BioMed to acquire two adjacent life science campuses in South San Francisco

BioMed Realty Trust, Inc. (NYSE: BMR) today announced that it has entered into a definitive agreement to acquire two adjacent life science campuses in South San Francisco: the Science Center at Oyster Point and the Gateway Business Park.  

The Science Center at Oyster Point is comprised of two newly constructed, state-of-the-art research facilities with an aggregate of approximately 205,000 square feet of office and laboratory space.  These buildings are 100% leased to Elan Corporation, plc under triple net leases that expire in 2024 and 2025.

The Gateway Business Park is a research and development park comprised of six buildings with an aggregate of approximately 284,000 square feet, which is 100% leased with various terms primarily expiring in 2012 through 2014.  Approximately 215,000 square feet of office and laboratory space is leased to Elan.  The Gateway Business Park also includes approximately 50,000 square feet leased to FedEx Corporation and approximately 19,000 square feet leased to Genentech, Inc., a member of the Roche Group.  As part of the acquisition, the company expects to assume a development agreement with the city of South San Francisco that would permit redevelopment of the campus to a total of approximately 1.23 million square feet of rentable space, representing a net increase of approximately 946,000 square feet.  

Alan D. Gold, Chairman and Chief Executive officer of BioMed, commented, "The acquisition in South San Francisco represents a strategic milestone for our company and our most significant new investment since our acquisition of the Center for Life Science | Boston.  It is an attractive investment opportunity which represents a strong fit within our core focus of acquiring well-located, state-of-the-art life science properties that offer a very attractive initial yield as well as long-term development potential.  We look forward to welcoming three high-caliber tenants – Elan, Genentech and FedEx – to our world-class tenant roster."

In aggregate, the properties comprise approximately 489,000 square feet of rentable space, with development rights for an additional 946,000 square feet, significantly expanding the company's presence in the San Francisco Bay Area.  Upon closing, the San Francisco Bay Area market would become the company's second largest market after Cambridge/Boston as measured by current annualized base rents.  Elan would become the company's fourth largest tenant on a pro forma basis, representing approximately 7.2% of current annualized base rents as of June 30, 2010.  Current annualized base rent is the monthly contractual rent as of the current quarter end, or if rent has not yet commenced, the first monthly rent payment due at each rent commencement date, annualized.

The additional development rights would significantly increase the company's national development potential from approximately 1.6 million square feet as of June 30, 2010 to more than 2.6 million square feet inclusive of this acquisition and additional investments previously announced after June 30, 2010.

The aggregate purchase price for the properties is approximately $298.0 million, including cash consideration of $290.3 million and the assumption of an interest rate swap liability that the company estimates to be approximately $7.7 million, excluding closing costs.  The company estimates the aggregate cash-basis 2011 net operating income for properties to be approximately $28.2 million, representing an initial yield of approximately 9.4%.  The company further estimates the aggregate 2011 GAAP net operating income to be approximately $22.7 million, representing an investment yield of approximately 7.6%.  The estimated cash-basis 2011 net operating income is equal to the estimated 2011 GAAP net operating income, adding back an estimated $8.0 million in above market rent adjustments and subtracting out an estimated $2.6 million in straight-line rent adjustments.  

The acquisitions are subject to the satisfaction of customary closing conditions, and BioMed can offer no assurances that any of the acquisitions will close on the terms described herein, or at all.