-----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, BB+UORtCsaNxEWnPGCOpUgWUjfMKkmRprHdwPsRYEn8r520u6vdZI8kc7yKQvs31 Vx6H3KXvSuF9CRmnSOVaRA== 0001047469-97-004907.txt : 19971117 0001047469-97-004907.hdr.sgml : 19971117 ACCESSION NUMBER: 0001047469-97-004907 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRANDYWINE REALTY TRUST CENTRAL INDEX KEY: 0000790816 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 232413352 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09106 FILM NUMBER: 97720474 BUSINESS ADDRESS: STREET 1: 16 CAMPUS BOULEVARD STREET 2: STE 100 CITY: NEWTOWN SQUARE STATE: PA ZIP: 19073 BUSINESS PHONE: 1-610-325-5600 MAIL ADDRESS: STREET 1: TWO GREENTREE CENTRE STREET 2: SUITE 100 CITY: MARLTON STATE: NJ ZIP: 08053 FORMER COMPANY: FORMER CONFORMED NAME: LINPRO SPECIFIED PROPERTIES DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1997 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period from ______________ to ______________ Commission file number 1-9106 Brandywine Realty Trust ----------------------- (Exact name of registrant as specified in its charter) Maryland 23-2413352 -------- ---------- State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization 16 Campus Boulevard, Newtown Square, Pennsylvania 19073 ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (610) 325-5600 -------------- Registrant's telephone number Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] A total of 23,336,046 Common Shares of Beneficial Interest were outstanding as of November 14, 1997. BRANDYWINE REALTY TRUST TABLE OF CONTENTS PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996 Consolidated Statements of Operations for the three months ended September 30, 1997 (unaudited) and September 30, 1996 (unaudited) Consolidated Statements of Operations for the nine months ended September 30, 1997 (unaudited) and September 30, 1996 (unaudited) Consolidated Statements of Cash Flow for the nine months ended September 30, 1997 (unaudited) and September 30, 1996 (unaudited) Notes to Financial Statements ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ITEM 3. Quantitative and Qualitative Disclosures about Market Risk--Not Applicable PART II--OTHER INFORMATION ITEM 1. Legal Proceedings ITEM 2. Changes in Securities ITEM 3. Defaults Upon Senior Securities ITEM 4. Submission of Matters to a Vote of Security Holders ITEM 5. Other Information ITEM 6. Exhibits and Reports on Form 8-K Signatures 2 PART I--FINANCIAL INFORMATION ITEM 1.--FINANCIAL STATEMENTS BRANDYWINE REALTY TRUST CONSOLIDATED BALANCE SHEETS (in thousands)
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ (UNAUDITED) ASSETS Real estate investments Operating properties.............................................................. $ 480,581 $ 161,284 Accumulated depreciation.......................................................... (17,809) (9,383) ------------- ------------ 462,772 151,901 Cash and cash equivalents........................................................... 19,965 18,279 Escrowed cash....................................................................... 348 2,044 Accounts receivable................................................................. 2,465 1,366 Due from affiliates................................................................. -- 517 Investment in management company.................................................... 318 -- Deferred costs and other assets..................................................... 8,470 4,219 ------------- ------------ Total assets...................................................................... $ 494,338 $ 178,326 ------------- ------------ ------------- ------------ LIABILITIES AND BENEFICIARIES' EQUITY Mortgage notes payable.............................................................. $ 47,984 $ 36,644 Notes payable, Credit Facility...................................................... 14,000 -- Accrued interest.................................................................... 303 202 Accounts payable and accrued expenses............................................... 4,128 3,119 Distributions payable............................................................... 8,338 2,255 Excess of losses over investment in management company.............................. -- 14 Tenant security deposits and deferred rents......................................... 3,960 1,324 Due to affiliates................................................................... 387 -- ------------- ------------ Total liabilities................................................................. 79,100 43,558 ------------- ------------ Minority interest................................................................... 4,894 6,398 ------------- ------------ Preferred shares--$0.01 par value, 5,000,000 preferred shares authorized............ -- 26,444 ------------- ------------ Beneficiaries' equity Shares of beneficial interest, $0.01 par value, 100,000,000 common shares authorized, 23,336,046 shares issued and outstanding........................................ 234 70 Additional paid-in capital........................................................ 428,787 113,047 Share warrants.................................................................... 962 962 Cumulative earnings (deficit)..................................................... 5,209 (3,248) Cumulative distributions.......................................................... (24,848) (8,905) ------------- ------------ Total beneficiaries' equity....................................................... 410,344 101,926 ------------- ------------ Total liabilities and beneficiaries' equity....................................... $ 494,338 $ 178,326 ------------- ------------ ------------- ------------
The accompanying condensed notes are an integral part of these consolidated financial statements. 3 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share information) (Unaudited)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------------ ------------------------ 1997 1996 1997 1996 ------------ ---------- ------------ ---------- Revenue: Rents..................................................... $ 15,401 $ 2,136 $ 32,290 $ 4,063 Tenant reimbursements..................................... 2,446 419 5,731 467 Other..................................................... 274 17 818 69 ------------ ---------- ------------ ---------- Total revenue........................................... 18,121 2,572 38,839 4,599 ------------ ---------- ------------ ---------- Operating Expenses: Interest.................................................. 1,840 926 4,899 1,342 Depreciation and amortization............................. 4,276 708 10,051 1,173 Property operating expenses............................... 6,277 900 13,309 1,759 Management fees........................................... 739 86 1,496 108 Administrative expenses................................... 275 180 705 439 ------------ ---------- ------------ ---------- Total operating expenses................................ 13,407 2,800 30,460 4,821 ------------ ---------- ------------ ---------- Income (loss) before equity in income of management company and minority interest............................. 4,714 (228) 8,379 (222) Equity in income of management company...................... 115 54 332 54 ------------ ---------- ------------ ---------- Income (loss) before minority interest...................... 4,829 (174) 8,711 (168) Minority interest in (income) loss.......................... (81) 45 (256) 40 ------------ ---------- ------------ ---------- Net Income (loss)........................................... 4,748 (129) 8,455 (128) Income allocated to Preferred Shares........................ -- -- (499) -- ------------ ---------- ------------ ---------- Income (loss) allocated to Common Shares.................... $ 4,748 $ (129) $ 7,956 $ (128) ------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------- PER SHARE DATA: Earnings per share of beneficial interest Income (loss) allocated to Common Share................... $ 0.25 $ (0.17) $ 0.65 $ (0.19) ------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------- Weighted average number of shares outstanding, including share equivalents.............................. 19,004,509 770,373 12,285,557 676,801 ------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
The accompanying condensed notes are an integral part of these consolidated financial statements. 4 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED SEPTEMBER 30, --------------------------- 1997 1996 ------------- ------------ (UNAUDITED AND IN THOUSANDS) Cash flows from operating activities: Net income................................................................................. $ 8,455 $ (128) Adjustments to reconcile net income to net cash provided by operating activities: Minority interest in income of affiliates................................................ 256 (40) Depreciation and amortization............................................................ 10,051 1,173 Equity in income of affiliate............................................................ (332) (54) Changes in assets and liabilities: (Increase) decrease in accounts receivable............................................. (1,099) (452) Decrease in affiliate receivable....................................................... 903 -- (Increase) decrease in other assets.................................................... (2,368) 77 Increase (decrease) in accounts payable and accrued expenses........................... 1,859 302 Increase (decrease) in accrued mortgage interest....................................... 101 190 Increase (decrease) in other liabilities............................................... 2,636 (181) ---------- --------- Net cash provided by operating activites............................................. 20,462 887 ---------- --------- Cash flows from investing activities: Purchase of properties.................................................................... (314,348) (9,522) Decrease (increase) in escrowed cash...................................................... 1,696 323 Capital expenditures and leasing commissions paid......................................... (7,311) (715) ---------- --------- Net cash used in investing activities............................................... (319,963) (9,914) ---------- --------- Cash flows from financing activites: Proceeds from issuance of shares, net..................................................... 287,807 1,003 Distributions paid to shareholders........................................................ (9,951) (319) Distributions paid to minority partners................................................... (287) (7) Proceeds from note payable to shareholder................................................. -- 1,392 Proceeds from mortgage notes payable...................................................... 14,858 8,574 Repayment of mortgage notes payable....................................................... (3,518) (350) Proceeds from notes payable, Credit Facility.............................................. 166,775 -- Repayment of notes payable, Credit Facility............................................... (152,775) -- Purchase of minority interests............................................................ (531) -- Costs associated with new ventures........................................................ -- (198) Other debt costs.......................................................................... (1,191) (49) ---------- --------- Net cash provided by (used in) financing activities................................... 301,187 10,046 ---------- --------- Increase (decrease) in cash and cash equivalents............................................ 1,686 1,019 Cash and cash equivalents at beginning of period............................................ 18,279 840 ---------- --------- Cash and cash equivalents at end of period.................................................. $ 19,965 $ 1,859 ---------- --------- ---------- ---------
The accompanying condensed notes are an integral part of these consolidated financial statements. 5 BRANDYWINE REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 1. ORGANIZATION AND NATURE OF OPERATIONS: Brandywine Realty Trust (the "Company"), is a Maryland real estate investment trust. As of September 30, 1997, the Company owned 93 properties (collectively, the "Properties"). The Company's interest in 92 of the Properties is held through Brandywine Operating Partnership, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership and, as of September 30, 1997, the Company held a 98.7% interest in the Operating Partnership. Brandywine Realty Services Corporation (the "Management Company"), is owned by the Operating Partnership through a 100% interest in the non-voting preferred stock and a 5% interest in the voting common stock. As of September 30,1997, the Management Company was responsible for managing and leasing 91 of the Company's Properties and other properties on behalf of third parties, as well as development opportunities as they arise. As of September 30, 1997, the Company's portfolio aggregated approximately 5.8 million square feet available for lease for office and industrial purposes. As of September 30, 1997, the overall occupancy rate of the Properties was approximately 92.4%. The Company's Properties are primarily located within the suburban Philadelphia office and industrial market area. 2. GENERAL: BASIS OF PRESENTATION The financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of the Company, all adjustments (consisting solely of normal recurring matters) necessary to fairly present the financial position of the Company as of September 30, 1997, and the results of its operations and its cash flows for the three and nine month periods ended September 30, 1997 and 1996 have been included. The results of operations for such interim periods are not necessarily indicative of the results for a full year. For further information, refer to the Company's consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K (as amended by Form 10-K/A) for the year ended December 31, 1996. RECLASSIFICATIONS Certain previously reported amounts have been reclassified to conform to the current presentation. Net Income (Loss) Per Share Net income (loss) per share is based on the weighted average number of common shares of beneficial interest ("Common Shares") outstanding adjusted to give effect to common share equivalents. In February, 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share", which is effective for financial statements for periods ending after December 15, 1997. At that time, the Company will be required to change the method currently used to compute and disclose earnings per share and to 6 restate all prior periods. The impact of Statement No. 128 on the calculation of primary and fully diluted earnings per share for the interim periods presented is expected to be immaterial. 3. ACQUISITIONS OF REAL ESTATE INVESTMENTS: All acquisitions between January 1, 1996 and September 30, 1997 were accounted for by the purchase method. For the year ended December 31, 1996, the Company acquired 33 properties aggregating 1.7 million net rentable square feet. During the period January 1, 1997 through September 30, 1997, the Company acquired 56 properties (43 office and 13 industrial) totaling 3.9 million net rentable square feet. The following table summarizes certain information regarding acquisition activity from January 1, 1997 through September 30, 1997:
NET PURCHASE DATE OF NUMBER OF RENTABLE PRICE ACQUISITION PROPERTIES TYPE LOCATION SQUARE FEET (IN MILLIONS) - ------------------------------ --------------- ----------- ------------------------------ ----------- ------------- January 24 3 Office Marlton, NJ 89,186 (a) 2 Office Mt. Laurel, NJ 200,436 (a) March 4 7 Office Voorhees, NJ 235,209 $ 21.5 March 6 1 Office East Goshen, PA 38,470 $ 3.6 April 3 2 Industrial King of Prussia, PA 124,960 $ 3.5 April 18 4 Office Marlton, NJ 201,970 $ 14.5 May 23 4 Industrial Westampton, NJ 388,767 (b) 1 Office Marlton, NJ 43,719 (b) 3 Office Langhorne, PA 115,390 (b) 2 Office Lower Gwynedd, PA 139,467 (b) May 30 5 Office Mt. Laurel, NJ 495,103 (c) 1 Office King of Prussia, PA 112,905 (c) June 5 2 Office Exton, PA 64,594 $ 5.3 June 16 1 Office Broomall, PA 62,934 $ 4.1 July 29 3 Office Berwyn, PA 241,458 $ 37.2 July 31 5 Office Reading, PA 574,241 $ 40.0 August 15 2 Office Fort Washington, PA 211,000 $ 16.9 September 19 1 Office Newark, DE 63,898 $ 5.5 September 29 7 Industrial Trevose, PA 447,000 $ 16.1 --------------- --------- 56 3,850,707
- ------------------------ (a) These properties were acquired for an aggregate purchase price of $31.3 million. (b) These properties were acquired for an aggregate purchase price of $41.6 million. (c) These properties were acquired for an aggregate purchase price of $66.2 million. On October 9, 1997, the Company purchased an office property located in Mount Laurel, NJ ("Atrium I") containing an aggregate of approximately 96,660 net rentable square feet for a cash purchase price of approximately $10.3 million. The results of operations for each of the properties acquired between January 1, 1996 and September 30, 1997 have been included from their respective purchase dates. The following unaudited pro forma financial information of the Company has been prepared as if the sales of securities in 1996 (refer to the 7 Company's Form 10-K for the year ended December 31, 1996 for more information), the March 1997 Offering (see Note 5), the July 1997 Offering (see Note 5), the September 1997 Offering (see Note 5), and the acquisitions of the 56 properties (including Atrium I which was acquired subsequent to September 30, 1997) acquired from July 19, 1996 through October 9, 1997 had all occurred on January 1, 1996. The pro forma financial information is unaudited and is not necessarily indicative of the results which actually would have occurred if the acquisitions had occurred on January 1, 1996, nor does it purport to represent the results of operations for future periods. NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ (UNAUDITED AND IN THOUSANDS) Pro forma total revenues......................... $ 59,966 $ 74,030 Pro forma net income............................. $ 17,330 $ 18,628 Pro forma net income per Common Share............ $ 0.75 $ 0.76 As previously reported in Current Reports on Form 8-K, the Company, through subsidiaries, entered into two joint ventures during the three-month period ended September 30, 1997. Through November 14, 1997, the Company has made equity contributions totaling approximately $1.4 million to these joint ventures, and, in respect of one of the joint ventures, delivered a $1.5 million letter of credit and a $14.5 million forward commitment of permanent financing for the benefit of the construction lender that is financing construction of a planned three-story office building. 4. INDEBTEDNESS: As of September 30, 1997, the Company had mortgage notes payable of $48.0 million and notes payable under its revolving credit facility (the "Credit Facility") of $14.0 million. The Credit Facility, which was established in December 1996, is secured by mortgages on certain of the Company's properties and enables borrowings to fund acquisitions, working capital and other business needs. During July 1997, the maximum amount of borrowings available under the Credit Facility was increased from $80 million to $150 million. Subsequent to September 30, 1997, the Company borrowed $33.0 million under the Credit Facility to fund property acquisitions, investments in joint ventures and for working capital purposes. 5. ISSUANCE OF SHARES AND WARRANTS: In March 1997, the Company completed the sale of 2,375,500 Common Shares to the public at a price of $20 5/8 per share (the "March 1997 Offering"). The net proceeds of the March 1997 Offering were used to fund the Company's acquisitions, repay certain indebtedness and for working capital purposes. In March 1997, 54,397 of the Series A Convertible Preferred Shares ("Preferred Shares") were converted into 181,323 Common Shares. In June 1997, the remaining 427,421 Preferred Shares were converted into 1,424,736 Common Shares. In July, 1997, the Company completed the sale of 11,500,000 Common Shares to the public at a price of $20 3/4 per share (the "July 1997 Offering"). The net proceeds of the July 1997 Offering were used by the Company to repay indebtedness under the Credit Facility and for working capital and investment purposes. In September 1997, the Company completed the sale of 786,840 Common Shares to the public at a price of $22 5/16 per share (the "September 1997 Offering"). The net proceeds of the September 1997 Offering were used by the Company for working capital and investment purposes. 8 6. DISTRIBUTIONS: On August 29, 1997, the Company declared a distribution of $0.36 per share which was paid on October 9, 1997 to shareholders of record as of September 9, 1997. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10-Q contains forward looking statements within the meaning of Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934. The words "believe", "expect", "anticipate", "intend", "estimate" and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. The Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference include but are not limited to the following: Real estate investment considerations, such as the effect of economic and other conditions in the market area on cash flows and values; the need to renew leases or relet space upon the expiration of current leases, and the ability of a property to generate revenues sufficient to meet debt service payments and other operating expenses; and risks associated with borrowings, such as the possibility that the Company will not have sufficient funds available to make principal payments on outstanding debt, outstanding debt may be refinanced at higher interest rates or otherwise on terms less favorable to the Company and interest rates under the Credit Facility may increase. The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the accompanying financial statements and notes thereto. RESULTS OF OPERATIONS Comparison of Three and Nine Months Ended September 30, 1997 and September 30, 1996 Net income for the three and nine months ended September 30, 1997 was $4.7 million and $8.0 million, respectively, compared with net losses of $129,000 and $128,000 for the corresponding periods in 1996. The increase in net income was primarily attributable to the operating results contributed by the 89 properties (the "Acquisition Properties") acquired during 1996 and through September 30, 1997. Property acquisitions have increased the Company's leaseable area from approximately 1.3 million net rentable square feet on September 30, 1996 to approximately 5.8 million net rentable square feet on September 30, 1997. Revenues, which include rental income, recoveries from tenants and other income, increased by $15.5 million and $34.2 million for the three and nine months ended September 30, 1997, respectively, as compared to the corresponding prior year period primarily as a result of property acquisitions. The impact of the straight-line rent adjustment increased revenues by $1.1 million for the nine months ended September 30, 1997. Property expenses, depreciation and amortization and management fees increased in aggregate by $9.6 million and $21.8 million for the three and nine months ended September 30, 1997 as compared with the corresponding prior year periods primarily as a result of property acquisitions. Interest expense increased as a result of additional indebtedness incurred to finance certain of the Company's acquisitions. Administrative expenses increased primarily as a result of the increase in management personnel, professional fees and public filing costs associated with the Company's growth. Minority interest primarily represents the portion of the Operating Partnership which is not owned by the Company. 9 LIQUIDITY AND CAPITAL RESOURCES STATEMENT OF CASH FLOWS During the nine months ended September 30, 1997, the Company generated $20.5 million in cash flow from operating activities, and together with $166.8 million in borrowings under the Company's Credit Facility, $14.9 million in additional mortgage notes payable, $287.8 million in net proceeds from share issuances and escrowed cash of $1.7 million, used an aggregate $491.7 million to (i) purchase 56 Properties for $314.3 million, (ii) fund capital expenditures and leasing commissions of $7.3 million, (iii) pay distributions to shareholders and minority partners in the Operating Partnership totaling $10.2 million, (iv) pay scheduled amortization on mortgage principal of $1.0 million, (v) satisfy $2.5 million of mortgage notes payable, (vi) pay down its outstanding borrowings on its Credit Facility by $152.8 million, (vii) purchase minority interests in the Operating Partnership for $0.5 million, (viii) pay other debt costs of $1.2 million; and (ix) increase existing cash reserves by $1.7 million. CAPITALIZATION As of September 30, 1997, the Company had approximately $62.0 million of debt outstanding, consisting of mortgage loans totaling $48.0 million and notes payable under the Company's revolving Credit Facility of $14.0 million. The mortgage loans mature between December 1997 and November 2004. The Credit Facility provides for borrowings up to $150.0 million and bears interest at a per annum floating rate equal to the 30, 60 or 90-day LIBOR, plus 175 basis points. For the nine months ended September 30, 1997, the weighted average interest on the Company's debt was 8.24%. The Company's debt to market capitalization was 10% as of September 30, 1997 (at the September 30, 1997 closing share price of $23.94). 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%. This policy is intended to provide the Company with financial flexibility to select the optimal source of capital to finance its growth. As part of its debt strategy, the Company has received a non-binding indicative term sheet from its existing lead lender to increase its revolving Credit Facility from $150 million to $300 million and to convert to an unsecured facility. The interest rate would be reduced by 37.5 to 60 basis points depending on the Company's degree of leverage. Upon attainment of an investment rating, the overall interest rate reduction would be between 60 to 75 basis points regardless of the degree of leverage. There can be no assurance that the Company will be able to increase its Credit Facility, to convert its Credit Facility to an unsecured facility or to have the interest rate on the Credit Facility reduced. SHORT AND LONG TERM LIQUIDITY The Company believes that its cash flow from operations is adequate to fund its short-term liquidity requirements for the foreseeable future. Cash flow from operations is generated primarily from rental revenues and operating expense reimbursements from tenants and the management services income from providing services to third parties. The Company intends to use these funds to meet its principal short-term liquidity needs which are to fund operating expenses, debt service requirements, recurring capital expenditures, tenant allowances, leasing commissions and the minimum distribution required to maintain the Company's REIT qualifications under the Internal Revenue Code. For the quarter ended September 30, 1997, the Company declared a distribution of $0.36 per Common Share (paid on October 9, 1997 to shareholders of record on September 9, 1997) amounting to approximately $8.1 million in the aggregate. In addition, during this period, the Company's distributions declared to minority partners in the Operating Partnership totaled approximately $114,000. The Company expects to meet its long-term liquidity requirements, such as for property acquisitions and development, scheduled debt maturities, renovations, expansions and other non-recurring capital improvements, through its Credit Facility and other long-term secured and unsecured indebtedness and the issuance of additional Operating Partnership units and equity securities. FUNDS FROM OPERATIONS Management generally considers Funds from Operations ("FFO") as one measure of REIT performance. The Company adopted the NAREIT definition of FFO in 1996 and has used this definition for all periods 10 presented in the financial statements included herein. FFO is calculated as net income (loss) adjusted for depreciation expense attributable to real property, amortization expense attributable to capitalized leasing costs, gains on sales of real estate investments and extraordinary and nonrecurring items. FFO 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 nine months ended September 30, 1997 and September 30, 1996 is summarized in the following table (in thousands, except share and per share data).
NINE MONTHS ENDED SEPTEMBER 30, -------------------------- 1997 1996 (2) --------------- --------- Income before minority interest........................ $ 8,711 $ (130) Add (Deduct): Depreciation attributable to real property........... 8,918 980 Amortization attributable to leasing costs........... 514 157 Minority interest not attributable to unit holders... (16) (6) --------------- --------- Funds from Operations before minority interest......... $ 18,127 $ 1,001 --------------- --------- --------------- --------- Weighted average Common Shares (including common share equivalents) and Operating Partnership units... 13,576,682(1) 753,685 ---------------- --------- ---------------- --------- Funds from Operations per share........................ $ 1.34 $ 1.33 ---------------- --------- ---------------- ---------
(1) Includes the weighted average effect of 1,424,736 Common Shares issued upon the conversion of the Preferred Shares for the period prior to conversion, the weighted average effect of 317,450 Common Shares issuable upon the conversion of 317,450 Operating Partnership units, the weighted average effect of the 53,123 Common Shares issued upon the conversion of 53,123 Operating Partnership units for the period prior to conversion and the weighted average effect of the 28,994 convertible Operating Partnership units for the period prior to cancellation. (2) In 1997 the Company began computing FFO using a methodology which, in management's opinion, is more consistent with industry practice. This methodology presents FFO before any adjustments for amounts attributable to minority unit holders of the Operating Partnership and includes such units in the FFO per share calculation. In restating FFO and FFO per share for the nine months ended September 30, 1996, FFO increased from $837 to $1,001 and FFO per share increased from $1.24 to $1.33 (after adjusting for the 1-for-3 reverse share split which occurred in the fourth quarter of 1996). 11 Part II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not currently involved (nor was it involved at September 30, 1997) in any material legal proceedings nor, to the Company's knowledge, is any material legal proceeding currently threatened against the company, other than routine litigation arising in the ordinary course of business, substantially all of which is expected to be covered by liability insurance. ITEM 2. CHANGES IN SECURITIES (a) Not applicable. (b) Not applicable. (c) On September 2, 1997, the Company issued an aggregate of 1,285 common shares to five persons in payment of one half of 1997 non-employee annual Trustee fees (257 shares per person). These shares were issued in reliance on the exemption from registration set forth in Section 4 (2) of the Securities Act of 1933. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None. (b) Reports on Form 8-K: During the three months ended September 30, 1997, and through November 15, 1997, the Company filed the following: (i) a Current Report on Form 8-K/A No. 1 dated July 21, 1997 (amending Item 5 as originally filed) regarding the Company's acquisition of a 6.8 acre parcel of undeveloped land located in Montgomery County, Pennsylvania, the Greentree Executive Campus, a multi-building garden office complex located in Burlington County, New Jersey and Five Eves Drive, a midrise office building, located in Burlington County, New Jersey. (ii) a Current Report on Form 8-K dated July 23, 1997 (reporting under Item 5 and Item 7) regarding the Company increasing the amount available for borrowing under its revolving credit facility to up to $150.0 million and the Company entering into an underwriting agreement with various underwriters pursuant to which the Company agreed to sell an aggregate of 10,000,000 common shares of beneficial interest, $.01 12 par value per share, and granted the underwriters an option to purchase up to an additional 1,500,000 common shares solely to cover over-allotments, if any. (iii) a Current Report on Form 8-K dated August 7, 1997 (reporting under Item 5) regarding the Company's earnings for the three and six months ended June 30, 1997 and certain other financial information. (iv) a Current Report on Form 8-K dated August 22, 1997 (reporting under Item 5) regarding the Company's acquisition of 500 and 501 Office Center Drive, two office properties located in Fort Washington, PA containing an aggregate of approximately 211,000 net rentable square feet. (v) a Current Report on Form 8-K dated September 10, 1997 (reporting under Item 5 and Item 7) regarding an increase in the Company's authorized common shares of beneficial interest from 25,000,000 to 100,000,000. Such Form 8-K also included an audited statement of revenue and certain expenses for 500 and 501 Office Center Drive, two office properties located in Fort Washington, PA, for the year ended December 31, 1996; and pro forma financial information as of and for the six months ended June 30, 1997 and for the year ended December 31, 1996. (vi) a Current Report on Form 8-K dated September 12, 1997 (reporting under Item 5 and Item 7) regarding the Company entering into an underwriting agreement with Smith Barney Inc. pursuant to which the Company agreed to sell an aggregate of 786,840 common shares of beneficial interest, $.01 par value per share. (vii) a Current Report on Form 8-K dated October 3, 1997 (reporting under Item 5 and Item 7) regarding the Company's acquisition of Metropolitan Industrial Center, seven industrial properties located in Bensalem Township, Bucks County, Pennsylvania which contain an aggregate of approximately 447,000 square feet; the acquisition of 100 Commerce Drive, a three-story office building located in Newark, Delaware which contains approximately 64,000 square feet; and the formation of two joint ventures, each of which were formed to acquire land and develop commercial properties in Delaware. (viii) a Current Report on Form 8-K dated October 30, 1997 (reporting under Item 5 and Item 7) regarding the Company's acquisition of Atrium I, a 96,660 square foot office property located in Mt. Laurel, New Jersey; the acquisition of 13.3 acres of land in New Castle County, Delaware by one of the Company's joint ventures; and the commencement of trading the Company's common shares on the New York Stock Exchange. Such Form 8-K also included audited statements of revenue and certain expenses for Metropolitan Industrial Center and for Atrium I, each for the year ended December 31, 1996; and pro forma financial information as of and for the six months ended June 30, 1997 and for the year ended December 31,1996. 13 BRANDYWINE REALTY TRUST SIGNATURES OF REGISTRANT Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRANDYWINE REALTY TRUST (Registrant) Date: November 14, 1997 By: /s/ Gerard H. Sweeney -------------------------------------------------- Gerard H. Sweeney, President and Chief Executive Officer (Principal Executive Officer) Date: November 14, 1997 By: /s/ Mark S. Kripke -------------------------------------------------- Mark S. Kripke, Chief Financial Officer (Principal Financial and Accounting Officer) 14 EX-27 2 EX-27
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 20,313 0 2,465 0 0 22,778 480,581 17,809 494,338 17,116 61,984 0 0 234 410,110 494,338 0 18,121 0 13,407 0 0 1,840 4,714 0 0 0 0 0 4,748 0.25 0
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