-----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, PbwrxwlVCYOG0n5Du9XUOK1nYDvoaTEzuqNWiVjiPmAKpjtZQeWFjV9UdqXFfeNE 1ojNo+c9Y/ZDd44JFYa1Ag== 0000950116-02-001865.txt : 20020814 0000950116-02-001865.hdr.sgml : 20020814 20020814103441 ACCESSION NUMBER: 0000950116-02-001865 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 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: 1934 Act SEC FILE NUMBER: 001-09106 FILM NUMBER: 02732183 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 ten-q.txt FORM 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 June 30, 2002 or ____ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 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 401 Plymouth Road, Plymouth Meeting, Pennsylvania 19462 ----------------------------------------------------------- (Address of principal executive offices) (Zip Code) (610) 325-5600 -------------- Registrant's telephone number 14 Campus Boulevard, Newtown Square, Pennsylvania 19073 ------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report) 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 or for such shorter period that the registrant was required to file such reports and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] A total of 35,476,315 Common Shares of Beneficial Interest, par value $.01 per share, were outstanding as of August 14, 2002. BRANDYWINE REALTY TRUST TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements (unaudited)........................................................ Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001......... 3 Condensed Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2002 and June 30, 2001................................................... 4 Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2002 and June 30, 2001......................................................... 5 Notes to Condensed Consolidated Financial Statements.................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................................................. 16 Item 3. Quantitative and Qualitative Disclosures about Market Risk.............................. 23 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders..................................... 23 Item 5. Other Information....................................................................... 24 Item 6. Exhibits and Reports on Form 8-K........................................................ 25 Signatures.............................................................................. 25
2 PART I - FINANCIAL INFORMATION Item 1. - Financial Statements BRANDYWINE REALTY TRUST CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands, except share and per share information)
June 30, December 31, 2002 2001 ----------- ----------- ASSETS Real estate investments: Operating properties $ 1,832,735 $ 1,893,039 Accumulated depreciation (221,685) (230,793) ----------- ----------- 1,611,050 1,662,246 Construction-in-progress 62,724 111,378 Land held for development 40,407 39,285 ----------- ----------- 1,714,181 1,812,909 Cash and cash equivalents 24,476 13,459 Escrowed cash 16,231 16,311 Accounts receivable, net 3,048 6,394 Accrued rent receivable, net 25,461 25,222 Marketable securities 10,850 10,735 Assets held for sale 28,523 - Investment in real estate ventures, at equity 19,082 19,067 Deferred costs, net 24,462 24,261 Other assets 58,714 31,845 ----------- ----------- Total assets $ 1,925,028 $ 1,960,203 =========== =========== LIABILITIES AND BENEFICIARIES' EQUITY Mortgage notes payable $ 617,100 $ 614,840 Borrowings under Credit Facility 383,325 394,325 Accounts payable and accrued expenses 26,884 39,678 Distributions payable 21,382 21,525 Tenant security deposits and deferred rents 15,924 22,290 Other liabilities 13,973 15,555 Liabilities related to assets held for sale 130 - ----------- ----------- Total liabilities 1,078,718 1,108,213 Minority interest 137,285 143,834 Commitments and contingencies Beneficiaries' equity: Preferred Shares (shares authorized-10,000,000): 7.25% Series A Cumulative Convertible Preferred Shares, $.01 par value; issued and outstanding- 750,000 in 2002 and 2001 8 8 8.75% Series B Cumulative Convertible Preferred Shares, $.01 par value; issued and outstanding- 4,375,000 in 2002 and 2001 44 44 Common Shares of Beneficial Interest, $0.01 par value; shares authorized-100,000,000; issued and outstanding- 35,689,115 in 2002 and 35,640,935 in 2001 355 355 Additional paid-in capital 851,223 848,214 Share warrants 401 401 Cumulative earnings 199,034 163,502 Accumulated other comprehensive loss (4,676) (4,587) Cumulative distributions (337,364) (299,781) ----------- ----------- Total beneficiaries' equity 709,025 708,156 ----------- ----------- Total liabilities and beneficiaries' equity $ 1,925,028 $ 1,960,203 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 BRANDYWINE REALTY TRUST CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share information)
Three-Month Periods Six-Month Periods Ended June 30, Ended June 30, ------------------------- -------------------------- 2002 2001 2002 2001 -------- -------- --------- --------- Revenue: Rents $ 62,976 $ 59,875 $ 123,066 $ 115,955 Tenant reimbursements 8,192 8,685 15,652 16,962 Other 2,758 2,064 5,639 4,319 -------- -------- --------- --------- Total revenue 73,926 70,624 144,357 137,236 Expenses: Property operating expenses 18,501 18,149 37,001 36,160 Real estate taxes 6,231 5,738 12,088 11,295 Interest 16,105 16,925 31,835 32,923 Depreciation and amortization 15,818 18,575 29,406 34,874 Administrative expenses 3,808 4,271 7,841 8,271 -------- -------- --------- --------- Total operating expenses 60,463 63,658 118,171 123,523 Income from continuing operations before equity in income of real estate ventures, net gain on sale of interests in real estate, minority interest and extraordinary item 13,463 6,966 26,186 13,713 Equity in income of real estate ventures 229 522 693 1,988 -------- -------- --------- --------- Income from continuing operations before net gain on sale of interests in real estate, minority interest and extraordinary item 13,692 7,488 26,879 15,701 Net gain on sale of interests in real estate - 186 - 368 Minority interest attributable to continuing operations (2,274) (1,930) (4,575) (3,956) -------- -------- --------- --------- Income from continuing operations 11,418 5,744 22,304 12,113 Discontinued operations: Income from discontinued operations 1,339 2,959 6,229 5,897 Gain on disposition of discontinued operations 116 - 8,562 - Minority interest (73) (169) (826) (336) -------- -------- --------- --------- 1,382 2,790 13,965 5,561 -------- -------- --------- --------- Income before extraordinary item 12,800 8,534 36,269 17,674 Extraordinary item - (1,111) - (1,111) -------- -------- --------- --------- Net income 12,800 7,423 36,269 16,563 Income allocated to Preferred Shares (2,977) (2,977) (5,954) (5,954) -------- -------- --------- --------- Income allocated to Common Shares $ 9,823 $ 4,446 $ 30,315 $ 10,609 ======== ======== ========= ========= Basic earnings per Common Share: Continuing operations $ 0.23 $ 0.07 $ 0.44 $ 0.15 Discontinued operations 0.03 0.07 0.39 0.16 Extraordinary item - (0.03) - (0.03) -------- -------- --------- --------- $ 0.26 $ 0.11 $ 0.83 $ 0.28 ======== ======== ========= ========= Diluted earnings per Common Share: Continuing operations $ 0.23 $ 0.07 $ 0.43 $ 0.15 Discontinued operations 0.03 0.07 0.39 0.16 Extraordinary item - (0.03) - (0.03) -------- -------- --------- --------- $ 0.26 $ 0.11 $ 0.82 $ 0.28 ======== ======== ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 BRANDYWINE REALTY TRUST CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands)
Six-Month Periods Ended June 30, -------------------------- 2002 2001 --------- -------- Cash flows from operating activities: Net income $ 36,269 $ 16,563 Adjustments to reconcile net income to net cash from operating activities: Depreciation 26,875 37,002 Amortization: Deferred financing costs 1,007 1,544 Deferred leasing costs 2,706 2,304 Notes payable discount - 42 Deferred compensation costs 1,599 2,047 Straight-line rent (2,937) (3,088) Provision for doubtful accounts 1,122 762 Net gain on sale of interests in real estate (8,562) (368) Minority interest 5,401 4,292 Distributions paid to minority partners (5,413) (5,302) Extraordinary item - 1,111 Changes in assets and liabilities: Accounts receivable 2,498 (2,440) Other assets 4,696 13,166 Accounts payable and accrued expenses (10,103) 3,779 Tenant security deposits and deferred rents (6,580) (11) Other liabilities (913) - --------- -------- Net cash from operating activites 47,665 71,403 Cash flows from investing activities: Acquisitions of properties (22,887) (40,159) Sales of properties 59,054 5,712 Capital expenditures (22,179) (37,145) Investment in real estate ventures (476) (2,227) Escrowed cash 997 (3,257) Cash distributions from real estate ventures in excess of equity in income 461 3,005 Leasing costs (6,518) (4,435) --------- -------- Net cash from investing activities 8,452 (78,506) Cash flows from financing activites: Proceeds from notes payable, Credit Facility 15,000 60,000 Repayments of notes payable, Credit Facility (26,000) - Proceeds from mortgage notes payable 14,021 93,336 Repayments of mortgage notes payable (4,229) (112,312) Debt financing costs - (871) Repayments on employee stock loans 1,618 - Repurchases of Common Shares and minority interest units (7,905) (3,903) Distributions paid to shareholders (37,605) (35,945) --------- -------- Net cash from financing activities (45,100) 305 --------- -------- Increase (decrease) in cash and cash equivalents 11,017 (6,798) Cash and cash equivalents at beginning of period 13,459 16,040 --------- -------- Cash and cash equivalents at end of period $ 24,476 $ 9,242 ========= ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 BRANDYWINE REALTY TRUST NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 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 June 30, 2002, the Company's portfolio included 214 office properties, 26 industrial facilities and one mixed-use property (collectively, the "Properties") containing an aggregate of approximately 16.0 million net rentable square feet. As of June 30, 2002, the Company also owned approximately 431 acres of undeveloped land and held options to purchase approximately 63 additional acres. The Properties are located in the office and industrial markets in and surrounding Philadelphia, Pennsylvania, New Jersey and Richmond, Virginia. As of June 30, 2002, the Company also held economic interests in thirteen real estate ventures (the "Real Estate Ventures") formed with third parties to develop commercial properties. As of June 30, 2002, the Company had an aggregate investment in the Real Estate Ventures of approximately $19.1 million (net of returns of investment received by Company). The Company owns its assets and conducts its operations through Brandywine Operating Partnership, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership and, as of June 30, 2002, was entitled to approximately 94.9% of the Operating Partnership's distributions after distributions by the Operating Partnership to holders of its Series B Preferred Units (defined below). The Operating Partnership owns a 95% interest in Brandywine Realty Services Corporation (the "Management Company"), a taxable REIT subsidiary that, as of June 30, 2002, was performing management and leasing services for 44 properties owned by third-parties that contain approximately 3.3 million net rentable square feet. Minority interest relates to interests in the Operating Partnership that are not owned by the Company. Income allocated to minority interest in a period is based on the percentage ownership of the Operating Partnership held by third parties throughout the period. 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 Units to persons that contributed assets to the Operating Partnership. The Operating Partnership is obligated to redeem each Class A Unit, at the request of the holder, 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 cumulative preferred distribution of 7.25% per annum ($3.625 per unit per annum), subject to an increase in the event quarterly distributions paid to holders of Common Shares exceed $0.51 per share. As of June 30, 2002, 1,876,814 Class A Units and 1,950,000 Series B Preferred Units were outstanding and held by third party investors. Minority interest also includes the 5% interest in the Management Company that is owned by a partnership comprised of two Company executives. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The condensed consolidated financial statements have been prepared by the Company without audit except as to the balance sheet as of December 31, 2001, 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 accounting principles generally accepted in the United States of America 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 management, all adjustments (consisting solely of normal recurring matters) necessary to fairly present the financial position of the Company as of June 30, 2002, the results of its operations for the three- and six-month periods ended June 30, 2002 and 2001, and its cash flows for the six-month periods ended June 30, 2002 and 2001 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 included in the Annual Report on Form 10-K for the year ended December 31, 2001. Certain prior period amounts have been reclassified to conform with the current period presentation. 6 Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding the collectibility of the Company's accounts receivable and regularly evaluates the Company's long-lived assets for impairment. Real Estate Investments Real estate investments include capitalized direct internal development costs totaling $.3 million and $.7 million for the three- and six-month periods ended June 30, 2002 and $.6 million and $1.2 million for three- and six-month periods ended June 30, 2001. The Company capitalized interest totaling $724,000 and $1.6 million for the three- and six-month periods ended June 30, 2002 and $1.2 million and $2.6 million for the three- and six-month periods ended June 30, 2001 related to property developments. Effective January 1, 2002, the Company changed the estimated useful lives of various buildings from 25 to 40 years. This change resulted in an increase of net income of $4.8 million or $.13 per share and $9.6 million or $.27 per share for the three- and six-month periods ended June 30, 2002. Management, taking into account industry standards, determined the longer period to be a better estimate of the useful lives of the buildings. Deferred Costs Deferred costs include internal direct leasing costs totaling $1.0 million and $1.7 million for the three- and six-month periods ended June 30, 2002 and $.7 million and $1.5 million for the three- and six-month periods ended June 30, 2001. The Company amortizes these costs over the related lease terms. Accounting for Derivative Instruments and Hedging Activities The Company accounts for its derivative instruments and hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its corresponding amendments under SFAS No. 138. SFAS 133 requires the Company to measure every derivative instrument (including certain derivative instruments embedded in other contracts) at fair value and record them in the balance sheet as either an asset or liability. For derivatives designated as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in the fair value of the derivative are reported in other comprehensive income. Changes in fair value of derivative instruments and ineffective portions of hedges are recognized in earnings in the current period. For the six-month period ended June 30, 2002, the Company was not party to any derivative contract designated as a fair value hedge. The Company recorded a loss of $2.6 million and $.2 million in other comprehensive income to recognize the change in value of derivatives accounted for as hedges during the three- and six-month periods ended June 30, 2002. The unrealized gains/losses and the transition adjustment held in accumulated other comprehensive income will be reclassified into earnings as the underlying hedged items affect earnings, such as when the forecasted interest payments occur. It is expected that $3.2 million of net losses will be reclassified into earnings over the next twelve months. The Company formally assesses, both at inception of the hedge and on an on-going basis, whether each derivative is highly-effective in offsetting changes in fair values or cash flows of the hedged item. If management determines that a derivative is not highly-effective as a hedge or if a derivative ceases to be a highly-effective hedge, the Company will discontinue hedge accounting prospectively. 7 The Company manages its ratio of fixed-to-floating rate debt with the objective of achieving a mix that management believes is appropriate. To manage this mix in a cost-effective manner, the Company, from time to time, enters into interest rate swap agreements, in which it agrees to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts. As of June 30, 2002, the maximum length of time until which the Company was hedging its exposure to the variability in future cash flows through June 2004. There was no gain or loss reclassified from accumulated other comprehensive income into earnings during the three- and six-month periods ended June 30, 2002 as a result of the discontinuance of a cash flow hedge due to the probability of the original forecasted transaction not occurring. New Pronouncements Effective January 1, 2002, the Company adopted Financial Accounting Standards Board Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which established a single accounting model for the impairment or disposal of long-lived assets including discontinued operations. This statement requires that the operations related to properties that have been sold or properties that are intended to be sold be presented as discontinued operations in the statement of operations for all periods presented and properties intended to be sold are to be designated as "held-for-sale" on the balance sheet. 3. ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS 2002 During the six-month period ended June 30, 2002, the Company sold 16 office properties containing an aggregate of 1.1 million net rentable square feet, 20 industrial properties containing an aggregate of .9 million net rentable square feet and one parcel of land containing 10.0 acres for an aggregate of $168.1 million, realizing a net gain of $8.6 million. The Company also purchased five office properties containing 503,000 net rentable square feet for an aggregate of $82.0 million. During the three-month period ended June 30, 2002, the Company sold six office properties containing an aggregate of 364,000 net rentable square feet, 10 industrial properties containing an aggregate of 297,000 net rentable square feet and one parcel of land containing 10.0 acres for an aggregate of $50.2 million, realizing a net gain of $.1 million, and purchased one office property containing 143,000 net rentable square feet for $14.8 million. 2001 During the six-month period ended June 30, 2001, the Company sold one office property containing 30,000 net rentable square feet, two industrial properties containing an aggregate of 55,000 net rentable square feet and one parcel of land containing 2.1 acres for an aggregate of $5.7 million, realizing a net gain of $368,000. During the three-month period ended June 30, 2001, the Company sold one industrial property containing 25,000 net rentable square feet for $2.2 million, realizing a gain of $186,000. In April 2001, the Company consumated an exchange of properties with Prentiss Properties Acquisition Partners, L.P. ("Prentiss"). The Company acquired from Prentiss 30 properties (29 office and one industrial) containing 1.6 million net rentable square feet and 6.9 acres of developable land for total consideration of $215.2 million. The Company conveyed to Prentiss four office properties located in Northern Virginia that contain an aggregate of 657,000 net rentable square feet, assumed $79.7 million of mortgage debt secured by certain of the Prentiss properties, issued a $7.8 million promissory note, paid $15.9 million in cash at closing and agreed to make additional payments totaling $7.0 million (including $5.4 million of payments discounted at 7.5%) over a three year period subsequent to closing. The Company also contributed to Prentiss its interest in a real estate venture that owns two additional office properties that contain an aggregate of 452,000 net rentable square feet and received a combination of preferred and common units of limited partnership interest in Prentiss having a value of $10.7 million as of the closing. In addition, as part of the Prentiss transaction, in June 2001 the Company purchased a 103,000 square foot building under construction and six acres of related developable land for $5.7 million, plus $4.2 million on account of additional costs related to development. 8 Proforma The properties acquired from Prentiss referenced 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 proforma financial information presented within this footnote is unaudited and is not necessarily indicative of the results which actually would have occurred if the acquisition or sale of the related properties had been consummated on January 1, 2001, nor does the pro forma information purport to represent the results of operations for future periods. The following unaudited pro forma financial information for the six-month period ended June 30, 2001 gives effect to the exchange of properties with Prentiss as if the transaction occurred on January 1, 2001:
Six-Month Period Ended June 30, 2001 ------------------------------------- (in thousands, except per share data) Pro forma total revenue $144,847 Pro forma net income - continuing operations $12,644 Pro forma net income - discontinued operations $5,561 Pro forma net income - extraordinary item ($1,111) Pro forma net income per Common Share - continuing operations (diluted) $0.17 Pro forma net income per Common Share - discontinued operations (diluted) $0.16 Pro forma net income per Common Share - extraordinary item (diluted) ($0.03)
4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES As of June 30, 2002, the Company had an aggregate investment of approximately $19.1 million in thirteen Real Estate Ventures (net of returns of investment received by the Company). The Company formed these ventures with unaffiliated third parties to develop office properties or to acquire land in anticipation of possible development of office properties. Nine of the Real Estate Ventures own nine office buildings that contain an aggregate of approximately 1.0 million net rentable square feet; one Real Estate Venture is developing one office building that will contain, upon completion, an aggregate of approximately 345,000 net rentable square feet; one Real Estate Venture developed a hotel property that contains 137 rooms; and two Real Estate Ventures hold approximately nine acres of land for future development. The Company accounts for its non-controlling interests in Real Estate Ventures using the equity method. Non-controlling ownership interests generally range from 6% to 65%, subject to specified priority allocations in certain of the Real Estate Ventures. The Company's investments, initially recorded at cost, are subsequently adjusted for the Company's net equity in the ventures' income or loss and cash contributions and distributions. The following is a summary of the financial position of the unconsolidated Real Estate Ventures in which the Company had interests as of June 30, 2002 and December 31, 2001: June 30, December 31, 2002 2001 --------- --------- (amounts in thousands) Net property $ 223,680 $ 180,497 Other assets 16,727 17,038 Liabilities 6,352 1,593 Debt 160,754 145,463 Equity 73,301 50,479 Company's share of equity 19,082 19,067 The following is a summary of financial operations of the unconsolidated Real Estate Ventures in which the Company had interests as of June 30, 2002 and 2001: 9 For the six months ended June 30, -------------------------------- 2002 2001 -------- -------- (amounts in thousands) Revenue $ 13,713 $ 14,664 Operating expenses 4,770 4,339 Interest expense, net 4,715 4,370 Depreciation and amortization 2,309 1,728 Net income 1,919 4,227 Company's share of income 693 1,988 The following is a summary of the financial position as of June 30, 2002 and the financial operations for the six-month period ended June 30, 2002 of the unconsolidated Real Estate Ventures in which the Company had interests as of June 30, 2002:
1000 Christiana Christiana Christiana Chesterbrook Center Center Center Two Tower Four Tower Boulevard Operating Operating Operating Bridge Bridge Partnership Company I, LLC Company II, LLC Company III, LLC Associates Associates -------------- -------------- --------------- ---------------- ------------ ---------- (a) (a) (a) Assets Net property $ 32,968 $ 14,619 $ 6,033 $ 418 $ 12,281 $ 14,280 Other assets 2,506 1,702 564 - 224 3,150 --------- -------- ------- ----- -------- -------- Total assets $ 35,474 $ 16,321 $ 6,597 $ 418 $ 12,505 $ 17,430 ========= ======== ======= ===== ======== ======== Liabilities and Equity Other liabilities $ - $ 37 $ 8 $ - $ 4,619 $ 143 Debt 28,354 12,582 6,114 - 7,249 11,000 --------- -------- ------- ----- -------- -------- Total liabilities 28,354 12,619 6,122 - 11,868 11,143 Equity 7,120 3,702 475 418 637 6,287 --------- -------- ------- ----- -------- -------- Total liabilies and equity $ 35,474 $ 16,321 $ 6,597 $ 418 $ 12,505 $ 17,430 ========= ======== ======= ===== ======== ======== Revenue Rents $ 2,299 $ 1,089 $ 509 $ - $ 890 $ 1,348 Tenant reimbursements and other 385 48 24 - 166 199 --------- -------- ------- ----- -------- -------- Total revenue 2,684 1,137 533 - 1,056 1,547 Operating Expenses Property operating expenses 547 217 111 - 232 209 Real estate taxes 209 73 31 - 79 72 Interest 1,019 459 257 - 252 557 Depreciation and amortization 448 222 107 - 179 364 Administrative expenses 5 - - - 75 74 --------- -------- ------- ----- -------- -------- Total operating expenses 2,228 971 506 - 817 1,276 --------- -------- ------- ----- -------- -------- Net Income $ 456 $ 166 $ 27 $ - $ 239 $ 271 ========= ======== ======= ===== ======== ========
[RESTUBBED]
Five Tower Six Tower Eight Tower Tower TBFA PJP Bridge Bridge Bridge Bridge Inn Partners, Building Associates Associates Associates Associates LP Two, LC ------------ ------------ ------------ ------------ ----------- ---------- Assets Net property $ 41,324 $ 16,815 $ 51,939 $ 16,884 $ 3,807 $ 5,645 Other assets 4,015 2,569 - 696 - 660 -------- -------- -------- -------- ------- ------- Total assets $ 45,339 $ 19,384 $ 51,939 $ 17,580 $ 3,807 $ 6,305 ======== ======== ======== ======== ======= ======= Liabilities and Equity Other liabilities $ 456 $ 608 $ - $ 332 $ - $ 47 Debt 27,600 16,078 29,179 11,700 - 5,172 -------- -------- -------- -------- ------- ------- Total liabilities 28,056 16,686 29,179 12,032 - 5,219 Equity 17,283 2,698 22,760 5,548 3,807 1,086 -------- -------- -------- -------- ------- ------- Total liabilies and equity $ 45,339 $ 19,384 $ 51,939 $ 17,580 $ 3,807 $ 6,305 ======== ======== ======== ======== ======= ======= Revenue Rents $ 2,204 $ 1,588 $ - $ 1,756 $ - $ 376 Tenant reimbursements and other 28 216 - 87 - 105 -------- -------- -------- -------- ------- ------- Total revenue 2,232 1,804 - 1,843 - 481 Operating Expenses Property operating expenses 572 305 - 1,035 - 131 Real estate taxes 138 168 - 143 - 19 Interest 710 751 - 497 - 104 Depreciation and amortization 95 405 - 160 - 242 Administrative expenses 68 107 - - - - -------- -------- -------- -------- ------- ------- Total operating expenses 1,583 1,736 - 1,835 - 496 -------- -------- -------- -------- ------- ------- Net Income $ 649 $ 68 $ - $ 8 $ - $ (15) ======== ======== ======== ======== ======= =======
[RESTUBBED TABLE]
PJP Building Five, LC Total ---------- --------- Assets Net property $ 6,667 $ 223,680 Other assets 641 16,727 ------- --------- Total assets $ 7,308 $ 240,407 ======= ========= Liabilities and Equity Other liabilities $ 102 $ 6,352 Debt 5,726 160,754 ------- --------- Total liabilities 5,828 167,106 Equity 1,480 73,301 ------- --------- Total liabilies and equity $ 7,308 $ 240,407 ======= ========= Revenue Rents $ 396 $ 12,455 Tenant reimbursements and other - 1,258 ------- --------- Total revenue 396 13,713 Operating Expenses Property operating expenses 124 3,483 Real estate taxes 26 958 Interest 109 4,715 Depreciation and amortization 87 2,309 Administrative expenses - 329 ------- --------- Total operating expenses 346 11,794 ------- --------- Net Income $ 50 $ 1,919 ======= =========
(a) In July 2002, the Company purchased the remaining interests in these Real Estate Ventures for an aggregate of $2.9 million. 10 As of June 30, 2002, the aggregate maturities of non-recourse debt of Real Estate Ventures payable to third-parties was as follows (000's): 2002 $ 2,864 2003 1,157 2004 2,651 2005 19,319 2006 and thereafter 134,763 --------- $ 160,754 ========= As of June 30, 2002, the Company had guaranteed repayment of approximately $2.0 million of loans for the Real Estate Ventures. The Company selectively provides completion guaranties on behalf of Real Estate Ventures as part of their development activities. As of June 30, 2002, the Company had provided a completion guaranty relating to the construction of one development project that management expects to be completed in the third quarter of 2002. 5. INDEBTEDNESS The Company utilizes credit facility borrowings for general business purposes, including the acquisition of properties and the repayment of debt. The Company maintains a $500 million unsecured credit facility (the "Credit Facility") that matures in June 2004. Borrowings under the Credit Facility bear interest at LIBOR (LIBOR was 1.84% at June 30, 2002) plus 1.5%, with the spread over LIBOR subject to reductions from .10% to .25% or increases of .25% based on the Company's leverage. As of June 30, 2002, the Company had $383.3 million of borrowings, $13.3 million of letters of credit outstanding and $103.4 million of unused availability under the Credit Facility. The weighted-average interest rate on borrowings under the Credit Facility was 5.32% for the six-month period ended June 30, 2002 and 7.08% for the six-month period ended June 30, 2001. As of June 30, 2002, the Company had $617.1 million of mortgage notes payable, secured by 108 of the Properties and certain land holdings. Fixed rate mortgages, totaling $515.9 million, require payments of principal and/or interest (or imputed interest) at rates ranging from 6.80% to 9.25% and mature on dates from July 2003 through July 2027. Variable rate mortgages, totaling $101.2 million, require payments of principal and/or interest at rates ranging from LIBOR plus .76% to 1.75% or 75% of prime (prime rate was 4.75% at June 30, 2002) and mature on dates from February 2003 through July 2027. The weighted-average interest rate on the Company's mortgages was 7.25% for the six-month period ended June 30, 2002 and 6.24% for the six-month period ended June 30, 2001. The Company has entered into interest rate swap and rate cap agreements designed to reduce the impact of interest rate changes on its variable rate debt. At June 30, 2002, the Company had interest rate swap agreements for notional principal amounts aggregating $175 million. The swap agreements effectively fix the LIBOR interest rate on $100 million of Credit Facility borrowings at 6.383%, $50 million at 6.080% and $25 million at 5.215% until September 2002. The Company entered into additional interest rate swap agreements that effectively fix the LIBOR interest rate on $100 million of Credit Facility borrowings at 4.230% and on $75 million at 4.215% from September 2002 to June 2004. The interest rate cap agreement effectively limits the interest rate on a mortgage with a notional value of $28 million at 8.7% until July 2004. 11 For the three- and six-month periods ended June 30, 2002 and 2001, the Company paid interest totaling $16.6 million and $31.3 million in 2002 and $18.9 million and $35.5 million in 2001. Subsequent to June 30, 2002, the Company obtained a $100 million term loan. The Company used proceeds of the term loan to repay indebtedness, including indebtedness under its Credit Facility. The term loan is unsecured and matures on July 15, 2005, subject to two extensions of one year each upon payment by the Company of an extension fee and the absence of any defaults at the time of each extension. There are no scheduled principal payments prior to maturity. The term loan bears interest at a spread over the one, two, three or six month LIBOR that varies between 1.05% and 1.90%, based on the Company's leverage ratio. 6. DISCONTINUED OPERATIONS For the three- and six-month periods ended June 30, 2002 and 2001, income from discontinued operations relates to 37 properties containing 2.0 million net rentable square feet that the Company sold during the six months ended June 30, 2002 and nine properties containing 415,000 net rentable square feet that the Company has designated as "held-for-sale". The following table summarizes information for the nine properties designated as held-for-sale as of June 30, 2002 (amounts in thousands): Real Estate Investments: Operating Properties $ 32,770 Accumulated depreciation (4,904) -------- 27,866 Construction-in-progress 12 -------- 27,878 Accrued rent receivable 372 Deferred costs, net 218 Other assets 55 -------- $ 28,523 ======== The following table summarizes revenue and expense information for the above properties sold or held-for-sale:
Three-month periods Six-month periods ended June 30, ended June 30, -------------------------- ------------------------- 2002 2001 2002 2001 ------- ------- ------- -------- (amounts in thousands) Revenue: Rents $ 1,699 $ 7,175 $ 8,206 $ 14,279 Tenant reimbursements 413 1,258 1,594 2,509 Other 281 68 470 114 ------- ------- ------- -------- Total revenue 2,393 8,501 10,270 16,902 Expenses: Property operating expenses 708 2,081 2,528 4,171 Real estate taxes 303 1,228 1,338 2,402 Depreciation and amortization 43 2,233 175 4,432 ------- ------- ------- -------- Total operating expenses 1,054 5,542 4,041 11,005 Income from discontinued operations before net gain on sale of interests in real estate and minority interest 1,339 2,959 6,229 5,897 Net gain on sales of interest in real estate 116 - 8,562 - Minority interest (73) (169) (826) (336) ------- ------- ------- -------- Income from discontinued operations $ 1,382 $ 2,790 $13,965 $ 5,561 ======= ======= ======= ========
Discontinued operations have not been segregated in the Condensed Consolidated Statements of Cash Flows. Therefore, amounts for certain captions will not agree with respective Condensed Consolidated Statements of Operations. Subsequent to June 30, 2002, the Company sold seven of the properties designated as held-for-sale for an aggregate of $22.7 million. 12 7. BENEFICIARIES EQUITY On June 21, 2002, the Company declared a distribution of $0.44 per Common Share, totaling $15.8 million, which was paid on July 15, 2002 to shareholders of record as of July 5, 2002. The Operating Partnership simultaneously declared a $0.44 per unit cash distribution to holders of Class A Units totaling $.8 million. On June 21, 2002, the Company and the Operating Partnership, respectively, also declared distributions to holders of Series A Preferred Shares, Series B Preferred Shares and Series B Preferred Units, which are each currently entitled to a cumulative preferential return of 7.25%, 8.75% and 7.25%, respectively. Distributions paid on July 15, 2002 to holders of Series A Preferred Shares, Series B Preferred Shares and Series B Preferred Units totaled $.7 million, $2.3 million and $1.8 million, respectively. 8. COMPREHENSIVE INCOME Comprehensive income represents net income, plus the results of certain non-shareholders' equity changes not reflected in the Condensed Consolidated Statements of Operations. The components of comprehensive income are as follows:
Ended June 30, Ended June 30, -------------------------- -------------------------- 2002 2001 2002 2001 -------- ------- -------- -------- (amounts in thousands) Net income $ 12,800 $ 7,423 $ 36,269 $ 16,563 Other comprehensive income: Cumulative effect of change in accounting principle (SFAS #133) on other comprehensive income - - - (1,300) Unrealized derivative gains (losses) on cash flow hedges (2,569) (274) (204) (2,930) Unrealized gain (loss) on available-for-sale securities 60 44 115 (100) -------- ------- -------- -------- Comprehensive income $ 10,291 $ 7,193 $ 36,180 $ 12,233 ======== ======= ======== ========
9. SEGMENT INFORMATION The Company currently manages its portfolio within three segments: (1) Pennsylvania, (2) New Jersey (included New York in prior periods) and (3) Virginia. Corporate is responsible for cash and investment management and certain other general support functions. Segment information for the three-month periods ended June 30, 2002 and 2001 is as follows (in thousands): 13
Pennsylvania New Jersey (a) Virginia Corporate Total ------------ -------------- --------- --------- ----------- As of June 30, 2002: Real estate investments, at cost $ 1,202,698 $ 510,439 $ 222,729 $ - $ 1,935,866 Assets held for sale, at cost 20,074 8,449 - - 28,523 For three months ended June 30, 2002: Total revenue $ 44,944 $ 22,036 $ 6,286 $ 660 $ 73,926 Property operating expenses and real estate taxes 14,936 7,613 2,183 - 24,732 ----------- --------- --------- -------- ----------- Net operating income $ 30,008 $ 14,423 $ 4,103 $ 660 $ 49,194 =========== ========= ========= ======== =========== As of December 31, 2001: Real estate investments, at cost $ 1,194,077 $ 642,645 $ 206,980 $ - $ 2,043,702 For three months ended June 30, 2001: Total revenue $ 41,693 $ 22,005 $ 6,348 $ 578 $ 70,624 Property operating expenses and real estate taxes 13,751 8,174 1,962 - 23,887 ----------- --------- --------- -------- ----------- Net operating income $ 27,942 $ 13,831 $ 4,386 $ 578 $ 46,737 =========== ========= ========= ======== ===========
Segment information for the six-month period ended June 30, 2002 and 2001 is as follows (in thousands):
Pennsylvania New Jersey (a) Virginia Corporate Total ------------ -------------- --------- --------- ----------- For six months ended June 30, 2002: Total revenue $ 86,833 $ 43,325 $ 12,989 $ 1,210 $ 144,357 Property operating expenses and real estate taxes 29,045 15,555 4,489 - 49,089 ----------- --------- --------- -------- ----------- Net operating income $ 57,788 $ 27,770 $ 8,500 $ 1,210 $ 95,268 =========== ========= ========= ======== =========== For six months ended June 30, 2001: Total revenue $ 77,763 $ 42,403 $ 16,015 $ 1,055 $ 137,236 Property operating expenses and real estate taxes 26,087 15,884 5,484 - 47,455 ----------- --------- --------- -------- ----------- Net operating income $ 51,676 $ 26,519 $ 10,531 $ 1,055 $ 89,781 =========== ========= ========= ======== ===========
(a) The Company sold all but one of its properties located in New York by June 30, 2002. Net operating income is defined as total revenue less property operating expenses and real estate taxes. Below is a reconciliation of consolidated net operating income to consolidated income from continuing operations:
Three-month periods Six-month periods ended June 30, ended June 30, --------------------------- -------------------------- 2002 2001 2002 2001 --------- -------- -------- -------- (amounts in thousands) (amounts in thousands) Consolidated net operating income $ 49,194 $ 46,737 $ 95,268 $ 89,781 Less: Interest expense 16,105 16,925 31,835 32,923 Depreciation and amortization 15,818 18,575 29,406 34,874 Administrative expenses 3,808 4,271 7,841 8,271 Minority interest attributable to continuing operations 2,274 1,930 4,575 3,956 Plus: Equity in income of real estate ventures 229 522 693 1,988 Net gains on sales of interests in real estate - 186 - 368 --------- -------- -------- -------- Consolidated income from continuing operations $ 11,418 $ 5,744 $ 22,304 $ 12,113 ========= ======== ======== ========
14 10. 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-Month Periods Ended June 30, ----------------------------------------------------------------------------- 2002 2001 -------------------------------- -------------------------------- Basic Diluted Basic Diluted ---------- ---------- ---------- ---------- Net income $ 12,800 $ 12,800 $ 7,423 $ 7,423 Preferred Share discount amortization (369) (369) (369) (369) Income allocated to Preferred Shares (2,977) (2,977) (2,977) (2,977) ---------- ---------- ---------- ---------- Net income available to common shareholders $ 9,454 $ 9,454 $ 4,077 $ 4,077 ========== ========== ========== ========== Weighted-average shares outstanding 35,684,100 35,684,100 35,665,182 35,665,182 Options and warrants - 74,668 - 36,928 ---------- ---------- --------- ---------- Total weighted-average shares outstanding 35,684,100 35,758,768 35,665,182 35,702,110 ========== ========== ========== ========== Earnings per share $ 0.26 $ 0.26 $ 0.11 $ 0.11 ========== ========== ========== ========== Six-Month Periods Ended June 30, ----------------------------------------------------------------------------- 2002 2001 -------------------------------- -------------------------------- Basic Diluted Basic Diluted ---------- ---------- ---------- ---------- Net income $ 36,269 $ 36,269 $ 16,563 $ 16,563 Preferred Share discount amortization (738) (738) (738) (738) Income allocated to Preferred Shares (5,954) (5,954) (5,954) (5,954) ---------- ---------- ---------- ---------- Net income available to common shareholders $ 29,577 $ 29,577 $ 9,871 $ 9,871 ========== ========== ========== ========== Weighted-average shares outstanding 35,692,678 35,692,678 35,705,335 35,705,335 Options and warrants - 162,216 - 31,347 ---------- ---------- ---------- ---------- Total weighted-average shares outstanding 35,692,678 35,854,894 35,705,335 35,736,682 ========== ========== ========== ========== Earnings per share $ 0.83 $ 0.82 $ 0.28 $ 0.28 ========== ========== ========== ==========
11. SUBSEQUENT EVENTS Subsequent to June 30, 2002, the Company sold seven properties, containing 288,000 net rentable square feet, for $22.7 million. In addition, the Company purchased one property, containing 56,000 net rentable square feet, for $7.6 million. 15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the financial statements and notes thereto 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. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Factors that could cause actual results to differ materially from management's 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 the economic conditions affecting industries in which the Company's principal tenants compete, the Company's failure to lease unoccupied space in accordance with the Company's projections, the failure of the Company to re-lease occupied space upon expiration of leases, the bankruptcy of major tenants, changes in prevailing interest rates, the unavailability of equity and debt financing, unanticipated costs associated with the acquisition and integration of the Company's acquisitions, costs to complete and lease-up pending developments, the Company's ability to obtain adequate insurance for terrorist acts, demand for tenant services beyond those traditionally provided by landlords, potential liability under environmental or other laws and the other risks identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. OVERVIEW The Company currently manages its portfolio within three segments:(1) Pennsylvania, (2) New Jersey and (3) Virginia. As of June 30, 2002, the Company's portfolio consisted of 214 office properties, 26 industrial facilities and one mixed-use property that contain an aggregate of approximately 16.0 million net rentable square feet. As of June 30, 2002, the Company held economic interests in thirteen Real Estate Ventures. The Company receives income primarily from rental revenue (including tenant reimbursements) from the Properties and, to a lesser extent, from the management of properties owned by third parties and from investments in the Real Estate Ventures. The Company's financial performance is dependent upon the demand for office and other commercial space in its markets. Current economic conditions, including recessionary pressures and capital market volatility, have enhanced the challenges facing the Company. In the current economic climate, the Company continues to seek revenue growth through an increase in occupancy of its portfolio (91% at June 30, 2002). However, with a downturn in general leasing activity, owners of commercial real estate, including the Company, are experiencing longer periods in which to lease unoccupied space, and may face higher capital costs and leasing commissions to achieve targeted tenancies. Management anticipates that revenue growth will also come from the acquisition and development of properties. However, the Company faces competition from other real estate owners in acquisition and development opportunities and for tenants, and the Company may be unable to acquire or develop additional properties that meet both its return on investment targets and its credit risk parameters. As the Company seeks to increase revenues, management also focuses on strategies to minimize operating risks, including (i) tenant rollover risk, (ii) tenant credit risk and (iii) development risk. Tenant Rollover Risk: - -------------------- The Company is subject to the risk that, upon expiration, leases may not be renewed, the space may not be relet, or the terms of renewal or reletting (including the cost of renovations) may be less favorable than the current lease terms. Leases accounting for approximately 4.9% of the aggregate annualized base rents from the Properties as of June 30, 2002 (representing approximately 5.6% of the net rentable square feet of the Properties) expire without penalty through the end of 2002. In addition, leases accounting for approximately 12.2% of the aggregate annualized base rents from the Properties as of June 30, 2002 (representing approximately 13.0% of the net rentable square feet of the Properties) are scheduled to expire without penalty in 2003. The Company maintains an active dialogue with its tenants in an effort to ensure a high level of lease renewals. The Company's retention rate for leases that were scheduled to expire in the six month period ended June 30, 2002 was 78.4%. If the Company is unable to renew leases for a substantial portion of the space under expiring leases, or to promptly relet this space, at anticipated rental rates, the Company's cash flow could be adversely impacted. Credit Risk: - ----------- In the event of a tenant default, the Company may experience delays in enforcing its rights as a landlord and may incur substantial costs in protecting its investment. Management regularly evaluates its accounts receivable reserve policy in light of its tenant base and general and local economic conditions. To address the risk of tenant delinquencies, the Company has increased its accounts receivable reserve over the last two years. The accounts receivable reserves were $5.4 million or 15.7% of total receivables (including accrued rent receivable) as of June 30, 2002 compared to $3.0 million or 8.4% of total receivables (including accrued rent receivable) as of June 30, 2001. 16 Development Risk: - ---------------- The Company currently has in development or redevelopment three sites aggregating 428,000 square feet. The total cost of these projects is estimated to be $83.7 million. As of June 30, 2002, these projects (one of which is the site of the Company's new headquarters) were approximately 41% leased. While the Company is actively marketing space at these projects to prospective tenants, management cannot provide assurance as to the timing or terms of any leases of such space. As of June 30, 2002, the Company owned approximately 431 acres of undeveloped land and held options to purchase approximately 63 additional acres. Risks associated with development of this land include construction cost overruns and construction delays, insufficient occupancy rates and inability to obtain necessary zoning, land-use, building, occupancy and other required governmental approvals. RECENT ACTIVITY The Company sold or disposed of the following properties during the six-month period ended June 30, 2002:
Sale # of Rentable Sales/Disposition Date Property/Portfolio Name Location Bldgs. Square Feet Price - ------ -------------------------- ------------------ ------- ----------- ----------------- Feb-02 8 Engineers Lane Long Island, NY 1 15,000 $ 865,000 Feb-02 Bucks County Portfolio Bucks County, PA 15 765,887 38,915,000 Feb-02 155 Rittenhouse Circle Bucks County, PA 1 22,500 1,912,500 Mar-02 470 John Young Way Exton, PA 1 15,085 2,850,000 Mar-02 Park 80 Saddlebrook, NJ 2 487,740 73,350,000 Apr-02 Long Island Long Island, NY 5 274,801 23,596,674 Apr-02 16 Campus Boulevard Newtown Square, PA 1 65,463 7,104,870 Apr-02 Jericho Long Island, NY 2 103,091 8,084,282 Jun-02 Plainview Long Island, NY 6 137,060 7,760,000 Jun-02 19 Engineers Lane Long Island, NY 1 10,000 630,000 Jun-02 91 North Industry Court Long Island, NY 1 71,000 2,272,000 -- --------- ------------ Total Properties Sold 36 1,967,627 $167,340,326 == ========= ============
The Company acquired the following operating properties during the six-month period ended June 30, 2002:
Month of # of Rentable Purchase Acquisition Property/Portfolio Name Location Buildings Square Feet Price - ----------- --------------------------------- -------------------- --------- ------------ -------- Mar-02 Plymouth Meeting Executive Campus Plymouth Meeting, PA 4 360,250 $ 67,165,000 May-02 6802 Paragon Place Richmond, VA 1 142,499 14,800,000 -- ------- ------------ Total Property Acquisitions 5 502,749 $ 81,965,000 == ======= ============
During the six-month period ended June 30, 2002, the Company sold one parcel of land, containing 10.0 acres, for $725,000. CRITICAL ACCOUNTING POLICIES Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and assumptions on historical experience and current economic conditions. On an on-going basis, management evaluates its estimates and assumptions including those related to bad debts, capitalization of costs, contingencies and litigation. Actual results may differ from those estimates and assumptions. The Company's Annual Report on Form 10-K for the year ended December 31, 2001 contains a detailed discussion of the Company's critical accounting policies that are influenced by its more significant estimates and assupmptions used in preparation of the financial statements. Management has discussed the Company's critical accounting policies and estimates with the Company's Audit Committee. The following accounting policy was implemented subsequent to December 31, 2001: Discontinued Operations Effective January 1, 2002, the Company adopted Financial Accounting Standards Board Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which established a single accounting model for the impairment or disposal of long-lived assets including discontinued operations. This statement requires that the operations related to properties that have been sold or classified as "held-for-sale" subsequent to January 1, 2002 be presented as discontinued operations in the statement of operations for all periods presented and properties intended to be sold are to be designated as "held-for-sale" on the balance sheet. 17 RESULTS OF OPERATIONS Comparison of the Three Months Ended June 30, 2002 and June 30, 2001
Three months ended June 30, ----------------------------- Dollar Percent 2002 2001 Change Change -------- -------- ------- ------ (amounts in thousands) -------------------------------------------------- Revenue: Rents $ 62,976 $ 59,875 $ 3,101 5.2% Tenant reimbursements 8,192 8,685 (493) -5.7% Other 2,758 2,064 694 33.6% -------- -------- ------- ------ Total revenue 73,926 70,624 3,302 4.7% Expenses: Property operating expenses 18,501 18,149 352 1.9% Real estate taxes 6,231 5,738 493 8.6% Interest 16,105 16,925 (820) -4.8% Depreciation and amortization 15,818 18,575 (2,757) -14.8% Administrative expenses 3,808 4,271 (463) -10.8% -------- -------- ------- ------ Total operating expenses 60,463 63,658 (3,195) -5.0% Income from continuing operations before equity in income of real estate ventures, net gain on sale of interests in real estate, minority interest and extraordinary item 13,463 6,966 6,497 93.3% Equity in income of real estate ventures 229 522 (293) -56.1% -------- -------- ------- ------ Income from continuing operations before net gain on sale of interests in real estate, minority interest and extraordinary item 13,692 7,488 6,204 82.9% Net gain on sale of interests in real estate - 186 (186) 100.0% Minority interest attributable to continuing operations (2,274) (1,930) (344) -17.8% -------- -------- ------- ------ Income from continuing operations 11,418 5,744 5,674 98.8% Discontinued operations: Income from discontinued operations, net of minority interest 1,272 2,790 (1,518) -54.4% Gain on disposition of discontinued operations, net of minority interest 110 - 110 - -------- -------- ------- ------ 1,382 2,790 (1,408) -50.5% -------- -------- ------- ------ Income before extraordinary item 12,800 8,534 4,266 50.0% Extraordinary item - (1,111) 1,111 -100.0% -------- -------- ------- ------ Net income $ 12,800 $ 7,423 $ 5,377 72.4% ======== ======== ======= ======
18 Comparison of the Six Months Ended June 30, 2002 and June 30, 2001
Six months ended June 30, ----------------------------- Dollar Percent 2002 2001 Change Change -------- -------- ------- ------ (amounts in thousands) -------------------------------------------------- Revenue: Rents $ 123,066 $ 115,955 $ 7,111 6.1% Tenant reimbursements 15,652 16,962 (1,310) -7.7% Other 5,639 4,319 1,320 30.6% --------- --------- -------- ------ Total revenue 144,357 137,236 7,121 5.2% Expenses: Property operating expenses 37,001 36,160 841 2.3% Real estate taxes 12,088 11,295 793 7.0% Interest 31,835 32,923 (1,088) -3.3% Depreciation and amortization 29,406 34,874 (5,468) -15.7% Administrative expenses 7,841 8,271 (430) -5.2% --------- --------- -------- ------ Total operating expenses 118,171 123,523 (5,352) -4.3% Income from continuing operations before equity in income of real estate ventures, net gain on sale of interests in real estate, minority interest and extraordinary item 26,186 13,713 12,473 91.0% Equity in income of real estate ventures 693 1,988 (1,295) -65.1% --------- --------- -------- ------ Income from continuing operations before net gain on sale of interests in real estate, minority interest and extraordinary item 26,879 15,701 11,178 71.2% Net gain on sale of interests in real estate - 368 (368) 100.0% Minority interest attributable to continuing operations (4,575) (3,956) (619) -15.6% --------- --------- -------- ------ Income from continuing operations 22,304 12,113 10,191 84.1% Discontinued operations: Income from discontinued operations, net of minority interest 5,886 5,561 325 5.8% Gain on disposition of discontinued operations, net of minority interest 8,079 - 8,079 - --------- --------- -------- ------ 13,965 5,561 8,404 151.1% --------- --------- -------- ------ Income before extraordinary item 36,269 17,674 18,595 105.2% Extraordinary item - (1,111) 1,111 -100.0% --------- --------- -------- ------ Net income $ 36,269 $ 16,563 $ 19,706 119.0% ========= ========= ======== ======
Of the 241 Properties owned by the Company as of June 30, 2002, a total of 230 Properties containing an aggregate of 15.2 million net rentable square feet ("Same Store Properties") were owned for the entire three-month periods ended June 30, 2002 and 2001. The following table sets forth revenue and expense information for these Same Store Properties for the three-month periods ended June 30, 2002 and 2001:
Three Months Ended June 30, ------------------------------ Dollar Percent 2002 2001 Change Change -------- -------- -------- ------ (amounts in thousands) ---------------------------------------------------- Revenue: Rents $ 58,956 $ 60,029 $ (1,073) -1.8% Tenant reimbursements 8,070 8,491 (421) -5.0% Other 292 115 177 153.9% -------- -------- -------- ----- Total revenue 67,318 68,635 (1,317) -1.9% Operating Expenses: Property operating expenses 19,589 20,134 (545) -2.7% Real estate taxes 5,833 5,619 214 3.8% -------- -------- -------- ----- Total operating expenses 25,422 25,753 (331) -1.3% -------- -------- -------- ----- Property NOI $ 41,896 $ 42,882 $ (986) -2.3% ======== ======== ======== =====
19 Revenue increased to $73.9 million and $144.4 million for the three- and six-month periods ended June 30, 2002 as compared to $70.6 million and $137.2 million for the comparable periods in 2001, primarily due to increased rental rates partially offset by decreased occupancy. The straight-line rent adjustment, which reflects the difference between rents accrued in accordance with generally accepted accounting principles and rents billed, increased revenues by $1.5 million and $2.8 million for the three- and six-month periods ended June 30, 2002 and $1.5 million and $2.9 million for the comparable periods in 2001. Revenue for Same Store Properties decreased to $67.3 million for the three months ended June 30, 2002 as compared to $68.6 million for the comparable period in 2001. This decrease was the result of decreased occupancy offset by increased rental rates in 2002 as compared to 2001. Average occupancy for the Same Store Properties for the three months ended June 30, 2002 decreased to 90.8% from 94.6% for the comparable period in 2001. Other revenue includes lease termination fees, leasing commissions, third-party management fees and interest income. Other revenue increased to $2.8 million and $5.6 million for the three- and six-month periods ended June 30, 2002 from $2.1 million and $4.3 million for the comparable periods in 2001 primarily due to lease termination fees in 2002. Property operating expenses increased to $18.5 million and $37.0 million for the three- and six-month periods ended June 30, 2002 as compared to $18.1 million and $36.2 million for the comparable periods in 2001, primarily due to an increase in the provision for bad debts in 2002. Property operating expenses included a provision for doubtful accounts of $700,000 and $1,122,000 for the three- and six-month periods ended June 30, 2002 and $612,000 and $762,000 for the comparable periods in 2001 in response to perceived increases in credit risk related to certain tenants and current economic conditions. Property operating expenses for the Same Store Properties decreased to $19.6 million for the three months ended June 30, 2002 as compared to $20.1 million for the comparable period in 2001 as a result of decreased utilities costs in 2002 as compared to 2001. Real estate taxes increased to $6.2 million and $12.1 million for the three- and six-month periods ended June 30, 2002 as compared to $5.7 million and $11.3 million for the comparable periods in 2001, primarily due to higher tax rates and property assessments in 2002. Real estate taxes for the Same Store Properties increased to $5.8 million for the three months ended June 30, 2002 as compared to $5.6 million for the comparable period in 2001 as a result of higher tax rates and property assessments. Interest expense decreased to $16.1 million and $31.8 million for the three- and six-month periods ended June 30, 2002 as compared to $16.9 million and $32.9 million for the comparable periods in 2001, primarily due to decreased interest rates offset by increased borrowings. Average outstanding debt balances for the six months ended June 30, 2002 were $1.0 billion as compared to $910.9 million for the comparable period in 2001, primarily due to the assumption of debt related to property acquisitions, net of debt discharged in property dispositions. The Company's weighted-average interest rate after giving effect to hedging activities on unsecured credit facilities decreased to 5.32% for the six months ended June 30, 2002 from 7.08% for the comparable period in 2001. The weighted-average interest rate on mortgage notes payable increased to 7.25% for the six months ended June 30, 2002 from 6.24% for the comparable period in 2001. Depreciation decreased to $14.5 million and $26.7 million for the three- and six-month periods ended June 30, 2002 as compared to $17.5 million and $32.8 million for the comparable periods in 2001. Of this decrease, $4.8 million ($.13 per share) and $9.6 million ($.27 per share) for the three- and six-month periods ended June 30, 2002 was due to a change made by the Company in the estimated useful lives of buildings from 25 to 40 years. Management determined that the longer period better reflected the useful lives of the buildings. This decrease was offset by $2.2 million of tenant improvements written-off during the three-month period June 30, 2002. Amortization, related to deferred leasing costs, increased to $1.3 million and $2.7 million for the three- and six-month periods ended June 30, 2002 as compared to $1.1 million and $2.1 million for the comparable periods in 2001, primarily due to increased leasing activity. Administrative expenses decreased to $3.8 million and $7.8 million for the three- and six-month periods ended June 30, 2002 as compared to $4.3 million and $8.3 million for the comparable periods in 2001 primarily due to decreased amortization of deferred compensation costs. 20 Equity in income of Real Estate Ventures decreased to $229,000 and $693,000 for the three- and six-month periods ended June 30, 2002 as compared to $522,000 and $2.0 million for the comparable periods in 2001 primarily due to the sale of two Real Estate Ventures during the first quarter of 2001 and decreased occupancy. Minority interest represents the equity in income attributable to the portion of the Operating Partnership not owned by the Company. Minority interest increased to $2.3 million and $4.6 million for the three- and six-month periods ended June 30, 2002 as compared to $1.9 million and $4.0 million for the comparable periods in 2001, primarily due to increased results of operations in 2002 as compared to 2001. During the six-month period ended June 30, 2002, the Company sold 16 office properties containing an aggregate of 1.1 million net rentable square feet, 20 industrial properties containing an aggregate of .9 million net rentable square feet and one parcel of land containing 10.0 acres for an aggregate of $168.1 million, realizing a net gain of $8.6 million. During the three-month period ended June 30, 2002, the Company sold six office properties containing an aggregate of 364,000 net rentable square feet, 10 industrial properties containing an aggregate of 297,000 net rentable square feet and one parcel of land containing 10.0 acres for an aggregate of $50.2 million, realizing a net gain of $.1 million. LIQUIDITY AND CAPITAL RESOURCES Cash Flows During the six-month period ended June 30, 2002, the Company generated $47.7 million in cash flow from operating activities. Other sources of cash flow consisted of: (i) $59.1 million of proceeds from sales of properties, (ii) $15.0 million of proceeds from draws on the Credit Facility, (iii) $14.0 million of proceeds of additional mortgage notes, (iv) $1.6 million from repayments of employee loans, (v) $1.0 million of escrowed cash and (vi) $.5 million of cash distributions from Real Estate Ventures. During the six-month period ended June 30, 2002, cash out-flows consisted of: (i) $37.6 million of distributions to shareholders, (ii) $26.0 million of Credit Facility repayments, (iii) $22.9 million for property acquisitions, (iv) $22.2 million to fund development and capital expenditures, (v) $7.9 million to repurchase Common Shares and minority interest units, (vi) $6.5 million of leasing costs, (vii) $4.2 million of mortgage note repayments and (viii) $.5 million of additional investments in unconsolidated Real Estate Ventures. Development The Company currently has in development or redevelopment three sites aggregating 428,000 square feet that are scheduled for completion on various dates through July 2002. The Company treats a property as under development or redevelopment until it reaches 95% occupancy or one year after the completion of shell construction, whichever is earlier. 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 costs of these projects is estimated to be $83.7 million of which $71.4 million was incurred as of June 30, 2002. As of June 30, 2002, these developments were approximately 41% leased. Capitalization As of June 30, 2002, the Company had approximately $1 billion of debt outstanding, consisting of $383.3 million of borrowings under the Credit Facility and $617.1 million of mortgage notes payable. The mortgage notes payable consists of $515.9 million of fixed rate loans and $101.2 million of variable rate loans. Additionally, the Company has entered into interest rate swap and cap agreements to fix the interest rate on $203.0 million of the Credit Facility and variable rate loans. The mortgage loans mature between July 2003 and July 2027. As of June 30, 2002, the Company also had $13.3 million of letters-of-credit outstanding under the Credit Facility and $103.4 million of unused availability under the Credit Facility. For the three- and six-month periods ended June 30, 2002, the weighted-average interest rate under the Company's Credit Facility was 5.40% and 5.32%, and the weighted-average interest rate for borrowings under mortgage notes payable was 7.15% and 7.25%. The following table outlines the timing of payment requirements related to the Company's commitments as of June 30, 2002: 21
Payments by Period (in thousands) ----------------------------------------------------------------------------- Less than After Total 1 Year 2-3 Years 4-5 Years 5 Years --------- ------- --------- --------- --------- Mortgage notes payable: Fixed rate $ 515,942 $ 4,420 $ 145,821 $ 18,327 $ 347,374 Variable rate 25,191 80 334 359 24,418 Construction loans 75,967 - 75,967 - - ---------- ------- --------- -------- --------- 617,100 4,500 222,122 18,686 371,792 Revolving credit facility 383,325 - 383,325 - - Other liabilities 13,973 791 13,182 - - ---------- ------- --------- -------- --------- $1,014,398 $ 5,291 $ 618,629 $ 18,686 $ 371,792 ========== ======= ========= ======== =========
The Company intends to refinance its mortgage notes payable as they become due or repay them if they relate to properties being sold. The Company expects to renegotiate its Credit Facility at maturity or extend its term. As of June 30, 2002, the Company had guaranteed repayment of approximately $2.0 million of loans for indebtedness of the Real Estate Ventures. Subsequent to June 30, 2002, the Company obtained a $100 million term loan. The Company used proceeds of the term loan to repay indebtedness, including indebtedness under its existing $500 million revolving credit facility. The term loan is unsecured and matures on July 15, 2005, subject to two extensions of one year each upon payment by the Company of an extension fee and the absence of any defaults at the time of each extension. There are no scheduled principal payments prior to maturity. The term loan bears interest at a spread over the one, two, three or six month LIBOR that varies between 1.05% and 1.90%, based on the Company's leverage ratio. As of June 30, 2002, the Company's debt-to-market capitalization ratio was 45.1%. As a general policy, the Company intends, but is not obligated, to adhere to a policy of maintaining a debt-to-market capitalization ratio of no more than 50%. The Company's Board of Trustees has previously approved a share repurchase program authorizing the Company to repurchase up to 4,000,000 of its outstanding Common Shares. During 2002, the Company has repurchased 28,274 Common Shares for an aggregate of $671,000 (an average price of $23.72 per share). The Company may purchase an additional 1.3 million Common Shares under this program. No time limit has been placed on the duration of the share repurchase program. Short- and Long-Term Liquidity The Company believes that its 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 providing 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 distributions required to maintain the Company's REIT qualification under the Internal Revenue Code. On June 21, 2002, the Company declared a distribution of $0.44 per Common Share, totaling $15.8 million, which was paid on July 15, 2002 to shareholders of record as of July 5, 2002. The Operating Partnership simultaneously declared a $0.44 per unit cash distribution to holders of Class A Units totaling $.8 million. On June 21, 2002, the Company and the Operating Partnership, respectively, also declared distributions to holders of Series A Preferred Shares, Series B Preferred Shares and Series B Preferred Units, which are each currently entitled to a preferential return of 7.25%, 8.75% and 7.25%, respectively. Distributions paid on July 15, 2002 to holders of Series A Preferred Shares, Series B Preferred Shares and Series B Preferred Units totaled $.7 million, $2.3 million and $1.8 million, respectively. 22 The Company expects to meet its long-term liquidity requirements, such as for property acquisitions, development, investments in real estate ventures, scheduled debt maturities, major renovations, expansions and other significant capital improvements, through borrowings under its Credit Facility, long-term secured and unsecured indebtedness, the issuance of equity securities and the proceeds from the disposition of selected assets. Funds from Operations Management 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 (losses) on sales of real estate investments, 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 REITs. 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- and six- month periods ended June 30, 2002 and 2001 is summarized in the following table (in thousands, except share data):
Three Months Ended June 30, Six Months Ended June 30, ---------------------------- ----------------------------- 2002 2001 2002 2001 ---------- ----------- ---------- ---------- Income before net gain on sale of interests in real estate, minority interest and extraordinary item: Continuing operations $ 13,692 $ 7,488 $ 26,879 $ 15,701 Discontinued operations 1,339 2,959 6,229 5,897 ---------- ----------- ---------- ---------- 15,031 10,447 33,108 21,598 Add: Depreciation: Real property 14,522 19,550 26,875 37,002 Real estate ventures 739 411 1,320 1,464 Amortization of leasing costs 1,339 1,258 2,706 2,304 Gain on sale of land interests - - - 41 Less: Gain included in equity in income of real estate ventures - - - (785) ---------- ----------- ---------- ---------- Funds from operations before minority interest $ 31,631 $ 31,666 $ 64,009 $ 61,624 ========== =========== ========== ========== Weighted-average Common Shares (including Common Share equivalents) and Operating Partnership units 47,152,178 47,326,364 47,355,479 47,361,479 ========== =========== ========== ==========
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 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 2002. Reference is made to Item 7 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting on May 7, 2002. At the meeting, each of the six individuals nominated for election to the Company's Board of Trustees was elected to the Board. These individuals will serve on the Board, together with a seventh Trustee (D. Pike Aloian), separately elected by the holder of a class of the Company's preferred securities. The number of shares cast for, against or withheld for each nominee is set forth below: 23 For Against Withheld ---------- ------- --------- Anthony A. Nichols, Sr. 34,674,670 0 1,011,198 Gerard H. Sweeney 34,719,061 0 966,807 Donald E. Axinn 34,719,026 0 966,842 Walter D'Alessio 34,671,390 0 1,014,478 Robert Larson 34,673,838 0 1,012,030 Charles P. Pizzi 34,711,699 0 974,169 Item 5. Other Information (i) Provision of Non-Auditing Services ---------------------------------- KPMG LLP is the Company's independent public accountants and also provides the Company with tax compliance and tax advisory services. The Audit Committee of the Company's Board of Trustees has approved the provision by KPMG LLP of these services. (ii) Equity Awards and Related Matters --------------------------------- On July 25, 2002, the Company awarded to 36 employees an aggregate of 100,982 "restricted" common shares of beneficial interest ("Restricted Shares"). In structuring these awards, the Board of Trustees considered the analysis and recommendation of an independent compensation consultant. The Restricted Shares are subject to vesting in five equal annual installments, with the first installment subject to vesting on January 1, 2003 and with each succeeding installment subject to vesting through January 1, 2007, based on the continued employment of the recipients with the Company, subject to accelerated vesting upon a change of control of the Company. Prior to vesting of a Restricted Share, the holder is entitled to receive dividends on and to vote such shares. The executive officers of the Company, Gerard H. Sweeney, Henry J. DeVuouno, George Sowa, Anthony Rimikis, Barbara Yamarick, Brad Molotsky, Anthony Nichols, Jr. and Bradley Harris, received, respectively, 38,562 shares, 7,119 shares, 7,119 shares, 6,585 shares, 4,390 shares, 4,627 shares, 4,152 shares and 2,492 shares. The balance of the shares were awarded to other Company employees. The Board also approved an extension to the term of the employment agreement of Gerard H. Sweeney, the Company's President and Chief Executive Officer, through May 7, 2005. The revised employment agreement provides that if the term of Mr. Sweeney's employment is not extended upon expiration, the Company will be obligated to provide him with a severance benefit during the one-year period following expiration of the term equal to the sum of his prior year salary and bonus as well as health care benefits. The revised employment agreement does not alter Mr. Sweeney's base annual salary of $325,000 or the severance benefits to which Mr. Sweeney would be entitled if his employment is terminated by the Company prior to expiration of the term. In addition, on July 25, 2002, the Company replaced the warrant, exercisable for 100,000 Common Shares at a per share exercise price of $19.50 and with an expiration date of August 22, 2002 held by the Company's President and Chief Executive Officer, with an option exercisable for 100,000 Common Shares at a per share exercise price of $19.50 and an expiration date of August 22, 2005. The Company will expense the cost of these options in accordance with SFAS 173. The form of Restricted Share Award for the President and Chief Executive Officer is attached to this Form 10-Q as Exhibit 10.71, and the form of Restricted Share Award for the other recipients is attached to this Form 10-Q as Exhibit 10.72. The form of the revised employment agreement and replacement option are attached as Exhibits 10.70 and 10.73. (iii) New Chief Financial Officer --------------------------- In addition, on August 15, 2002, Christopher P. Marr will join the Company as Senior Vice President and Chief Financial Officer. Mr. Marr will receive a base annual salary of $275,000, and will receive an award of Restricted Shares. The number of Restricted Shares that Mr. Marr will receive will equal $200,000 divided by the closing price of a Common Share on August 15, 2002. 24 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.70 Amended and Restated Employment Agreement for Gerard H. Sweeney 10.71 Restricted Share Award for Gerard H. Sweeney 10.72 Form of Restricted Share Award for Other Recipients 10.73 Option for Gerard H. Sweeney 99.1 Chief Executive Officer's Financial Statement Certification 99.2 Chief Accounting Officer's Financial Statement Certification (b) Reports on Form 8-K: During the three months ended June 30, 2002 and through August 14, 2002, the Company filed the following: (i) Current Report on Form 8-K filed May 8, 2002 (reporting under Item 9). (ii) Current Report on Form 8-K filed May 30, 2002 (reporting under Items 4 and 7). (iii) Current Report on Form 8-K filed July 16, 2002 (reporting under Items 5 and 7). 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: August 14, 2002 By: /s/ Gerard H. Sweeney --------------- ---------------------------------------------------- Gerard H. Sweeney, President and Chief Executive Officer (Principal Executive Officer) Date: August 14, 2002 By: /s/ Bradley W. Harris --------------- -------------------------------------------------- Bradley W. Harris, Vice President and Chief Accounting Officer (Principal Accounting Officer) 25 EX-10 3 ex10-70.txt EXHIBIT 10.70 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is made as of May 7, 2002 and amends and restates in its entirety the Amended and Restated Employment Agreement made and entered into as of December 8, 2000, by and between Gerard H. Sweeney ("Employee") and Brandywine Realty Trust, a Maryland real estate investment trust (the "Company"). BACKGROUND The Company desires to employ Employee, and Employee desires to enter into the employ of the Company, on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the mutual agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Employment. The Company hereby employs Employee, and Employee hereby accepts employment by the Company, for the period and upon the terms and conditions contained in this Agreement. 2. Office and Duties. (a) Employee shall be employed by the Company as its President and Chief Executive Officer and will serve as a member of the Board of Trustees of the Company (the "Board") and member of the Executive Committee of the Board, and shall perform such duties and shall have such authority as may from time to time be specified by the Board. Employee shall report directly to the Board. (b) Without further consideration, Employee shall, as directed by the Board, serve as a director or officer of, or perform such other duties and services as may be requested for and with respect to, any of the Company's Subsidiaries, including, without limitation, Brandywine Realty Services Corporation. As used in this Agreement, the terms "Subsidiary" and "Subsidiaries" shall mean, with respect to any entity, any corporation, partnership, limited liability company or other business entity in which the subject entity has the power (whether by contract, through securities ownership, or otherwise and whether directly or indirectly through control of one or more intermediate Subsidiaries) to elect a majority of board of directors or other governing body, including, in the case of a partnership, a majority of the board of directors or other governing body of the general partner. (c) Employee shall devote his full working time, energy, skill and best efforts to the performance of his duties hereunder, in a manner which will faithfully and diligently further the business interests of the Company and its Subsidiaries. 3. Term. Unless sooner terminated as hereinafter provided, the term of Employee's employment shall extend through May 7, 2005 (the "Term"). The Term shall automatically renew for additional one-year periods at the expiration of the then current Term unless either party shall give notice of his or its election to terminate Employee's employment at least one year prior to the end of the then-current Term, unless earlier terminated as hereinafter provided. 4. Base Salary. For all of the services rendered by Employee to the Company and its Subsidiaries, Employee shall receive an aggregate base salary of $325,000 per annum during the term of his employment hereunder. Such salary may be paid, at the election of the Company, either by the Company or by one or more of its Subsidiaries, in such relative proportions as the Company may determine, as earned in periodic installments in accordance with the Company's normal payment policies for executive officers. In the event that the Employee is also employed during any period by a Subsidiary of the Company, the amount of the base salary payable by the Company during such period shall be reduced by the amount of salary received by Employee during such period from such Subsidiary. Employee's base salary shall be subject to review by the Board not less frequently than annually, and Employee shall receive such salary increases as the Board may from time to time approve. 5. Bonus. Employee shall receive, during the term of his employment hereunder, such annual bonus as the Board, in its sole discretion, may determine from time to time. Any such bonus may be based on Employee's annual performance goals as established by the Board from time to time. 6. Participation in Incentive Plans. In addition to Employee's eligibility to receive annual bonuses pursuant to Section 5, Employee shall be entitled to participate in short-term and long-term incentive plans as shall be maintained by the Company from time to time on such terms and conditions as shall be established by the Board. 7. Prior Option and Warrants. Nothing in this Agreement shall affect the terms and conditions of options and warrants granted by the Company to Employee before the date of this Agreement. Such options and warrants shall continue in force as in effect immediately before the date of this Agreement. Without limiting the generality of the foregoing, the options granted to Employee under his employment agreement executed on August 8, 1994 (the "1994 Agreement") shall remain in effect, and those provisions of the 1994 Agreement which govern Employee's entitlement to exercise such options shall continue in effect as if such 1994 Agreement had not been terminated. In furtherance of the foregoing, references in Section 4.1(b)(v) of the 1994 Agreement to "the Company" shall hereafter be construed as references to the Company and its Subsidiaries. 8. Fringe Benefits. Throughout the term of his employment and as long as they are kept in force by the Company, Employee shall be entitled to participate in and receive the benefits of any profit sharing plan, retirement plan, health or other employee benefit plan made available to other executive officers of the Company, but in no event shall such benefits be less favorable to Employee than the benefits listed on Schedule A hereto. 9. Automobile Allowance. Employee shall receive, during the term of his employment hereunder, an automobile allowance of $1,000 per month. 10. Expenses. The Company shall reimburse Employee for all reasonable, ordinary and necessary business expenses incurred by Employee in connection with the performance of Employee's duties hereunder upon receipt of vouchers therefor and in accordance with the Company's regular reimbursement procedures and practices in effect from time to time. -2- 11. Vacation. Employee shall be entitled to a vacation of four (4) weeks during each twelve (12) month period of his employment hereunder, during which time Employee's compensation hereunder shall be paid in full. Employee shall be permitted to carry over unused vacation during each twelve (12) month period during the term and use such unused vacation in any subsequent twelve (12) month period during the term. 12. Disability. If the Board determines in good faith by a vote of a majority of its members (other than Employee) that Employee is unable to perform his duties hereunder due to partial or total disability or incapacity resulting from a mental or physical illness or injury or any similar cause for a period of one hundred and twenty (120) consecutive days or for a cumulative period of one hundred and eighty (180) days during any twelve (12) month period, the Company shall have the right to terminate Employee's employment at any time thereafter. 13. Death. Employee's employment shall terminate at the time of his death. 14. Termination of Employment for Cause. The Company may discharge Employee at any time for Cause. Cause shall mean: (i) habitual intoxication; (ii) drug addiction; (iii) intentional and willful violation of any express direction of the Board; (iv) theft, misappropriation or embezzlement of the Company's funds; (v) conviction of a felony; or (vi) repeated and consistent failure of Employee to be present at work during regular hours without valid reason therefor. 15. Termination of Employment Without Cause. The Board, in its sole discretion, may terminate Employee's employment hereunder without Cause upon 30 days' prior written notice to Employee at any time. 16. Resignation For Good Reason. Employee's resignation shall be treated as a "Resignation for Good Reason" if Employee resigns within six (6) months after any of the following circumstances, unless in the case of the circumstances set forth in paragraphs (b), (c) or (d) below, such circumstances are fully corrected within 30 days of Employee's delivery of notice to the Company: (a) A reduction in Employee's annual rate of base salary; (b) A failure of the Company to make the payments required by Section 4 hereof; (c) A significant adverse alteration in the nature or status of Employee's responsibilities; (d) Any other material breach by the Company of this Agreement; (e) Relocation (without the written consent of Employee) of the Company's executive offices to a location more than 30 miles from its current location; or -3- (f) Upon a Change of Control (as defined in Section 17). 17. Change of Control. For purpose of this Agreement, a "Change of Control" means: (a) A "Change of Control" within the meaning of Section 1(d) of the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as currently in effect; or (b) The purchase of any common shares of beneficial interest of the Company pursuant to a tender or exchange offer other than an offer by the Company. 18. Payments Upon or After Termination of Employment. (a) Voluntary Resignation Other than for Good Reason; Termination for Cause; Non-Renewal of Employment Agreement. If Employee's employment hereunder is terminated before the expiration of the Term because of Employee's voluntary resignation (other than a Resignation for Good Reason) or because of the Company's termination of Employee's employment for Cause, the Company, or at its direction, its Subsidiaries shall pay to Employee or, as appropriate, his legal representatives, heirs or estate all amounts payable under Sections 4 and 8 accrued through the applicable date of termination (the "Accrued Amount") within 30 days after such date of termination. If Employee's employment is terminated by the Company for Cause or by the Employee voluntarily (unless such termination of employment is a Resignation for Good Reason), the Company shall have no obligation or liability hereunder after the date of discharge or termination to pay or provide base salary, bonus compensation, fringe benefits, or any other form of compensation hereunder other than to pay the Accrued Amount. If Employee's employment is terminated at the expiration of the Term following an election by the Company not to renew the Term pursuant to Section 3, the Company, or at its direction, its Subsidiaries shall pay to Employee all amounts payable under Sections 4 and 8 accrued through the applicable date of expiration (the "Accrued Amount") within 30 days after such date of expiration and, in addition, the Company, or at its direction, its Subsidiaries shall (i) pay to Employee, in approximately equal monthly installments, during the one-year period following such expiration, an amount equal in the aggregate to the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) for the calendar year preceding the calendar year in which such expiration occurs and (ii) during the one-year period following such expiration continue to provide Employee with health care benefits at levels no less favorable to him than those in effect immediately prior to such expiration. (b) Termination of Employment Because of Death. If Employee's employment is terminated as a result of the Employee's death before the expiration of the Term, the Company shall pay Employee's legal representatives the Accrued Amount as of the date of Employee's death, and, in addition, the product of three (3) times the greater of (1) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) for the calendar year preceding the calendar year in which the death occurs or (2) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) during the one-year period -4- ending on the date of such death, provided that if such date of death occurs before the first anniversary of the date hereof, the cash lump sum payment shall be equal to the product of three (3) times the sum of (x) Employee's annualized base salary pay rate in effect as of such date of death and (y) the maximum bonus that would have been payable for the year that includes such date of death if all of the conditions for the payment of such maximum bonus had been satisfied, less the proceeds receivable by Employee's heirs and legal representatives from any life insurance policy provided by the Company. (c) Termination of Employment Because of Disability. If Employee's employment is terminated by the Company for disability before the expiration of the Term, the Company shall pay Employee the Accrued Amount as of the such date of termination, and, in addition, the consideration described in Sections 4 and 8 hereof, at the rate in effect at the date of termination, until one year after Employee becomes eligible to receive benefits pursuant to the disability insurance policy provided by the Company, at the rate in effect at such date of termination, less the amount of disability insurance proceeds receivable by Employee, provided that such period shall not exceed two years in the aggregate. In addition, Employee shall be entitled to receive an amount equal to the product that results from multiplying the amount of the bonus paid to him pursuant to Section 5 hereof for the calendar year prior to the year in which Employee's employment is terminated for disability multiplied by a fraction, the numerator of which is the number of days that elapsed prior to the termination during the year in which the termination occurs and the denominator of which is 365. (d) Termination of Employment by Company Without Cause; Resignation for Good Reason. If Employee's employment is terminated by the Company without Cause, or Employee Resigns for Good Reason, within 30 days following the date of such termination of employment, the Company shall pay Employee the Accrued Amount as of the date of such termination, and in addition, the Company shall make a cash lump sum payment to Employee equal to the sum of (x) the greater of the amount described in (i) or (ii) below, plus (y) the "Gross-Up Payment," as defined and more fully provided for in Section 18(g). (i) the product of three (3) times the greater of (1) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) for the calendar year preceding the calendar year in which such termination of employment occurs or (2) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) during the one-year period ending on the date of such termination; or (ii) The amount payable pursuant to Section 4 hereunder for the remainder of the Term at a rate equal to his base salary in effect at the time of the date of such termination. (e) In the event that Employee is employed by a Subsidiary of the Company at the time of termination of employment, any amounts payable to the Employee pursuant to this Section 18 shall be reduced by the amounts paid to Employee by any such Subsidiary. -5- (f) Upon the payment of the amounts payable under this Section 18, neither the Company nor any of its Subsidiaries shall have any further obligations hereunder to Employee (or to his estate, heirs, beneficiaries, or legal representatives, as appropriate, or otherwise) to pay or provide any base salary, bonus compensation, or fringe benefits, provided that if Employee Resigns for Good Reason or the Company terminates Employee's employment without Cause, Company shall, at its own expense, for a thirty-six (36) month period after the date of termination of employment, arrange to provide Employee with life, disability, accident and health insurance benefits substantially similar to those which Employee was entitled to receive immediately prior to such date of termination. (g) "Gross-Up Payment." (i) For purposes of this Agreement, the term "Gross-Up Payment" means an amount such that the net amount retained by Employee, after deduction of the excise tax imposed under section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision of law ("Excise Tax"), on the "Total Payments" (as hereinafter defined) and any federal, state and local income tax, employment tax and Excise Tax upon the payment provided for by this Section 18(g), shall be equal to the excess of the Total Payments (including the payment provided for in clause (y) of Section 18(d) and in this Section 18(g)) over the payment provided for by this Section 18(g). (ii) For purposes of determining whether any of the Total Payments will be subject to Excise Tax and the amount of such Excise Tax, (A) any payments or benefits received or to be received by Employee in connection with a Change of Control or Employee's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company or a Subsidiary, any person whose actions result in a Change of Control or any person affiliated with the Company or such person (the "Total Payments")) shall be treated as "parachute payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of a tax advisor selected by the Company's independent auditors and reasonably acceptable to Employee, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, and all "excess parachute payments" (within the meaning of section 280G(b)(1) of the Code) shall be treated as subject to Excise Tax unless, in the opinion of such tax counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code), or are otherwise not subject to Excise Tax; and (B) the value of any noncash benefits or deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Employee shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Employee's residence on the date of Employee's termination of employment (or such other time as is hereinafter described), net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state and local taxes. -6- (iii) Notwithstanding the foregoing, if the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Employee's employment, Employee shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the Gross-Up Payment being repaid by Employee to the extent that such repayment results in a reduction in Excise Tax or a federal, state or local income tax deduction), plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the Code. If the Excise Tax is subsequently determined to exceed the amount taken into account hereunder at the time of termination of Employee's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by Employee with respect to such excess) at the time that the amount of such excess is finally determined. Employee and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. Such additional payment shall be made within 30 days following the date Employee notifies the Company that he is subject to the Excise Tax. (iv) The Company shall promptly pay in advance or reimburse Employee for all reasonable legal fees and expenses incurred in good faith by Employee in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder. 19. Prior Agreement. This Agreement is the successor to the Employment Agreement between Employee and the Company dated as of July 31, 1996 (which Agreement was assigned to the Company as of October 31, 1996). Employee represents to the Company that (a) there are no other agreements or understandings with the Company to which Employee is a party relating to employment, benefits or retirement, (b) there are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful his execution of this Agreement or his employment hereunder, (c) his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which he is a party or by which he is bound, and (d) he is free and able to execute this Agreement and to continue in the employment of the Company. 20. Key Man Insurance. The Company shall have the right at its expense to purchase insurance on the life of Employee in such amounts as it shall from time to time determine, of which the Company shall be the beneficiary. Employee shall submit to such physical examinations as may be required, and shall otherwise cooperate with the Company, in connection with the Company obtaining such insurance. 21. Miscellaneous. -7- (a) Controlling Law. This Agreement, and all questions relating to its validity, interpretation, performance and enforcement, shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. (b) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered in person against receipt, or when sent by United States registered or certified mail, return receipt requested, postage prepaid, addressed as set forth below: (i) If to Employee: Gerard H. Sweeney 2 Craig Lane Haverford, PA 19041 (ii) If to the Company: Brandywine Realty Trust 401 Plymouth Road Suite 500 Plymouth Meeting, PA 19462 Attention: General Counsel In addition, notice by mail shall be by air mail if posted outside of the continental United States. Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this paragraph for the giving of notice. (c) Binding Nature of Agreement. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns and shall be binding upon Employee, his heirs and legal representatives. (d) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party who executes the same, and all of which shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. (e) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. (f) Entire Agreement. This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing. -8- (g) Section and Paragraph Headings. The section and paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. (h) Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. (i) Number of Days. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or holiday. (j) Survival. The provisions of Sections 7, 12, 13, 14, 15, 16, 17, 18 and 19 shall survive the expiration or termination of the term of Employee's employment hereunder. (k) Assignability. This Agreement is not assignable by Employee. It is assignable by the Company only (i) to any subsidiary of the Company so long as the Company agrees to guarantee such subsidiary's obligations hereunder, or (ii) subject to Sections 16 and 18 and only upon Employee's prior written consent, to a person which is a successor in interest to the Company in the business operated by it or which acquires all or substantially all of its assets. (l) Liability of Trustees, etc. No recourse shall be had for any obligation of the Company hereunder, or for any claim based thereon or otherwise in respect thereof, against any past, present or future trustee, shareholder, officer or employee of the Company, whether by virtue of any statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being expressly waived and released by each party hereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered on the date first above-written. BRANDYWINE REALTY TRUST By: ----------------------------- Title: ----------------------------- EMPLOYEE ----------------------------- Gerard H. Sweeney -9- GUARANTEE In the event that the Company fails to perform its obligations under the foregoing Employment Agreement, Brandywine Operating Partnership, L.P. shall promptly perform the obligations of the Company arising thereunder which have not been performed in strict accordance with the terms and conditions thereof. BRANDYWINE OPERATING PARTNERSHIP, L.P. By: BRANDYWINE REALTY TRUST, its general partner By: ------------------------ -1- -10- EX-10 4 ex10-71.txt EXHIBIT 10.71 BRANDYWINE REALTY TRUST RESTRICTED SHARE AWARD ---------------------- This is a Restricted Share Award dated as of July 25, 2002, from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Gerard H. Sweeney ("Grantee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Award" means the award of Restricted Shares hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Cause" means "Cause" as defined in the Employment Agreement or the Plan. (d) "Change of Control" means "Change of Control" as defined in the Plan. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (f) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no Committee has been appointed pursuant to Section 2, or if such a Committee is not in existence at the time of reference, "Committee" means the Board. (g) "Date of Grant" means July 25, 2002 the date on which the Company awarded the Restricted Shares. (h) "Disability" means "Disability" as defined in the Plan. (i) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (j) "Employment Agreement" means the Amended and Restated Employment Agreement between Grantee and the Company, dated as of May 7, 2002, or any subsequent employment agreement between Grantee and the Company as in effect at the time of determination. (k) "Fair Market Value" means "Fair Market Value" as defined in the Plan. (l) "Resignation for Good Reason" means "Resignation for Good Reason" as defined in the Employment Agreement. (m) "Restricted Period" means, with respect to each Restricted Share, the period beginning on the Date of Grant and ending on the applicable Vesting Date for such Restricted Share. (n) "Restricted Shares" means the 38,562 Shares which are subject to vesting and forfeiture in accordance with the terms of this Award. (o) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in effect from time to time. (p) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Section 3(c) of the Plan. (q) "Subsidiary" means, with respect to the Company, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (r) "Vesting Date" means the date on which the restrictions imposed under Paragraph 3 on a Restricted Share lapse, as provided in Paragraph 4. 2. Grant of Restricted Shares. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the Restricted Shares. Grantee shall pay to the Company $.01 per Restricted Share granted to him. 3. Restrictions on Restricted Share. Subject to the terms and conditions set forth herein and in the Plan, prior to the Vesting Date in respect of Restricted Shares, Grantee shall not be permitted to sell, transfer, pledge or assign such Restricted Shares except to a limited partnership in which Grantee is the sole general partner and which limited partnership agrees to hold such Restricted Shares subject to all of the restrictions contained herein, including the forfeiture provisions. Share certificates evidencing Restricted Shares shall be held in custody by the Company until the restrictions thereon have lapsed. Concurrently herewith, Grantee shall deliver to the Company a share power, endorsed in blank, relating to the Restricted Shares covered by the Award. During the Restricted Period, share certificates evidencing Restricted Shares shall bear a legend in substantially the following form: THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE BRANDYWINE REALTY TRUST 1997 LONG-TERM INCENTIVE PLAN, AS AMENDED, AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BRANDYWINE REALTY TRUST. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF BRANDYWINE REALTY TRUST AND WILL BE MADE AVAILABLE TO ANY SHAREHOLDER WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY. -2- 4. Lapse of Restrictions for Restricted Shares. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 3 on each Restricted Share that has not been forfeited as provided in Paragraph 5 shall lapse on the applicable Vesting Date in respect of such Restricted Share, provided that either (i) on the Vesting Date, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary during the Restricted Period, or (ii) Grantee's termination of employment before the Vesting Date occurred because of Grantee's death or Disability. (b) Subject to Paragraph 4(a), a Vesting Date for Restricted Shares subject to the Award shall occur in accordance with the following schedule: (i) One-fifth of the Restricted Shares will vest on January 1, 2003; (ii) An additional one-fifth of the Restricted Shares will vest on January 1, 2004; (iii) An additional one-fifth of the Restricted Shares will vest on January 1, 2005; (iv) An additional one-fifth of the Restricted Shares will vest on January 1, 2006; and (v) An additional one-fifth of the Restricted Shares will vest on January 1, 2007. (c) Notwithstanding Paragraph 4(b), a Vesting Date for all Restricted Shares shall occur upon the occurrence of any of the following events, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full: (i) A Change of Control, provided that (A) as of the date of the Change of Control, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary or (B) Grantee's termination of employment before the date of the Change of Control occurred because of Grantee's death or Disability; (ii) The purchase of any common share of beneficial interest of the Company pursuant to a tender or exchange offer other than an offer by the Company, provided that (A) as of the date of such purchase, Grantee is, and has from the Date of Grant, continuously been, an employee of Company or a Subsidiary or (B) Grantee's termination of employment before the date of such purchase occurred because of Grantee's death or Disability; -3- (iii) Termination of the Grantee's employment by the Employer without Cause; or (iv) The Grantee's resignation from the Employer if such resignation is a Resignation for Good Reason. 5. Forfeiture of Restricted Shares. (a) Subject to the terms and conditions set forth herein, if Grantee terminates employment with the Company and all Subsidiaries prior to the Vesting Date for a Restricted Share for reasons other than as described in Paragraph 4(c)(iii) or (iv) Grantee shall forfeit any such Restricted Share which has not vested as of such termination of employment, provided that Grantee shall not, on account of such termination, forfeit Restricted Shares which have not vested as of Grantee's termination of employment with the Employer because of death or Disability. Upon a forfeiture of the Restricted Shares as provided in this Paragraph 5, the Restricted Shares shall be deemed canceled. (b) The provisions of this Paragraph 5 shall not apply to Restricted Shares as to which the restrictions of Paragraph 3 have lapsed. 6. Rights of Grantee. During the Restricted Period, with respect to the Restricted Shares, Grantee shall have all of the rights of a shareholder of the Company, including the right to vote the Restricted Shares and the right to receive any distributions or dividends payable on Shares. 7. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 401 Plymouth Road Suite 500 Plymouth Meeting, PA 19462 Attention: Chief Financial Officer or such other address as may be provided to Grantee by written notice. Any notice to Grantee under this Award shall be made to Grantee at the address listed in the Company's personnel files. All notices under this Award shall be deemed to have been given when hand-delivered, telecopied or delivered by first class mail, postage prepaid, and shall be irrevocable once given. 8. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Shares as it deems necessary or advisable to ensure that the Plan satisfies the conditions of Rule 16b-3, and that Shares are issued and resold in compliance with the Securities Act of 1933, as amended. -4- 9. Delivery of Shares. Upon a Vesting Date, the Company shall notify Grantee (or Grantee's legal representatives, estate or heirs, in the event of Grantee's death before a Vesting Date) that the restrictions on the Restricted Shares have lapsed. Within ten (10) business days of a Vesting Date, the Company shall, without payment from Grantee for the Restricted Shares, deliver to Grantee a certificate for the Restricted Shares without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under Paragraph 8, provided that no certificates for Shares will be delivered to Grantee until appropriate arrangements have been made with Employer for the withholding of any taxes which may be due with respect to such Shares. The Company is authorized to withhold from any cash remuneration then or thereafter payable to Grantee an amount sufficient to cover required tax withholdings and is further authorized to cancel a number of Shares for which the restrictions have lapsed having an aggregate Fair Market Value equal to the required tax withholdings. The Company may condition delivery of certificates for Shares upon the prior receipt from Grantee of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The right to payment of any fractional Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair market value of a Share on the Vesting Date, as determined by the Committee. 10. Award Not to Affect Employment. The Award granted hereunder shall not confer upon Grantee any right to continue in the employment of the Company or any Subsidiary. 11. Miscellaneous. (a) The address for Grantee to which notice, demands and other communications are to be given or delivered under or by reason of the provisions hereof shall be the Grantee's address as reflected in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of Pennsylvania. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ -5- EX-10 5 ex10-72.txt EXHIBIT 10.72 BRANDYWINE REALTY TRUST RESTRICTED SHARE AWARD ---------------------- This is a Restricted Share Award dated as of July 25, 2002, from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to _________________ ("Grantee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Award" means the award of Restricted Shares hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Cause" means "Cause" as defined in the Plan. (d) "Change of Control" means "Change of Control" as defined in the Plan. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (f) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no Committee has been appointed pursuant to Section 2, or if such a Committee is not in existence at the time of reference, "Committee" means the Board. (g) "Date of Grant" means July 25, 2002 the date on which the Company awarded the Restricted Shares. (h) "Disability" means "Disability" as defined in the Plan. (i) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (j) "Fair Market Value" means "Fair Market Value" as defined in the Plan. (k) "Restricted Period" means, with respect to each Restricted Share, the period beginning on the Date of Grant and ending on the applicable Vesting Date for such Restricted Share. (l) "Restricted Shares" means the _______ Shares which are subject to vesting and forfeiture in accordance with the terms of this Award. (m) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in effect from time to time. (n) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Section 3(c) of the Plan. (o) "Subsidiary" means, with respect to the Company, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (p) "Vesting Date" means the date on which the restrictions imposed under Paragraph 3 on a Restricted Share lapse, as provided in Paragraph 4. 2. Grant of Restricted Shares. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the Restricted Shares. Grantee shall pay to the Company $.01 per Restricted Share granted to him. 3. Restrictions on Restricted Share. Subject to the terms and conditions set forth herein and in the Plan, prior to the Vesting Date in respect of Restricted Shares, Grantee shall not be permitted to sell, transfer, pledge or assign such Restricted Shares. Share certificates evidencing Restricted Shares shall be held in custody by the Company until the restrictions thereon have lapsed. Concurrently herewith, Grantee shall deliver to the Company a share power, endorsed in blank, relating to the Restricted Shares covered by the Award. During the Restricted Period, share certificates evidencing Restricted Shares shall bear a legend in substantially the following form: THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE BRANDYWINE REALTY TRUST 1997 LONG-TERM INCENTIVE PLAN, AS AMENDED, AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BRANDYWINE REALTY TRUST. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF BRANDYWINE REALTY TRUST AND WILL BE MADE AVAILABLE TO ANY SHAREHOLDER WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY. 4. Lapse of Restrictions for Restricted Shares. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 3 on each Restricted Share that has not been forfeited as provided in Paragraph 5 shall lapse on the applicable Vesting Date in respect of such Restricted Share, provided that either (i) on the Vesting Date, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary during the Restricted Period, or (ii) Grantee's termination of employment before the Vesting Date occurred because of Grantee's death or Disability. -2- (b) Subject to Paragraph 4(a), a Vesting Date for Restricted Shares subject to the Award shall occur in accordance with the following schedule: (i) One-fifth of the Restricted Shares will vest on January 1, 2003; (ii) An additional one-fifth of the Restricted Shares will vest on January 1, 2004; (iii) An additional one-fifth of the Restricted Shares will vest on January 1, 2005; (iv) An additional one-fifth of the Restricted Shares will vest on January 1, 2006; and (v) An additional one-fifth of the Restricted Shares will vest on January 1, 2007. (c) Notwithstanding Paragraph 4(b), a Vesting Date for all Restricted Shares shall occur upon the occurrence of a Change of Control, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full, provided that (i) as of the date of the Change of Control, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary or (ii) Grantee's termination of employment before the date of the Change of Control occurred because of Grantee's death or Disability. 5. Forfeiture of Restricted Shares. (a) Subject to the terms and conditions set forth herein, if Grantee terminates employment with the Company and all Subsidiaries prior to the Vesting Date for a Restricted Share for reasons other than death or Disability, Grantee shall forfeit any such Restricted Share which has not vested as of such termination of employment. Grantee shall not forfeit Restricted Shares which have not vested as of Grantee's termination of employment with the Employer because of death or Disability. Upon a forfeiture of the Restricted Shares as provided in this Paragraph 5, the Restricted Shares shall be deemed canceled. (b) The provisions of this Paragraph 5 shall not apply to Restricted Shares as to which the restrictions of Paragraph 3 have lapsed. 6. Rights of Grantee. During the Restricted Period, with respect to the Restricted Shares, Grantee shall have all of the rights of a shareholder of the Company, including the right to vote the Restricted Shares and the right to receive any distributions or dividends payable on Shares. -3- 7. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 401 Plymouth Road Suite 500 Plymouth Meeting, PA 19462 Attention: Chief Financial Officer or such other address as may be provided to Grantee by written notice. Any notice to Grantee under this Award shall be made to Grantee at the address listed in the Company's personnel files. All notices under this Award shall be deemed to have been given when hand-delivered, telecopied or delivered by first class mail, postage prepaid, and shall be irrevocable once given. 8. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Shares as it deems necessary or advisable to ensure that the Plan satisfies the conditions of Rule 16b-3, and that Shares are issued and resold in compliance with the Securities Act of 1933, as amended. 9. Delivery of Shares. Upon a Vesting Date, the Company shall notify Grantee (or Grantee's legal representatives, estate or heirs, in the event of Grantee's death before a Vesting Date) that the restrictions on the Restricted Shares have lapsed. Within ten (10) business days of a Vesting Date, the Company shall, without payment from Grantee for the Restricted Shares, deliver to Grantee a certificate for the Restricted Shares without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under Paragraph 8, provided that no certificates for Shares will be delivered to Grantee until appropriate arrangements have been made with Employer for the withholding of any taxes which may be due with respect to such Shares. The Company is authorized to withhold from any cash remuneration then or thereafter payable to Grantee an amount sufficient to cover required tax withholdings and is further authorized to cancel a number of Shares for which the restrictions have lapsed having an aggregate Fair Market Value equal to the required tax withholdings. The Company may condition delivery of certificates for Shares upon the prior receipt from Grantee of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The right to payment of any fractional Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair market value of a Share on the Vesting Date, as determined by the Committee. 10. Award Not to Affect Employment. The Award granted hereunder shall not confer upon Grantee any right to continue in the employment of the Company or any Subsidiary. 11. Miscellaneous. (a) The address for Grantee to which notice, demands and other communications are to be given or delivered under or by reason of the provisions hereof shall be the Grantee's address as reflected in the Company's personnel records. -4- (b) This Award and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of Pennsylvania. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ -5- EX-10 6 ex10-73.txt EXHIBIT 10.73 BRANDYWINE REALTY TRUST NON-QUALIFIED OPTION -------------------- This is a Non-Qualified Stock Option Award dated as of July 25, 2002 (the "Award") from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Gerard H. Sweeney ("Optionee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Board" means the Board of Trustees of the Company, as constituted from time to time. (b) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (c) "Common Share" means a common share of beneficial interest, $.01 par value per share, of the Company. (d) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no Committee has been appointed pursuant to Section 2, or if such a Committee is not in existence at the time of reference, "Committee" means the Board. (e) "Date of Exercise" means the date on which the notice required by Paragraph 6 hereof is hand-delivered, delivered by facsimile transmission or delivered via United States mail postage prepaid. (f) "Date of Grant" means July 25, 2002, the date on which the Company awarded the Option. (g) "Expiration Date" means 5:00 p.m. on August 22, 2007. (h) "Fair Market Value" means the Fair Market Value of a Share, as determined pursuant to the Plan. (i) "Option" means the option to purchase Shares hereby granted. (j) "Option Price" means $19.50; provided that in the event of any recapitalization, Share distribution or dividend, Share split or combination, the Option Price shall be equitably and proportionally adjusted. The Option Price shall also be subject to adjustment pursuant to Section 3(c) of the Plan. (k) "Prior Warrant" means the Warrant held by Optionee to purchase 100,000 Common Shares that expires on August 22, 2002. (l) "Shares" means the 100,000 Common Shares which are the subject of the Option hereby granted. In the event of any recapitalization, Share distribution or dividend, Share split or combination, the number of Shares that remain subject to the Option shall be equitably and proportionally adjusted. The number of Shares that remain subject to the Option shall also be subject to adjustment pursuant to Section 3(c) of the Plan. Notwithstanding the foregoing, the number of Shares available for exercise as determined under this paragraph shall be rounded down to the nearest whole Share. 2. Grant of Option. On the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Optionee the Option to purchase any or all of the Shares. 3. Time of Exercise of Options. The Option may be exercised at any time and from time to time after expiration of the Prior Warrant on August 22, 2002 and prior to 5:00 p.m. on the Expiration Date, when the right to exercise shall terminate absolutely. 4. Termination of Option. In the event that the Option remains outstanding upon the occurrence of a transaction constituting a Change of Control under clause (ii) of the definition of the term "Change of Control" in the Plan and Optionee has not exercised the Option immediately prior to the consummation of the transaction giving rise to the Change of Control (e.g., consummation of the merger, reorganization, consolidation or asset sale or disposition), then, unless the Company provides for (as part of the Change of Control transaction or otherwise) either (x) the continuation of the Option following the Change of Control or (y) a substitute option exercisable for shares of common stock or common shares of beneficial interest of the purchaser or successor to the Company in the transaction resulting in the Change of Control (with such adjustments in the exercise price and number of shares covered by the Option as the Board shall determine, taking into account the conversion or exchange ratio in the Change of Control transaction), the Option shall automatically terminate and Optionee's right to acquire Common Shares hereunder shall terminate absolutely. 5. Payment for Shares. Full payment for Shares purchased upon the exercise of an Option shall be made in cash or, at the election of the Optionee, by surrendering Common Shares with an aggregate Fair Market Value as of the last trading day prior to the Date of Exercise equal to the aggregate Option Price, or by delivering such combination of Common Shares and cash as the Optionee may elect. 6. Manner of Exercise. The Option shall be exercised by giving written notice of exercise to: Brandywine Realty Trust 401 Plymouth Road, Suite 500 Plymouth Meeting, PA 19462 Attention: Chief Financial Officer All notices under this agreement shall be deemed to have been given when hand-delivered, delivered by facsimile transmission or delivered by U.S. mail postage prepaid, and shall be irrevocable once given. -2- 7. Nontransferability of Option. The Option may not be transferred or assigned by the Optionee otherwise than as and to the extent permitted by Section 5(e) of the Plan; and any attempt at assignment or transfer contrary to the provisions of the Plan or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option. 8. Securities Laws. The Committee may from time to time impose any conditions on the exercise of the Option as it deems necessary or appropriate to comply with the then-existing requirements of the Securities Act of 1933, as amended, or of the Securities Exchange Act of 1934, as amended, including Rule 16b-3 (or any similar rule) of the Securities and Exchange Commission. If the listing, registration or qualification of Shares issuable on the exercise of the Option upon any securities exchange or under any federal or state law, or the consent or approval of any governmental regulatory body is necessary as a condition of or in connection with the purchase of such Shares, the Company shall not be obligated to issue or deliver the certificates representing the Shares otherwise issuable on the exercise of the Option unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained. If registration is considered unnecessary by the Company or its counsel, the Company may cause a legend to be placed on such Shares calling attention to the fact that they have been acquired for investment and have not been registered. 9. Issuance of Certificate. Subject to the provisions of Paragraphs 7 and 9 hereof, a certificate for the Shares issuable on the exercise of the Option shall be delivered to the Optionee or to his personal representative, heir or legatee as promptly as feasible after the exercise, provided that no certificates for Shares will be delivered to the Optionee or to his personal representative, heir or legatee unless the Option Price has been paid in full. 10. Rights Prior to Exercise. The Optionee shall not have any right as a shareholder with respect to any Shares subject to his Options until the Option shall have been exercised in accordance with the terms of the Plan and this Award and the Optionee shall have paid the full purchase price for the number of Shares in respect of which the Option was exercised, provided that in the event that the Optionee's employment with the Company is terminated for Cause, upon a determination by the Committee, the Optionee shall automatically forfeit all Shares otherwise subject to delivery upon exercise of an Option but for which the Company has not yet delivered the Share certificates, upon refund by the Company of the Option Price. 11. Status of Option; Interpretation. The Option is intended to be a non-qualified stock option. Accordingly, it is intended that the transfer of property pursuant to the exercise of the Option shall be subject to federal income tax in accordance with section 83 of the Code. The Option is not intended to qualify as an incentive stock option within the meaning of section 422 of the Code. The interpretation and construction of any provision of this Option or the Plan made by the Committee shall be final and conclusive and, insofar as possible, shall be consistent with the intention expressed in this Paragraph 11. -3- 12. Option Not to Affect Employment. The Option granted hereunder shall not confer upon the Optionee any right to continue in the employment of the Company or any Subsidiary. 13. Miscellaneous. (a) The address for the Optionee to which notice, demands and other communications to be given or delivered under or by reason of the provisions hereof shall be the address contained in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance, and enforcement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 14. Withholding of Taxes. Whenever the Company proposes or is required to issue or deliver Shares in connection with the exercise of the Option, the Company shall have the right to (a) require the Optionee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the issuance or delivery of any Shares (which withholding requirement may be satisfied through the surrender to the Company of Shares otherwise issuable upon the exercise of the Options having a Fair Market Value equal to the amount sufficient to satisfy the withholding requirements) or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities. IN WITNESS WHEREOF, the Company has granted this Award on the day and year first above written. BRANDYWINE REALTY TRUST BY: ------------------------------------ TITLE: --------------------------------- -4- EX-99 7 ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Brandywine Realty Trust (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerard H. Sweeney, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly represents, in all material respects, the financial condition and result of operations of the Company. /s/ Gerard H. Sweeney Gerard H. Sweeney President and Chief Executive Officer August 14, 2002 EX-99 8 ex99-2.txt EXHIBIT 99.2 Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Brandywine Realty Trust (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bradley W. Harris, Vice President and Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly represents, in all material respects, the financial condition and result of operations of the Company. /s/ Bradley W. Harris Bradley W. Harris Vice President and Chief Accounting Officer August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----