Business Strategy

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BioMed owns, acquires, develops, leases and manages laboratory and office space for life science tenants in the seven core U.S. life science markets. This highly focused business strategy, coupled with our management expertise, provides significant internal and external growth opportunities.

The Life Science Industry

U.S. government agencies, research institutions and universities have been at the forefront of major discoveries in medicine and science for over 50 years, spawning a vibrant U.S. life science industry that has become the world leader in carrying these breakthroughs forward into approved, marketable products. These organizations’ business models are predicated on advancing their research through the clinical trial process and toward commercialization, making our laboratory facilities mission critical to their success.

Powerful, long-term market drivers fuel the growth of the life science industry. Positive demographic trends, such as an aging population and longer life expectancies, combined with rising health care expenditures and greater demand for a higher quality of life, are the driving forces behind the push for more efficient and effective treatments. These demands open the door to capital investment in organizations and companies developing the next generation of life science products and solutions, and drive the need for state-of-the-art laboratory space in the seven core U.S. life science markets.

Opportunity for BioMed

Starting with the positive long-term demographic and economic trends, we believe the life science industry’s demand for high quality space will continue and create new opportunities for BioMed.

Life science organizations require excellent facilities with a mix of laboratory, office and manufacturing space to support their research and development efforts. Converting traditional office buildings into laboratory space is difficult, if not cost prohibitive, because of the need for greater floor-to-ceiling clear heights to accommodate unique HVAC and plumbing requirements, and greater load-bearing floors to hold refrigerators and other heavy laboratory equipment. As a result, the traditional commercial real estate community has historically underserved life science tenants.

We have unparalleled experience and skill in developing life science properties with state-of-the-art laboratory and R&D space, traditional office space, and large scale, controlled-environment manufacturing space in our markets.

Internal Growth

Our internal growth strategy is designed to maximize distributions to our stockholders by capitalizing on BioMed’s significant management expertise through the following means:

  • Maximized occupancy. Our access to cost-effective capital enables BioMed to finance tenant improvements and lease our available office and laboratory space to high quality tenants in order to maximize occupancy and drive revenue growth.
  • Income stability and growth. Our revenue is primarily generated through long-term, triple-net leases that typically include annual rent escalations that provide tremendous visibility and stability in our future income and cash flows.
  • Tenant monitoring. We closely monitor changes in our existing tenants’ financial position, prospects and creditworthiness in order to identify and address opportunities to renew, extend or modify existing leases and find additional expansion opportunities.
  • Opportunistic laboratory biotech space conversions. We continually evaluate opportunities to convert existing office and industrial space into laboratory space that is adaptable to meet the needs of a wide range of life science companies.
  • Tenant-financed improvements. Our tenants generally invest significant funds to further improve their facilities, which further enhance the property for themselves and future tenants.
External Growth

We focus on acquiring properties leased to high quality life science tenants at attractive yields, with additional value creation realized through lease-up, redevelopment or additional development. Our acquisition strategy is a real estate based formula, combining extensive tenant analysis and risk-based underwriting. Our acquisition strategy includes:

  • Real Estate Underwriting. We conduct extensive analyses when evaluating properties for potential acquisition, including taking into consideration the following factors:
    • the location of a property in relation to academic and research institutions and other demand generators in our target markets
    • the property’s suitability for life science tenants and the level of generic laboratory space, which is a determinant of the flexibility of the property to attract new or replacement tenants or be convertible to multi-tenant use
    • the type and amount of building improvements financed by the tenant, which provide significant protection of our investment while increasing tenant retention and providing future rental increases
    • the property’s basic design and construction and ability to accommodate life science tenants, including key features such as floor-to-ceiling clear heights; floor rigidity and load-bearing capacity; and electrical, plumbing and HVAC systems
  • Tenant Credit Analysis. Our tenant credit analysis considers three key elements in evaluating prospective tenants: (1) financial condition, (2) management team and (3) scientific focus. We perform a thorough review of the prospective tenant’s financial statements, considering the current liquidity and cash resources as well as the tenant’s prospects for raising additional capital. We also meet with the prospective tenant’s senior management team in order to evaluate the quality of the management team, their scientific focus and their ability to raise capital.
  • Lease Structuring. After careful consideration of the subject property and the prospective tenant, we analyze our leases to ensure the appropriate economic return based on our risk assessment. Depending on the business plan for each individual property, our leases generally range from five to 15 years, with extension options, and include a fixed rental rate with scheduled annual escalations. The leases typically are triple-net. In addition, our tenants typically are responsible for capital improvements necessary to maintain the property in its original condition.
Conservative Capital Structure

Since inception, BioMed has maintained a conservative capital structure, positioning itself with the liquidity and the flexibility to manage uncertainty and to take advantage of future opportunities. As prudent stewards of capital, proactively managing our balance sheet and liquidity position remains a hallmark of BioMed’s strategy.

  • Match-Funding Investments with Permanent Capital. We aggressively manage our balance sheet to ensure that the company is properly capitalized for the long-term. In 2007, the management team recognized the warning signs that the market was shifting, and made several business and operating decisions to solidify the company’s capital position, including raising common equity twice in 2008, resulting in net proceeds of over $360 million that were used to pay down debt. As a result, we lowered our debt to total assets ratio to 42% at the end of 2008, our lowest level since the third quarter of 2006.
  • Strong Liquidity Position. We have the capacity to meet BioMed’s capital needs, including anticipated costs to complete all development and redevelopment projects. In addition, we maintain a high percentage of unencumbered properties to provide the company with substantial financial flexibility. As of December 31, 2008, BioMed maintained over $500 million in immediate liquidity on hand, and debt-free properties representing 59% of annualized base rents.