-----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, E1i6Wa8YN6b9jdrHKzjlyiQCG4/lCwuDXUDwckWI29EEJkLfGFS7bgOQ2IivZpgZ dcaeXTX/UjiEsCWoeWuLuQ== 0000950116-98-002210.txt : 19981116 0000950116-98-002210.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950116-98-002210 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 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: 10-Q SEC ACT: SEC FILE NUMBER: 001-09106 FILM NUMBER: 98747826 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 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities ---- Exchange Act of 1934 For the quarterly period ended September 30, 1998 or ____ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period from ____________ to ___________ Commission file number 1-9106 ------ Brandywine Realty Trust ----------------------- (Exact name of registrant as specified in its charter) Maryland 23-2413352 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 16 Campus Boulevard, Newtown Square, Pennsylvania 19073 ------------------------------------------------------- (Address of principal executive offices) (Zip Code) (610) 325-5600 -------------- (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] A total of 38,016,938 Common Shares of Beneficial Interest were outstanding as of November 12, 1998. BRANDYWINE REALTY TRUST TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1998 (unaudited) And December 31, 1997 Consolidated Statements of Operations for the three months and nine months Ended September 30, 1998 (unaudited) and September 30, 1997 (unaudited) Consolidated Statements of Cash Flow for the nine months Ended September 30, 1998 (unaudited) and September 30, 1997 (unaudited) Notes to Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk PART II - OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures 2 PART I - FINANCIAL INFORMATION Item 1. - Financial Statements BRANDYWINE REALTY TRUST CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, December 31, 1998 1997 ----------- ----------- (unaudited) ASSETS Real estate investments Operating properties $ 1,788,185 $ 586,414 Accumulated depreciation (50,762) (22,857) ----------- ----------- 1,737,423 563,557 Cash and cash equivalents 38,539 29,442 Escrowed cash 7,865 212 Accounts receivable 9,276 3,689 Due from affiliates -- 214 Investment in management company 182 74 Investment in real estate ventures, at equity 15,393 5,480 Deposits 3,200 12,133 Deferred costs and other assets 17,023 6,680 ----------- ----------- Total assets $ 1,828,901 $ 621,481 =========== =========== LIABILITIES AND BENEFICIARIES' EQUITY Mortgage notes payable $ 306,206 $ 48,731 Notes payable, Credit Facility 636,225 115,233 Accrued interest 1,683 857 Accounts payable and accrued expenses 6,584 2,377 Distributions payable 15,016 8,843 Due to affiliates 296 -- Tenant security deposits, deferred rents and other liabilities 10,576 5,535 ----------- ----------- Total liabilities 976,586 181,576 ----------- ----------- Commitments and Contingencies Preferred Shares, $0.01 par value, 5,000,000 shares authorized, 750,000 convertible preferred shares issued and outstanding at September 30, 1998 37,500 -- ----------- ----------- Minority interest 99,454 14,377 ----------- ----------- Beneficiaries' equity Common Shares of beneficial interest, $0.01 par value, 100,000,000 common shares authorized, 38,016,938 and 24,087,315 shares issued and outstanding at September 30, 1998 and December 31, 1997, respectively 376 241 Additional paid-in capital 751,797 446,054 Share warrants 962 962 Cumulative earnings 38,514 11,753 Cumulative distributions (76,288) (33,482) ----------- ----------- Total beneficiaries' equity 715,361 425,528 ----------- ----------- Total liabilities and beneficiaries' equity $ 1,828,901 $ 621,481 =========== ===========
The accompanying condensed notes are integral part of these consolidated financial statements. 3 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share information) (Unaudited)
Three Months Nine Months Ended September 30, Ended September 30, ---------------------- ---------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Revenue: Rents $ 39,856 $ 15,401 $ 105,409 $ 32,290 Tenant reimbursements 6,699 2,446 16,105 5,731 Other 701 274 1,974 818 --------- --------- --------- --------- Total revenue 47,256 18,121 123,488 38,839 --------- --------- --------- --------- Operating Expenses: Interest 8,040 1,840 19,057 4,899 Depreciation and amortization 11,952 4,276 30,145 10,051 Amortization of deferred compensation costs 372 -- 1,116 -- Property operating expenses 15,236 6,277 38,686 13,309 Management fees 1,710 739 4,592 1,496 Administrative expenses 395 275 1,022 705 --------- --------- --------- --------- Total operating expenses 37,705 13,407 94,618 30,460 --------- --------- --------- --------- Income before equity in income of management company, equity in income of real estate ventures, gains on sales, minority interest and extraordinary items 9,551 4,714 28,870 8,379 Equity in income of management company 33 115 108 332 Equity in income of real estate ventures 251 -- 251 -- --------- --------- --------- --------- Income before gains on sales, minority interest and extraordinary items 9,835 4,829 29,229 8,711 Gains on sale of interests in real estate -- -- 209 -- --------- --------- --------- --------- Income before minority interest and extraordinary items 9,835 4,829 29,438 8,711 Minority interest in income (276) (81) (654) (256) --------- --------- --------- --------- Net income before extraordinary items 9,559 4,748 28,784 8,455 Extraordinary items (1,145) -- (2,003) -- --------- --------- --------- --------- Net income 8,414 4,748 26,781 8,455 Income allocated to Preferred Shares (22) -- (22) (499) --------- --------- --------- --------- Income allocated to Common Shares $ 8,392 $ 4,748 $ 26,759 $ 7,956 ========= ========= ========= ========= Earnings per Common Share: Basic $ 0.22 $ 0.25 $ 0.75 $ 0.65 ========= ========= ========= ========= Diluted $ 0.22 $ 0.25 $ 0.75 $ 0.65 ========= ========= ========= =========
The accompanying condensed notes are an integral part of these consolidated financial statements. 4 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited and in thousands)
Nine Months Ended September 30, ------------------------------- 1998 1997 ----------- ----------- Cash flows from operating activities: Net income $ 26,781 $ 8,455 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest 654 256 Depreciation and amortization 30,145 10,051 Equity in income of management company (108) (332) Equity in income of real estate ventures (251) -- Amortization of deferred compensation costs 1,116 -- Issuance of shares to trustees 29 -- Amortization of discounted notes payable 188 -- Gain on sale of interest in real estate (209) -- Extraordinary items 2,003 -- Changes in assets and liabilities: Accounts receivable (5,587) (1,099) Affiliate receivable 510 903 Other assets (8,720) (2,368) Accounts payable and accrued expenses 1,282 1,859 Accrued mortgage interest 826 101 Other liabilities 5,041 2,636 ----------- ----------- Net cash provided by operating activites 53,700 20,462 ----------- ----------- Cash flows from investing activities: Acquisitions of properties (806,085) (314,348) Sales of properties 14,704 -- Investment in real estate ventures (9,662) -- Decrease (increase) in escrowed cash (7,653) 1,696 Capital expenditures and leasing commissions paid (12,735) (7,311) ----------- ----------- Net cash used in investing activities (821,431) (319,963) ----------- ----------- Cash flows from financing activites: Proceeds from issuance of shares, net 301,306 287,807 Repurchases of Common Shares (1,657) -- Distributions paid to shareholders (36,961) (9,951) Distributions paid to minority partners (568) (287) Proceeds from mortgage notes payable 9,143 14,858 Repayments of mortgage notes payable (13,621) (3,518) Proceeds from notes payable, Credit Facility 1,329,367 166,775 Repayments of notes payable, Credit Facility (808,375) (152,775) Purchase of minority interests -- (531) Other debt costs (1,806) (1,191) ----------- ----------- Net cash provided by financing activities 776,828 301,187 ----------- ----------- Increase in cash and cash equivalents 9,097 1,686 Cash and cash equivalents at beginning of period 29,442 18,279 ----------- ----------- Cash and cash equivalents at end of period $ 38,539 $ 19,965 =========== ===========
The accompanying condensed notes are an integral part of these consolidated financial statements. 5 BRANDYWINE REALTY TRUST NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 1. ORGANIZATION AND NATURE OF OPERATIONS: Brandywine Realty Trust (collectively with its subsidiaries, the "Company") is a self-administered, self-managed and fully integrated real estate investment trust (a "REIT"). The Company owns a portfolio of real estate assets located primarily in the Mid-Atlantic Region. As of September 30, 1998, the Company's portfolio included 194 office properties, 51 industrial facilities and one mixed use property (collectively, the "Properties") that contain an aggregate of approximately 17.6 million net rentable square feet. As of September 30, 1998, the Company also held economic interests in nine office real estate ventures (the "Real Estate Ventures"). The Company's interest in the Properties and the Real Estate Ventures 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 September 30, 1998, the Company held an approximately 90.7% interest (computed assuming conversion of the preferred units, as defined below, into Class A Units, as defined below) in the Operating Partnership and was entitled to 97.6% of the Operating Partnership's income after distributions to holders of Preferred Units. The Operating Partnership holds a 95% economic interest in Brandywine Realty Services Corporation (the "Management Company") through its ownership of 100% of the Management Company's non-voting preferred stock and 5% of its voting common stock. As of September 30, 1998, the Management Company was responsible for managing and leasing 207 of the Properties and additional properties on behalf of third parties. A majority of the Properties are located within the suburban Philadelphia office and industrial market. As such, a downturn in business activity in this market could negatively impact the Company. Management believes that the Philadelphia office and industrial market provides a well-diversified economic base which helps to insulate the region from the types of market vicissitudes that can adversely affect a single-sector economy. 2. BASIS OF PRESENTATION: The consolidated financial statements have been prepared by the Company without audit except as to the balance sheet as of December 31, 1997, which has been prepared from audited data, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the included disclosures are adequate to make the information presented not misleading. In the opinion of the Company, all adjustments (consisting solely of normal recurring matters) necessary to fairly present the financial position of the Company as of September 30, 1998, the results of its operations for the three month periods ended September 30, 1998 and 1997, and the results of its operations and its cash flows for the nine month periods ended September 30, 1998 and 1997 have been included. The results of operations for such interim periods are not necessarily indicative of the results for a full year. For further information, refer to the Company's consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K, as amended on Form 10-K/A, for the year ended December 31, 1997. 3. MINORITY INTEREST IN THE OPERATING PARTNERSHIP: Minority Interest in the Operating Partnership relates to interests in the Operating Partnership that are not owned by the Company. Income allocated to the minority interest is based on the weighted average percentage ownership of the Operating Partnership throughout the year. Minority Interest is comprised of Class A Units of limited partnership interest ("Class A Units") and Series B Preferred Units of limited partnership interest ("Preferred Units"). The Operating Partnership issued these interests to persons that contributed assets to the Operating Partnership. The Operating Partnership will, at the request of a holder, be obligated to redeem each Class A Unit held by such holder, at the option of the Company, for cash or one Common Share. Each Preferred Unit has a stated value of $50.00 and is 6 convertible at the option of the holder into Class A Units at a conversion price of $28.00. The conversion price is subject to reduction to $26.50 if the average trading price of the Common Shares during the 60-day period ending December 31, 2003 is $23.00 or lower. The Preferred Units bear a preferred distribution of 7.25% per annum, subject to an increase in the event quarterly distributions paid to holders of Common Shares exceeds $0.51 per share. As of September 30, 1998, there were 947,005 outstanding Class A Units held by holders other than the Company. In addition, 1,550,000 Preferred Units were outstanding. 4. ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS: Subsequent to September 30, 1998 Subsequent to September 30, 1998 and through November 13, 1998, the Company acquired four office properties and 18 industrial properties containing an aggregate of approximately 889,993 net rentable square feet. The aggregate purchase price for the 22 properties was approximately $62.7 million, funded with approximately $36.5 million of cash and approximately $26.2 million in Class A Units. Third Quarter - 1998 During the third quarter of 1998, the Company consummated a transaction in which it acquired 43 office properties, 23 industrial facilities, one mixed use property, approximately 172 acres of undeveloped land, an interest in a Real Estate Venture and an option to purchase a 294,800 square foot building under development for an option price of $68.0 million on or before March 1, 1999. The 67 acquired properties contain an aggregate of approximately 5.5 million net rentable square feet. The aggregate purchase price of the transaction was approximately $599.1 million, which was funded with approximately $244.4 million of cash; debt assumption of approximately $239.7 million; the issuance of 750,000 Preferred Shares (as defined below) with an aggregate stated value of $37.5 million; and the issuance of 1,550,000 Preferred Units with an aggregate stated value of $77.5 million. As part of the transaction, the Company also agreed to purchase a property with 154,155 square feet for a purchase price of approximately $20.0 million which will be satisfied through the issuance of 400,000 Preferred Units with an aggregate stated value of $20.0 million. The Company expects to acquire this property in the first quarter of 1999. Second Quarter - 1998 During the second quarter of 1998, the Company acquired 13 office properties containing an aggregate of approximately 796,150 net rentable square feet. The aggregate purchase price of the 13 properties was approximately $98.2 million, which was satisfied with approximately $87.9 million of cash, debt assumption of approximately $1.0 million and the issuance of approximately $9.3 million in Class A Units. During the second quarter of 1998, the Company sold an office property located in Cincinnati, Ohio containing approximately 156,175 net rentable square feet for a gross sales price of approximately $15.2 million. First Quarter - 1998 During the first quarter of 1998, the Company acquired 44 office properties and six industrial facilities containing an aggregate of approximately 4.3 million net rentable square feet. The aggregate purchase price of the 50 properties was approximately $492.7 million, funded with approximately $468.1 million of cash, debt assumption of approximately $21.0 million and approximately $3.6 million in Class A Units. 1997 During 1997, the Company acquired 80 properties (61 office properties and 19 industrial facilities) containing an aggregate of approximately 5.1 million net rentable square feet. The aggregate purchase price for the 1997 property acquisitions was approximately $403.7 million, funded with approximately $378.3 million of cash, debt assumption of approximately $15.9 million and approximately $9.5 million in Class A Units. The following unaudited pro forma financial information of the Company for the nine months ended September 30, 1998 and 1997 gives effect to the Properties acquired through September 30, 1998 and the offerings of Common Shares during 1998 and 1997 as if the purchases and offerings had occurred on January 1, 1997. 7
Nine Months Ended September 30, -------------------------------------- 1998 1997 ------------------ ------------------ (in thousands, except per share data) (Unaudited) Pro forma total revenues $195,222 $184,272 Pro forma net income before extraordinary items $23,076 $19,970 Diluted pro forma net income per Common Share before extraordinary items $0.52 $0.51
All acquisitions described above were accounted for by the purchase method. The results of operations for each of the acquired properties have been included from the respective purchase dates. All pro forma financial information presented within this footnote is unaudited and is not necessarily indicative of the results which actually would have occurred if acquisitions had been consummated on the respective dates indicated, nor does the pro forma information purport to represent the results of operations for future periods. 5. INDEBTEDNESS Notes Payable Credit Facility - The Company uses credit facility borrowings for general business purposes, including the acquisition of office, industrial and mixed use properties and the repayment of certain outstanding debt. At December 31, 1997, the Company had a $150.0 million secured credit facility (the "1997 Credit Facility"). The 1997 Credit Facility was secured by 39 of the Properties and bore interest at a per annum floating rate equal to the Company's choice of 30, 60 or 90-day LIBOR, plus 175 basis points. During the first quarter of 1998, the Company replaced the 1997 Credit Facility with a $330.0 million unsecured revolving credit facility (the "1998 Credit Facility"). The Company wrote off $858,000 of unamortized deferred financing costs relating to the 1997 Credit Facility which has been accounted for as an extraordinary item in the statement of operations. The 1998 Credit Facility bore interest at a reduced interest rate equal to the 30, 60, 90 or 180-day LIBOR, plus, in each case, a range of 100 to 137.5 basis points, depending on the Company's then existing leverage and debt rating. Alternatively, the Company could have borrowed funds at a base rate equal to the higher of (i) the Prime Rate or (ii) the Fed Funds Rate plus 50 basis points. The 1998 Credit Facility required the Company to maintain ongoing compliance with a number of customary financial and other covenants, including leverage ratios based on gross implied asset value and debt service coverage ratios, limitations on liens and distributions and a minimum net worth requirement. During the second quarter of 1998, the Company entered into a $150.0 million unsecured credit facility (the "Additional Facility") to facilitate certain of the Company's property acquisitions. Amounts repaid by the Company under the Additional Facility were not subject to reborrowing. The Additional Facility incorporated the covenants contained in the 1998 Credit Facility. During the third quarter of 1998, the Company replaced the 1998 Credit Facility with a new revolving credit facility of $550.0 million (the "New 1998 Credit Facility"). The New 1998 Credit Facility is currently unsecured, but will convert to a secured facility if certain leverage requirements are not met. The Company wrote off approximately $1.1 million of unamortized deferred financing costs related to the 1998 Credit Facility which has been accounted for as an extraordinary item in the statement of operations. The interest rate borne by the New 1998 Credit Facility was LIBOR plus 150 basis points initially, with the spread over LIBOR subject to reductions of from 12.5 to 35 basis points and a possible increase of 25 basis points based on the Company's leverage. The spread over LIBOR may also be reduced to either 115 or 100 basis points depending on the Company's long term debt rating. The New 1998 Credit Facility matures in September 2001 and contains financial and operating convenants similar to those contained in the 1998 Credit Facility with certain definitional and computational modifications. On September 30, 1998, the Company had approximately $493.2 million of indebtedness outstanding under the New 1998 Credit Facility. 8 During the third quarter of 1998, the Company also replaced the Additional Facility with a new $150 million unsecured credit facility (the "New Additional Facility") which bears interest at LIBOR plus 200 basis points and is payable in full on March 31, 1999. Amounts repaid under the New Additional Facility are not subject to reborrowing. The New Additional Facility contains financial and operating convenants that are identical to those applicable to the New 1998 Credit Facility. As of September 30, 1998, the Company had approximately $143.0 million of indebtedness outstanding under the New Additional Facility. Borrowings under the New 1998 Credit Facility and the New Additional Facility were used to fund the costs of acquiring properties. The Company is currently in compliance with all covenants related to the new financings. The Company paid interest totaling approximately $19.9 million during the nine months ended September 30, 1998 and approximately $4.5 million during the nine months ended September 30, 1997. As of September 30, 1998, the fair values of mortgage notes payable and notes payable under the New 1998 Credit Facility and the New Additional Facility approximate carrying costs. During the nine months ended September 30, 1998, the Company capitalized interest related to development and redevelopment projects totaling approximately $914,000. As of September 30, 1998, the Company anticipated making equity contributions to Real Estate Ventures under development totaling approximately $7.8 million of which $2.3 million was contributed as of September 30, 1998. The Company has also entered into guarantees for the benefit of certain Real Estate Ventures, aggregating approximately $15.2 million. Payment under these guaranties would constitute loan obligations of, or preferred equity positions in, the applicable Real Estate Venture. 6. SHARES, WARRANTS AND OPTIONS: The following table summarizes the Company's issuance of Common Shares, warrants and options during the periods presented:
Number of Type of issuance Investor Date of issuance Common Shares Share Price - ----------------------- ------------------------ ---------------- ------------- ----------- 1998 Activity through September 30, 1998 - --------------------------------------------------- Repurchases (ii) (86,744) (ii) Trustee Fees (iii) Trustees 5/8/98 1,248 - Share offering Public 4/21/98 625,000 $ 24.00 Share offering (iv) Public 3/6/98 1,000,000 $ 24.00 Share offering Public 2/27/98 629,921 $ 23.81 Share offering Public 2/18/98 1,012,820 $ 24.06 Share offering Public 2/4/98 10,000,000 $ 24.00 Unit redemptions (v) Various 6/30/98 1,434 - Unit redemptions (v) Scarborough 6/22/98 50,000 - Unit redemptions (v) Safeguard Scientifics 1/6/98 252,387 - Employee share awards Company employees 1/2/98 443,557 - Employee share options Company employees 1/2/98 - - Employee share options Company employees 1/2/98 - - Employee share options Company employees 1/2/98 - - -------------- 13,929,623 -------------- Amounts outstanding at December 31, 1997 - ------------------------------------------------- Shares outstanding Various 12/31/97 24,087,315 Options outstanding Various 12/31/97 - -------------- 24,087,315 -------------- Total outstanding as of September 30, 1998 38,016,938 ==============
[TABLE RESTUBBED]
Number of options / Proceeds (in Type of issuance Investor warrants Exercise Price thousands)(i) - ----------------------- ------------------------ -------- -------------- ------------- 1998 Activity through September 30, 1998 - --------------------------------------------------- Repurchases Trustee Fees (iii) Trustees - - - Share offering Public - - 14,250 Share offering (iv) Public - - 22,770 Share offering Public - - 14,325 Share offering Public - - 23,152 Share offering Public - - 227,700 Unit redemptions (v) Various - - - Unit redemptions (v) Scarborough - - - Unit redemptions (v) Safeguard Scientifics - - - Employee share awards Company employees - - - Employee share options Company employees 748,874 $ 29.04 - Employee share options Company employees 740,796 $ 27.78 - Employee share options Company employees 554,034 $ 25.25 - ----------- ========= 2,043,704 $ 302,197 ----------- ========= Amounts outstanding at December 31, 1997 - ------------------------------------------------- Shares outstanding Various - - - Options outstanding Various 762,105 $6.21 - $25.50 - ----------- 762,105 ----------- Total outstanding as of September 30, 1998 2,805,809 ===========
i. Proceeds are net of underwriter's discounts and before deducting other expenses, if any. ii. The Company repurchased 86,744 of its Common Shares on the open market between August 11, 1998 and September 2, 1998 for prices ranging from $17.75 per share to $20.125 per share. iii. The Company issued Common Shares as partial payment of annual fees to non-employee Trustees. iv. This offering was pursuant to the exercise of underwriters' over-allotment options. v. Class A Unit Redemptions represent Common Shares issued upon redemption of Class A Units. 9 On January 2, 1998, the Company awarded an aggregate of 443,557 "restricted" Common Shares to six of the Company's executives. These restricted shares vest over five to eight year periods and were valued at approximately $11.2 million (based on the closing price of Common Shares on January 2, 1998). Also on January 2, 1998, the Company awarded certain of its employees options exercisable for an aggregate 2,043,704 Common Shares. Of the options awarded, 1,737,261 were granted subject to shareholder approval, which was obtained on May 15, 1998. These options vest over two to five years and have exercise prices ranging from $25.25 to $29.04. The Company has reserved, as of September 30, 1998, 2,805,809 Common Shares for issuance upon the exercise of options and warrants described above. There were no options or warrants exercised or canceled and no options or warrants expired from January 1, 1997 to September 30, 1998. As of September 30, 1998, 750,000 Series A Preferred Shares (the "Preferred Shares") of the Company were outstanding. Each Preferred Share has a stated value of $50.00 and is convertible at the option of the holder into Common Shares at a conversion price of $28.00. The conversion price is subject to reduction to $26.50 if the average trading price of the Common Shares during the 60-day period ending December 31, 2003 is $23.00 or lower. The Preferred Shares bear a preferred distribution of 7.25% per annum, subject to an increase in the event quarterly distributions paid to holders of Common Shares exceeds $0.51 per share. 7. DISTRIBUTIONS: On September 15, 1998, the Company declared a distribution of $0.38 per share, totaling approximately $14.5 million, which was paid on October 15, 1998 to shareholders of record as of September 28, 1998. The Operating Partnership simultaneously declared a $0.38 per unit cash distribution to holders of Class A Units totaling approximately $360,000. The Company and the Operating Partnership, respectively, also paid distributions to holders of Preferred Shares and Preferred Units, which are each entitled to a 7.25% preferential return. Distributions to holders of Preferred Shares and Preferred Units were approximately $22,000 and $46,000, respectively. 8. NET INCOME PER SHARE: In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 establishes standards for computing and presenting earnings per share ("EPS"). Basic earnings per share are based on the weighted average number of Common Shares outstanding during the year. Diluted earnings per share are based on the weighted average number of Common Shares outstanding during the year adjusted to give effect to common share equivalents. All per share amounts for all periods presented have been restated to conform to SFAS 128. A reconciliation between basic and diluted EPS is shown below (in thousands, except share and per share data). 10
Three Months Ended September 30, --------------------------------------------------------------------------- 1998 1997 --------------------------------- --------------------------------- Basic Diluted Basic Diluted ------------ ------------ ------------ ------------ Net income before extraordinary item $ 9,559 $ 9,559 $ 4,748 $ 4,748 Income allocated to Preferred Shares (22) (22) -- -- ------------ ------------ ------------ ------------ Income available to common shareholders before extraordinary item $ 9,537 $ 9,537 $ 4,748 $ 4,748 Extraordinary item $ (1,145) $ (1,145) ------------ ------------ ------------ ------------ Net income available to common shareholders $ 8,392 $ 8,392 $ 4,748 $ 4,748 ------------ ------------ ------------ ------------ Weighted average shares outstanding 37,622,205 37,622,205 18,925,081 18,925,081 Options and warrants -- 24,252 -- 79,429 ------------ ------------ ------------ ------------ Total weighted average shares outstanding 37,622,205 37,646,457 18,925,081 19,004,510 ------------ ------------ ------------ ------------ Earnings per share before extraordinary item $ 0.25 $ 0.25 $ 0.25 $ 0.25 ============ ============ ============ ============ Earnings per share after extraordinary item $ 0.22 $ 0.22 $ 0.25 $ 0.25 ============ ============ ============ ============
Nine Months Ended September 30, --------------------------------------------------------------------------- 1998 1997 --------------------------------- --------------------------------- Basic Diluted Basic Diluted ------------ ------------ ------------ ------------ Net income before extraordinary item $ 28,784 $ 28,784 $ 8,455 $ 8,455 Income allocated to Preferred Shares (22) (22) (499) (499) ------------ ------------ ------------ ------------ Income available to common shareholder before extraordinary item $ 28,762 $ 28,762 $ 7,956 $ 7,956 Extraordinary Item (2,003) (2,003) -- -- ------------ ------------ ------------ ------------ Net income available to common shareholders $ 26,759 $ 26,759 $ 7,956 $ 7,956 ------------ ------------ ------------ ------------ Weighted average shares outstanding 35,568,411 35,568,411 12,206,129 12,206,129 Options and warrants -- 92,367 -- 79,429 ------------ ------------ ------------ ------------ Total weighted average shares outstanding 35,568,411 35,660,778 12,206,129 12,285,558 ------------ ------------ ------------ ------------ Earnings per share before extraordinary item $ 0.81 $ 0.81 $ 0.65 $ 0.65 ============ ============ ============ ============ Earnings per share after extraordinary item $ 0.75 $ 0.75 $ 0.65 $ 0.65 ============ ============ ============ ============
INCOME TAXES: The Company is taxed as a REIT under Section 856(c) of the Internal Revenue Code of 1986, as amended, and generally will not be subject to federal income tax to the extent it distributes at least 95% of its REIT taxable income to its shareholders and meets certain other requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate rates. The Company may also be subject to certain state and local taxes on its income and property and federal income and excise taxes on its undistributed taxable income. The Company was and is in compliance with all REIT requirements and was not subject to federal income taxes. 10. NEWLY ISSUED ACCOUNTING STANDARDS: Statement on Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments and Hedging Activities" is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999, although earlier application is encouraged. SFAS 133 established standards related to the Company's financial risks associated with its activity as it relates to financial activities with respect to derivative instruments and hedging. The Company has not 11 engaged in the practice of using financial derivative instruments and hedging activities. The Company does not believe that the implementation of SFAS 133 will have a material impact on the Company's financial position or results of operations. 11. RELATED PARTY TRANSACTIONS: On October 20, 1998, the Company loaned certain employees an aggregate of approximately $2.4 million to fund this purchase of 130,428 shares on the open market. The loans are full recourse and mature in five years. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the financial statements appearing elsewhere herein. This Form 10-Q contains forward-looking statements for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934 and as such may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that these expectations will be realized. Factors that could cause actual results to differ materially from current expectations include, but are not limited to, changes in general economic conditions, changes in local real estate conditions (including rental rates and competing properties), changes in industries in which the Company's principal tenants compete, the failure to timely lease unoccupied space, the failure to timely re-lease occupied space upon expiration of leases, the inability to generate sufficient revenues to meet debt service payments and operating expenses, the unavailability of equity and debt financing, unanticipated costs associated with the acquisition and integration of the Company's recent and pending acquisitions, potential liability under environmental or other laws and regulations and the failure of the Company to manage its growth effectively. OVERVIEW The Company continued its growth during the nine months ended September 30, 1998 by purchasing 100 office properties, 29 industrial properties and one mixed use property for an aggregate purchase price of approximately $1.2 billion and investing approximately $9.9 million in unconsolidated real estate ventures. These acquisitions increased the Company's market share in the suburban Philadelphia office and industrial market and expanded the Company's presence into several other markets within the Mid-Atlantic Region. In addition, the Company sold an office property in Ohio which contains approximately 156,175 net rentable square feet for a gross sale price of approximately $15.2 million. As of September 30, 1998, the Company's portfolio consisted of 194 office properties, 51 industrial facilities and one mixed use property totaling approximately 17.6 million net rentable square feet. The acquisitions consummated during the nine months ended September 30, 1998 were financed through a combination of: net proceeds of approximately $301.3 million received from four public offerings of an aggregate of approximately 13.3 million Common Shares; borrowings under the Company's revolving credit facilities; assumption of mortgage notes payable; the issuance of 750,000 Preferred Shares having an aggregate stated value of $37.5 million; the issuance by the Operating Partnership of 543,400 Class A Units valued at approximately $12.9 million; and the issuance by the Operating Partnership of 1,550,000 Preferred Units having an aggregate stated value of $77.5 million. These acquisitions expanded the Company's presence into Maryland; Delaware; Northern New Jersey; Central New Jersey; Harrisburg, Pennsylvania; Northern Virginia; Richmond, Virginia; and North Carolina while reinforcing the Company's presence in suburban Philadelphia and Southern New Jersey. During the period September 30, 1998 through November 13, 1998, the Company acquired four office properties and 18 industrial facilities containing an aggregate of approximately 889,993 net rentable square feet for approximately $62.7 million. These acquisitions expanded the Company's portfolio into the Long Island, New York market and strengthened the Company's presence in the Northern New Jersey market. The Company receives income primarily from rental revenue (including tenant reimbursements) from the Properties and, to a lesser extent, from the management of certain properties owned by third parties. The Company expects that 12 revenue growth in the next two years will result primarily from additional redevelopment, development and acquisition projects as well as from rent and occupancy increases in its current portfolio. RESULTS OF OPERATIONS Comparison of the Three and Nine Months Ended September 30, 1998 and September 30, 1997 Net income before extraordinary items for the three months and nine months ended September 30, 1998 was $9.6 million and $28.8 million compared with net income of $4.7 million and $8.5 million for the corresponding periods in 1997. The increases were primarily attributable to the operating results contributed by the 210 properties acquired from January 1, 1997 through September 30, 1998. Revenues, which include rental income, recoveries from tenants and other income, increased from $18.1 million to $47.3 million for the three months ended September 30, 1997 to 1998 and increased from $38.8 million to $123.5 million for the nine months ended September 30, 1997 to 1998. These increases were primarily as a result of property acquisitions and, to a lesser extent, increased occupancy. The impact of the straight-line rent adjustment increased revenues by $4.0 million for the nine months ended September 30, 1998 and $1.1 million for the nine months ended September 30, 1997. Property operating expenses, depreciation and amortization and management fees increased from $11.3 million to $29.3 million for the three months ended September 30, 1997 to 1998 and increased from $24.9 million to $74.5 million for the nine months ended September 30, 1997 to 1998. These increases were primarily as a result of property acquisitions. Property level operating income for the 93 properties owned as of September 30, 1997 increased from $24.0 million to $25.7 million for the nine months ended September 30, 1997 to 1998, an increase of 7.0%. Occupancy for these 93 properties increased from 92.5% to 93.7% driving revenue growth of 5.9% and causing expenses to increase by 3.9%. During the nine month period ended September 30, 1998, 63 leases representing 332,140 square feet of office and industrial space commenced at an average rate per square foot of $15.40 which was 15.8% higher than the average rate per square foot on the expired leases. Interest expense increased from $1.8 million to $8.0 million for the three months ended September 30, 1997 to 1998 and increased from $4.9 million to $19.1 million for the nine months ended September 30, 1997 to 1998. The increase in interest expense was primarily a result of additional indebtedness incurred to finance certain of the Company's acquisitions. Administrative expenses increased from $0.3 million to $0.4 million for the three months ended September 30, 1997 to 1998 and increased from $0.7 million to $1.0 million for the nine months ended September 30, 1997 to 1998. These increases were primarily a result of management and staffing additions to support the Company's growth. LIQUIDITY AND CAPITAL RESOURCES Cash Flows During the nine months ended September 30, 1998, the Company generated $54.0 million in cash flow from operating activities. Other sources of cash flow consisted of: (i) $1.3 billion in net additional borrowings under the Company's revolving credit facilities, (ii) $301.3 million in net proceeds from Common Share issuances, (iii) $14.7 million from a property sale and (iv) $9.1 million in proceeds from additional borrowings under mortgage notes payable. During the nine months ended September 30, 1998, the Company used its cash to: (i) finance the $806.1 million cash portion of the acquisition cost of 130 Properties, (ii) repay notes payable under its credit facilities of $808.4 million, (iii) invest $9.7 million in unconsolidated real estate ventures, (iv) fund capital expenditures and leasing commissions of $12.7 million, (v) pay distributions totaling $37.5 million to common shareholders, preferred shareholders and minority 13 interests in the Operating Partnership, (vi) repay mortgage notes payable of $13.6 million (vii) increase escrowed cash by $7.7 million, (viii) pay other debt costs of $1.8 million and (ix) increase existing cash reserves by $9.1 million. Development The Company is in the process of developing five sites (two wholly-owned and three through Real Estate Ventures) and redeveloping two sites (one wholly-owned and one through a Real Estate Venture) which have anticipated completions during the fourth quarter of 1998 and the first quarter of 1999. These projects are in various stages of development and there can be no assurance that any of these projects will be completed or opened on schedule. During the nine months ended September 30, 1998, the Company capitalized interest totaling approximately $914,000 related to development and redevelopment projects and land held for development. Capitalization During the first quarter of 1998, the Company replaced its $150 million secured revolving credit facility (the "1997 Credit Facility") which bore interest at the rate of LIBOR plus 175 basis points with a $330 million unsecured revolving credit facility (the "1998 Credit Facility"). The interest rate was reduced by 37.5 to 60 basis points depending on the Company's degree of leverage. During the second quarter of 1998, the Company and the Operating Partnership entered into a $150 million unsecured credit facility (the "Additional Facility") to facilitate certain of the Company's property acquisitions. Amounts repaid by the Company under the Additional Facility were not subject to reborrowing. The Additional Facility incorporated the covenants contained in the 1998 Credit Facility. During the third quarter of 1998, the Company and the Operating Partnership replaced the 1998 Credit Facility with a new $550 million unsecured revolving credit facility (the "New 1998 Credit Facility"). The interest rate borne on the New 1998 Credit Facility was LIBOR plus 150 basis points initially, subject to certain adjustments based on the Company's leverage. The New 1998 Credit Facility matures in September 2001. Also during the third quarter of 1998, the Company and Operating Partnership replaced the Additional Facility with a new $150 million unsecured facility (the "New Additional Facility"). The New Additional Facility bears interest at LIBOR plus 200 basis points and is payable in full on March 31, 1999. As of September 30, 1998, the Company had approximately $942.4 million of debt outstanding, consisting of mortgage loans totaling $306.2 million, notes payable under the New 1998 Credit Facility of $493.2 million and borrowings under the New Additional Facility of $143.0 million. The mortgage loans mature between January 1999 and July 2027. As of September 30, 1998, the Company had $56.8 million of remaining availability under the New 1998 Credit Facility and had $7.0 million of remaining availability under the New Additional Facility. For the nine months ended September 30, 1998, the weighted average interest rate under the Company's revolving credit facilities was 7.05%, and the weighted average interest rate for borrowings under mortgage notes payable was 8.12%. As of September 30, 1998, the Company's debt to market capitalization ratio was 52.5%. As a general policy, the Company seeks to maintain a long-term average debt to market capitalization ratio of no more than 50%. This policy is intended to provide the Company with financial flexibility to select what management believes to be the optimal source of capital to finance the Company's growth. The Company expects to reduce its current leverage through a combination of asset sales, formation of joint venture transactions and the issuance of preferred securities in the next six to twelve months. During 1998, the Company sold an aggregate of 13.3 million Common Shares for net proceeds of approximately $301.3 million pursuant to four public offerings. Also, from August 11, 1998 to September 2, 1998, the Company repurchased 86,744 of its Common Shares in open market transactions at share prices ranging from $17.75 per share to $20.25 per share for a total purchase price of approximately $1.7 million. During 1998, as consideration for certain of the Company's property acquisitions, (i) the Operating Partnership issued 543,400 Class A Units with an aggregate value of approximately $12.9 million, (ii) the Operating Partnership issued 14 1,550,000 Preferred Units with a stated value of $77.5 million, and (iii) the Company issued 750,000 Preferred Shares with a stated value of $37.5 million. Short and Long Term Liquidity The Company believes that its cash flow from operations is adequate to fund its short-term liquidity requirements for the foreseeable future. Cash flow from operations is generated primarily from rental revenues and operating expense reimbursements from tenants and management services income from the provision of services to third parties. The Company intends to use these funds to meet its short-term liquidity needs, which are to fund operating expenses, debt service requirements, recurring capital expenditures, tenant allowances, leasing commissions and the minimum distribution required to maintain the Company's REIT qualification under the Internal Revenue Code. On September 15, 1998, the Company declared a distribution of $0.38 per Common Share, totaling $14.5 million, which was paid on October 15, 1998 to shareholders of record as of September 28, 1998. The Operating Partnership simultaneously declared a $0.38 per unit cash distribution to holders of Class A Units totaling approximately $360,000. On October 15, 1998, the Company and the Operating Partnership, respectively, also paid distributions to holders of Preferred Shares and Preferred Units, which are each entitled to a 7.25% preferential return. The distributions to the Preferred Shares and the Preferred Units were approximately $22,000 and $46,000, respectively. As of September 30, 1998, the Company anticipated making equity contributions to Real Estate Ventures under development totaling approximately $7.8 million of which $2.3 million was contributed as of September 30, 1998. The Company has also entered into guarantees for the benefit of certain Real Estate Ventures, aggregating approximately $15.2 million. Payment under these guaranties would constitute loan obligations of, or preferred equity positions in, the applicable Real Estate Venture. The Company expects to meet its long-term liquidity requirements, such as for property acquisitions, development, investments in unconsolidated real estate ventures, scheduled debt maturities, renovations, expansions and other non-recurring capital improvements, through borrowings under the New 1998 Credit Facility and other long-term secured and unsecured indebtedness and the issuance of additional Class A Units and other equity securities. Funds from Operations Management generally considers Funds from Operations ("FFO") as one measure of REIT performance. The Company adopted the NAREIT definition of FFO in 1996 and has used this definition for all periods presented in the financial statements included herein. FFO is calculated as net income (loss) adjusted for depreciation expense attributable to real property, amortization expense attributable to capitalized leasing costs, gains on sales of real estate investments and extraordinary and nonrecurring items. FFO may not be calculated in the same manner for all companies and accordingly FFO presented below may not be comparable to similarly titled measures by other companies. FFO should not be considered an alternative to net income as an indication of the Company's performance or to cash flows as a measure of liquidity. FFO for the three months and nine months ended September 30, 1998 and 1997 is summarized in the following table (in thousands, except share data). 15
Three Months Ended September 30, -------------------------------- 1998 1997 ------------ ------------ Income before gains on sales, minority interest and extraordinary items $ 9,835 $ 4,829 Add (Deduct): Depreciation attributable to real property 11,225 3,825 Amortization attributable to leasing costs 489 175 Minority interest not attributable to unit holders -- -- ------------ ------------ Funds from Operations before minority interest $ 21,549 $ 8,829 ============ ============ Weighted average Common Shares (including common share equivalents) and Operating Partnership units (1) 38,734,972 19,339,567 ============ ============
[RESTUBBED TABLE]
Nine Months Ended September 30, -------------------------------- 1998 1997 ------------ ------------ Income before gains on sales, minority interest and extraordinary items $ 29,229 $ 8,711 Add (Deduct): Depreciation attributable to real property 28,326 8,918 Amortization attributable to leasing costs 1,225 514 Minority interest not attributable to unit holders -- (16) ------------ ------------ Funds from Operations before minority interest $ 58,780 $ 18,127 ============ ============ Weighted average Common Shares (including common share equivalents) and Operating Partnership units (1) 36,461,052 13,576,682 ============ ============
(1) Includes the weighted average effect of Common Shares issued upon the conversion of preferred shares in 1997 for the period prior to conversion and the weighted average effect of Common Shares issuable upon the conversion of Class A Units. Year 2000 Compliance The Year 2000 compliance issue concerns the inability of computerized information systems to accurately calculate, store or use a date after 1999. This could result in a system failure or miscalculations causing disruptions of operations. The Year 2000 issue affects virtually all companies and all organizations. The Company recognizes the importance of ensuring that its business operations are not disrupted as a result of Year 2000 related computer system and software issues. The Company is currently upgrading its internal computer information systems as a normal part of its business. During this conversion, the Company will assess the new hardware and software systems for Year 2000 compliance. The Company planned to complete, and expects to complete, its conversion during 1999. The planned conversion was not accelerated, nor were incremental costs incurred as a result of the Year 2000 issue. In addition, the Company is currently evaluating and assessing those computer systems that do not relate to information technology (such as systems designed to operate a building, which typically include embedded technology), including, without limitation, its telecommunication systems, security systems (such as card-access door lock systems), energy management systems, sprinkler systems and elevator systems. The Company's Year 2000 compliance program is being centrally coordinated, but involves all property management personnel. For each of the Company's properties, compliance letters have been sent to the manufacturers of key operational systems, third-party service providers and vendors. In the event a satisfactory response is not received, the Company intends to consider changing service providers, testing systems for compliance, replacing systems, or pursuing alternative measures to ensure Year 2000 compliance. This assessment is approximately 50% complete for properties owned by the Company as of September 27, 1998. For properties acquired after September 27, 1998, the Company plans to immediately begin its Year 2000 assessment. The total cost of bringing these internal systems and equipment into Year 2000 compliance has not been quantified. The Company is unable to determine, based on available information, whether these costs will have a material adverse effect on its business, financial condition or results of operations. The Company expects to be Year 2000 compliant by December 31, 1999. The Company is currently evaluating the consequences of a potential failure to remediate these matters on time and is in the process of developing contingency plans regarding these matters. The Company expects to have such contingency plans in place by June 30, 1999. Under a most reasonably likely worst case scenario, until systems became operational, the Company would resort to a combination of temporary hiring, operational system repair or replacement and alternative software to process normal accounts and financial information. Further, no estimates have been made as to any potential adverse impact resulting from the failure of third-party service providers (including, without limitation, its banks, its payroll processor and its telecommunications providers) vendors and tenants to prepare for the Year 2000. The Company is attempting to identify those risks as well as to receive compliance certificates from all third-parties that could have a material impact on the Company's operations by June 30, 1999. Although the Company is in the process of working with such third-parties in order to attempt to 16 eliminate its Year 2000 concerns the cost to the Company of the third-party Year 2000 compliance has not been quantified. The Company would consider changing third-party service providers and vendors who are Year 2000 compliant before incurring any significant additional costs. To date, the Company has not expended significant funds to assess its Year 2000 issues, as the Company's evaluation of its Year 2000 concerns has been conducted by its own personnel at routine staffing levels and without any out-of-pocket expenses for consultants. The Company's evaluation has not been subject to any independent verification or review process. Inflation A majority of the Company's leases provide for separate escalations of real estate taxes and operating expenses either on a triple net basis or over a base amount. In addition, many of the office leases provide for fixed base rent increases or indexed escalations (based on the CPI or other measure). The Company believes that inflationary increases in expenses will be partially offset by the expense reimbursement and contractual rent increases. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable. 17 Part II. OTHER INFORMATION Item 1. Legal Proceedings The Company is not currently involved (nor was it involved at September 30, 1998) in any material legal proceedings other than routine litigation arising in the ordinary course of business, substantially all of which is expected to be covered by liability insurance. Item 2. Changes in Securities (a) On September 28, 1998 and in conjunction with the issuance of the Preferred Shares as described below, the Company's Declaration of Trust was amended by filing Articles Supplementary establishing the rights, preferences and other privileges of the Preferred Shares. (b) On September 28, 1998, the Company issued 750,000 Preferred Shares. Holders of Preferred Shares have certain preferences with respect to the receipt of dividends and amounts payable upon liquidation over the holders of Common Shares. The Company is prohibited from making distributions to holders of Common Shares unless all required payments with respect to the Preferred Shares have been made. (c) On September 28, 1998, the Company issued 750,000 Preferred Shares in a private transaction exempt from the registration of the Securities Act pursuant to Section 4(2) thereof. The Preferred Shares were issued as part of the purchase price for the Company's acquisition of certain properties. The Preferred Shares are convertible into Common Shares at a conversion price of $28.00 per Common Share, which conversion price will be reduced to $26.50 in the event the average market price of a Common Share is less than $23.00 during the 60-day period ending on December 31, 2003. (d) Not applicable Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27.1 Financial Data Schedule (electronic filers) (b) Reports on Form 8-K: During the three months ended September 30, 1998, and through November 13, 1998, the Company filed the following: (i) Current Report on Form 8-K/A No. 1 filed July 30, 1998 (reporting under Item 7). This amendment included (i) an audited financial statement of revenue and certain expenses of the First Commercial Properties for the year ended December 31, 1997 and (ii) an audited financial statement of revenue and certain expenses of One Christina Centre 18 for the year ended December 31, 1997. This Amendment No. 1 also included unaudited pro forma information for the year ended December 31, 1997. (ii) Current Report on Form 8-K filed July 30, 1998 (reporting under Items 5 and 7). This Current Report included an audited combined statement of revenue and certain expenses of the Axinn Properties for the year ended December 31, 1997 and an unaudited combined statement of revenue and certain expenses of the Axinn Properties for the three months ended March 31, 1998. This Current Report also included pro forma financial information for the three months ended March 31, 1998 and year ended December 31, 1997. (iii) Current Report on Form 8-K filed October 13, 1998 (reporting under Items 2, 5 and 7). This Current Report disclosed the closings of both the Axinn and Lazard Transactions. (iv) Current Report on Form 8-K/A No. 1 filed October 21, 1998 (reporting under Item 7). This amendment included (i) an audited financial statement of revenue and certain expenses of the Axinn Properties for the year ended December 31, 1997, (ii) an audited financial statement of revenue and certain expenses of the Lazard Properties for the year ended December 31, 1997, (iii) an unaudited financial statement of revenue and certain expenses of the Axinn Properties for the six months ended June 30, 1998 and (iv) an unaudited financial statement of revenue and certain expenses of the Lazard Properties for the six months ended June 30, 1998. This Amendment No. 1 also included unaudited pro forma information for the six months ended June 30, 1998 and for the year ended December 31, 1997. 19 BRANDYWINE REALTY TRUST SIGNATURES OF REGISTRANT 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 (Registrant) Date: November 13 , 1998 By: /s/ Gerard H. Sweeney ------------------ -------------------------------------------------------- Gerard H. Sweeney, President and Chief Executive Officer (Principal Executive Officer) Date: November 13 , 1998 By: /s/ Mark S. Kripke ------------------ -------------------------------------------------------- Mark S. Kripke, Chief Financial Officer (Principal Financial and Accounting Officer)
20 EX-27 2
5 0000790816 BRANDYWINE REALTY TRUST 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 38,539 0 9,276 0 0 55,680 1,788,185 50,762 1,828,901 34,155 0 0 37,500 376 714,985 1,828,901 0 123,488 0 94,618 0 0 19,057 26,781 0 0 0 2,003 0 26,759 0.75 0.75
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