UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

BIOMED REALTY TRUST, INC.

Maryland		20-1142292
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
17140 Bernardo Center Drive, Suite 222
San Diego, California		92128
(Address of Principal Executive Offices)		(Zip 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 Securities Exchange Act of 1934 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. Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ           Accelerated filer o           Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     The number of outstanding shares of the registrant’s common stock, par value $0.01 per share, as of November 7, 2007 was 65,465,839.

 

 

BIOMED REALTY TRUST, INC.

FORM 10-Q — QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007
TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements			3
Consolidated Balance Sheets as of September 30, 2007 (Unaudited) and December 31, 2006			3
Consolidated Statements of Income for the three and nine months ended September 30, 2007 and 2006 (Unaudited)			4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006 (Unaudited)			5
Notes to Consolidated Financial Statements (Unaudited)			6
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations.			22
Item 3 Quantitative and Qualitative Disclosures About Market Risk			33
Item 4 Controls and Procedures			34
PART II — OTHER INFORMATION
Item 1 Legal Proceedings			34
Item 1A Risk Factors			34
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 3 Defaults Upon Senior Securities			34
Item 4 Submission of Matters to a Vote of Security Holders			35
Item 5 Other Information			35
Item 6 Exhibits			35
SIGNATURES			36
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 10.6
EXHIBIT 10.7
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

PART 1 — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

BIOMED REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

		September 30, 2007				December 31, 2006
		(Unaudited)
ASSETS
Investments in real estate, net		$	2,742,603			$	2,457,538
Investment in unconsolidated partnerships			21,741				2,436
Cash and cash equivalents			18,424				25,664
Restricted cash			10,003				6,426
Accounts receivable, net of allowance for doubtful accounts of $1,602 and $1,240 as of September 30, 2007 and December 31, 2006, respectively			3,722				5,985
Accrued straight-line rents, net			32,012				20,446
Acquired above-market leases, net			6,339				7,551
Deferred leasing costs, net			119,699				129,322
Deferred loan costs, net			17,052				17,608
Prepaid expenses			4,608				3,627
Other assets			31,959				16,039
Total assets		$	3,008,162			$	2,692,642
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgage notes payable, net		$	397,341			$	403,836
Secured construction loan			389,904				286,355
Secured term loan			250,000				250,000
Exchangeable senior notes			175,000				175,000
Unsecured line of credit			216,847				228,165
Security deposits			7,513				7,704
Dividends and distributions payable			25,557				19,847
Accounts payable, accrued expenses, and other liabilities			81,195				62,602
Acquired below-market leases, net			25,220				25,101
Total liabilities			1,568,577				1,458,610
Minority interests			19,269				19,319
Stockholders’ equity:
Preferred stock, $.01 par value, 15,000,000 shares authorized: 7.375% Series A cumulative redeemable preferred stock, $230,000,000 liquidation preference ($25.00 per share), 9,200,000 shares issued and outstanding at September 30, 2007			222,413				—
Common stock, $.01 par value, 100,000,000 shares authorized, 65,465,839 and 65,425,598 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively			655				654
Additional paid-in capital			1,275,347				1,272,243
Accumulated other comprehensive income			6,945				8,417
Dividends in excess of earnings			(85,044	)			(66,601	)
Total stockholders’ equity			1,420,316				1,214,713
Total liabilities and stockholders’ equity		$	3,008,162			$	2,692,642

See accompanying notes to consolidated financial statements.

BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2007				2006				2007				2006
		(Unaudited)
Revenues:
Rental		$	49,382			$	49,197			$	146,351			$	115,808
Tenant recoveries			15,084				14,632				47,264				39,870
Other income			366				9				8,445				79
Total revenues			64,832				63,838				202,060				155,757
Expenses:
Rental operations			12,789				11,030				38,784				30,030
Real estate taxes			5,079				5,682				16,538				14,409
Depreciation and amortization			17,665				18,481				54,556				46,283
General and administrative			5,283				4,609				15,990				13,162
Total expenses			40,816				39,802				125,868				103,884
Income from operations			24,016				24,036				76,192				51,873
Equity in net (loss)/income of unconsolidated partnerships			(261	)			20				(694	)			62
Interest income			239				218				809				813
Interest expense			(7,043	)			(13,346	)			(21,013	)			(30,383	)
Income from continuing operations before minority interests			16,951				10,928				55,294				22,365
Minority interests in continuing operations of consolidated partnerships			51				15				(61	)			115
Minority interests in continuing operations of operating partnership			(545	)			(497	)			(1,821	)			(1,131	)
Income from continuing operations			16,457				10,446				53,412				21,349
Income from discontinued operations before (loss)/gain on sale of assets and minority interests			—				383				639				1,156
(Loss)/gain on sale of real estate assets			(1	)			—				1,087				—
Minority interests attributable to discontinued operations			—				(17	)			(74	)			(61	)
(Loss)/income from discontinued operations			(1	)			366				1,652				1,095
Net income			16,456				10,812				55,064				22,444
Preferred stock dividends			(4,241	)			—				(12,628	)			—
Net income available to common stockholders		$	12,215			$	10,812			$	42,436			$	22,444
Income from continuing operations per share available to common stockholders:
Basic and diluted earnings per share		$	0.19			$	0.17			$	0.62			$	0.40
Net income per share available to common stockholders:
Basic and diluted earnings per share		$	0.19			$	0.18			$	0.65			$	0.42
Weighted-average common shares outstanding:
Basic			65,308,702				60,477,672				65,300,802				52,822,498
Diluted			68,274,908				63,646,647				68,262,086				55,926,343

See accompanying notes to consolidated financial statements.

BIOMED REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		Nine Months Ended
		September 30,
		2007				2006
		(Unaudited)
Operating activities:
Net income		$	55,064			$	22,444
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of real estate assets			(1,087	)			—
Depreciation and amortization, including amounts for discontinued operations			54,784				46,694
Minority interests in consolidated partnerships			61				(115	)
Minority interests in operating partnership and discontinued operations			1,895				1,192
Allowance for doubtful accounts			281				118
Revenue reduction attributable to acquired above-market leases			1,857				1,840
Revenue recognized related to acquired below-market leases			(4,347	)			(3,588	)
Compensation expense related to restricted common stock and LTIP units			4,064				2,887
Amortization of deferred loan costs			2,278				1,322
Amortization of debt premium on mortgage notes payable			(596	)			(1,837	)
Loss/(income) from unconsolidated partnerships			694				(62	)
Distributions received from unconsolidated partnerships			328				100
Distributions to minority interest in consolidated partnerships			(108	)			—
Changes in operating assets and liabilities:
Restricted cash			(3,577	)			(613	)
Accounts receivable			1,982				5,139
Accrued straight-line rents			(11,566	)			(7,845	)
Deferred leasing costs			(7,267	)			(1,507	)
Prepaid expenses			(981	)			(3,817	)
Other assets			(3,081	)			(531	)
Security deposits			(164	)			(668	)
Accounts payable, accrued expenses and other liabilities			(7,450	)			10,553
Net cash provided by operating activities			83,064				71,706
Investing activities:
Purchases of interests in and additions to investments in real estate and related intangible assets			(313,081	)			(799,291	)
Purchases of interests in unconsolidated partnerships			(20,327	)			—
Proceeds from sale of real estate assets, net of selling costs			19,389				—
Minority interest investment in consolidated partnerships			205				337
Receipts of master lease payments			696				454
Security deposits received from prior owners of rental property			—				319
Additions to non-real estate assets			(307	)			(1,094	)
Funds held in escrow for acquisitions			(12,399	)			(2,100	)
Net cash used in investing activities			(325,824	)			(801,375	)
Financing activities:
Proceeds from common stock offering			—				528,784
Proceeds from exercise of common stock warrant			—				4,050
Proceeds from preferred stock offering			230,000				—
Payment of common stock offering costs			—				(21,866	)
Payment of preferred stock offering costs			(7,587	)			—
Payment of deferred loan costs			(3,809	)			(8,138	)
Unsecured line of credit proceeds			232,137				392,311
Unsecured line of credit repayments			(243,455	)			(409,311	)
Secured bridge loan proceeds			—				150,000
Secured bridge loan payments			—				(150,000	)
Exchangeable notes proceeds			—				175,000
Mortgage notes proceeds			—				147,000
Principal payments on mortgage notes payable			(4,547	)			(3,990	)
Secured construction loan proceeds			103,549				—
Tenant improvement loan			—				(2,000	)
Tenant improvement loan repayments			91				24
Distributions to operating partnership unit and LTIP unit holders			(2,914	)			(2,434	)
Dividends paid to common stockholders			(59,558	)			(42,755	)
Dividends paid to preferred stockholders			(8,387	)			—
Net cash provided by financing activities			235,520				756,675
Net (decrease)/increase in cash and cash equivalents			(7,240	)			27,006
Cash and cash equivalents at beginning of period			25,664				20,312
Cash and cash equivalents at end of period		$	18,424			$	47,318

		Nine Months Ended
		September 30,
		2007				2006
		(Unaudited)
Supplemental disclosure of cash flow information:
Cash paid during the period for interest (net of amounts capitalized of $40,642 and $1,284, respectively)		$	21,582			$	29,814
Supplemental disclosure of non-cash investing and financing activities:
Accrual for preferred stock dividends declared		$	4,241			$	—
Accrual for common stock dividends declared			20,294				18,993
Accrual for distributions declared for partnership unit and LTIP unit holders			1,022				830
Mortgage loans assumed (includes premium of $236 for the nine months ended September 30, 2006)			—				2,001
Accrued additions to real estate and related intangible assets			52,174				5,270
Change in minority interest for vesting of LTIP units			959				—

See accompanying notes to consolidated financial statements.

BIOMED REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Description of Business

     BioMed Realty Trust, Inc., a Maryland corporation (the “Company”) was incorporated in Maryland on April 30, 2004. On August 11, 2004, the Company commenced operations after completing its initial public offering. The 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 (its “Operating Partnership”). 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 Diego, San Francisco, Seattle, Maryland, Pennsylvania and New York/New Jersey.

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 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 our annual report on Form 10-K for the year ended December 31, 2006.

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 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 minority 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 shareholder. If the minority shareholder holds substantive participating rights, it overcomes the presumption of control by the majority voting interest holder. In contrast, if the minority shareholder 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.

Investments in Partnerships

     The Company evaluates its investments in limited liability companies and partnerships under Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46R”), an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46R provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities”) and the determination of which business enterprise should consolidate the variable interest entity (the “primary beneficiary”). Generally, FIN 46R applies when either (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest, (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.

     If FIN 46R does not apply, the Company considers Emerging Issues Task Force (“EITF”) Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-5”), which provides guidance in determining whether a general partner controls a limited partnership. EITF 04-5 states that the general partner in a limited partnership is presumed to control that limited partnership. The presumption may be overcome if the limited partners have either (1) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause or (2) substantive participating rights, which provide the limited partners with the ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of the limited partnership’s business and thereby preclude the general partner from exercising unilateral control over the partnership. If the criteria in EITF 04-5 are met, the consolidation of the partnership or limited liability company is required.

     Except for investments that are consolidated in accordance with FIN 46R or EITF 04-5, the Company accounts for investments in entities over which it exercises significant influence, but does not control, under the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for equity in earnings and cash contributions and distributions. Under the equity method of accounting, the Company’s net equity in the investment is reflected in the consolidated balance sheets and its share of net income or loss is included in the Company’s consolidated statements of income.

     On a periodic basis, management assesses whether there are any indicators that the carrying value of the Company’s investments in partnerships or limited liability companies may be impaired on a more than temporary basis. An investment is impaired only if management’s estimate of the fair-value of the investment is less than the carrying value of the investment. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying value of the investment over the fair-value of the investment. Management does not believe that the value of any of the Company’s investments in partnerships or limited liability companies was impaired as of September 30, 2007.

Investments in Real Estate

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

		September 30, 2007				December 31, 2006
Land		$	307,504			$	270,286
Ground lease			6,243				14,210
Land under development			103,827				85,362
Buildings and improvements			1,670,484				1,598,384
Construction in progress			688,741				497,971
Tenant improvements			59,503				51,904
			2,836,302				2,518,117
Accumulated depreciation			(93,699	)			(60,579	)
		$	2,742,603			$	2,457,538

     The purchase prices of the acquisitions completed in the first nine months of 2007 have been allocated on a preliminary basis to the assets acquired and the liabilities assumed. The Company expects to finalize its purchase price allocation no later than twelve months from the date of acquisition (See Note 10).

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 less costs to sell, and such loss could be material. If the Company determines that impairment has occurred, the affected assets must be reduced to their fair-value. As of and through September 30, 2007, no assets have been identified as impaired and no such impairment losses have been recognized.

Deferred Leasing Costs

     Leasing commissions and other direct costs associated with new or renewal lease activity are recorded at cost and amortized on a straight-line basis over the terms of the respective leases, with remaining terms ranging from two months to approximately 16 years as of September 30, 2007. Deferred leasing costs also include the net carrying value of acquired in-place leases and acquired management agreements.

     The balance at September 30, 2007 was comprised as follows (in thousands):

		Balance at
		September 30,				Accumulated
		2007				Amortization				Net
Acquired in-place leases		$	167,663			$	(65,821	)		$	101,842
Acquired management agreements			12,921				(6,109	)			6,812
Deferred leasing and other direct costs			12,310				(1,265	)			11,045
		$	192,894			$	(73,195	)		$	119,699

     The balance at December 31, 2006 was comprised as follows (in thousands):

		Balance at
		December 31,				Accumulated
		2006				Amortization				Net
Acquired in-place leases		$	162,935			$	(47,066	)		$	115,869
Acquired management agreements			12,601				(4,574	)			8,027
Deferred leasing and other direct costs			6,122				(696	)			5,426
		$	181,658			$	(52,336	)		$	129,322

Revenue Recognition

     The Company commences revenue recognition on its leases based on a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. Generally, this occurs on the lease commencement date. In determining what constitutes the leased asset, the Company evaluates whether the Company or the lessee is the owner, for accounting purposes, of the tenant improvements. If the Company is the owner, for accounting purposes, of the tenant improvements, then the leased asset is the finished space and revenue recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete. If the Company concludes that it is not the owner, for accounting purposes, of the tenant improvements (the lessee is the owner), then the leased asset is the unimproved space and any tenant improvement allowances funded under the lease are treated as lease incentives which reduce revenue recognized over the term of the lease. In these circumstances, the Company begins revenue recognition when the lessee takes possession of the unimproved space for the lessee to construct improvements. The determination of who is the owner, for accounting purposes, of the tenant improvements determines the nature of the leased asset and when revenue recognition under a lease begins. The Company considers a number of different factors to evaluate whether it or the lessee is the owner of the tenant improvements for accounting purposes. These factors include:

	•		whether the lease stipulates how and on what a tenant improvement allowance may be spent;
	•		whether the tenant or landlord retain legal title to the improvements;

	•		the uniqueness of the improvements;
	•		the expected economic life of the tenant improvements relative to the length of the lease;
	•		the responsible party for construction cost overruns; and
	•		who constructs or directs the construction of the improvements.

     The determination of who owns the tenant improvements, for accounting purposes, is subject to significant judgment. In making that determination, the Company considers all of the above factors. However, no one factor is determinative in reaching a conclusion.

     All leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the term of the related lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in accrued straight-line rents on the accompanying consolidated balance sheets and contractually due but unpaid rents are included in accounts receivable. Existing leases at acquired properties are reviewed at the time of acquisition to determine if contractual rents are above or below current market rents for the acquired property. An identifiable lease intangible asset or liability is recorded based on the present value (using a discount rate that reflects the risks associated with the acquired leases) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) the Company’s estimate of the fair market lease rates for the corresponding in-place leases at acquisition, measured over a period equal to the remaining non-cancelable term of the leases. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the remaining non-cancelable terms of the respective leases. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangible will be written off.

     The balance of acquired above-market leases, net was comprised as follows (in thousands):

		September 30,				December 31,
		2007				2006
Acquired above-market leases		$	12,729			$	12,084
Accumulated amortization			(6,390	)			(4,533	)
		$	6,339			$	7,551

     The balance of acquired below-market leases, net was comprised as follows (in thousands):

		September 30,				December 31,
		2007				2006
Acquired below-market leases		$	37,961			$	33,495
Accumulated amortization			(12,741	)			(8,394	)
		$	25,220			$	25,101

     Substantially all rental operations expenses, consisting of real estate taxes, insurance and common area maintenance costs are recoverable from tenants under the terms of lease agreements. Amounts recovered are dependent on several factors, including occupancy and lease terms. Revenues are recognized in the period the expenses are incurred. The reimbursements are recognized and presented in accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent (“EITF 99-19”). EITF 99-19 requires that these reimbursements be recorded gross, as the Company is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the credit risk.

     Lease termination fees are recognized when the related leases are canceled and the Company has no continuing obligation to provide services to such former tenants. A gain on early termination of leases of $7.7 million for the nine months ended September 30, 2007 is included in other income in the 2007 consolidated statements of income. A portion of the related straight-line rent receivables and remaining other related intangible assets corresponding to the lease terminations was fully amortized in 2006 and approximately $1.6 million was fully amortized for the nine months ended September 30, 2007.

Incentive Awards

     Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), Share-Based Payment, requires that all share-based payments to employees be recognized in the income statement based on their fair-value. The fair-value is recorded based on the market value of the common stock on the grant date and is amortized to general and administrative expense and rental operations expense over the relevant service period, adjusted for anticipated forfeitures. Through the nine months ended September 30, 2007, the Company only awarded restricted stock and long-term incentive plan (“LTIP”) unit grants under its incentive award plan (see Note 8), which are valued based on the market value of the underlying common stock, and did not grant any stock options.

Derivative Instruments

     The Company records all derivatives on the balance sheet at fair-value. The accounting for changes in the fair-value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair-value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair-value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

     For derivatives designated as cash flow hedges, the effective portion of changes in the fair-value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair-value of the derivative is recognized directly in earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction.

     The Company’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps as part of its cash flow hedging strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. During 2006 and the nine months ended September 30, 2007, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt and future variability in the interest related cash flows from forecasted issuances of debt (see Notes 6 and 13). The Company formally documents the hedging relationships for all derivative instruments, accounts for all of its interest rate swap agreements as cash flow hedges, and does not use derivatives for trading or speculative purposes.

Management’s Estimates

     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 revenues 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 revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions.

Reclassifications

     Certain prior year amounts have been reclassified to conform to the current year presentation.

3. Minority Interests

     Minority interests on the consolidated balance sheets relate primarily to the partnership and LTIP units in the Operating Partnership (collectively, the “Units”) that are not owned by the Company. In conjunction with the formation of the Company, certain persons and entities contributing interests in properties to the Operating

Partnership received partnership units. In addition, certain limited partners of the Operating Partnership have received LTIP units in connection with services rendered or to be rendered to the Operating Partnership. Limited partners who have been issued Units have the right to require the Operating Partnership to redeem part or all of their Units upon vesting of the Units, if applicable. The Company may elect to acquire those Units in exchange for shares of the Company’s common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events, or pay cash based upon the fair market value of an equivalent number of shares of the Company’s common stock at the time of redemption.

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

		September 30, 2007								December 31, 2006
		Partnership units				Percentage of				Partnership units				Percentage of
		and LTIP units				total				and LTIP units				total
BioMed Realty Trust			65,308,702				95.7	%			65,151,884				95.8	%
Minority interest consisting of:
Partnership and LTIP units held by employees and related parties			2,726,172				4.0	%			2,673,172				3.9	%
Partnership units held by third parties			190,392				0.3	%			190,392				0.3	%
Total			68,225,266				100.0	%			68,015,448				100.0	%

     Minority interests also include the 11% interest of a limited partner in the limited partnership that owns the King of Prussia property, the 30% interest of a member in the limited liability company that owns the Waples property, the 30% interest of a member in the limited liability company that owns the Fairview property, and the 12.5% interest of a member in the limited liability company that owns the Ardenwood property, which are consolidated entities of the Company. On October 1, 2007, pursuant to the exercise of a put option by the minority interest limited partner in the limited partnership that owns the King of Prussia property, the Company completed the purchase of the remaining 11% interest for a purchase price of approximately $1.8 million, excluding closing costs.

4. Stockholders’ Equity

     During the nine months ended September 30, 2007, the Company issued restricted stock awards to employees and to the members of its board of directors totaling 38,500 shares and 10,000 shares, respectively, of common stock (8,259 shares were forfeited during the same period), which are included in the total of common stock outstanding as of the period end (see Note 7). During the nine months ended September 30, 2007, the Company also issued 282,000 LTIP units to employees, which are included in the total of common stock outstanding as of the period end (see Note 7).

     In June 2007 the Company adopted a Dividend Reinvestment Program and a Cash Option Purchase Plan (collectively, the “DRIP Plan”) to provide existing stockholders of the Company with an opportunity to invest automatically the cash dividends paid upon shares of the Company’s common stock held by them, as well as permit existing and prospective stockholders to make voluntary cash purchases. Participants may elect to reinvest a portion of, or the full amount of cash dividends paid, whereas optional cash purchases are normally limited to a maximum amount of $10,000. In addition, the Company may elect to establish a discount ranging from 0% to 5% from the market price applicable to newly issued shares of common stock purchased directly from the Company. The Company may change the discount, initially set at 0%, at its discretion, but may not change the discount more frequently than once in any three-month period. Shares purchased under the DRIP Plan shall be, at the Company’s option, purchased from either (1) authorized, but previously unissued shares of common stock, (2) shares of common stock purchased in the open market or privately negotiated transactions, or (3) a combination of both.

Common Stock, Partnership Units and LTIP Units

     As of September 30, 2007, the Company had outstanding 65,465,839 shares of common stock and 2,863,564 and 432,666 partnership and LTIP units, respectively. A share of the Company’s common stock and the 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. The partnership units are further discussed in Note 3 and the LTIP units are discussed in Notes 3 and 8.

7.375% Series A Cumulative Redeemable Preferred Stock

     As of September 30, 2007, the Company had outstanding 9,200,000 shares of 7.375% Series A cumulative redeemable preferred stock, or Series A preferred stock. Dividends are cumulative on the Series A preferred stock from the date of original issuance in the amount of $1.84375 per share each year, which is equivalent to 7.375% of the $25.00 liquidation preference per share. Dividends on the Series A preferred stock are payable quarterly in arrears on or about the 15th day of January, April, July and October of each year. Following a change in control, if the Series A preferred stock is not listed on the New York Stock Exchange, the American Stock Exchange or the Nasdaq Global Market, holders will be entitled to receive (when and as authorized by the board of directors and declared by the Company), cumulative cash dividends from, but excluding, the first date on which both the change of control and the delisting occurred at an increased rate of 8.375% per annum of the $25.00 liquidation preference per share (equivalent to an annual rate of $2.09375 per share) for as long as the Series A preferred stock is not listed. The Series A preferred stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the Series A preferred stock will rank senior to the Company’s common stock with respect to the payment of distributions and other amounts. The Company is not allowed to redeem the Series A preferred stock before January 18, 2012, except in limited circumstances to preserve its status as a REIT. On or after January 18, 2012, the Company may, at its option, redeem the Series A preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on such Series A preferred stock up to, but excluding the redemption date. Holders of the Series A preferred stock generally have no voting rights except for limited voting rights if the Company fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. The Series A preferred stock is not convertible into or exchangeable for any other property or securities of the Company.

Dividends and Distributions

     The following table lists the dividends and distributions made by the Company and the Operating Partnership during the nine months ended September 30, 2007:

										Dividend and		Dividend and
				Amount Per						Distribution		Distribution Amount
Declaration Date		Securities Class		Share/Unit				Period Covered		Payable Date		(in thousands)
March 15, 2007.		Common stock and partnership and LTIP units		$	0.31000			January 1, 2007 to March 31, 2007		April 16, 2007		$	21,309
March 15, 2007.		Series A preferred stock		$	0.45582			January 18, 2007 to April 16, 2007		April 16, 2007		$	4,193
June 15, 2007.		Common stock and partnership and LTIP units		$	0.31000			April 1, 2007 to June 30, 2007		July 16, 2007		$	21,315
June 15, 2007.		Series A preferred stock		$	0.45582			April 17, 2007 to July 15, 2007		July 16, 2007		$	4,194
September 14, 2007		Common stock and partnership and LTIP units		$	0.31000			July 1, 2007 to September 30, 2007		October 15, 2007		$	21,316
September 14, 2007		Series A preferred stock		$	0.46094			July 16, 2007 to October 15, 2007		October 15, 2007		$	4,241

Total 2007 dividends and distributions declared through September 30, 2007:
Common stock, partnership units, and LTIP units		$	63,940
Series A preferred stock			12,628
		$	76,568

Accumulated Other Comprehensive Income

     The following tables provide a reconciliation of comprehensive income (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2007				2006				2007				2006
Net income available to common stockholders		$	12,215			$	10,812			$	42,436			$	22,444
Unrealized (loss)/gain on interest rate swap agreements			(19,606	)			(5,211	)			(1,472	)			513
Comprehensive (loss)/income		$	(7,391	)		$	5,601			$	40,964			$	22,957

5. Mortgage Notes Payable

     A summary of the Company’s outstanding consolidated mortgage notes payable was as follows (dollars in thousands):

		Stated Fixed				Effective				Principal Balance
		Interest				Interest				September 30,				December 31,
		Rate				Rate				2007				2006				Maturity Date
Ardentech Court			7.25	%			5.06	%		$	4,589			$	4,658			July 1, 2012
Bayshore Boulevard			4.55	%			4.55	%			15,435				15,730			January 1, 2010
Bridgeview Technology Park I			8.07	%			5.04	%			11,538				11,625			January 1, 2011
Eisenhower Road			5.80	%			4.63	%			2,122				2,164			May 5, 2008
Elliott Avenue			7.38	%			4.63	%			15,615				16,020			November 24, 2007
40 Erie Street			7.34	%			4.90	%			17,895				18,676			August 1, 2008
500 Kendall Street (Kendall D)			6.38	%			5.45	%			69,827				70,963			December 1, 2018
Lucent Drive			5.50	%			5.50	%			5,591				5,733			January 21, 2015
Monte Villa Parkway			4.55	%			4.55	%			9,397				9,576			January 1, 2010
6828 Nancy Ridge Drive			7.15	%			5.38	%			6,808				6,872			September 1, 2012
Road to the Cure			6.70	%			5.78	%			15,482				15,657			January 31, 2014
Science Center Drive			7.65	%			5.04	%			11,338				11,444			July 1, 2011
Shady Grove Road			5.97	%			5.97	%			147,000				147,000			September 1, 2016
Sidney Street			7.23	%			5.11	%			30,178				30,732			June 1, 2012
9885 Towne Centre Drive			4.55	%			4.55	%			21,463				21,872			January 1, 2010
900 Uniqema Boulevard			8.61	%			5.61	%			1,545				1,648			May 1, 2015
											385,823				390,370
Unamortized premiums											11,518				13,466
										$	397,341			$	403,836

     Premiums were recorded upon assumption of the mortgage notes payable at the time of acquisition to account for above-market interest rates. Amortization of these premiums is recorded as a reduction to interest expense over the remaining term of the respective note using the effective-interest method.

6. Credit Facilities, Exchangeable Notes, and Other Debt Instruments

Unsecured Line of Credit

     The Company’s unsecured line of credit with KeyBank National Association (“KeyBank”) and other lenders was amended on August 1, 2007 to increase the borrowing capacity from $500.0 million to $600.0 million and extend the maturity date to August 1, 2011. The unsecured line of credit bears interest at a floating rate equal to, at the Company’s option, either (1) reserve adjusted LIBOR plus a spread which ranges from 100 to 155 basis points, depending on the Company’s leverage, or (2) the higher of (a) the prime rate then in effect plus a spread which ranges from 0 to 25 basis points, or (b) the federal funds rate then in effect plus a spread which ranges from 50 to 75 basis points, in each case, depending on the Company’s leverage. The Company may increase the amount of the unsecured line of credit to $1.0 billion subject to certain conditions. In addition, the Company, at its sole discretion, may extend the maturity date of the unsecured line of credit to August 1, 2012 after satisfying certain conditions and paying an extension fee based on the then current facility commitment. In September 2007, the Company entered into three interest rate swap agreements, which were intended to have the effect of initially fixing the interest rate on $205.0 million of the unsecured line of credit at a weighted average rate of 5.8% through September 2008. The Company has deferred the loan costs associated with the subsequent amendments to the unsecured line of credit, which are being amortized to expense with the unamortized loan costs from the original debt facility over the remaining term. At September 30, 2007, the Company had $216.8 million in outstanding borrowings on its unsecured line of credit, with a weighted average interest rate of 6.5% on the unhedged portion of the outstanding debt.

Secured Term Loan

     The Company’s $250.0 million secured term loan from KeyBank and other lenders, which is secured by the Company’s interests in 14 of its properties, was amended on August 1, 2007 and has a new maturity date of August 1, 2012. The secured term loan bears interest at a floating rate equal to, at the Company’s option, either (1) reserve-adjusted LIBOR plus 165 basis points or (2) the higher of (a) the prime rate then in effect plus 25 basis points or (b) the federal funds rate then in effect plus 75 basis points. The secured term loan is also secured by the Company’s interest in any distributions from these properties, a pledge of the equity interests in a subsidiary owning one of these properties, and a pledge of the equity interests in a subsidiary owning an interest in another of these properties. The Company entered into an interest rate swap agreement in connection with the initial closing of the secured term loan, which has the effect of fixing the interest rate on the secured term loan at 5.8% until the interest rate swap expires in 2010. At September 30, 2007, the Company had $250.0 million in outstanding borrowings on its secured term loan.

     The terms of the credit agreements for the unsecured line of credit and secured term loan include certain restrictions and covenants, which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens. The terms also require compliance with financial ratios relating to the minimum amounts of net worth, fixed charge coverage, unsecured debt service coverage, the maximum amount of secured, and secured recourse indebtedness, leverage ratio and certain investment limitations. The dividend restriction referred to above provides that, except to enable the Company to continue to qualify as a REIT for federal income tax purposes, the Company will not make distributions with respect to common stock or other equity interests in an aggregate amount for the preceding four fiscal quarters in excess of 95% of funds from operations, as defined, for such period, subject to other adjustments. Management believes that it was in compliance with the covenants as of September 30, 2007.

Exchangeable Senior Notes

     On September 25, 2006, the Operating Partnership issued $175.0 million aggregate principal amount of its 4.50% Exchangeable Senior Notes due 2026 (the “Notes”). The Notes are general senior unsecured obligations of the Operating Partnership and rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership. Interest at a rate of 4.50% per annum is payable on April 1 and October 1 of each year, beginning on April 1, 2007, until the stated maturity date of October 1, 2026. The terms of the Notes are governed by an indenture, dated September 25, 2006, among the Operating Partnership, as issuer, the Company, as guarantor, and U.S. Bank National Association, as trustee. The Notes contain an exchange settlement feature, which provides that the Notes may, on or after September 1, 2026 or under certain other circumstances, be exchangeable for cash (up to the principal amount of the Notes) and, with respect to excess exchange value, into, at the Company’s option, cash, shares of the Company’s common stock or a combination of cash and shares of common stock at the then applicable exchange rate. The initial exchange rate is 26.4634 shares per $1,000 principal amount of Notes, representing an exchange price of approximately $37.79 per share. If certain designated events occur on or prior to October 6, 2011 and a holder elects to exchange Notes in connection with any such transaction, the Company will increase the exchange rate by a number of additional shares of common stock based on the date the transaction becomes effective and the price paid per share of common stock in the transaction, as set forth in the indenture governing the Notes. The exchange rate may also be adjusted under certain other circumstances, including the payment of cash dividends in excess of $0.29 per share of common stock. The increase in the cash dividend to $0.31 per share of common stock for each of the first three quarters of 2007 did not result in a material change to the exchange rate. The Operating Partnership may redeem the Notes, in whole or in part, at any time to preserve the Company’s status as a REIT or at any time on or after October 6, 2011 for cash at 100% of the principal amount plus accrued and unpaid interest. The holders of the Notes have the right to require the Operating Partnership to repurchase the Notes, in whole or in part, for cash on each of October 1, 2011, October 1, 2016 and October 1, 2021, or upon the occurrence of a designated event, in each case for a repurchase price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest. At September 30, 2007, the Company had an aggregate principal amount of $175.0 million outstanding under the Notes.

Secured Construction Loan

     The Company’s $550.0 million secured construction loan from KeyBank is secured by the Company’s Center for Life Science | Boston property. The loan is separated into four tranches of notes, tranches A, B-1, B-2 and C, and bears interest at a blended rate equal to, at the Company’s option, either (1) LIBOR plus approximately 122.5 basis points or (2) the higher of (a) the prime rate then in effect or (b) the federal funds rate then in effect plus 50 basis points. The loan matures on November 16, 2009, but the Company may extend the maturity date to November 16, 2010 after satisfying certain conditions and payment of an extension fee. The construction loan requires interest only monthly payments until the maturity date. The Company utilized a portion of the borrowing capacity on the construction loan, along with borrowings on its unsecured line of credit, to acquire the Center for Life Science | Boston property and to fund construction activities. In September 2007, the Company entered into an interest rate swap agreement, which is intended to have the effect of initially fixing the interest rate on $330.0 million of the secured construction loan at a rate of 6.1% through September 2008. The loan includes certain restrictions and covenants, which limit, among other things, the incurrence of additional indebtedness and liens. The loan also requires compliance with financial covenants relating to minimum amounts of net worth, fixed charge coverage, and leverage ratio. Management believes that it was in compliance with these covenants as of September 30, 2007. At September 30, 2007, the Company had outstanding borrowings on the secured construction loan of $389.9 million, with a weighted average interest rate of 6.4% on the unhedged portion of the outstanding debt.

     As of September 30, 2007, principal payments due for the Company’s consolidated indebtedness (mortgage notes payable excluding debt premium of $11.5 million, unsecured line of credit, secured term loan, the Notes, and the secured construction loan) were as follows (in thousands):

2007		$	17,029
2008			24,455
2009			394,930
2010			47,445
2011			243,067
Thereafter			690,648
		$	1,417,574

7. Earnings Per Share

     Earnings per share is calculated based on the weighted-average number of shares of the Company’s common stock outstanding during the period. The effects of the outstanding Units, vesting of unvested LTIP units and restricted stock that have been granted, and a stock warrant issued in connection with the Company’s initial public offering that was exercised in September 2006, using the treasury method, were dilutive and included in the calculation of diluted weighted-average shares for the three and nine months ended September 30, 2007 and 2006. No shares were contingently issuable upon settlement of the excess exchange value pursuant to the exchange settlement feature of the Notes (see Note 6) as the weighted-average common stock price of $24.17 and $26.74 for three and nine months ended September 30, 2007, respectively, did not exceed the initial exchange price of $37.79 per share. Therefore, potentially issuable shares resulting from settlement of the Notes were not included in the calculation of diluted weighted-average shares. No other shares were considered antidilutive for the three and nine months ended September 30, 2007 and 2006.

     The following table sets forth information related to the computations of basic and diluted earnings per share in accordance with SFAS No. 128, Earnings per Share (in thousands, except per share amounts):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2007				2006				2007				2006
Income from continuing operations and net income available for common stockholders (basic EPS):
Income from continuing operations		$	16,457			$	10,446			$	53,412			$	21,349
Preferred stock dividends			(4,241	)			—				(12,628	)			—
Income from continuing operations available for common stockholders			12,216				10,446				40,784				21,349
(Loss)/income from discontinued operations.			(1	)			366				1,652				1,095
Net income available to common stockholders		$	12,215			$	10,812			$	42,436			$	22,444
Income from continuing operations and net income available for common stockholders (diluted EPS):
Income from continuing operations available for common stockholders			12,216				10,446				40,784				21,349
Minority interests in continuing operations of operating partnership			545				497				1,821				1,131
Income from continuing operations available to common stockholders before minority interests in continuing operations			12,761				10,943				42,605				22,480
(Loss)/income from discontinued operations.			(1	)			366				1,652				1,095
Minority interests in discontinued operations of operating partnership			—				17				74				61
Net income available to common stockholders before minority interests		$	12,760			$	11,326			$	44,331			$	23,636
Weighted-average common shares outstanding:
Basic			65,308,702				60,477,672				65,300,802				52,822,498
Incremental shares from assumed conversion/exercise:
Stock warrant			—				136,306				—				127,926
Unvested restricted stock and LTIP units using the treasury method			49,642				169,105				45,044				112,355
Operating partnership and LTIP units			2,916,564				2,863,564				2,916,240				2,863,564
Diluted			68,274,908				63,646,647				68,262,086				55,926,343
Basic and diluted earnings per share:
Income from continuing operations available for common stockholders		$	0.19			$	0.17			$	0.62			$	0.40
Discontinued operations			—				0.01				0.03				0.02
Net income available to common stockholders		$	0.19			$	0.18			$	0.65			$	0.42

8. Incentive Award Plan

     The Company has adopted the BioMed Realty Trust, Inc. and BioMed Realty, L.P. 2004 Incentive Award Plan (the “Plan”). The Plan provides for grants to directors, employees and consultants of the Company and the Operating Partnership (and their respective subsidiaries) of stock options, restricted stock, LTIP units, stock appreciation rights, dividend equivalents, and other incentive awards. The Company has reserved 2,500,000 shares of common stock for issuance pursuant to the Plan, subject to adjustments as set forth in the Plan. As of September 30, 2007, 1,472,745 shares of common stock or awards convertible into or exchangeable for common stock remained available for future issuance under the Plan. Each LTIP unit issued will count as one share of common stock for purposes of calculating the limit on shares that may be issued. Compensation cost for these incentive awards is measured based on the fair-value of the award on the grant date and is recognized as expense over the respective vesting period, which for restricted stock awards and LTIP units is generally two to four years. Fully vested incentive awards may be settled for either cash or stock depending on the Company’s election and the type of award granted. Participants are entitled to cash dividends and may vote such awarded shares, but the sale or transfer of such shares is limited during the restricted or vesting period. Through September 30, 2007, the Company only awarded restricted stock grants and LTIP units. The restricted stock grants may only be settled for stock whereas the LTIP units may be redeemed for either cash or common stock, at the Company’s election.

     LTIP units represent a profits interest in the Operating Partnership for services rendered or to be rendered by the LTIP unit holder in its capacity as a partner, or in anticipation of becoming a partner, in the Operating Partnership. Initially, LTIP units do not have full parity with common units of the Operating Partnership with respect to liquidating distributions, although LTIP unit holders receive the same quarterly per unit distributions as common units and may vote the LTIP units from the date of issuance. The LTIP units are subject to vesting requirements, which lapse over a specified period of time (normally three or four years from the date of issuance). In addition, the LTIP units are generally subject to a two-year lock-up period during which time the LTIP units may not be redeemed or sold by the LTIP unit holder. Upon the occurrence of specified events, LTIP units may over time achieve full parity with common units of the Operating Partnership for all purposes. Upon achieving full parity, and after the expiration of any vesting and lock-up periods, LTIP units may be redeemed for an equal number of the Company’s common stock or cash, at the Company’s election.

     During the three months ended September 30, 2007 and 2006, the Company granted 3,000 shares of unvested restricted stock with an aggregate value of $78,000, and 2,000 shares of unvested restricted stock with an aggregate value of $62,000 under the Plan, respectively. During the nine months ended September 30, 2007 and 2006, the Company granted 330,500 shares of unvested restricted stock and LTIP units with an aggregate value of $9.8 million, and 160,200 shares of unvested restricted stock with an aggregate value of $4.4 million under the Plan, respectively. For the nine months ended September 30, 2007 and 2006, a total of 209,818 and 163,194 shares of restricted stock and LTIP units vested, with fair-values of $6.0 million and $4.0 million, respectively. For the three months ended September 30, 2007 and 2006, $1.5 million and $1.1 million, respectively, of stock-based compensation expense was recognized in general and administrative expense and rental operations expense. For the nine months ended September 30, 2007 and 2006, $4.1 million and $2.9 million, respectively, of stock-based compensation expense was recognized in general and administrative expense and rental operations expense. As of September 30, 2007, total compensation expense related to unvested awards of $11.5 million will be recognized in the future over a weighted-average period of 2.7 years.

     A summary of the Company’s restricted stock and Operating Partnership’s LTIP unit activity for the nine months ended September 30, 2007 and 2006 is presented below:

						Weighted-
		Restricted Shares and				Average Grant-
		LTIP Units				Date Fair-Value
Balance at January 1, 2007			424,380			$	23.79
Granted			302,500				29.83
Forfeited			(3,809	)			28.16
Vested			(199,818	)			19.96
Balance at March 31, 2007			523,253				28.71
Granted			25,000				27.49
Forfeited			(4,450	)			28.18
Vested			(10,000	)			28.59
Balance at June 30, 2007			533,803				28.66
Granted			3,000				26.01
Balance at September 30, 2007			536,803			$	28.65

						Weighted-
		Restricted Shares and				Average Grant-
		LTIP Units				Date Fair-Value
Balance at January 1, 2006			344,492			$	17.70
Granted			147,200				27.11
Vested			(153,194	)			16.53
Balance at March 31, 2006			338,498				22.32
Granted			11,000				28.53
Forfeited			(150	)			26.70
Vested			(10,000	)			21.20
Balance at June 30, 2006			339,348				22.55
Granted			2,000				31.02
Balance at September 30, 2006			341,348			$	22.60

9. Segment Information

     The Company’s properties share the following similar economic and operating characteristics: (1) they have similar forecasted returns (measured by capitalization rate at acquisition), (2) they are generally occupied almost exclusively by life science tenants that are public companies, government agencies or their subsidiaries, (3) they are generally located near areas of high life science concentrations with similar demographics and site characteristics, (4) the majority of properties are designed specifically for life science tenants that require infrastructure improvements not generally found in standard office properties, and (5) the associated leases are primarily triple-net leases, generally with a fixed rental rate and scheduled annual escalations, that provide for a recovery of close to 100% of operating expenses. Consequently, the Company’s properties qualify for aggregation into one operating segment under the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information.

10. Property Acquisitions

     The Company acquired the following properties during the nine months ended September 30, 2007. The purchase prices of the acquisitions completed in the first, second, and third quarters of 2007 have been allocated on a preliminary basis to the assets acquired and the liabilities assumed. The Company expects to finalize its purchase price allocations no later than twelve months from the dates of acquisition. The table below reflects the purchase price allocations for the acquisitions as of September 30, 2007 (in thousands):

														Deferred Leasing Costs
		Acquisition				Investments				Acquired Above				In place								Acquired Below				Total Cash
Property		Date				in Real Estate				Market Lease				Lease				Management Fee				Market Lease				Consideration
Torreyana Road		March 22, 2007				$	32,128			$	—			$	1,937			$	57			$	(1,082	)		$	33,040
6114-6154 Nancy Ridge Drive		May 2, 2007					37,711				645				—				—				(126	)			38,230
9920 Belward Campus Drive		May 8, 2007					15,137				—				1,282				145				(1,483	)			15,081
Pacific Center Boulevard		August 24, 2007					16,912				—				623				118				(855	)			16,798
Forbes Boulevard		September 5, 2007					32,584				—				886				—				(919	)			32,551
Total						$	134,472			$	645			$	4,728			$	320			$	(4,465	)		$	135,700
Intangible amortization life (in months)											241				42				58				54

11. Investment in Unconsolidated Partnerships

     The Company has investments in limited liability companies with Prudential Real Estate Investors (“PREI”), which were formed in the second quarter of 2007, and in McKellar Court L.P. (“McKellar Court”), a limited partnership with Quidel Corporation, which occupies the McKellar Court property. As it does not control the limited liability companies or the partnership, the Company accounts for them under the equity method of accounting. The following table provides general information on the limited liability companies and the partnership (each referred to in this footnote individually as a “partnership” and collectively as the “partnerships”) as of September 30, 2007 (dollars in thousands):

						Company’s				Company’s
						Ownership				Economic								Acquisition
Name		Partner				Interest				Interest				Date Acquired				Price (1)
PREI I (2)		PREI					20	%			20	%		April 4, 2007				$	466,252
PREI II (3)		PREI					20	%			20	%		April 4, 2007					40,472
McKellar Court (4)		Quidel Corporation					21	%			21	%(5)		September 30, 2004					2,058

     The Company acts as the operating member or partner, as applicable, and day-to-day manager for the partnerships. The Company is entitled to receive fees for providing construction and development services (as applicable) and management services to the PREI limited liability companies. The Company earned approximately $387,000 and $779,000 in fees for the three and nine months ended September 30, 2007, respectively, for services provided to the PREI limited liability companies.

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

		September 30,				December 31,
		2007				2006
Assets:
Investments in real estate, net		$	519,544			$	15,061
Cash and cash equivalents (including restricted cash)			7,995				605
Intangible assets, net			15,375				—
Other assets			6,386				1,078
Total assets		$	549,300			$	16,744
Liabilities and equity:
Mortgage notes payable		$	425,611			$	10,619
Other liabilities			20,852				285
Members’ equity			102,837				5,840
Total liabilities and equity		$	549,300			$	16,744
Company’s net investment in unconsolidated partnerships		$	21,741			$	2,436

     In connection with the acquisition of certain properties by PREI II LLC, the partnership assumed an obligation related to the remediation of environmental conditions at off-site parcels located in Cambridge, Massachusetts. PREI II LLC has estimated the costs of the remediation to be $3.6 million, which was recorded as an increase to the assets acquired and the recognition of a corresponding liability, in accordance with the guidance provided in SFAS No. 143, Accounting for Asset Retirement Obligations.

     The condensed combined statements of income for the unconsolidated partnerships were as follows (in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2007				2006				2007				2006
Total revenues		$	6,800			$	479			$	12,701			$	1,433
Rental operations expenses			2,389				10				4,564				31
Real estate taxes			678				40				1,285				116
Depreciation and amortization			1,827				95				3,709				286
Interest expense, net of interest income			3,153				234				6,559				696
Total expenses			8,047				379				16,117				1,129
Net (loss)/ income		$	(1,247	)		$	100			$	(3,416	)		$	304
Company’s equity in net (loss)/income of unconsolidated partnerships		$	(261	)		$	20			$	(694	)		$	62

12. Discontinued Operations

     During the nine months ended September 30, 2007, the Company sold the following property (in thousands):

Original

Property

Date of Sale

Acquisition Date

Sales Price

Gain on Sale

Colorow Drive

May 30, 2007

December 22, 2005

$

20,000

$

1,087

     The results of operations of the above property are reported as discontinued operations for all periods presented in the accompanying consolidated financial statements. The following table summarizes the revenue and expense components that comprise income from discontinued operations (in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2007				2006				2007				2006
Total revenues		$	—			$	672			$	1,111			$	2,005
Total expenses			—				289				472				849
Income before minority interests and gain on sale			—				383				639				1,156
(Loss)/gain on sale of real estate assets			(1	)			—				1,087				—
Minority interests attributable to discontinued operations			—				(17	)			(74	)			(61	)
(Loss)/income from discontinued operations		$	(1	)		$	366			$	1,652			$	1,095

13. Derivatives and Other Financial Instruments

     As of September 30, 2007, the Company had four forward starting swaps hedging a forecasted debt issuance, with a total notional value of $450.0 million under which at each three month settlement date the Company will either (i) receive the difference between a fixed interest rate (the “Strike Rate”) and one-month LIBOR if the Strike Rate is less than LIBOR or (ii) pay such difference if the Strike Rate is greater than LIBOR. No initial net investment was made to enter into these agreements.

     As of September 30, 2007, the Company also had five interest rate swaps with an aggregate notional amount of $785.0 million under which at each monthly settlement date the Company either (i) receives the difference between a fixed interest rate (the “Strike Rate”) and one-month LIBOR if the Strike Rate is less than LIBOR or (ii) pays such difference if the Strike Rate is greater than LIBOR. One interest rate swap with a notional amount of $250.0 million hedges the Company’s secured term loan. Each of the remaining four interest rate swaps hedges the first interest payments, due on the date that is on or closest after each swap’s settlement date, associated with the amount of LIBOR-based debt equal to each swap’s notional amount. Three of these interest rate swaps have an aggregate notional amount of $205.0 million and are initially intended to hedge interest payments associated with the Company’s unsecured line of credit. The remaining interest rate swap has a notional amount of $330.0 million and is initially intended to hedge interest payments associated with the Company’s secured construction loan. No initial investment was made to enter into the interest rate swap agreements.

     The following table summarizes the terms of the forward starting swaps and the interest rate swaps and their fair-values, which are included in other assets and other liabilities on the accompanying consolidated balance sheets (in thousands):

Current																		Fair-Value
Notional Amount						Strike Rate				Effective Date				Expiration Date				September 30, 2007				December 31, 2006
$	250,000						4.157	%		June 1, 2005				June 1, 2010				$	2,271			$	6,263
	150,000						5.152	%		December 30, 2008				December 30, 2018					2,005				808
	150,000						5.162	%		December 30, 2008				December 30, 2018					1,895				704
	50,000						5.167	%		December 30, 2008				December 30, 2018					613				217
	100,000						5.167	%		December 30, 2008				December 30, 2018					1,227				434
	115,000						4.673	%		October 1, 2007				August 1, 2011					(248	)			—
	35,000						4.700	%		October 10, 2007				August 1, 2011					(115	)			—
	330,000						4.825	%		September 25, 2007				September 25, 2008					(631	)			—
	55,000						4.760	%		September 20, 2007				September 20, 2008					(59	)			—
$	1,235,000																	$	6,958			$	8,426

     The (decrease)/increase in net unrealized gains of ($19.6) million and ($1.5) million for the three and nine months ended September 30, 2007, respectively, and ($5.2) million and $513,000 for the three and nine months ended September 30, 2006, respectively, for derivatives designated as cash flow hedges are separately disclosed in

the accompanying footnotes to the consolidated financial statements in stockholders’ equity as a component of accumulated other comprehensive income (see Note 4). For the three and nine months ended September 30, 2007 and 2006, an immaterial amount of hedge ineffectiveness on cash flow hedges due to mismatches in maturity dates of the interest rate swap and debt was recognized in interest expense.

     Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s hedged debt. The change in net unrealized gains on cash flow hedges includes a reclassification of net unrealized gains/losses from accumulated other comprehensive income as a reduction to interest expense of $835,000 and $765,000 for the three months ended September 30, 2007 and 2006, respectively, and of $2.3 million and $1.5 million for the nine months ended September 30, 2007 and 2006, respectively.

     The limited partner in the King of Prussia limited partnership had a put option that would require the Company to purchase the limited partner’s interest in the property beginning August 21, 2007 through November 11, 2007 for $1.8 million less any distributions paid to the limited partner. The net fair-value of the put and call options was $432,000 and $384,000 at September 30, 2007 and December 31, 2006, respectively, and is recorded as a net accrued liability included in accounts payable and accrued expenses on the consolidated balance sheets. In addition, the Company has recorded net changes in fair-value of the put and call options of $17,000 and $34,000 for the three months ended September 30, 2007 and 2006, respectively, and of $48,000 and $49,000 for the nine months ended September 30, 2007 and 2006, respectively, which are recorded as a charge to income on the consolidated statements of income. On October 1, 2007, the limited partner exercised its put option, resulting in the Company’s purchase of the minority interest in the property for a purchase price of approximately $1.8 million, excluding closing costs (see Note 3).

     The other member in the Waples limited liability company has a put option that would require the Company to purchase the member’s interest in the property. The Company has a call option to purchase the other member’s interest, subject to certain conditions. If neither option is exercised, then the limited liability company will continue in existence under the terms of the limited liability company agreement. The agreement provides that the put and call option prices will be based on the fair-value of the project at the time of exercise. The Company believes the fair-value of the project is equal to, or in excess of, the carrying value of the project as of September 30, 2007. In addition, if the other member exercises the put option, the Company believes that it has adequate resources to settle the option.

     The other member in the Fairview limited liability company has a put option that would require the Company to purchase the member’s interest in the property at any time after the first anniversary and before the fifth anniversary of the project completion date. The Company has a call option to purchase the other member’s interest at any time after the first anniversary and before the fifth anniversary of the project completion date. If neither option is exercised, then the limited liability company will continue in existence under the terms of the limited liability company agreement. The agreement provides that the put and call option prices will be based on an intrinsic value of the project at the time of exercise. The Company recorded a net change in the fair-value of the put option of approximately $12,000 and $125,000 for the three and nine months ended September 30, 2007, respectively. In addition, if the other member exercises the put option, the Company believes that it has adequate resources to settle the option.

     The Company has the right to purchase the other member’s interest or sell its own interest (collectively, the “Buy-Sell Option”) in the Ardenwood limited liability company at any time after the later of (1) the second anniversary of the date that the related property is at least ninety percent leased with remaining lease terms of at least five years and (2) the date that a term loan is obtained pursuant to the agreement. If the Buy-Sell Option is exercised by the Company, the other member has the right to determine whether to acquire the Company’s membership interest or to sell its own membership interest to the Company. The agreement provides that the Buy-Sell Option price will be based on the fair-value of the assets at the time of exercise. In addition, if the other member exercises the Buy-Sell Option, the Company believes that it has adequate resources to settle the option.

14. New Accounting Standards

     In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 for the fiscal year beginning January 1, 2007 did not have an impact on the Company’s consolidated financial statements.

     In September 2006, the FASB issued SFAS No. 157, Fair-Value Measurements (“SFAS 157”). SFAS 157 defines fair-value, establishes a framework for measuring fair-value in generally accepted accounting principles, and expands disclosures about fair-value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair-value measurements, but does not require new fair-value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the requirements of this statement and its impact on the valuation of the Company’s derivative instruments and other fair-value disclosures, but has not yet determined its effect on the Company’s consolidated financial statements when it is adopted in the fiscal year beginning January 1, 2008.

     In February 2007, the FASB issued SFAS No. 159, The Fair-Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair-value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities. This statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the requirements of this statement and has not yet determined its effect on the Company’s consolidated financial statements. However, the Company does not presently expect to elect fair-value measurement of any assets and liabilities other than those derivative instruments that are currently carried at fair-value in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.

     In September 2007, the FASB exposed for comment a clarification on the accounting for convertible debt instruments that may be settled in cash, FASB Staff Position APB 14-a (“FSP 14-a”). The proposed guidance, which is an interpretation of APB Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants, would require the issuer to bifurcate and separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s noncovertible debt borrowing rate. The equity component of the convertible debt would be included in the paid-in capital section of stockholders’ equity and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the debt security. The resulting debt discount would be accreted as additional interest expense over the non-cancellable term of the instrument. The proposed FSP 14-a would be effective for fiscal years beginning after December 15, 2007, with early adoption not permitted. Retrospective application would be required for all periods presented. If the guidance is finalized as currently drafted, the Company believes it would increase interest expense associated with the Notes and also result in an increase in capitalized interest. However, the Company has not yet conclusively determined the effect on the Company’s consolidated financial statements, as the proposed guidance has not yet been finalized.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     As used herein, the terms “we”, “us”, “our” or the “Company” refer to BioMed Realty Trust, Inc., a Maryland corporation, and any of our subsidiaries.

     The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. We make statements in this report that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described

will happen as described (or that they will happen at all). You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate); adverse economic or real estate developments in the life science industry or our target markets; risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments; failure to manage effectively our growth and expansion into new markets, or to complete or integrate acquisitions successfully; risks and uncertainties affecting property development and construction; risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets; potential liability for uninsured losses and environmental contamination; risks associated with our potential failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended, or the Code, and possible adverse changes in tax and environmental laws; and risks associated with our dependence on key personnel whose continued service is not guaranteed. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

     The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in other sections of this report. In addition, we discussed a number of material risks in our annual report on Form 10-K for the year ended December 31, 2006. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Overview

     We operate as a REIT focused on acquiring, developing, owning, leasing and managing laboratory and office space for the life science industry. Our tenants primarily include biotechnology and pharmaceutical companies, scientific research institutions, government agencies and other entities involved in the life science industry. Our properties are generally located in markets with well-established reputations as centers for scientific research, including Boston, San Diego, San Francisco, Seattle, Maryland, Pennsylvania and New York/New Jersey.

     As of September 30, 2007, we owned or had interests in 68 properties, consisting of 103 buildings. Our portfolio was comprised of the following, with our operating portfolio 93.3% leased to 111 tenants, as of September 30, 2007:

		Rentable
		Square Feet
Operating portfolio			6,626,723
Repositioning and redevelopment properties			1,871,353
Construction in progress			1,941,000
Land parcels			1,293,000
Total proforma portfolio			11,732,076

Factors Which May Influence Future Operations

     Our corporate strategy is to continue to focus on acquiring, developing, owning, leasing and managing laboratory and office space for the life science industry. Approximately 0.4% of our leased square footage expires during the remainder of 2007 and approximately 6.7% of our leased square footage expires during 2008. Our leasing strategy focuses on leasing currently vacant space and negotiating renewals for expiring leases and identifying new tenants or existing tenants seeking additional space to occupy the spaces for which we are unable to negotiate such renewals.

     The success of our leasing and development strategy will depend upon the general economic conditions in the United States and in our target markets of Boston, San Diego, San Francisco, Seattle, Maryland, Pennsylvania, New York/New Jersey and research parks near or adjacent to universities.

Critical Accounting Policies

     A complete discussion of our critical accounting policies can be found in our annual report on Form 10-K for the year ended December 31, 2006.

New Accounting Standards

     See Notes to Consolidated Financial Statements (Unaudited) included elsewhere herein for disclosure of new accounting standards.

Results of Operations

Comparison of the Three Months Ended September 30, 2007 to the Three Months Ended September 30, 2006

     The following tables show operating revenues for same properties (all properties except redevelopment and new properties and discontinued operations), redevelopment properties (properties that were under redevelopment or development during either of the three months ended September 30, 2007 or 2006 and not included in new properties), and new properties (properties that were not owned for each of the full three months ended September 30, 2007 and 2006), in thousands:

		Same Properties								Redevelopment Properties								New Properties
		2007				2006				2007				2006				2007				2006
Rental		$	42,044			$	40,525			$	1,775			$	6,536			$	5,563			$	2,136
Tenant recoveries			13,474				12,622				630				1,772				980				238
Other income			366				9				—				—				—				—
Total revenues		$	55,884			$	53,156			$	2,405			$	8,308			$	6,543			$	2,374

     Rental Revenues. Rental revenues increased $185,000 to $49.4 million for the three months ended September 30, 2007 compared to $49.2 million for the three months ended September 30, 2006. The increase was primarily due to acquisitions during 2006 and 2007, partially offset by properties that generated rental revenue in 2006, which are currently undergoing redevelopment. In addition, same property rental revenues increased $1.5 million, or 3.7%, for the three months ended September 30, 2007 compared to the same period in 2006. The increase in same property rental revenues was primarily a result of a full three months of rental revenues for new leases in the period ended September 30, 2007 at our Bayshore, Graphics and Landmark at Eastview properties.

     Tenant Recoveries. Revenues from tenant reimbursements increased $452,000 to $15.1 million for the three months ended September 30, 2007 compared to $14.6 million for the three months ended September 30, 2006. The increase was primarily due to acquisitions during 2006 and 2007, partially offset by properties for which tenant recoveries were recognized in 2006, but which are currently undergoing redevelopment. In addition, same property tenant recoveries increased $852,000, or 6.8%, for the three months ended September 30, 2007 compared to the same period in 2006 primarily as a result of a full three months of tenant recoveries for new leases in the period ended September 30, 2007 and increases in utilities and other recoverable costs at certain properties compared to the prior year.

     Other Income. Other income was $366,000 for the three months ended September 30, 2007 compared to $9,000 for the three months ended September 30, 2006. The increase was primarily due to construction management and development fees earned from the PREI limited liability companies.

     The following tables show operating expenses for same properties, redevelopment properties, and new properties, in thousands:

		Same Properties								Redevelopment Properties								New Properties
		2007				2006				2007				2006				2007				2006
Rental operations		$	11,503			$	10,339			$	551			$	587			$	735			$	104
Real estate taxes			4,173				4,309				239				1,223				667				150
Depreciation and amortization			14,638				14,553				1,025				3,102				2,002				826
Total expenses		$	30,314			$	29,201			$	1,815			$	4,912			$	3,404			$	1,080