SAN DIEGO—BioMed Realty Trust, Inc., a leading real estate company focusing on life sciences, has disclosed its financial results for the third quarter ended September 30.
"We are pleased to see that our strategy of creating value with connection points for leading life science companies and research institutions continues to drive strong results,” said chairman and CEO Alan Gold. “We saw robust leasing in the third quarter led by leases with two global biopharmaceutical leaders in our two largest markets—Baxter in Cambridge and Bristol-Myers Squibb in the Bay Area. These important transactions validate our proven business model of creating exceptional research environments in the right markets for the life science industry to create scientific breakthroughs that are changing the world."

At September 30, 2014, the company's total portfolio comprised approximately 17.2 million rentable square feet, with land supporting an estimated additional 7.4 million square feet of development potential.  Third quarter same property net operating income on a cash basis increased 7.2% year-over-year, primarily as a result of sustained leasing success and contractual rent escalations.
During the quarter, the company entered into a lease termination with a tenant for 180,000 square feet at its 50 Hampshire building in Cambridge, MA.  The original lease was scheduled to expire in January 2020.  Under the terms of the agreement, the tenant agreed to pay a termination fee of $8.5 million which, net of related GAAP adjustments, will result in $7.5 million being recognized as other revenue ratably through March 2015, when the tenant is expected to vacate the space.
During the quarter, the company completed construction of an approximately 334,000 square foot laboratory and office building at 3737 Market Street in Philadelphia, Pennsylvania. The eleven-story building is 82.4% leased to tenants that include Penn Medicine University City; Spark Therapeutics, Inc., a gene therapy company originating out of The Children's Hospital of Philadelphia; Good Shepherd Penn Partners, which operates the Penn Institute for Rehabilitation Medicine; and The Rose Group, owner of the Corner Bakery Café.
"Our team's unmatched ability to successfully acquire, develop, redevelop, lease, finance and operate life science real estate continues to translate into superior operating and financial results in 2014," said Kent Griffin, President of BioMed Realty. "Leasing volume of almost two million square feet, acquisitions which have added over one million rentable square feet which are 99% leased, and on-time, on-budget development deliveries such as the 3737 Market Street project in Philadelphia supply the year-to-date headlines. Supporting all of this growth is our exceptionally strong capital position, liquidity and credit profile which drive down our cost of capital. In doing so, we more effectively serve our tenants, maximize the operating cash flow from our property portfolio and capitalize on future opportunities to generate value for shareholders."

Financial and Operating Performance

    --  Executed 47 leasing transactions during the quarter representing
        approximately 657,700 square feet,  contributing to:
        --  Positive net absorption for the third quarter of approximately
            219,700 square feet; and
        --  An increase in the operating portfolio leased percentage on a
            weighted-average basis to 92.6% at quarter end;
    --  Increased same property net operating income on a cash basis by 7.2%
        year-over-year;
    --  Generated total revenues of approximately $168.9 million and set a new
        company record for rental revenues of $122.8 million; and
    --  Generated funds from operations (FFO) and core funds from operations
        (CFFO) of $0.40 per diluted share and adjusted funds from operations
        (AFFO) of $0.35 per diluted share, and reported net income available to
        common stockholders for the quarter of approximately $16.0 million, or
        $0.08 per diluted share.

New Investments

    --  Completed development delivery of the 3737 Market Street building on the
        Science Center campus in Philadelphia, Pennsylvania, which was 82.4%
        leased at quarter end.

Financing Activity

    --  Issued 4,955,377 shares of common stock in exchange for approximately
        $84.3 million of exchangeable senior notes at the request of holders
        exercising their exchange rights.

During the quarter, the company executed 47 leasing transactions representing approximately 657,700 square feet, contributing to an operating portfolio leased percentage on a weighted-average basis of 92.6% and a development portfolio pre-leased percentage of 83.8% at quarter end. Third quarter leasing was comprised of:

    --  33 new leases totaling approximately 380,400 square feet, highlighted
        by:
        --  A new lease with Baxter Healthcare Corporation for approximately
            206,100 square feet at the 650 East Kendall Street property in
            Cambridge, Massachusetts, which the company owns through its joint
            venture with Prudential Real Estate Investors (PREI). Concurrently,
            the company executed a lease termination with AVEO Pharmaceuticals,
            Inc. in the building in exchange for a termination fee of $15.6
            million.  As a result of these transactions, 650 East Kendall is now
            100% leased;
        --  A new lease with Bristol-Myers Squibb Company totaling approximately
            61,000 square feet at the company's Woodside Technology Park campus
            in Redwood City, California; and
        --  A new lease with GlycoMimetics, Inc. for approximately 33,800 square
            feet at the company's 9708-9714 Medical Center Drive property in
            Rockville, Maryland.
    --  14 lease renewals and extensions totaling approximately 277,300 square
        feet, highlighted by:
        --  A lease extension with Bristol-Myers Squibb for approximately
            133,100 square feet at the Woodside Technology Park campus;
        --  A lease extension with PPD Global Limited for approximately 64,600
            square feet at the company's Granta Park campus in Cambridge, United
            Kingdom; and
        --  A lease extension with Ardelyx, Inc. for approximately 27,600 square
            feet at the company's Ardenwood Boulevard property in Fremont,
            California.

Third Quarter 2014 Financial Results

Rental revenues for the third quarter were approximately $122.8 million, compared to approximately $116.9 million for the same period in 2013, an increase of 5.0% and the highest in the company's history.  Total revenues for the third quarter were approximately $168.9 million, compared to approximately $159.2 million for the same period in 2013, an increase of 6.1%.

CFFO for the third quarter was $0.40 per diluted share and FFO, calculated in accordance with standards established by NAREIT, was also $0.40 per diluted share for the quarter.  AFFO for the quarter was $0.35 per diluted share. The company reported net income available to common stockholders for the quarter of approximately $16.0 million, or $0.08 per diluted share.  Results of operations were favorably impacted by the following items, which increased FFO in aggregate by approximately $9.7 million, or $0.05 per diluted share:

    --  Lease termination fees totaling $3.3 million were recorded as other
        revenue during the third quarter, primarily associated with the
        previously announced lease termination at 50 Hampshire.
    --  In connection with the lease termination at 650 East Kendall Street,
        AVEO Pharmaceuticals committed to pay the company a termination fee of
        approximately $15.6 million.  The company holds a 20% interest in the
        PREI joint venture that owns the 650 East Kendall property and in the
        third quarter the joint venture recognized approximately $10.0 million
        of the total $15.6 million termination fee as additional revenue.  The
        balance will be recognized as additional revenue over the remaining term
        of the lease through September 2015.  The financial results of the joint
        venture are not consolidated in the company's financial statements.
        Accordingly, the company recognized approximately $2.0 million in
        termination fee income through equity in income of unconsolidated
        subsidiaries in the third quarter.
    --  Gains on securities investments of approximately $2.4 million.
    --  Deferred rent receipts of approximately $2.0 million, which have been
        recorded as rental and tenant recovery revenues during the third
        quarter.

Financing Activity

During the third quarter of 2014, certain holders of the company's exchangeable senior notes exercised their exchange rights, pursuant to which the company issued 4,955,377 shares of common stock in exchange for approximately $84.3 million principal amount of notes.

Also during the third quarter, the company amended the terms of the loan secured by its PREI joint venture's 650 East Kendall Street property, extending the loan's maturity date to August 13, 2015 and reducing the applicable credit spread to 205 basis points, with an option to further extend the maturity date to August 13, 2016.

Earnings Guidance

The company's updated 2014 guidance for net income per diluted share, FFO per diluted share and CFFO per diluted share are set forth and reconciled below. Projected net income per diluted share and FFO per diluted share (and CFFO per diluted share) are based upon estimated, weighted-average diluted common shares outstanding of approximately 198.6 million and 208.7 million, respectively.