REAL ESTATE INVESTMENTS

12 Months Ended

Dec. 31, 2023

3. REAL ESTATE INVESTMENTS

As of December 31, 2023 and 2022, the gross carrying value of the operating properties was as follows (in thousands):


	December 31, 2023		December 31, 2022
Land	$	394,669	$	403,998
Building and improvements	2,671,024		2,760,357
Tenant improvements	476,539		452,885


Total	$	3,542,232	$	3,617,240

Construction-in-Progress

Internal direct construction costs totaling $8.9 million in 2023, $9.3 million in 2022, and $7.9 million in 2021 and interest totaling $5.2 million in 2023, $4.7 million in 2022, and $7.0 million in 2021 were capitalized related to the development, redevelopment and construction of tenant improvements of certain properties and land holdings.

During the years ended December 31, 2023, 2022 and 2021, the Company’s internal direct construction costs are comprised of capitalized salaries. The following table shows the amount of compensation costs (including bonuses and benefits) capitalized for the years presented (in thousands):


	December 31,
	2023		2022		2021
Development	$	4,096	$	5,343	$	4,815
Redevelopment	944		1,484		1,170
Tenant Improvements	3,817		2,505		1,917
Total	$	8,857	$	9,332	$	7,902

2023 Acquisitions

Property/Portfolio Name

Acquisition Date

Location

Property Type

Rentable Square Feet/Acres

Purchase Price

165 King of Prussia Road

October 27, 2023

Radnor, PA

Land

1.1 acres

8,550

2022 Acquisitions

Property/Portfolio Name

Acquisition Date

Location

Property Type

Rentable Square Feet/Acres

Purchase Price

631 Park Avenue

January 21, 2022

King of Prussia, PA

Land

3.3 acres

3,650

3151 Market Street (a)

April 29, 2022

Philadelphia, PA

Leasehold Interest

0.8 acres

27,349

(a)On April 29, 2022, the Company acquired, through a 99-year ground lease, the leasehold interest in a 0.8-acre land parcel, located at 3151 Market Street, in Philadelphia, Pennsylvania. The Company prepaid $19.5 million of the ground lease, representing 500,000 square feet of buildable floor to area ratio (“FAR”) to be used for the development of 3151 Market Street, and paid $7.8 million for 200,000 square feet of FAR density usable pursuant to the Schuylkill Yards Project master development agreement. The additional density is included in prepaid leasehold interests in land held for development in the consolidated balance sheets. See below regarding disposition of 500,000 square feet of FAR.

2021 Acquisitions

During the year ended December 31, 2021, the Company did not acquire any properties from a third party.

Dispositions

The following table summarizes the property dispositions during the years ended December 31, 2023, 2022 and 2021 (dollars in thousands):


Property/Portfolio Name	Disposition Date	Location	Property Type	Rentable Square Feet/Acres	Sales Price		Gain/(Loss) on Sale (a)
Dabney East	December 27, 2023	Richmond, VA	Land	11.6 acres	$	1,600	$	430
Byberry	December 7, 2023	Philadelphia, PA	Land Purchase Option	50.0 acres	$	9,641	$	3,960
8521 Leesburg Pike (f)	December 1, 2023	Vienna, VA	Office	150,897	$	11,000	$	—
200 N. Radnor Chester Road	October 31, 2023	Radnor, PA	Retail	17,884	$	14,200	$	7,735
Three Barton Skyway (f)	August 4, 2023	Austin, TX	Office	173,302	$	53,250	$	—
200 Barr Harbor Drive	November 22, 2022	West Conshohocken, PA	Office	86,000	$	30,500	$	8,740
11501 Burnett Road (d)	July 29, 2022	Austin, TX	Land	4.7 acres	$	32,513	$	8,340
3151 Market Street (c)	July 14, 2022	Philadelphia, PA	Leasehold Interest	0.8 acres	$	30,394	$	2,583
Gibbsboro Portfolio (b)	June 28, 2022	Gibbsboro, NJ	Office/Land	42,809/4.0 acres	$	4,100	$	831
25 M Street (e)	April 14, 2022	Washington, D.C.	Land	0.8 acres	$	29,675	$	3,836
Gateway G & H	January 20, 2022	Richmond, VA	Land	10.0 acres	$	1,600	$	897
1100 Lenox Drive	September 8, 2021	Lawrenceville, NJ	Land	5.0 acres	$	2,575	$	68
2100-2200 Lenox Drive	July 6, 2021	Lawrenceville, NJ	Land	35.2 acres	$	8,900	$	842
3025 JFK Boulevard	February 2, 2021	Philadelphia, PA	Leasehold Interest	1.0 acres	$	34,800	$	2,000

(a)Gain/(Loss) on Sale is net of closing and other transaction related costs.

(b)Includes $0.7 million of gain on sale of undepreciated real estate and $0.1 million of gain on disposition of real estate included within the consolidated statements of operations for the twelve months ended December 31, 2022.

(c)On July 14, 2022, the Company contributed 500,000 square feet of FAR relating to its 99-year prepaid leasehold interest at 3151 Market Street in Philadelphia, Pennsylvania, acquired on April 29, 2022, to a newly formed joint venture with an unaffiliated third party. The Company's initial deemed contribution in the project was $30.4 million and the transaction resulted in deconsolidation of the property and conversion of Brandywine 3151 Market, LP, (formerly a wholly-owned subsidiary of the Operating Partnership) to a real estate venture (“3151 Market Street Venture”). The Company recorded its investment at fair value and recognized a gain, net of transaction costs, of $2.6 million, in “Net gain on sale of undepreciated real estate” on the consolidated statements of operations. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information.

(d)On July 29, 2022, the Company contributed a 4.7 acre parcel of land held for development at 11501 Burnet Road in Austin, Texas to a newly formed joint venture with an unaffiliated third party. The project is part of the Uptown ATX master development. The Company's combined contributed initial land investment in the project was $32.5 million and the transaction resulted in the deconsolidation of the property and formation of Brandywine Uptown Office LLC and Brandywine One Uptown Multifamily LLC, (together, “One Uptown Ventures)”). The Company recorded its investment at fair value and recognized a gain of $8.3 million in “Net gain on disposition of real estate” on the consolidated statements of operations. Gain on sale of $8.3 million is calculated as the difference between the estimated relative sales value of the contributed land and the estimated total cost allocations per block. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information.

(e)On September 30, 2022, the Company recognized $0.4 million of additional gain on disposition of real estate.

(f)Recognized a provision for impairment of $16.7 million on the property prior to the sales.

3025 JFK Venture

In addition, on February 2, 2021, the Company contributed its investment in a 99-year prepaid leasehold interest in a one-acre land parcel held for development at 3025 JFK Boulevard in Philadelphia, Pennsylvania to a newly formed joint venture with an unaffiliated third party. The project is part of the Schuylkill Yards master development. The Company's investment in the project was valued at $34.8 million and the transaction resulted in deconsolidation of the property and conversion of Brandywine Opportunity Fund, L.P. (formerly a wholly-owned subsidiary of the Operating Partnership) to a real estate venture (“3025 JFK Venture”). The Company recorded its investment at fair value and recognized a gain of $2.0 million in “Net gain on sale of undepreciated real estate” on the consolidated statements of operations. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information.

3151 Market Venture

On July 14, 2022, the Company contributed 500,000 square feet of FAR relating to its 99-year prepaid leasehold interest at 3151 Market Street in Philadelphia, Pennsylvania, acquired on April 29, 2022, to a newly formed joint venture with an unaffiliated third party. The Company's initial deemed contribution in the project was $30.4 million and the transaction

resulted in deconsolidation of the property and conversion of Brandywine 3151 Market, LP, (formerly a wholly-owned subsidiary of the Operating Partnership) to a real estate venture (“3151 Market Street Venture”). The Company recorded its investment at fair value and recognized a gain, net of transaction costs, of $2.6 million, in “Net gain on sale of undepreciated real estate” on the consolidated statements of operations. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information.

During the first quarter of 2023, the Company deconsolidated $7.8 million recorded in “Prepaid leasehold interests in land held for development, net” on the consolidated balance sheets. This deconsolidation reflects the Company’s contribution, in January 2023, of 200,000 square feet of buildable floor to area ratio (“FAR”) to the Company’s unconsolidated real estate venture, referred to in Note 4 below as the 3151 Market Street Venture, for use by this unconsolidated real estate venture in the development of 3151 Market Street. Upon contribution at fair market value, the Company recognized a gain, net of transaction costs, of $0.8 million in “Net gain on sale of undepreciated real estate” on the consolidated statements of operations.

Held for Use Impairment

For the year ended December 31, 2023, the Company recorded aggregate impairment charges of $103.2 million on three properties within the Company’s Metropolitan Washington, D.C. area in the Company's Other segment. These impairments resulted from the shortened hold period assumptions for the assets as a result of the Company's plan to exit these markets as conditions permit and it was determined that the carrying value exceeded the Company's estimated fair value of the properties. The estimated fair value is considered Level 3 in accordance with ASC 820 and was determined by estimating discounted cash flows using significant unobservable inputs, which were the discount rate of 10.00% and residual capitalization rate of 8.50%.

During the year ended December 31, 2023, the Company recognized impairment losses totaling $11.7 million on properties located in the Pennsylvania Suburbs segment. The estimated fair value is considered Level 3 in accordance with ASC 820 and was based upon an executed purchase and sale agreement as of September 30, 2023 that was not completed as of December 31, 2023 due to the termination of the purchase and sale agreement.

During the year ended December 31, 2022, the Company recognized an impairment loss totaling approximately $4.7 million on a property located in the Other segment. The Company’s estimated fair value is considered Level 3 in accordance with ASC 820, and was based on a pending offer form a third party to acquire the property and the subsequent execution of a purchase and sale agreement.

Held for Sale

As of December 31, 2023 and 2022, the Company had no assets held for sale.

As of December 31, 2021, the Company determined that the sale of two adjacent parcels of land within the Other segment totaling 10.0 acres was probable and classified these properties as held for sale. As such, $0.6 million was classified as Assets held for sale, net” on the consolidated balance sheets. The Company closed on the sale of the two parcels of land on January 20, 2022 for an aggregate sales price of $1.6 million.