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Section 1: 8-K (8-K)

bdn-8k_20181017.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): October 17, 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 Item 2.02 - “Results of Operations and Financial Condition,” including the press release attached as an exhibit to this Current Report, is being furnished and 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, and 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 October 17, 2018, we issued a press release announcing our financial results for the nine months ended September 30, 2018.  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 2.06Material Impairment

On September 30, 2018, the Registrant held for sale a portfolio of eight suburban office properties in the Metropolitan Washington D.C. segment. On October 16, 2018, the Registrant entered into an agreement of sale to a newly formed real estate venture with an unaffiliated third party.  In connection with the entry into the agreement of sale, the Registrant recorded an impairment charge of $56.9 million as of September 30, 2018, reducing the aggregate carrying value of these properties from $366.0 million to the sales price less estimated closing costs of $309.1 million.

Item 9.01Financial Statements and Exhibits

Exhibits

99.1

 

Brandywine Realty Trust Press Release dated October 17, 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: October 17, 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

[email protected]

 

 

 

 

 

Brandywine Realty Trust Announces Significant Investment Activity, Third Quarter 2018 Results,

Narrows 2018 Guidance and Provides Initial 2019 Guidance

 

 

Philadelphia, PA, October 17, 2018 — Brandywine Realty Trust (NYSE:BDN) today reported its financial and operating results for the three and nine-month periods ended September 30, 2018, revised full year 2018 guidance and introduced 2019 earnings guidance.

Management Comments

“In addition to making excellent progress on our 2018 business plan, we also are announcing two significant transactions that further accelerate our growth,” stated Gerard H. Sweeney, President and Chief Executive Officer of Brandywine Realty Trust.  “These transactions achieve our goals of increasing our revenue contribution from Austin, increasing our return on invested capital and creating earnings momentum.  Both of these transactions will close in the fourth quarter.  Given the continued progress of our 2018 business plan, we are narrowing our 2018 FFO guidance range from $1.35 to $1.41 per share to $1.36 to $1.40 per share.  We are also introducing our 2019 FFO guidance range of $1.37 to $1.47 per share which includes the impact of the announced transaction activity and a $0.03 per share reduction due to a new lease accounting standard.  Our 2019 guidance at the midpoint represents a comparable 5% annual FFO growth rate.”

 

Third Quarter Highlights

Financial Results

 

Net loss available to common shareholders; ($43.0) million, or ($0.24) per diluted share, which includes an impairment charge totaling ($56.9) million, or ($0.32) per diluted share.

 

Funds from Operations (FFO); $63.2 million, or $0.35 per diluted share.

Portfolio Results

 

Core portfolio was 93.0% occupied and 95.1% leased.

 

Signed 526,000 square feet of new and renewal leases.

 

Achieved 75% tenant retention ratio.

 

Rental rate mark-to-market increased 11.4% on a GAAP basis and increased 3.0% on a cash basis.

2018 Business Plan Revisions

 

2018 Disposition Target Increase:  85% of Northern Virginia Joint Venture, or $265.2 million.

 

2018 Acquisition Target Increase:  50% of Austin Investment, or $268.5 million.

 

Speculative Review Target:  Decrease from $26.3 million to $25.3 million.

 

 

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

 


 

 

GAAP Same-Store Growth Rate:  Adjust from (1)-1% to (1.5)-0%.

 

GAAP Market-to-Market:  Increase from 8-10% to 13-14%.

 

Estimated Changes to 2018 Net Income (In $millions):

Gain and Promote on Austin Portfolio Transaction$127.3  

Impairment on Sale of Northern Virginia Assets   (56.9)

Net Increase to Net Income$  70.4

The net increase to 2018 net income represents $0.39 per diluted share and will not be included in FFO.

2019 Business Plan and Guidance Introduced

 

Net income:  $0.36 to $0.46 per diluted share

 

FFO:  $1.37 to $1.47 per diluted share

 

Same Store Growth Range: 1-3% cash and 0-2% GAAP

 

Rental Rate Mark-to-Market Range:  8-10% GAAP and 2-4% cash

 

Effective January 1, 2019, we will implement a new lease accounting standard that will modify our accounting for leases, ground leases and the capitalization of lease related pursuit costs.  We estimate that the implementation of the new standard will reduce earnings by $4.6 million.  Our 2019 guidance reflects the $4.6 million, or $0.03 per diluted share, reduction in our net income available to shareholders and FFO to reflect the implementation of the new accounting standard.

Transaction Activity

Austin Investment

 

On October 17, 2018, we entered into an agreement to acquire our partner’s entire 50% interest in the 12 remaining buildings within the DRA Austin real estate venture (“Austin Portfolio”) containing 1,570,123 square feet, located in Austin, Texas, valuing the portfolio at $537.0 million, or $342 per square foot.  The Austin Portfolio is currently encumbered by $246.5 million of mortgage indebtedness that we intend to pay-off at closing or during the first quarter of 2019.  Upon closing, the joint venture generated a 27% internal rate of return to our shareholders.  We anticipate the transaction closing during the fourth quarter 2018 and will fund the acquisition using cash-on-hand, proceeds from the anticipated Northern Virginia Joint Venture and our unsecured line of credit.

Dispositions

Northern Virginia Joint Venture

 

On October 16, 2018, we entered into an agreement with the Rockpoint Group to sell a portfolio of 8 properties (the “Portfolio”) containing an aggregate of 1,293,197 square feet, located in the Northern Virginia, for a sales price of $312.0 million.  We retained a 15% equity interest in the Portfolio through an unconsolidated real estate venture (the “JV”).  To partially fund the acquisition, the JV will secure mortgage financing.  As of September 30, 2018, the Portfolio was classified as held for sale.

 

 

 

 

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National Training Center

 

On May 18, 2018, Subaru exercised its option to purchase the National Training Center in Camden, New Jersey.  During the third quarter 2018, we placed the National Training Center into service and Subaru took occupancy.  Subaru will purchase the property during the fourth quarter 2018.  At closing, we estimate the gross purchase price will approximate $47.7 million, we expect to record a gain totaling approximately $3.5 million, and receive proceeds of approximately $45.2 million.

Finance Activity

 

As previously disclosed, on July 17, 2018, we amended our revolving credit facility to extend the maturity date from May 15, 2019 to July 15, 2022 with two six-month extensions.  In addition, we lowered our interest rate borrowing margin by 10 basis points and reduced our financial covenant requirements.

 

On August 1, 2018, the MAP Venture refinanced its mortgage loan which reduced the interest rate to LIBOR + 2.45% capped at a total maximum interest rate of 6.0%, and extended the maturity date to August 1, 2023.

 

We have no outstanding balance on our $600.0 million unsecured revolving credit facility as of September 30, 2018.

 

We have $70.0 million of cash and cash equivalents on-hand as of September 30, 2018.

Results for the Three and Nine-Month Periods Ended September 30, 2018

Net loss allocated to common shares totaled ($43.0) million or ($0.24) per diluted share in the third quarter of 2018 compared to a net income of $18.8 million or $0.11 per diluted share in the third quarter of 2017.  The 2018 results include an impairment charge totaling ($56.9) million, or ($0.32) per diluted share.

FFO available to common shares and units in the third quarter of 2018 totaled $63.2 million or $0.35 per diluted share versus $61.9 million or $0.35 per diluted share in the third quarter of 2017.  Our third quarter 2018 payout ratio ($0.18 common share distribution / $0.35 FFO per diluted share) was 51.4%.  

Net income allocated to common shares totaled $14.1 million or $0.08 per diluted share for the first nine months of 2018 compared to net income of $42.2 million or $0.24 per diluted share in the first nine months of 2017.  The 2018 results include an impairment charge totaling ($56.9) million, or ($0.32) per diluted share.

Our FFO available to common shares and units for the first nine months of 2018 totaled $183.4 million, or $1.01 per diluted share compared to FFO available to common shares and units of $175.5 million, or $0.99 per diluted share, for the first nine months of 2017.  Our first nine months 2018 FFO payout ratio ($0.54 common share distribution / $1.01 FFO per diluted share) was 53.5%.

Operating and Leasing Activity

In the third quarter of 2018, our Net Operating Income (NOI) excluding termination revenues and other income items increased 3.4% on a GAAP basis and increased 13.7% on a cash basis for our 76 same store properties, which were 93.1% and 92.4% occupied on September 30, 2018 and September 30, 2017, respectively.

We leased approximately 526,000 square feet and commenced occupancy on 336,000 square feet during the third quarter of 2018.  The third quarter occupancy activity includes 140,000 square feet of renewals, 121,000 square feet of new leases and 75,000 square feet of tenant expansions.  We have an additional 302,000 square feet of executed new leasing scheduled to commence subsequent to September 30, 2018.

We achieved a 75% tenant retention ratio in our core portfolio with net absorption of 50,000 square feet during the third quarter of 2018.  Third quarter rental rate growth increased 11.4% as our renewal rental rates increased 6.3% and our new lease/expansion rental rates increased 17.1%, all on a GAAP basis.

 

 

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At September 30, 2018, our core portfolio of 78 properties comprising 14.3 million square feet was 93.0% occupied and we are now 95.1% leased (reflecting new leases commencing after September 30, 2018).

Distributions

On September 11, 2018, our Board of Trustees declared a quarterly dividend distribution of $0.18 per common share that was paid on October 18, 2018 to shareholders of record as of October 4, 2018.  

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 previously issued 2018 net income guidance of $0.29 to $0.35 per diluted share to $0.76 to $0.80 per diluted share and adjusting our previously issued 2018 FFO guidance of $1.35 to $1.41 per diluted share to $1.36 to $1.40 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

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted share allocated to common shareholders

$

0.69

 

to

$

0.73

 

 

Less: Impairment & estimated net (gain) loss on sale of real estate transactions and promote income

 

(0.39

)

 

 

(0.39

)

 

Plus: Real estate depreciation, amortization

 

1.06

 

 

 

1.06

 

 

 

 

 

 

 

 

 

 

 

FFO per diluted share

$

1.36

 

to

$

1.40

 

 

Our 2018 FFO key assumptions to include:

 

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

 

13-14% GAAP increase in overall lease rates during 2018 with a resulting (1.5)-0% (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;

 

Speculative Revenue Target:  $25.3 million, 96% achieved;

 

$0.18 per share quarterly dividend;

 

Acquisition Activity:  Austin Investment, 50% of $537.0 million, or $268.5 million;

 

Sales Activity:  $366.0 million, represents sales of evo and Northern Virginia Joint Venture;

 

One development start; and

 

Annual earnings and FFO per diluted share based on 182.0 million fully diluted weighted average common shares.

 

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2019 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 introducing our 2019 net income guidance of $0.36 - $0.46 per diluted share and 2019 FFO guidance of $1.37 - $1.47 per diluted share.  This guidance is provided for informational purposes and is subject to change.  The following is a reconciliation of the calculation of 2019 FFO and earnings per diluted share:

Guidance for 2019

 

 

 

Range

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted share allocated to common shareholders

$

0.36

 

to

$

0.46

 

 

Plus: real estate depreciation, amortization

 

1.01

 

 

 

1.01

 

 

 

 

 

 

 

 

 

 

 

FFO per diluted share

$

1.37

 

to

$

1.47

 

 

Our 2019 FFO key assumptions to include:

 

Core Occupancy improving to a range of 94-95% by year-end 2019 and 95-96% leased;

 

8-10% GAAP increase in overall lease rates;

 

2-4% cash increase in overall lease rates;

 

0-2% increase in 2019 same store GAAP NOI;

 

1-3% increase in 2019 same store cash NOI;

 

Speculative Revenue Target:  $31.0 million, 65% achieved;

 

Change in Lease Accounting Treatment:  $4.6 million, or $0.03 per diluted share;

 

$0.18 per share quarterly dividend;

 

Acquisition Activity:  none

 

Sales Activity:  none;

 

One development start; and

 

Annual earnings and FFO per diluted share based on 182.0 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 184 properties and 25.3 million square feet as of September 30, 2018, 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.

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Conference Call and Audio Webcast

BDN management will discuss updated earnings guidance for fiscal 2018 on Thursday, October 18, 2018, during the company’s earnings call.  The conference call will begin at 9:00 a.m. Eastern Time and will last approximately one hour.  The conference call can be accessed by dialing 1-833-818-6810 and providing conference ID: 9359369.  Beginning two hours after the conference call, a taped replay of the call can be accessed through Friday, November 2, 2018, by calling 1-855-859-2056 and entering access code 9359369.  The conference call can also be accessed via a webcast on our website at www.brandywinerealty.com.

Looking Ahead – Fourth Quarter 2018 Conference Call

We anticipate we will release our fourth quarter 2018 earnings on Wednesday, January 30, 2019, after the market close and will host our fourth quarter 2018 conference call on Thursday, January 31, 2019 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, 2017.  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.

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

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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)

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

ASSETS

 

(unaudited)

 

 

 

 

 

Real estate investments:

 

 

 

 

 

 

 

 

Operating properties

 

$

3,429,048

 

 

$

3,832,348

 

Accumulated depreciation

 

 

(845,674

)

 

 

(895,091

)

Operating real estate investments, net

 

 

2,583,374

 

 

 

2,937,257

 

Construction-in-progress

 

 

157,075

 

 

 

121,188

 

Land held for development

 

 

77,578

 

 

 

98,242

 

Prepaid leasehold interests in land held for development, net

 

 

40,100

 

 

 

-

 

Total real estate investments, net

 

 

2,858,127

 

 

 

3,156,687

 

Assets held for sale, net

 

 

297,194

 

 

 

392

 

Cash and cash equivalents

 

 

70,360

 

 

 

202,179

 

Accounts receivable, net of allowance of $3,782 and $3,467 as of September 30, 2018 and December 31, 2017, respectively

 

 

13,871

 

 

 

17,938

 

Accrued rent receivable, net of allowance of $13,562 and $13,645 as of September 30, 2018 and December 31, 2017, respectively

 

 

178,013

 

 

 

169,760

 

Investment in real estate ventures, at equity

 

 

167,782

 

 

 

194,621

 

Deferred costs, net

 

 

97,004

 

 

 

96,695

 

Intangible assets, net

 

 

55,139

 

 

 

64,972

 

Other assets

 

 

186,132

 

 

 

92,204

 

Total assets

 

$

3,923,622

 

 

$

3,995,448

 

LIABILITIES AND BENEFICIARIES' EQUITY

 

 

 

 

 

 

 

 

Mortgage notes payable, net

 

$

322,588

 

 

$

317,216

 

Unsecured term loan, net

 

 

248,677

 

 

 

248,429

 

Unsecured senior notes, net

 

 

1,366,272

 

 

 

1,365,183

 

Accounts payable and accrued expenses

 

 

116,994

 

 

 

107,074

 

Distributions payable

 

 

32,492

 

 

 

32,456

 

Deferred income, gains and rent

 

 

26,731

 

 

 

42,593

 

Acquired lease intangibles, net

 

 

17,680

 

 

 

20,274

 

Liabilities related to assets held for sale

 

 

826

 

 

 

-

 

Other liabilities

 

 

14,559

 

 

 

15,623

 

Total liabilities

 

$

2,146,819

 

 

$

2,148,848

 

 

 

 

 

 

 

 

 

 

Brandywine Realty Trust's Equity:

 

 

 

 

 

 

 

 

Common Shares of Brandywine Realty Trust's beneficial interest, $0.01 par value; shares authorized 400,000,000; 178,602,602 and 178,285,236 issued and outstanding as of September 30, 2018 and December 31, 2017, respectively

 

 

1,787

 

 

 

1,784

 

Additional paid-in-capital

 

 

3,223,817

 

 

 

3,218,564

 

Deferred compensation payable in common shares

 

 

14,021

 

 

 

12,445

 

Common shares in grantor trust, 977,120 and 894,736 issued and outstanding as of September 30, 2018 and December 31, 2017, respectively

 

 

(14,021

)

 

 

(12,445

)

Cumulative earnings

 

 

674,599

 

 

 

660,174

 

Accumulated other comprehensive income

 

 

10,239

 

 

 

2,399

 

Cumulative distributions

 

 

(2,150,463

)

 

 

(2,053,741

)

Total Brandywine Realty Trust's equity

 

 

1,759,979

 

 

 

1,829,180

 

Noncontrolling interests

 

 

16,824

 

 

 

17,420

 

Total beneficiaries' equity

 

 

1,776,803

 

 

 

1,846,600

 

Total liabilities and beneficiaries' equity

 

$

3,923,622

 

 

$

3,995,448

 

 


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BRANDYWINE REALTY TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rents

$

107,580

 

 

$

102,557

 

 

$

321,597

 

 

$

307,446

 

Tenant reimbursements

 

20,557

 

 

 

17,239

 

 

 

59,094

 

 

 

53,812

 

Termination fees

 

498

 

 

 

200

 

 

 

1,630

 

 

 

2,013

 

Third party management fees, labor reimbursement and leasing

 

4,944

 

 

 

6,918

 

 

 

17,531

 

 

 

20,483

 

Other

 

1,419

 

 

 

1,524

 

 

 

5,290

 

 

 

3,395

 

Total revenue

 

134,998

 

 

 

128,438

 

 

 

405,142

 

 

 

387,149

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

37,833

 

 

 

36,847

 

 

 

115,052

 

 

 

110,947

 

Real estate taxes

 

12,433

 

 

 

11,235

 

 

 

37,272

 

 

 

34,062

 

Third party management expenses

 

2,612

 

 

 

2,619

 

 

 

9,605

 

 

 

7,391

 

Depreciation and amortization

 

43,900

 

 

 

42,429

 

 

 

130,908

 

 

 

132,584

 

General and administrative expenses

 

5,963

 

 

 

5,813

 

 

 

22,209

 

 

 

21,797

 

Provision for impairment

 

56,865

 

 

 

-

 

 

 

56,865

 

 

 

3,057

 

Total operating expenses

 

159,606

 

 

 

98,943

 

 

 

371,911

 

 

 

309,838

 

Operating income (loss)

 

(24,608

)

 

 

29,495

 

 

 

33,231

 

 

 

77,311

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

1,220

 

 

 

79

 

 

 

2,564

 

 

 

635

 

Interest expense

 

(19,257

)

 

 

(19,732

)

 

 

(58,091

)

 

 

(61,473

)

Interest expense - amortization of deferred financing costs

 

(618

)

 

 

(577

)

 

 

(1,872

)

 

 

(1,807

)

Equity in income (loss) of Real Estate Ventures

 

1

 

 

 

(5,723

)

 

 

(1,182

)

 

 

(5,387

)

Net gain (loss) on disposition of real estate

 

-

 

 

 

-

 

 

 

(35

)

 

 

8,411

 

Net gain on sale of undepreciated real estate

 

-

 

 

 

953

 

 

 

2,859

 

 

 

953

 

Net gain on Real Estate Venture transactions

 

-

 

 

 

13,758

 

 

 

37,263

 

 

 

28,340

 

Net income (loss) before income taxes

 

(43,262

)

 

 

18,253

 

 

 

14,737

 

 

 

46,983

 

Income tax (provision) benefit

 

-

 

 

 

793

 

 

 

(158

)

 

 

1,032

 

Net income (loss)

 

(43,262

)

 

 

19,046

 

 

 

14,579

 

 

 

48,015

 

Net (income) loss attributable to noncontrolling interests

 

339

 

 

 

(170

)

 

 

(167

)

 

 

(384

)

Net income (loss) attributable to Brandywine Realty Trust

 

(42,923

)

 

 

18,876

 

 

 

14,412

 

 

 

47,631

 

Distribution to preferred shareholders

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,032

)

Preferred share redemption charge

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,181

)

Nonforfeitable dividends allocated to unvested restricted shareholders

 

(80

)

 

 

(73

)

 

 

(280

)

 

 

(245

)

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

$

(43,003

)

 

$

18,803

 

 

$

14,132

 

 

$

42,173

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PER SHARE DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per Common Share

$

(0.24

)

 

$

0.11

 

 

$

0.08

 

 

$

0.24

 

Basic weighted average shares outstanding

 

178,602,622

 

 

 

175,433,657

 

 

 

178,515,993

 

 

 

175,315,581

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per Common Share

$

(0.24

)

 

$

0.11

 

 

$

0.08

 

 

$

0.24

 

Diluted weighted average shares outstanding

 

178,602,622

 

 

 

176,835,022

 

 

 

179,752,544

 

 

 

176,599,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-9-

 


 

 

BRANDYWINE REALTY TRUST

FUNDS FROM OPERATIONS

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

 

Three Months Ended September 30,

 

 

 

Nine Months Ended September 30,

 

 

2018

 

 

2017

 

 

 

2018

 

 

2017

 

Reconciliation of Net Income (Loss) to Funds from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

$

(43,003

)

 

$

18,803

 

 

 

$

14,132

 

 

$

42,173

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interests - LP units

 

(359

)

 

 

158

 

 

 

 

121

 

 

 

359

 

Nonforfeitable dividends allocated to unvested restricted shareholders

 

80

 

 

 

73

 

 

 

 

280

 

 

 

245

 

Net gain on real estate venture transactions

 

-

 

 

 

(13,758

)

 

 

 

(37,263

)

 

 

(28,340

)

Net (gain) loss on disposition of real estate

 

-

 

 

 

-

 

 

 

 

35

 

 

 

(8,411

)

Provision for impairment

 

56,865

 

 

 

-

 

 

 

 

56,865

 

 

 

2,730

 

Other than temporary impairment of equity method investment

 

-

 

 

 

4,844

 

 

 

 

-

 

 

 

4,844

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real property

 

35,011

 

 

 

34,742

 

 

 

 

104,798

 

 

 

104,340

 

Leasing costs including acquired intangibles

 

8,482

 

 

 

7,464

 

 

 

 

24,932

 

 

 

27,713

 

Company’s share of unconsolidated real estate ventures

 

6,334

 

 

 

9,816

 

 

 

 

20,230

 

 

 

30,505

 

Partners’ share of consolidated real estate ventures

 

(57

)

 

 

(54

)

 

 

 

(166

)

 

 

(177

)

Funds from operations

$

63,353

 

 

$

62,088

 

 

 

$

183,964

 

 

$

175,981

 

Funds from operations allocable to unvested restricted shareholders

 

(157

)

 

 

(162

)

 

 

 

(528

)

 

 

(511

)

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

$

63,196

 

 

$

61,926

 

 

 

$

183,436

 

 

$

175,470

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per share - fully diluted

$

0.35

 

 

$

0.35

 

 

 

$

1.01

 

 

$

0.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares/units outstanding - fully diluted

 

181,253,953

 

 

 

178,314,821

 

 

 

 

181,232,343

 

 

 

178,079,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid per common share

$

0.18

 

 

$

0.16

 

 

 

$

0.54

 

 

$

0.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

51.4

%

 

 

45.7

%

 

 

 

53.5

%

 

 

48.5

%

 


-10-

 


 

BRANDYWINE REALTY TRUST

SAME STORE OPERATIONS – 3rd QUARTER

(unaudited and in thousands)

 

 

Of the 93 properties owned by the Company as of September 30, 2018, a total of 76 properties ("Same Store Properties") containing an aggregate of 14.2 million net rentable square feet were owned for the entire three-month periods ended September 30, 2018 and 2017. As of September 30, 2018, two properties were recently completed/acquired, two properties were in development and five properties were in redevelopment. Average occupancy for the Same Store Properties was 92.9% during 2018 and 92.0% during 2017. The following table sets forth revenue and expense information for the Same Store Properties:

 

 

Three Months Ended September 30,

 

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

 

Rents

 

$

93,210

 

 

$

90,854

 

Tenant reimbursements

 

 

19,109

 

 

 

16,793

 

Termination fees

 

 

498

 

 

 

200

 

Other

 

 

345

 

 

 

541

 

Total revenue

 

 

113,162

 

 

 

108,388

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Property operating expenses

 

 

32,193

 

 

 

31,072

 

Real estate taxes

 

 

10,520

 

 

 

9,270

 

Net operating income

 

$

70,449

 

 

$

68,046

 

 

 

 

 

 

 

 

 

 

Net operating income - percentage change over prior year

 

 

3.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other

 

$

69,606

 

 

$

67,305

 

 

 

 

 

 

 

 

 

 

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

 

 

3.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

$

70,449

 

 

$

68,046

 

Straight line rents & other

 

 

(1,978

)

 

 

(7,961

)

Above/below market rent amortization

 

 

(406

)

 

 

(457

)

Amortization of tenant inducements

 

 

238

 

 

 

312

 

Non-cash ground rent

 

 

22

 

 

 

22

 

Cash - Net operating income

 

$

68,325

 

 

$

59,962

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income - percentage change over prior year

 

 

13.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

67,265

 

 

$

59,161

 

 

 

 

 

 

 

 

 

 

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

 

 

13.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

2018

 

 

2017

 

Net income (loss):

 

$

(43,262

)

 

$

19,046

 

Add/(deduct):

 

 

 

 

 

 

 

 

Interest income

 

 

(1,220

)

 

 

(79

)

Interest expense

 

 

19,257

 

 

 

19,732

 

Interest expense - amortization of deferred financing costs

 

 

618

 

 

 

577

 

Equity in (income) loss of Real Estate Ventures

 

 

(1

)

 

 

5,723

 

Net gain on Real Estate Venture transactions

 

 

-

 

 

 

(13,758

)

Net gain on sale of undepreciated real estate

 

 

-

 

 

 

(953

)

Depreciation and amortization

 

 

43,900

 

 

 

42,429

 

General & administrative expenses

 

 

5,963

 

 

 

5,813

 

Income tax benefit

 

 

-

 

 

 

(793

)

Provision for impairment

 

 

56,865

 

 

 

-

 

Consolidated net operating income

 

 

82,120

 

 

 

77,737

 

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

 

 

(11,671

)

 

 

(9,691

)

Same store net operating income

 

$

70,449

 

 

$

68,046

 

 

 

 

 

 

 

 

 

-11-

 


 

BRANDYWINE REALTY TRUST

SAME STORE OPERATIONS – NINE MONTHS

(unaudited and in thousands)

 

 

Of the 93 properties owned by the Company as of September 30, 2018, a total of 73 properties ("Same Store Properties") containing an aggregate of 13.0 million net rentable square feet were owned for the entire nine-month periods ended September 30, 2018 and 2017. As of September 30, 2018, five properties were recently completed/acquired, two properties were in development and five properties were in redevelopment. Average occupancy for the Same Store Properties was 92.9% during 2018 and 94.4% during 2017. The following table sets forth revenue and expense information for the Same Store Properties:

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

 

Rents

 

$

247,836

 

 

$

249,669

 

Tenant reimbursements

 

 

49,750

 

 

 

47,914

 

Termination fees

 

 

1,630

 

 

 

1,536

 

Other

 

 

1,197

 

 

 

1,422

 

Total revenue

 

 

300,413

 

 

 

300,541

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Property operating expenses

 

 

88,207

 

 

 

86,085

 

Real estate taxes

 

 

30,000

 

 

 

26,797

 

Net operating income

 

$

182,206

 

 

$

187,659

 

 

 

 

 

 

 

 

 

 

Net operating income - percentage change over prior year

 

 

-2.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other

 

$

179,379

 

 

$

184,701

 

 

 

 

 

 

 

 

 

 

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

 

 

-2.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

$

182,206

 

 

$

187,659

 

Straight line rents & other

 

 

(982

)

 

 

(5,943

)

Above/below market rent amortization

 

 

(1,266

)

 

 

(2,244

)

Amortization of tenant inducements

 

 

561

 

 

 

697

 

Non-cash ground rent

 

 

67

 

 

 

67

 

Cash - Net operating income

 

$

180,586