Jefferies Comments On Biomed Realty Trust, Boston Realty Market

The Greater Boston life science real estate market contributes 33.6% of BioMed Realty Trust's BMR rents. Life science real estate fundamentals have been steadily improving, as market vacancy has declined by 180 basis points since 1Q10 to 11.5%. Jefferies continues to expect solid life science fundamentals from this market given its proximity to prestigious universities and research institutions. On 1/25/11, the Boston Globe reported that Vertex, BMR's second largest tenant, is planning to move from its current space in Cambridge to a new project in Boston, not owned by BMR. This sparked a sell-off in BMR's stock, which led to underperformance of more than 10% vs. the RMZ over the following four weeks. BMR has since made up most of its loss and has now underperformed the RMZ by just 3% since 1/25/11. BMR recently issued $400M of 5- year unsecured notes at a 3.85% interest rate. Jefferies had assumed a $250M offering in 4Q11 at a higher rate. Due to the earlier than expected offering, it is lowering its 2011 FFO per share estimate slightly to $1.22 from $1.23, and due to the low interest rate, raising its 2012 estimate to $1.29 from $1.28. Jefferies has a $19 PT and Hold rating on BMR BMR closed Friday at $18.79