Edgar Filing: BioMed Realty Trust Inc

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

(Do not check if a smaller

reporting company)

BMR-2014.03.31-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

Form 10-Q

QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

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 þ No o
BioMed Realty, L.P.	Yes þ 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 þ No o
BioMed Realty, L.P.	Yes þ 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.:

BioMed Realty, L.P.:

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 þ
BioMed Realty, L.P.	Yes o No þ

The number of outstanding shares of BioMed Realty Trust, Inc.’s common stock, par value $0.01 per share, as of May 1, 2014 was 192,506,626.

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2014 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 is the general partner of BioMed Realty, L.P. As of March 31, 2014, BioMed Realty Trust, Inc. owned an approximate 97.3% partnership interest and other limited partners, including some of our directors, executive officers and their affiliates, owned the remaining 2.7% 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 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

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•	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.

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

FORM 10-Q - QUARTERLY REPORT

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014

TABLE OF CONTENTS



		Page
	PART I - FINANCIAL INFORMATION

	Item 1 Consolidated Financial Statements	6

	Consolidated Financial Statements of BioMed Realty Trust, Inc.:	6

	Consolidated Balance Sheets as of March 31, 2014 (Unaudited) and December 31, 2013	6

	Consolidated Statements of Income for the three months ended March 31, 2014 and 2013 (Unaudited)	7

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2014 and 2013 (Unaudited)	8

	Consolidated Statement of Equity for the three months ended March 31, 2014 (Unaudited)	9

	Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (Unaudited)	10

	Consolidated Financial Statements of BioMed Realty, L.P.:	12

	Consolidated Balance Sheets as of March 31, 2014 (Unaudited) and December 31, 2013	12

	Consolidated Statements of Income for the three months ended March 31, 2014 and 2013 (Unaudited)	13

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2014 and 2013 (Unaudited)	14

	Consolidated Statement of Capital for the three months ended March 31, 2014 (Unaudited)	15

	Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (Unaudited)	16

	Notes to Consolidated Financial Statements of BioMed Realty Trust, Inc. and BioMed Realty, L.P.	18

	Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations	32

	Item 3 Quantitative and Qualitative Disclosures About Market Risk	46

	Item 4 Controls and Procedures	49

	PART II - OTHER INFORMATION

	Item 1 Legal Proceedings	50

	Item 1A Risk Factors	50

	Item 2 Unregistered Sale of Equity Securities and Use of Proceeds	50

	Item 3 Defaults Upon Senior Securities	50




	Item 4 Mine Safety Disclosures	50

	Item 5 Other Information	50

	Item 6 Exhibits	50

	SIGNATURES	52

	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32.1

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PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

BIOMED REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



	March 31, 2014			December 31, 2013
	(Unaudited)
ASSETS
Investments in real estate, net	$	5,235,036		$	5,217,902
Investments in unconsolidated partnerships	31,461			32,137
Cash and cash equivalents	59,121			34,706
Accounts receivable, net	10,719			8,421
Accrued straight-line rents, net	178,114			173,779
Deferred leasing costs, net	189,527			198,067
Other assets	371,453			307,589
Total assets	$	6,075,431		$	5,972,601
LIABILITIES AND EQUITY
Mortgage notes payable, net	$	706,013		$	709,324
Exchangeable senior notes	180,000			180,000
Unsecured senior notes, net	895,312			895,083
Unsecured senior term loans	760,066			758,786
Unsecured line of credit	226,000			128,000
Accounts payable, accrued expenses and other liabilities	333,157			314,383
Total liabilities	3,100,548			2,985,576
Equity:
Stockholders’ equity:
Common stock, $.01 par value, 250,000,000 shares authorized, 192,502,965 shares and 192,115,002 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively	1,925			1,921
Additional paid-in capital	3,554,504			3,554,558
Accumulated other comprehensive loss, net	(19,973		)	(32,923		)
Dividends in excess of earnings	(612,864		)	(583,569		)
Total stockholders’ equity	2,923,592			2,939,987
Noncontrolling interests	51,291			47,038
Total equity	2,974,883			2,987,025
Total liabilities and equity	$	6,075,431		$	5,972,601

See accompanying notes to consolidated financial statements.

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BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)

(Unaudited)



	For the Three Months Ended
	March 31,
	2014			2013
Revenues:
Rental	$	120,026		$	102,956
Tenant recoveries	38,735			32,637
Other revenue	10,115			24,857
Total revenues	168,876			160,450
Expenses:
Rental operations	52,523			40,553
Depreciation and amortization	62,409			60,764
General and administrative	11,942			10,028
Acquisition-related expenses	1,250			2,236
Total expenses	128,124			113,581
Income from operations	40,752			46,869
Equity in net loss of unconsolidated partnerships	(138		)	(319		)
Interest expense, net	(28,010		)	(25,902		)
Other income / (expense)	8,163			(3,190		)
Net income	20,767			17,458
Net income attributable to noncontrolling interests	(1,934		)	(146		)
Net income attributable to the Company	18,833			17,312
Preferred stock dividends	—			(2,393		)
Cost on redemption of preferred stock	—			(6,531		)
Net income available to common stockholders	$	18,833		$	8,388
Net income per share available to common stockholders:
Basic and diluted earnings per share	$	0.10		$	0.05
Weighted-average common shares outstanding:
Basic	190,905,867			159,692,470
Diluted	196,545,536			162,713,677

See accompanying notes to consolidated financial statements.

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BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)



	Three Months Ended
	March 31,
	2014			2013
Net income	$	20,767		$	17,458
Other comprehensive income / (loss):
Foreign currency translation adjustments	238			(2,182		)
Unrealized loss from derivative instruments, net	(590		)	(137		)
Amortization of deferred interest costs	1,691			1,718
Reclassification on sale of equity securities	(9,322		)	—
Unrealized gain / (loss) on equity securities	24,634			(168		)
Total other comprehensive income / (loss)	16,651			(769		)
Comprehensive income	37,418			16,689
Comprehensive income attributable to noncontrolling interests	(5,635		)	(132		)
Comprehensive income attributable to the Company	$	31,783		$	16,557

See accompanying notes to consolidated financial statements.

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BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENT OF EQUITY

(In thousands, except share data)

(Unaudited)



	Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive (Loss)/Income, net			Dividends in Excess of Earnings			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive (Loss)/Income, net			Dividends in Excess of Earnings			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2013	192,115,002	$	1,921	$	3,554,558		$	(32,923	)	$	(583,569	)	2,939,987			$	47,038		$	2,987,025
Offering costs from sale of common stock	—	—		(49		)	—			—			(49		)	—			(49		)
Net issuances of unvested restricted common stock	377,463	4		(3,786		)	—			—			(3,782		)	—			(3,782		)
Conversion of OP units to common stock	10,500	—		(51		)	—			—			(51		)	51			—
Vesting of share-based awards	—	—		3,750			—			—			3,750			—			3,750
Reallocation of noncontrolling interests to equity	—	—		82			—			—			82			(82		)	—
Common stock dividends	—	—		—			—			(48,128		)	(48,128		)	—			(48,128		)
OP unit distributions	—	—		—			—			—			—			(1,351		)	(1,351		)
Net income	—	—		—			—			18,833			18,833			1,934			20,767
Foreign currency translation adjustments	—	—		—			232			—			232			6			238
Reclassification on sale of equity securities	—	—		—			(7,784		)	—			(7,784		)	(1,538		)	(9,322		)
Unrealized gain on equity securities	—	—		—			19,430			—			19,430			5,204			24,634
Amortization of deferred interest costs	—	—		—			1,646			—			1,646			45			1,691
Unrealized loss on derivative instruments, net	—	—		—			(574		)	—			(574		)	(16		)	(590		)
Balance at March 31, 2014	192,502,965	$	1,925	$	3,554,504		$	(19,973	)	$	(612,864	)	$	2,923,592		$	51,291		$	2,974,883

See accompanying notes to consolidated financial statements.

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BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended
	March 31,
	2014			2013

Operating activities:
Net income	$	20,767		$	17,458
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	62,409			60,764
Allowance for doubtful accounts	526			501
Non-cash revenue adjustments	481			5,803
Other non-cash adjustments	(4,886		)	6,457
Compensation expense related to restricted common stock and LTIP units	3,750			3,011
Distributions representing a return on capital from unconsolidated partnerships	203			59
Changes in operating assets and liabilities:
Accounts receivable	(2,482		)	(31,822		)
Accrued straight-line rents	(4,676		)	(3,555		)
Deferred leasing costs	(1,754		)	(1,520		)
Other assets	1,206			314
Accounts payable, accrued expenses and other liabilities	2,194			2,823
Net cash provided by operating activities	77,738			60,293
Investing activities:
Purchases of investments in real estate and related intangible assets	—			(123,841		)
Capital expenditures	(69,843		)	(39,250		)
Contributions from historic tax credit transactions, net	15,502			—
Draws on construction loan receivable	(39,584		)	(34,310		)
Contributions to unconsolidated partnerships, net	(4		)	(336		)
Purchases of debt and equity securities	(2,971		)	(5,395		)
Proceeds from the sale of debt and equity securities	13,952			—
Deposits to escrow for acquisitions	(16,100		)	—
Net cash used in investing activities	(99,048		)	(203,132		)
Financing activities:
Net proceeds from common stock offering	—			299,402
Payment of offering costs	—			(12,410		)
Redemption of Series A preferred stock	—			(198,000		)
Unsecured line of credit proceeds	130,000			284,000
Unsecured line of credit payments	(32,000		)	(187,000		)
Principal payments on mortgage notes payable	(2,776		)	(2,073		)
Distributions to operating partnership unit and LTIP unit holders	(1,354		)	(689		)
Dividends paid to common stockholders	(48,029		)	(36,268		)
Dividends paid to preferred stockholders	—			(6,044		)
Net cash provided by financing activities	45,841			140,918
Effect of exchange rate changes on cash and cash equivalents	(116		)	497
Net increase / (decrease) in cash and cash equivalents	24,415			(1,424		)
Cash and cash equivalents at beginning of period	34,706			19,976
Cash and cash equivalents at end of period	$	59,121		$	18,552

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	Three Months Ended
	March 31,
	2014		2013

Supplemental disclosure of cash flow information:
Cash paid during the period for interest (net of amounts capitalized of $4,192 and $2,840, respectively)	$	21,593	$	16,654
Supplemental disclosure of non-cash investing and financing activities:
Accrual for common stock dividends declared	$	48,128	$	39,727
Accrual for distributions declared for operating partnership unit and LTIP unit holders	1,351		686
Accrued additions to real estate and related intangible assets	60,171		31,928

See accompanying notes to consolidated financial statements.

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BIOMED REALTY, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)



	March 31, 2014			December 31, 2013
	(Unaudited)
ASSETS
Investments in real estate, net	$	5,235,036		$	5,217,902
Investments in unconsolidated partnerships	31,461			32,137
Cash and cash equivalents	59,121			34,706
Accounts receivable, net	10,719			8,421
Accrued straight-line rents, net	178,114			173,779
Deferred leasing costs, net	189,527			198,067
Other assets	371,453			307,589
Total assets	$	6,075,431		$	5,972,601
LIABILITIES AND CAPITAL
Mortgage notes payable, net	$	706,013		$	709,324
Exchangeable senior notes	180,000			180,000
Unsecured senior notes, net	895,312			895,083
Unsecured senior term loans	760,066			758,786
Unsecured line of credit	226,000			128,000
Accounts payable, accrued expenses and other liabilities	333,157			314,383
Total liabilities	3,100,548			2,985,576
Capital:
Partners’ capital:
Limited partners' capital, 5,405,474 and 5,415,974 units issued and outstanding at March 31, 2014 and December 31, 2013, respectively	45,204			45,708
General partner's capital, 192,502,965 and 192,115,002 units issued and outstanding at March 31, 2014 and December 31, 2013, respectively	2,940,948			2,970,650
Accumulated other comprehensive loss	(17,356		)	(30,663		)
Total partners’ capital	2,968,796			2,985,695
Noncontrolling interests	6,087			1,330
Total capital	2,974,883			2,987,025
Total liabilities and capital	$	6,075,431		$	5,972,601

See accompanying notes to consolidated financial statements.

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BIOMED REALTY, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except unit data)

(Unaudited)



	For the Three Months Ended
	March 31,
	2014			2013
Revenues:
Rental	$	120,026		$	102,956
Tenant recoveries	38,735			32,637
Other revenue	10,115			24,857
Total revenues	168,876			160,450
Expenses:
Rental operations	52,523			40,553
Depreciation and amortization	62,409			60,764
General and administrative	11,942			10,028
Acquisition-related expenses	1,250			2,236
Total expenses	128,124			113,581
Income from operations	40,752			46,869
Equity in net loss of unconsolidated partnerships	(138		)	(319		)
Interest expense, net	(28,010		)	(25,902		)
Other income / (expense)	8,163			(3,190		)
Net income	20,767			17,458
Net (income) / loss attributable to noncontrolling interests	(1,413		)	8
Net income attributable to the Operating Partnership	19,354			17,466
Preferred unit distributions	—			(2,393		)
Cost on redemption of preferred units	—			(6,531		)
Net income available to unitholders	$	19,354		$	8,542
Net income per unit available to unitholders:
Basic and diluted earnings per unit	$	0.10		$	0.05
Weighted-average units outstanding:
Basic	196,316,241			162,612,998
Diluted	196,545,536			162,710,786

See accompanying notes to consolidated financial statements.

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BIOMED REALTY, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)



	Three Months Ended
	March 31,
	2014			2013
Net income	$	20,767		$	17,458
Other comprehensive income / (loss):
Foreign currency translation adjustments	238			(2,182		)
Unrealized loss from derivative instruments, net	(590		)	(137		)
Amortization of deferred interest costs	1,691			1,718
Reclassification on sale of equity securities	(9,322		)	—
Unrealized gain / (loss) on equity securities	24,634			(168		)
Total other comprehensive income / (loss)	16,651			(769		)
Comprehensive income	37,418			16,689
Comprehensive (income) / loss attributable to noncontrolling interests	(4,757		)	8
Comprehensive income attributable to the Operating Partnership	$	32,661		$	16,697

See accompanying notes to consolidated financial statements.

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BIOMED REALTY, L.P.

CONSOLIDATED STATEMENT OF CAPITAL

(In thousands, except unit data)

(Unaudited)



	Limited Partners' Capital					General Partner's Capital				Accumulated Other Comprehensive (Loss)/Income			Total Partners' Capital			Noncontrolling Interests / (Deficit)			Total Capital
	Units		Amount			Units	Amount			Accumulated Other Comprehensive (Loss)/Income			Total Partners' Capital			Noncontrolling Interests / (Deficit)			Total Capital
Balance at December 31, 2013	5,415,974		$	45,708		192,115,002	$	2,970,650		$	(30,663	)	$	2,985,695		$	1,330		$	2,987,025
Offering costs from issuance of OP units	—		—			—	(49		)	—			(49		)	—			(49		)
Net issuances of unvested restricted OP units	—		—			377,463	(3,782		)	—			(3,782		)	—			(3,782		)
Conversion of OP units	(10,500	)	51			10,500	(51		)	—			—			—			—
Vesting of share-based awards	—		—			—	3,750			—			3,750			—			3,750
Reallocation of capital to limited partners	—		275			—	(275		)	—			—			—			—
Distributions	—		(1,351		)	—	(48,128		)	—			(49,479		)	—			(49,479		)
Net income	—		521			—	18,833			—			19,354			1,413			20,767
Foreign currency translation adjustments	—		—			—	—			238			238			—			238
Reclassification on sale of equity securities	—		—			—	—			(7,784		)	(7,784		)	(1,538		)	(9,322		)
Unrealized gain on equity securities	—		—			—	—			19,752			19,752			4,882			24,634
Amortization of deferred interest costs	—		—			—	—			1,691			1,691			—			1,691
Unrealized loss on derivative instruments, net	—		—			—	—			(590		)	(590		)	—			(590		)
Balance at March 31, 2014	5,405,474		$	45,204		192,502,965	$	2,940,948		$	(17,356	)	$	2,968,796		$	6,087		$	2,974,883

See accompanying notes to consolidated financial statements.

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BIOMED REALTY, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended
	March 31,
	2014			2013

Operating activities:
Net income	$	20,767		$	17,458
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	62,409			60,764
Allowance for doubtful accounts	526			501
Non-cash revenue adjustments	481			5,803
Other non-cash adjustments	(4,886		)	6,457
Compensation expense related to share-based payments	3,750			3,011
Distributions representing a return on capital from unconsolidated partnerships	203			59
Changes in operating assets and liabilities:
Accounts receivable	(2,482		)	(31,822		)
Accrued straight-line rents	(4,676		)	(3,555		)
Deferred leasing costs	(1,754		)	(1,520		)
Other assets	1,206			314
Accounts payable, accrued expenses and other liabilities	2,194			2,823
Net cash provided by operating activities	77,738			60,293
Investing activities:
Purchases of investments in real estate and related intangible assets	—			(123,841		)
Capital expenditures	(69,843		)	(39,250		)
Contributions from historic tax credit transactions, net	15,502			—
Draws on construction loan receivable	(39,584		)	(34,310		)
Contributions to unconsolidated partnerships, net	(4		)	(336		)
Purchases of debt and equity securities	(2,971		)	(5,395		)
Proceeds from the sale of debt and equity securities	13,952			—
Deposits to escrow for acquisitions	(16,100		)	—
Net cash used in investing activities	(99,048		)	(203,132		)
Financing activities:
Net proceeds from issuance of OP units	—			286,992
Redemption of Series A preferred units	—			(198,000		)
Unsecured line of credit proceeds	130,000			284,000
Unsecured line of credit payments	(32,000		)	(187,000		)
Principal payments on mortgage notes payable	(2,776		)	(2,073		)
Distributions paid to unitholders	(49,383		)	(36,957		)
Distributions paid to preferred unitholders	—			(6,044		)
Net cash provided by financing activities	45,841			140,918
Effect of exchange rate changes on cash and cash equivalents	(116		)	497
Net increase / (decrease) in cash and cash equivalents	24,415			(1,424		)
Cash and cash equivalents at beginning of period	34,706			19,976

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	Three Months Ended
	March 31,
	2014		2013

Cash and cash equivalents at end of period	$	59,121	$	18,552
Supplemental disclosure of cash flow information:
Cash paid during the period for interest (net of amounts capitalized of $4,192 and $2,840, respectively)	$	21,593	$	16,654
Supplemental disclosure of non-cash investing and financing activities:
Accrual for unit distributions declared	$	49,479	$	40,413
Accrued additions to real estate and related intangible assets	60,171		31,928

See accompanying notes to consolidated financial statements.

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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, North Carolina, Seattle and Cambridge (United Kingdom) and, through Wexford Science & Technology, LLC and related entities (collectively, "Wexford"), with universities and their related medical systems.

The Parent Company is the sole general partner of the Operating Partnership and, as of March 31, 2014, owned a 97.3% interest in the Operating Partnership. The remaining 2.7% 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.

On April 4, 2014, the Company completed an investment in two properties, 300 George Street and 100 College Street, in New Haven, Connecticut. The 300 George Street property is a 519,000 square foot laboratory and office building. The 100 College Street property, currently under construction, is expected to be a 508,000 square foot laboratory and office building. The total project investment is expected to be approximately $308 million, comprised of (1) approximately $206 million in cash, assumptions of mortgage notes payable and a construction loan in connection with the Company's investment, and a continuing minority partnership interest of Winstanley Enterprises LLC, which will also continue to provide construction and property management services for the properties, and (2) approximately $102 million of remaining construction costs. As of April 4, 2014, Winstanley Enterprises LLC retained approximately 7% and 25% continuing minority partnership interests in the 300 George Street and 100 College Street properties, respectively. Upon completion of construction of the 100 College Street property and repayment of the related construction loan, the Company expects Winstanley Enterprises LLC’s minority partnership interest in the 100 College Street property to be reduced to approximately 2.5%.

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying interim financial statements are unaudited, but have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the U.S. Securities and Exchange Commission. 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, 2013.

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 (“VIEs”) 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.

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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 months ended March 31, 2014 and 2013, total revenues from properties outside the United States were $4.8 million and $4.5 million, respectively, which represented 2.8% of the Company's total revenues during each period. The Company’s net investments in properties outside the United States were $190.7 million and $190.2 million at March 31, 2014 and December 31, 2013, respectively.

Investments in Partnerships and Limited Liability Companies

The Company has determined that it is the primary beneficiary in five VIEs (excluding certain VIEs through its ownership of Wexford), 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 these VIEs at March 31, 2014 and December 31, 2013 consist of the following (in thousands):



	March 31, 2014		December 31, 2013
Investment in real estate, net	$	339,284	$	336,832
Total assets	378,961		375,443
Total debt	142,564		143,067
Total liabilities	156,186		154,953

Wexford - Variable Interest Entities

Wexford is a party to certain contractual arrangements with tax credit investors (“TCIs”) that were established to enable the TCIs to receive the benefits of historic tax credits (“HTCs”) and/or new market tax credits (“NMTCs”) for certain properties owned by Wexford. At March 31, 2014, Wexford owned nine properties that had syndicated HTCs or NMTCs, or both, to TCIs.

Historic Tax Credits and New Market Tax Credits

Capital contributions are made by TCIs into special purpose entities that ultimately invest these funds in the entity that owns the subject property that generates the tax credits. The TCIs are allocated substantially all of the tax credits and hold only a noncontrolling interest in the economic risk and rewards of the special purpose entities. HTCs are delivered to the TCI upon substantial completion of the project. NMTCs are allowed for up to 39% of a qualified investment and are delivered to the TCI after the investment has been funded and spent on a qualified business. HTCs are subject to 20% recapture per year beginning one year after the completion of the historic rehabilitation of the subject property. NMTCs are subject to 100% recapture until the end of the seventh year following the qualifying investment. The Company has provided the TCIs with certain guarantees which protect the TCIs from loss should a tax credit recapture event occur. The contractual arrangements with the TCIs include a put/call provision whereby the Company may be obligated or entitled to repurchase the ownership interest of the TCIs in the special purpose entities at the end of the tax credit recapture period. The Company anticipates that either the TCIs will exercise their put rights or the Company will exercise its call rights; however, the Company believes that the put rights are more likely to be exercised.

The Company has determined that the special purpose entities are VIEs, since there is insufficient capital to finance their activities without further subordinated financial support. The Company has determined that it is the primary beneficiary of these VIEs, because it has the authority to direct the activities which most significantly impact their economic performance.

The portion of the TCI’s capital contribution that is attributed to the put is recorded at fair-value at inception and is accreted to the expected put price as interest expense in the consolidated statement of income. At March 31, 2014, approximately $4.5 million of put liabilities were included in other liabilities in the consolidated balance sheets. The remaining balance of the TCI’s capital contribution is initially recorded in other liabilities in the consolidated balance sheets and is reclassified, upon delivery of the tax credit to the TCI, to reduce the carrying value of the subject property, net of allocated expenses. Direct and incremental costs incurred in structuring the transaction, consisting of third-party legal, accounting and other professional fees are deferred and will be recognized as an increase in the cost basis of the subject property upon the recognition of the related tax credit as discussed above. During the quarter ended March 31, 2014, $15.5 million of tax credits, net of costs and estimated put payments, were contributed by TCIs and recorded as other liabilities in the consolidated balance sheets, of which $12.8 million in tax credits were delivered to the TCIs and reclassified as a reduction of the carrying value of the subject property.

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The Company has determined that certain special purpose entities owning properties under development are VIEs, since there is insufficient capital to finance the remaining development activities without further subordinated financial support. The Company has determined it is the primary beneficiary of these VIEs, because it has the authority to direct the activities which most significantly impact their economic performance. Selected financial data of the VIEs at March 31, 2014 consisted of the following (in thousands):



	March 31, 2014		December 31, 2013
Investment in real estate, net	$	181,458	$	177,901
Total assets	193,789		198,968
Total liabilities	63,877		60,197

Investments in Real Estate, Net

Investments in real estate, net consisted of the following (in thousands):



	March 31, 2014			December 31, 2013
Land	$	717,328		$	713,955
Land under development	116,220			119,325
Buildings and improvements	4,907,630			4,854,175
Construction in progress	329,803			316,025
	6,070,981			6,003,480
Accumulated depreciation	(835,945		)	(785,578		)
	$	5,235,036		$	5,217,902

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. As of and for the three months ended March 31, 2014, no assets have been identified as impaired and no such impairment losses have been recognized.

Deferred Leasing Costs, Net

Leasing commissions and other direct costs associated with obtaining new or renewal leases are recorded at cost and amortized on a straight-line basis over the terms of the respective leases, with remaining terms ranging from less than one year to approximately 20 years as of March 31, 2014. Deferred leasing costs also include the net carrying value of acquired in-place leases and acquired management agreements.

Deferred leasing costs, net at March 31, 2014 consisted of the following (in thousands):



	Balance at		Accumulated
	March 31, 2014		Amortization			Net
Acquired in-place leases	$	365,944	$	(243,437	)	$	122,507
Acquired management agreements	25,801		(20,502		)	5,299
Deferred leasing and other direct costs	94,273		(32,552		)	61,721
	$	486,018	$	(296,491	)	$	189,527

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Deferred leasing costs, net at December 31, 2013 consisted of the following (in thousands):



	Balance at		Accumulated
	December 31, 2013		Amortization			Net
Acquired in-place leases	$	365,753	$	(233,935	)	$	131,818
Acquired management agreements	25,801		(20,053		)	5,748
Deferred leasing and other direct costs	91,142		(30,641		)	60,501
	$	482,696	$	(284,629	)	$	198,067

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, 2014		December 31, 2013
Available-for-sale securities, historical cost	$	7,191	$	8,543
Unrealized gain, net	26,088		11,023
Available-for-sale securities, fair-value (1)	33,279		19,566
Privately-held securities, cost basis	17,107		18,485
Total equity securities	$	50,386	$	38,051


(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 certain publicly-traded companies. Certain of these investments have fair-values 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, 2014. However, management has the intent and ability to retain the investments for a period of time sufficient to allow for an anticipated recovery in their 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 also holds investments in securities of certain privately-held companies and funds, which are recorded at cost basis due to the Company’s lack of control or significant influence over such companies and funds.

During the three months ended March 31, 2014, the Company recorded a $1.3 million impairment charge, which is included in other expense in the consolidated statements of income. The impairment charge related to the Company’s investment in a privately-held company. Other than this investment 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, 2014 on the Company’s remaining cost basis investments.

Construction Loan Receivable

The Company has a $255.0 million interest in a $355.0 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").

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. As of March 31, 2014 and

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December 31, 2013, the Company had invested approximately $191.3 million and $151.8 million, respectively, in the Construction Loan, which are included in other assets on the Company's consolidated balance sheets.

Lease Termination

During the three months ended March 31, 2014 and 2013, the Company recorded lease termination revenue, net of write-offs of lease intangibles, included in other revenue on the consolidated statement of income of approximately $5.5 million and $24.0 million, respectively. Lease termination revenue for the three months ended March 31, 2014 primarily related to the early termination of leases at the Company's 4570 Executive Drive property. Lease termination revenue for the three months ended March 31, 2013 primarily related to the termination of a lease with Elan Corporation at the Company’s Science Center at Oyster Point property for which Elan paid the Company $46.5 million. The impact of the Elan lease termination was recognized through the date of the termination of the lease in April 2013.

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, 2014, the Parent Company issued restricted stock awards to the Company’s employees totaling 557,237 shares of common stock (190,062 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 2,693 shares were forfeited during the same period), which are included in the total of common stock outstanding as of the period end.

The Parent Company awarded units to certain of its executive officers (the “Performance Units”), which represent a contingent right to receive one share of the Parent Company’s common stock if vesting conditions are satisfied. Outstanding Performance Units vest ratably over two or three year periods (each, a “Performance Period”) based upon the Parent Company’s total stockholder return relative to its peer group (the "Market Conditions"). The grant date fair-value of the Performance Units was estimated using a Monte Carlo simulation which considered the likelihood of achieving the Market Conditions. The expected value of the Performance Units on the grant date was determined by simulating the total stockholder return for the Parent Company and the peer group, considering the stock price variance for each of the peer group companies compared to each other and the Parent Company. In January 2014, of the 136,296 Performance Units which were originally granted to certain executive officers in January 2012 and represent the maximum number of Performance Units that could have vested, 20,224 Performance Units vested (resulting in the issuance of 20,224 shares of the Parent Company’s common stock (7,243 shares issued in connection with the vesting of the Performance Units were surrendered to the Company and subsequently retired in lieu of cash payments for taxes due on the vesting of Performance Units) and the remaining 116,072 Performance Units were forfeited, based on the Parent Company’s total stockholder return relative to its peer group for the two years ended December 31, 2013. During the three months ended March 31, 2014, the Parent Company awarded 494,410 Performance Units which represent the maximum number of Performance Units that may vest and which vest over a three-year Performance Period. The grant date fair-value of these awards of approximately $3.8 million will be recognized as compensation expense on a straight-line basis over each respective Performance Period. The total compensation remaining on the Performance Units granted during the three months ended March 31, 2014 to be expensed in future periods over a weighted-average term of approximately 2.8 years was $3.5 million as of March 31, 2014. 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, 2014, the Company had outstanding 192,502,965 shares of the Parent Company’s common stock and 5,083,400 and 322,074 operating partnership and LTIP units, respectively (excluding operating partnership units held by the Parent Company). 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

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The following table lists the dividends and distributions declared by the Parent Company and the Operating Partnership during the three months ended March 31, 2014:

Declaration Date

Securities Class

Amount Per

Share/Unit

Period Covered

Dividend and

Distribution

Payable Date

Dividend and

Distribution Amount

(In thousands)

March 17, 2014

Common stock and OP units

0.250

January 1, 2014 to March 31, 2014

April 15, 2014

49,479

Changes in Accumulated Other Comprehensive Loss by Component

The following table shows the changes in accumulated other comprehensive loss for the Parent Company for the three months ended March 31, 2014, by component (in thousands):



	Foreign currency translation adjustments			Unrealized gains on available-for-sale securities			Gain / (loss) on derivative instruments			Total
	Foreign currency translation adjustments			Unrealized gains on available-for-sale securities			Gain / (loss) on derivative instruments			Total
Balance at December 31, 2013	$	3,905		$	8,938		$	(45,766	)	$	(32,923	)
Other comprehensive income / (loss) before reclassifications	238			24,634			$	(1,449	)	23,423
Amounts reclassified from accumulated other comprehensive income (1)	—			(9,322		)	$	2,550		(6,772		)
Net other comprehensive income	238			15,312			1,101			16,651
Net other comprehensive income allocable to noncontrolling interests	(6		)	(3,666		)	(29		)	(3,701		)
Balance as of March 31, 2014	$	4,137		$	20,584		$	(44,694	)	$	(19,973	)


(1)	Amounts reclassified from unrealized gain on available-for-sale securities are included in other income, net in the consolidated statements of income. Amounts reclassified from loss on derivative instruments are included in interest expense, net in the consolidated statements of income. See Note 9 for further information on derivative instruments.

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, 2014, was approximately $109.0 million based on the average closing price of the Parent Company’s common stock of $20.16 per share for the ten consecutive trading days immediately preceding March 31, 2014.

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

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	March 31, 2014			December 31, 2013
	Operating Partnership Units and LTIP Units	Percentage of Total		Operating Partnership Units and LTIP Units	Percentage of Total
BioMed Realty Trust	191,006,788	97.3	%	190,676,428	97.3	%
Noncontrolling interest consisting of:
Operating partnership and LTIP units held by employees and related parties	2,645,888	1.4	%	2,656,388	1.4	%
Operating partnership and LTIP units held by third parties	2,627,145	1.3	%	2,627,145	1.3	%
Total	196,279,821	100.0	%	195,959,961	100.0	%

4. Capital of the Operating Partnership

Operating Partnership Units and LTIP Units

As of March 31, 2014, the Operating Partnership had outstanding 197,586,365 operating partnership units and 322,074 LTIP units. The Parent Company owned 97.3% of the partnership interests in the Operating Partnership at March 31, 2014, 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 Parent Company has generally acquired OP units upon a limited partner’s notice of redemption in exchange for shares of its common stock. The redemption provisions of OP units owned by limited partners that permit the Parent Company to settle in either cash or common stock at the option of the Parent Company 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, 2014, was approximately $109 million based on the average closing price of the Parent Company’s common stock of $20.16 per share for the ten consecutive trading days immediately preceding March 31, 2014.

Changes in Accumulated Other Comprehensive Loss by Component

The following table shows the changes in accumulated other comprehensive loss for the Operating Partnership for the three months ended March 31, 2014, by component (in thousands):



	Foreign currency translation adjustments		Unrealized gains on available- for-sale securities			Gain / (loss) on derivative instruments			Total
	Foreign currency translation adjustments		Unrealized gains on available- for-sale securities			Gain / (loss) on derivative instruments			Total
Balance at December 31, 2013	$	4,006	$	9,186		$	(43,855	)	$	(30,663	)
Other comprehensive income / (loss) before reclassifications	238		24,634			$	(1,449	)	23,423
Amounts reclassified from accumulated other comprehensive income (1)	—		(9,322		)	$	2,550		(6,772		)
Net other comprehensive income	238		15,312			1,101			16,651
Net other comprehensive income allocable to noncontrolling interest	$	—	$	(3,344	)	$	—		$	(3,344	)
Balance as of March 31, 2014	$	4,244	$	21,154		$	(42,754	)	$	(17,356	)


(1)	Amounts reclassified from unrealized gain on available-for-sale securities are included in other income, net in the consolidated statements of income. Amounts reclassified from loss on derivative instruments are included in interest expense, net in the consolidated statements of income. See Note 9 for further information on derivative instruments.

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5. Debt

Debt of the Parent Company

The Parent Company does not hold any indebtedness. All debt is held directly or indirectly by the Operating Partnership; however, the Parent Company has guaranteed the Operating Partnership’s mortgage loan secured by the Company’s Center for Life Science | Boston property, Exchangeable Senior Notes due 2030 (the “Exchangeable Senior Notes”), Unsecured Senior Notes due 2016 (the “Notes due 2016”), Unsecured Senior Notes due 2020 (the “Notes due 2020”), Unsecured Senior Notes due 2022 (the “Notes due 2022”), Unsecured Senior Term Loan due 2017 (the “Term Loan due 2017”), Unsecured Senior Term Loan due 2018 (the “Term Loan due 2018”) and unsecured line of credit. On April 1, 2014, the Operating Partnership repaid in full the mortgage loan secured by the Company’s Center for Life Science | Boston property prior to its scheduled maturity date. The Parent Company has also guaranteed the Operating Partnership’s Unsecured Senior Notes due 2019 (the “Notes due 2019”), which were issued on April 23, 2014.

Debt of the Operating Partnership

The following is a summary of the Operating Partnership’s outstanding consolidated debt as of March 31, 2014 and December 31, 2013 (dollars in thousands):



	Stated Interest Rate		Effective Interest Rate		Principal Balance
	Stated Interest Rate		Effective Interest Rate		March 31, 2014			December 31, 2013			Maturity Date
Mortgage Notes Payable
9900 Belward Campus Drive	5.64	%	3.99	%	$	10,593		$	10,631		July 1, 2017
9901 Belward Campus Drive	5.64	%	3.99	%	13,045			13,091			July 1, 2017
Center for Life Science \| Boston (1)	7.75	%	7.75	%	333,398			334,447			June 30, 2014
4320 Forest Park Avenue	4.00	%	2.70	%	21,000			21,000			June 30, 2015
Hershey Center for Applied Research	6.15	%	4.71	%	13,328			13,449			May 5, 2027
500 Kendall Street (Kendall D)	6.38	%	5.45	%	57,346			57,927			December 1, 2018
Shady Grove Road	5.97	%	5.97	%	142,564			143,067			September 1, 2016
University of Maryland BioPark I	5.93	%	4.69	%	16,587			16,752			May 15, 2025
University of Maryland BioPark II	5.20	%	4.33	%	62,691			62,946			September 5, 2021
University of Maryland BioPark Garage	5.20	%	4.33	%	4,719			4,738			September 1, 2021
University of Miami Life Science & Technology Park	4.00	%	2.89	%	20,000			20,000			February 1, 2016
					695,271			698,048
Unamortized premiums					10,742			11,276
Mortgage notes payable, net					706,013			709,324
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			250,000			July 15, 2022
					900,000			900,000
Unamortized discounts					(4,688		)	(4,917		)
Unsecured senior notes, net					895,312			895,083
Term Loan due 2017 - U.S. dollar (2)	1.80	%	2.63	%	243,596			243,596			March 30, 2017
Term Loan due 2017 - GBP (2)	2.13	%	2.39	%	166,470			165,190			March 30, 2017
Term Loan due 2018	1.65	%	1.97	%	350,000			350,000			March 24, 2018
Unsecured senior term loans					760,066			758,786
Unsecured line of credit (3)	1.45	%	1.45	%	226,000			128,000			March 24, 2018
Total consolidated debt					$	2,767,391		$	2,671,193

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(1)	On April 1, 2014, the Operating Partnership repaid in full the mortgage loan secured by the Company’s Center for Life Science \| Boston property prior to its scheduled maturity date.

(2)

In August 2012, the Operating Partnership converted approximately $156.4 million of outstanding borrowings into British pounds sterling (“GBP”) equal to £100.0 million, which was designated as a net investment hedge to mitigate the risk of fluctuations in foreign currency exchange rates. The principal balance represents the U.S. dollar amount based on the exchange rates of $1.66 to £1.00 and $1.65 to £1.00 at March 31, 2014 and December 31, 2013, respectively. 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 March 31, 2014, the Operating Partnership had additional borrowing capacity under the unsecured line of credit of up to approximately $674.0 million.

Exchangeable Senior Notes

The exchange rate for the Exchangeable Senior Notes may be adjusted under certain circumstances, including the payment of cash dividends in excess of $0.14 per share of common stock. The increase in the quarterly cash dividend through the first quarter of 2014 resulted in an increase in the exchange rate of the Exchangeable Senior Notes to 58.4745 shares per $1,000 principal amount of Exchangeable Senior Notes (effective conversion value of $17.10 per share), as of March 27, 2014, the Company’s ex-dividend date.

Net Investment Hedge

The Operating Partnership designated the GBP denominated debt under the Term Loan due 2017 as a net investment hedge. The Operating Partnership entered into this net investment hedge to protect a designated amount of the Operating Partnership’s net investment in a GBP functional currency subsidiary against the risk of adverse changes in the GBP/U.S. dollar exchange rate (foreign exchange risk). Variability in the GBP/U.S. dollar exchange rate impacts the Operating Partnership (a U.S. dollar functional currency entity) as the financial statements of the GBP functional currency subsidiary are translated each period, with the effect of changes in the GBP/U.S. dollar exchange rate being recorded in accumulated other comprehensive income. When the net investment is sold or substantially liquidated, the balance of the translation adjustment accumulated in other comprehensive income will be reclassified into earnings. The Operating Partnership is hedging the risk of changes in the U.S. dollar equivalent value of a portion of its net investment in its GBP subsidiary attributable to changes in the GBP/U.S. dollar exchange rate during the period of investment during which the hedging instrument is outstanding.

Maturities of Long-Term Debt

As of March 31, 2014, principal payments due for the Operating Partnership’s consolidated indebtedness (excluding debt premiums and discounts) were as follows (in thousands):



2014	$	338,639
2015	30,006
2016	566,516
2017	440,360
2018	621,663
Thereafter (1)	764,153
	$	2,761,337


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

Assumed Debts

On April 4, 2014, the Company completed an investment in two properties, 300 George Street and 100 College Street, in New Haven, Connecticut. In connection with that investment, the Operating Partnership assumed a $46.3 million mortgage note secured by the 300 George Street property and a construction loan with $21.7 million of outstanding borrowings that were used to partially fund the development of the 100 College Street property.

Notes due 2019

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On April 23, 2014, the Operating Partnership issued $400 million aggregate principal amount of its Notes due 2019. The Notes due 2019 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 2019 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 credit agreement governing the Operating Partnership's unsecured line of credit and Term Loan due 2018. The Notes due 2019 bear interest at 2.625% per annum, priced at 99.408% of the principal amount to yield 2.752% to maturity. Interest is payable on May 1 and November 1 of each year beginning November 1, 2014 until the maturity date of May 1, 2019. The Operating Partnership’s obligations under the Notes due 2019 are fully and unconditionally guaranteed by the Parent Company.

6. Earnings Per Share of the Parent Company

Through March 31, 2014 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 unvested restricted stock outstanding for the three months ended March 31, 2014 and 2013 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, 2014 and 2013 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, 2014, the Performance Units were dilutive to the calculation of diluted earnings per share as calculated, assuming that March 31, 2014 was the end date of the Performance Units' Performance Period. For the three months ended March 31, 2013, the Performance Units were dilutive to the calculation of diluted earnings per share as calculated, assuming that March 31, 2013 was the end date of the Performance Units' Performance Period. For the three months ended March 31, 2014 and 2013, the unvested 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. In addition, 10,525,410 and 10,259,496 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 months ended March 31, 2014 and 2013, respectively. No other shares were considered anti-dilutive for the three months ended March 31, 2014 or 2013.

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

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	Three Months Ended
	March 31,
	2014			2013
Basic earnings per share:
Net income	$	20,767		$	17,458
Net income attributable to noncontrolling interests	(1,934		)	(146		)
Preferred stock dividends	—			(2,393		)
Cost on redemption of preferred stock	—			(6,531		)
Net income allocable and distributions in excess of earnings to participating securities	(378		)	(345		)
Net income available to common stockholders - basic	$	18,455		$	8,043

Diluted earnings per share:
Net income available to common stockholders - basic	18,455			8,043
Net income attributable to noncontrolling interests in Operating Partnership	521			159
Net income available to common stockholders - diluted	$	18,976		$	8,202

Weighted-average common shares outstanding:
Basic	190,905,867			159,692,470
Incremental shares from:
Performance units	229,295			97,788
Operating partnership and LTIP units	5,410,374			2,923,419
Diluted	196,545,536			162,713,677

Basic and diluted earnings per share:
Net income per share available to common stockholders - basic and diluted	$	0.10		$	0.05

7. Earnings Per Unit of the Operating Partnership

Through March 31, 2014, 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, 2014 and 2013, has been deducted from net income available to unitholders to calculate basic earnings per unit. For the three months ended March 31, 2014 and 2013, 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 was calculated based upon net income attributable to unitholders. For the three months ended March 31, 2014, the Performance Units were dilutive to the calculation of diluted earnings per unit as calculated, assuming that March 31, 2014 was the end date of the Performance Units’ Performance Period. For the three months ended March 31, 2013, the Performance Units were dilutive to the calculation of diluted earnings per unit as calculated, assuming that March 31, 2013 was the end date of the Performance Units' Performance Period. In addition, 10,525,410 and 10,259,496 units 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 unit based on the “if converted” method for the three months ended March 31, 2014 and 2013, respectively. No other units were considered anti-dilutive for the three months ended March 31, 2014 or 2013.

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

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	Three Months Ended
	March 31,
	2014			2013
Basic and diluted earnings per unit:
Net income	$	20,767		$	17,458
(Income) / loss attributable to noncontrolling interests	(1,413		)	8
Preferred unit distributions	—			(2,393		)
Cost on redemption of preferred units	—			(6,531		)
Net income allocable and distributions in excess of earnings to participating securities	(378		)	(345		)
Net income available to unitholders - basic and diluted	$	18,976		$	8,197

Weighted-average units outstanding:
Basic	196,316,241			162,612,998
Incremental units from:
Performance units	229,295			97,788
Diluted	196,545,536			162,710,786

Basic and diluted earnings per unit:
Net income per unit available to unitholders - basic and diluted	$	0.10		$	0.05

8. Investment in Unconsolidated Partnerships

The accompanying consolidated financial statements include investments in two limited liability companies with Prudential Real Estate Investors (“PREI”), 10165 McKellar Court, L.P. (“McKellar Court”), a limited partnership with Quidel Corporation, the tenant which occupies the McKellar Court property and BioPark Fremont, LLC ("BioPark Fremont"), a limited liability company with RPC Poppleton, LLC. General information on the PREI limited liability companies, the McKellar Court partnership and BioPark Fremont (each referred to in this footnote individually as a “partnership” and collectively as the “partnerships”) as of March 31, 2014 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
BioPark Fremont	RPC Poppleton, LLC	50%	50%	May 31, 2013

(1)

PREI I LLC owns two properties in Cambridge, Massachusetts. At March 31, 2014, 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 3.16% (including the applicable credit spread) and a maturity date of August 13, 2014. At maturity, PREI I LLC may refinance the secured loan facility, depending on market conditions and the availability of credit, or it may repay the principal balance through capital contributions of its members.


(2)	The Company’s investment in the McKellar Court partnership (maximum exposure to losses) was approximately $12.0 million at March 31, 2014. 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.

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



	March 31, 2014		December 31, 2013
Assets:
Investments in real estate, net	$	271,132	$	262,753
Cash and cash equivalents (including restricted cash)	5,612		3,855
Other assets	3,758		5,301
Total assets	$	280,502	$	271,909
Liabilities and members’ equity:
Mortgage notes payable and secured loan	$	151,992	$	151,968
Other liabilities	23,541		12,102
Members’ equity	104,969		107,839
Total liabilities and members equity