-----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, LCwk2+FqpZ7sXOcd9cjS2vX5VP1ikIHFQFiCmY5NwPjjMrM0diUvlGAG7428RijF P+wlGMJ/lBRhy5b+PKJ7OQ== 0000950116-00-001194.txt : 20000516 0000950116-00-001194.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950116-00-001194 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 631158 BUSINESS ADDRESS: STREET 1: 14 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 10-Q 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 March 31, 2000 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 14 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 36,138,110 Common Shares of Beneficial Interest were outstanding as of May 2, 2000. BRANDYWINE REALTY TRUST TABLE OF CONTENTS ----------------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 Consolidated Statements of Operations for the three months ended March 31, 2000 and March 31, 1999 Consolidated Statements of Cash Flow for the three months ended March 31, 2000 and March 31, 1999 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 (unaudited, in thousands)
March 31, December 31, 2000 1999 ----------- ----------- ASSETS Real estate investments: Operating properties $ 1,851,256 $ 1,828,097 Accumulated depreciation (141,683) (125,744) ----------- ----------- 1,709,573 1,702,353 Cash and cash equivalents 8,452 5,692 Escrowed cash 13,154 10,814 Accounts receivable, net 28,565 25,893 Due from affiliates 9,515 7,361 Investment in management company, at equity 241 228 Investment in real estate ventures, at equity 38,166 35,682 Deferred costs, net 18,295 17,960 Other assets 24,285 23,933 ----------- ----------- Total assets $ 1,850,246 $ 1,829,916 =========== =========== LIABILITIES AND BENEFICIARIES' EQUITY Mortgage notes payable $ 465,512 $ 462,809 Borrowings under Credit Facility 416,824 376,825 Accounts payable and accrued expenses 17,403 17,596 Distributions payable 20,066 18,982 Tenant security deposits and deferred rents 17,225 18,871 ----------- ----------- Total liabilities 937,030 895,083 Minority interest 145,494 145,941 Preferred Shares, 8.75% Series B Preferred Shares, $0.01 par value; shares authorized-10,000,000; issued and outstanding-4,375,000 in 2000 and 1999 94,841 94,841 Commitments and Contingencies Beneficiaries' equity: Preferred Shares, 7.25% Series A Preferred Shares, $0.01 par value; shares authorized-10,000,000; issued and outstanding-750,000 in 2000 and 1999 8 8 Common Shares of beneficial interest, $0.01 par value; shares authorized-100,000,000; issued and outstanding-35,707,473 in 2000 and 36,372,590 in 1999 356 364 Additional paid-in capital 754,849 769,165 Share warrants 908 908 Cumulative earnings 81,506 73,892 Cumulative distributions (164,746) (150,286) ----------- ----------- Total beneficiaries' equity 672,881 694,051 ----------- ----------- Total liabilities and beneficiaries' equity $ 1,850,246 $ 1,829,916 =========== ===========
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 Ended March 31, -------------------------------- 2000 1999 -------- -------- Revenue: Rents $ 60,531 $ 59,439 Tenant reimbursements 8,956 8,734 Other 1,957 2,610 -------- -------- Total revenue 71,444 70,783 Operating Expenses: Property operating expenses 16,363 15,987 Real estate taxes 6,284 6,199 Interest 15,954 18,762 Depreciation and amortization 16,563 17,065 Amortization of deferred compensation costs 497 360 Management fees 3,309 3,141 Administrative expenses 358 403 -------- -------- Total operating expenses 59,328 61,917 Income before equity in income of management company, equity in income of real estate ventures and minority interest 12,116 8,866 Equity in income of management company 13 33 Equity in income of real estate ventures 643 149 -------- -------- Income before minority interest 12,772 9,048 Minority interest (2,182) (1,850) -------- -------- Net income 10,590 7,198 Income allocated to Preferred Shares (2,977) (680) -------- -------- Income allocated to Common Shares $ 7,613 $ 6,518 ======== ======== Earnings per Common Share: Basic $ 0.21 $ 0.17 ======== ======== Diluted $ 0.21 $ 0.17 ======== ========
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)
Three Months Ended March 31, ---------------------------------- 2000 1999 -------- ------- Cash flows from operating activities: Net income $ 10,590 $ 7,198 Adjustments to reconcile net income to net cash from operating activities: Minority interest 2,182 1,850 Depreciation and amortization 17,378 17,769 Straight-line rent (1,872) (2,175) Equity in income of management company (13) (33) Equity in income of real estate ventures (643) (149) Amortization of deferred compensation costs 497 360 Amortization of discounted notes payable 21 41 Changes in assets and liabilities: Accounts receivable (800) (5,303) Due from affiliates (2,154) (1,172) Deferred costs and other assets (352) 1,969 Accounts payable and accrued expenses 133 (414) Tenant security deposits and deferred rents (1,646) 3,915 -------- ------- Net cash from operating activites 23,321 23,856 Cash flows from investing activities: Acquisitions of properties (5,250) - Sales of properties - 23,161 Capital expenditures (17,917) (8,742) Investment in real estate ventures (1,841) (3,658) Increase in escrowed cash (2,340) (4,396) Leasing costs (1,605) (1,926) -------- ------- Net cash from investing activities (28,953) 4,439 Cash flows from financing activites: Proceeds from notes payable, Credit Facility 39,999 - Repayment of notes payable, Credit Facility - (150,000) Proceeds from mortgage notes payable 8,235 195,695 Repayments of mortgage notes payable (6,067) (9,565) Debt financing costs (161) (1,482) Repurchases of Common Shares (14,632) - Distributions paid to shareholders (16,352) (15,540) Distributions paid to minority partners (2,630) (2,993) -------- ------- Net cash from financing activities 8,392 16,115 -------- ------- Increase in cash and cash equivalents 2,760 44,410 Cash and cash equivalents at beginning of period 5,692 13,075 -------- ------- Cash and cash equivalents at end of period $ 8,452 $ 57,485 ======== ========
The accompanying condensed notes are an integral part of these consolidated financial statements. 5 BRANDYWINE REALTY TRUST NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 1. THE COMPANY ----------- Brandywine Realty Trust (collectively with its subsidiaries, the "Company") is a self-administered and self-managed real estate investment trust (a "REIT") active in acquiring, developing, redeveloping, leasing and managing office and industrial properties. As of March 31, 2000, the Company's portfolio included 199 office properties, 51 industrial facilities and one mixed-use property (collectively, the "Properties") that contained an aggregate of approximately 16.6 million net rentable square fee. A majority of the Properties were located in the office and industrial markets surrounding Philadelphia (Northern and Western Suburbs and Wilmington, Delaware) and Southern and Central New Jersey. The balance of the Properties were primarily located in Northern New Jersey and Long Island, New York; and Northern and Richmond, Virginia. As of March 31, 2000, the Company also held economic interests in twelve office real estate ventures (the "Real Estate Ventures"). The Company's interest in its assets 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 March 31, 2000, held an approximate 87.7% interest in the Operating Partnership and was entitled to approximately 94.4% of the Operating Partnership's income after distributions to holders of Series B 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 March 31, 2000, the Management Company was managing and leasing properties containing an aggregate of approximately 20.5 million net rentable square feet, of which 16.5 million net rentable square feet related to properties owned by the Company or subject to purchase options held by the Company, and approximately 4.0 million net rentable square feet related to properties owned by unaffiliated third parties. Minority interest relates to interests in the Operating Partnership that are not owned by the Company. Income allocated to the minority interest is based on the percentage ownership of the Operating Partnership held by third parties 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 ("Series B Preferred Units"). The Operating Partnership issued these interests to persons that contributed assets to the Operating Partnership. The Operating Partnership is obligated to redeem, at the request of a holder, each Class A Unit for cash or one Common Share, at the option of the Company. Each Series B Preferred Unit has a stated value of $50.00 and is convertible, at the option of the holder, into Class A Units at a conversion price of $28.00. The conversion price declines 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 less. The Series B 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 exceed $0.51 per share. As of March 31, 2000, there were 2,156,150 Class A Units and 1,950,000 outstanding Series B Preferred Units held by third party investors. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ 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, 1999, 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 March 31, 2000, the results of its operations for the three month periods ended March 31, 2000 and 1999, and its cash flows for the three month periods ended March 31, 2000 and 1999 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 6 consolidated financial statements and footnotes included in the Annual Report on Form 10-K for the year ended December 31, 1999. Certain prior year amounts have been reclassified to conform with the current year presentation. Real Estate Investments - ----------------------- Real estate investments include direct construction costs totaling $250,000 in 2000 and $221,000 in 1999. Interest totaling $1.4 million in 2000 and $137,000 in 1999 was capitalized related to the development of certain Properties and land holdings. Deferred Costs - -------------- Deferred costs include direct leasing costs totaling $839,000 in 2000 and $310,000 in 1999. New Pronouncements - ------------------ In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The FASB also issued SFAS No. 137 that delays the effective date for SFAS 133 until fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting and reporting standards for the recognition and measurement of derivative instruments and hedging activities. The Company has not quantified the impact of SFAS 133 on the Company's future financial position or result of operations. 3. ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS -------------------------------------------------------- First Quarter 2000 - ------------------ In January 2000, the Company purchased a 21 acre parcel of land for $5.3 million. First Quarter 1999 - ------------------ During the first quarter of 1999, the Company sold three office properties, containing an aggregate of 324,000 net rentable square feet, for $23.2 million. The acquisition described above was accounted for by the purchase method. The results of the acquired property are included in the Company's results of operations from its purchase date. The results of operations on a pro forma basis on the above acquisition and dispositions are not material. 4. INDEBTEDNESS ------------ The Company uses credit facility borrowings for general business purposes, including the acquisition of properties and the repayment of debt. At March 31, 2000, the Company had a $450.0 million unsecured credit facility (the "Credit Facility") that matures in September 2001, which can be extended through September 2002 upon payment of a fee. The Credit Facility bears interest at LIBOR (LIBOR was 5.97% at March 31, 2000) plus 1.5%, with the spread over LIBOR subject to reductions from .125% to .35% and a possible increase of .25% based on the Company's leverage. As of March 31, 2000, the Company had $416.8 million outstanding under the Credit Facility. The weighted-average interest rate on the Company's unsecured Credit Facility was 7.56% in 2000. The Company is currently in compliance with all covenants related to the Credit Facility. As of March 31, 2000, the Company had $465.5 million of mortgage notes payable secured by 97 of the Properties and certain land holdings. Fixed rate mortgages, totaling $338.4 million, require payments of principal and/or interest (or imputed interest) at rates ranging from 5.0% to 9.88% and mature at various dates from August 2000 through July 2027. The weighted-average interest rate on the Company's mortgages was 6.86% in 2000. The Company paid interest (including capitalized interest) totaling $16.7 million in 2000 and $18.8 million in 1999. 5. BENEFICIARIES' EQUITY --------------------- On March 23, 2000, the Company declared a distribution of $0.40 per Common Share, totaling $14.5 million, which was paid on April 17, 2000 to shareholders of record as of April 5, 2000. The Operating Partnership simultaneously declared a $0.40 per unit cash distribution to holders of Class A Units totaling $862,000. 7 On March 23, 2000, the Company and the Operating Partnership, respectively, also declared distributions to holders of Series A Preferred Shares, Series B Preferred Shares and Preferred Units, which are each currently entitled to a preferential return of 7.25%, 8.75% and 7.25%, respectively. Distributions paid on April 17, 2000 to holders of Series A Preferred Shares, Series B Preferred Shares and Preferred Units totaled $680,000, $2.3 million and $1.8 million, respectively. During the first quarter of 2000, the Company repurchased 917,996 Common Shares for an aggregate of $14.6 million (an average price of $15.94 per share). 6. SEGMENT INFORMATION ------------------- The Company has four reportable segments: (1) Pennsylvania Suburbs (includes Berks, Bucks, Chester, Cumberland, Dauphin, Delaware, Lehigh, Montgomery, Northampton and Philadephia counties and Wilmington, Delaware), (2) Southern and Central New Jersey (includes Atlantic, Burlington, Camden and Mercer counties), (3) New York (includes Northern New Jersey and Long Island, New York) and (4) Virginia (includes Northern Virginia and Richmond, Virginia). Corporate is responsible for cash and investment management and certain other general support functions. Segment information for the three months ended March 31, 2000 and 1999 is as follows (in thousands):
Southern Pennsylvania and Central Suburbs New Jersey New York Virginia Corporate Total ------------ ------------ -------- -------- --------- ----- 2000: - ----- Real estate investments, at cost $ 912,897 $ 462,893 $ 169,808 $ 305,658 $ - $ 1,851,256 Total revenue 35,096 19,426 6,585 9,580 757 71,444 Property operating expenses and real estate taxes 11,353 6,432 1,949 2,913 - 22,647 Interest 1,859 2,517 737 543 10,298 15,954 Depreciation & amortization 8,216 4,389 1,789 2,444 540 17,378 1999: - ----- Real estate investments, at cost $ 967,333 $ 466,448 $ 151,884 $ 307,601 $ - $ 1,893,266 Total revenue 36,846 18,539 6,110 8,971 317 70,783 Property operating expenses and real estate taxes 11,212 6,417 1,757 2,800 - 22,186 Interest 1,384 1,528 714 680 14,456 18,762 Depreciation & amortization 9,047 4,610 1,300 2,159 653 17,769
8 7. EARNINGS PER COMMON SHARE ------------------------- The following table details the number of shares and net income used to calculate basic and diluted earnings per share (in thousands, except per share amounts).
Three Months Ended March 31, --------------------------------------------------------------- 2000 1999 --------------------------------- ---------------------------- Basic Diluted Basic Diluted ------------ ----------- ----------- ----------- Net income $ 10,590 $ 10,590 $ 7,198 $ 7,198 Income allocated to Preferred Shares (2,977) (2,977) (680) (680) ----------- ----------- ----------- ----------- Net income available to common shareholders $ 7,613 $ 7,613 $ 6,518 $ 6,518 =========== =========== =========== =========== Weighted-average shares outstanding 36,144,013 36,144,013 37,573,381 37,573,381 Options and warrants - 12,072 - 13,974 ----------- ----------- ----------- ----------- Total weighted-average shares outstanding 36,144,013 36,156,085 37,573,381 37,587,355 =========== =========== =========== =========== Earnings per share $ 0.21 $ 0.21 $ 0.17 $ 0.17 =========== =========== =========== ===========
9 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 acquisitions, potential liability under environmental or other laws and regulations, the failure of the Company to manage its growth effectively and the other risks identified in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. OVERVIEW The Company operates in four geographic segments: (1) Pennsylvania Suburbs (includes Berks, Bucks, Chester, Cumberland, Dauphin, Delaware, Lehigh, Montgomery, Northampton and Philadelphia counties and Wilmington, Delaware), (2) Southern and Central New Jersey (includes Atlantic, Burlington, Camden and Mercer counties), (3) New York (includes Northern New Jersey and Long Island, New York), and (4) Virginia (includes Northern Virginia and Richmond, Virginia). The Company believes it has established an effective platform in these office and industrial markets that provides a foundation for achieving its goals of maximizing market penetration and operating economies of scale. As of March 31, 2000, the Company's portfolio consisted of 199 office properties, 51 industrial facilities and one mixed-use property totaling approximately 16.6 million net rentable square feet. 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 revenue growth in the next two years will result primarily from rent increases in its current portfolio. RESULTS OF OPERATIONS The results of operations for the three months ended March 31, 2000 and 1999 include the respective operations of the Company. For comparative purposes, the Company had a total of 242 of the Properties ("Same Store Properties") for the entire three months ended March 31, 2000 and 1999 as compared to 251 properties as of March 31, 2000. Comparison of the Three Months Ended March 31, 2000 and March 31, 1999 Revenue (which includes rental income, recoveries from tenants and other income) increased to $71.4 million for the three months ended March 31, 2000 as compared to $70.8 million for the comparable period in 1999. The straight-line rent adjustment increased revenues by $1.9 million for the three months ended March 31, 2000 and $2.2 million for three months ended March 31, 1999. Rental income for the Same Store Properties increased from $53.4 million for three months ended March 31, 1999 to $57.3 million for the comparable period in 2000. This increase of $3.9 million was primarily attributable to increased rental rates and increased occupancy during 2000 as compared to 1999. Property operating expenses and real estate taxes increased to $22.6 million for the three months ended March 31, 2000 as compared to $22.2 million for the comparable period in 1999. Property operating expenses and real estate taxes for the Same Store Properties increased from $21.3 million for the three months ended March 31, 1999 to $21.7 million for the comparable period in 2000. This increase was primarily attributable to increases in real estate taxes and snow removal expenses offset by expense savings from the Company's "Preferred Vendor Program," designed to take advantage of economies of scale. 10 Interest expense decreased to $16.0 million for the three months ended March 31, 2000 from $18.8 million for the comparable period in 1999 as a result of decreased average outstanding borrowings on the Company's Credit Facility. Average debt balances outstanding for the three months ended March 31, 2000 were $861.0 million as compared to $1.0 billion for the three months ended March 31, 1999. For the three months ended March 31, 2000, the weighted-average interest rate on the Credit Facility and borrowings under mortgage notes payable were 7.56% and 6.86%, respectively, as compared to 6.83% and 7.27% for the comparable period in 1999. Depreciation and amortization expense decreased to $16.6 million for the three months ended March 31, 2000 from $17.1 million for the comparable period in 1999 as a result of property dispositions during the second half of 1999. Amortization of deferred compensation costs increased to $.5 million for the three months ended March 31, 2000 as compared to $.4 million for the comparable period in 1999 due to the issuance of additional restricted Common Shares to Company executives in the latter part of 1999. Management fees increased to $3.3 million for the three months ended March 31, 2000 from $3.2 million for the comparable period in 1999. This increase was attributable to increased management fee rates in 2000 offset by properties sold during the second half of 1999. LIQUIDITY AND CAPITAL RESOURCES Cash Flows During the three months ended March 31, 2000, the Company generated $23.3 million in cash flow from operating activities. Other sources of cash flow consisted of: (i) $40.0 million of proceeds from draws on the Credit Facility and (ii) $8.2 million in additional mortgage notes payable. During the three months ended March 31, 2000, cash out-flows consisted of: (i) $19.0 million of distributions to shareholders and minority partners in the Operating Partnership, (ii) $17.9 million to fund development and capital expenditures, (iii) $14.6 million to repurchase Common Shares, (iv) $6.1 million of mortgage note repayments, (v) $5.3 million for property acquisitions, (vi) $2.3 million of escrowed cash, (vii) $1.8 million of investment in unconsolidated real estate ventures and (viii) $1.8 million in deferred leasing and financing costs. Development The Company is in the process of developing three sites and redeveloping three sites. 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. The total projected costs of these developments are $92.3 million, of which $52.5 million has been incurred as of March 31, 2000. During the three months ended March 31, 2000, the Company capitalized interest totaling approximately $1.4 million related to development and redevelopment projects. Capitalization At March 31, 2000, the Company maintained a $450.0 million Credit Facility. As of March 31, 2000, the Company had approximately $882.3 million of debt outstanding, consisting of $416.8 million of borrowings under the Credit Facility and $465.5 million of mortgage notes payable. The mortgage notes payable consists of $338.4 million of fixed rate loans and $127.1 million of variable rate loans. The mortgage loans mature between August 2000 and July 2027. As of March 31, 2000, the Company had $16.5 million of letters of credit outstanding and $16.7 million of availability remaining under the Credit Facility. For the quarter ended March 31, 2000, the weighted-average interest rate under the Company's Credit Facility was 7.56%, and the weighted-average interest rate for borrowings under mortgage notes payable was 6.86%. As of March 31, 2000, the Company's debt-to-market capitalization ratio was 49%. As a general policy, the Company intends to maintain a long-term average debt-to-market capitalization ratio of no more than 50%. The Company's Board of Trustees previously approved a program authorizing the Company to repurchase up to 3,000,000 of its outstanding Common Shares. The Board imposes no time limit on the share repurchase program. During the first quarter of 2000, the Company repurchased 917,996 Common Shares for an aggregate of $14.6 million (an average price of $15.94 per share). Under the share repurchase program, the Company is able to repurchase an additional 657,020 shares. 11 Short- and Long-Term Liquidity The Company believes that cash flow from operations is adequate to fund 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 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 March 23, 2000, the Company declared a distribution of $0.40 per Common Share, totaling $14.5 million, which was paid on April 17, 2000 to shareholders of record as of April 5, 2000. The Operating Partnership simultaneously declared a $0.40 per unit cash distribution to holders of Class A Units totaling $862,000. On March 23, 2000, the Company and the Operating Partnership, respectively, also declared distributions to holders of Series A Preferred Shares, Series B Preferred Shares and Preferred Units, which are each currently entitled to a preferential return of 7.25%, 8.75% and 7.25%, respectively. Distributions paid on April 17, 2000 to holders of Series A Preferred Shares, Series B Preferred Shares and Preferred Units totaled $680,000, $2.3 million and $1.8 million, respectively. The Company expects to meet 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 asset dispositions, long-term secured and unsecured indebtedness and the issuance of equity securities. Funds from Operations Management generally considers Funds from Operations ("FFO") as one measure of REIT performance. 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 items and comparable adjustments for real estate ventures accounted for using the equity method. Management believes that FFO is a useful disclosure in the real estate industry, however, the Company's disclosure may not be comparable to other REIT's. 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 ended March 31, 2000 and 1999 is summarized in the following table (in thousands, except share data):
Three Months Ended March 31, ------------------------------ 2000 1999 ----------- ----------- Income before gains on sales and minority interest $ 12,772 $ 9,048 Add: Depreciation: Real property 15,947 16,340 Real estate ventures 616 726 Amortization of leasing costs 537 241 ----------- ----------- Funds from operations before minority interest $ 29,872 $ 26,355 =========== =========== Weighted-average Common Shares (including Common Share equivalents) and Operating Partnership units 47,781,584 44,085,536 =========== ===========
12 Year 2000 Compliance The Company has not experienced any problems relating to the Year 2000 issue on or after January 1, 2000. The Company implemented its Year 2000 compliance program and intends to maintain its contingency plans until satisfied that Company operations will not be adversely impacted by the possibility of a Year 2000 issue. 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 significantly offset by expense reimbursement and contractual rent increases. Item 3. Quantitative and Qualitative Disclosures about Market Risk ---------------------------------------------------------- There have been no material changes in Quantitative and Qualitative disclosures in 2000. Reference is made to Item 7 included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Part II. OTHER INFORMATION Item 1. Legal Proceedings ------------------ The Company is a defendant in a case which the plaintiffs allege that the Company breached its obligation to purchase a portfolio of properties for approximately $83.0 million. In July 1999, the complaint against the Company was dismissed with prejudice. The plaintiffs then appealed the dismissal and filed a motion for reconsideration. The case is currently on appeal before the Appellate Division of the Superior Court of New Jersey. Briefing on the appeal has been completed and the parties are awaiting a decision. In November 1999, a third-party complaint was filed in the Superior Court of New Jersey, Burlington County, by BRI OP Limited Partnership ("BRI OP") against the Company as well as several persons and entities, including against several former affiliates of the Company, relative to Greentree Shopping Center located in Marlton, New Jersey ("Subject Property"). The Subject Property was owned and managed by a subsidiary of the Company between 1986 and 1988. BRI OP, also a former owner of the Subject Property, has been sued by the present owner and manager of the Subject Property, seeking indemnification and contribution for costs related to the remediation of environmental contamination allegedly caused by a dry cleaning business, which was a tenant of the Subject Property. BRI OP, in turn, brought a third-party action against the Company and others seeking indemnification for environmental remediation and clean up costs for which it may be held liable. The litigation is presently in the early stages of discovery; however, plaintiff's response to the Company's interrogatories indicates that the estimated cost of remediation and/or clean-up is approximately $150,000. As of this date, the Company is unable to determine its ultimate responsibility for such costs. Item 2. Changes in Securities --------------------- None. Item 3. Defaults Upon Senior Securities ------------------------------- None. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None. Item 5. Other Information ----------------- None. 13 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 March 31, 2000, and through May 15, 2000, the Company did not file any Reports on Form 8-K. 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: May 15, 2000 By: /s/ Gerard H. Sweeney ------------ --------------------------------- Gerard H. Sweeney, President and Chief Executive Officer (Principal Executive Officer) Date: May 15, 2000 By: /s/ Jeffrey F. Rogatz ------------ -------------------------------- Jeffrey F. Rogatz, Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date: May 15, 2000 By: /s/ Bradley W. Harris ------------ -------------------------------- Bradley W. Harris, Vice President and Chief Accounting Officer (Principal Accounting Officer) 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 8,452 0 28,565 0 0 50,171 1,851,256 141,683 1,850,246 54,694 882,336 0 94,841 356 672,525 1,850,246 0 71,444 0 59,328 0 0 15,954 10,590 0 0 0 0 0 10,590 0.21 0.21
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