At BioMed Realty, our opportunity is clear: to serve our tenants by developing, owning and operating the best real estate portfolio located at the intersection of the growing health care sector and the permanent frontier of innovation, the life science industry.
Over the course of our ten years as a publicly traded company, we have developed a platform with a proven ability to serve the dynamic life science industry. We have grown by providing our tenant partners with the full range of real estate services – including development, construction, redevelopment, acquisition, financing and management.
By investing over $7 billion in life science real estate and maintaining each property to the highest standards of the industry, we create innovation opportunities for our tenants that enable them to advance their transformational research, and bring treatments and hope to patients around the world. Looking ahead, our focus will continue to be on serving our tenants – because when they grow, we grow with them.
Our best-in-class team continues to achieve remarkable leasing success. With every lease, we take pride in finding exactly the right space for each tenant.
We continue to deliver on the leasing opportunities before us with a tremendous organization of professionals dedicated to executing on our strategy and positioning every one of our tenants for success. We achieved record gross leasing volumes in 2014 totaling 2.8 million square feet and, as a result, we ended the year with an operating portfolio leased percentage on a weighted-average book value basis of 91.6%.
Our knowledgeable team takes a creative approach to fulfilling each tenant’s unique requirements, in some cases relocating them to new properties in our portfolio that are even better suited to their needs. By creating long-term partnerships with our tenants, we can harvest the greatest value from our world-class portfolio in core and developing life science markets.
We continue to strengthen our tenant roster, executing new significant leases in 2014 with life science leaders including Illumina in the Bay Area, Baxter Healthcare in Cambridge, Massachusetts, and Spark Therapeutics and the University of Pennsylvania Health System in Philadelphia.
At the same time, our ability to build relationships results in repeat business with our tenant partners. Last year our success was demonstrated through lease expansions with Bristol-Myers Squibb, Theranos and Revance Therapeutics in the Bay Area as well as Novo Nordisk and NanoString Technologies in Seattle, to name just a few.
Each lease represents a new opportunity for our tenants to grow. In the years ahead, we will continue providing meaningful connection points between academia and commercial enterprise to support the innovations of the life science industry.
Some of our key leases for the year included:
- A new 360,000 square foot lease in a build-to-suit campus for expansion by Illumina, Inc. in Foster City, California on the San Francisco Peninsula, with the opportunity to grow the project by another 160,000 square feet. The campus will include two Class A laboratory and office buildings that will provide the highest levels of sustainability and energy efficiency and are expected to receive LEED® Gold certification.
- A 12-year lease with Baxter Healthcare for approximately 206,000 square feet at 650 East Kendall Street in Cambridge, Massachusetts. The site will become a new global innovation and research and development center for its biopharmaceuticals business.
- A lease expansion and extension with existing tenant Bristol-Myers Squibb (BMS) at our Woodside Technology Park life science campus in the Bay Area. Altogether BMS will occupy a total of approximately 194,000 square feet for its hub of research in pioneering cancer therapies in the emerging field of immunotherapy.
- Leases totaling approximately 125,000 square feet with two companies co-founded by world-renowned genomics pioneer J. Craig Venter at our 4570 Executive Drive property in San Diego.
We specialize in developments that meet the needs of our growing tenants, from biotechnology and pharmaceutical companies to universities and research institutes.
We excel at collaborating with a variety of partners to create knowledge communities – vibrant, mixed-use, amenity-rich environments where innovation thrives. Although each of these developments is different, they all share a common purpose: helping our tenants achieve their scientific and strategic goals.
To deliver on this vision, we use best practices, leading-edge technologies and a flexible, modular design that optimizes spaces for every use. As a result, we create developments that take full advantage of our deep industry experience to deliver value for tenants, communities and ultimately our stockholders.
In Philadelphia we delivered our 3737 Market Street property on time and on budget with our partner, the University City Science Center. Located next to our 3711 Market Street property, it is adjacent to the University of Pennsylvania and Drexel University and is now 100% leased. We also partnered with Drexel to buy the neighboring site, giving us another over two million square feet of development potential over the next 10 years.
Winston-Salem, North Carolina is a rapidly growing core innovation district anchored by Wake Forest University. This vibrant area for life science innovation has been one of our most active markets for development as we continue to preserve and reposition key portions of the R.J. Reynolds’ historic tobacco warehouses in downtown Winston-Salem. Through the end of 2014 we completed the development and leasing of almost 700,000 square feet at the site and in late 2014, we announced plans to begin construction on an additional 283,000 square foot expansion of the Innovation Quarter to be anchored by Wake Forest University School of Medicine. In the years ahead, we expect to play a pivotal role in realizing the full potential of this burgeoning urban research park.
As of year-end, we were creating almost 1.7 million square feet of new space from our construction pipeline to deliver growth opportunities for our tenants and the life science community and long-term value at the asset level. These projects will be Class A facilities located on irreplaceable sites and anchored by world-renowned members of the life science community:
- In Seattle’s South Lake Union district – one of the most vibrant innovation districts – we broke ground on a 123,000 square foot building that is next to our fully leased 101,000 square foot building on Fairview Avenue. Together, the two buildings comprising approximately 224,000 square feet, known as the BioMed Realty Research Center, will provide additional institutional, Class A laboratory and office space for our premier tenants in Seattle. Our new development will give them room to grow and access to a full range of amenities within the Center and throughout the South Lake Union neighborhood.
- In New York, we continue to expand our campus at The Landmark at Eastview to support the breathtaking growth of our long-time, and now largest, tenant – Regeneron Pharmaceuticals. After breaking ground in the fourth quarter of 2013, this 297,000 square foot, state-of-the-art expansion is expected to be delivered to Regeneron by the end of 2015.
- In Cambridge, Massachusetts, we began construction on a 63,000 square foot, five-story ground-up development at 450 Kendall Street in the heart of Kendall Square, arguably the global epicenter for life science research. Scheduled to be completed by mid-year 2015, 450 Kendall is in very close proximity to our other three iconic properties on Kendall Square – 500 Kendall Street, 675 West Kendall Street and 650 East Kendall Street, the new home of Baxter Healthcare. MPM Capital – one of the top venture capital firms in the Boston area specializing in funding life science companies – became the first tenant at 450 Kendall with a new long-term lease, relocating its headquarters in order to be closer to its demand drivers in the burgeoning life science community of Cambridge.
- In the United Kingdom, we see continuing global interest in the Cambridge area specifically, which again demonstrates the critical factor of proximity and access to academia that drives the demand for real estate. Following up on our first U.K. investment at Granta Park in 2012, we are nearing completion on a build-to-suit development for Takeda Pharmaceuticals in the Cambridge Science Park. Upon expected completion in the third quarter of 2015, we will deliver a 42,000 square foot build-to-suit research facility, which is adjacent to Takeda’s existing building where the company has developed an extensive drug pipeline, including treatments for Alzheimer’s, diabetes, obesity and inflammatory disease.
We are investing in markets with core research universities and medical research institutions to drive life science innovation for decades to come.
Last April we invested in two properties in the growing life science research community adjacent to the Yale School of Medicine in New Haven, Connecticut, with the acquisition of 300 George Street and 100 College Street. The transaction brings our university-based, knowledge community platform to New Haven for the first time.
300 George Street – a nine-story, 519,000 square foot laboratory and office building – is anchored by long-term leases to Yale University and the Yale-New Haven Hospital. The 100 College Street building, currently under construction, will be a 14-story, 510,000 square foot laboratory and office project fully leased to Alexion Pharmaceuticals.
In December we announced the strategic sale of a biological manufacturing facility in Rockville, Maryland for approximately $322.5 million in gross proceeds, resulting in a gain on sale of approximately $136.0 million, net of closing costs.
The 289,900 square foot facility, which sold for $1,112 per square foot, is fully leased to Human Genome Sciences, Inc. (HGSI), a wholly-owned subsidiary of GlaxoSmithKline. At the same time, we retained ownership of a neighboring 635,000 square foot building, also leased to HGSI, and an adjacent land parcel with approximately 500,000 square feet of future development potential.
The transformative disposition is the latest example of our ability to create value at the asset level as we successfully harvested the value of one small piece of our portfolio, enabling us reinvest some of the proceeds into future higher-growth opportunities and reward our stockholders with a special dividend of $0.30 per share of common stock.
We have long understood that collaboration is essential to our success. That’s why we cultivate strategic partnerships that connect us to what’s coming next in the life sciences.
In 2014 we announced a strategic partnership with the Broad Institute of MIT and Harvard to foster innovation and promote relationships within the life science community. Through our strategic investment group, BioMed Ventures, we will work with the Broad Institute to engage biomedical leaders though events that spark conversations across academia, the life science industry and the investment sector.
This is just the latest partnership we have formed to advance this multidisciplinary dialogue. In addition, we have developed a powerful leadership connection with the Salk Institute for Biological Studies, one of the world’s preeminent basic research institutions. Alan Gold, our Chairman, President and CEO, serves on the Salk Institute board of trustees. At the same time, Dr. William R. Brody, President of the Salk Institute, is a member of our board of directors. Recognized internationally for his accomplishments in biomedical engineering, Dr. Brody previously served as President of The Johns Hopkins University and co-founded three medical device companies during his distinguished career.
Over the years we also have built a longstanding partnership with the J. Craig Venter Institute, a world leader in genomic research which leases space from BioMed Realty in Rockville, Maryland. In addition, two other companies co-founded by genomics research pioneer J. Craig Venter lease space from BioMed Realty in San Diego.
These partnerships are designed to leverage innovative research organizations and our core real estate acumen to create meaningful connection points between academia, biotech and pharmaceutical companies and the investment community. As a result, we can broaden our pipeline of prospective tenants, identify attractive investment opportunities in our core markets, and most importantly, continue to deliver space that meets the current and future needs of the industry.