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Brandywine Realty Trust Announces Significant Investment Activity, Third Quarter 2018 Results, Narrows 2018 Guidance and Provides Initial 2019 Guidance

PHILADELPHIA, Oct. 17, 2018 (GLOBE NEWSWIRE) -- 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.
  • 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.

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.

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  
   Less:  Impairment & estimated net (gain) loss on sale of real estate transactions and promote income $0.69 to $0.73  
   Plus:  Real estate depreciation, amortization (0.39)  (0.39)                                                                                                                                                                                                                    
      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.

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.

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 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.

Company / Investor Contact:
Tom Wirth
EVP & CFO
610-832-7434
tom.wirth@bdnreit.com


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  


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  


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 %

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  

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     $ 180,236  
                 
Cash - Net operating income - percentage change over prior year     0.2 %        
                 
Cash - Net operating income, excluding net termination fees & other   $ 177,096     $ 176,349  
                 
Cash - Net operating income, excluding net termination fees & other - percentage change over prior year     0.4 %        
                 
    Nine Months Ended September 30,  
    2018     2017  
Net income:   $ 14,579     $ 48,015  
Add/(deduct):                
Interest income     (2,564 )     (635 )
Interest expense     58,091       61,473  
Interest expense - amortization of deferred financing costs     1,872       1,807  
Equity in loss of Real Estate Ventures     1,182       5,387  
Net gain on Real Estate Venture transactions     (37,263 )     (28,340 )
Net (gain) loss on disposition of real estate     35       (8,411 )
Net gain on sale of undepreciated assets     (2,859 )     (953 )
Depreciation and amortization     130,908       132,584  
General & administrative expenses     22,209       21,797  
Income tax provision (benefit)     158       (1,032 )
Provision for impairment     56,865       3,057  
Consolidated net operating income     243,213       234,749  
Less: Net operating income of non-same store properties and elimination of non-property specific operations     (61,007 )     (47,090 )
Same store net operating income   $ 182,206     $ 187,659  

 

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