BioMed Realty Trust Earnings Call Nuggets: Net Absorption Guidance and Extra Land Update

BioMed Realty Trust Inc (NYSE:BMR) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Net Absorption Guidance

Jordan Sadler – KeyBanc Capital Markets: First question is looking for a little bit of maybe an update or clarification relative to the net absorption guidance of 300,000 square feet that was anticipated from the end of 3Q through the end of this year. I think if I tally it and I don’t know if this is the right way to look at it, but off of page 33 we are running at about negative 81,000 square feet for the last three quarters combined. So that would mean you’d have to do 190,000 square feet or so a quarter in the back half of the year to hit that. So my question is that still achievable and am I looking at it the right way and two is that still achievable and how is that factored into your guidance?

R. Kent Griffin, Jr. – President and COO: So I think you are looking at it the right way. I think you are accurate. When we gave our guidance last year, we targeted that level of net absorption. We certainly spoke at the time about some of the known move outs that we’re going to hit the first part of the year particularly in line and so we expected some negative net absorption in the first half of the year. but that said despite the fact that we’ve had pretty tremendous overall leasing results, majority of that has been in renewals and some of that’s been in – like the new Regeneron development and some of the leasing we did with Wexford recently was pre-closing and so and that really wasn’t part of original net absorption figure anyway. But without the benefit of the Regeneron pre-leasing on the build-to-suit which was 300,000 square feet we still have a lot of work – wood to chop on the net absorption front, but from an achievability perspective clearly with the environment we are in we definitely think it’s achievable.

Jordan Sadler – KeyBanc Capital Markets: And is there a weighting, I mean do you think it will be evenly weighted through the back half of the year? And that’s really just signings not commencements, is that the right way to think about it?

R. Kent Griffin, Jr. – President and COO: That’s correct, that’s correct.

Jordan Sadler – KeyBanc Capital Markets: So, evenly weighted…

R. Kent Griffin, Jr. – President and COO: I think predicting what portion of your leasing volume is going to be from new leasing versus early renewals and extensions is a tough prediction.

Jordan Sadler – KeyBanc Capital Markets: Second question is just regarding the new development I think at NAREIT we talked a little bit about the prospect of launching the new Kendall G, which we saw you (hired) up in the quarter. Can you maybe just give us some color around sort of that decision to launch the new development there and may be put it in the context of the remaining vacancy at Kendall B?

R. Kent Griffin, Jr. – President and COO: This is Kent again. So, in our operating portfolio excluding the joint venture asset at Kendall B, I think before we launched this, we’re 96% almost 97% leased in the Boston market overall. So, not only is our portfolio very well leased that market continues to be very tight. And as I think this would be supplemental shows that we’re not expecting to deliver that space for a couple of years. And so, really our only sizeable block of space left is at Kendall B and certainly we don’t expect that to be available in two years. So, from a going spec perspective, it’s not something we do often or take lightly, but in this particular case given the size of the project at 63,000 square feet it’s very measured amount of development and its frankly in a great market and in a great location within the market and based on our current expected cost and the current rent environment, we think the economics are pretty compelling…

Jordan Sadler – KeyBanc Capital Markets: Is it being built fully as lab or is that – I mean it looks like about $700 a foot is the number. Is that sort of just a placeholder?

R. Kent Griffin, Jr. – President and COO: I think we are looking at a variety of scenarios. It’s generally targeted to be lab. There could be some office space as a part of it, but yes, that is our current projection, which includes a lab build out.

Jordan Sadler – KeyBanc Capital Markets: Last one would just be the yield, what would the expected yield be on a development like that?

R. Kent Griffin, Jr. – President and COO: I think, current asking rents north of $50 in that submarket. So, you’re getting close to an eight yield.

Extra Land Update

Omotayo Okusanya – Jefferies & Co.: Just a couple of quick questions. First of all, Granta Park, any update in regards to the extra land out there? It seems like you’re getting really good demand for space and possibly building out the extra land?

Alan D. Gold – Chairman and CEO: No current update, we’re certain there’s been interest and we are having discussions with perspective tenants who have some interest in potential build to suits on a portion of that land, but nothing to report currently.

Omotayo Okusanya – Jefferies & Co.: Then also on the J&J space in Radnor, Pennsylvania, that’s meant to come up for renewal first quarter of ’14. Has that been finalized whether they’re staying or going?

R. Kent Griffin, Jr. – President and COO: We are highly confident that they are not going to renew and we think all our investors should expect that.

Omotayo Okusanya – Jefferies & Co.: And what’ll kind of the plan be for that space, based on that expectation?

R. Kent Griffin, Jr. – President and COO: So we are going to – we started to talk about it a couple of years ago that the alternative plant it really is a redevelopment there’s the opportunity to add a significant amount of density in the larger site and we are looking at a variety of options including largely office and potentially boarder mix used development project and we are working with through the process currently to put in place entitlements to pursue that type of plan.

Omotayo Okusanya – Jefferies & Co.: Last question for me on the Wexford. I mean since the deal is now, since when the deal was announced up until now any changes to this positively or negative that you have seen versus what you underwrote the deal out?

R. Kent Griffin, Jr. – President and COO: I would say, no negative surprises that the margin we’ve been positively implying both in terms of the reception we’ve had from the tenants and some of the perspective new opportunities that we’re engaged in discussions on and obviously the traction and the leasing front is also a nice positive.

A Closer Look: BioMed Realty Trust Earnings Cheat Sheet>>