-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VUTPosP4MDFXNZBmy6kT24D0c5SzbdNwAvmgZLm28jELkjBtucQRd8RsljefkHL4 apSz2Ogsczi5LY7LvRNjJQ== 0000950116-98-000885.txt : 19980417 0000950116-98-000885.hdr.sgml : 19980417 ACCESSION NUMBER: 0000950116-98-000885 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980304 ITEM INFORMATION: FILED AS OF DATE: 19980416 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRANDYWINE REALTY TRUST CENTRAL INDEX KEY: 0000790816 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 232413352 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-09106 FILM NUMBER: 98595676 BUSINESS ADDRESS: STREET 1: 16 CAMPUS BLVD STREET 2: STE 100 CITY: NEWTOWN SQUARE STATE: PA ZIP: 19073 BUSINESS PHONE: 6103255600 MAIL ADDRESS: STREET 1: TWO GREENTREE CENTRE STREET 2: SUITE 100 CITY: MARLTON STATE: NJ ZIP: 08053 FORMER COMPANY: FORMER CONFORMED NAME: LINPRO SPECIFIED PROPERTIES DATE OF NAME CHANGE: 19920703 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A No. 1 Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) March 4, 1998 BRANDYWINE REALTY TRUST ------------------------------------------------------ (Exact name of registrant as specified in its charter)
MARYLAND 1-9106 23-2413352 ------------------------------- ------------------------ ------------------------------- (State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification incorporation) Number)
16 Campus Boulevard, Newtown Square, Pennsylvania 19073 (Address of principal executive offices) (610) 325-5600 (Registrant's telephone number, including area code) Page 1 of 3 pages Item 5. Other Events Brandywine Realty Trust (the "Company") previously reported its acquisition of Three Christina Centre and the DKM Properties in Current Reports on Form 8-K filed with the Securities and Exchange Commission on February 23, 1998 (Three Christina Centre), March 17, 1998 (Three Christina Centre) and April 13, 1998 (DKM Properties). The Company is filing this Current Report on Form 8-K/A No. 1 to include additional financial statements of Three Christina Centre, financial statements of the DKM Properties and pro forma financial information of the Company. After reasonable inquiry, the Company is not aware of any material factors relating to Three Christina Centre or the DKM Properties that would cause the reported financial information relating to such properties not to be necessarily indicative of future operating results. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements. The audited statement of revenue and certain operating expenses of Three Christina Centre for the year ended December 31, 1997 are included on pages F-9 to F-12. The audited statement of revenue and certain operating expenses of the DKM Properties for the year ended December 31, 1997 are included on pages F-13 to F-16. (b) Pro Forma Financial Information. Pro forma financial information which reflects the Company's acquisition Three Christina Centre and the DKM Properties as of and for the year ended December 31, 1997 are included on pages F-1 to F-8. (c) Exhibits. 23.1 - Consent of Arthur Andersen LLP -2- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BRANDYWINE REALTY TRUST Date: April 16, 1998 By: /s/ Gerard H. Sweeney -------------- ---------------------------------------- Gerard H. Sweeney, President and Chief Executive Officer (Principal Executive Officer) Date: April 16, 1998 By: /s/ Mark S. Kripke -------------- ---------------------------------------- Mark S. Kripke, Chief Financial Officer -3- BRANDYWINE REALTY TRUST INDEX TO FINANCIAL STATEMENTS I. UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION Pro Forma Condensed Consolidating Balance Sheet as of December 31, 1997 F - 3 Pro Forma Condensed Consolidating Statement of Operations for the Year Ended December 31, 1997............................................ F - 4 Notes and Management's Assumptions to Unaudited Pro Forma Condensed Consolidating Financial Information..................................... F - 5 II. THREE CHRISTINA CENTRE Report of Independent Public Accountants................................ F - 9 Combined Statement of Revenue and Certain Expenses for the Year Ended December 31, 1997 (audited)....................................... F - 10 Notes to Statement of Revenue and Certain Expenses...................... F - 11 III. DKM PROPERTIES Report of Independent Public Accountants................................ F - 13 Combined Statement of Revenue and Certain Expenses for the Year Ended December 31, 1997 (audited)....................................... F - 14 Notes to Statement of Revenue and Certain Expenses...................... F - 15 F-1 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION The following sets forth the pro forma condensed consolidating balance sheet of Brandywine Realty Trust ("the Company") as of December 31, 1997 and the pro forma condensed consolidating statement of operations for the year ended December 31, 1997. The pro forma condensed consolidating financial information should be read in conjunction with the historical financial statements of the Company and those acquisitions deemed significant pursuant to the rules and regulations of the Securities and Exchange Commission. The unaudited pro forma condensed consolidating financial information is presented as if the following events occurred on December 31, 1997 for balance sheet purposes, and on January 1, 1997 for purposes of the statement of operations: - - The Company acquired the properties described in Note 1 to these pro forma financial statements. - - The Company issued 2,375,500 Common Shares at $20.625 per share, of which 175,500 shares related to the underwriter's exercise of the over-allotment option (the "March 1997 Offering"). The net proceeds from the March 1997 Offering were contributed to the Operating Partnership in exchange for 2,375,500 GP Units. - - The Company issued 11,500,000 Common Shares at $20.75 per share, of which 1,500,000 shares related to the underwriter's exercise of the over-allotment option (the "July 1997 Offering"). The net proceeds from the July 1997 Offering were contributed to the Operating Partnership in exchange for 11,500,000 GP Units. - - The Company issued 786,840 Common Shares at $22.31 per share (the "September 1997 Offering"). The net proceeds from the September 1997 Offering were contributed to the Brandywine Operating Partnership, L.P. (the "Operating Partnership") in exchange for 786,840 units of general partnership interest ("GP Units") in the Operating Partnership. - - The Company issued 751,269 Common Shares at $24.63 per share (the "December 1997 Offering"). The net proceeds from the December 1997 Offering were contributed to the Operating Partnership in exchange for 751,269 GP Units. - - The Company issued 11,000,000 Common Shares at $24.00 per share, of which 1,000,000 shares related to the underwriter's exercise of the over-allotment option (the "January 1998 Offering"). The net proceeds from the January 1998 Offering were contributed to the Operating Partnership in exchange for 11,000,000 GP Units. - - The Company issued an aggregate of 1,012,820 Common Shares at $24.06 per share (the "February 18, 1998 Offering"). The net proceeds from the February 18, 1998 Offering were contributed to the Operating Partnership in exchange for 1,012,820 GP Units. - - The Company issued an aggregate of 629,921 Common Shares at $23.81 per share (the "February 27, 1998 Offering"). The net proceeds from the February 27, 1998 Offering were contributed to the Operating Partnership in exchange for 629,921 GP Units. The pro forma condensed consolidating financial information is unaudited and is not necessarily indicative of what the actual financial position would have been at December 31, 1997, nor does it purport to represent the future financial position and the results of operations of the Company. F-2 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1997 (Notes 1 and 2) (Unaudited) (In thousands)
BRANDYWINE REALTY TRUST HISTORICAL SHARE PROPERTY CONSOLIDATED OFFERINGS ACQUISITIONS PRO FORMA (A) (B) (C) CONSOLIDATED ------------ --------- ------------ ------------ ASSETS: Real estate investments, net $ 563,557 $ -- $ 496,869 $ 1,060,426 Cash and cash equivalents 29,442 -- -- 29,442 Escrowed cash 212 -- -- 212 Accounts receivable 3,689 -- -- 3,689 Due from affiliates 214 -- -- 214 Investment in management company 74 -- -- 74 Investment in unconsolidated real estate ventures 5,480 -- -- 5,480 Deposits 12,133 -- (12,133) -- Deferred costs and other assets 6,680 -- -- 6,680 ----------- ----------- ----------- ----------- Total assets 621,481 -- 484,736 1,106,217 =========== =========== =========== =========== LIABILITIES: Mortgages and notes payable 163,964 (287,247) 481,124 357,841 Accrued interest 857 -- -- 857 Accounts payable and accrued expenses 2,377 -- -- 2,377 Distributions payable 8,843 -- -- 8,843 Tenant security deposits and deferred rents 5,535 -- -- 5,535 ----------- ----------- ----------- ----------- Total liabilities 181,576 (287,247) 481,124 375,453 ----------- ----------- ----------- ----------- MINORITY INTEREST 14,377 -- 3,612 17,989 ----------- ----------- ----------- ----------- BENEFICIARIES' EQUITY: Common shares of beneficial interest 241 126 -- 367 Additional paid-in capital 446,054 287,121 -- 733,175 Share warrants 962 -- -- 962 Cumulative earnings 11,753 -- -- 11,753 Cumulative distributions (33,482) -- -- (33,482) ----------- ----------- ----------- ----------- Total beneficiaries' equity 425,528 287,247 -- 712,775 ----------- ----------- ----------- ----------- Total liabilities and beneficiaries' equity $ 621,481 $ -- $ 484,736 $ 1,106,217 =========== =========== =========== ===========
F-3 BRANDYWINE REALTY TRUST PROFORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (Notes 1 and 3) (Unaudited) (In thousands, except share and per share amounts)
BRANDYWINE REALTY 1998 1998 TRUST SHARE PROPERTY TOTAL HISTORICAL 1997 OFFERINGS ACQUISITIONS PRO FORMA CONSOLIDATED(A) EVENTS(B) SUBTOTAL (C) (D) CONSOLIDATED -------------- --------- --------- --------- --------- ------------ REVENUE: Base rents $ 49,928 $ 29,558 $ 79,486 $ - $ 51,845 $131,331 Tenant reimbursements 9,396 3,954 13,350 - 9,267 22,617 Other 1,736 284 2,020 - 220 2,240 --------- ---------- -------- --------- ---------- ------------ Total Revenue 61,060 33,796 94,856 - 61,332 156,188 --------- ---------- -------- --------- ---------- ------------ OPERATING EXPENSES: Interest 7,079 4,303 11,382 (21,544) 36,064 25,902 Depreciation and amortization 15,589 7,093 22,682 - 15,900 38,582 Property operating expenses 22,445 13,079 35,524 - 23,181 58,705 Administrative expenses 659 - 659 - - 659 --------- ---------- -------- --------- ---------- ------------ Total operating expenses 45,772 24,475 70,247 (21,544) 75,145 123,848 --------- ---------- -------- --------- ---------- ------------ Income (loss) before equity in income of management company and minority interest 15,288 9,321 24,609 21,544 (13,813) 32,340 Equity in income (loss) of management company 89 422 (E) 511 - 1,289 (E) 1,800 --------- ---------- -------- --------- ---------- ------------ Income (loss) before minority interest 15,377 9,743 25,120 21,544 (12,524) 34,140 Minority interest in (income) loss (376) (355) (F) (731) (337)(F) 287 (F) (781) --------- ---------- -------- --------- ---------- ------------ Net income (loss) 15,001 9,388 24,389 21,207 (12,237) 33,359 Income allocated to Preferred Shares (499) - (499) - - (499) --------- ---------- -------- --------- ---------- ------------ Income (loss) allocated to Common Shares $ 14,502 $ 9,388 $ 23,890 $ 21,207 $ (12,237) $ 32,860 ========= ========== ======== ========= ========== ============ Diluted earnings (loss) per Common Share $ 0.95 $ 0.92 ========= ============ Diluted weighted average number of shares outstanding 15,793,329 36,096,485 =========== ============
F-4 BRANDYWINE REALTY TRUST NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 1. BASIS OF PRESENTATION: Brandywine Realty Trust (the "Company") is a Maryland real estate investment trust. As of April 15, 1998, the Company owned 167 properties. The Company's interest in all of the Properties is held through Brandywine Operating Partnership, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership and as of April 15, 1998, the Company held an approximately 98.7% interest in the Operating Partnership. These pro forma financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company, the Columbia Acquisition Properties, the Main Street Acquisition Properties, the TA Properties, the Emmes Properties, the Greentree Executive Campus Acquisition Properties, 748 & 855 Springdale Drive, the Green Hills Properties, the Berwyn Park Properties, 500 & 501 Office Center Drive, Metropolitan Industrial Center, Atrium 1, Bala Pointe Office Centre, the Scarborough Properties, the GMH Properties, the RREEF Properties, Three Christina Centre and the DKM Properties. In management's opinion, all adjustments necessary to reflect the effects of the March 1997 Offering, the July 1997 Offering, the September 1997 Offering, the December 1997 Offering, the January 1998 Offering, the February 18, 1998 Offering, the February 27, 1998 Offering, the acquisitions of the Columbia Acquisition Properties, the Main Street Acquisition Properties, 1336 Enterprise Drive, the Greentree Executive Campus Acquisition Properties, Five Eves Drive, Kings Manor, the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974 Sproul Road, the Green Hills Properties, the Berwyn Park Properties, 500 & 501 Office Center Drive, Christiana Corporate Center, Metropolitan Industrial Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive, Provident Place, the PECO Building, Bala Pointe Office Centre, the Scarborough Properties, the GMH Properties, the RREEF Properties, Three Christina Centre, 920 Harvest Drive, Norriton Business Center and the DKM Properties by the Company have been made. 2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET: (A) Reflects the Company's historical consolidated balance sheet as of December 31, 1997. (B) Reflects the Company's recent public share offerings and the use of the aggregate net proceeds to repay $287.2 million of indebtedness under the Credit Facility, as summarized below: Net Proceeds ----------- January 1998 Offering $ 249,970 February 18, 1998 Offering $ 23,052 February 27, 1998 Offering 14,225 ----------- Total $ 287,247 =========== F-5 (C) Reflects the Company's recent property acquisitions as follows:
Cost Consideration --------------------------------------- ------------------------------------------------------- Operating Closing Credit Facility Mortgage Debt Partnerships Acquisition Purchase Costs Total Borrowings Assumptions Units Deposits ----------- -------- ----- ----- ---------- ----------- ----- -------- GMH Portfolio $ 229,015 $ 1,665 $ 230,680 $218,547 $ - $ - $ 12,133 RREEF Portfolio 55,500 657 56,157 56,157 - - - Three Christina Centre 50,600 1,062 51,662 51,662 - - - 920 Harvest Drive 12,000 164 12,164 12,164 - - - Norriton Business Center 7,742 283 8,025 2,367 5,658 - - DKM Portfolio 137,800 381 138,181 119,195 15,374 3,612 - --------------------------------------- ---------------------------------------------------- Total $ 492,657 $ 4,212 $ 496,869 $460,092 $ 21,032 $ 3,612 $ 12,133 ======================================= ====================================================
3. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS: (A) Reflects the historical consolidated operations of the Company. (B) Reflects the pro forma statements of operations of the Columbia Acquisition Properties, the Main Street Acquisition Properties, 1336 Enterprise Drive, Kings Manor, Greentree Executive Campus, Five Eves Drive, the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974 Sproul Road, the Berwyn Park Properties, the Green Hills Properties, 500/501 Office Center Drive, Christiana Corporate Center, Metropolitan Industrial Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive, Provident Place, the PECO Building, Bala Pointe Office Centre and the Scarborough Properties for the year ended December 31, 1997 and other pro forma adjustments to reflect the March 1997 Offering, the July 1997 Offering, the September 1997 Offering and the December 1997 Offering for the year ended December 31, 1997. The operating results reflected below include the historical results and related pro forma adjustments to reflect the period January 1, 1997 through the earlier of the respective acquisition dates or December 31, 1997. Operating results from those dates forward are included in the historical results of the Company. F-6
Revenue Operating Expenses ---------------------------------------- -------------------------------------------------- Depreciation Tenant and Property reimburse- amortiza- operating Acquisition / Offering Rents ments Other Total Interest(i) tion(ii) expenses Total Subtotal - ------------------------------------------------------------------------------------------------------------------------------------ Columbia Acquisition Properties $ 338 $ 24 $ 25 $ 387 $ 110 $ 66 $ 130 $ 306 $ 81 Main Street Acquisition Properties 542 60 -- 602 -- 109 379 488 114 1336 Enterprise Drive 78 13 -- 91 -- 21 19 40 51 Kings Manor 105 27 -- 132 -- 29 43 72 60 Greentree Executive Campus 602 17 -- 619 249 106 272 627 (8) Five Eves Drive 103 12 -- 115 75 32 45 152 (37) TA Properties 2,053 299 6 2,358 1,241 530 698 2,469 (111) Emmes Properties 2,570 1,130 2 3,702 2,049 874 1,332 4,255 (553) 748 & 755 Springdale Drive 414 -- -- 414 171 73 99 343 71 1974 Sproul Road 354 54 -- 408 -- 61 225 286 122 Berwyn Park Properties 2,492 376 36 2,904 -- 700 1,073 1,773 1,131 Green Hills Properties (iii) 4,567 -- -- 4,567 690 745 2,059 3,494 1,073 500/501 Office Center Drive 1,106 919 48 2,073 700 340 971 2,011 62 Christiana Corporate Center 615 22 45 682 308 132 218 658 24 Metropolitan Industrial Center 1,395 306 33 1,734 926 395 472 1,793 (59) Atrium 1 994 34 26 1,054 597 255 573 1,425 (371) 5 & 6 Cherry Hill Executive Campus 127 -- -- 127 218 93 140 451 (324) 220 Commerce Drive 594 -- -- 594 345 147 186 678 (84) Provident Place 644 90 7 741 411 175 283 869 (128) PECO Building (iv) 918 -- -- 918 652 278 -- 930 (12) Bala Pointe Office Centre 3,523 34 35 3,592 1,891 807 1,544 4,242 (650) Scarborough Properties 5,424 537 21 5,982 1,957 1,125 2,318 5,400 582 March 1997 Offering -- -- -- -- (91) -- -- (91) 91 July 1997 Offering -- -- -- -- (6,905) -- -- (6,905) 6,905 September 1997 Offering -- -- -- -- -- -- -- -- -- December 1997 Offering -- -- -- -- (1,291) -- -- (1,291) 1,291 - ------------------------------------------------------------------------------------------------------------------------------------ Total $ 29,558 $ 3,954 $ 284 $ 33,796 $ 4,303 $ 7,093 $ 13,079 $ 24,475 $ 9,321 ====================================================================================================================================
(i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility. The adjustment for the Columbia Acquisition Properties also reflects an effective interest rate of 9.5% on assumed debt. (ii) Pro forma depreciation expense is presented assuming an 80% building and 20% land allocation of the purchase price and capitalized closing costs and assumes a useful life of 25 years. (iii) Pro forma property expenses of the Green Hill Properties exclude $666,000 from historical amounts. Such amount represents expected salary savings. (iv) Pro forma base rents for the Peco Building are based on the lease in place as of November 25, 1997 as historically the property was owner occupied and was not an operating property. All property expenses are paid directly by the tenant. (C) Represents interest expense savings from debt repayments upon the application of the net proceeds from the January 1998 Offering, the February 18, 1998 Offering and the February 27, 1998 Offering. Offering Interest savings (i) - ------------------------------------------------------- January 1998 Offering $ (18,748) February 18, 1998 Offering (1,729) February 28, 1998 Offering (1,067) ------------- Total $ (21,544) ============= (i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility. F-7 (D) Reflects the pro forma statements of operations of the GMH Portfolio, the RREEF Portfolio, Three Christina Centre, 920 Harvest Drive, Norriton Business Center and the DKM Properties for the year ended December 31, 1997. The operating results reflected below include the historical results and related pro forma adjustments to reflect the period January 1, 1997 through December 31, 1997.
Revenue Operating Expenses ---------------------------------------- ------------------------------------------------- Depreciation Tenant and Property reimburse- amortiza- operating Acquisition / Offering Rents ments Other Total Interest(i) tion(ii) expenses Total - ----------------------------------------------------------------------------------------------------------------------------- GMH Portfolio $ 25,049 $ 1,937 $ 174 $ 27,160 $ 16,391 $ 7,382 $ 10,935 $ 34,708 RREEF Portfolio 4,160 705 - 4,865 4,212 1,797 1,252 7,261 Three Christina Centre 4,635 2,427 22 7,084 3,875 1,653 2,830 8,358 920 Harvest Drive 1,658 63 - 1,721 912 389 724 2,025 Norriton Business Center 1,161 - - 1,161 658 257 276 1,191 DKM Properties 15,182 4,135 24 19,341 10,016 4,422 7,164 21,602 ---------------------------------------------------------------------------------------------- Total $ 51,845 $ 9,267 $ 220 $ 61,332 $ 36,064 $ 15,900 $ 23,181 $ 75,145 ==============================================================================================
(i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility, and an effective rate of 7% to 8.5% on assumed mortgage indebtedness. (ii) Pro forma depreciation expense is presented assuming an 80% building and 20% land allocation of the purchase price and capitalized closing costs and assumes a useful life of 25 years. (E) Pro forma equity in income of management company is based on management fees less incremental costs estimated to be incurred. (F) Pro forma minority interest in income represents the incremental pro forma earnings allocable to minority partners. F-8 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Brandywine Realty Trust: We have audited the statement of revenue and certain expenses of the Three Christina Centre described in Note 1, for the year ended December 31, 1997. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of Brandywine Realty Trust as described in Note 1 and is not intended to be a complete presentation of the Three Christina Centre's revenue and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of the Three Christina Centre for the year ended December 31, 1997, in conformity with generally accepted accounting principles. Arthur Andersen LLP Philadelphia, Pa., March 24, 1998 F-9 THREE CHRISTINA CENTRE STATEMENT OF REVENUE AND CERTAIN EXPENSES For the Year Ended December 31, 1997 ------------ REVENUE: Base rents (Note 2) $4,635,000 Tenant reimbursements 2,427,000 Other revenue 22,000 ---------- Total revenue 7,084,000 ---------- CERTAIN EXPENSES: Maintenance and other operating expenses 1,444,000 Utilities 933,000 Real estate taxes 453,000 ---------- Total certain expenses 2,830,000 ---------- REVENUE IN EXCESS OF CERTAIN EXPENSES $4,254,000 ========== The accompanying notes are an integral part of this financial statement. F-10 THREE CHRISTINA CENTRE NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES DECEMBER 31, 1997 1. BASIS OF PRESENTATION: The statement of revenue and certain expenses reflect the operations of Three Christina Centre (the 'Property"). The Property was acquired from the Flynn Company on March 4, 1998 by Brandywine Operating Partnership LP, which is 98.7% owned by Brandywine Realty Trust (the "Company"). The Property has an aggregate net rentable area of approximately 311,826 square feet and was 100% leased as of December 31, 1997. The purchase price was approximately $50.6 million. This statement of revenue and certain expenses is to be included in the Company's current report on Form 8-K, as the above described transaction has been deemed significant pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying financial statements are prepared under generally accepted accounting principles using the accrual basis of accounting. The accompanying financial statements exclude certain expenses such as interest, depreciation and amortization, and other costs not directly related to the future operations of the Property. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities which affect the reported amounts of revenues and expense during the reporting period. The ultimate results could differ from those estimates. F-11 2. OPERATING LEASES: Base rents for the year ended December 31, 1997, include straight-line adjustments for rental revenue increases in accordance with generally accepted accounting principles. The aggregate rental revenue increase resulting from the straight-line adjustments for the year ended December 31, 1997 were $321,000. During 1997, rental revenues earned under leases with First USA Bank and Brandywine Asset Management Group each individually represented greater than 10% of the Company's total rental revenue in 1997. The Properties are leased to tenants under operating leases with expiration dates extending to the year 2012. Future minimum rentals under noncancelable operating leases, excluding tenant reimbursements of operating expenses, as of December 31, 1997, were as follows: 1998 $ 4,194,000 1999 4,139,000 2000 4,140,000 2001 4,178,000 2002 4,182,000 Thereafter 39,296,000 ---------- $ 60,129,000 Certain leases also include provisions requiring tenants to reimburse the Property for management costs and other operating expenses up to stipulated amounts. 3. RELATED PARTY TRANSACTIONS: The Property paid management fees of $175,000 to Flynn Management Company, a related party, based on 2.5% of cash receipts as defined in the management agreement. These management fees are included within maintenance and other operating expenses in the statement of revenue and certain expenses. F-12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Brandywine Realty Trust: We have audited the combined statement of revenue and certain expenses of DKM Properties, described in Note 1, for the year ended December 31, 1997. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The combined statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of Brandywine Realty Trust as described in Note 1 and is not intended to be a complete presentation of DKM Properties' revenue and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of the DKM Properties for the year ended December 31, 1997, in conformity with generally accepted accounting principles. Arthur Andersen LLP Philadelphia, Pa., April 15, 1998 F-13 DKM PROPERTIES COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES (NOTE 1) For the Year Ended December 31, 1997 ----------- REVENUE: Base rents (Note 2) $15,182,000 Tenant reimbursements 4,135,000 Other 24,000 ----------- Total revenue 19,341,000 ----------- CERTAIN EXPENSES: Maintenance and other operating expenses 3,206,000 Utilities 1,758,000 Real estate taxes 2,200,000 ----------- Total certain expenses 7,164,000 ----------- REVENUE IN EXCESS OF CERTAIN EXPENSES $12,177,000 =========== The accompanying notes are an integral part of this financial statement. F-14 DKM PROPERTIES NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES DECEMBER 31, 1997 1. BASIS OF PRESENTATION: The accompanying combined statement of revenue and certain expenses reflects the operations of certain properties (the "DKM Properties") described below. These properties were acquired by Brandywine Operating Partnership, LP, which is 98.4% owned by Brandywine Realty Trust on March 31, 1998 for an aggregate purchase price of $137.8 million. The DKM Properties have an aggregate net rentable area of approximately 918,000 square feet and were 97% leased as of December 31, 1997. The DKM Properties are as follows:
Approximate Property Seller Square Feet Location - -------- ------ ----------- -------- 104 Windsor Center DKM Properties Corp. 67,000 Lawrenceville Capital Center Capital Center Urban Renewal Corporation 306,000 Trenton 33 W State Street DB State Street Urban Renewal Associates 168,000 Trenton Princeton Pike Corporate Center II Princeton Pike Corp. Center Associates II LP 111,000 Lawrenceville Princeton Pike Corporate Center III Princeton Pike Corp Center Associates III LP 97,000 Lawrenceville Princeton Pike Corporate Center IV Princetone Pike Corp. Center Associates IV LP 169,000 Lawrenceville
These combined statement of revenue and certain expenses are to be included in the Company's Current Report on Form 8-K, pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles and exclude certain expenses such as interest, depreciation and amortization, and other costs not directly related to the future operations of the DKM Properties. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities during the reporting period. The ultimate results could differ from those estimates. 2. OPERATING LEASES: Base rents for the year ended December 31, 1997, include straight-line adjustments for rental revenue increases in accordance with generally accepted accounting principles. The aggregate rental revenue increases resulting from the straight-line adjustments for the year ended December 31, 1997 was $570,000. The State of New Jersey's minimum rental payments were $5,844,000 and represented greater than 10% of the total base rents in 1997. F-15 The DKM Properties are leased to tenants under operating leases with expiration dates extending to the year 2009. Future minimum rentals under noncancelable operating leases, excluding tenant reimbursements of operating expenses as of December 31, 1997, are as follows: 1998 $ 14,559,000 1999 14,212,000 2000 13,229,000 2001 10,774,000 2002 9,191,000 Thereafter 47,172,000 ------------ Total $ 109,137,000 ============= Certain leases also include provisions requiring tenants to reimburse DKM for management costs and other operating expenses up to stipulated amounts. 3. RELATED PARTY TRANSACTIONS: DKM Properties have an agreement with an affiliate which provides DKM Properties with certain property management, marketing and related services. Total costs incurred for these services and included in maintenance and other operating expenses, aggregated approximately $545,000 in 1997. URBAN RENEWAL PROGRAM: Two of the DKM Properties are qualified to develop, own and operate the Premises under the provisions of the Urban Renewal Corporations and Associations Law of 1961 (the "Act"). Under the provisions of the Act, these two properties receive a real estate tax exemption for all improvements constructed on the Premises for a period of 15 years, expiring in 2004. In lieu of such taxes the properties paid an annual service charge to the City of Trenton in an amount equal to 15% of annual gross revenue, as defined. In 1997, the annual service charge amounted to approximately $1,047,000, which are included as real estate taxes on the accompanying statements of operations. To qualify for this exemption, DKM agreed to limit the amounts of the profits generated from the two properties in accordance with the Act. Any profits generated from the properties in excess of the profits limitation would be payable to the City of Trenton. No excess profits were paid in 1997. In 1994, a Partnership which owns one of the Properties described above received a notice from the City of Trenton claiming an amount due of approximately $5,072,000 for profits earned by the Partnership in excess of the maximum amount allowed under the provisions of the Act. The Partnership is disputing this claim asserting that the Partnership has not exceeded the maximum allowable profits under the Act and that no amounts are due. The ultimate outcome of this matter is uncertain at this time. No adjustments have been recorded in the accompanying financial statements to reflect the outcome of this uncertainty. F-16 EX-23 2 EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated March 24, 1998 in this Form 8-K on the combined statement of revenue and certain expenses of Three Christina Centre and our report dated April 15, 1998 in this Form 8-K on the combined statement of revenue and certain expenses of the DKM Properties into the Company's previously filed Registration Statements on Forms S-3 (File No. 333-46647, File No. 333-39155 and File No. 333-20999) and Forms S-8 (File No. 333-14243 and File No. 333-28427). ARTHUR ANDERSEN LLP Philadelphia, Pa., April 16, 1998 -----END PRIVACY-ENHANCED MESSAGE-----