BMR-2012.09.30-10Q

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
Form 10-Q

QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

Commission File Number: 1-32261 (BioMed Realty Trust, Inc.)
000-54089 (BioMed Realty, L.P.)
BIOMED REALTY TRUST, INC.
BIOMED REALTY, L.P.
(Exact name of registrant as specified in its charter)

Maryland
20-1142292 (BioMed Realty Trust, Inc.)
(State or other jurisdiction of
20-1320636 (BioMed Realty, L.P.)
incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
17190 Bernardo Center Drive
 
San Diego, California
92128
(Address of Principal Executive Offices)
(Zip Code)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
BioMed Realty Trust, Inc.
Yes x No o
BioMed Realty, L.P.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
BioMed Realty Trust, Inc.
Yes x No o
BioMed Realty, L.P.
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




BioMed Realty Trust, Inc.:
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 

BioMed Realty, L.P.:
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
BioMed Realty Trust, Inc.
Yes o No x
BioMed Realty, L.P.
Yes o No x

The number of outstanding shares of BioMed Realty Trust, Inc.'s common stock, par value $0.01 per share, as of November 2, 2012 was 154,317,818.

 



Table of Contents


EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2012 of BioMed Realty Trust, Inc., a Maryland corporation, and BioMed Realty, L.P., a Maryland limited partnership of which BioMed Realty Trust, Inc. is the parent company and general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our” or “our company” refer to BioMed Realty Trust, Inc. together with its consolidated subsidiaries, including BioMed Realty, L.P. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “our operating partnership” or “the operating partnership” refer to BioMed Realty, L.P. together with its consolidated subsidiaries.
BioMed Realty Trust, Inc. operates as a real estate investment trust, or REIT, and the general partner of BioMed Realty, L.P. As of September 30, 2012, BioMed Realty Trust, Inc. owned an approximate 98.1% partnership interest and other limited partners, including some of our directors, executive officers and their affiliates, owned the remaining 1.9% partnership interest (including long term incentive plan units) in BioMed Realty, L.P. As the sole general partner of BioMed Realty, L.P., BioMed Realty Trust, Inc. has the full, exclusive and complete responsibility for the operating partnership's day-to-day management and control.

There are a few differences between our company and our operating partnership, which are reflected in the disclosure in this report. We believe it is important to understand the differences between our company and our operating partnership in the context of how BioMed Realty Trust, Inc. and BioMed Realty, L.P. operate as an interrelated consolidated company. BioMed Realty Trust, Inc. is a REIT, whose only material asset is its ownership of partnership interests of BioMed Realty, L.P. As a result, BioMed Realty Trust, Inc. does not conduct business itself, other than acting as the sole general partner of BioMed Realty, L.P., issuing public equity from time to time and guaranteeing certain debt of BioMed Realty, L.P. BioMed Realty Trust, Inc. itself does not hold any indebtedness but guarantees some of the secured and unsecured debt of BioMed Realty, L.P. BioMed Realty, L.P. holds substantially all the assets of the company and holds the ownership interests in the company's joint ventures. BioMed Realty, L.P. conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by BioMed Realty Trust, Inc., which are generally contributed to BioMed Realty, L.P. in exchange for partnership units, BioMed Realty, L.P. generates the capital required by the company's business through BioMed Realty, L.P.'s operations, by BioMed Realty, L.P.'s direct or indirect incurrence of indebtedness or through the issuance of partnership units.

Noncontrolling interests and stockholders' equity and partners' capital are the main areas of difference between the consolidated financial statements of BioMed Realty Trust, Inc. and those of BioMed Realty, L.P. The operating partnership and long term incentive plan units in BioMed Realty, L.P. that are not owned by BioMed Realty Trust, Inc. are accounted for as partners' capital in BioMed Realty, L.P.'s financial statements and as noncontrolling interests in BioMed Realty Trust, Inc.'s financial statements. The noncontrolling interests in BioMed Realty, L.P.'s financial statements include the interests of joint venture partners. The noncontrolling interests in BioMed Realty Trust, Inc.'s financial statements include the same noncontrolling interests at the BioMed Realty, L.P. level as well as the limited partnership unitholders of BioMed Realty, L.P., not including BioMed Realty Trust, Inc. The differences between stockholders' equity and partners' capital result from the differences in the equity issued at the BioMed Realty Trust, Inc. and the BioMed Realty, L.P. levels.

We believe combining the quarterly reports on Form 10-Q of BioMed Realty Trust, Inc. and BioMed Realty, L.P. into this single report:

better reflects how management and the analyst community view the business as a single operating unit,

enhances investor understanding of our company by enabling them to view the business as a whole and in the same manner as management,

is more efficient for our company and results in savings in time, effort and expense, and

is more efficient for investors by reducing duplicative disclosure and providing a single document for their review.

To help investors understand the significant differences between our company and our operating partnership, this report presents the following separate sections for each of BioMed Realty Trust, Inc. and BioMed Realty, L.P.:

consolidated financial statements,

the following notes to the consolidated financial statements:


2

Table of Contents

Equity / Partners' Capital,

Debt, and

Earnings Per Share / Unit,

Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of
Operations, and

Unregistered Sales of Equity Securities and Use of Proceeds.

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of BioMed Realty Trust, Inc. and BioMed Realty, L.P. in order to establish that the Chief Executive Officer and the Chief Financial Officer of BioMed Realty Trust, Inc. have made the requisite certifications and BioMed Realty Trust, Inc. and BioMed Realty, L.P. are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.




3


BIOMED REALTY TRUST, INC. AND BIOMED REALTY, L.P.

FORM 10-Q - QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
 
 

 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

4


 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 31.1
 
Exhibit 31.2
 
Exhibit 32.1
 
 
 


5

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

BIOMED REALTY TRUST, INC.
 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 
September 30,
2012

December 31,
2011
 
(Unaudited)
 
 
ASSETS
 
 
 
Investments in real estate, net
$
4,327,426

 
$
3,950,246

Investments in unconsolidated partnerships
31,955

 
33,389

Cash and cash equivalents
20,646

 
16,411

Accounts receivable, net
7,128

 
5,141

Accrued straight-line rents, net
144,975

 
130,582

Deferred leasing costs, net
180,925

 
157,255

Other assets
118,052

 
135,521

Total assets
$
4,831,107

 
$
4,428,545

LIABILITIES AND EQUITY
 
 
 
Mortgage notes payable, net
$
574,497

 
$
587,844

Exchangeable senior notes
180,000

 
180,000

Unsecured senior notes, net
893,955

 
645,581

Unsecured senior term loan
405,216

 

Unsecured line of credit
87,000

 
268,000

Accounts payable, accrued expenses and other liabilities
178,706

 
134,924

Total liabilities
2,319,374

 
1,816,349

Equity:
 
 
 
Stockholders' equity:
 
 
 
Preferred stock, $.01 par value, 15,000,000 shares authorized: 7.375% Series A cumulative redeemable preferred stock, $198,000 liquidation preference ($25.00 per share), 7,920,000 shares issued and outstanding at September 30, 2012 and December 31, 2011
191,469

 
191,469

Common stock, $.01 par value, 200,000,000 shares authorized, 154,334,988 and 154,101,482 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively
1,543

 
1,541

Additional paid-in capital
2,779,035

 
2,773,994

Accumulated other comprehensive loss, net
(56,988
)
 
(60,138
)
Dividends in excess of earnings
(411,529
)
 
(304,759
)
Total stockholders' equity
2,503,530

 
2,602,107

Noncontrolling interests
8,203

 
10,089

Total equity
2,511,733

 
2,612,196

Total liabilities and equity
$
4,831,107

 
$
4,428,545


See accompanying notes to consolidated financial statements.

6

Table of Contents

BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)

 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
Rental
$
101,467

 
$
83,549

 
$
288,650

 
$
244,598

Tenant recoveries
31,765

 
26,603

 
89,155

 
75,867

Other revenue
1,305

 
4,487

 
1,590

 
5,775

Total revenues
134,537

 
114,639

 
379,395

 
326,240

Expenses:
 
 
 
 
 
 
 
Rental operations
38,944

 
33,876

 
112,717


96,246

Depreciation and amortization
51,372

 
36,203

 
143,882


105,649

General and administrative
10,226

 
7,682

 
27,416


21,797

Acquisition-related expenses
176

 
136

 
13,055


789

Total expenses
100,718

 
77,897

 
297,070

 
224,481

Income from operations
33,819

 
36,742

 
82,325

 
101,759

Equity in net loss of unconsolidated partnerships
(339
)
 
(735
)
 
(1,011
)
 
(1,849
)
Interest expense, net
(26,817
)
 
(22,887
)
 
(72,863
)
 
(67,456
)
Other expense
(208
)
 
(4,259
)
 
(580
)
 
(6,005
)
Income from continuing operations
6,455

 
8,861

 
7,871

 
26,449

Income / (loss) from discontinued operations

 
76

 
(4,370
)
 
312

Net income
6,455

 
8,937

 
3,501

 
26,761

Net (income) / loss attributable to noncontrolling interests
(46
)
 
(106
)
 
156

 
(281
)
Net income attributable to the Company
6,409

 
8,831

 
3,657

 
26,480

Preferred stock dividends
(3,651
)
 
(3,901
)
 
(10,952
)
 
(12,382
)
Cost on redemption of preferred stock

 
(165
)
 

 
(165
)
Net income / (loss) available to common stockholders
$
2,758

 
$
4,765

 
$
(7,295
)
 
$
13,933

Income / (loss) from continuing operations per share available to common stockholders:
 
 
 
 
 
 
 
Basic and diluted earnings per share
$
0.02

 
$
0.03

 
$
(0.02
)
 
$
0.10

Income / (loss) from discontinued operations per share available to common stockholders:
 
 
 
 
 
 
 
Basic and diluted earnings per share
$

 
$

 
$
(0.03
)
 
$

Net income / (loss) per share available to common stockholders:
 
 
 
 
 
 
 
Basic and diluted earnings per share
$
0.02

 
$
0.03

 
$
(0.05
)
 
$
0.10

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
152,785,451

 
129,872,349

 
152,739,130

 
129,834,429

Diluted
155,728,209

 
132,852,328

 
152,739,130

 
132,819,688


See accompanying notes to consolidated financial statements.


7

Table of Contents

BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Net income
$
6,455

 
$
8,937

 
$
3,501

 
$
26,761

Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustments
576

 

 
3,567

 

Unrealized (loss) / gain on derivative instruments, net
(1,966
)
 
386

 
(5,563
)
 
3,795

Amortization of deferred interest costs
1,730

 
1,754

 
5,209

 
5,279

Reclassification on unrealized loss on equity securities

 
3,802

 
545

 
4,627

Reclassification on sale of equity securities
(6
)
 
21

 
(38
)
 
21

Unrealized gain / (loss) on equity securities
10

 
(883
)
 
(509
)
 
(4,575
)
Total other comprehensive income
344

 
5,080

 
3,211

 
9,147

Comprehensive income
6,799

 
14,017

 
6,712

 
35,908

Comprehensive (income) / loss attributable to noncontrolling interests
(51
)
 
(218
)
 
95

 
(483
)
Comprehensive income attributable to the Company
$
6,748

 
$
13,799

 
$
6,807

 
$
35,425


See accompanying notes to consolidated financial statements.

8

Table of Contents

BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENT OF EQUITY
(In thousands, except share data)
(Unaudited)

 
Series A Preferred Stock
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Loss, net
 
Dividends in Excess of Earnings
 
Total Stockholders' Equity
 
Noncontrolling Interests
 
Total Equity
 
 
Shares
 
Amount
 
Balance at December 31, 2011
$
191,469

 
154,101,482

 
$
1,541

 
$
2,773,994

 
$
(60,138
)
 
$
(304,759
)
 
$
2,602,107

 
$
10,089

 
$
2,612,196

Net issuances of unvested restricted common stock

 
196,285

 
1

 
(3,517
)
 

 

 
(3,516
)
 

 
(3,516
)
Conversion of OP units to common stock

 
37,221

 
1

 
30

 

 

 
31

 
(31
)
 

Vesting of share-based awards

 

 

 
8,670

 

 

 
8,670

 

 
8,670

Reallocation of equity to noncontrolling interests

 

 

 
(142
)
 

 

 
(142
)
 
142

 

Common stock dividends

 

 

 

 

 
(99,475
)
 
(99,475
)
 

 
(99,475
)
OP unit distributions

 

 

 

 

 

 

 
(1,902
)
 
(1,902
)
Net income / (loss)

 

 

 

 

 
3,657

 
3,657

 
(156
)
 
3,501

Preferred stock dividends

 

 

 

 

 
(10,952
)
 
(10,952
)
 

 
(10,952
)
Foreign currency translation adjustment

 

 

 

 
3,500

 

 
3,500

 
67

 
3,567

Reclassification on other-than-temporary impairment of equity securities

 

 

 

 
535

 

 
535

 
10

 
545

Reclassification on sale of equity securities

 

 

 

 
(38
)
 

 
(38
)
 

 
(38
)
Unrealized loss on equity securities

 

 

 

 
(499
)
 

 
(499
)
 
(10
)
 
(509
)
Amortization of deferred interest costs

 

 

 

 
5,111

 

 
5,111

 
98

 
5,209

Unrealized loss on derivative instruments, net

 

 

 

 
(5,459
)
 

 
(5,459
)
 
(104
)
 
(5,563
)
Balance at September 30, 2012
$
191,469

 
154,334,988

 
$
1,543

 
$
2,779,035

 
$
(56,988
)
 
$
(411,529
)
 
$
2,503,530

 
$
8,203

 
$
2,511,733


See accompanying notes to consolidated financial statements.


9

Table of Contents

BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Nine Months Ended
 
September 30,
 
2012
 
2011
 
 
 
 
Operating activities:
 
 
 
Net income
$
3,501

 
$
26,761

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
143,974

 
105,919

Allowance for doubtful accounts
1,167

 
2,194

Non-cash revenue adjustments
9,045

 
7,699

Other non-cash adjustments
15,283

 
10,442

Compensation expense related to restricted common stock and LTIP units
8,670

 
5,554

Distributions representing a return on capital from unconsolidated partnerships
1,145

 
1,573

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(2,040
)
 
(2,614
)
Accrued straight-line rents
(15,740
)
 
(17,907
)
Deferred leasing costs
(9,873
)
 
(10,830
)
Other assets
(2,925
)
 
(1,809
)
Accounts payable, accrued expenses and other liabilities
23,825

 
8,061

Net cash provided by operating activities
176,032

 
135,043

Investing activities:
 
 
 
Purchases of investments in real estate and related intangible assets
(367,785
)
 
(38,981
)
Capital expenditures
(110,205
)
 
(117,440
)
Contributions to unconsolidated partnerships, net
(1,351
)
 
(14,351
)
Purchases of debt and equity securities
(5,101
)
 
(2,125
)
Proceeds from the sale of equity securities
133

 
31

Deposits to escrow for acquisitions

 
(5,500
)
Net cash used in investing activities
(484,309
)
 
(178,366
)
Financing activities:
 
 
 
Redemption of Series A preferred stock

 
(31,109
)
Payment of deferred loan costs
(5,989
)
 
(9,786
)
Unsecured line of credit proceeds
543,000

 
400,075

Unsecured line of credit payments
(724,000
)
 
(576,425
)
Principal payments on mortgage notes payable
(38,533
)
 
(52,554
)
Proceeds from unsecured senior term loan
556,404

 

Unsecured senior term loan payments
(156,404
)
 

Proceeds from unsecured senior notes
247,815

 
397,460

Distributions to operating partnership unit and LTIP unit holders
(1,865
)
 
(1,702
)
Dividends paid to common stockholders
(97,116
)
 
(74,779
)
Dividends paid to preferred stockholders
(10,950
)
 
(12,973
)
Net cash provided by financing activities
312,362

 
38,207

Effect of exchange rate changes on cash and cash equivalents
150

 

Net increase / (decrease) in cash and cash equivalents
4,235

 
(5,116
)

10

Table of Contents

 
Nine Months Ended
 
September 30,
 
2012
 
2011
 
 
 
 
Cash and cash equivalents at beginning of period
16,411

 
21,467

Cash and cash equivalents at end of period
$
20,646

 
$
16,351

Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for interest (net of amounts capitalized of $6,376 and $5,308, respectively)
$
58,978

 
$
50,065

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Accrual for preferred stock dividends declared
$
3,651

 
$
3,651

Accrual for common stock dividends declared
33,182

 
26,253

Accrual for distributions declared for operating partnership unit and LTIP unit holders
633

 
596

Accrued additions to real estate and related intangible assets
28,545

 
17,026

Mortgage notes assumed (including premium of $1,802 in 2012)
25,947

 

Deposits applied for acquisitions
18,649

 
1,800


See accompanying notes to consolidated financial statements.


11

Table of Contents

BIOMED REALTY, L.P.

CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)

 
September 30,
2012
 
December 31,
2011
 
(Unaudited)
 
 
ASSETS
 
 
 
Investments in real estate, net
$
4,327,426

 
$
3,950,246

Investments in unconsolidated partnerships
31,955

 
33,389

Cash and cash equivalents
20,646

 
16,411

Accounts receivable, net
7,128

 
5,141

Accrued straight-line rents, net
144,975

 
130,582

Deferred leasing costs, net
180,925

 
157,255

Other assets
118,052

 
135,521

Total assets
$
4,831,107

 
$
4,428,545

LIABILITIES AND CAPITAL
 
 
 
Mortgage notes payable, net
$
574,497

 
$
587,844

Exchangeable senior notes
180,000

 
180,000

Unsecured senior notes, net
893,955

 
645,581

Unsecured senior term loan
405,216

 

Unsecured line of credit
87,000

 
268,000

Accounts payable, accrued expenses and other liabilities
178,706

 
134,924

Total liabilities
2,319,374

 
1,816,349

Capital:
 
 
 
Partners' capital:
 
 
 
Preferred units, 7.375% Series A cumulative redeemable preferred units, $198,000 liquidation preference ($25.00 per unit), 7,920,000 units issued and outstanding at September 30, 2012 and December 31, 2011
191,469

 
191,469

Limited partners' capital, 2,942,758 and 2,979,979 units issued and outstanding at September 30, 2012 and December 31, 2011, respectively
8,463

 
10,332

General partner's capital, 154,334,988 and 154,101,482 units issued and outstanding at September 30, 2012 and December 31, 2011, respectively
2,367,444

 
2,469,233

Accumulated other comprehensive loss
(55,383
)
 
(58,594
)
Total partners' capital
2,511,993

 
2,612,440

Noncontrolling interests deficit
(260
)
 
(244
)
Total capital
2,511,733

 
2,612,196

Total liabilities and capital
$
4,831,107

 
$
4,428,545


See accompanying notes to consolidated financial statements.

12

Table of Contents

BIOMED REALTY, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except unit data)
(Unaudited)

 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
Rental
$
101,467

 
$
83,549

 
$
288,650

 
$
244,598

Tenant recoveries
31,765

 
26,603

 
89,155

 
75,867

Other revenue
1,305

 
4,487

 
1,590

 
5,775

Total revenues
134,537

 
114,639

 
379,395

 
326,240

Expenses:
 
 
 
 
 
 
 
Rental operations
38,944

 
33,876

 
112,717

 
96,246

Depreciation and amortization
51,372

 
36,203

 
143,882

 
105,649

General and administrative
10,226

 
7,682

 
27,416

 
21,797

Acquisition-related expenses
176

 
136

 
13,055

 
789

Total expenses
100,718

 
77,897

 
297,070

 
224,481

Income from operations
33,819

 
36,742

 
82,325

 
101,759

Equity in net loss of unconsolidated partnerships
(339
)
 
(735
)
 
(1,011
)
 
(1,849
)
Interest expense, net
(26,817
)
 
(22,887
)
 
(72,863
)
 
(67,456
)
Other expense
(208
)
 
(4,259
)
 
(580
)
 
(6,005
)
Income from continuing operations
6,455

 
8,861

 
7,871

 
26,449

Income / (loss) from discontinued operations

 
76

 
(4,370
)
 
312

Net income
6,455

 
8,937

 
3,501

 
26,761

Net loss attributable to noncontrolling interests
7

 
5

 
16

 
37

Net income attributable to the Operating Partnership
6,462

 
8,942

 
3,517

 
26,798

Preferred unit distributions
(3,651
)
 
(3,901
)
 
(10,952
)
 
(12,382
)
Cost on redemption of preferred units

 
(165
)
 

 
(165
)
Net income / (loss) available to unitholders
$
2,811

 
$
4,876

 
$
(7,435
)
 
$
14,251

Income / (loss) from continuing operations per unit available to common unitholders:
 
 
 
 
 
 
 
Basic and diluted earnings per unit
$
0.02

 
$
0.03

 
$
(0.02
)
 
$
0.10

Income / (loss) from discontinued operations per unit available to common unitholders:
 
 
 
 
 
 
 
Basic and diluted earnings per unit
$

 
$

 
$
(0.03
)
 
$

Net income / (loss) per unit available to common unitholders:
 
 
 
 
 
 
 
Basic and diluted earnings per unit
$
0.02

 
$
0.03

 
$
(0.05
)
 
$
0.10

Weighted-average units outstanding:
 
 
 
 
 
 
 
Basic
155,699,816

 
132,793,468

 
155,661,231

 
132,759,427

Diluted
155,699,816

 
132,793,468

 
155,661,231

 
132,759,427


See accompanying notes to consolidated financial statements.

13

Table of Contents

BIOMED REALTY, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Net income
$
6,455

 
$
8,937

 
$
3,501

 
$
26,761

Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustments
576

 

 
3,567

 

Unrealized (loss) / gain on derivative instruments, net
(1,966
)
 
386

 
(5,563
)
 
3,795

Amortization of deferred interest costs
1,730

 
1,754

 
5,209

 
5,279

Reclassification on unrealized loss on equity securities

 
3,802

 
545

 
4,627

Reclassification on sale of equity securities
(6
)
 
21

 
(38
)
 
21

Unrealized gain / (loss) on equity securities
10

 
(883
)
 
(509
)
 
(4,575
)
Total other comprehensive income
344

 
5,080

 
3,211

 
9,147

Comprehensive income
6,799

 
14,017

 
6,712

 
35,908

Comprehensive loss attributable to noncontrolling interests
7

 
5

 
16

 
37

Comprehensive income attributable to the Operating Partnership
$
6,806

 
$
14,022

 
$
6,728

 
$
35,945


See accompanying notes to consolidated financial statements.

14

Table of Contents

BIOMED REALTY, L.P.

CONSOLIDATED STATEMENT OF CAPITAL
(In thousands, except unit data)
(Unaudited)

 
Preferred Series A
 
Limited Partners' Capital
 
General Partner's Capital
 
Accumulated Other Comprehensive Loss
 
Total Partner's Capital
 
Noncontrolling Interests Deficit
 
Total Capital
 
Units
 
Amount
 
Units
 
Amount
 
Units
 
Amount
 
Balance at December 31, 2011
7,920,000

 
$
191,469

 
2,979,979

 
$
10,332

 
154,101,482

 
$
2,469,233

 
$
(58,594
)
 
$
2,612,440

 
$
(244
)
 
$
2,612,196

Net issuances of unvested restricted OP units

 

 

 

 
196,285

 
(3,516
)
 

 
(3,516
)
 

 
(3,516
)
Conversion of OP units

 

 
(37,221
)
 
(31
)
 
37,221

 
31

 

 

 

 

Vesting of share-based awards

 

 

 

 

 
8,670

 

 
8,670

 

 
8,670

Reallocation of equity to limited partners

 

 

 
204

 

 
(204
)
 

 

 

 

Distributions

 
(10,952
)
 

 
(1,902
)
 

 
(99,475
)
 

 
(112,329
)
 

 
(112,329
)
Net income / (loss)

 
10,952

 

 
(140
)
 

 
(7,295
)
 

 
3,517

 
(16
)
 
3,501

Foreign currency translation adjustment

 

 

 

 

 

 
3,567

 
3,567

 

 
3,567

Reclassification on other-than-temporary impairment of equity securities

 

 

 

 

 

 
545

 
545

 

 
545

Reclassification on sale of equity securities

 

 

 

 

 

 
(38
)
 
(38
)
 

 
(38
)
Unrealized loss on equity securities

 

 

 

 

 

 
(509
)
 
(509
)
 

 
(509
)
Amortization of deferred interest costs

 

 

 

 

 

 
5,209

 
5,209

 

 
5,209

Unrealized loss on derivative instruments, net

 

 

 

 

 

 
(5,563
)
 
(5,563
)
 

 
(5,563
)
Balance at September 30, 2012
7,920,000

 
$
191,469

 
2,942,758

 
$
8,463

 
154,334,988

 
$
2,367,444

 
$
(55,383
)
 
$
2,511,993

 
$
(260
)
 
$
2,511,733


See accompanying notes to consolidated financial statements.

15

Table of Contents

BIOMED REALTY, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Nine Months Ended
 
September 30,
 
2012
 
2011
 
 
 
 
Operating activities:
 
 
 
Net income
$
3,501

 
$
26,761

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
143,974

 
105,919

Allowance for doubtful accounts
1,167

 
2,194

Non-cash revenue adjustments
9,045

 
7,699

Other non-cash adjustments
15,283

 
10,442

Compensation expense related to share-based payments
8,670

 
5,554

Distributions representing a return on capital from unconsolidated partnerships
1,145

 
1,573

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(2,040
)
 
(2,614
)
Accrued straight-line rents
(15,740
)
 
(17,907
)
Deferred leasing costs
(9,873
)
 
(10,830
)
Other assets
(2,925
)
 
(1,809
)
Accounts payable, accrued expenses and other liabilities
23,825

 
8,061

Net cash provided by operating activities
176,032

 
135,043

Investing activities:
 
 
 
Purchases of investments in real estate and related intangible assets
(367,785
)
 
(38,981
)
Capital expenditures
(110,205
)
 
(117,440
)
Contributions to unconsolidated partnerships, net
(1,351
)
 
(14,351
)
Purchases of debt and equity securities
(5,101
)
 
(2,125
)
Proceeds from the sale of equity securities
133

 
31

Deposits to escrow for acquisitions

 
(5,500
)
Net cash used in investing activities
(484,309
)
 
(178,366
)
Financing activities:
 
 
 
Redemption of Series A preferred units

 
(31,109
)
Payment of deferred loan costs
(5,989
)
 
(9,786
)
Unsecured line of credit proceeds
543,000

 
400,075

Unsecured line of credit payments
(724,000
)
 
(576,425
)
Principal payments on mortgage notes payable
(38,533
)
 
(52,554
)
Proceeds from unsecured senior term loan
556,404

 

Unsecured senior term loan repayments
(156,404
)
 

Proceeds from unsecured senior notes
247,815

 
397,460

Distributions paid to unitholders
(98,981
)
 
(76,481
)
Distributions paid to preferred unitholders
(10,950
)
 
(12,973
)
Net cash provided by financing activities
312,362

 
38,207

Effect of exchange rate changes on cash and cash equivalents
150

 


16

Table of Contents

 
Nine Months Ended
 
September 30,
 
2012
 
2011
 
 
 
 
Net increase / (decrease) in cash and cash equivalents
4,235

 
(5,116
)
Cash and cash equivalents at beginning of period
16,411

 
21,467

Cash and cash equivalents at end of period
$
20,646

 
$
16,351

Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for interest (net of amounts capitalized of $6,376 and $5,308, respectively)
$
58,978

 
$
50,065

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Accrual for unit distributions declared
$
33,815

 
$
26,849

Accrual for preferred unit distributions declared
3,651

 
3,651

Accrued additions to real estate and related intangible assets
28,545

 
17,026

Mortgage notes assumed (includes premium of $1,802 in 2012)
25,947

 

Deposits applied for acquisitions
18,649

 
1,800


See accompanying notes to consolidated financial statements.


17

Table of Contents

BIOMED REALTY TRUST, INC.
BIOMED REALTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Organization of the Parent Company and Description of Business

BioMed Realty Trust, Inc., a Maryland corporation (the “Parent Company”), operates as a fully integrated, self-administered and self-managed real estate investment trust (“REIT”) focused on acquiring, developing, owning, leasing and managing laboratory and office space for the life science industry principally through its subsidiary, BioMed Realty, L.P., a Maryland limited partnership (the “Operating Partnership” and together with the Parent Company referred to as the “Company”). The Company's tenants primarily include biotechnology and pharmaceutical companies, scientific research institutions, government agencies and other entities involved in the life science industry. The Company's properties are generally located in markets with well-established reputations as centers for scientific research, including Boston, San Francisco, San Diego, Maryland, New York/New Jersey, Pennsylvania and Seattle.

The Parent Company is the sole general partner of the Operating Partnership and, as of September 30, 2012, owned a 98.1% interest in the Operating Partnership. The remaining 1.9% interest in the Operating Partnership is held by limited partners. Each partner's percentage interest in the Operating Partnership is determined based on the number of operating partnership units and long-term incentive plan units (“LTIP units” and together with the operating partnership units, the “OP units”) owned as compared to total OP units (and potentially issuable OP units, as applicable) outstanding as of each period end and is used as the basis for the allocation of net income or loss to each partner.

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying interim financial statements are unaudited, but have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments and eliminations, consisting of normal recurring adjustments necessary for a fair presentation of the financial statements for these interim periods have been recorded. These financial statements should be read in conjunction with the audited consolidated financial statements and notes therein included in the Company's annual report on Form 10-K for the year ended December 31, 2011 and the Company's current report on Form 8-K filed with the SEC on August 24, 2012.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, partnerships and limited liability companies it controls, and variable interest entities for which the Company has determined itself to be the primary beneficiary. All material intercompany transactions and balances have been eliminated. The Company consolidates entities the Company controls and records a noncontrolling interest for the portions not owned by the Company. Control is determined, where applicable, by the sufficiency of equity invested and the rights of the equity holders, and by the ownership of a majority of the voting interests, with consideration given to the existence of approval or veto rights granted to the minority stockholder. If the minority stockholder holds substantive participating rights, it overcomes the presumption of control by the majority voting interest holder. In contrast, if the minority stockholder simply holds protective rights (such as consent rights over certain actions), it does not overcome the presumption of control by the majority voting interest holder.

Assets and liabilities of subsidiaries outside the United States with non-U.S. dollar functional currencies are translated into U.S. dollars using exchange rates as of the balance sheet dates. Income and expenses are translated using the average exchange rates for the reporting period. Foreign currency translation adjustments are recorded as a component of other comprehensive income. For the three and nine months ended September 30, 2012, total revenues from properties outside the United States were $4.4 million and $5.3 million, respectively, which represented 3.3% and 1.4% of the Company's total revenues during the same periods, respectively. The Company's net investment in properties outside the United States was $189.9 million as of September 30, 2012.

Investments in Partnerships and Limited Liability Companies

The Company has determined that it is the primary beneficiary in six variable interest entities, or VIEs, consisting of single-tenant properties in which the tenant has a fixed-price purchase option, which are consolidated and reflected in the

18

Table of Contents

accompanying consolidated financial statements. Selected financial data of the VIEs at September 30, 2012 and December 31, 2011 consist of the following (in thousands):
 
September 30,
2012
 
December 31,
2011
Investment in real estate, net
$
400,629

 
$
409,327

Total assets
439,527

 
454,208

Total debt
145,334

 
146,581

Total liabilities
151,695

 
151,893


Investments in Real Estate, Net

Investments in real estate, net consisted of the following (in thousands):
 
September 30,
2012
 
December 31,
2011
Land
$
704,825

 
$
591,009

Land under development
46,861

 
56,008

Buildings and improvements
4,007,656

 
3,615,678

Construction in progress
130,940

 
140,025

 
4,890,282

 
4,402,720

Accumulated depreciation
(562,856
)
 
(452,474
)
 
$
4,327,426

 
$
3,950,246


Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed

The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on an estimate of the future undiscounted cash flows (excluding interest charges) expected to result from the long-lived asset's use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a long-lived asset, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair-value of the property. The Company is required to make subjective assessments as to whether there are impairments in the values of its investments in long-lived assets. These assessments have a direct impact on the Company's net income because recording an impairment loss results in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Although the Company's strategy is to hold its properties over the long-term, if the Company's strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized to reduce the property to the lower of the carrying amount or fair-value, and such loss could be material.

In April 2012, the Company completed the exchange of a property for another real estate operating property. As a result, the property disposed of was reclassified as a discontinued operation. This property was written down to its estimated fair-value of $28.0 million, less costs to sell, which resulted in an impairment loss of $4.6 million that is included in loss from discontinued operations for the nine months ended September 30, 2012. The parties to the exchange determined and agreed upon the fair-value of the property received in the transaction, which the Company considers to be a level 2 input in the fair-value hierarchy. See Note 12 for discussion of discontinued operations.
 
Deferred Leasing Costs, Net

Deferred leasing costs, net at September 30, 2012 consisted of the following (in thousands):
 
Balance at
 
Accumulated
 
 
 
September 30, 2012
 
Amortization
 
Net
Acquired in-place leases
$
303,485

 
$
(175,517
)
 
$
127,968

Acquired management agreements
24,963

 
(14,449
)
 
10,514

Deferred leasing and other direct costs
64,558

 
(22,115
)
 
42,443

 
$
393,006

 
$
(212,081
)
 
$
180,925


19

Table of Contents


Deferred leasing costs, net at December 31, 2011 consisted of the following (in thousands):
 
Balance at
 
Accumulated
 
 
 
December 31, 2011
 
Amortization
 
Net
Acquired in-place leases
$
260,552

 
$
(150,453
)
 
$
110,099

Acquired management agreements
22,696

 
(12,641
)
 
10,055

Deferred leasing and other direct costs
54,461

 
(17,360
)
 
37,101

 
$
337,709

 
$
(180,454
)
 
$
157,255


Investments

Investments in equity securities, which are included in other assets on the accompanying consolidated balance sheets, consisted of the following (in thousands):
 
September 30,
2012
 
December 31,
2011
Available-for-sale securities, historical cost
$
5,958

 
$
5,585

Other-than-temporary unrealized loss
(5,684
)
 
(4,595
)
Unrealized loss
(3
)
 
(2
)
Available-for-sale securities, fair-value(1)
271

 
988

Privately-held securities, cost basis
8,875

 
4,245

Total equity securities
$
9,146

 
$
5,233

____________
(1)
Determination of fair-value is classified as Level 1 in the fair-value hierarchy based on the use of quoted prices in active markets.

The Company holds investments in available-for-sale securities of two publicly traded companies. During the nine months ended September 30, 2012, the Company reclassified to other expense from accumulated other comprehensive loss, an unrealized loss, considered to be other-than-temporary, of approximately $545,000, relating to its investment in securities of one of these companies. Management has the intent and ability to retain the investment in the other company for a period of time sufficient to allow for an anticipated recovery in its market value. Management will continue to periodically evaluate whether any investment, the fair-value of which is less than the Company's cost basis, should be considered other-than-temporarily-impaired. If other-than-temporary impairment is considered to exist, the related unrealized loss will be reclassified from accumulated other comprehensive loss and recorded as a reduction of net income.

The Company's remaining investments consisted of securities in privately-held companies or funds, which are recorded at cost basis due to the Company's lack of control or significant influence over such companies or funds. The Company owned equity securities of five privately-held companies and two privately-held funds during the nine months ended September 30, 2012. There were no identified events or changes in circumstances that may have a significant adverse effect on the carrying value of the Company's cost basis investments and therefore, no evaluation of impairment was performed during the nine months ended September 30, 2012 on the Company's cost basis investments.

Construction Loan Receivable

During the nine months ended September 30, 2012, the Company entered into an agreement to purchase a $255 million interest in a $355 million construction loan secured by first priority mortgages on a 1.1 million square foot laboratory, office and retail development project located in Boston, Massachusetts, which is 95% leased to Vertex Pharmaceuticals Incorporated to serve as its new corporate headquarters.

The construction loan matures on September 30, 2014, with two one-year extension options exercisable at the borrower's election after paying the lenders an extension fee on the then-outstanding principal amount. The construction loan bears interest on the outstanding principal amount at a floating rate equal to the greater of (1) reserve adjusted LIBOR plus 550 basis points and (2) 6.5%. In addition, the borrower is required to pay a fee to the lenders based on a specified percentage of the average daily unfunded amount of the construction loan. The borrower may prepay the construction loan in part under certain circumstances, and may prepay the construction loan in full with prior notice and a prepayment fee to the lenders. The

20

Table of Contents

Company expects initial draws on the construction loan to be funded in the fourth quarter of 2012 and to be fully invested in early 2014.

Management's Estimates

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reporting of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with GAAP. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and reported amounts of revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions.

3. Equity of the Parent Company

During the nine months ended September 30, 2012, the Parent Company issued restricted stock awards to the Company's employees and directors totaling 378,655 and 16,695 shares of common stock, respectively (180,594 shares of common stock were surrendered to the Company and subsequently retired in lieu of cash payments for taxes due on the vesting of restricted stock and 18,471 shares were forfeited during the same period), which are included in the total of common stock outstanding as of the period end.

During the nine months ended September 30, 2012, the Parent Company awarded 408,888 performance units (the “Performance Units”) to certain of its executive officers, which represent the maximum number of Performance Units that may vest. Each Performance Unit represents a contingent right to receive one share of the Parent Company's common stock if vesting conditions are satisfied. Performance Units vest ratably over one, two and three year periods (each, a “Performance Period”) based upon the Parent Company's total stockholder return relative to its peer group. The grant date fair-value of the Performance Units was estimated using a Monte Carlo simulation which considered the likelihood of achieving the vesting conditions. The grant date fair-value of these awards of approximately $3.4 million will be recognized as compensation expense on a straight-line basis over each respective Performance Period. The total compensation to be expensed in future periods as of September 30, 2012 was $1.9 million over a weighted-average of approximately 1.6 years. No dividends will be paid or accrued on the Performance Units, and shares of the Parent Company's common stock will not be issued until vesting of the Performance Units occurs.

Common Stock, Operating Partnership Units and LTIP Units

As of September 30, 2012, the Company had outstanding 154,334,988 shares of the Parent Company's common stock and 2,579,788 and 362,970 operating partnership and LTIP units, respectively. A share of the Parent Company's common stock and the operating partnership and LTIP units have essentially the same economic characteristics as they share equally in the total net income or loss and distributions of the Operating Partnership.

Dividends and Distributions

The following table lists the dividends and distributions declared by the Parent Company and the Operating Partnership during the nine months ended September 30, 2012:

Declaration Date
 
Securities Class
 
Amount Per
Share/Unit
 
Period Covered
 
Dividend and
Distribution
Payable Date
 
Dividend and
Distribution Amount
 
 
 
 
 
 
 
 
 
 
(In thousands)
March 15, 2012
 
 Common stock and OP units
 
$
0.21500

 
 January 1, 2012 to March 31, 2012
 
April 16, 2012
 
$
33,780

March 15, 2012
 
 Series A preferred stock/units
 
$
0.46094

 
 January 16, 2012 to April 15, 2012
 
April 16, 2012
 
$
3,650

June 15, 2012
 
 Common stock and OP units
 
$
0.21500

 
 April 1, 2012 to June 30, 2012
 
July 16, 2012
 
$
33,782

June 15, 2012
 
 Series A preferred stock/units
 
$
0.46094

 
 April 16, 2012 to July 15, 2012
 
July 16, 2012
 
$
3,651

September 14, 2012
 
 Common stock and OP units
 
$
0.21500

 
 July 1, 2012 to September 30, 2012
 
October 15, 2012
 
$
33,815

September 14, 2012
 
 Series A preferred stock/units
 
$
0.46094

 
 July 16, 2012 to October 15, 2012
 
October 15, 2012
 
$
3,651


Total 2012 dividends and distributions declared through September 30, 2012 (in thousands):


21

Table of Contents

Common stock and OP units
$
101,377

Series A preferred stock/units
10,952

 
$
112,329


Noncontrolling Interests

Noncontrolling interests on the consolidated balance sheets of the Parent Company relate primarily to the OP units in the Operating Partnership that are not owned by the Parent Company. With respect to the noncontrolling interests in the Operating Partnership, noncontrolling interests with redemption provisions that permit the issuer to settle in either cash or common stock at the option of the issuer are further evaluated to determine whether temporary or permanent equity classification on the balance sheet is appropriate. Because the OP units comprising the noncontrolling interests contain such a provision, the Company evaluated this guidance, including the requirement to settle in unregistered shares, and determined that the OP units meet the requirements to qualify for presentation as permanent equity.

The Company evaluates individual redeemable noncontrolling interests for the ability to continue to recognize the noncontrolling interest as permanent equity in the consolidated balance sheets. Any redeemable noncontrolling interest that fails to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount, or (2) its redemption value at the end of the period in which the determination is made.

The redemption value of the OP units not owned by the Parent Company, had such units been redeemed at September 30, 2012, was approximately $56.1 million based on the average closing price of the Parent Company's common stock of $19.07 per share for the ten consecutive trading days immediately preceding September 30, 2012.

The following table shows the vested ownership interests in the Operating Partnership were as follows:

 
September 30, 2012
 
December 31, 2011
 
Operating Partnership Units and LTIP Units
 
Percentage of Total
 
Operating Partnership Units and LTIP Units
 
Percentage of Total
BioMed Realty Trust
152,843,368

 
98.1
%
 
152,435,271

 
98.1
%
Noncontrolling interest consisting of:
 
 
 
 
 
 
 
Operating partnership and LTIP units held by employees and related parties
2,339,314

 
1.5
%
 
2,332,318

 
1.5
%
Operating partnership and LTIP units held by third parties
575,051

 
0.4
%
 
588,801

 
0.4
%
Total
155,757,733

 
100.0
%
 
155,356,390

 
100.0
%

4. Capital of the Operating Partnership

Operating Partnership Units and LTIP Units

As of September 30, 2012, the Operating Partnership had outstanding 156,914,776 operating partnership units and 362,970 LTIP units. The Parent Company owned 98.1% of the partnership interests in the Operating Partnership at September 30, 2012, is the Operating Partnership's general partner and is responsible for the management of the Operating Partnership's business. As the general partner of the Operating Partnership, the Parent Company effectively controls the ability to issue common stock of the Parent Company upon a limited partner's notice of redemption. In addition, the general partner of the Operating Partnership has generally acquired OP units upon a limited partner's notice of redemption in exchange for shares of the Parent Company's common stock. The redemption provisions of OP units owned by limited partners that permit the issuer to settle in either cash or common stock at the option of the issuer are further evaluated in accordance with applicable accounting guidance to determine whether temporary or permanent equity classification on the balance sheet is appropriate. The Operating Partnership evaluated this guidance, including the requirement to settle in unregistered shares, and determined that these OP units meet the requirements to qualify for presentation as permanent equity.

The redemption value of the OP units owned by the limited partners, not including the Parent Company, had such units been redeemed at September 30, 2012, was approximately $56.1 million based on the average closing price of the Parent Company's common stock of $19.07 per share for the ten consecutive trading days immediately preceding September 30, 2012.


22

Table of Contents

5. Debt

Debt of the Parent Company

The Parent Company does not hold any indebtedness. All debt is held directly or indirectly by the Operating Partnership; however, the Parent Company has guaranteed the Operating Partnership's mortgage loan secured by the Company's Center for Life Science | Boston property, Exchangeable Senior Notes due 2030 (the “Exchangeable Senior Notes”), Unsecured Senior Notes due 2016 (the “Notes due 2016”), Unsecured Senior Notes due 2020 (the “Notes due 2020”), Unsecured Senior Notes due 2022 (the “Notes due 2022”), Unsecured Senior Term Loan (the “Term Loan”) and unsecured line of credit.

Debt of the Operating Partnership

A summary of the Operating Partnership's outstanding consolidated debt as of September 30, 2012 and December 31, 2011 was as follows (dollars in thousands):

 
Stated Interest Rate
 
Effective Interest Rate
 
Principal Balance
 
 
 
 
September 30,
2012
 
December 31,
2011
 
Maturity Date
Mortgage Notes Payable
 
 
 
 
 
 
 
 
 
9900 Belward Campus Drive
5.64
%
 
3.99
%
 
$
10,800

 
$

 
July 1, 2017
9901 Belward Campus Drive
5.64
%
 
3.99
%
 
13,301

 

 
July 1, 2017
Center for Life Science | Boston
7.75
%
 
7.75
%
 
339,399

 
342,149

 
June 30, 2014
500 Kendall Street (Kendall D)
6.38
%
 
5.45
%
 
60,700

 
62,261

 
December 1, 2018
6828 Nancy Ridge Drive (1)
7.15
%
 
5.38
%
 

 
6,373

 
September 1, 2012
Shady Grove Road
5.97
%
 
5.97
%
 
145,334

 
146,581

 
September 1, 2016
Sidney Street (1)
7.23
%
 
5.11
%
 

 
26,400

 
June 1, 2012
900 Uniqema Boulevard
8.61
%
 
5.61
%
 
655

 
814

 
May 1, 2015
 
 
 
 
 
570,189

 
584,578

 
 
Unamortized premiums
 
 
 
 
4,308

 
3,266

 
 
Mortgage notes payable, net
 
 
 
 
574,497

 
587,844

 
 
Exchangeable Senior Notes
3.75
%
 
3.75
%
 
180,000

 
180,000

 
January 15, 2030
Notes due 2016
3.85
%
 
3.99
%
 
400,000

 
400,000

 
April 15, 2016
Notes due 2020
6.13
%
 
6.27
%
 
250,000

 
250,000

 
April 15, 2020
Notes due 2022
4.25
%
 
4.36
%
 
250,000

 

 
July 15, 2022
 
 
 
 
 
900,000

 
650,000

 
 
Unamortized discounts
 
 
 
 
(6,045
)
 
(4,419
)
 
 
Unsecured senior notes, net
 
 
 
 
893,955

 
645,581

 
 
Term Loan - U.S. dollar (2)
1.87
%
 
2.64
%
 
243,596

 

 
March 30, 2017
Term Loan - GBP (2)
2.18
%
 
2.39
%
 
161,620

 

 
March 30, 2017
Term Loan (3)
 
 
 
 
405,216

 

 
 
Unsecured line of credit (3) (4)
1.77
%
 
1.77
%
 
87,000

 
268,000

 
July 13, 2015
Total consolidated debt
 
 
 
 
$
2,140,668

 
$
1,681,425

 
 
____________

(1)
During the nine months ended September 30, 2012, the Operating Partnership repaid in full the outstanding mortgage notes totaling approximately $32.5 million pertaining to the 6828 Nancy Ridge Drive and Sidney Street properties, resulting in a gain on extinguishment representing the write-off of unamortized debt premium, partially offset by the write-off of deferred loan fees, which is included in other expense.
(2)
In August 2012, the Operating Partnership converted approximately $156.4 million of outstanding borrowings into British pounds sterling ("GBP") equal to £100.0 million. The principal balance represents the U.S. dollar amount based on the exchange rate of $1.62 to £1.00 at September 30, 2012. The effective interest rate includes the impact of interest rate swap agreements (see Note 9 for further discussion of interest rate swap agreements).

23

Table of Contents

(3)
In August 2012, the Operating Partnership amended the Term Loan facility and the credit agreement governing the unsecured line of credit to include the Operating Partnership's qualifying real property owned, leased or operated in certain foreign counties, including the United Kingdom, in the covenant calculations of the respective facilities.
(4)
At September 30, 2012, the Operating Partnership had additional borrowing capacity under the unsecured line of credit of up to approximately $650.5 million (net of outstanding letters of credit issued by the Operating Partnership and drawable on the unsecured line of credit of approximately $12.5 million).

Unsecured Senior Term Loan

Term Loan - U.S. dollar

On March 30, 2012, the Operating Partnership entered into a $400.0 million Term Loan with KeyBank National Association as Administrative Agent and Co-Lead Arranger, Wells Fargo Securities, LLC as Co-Lead Arranger and Wells Fargo Bank National Association as Co-Syndication Agent, U.S. Bank National Association as Co-Syndication Agent and Co-Lead Arranger and other lenders. The Term Loan has a maturity date of March 30, 2017. Subject to the Administrative Agent's reasonable discretion, the Operating Partnership may increase the amount of the borrowings to $500.0 million under the Term Loan upon satisfying certain conditions. Borrowings under the Term Loan are guaranteed by the Parent Co