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 June 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 August 2, 2012 was 154,186,244.
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended June 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 June 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
• | 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 JUNE 30, 2012
TABLE OF CONTENTS
Page | ||
4
Exhibit 31.1 | ||
Exhibit 31.2 | ||
Exhibit 32.1 | ||
5
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
BIOMED REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, 2012 | December 31, 2011 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Investments in real estate, net | $ | 4,309,421 | $ | 3,950,246 | |||
Investments in unconsolidated partnerships | 32,562 | 33,389 | |||||
Cash and cash equivalents | 17,385 | 16,411 | |||||
Accounts receivable, net | 4,241 | 5,141 | |||||
Accrued straight-line rents, net | 139,346 | 130,582 | |||||
Deferred leasing costs, net | 185,354 | 157,255 | |||||
Other assets | 111,383 | 135,521 | |||||
Total assets | $ | 4,799,692 | $ | 4,428,545 | |||
LIABILITIES AND EQUITY | |||||||
Mortgage notes payable, net | $ | 550,704 | $ | 587,844 | |||
Exchangeable senior notes | 180,000 | 180,000 | |||||
Unsecured senior notes, net | 893,737 | 645,581 | |||||
Unsecured senior term loan | 400,000 | — | |||||
Unsecured line of credit | 78,000 | 268,000 | |||||
Accounts payable, accrued expenses and other liabilities | 157,829 | 134,924 | |||||
Total liabilities | 2,260,270 | 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 June 30, 2012 and December 31, 2011 | 191,469 | 191,469 | |||||
Common stock, $.01 par value, 200,000,000 shares authorized, 154,183,744 and 154,101,482 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively | 1,542 | 1,541 | |||||
Additional paid-in capital | 2,776,046 | 2,773,994 | |||||
Accumulated other comprehensive loss, net | (57,326 | ) | (60,138 | ) | |||
Dividends in excess of earnings | (381,105 | ) | (304,759 | ) | |||
Total stockholders' equity | 2,530,626 | 2,602,107 | |||||
Noncontrolling interests | 8,796 | 10,089 | |||||
Total equity | 2,539,422 | 2,612,196 | |||||
Total liabilities and equity | $ | 4,799,692 | $ | 4,428,545 | |||
See accompanying notes to consolidated financial statements.
6
BIOMED REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
For the Three Months Ended | For the Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenues: | |||||||||||||||
Rental | $ | 95,708 | $ | 81,145 | $ | 187,183 | $ | 161,050 | |||||||
Tenant recoveries | 28,939 | 24,723 | 57,390 | 49,264 | |||||||||||
Other revenue | 201 | 541 | 285 | 1,288 | |||||||||||
Total revenues | 124,848 | 106,409 | 244,858 | 211,602 | |||||||||||
Expenses: | |||||||||||||||
Rental operations | 37,044 | 31,298 | 73,773 | 62,371 | |||||||||||
Depreciation and amortization | 47,575 | 35,696 | 92,508 | 69,447 | |||||||||||
General and administrative | 8,576 | 6,694 | 17,191 | 14,115 | |||||||||||
Acquisition-related expenses | 12,245 | 334 | 12,879 | 653 | |||||||||||
Total expenses | 105,440 | 74,022 | 196,351 | 146,586 | |||||||||||
Income from operations | 19,408 | 32,387 | 48,507 | 65,016 | |||||||||||
Equity in net loss of unconsolidated partnerships | (317 | ) | (466 | ) | (671 | ) | (1,115 | ) | |||||||
Interest expense, net | (23,825 | ) | (23,378 | ) | (46,044 | ) | (44,568 | ) | |||||||
Other expense | (549 | ) | (691 | ) | (375 | ) | (1,745 | ) | |||||||
(Loss) / income from continuing operations | (5,283 | ) | 7,852 | 1,417 | 17,588 | ||||||||||
Income / (loss) from discontinued operations | 49 | 95 | (4,370 | ) | 236 | ||||||||||
Net (loss) / income | (5,234 | ) | 7,947 | (2,953 | ) | 17,824 | |||||||||
Net loss / (income) attributable to noncontrolling interests | 172 | (68 | ) | 201 | (175 | ) | |||||||||
Net (loss) / income attributable to the Company | (5,062 | ) | 7,879 | (2,752 | ) | 17,649 | |||||||||
Preferred stock dividends | (3,651 | ) | (4,241 | ) | (7,301 | ) | (8,481 | ) | |||||||
Net (loss) / income available to common stockholders | $ | (8,713 | ) | $ | 3,638 | $ | (10,053 | ) | $ | 9,168 | |||||
(Loss) / income from continuing operations per share available to common stockholders: | |||||||||||||||
Basic and diluted earnings per share | $ | (0.06 | ) | $ | 0.03 | $ | (0.04 | ) | $ | 0.07 | |||||
(Loss) / income from discontinued operations per share available to common stockholders: | |||||||||||||||
Basic and diluted earnings per share | $ | — | $ | — | $ | (0.03 | ) | $ | — | ||||||
Net (loss) / income per share available to common stockholders: | |||||||||||||||
Basic and diluted earnings per share | $ | (0.06 | ) | $ | 0.03 | $ | (0.07 | ) | $ | 0.07 | |||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 152,775,422 | 129,858,098 | 152,715,715 | 129,815,154 | |||||||||||
Diluted | 152,775,422 | 132,840,932 | 152,715,715 | 132,803,097 | |||||||||||
See accompanying notes to consolidated financial statements.
7
BIOMED REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME
(In thousands)
(Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net (loss) / income | $ | (5,234 | ) | $ | 7,947 | $ | (2,953 | ) | $ | 17,824 | |||||
Other comprehensive income: | |||||||||||||||
Foreign currency translation adjustments | 2,991 | — | 2,991 | — | |||||||||||
Unrealized (loss) / gain on derivative instruments, net | (3,372 | ) | 864 | (3,597 | ) | 3,409 | |||||||||
Amortization of deferred interest costs | 1,736 | 1,760 | 3,479 | 3,525 | |||||||||||
Reclassification on unrealized loss on equity securities | 545 | 825 | 545 | 825 | |||||||||||
Reclassification on sale of equity securities | (60 | ) | — | (32 | ) | — | |||||||||
Unrealized loss on equity securities | (254 | ) | (1,375 | ) | (519 | ) | (3,692 | ) | |||||||
Total other comprehensive income | 1,586 | 2,074 | 2,867 | 4,067 | |||||||||||
Comprehensive (loss) / income | (3,648 | ) | 10,021 | (86 | ) | 21,891 | |||||||||
Comprehensive loss / (income) attributable to noncontrolling interests | 141 | (114 | ) | 146 | (265 | ) | |||||||||
Comprehensive (loss) / income attributable to the Company | $ | (3,507 | ) | $ | 9,907 | $ | 60 | $ | 21,626 | ||||||
See accompanying notes to consolidated financial statements.
8
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 | — | 45,041 | — | (3,401 | ) | — | — | (3,401 | ) | — | (3,401 | ) | ||||||||||||||||||||||
Conversion of OP units to common stock | — | 37,221 | 1 | 30 | — | — | 31 | (31 | ) | — | ||||||||||||||||||||||||
Vesting of share-based awards | — | — | — | 5,576 | — | — | 5,576 | — | 5,576 | |||||||||||||||||||||||||
Reallocation of equity to noncontrolling interests | — | — | — | (153 | ) | — | — | (153 | ) | 153 | — | |||||||||||||||||||||||
Common stock dividends | — | — | — | — | — | (66,293 | ) | (66,293 | ) | — | (66,293 | ) | ||||||||||||||||||||||
OP unit distributions | — | — | — | — | — | — | — | (1,269 | ) | (1,269 | ) | |||||||||||||||||||||||
Net loss | — | — | — | — | — | (2,752 | ) | (2,752 | ) | (201 | ) | (2,953 | ) | |||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | (7,301 | ) | (7,301 | ) | — | (7,301 | ) | ||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | 2,935 | — | 2,935 | 56 | 2,991 | |||||||||||||||||||||||||
Reclassification on other-than-temporary impairment of marketable securities | — | — | — | — | 535 | — | 535 | 10 | 545 | |||||||||||||||||||||||||
Reclassification on sale of marketable securities | — | — | — | — | (32 | ) | — | (32 | ) | — | (32 | ) | ||||||||||||||||||||||
Unrealized loss on equity securities | — | — | — | — | (509 | ) | — | (509 | ) | (10 | ) | (519 | ) | |||||||||||||||||||||
Amortization of deferred interest costs | — | — | — | — | 3,413 | — | 3,413 | 66 | 3,479 | |||||||||||||||||||||||||
Unrealized loss on derivative instruments, net | — | — | — | — | (3,530 | ) | — | (3,530 | ) | (67 | ) | (3,597 | ) | |||||||||||||||||||||
Balance at June 30, 2012 | $ | 191,469 | 154,183,744 | $ | 1,542 | $ | 2,776,046 | $ | (57,326 | ) | $ | (381,105 | ) | $ | 2,530,626 | $ | 8,796 | $ | 2,539,422 | |||||||||||||||
See accompanying notes to consolidated financial statements.
9
BIOMED REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended | |||||||
June 30, | |||||||
2012 | 2011 | ||||||
Operating activities: | |||||||
Net (loss) / income | $ | (2,953 | ) | $ | 17,824 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 92,600 | 69,625 | |||||
Allowance for doubtful accounts | 833 | 931 | |||||
Non-cash revenue adjustments | 6,349 | 5,145 | |||||
Other non-cash adjustments | 11,862 | 6,621 | |||||
Compensation expense related to restricted common stock and LTIP units | 5,575 | 3,656 | |||||
Distributions representing a return on capital from unconsolidated partnerships | 1,088 | 816 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 1,004 | 2,715 | |||||
Accrued straight-line rents | (9,934 | ) | (10,249 | ) | |||
Deferred leasing costs | (6,587 | ) | (9,402 | ) | |||
Other assets | 6,038 | 524 | |||||
Accounts payable, accrued expenses and other liabilities | 2,243 | (6,434 | ) | ||||
Net cash provided by operating activities | 108,118 | 81,772 | |||||
Investing activities: | |||||||
Purchases of investments in real estate and related intangible assets | (365,751 | ) | (38,981 | ) | |||
Capital expenditures | (79,703 | ) | (81,537 | ) | |||
Contributions to unconsolidated partnerships, net | (1,350 | ) | — | ||||
Purchases of debt and equity securities | (3,258 | ) | (2,050 | ) | |||
Proceeds from the sale of equity securities | 110 | — | |||||
Deposits to escrow for acquisitions | (1,000 | ) | — | ||||
Net cash used in investing activities | (450,952 | ) | (122,568 | ) | |||
Financing activities: | |||||||
Payment of deferred loan costs | (5,022 | ) | (3,466 | ) | |||
Unsecured line of credit proceeds | 498,000 | 145,475 | |||||
Unsecured line of credit payments | (688,000 | ) | (416,725 | ) | |||
Principal payments on mortgage notes payable | (36,557 | ) | (33,268 | ) | |||
Proceeds from unsecured senior term loan | 400,000 | — | |||||
Proceeds from unsecured senior notes | 247,815 | 397,460 | |||||
Distributions to operating partnership unit and LTIP unit holders | (1,232 | ) | (1,107 | ) | |||
Dividends paid to common stockholders | (63,965 | ) | (48,526 | ) | |||
Dividends paid to preferred stockholders | (7,301 | ) | (8,481 | ) | |||
Net cash provided by financing activities | 343,738 | 31,362 | |||||
Effect of exchange rate changes on cash and cash equivalents | 70 | — | |||||
Net increase / (decrease) in cash and cash equivalents | 974 | (9,434 | ) | ||||
Cash and cash equivalents at beginning of period | 16,411 | 21,467 | |||||
Cash and cash equivalents at end of period | $ | 17,385 | $ | 12,033 | |||
10
Six Months Ended | |||||||
June 30, | |||||||
2012 | 2011 | ||||||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for interest (net of amounts capitalized of $4,450 and $3,311, respectively) | $ | 34,289 | $ | 35,927 | |||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Accrual for preferred stock dividends declared | $ | 3,651 | $ | 4,241 | |||
Accrual for common stock dividends declared | 33,149 | 26,252 | |||||
Accrual for distributions declared for operating partnership unit and LTIP unit holders | 633 | 596 | |||||
Accrued additions to real estate and related intangible assets | 30,104 | 24,891 | |||||
Deposits applied for acquisitions | 18,649 | 1,800 | |||||
See accompanying notes to consolidated financial statements.
11
BIOMED REALTY, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
June 30, 2012 | December 31, 2011 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Investments in real estate, net | $ | 4,309,421 | $ | 3,950,246 | |||
Investments in unconsolidated partnerships | 32,562 | 33,389 | |||||
Cash and cash equivalents | 17,385 | 16,411 | |||||
Accounts receivable, net | 4,241 | 5,141 | |||||
Accrued straight-line rents, net | 139,346 | 130,582 | |||||
Deferred leasing costs, net | 185,354 | 157,255 | |||||
Other assets | 111,383 | 135,521 | |||||
Total assets | $ | 4,799,692 | $ | 4,428,545 | |||
LIABILITIES AND CAPITAL | |||||||
Mortgage notes payable, net | $ | 550,704 | $ | 587,844 | |||
Exchangeable senior notes | 180,000 | 180,000 | |||||
Unsecured senior notes, net | 893,737 | 645,581 | |||||
Unsecured senior term loan | 400,000 | — | |||||
Unsecured line of credit | 78,000 | 268,000 | |||||
Accounts payable, accrued expenses and other liabilities | 157,829 | 134,924 | |||||
Total liabilities | 2,260,270 | 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 June 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 June 30, 2012 and December 31, 2011, respectively | 9,049 | 10,332 | |||||
General partner's capital, 154,183,744 and 154,101,482 units issued and outstanding at June 30, 2012 and December 31, 2011, respectively | 2,394,884 | 2,469,233 | |||||
Accumulated other comprehensive loss | (55,727 | ) | (58,594 | ) | |||
Total partners' capital | 2,539,675 | 2,612,440 | |||||
Noncontrolling interests deficit | (253 | ) | (244 | ) | |||
Total capital | 2,539,422 | 2,612,196 | |||||
Total liabilities and capital | $ | 4,799,692 | $ | 4,428,545 | |||
See accompanying notes to consolidated financial statements.
12
BIOMED REALTY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except unit data)
(Unaudited)
For the Three Months Ended | For the Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenues: | |||||||||||||||
Rental | $ | 95,708 | $ | 81,145 | $ | 187,183 | $ | 161,050 | |||||||
Tenant recoveries | 28,939 | 24,723 | 57,390 | 49,264 | |||||||||||
Other revenue | 201 | 541 | 285 | 1,288 | |||||||||||
Total revenues | 124,848 | 106,409 | 244,858 | 211,602 | |||||||||||
Expenses: | |||||||||||||||
Rental operations | 37,044 | 31,298 | 73,773 | 62,371 | |||||||||||
Depreciation and amortization | 47,575 | 35,696 | 92,508 | 69,447 | |||||||||||
General and administrative | 8,576 | 6,694 | 17,191 | 14,115 | |||||||||||
Acquisition-related expenses | 12,245 | 334 | 12,879 | 653 | |||||||||||
Total expenses | 105,440 | 74,022 | 196,351 | 146,586 | |||||||||||
Income from operations | 19,408 | 32,387 | 48,507 | 65,016 | |||||||||||
Equity in net loss of unconsolidated partnerships | (317 | ) | (466 | ) | (671 | ) | (1,115 | ) | |||||||
Interest expense, net | (23,825 | ) | (23,378 | ) | (46,044 | ) | (44,568 | ) | |||||||
Other expense | (549 | ) | (691 | ) | (375 | ) | (1,745 | ) | |||||||
(Loss) / income from continuing operations | (5,283 | ) | 7,852 | 1,417 | 17,588 | ||||||||||
Income / (loss) from discontinued operations | 49 | 95 | (4,370 | ) | 236 | ||||||||||
Net (loss) / income | (5,234 | ) | 7,947 | (2,953 | ) | 17,824 | |||||||||
Net loss attributable to noncontrolling interests | 6 | 14 | 9 | 32 | |||||||||||
Net (loss) / income attributable to the Operating Partnership | (5,228 | ) | 7,961 | (2,944 | ) | 17,856 | |||||||||
Preferred unit distributions | (3,651 | ) | (4,241 | ) | (7,301 | ) | (8,481 | ) | |||||||
Net (loss) / income available to unitholders | $ | (8,879 | ) | $ | 3,720 | $ | (10,245 | ) | $ | 9,375 | |||||
(Loss) / income from continuing operations per unit available to common unitholders: | |||||||||||||||
Basic and diluted earnings per unit | $ | (0.06 | ) | $ | 0.03 | $ | (0.04 | ) | $ | 0.07 | |||||
(Loss) / income from discontinued operations per unit available to common unitholders: | |||||||||||||||
Basic and diluted earnings per unit | $ | — | $ | — | $ | (0.03 | ) | $ | — | ||||||
Net (loss) / income per unit available to common unitholders: | |||||||||||||||
Basic and diluted earnings per unit | $ | (0.06 | ) | $ | 0.03 | $ | (0.07 | ) | $ | 0.07 | |||||
Weighted-average units outstanding: | |||||||||||||||
Basic | 155,694,169 | 132,782,072 | 155,641,727 | 132,742,123 | |||||||||||
Diluted | 155,694,169 | 132,782,072 | 155,641,727 | 132,742,123 | |||||||||||
See accompanying notes to consolidated financial statements.
13
BIOMED REALTY, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME
(In thousands)
(Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net (loss) / income | $ | (5,234 | ) | $ | 7,947 | $ | (2,953 | ) | $ | 17,824 | |||||
Other comprehensive income: | |||||||||||||||
Foreign currency translation adjustments | 2,991 | — | 2,991 | — | |||||||||||
Unrealized (loss) / gain on derivative instruments, net | (3,372 | ) | 864 | (3,597 | ) | 3,409 | |||||||||
Amortization of deferred interest costs | 1,736 | 1,760 | 3,479 | 3,525 | |||||||||||
Reclassification on unrealized loss on equity securities | 545 | 825 | 545 | 825 | |||||||||||
Reclassification on sale of equity securities | (60 | ) | — | (32 | ) | — | |||||||||
Unrealized loss on equity securities | (254 | ) | (1,375 | ) | (519 | ) | (3,692 | ) | |||||||
Total other comprehensive income | 1,586 | 2,074 | 2,867 | 4,067 | |||||||||||
Comprehensive (loss) / income | (3,648 | ) | 10,021 | (86 | ) | 21,891 | |||||||||
Comprehensive loss attributable to noncontrolling interests | 6 | 14 | 9 | 32 | |||||||||||
Comprehensive (loss) / income attributable to the Operating Partnership | $ | (3,642 | ) | $ | 10,035 | $ | (77 | ) | $ | 21,923 | |||||
See accompanying notes to consolidated financial statements.
14
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 | — | — | — | — | 45,041 | (3,401 | ) | — | (3,401 | ) | — | (3,401 | ) | |||||||||||||||||||||||
Conversion of OP units | — | — | (37,221 | ) | (31 | ) | 37,221 | 31 | — | — | — | — | ||||||||||||||||||||||||
Vesting of share-based awards | — | — | — | — | — | 5,576 | — | 5,576 | — | 5,576 | ||||||||||||||||||||||||||
Reallocation of equity to limited partners | — | — | — | 209 | — | (209 | ) | — | — | — | — | |||||||||||||||||||||||||
Distributions | — | (7,301 | ) | — | (1,269 | ) | — | (66,293 | ) | — | (74,863 | ) | — | (74,863 | ) | |||||||||||||||||||||
Net income / (loss) | — | 7,301 | — | (192 | ) | — | (10,053 | ) | — | (2,944 | ) | (9 | ) | (2,953 | ) | |||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | 2,991 | 2,991 | — | 2,991 | ||||||||||||||||||||||||||
Reclassification on other-than-temporary impairment of marketable securities | — | — | — | — | — | — | 545 | 545 | — | 545 | ||||||||||||||||||||||||||
Reclassification on sale of marketable securities | — | — | — | — | — | — | (32 | ) | (32 | ) | — | (32 | ) | |||||||||||||||||||||||
Unrealized loss on equity securities | — | — | — | — | — | — | (519 | ) | (519 | ) | — | (519 | ) | |||||||||||||||||||||||
Amortization of deferred interest costs | — | — | — | — | — | — | 3,479 | 3,479 | — | 3,479 | ||||||||||||||||||||||||||
Unrealized loss on derivative instruments, net | — | — | — | — | — | — | (3,597 | ) | (3,597 | ) | — | (3,597 | ) | |||||||||||||||||||||||
Balance at June 30, 2012 | 7,920,000 | $ | 191,469 | 2,942,758 | $ | 9,049 | 154,183,744 | $ | 2,394,884 | $ | (55,727 | ) | $ | 2,539,675 | $ | (253 | ) | $ | 2,539,422 | |||||||||||||||||
See accompanying notes to consolidated financial statements.
15
BIOMED REALTY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended | |||||||
June 30, | |||||||
2012 | 2011 | ||||||
Operating activities: | |||||||
Net (loss) / income | $ | (2,953 | ) | $ | 17,824 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 92,600 | 69,625 | |||||
Allowance for doubtful accounts | 833 | 931 | |||||
Non-cash revenue adjustments | 6,349 | 5,145 | |||||
Other non-cash adjustments | 11,862 | 6,621 | |||||
Compensation expense related to share-based payments | 5,575 | 3,656 | |||||
Distributions representing a return on capital from unconsolidated partnerships | 1,088 | 816 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 1,004 | 2,715 | |||||
Accrued straight-line rents | (9,934 | ) | (10,249 | ) | |||
Deferred leasing costs | (6,587 | ) | (9,402 | ) | |||
Other assets | 6,038 | 524 | |||||
Accounts payable, accrued expenses and other liabilities | 2,243 | (6,434 | ) | ||||
Net cash provided by operating activities | 108,118 | 81,772 | |||||
Investing activities: | |||||||
Purchases of investments in real estate and related intangible assets | (365,751 | ) | (38,981 | ) | |||
Capital expenditures | (79,703 | ) | (81,537 | ) | |||
Contributions to unconsolidated partnerships, net | (1,350 | ) | — | ||||
Purchases of debt and equity securities | (3,258 | ) | (2,050 | ) | |||
Proceeds from the sale of equity securities | 110 | — | |||||
Deposits to escrow for acquisitions | (1,000 | ) | — | ||||
Net cash used in investing activities | (450,952 | ) | (122,568 | ) | |||
Financing activities: | |||||||
Payment of deferred loan costs | (5,022 | ) | (3,466 | ) | |||
Unsecured line of credit proceeds | 498,000 | 145,475 | |||||
Unsecured line of credit payments | (688,000 | ) | (416,725 | ) | |||
Principal payments on mortgage notes payable | (36,557 | ) | (33,268 | ) | |||
Proceeds from unsecured senior term loan | 400,000 | — | |||||
Proceeds from unsecured senior notes | 247,815 | 397,460 | |||||
Distributions paid to unitholders | (65,197 | ) | (49,633 | ) | |||
Distributions paid to preferred unitholders | (7,301 | ) | (8,481 | ) | |||
Net cash provided by financing activities | 343,738 | 31,362 | |||||
Effect of exchange rate changes on cash and cash equivalents | 70 | — | |||||
Net increase / (decrease) in cash and cash equivalents | 974 | (9,434 | ) | ||||
Cash and cash equivalents at beginning of period | 16,411 | 21,467 | |||||
16
Six Months Ended | |||||||
June 30, | |||||||
2012 | 2011 | ||||||
Cash and cash equivalents at end of period | $ | 17,385 | $ | 12,033 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for interest (net of amounts capitalized of $4,450 and $3,311, respectively) | $ | 34,289 | $ | 35,927 | |||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Accrual for unit distributions declared | $ | 33,782 | $ | 26,848 | |||
Accrual for preferred unit distributions declared | 3,651 | 4,241 | |||||
Accrued additions to real estate and related intangible assets | 30,104 | 24,891 | |||||
Deposits applied for acquisitions | 18,649 | 1,800 | |||||
See accompanying notes to consolidated financial statements.
17
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 June 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 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.
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 six months ended June 30, 2012, total revenues from properties outside the United States were $901,000, which represented less than 1% of the Company's total revenues for both the three and six months ended June 30, 2012. The Company's net investment in properties outside the United States was $205.9 million as of June 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 accompanying consolidated financial statements. Selected financial data of the VIEs at June 30, 2012 and December 31, 2011
18
consist of the following (in thousands):
June 30, 2012 | December 31, 2011 | ||||||
Investment in real estate, net | $ | 403,588 | $ | 409,327 | |||
Total assets | 437,109 | 454,208 | |||||
Total debt | 145,748 | 146,581 | |||||
Total liabilities | 150,369 | 151,893 | |||||
Investments in Real Estate, Net
Investments in real estate, net consisted of the following (in thousands):
June 30, 2012 | December 31, 2011 | ||||||
Land | $ | 699,268 | $ | 591,009 | |||
Land under development | 46,969 | 56,008 | |||||
Buildings and improvements | 3,972,914 | 3,615,678 | |||||
Construction in progress | 113,024 | 140,025 | |||||
4,832,175 | 4,402,720 | ||||||
Accumulated depreciation | (522,754 | ) | (452,474 | ) | |||
$ | 4,309,421 | $ | 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 six months ended June 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 June 30, 2012 consisted of the following (in thousands):
Balance at | Accumulated | ||||||||||
June 30, 2012 | Amortization | Net | |||||||||
Acquired in-place leases | $ | 299,607 | $ | (166,328 | ) | $ | 133,279 | ||||
Acquired management agreements | 24,957 | (13,851 | ) | 11,106 | |||||||
Deferred leasing and other direct costs | 61,083 | (20,114 | ) | 40,969 | |||||||
$ | 385,647 | $ | (200,293 | ) | $ | 185,354 | |||||
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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):
June 30, 2012 | December 31, 2011 | ||||||
Available-for-sale securities, historical cost | $ | 5,390 | $ | 5,585 | |||
Other-than-temporary unrealized loss | (5,083 | ) | (4,595 | ) | |||
Unrealized loss | (8 | ) | (2 | ) | |||
Available-for-sale securities, fair-value(1) | 299 | 988 | |||||
Privately-held securities, cost basis | 7,220 | 4,245 | |||||
Total equity securities | $ | 7,519 | $ | 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 six months ended June 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 four privately-held companies and two privately-held funds during the six months ended June 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 six months ended June 30, 2012 on the Company's cost basis investments.
Construction Loan Receivable
During the six months ended June 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 Company expects initial draws on the construction loan to be funded in the fourth quarter of 2012 and to be fully invested in
20
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 six months ended June 30, 2012, the Parent Company issued restricted stock awards to the Company's employees and directors totaling 227,411 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 six months ended June 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 $3.3 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 June 30, 2012 was $2.4 million over a weighted-average of approximately 1.7 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 June 30, 2012, the Company had outstanding 154,183,744 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 six months ended June 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 | |||||||
Total 2012 dividends and distributions declared through June 30, 2012 (in thousands):
Common stock and OP units | $ | 67,562 | |
Series A preferred stock/units | 7,301 | ||
$ | 74,863 | ||
21
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 June 30, 2012, was approximately $53.5 million based on the average closing price of the Parent Company's common stock of $18.17 per share for the ten consecutive trading days immediately preceding June 30, 2012.
The following table shows the vested ownership interests in the Operating Partnership were as follows:
June 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 June 30, 2012, the Operating Partnership had outstanding 156,763,532 operating partnership units and 362,970 LTIP units. The Parent Company owned 98.1% of the partnership interests in the Operating Partnership at June 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 June 30, 2012, was approximately $53.5 million based on the average closing price of the Parent Company's common stock of $18.17 per share for the ten consecutive trading days immediately preceding June 30, 2012.
5. Debt
Debt of the Parent Company
22
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 “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 June 30, 2012 and December 31, 2011 was as follows (dollars in thousands):
Stated Interest Rate | Effective Interest Rate | Principal Balance | |||||||||||||
June 30, 2012 | December 31, 2011 | Maturity Date | |||||||||||||
Mortgage Notes Payable | |||||||||||||||
Center for Life Science | Boston | 7.75 | % | 7.75 | % | $ | 340,334 | $ | 342,149 | June 30, 2014 | ||||||
500 Kendall Street (Kendall D) | 6.38 | % | 5.45 | % | 61,229 | 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 | % | 145,748 | 146,581 | September 1, 2016 | ||||||||
Sidney Street (1) | 7.23 | % | 5.11 | % | — | 26,400 | June 1, 2012 | ||||||||
900 Uniqema Boulevard | 8.61 | % | 5.61 | % | 710 | 814 | May 1, 2015 | ||||||||
548,021 | 584,578 | ||||||||||||||
Unamortized premiums | 2,683 | 3,266 | |||||||||||||
Mortgage notes payable, net | 550,704 | 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 | (6,263 | ) | (4,419 | ) | |||||||||||
Unsecured senior notes, net | 893,737 | 645,581 | |||||||||||||
Unsecured senior term loan (2) | 1.90 | % | 2.36 | % | 400,000 | — | March 30, 2017 | ||||||||
Unsecured line of credit (3) | 1.79 | % | 1.79 | % | 78,000 | 268,000 | July 13, 2015 | ||||||||
Total consolidated debt | $ | 2,102,441 | $ | 1,681,425 | |||||||||||
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(1) | During the six months ended June 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) | The effective interest rate includes the impact of interest rate swap agreements (see Note 9 for further discussion of interest rate swap agreements). |
(3) | At June 30, 2012, the Operating Partnership had additional borrowing capacity under the unsecured line of credit of up to approximately $658.6 million (net of outstanding letters of credit issued by the Operating Partnership and drawable on the unsecured line of credit of approximately $13.4 million). During the six months ended June 30, 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
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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.
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 June 30, 2012.
Unsecured Senior Notes due 2022, net
On June 28, 2012, the Operating Partnership issued $250.0 million aggregate principal amount of its Notes due 2022. The purchase price paid by the underwriters was 99.126% of the principal amount and the Notes due 2022 have been recorded on the consolidated balance sheet net of the discount. The Notes due 2022 are senior unsecured obligations of the Operating Partnership and rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership. However, the Notes due 2022 are effectively subordinated to the Operating Partnership's existing and future mortgages and other secured indebtedness (to the extent of the value of the collateral securing such indebtedness) and to all existing and future preferred equity and liabilities, whether secured or unsecured, of the Operating Partnership's subsidiaries, including guarantees provided by the Operating Partnership's subsidiaries under the Operating Partnership's unsecured line of credit. Interest at a rate of 4.25% per year is payable on January 15 and July 15 of each year, beginning on January 15, 2013, until the stated maturity date of July 15, 2022. The terms of the Notes due 2022 are governed by a base indenture and supplemental indenture, dated March 30, 2011 and June 28, 2012, respectively, among the Operating Partnership, as issuer, the Parent Company, as guarantor, and U.S. Bank National Association, as trustee.
The Operating Partnership may redeem the Notes due 2022, in whole or in part, at any time for cash at a redemption price equal to the greater of (1) 100% of the principal amount of the Notes due 2022 being redeemed; or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the adjusted treasury rate plus 45 basis points, plus in each case, accrued and unpaid interest.
The terms of the indenture for the Notes due 2022 require compliance with various financial covenants, including limits on the amount of total leverage and secured debt maintained by the Operating Partnership and which require the Operating Partnership to maintain minimum levels of debt service coverage. Management believes that it was in compliance with these covenants as of June 30, 2012.
As of June 30, 2012, principal payments due for the Operating Partnership's consolidated indebtedness (excluding debt premiums and discounts) were as follows (in thousands):
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2012 | $ | 3,922 | |
2013 | 8,291 | ||
2014 | 339,020 | ||
2015 | 84,253 | ||
2016 | 543,426 | ||
Thereafter(1) | 1,127,109 | ||
$ | 2,106,021 | ||
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(1) | Includes $180.0 million in principal payments of the Exchangeable Senior Notes based on a contractual maturity date of January 15, 2030. |
6. Earnings Per Share of the Parent Company
Through June 30, 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 and six months ended June 30, 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 and six months ended June 30, 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 and six months ended June 30, 2012, the outstanding OP units (both vested and unvested) were anti-dilutive to the calculation of diluted earnings per share and were therefore excluded and net income attributable to noncontrolling interests in the Operating Partnership was not added back to net income available to common stockholders. For the three and six months ended June 30, 2012, the Performance Units were anti-dilutive to the calculation of diluted earnings per share as calculated, assuming that June 30, 2012 is the end of the Performance Units' Performance Period. For the three and six months ended June 30, 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 June 30, 2011 did not exceed the exchange price then in effect. In addition, shares issuable upon settlement of the exchange feature of the Exchangeable Senior Notes were anti-dilutive and were not included in the calculation of diluted earnings per share based on the “if converted” method for the three and six months ended June 30, 2012 and 2011. No other shares were considered anti-dilutive for the three and six months ended June 30, 2012 and 2011.
Computations of basic and diluted earnings per share (in thousands, except share data) were as follows:
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Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Basic earnings per share: | |||||||||||||||