FFO			208,969				209,234				208,528				208,649				208,888

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DEBT SUMMARY

JUNE 30, 2015

 

(Dollars in thousands)

 

														Unamortized
		Stated				Effective				Principal				Premium /				Carrying				Maturity
		Rate				Rate				Balance				(Discount)				Value				Date
Consolidated Debt:
Mortgage Notes Payable:
9900 Belward Campus Drive			5.64	%			3.99	%		$	10,410			$	356			$	10,766				07/17
9901 Belward Campus Drive			5.64	%			3.99	%			12,819				436				13,255				07/17
100 College Street			2.40	%			2.40	%			101,847				—				101,847				08/16
300 George Street			6.20	%			4.91	%			44,172				3,464				47,636				07/25
Hershey Center for Applied Research			6.15	%			4.71	%			12,663				1,202				13,865				05/27
500 Kendall Street (Kendall D)			6.38	%			5.45	%			53,535				1,368				54,903				12/18
Shady Grove Road			5.97	%			5.97	%			140,106				—				140,106				09/16
University of Maryland BioPark I			5.93	%			4.69	%			15,682				1,221				16,903				05/25
University of Maryland BioPark II			5.20	%			4.33	%			61,364				3,233				64,597				09/21
University of Maryland BioPark Garage			5.20	%			4.33	%			4,619				243				4,862				09/21
University of Miami Life Science & Technology Park			4.00	%			2.89	%			20,000				205				20,205				02/16
Total / Weighted-Average on Mortgage Notes Payable			5.07	%			4.52	%			477,217				11,728				488,945
Unsecured Fixed Rate Debt:
Unsecured Senior Notes Due 2016			3.85	%			3.99	%			400,000				(431	)			399,569				04/16
Unsecured Senior Notes Due 2019			2.63	%			2.72	%			400,000				(1,903	)			398,097				05/19
Unsecured Senior Notes Due 2020			6.13	%			6.27	%			250,000				(1,425	)			248,575				04/20
Unsecured Senior Notes Due 2022			4.25	%			4.36	%			250,000				(1,627	)			248,373				07/22
Unsecured Variable Rate Debt:
Unsecured Senior Term Loan Due 2017 - U.S. Dollar (1)			1.59	%			2.39	%			243,596				—				243,596				03/17
Unsecured Senior Term Loan Due 2017 - GBP (2)			1.91	%			2.14	%			157,260				—				157,260				03/17
Unsecured Senior Term Loan Due 2018 (3)			1.38	%			1.68	%			350,000				—				350,000				03/18
Unsecured Line of Credit (4)			1.28	%			1.28	%			369,000				—				369,000				03/18
Total / Weighted-Average on Consolidated Debt			3.19	%			3.27	%		$	2,897,073			$	6,342			$	2,903,415
Share of Unconsolidated Partnership Debt:
BioPark Fremont (50%) (fixed)			2.44	%			2.69	%			1,422				6				1,428				05/17
PREI Secured Loan (20%) (variable) (5)			2.24	%			2.24	%			27,795				—				27,795				08/20
Total / Weighted-Average on Share of Unconsolidated Partnership Debt			2.25	%			2.26	%			29,217				6				29,223
Total / Weighted-Average on Consolidated and Share of Unconsolidated Partnership Debt			3.18	%			3.26	%		$	2,926,290			$	6,348			$	2,932,638

 

(1)

The Company entered into interest rate swap agreements that effectively fix the interest rate on $200 million of the unsecured senior term loan facility due 2017 at 2.56% for the remaining term of the loan, subject to adjustments based on the Company’s credit ratings. Including the effect of these swaps, the weighted-average effective interest rate for the $243.6 million outstanding under the unsecured senior term loan facility due 2017 was 2.39% at June 30, 2015.

(2)

The Company amended the unsecured senior term loan facility and converted $156.4 million of outstanding borrowings into British pounds sterling equal to £100 million. The principal balance represents the dollar amount based on the exchange rate of 1.5726 to £1.00 at the end of the quarter. The Company entered into interest rate swap agreements that effectively fix the interest rate on £100 million at 2.14% for the remaining term of the loan, subject to adjustments based on the Company’s credit ratings.

(3)

The Company entered into interest rate swap agreements effective October 1, 2013 that effectively fix the interest rate on $200 million of the unsecured senior term loan facility due Including the effect of these swaps, the weighted-average effective interest rate for the $350.0 million outstanding under the unsecured senior term loan facility due 2018 was 1.68% at June 30, 2015.

(4)	Effective rate excludes facility fee of 20 bps on the entire capacity of the unsecured line of credit, which equals approximately $450,000 per quarter.

(5)

In July 2015, the wholly-owned subsidiary of PREI I LLC refinanced this secured loan facility into a new secured loan with a principal amount of $160 million, with the company’s pro-rata share being $32 million (20%), and a maturity date of August 1, 2020 (with two options to extend the maturity date for one year each).

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DEBT ANALYSIS

JUNE 30, 2015

 

(Dollars in thousands)

 

Credit Ratings		Rating				Outlook
Standard & Poors			BBB				Stable
Moody’s Investors Service			Baa2				Stable

 

		Principal				Percentage				Wtd. -Avg.				Wtd. - Avg.
Variable and Fixed Rate Debt		Balance				of Total				Stated Rate				Effective Rate
Fixed Rate Debt		$	1,681,712				57.9	%			4.40	%			4.33	%
Variable Rate Debt - Hedged
Unsecured Senior Term Loan Due 2017 - U.S. Dollar		$	200,000				6.9	%			1.59	%			2.56	%
Unsecured Senior Term Loan Due 2017 - GBP			157,260				5.4	%			1.91	%			2.14	%
Unsecured Senior Term Loan Due 2018			200,000				6.9	%			1.38	%			1.90	%
Subtotal / Weighted-Average on Variable Rate Debt - Hedged		$	557,260				19.2	%			1.60	%			2.21	%
Variable Rate Debt - Unhedged
Variable Rate Mortgages		$	101,847				3.5	%			2.40	%			2.40	%
Unsecured Senior Term Loan Due 2017 - U.S. Dollar			43,596				1.5	%			1.59	%			1.59	%
Unsecured Senior Term Loan Due 2018			150,000				5.2	%			1.38	%			1.38	%
Unsecured Line of Credit			369,000				12.7	%			1.28	%			1.28	%
Subtotal / Weighted-Average on Variable Rate Debt - Unhedged		$	664,443				22.9	%			1.49	%			1.49	%
Total / Weighted-Average on Consolidated Debt		$	2,903,415				100.0	%			3.19	%			3.27	%

 

Total Consolidated Debt				6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Secured debt / Total gross assets					6.6	%			6.9	%			7.0	%			6.7	%			6.5	%
Floating rate debt / Total debt					42.2	%			38.4	%			33.7	%			36.8	%			33.6	%
Adjusted floating rate debt / Total debt (1)					22.9	%			18.5	%			13.2	%			17.0	%			13.5	%
Unencumbered real estate / Total real estate					90.1	%			90.2	%			85.7	%			86.1	%			86.3	%
Unencumbered CABR / Total CABR (2)					83.8	%			82.6	%			82.9	%			83.4	%			83.2	%
Unsecured line of credit capacity				$	531,000			$	674,000			$	816,000			$	671,000			$	745,000
Net Debt / Adjusted EBITDA (4)					5.0				5.7				6.5				6.6				6.7
Net Debt / Adjusted EBITDA - trailing twelve months					6.1				6.2				6.2				6.6				6.8
Bond Covenants (3)		Requirements
Total outstanding debt / Total assets		Must be < 60%			40.2	%			38.6	%			39.1	%			40.7	%			41.5	%
Secured debt / Total assets		Must be < 40%			6.8	%			7.0	%			7.1	%			6.8	%			6.6	%
Consolidated income available for debt service / Annual debt service charge		Must be > 1.5X			4.2				4.5				4.2				4.3				4.0
Unencumbered assets / Unsecured debt - Notes due 2020		Must be > 150%			254	%			264	%			260	%			246	%			240	%
Unencumbered assets / Unsecured debt - Notes due 2016, 2019 and 2022		Must be > 150%			253	%			263	%			259	%			244	%			239	%

 

(1)	Includes effect of interest rate swaps on the Company’s unsecured senior term loan facilities. See page 21 for more information.

(2)	For current annualized base rent (CABR) by market, see page 31.

(3)	For discussion on bond covenants, see page 38.

(4)

Adjusted EBITDA is calculated by adding to EBITDA: (a) noncontrolling interests in our operating partnership, (b) non-cash adjustments for securities, (c) losses from sales of real estate, and (d) executive severance, and by subtracting from EBITDA gains from sales of real estate, on an annualized basis.

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DEBT MATURITIES

JUNE 30, 2015

 

(In thousands)

Weighted-average debt maturity is 3.2 years for consolidated debt (excluding extension options).

 

		2015				2016				2017				2018				2019				2020				Thereafter				Total
Consolidated debt:
Mortgage notes payable:
Principal amortization		$	5,326			$	10,760			$	9,796			$	9,852			$	5,724			$	6,139			$	29,332			$	76,929
Maturity payments			—				259,496				22,510				37,952				—				—				80,330			$	400,288
Total mortgage notes payable			5,326				270,256				32,306				47,804				5,724				6,139				109,662				477,217
Unsecured debt:
Unsecured senior notes due 2016			—				400,000				—				—				—				—				—				400,000
Unsecured senior notes due 2019			—				—				—				—				400,000				—				—				400,000
Unsecured senior notes due 2020			—				—				—				—				—				250,000				—				250,000
Unsecured senior notes due 2022			—				—				—				—				—				—				250,000				250,000
Unsecured senior term loan due 2017 - U.S. Dollar			—				—				243,596				—				—				—				—				243,596
Unsecured senior term loan due 2017 - GBP			—				—				157,260				—				—				—				—				157,260
Unsecured senior term loan due 2018			—				—				—				350,000				—				—				—				350,000
Unsecured line of credit			—				—				—				369,000				—				—				—				369,000
Total unsecured debt			—				400,000				400,856				719,000				400,000				250,000				250,000				2,419,856
Total consolidated debt		$	5,326			$	670,256			$	433,162			$	766,804			$	405,724			$	256,139			$	359,662			$	2,897,073
Share of unconsolidated partnership debt:
BioPark Fremont (50%) (fixed)			—				—				1,422				—				—				—				—				1,422
PREI secured loan (20%) (variable) (1)			—				—				—				—				—				27,795				—				27,795
Share of total unconsolidated partnership debt		$	—			$	—			$	1,422			$	—			$	—			$	27,795			$	—			$	29,217
Total consolidated and share of unconsolidated partnership debt		$	5,326			$	670,256			$	434,584			$	766,804			$	405,724			$	283,934			$	359,662			$	2,926,290

 

(1)

In July 2015, the wholly-owned subsidiary of PREI I LLC refinanced this secured loan facility into a new secured loan with a principal amount of $160 million, with the company’s pro-rata share being $32 million (20%), and a maturity date of August 1, 2020 (with two options to extend the maturity date for one year each).

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MARKET SUMMARY

JUNE 30, 2015

 

 

						Current (1)												Expiration (2)												GAAP
Market		Leased Square Feet				Annualized Base Rent				Percent of Annualized Base Rent				Annualized Base Rent per Leased Sq Ft				Annualized Base Rent				Percent of Annualized Base Rent				Annualized Base Rent per Leased Sq Ft				Annualized Base Rent				Annualized Base Rent per Leased Sq Ft
						(In thousands)												(In thousands)												(In thousands)
Boston			2,971,887			$	172,235				30.9	%		$	57.95			$	185,143				28.5	%		$	62.30			$	168,646			$	56.75
San Francisco			2,865,129				73,832				13.2	%			25.77				90,775				14.0	%			31.68				77,262				26.97
San Diego			1,888,472				64,196				11.5	%			33.99				79,346				12.2	%			42.02				66,187				35.05
New York			1,757,321				59,859				10.7	%			34.06				73,177				11.3	%			41.64				63,186				35.96
Maryland			1,587,548				50,209				9.0	%			31.63				58,414				9.0	%			36.80				51,059				32.16
Cambridge, UK			667,425				24,791				4.4	%			37.14				24,968				3.8	%			37.41				24,949				37.38
North Carolina			1,226,727				22,235				4.0	%			18.13				28,676				4.4	%			23.38				26,484				21.59
Pennsylvania			745,755				19,476				3.5	%			26.12				24,403				3.8	%			32.72				21,262				28.51
Seattle			458,807				18,391				3.3	%			40.08				23,166				3.6	%			50.49				19,923				43.42
University Related (3)			2,103,069				52,800				9.5	%			25.11				62,123				9.4	%			29.54				58,443				27.79
Total portfolio			16,272,140			$	558,024				100.0	%		$	34.29			$	650,191				100.0	%		$	39.96			$	577,401			$	35.48
		Active New				Active				Unconsolidated
		Construction				Redevelopment				Partnership								Total Operating Portfolio
Percent Leased by Market		(4)				(4)				Portfolio (5)								6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Boston			—				—				99.9	%							87.1	%			86.0	%			96.5	%			99.2	%			98.9	%
San Francisco			100.0	%			—				—								87.6	%			86.1	%			81.4	%			83.7	%			81.2	%
San Diego			—				—				100.0	%							94.6	%			94.0	%			93.6	%			92.7	%			92.5	%
New York			100.0	%			—				—								98.0	%			86.8	%			86.8	%			86.8	%			86.8	%
Maryland			—				—				—								93.9	%			91.7	%			92.1	%			95.4	%			93.7	%
Cambridge, UK			100.0	%			—				—								99.6	%			99.5	%			99.5	%			99.5	%			99.5	%
North Carolina			67.5	%			—				—								98.3	%			98.3	%			97.0	%			92.9	%			92.9	%
Pennsylvania			—				—				—								84.5	%			83.0	%			75.9	%			75.9	%			71.2	%
Seattle			37.8	%			—				—								84.6	%			84.2	%			72.9	%			69.7	%			69.7	%
University Related (3)			99.1	%			—				—								90.1	%			91.9	%			91.3	%			91.2	%			90.6	%
Total portfolio			75.0	%			—				99.9	%							91.0	%			89.2	%			89.6	%			90.6	%			89.9	%

 

(1)	Current annualized base rent is the monthly contractual rent as of the current quarter ended, or if rent has not yet commenced, the first monthly rent payment due at each rent commencement date, multiplied by 12 months.

(2)	Annualized base rent at expiration is the monthly contractual rent as of date of expiration of the applicable lease (not including any extension option(s)), multiplied by 12 months.

(3)	Includes Wexford and BioMed properties not located in a core market. See page 26 for property listing.

(4)	See pages 24 - 26 for detail of the consolidated portfolio and page 38 for definitions of terms.

(5)	See page 27 for detail of the unconsolidated partnership portfolio.

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PROPERTY LISTING

JUNE 30, 2015

 

 

				Excluded from				Rentable Square Feet																Leased Square Feet
				Same Property Analysis								Active New				Active												Percent Leased (1)
		Property		3 months		6 months		Land Bank				Constr- uction				Redeve- lopment				Operating Portfolio								6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
		Boston
1		Albany Street							—				—				—				75,003				75,003				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
2		320 Bent Street							—				—				—				195,198				195,137				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
3		301 Binney Street							—				—				—				417,290				417,290				100.0	%			100.0	%			79.7	%			98.8	%			96.7	%
4		301 Binney Street Garage							—				—				—				528 Stalls				n/a				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
5		210 Broadway							—				—				—				64,812				64,812				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
6		Center for Life Science | Boston							—				—				—				704,159				704,159				100.0	%			100.0	%			98.9	%			98.9	%			98.9	%
7		Charles Street							—				—				—				47,912				47,912				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
8		320 Charles Street							—				—				—				99,513				99,513				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
9		Coolidge Avenue							—				—				—				37,684				34,580				91.8	%			91.8	%			91.8	%			91.8	%			91.8	%
10		21 Erie Street							—				—				—				48,627				28,019				57.6	%			57.6	%			100.0	%			100.0	%			100.0	%
11		40 Erie Street							—				—				—				100,854				—				—				—				100.0	%			100.0	%			100.0	%
12		47 Erie Street Parking Structure							—				—				—				447 Stalls				n/a				28.2	%			28.2	%			73.2	%			73.2	%			72.0	%
13		Fresh Pond Research Park							—				—				—				90,702				89,176				98.3	%			98.3	%			98.3	%			98.3	%			98.3	%
14		50 Hampshire Street							—				—				—				200,360				103,694				51.8	%			51.8	%			100.0	%			100.0	%			100.0	%
15		60 Hampshire Street							—				—				—				41,257				41,257				100.0	%			86.5	%			86.5	%			86.5	%			86.5	%
16		Kendall Crossing Apartments							—				—				—				37 Apts.				n/a				97.3	%			97.3	%			94.7	%			97.6	%			100.0	%
17		450 Kendall Street (Kendall G)		ü		ü			—				—				—				63,520				31,309				49.3	%			22.8	%			22.8	%			—				—
18		500 Kendall Street (Kendall D)							—				—				—				349,325				346,535				99.2	%			99.2	%			99.2	%			98.5	%			98.5	%
19		675 W. Kendall Street (Kendall A)							—				—				—				302,919				302,919				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
20		Sidney Street							—				—				—				188,614				47,740				25.3	%			—				100.0	%			100.0	%			100.0	%
21		Vassar Street							—				—				—				60,845				60,845				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
		Total Boston							—				—				—				3,088,594				2,689,900				87.1	%			84.7	%			95.0	%			97.0	%			96.7	%
		San Francisco
22		Ardentech Court							—				—				—				55,588				55,588				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
23		Ardenwood Venture (2)							—				—				—				72,500				72,500				100.0	%			100.0	%			100.0	%			100.0	%			83.2	%
24		Bayshore Boulevard							—				—				—				183,344				183,344				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
25		Bridgeview Technology Park I							—				—				—				201,567				128,676				63.8	%			66.8	%			52.9	%			52.9	%			52.9	%
26		Bridgeview Technology Park II							—				—				—				50,400				50,400				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
27		550 Broadway Street							—				—				—				71,239				71,239				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
28		Dumbarton Circle							—				—				—				44,000				44,000				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
29		Eccles Avenue		ü		ü			265,000				—				—				—				—				—				—				—				—				—
30		Gateway Business Park							770,000				—				—				69,272				69,272				100.0	%			62.8	%			43.2	%			82.2	%			82.2	%
31		Gateway Business Park II		ü		ü			650,000				—				—				—				—				—				—				—				—				—
32		Industrial Road							—				—				—				175,144				175,144				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
33		Kaiser Drive							—				—				—				87,953				71,215				81.0	%			81.0	%			81.0	%			81.0	%			81.0	%
34		Lincoln Centre		ü		ü			160,000				360,000				—				—				360,000				100.0	%			100.0	%			100.0	%			—				—
35		Pacific Industrial Center							—				—				—				305,026				262,124				85.9	%			86.4	%			86.4	%			85.9	%			85.9	%
36		Pacific Research Center North							—				—				—				661,245				582,649				88.1	%			83.7	%			79.2	%			79.2	%			79.2	%
37		Pacific Research Center South							400,000				—				—				423,246				296,525				70.1	%			70.1	%			62.3	%			62.3	%			62.3	%
38		Science Center at Oyster Point							—				—				—				204,887				204,887				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
39		Woodside Technology Park							—				—				—				255,650				237,566				92.9	%			100.0	%			100.0	%			100.0	%			76.1	%
		Total San Francisco							2,245,000				360,000				—				2,861,061				2,865,129				88.9	%			87.6	%			83.5	%			83.7	%			81.2	%
		San Diego
40		Balboa Avenue							—				—				—				35,344				35,344				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
41		Bernardo Center Drive							—				—				—				61,286				61,286				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
42		Coast 9							—				—				—				162,074				160,160				98.8	%			96.7	%			84.6	%			84.6	%			84.6	%
43		4570 Executive Drive							—				—				—				125,219				125,219				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
44		Faraday Avenue							—				—				—				28,704				28,704				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
45		Gazelle Court							—				—				—				176,000				176,000				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%

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PROPERTY LISTING

JUNE 30, 2015

 

 

				Excluded from								Rentable Square Feet																Leased
				Same Property Analysis								Land				Active New				Active				Operating				Square				Percent Leased (1)
		Property		3 months				6 months				Bank				Construction				Redevelopment				Portfolio				Feet				6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
		San Diego (Continued)
46		i3		ü				ü					—				316,000				—				—				—				—				—				—				—				—
47		3525 John Hopkins Court											—				—				—				48,306				48,306				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
48		3545-3575 John Hopkins Court											—				—				—				72,192				72,192				100.0	%			84.7	%			84.7	%			87.9	%			87.2	%
49		6114-6154 Nancy Ridge Drive											—				—				—				196,557				196,557				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
50		6122-6126 Nancy Ridge Drive											—				—				—				68,000				68,000				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
51		6828 Nancy Ridge Drive											—				—				—				42,138				42,138				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
52		Pacific Center Boulevard											—				—				—				66,745				66,745				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
53		Road to the Cure											—				—				—				67,998				48,248				71.0	%			71.0	%			100.0	%			100.0	%			100.0	%
54		San Diego Science Center											—				—				—				105,364				88,323				83.8	%			89.8	%			83.5	%			81.6	%			79.9	%
55		10240 Science Center Drive											—				—				—				49,347				49,347				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
56		10255 Science Center Drive											—				—				—				53,740				53,740				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
57		Sorrento Plaza											—				—				—				31,184				31,184				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
58		Sorrento Valley Boulevard											—				—				—				54,924				—				—				—				—				—				—
59		11388 Sorrento Valley Road											—				—				—				35,940				35,940				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
60		Summers Ridge											—				—				—				—				—				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
61		Torreyana Road											—				—				—				81,204				81,204				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
62		9865 Towne Centre Drive											—				—				—				94,866				94,866				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
63		9885 Towne Centre Drive											—				—				—				104,870				104,870				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
64		Towne Centre Technology Park		ü				ü					104,500				—				182,866				—				—				—				—				—				—				—
65		Waples Street											—				—				—				50,055				40,746				81.4	%			81.4	%			81.4	%			43.9	%			43.9	%
66		Wateridge Circle											—				—				—				106,490				106,490				100.0	%			95.6	%			95.6	%			95.6	%			95.6	%
		Total San Diego											104,500				316,000				182,866				1,918,547				1,815,609				75.1	%			80.7	%			93.6	%			92.7	%			92.5	%
		New York
67		Ardsley Park											50,000				—				—				209,283				187,785				89.7	%			89.4	%			89.4	%			89.4	%			89.4	%
68		Graphics Drive											—				—				—				69,406				68,397				98.5	%			64.2	%			64.2	%			64.2	%			64.2	%
69		Landmark at Eastview											273,000				—				—				800,671				793,038				99.0	%			81.5	%			81.5	%			81.5	%			81.5	%
70		Landmark at Eastview II											—				—				—				360,520				360,520				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
71		Landmark at Eastview III		ü				ü					—				297,000				—				—				297,000				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
72		One Research Way											—				—				—				50,581				50,581				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
		Total New York											323,000				297,000				—				1,490,461				1,757,321				98.3	%			89.0	%			89.0	%			89.0	%			89.0	%
		Maryland
73		Beckley Street											—				—				—				77,225				77,225				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
74		9900 Belward Campus Drive											—				—				—				49,317				41,816				84.8	%			84.8	%			84.8	%			84.8	%			84.8	%
75		9901 Belward Campus Drive											—				—				—				57,152				57,110				99.9	%			99.9	%			99.9	%			99.9	%			99.9	%
76		9920 Belward Campus Drive											—				—				—				51,181				51,181				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
77		9704 Medical Center Drive											—				—				—				122,600				122,600				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
78		9708-9714 Medical Center Drive											—				—				—				92,125				50,075				54.4	%			54.4	%			54.2	%			54.2	%			17.4	%
79		1701 / 1711 Research Boulevard						ü					—				—				—				104,743				104,743				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
80		Shady Grove Road											500,000				—				—				635,058				635,058				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
81		Tributary Street											—				—				—				91,592				91,592				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
82		University of Maryland BioPark I											—				—				—				76,542				72,909				95.3	%			98.7	%			98.7	%			98.5	%			98.5	%
83		University of Maryland BioPark II											—				—				—				235,333				223,734				95.1	%			94.1	%			97.5	%			98.0	%			98.0	%
84		University of Maryland BioPark III		ü				ü					200,000				—				—				—				—				—				—				—				—				—
85		University of Maryland BioPark Garage											—				—				—				638 Stalls				n/a				66.5	%			100.0	%			100.0	%			100.0	%			100.0	%
86		50 West Watkins Mill Road											—				—				—				57,410				20,000				34.8	%			34.8	%			34.8	%			34.8	%			34.8	%
87		55 West Watkins Mill Road											—				—				—				39,505				39,505				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
		Total Maryland											700,000				—				—				1,689,783				1,587,548				93.9	%			91.7	%			92.1	%			95.4	%			93.7	%
		Cambridge, UK
88		Granta Park											138,000				—				—				472,234				470,015				99.5	%			99.5	%			99.5	%			99.5	%			99.5	%

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PROPERTY LISTING

JUNE 30, 2015

 

 

				Excluded from				Rentable Square Feet																Leased Square Feet
				Same Property Analysis				Land Bank				Active New Construction				Active Redevelopment				Operating Portfolio								Percent Leased (1)
		Property		3 months		6 months																						6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
		Cambridge, UK (Continued)
89		Granta Park II		ü		ü			—				155,000				—				—				155,000				100.0	%			—				—				—				—
90		430 Cambridge Science Park		ü		ü			—				—				—				42,410				42,410				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
		Total Cambridge, UK							138,000				155,000				—				514,644				667,425				99.7	%			99.6	%			99.6	%			99.6	%			99.6	%
		North Carolina
91		Chesterfield		ü		ü			—				284,462				—				—				100,000				35.2	%			—				—				—				—
92		Paramount Parkway							—				—				—				61,603				61,603				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
93		Patriot Drive							—				—				—				48,394				48,394				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
94		Piedmont Triad Research - Wake 90				ü			—				—				—				475,742				460,891				96.9	%			96.9	%			94.6	%			87.3	%			87.3	%
95		Wake 60		ü		ü			—				283,250				—				—				283,250				100.0	%			59.3	%			59.3	%			—				—
96		Wake Forest Biotech Place							—				—				—				242,000				242,000				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
97		Weston Parkway							—				—				—				30,589				30,589				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
		Total North Carolina							—				567,712				—				858,328				1,226,727				86.0	%			88.6	%			87.6	%			92.9	%			92.9	%
		Pennsylvania
98		Drexel		ü		ü			2,271,000				—				—				—				—				—				—				—				—				—
99		George Patterson Boulevard							—				—				—				71,500				71,500				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
100		Hershey Center for Applied Research							—				—				—				80,867				78,117				96.6	%			96.6	%			95.7	%			96.9	%			94.9	%
101		3711 Market Street (4)							—				—				—				154,793				147,476				95.3	%			95.3	%			96.2	%			95.5	%			95.5	%
102		3737 Market Street (3) (4)		ü		ü			—				—				—				334,305				334,305				100.0	%			100.0	%			82.4	%			82.4	%			80.8	%
103		Phoenixville Pike							—				—				—				104,400				48,181				46.2	%			41.8	%			41.8	%			41.8	%			37.5	%
104		Spring Mill Drive							—				—				—				76,561				66,176				86.4	%			86.4	%			80.5	%			80.5	%			82.5	%
105		1000 Uniqepma Boulevard							—				—				—				59,821				—				—				—				—				—				—
		Total Pennsylvania							2,271,000				—				—				882,247				745,755				84.5	%			83.0	%			75.9	%			75.9	%			74.8	%
		Seattle
106		Elliott Avenue							—				—				—				151,194				98,781				65.3	%			64.0	%			64.0	%			56.0	%			56.0	%
107		500 Fairview Avenue		ü		ü			—				122,702				—				—				46,407				37.8	%			37.8	%			37.8	%			20.5	%			20.5	%
108		530 Fairview Avenue							—				—				—				101,118				100,501				99.4	%			99.4	%			100.0	%			100.0	%			100.0	%
109		Monte Villa Parkway							—				—				—				51,000				30,167				59.2	%			59.2	%			59.2	%			59.2	%			59.2	%
110		Westlake		ü		ü			—				—				—				116,214				115,152				99.1	%			99.1	%			—				—				—
111		217th Place							50,000				—				—				67,799				67,799				100.0	%			100.0	%			62.9	%			100.0	%			62.9	%
		Total Seattle							50,000				122,702				—				487,325				458,807				75.2	%			74.9	%			64.2	%			57.5	%			57.5	%
		University Related
112		BRDG Park at Danforth Plant Science Center							—				—				—				109,731				71,286				65.0	%			90.6	%			90.6	%			90.6	%			85.0	%
113		100 College Street (5)		ü		ü			—				510,419				—				—				505,683				99.1	%			99.1	%			99.1	%			99.1	%			99.1	%
114		4320 Forest Park Avenue							—				—				—				152,403				152,403				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
115		300 George Street (5)		ü		ü			—				—				—				518,940				511,971				98.7	%			98.7	%			98.7	%			98.7	%			98.7	%
116		Heritage @ 4240				ü			—				—				—				185,207				166,623				90.0	%			90.0	%			89.0	%			89.0	%			89.0	%
117		Innovation Research Park at ODU I							—				—				—				95,634				82,699				86.5	%			90.0	%			90.0	%			90.0	%			90.0	%
118		Innovation Research Park at ODU II							—				—				—				95,634				78,472				82.1	%			82.7	%			82.7	%			82.7	%			75.8	%
119		311 South Sarah		ü		ü			300,000				—				—				—				—				—				—				—				—				—
120		Trade Centre Avenue							—				—				—				78,023				78,023				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
121		University of Miami Life Science & Technology Park							—				—				—				258,681				176,747				68.3	%			68.4	%			64.7	%			64.4	%			64.9	%
122		University Tech Park at IIT							—				—				—				129,178				129,178				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
123		Walnut Street							—				—				—				149,984				149,984				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
		Total University Related							300,000				510,419				—				1,773,415				2,103,069				92.1	%			93.5	%			93.0	%			93.0	%			92.5	%
		Total Consolidated Portfolio							6,131,500				2,328,833				182,866				15,564,405				15,917,290				88.1	%			87.3	%			89.2	%			90.2	%			89.3	%

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PROPERTY LISTING

JUNE 30, 2015

 

 

				Excluded from				Rentable Square Feet																Leased Square Feet
				Same Property Analysis				Land				Active New				Active				Operating								Percent Leased (1)
		Property		3 months		6 months		Bank				Construction				Redevelopment				Portfolio								6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
		Unconsolidated Partnership Portfolio
124		BioPark Fremont		ü		ü			100,000				—				—				—				—				—				—				—				—				—
125		McKellar Court		ü		ü			—				—				—				72,863				72,863				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
126		350 E. Kendall Street Garage (Kendall F)		ü		ü			—				—				—				1,409 Stalls				n/a				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
127		650 E. Kendall Street (Kendall B)		ü		ü			—				—				—				282,217				281,987				99.9	%			99.9	%			99.9	%			99.9	%			71.5	%
		Total Unconsolidated Partnership Portfolio							100,000				—				—				355,080				354,850				99.9	%			99.9	%			99.9	%			99.9	%			77.3	%
		Total Portfolio							6,231,500				2,328,833				182,866				15,919,485				16,272,140				88.3	%			87.5	%			89.4	%			90.4	%			89.1	%

 

(1)	Percentage leased excludes estimated square feet in the Land Bank.

(2)	The Company owns 87.5% of the limited liability company that owns the Ardenwood Venture property.

(3)	The Company owns 68% of the limited liability company that owns the 3737 Market Street property.

(4)	The Company has entered into a joint development agreement to explore the potential acquisition of an estimated additional 2.1 million square feet next to the Market Street properties.

(5)	The Company owns 93% of the limited liability companies that own the 300 George Street property. Upon completion of the project and debt repayment, the Company will own 97.5% of the limited liability company that owns the 100 College Street property.

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DEVELOPMENT AND REDEVELOPMENT

JUNE 30, 2015

 

(Dollars in thousands)

 

Active Development: Property		Market		Rentable Square Feet				Pre-Leased Square Feet				Percent Pre-Leased				Investment to Date (1)				Cost to Complete				Estimated Total Investment (2)				Estimated In-Service Date (3)
Active New Construction:
100 College Street		University Related			510,419				505,683				99.1	%		$	134,200			$	56,800			$	191,000			Q3 2015
i3		San Diego			316,000				—				—				55,500				126,000				181,500			Q3 2017
Landmark at Eastview III		New York			297,000				297,000				100.0	%			159,400				17,100				176,500			Q4 2015
Lincoln Centre (4)		San Francisco			360,000				360,000				100.0	%			34,400				115,300				149,700			Q3 2017 & Q3 2018
Chesterfield		North Carolina			284,462				100,000				35.2	%			11,300				78,700				90,000			Q4 2017
500 Fairview Avenue		Seattle			122,702				46,407				37.8	%			26,400				48,100				74,500			Q1 2016
Granta Park II		Cambridge, UK			155,000				155,000				100.0	%			1,100				76,500				77,600			Q4 2017
Wake 60		North Carolina			283,250				283,250				100.0	%			14,500				40,800				55,300			Q3 2016
Total / weighted-average					2,328,833				1,747,340				75.0	%		$	436,800			$	559,300			$	996,100
Active Redevelopment: Property		Market		Rentable Square Feet				Leased Square Feet				Percent Leased				Investment to Date (1)				Cost to Complete				Estimated Total Investment (2)				Estimated In-Service Date (3)
Active Redevelopment:
Sidney Street/40 Erie Street		Boston			289,468				47,740				16.5	%		$	107,200			$	81,800			$	189,000			Q4 2015 - 2017
Towne Centre Technology Park (5)		San Diego			182,866				—				—				54,400				50,600				105,000			Q1 2016 - 2017
Total / weighted-average					472,334				47,740				10.1	%		$	161,600			$	132,400			$	294,000

 

Recently Delivered Development: Property		Market		Rentable Square Feet				Leased Square Feet				Percent Leased				Percent In-Service				Capitalized Interest (6)				In-Service Date
Recently Delivered Development:
430 Cambridge Science Park		United Kingdom			42,410				42,410				100.0	%			100.0	%		$	—			Q2 2015
450 Kendall Street (Kendall G)		Boston			63,520				31,309				49.3	%			22.8	%			288			Q2 2015
Total / weighted-average					105,930				73,719				69.6	%			53.7	%		$	288

 

(1)	Includes amounts paid for acquiring the property, landlord improvements, tenant improvement allowances and any capitalized amounts related to payroll, interest, ground rent and operating expenses through June 30, 2015.

(2)	Includes remaining forecasted landlord improvements, tenant improvement allowances and any capitalized costs related to interest, operating expenses, property taxes, payroll and ground rent. Includes costs associated with speculative leasing.

(3)

Management’s estimate of the time in which construction is substantially completed. A project is considered substantially complete and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity. Upon completion, management expects the property to enter the Same Property Portfolio one year subsequent to the in-service date.

(4)	Phase I of the project is comprised of 200,000 square feet and is estimated to be substantially completed in Q3 2017. Phase II comprising 160,000 square feet is estimated to be substantially completed in Q3 2018.

(5)	Sidney Street and 40 Erie Street remain within the operating portfolio for lease reporting and Same Property purposes.

(6)	Investment to date based on preliminary purchase price allocation for Towne Centre Technology Park acquired on May 5, 2015.

(7)	Capitalized interest for the three months ended June 30, 2015.

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CAPITAL EXPENDITURES

JUNE 30, 2015

 

(Dollars in thousands)

 

Capital Expenditures:						Three Months Ended
						6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Active new construction						$	75,710			$	33,619			$	69,530			$	73,264			$	70,640
Tax credit funding receipts, net of deferred costs							(3,332	)			—				(26,232	)			—				(22,557	)
Land bank							2,115				3,618				6,139				6,998				3,747
Active redevelopment							679				—				—				—				—
Tenant improvements - first generation (1)							17,972				14,534				10,386				13,304				8,614
Recurring capital expenditures and second generation tenant improvements (1) (2)							21,600				15,782				22,591				17,007				21,553
Other capital							13,321				3,200				5,093				10,454				5,292
Total capital expenditures						$	128,065			$	70,753			$	87,507			$	121,027			$	87,289
Capitalized Interest:		Investment				Three Months Ended
		to Date (3)				6/30/15				3/31/15				12/31/14				9/30/14				6/30/14
Active new construction		$	436,800			$	3,489			$	3,395			$	2,634			$	1,983			$	2,043
Active redevelopment			54,400				496				—				—				—				—
Recently delivered development projects (4)			30,649				288				129				373				738				282
Other portfolio improvements (5)			280,011				2,472				1,576				1,506				1,696				1,469
Land bank			118,729				1,446				1,681				1,630				1,703				1,629
Total		$	920,589			$	8,191			$	6,781			$	6,143			$	6,120			$	5,423
Average interest rate capitalized							3.81	%			3.95	%			3.96	%			3.97	%			3.94	%

 

(1)	For definitions of first and second generation leases, see page 38.

(2)	Includes amounts paid for acquiring the property, landlord improvements, tenant improvement allowances and capitalized costs of payroll, interest, ground rent, operating expenses, but excludes any amounts accrued through through June 30, 2015.

(3)	Includes amounts paid for acquiring the property, landlord improvements and tenant improvement allowances, but for Active New Construction and Active Redevelopment properties excludes any amounts accrued, and payroll, interest or operating expenses capitalized, through June 30, 2015.

(4)	Includes 450 Kendall Street (Kendall G) (Q2 2015), Heritage @4240 (Q4 2013), 3737 Market Street (Q2 2014) and Piedmont Triad Research - Wake 90 (Q4 2013). See page 28 for recently delivered projects during the quarter.

(5)	Includes improvements on operating properties, including major tenant improvement projects on properties which are not considered to be in Active New Construction, Active Redevelopment or Land Bank during the three months ended June 30, 2015.

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LEASE EXPIRATIONS

JUNE 30, 2015

 

The weighted-average remaining lease term is 8.8 years for the total portfolio.

 

										Current (1)												Expiration (2)												GAAP
Expiration		Leased Square Feet				Percent of Leased Square Feet				Annualized Base Rent				Percent of Annualized Base Rent				Annualized Base Rent per Leased Square Feet				Annualized Base Rent				Percent of Annualized Base Rent				Annualized Base Rent per Leased Square Feet				Annualized Base Rent				Percent of Annualized Base Rent				Annualized Base Rent per Leased Square Feet
										(In thousands)												(In thousands)												(In thousands)
Month-to-month			63,481				0.4	%		$	1,044				0.2	%		$	16.45			$	1,044				0.2	%		$	16.45			$	1,046				0.2	%		$	16.48
Third quarter 2015			261,690				1.6	%			6,799				1.2	%			25.98				6,833				1.1	%			26.11				8,739				1.5	%			33.39
Fourth quarter 2015			107,371				0.7	%			3,278				0.6	%			30.53				3,298				0.5	%			30.72				3,119				0.5	%			29.05
2015			369,061				2.3	%			10,077				1.8	%			27.30				10,131				1.6	%			27.45				11,858				2.0	%			32.13
2016			674,216				4.1	%			23,515				4.2	%			34.88				23,908				3.7	%			35.46				22,702				3.9	%			33.67
2017			981,419				6.0	%			29,812				5.3	%			30.38				31,391				4.8	%			31.99				28,337				4.9	%			28.87
2018			1,896,097				11.7	%			83,102				14.9	%			43.83				85,817				13.2	%			45.26				76,820				13.3	%			40.51
2019			941,793				5.8	%			25,341				4.5	%			26.91				27,800				4.3	%			29.52				25,883				4.5	%			27.48
2020			1,087,535				6.7	%			33,345				6.0	%			30.66				37,277				5.7	%			34.28				33,400				5.8	%			30.71
2021			486,802				3.0	%			17,890				3.2	%			36.75				20,161				3.1	%			41.42				18,376				3.2	%			37.75
2022			374,265				2.3	%			11,259				2.0	%			30.08				13,414				2.1	%			35.84				11,916				2.1	%			31.84
2023			1,547,510				9.5	%			63,181				11.3	%			40.83				70,461				10.8	%			45.53				63,604				11.0	%			41.10
2024			670,076				4.1	%			22,144				4.0	%			33.05				26,489				4.1	%			39.53				22,994				4.0	%			34.32
Thereafter			7,179,885				44.1	%			237,314				42.6	%			33.05				302,298				46.4	%			42.10				260,465				45.1	%			36.28
Total / weighted- average			16,272,140				100.0	%		$	558,024				100.0	%		$	34.29			$	650,191				100.0	%		$	39.96			$	577,401				100.0	%		$	35.48

 

 

(1)	Current annualized base rent (CABR) is the monthly contractual rent as of the current quarter ended, or if rent has not yet commenced, the first monthly rent payment due at each rent commencement date, multiplied by 12 months.

(2)	Annualized base rent at expiration is the monthly contractual rent as of the date of expiration of the applicable lease (not including any extension option(s)), multiplied by 12 months.

(3)	For a definition of “forward leased”, see page 38.

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EXPIRATIONS BY MARKET

JUNE 30, 2015

 

 

		Leased Square Feet
Expiration		Boston				San Francisco				San Diego				New York				Maryland				Cambridge, UK				North Carolina				Pennsylvania				Seattle				University Related				Total
Month-to-month			—				—				728				6,230				19,797				1,038				—				1,014				—				34,674				63,481
2015			35,641				45,452				117,084				8,981				10,136				21,576				16,492				31,623				—				82,076				369,061
2016			113,624				246,012				58,756				115,603				33,237				1,103				30,589				25,834				14,124				35,334				674,216
2017			130,965				255,393				230,615				90,063				111,760				29,884				7,853				28,448				34,581				61,857				981,419
2018			1,147,276				99,067				352,249				82,124				61,336				—				15,117				14,389				—				124,539				1,896,097
2019			155,305				162,958				93,187				—				275,328				25,245				8,932				92,019				—				128,819				941,793
2020			210,705				284,850				66,739				34,371				175,785				136,434				19,261				118,727				1,744				38,919				1,087,535
2021			107,824				50,327				39,126				40,914				5,929				160,290				71,663				4,592				2,695				3,442				486,802
2022			64,780				197,726				20,235				27,524				4,599				—				—				7,311				1,733				50,357				374,265
2023			571,792				593,764				224,343				68,039				33,843				26,294				—				8,542				—				20,893				1,547,510
2024			75,903				—				—				262,476				11,120				64,617				23,932				—				34,980				197,048				670,076
Thereafter			358,072				929,580				685,410				1,020,996				844,678				200,944				1,032,888				413,256				368,950				1,325,111				7,179,885
Total			2,971,887				2,865,129				1,888,472				1,757,321				1,587,548				667,425				1,226,727				745,755				458,807				2,103,069				16,272,140
		Current Annualized Base Rent at Expiration (1)
Expiration		Boston				San Francisco				San Diego				New York				Maryland				Cambridge, UK				North Carolina				Pennsylvania				Seattle				University Related				Total
		(in thousands)
Month-to-month		$	—			$	—			$	—			$	13			$	474			$	—			$	—			$	24			$	—			$	533			$	1,044
2015			767				798				4,097				292				274				914				334				820				3				1,833				10,131
2016			6,333				8,385				1,491				3,668				965				54				634				828				630				921				23,908
2017			5,685				6,194				8,387				2,687				3,349				1,156				133				851				1,405				1,544				31,391
2018			63,129				2,898				10,237				2,402				3,096				—				343				562				—				3,150				85,817
2019			7,886				2,751				2,824				—				7,448				1,183				217				2,096				—				3,395				27,800
2020			13,342				8,326				2,441				1,224				3,205				4,100				298				3,299				80				963				37,277
2021			8,348				984				1,441				757				240				6,255				1,829				124				84				98				20,161
2022			4,448				6,212				1,007				—				162				—				—				270				72				1,242				13,414
2023			44,355				9,833				11,215				2,397				722				972				—				279				—				688				70,461
2024			4,739				—				—				8,557				503				2,167				314				—				942				9,266				26,489
Thereafter			26,111				44,395				36,206				51,181				37,976				8,166				24,574				15,251				19,949				38,491				302,298
Total		$	185,143			$	90,775			$	79,346			$	73,177			$	58,414			$	24,968			$	28,676			$	24,403			$	23,166			$	62,124			$	650,191

 

(1)	Annualized base rent at expiration is the monthly contractual rent as of date of expiration of the applicable lease (not including any extension option(s)), multiplied by 12 months.

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FUTURE LEASE COMMENCEMENTS

JUNE 30, 2015

 

(Dollars in thousands)

 

		Annualized Base Rent (1)
		Operating								Development								Total
Expected Commencement Quarter (1)		GAAP (2)				Cash (3)				GAAP (2)				Cash (3)				GAAP (2)				Cash (3)
3Q15		$	15,456			$	18,829			$	11,030			$	10,383			$	26,486			$	29,212
4Q15			9,364				3,317				15,464				13,369				24,828				16,686
2016			6,887				16,680				9,803				9,070				16,690				25,750
2017			1,867				1,768				15,029				7,317				16,896				9,085
2018			—				—				8,134				8,358				8,134				8,358
2019			24,509				19,767				—				5,258				24,509				25,025
		$	58,083			$	60,361			$	59,460			$	53,755			$	117,543			$	114,116
		Leased Square Feet
		Operating								Development								Total
Expected Commencement Quarter (1)		GAAP (4)				Cash (4)				GAAP (4)				Cash (4)				GAAP (4)				Cash (4)
3Q15			370,970				485,457				410,411				410,411				781,381				895,868
4Q15			236,627				163,850				297,000				297,000				533,627				460,850
2016			200,496				455,463				424,929				424,929				625,425				880,392
2017			99,342				99,342				385,000				230,000				484,342				329,342
2018			—				—				230,000				225,000				230,000				225,000
2019			295,030				295,030				—				160,000				295,030				455,030
			1,202,465				1,499,142				1,747,340				1,747,340				2,949,805				3,246,482

 

(1)	Current estimates of future lease commencement timing. Actual results may vary from current estimates. Excludes unconsolidated joint ventures.

(2)	The annualized GAAP monthly rent (GABR).

(3)	The annualized first monthly cash rent payment due (CABR).

(4)	The leased square feet for GAAP and Cash correspond with the applicable annualized base rent commencements above.

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20 LARGEST TENANTS

JUNE 30, 2015

 

BioMed’s properties were leased to 379 tenants.

 

		Tenant		Leased Square Feet				Percent of Leased Sq Ft				Annualized Base Rent Current (1) (In thousands)				Annualized Base Rent per Leased Sq Ft Current				Percent of Annualized Base Rent Current Total Portfolio				Lease Expiration
1		Regeneron Pharmaceuticals, Inc. (2)			1,118,355				6.9	%			43,736			$	39.11				7.8	%			Multiple
2		Illumina, Inc. (3)			736,193				4.5	%			27,465				37.31				4.9	%			Multiple
3		Beth Israel Deaconess Medical Center, Inc.			362,364				2.2	%			26,823				74.02				4.8	%			June 2023
4		GlaxoSmithKline plc (4)			635,058				3.9	%			23,603				37.17				4.2	%			May 2026
5		Sanofi (5)			418,003				2.6	%			23,100				55.26				4.1	%			Multiple
6		Vertex Pharmaceuticals Incorporated (6)			371,920				2.3	%			21,337				57.37				3.8	%			Multiple
7		Children’s Hospital Corporation (7)			207,909				1.3	%			15,506				74.58				2.8	%			April 2023
8		Ironwood Pharmaceuticals, Inc.			311,702				1.9	%			15,411				49.44				2.8	%			January 2018
9		Wake Forest University (8)			655,420				4.0	%			12,049				18.38				2.2	%			Multiple
10		Baxter Healthcare Corporation			206,084				1.3	%			12,024				58.35				2.2	%			January 2027
11		Alexion Pharmaceuticals, Inc. (9)			413,545				2.5	%			10,428				25.22				1.9	%			Multiple
12		Arena Pharmaceuticals, Inc.			264,557				1.6	%			8,137				30.76				1.5	%			May 2027
13		Yale University (10)			397,402				2.4	%			8,027				20.20				1.4	%			Multiple
14		MedImmune, Inc. (11)			221,371				1.4	%			7,848				35.45				1.4	%			Multiple
15		Isis Pharmaceuticals, Inc. (12)			204,704				1.3	%			7,268				35.50				1.3	%			Multiple
16		Life Technologies Corporation			204,887				1.3	%			7,251				35.39				1.3	%			March 2028
17		Bristol-Myers Squibb Company (13)			237,435				1.5	%			7,042				29.66				1.3	%			Multiple
18		Momenta Pharmaceuticals, Inc.			104,678				0.6	%			6,176				59.00				1.1	%			August 2016
19		Penn Presbyterian Medical Center			269,238				1.7	%			5,779				21.46				1.0	%			August 2034
20		Human Longevity, Inc. (14)			147,433				0.9	%			5,345				36.25				1.0	%			Multiple
		Total / weighted-average (15)			7,488,258				46.1	%		$	294,355			$	39.31				52.8	%

 

(1)	Based on current annualized base rent. Current annualized base rent is the monthly contractual rent as of the current quarter ended, or if rent has not yet commenced, the first monthly rent payment due at each rent commencement date, multiplied by 12 months.

(2)

Includes build-to-suit transaction to construct two new buildings pre-leased to Regeneron for a 15 year term totaling approximately 297,000 square feet at Landmark at Eastview. 8,981 square feet will expire in November 2015, 7,568 square feet in December 2016, 82,124 square feet in December 2018, 262,476 square feet in June 2024 and 757,206 square feet in June 2029.

(3)

Includes build-to-suit transactions to construct three new buildings pre-leased to Illumina for a 15 year term totaling approximately 360,000 square feet at Lincoln Centre and another new building on a 20 year term totaling approximately 155,000 square feet at Granta Park II. 28,057 square feet will expire in June 2017, 193,136 square feet in October 2023, 200,000 square feet in June 2032, 160,000 square feet in June 2033, and 155,000 square feet in September 2037.

(4)	The Company’s tenant is Human Genome Sciences (HGS), a wholly owned subsidiary of GlaxoSmithKline plc (GSK).

(5)	343,000 square feet expire July 2018 and 75,003 square feet expire September 2018.

(6)	81,204 square feet are leased with a subsidiary of Vertex Pharmaceuticals Incorporated. 290,716 square feet expire April 2018, and 81,204 square feet expire December 2018.

(7)	This tenant guarantees rent on 49,866 square feet leased at the Center for Life Science | Boston.

(8)	242,000 square feet expire December 2027, 130,170 square feet in 2029, 167,947 square feet in June 2031, and 115,303 square feet expire in December 2031. Wake Forest University is the sole member of the tenant, Wake Forest University Health Sciences.

(9)	3,134 square feet are currently month-to-month and 410,411 square feet expire November 2027.

(10)

9,330 square feet are currently month-to-month, 8,478 square feet expire May 2016, 10,578 square feet expire February 2018, 15,436 square feet expire August 2020, 20,143 square feet expire February 2022, 19,912 square feet expire May 2025, 4,796 square feet expire October 2025, 208,777 square feet expire April 2032 and 95,272 square feet expire February 2036.

(11)	21,576 square feet expire December 2015, 39,505 square feet expire December 2020 and 160,290 square feet expire in December 2021.

(12)	176,000 square feet expire July 2031 and 28,704 square feet expire December 2031.

(13)	13,160 square feet will expire July, 2016, 30,167 square feet expire April 2024, and 194,108 square feet expire May 2025.

(14)	22,214 square feet will expire January 2017 and 125,219 square feet will expire in September 2025.

(15)	Without regard to any renewal options but includes managements assessment on early termination options.

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LEASING ACTIVITY (1)

JUNE 30, 2015

 

 

		Leased Square Feet				Current Annualized Base Rent per Leased Sq Ft				GAAP Annualized Base Rent per Leased Sq Ft				Forward-Leased Square Feet				Current Annualized Base Rent per Forward- Leased Sq Ft				GAAP Annualized Base Rent per Forward- Leased Sq Ft
Leased Square Feet as of March 31, 2015			15,683,467												164,448
Expirations and terminations			(461,201	)		$	35.40			$	34.12
Forward-lease delivery (2)			53,095				56.39				62.77				(53,095	)		$	56.39			$	62.77
Renewals and extensions			264,780				29.78				33.00
New leases (3)			731,999				29.27				30.94				305,787				65.84				81.42
Leased Square Feet as of June 30, 2015			16,272,140												417,140
		Three Months Ended																				Year to Date
Leased Square Feet		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14				6/30/15
Renewals and extensions			264,780				84,392				219,817				277,313				319,067				349,172
New leases			1,037,786				696,408				656,157				380,433				493,152				1,734,194
Gross Leasing Activity			1,302,566				780,800				875,974				657,746				812,219				2,083,366
Expirations			(353,486	)			(137,441	)			(423,634	)			(385,365	)			(811,921	)			(490,927	)
Terminations			(107,715	)			(759,588	)			(9,189	)			(106,629	)			(167,249	)			(867,303	)
Forward-lease delivery (2)			53,095				18,396				—				103,192				117,378				71,491
Renewals and extensions			264,780				84,392				219,817				277,313				319,067				349,172
New leases - 1st & 2nd generation (2)			361,696				692,713				92,158				331,153				307,834				1,054,409
New leases - pre-leased (3)			370,303				—				563,999				—				55,084				370,303
Net Absorption (4)			588,673				(101,528	)			443,151				219,664				(179,807	)			487,145
Operating portfolio			218,370				(101,528	)			(120,848	)			214,172				(204,673	)			116,842
Active redevelopment			—				—				—				—				—				—
Active new construction			370,303				—				563,999				5,492				24,866				370,303
Net Absorption (4)			588,673				(101,528	)			443,151				219,664				(179,807	)			487,145
Operating portfolio			932,263				780,800				311,975				652,254				787,353				1,713,063
Active redevelopment			—				—				—				—				—				—
Active new construction			370,303				—				563,999				5,492				24,866				370,303
Gross Leasing Activity			1,302,566				780,800				875,974				657,746				812,219				2,083,366

 

(1)	Leasing activity for leases signed during the periods presented, which may be different than the period of actual occupancy.

(2)	For definition of forward-leased, see page 38.

(3)	Includes first and second generation leases, forward-leases, and pre-leased. For definitions see page 38.

(4)	Net absorption is calculated as total square footage of new leases, renewals and extensions, and forward-lease deliveries, less expirations and terminated square feet for the given period.

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LEASING DATA

JUNE 30, 2015

 

 

		Three Months Ended																				Six Months Ended
		6/30/15				3/31/15				12/31/14				9/30/14				6/30/14				6/30/15
Renewals and Extensions (1)
Number of renewals			18				16				14				14				16				34
Square feet			264,780				84,392				219,817				277,313				319,067				349,172
Percentage change - CABR (2) (4)			-15.3	%			6.4	%			-5.5	%			0.4	%			-13.2	%			-10.8	%
Percentage change - GABR (2) (4)			-0.1	%			11.4	%			-1.5	%			3.3	%			-8.1	%			-2.5	%
Free rent months			0.2				3.4				1.1				—				0.2				0.9
Weighted-average lease term years			9.0				4.8				6.4				7.2				8.8				8.0
Tenant improvement costs per square foot		$	11.37			$	—			$	8.78			$	1.50			$	1.05			$	8.63
Landlord costs per square foot			0.33				0.93				0.87				0.18				1.27				0.47
Leasing commission costs per square foot			9.47				1.55				4.61				1.46				2.17				7.55
Total tenant improvement, landlord and leasing commission costs psf		$	21.17			$	2.48			$	14.26			$	3.15			$	4.49			$	16.65
New Leases - 1st Generation (3)
Number of leases			9				9				5				12				16				18
Square feet			87,381				160,674				40,107				152,380				193,532				248,055
Free rent months			0.5				3.3				7.8				0.2				4.6				2.3
Weighted-average lease term years			7.5				12.6				9.4				9.5				8.5				10.8
Tenant improvement costs per square foot		$	59.16			$	45.04			$	87.64			$	62.99			$	56.63			$	50.02
Landlord costs per square foot			—				0.09				0.13				11.44				12.07				0.06
Leasing commission costs per square foot			9.05				9.16				6.57				12.60				5.27				9.12
Total tenant improvement, landlord and leasing commission costs psf		$	68.20			$	54.28			$	94.35			$	87.04			$	73.97			$	59.19
New Leases - 2nd Generation (3)
Number of leases			16				24				11				21				28				40
Square feet			580,102				535,734				52,051				228,053				244,536				1,115,836
Percentage change - CABR (2) (5)			3.4	%			-5.9	%			66.0	%			15.3	%			-29.1	%			-0.9	%
Percentage change - GABR (2) (5)			27.9	%			14.7	%			50.4	%			16.0	%			-17.9	%			22.3	%
Free rent months			2.4				1.5				0.4				5.8				0.8				1.9
Weighted-average lease term years			12.1				8.6				3.9				9.4				6.8				10.4
Tenant improvement costs per square foot		$	118.04			$	39.77			$	23.59			$	87.14			$	37.34			$	80.46
Landlord costs per square foot			6.47				4.67				34.82				1.40				2.40				5.61
Leasing commission costs per square foot			17.18				10.77				5.16				12.19				9.59				14.10
Total tenant improvement, landlord and leasing commission costs psf		$	141.68			$	55.21			$	63.56			$	100.74			$	49.32			$	100.17
New Leases - Pre-Leased
Number of leases			3				—				4				—				3				3
Square feet			370,303				—				563,999				—				55,084				370,303
Free rent months			2.5				—				3.5				—				2.7				2.5
Weighted-average lease term years			17.1				—				14.6				—				12.1				17.1
Tenant improvement costs per square foot		$	113.67			$	—			$	84.49			$	—			$	67.75			$	113.67
Landlord costs per square foot			162.16				—				205.82				—				98.42				162.16
Leasing commission costs per square foot			7.81				—				10.62				—				18.29				7.81
Total tenant improvement, landlord and leasing commission costs psf		$	283.64			$	—			$	300.94			$	—			$	184.46			$	283.64
Total
Number of leases and renewals			46				49				34				47				63				95
Square feet			1,302,566				780,800				875,974				657,746				812,219				2,083,366
Percentage change - CABR (2) (6)			-1.6	%			-4.6	%			1.4	%			8.7	%			-20.6	%			-2.8	%
Percentage change - GABR (2) (6)			20.6	%			14.6	%			3.7	%			10.5	%			10.7	%			17.1	%
Free rent months			1.8				2.0				2.9				2.1				1.6				1.9
Weighted-average lease term years			12.6				9.0				11.7				8.5				8.3				11.2
Tenant improvement costs per square foot		$	91.16			$	36.56			$	62.02			$	45.44			$	29.74			$	70.70
Landlord costs per square foot			49.05				3.32				134.81				3.21				10.77				31.91
Leasing commission costs per square foot			12.40				9.44				8.60				7.76				6.24				11.29
Total tenant improvement, landlord and leasing commission costs psf		$	152.61			$	49.32			$	205.43			$	56.42			$	46.75			$	113.90

 

(1)	Does not include retained tenants that have relocated to new space or expanded into new space.

(2)	Excludes retail leases, leases less than 5,000 square feet, and leases for space unoccupied for a period greater than 24 months.

(3)	Includes forward-leasing activity and retained tenants that have relocated or expanded into new space within the Company’s portfolio. For definitions of first and second generation leases, see page 38.

(4)	Excluding the impact of the leasing activity in Colorado, percentage change in CABR and GABR for renewals and extensions is -7.2% and 9.9%, respectively, for the three months ended June 30, 2015.

(5)	Excluding the impact of the leasing activity in Colorado, percentage change in CABR and GABR for 2nd Generation leases is 7.0% and 33.0%, respectively, for the three months ended June 30, 2015.

(6)	Excluding the impact of the leasing activity in Colorado, percentage change in CABR and GABR for Renewals and 2nd Generation leases is 4.7% and 29.3%, respectively, for the three months ended June 30, 2015.

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ACQUISITIONS AND DISPOSITIONS

JUNE 30, 2015

 

 

Acquisitions Detail for 2015:

Rentable

Percent

Square

Leased at

Property

Market

Closing Date

Feet

Investment

Acquisition

(In thousands)

First Quarter 2015

Westlake

Seattle

February 11, 2015

116,214

$

89,700

99.1

%

Second Quarter 2015

Towne Centre Technology Park (1)

San Diego

May 5, 2015

182,866

$

84,000

—

Total 2015 Acquisitions

299,080

$

173,700

38.5

%

Dispositions Detail for 2015:

Rentable

Square

Gross

Property

Market

Closing Date

Feet

Proceeds

(In thousands)

Second Quarter 2015

King of Prussia

Pennsylvania

May 29, 2015

547,000

$

35,223

Held for Sale:

Anticipated

Rentable Square

Property

Market

Closing

Feet

Second Quarter 2015

65 West Watkins Mill Road

Maryland

Q3 2015

42,900

 

(1)	Investment includes approximately 104,500 SF of estimated development potential.

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NON-GAAP FINANCIAL MEASURE DEFINITIONS

JUNE 30, 2015

 

This document includes certain non-GAAP financial measures that management believes are helpful in understanding our business, as further described below. Our definition and calculation of non-GAAP financial measures may differ from those of other REITs, and therefore, may not be comparable. The non-GAAP measures should not be considered an alternative to net income as an indicator of our performance and should be considered only a supplement to cash flows from operating, investing or financing activities as a measure of liquidity, computed in accordance with GAAP.

FFO, CFFO and AFFO

We present funds from operations, or FFO, FFO excluding acquisition-related expenses, or CFFO, and adjusted funds from operations, or AFFO, available to common shares and OP units because we consider them to be important supplemental measures of our operating performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO, CFFO and AFFO when reporting their results.

FFO, CFFO and AFFO are 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, CFFO and AFFO exclude depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, they provide performance measures that, when compared year over year, reflect 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. As defined by NAREIT, FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable property, impairment charges on depreciable real estate, real estate related depreciation and amortization (excluding amortization of loan origination costs) and after adjustments for unconsolidated partnerships and joint ventures.

We calculate CFFO by adding acquisition-related expenses to FFO. We calculate AFFO by adding to CFFO: (a) non-cash revenues and expenses, (b) recurring capital expenditures and second generation tenant improvements and (c) leasing commissions.

Our computations may differ from the methodologies for calculating FFO, CFFO and AFFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. Further, FFO, CFFO and AFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. FFO, CFFO and AFFO should not be considered alternatives to net income/(loss) (computed in accordance with GAAP) as indicators of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as indicators of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. FFO, CFFO and AFFO should be considered only as supplements to net income computed in accordance with GAAP as measures of our operations.

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA), and Adjusted EBITDA

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We calculate Adjusted EBITDA by adding to EBITDA: (a) noncontrolling interests in our operating partnership, (b) non-cash adjustments for securities, (c) losses from sales of real estate, (d) executive severance, and (e) acquisition-related expenses, and by subtracting from EBITDA gains from sales of real estate. Management uses EBITDA and Adjusted EBITDA as indicators of our ability to incur and service debt. In addition, we consider EBITDA and Adjusted EBITDA to be appropriate supplemental measures of our performance because they eliminate depreciation and interest, which permits investors to view income from operations without the impact of non-cash depreciation or the cost of debt. However, because EBITDA and Adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utility is limited.

Coverage Ratios

We present interest and fixed charge ratios as supplemental liquidity measures. Management uses these ratios as indicators of our financial flexibility to service current interest expense and debt amortization from current cash net operating income. In addition, we believe that these coverage ratios represent common metrics used by securities analysts, investors and other interested parties to evaluate our ability to service fixed cash payments. However, because these ratios are derived from Adjusted EBITDA, their utility is limited by the same factors that limit the usefulness of Adjusted EBITDA as a liquidity measure.

Net Operating Income (NOI)

We use net operating income, or NOI, as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. We compute NOI by adding or subtracting certain items from net income, noncontrolling interest in the operating partnership, gains/losses from investment in unconsolidated partnerships, interest expense, interest income, depreciation and amortization and general and administrative expenses. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of liquidity or ability to make distributions.

Net Operating Income (NOI) - Cash Basis

We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent, amortization of lease incentives, above and below market amortization on acquired leases, bad debt expense and rental cash adjustments to rental revenue recorded on a GAAP basis. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of liquidity or ability to make distributions.

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DEFINITIONS

JUNE 30, 2015

 

Property Status

Active Redevelopment

Represents properties that we are currently preparing for their intended use, and accordingly are capitalizing interest and other costs as of the end of the quarter.

Active New Construction

Represents properties that we are currently developing through ground up construction.

Land Bank

Represents estimates of the additional rentable square footage that we could put into service if management made the strategic election to pursue additional development. Also includes properties that may be held for future development or are currently engaged in activities related to planning, entitlement or other preparations for future construction.

Lease Type

First Generation

Leases on space which, in management’s evaluation, require significant improvements to prepare or condition the premises for its intended purpose or enhance the value of the property. This generally includes capital expenditures for development, redevelopment or repositioning a property.

Second Generation

Leases which are not considered by management to be first generation leases.

Pre-Leased

Leases on space classified as active new construction or, prior to execution, was included in the land bank and is expected to enter the Company’s operating portfolio at a future date.

Forward-Leased

Leases on space which is currently occupied and which are expected to commence upon vacancy of the existing tenants.

Recurring Capital Expenditures

Recurring capital expenditures exclude (1) items associated with the expansion of a building or its improvements, (2) renovations to a building which change the underlying classification of the building, incurred to prepare or condition the premises for its intended purpose (for example, from office to laboratory) or (3) capital improvements that represent an addition to the property rather than the replacement of property, plant or equipment.

Bond Covenants

Calculated in accordance with the covenants contained in the indenture that governs the terms of the Company’s unsecured senior notes due 2020 and supplemental and base indentures that govern the terms of the Company’s unsecured senior notes due 2016, unsecured senior notes due 2019, and unsecured senior notes due 2022, which are included as exhibits to the Company’s Forms 8-K filed with the SEC on April 30, 2010, March 30, 2011, April 23, 2014, and June 28, 2012, respectively. The covenants for the unsecured senior notes due 2020, unsecured senior notes due 2016, unsecured senior notes due 2019, and unsecured senior notes due 2022 are identical, except that the unencumbered total asset value definition for the unsecured senior notes due 2020 includes investments in unconsolidated partnerships accounted for under the equity method of accounting, whereas the unencumbered total asset value definition for the unsecured senior notes due 2016, unsecured senior notes due 2019, and unsecured senior notes due 2022 excludes such investments in unconsolidated partnerships.