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Section 1: 8-K (8-K)

bdn-8k_20180125.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 25, 2018

Brandywine Realty Trust

Brandywine Operating Partnership, L.P.

(Exact name of registrant as specified in charter)

 

Maryland

(Brandywine Realty Trust)

 

001-9106

 

23-2413352

 

 

 

 

 

Delaware

(Brandywine Operating Partnership, L.P.)

 

000-24407

(Commission file number)

 

23-2862640

(I.R.S. Employer

Identification Number)

(State or Other Jurisdiction of

Incorporation or Organization)

 

 

 

 

 

2929 Walnut Street, Suite 1700

Philadelphia, PA 19104

(Address of principal executive offices)

 

(610) 325-5600

(Registrant's telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

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Item 2.02Results of Operations and Financial Condition

The information in this Current Report on Form 8-K is furnished under Item 2.02 - “Results of Operations and Financial Condition.”  Such information, including the exhibits attached hereto, shall not be deemed to be “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section.  The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

On January 25, 2018, we issued a press release announcing our financial results for the twelve months ended December 31, 2017.  That press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

The press release includes “non-GAAP financial measures” within the meaning of the Securities and Exchange Commission's Regulation G.  With respect to such non-GAAP financial measures, we have disclosed in the press release the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles (“GAAP”) and have provided a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measure.

Item 9.01Financial Statements and Exhibits

Exhibits

99.1    Brandywine Realty Trust Press Release dated January 25, 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, hereunto duly authorized.

 

 

Brandywine Realty Trust

 

 

 

 

By:

/s/ Thomas E. Wirth

 

 

Thomas E. Wirth

 

 

Executive Vice President and Chief Financial Officer

 

 

 

Brandywine Operating Partnership L.P.,

 

 

 

 

By:

Brandywine Realty Trust, its sole General Partner

 

 

 

 

By:

/s/ Thomas E. Wirth

 

 

Thomas E. Wirth

 

 

Executive Vice President and Chief Financial Officer

 

Date: January 25, 2018

 

 

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Section 2: EX-99.1 (EX-99.1)

bdn-ex991_6.htm

Exhibit 99.1

 

 

Company / Investor Contact:

Tom Wirth

EVP & CFO

610-832-7434

tom.wirth@bdnreit.com

 

 

Brandywine Realty Trust Announces Fourth Quarter and Full Year 2017 Results

And Revises 2018 Guidance

 

 

Philadelphia, PA, January 25, 2018 — Brandywine Realty Trust (NYSE:BDN) today reported its financial and operating results for the three and twelve-month periods ended December 31, 2017.

Management Comments

“The final quarter of 2017 was very active for Brandywine and we finished the year achieving or exceeding many of our business goals,” stated Jerry Sweeney, President and Chief Executive Officer for Brandywine Realty Trust.  “Our fourth quarter operating metrics allowed us to exceed our rental rate mark-to-market and tenant retention while keeping our capital costs down.  We are also pleased to announce a strong start to 2018 with the sale of our interests in evo at Cira Centre South for $197.5 million, a student housing project located in Philadelphia, in which we had a 50% ownership interest. The sale represents another very successful joint venture development project generating a $25.3 million gain and generating over a 20% annual rate of return on our invested equity. We also took advantage of the favorable public debt market to raise $550 million of unsecured bonds and prepaid $325 million of 2018 bonds, which lowered our average borrowing cost to 4.0% and lengthened our weighted-average debt maturities to 7.7 years. In addition, we utilized our continuous equity offering program to raise $51.6 million at an average price of $18.19 per share. These transactions demonstrate our priority to continually improve our balance sheet metrics and financial position and we have now pre-funded all of our 2018 balance sheet obligations.  Based on our sale of evo and equity issuance, we are adjusting our 2018 FFO guidance from $1.36-$1.46 per share to $1.33-$1.43 per share.”

Fourth Quarter 2017 Highlights

Financial Results

 

Net income allocated to common shareholders; $73.1 million, or $0.41 per diluted share.  Our fourth quarter results include net gains on sale of real estate totaling $75.4 million, or $0.43 per diluted share and includes one-time charges related to liability management totaling $3.9 million for early extinguishment of 2018 bonds, incremental interest totaling $0.8 million related to the make-whole provisions of our 2018 bonds, and $1.3 million related to the sale of properties in our joint venture located in Austin, Texas.

 

Funds from Operations (FFO); $53.7 million, or $0.30 per diluted share.  Our fourth quarter results include one-time charges related to liability management totaling $3.9 million for early extinguishment of 2018 bonds, incremental interest totaling $0.8 million related to the make-whole provisions of our 2018 bonds, and $1.3 million related to the sale of properties in our joint venture located in Austin, Texas.

Portfolio Results

 

Core portfolio was 92.9% occupied and 94.3% leased.

 

Signed approximately 893,000 square feet of new and renewal leases.

 

Achieved 90% tenant retention ratio for the fourth quarter and 75% for 2017.

 

Rental rate mark-to-market increased 19.3% on a GAAP basis and increased 4.6% on a cash basis.

 

Same store net operating income growth: (2.3%) on a GAAP basis and 3.3% on a cash basis.

 

 

 

2929 Walnut Street, Suite 1700, Philadelphia, PA 19104 Phone: (610) 325-5600 • Fax: (610) 325-5622

 


 

Recent Transaction Activity

2018 Business Plan Revisions

 

Net Disposition Target:  $100.0 million increase to our disposition target due to the sale of our interests in evo at Cira Centre South.

Joint Venture Activity

 

On January 10, 2018, the evo at Cira Centre South Venture, a real estate venture in which we owned a 50% interest, sold its 347-unit residential property in Philadelphia, Pennsylvania, at a gross sales price of $197.5 million. We received net cash proceeds of $43.0 million after closing costs and related debt payoffs and recorded a gain of $25.3 million.

 

On January 5, 2018, we exchanged our 20% interest in Seven Tower Bridge, a real estate venture which owns an undeveloped land parcel in Conshohocken, Pennsylvania encumbered by $14.6 million of debt for the remaining 35% interest in Four Tower Bridge, a real estate venture which owns an office property containing 86,021 square feet in Conshohocken, Pennsylvania encumbered by $9.7 million of debt.  The estimated gain on the transaction is $9.7 million.

 

As previously announced, on October 18, 2017, our joint venture in Austin, Texas, a real estate venture in which we own a 50% interest, sold five office portfolios containing an aggregate of approximately 1,164,500 square feet located in Austin, Texas for a gross sales price of $333.3 million. These properties were encumbered with $151.4 million of first mortgage financing.  After closing costs and related debt payoffs, we received net cash proceeds totaling approximately $86.4 million.  These properties were 86% occupied and 95% leased at September 30, 2017. Net cash proceeds were used to lower the outstanding balance on our unsecured line of credit.  As a result of these property sales, we incurred a one-time charge of approximately $1.3 million for the early extinguishment of debt and recorded a net gain totaling $52.2 million.

Dispositions

 

On November 22, 2017, we completed the previously announced sale of five buildings in Newtown Square, Pennsylvania for $42.0 million.  The buildings total approximately 253,000 square feet and we received net cash proceeds of $40.5 million and recorded a gain of $19.6 million.  Net cash proceeds were used to lower the outstanding balance on our unsecured line of credit.

 

As previously announced, we completed the sale of a 150,000 square foot office building located at 630 Allendale Road in King of Prussia, Pennsylvania for $17.5 million.  We received net cash proceeds of $16.6 million and recorded a gain of $3.6 million.  Net cash proceeds were used to lower the outstanding balance on our unsecured line of credit.

Development/Redevelopment Acquisitions

Schuylkill Yards/One Drexel Plaza

 

As previously announced, on October 13, 2017, we acquired a leasehold interest in an office building known as One Drexel Plaza in Philadelphia, Pennsylvania, containing approximately 283,000 rentable square feet for a gross purchase price of $35.0 million. The acquisition represents an investment in our Schuylkill Yards development and the property will be repositioned over the next 12-18 months. The acquisition was funded from borrowings under our unsecured line of credit.

Austin, Texas Development

 

As previously announced, on October 2, 2017, we signed a 165,000 square foot, 10-year lease for a build-to-suit property located in our project at Four Points in Austin, Texas.  We commenced construction on the 100% pre-leased building in October 2017. Estimated project costs total $48.2 million, with delivery anticipated in the first quarter 2019.  We expect to fund the project with available cash balances and/or our unsecured line of credit.

 

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Guaranteed Note Transaction Highlights

 

On November 17, 2017, we issued $450.0 million of 3.95% ten-year guaranteed notes and $100.0 million 3.95% guaranteed notes due February 2023, realizing net proceeds of approximately $544.5 million. The $100.0 million of 3.95% guaranteed notes due February 2023 were issued at approximately 102.5% of their principal amount resulting in an effective yield to maturity of 3.40% and will be additive to the $250.0 million guaranteed notes that were issued in December 2012 with the same maturity date.

 

 

On November 16, 2017, we completed a $113.4 million tender offer of our 4.95% Guaranteed Notes due April 2018 (the “2018 Notes”) and on December 18, 2017, we redeemed $211.6 million of 2018 Notes not previously retired through the tender offer.

 

 

As a result of the above transactions, we incurred approximately $4.7 million, or $0.03 per diluted share, of net one-time charges primarily related to the $3.9 million write-off of unamortized deferred financing costs and redemption costs associated with the early redemption of our 2018 Notes and $0.8 million of incremental interest related to the make-whole provisions of our 2018 Notes.

 

2017 Finance / Capital Markets Activity

 

During the fourth quarter of 2017 and the first quarter of 2018, we issued approximately 2.9 million shares under our continuous equity offering program raising $51.6 million in net proceeds.

 

 

We have no outstanding balance on our $600.0 million unsecured revolving credit facility as of December 31, 2017.

 

 

We have $202.2 million of cash and cash equivalents on-hand as of December 31, 2017.

Results for the Three and Twelve-Month Periods Ended December 31, 2017

Net income allocated to common shares totaled $73.1 million, or $0.41 per diluted share, in the fourth quarter of 2017 compared to a net loss of ($14.1) million or ($0.08) per share in the fourth quarter of 2016.  Our fourth quarter 2017 results include net gains on sale of real estate totaling $75.4 million, or $0.43 per diluted share and one-time charges related to liability management totaling $3.9 million for early extinguishment of 2018 bonds, incremental interest totaling $0.8 million related to the make-whole provisions of our 2018 bonds, and $1.3 million related to the sale of properties in our joint venture located in Austin, Texas.  Our fourth quarter 2016 results included impairment charges on real estate and unimproved land totaling $27.4 million, or ($0.16) per share.

FFO available to common shares and units in the fourth quarter of 2017 totaled $53.7 million or $0.30 per diluted share versus $63.0 million or $0.35 per diluted share in the fourth quarter of 2016.  Our fourth quarter 2017 results include one-time charges related to liability management totaling $3.9 million for early extinguishment of 2018 bonds, incremental interest totaling $0.8 million related to the make-whole provisions of our 2018 bonds, and $1.3 million related to the sale of properties in our joint venture located in Austin, Texas.  Our fourth quarter 2016 results included $3.5 million, or $0.02 per share, from a net gain, after impairments on unimproved land.  Our fourth quarter 2017 payout ratio ($0.16 common share distribution / $0.30 FFO per diluted share) was 53.3%.

Net income allocated to common shares totaled $115.3 million or $0.65 per diluted share for twelve months of 2017 compared to net income of $33.0 million or $0.19 per diluted share in the twelve months of 2016.  Our 2017 results include net gains on sale of real estate totaling $75.4 million, or $0.43 per diluted share and one-time charges related to liability management totaling $3.9 million for early extinguishment of 2018 bonds, incremental interest totaling $0.8 million related to the make-whole provisions of our 2018 bonds, and $1.3 million related to the sale of properties in our joint venture located in Austin, Texas.  Our 2016 results included provisions for impairment of real estate totaling $40.5 million, or ($0.23) per share.

Our FFO available to common shares and units for the twelve months ended 2017 totaled $229.2 million, or $1.29 per diluted share, compared to our FFO available to common shares and units for the twelve months of 2016, which totaled $167.0 million, or $0.94 per diluted share.  Our 2017 results include net gains on sale of real estate totaling $75.4 million, or $0.43 per diluted share and one-time charges related to liability management totaling $3.9 million for early extinguishment of 2018 bonds, incremental interest totaling $0.8 million related to the make-whole provisions of our 2018 bonds, and $1.3 million related to the sale of properties in our joint venture located in Austin, Texas.  Our 2016 results include a $66.6 million, or $0.38 per share, charge for the early extinguishment of debt related to our sale of our Cira Square property located in Philadelphia, Pennsylvania and $3.5 million, or $0.02 per share, from net gains/impairments on undeveloped land.  Excluding the early extinguishment of debt and net gain, after impairments, on unimproved land, FFO available to common shares and units in the twelve months of 2016

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totaled $230.1 million, or $1.30 per diluted share.  Our 2017 FFO payout ratio ($0.64 common share distribution / $1.29 FFO per diluted share) was 49.6%.

Operating and Leasing Activity

In the fourth quarter of 2017, our Net Operating Income (NOI) excluding termination revenues and other income items decreased 2.3% on a GAAP basis and increased 3.3% on a cash basis for our 83 same store properties, which were 93.2% and 94.8% occupied on December 31, 2017 and December 31, 2016, respectively.

We leased approximately 893,000 square feet and commenced occupancy on 400,000 square feet during the fourth quarter of 2017.  The fourth quarter occupancy activity includes 133,000 square feet of renewals, 168,000 square feet of new leases and 99,000 square feet of tenant expansions.  We have an additional 215,000 square feet of executed new leasing scheduled to commence subsequent to December 31, 2017.

We achieved a 90% tenant retention ratio in our core portfolio with net absorption of 141,000 square feet during the fourth quarter of 2017.  Fourth quarter rental rate growth increased 19.3% as our renewal rental rates increased 11.2% and our new lease/expansion rental rates increased 28.4%, all on a GAAP basis.

At December 31, 2017, our core portfolio of 87 properties comprising 15.6 million square feet was 92.9% occupied and we are now 94.3% leased (reflecting new leases commencing after December 31, 2017).

Distributions

On December 7, 2017, our Board of Trustees declared a quarterly cash dividend of $0.18 per common share and OP Unit that was paid on January 23, 2018 to holders of record on January 9, 2018.  The quarterly dividend is equivalent to an annual rate of $0.72 per share representing a 12.5% increase from the previous annual dividend rate of $0.64 per share.

2018 Earnings and FFO Guidance

Based on current plans and assumptions and subject to the risks and uncertainties more fully described in our Securities and Exchange Commission filings, we are adjusting our 2018 net income guidance of $0.34 - $0.44 to $0.29 - $0.39 per diluted share and 2018 FFO guidance of $1.36 - $1.46 to $1.33 - $1.43 per diluted share.  This guidance is provided for informational purposes and is subject to change.  The following is a reconciliation of the calculation of 2018 FFO and earnings per diluted share:

Guidance for 2018

 

 

 

Range

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per diluted share allocated to common shareholders

$

0.29

 

to

$

0.39

 

 

Plus: real estate depreciation, amortization

 

1.04

 

 

 

1.04

 

 

 

 

 

 

 

 

 

 

 

FFO per diluted share

$

1.33

 

to

$

1.43

 

 

Our 2018 FFO key assumptions to include:

 

Core Occupancy improving to a range of 94-95% by year-end 2018 and 95-96% leased;

 

Average Same-Store Occupancy of 92.6% during 2018 versus 93.5% during 2017;

 

8-10% GAAP increase in overall lease rates during 2018 with a resulting (1)-1% (decrease)/increase in 2018 same store GAAP NOI;

 

(2)-2% cash (decrease)/increase in overall lease rates during 2018 with a resulting 1-3% increase in 2018 same store cash NOI growth;

 

Speculative Revenue Target:  $26.3 million, 75% achieved;

 

$0.18 per share quarterly dividend;

 

No acquisition activity;

 

$100 million sales activity;

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One development start; and

 

Annual earnings and FFO per diluted share based on 181.5 million fully diluted weighted average common shares.

About Brandywine Realty Trust

Brandywine Realty Trust (NYSE: BDN) is one of the largest, publicly traded, full-service, integrated real estate companies in the United States with a core focus in the Philadelphia, Washington, D.C., and Austin markets.  Organized as a real estate investment trust (REIT), we own, develop, lease and manage an urban, town center and transit-oriented portfolio comprising 185 properties and 25.3 million square feet as of December 31, 2017, which excludes assets held for sale.  Our purpose is to shape, connect and inspire the world around us through our expertise, the relationships we foster, the communities in which we live and work, and the history we build together.  For more information, please visit www.brandywinerealty.com.

Conference Call and Audio Webcast

BDN management will discuss 2017 financial results and earnings guidance for fiscal 2018 on Friday, January 26, 2018 at 9:00 a.m. EDT.  The conference call can be accessed by dialing 1-833-818-6810 and providing conference ID: 6578749.  Beginning two hours after the conference call, a taped replay of the call can be accessed through Friday, February 9, 2018, by calling 1-855-859-2056 and entering access code 6578749.  The conference call can also be accessed via a webcast on our website at www.brandywinerealty.com.

Looking Ahead – First Quarter 2018 Conference Call

We anticipate we will release our first quarter 2018 earnings on Thursday, April 19, 2018, after the market close and will host our first quarter 2018 conference call on Friday, April 20, 2018 at 9:00 a.m. Eastern Time.  We expect to issue a press release in advance of these events to reconfirm the dates and times and provide all related information.

Forward-Looking Statements

Estimates of future earnings per share, FFO per share, common share dividend distributions and certain other statements in this release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our and our affiliates’ actual results, performance, achievements or transactions to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements.  Such risks, uncertainties and other factors relate to, among others: our ability to lease vacant space and to renew or relet space under expiring leases at expected levels; competition with other real estate companies for tenants; the potential loss or bankruptcy of major tenants; interest rate levels; the availability of debt, equity or other financing; risks of acquisitions, dispositions and developments, including the cost of construction delays and cost overruns; unanticipated operating and capital costs; our ability to obtain adequate insurance, including coverage for terrorist acts; dependence upon certain geographic markets; and general and local economic and real estate conditions, including the extent and duration of adverse changes that affect the industries in which our tenants operate. The declaration and payment of future dividends (both timing and amount) is subject to the determination of our Board of Trustees, in its sole discretion, after considering various factors, including the Company's financial condition, historical and forecast operating results, and available cash flow, as well as any applicable laws and contractual covenants and any other relevant factors. The Company's practice regarding payment of dividends may be modified at any time and from time to time.  Additional information on factors which could impact us and the forward-looking statements contained herein are included in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2016. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events except as required by law.

Non-GAAP Supplemental Financial Measures

We compute our financial results in accordance with generally accepted accounting principles (GAAP).  Although FFO and NOI are non-GAAP financial measures, we believe that FFO and NOI calculations are helpful to shareholders and potential investors and are widely recognized measures of real estate investment trust performance.  At the end of this press release, we have provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measure.

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Funds from Operations (FFO)

We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than us.  NAREIT defines FFO as net income (loss) before non-controlling interests and excluding gains (losses) on sales of depreciable operating property, impairment losses on depreciable consolidated real estate, impairment losses on investments in unconsolidated real estate ventures and extraordinary items (computed in accordance with GAAP); plus real estate related depreciation and amortization (excluding amortization of deferred financing costs), and after similar adjustments for unconsolidated joint ventures.  Net income, the GAAP measure that we believe to be most directly comparable to FFO, includes depreciation and amortization expenses, gains or losses on property sales, extraordinary items and non-controlling interests.  To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income (determined in accordance with GAAP) as presented in the financial statements included elsewhere in this release.  FFO does not represent cash flow from operating activities (determined in accordance with GAAP) and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders.

Net Operating Income (NOI)

NOI is a financial measure equal to net income available to common shareholders, the most directly comparable GAAP financial measure, plus corporate general and administrative expense, depreciation and amortization, interest expense, non-controlling interest in the Operating Partnership and losses from early extinguishment of debt, less interest income, development and management income, gains from property dispositions, gains on sale from discontinued operations, gains on early extinguishment of debt, income from discontinued operations, income from unconsolidated joint ventures and non-controlling interest in property partnerships. In some cases we also present NOI on a cash basis, which is NOI after eliminating the effects of straight-lining of rent and deferred market intangible amortization. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered an alternative to net income as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions. NOI is a useful measure for evaluating the operating performance of our properties, as it excludes certain components from net income available to common shareholders in order to provide results that are more closely related to a property's results of operations. NOI is used internally to evaluate the performance of our operating segments and to make decisions about resource allocations.  We concluded that NOI provides useful information to investors regarding our financial condition and results of operations, as it reflects only the income and expense items incurred at the property level, as well as the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unlevered basis.

Core Portfolio

Our core portfolio is comprised of our wholly-owned properties, excluding any properties currently in development, re-development or re-entitlement.

 

 

 

 

 

 

 

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BRANDYWINE REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

ASSETS

 

(unaudited)

 

 

 

 

 

Real estate investments:

 

 

 

 

 

 

 

 

Operating properties

 

$

3,832,348

 

 

$

3,586,295

 

Accumulated depreciation

 

 

(895,091

)

 

 

(852,476

)

Operating real estate investments, net

 

 

2,937,257

 

 

 

2,733,819

 

Construction-in-progress

 

 

121,188

 

 

 

297,462

 

Land held for development

 

 

98,242

 

 

 

150,970

 

Total real estate investments, net

 

 

3,156,687

 

 

 

3,182,251

 

Assets held for sale, net

 

 

392

 

 

 

41,718

 

Cash and cash equivalents

 

 

202,179

 

 

 

193,919

 

Accounts receivable, net of allowance of $3,467 and $2,373 in 2017 and 2016, respectively

 

 

17,938

 

 

 

12,446

 

Accrued rent receivable, net of allowance of $13,645 and $13,743 in 2017 and 2016, respectively

 

 

169,760

 

 

 

149,624

 

Investment in real estate ventures, at equity

 

 

194,621

 

 

 

281,331

 

Deferred costs, net

 

 

96,695

 

 

 

91,342

 

Intangible assets, net

 

 

64,972

 

 

 

72,478

 

Other assets

 

 

92,204

 

 

 

74,104

 

Total assets

 

$

3,995,448

 

 

$

4,099,213

 

LIABILITIES AND BENEFICIARIES' EQUITY

 

 

 

 

 

 

 

 

Mortgage notes payable, net

 

$

317,216

 

 

$

321,549

 

Unsecured term loans, net

 

 

248,429

 

 

 

248,099

 

Unsecured senior notes, net

 

 

1,365,183

 

 

 

1,443,464

 

Accounts payable and accrued expenses

 

 

107,074

 

 

 

103,404

 

Distributions payable

 

 

32,456

 

 

 

30,032

 

Deferred income, gains and rent

 

 

42,593

 

 

 

31,620

 

Acquired lease intangibles, net

 

 

20,274

 

 

 

18,119

 

Liabilities related to assets held for sale

 

 

-

 

 

 

81

 

Other liabilities

 

 

15,623

 

 

 

19,408

 

Total liabilities

 

$

2,148,848

 

 

$

2,215,776

 

 

 

 

 

 

 

 

 

 

Brandywine Realty Trust's Equity:

 

 

 

 

 

 

 

 

Preferred Shares (shares authorized-20,000,000)

 

 

 

 

 

 

 

 

6.90% Series E Preferred Shares, $0.01 par value; issued and outstanding- 0 in 2017 and 4,000,000 in 2016

 

 

-

 

 

 

40

 

Common Shares of Brandywine Realty Trust's beneficial interest, $0.01 par value; shares authorized 400,000,000; 178,285,236 and 175,140,760 issued and outstanding in 2017 and in 2016, respectively

 

 

1,784

 

 

 

1,752

 

Additional paid-in-capital

 

 

3,218,564

 

 

 

3,258,870

 

Deferred compensation payable in common shares

 

 

11,304

 

 

 

13,684

 

Common shares in grantor trust, 894,736 in 2017, 899,457 in 2016

 

 

(11,304

)

 

 

(13,684

)

Cumulative earnings

 

 

660,174

 

 

 

539,319

 

Accumulated other comprehensive income (loss)

 

 

2,399

 

 

 

(1,745

)

Cumulative distributions

 

 

(2,053,741

)

 

 

(1,931,892

)

Total Brandywine Realty Trust's equity

 

 

1,829,180

 

 

 

1,866,344

 

Non-controlling interests

 

 

17,420

 

 

 

17,093

 

Total beneficiaries' equity

 

 

1,846,600

 

 

 

1,883,437

 

Total liabilities and beneficiaries' equity

 

$

3,995,448

 

 

$

4,099,213

 

 


-7-

 


 

BRANDYWINE REALTY TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except share and per share data)

 

Three Months Ended December 31,

 

 

Twelve Months Ended December 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rents

$

104,887

 

 

$

103,181

 

 

$

412,333

 

 

$

421,505

 

Tenant reimbursements

 

18,808

 

 

 

17,314

 

 

 

72,620

 

 

 

70,629

 

Termination fees

 

357

 

 

 

880

 

 

 

2,370

 

 

 

2,339

 

Third party management fees, labor reimbursement and leasing

 

7,862

 

 

 

8,983

 

 

 

28,345

 

 

 

26,674

 

Other

 

1,430

 

 

 

1,728

 

 

 

4,825

 

 

 

4,316

 

Total revenue

 

133,344

 

 

 

132,086

 

 

 

520,493

 

 

 

525,463

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

39,888

 

 

 

38,718

 

 

 

150,835

 

 

 

152,926

 

Real estate taxes

 

11,142

 

 

 

11,319

 

 

 

45,204

 

 

 

46,252

 

Third party management expenses

 

2,569

 

 

 

3,098

 

 

 

9,960

 

 

 

10,270

 

Depreciation and amortization

 

46,773

 

 

 

46,940

 

 

 

179,357

 

 

 

189,676

 

General and administrative expenses

 

6,741

 

 

 

5,885

 

 

 

28,538

 

 

 

26,596

 

Provision for impairment

 

-

 

 

 

27,448

 

 

 

3,057

 

 

 

40,517

 

Total operating expenses

 

107,113

 

 

 

133,408

 

 

 

416,951

 

 

 

466,237

 

Operating income (loss)

 

26,231

 

 

 

(1,322

)

 

 

103,542

 

 

 

59,226

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

478

 

 

 

266

 

 

 

1,113

 

 

 

1,236

 

Interest expense

 

(20,413

)

 

 

(20,374

)

 

 

(81,886

)

 

 

(84,708

)

Interest expense - amortization of deferred financing costs

 

(628

)

 

 

(633

)

 

 

(2,435

)

 

 

(2,696

)

Interest expense - financing obligation

 

-

 

 

 

-

 

 

 

-

 

 

 

(679

)

Equity in loss of Real Estate Ventures

 

(2,919

)

 

 

(2,180

)

 

 

(8,306

)

 

 

(11,503

)

Net gain on disposition of real estate

 

23,246

 

 

 

2,358

 

 

 

31,657

 

 

 

116,983

 

Net gain on sale of undepreciated real estate

 

-

 

 

 

9,044

 

 

 

953

 

 

 

9,232

 

Net gain on real estate venture transactions

 

52,186

 

 

 

471

 

 

 

80,526

 

 

 

20,000

 

Loss on early extinguishment of debt

 

(3,933

)

 

 

-

 

 

 

(3,933

)

 

 

(66,590

)

Net income (loss) before income taxes

 

74,248

 

 

 

(12,370

)

 

 

121,231

 

 

 

40,501

 

Income tax (provision) benefit

 

(404

)

 

 

-

 

 

 

628

 

 

 

-

 

Net income (loss)

 

73,844

 

 

 

(12,370

)

 

 

121,859

 

 

 

40,501

 

Net (income) loss attributable to non-controlling interests

 

(625

)

 

 

115

 

 

 

(1,009

)

 

 

(310

)

Net income (loss) attributable to Brandywine Realty Trust

 

73,219

 

 

 

(12,255

)

 

 

120,850

 

 

 

40,191

 

Distribution to preferred shareholders

 

-

 

 

 

(1,725

)

 

 

(2,032

)

 

 

(6,900

)

Preferred share redemption charge

 

-

 

 

 

-

 

 

 

(3,181

)

 

 

-

 

Nonforfeitable dividends allocated to unvested restricted shareholders

 

(82

)

 

 

(78

)

 

 

(327

)

 

 

(341

)

Net income (loss) attributable to Common Shareholders of Brandywine Realty Trust

$

73,137

 

 

$

(14,058

)

 

$

115,310

 

 

$

32,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PER SHARE DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share

$

0.42

 

 

$

(0.08

)

 

$

0.66

 

 

$

0.19

 

Basic weighted average shares outstanding

 

175,985,156

 

 

 

175,140,760

 

 

 

175,484,350

 

 

 

175,018,163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per common share

$

0.41

 

 

$

(0.08

)

 

$

0.65

 

 

$

0.19

 

Diluted weighted average shares outstanding

 

177,426,365

 

 

 

175,140,760

 

 

 

176,808,166

 

 

 

176,010,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-8-

 


 

BRANDYWINE REALTY TRUST

FUNDS FROM OPERATIONS

(unaudited, in thousands, except share and per share data)

 

Three Months Ended December 31,

 

 

 

Twelve Months Ended December 31,

 

 

2017

 

 

2016

 

 

 

2017

 

 

2016

 

Reconciliation of Net Income to Funds from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

$

73,137

 

 

$

(14,058

)

 

 

$

115,310

 

 

$

32,950

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to non-controlling interests - LP units

 

621

 

 

 

(118

)

 

 

 

980

 

 

 

295

 

Nonforfeitable dividends allocated to unvested restricted shareholders

 

82

 

 

 

78

 

 

 

 

327

 

 

 

341

 

Net gain on real estate venture transactions

 

(52,186

)

 

 

(471

)

 

 

 

(80,526

)

 

 

(20,000

)

Net gain on disposition of real estate

 

(23,246

)

 

 

(2,358

)

 

 

 

(31,657

)

 

 

(116,983

)

Provision for impairment

 

-

 

 

 

21,860

 

 

 

 

2,730

 

 

 

34,929

 

Other than temporary impairment of equity method investment

 

-

 

 

 

-

 

 

 

 

4,844

 

 

 

-

 

Company's share of impairment of an unconsolidated real estate venture

 

-

 

 

 

-

 

 

 

 

-

 

 

 

5,238

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real property

 

38,208

 

 

 

34,171

 

 

 

 

142,548

 

 

 

135,094

 

Leasing costs including acquired intangibles

 

8,207

 

 

 

12,667

 

 

 

 

35,920

 

 

 

54,195

 

Company’s share of unconsolidated real estate ventures

 

9,117

 

 

 

11,427

 

 

 

 

39,622

 

 

 

41,612

 

Partners’ share of consolidated real estate ventures

 

(54

)

 

 

(59

)

 

 

 

(231

)

 

 

(235

)

Funds from operations

$

53,886

 

 

$

63,139

 

 

 

$

229,867

 

 

$

167,436

 

Funds from operations allocable to unvested restricted shareholders

 

(137

)

 

 

(176

)

 

 

 

(648

)

 

 

(457

)

Funds from operations available to common share and unit holders (FFO)

$

53,749

 

 

$

62,963

 

 

 

$

229,219

 

 

$

166,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per share - fully diluted

$

0.30

 

 

$

0.35

 

 

 

$

1.29

 

 

$

0.94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares/units outstanding - fully diluted

 

178,906,164

 

 

 

177,491,208

 

 

 

 

178,287,965

 

 

 

177,516,451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid per common share

$

0.16

 

 

$

0.16

 

 

 

$

0.64

 

 

$

0.63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO payout ratio (distributions paid per common share/FFO per diluted share)

 

53.3

%

 

 

45.7

%

 

 

 

49.6

%

 

 

67.0

%

 

 

(a)


-9-

 


 

BRANDYWINE REALTY TRUST

SAME STORE OPERATIONS – 4th QUARTER

(unaudited and in thousands)

 

 

Of the 93 properties owned by the Company as of December 31, 2017, a total of 83 properties ("Same Store Properties") containing an aggregate of 14.3 million net rentable square feet were owned for the entire three-month periods ended December 31, 2017 and 2016. As of December 31, 2017, four properties were recently completed/acquired, two properties were in development and four properties were in redevelopment. Average occupancy for the Same Store Properties was 92.8% during 2017 and 94.4% during 2016. The following table sets forth revenue and expense information for the Same Store Properties:

 

 

Three Months Ended December 31,

 

 

 

2017

 

 

2016

 

Revenue

 

 

 

 

 

 

 

 

Rents

 

$

90,603

 

 

$

91,748

 

Tenant reimbursements

 

 

16,861

 

 

 

15,641

 

Termination fees

 

 

357

 

 

 

335

 

Other

 

 

416

 

 

 

436

 

Total revenue

 

 

108,237

 

 

 

108,160

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Property operating expenses

 

 

32,628

 

 

 

31,326

 

Real estate taxes

 

 

10,012

 

 

 

9,682

 

Net operating income

 

$

65,597

 

 

$

67,152

 

 

 

 

 

 

 

 

 

 

Net operating income - percentage change over prior year

 

 

-2.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other

 

$

64,824

 

 

$

66,381

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other - percentage change over prior year

 

 

-2.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

$

65,597

 

 

$

67,152

 

Straight line rents & other

 

 

(143

)

 

 

(3,164

)

Above/below market rent amortization

 

 

(450

)

 

 

(1,451

)

Amortization of tenant inducements

 

 

390

 

 

 

724

 

Non-cash ground rent

 

 

22

 

 

 

22

 

Cash - Net operating income

 

$

65,416

 

 

$

63,283

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income - percentage change over prior year

 

 

3.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income, excluding net termination fees & other

 

$

64,439

 

 

$

62,406

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income, excluding net termination fees & other - percentage change over prior year

 

 

3.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

 

2017

 

 

2016

 

Net income (loss)

 

$

73,844

 

 

$

(12,370

)

Add/(deduct):

 

 

 

 

 

 

 

 

Interest income

 

 

(478

)

 

 

(266

)

Interest expense

 

 

20,413

 

 

 

20,374

 

Interest expense - amortization of deferred financing costs

 

 

628

 

 

 

633

 

Equity in loss of real estate ventures

 

 

2,919

 

 

 

2,180

 

Net gain on real estate venture transactions

 

 

(52,186

)

 

 

(471

)

Net gain on disposition of real estate

 

 

(23,246

)

 

 

(2,358

)

Net gain on sale of undepreciated real estate

 

 

-

 

 

 

(9,044

)

Loss on early extinguishment of debt

 

 

3,933

 

 

 

-

 

Depreciation and amortization

 

 

46,773

 

 

 

46,940

 

General & administrative expenses

 

 

6,741

 

 

 

5,885

 

Income tax provision

 

 

404

 

 

 

-

 

Provision for impairment

 

 

-

 

 

 

27,448

 

Consolidated net operating income

 

 

79,745

 

 

 

78,951

 

Less: Net operating income of non-same store properties and elimination of non-property specific operations

 

 

(14,148

)

 

 

(11,799

)

Same store net operating income

 

$

65,597

 

 

$

67,152

 

 

 

 

 

 

 

 

-10-

 


 

 

 

BRANDYWINE REALTY TRUST

SAME STORE OPERATIONS – TWELVE MONTHS

(unaudited and in thousands)

 

 

Of the 93 properties owned by the Company as of December 31, 2017, a total of 83 properties ("Same Store Properties") containing an aggregate of 14.3 million net rentable square feet were owned for the entire twelve-month periods ended December 31, 2017 and 2016. As of December 31, 2017, four properties were recently completed/acquired, two properties were in development and four properties were in redevelopment. Average occupancy for the Same Store Properties was 93.5% during 2017 and 94.2% during 2016. The following table sets forth revenue and expense information for the Same Store Properties:

 

 

Twelve Months Ended December 31,

 

 

 

2017

 

 

2016

 

Revenue

 

 

 

 

 

 

 

 

Rents

 

$

365,717

 

 

$

365,415

 

Tenant reimbursements

 

 

66,124

 

 

 

61,747

 

Termination fees

 

 

1,893

 

 

 

660

 

Other

 

 

2,056

 

 

 

1,744

 

Total revenue

 

 

435,790

 

 

 

429,566

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Property operating expenses

 

 

126,463

 

 

 

124,154

 

Real estate taxes

 

 

39,928

 

 

 

39,061

 

Net operating income

 

$

269,399

 

 

$

266,351

 

 

 

 

 

 

 

 

 

 

Net operating income - percentage change over prior year

 

 

1.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other

 

$

265,450

 

 

$

263,947

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other - percentage change over prior year

 

 

0.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

$

269,399

 

 

$

266,351

 

Straight line rents & other

 

 

(6,117

)

 

 

(20,231

)

Above/below market rent amortization

 

 

(2,694

)

 

 

(6,648

)

Amortization of tenant inducements

 

 

1,448

 

 

 

1,752

 

Non-cash ground rent

 

 

88

 

 

 

88

 

Cash - Net operating income

 

$

262,124

 

 

$

241,312