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BioMed Realty’s Quality Tenant Base and Triple Net Leases Ensure Steady Cash Flows

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Jan. 5 2016, Updated 10:07 a.m. ET

BioMed Realty’s tenant base

BioMed Realty Trust’s (BMR) tenant base is made up of some of the top names in biotechnology and pharmaceutical companies, scientific research institutions, government agencies, and other entities involved in the life science industry. This diversified tenant base reduces the company’s dependence on any particular industry.

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BioMed Realty’s top tenants

As of September 2015, BioMed Realty’s properties were leased to 395 tenants. The top 20 tenants of the company contributed 50.6% to the annualized base rent of the company and occupy a rentable area of 7.4 million square feet. The top 5 tenants of the company are as follows:

  • Regeneron Pharmaceuticals—7.6% of annualized base rent
  • Beth Israel Deaconess Medical Center—4.6% of annualized base rent
  • Illumina—4.4% of annualized base rent
  • GlaxoSmithKline—4.1% of annualized base rent
  • Sanofi—4% of annualized base rent

Tenant acquisitions

The company has acquired a number of new tenants in fiscal 2015. Some of the contracts signed during the year are as follows:

  • AbbVie for 43,000 square feet in Cambridge, Massachusetts
  • Precision Toxicology for 56,000 square feet in San Diego, California
  • Stanford Health Care for 41,200 square feet in Newark, California
  • A large biopharmaceutical company for 95,000 square feet in Cambridge, United Kingdom
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Triple net leases

BioMed Realty’s leases typically last for 5–15 years with renewal options and annual rent escalations. As of September 2015, 70.8% of the company’s leases were long-term in nature expiring after 2019. The long-term nature of leases ensures a steady income to the company without any risk of renewals.

In addition, 95.3% of current annualized base rent of the company was earned from triple-net leases leading to the stable cash flows. In triple-net leases, tenants also pay real estate taxes and operating expenses of the leased property apart from base rent.

BioMed Realty’s competition and ETF exposure

Other major players in the office REITs such as Kilroy Realty Corporation (KRC), SL Green Realty Corporation (SLG), and Boston Properties (BXP) are following the same tenant diversification strategy and look for long-term leases. The iShares US Real Estate ETF (IYR) invests approximately 0.6% of its portfolio in BioMed Realty.

Continue to the next part for an analysis of BioMed Realty’s property acquisitions and dispositions.

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