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-2015.3.31-10Q

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, 2015

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 April 29, 2015 was 203,566,934.

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2015 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, 2015, BioMed Realty Trust, Inc. owned an approximate 97.5% partnership interest and other limited partners, including some of our directors, executive officers and their affiliates, owned the remaining 2.5% 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 unit holders 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, 2015

TABLE OF CONTENTS



		Page
	PART I - FINANCIAL INFORMATION

	Item 1 Consolidated Financial Statements	6

	Consolidated Financial Statements of BioMed Realty Trust, Inc.:	7

	Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014	7

	Consolidated Statements of Income for the three months ended March 31, 2015 and 2014 (Unaudited)	8

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014 (Unaudited)	9

	Consolidated Statement of Equity for the three months ended March 31, 2015 (Unaudited)	10

	Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (Unaudited)	11

	Consolidated Financial Statements of BioMed Realty, L.P.:	13

	Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014	13

	Consolidated Statements of Income for the three months ended March 31, 2015 and 2014 (Unaudited)	14

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014 (Unaudited)	15

	Consolidated Statement of Capital for the three months ended March 31, 2015 (Unaudited)	16

	Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (Unaudited)	17

	Notes to Consolidated Financial Statements of BioMed Realty Trust, Inc. and BioMed Realty, L.P.	19

	Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations	33

	Item 3 Quantitative and Qualitative Disclosures About Market Risk	47

	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	51

	SIGNATURES	52

	Exhibit 10.1
	Exhibit 10.2
	Exhibit 10.3
	Exhibit 10.4
	Exhibit 10.5
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32.1

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PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

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BIOMED REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



	March 31, 2015			December 31, 2014
	(Unaudited)
ASSETS
Investments in real estate, net	$	5,517,629		$	5,416,575
Investments in unconsolidated partnerships	34,978			35,291
Cash and cash equivalents	64,958			46,659
Accounts receivable, net	13,518			14,631
Accrued straight-line rents, net	164,049			163,716
Deferred leasing costs, net	219,549			219,713
Other assets	293,737			274,301
Total assets	$	6,308,418		$	6,170,886
LIABILITIES AND EQUITY
Mortgage notes payable, net	$	503,200		$	496,757
Exchangeable senior notes	—			95,678
Unsecured senior notes, net	1,294,255			1,293,903
Unsecured senior term loans	741,626			749,326
Unsecured line of credit	226,000			84,000
Accounts payable, accrued expenses and other liabilities	386,259			381,280
Total liabilities	3,151,340			3,100,944
Equity:
Stockholders’ equity:
Common stock, $.01 par value, 250,000,000 shares authorized, 203,563,054 shares and 197,442,432 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively	2,036			1,975
Additional paid-in capital	3,746,823			3,649,235
Accumulated other comprehensive income / (loss), net	14,804			(2,214		)
Dividends in excess of earnings	(681,564		)	(645,983		)
Total stockholders’ equity	3,082,099			3,003,013
Noncontrolling interests	74,979			66,929
Total equity	3,157,078			3,069,942
Total liabilities and equity	$	6,308,418		$	6,170,886

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,
	2015			2014
Revenues:
Rental	$	117,520		$	120,026
Tenant recoveries	43,956			38,735
Other revenue	16,534			10,115
Total revenues	178,010			168,876
Expenses:
Rental operations	58,647			52,523
Depreciation and amortization	67,080			62,409
General and administrative	12,789			11,942
Executive severance	9,891			—
Acquisition-related expenses	464			1,250
Total expenses	148,871			128,124
Income from operations	29,139			40,752
Equity in net income / (loss) of unconsolidated partnerships	153			(138		)
Interest expense, net	(21,395		)	(28,010		)
Other income	12,884			8,163
Net income	20,781			20,767
Net income attributable to noncontrolling interests	(3,436		)	(1,934		)
Net income attributable to the Company	17,345			18,833
Net income per share attributable to common stockholders:
Basic and diluted earnings per share	$	0.08		$	0.10
Weighted-average common shares outstanding:
Basic	200,789,795			190,905,867
Diluted	206,536,148			196,545,536

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,
	2015			2014
Net income	$	20,781		$	20,767
Other comprehensive income:
Foreign currency translation adjustments	(1,216		)	238
Unrealized loss on derivative instruments, net	(1,363		)	(590		)
Amortization of deferred interest costs	1,663			1,691
Reclassification on sale of equity securities	(12,334		)	(9,322		)
Unrealized gain on equity securities	35,653			24,634
Total other comprehensive income	22,403			16,651
Comprehensive income	43,184			37,418
Comprehensive income attributable to noncontrolling interests	(8,821		)	(5,635		)
Comprehensive income attributable to the Company	$	34,363		$	31,783

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, 2014	197,442,432	$	1,975	$	3,649,235		$	(2,214	)	$	(645,983	)	$	3,003,013		$	66,929		$	3,069,942
Net issuances of unvested restricted common stock	356,596	4		(5,325		)	—			—			(5,321		)	—			(5,321		)
Exchange of Exchangeable Senior Notes	5,764,026	57		95,699			—			—			95,756			—			95,756
Vesting of share-based awards	—	—		8,007			—			—			8,007			—			8,007
Reallocation of equity to noncontrolling interests	—	—		(793		)	—			—			(793		)	793			—
Common stock dividends	—	—		—			—			(52,926		)	(52,926		)	—			(52,926		)
OP unit distributions	—	—		—			—			—			—			(1,405		)	(1,405		)
Distributions to noncontrolling interests	—	—		—			—			—			—			(159		)	(159		)
Net income	—	—		—			—			17,345			17,345			3,436			20,781
Foreign currency translation adjustments	—	—		—			(1,185		)	—			(1,185		)	(31		)	(1,216		)
Reclassification on sale of equity securities	—	—		—			(9,895		)	—			(9,895		)	(2,439		)	(12,334		)
Unrealized gain on equity securities	—	—		—			27,806			—			27,806			7,847			35,653
Amortization of deferred interest costs	—	—		—			1,620			—			1,620			43			1,663
Unrealized loss on derivative instruments, net	—	—		—			(1,328		)	—			(1,328		)	(35		)	(1,363		)
Balance at March 31, 2015	203,563,054	$	2,036	$	3,746,823		$	14,804		$	(681,564	)	$	3,082,099		$	74,979		$	3,157,078

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,
	2015			2014

Operating activities:
Net income	$	20,781		$	20,767
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	67,080			62,409
Allowance for doubtful accounts	297			526
Gain on sale of debt and equity securities	(12,334		)	(9,322		)
Non-cash revenue adjustments	448			481
Other non-cash adjustments	3,147			4,436
Compensation expense related to share based payments	8,007			3,750
Distributions representing a return on capital from unconsolidated partnerships	285			203
Changes in operating assets and liabilities:
Accounts receivable	1,128			(2,482		)
Accrued straight-line rents	(657		)	(4,676		)
Deferred leasing costs	(5,665		)	(1,754		)
Other assets	2,288			1,206
Accounts payable, accrued expenses and other liabilities	(8,142		)	2,194
Net cash provided by operating activities	76,663			77,738
Investing activities:
Purchases of investments in real estate and related intangible assets	(89,700		)	—
Capital expenditures	(70,753		)	(69,843		)
Contributions from tax credit transactions, net	—			15,502
Draws on notes and construction loan receivable	(1,278		)	(39,584		)
Contributions to unconsolidated partnerships, net	(57		)	(4		)
Purchases of debt and equity securities	(6,151		)	(2,971		)
Proceeds from the sale of debt and equity securities	13,696			13,952
Funds held for investments in real estate	—			(16,100		)
Net cash used in investing activities	(154,243		)	(99,048		)
Financing activities:
Payment of deferred loan costs	(61		)	—
Unsecured line of credit proceeds	162,000			130,000
Unsecured line of credit payments	(20,000		)	(32,000		)
Mortgage notes proceeds	9,525			—
Principal payments on mortgage notes payable	(2,514		)	(2,776		)
Distributions to operating partnership unit and LTIP unit holders	(1,564		)	(1,354		)
Dividends paid to common stockholders	(51,335		)	(48,029		)
Net cash provided by financing activities	96,051			45,841
Effect of exchange rate changes on cash and cash equivalents	(172		)	(116		)
Net increase in cash and cash equivalents	18,299			24,415
Cash and cash equivalents at beginning of period	46,659			34,706
Cash and cash equivalents at end of period	$	64,958		$	59,121
Supplemental disclosure of cash flow information:

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	Three Months Ended
	March 31,
	2015		2014

Cash paid during the period for interest (net of amounts capitalized of $6,781 and $4,192, for the three months ended March 31, 2015 and 2014, respectively)	$	11,288	$	21,593
Supplemental disclosure of non-cash investing and financing activities:
Accrual for common stock dividends declared	$	52,926	$	48,128
Accrual for distributions declared for operating partnership unit and LTIP unit holders	1,405		1,351
Accrued additions to real estate and related intangible assets	69,496		60,171
Exchange of Exchangeable Senior Notes for common stock	95,678		—
Deposits applied for investments in real estate	3,537		—

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, 2015		December 31, 2014
	(Unaudited)
ASSETS
Investments in real estate, net	$	5,517,629	$	5,416,575
Investments in unconsolidated partnerships	34,978		35,291
Cash and cash equivalents	64,958		46,659
Accounts receivable, net	13,518		14,631
Accrued straight-line rents, net	164,049		163,716
Deferred leasing costs, net	219,549		219,713
Other assets	293,737		274,301
Total assets	$	6,308,418	$	6,170,886
LIABILITIES AND CAPITAL
Mortgage notes payable, net	$	503,200	$	496,757
Exchangeable senior notes	—		95,678
Unsecured senior notes, net	1,294,255		1,293,903
Unsecured senior term loans	741,626		749,326
Unsecured line of credit	226,000		84,000
Accounts payable, accrued expenses and other liabilities	386,259		381,280
Total liabilities	3,151,340		3,100,944
Capital:
Partners’ capital:
Limited partners' capital, 5,405,474 issued and outstanding at March 31, 2015 and December 31, 2014, respectively	46,154		45,600
General partner's capital, 203,563,054 and 197,442,432 units issued and outstanding at March 31, 2015 and December 31, 2014, respectively	3,063,494		3,002,135
Accumulated other comprehensive income	18,605		878
Total partners’ capital	3,128,253		3,048,613
Noncontrolling interests	28,825		21,329
Total capital	3,157,078		3,069,942
Total liabilities and capital	$	6,308,418	$	6,170,886

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,
	2015			2014
Revenues:
Rental	$	117,520		$	120,026
Tenant recoveries	43,956			38,735
Other revenue	16,534			10,115
Total revenues	178,010			168,876
Expenses:
Rental operations	58,647			52,523
Depreciation and amortization	67,080			62,409
General and administrative	12,789			11,942
Executive severance	9,891			—
Acquisition-related expenses	464			1,250
Total expenses	148,871			128,124
Income from operations	29,139			40,752
Equity in net income / (loss) of unconsolidated partnerships	153			(138		)
Interest expense, net	(21,395		)	(28,010		)
Other income	12,884			8,163
Net income	20,781			20,767
Net income attributable to noncontrolling interests	(2,979		)	(1,413		)
Net income attributable to the Operating Partnership	17,802			19,354
Net income per unit attributable to unit holders:
Basic and diluted earnings per unit	$	0.08		$	0.10
Weighted-average units outstanding:
Basic	206,195,269			196,316,241
Diluted	206,536,148			196,545,536

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,
	2015			2014
Net income	$	20,781		$	20,767
Other comprehensive income:
Foreign currency translation adjustments	(1,216		)	238
Unrealized loss on derivative instruments, net	(1,363		)	(590		)
Amortization of deferred interest costs	1,663			1,691
Reclassification on sale of equity securities	(12,334		)	(9,322		)
Unrealized gain on equity securities	35,653			24,634
Total other comprehensive income	22,403			16,651
Comprehensive income	43,184			37,418
Comprehensive income attributable to noncontrolling interests	(7,655		)	(4,757		)
Comprehensive income attributable to the Operating Partnership	$	35,529		$	32,661

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 Income			Total Partners' Capital			Noncontrolling Interests			Total Capital
	Units	Amount			Units	Amount			Accumulated Other Comprehensive Income			Total Partners' Capital			Noncontrolling Interests			Total Capital
Balance at December 31, 2014	5,405,474	$	45,600		197,442,432	$	3,002,135		$	878		$	3,048,613		$	21,329		$	3,069,942
Net issuances of unvested restricted OP units	—	—			356,596	(5,321		)	—			(5,321		)	—			(5,321		)
Exchange of Exchangeable Senior Notes	—	—			5,764,026	95,756			—			95,756			—			95,756
Vesting of share-based awards	—	—			—	8,007			—			8,007			—			8,007
Reallocation of capital to limited partners	—	1,502			—	(1,502		)	—			—			—			—
Distributions	—	(1,405		)	—	(52,926		)	—			(54,331		)	—			(54,331		)
Distributions to noncontrolling interests	—	—			—	—			—			—			(159		)	(159		)
Net income	—	457			—	17,345			—			17,802			2,979			20,781
Foreign currency translation adjustments	—	—			—	—			(1,216		)	(1,216		)	—			(1,216		)
Reclassification on sale of equity securities	—	—			—	—			(9,895		)	(9,895		)	(2,439		)	(12,334		)
Unrealized gain on equity securities	—	—			—	—			28,538			28,538			7,115			35,653
Amortization of deferred interest costs	—	—			—	—			1,663			1,663			—			1,663
Unrealized loss on derivative instruments, net	—	—			—	—			(1,363		)	(1,363		)	—			(1,363		)
Balance at March 31, 2015	5,405,474	$	46,154		203,563,054	$	3,063,494		$	18,605		$	3,128,253		$	28,825		$	3,157,078

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,
	2015			2014

Operating activities:
Net income	$	20,781		$	20,767
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	67,080			62,409
Allowance for doubtful accounts	297			526
Gain on sale of debt and equity securities	(12,334		)	(9,322		)
Non-cash revenue adjustments	448			481
Other non-cash adjustments	3,147			4,436
Compensation expense related to share-based payments	8,007			3,750
Distributions representing a return on capital from unconsolidated partnerships	285			203
Changes in operating assets and liabilities:
Accounts receivable	1,128			(2,482		)
Accrued straight-line rents	(657		)	(4,676		)
Deferred leasing costs	(5,665		)	(1,754		)
Other assets	2,288			1,206
Accounts payable, accrued expenses and other liabilities	(8,142		)	2,194
Net cash provided by operating activities	76,663			77,738
Investing activities:
Purchases of investments in real estate and related intangible assets	(89,700		)	—
Capital expenditures	(70,753		)	(69,843		)
Contributions from tax credit transactions, net	—			15,502
Draws on notes and construction loan receivable	(1,278		)	(39,584		)
Contributions to unconsolidated partnerships, net	(57		)	(4		)
Purchases of debt and equity securities	(6,151		)	(2,971		)
Proceeds from the sale of debt and equity securities	13,696			13,952
Funds held for investments in real estate	—			(16,100		)
Net cash used in investing activities	(154,243		)	(99,048		)
Financing activities:
Payment of deferred loan costs	(61		)	—
Unsecured line of credit proceeds	162,000			130,000
Unsecured line of credit payments	(20,000		)	(32,000		)
Mortgage notes proceeds	9,525			—
Principal payments on mortgage notes payable	(2,514		)	(2,776		)
Distributions paid to unit holders	(52,899		)	(49,383		)
Net cash provided by financing activities	96,051			45,841
Effect of exchange rate changes on cash and cash equivalents	(172		)	(116		)
Net increase in cash and cash equivalents	18,299			24,415
Cash and cash equivalents at beginning of period	46,659			34,706

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	Three Months Ended
	March 31,
	2015		2014

Cash and cash equivalents at end of period	$	64,958	$	59,121
Supplemental disclosure of cash flow information:
Cash paid during the period for interest (net of amounts capitalized of $6,781 and $4,192, for the three months ended March 31, 2015 and 2014, respectively)	$	11,288	$	21,593
Supplemental disclosure of non-cash investing and financing activities:
Accrual for unit distributions declared	$	54,331	$	49,479
Accrued additions to real estate and related intangible assets	69,496		60,171
Exchange of Exchangeable Senior Notes for common units	95,678		—
Deposits applied for investments in real estate	3,537		—

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, Cambridge (United Kingdom) and research parks located near or adjacent to universities and their related medical systems.

The Parent Company is the sole general partner of the Operating Partnership and, as of March 31, 2015, owned a 97.5% interest in the Operating Partnership. The remaining 2.5% interest in the Operating Partnership is held by limited partners. Each partner’s percentage interest in the Operating Partnership is determined based on the number of operating partnership units and long-term incentive plan units (“LTIP units” and together with the operating partnership units, the “OP units”) owned as compared to total OP units (and potentially issuable OP units, as applicable) outstanding as of each period end and is used as the basis for the allocation of net income or loss to each partner.

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying interim financial statements are unaudited, but have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and in conjunction with the rules and regulations of the U.S. Securities and Exchange Commission. 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, 2014.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to current period presentation. Such reclassifications have no effect on net income as previously reported.

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.

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, 2015 and 2014, total revenues from properties outside the United States were $4.2 million and $4.8 million, respectively, which represented 2.4% and 2.8% of the Company's total revenues during the respective periods. The Company’s net investments in properties outside the United States were $203.7 million and $200.2 million at March 31, 2015 and December 31, 2014, respectively.

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Investments in Partnerships and Limited Liability Companies

The Company has determined that it is the primary beneficiary in six VIEs (excluding certain VIEs associated with tax credits discussed below), consisting of single-tenant properties in which the tenant has a purchase option, which are consolidated and reflected in the accompanying consolidated financial statements. Selected financial data of the VIEs at March 31, 2015 and December 31, 2014 consist of the following (in thousands):



	March 31, 2015		December 31, 2014
Investment in real estate, net	$	430,343	$	433,842
Total assets	491,610		493,066
Total debt	188,780		189,848
Total liabilities	202,592		203,529

Historic Tax Credits and New Market Tax Credits

The Company is a party to certain contractual arrangements with tax credit investors ("TCIs") that were established to enable the TCIs to receive benefits of historic tax credits ("HTCs") and/or new market tax credits ("NMTCs") for certain properties owned by the Company. At March 31, 2015 and December 31, 2014, the Company owned ten properties that had syndicated HTCs or NMTCs, or both, to TCIs.

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 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 statements of income. At each of March 31, 2015 and December 31, 2014, approximately $5.2 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, as a reduction in the carrying value of the subject property, net of allocated expenses. During the three months ended March 31, 2014, $15.5 million of tax credits, net of costs and estimated put payments, were contributed by TCIs and were recorded as other liabilities in the consolidated balance sheets. During the three months ended March 31, 2014, $12.8 million of tax credits had been delivered to the TCIs and were reclassified as a reduction of the carrying value of the subject property. 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.

At March 31, 2015 and December 31, 2014, the Company determined that the special purpose entity owning one property under development is a VIE, 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 this VIE, because it has the authority to direct the activities which most significantly impact its economic performance. Selected financial data of the VIE at March 31, 2015 and December 31, 2014 consisted of the following (in thousands):



	March 31, 2015		December 31, 2014
Investment in real estate, net	$	5,764	$	2,507
Total assets	22,720		24,478
Total liabilities	6,679		7,467

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Investments in Real Estate, Net

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



	March 31, 2015			December 31, 2014
Land	$	643,041		$	704,958
Land under development	225,846			151,242
Buildings and improvements	4,909,684			4,877,135
Construction in progress	738,603			629,679
	6,517,174			6,363,014
Accumulated depreciation	(999,545		)	(946,439		)
	$	5,517,629		$	5,416,575

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, 2015, 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, 2015. 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, 2015 consisted of the following (in thousands):



	Balance at		Accumulated
	March 31, 2015		Amortization			Net
Acquired in-place leases	$	420,032	$	(280,148	)	$	139,884
Acquired management agreements	25,801		(23,097		)	2,704
Deferred leasing and other direct costs	119,250		(42,289		)	76,961
	$	565,083	$	(345,534	)	$	219,549

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



	Balance at		Accumulated
	December 31, 2014		Amortization			Net
Acquired in-place leases	$	415,389	$	(271,782	)	$	143,607
Acquired management agreements	25,801		(22,328		)	3,473
Deferred leasing and other direct costs	111,290		(38,657		)	72,633
	$	552,480	$	(332,767	)	$	219,713

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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, 2015		December 31, 2014
Available-for-sale securities, historical cost	$	14,309	$	10,280
Unrealized gain, net	71,662		48,341
Available-for-sale securities, fair-value (1)	85,971		58,621
Privately-held securities, cost basis	43,895		43,428
Total equity securities	$	129,866	$	102,049


(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. Changes in the fair-value of investments classified as available-for-sale are recorded in comprehensive income. The fair-value of the Company's equity investments in publicly-traded companies are based upon the closing trading price of the equity security as of the balance sheet date. 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, 2015. 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, 2015, the Company recorded impairment charges of $292,000. Impairment charges are included in other expense in the consolidated statements of income and relate to the Company’s investment in a publicly-traded 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, 2015 on the Company’s remaining cost basis investments.

In April 2015, the Company received $57.1 million of proceeds from the sale of an investment in a publicly-traded company, resulting in a realized gain on sale of $43.8 million, net of allocation to a noncontrolling interest.

Construction Loan Receivable

The Company had 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"). In May 2014, the borrower repaid the then outstanding principal and accrued interest balance prior to maturity, of which the Company's portion was approximately $191.2 million.

Lease Termination

During the three months ended March 31, 2015 and 2014, the Company recorded lease termination revenue, net of write-offs of lease intangibles, included in other revenue on the consolidated statements of income of approximately $16.2 million and $5.5 million, respectively. Lease termination revenue for the three months ended March 31, 2015 primarily related to the early termination of Vertex Pharmaceuticals' leases at three of the Company's properties in Cambridge, Massachusetts. 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.

Management’s Estimates

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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.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2014-09, Revenue From Contracts With Customers (“ASU 2014-09”), which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU 2014-09 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” While ASU 2014-09 specifically references contracts with customers, it may apply to certain other transactions such as the sale of real estate or equipment. ASU 2014-09 is effective for the Company beginning January 1, 2017, although on April 1, 2015, the FASB proposed a one-year deferral of the effective date. The Company does not expect the adoption of this standard to have a significant impact on the consolidated financial statements as a substantial portion of the Company's revenue consists of rental income from leasing arrangements, which are specifically excluded from ASU 2014-09.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination. ASU 2015-02 is effective for the Company beginning January 1, 2016. Early adoption is permitted. The Company does not expect the adoption of this standard to have a significant impact on the consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. ASU 2015-03 is effective for the Company beginning January 1, 2016. Early adoption is permitted. Upon adoption, the Company will apply the new standard on a retrospective basis and adjust the balance sheet of each individual period to reflect the period-specific effects of applying the new standard. The Company does not expect the adoption of this standard to have a significant impact on the consolidated financial statements.

3. Equity of the Parent Company

During the three months ended March 31, 2015, the Parent Company issued restricted stock awards to the Company’s employees totaling 586,674 shares of common stock (237,789 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), 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 2015, 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, were forfeited as a result of the Parent Company's total stockholder return relative to its peer group for the three years ending December 31, 2014 being below the threshold for any payout. In addition, of the 203,144 Performance Units which were originally granted to certain executive officers in January 2013 and represent the maximum number of Performance Units that could have vested, 13,215 Performance Units vested (resulting in the issuance of 13,215 shares of the Parent Company’s common stock, of which 5,504 shares were surrendered to the Company and subsequently retired in lieu of cash payments for taxes due on such vesting) and the remaining 189,929 Performance Units were forfeited, based on the Parent Company’s total stockholder return relative to its peer group for the two years ending December 31, 2014. During the three months ended March 31, 2015, the Parent Company awarded 370,880 Performance Units

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which represent the maximum number of Performance Units that may vest over a three-year Performance Period ending December 31, 2017. The grant date fair-value of these awards of approximately $5.4 million will be recognized as compensation expense on a straight-line basis over the three-year Performance Period. The total unearned compensation remaining on the Performance Units granted during the three months ended March 31, 2015 to be expensed in future periods over a weighted-average term of 2.8 years was $3.8 million as of March 31, 2015. 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, 2015, the Company had outstanding 203,563,054 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

The following table lists the dividends and distributions declared by the Parent Company and the Operating Partnership during the three months ended March 31, 2015:

Declaration Date

Securities Class

Amount Per

Share/Unit

Period Covered

Dividend and

Distribution

Payable Date

Dividend and

Distribution Amount

(In thousands)

March 16, 2015

Common stock and OP units

0.260

January 1, 2015 to March 31, 2015

April 15, 2015

54,331

Changes in Accumulated Other Comprehensive Income / (Loss) by Component

The following table shows the changes in accumulated other comprehensive income / (loss) for the Parent Company for the three months ended March 31, 2015, 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, 2014	$	2,309		$	37,705		$	(42,228	)	$	(2,214	)
Other comprehensive (loss) / income before reclassifications	(1,216		)	35,653			(2,202		)	32,235
Amounts reclassified from accumulated other comprehensive income (1)	—			(12,334		)	2,502			(9,832		)
Net other comprehensive (loss) / income	(1,216		)	23,319			300			22,403
Net other comprehensive loss / (income) allocable to noncontrolling interests	31			(5,408		)	(8		)	(5,385		)
Balance as of March 31, 2015	$	1,124		$	55,616		$	(41,936	)	$	14,804


(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.

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

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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, 2015, was approximately $122.7 million based on the average closing price of the Parent Company’s common stock of $22.69 per share for the ten consecutive trading days immediately preceding March 31, 2015.

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



	March 31, 2015			December 31, 2014
	Operating Partnership Units and LTIP Units	Percentage of Total		Operating Partnership Units and LTIP Units	Percentage of Total
BioMed Realty Trust	202,174,206	97.5	%	196,031,538	97.4	%
Noncontrolling interest consisting of:
Operating partnership and LTIP units held by employees and related parties	2,645,888	1.3	%	2,645,888	1.3	%
Operating partnership and LTIP units held by third parties	2,627,145	1.2	%	2,627,145	1.3	%
Total	207,447,239	100.0	%	201,304,571	100.0	%

4. Capital of the Operating Partnership

Operating Partnership Units and LTIP Units

As of March 31, 2015, the Operating Partnership had outstanding 208,646,454 operating partnership units and 322,074 LTIP units. The Parent Company owned 97.5% of the partnership interests in the Operating Partnership at March 31, 2015, 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, 2015, was approximately $122.7 million based on the average closing price of the Parent Company’s common stock of $22.69 per share for the ten consecutive trading days immediately preceding March 31, 2015.

Changes in Accumulated Other Comprehensive Income / (Loss) by Component

The following table shows the changes in accumulated other comprehensive income / (loss) for the Operating Partnership for the three months ended March 31, 2015, by component (in thousands):

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	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, 2014	$	2,367		$	38,732		$	(40,221	)	$	878
Other comprehensive (loss) / income before reclassifications	(1,216		)	35,653			(2,202		)	32,235
Amounts reclassified from accumulated other comprehensive income (1)	—			(12,334		)	2,502			(9,832		)
Net other comprehensive (loss) / income	(1,216		)	23,319			300			22,403
Net other comprehensive income allocable to noncontrolling interest	—			(4,676		)	—			(4,676		)
Balance as of March 31, 2015	$	1,151		$	57,375		$	(39,921	)	$	18,605


(1)	Amounts reclassified from unrealized gain on available-for-sale securities are included in other income, net in the 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.

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 Unsecured Senior Notes due 2016 (the “Notes due 2016”), Unsecured Senior Notes due 2019 (the "Notes due 2019"), 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.

Debt of the Operating Partnership

The following is a summary of the Operating Partnership’s outstanding consolidated debt as of March 31, 2015 and December 31, 2014 (dollars in thousands):

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	Stated Interest Rate		Effective Interest Rate		Principal Balance
	Stated Interest Rate		Effective Interest Rate		March 31, 2015			December 31, 2014			Maturity Date
Mortgage Notes Payable
9900 Belward Campus Drive	5.64	%	3.99	%	$	10,447		$	10,486		July 1, 2017
9901 Belward Campus Drive	5.64	%	3.99	%	12,864			12,913			July 1, 2017
100 College Street	2.40	%	2.40	%	91,882			82,210			August 2, 2016
4320 Forest Park Avenue	4.00	%	2.70	%	21,000			21,000			June 30, 2015
300 George Street	6.20	%	4.91	%	44,615			45,052			July 1, 2025
Hershey Center for Applied Research	6.15	%	4.71	%	12,803			12,938			May 5, 2027
500 Kendall Street (Kendall D)	6.38	%	5.45	%	54,548			55,545			December 1, 2018
Shady Grove Road	5.97	%	5.97	%	140,599			141,131			September 1, 2016
University of Maryland BioPark I	5.93	%	4.69	%	15,871			16,056			May 15, 2025
University of Maryland BioPark II	5.20	%	4.33	%	61,636			61,905			September 5, 2021
University of Maryland BioPark Garage	5.20	%	4.33	%	4,639			4,660			September 1, 2021
University of Miami Life Science & Technology Park	4.00	%	2.89	%	20,000			20,000			February 1, 2016
					490,904			483,896
Unamortized premiums					12,296			12,861
Mortgage notes payable, net					503,200			496,757
Exchangeable Senior Notes (1)	3.75	%	3.75	%	—			95,678			January 30, 2015
Notes due 2016	3.85	%	3.99	%	400,000			400,000			April 15, 2016
Notes due 2019	2.63	%	2.72	%	400,000			400,000			May 1, 2019
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
					1,300,000			1,300,000
Unamortized discounts					(5,745		)	(6,097		)
Unsecured senior notes, net					1,294,255			1,293,903
Term Loan due 2017 - U.S. dollar (2)	1.57	%	2.39	%	243,596			243,596			March 30, 2017
Term Loan due 2017 - GBP (2)	1.90	%	2.14	%	148,030			155,730			March 30, 2017
Term Loan due 2018	1.36	%	1.67	%	350,000			350,000			March 24, 2018
Unsecured senior term loans					741,626			749,326
Unsecured line of credit (3)	1.27	%	1.27	%	226,000			84,000			March 24, 2018
Total consolidated debt					$	2,765,081		$	2,719,664


(1)	In January 2015, the entire principal amount of the Operating Partnership's Exchangeable Senior Notes due 2030 (the "Exchangeable Senior Notes") was exchanged for 5,764,026 shares of the Parent Company's common stock, at the request of the holders.

(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 $1.48 to £1.00 and $1.56 to £1.00 at March 31, 2015 and December 31, 2014, 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, 2015, the Operating Partnership had additional borrowing capacity under the unsecured line of credit of up to approximately $674.0 million.

Exchangeable Senior Notes

During the three months ended March 31, 2015, at the request of the holders that exercised their exchange right pursuant to the terms of the Exchangeable Senior Notes, the Parent Company issued 5,764,026 shares of its common stock in exchange for the remaining $95.7 million in aggregate principal amount of the Exchangeable Senior Notes.

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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, 2015, principal payments due for the Operating Partnership’s consolidated indebtedness (excluding debt premiums and discounts) were as follows (in thousands):



2015	$	28,977
2016	660,291
2017	423,932
2018	623,804
2019	405,724
Thereafter	615,802
	$	2,758,530

6. Earnings Per Share of the Parent Company

Through March 31, 2015 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, 2015 and 2014 has been deducted from net income attributable to the Company to calculate basic earnings per share attributable to common stockholders. The calculation of diluted earnings per share for the three months ended March 31, 2015 and 2014 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 attributable to the Company. For the three months ended March 31, 2015 and 2014, the Performance Units were dilutive to the calculation of diluted earnings per share as calculated, assuming that March 31, 2015 and 2014 were the end dates of the respective Performance Units' Performance Periods. For the three months ended March 31, 2015 and 2014, 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 attributable to the Company less net income allocable to unvested restricted stock and distributions in excess of earnings attributable to unvested restricted stock. In addition, for the three months ended March 31, 2015 and 2014, 1,194,015 and 10,525,410 shares issuable upon settlement of the exchange feature of the Exchangeable Senior Notes, respectively, were anti-dilutive and were not included in the calculation of diluted earnings per share based on the “if converted” method. No other shares were considered anti-dilutive for the three months ended March 31, 2015 or 2014.

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,
	2015			2014
Basic earnings per share:
Net income attributable to the Company	$	17,345		$	18,833
Net income allocable and distributions in excess of earnings to participating securities	(393		)	(378		)
Net income attributable to common stockholders - basic	$	16,952		$	18,455

Diluted earnings per share:
Net income attributable to common stockholders - basic	16,952			18,455
Net income attributable to noncontrolling interests in Operating Partnership	457			521
Net income attributable to common stockholders - diluted	$	17,409		$	18,976

Weighted-average common shares outstanding:
Basic	200,789,795			190,905,867
Incremental shares from:
Performance units	340,879			229,295
Operating partnership and LTIP units	5,405,474			5,410,374
Diluted	206,536,148			196,545,536

Basic and diluted earnings per share:
Net income per share attributable to common stockholders - basic and diluted	$	0.08		$	0.10

7. Earnings Per Unit of the Operating Partnership

Through March 31, 2015, 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, 2015 and 2014 has been deducted from net income attributable to the Operating Partnership to calculate basic earnings per unit attributable to common unit holders. For the three months ended March 31, 2015 and 2014, 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 unit holders. For the three months ended March 31, 2015 and 2014, the Performance Units were dilutive to the calculation of diluted earnings per unit as calculated, assuming that March 31, 2015 and 2014 were the end date of the respective Performance Units’ Performance Periods. In addition, for the three months ended March 31, 2015 and 2014, 1,194,015 and 10,525,410 units issuable upon settlement of the exchange feature of the Exchangeable Senior Notes, respectively, were anti-dilutive and were not included in the calculation of diluted earnings per unit based on the “if converted” method. No other units were considered anti-dilutive for the three months ended March 31, 2015 or 2014.

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,
	2015			2014
Basic and diluted earnings per unit:
Net income attributable to the Operating Partnership	$	17,802		$	19,354
Net income allocable and distributions in excess of earnings to participating securities	(393		)	(378		)
Net income attributable to unit holders - basic and diluted	$	17,409		$	18,976

Weighted-average units outstanding:
Basic	206,195,269			196,316,241
Incremental units from:
Performance units	340,879			229,295
Diluted	206,536,148			196,545,536

Basic and diluted earnings per unit:
Net income per unit attributable to unit holders - basic and diluted	$	0.08		$	0.10

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, 2015 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, 2015, 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 2.23% (including the applicable credit spread) and a maturity date of August 13, 2015 (with an option to extend the maturity date to August 13, 2016 at its discretion after satisfying certain conditions and paying an extension fee).


(2)	The Company’s investment in the McKellar Court partnership (maximum exposure to losses) was approximately $11.8 million at March 31, 2015. The Company’s economic interest in the McKellar Court partnership entitles it to 75% of the extraordinary cash flows after repayment of the partners’ capital contributions and 22% of the operating cash flows.

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

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	March 31, 2015		December 31, 2014
Assets:
Investments in real estate, net	$	262,727	$	267,007
Cash and cash equivalents (including restricted cash)	8,504		6,057
Other assets	11,445		11,599
Total assets	$	282,676	$	284,663
Liabilities and members’ equity:
Mortgage notes payable and secured loan	$	152,077	$	152,056
Other liabilities	8,449		9,020
Members’ equity	122,150		123,587
Total liabilities and members' equity	$	282,676	$	284,663
Company’s investments in unconsolidated partnerships	$	34,978	$	35,291

The selected data and results of operations for the unconsolidated partnerships were as follows (in thousands):



	Three Months Ended
	March 31,
	2015			2014
Total revenues	$	8,728		$	4,059
Total expenses	(9,086		)	(6,130		)
Net loss