XNYS:BMR BioMed Realty Trust Inc Quarterly Report 10-Q Filing - 3/31/2012

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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 March 31, 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):

1



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 May 2, 2012 was 154,160,225.

 

EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 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 March 31, 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:

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.




2


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

FORM 10-Q - QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 

 
 
 

 
 
 

 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


 
 
 
 
 
 
 
 
Exhibit 31.1
 
Exhibit 31.2
 
Exhibit 32.1
 
 
 


3


PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

BIOMED REALTY TRUST, INC.
 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 
March 31,
2012

December 31,
2011
 
(Unaudited)
 
 
ASSETS
 
 
 
Investments in real estate, net
$
4,037,928

 
$
3,950,246

Investments in unconsolidated partnerships
32,901

 
33,389

Cash and cash equivalents
13,336

 
16,411

Accounts receivable, net
4,426

 
5,141

Accrued straight-line rents, net
134,371

 
130,582

Deferred leasing costs, net
164,002

 
157,255

Other assets
158,285

 
135,521

Total assets
$
4,545,249

 
$
4,428,545

LIABILITIES AND EQUITY
 
 
 
Mortgage notes payable, net
$
559,111

 
$
587,844

Exchangeable senior notes
180,000

 
180,000

Unsecured senior notes, net
645,749

 
645,581

Unsecured senior term loan
400,000

 

Unsecured line of credit
26,000

 
268,000

Accounts payable, accrued expenses and other liabilities
156,669

 
134,924

Total liabilities
1,967,529

 
1,816,349

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

 
191,469

Common stock, $.01 par value, 200,000,000 shares authorized, 154,163,339 and 154,101,482 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively
1,541

 
1,541

Additional paid-in capital
2,773,248

 
2,773,994

Accumulated other comprehensive loss, net
(58,882
)
 
(60,138
)
Dividends in excess of earnings
(339,243
)
 
(304,759
)
Total stockholders' equity
2,568,133

 
2,602,107

Noncontrolling interests
9,587

 
10,089

Total equity
2,577,720

 
2,612,196

Total liabilities and equity
$
4,545,249

 
$
4,428,545


See accompanying notes to consolidated financial statements.

4


BIOMED REALTY TRUST, INC.

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

 
For the Three Months Ended
 
March 31,
 
2012
 
2011
Revenues:
 
 
 
Rental
$
91,475

 
$
79,905

Tenant recoveries
28,453

 
24,541

Other revenue
84

 
747

Total revenues
120,012

 
105,193

Expenses:
 
 
 
Rental operations
36,729

 
31,073

Depreciation and amortization
44,934

 
33,749

General and administrative
8,614

 
7,421

Acquisition related expenses
633

 
320

Total expenses
90,910

 
72,563

Income from operations
29,102

 
32,630

Equity in net loss of unconsolidated partnerships
(355
)
 
(648
)
Interest expense, net
(22,219
)
 
(21,191
)
Other income / (expense)
174

 
(1,054
)
Income from continuing operations
6,702

 
9,737

(Loss) / income from discontinued operations
(4,420
)
 
141

Net income
2,282

 
9,878

Net loss / (income) attributable to noncontrolling interests
30

 
(107
)
Net income attributable to the Company
2,312

 
9,771

Preferred stock dividends
(3,651
)
 
(4,241
)
Net (loss) / income available to common stockholders
$
(1,339
)
 
$
5,530

Income from continuing operations per share attributable to common stockholders:
 
 
 
Basic and diluted earnings per share
$
0.02

 
$
0.04

(Loss) / income from discontinued operations per share attributable to common stockholders:
 
 
 
Basic and diluted earnings per share
$
(0.03
)
 
$
0.00

Net (loss) / income per share attributable to common stockholders:
 
 
 
Basic and diluted earnings per share
$
(0.01
)
 
$
0.04

Weighted-average common shares outstanding:
 
 
 
Basic
152,659,258

 
129,771,733

Diluted
155,625,204

 
132,764,842


See accompanying notes to consolidated financial statements.

BIOMED REALTY TRUST, INC.

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

 
Three Months Ended
 
March 31,
 
2012
 
2011
Net income
$
2,282

 
$
9,878

Other comprehensive income:
 
 
 
Unrealized (loss) / gain on derivative instruments, net
(225
)
 
2,545

Amortization of deferred interest costs
1,743

 
1,765

Reclassification on sale of equity securities
28

 

Unrealized loss on equity securities
(265
)
 
(2,317
)
Total other comprehensive income
1,281

 
1,993

Comprehensive income
3,563

 
11,871

Comprehensive loss / (income) attributable to noncontrolling interests
5

 
(151
)
Comprehensive income attributable to the Company
$
3,568

 
$
11,720


See accompanying notes to consolidated financial statements.
BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS 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

 
38,386

 

 
(3,296
)
 

 

 
(3,296
)
 

 
(3,296
)
Conversion of OP units to common stock

 
23,471

 

 
(73
)
 

 

 
(73
)
 
73

 

Vesting of share-based awards

 

 

 
2,689

 

 

 
2,689

 

 
2,689

Reallocation of equity to noncontrolling interests

 

 

 
(66
)
 

 

 
(66
)
 
66

 

Common stock dividends

 

 

 

 

 
(33,145
)
 
(33,145
)
 

 
(33,145
)
OP unit distributions

 

 

 

 

 

 

 
(636
)
 
(636
)
Net income

 

 

 

 

 
2,312

 
2,312

 
(30
)
 
2,282

Preferred stock dividends

 

 

 

 

 
(3,651
)
 
(3,651
)
 

 
(3,651
)
Reclassification on sale of marketable securities

 

 

 

 
27

 

 
27

 
1

 
28

Unrealized loss on equity securities

 

 

 

 
(260
)
 

 
(260
)
 
(5
)
 
(265
)
Amortization of deferred interest costs

 

 

 

 
1,710

 

 
1,710

 
33

 
1,743

Unrealized loss on derivative instruments, net

 

 

 

 
(221
)
 

 
(221
)
 
(4
)
 
(225
)
Balance at March 31, 2012
$
191,469

 
154,163,339

 
$
1,541

 
$
2,773,248

 
$
(58,882
)
 
$
(339,243
)
 
$
2,568,133

 
$
9,587

 
$
2,577,720


See accompanying notes to consolidated financial statements.


5


BIOMED REALTY TRUST, INC.

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

 
Three Months Ended
 
March 31,
 
2012
 
2011
 
 
 
 
Operating activities:
 
 
 
Net income
$
2,282

 
$
9,878

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
45,026

 
33,835

Allowance for doubtful accounts
213

 
324

Non-cash revenue adjustments
3,469

 
2,617

Other non-cash adjustments
7,696

 
4,025

Compensation expense related to restricted common stock and LTIP units
2,689

 
1,871

Distributions representing a return on capital from unconsolidated partnerships
1,031

 
192

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
902

 
(1,570
)
Accrued straight-line rents
(4,427
)
 
(4,314
)
Deferred leasing costs
(2,517
)
 
(2,462
)
Other assets
(146
)
 
(2,890
)
Accounts payable, accrued expenses and other liabilities
8,376

 
(102
)
Net cash provided by operating activities
64,594

 
41,404

Investing activities:
 
 
 
Purchases of investments in real estate and related intangible assets
(113,985
)
 

Capital expenditures
(42,070
)
 
(41,898
)
Contributions to unconsolidated partnerships, net
(1,107
)
 

Purchases of debt and equity securities
(1,125
)
 

Proceeds from the sale of equity securities
79

 

Deposits to escrow for acquisitions
(1,000
)
 
(875
)
Net cash used in investing activities
(159,208
)
 
(42,773
)
Financing activities:
 
 
 
Payment of deferred loan costs
(3,071
)
 
(2,383
)
Unsecured line of credit proceeds
176,000

 
70,200

Unsecured line of credit payments
(418,000
)
 
(411,650
)
Principal payments on mortgage notes payable
(28,322
)
 
(27,292
)
Proceeds from unsecured senior term loan
400,000

 

Proceeds from unsecured senior notes

 
397,460

Deferred settlement payments on interest rate swaps, net

 
(52
)
Distributions to operating partnership unit and LTIP unit holders
(596
)
 
(509
)
Dividends paid to common stockholders
(30,821
)
 
(22,280
)
Dividends paid to preferred stockholders
(3,651
)
 
(4,241
)
Net cash provided by / (used in) financing activities
91,539

 
(747
)
Net decrease in cash and cash equivalents
(3,075
)
 
(2,116
)
Cash and cash equivalents at beginning of period
16,411

 
21,467

Cash and cash equivalents at end of period
$
13,336

 
$
19,351

Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for interest (net of amounts capitalized of $2,360 and $1,494, respectively)
$
13,077

 
$
16,452

Supplemental disclosure of non-cash investing and financing activities:
 
 
 

6


 
Three Months Ended
 
March 31,
 
2012
 
2011
 
 
 
 
Accrual for preferred stock dividends declared
$
3,651

 
$
4,241

Accrual for common stock dividends declared
33,145

 
26,248

Accrual for distributions declared for operating partnership unit and LTIP unit holders
636

 
598

Accrued additions to real estate and related intangible assets
34,651

 
21,755


See accompanying notes to consolidated financial statements.


7


BIOMED REALTY, L.P.

CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)

 
March 31,
2012
 
December 31,
2011
 
(Unaudited)
 
 
ASSETS
 
 
 
Investments in real estate, net
$
4,037,928

 
$
3,950,246

Investments in unconsolidated partnerships
32,901

 
33,389

Cash and cash equivalents
13,336

 
16,411

Accounts receivable, net
4,426

 
5,141

Accrued straight-line rents, net
134,371

 
130,582

Deferred leasing costs, net
164,002

 
157,255

Other assets
158,285

 
135,521

Total assets
$
4,545,249

 
$
4,428,545

LIABILITIES AND CAPITAL
 
 
 
Mortgage notes payable, net
$
559,111

 
$
587,844

Exchangeable senior notes
180,000

 
180,000

Unsecured senior notes, net
645,749

 
645,581

Unsecured senior term loan
400,000

 

Unsecured line of credit
26,000

 
268,000

Accounts payable, accrued expenses and other liabilities
156,669

 
134,924

Total liabilities
1,967,529

 
1,816,349

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

 
191,469

Limited partners' capital, 2,956,508 and 2,979,979 units issued and outstanding at March 31, 2012 and December 31, 2011, respectively
9,834

 
10,332

General partner's capital, 154,163,339 and 154,101,482 units issued and outstanding at March 31, 2012 and December 31, 2011, respectively
2,433,978

 
2,469,233

Accumulated other comprehensive loss
(57,313
)
 
(58,594
)
Total partners' capital
2,577,968

 
2,612,440

Noncontrolling interests deficit
(248
)
 
(244
)
Total capital
2,577,720

 
2,612,196

Total liabilities and capital
$
4,545,249

 
$
4,428,545


See accompanying notes to consolidated financial statements.
BIOMED REALTY, L.P.

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

 
For the Three Months Ended
 
March 31,
 
2012
 
2011
Revenues:
 
 
 
Rental
$
91,475

 
$
79,905

Tenant recoveries
28,453

 
24,541

Other revenue
84

 
747

Total revenues
120,012

 
105,193

Expenses:
 
 
 
Rental operations
36,729

 
31,073

Depreciation and amortization
44,934

 
33,749

General and administrative
8,614

 
7,421

Acquisition related expenses
633

 
320

Total expenses
90,910

 
72,563

Income from operations
29,102

 
32,630

Equity in net loss of unconsolidated partnerships
(355
)
 
(648
)
Interest expense, net
(22,219
)
 
(21,191
)
Other income / (expense)
174

 
(1,054
)
Income from continuing operations
6,702

 
9,737

(Loss) / income from discontinued operations
(4,420
)
 
141

Net income
2,282

 
9,878

Net loss attributable to noncontrolling interests
4

 
18

Net income attributable to the Operating Partnership
2,286

 
9,896

Preferred unit distributions
(3,651
)
 
(4,241
)
Net (loss) / income available to unitholders
$
(1,365
)
 
$
5,655

Income from continuing operations per unit attributable to common unitholders:
 
 
 
Basic and diluted earnings per unit
$
0.02

 
$
0.04

(Loss) / income from discontinued operations per unit attributable to common unitholders:
 
 
 
Basic and diluted earnings per unit
$
(0.03
)
 
$
0.00

Net (loss) / income per unit available to unitholders:
 
 
 
Basic and diluted earnings per unit
$
(0.01
)
 
$
0.04

Weighted-average units outstanding:
 
 
 
Basic
155,592,535

 
132,701,731

Diluted
155,592,535

 
132,701,731


See accompanying notes to consolidated financial statements.
BIOMED REALTY, L.P.

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

 
Three Months Ended
 
March 31,
 
2012
 
2011
Net income
$
2,282

 
$
9,878

Other comprehensive income:
 
 
 
Unrealized (loss) / gain on derivative instruments, net
(225
)
 
2,545

Amortization of deferred interest costs
1,743

 
1,765

Reclassification on sale of equity securities
28

 

Unrealized loss on equity securities
(265
)
 
(2,317
)
Total other comprehensive income
1,281

 
1,993

Comprehensive income
$
3,563

 
$
11,871


See accompanying notes to consolidated financial statements.
BIOMED REALTY, L.P.

CONSOLIDATED STATEMENTS 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 Equity
 
Noncontrolling Interests Deficit
 
Total Equity
 
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

 

 

 

 
38,386

 
(3,296
)
 

 
(3,296
)
 

 
(3,296
)
Conversion of OP units

 

 
(23,471
)
 
73

 
23,471

 
(73
)
 

 

 

 

Vesting of share-based awards

 

 

 

 

 
2,689

 

 
2,689

 

 
2,689

Reallocation of equity to limited partners

 

 

 
91

 

 
(91
)
 

 

 

 

Distributions

 
(3,651
)
 

 
(636
)
 

 
(33,145
)
 

 
(37,432
)
 

 
(37,432
)
Net income

 
3,651

 

 
(26
)
 

 
(1,339
)
 

 
2,286

 
(4
)
 
2,282

Reclassification on sale of marketable securities

 

 

 

 

 

 
28

 
28

 

 
28

Unrealized loss on equity securities

 

 

 

 

 

 
(265
)
 
(265
)
 

 
(265
)
Amortization of deferred interest costs

 

 

 

 

 

 
1,743

 
1,743

 

 
1,743

Unrealized loss on derivative instruments, net

 

 

 

 

 

 
(225
)
 
(225
)
 

 
(225
)
Balance at March 31, 2012
7,920,000

 
$
191,469

 
2,956,508

 
$
9,834

 
154,163,339

 
$
2,433,978

 
$
(57,313
)
 
$
2,577,968

 
$
(248
)
 
$
2,577,720


See accompanying notes to consolidated financial statements.
BIOMED REALTY, L.P.

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

 
Three Months Ended
 
March 31,
 
2012
 
2011
 
 
 
 
Operating activities:
 
 
 
Net income
$
2,282

 
$
9,878

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
45,026

 
33,835

Allowance for doubtful accounts
213

 
324

Non-cash revenue adjustments
3,469

 
2,617

Other non-cash adjustments
7,696

 
4,025

Compensation expense related to share-based payments
2,689

 
1,871

Distributions representing a return on capital from unconsolidated partnerships
1,031

 
192

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
902

 
(1,570
)
Accrued straight-line rents
(4,427
)
 
(4,314
)
Deferred leasing costs
(2,517
)
 
(2,462
)
Other assets
(146
)
 
(2,890
)
Accounts payable, accrued expenses and other liabilities
8,376

 
(102
)
Net cash provided by operating activities
64,594

 
41,404

Investing activities:
 
 
 
Purchases of investments in real estate and related intangible assets
(113,985
)
 

Capital expenditures
(42,070
)
 
(41,898
)
Contributions to unconsolidated partnerships, net
(1,107
)
 

Purchases of debt and equity securities
(1,125
)
 

Proceeds from the sale of equity securities
79

 

Deposits to escrow for acquisitions
(1,000
)
 
(875
)
Net cash used in investing activities
(159,208
)
 
(42,773
)
Financing activities:
 
 
 
Payment of deferred loan costs
(3,071
)
 
(2,383
)
Unsecured line of credit proceeds
176,000

 
70,200

Unsecured line of credit payments
(418,000
)
 
(411,650
)
Principal payments on mortgage notes payable
(28,322
)
 
(27,292
)
Proceeds from unsecured senior term loan
400,000

 

Proceeds from unsecured senior notes

 
397,460

Deferred settlement payments on interest rate swaps, net

 
(52
)
Distributions paid to unitholders
(31,417
)
 
(22,789
)
Distributions paid to preferred unitholders
(3,651
)
 
(4,241
)
Net cash provided by / (used in) financing activities
91,539

 
(747
)
Net decrease in cash and cash equivalents
(3,075
)
 
(2,116
)
Cash and cash equivalents at beginning of period
16,411

 
21,467

Cash and cash equivalents at end of period
$
13,336

 
$
19,351

Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for interest (net of amounts capitalized of $2,360 and $1,494, respectively)
$
13,077

 
$
16,452

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Accrual for unit distributions declared
$
33,781

 
$
26,846

Accrual for preferred unit distributions declared
3,651

 
4,241

Accrued additions to real estate and related intangible assets
34,651

 
21,755


See accompanying notes to consolidated financial statements.


8


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 March 31, 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 Securities and Exchange Commission. 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.

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.

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 accompanying consolidated financial statements. Selected financial data of the VIEs at March 31, 2012 and December 31, 2011 consist of the following (in thousands):
 
March 31,
2012
 
December 31,
2011
Investment in real estate, net
$
406,830

 
$
409,327

Total assets
452,260

 
454,208

Total debt
146,155

 
146,581

Total liabilities
151,264

 
151,893


Investments in Real Estate, Net

Investments in real estate, net consisted of the following (in thousands):
 
March 31,
2012
 
December 31,
2011
Land
$
610,752

 
$
591,009

Land under development
47,634

 
56,008

Buildings and improvements
3,752,831

 
3,615,678

Construction in progress
112,431

 
140,025

 
4,523,648

 
4,402,720

Accumulated depreciation
(485,720
)
 
(452,474
)
 
$
4,037,928

 
$
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, as of March 31, 2012, the property being disposed of was reclassified as held for sale. 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, which is included in loss from discontinued operations, for the three months ended March 31, 2012. The parties to the exchange determined and agreed upon the fair-value of the property received in the transaction, which we consider to be a level 2 input in the fair value hierarchy. See Note 11 for discussion of discontinued operations.
 
Deferred Leasing Costs, Net

Deferred leasing costs, net of accumulated amortization at March 31, 2012 consisted of the following (in thousands):
 
Balance at
 
Accumulated
 
 
 
March 31, 2012
 
Amortization
 
Net
Acquired in-place leases
$
272,330

 
$
(158,499
)
 
$
113,831

Acquired management agreements
24,785

 
(13,242
)
 
11,543

Deferred leasing and other direct costs
57,408

 
(18,780
)
 
38,628

 
$
354,523

 
$
(190,521
)
 
$
164,002


Deferred leasing costs, net of accumulated amortization 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):
 
March 31,
2012
 
December 31,
2011
Available-for-sale securities, historical cost
$
5,298

 
$
5,585

Other-than-temporary unrealized loss
(4,359
)
 
(4,595
)
Unrealized loss
(239
)
 
(2
)
Available-for-sale securities, fair-value(1)
700

 
988

Privately-held securities, cost basis
5,370

 
4,245

Total equity securities
$
6,070

 
$
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's investments in available-for-sale securities of two publicly traded companies currently have fair-values that are less than the Company's cost basis, net of previous other-than-temporary impairment in these securities due to decreases in their respective stock prices during the three months ended March 31, 2012. However, management has the intent and ability to retain the investments for a period of time sufficient to allow for an anticipated recovery in 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 three privately-held companies and two privately-held funds during the three months ended March 31, 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 three months ended March 31, 2012 on the Company's cost basis investments.

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 three months ended March 31, 2012, the Parent Company issued restricted stock awards to the Company's employees totaling 218,911 shares of common stock (180,525 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 during the same period), which are included in the total of common stock outstanding as of the period end.

During the three months ended March 31, 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 $3.3 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 March 31, 2012 was $3.0 million over a weighted-average of approximately 1.8 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 March 31, 2012, the Company had outstanding 154,163,339 shares of the Parent Company's common stock and 2,593,538 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 three months ended March 31, 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
 
$
33,781

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

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


Total 2012 dividends and distributions declared through March 31, 2012 (in thousands):

Common stock and OP units
$
33,781

Series A preferred stock/units
3,651

 
$
37,432


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 March 31, 2012, was approximately $56.4 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 March 31, 2012.

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

 
March 31, 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
152,814,354

 
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
588,801

 
0.4
%
 
588,801

 
0.4
%
Total
155,742,469

 
100.0
%
 
155,356,390

 
100.0
%

4. Capital of the Operating Partnership

Operating Partnership Units and LTIP Units

As of March 31, 2012, the Operating Partnership had outstanding 156,756,877 operating partnership units and 362,970 LTIP units. The Parent Company owned 98.1% of the partnership interests in the Operating Partnership at March 31, 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 March 31, 2012, was approximately $56.4 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 March 31, 2012.

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 Exchangeable Senior Notes due 2030 (the “Notes due 2030”), Unsecured Senior Notes due 2016 (the “Notes due 2016”), Unsecured Senior Notes due 2020 (the “Notes due 2020”), 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 March 31, 2012 and December 31, 2011 was as follows (dollars in thousands):


9


 
Stated Fixed Interest Rate
 
Effective Interest Rate
 
Principal Balance
 
 
 
 
March 31,
2012
 
December 31,
2011
 
Maturity Date
Mortgage Notes Payable
 
 
 
 
 
 
 
 
 
Center for Life Science | Boston
7.75
%
 
7.75
%
 
$
341,250

 
$
342,149

 
June 30, 2014
500 Kendall Street (Kendall D)
6.38
%
 
5.45
%
 
61,749

 
62,261

 
December 1, 2018
6828 Nancy Ridge Drive
7.15
%
 
5.38
%
 
6,342

 
6,373

 
September 1, 2012
Shady Grove Road
5.97
%
 
5.97
%
 
146,155

 
146,581

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

 
26,400

 
June 1, 2012
900 Uniqema Boulevard
8.61
%
 
5.61
%
 
762

 
814

 
May 1, 2015
 
 
 
 
 
556,258

 
584,578

 
 
Unamortized premiums
 
 
 
 
2,853

 
3,266

 
 
Mortgage notes payable, net
 
 
 
 
559,111

 
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
Unamortized discount (2)
 
 
 
 
(2,073
)
 
(2,190
)
 
 
Notes due 2016, net
 
 
 
 
397,927

 
397,810

 
 
Notes due 2020
6.13
%
 
6.27
%
 
250,000

 
250,000

 
April 15, 2020
Unamortized discount (3)
 
 
 
 
(2,178
)
 
(2,229
)
 
 
Notes due 2020, net
 
 
 
 
247,822

 
247,771

 
 
Unsecured senior notes, net
 
 
 
 
645,749

 
645,581

 
 
Term Loan (4)
1.89
%
 
2.35
%
 
400,000

 

 
March 30, 2017
Unsecured line of credit (5)
1.79
%
 
1.79
%
 
26,000

 
268,000

 
July 13, 2015
Total consolidated debt
 
 
 
 
$
1,810,860

 
$
1,681,425

 
 
____________

(1)
During the three months ended March 31, 2012, the Operating Partnership repaid in full the outstanding mortgage notes totaling approximately $26.2 million pertaining to the Sidney Street property 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 income / (expense).
(2)
The unamortized debt discount will be amortized through April 15, 2016, the maturity date of the Notes due 2016.
(3)
The unamortized debt discount will be amortized through April 15, 2020, the maturity date of the Notes due 2020.
(4)
The effective interest rate includes the impact of interest rate swap agreements (see Note 9 for further discussion of interest rate swap agreements).
(5)
At March 31, 2012, the Operating Partnership had additional borrowing capacity under the unsecured line of credit of up to approximately $723.1 million (net of outstanding letters of credit issued by the Operating Partnership and drawable on the unsecured line of credit of approximately $910,000). During the three months ended March 31, 2012, the Operating Partnership amended the credit agreement governing the unsecured line of credit, which provides for a revision to the definition of “gross asset value” to conform to the definition included in the Term Loan credit facility and certain other revisions to reflect the existence of the Term Loan, including changes pertaining to cross-default provisions and negative pledge restrictions. All other material terms under the credit agreement governing the unsecured line of credit remain unchanged.

Unsecured Senior Term Loan

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 Company.


10


Borrowings under the Term Loan bear interest at a floating rate equal to, at the Operating Partnership's option, either (1) reserve adjusted LIBOR plus a spread which ranges from 115 to 205 basis points, depending on the Company's credit ratings, or (2) the highest of (a) the prime rate then in effect plus a spread which ranges from 15 to 120 basis points, (b) the federal funds rate then in effect plus a spread which ranges from 65 to 170 basis points or (c) one-month LIBOR plus a spread which ranges from 115 to 205 basis points, in each case, depending on the Parent Company's credit ratings.

Concurrent with the closing of the Term Loan the Operating Partnership entered into interest rate swap agreements, which are intended to have the effect of fixing interest payments associated with $200.0 million of the $400.0 million outstanding under the Term Loan at approximately 2.81% for a five-year term, subject to change depending on the Parent Company's credit ratings.

The Term Loan includes certain restrictions and covenants which require compliance with financial covenants relating to the minimum amounts of net worth, fixed charge coverage, unsecured debt service coverage, overall leverage and unsecured leverage ratios, the maximum amount of secured indebtedness and certain investment limitations. The Term Loan specifies a number of events of default (some of which are subject to applicable cure periods), including, among others, the failure to make payments when due, noncompliance with covenants and defaults under other agreements or instruments of indebtedness. Upon the occurrence of an event of default, the lenders may terminate the Term Loan and declare all amounts outstanding to be immediately due and payable. Management believes that it was in compliance with the covenants as of March 31, 2012.

As of March 31, 2012, principal payments due for the Operating Partnership's consolidated indebtedness (excluding debt premiums and discounts) were as follows (in thousands):

2012
$
12,159

2013
8,291

2014
339,020

2015
32,253

2016
543,426

Thereafter(1)
877,109

 
$
1,812,258

____________

(1)
Includes $180.0 million in principal payments of the Notes due 2030 based on a contractual maturity date of January 15, 2030.

6. Earnings Per Share of the Parent Company

Through March 31, 2012 all of the Company's participating securities (including the OP units) received dividends/distributions at an equal dividend/distribution rate per share/unit. As a result, the portion of net income allocable to the weighted-average restricted stock outstanding for the three months ended March 31, 2012 and 2011 has been deducted from net income available to common stockholders to calculate basic earnings per share. The calculation of diluted earnings per share for the three months ended March 31, 2012 and 2011 includes the outstanding OP units (both vested and unvested) in the weighted-average shares, and net income attributable to noncontrolling interests in the Operating Partnership has been added back to net income available to common stockholders. For the three months ended March 31, 2012, the Performance Units were anti-dilutive to the calculation of diluted earnings per share as calculated, assuming that March 31, 2012 is the end of the Performance Units' Performance Period. For the three months ended March 31, 2012 and 2011, the restricted stock was anti-dilutive to the calculation of diluted earnings per share and was therefore excluded. As a result, diluted earnings per share was calculated based upon net income available to common stockholders less net income allocable to unvested restricted stock and distributions in excess of earnings attributable to unvested restricted stock. No shares were issuable upon settlement of the excess exchange value pursuant to the exchange settlement feature of the Operating Partnership's Exchangeable Senior Notes due 2026 (the “Notes due 2026”) as the common stock price at March 31, 2011 did not exceed the exchange price then in effect. In addition, shares issuable upon settlement of the exchange feature of the Notes due 2030 were anti-dilutive and were not included in the calculation of diluted earnings per share based on the “if converted” method for the three months ended March 31, 2012 and 2011. No other shares were considered anti-dilutive for the three months ended March 31, 2012 and 2011.

Computations of basic and diluted earnings per share (in thousands, except share data) were as follows:

 
Three Months Ended
 
March 31,
 
2012
 
2011
Basic earnings per share:
 
 
 
Income from continuing operations and noncontrolling interests
$
6,702

 
$
9,737

Income from continuing operations attributable to noncontrolling interests
(58
)
 
(122
)
Preferred dividends
(3,651
)
 
(4,241
)
Net income allocable and distributions in excess of earnings to participating securities (continuing operations)
(319
)
 
(304
)
Income from continuing operations attributable to common stockholders - basic
2,674

 
5,070

 
 
 
 
(Loss) / income from discontinued operations
(4,420
)
 
141

Loss / (income) from discontinued operations attributable to noncontrolling interests
83

 
(3
)
(Loss) / income from discontinued operations attributable to common stockholders - basic
(4,337
)
 
138

 
 
 
 
Net (loss) / income attributable to common stockholders - basic
$
(1,663
)
 
$
5,208

Diluted earnings per share:
 
 
 
Income from continuing operations attributable to common stockholders - basic
2,674

 
5,070

Income from continuing operations attributable to noncontrolling interests
58

 
122

Income from continuing operations attributable to common stockholders - diluted
2,732

 
5,192

 
 
 
 
(Loss) / income from discontinued operations attributable to common stockholders - basic
(4,337
)
 
138

Loss / (income) from discontinued operations attributable to noncontrolling interests
(83
)
 
3

(Loss) / income from discontinued operations attributable to common stockholders - diluted
(4,420
)
 
141

 
 
 
 
Net (loss) / income attributable to common stockholders and participating securities - diluted
$
(1,688
)
 
$
5,333

Weighted-average common shares outstanding:
 
 
 
Basic
152,659,258

 
129,771,733

Incremental shares from assumed conversion:
 
 
 
Operating partnership and LTIP units
2,965,946

 
2,993,109

Diluted
155,625,204

 
132,764,842

Basic and diluted earnings per share:
 
 
 
Income from continuing operations per share attributable to common stockholders - basic and diluted
$
0.02

 
$
0.04

(Loss) / income from discontinued operations per share attributable to common stockholders - basic and diluted
$
(0.03
)
 
$
0.00

Net (loss) / income per share attributable to common stockholders - basic and diluted
$
(0.01
)
 
$
0.04


7. Earnings Per Unit of the Operating Partnership

Through March 31, 2012 all of the Operating Partnership's participating securities received distributions at an equal distribution rate per unit. As a result, the portion of net income allocable to the weighted-average unvested OP units outstanding for the three months ended March 31, 2012 and 2011 has been deducted from net income available to unitholders to calculate basic earnings per unit. For the three months ended March 31, 2012 and 2011 the unvested OP units were anti-dilutive to the calculation of earnings per unit and were therefore excluded from the calculation of diluted earnings per unit, and diluted earnings per unit is calculated based upon net income attributable to unitholders. For the three months ended March 31, 2012, the Performance Units were anti-dilutive to the calculation of diluted earnings per share as calculated, assuming that March 31, 2012 is the end of the Performance Units' Performance Period. No shares of common stock of the Parent Company were contingently issuable upon settlement of the excess exchange value pursuant to the exchange settlement feature of the Notes due 2026 as the common stock price at March 31, 2011 did not exceed the exchange price then in effect. In addition, units issuable upon settlement of the exchange feature of the Notes due 2030 were anti-dilutive and were not included in the calculation of diluted earnings per unit based on the “if converted” method for the three months ended March 31, 2012 and 2011. No other units were considered anti-dilutive for the three months ended March 31, 2012 and 2011.

Computations of basic and diluted earnings per unit (in thousands, except share data) were as follows:

 
Three Months Ended
 
March 31,
 
2012
 
2011
Basic and diluted earnings per unit:
 
 
 
Income from continuing operations
$
6,702

 
$
9,737

Preferred dividends
(3,651
)
 
(4,241
)
Net income allocable and distributions in excess of earnings to participating securities (continuing operations)
(326
)
 
(310
)
Income from continuing operations attributable to common unitholders - basic and diluted
2,725

 
5,186

 
 
 
 
(Loss) / income from discontinued operations - basic and diluted
(4,420
)
 
141

 
 
 
 
Net (loss) / income attributable to unitholders - basic and diluted
$
(1,695
)
 
$
5,327

Weighted-average units outstanding:
 
 
 
Basic and diluted
155,592,535

 
132,701,731

Basic and diluted earnings per unit:
 
 
 
Income from continuing operations per unit attributable to common unitholders - basic and diluted
$
0.02

 
$
0.04

(Loss) / income from discontinued operations per share attributable to common unitholders - basic and diluted
$
(0.03
)
 
$
0.00

Net (loss) / income per unit attributable to unitholders, basic and diluted
$
(0.01
)
 
$
0.04


8. Investment in Unconsolidated Partnerships

The accompanying consolidated financial statements include investments in two limited liability companies with Prudential Real Estate Investors (“PREI”), and in 10165 McKellar Court, L.P. (“McKellar Court”), a limited partnership with Quidel Corporation, the tenant which occupies the McKellar Court property. General information on the PREI limited liability companies and the McKellar Court partnership (each referred to in this footnote individually as a “partnership” and collectively as the “partnerships”) as of March 31, 2012 was as follows:
Name
Partner
 
Company's
Ownership
Interest
 
Company's
Economic
Interest
 
Date Acquired
PREI I LLC(1)
PREI
 
20%
 
20%
 
April 4, 2007
PREI II LLC
PREI
 
20%
 
20%
 
April 4, 2007
McKellar Court(2)
Quidel Corporation
 
22%
 
22%
 
September 30, 2004
____________

(1)
PREI I LLC owns two properties in Cambridge, Massachusetts. At March 31, 2012, there were $139.0 million in outstanding borrowings on a secured loan facility held by a wholly owned subsidiary of PREI I LLC, with a contractual interest rate of 3.25% (including the applicable credit spread) and a maturity date of August 13, 2013.

(2)
The Company's investment in the McKellar Court partnership (maximum exposure to losses) was approximately $12.3 million at March 31, 2012. The Company's economic interest in the McKellar Court partnership entitles it to 75% of the extraordinary cash flows after repayment of the partners' capital contributions and 22% of the operating cash flows.

The condensed combined balance sheets for all of the Company's unconsolidated partnerships were as follows (in thousands):

 
March 31,
2012
 
December 31,
2011
Assets:
 
 
 
Investments in real estate, net
$
255,735

 
$
257,297

Cash and cash equivalents (including restricted cash)
4,554

 
4,384

Other assets
2,334

 
2,392

Total assets
$
262,623

 
$
264,073

Liabilities and members' equity:
 
 
 
Mortgage notes payable and secured loan
$
149,255

 
$
149,256

Other liabilities
2,267

 
1,408

Members' equity
111,101

 
113,409

Total liabilities and equity
$
262,623

 
$
264,073

Company's net investment in unconsolidated partnerships
$
32,901

 
$
33,389


The selected data and results of operations for the unconsolidated partnerships were as follows (in thousands):
 
Three Months Ended
 
March 31,
 
2012
 
2011
Total revenues
$
2,205

 
$
2,052

Total expenses
(5,013
)
 
(4,808
)
Loss from continuing operations
(2,808
)
 
(2,756
)
Loss from discontinued operations

 
(1,919
)
Net loss
$
(2,808
)
 
$
(4,675
)
 
 
 
 
Company's equity in net loss of unconsolidated partnerships
$
(355
)
 
$
(648
)
 
 
 
 
Fees earned by the Company (1)
$
22

 
$
357

____________

(1)
The Company acts as the operating member or partner, as applicable, and day-to-day manager for the partnerships. The Company is entitled to receive fees for providing construction and development services (as applicable) and management services to the PREI joint ventures, which are reflected in tenant recoveries and other income in the consolidated statements of income.

9. Derivatives and Other Financial Instruments

On March 30, 2012, the Company entered into four interest rate swaps with an aggregate notional amount of $200.0 million under which at each monthly settlement date the Company either (1) receives the difference between a fixed interest rate (the “Strike Rate”) and one-month LIBOR if the Strike Rate is less than one-month LIBOR or (2) pays such difference if the Strike Rate is greater than one-month LIBOR. The interest rate swaps hedge the Company's exposure to the variability on expected cash flows attributable to changes in interest rates on the first interest payments, due on the date that is on or closest after each swap's settlement date, associated with the amount of one-month LIBOR-based debt equal to each swap's notional amount. These interest rate swaps, with a notional amount of $200.0 million, are currently intended to hedge interest payments associated with the Operating Partnership's Term Loan. No initial investment was made to enter into the interest rate swap agreements.

As of March 31, 2012, the Company had deferred interest costs of approximately $47.4 million in accumulated other comprehensive loss related to forward starting swaps, which were settled with the corresponding counterparties in March and April 2009. The forward starting swaps were entered into to mitigate the Company's exposure to the variability in expected future cash flows attributable to changes in future interest rates associated with a forecasted issuance of fixed-rate debt, with interest payments for a minimum of ten years. The deferred interest costs will be amortized as additional interest expense over a remaining period of approximately seven years.

The following is a summary of the terms of the interest rate swaps and stock purchase warrants and their respective fair-values, which are included in derivative instruments on the accompanying consolidated balance sheets (dollars in thousands):


11


 
Notional Amount
 
 
 
 
 
 
 
Fair-Value(1)
 
 
Strike Rate
 
Effective Date
 
Expiration Date
 
March 31,
2012
 
December 31,
2011
 
$
75,000

 
1.163
%
 
March 30, 2012
 
March 30, 2017
 
$
(88
)
 
$

 
50,000

 
1.163
%
 
March 30, 2012
 
March 30, 2017
 
(39
)
 

 
50,000

 
1.163
%
 
March 30, 2012
 
March 30, 2017
 
(97
)
 

 
25,000

 
1.163
%
 
March 30, 2012
 
March 30, 2017
 
(65
)
 

Interest rate swaps
200,000

 
 
 
 
 
 
 
(289
)
 

Other(2)

 
 
 
 
 
 
 
1

 
9