BioMed Realty Trust Inc. (NYSE:BMR) Q1 2015 Earnings Conference Call - Final Transcript 2015-04-29T17:00:00+0000 Executives Unidentified Speaker - , Richard Howe - BioMed Realty Trust's, Alan Gold - BioMed Realty Trust's, Greg Lubushkin - BioMed Realty Trust's, John Bonanno - BioMed Realty Trust's, Bruce Steel - BioMed Realty Trust's, William Kane - BioMed Realty Trust's, Analysts Unidentified Participant - , Jordan Sadler - KeyBanc Capital Markets, Ross Nussbaum - UBS, Tom Catherwood - Cowen and Company, Brendan Maiorana - Wells Fargo Securities, LLC, Daniel Bernstein - Stifel Nicolaus, Kevin Tyler - Green Street Advisors, Tayo Okusanya - Jefferies LLC, Rich Anderson - Mizuho Securities Co., Q & A operator - Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Craig Mailman from KeyBanc. Jordan Sadler - KeyBanc Capital Markets Hey, it's Jordan Sadler here with Craig. Curious to sort of follow-up on this transactional side a little bit in December. You sold the manufacturing facility in Rockville and that was a great real estate transaction for you guys. And I was curious about the headquarters building that remains down there and whether or not you guys have received notice from HGSI Glaxo about their intention to repurchase or whether or not they will repurchase? Alan Gold - BioMed Realty Trust's Jordan, thank you. So this is Alan Gold. We have not received notice and we appreciate the acknowledgment of a great transaction that was executed in December. We really do think being able to sell that the LSN facility for $322.5 million and generating $136 million of profit was a great outcome for the company. To date, as I said, we have not received any notice and our GSK has until December 1 of this year to give us that notice. And I guess we'll just have to wait and hear from them as to what they intend to do. What they have announced though is that they have been moving more people back into the building. They've decided to consolidate all their vaccine business there in the Rockville, Maryland area, and are going to be occupying a significant portion of the building with that, consolidating from operations out of the UK, out of the suburban Boston area and suburban Pennsylvania. So we think that that's really a really exciting outcome for the Rockville, Maryland area, providing another refocus of attention on that market, bringing new and exciting scientists to that market. And we think it will continue to add to the value of that Maryland market for us. Unidentified Participant - Hey, guys its Greg here. You guys clearly had a strong quarter on the leasing front. Just curious, are there anymore potential opportunistic take backs that you guys are looking at now. Alan Gold - BioMed Realty Trust's It's a good question. We do have a very dynamic portfolio, a portfolio that we're constantly working on and managing to make sure we generate the greatest value for our shareholders and we will continue to do that over time. I think the opportunity that we've had to date have turned out to be a very good opportunity and starting with the space and PRC where we terminated Logitech and put Stanford Health Care in for a portion of the space in addition to expanding and leasing additional space to Stanford Health Care, we think that's a fantastic outcome for the PRC market as it adds a very exciting new tenant to that product or to that location and with an entity that is continuing to look to grow. In addition to that, we did the 50 Hampshire lease termination where - as we've described, we took 180,000 square feet that was leased at around $40 a square foot gross and have now been able to increase those rents to well over the mid 60s and with just two leases and 100,000 square feet lease we replaced 90% of that income and we expect that same sort of positive outcome or the most recent transaction which is the Vertex transaction, where we've terminated 300,000 square feet and I'll have Bill Kane talk about the exciting things going on there at the Sidney research campus. John Bonanno - BioMed Realty Trust's Thanks Alan. Sidney research campus is a concept we just recently branded to encapsulate all the opportunity that we've captured with this transaction that we did recently announced with Vertex that involves 40 Erie Street and involves 200 Sidney Street, 47 Erie Garage and it actually is positioned in a really unique point in time when the pressure in Kendall Square and East Cambridge is really creating quite a transitional shift in not only rents and vacancies but where well capitalized venture backed companies can find a home and continue to grow in Cambridge, in very close proximity to MIT, so what we've done is we've announced the Vertex transaction last month. We've taken our designs and our design team and put a crack team on it and we've come up with a really interesting environment that will be very robust in terms of amenities, in terms of collaboration spaces, in terms of proximity to the MIT urban environment and to our surprise, to our pleasant surprise, we're already the first building 200 Sidney is already 90% spoken for so we're really excited about that. That's not only shown us the leasing momentum that is in the market but also validated the rents and rates and the incomes that we are assuming and speculating for that asset so we are pointing this transaction to a yield of above an 8% and we think we have a lot more success ahead of it on that transaction. Jordan Sadler - KeyBanc Capital Markets That 90% 200 Sidney is that a done deal at this point or are you guys still kind of trading paper? William Kane - BioMed Realty Trust's No, I am sorry the 90% just to be clear are lease negotiations that have traded paper, that have progressed to a fairly mature State but not signed or executed at a final State yet. Jordan Sadler - KeyBanc Capital Markets Great, thanks, guys. operator - Nick Yulico, UBS. Ross Nussbaum - UBS Hi. It's Ross Nussbaum here with Nick. Couple different questions. The first one is out at Pacific Research Center, PRC. Now that you've gotten the thing up to, I call what, about 80%-ish occupied, do you have any thoughts of selling that property since it isn't necessarily sort of, what I'll call, 100% life science in sort of a core life science location? Alan Gold - BioMed Realty Trust's So first of all we do believe it's a core life science location, it's within 15 minutes of Stanford Research Center. It's leased to some very strong existing life science tenants including Depomed and Revance, both who have - Revance just went public just last year, is doing fantastic and Depomed stock has traded up quite significantly over the last couple of months and both of those companies look to grow and expand. We believe that we've proven this to be a very viable life science location with the leases that we've had there and but all that being said, we are highly focused on the North Campus. The South Campus still remains a opportunity for us to lease up additional space. We have 126,000 square feet of availability there that we would like to get that leased. As I described in my prepared remarks that we have over 500,000 square feet of demand that we're tracking in that market and we hope that by the end of the year we'll have some additional progress there. With that being said, if somebody were to make us say an offer that we couldn't refuse on that side, we would certainly be very open to looking at it. Ross Nussbaum - UBS Okay. Switching over to Cambridge at 675 Kendall, can you talk a little bit more about the $190 per square foot capital requirement, which if my math is right, we're talking about $55 million and how you've thought about the return on that incremental investment? And what specifically are you putting in - or what's getting put in for $190 a square foot? Alan Gold - BioMed Realty Trust's So you're referring to the Alnylam lease which we were able to lease 295,000 square feet of the space, three years in advance of in the future here in which we've talked about $140 a square foot NTIs and $50 in landlord work and we also mentioned that and discussed how it's 6% to 8% increase in the current rents and over a 30% on increase in rents on an average rent and I'm going to have Bill kind of describe the improvements that are going to go into that space and the importance and how long Vertex was in that space. William Kane - BioMed Realty Trust's Thank you, Alan. Those of you that have toured the building and for those of you that haven't, it's 290 plus thousand square foot single tenant building with a full height atrium, pretty remarkable architecture, signature architecture through a design competition that was done around 2001. Steven Erlk & Associates of Los Angeles won the competition and it's been one of our kind of signature properties in the Cambridge market for quite some time. The building at the time it was built was built for a single purpose Vertex specifically, heavy chemistry use for very specific type of process that Vertex had used for the last 12 years in occupying it and since then they've gone through a few multi-tenant iterations in terms of subleasing space to a few Synnefa and Momenta. The improvements that - I'm sorry Alnylam is contemplating is really interesting in that it has an optimization for environmental efficiency and mechanical efficiency in mind and something that wasn't really contemplated back in the year 2000 to bore you with the mechanicals, there's a point in time where we didn't use heat recovery processes and at that point in time we didn't use fan walls. And these are all really great mechanical improvements that both we and Alnylam want to add across-the-board in terms of building we're building for Alnylam in terms of the buildings that were trying to reposition across the board for all of our tenants it's a real new frontier in terms of how we can optimize their experience and minimize their operational and the most dynamic way. Alnylam was actually a surprise to us we were currently tracking 39 lab requirements in the market today as you know the Vertex lease exploration wasn't for several years and when we started talking to them we realize what a perfect fit their use to would be in this building not just for the way the building was built but specifically how they want to improve these mechanic systems. How they want to enhance the full height atrium and make it more dynamic and more collaborative. And on top of that they also - we also learn that they had a very strong interest in 500 Kendall so we added a right of first offer on that lease, so there's a lot of dynamics just a longwinded way of explaining a lot of other aspects to the transaction, but we really found a Cinderella slipper here in terms of not only forging and opportunity for Alnylam but forging a real strong relationship between us and a company that is really taking off and has a real lot of potential in the future. Ross Nussbaum - UBS That's helpful. I appreciate it. Finally, Greg, this one might be for you. In the guidance, I think it's on Page 7, the operating portfolio leasing capital of $70 million to $115 million - I just want to be clear on what exactly is in there and how that matches up to the way that you disclose your AFFO adjustments on Page 12. So is that - what does that include? Is it just second generation tenant improvements? Is there any first generation in there? Is there any recurring CapEx? Can you be specific on what's in that $70 million to $150 number? Greg Lubushkin - BioMed Realty Trust's It's a mix of both first and second gen although with the leasing that we have in front of us the bulk of the leasing that we'll do over the course of the balance sheet in the operating portfolio. We will be bias more towards second generation leasing. And as a result we will have generally a lower per square foot capital requirement in that first gen. But I think we are look at probably a split of about 25% first gen, 75% second gen which respect to leasing over the balance of the year 30%, 70% somewhere in those relative propositions that should help you understand how that capital will be spent. Ross Nussbaum - UBS Okay. And so how much of that $70 million to $115 million is what you'd call recurring maintenance CapEx? Greg Lubushkin - BioMed Realty Trust's Yes, maybe you can take that up offline because I don't have the specific numbers in front of me, I know that in arriving at that $70 million to $115 million we did utilize a split of first and second Gen of roughly 25% to 30% and 70% to 75% and had a relatively higher first Gen per square foot capital requirement somewhere in the roughly $80 range and I think we were inside of $50 for the second Gen. Alan Gold - BioMed Realty Trust's And it's also to note that the concept of recurring Capital Expenditures that occur at the property level are actually primarily covered by the tenants and tenant leases. Those are expenses, those are costs that are either amortized and reimbursed by tenants over time. These are really more going from one tenant to another tenant or releasing a space from first generation basis. Greg Lubushkin - BioMed Realty Trust's And there's also a blend of CapEx associated with renewal that would fit into that second Gen as well Ross but that would have a very low CapEx requirement probably in the $10 to $15 range too if you're trying to model it all out. operator - Tom Catherwood, Cowen and Company. Tom Catherwood - Cowen and Company Yes, good morning to you guys out there. Wanted to talk a little bit about San Francisco and the market conditions you guys are seeing out there. Can you comment a little bit on what you're seeing as far as tenant demand and trends out there? Alan Gold - BioMed Realty Trust's So I think the San Francisco market is - one, it's a very big market with multiple submarkets and that's number one and number two is that there a lot of different things occurring in that market. Very exciting things are happening in the city with a lot of activity going on with office and tech type users and very strong demand along the peninsula and as I've described over 500,000 square feet of laboratory demand on just the EastBay alone. On the peninsula side on the main part of San Francisco we're seeing well over a million and a half square feet of demand that we're tracking in life science type users primarily in the South San Francisco market that we're looking at right today. Tom Catherwood - Cowen and Company How would that compare, then, to even a year ago? Do you think the demand has stayed relatively flat or are you incrementally more positive? My sense is, are you getting the feeling that there are kind of more requirements out there for a limited amount of space or is it in kind of just flat? Alan Gold - BioMed Realty Trust's Well I think the answer is it's incrementally more positive based on what we've been talking about for the last couple of years which is the activity and the life science the capital activity in life science sector has just been continuously increasing a year-over-year with more and more capital flowing into the industry. We've had a very successful year and year and a half almost two years of IPO activity. All that activity is now driving demand for life science tenants on top of what's been happening in the tech sector. Not to mention the fact that just to remind everybody we did announce a 360,000 square foot build-to-suite for Illumina there in our Foster City property which further illustrates the activity and type of activity that we're seeing out there. Tom Catherwood - Cowen and Company Completely fair. And as we think of the San Francisco, obviously you're absolutely right, many different markets, lots of different demand to drivers. Is South San Francisco becoming more of a value option then to kind of more of a core San Francisco for people that have been priced out? Or are you really seeing companies that want to be down there that have drivers that they need to be there or even in the East Bay area? Alan Gold - BioMed Realty Trust's Let me turn the call over to John Bonanno who is really focused our developments projects and has been working with our Gateway of Pacific project there in the South San Francisco market. John Bonanno - BioMed Realty Trust's Yes, it's John Bonanno. Well, I'd say the South San Francisco remains an absolute core market for the life science industry and for users there. It's really a central location up and down the peninsula and gives the employees and workers a good location to work in a reasonable commute from just about everywhere and it's also very close to the airport and its always been just about the best submarket and still remains the largest submarket by far for laboratory users in terms of number and the amount of space they have. It also only has about 1% vacancy right now. The tenants are having a hard time finding places and so as a result of that, the tenants are, we're seeing demand for space on leases that are going to expire even a year or more from now in many case or most cases actually with multiple proposals and tenants touring already if the tenants known to move out. So the market is as good as it's ever been and for Gateway of Pacific, which is a prior general land bank that we've advanced fairly well and are waiting the right anchor tenant to kick that project off, we've had a lot of success in the entitlement of that project and it's expanded quite a bit from the amount of land area that we had when we acquired, but and so that drops our cost down on a per square foot level to a level that extremely competitive. So that our new construction can be done easily at the rates that we are seeing in the marketplace which are mid to high-40s even approaching $50 now for that type of building and most of our competitor projects are pricing their assets at North of $50. So we like our position there a lot and we like the market a lot. Tom Catherwood - Cowen and Company Got it. I appreciate that, John and just one clean up question. Down at Pacific Research Center, where obviously you did a termination with Logitech, Stanford comes in and takes a little additional space, how does the Stanford rents compare to the Logitech rents all in the same space? Alan Gold - BioMed Realty Trust's On the same space it was when straight from Logitech was paying straight over to Stanford, but on the space the expansion space that where they took over that was significant increase we leased space with to Logitech in three or four years ago at about around $12 of square foot net and I think we are in the high teens to low-20s with Stanford. Greg Lubushkin - BioMed Realty Trust's This is Greg. I would add you can see that the impact that Alan is talking about when you look at the change in the effective rents Stanford excuse me Logitech to Stanford. Because the Stanford lease blended the two rents that Alan was talking about, but on a blended basis the gap rents, the effective rents are up 35%. operator - Brendan Maiorana, Wells Fargo. Brendan Maiorana - Wells Fargo Securities, LLC Thanks. Good morning. Greg, a couple of clean ups for you to start out with. So the impact on same-store from the Vertex - give backup space with the lease term not in there - I'm estimating it's about 400 basis points to quarters two, three and four in terms of kind where your same-store is now? Is that about right? Greg Lubushkin - BioMed Realty Trust's Yes, I mean that sounds right. As I think I said in the prepared remarks we were 2% year-over-year for the first quarter, actual and we're forecasting going from 4% to 6% down in quarters two and three. That is Vertex that also will encompass the CDM expiration as well as few other expirations as well including Broad - the Broad move out late last year while we are waiting for Biogen rents to commence later this year. Brendan Maiorana - Wells Fargo Securities, LLC Okay. And then your Cap interest guidance went up $6 million, overall interest expense was down $10 million. So I guess that was part of the debt issuance inflating for later in the year but Cap interest was up $6 million. Is that all attributable to the Sidney and Erie redevelopments that are now in your redevelopment pool? Greg Lubushkin - BioMed Realty Trust's Not all but the bulk of it, yes. Brendan Maiorana - Wells Fargo Securities, LLC Okay. So from a real estate perspective, Ross asked about 675 West Kendall, looking at 200 Sidney and 40 Erie. My sort of impression of lab space was there's a lot of improvements that go into the space. I don't know if you'd call it just initial buildout of first gen space or if you'd call it first Gen TIs. But those are sort of standardized and would carry on to future tenants. But is that maybe not as much the case anymore? Do tenants look for things to be a little bit more specialized? Because $190 a foot going into 675 West Kendall seems high for a relatively new building. Or redeveloping the Sidney Street stuff for about $250 a square foot seems high for kind of second Gen type of uses. So, maybe if you guys could comment on it that would be helpful. Alan Gold - BioMed Realty Trust's I don't think it's really that high when you look at the length of time the tenants were in those spaces and when you look at a dynamic portfolio that has a lot of different data points such as the space where we built out the space for the Broad Institute at 301 Binney and released that with less than $25 in TIs, if you wanted to extrapolate that you could extrapolate that. You look at 675 and you say well a $190 a foot is a lot of money. Well it's only $13 a square foot over the 15 year lease term in which we are already getting a 30% average rent increase. On top of the fact that you're dealing with the secular changes where the sustainability and efficiencies of HVAC systems are becoming much more important to tenants over time and we agree that those changes should be done in those buildings and that's where most of that improvement dollars are going for. Bill do you have anything else you want to talk about it. William Kane - BioMed Realty Trust's I would just point out, it's actually kind of go in the opposite direction in terms of customization. We're finding that there are new technologies within mechanical systems, new ways to program and zone lab spaces, and new ways to build and erect walls in rooms that don't necessarily require demolition every time a lease rolls. Alan's vision for a long-term hold, a long-term horizon really resonates into the way we program our facilities so it's that much more important for us to do it right the very first time we get it back for the benefit of the next lease roll and the roll after that and roll after that and if we do that on a long-term basis it really is the most efficient way to reposition the space and we realize that as Alan pointed out at 301 Binney, we realized it at 325 Vassar where we came up with that universal flex lab concept which a number of you visited and spoken to us about. You're literally dismantling these areas with screw drivers instead of sledgehammer and that's an oversimplification of what we're doing, it's all about repositioning the mechanical systems so you're not rerouting major duct work every time a lease rolls and I guess the final point I would make on that is what we do see evolving is tenants needs for adaptability and optionality to be increasing as well. So this isn't just for us and our shareholders in a long-term value and optimization of our assets, but it's also a position in asset and the facility to our tenants is highly adaptable for an environment that changes a lot over time and we're allowing our tenants to add staff, add equipment, change the way that you do work without renovating the space over and over and over again, within their own term as well, so it's kind of a win-win. Brendan Maiorana - Wells Fargo Securities, LLC That's helpful. So do you guys have a - if you think about the spend on a second gen space, do you have a benchmark of kind of where you think that should be relative to rent? So, Alan, I think you said at 675 West Kendall it's only $13 a square foot a year over time compared to average effective rents in the $80 range. So that's probably 15% or somewhere around there. Is that sort of a good benchmark of kind of how much capital dollars should be on a second gen lease deal? Alan Gold - BioMed Realty Trust's I wish I could say that there is a standard way that every building and every project would go down that certain path and we could make it very easy for everybody to model. Our buildings are very unique. We have buildings in many different markets. We could cater to a wide variety of tenants within the life science sector, so it's hard for me to give a standard answer to that, but let me turn it over to John here and let see what we wants. John Bonanno - BioMed Realty Trust's Yes, I wanted to add, so in the first part of your question you said the first generation improvements go in, you get a rather generic improvement to the space that makes the building a laboratory building and that's largely true. A biology lab is a biology lab there aren't much differences to them in the function of that lab. What matter more and what we've been doing over the last several years is going through the projects that we have acquired and owned and as basis turnover and making sure that the infrastructure for the building. The thing that makes the building truly a laboratory asset is flexible and built in a way that allows for future change over. So rather more on a formulaic basis that allows for expanding and contracting suite sizes and different tenant configurations at a very low rollover cost. With the infrastructure making the project actually a what we would considered to be a true laboratory shell rather than office building or just a building with laboratory improvements in it. We've made those investments over our portfolio over the last several years and those investments will absolutely have huge dividends for us in the future as we role future tenants basis, so we really transform things and we are going to do that at 200 Sydney as well and those investments will, it's absolutely the right thing to do we will continue make a great return on the product, but it allows us to have even more sustainable returns in the future without the huge heavy rollover cost. Brendan Maiorana - Wells Fargo Securities, LLC Great. Last one might be for Bill again. Genzyme has been in the news about the new build-to-suit. Have they given you guys notice or any clarity on their plans for the expiration at 500 Kendall? William Kane - BioMed Realty Trust's No, Brendan working on some conversations with our contacts within the organization as you know their part of a much larger international conglomerate that is in a very diverse, very dynamic environment. They contractually don't have any communication, any type of paper on the table now that is secured that decision. So the thing that I am focused on right now has being the best darn landlord I can possibly be. They still have some term left and if there something they want to talk about or if there is a contractual milestone that we are going to hit we will address it that time. I just wanted to pointed out that it is one of the most unique buildings and I know that you've been in it I know and a lot of your peers have been in it and it's just one of the most remarkable facilities I've ever worked on in my career and I think this is a really interesting opportunity either for Genzyme itself or whoever else may be able to capture that kind of identity and headquarters location in the middle of Kendall Square. Greg Lubushkin - BioMed Realty Trust's Right. And just to further remind everybody, this is a 343,000 square foot building and that I think we've discussed that the notice deadline for them to give us on the renewal would be in October, the end of October 2016. A long ways down the road here. And their lease doesn't expire until July 31 of 2018, another long ways down the road and as we've discussed earlier, we -Alnylam already has a right of first offer on the space and we've entertained tours from a variety of tenants that are currently in the market for this iconic building. Brendan Maiorana - Wells Fargo Securities, LLC And, guys, just a point of clarification while I remember it. I know there's a big atrium in that building. Is that atrium considered leasable? Is that space that Genzyme or Synnefa is paying rent on or is that not considered part of the leasable square footage as it stands today? Alan Gold - BioMed Realty Trust's I would say the trend in the marketplace right now especially for single tenant buildings is to charge rent for that space. The atrium is less than 10% overall rentable area but when you compare that to the growth in the market, the strength of the demand and naturally the impact that it had on the rates, it can go either way but to answer your question, there is, it is considered market right now. We do have existing transactions in the market that satisfies that and justifies charging rents for that space. operator - Daniel Bernstein, Stifel. Daniel Bernstein - Stifel Nicolaus Hi. Good afternoon for me, good morning for you. I guess most of the questions have been answered but my question on the development side - you're putting in a target cash yield on i3, 8% plus or minus. And just trying to understand what goes into that 8%. It looks a little bit higher than, say, some of the other projects you have in there. Is there some anticipation of continuing rate or some kind of rate improvement in the San Diego market? Just trying to understand what goes into that 8%. Alan Gold - BioMed Realty Trust's So the - what goes into the 8% is the overall total project cost and our expectation of market rent is at the time that we expect that space to be leased. I think John talk about the exciting work that we're doing on pre-development on some of our transactions and what's been happening in the developments. We've been very pleasantly surprised by the amount of activity, the amount of demand that's been occurring in our existing development portfolio and our future growth for our future developments. John Bonanno - BioMed Realty Trust's Sure, so the first question was about the rental rates at I3 or just the returns on I3. Alan Gold - BioMed Realty Trust's Yes, I think you answered it. It's the overall. It's an all-in project cost and the rents that we've received back from that and part of it again occurred as a result of very successful entitlement program, the building is extraordinarily attractive in terms of where it's located and it has the best visibility of any project in the marketplace and also arguably the very best location as well, but the design is beautiful for that. So we think we expect that we absolutely expect that we'll be able to achieve an 8% return based upon the lease up of the project and it's a little higher than it would otherwise be because it is on a speculative basis so if we had a full tenant build-to-suite or pre lease on the project the return might come down just a little bit, but we would have - we are having a very long-term leased with the tenant for the building. Across the portfolio we're enormously pleased with our developments, their progress and our dedicated team of skillful execution towards their delivery and additionally I'd note we are cultivating many opportunities for exciting future developments in our land banks and also note that we have right prospects under pursuit by our development and investment team. We also have some existing ability to do additional development on our existing construction projects including at the landmark and at Foster City that we do expect to develop into development at some point in the future and we intend to advance our developments primarily in connection with lease commitments and sometimes also with new investments and we have an awful lot of predevelopment activities under way designed to expand our companies growth through development. That's basically what's going on. We're thrilled with the new developments and they are all going great. Daniel Bernstein - Stifel Nicolaus You have done a lot of preleasing, but is there some more tilt towards spec given the strength of the fundamental core markets in San Diego, Boston, San Francisco? I mean is there - would you rather do some more spec now versus the preleasing you've done in the last few years? Alan Gold - BioMed Realty Trust's This is Alan again, we did announce the speck project there at I3, but I think that that is an exciting project, but our absolute preference is to start projects with significant pre-leasing if not fully leased. operator - Kevin Tyler, Greet Street Advisors. Kevin Tyler - Green Street Advisors Hi, guys. Most of my questions have been answered as well, but just a quick one, Greg, for you. You don't have any equity issuances in your guidance right now, at least in the new page 7 that you provided. Thanks for that. But could you give us a little bit of color on how you're thinking about equity today and maybe into 2016 with the HGSI purchase option? Greg Lubushkin - BioMed Realty Trust's Well, as I said in the prepared remarks we believe that with the forecasted asset sales for 2015 and operating cash flow and then certainly starting from less than 38% leverage today. There is no need to raise equity in 2015, as we move into 2016 again we are starting from very strong position and just recently met with the rating agencies obtain the upgrade from Moody's to Baa2 and as part of the meeting so we have with the rating agencies we are very can did open about the level of development activity that we have underway and the impact potentially could have on our leverage. As these developments come online leverage measure principally that EBITDA we will come down from elevated levels that we will you will as we move towards at the end of the year. And you know certainly if by chance GSK exercise the purchase option that will just further strength the overall capital position of aiding the need to think through whether equity is going to be necessary with a slate of opportunities that are in front of us today. Obviously that could all change large acquisition, asset sales beyond those that were forecasting come down major new development opportunities those are all factors we are going to have to consider as we move through 2016 and consider they need potentially for equity. But as we see here today we do not see in the foreseeable future they need raise equity. operator - Tayo Okusanya, Jefferies. Tayo Okusanya - Jefferies LLC Yes, good afternoon. Most of my questions have been answered, but I just had a quick one. Could you talk a little bit about how you're thinking about international expansion, specifically on the opportunities to develop the land right next to Granta Park or possibly make - do more acquisitions internationally in the biotech space? Alan Gold - BioMed Realty Trust's I think we are very pleased with the opportunities that we've and the project that we acquired there in the UK market, the Granta Park project it was 98% leased it remains on 8% lease we have entertained additional opportunities in that market I mean believe that could be some we could have some positive announcements in the next couple of quarters. Let me make it clear that's where our international expansion is and we are focused in that area and that's where we're focused. Looking beyond that, we really don't see the business model translating today beyond that market and so that's where we are focused. operator - Rich Anderson, Mizuho Securities. Rich Anderson - Mizuho Securities Co. Thanks. Good morning. Can you tell me - is the NOI loss, the $0.05 that's in guidance from the termination, is that fully baked into the first quarter? Or does there need to be some sort of future adjustment there still that hasn't been fully reflected? Greg Lubushkin - BioMed Realty Trust's Hi, Rich. This is Greg. If I understand your question, the $0.05 in lost revenues or lost NOI really relates to the full year 2015. Rich Anderson - Mizuho Securities Co. No, I know but I'm thinking. Greg Lubushkin - BioMed Realty Trust's A penny of that is in the first quarter. Rich Anderson - Mizuho Securities Co. Okay. So then it should be rolling at this point. I don't have to make any adjustment to the - I'm trying to get a quarterly run rate with all of the moving parts and that's basically the premise of the question. Greg Lubushkin - BioMed Realty Trust's Sure. And that's why we tried to layout in the specific detail we did in the presentation how you get to that clean FFO run rate or clean FFO rate for the first quarter and the full year impact as we reconcile guidance. Rich Anderson - Mizuho Securities Co. Okay. Second question. On your - and by the way, good improvement in disclosure. I second that or fifth that or whatever. But the other revenue that you disclose on page 10, how much of that is - and in this quarter it's almost entirely the lease term fees, but is it usually lease term fees? What usually is in other revenue? Alan Gold - BioMed Realty Trust's So lease term fees are in other revenues but in the first quarter we do have $11 million of other income generated from. Greg Lubushkin - BioMed Realty Trust's $11 million that Alan is going to talk about the gains on sales are actually down in the other income expense line item. Rich Anderson - Mizuho Securities Co. I see that. Greg Lubushkin - BioMed Realty Trust's What's in the other revenue is principally lease term revenue. From time to time, there will be some other items that may flow through there if we sell some equipment at an asset or there are some fees I think that we're still getting out of the [Pru] JV that will flow through that line item as well. And if you go back in time, the interest income that we were getting from Fan Pier was included in that line item as well. But right now it's substantially all lease term revenue with the security gains and losses down in the other income expense line item. Rich Anderson - Mizuho Securities Co. Right. You're speaking to the history, not just - I know that it is this quarter. But going back in time, the past call a year or so it is principally lease termination fees. Greg Lubushkin - BioMed Realty Trust's Yes, except when we had the Fan Pier loan. When we had Fan Pier loan, we had interest income flowing through the other revenue line item. Rich Anderson - Mizuho Securities Co. Got you. Okay. Alan, at the start you kind of used the word recapture space as if these terminations were driven by you. In fact, most of the time they're driven by the tenants desire to leave. Am I saying that accurately? Or do you actually go to tenants and say please - or try to escort them out of the building? I feel like it goes the other way. A maybe you have an opportunity like you do at Hampshire and the Vertex space, but you don't necessarily want these things to happen. It's good that there's an opportunity behind them but you don't really want them to happen. Is that accurate? Alan Gold - BioMed Realty Trust's No, mean, no. I think 50 Hampshire is a perfect example of things that we actively did. We actually actively moved forward with that in transaction so that we could recapture upside. Now that isn't a good characterization. There are situations where leases do expire but we've done a very good of releasing space and we do have a very good ability to retenant and extend tenants when the space works for their needs. Rich Anderson - Mizuho Securities Co. Right. But these are early terminations, not lease expirations. And so in those cases, you don't go into a lease hoping that someone will leave early. You go in hoping they stay until the end. Isn't that fair? Alan Gold - BioMed Realty Trust's And that's exactly right. And there is an end, right? And so as an example with the Vertex, we could have absolutely been very comfortable waiting all the way through the end of the lease which would have expired at the end of 2015 but we actively negotiated with Vertex to terminate early, collect the fee, bridge the yield, and take advantage of the opportunity that exists today. Actively manage the portfolio. Rich Anderson - Mizuho Securities Co. Okay. I don't want to beat a dead horse there. The last question is what percentage of your portfolio of your tenant base would you say is backed by VC? Alan Gold - BioMed Realty Trust's I think we're probably in that 3% to 4% of our revenue comes from what we consider VC backed type tenants. operator - Thank you. Now, I would like to turn the call over to Mr. Alan Gold for any final remarks. Alan Gold - BioMed Realty Trust's Well, thank you operator and then with that I'd like to thank you all for joining us here today to thank our entire team for their hard and smart work. Thank you all. operator - Thank you. Ladies and gentlemen with this we conclude today's conference. Thank you for participating. You may now disconnect.