EX-99.1 2 bdn-ex991_6.htm EX-99.1 bdn-ex991_6.htm

Exhibit 99.1

 

 

Company / Investor Contact:

Tom Wirth

EVP & CFO

610-832-7434

tom.wirth@bdnreit.com

 

 

 

 

 

Brandywine Realty Trust Announces Fourth Quarter and Full Year 2018 Results

 

 

Philadelphia, PA, January 30, 2019 — Brandywine Realty Trust (NYSE:BDN) today reported its financial and operating results for the three and twelve-month periods ended December 31, 2018.

Management Comments

“We had a very active and successful final quarter of 2018 as we closed several significant transactions while achieving or exceeding many of our 2018 business plan goals,” stated Jerry Sweeney, President and Chief Executive Officer for Brandywine Realty Trust.  “In addition to the previously announced transactions, we continued to increase our presence in Austin through the acquisition of a 121,000 square foot office property in close proximity to our Broadmoor campus.  Also consistent with our business strategy, we sold a 510,000 square foot portfolio located in Silver Spring, Maryland that was owned in a joint venture.  We are excited to announce the commencement of our development of 405 Colorado, a 200,000 square foot office building located in the heart of Austin’s CBD.  With the additional net sales activity, we used that liquidity to opportunistically repurchase over 3.0 million common shares at a weighted-average price of $12.76 per share which is well below our current net asset value.  Based on the fourth quarter activity and our outlook for 2019, we are maintaining our current FFO guidance range of $1.37 to $1.47.”

Fourth Quarter 2018 Highlights

Financial Results

 

Net income allocated to common shareholders; $121.8 million, or $0.68 per diluted share.  Our fourth quarter results include net gains on sale of real estate totaling $107.9 million, or $0.60 per diluted share.

 

Funds from Operations (FFO); $64.3 million, or $0.36 per diluted share.

Fourth Quarter Portfolio Results

 

Core Portfolio:  93.3% occupied and 95.5% leased.

 

Signed approximately 613,000 square feet of new and renewal leases.

 

Tenant Retention Ratio:  83% in fourth quarter and 73% for 2018.

 

Rental Rate Mark-to-Market:  10.8% on a GAAP basis and (4.1%) on a cash basis.

 

Same Store Net Operating Income Growth:  2.3% on a GAAP basis and 8.7% on a cash basis.

2019 Business Plan Revisions

 

Speculative Revenue:  An increase from $31.0 million to $31.5 million, 77% achieved.

 

 

 

 

2929 Walnut Street, Suite 1700, Philadelphia, PA 19104 Phone: (610) 325-5600 • Fax: (610) 325-5622

 


 

Transaction Activity

Austin Acquisitions

 

As previously announced on October 17, 2018, we entered into an agreement to acquire our partner’s entire 50% interest in the 12 remaining buildings within the DRA Austin real estate venture (“Austin Portfolio”) containing approximately 1,570,000 square feet, located in Austin, Texas, valuing the portfolio at $537.0 million, or $342 per square foot.  Upon closing, the joint venture generated a 27% internal rate of return to our shareholders and we recorded a $103.8 million gain and $28.3 million gain on our promoted interest during the fourth quarter.  The transaction closed on December 11, 2018 and all existing mortgages were paid off.  We funded the transaction using cash-on-hand, proceeds from our Northern Virginia Joint Venture and our unsecured line of credit.

 

On December 19, 2018, we acquired an office building containing 120,559 rentable square feet located at 4516 Seton Center Parkway, in Austin, Texas, known as Quarry Lake II for a gross purchase price of $39.5 million.  The building was 100% occupied at closing.  We funded the transaction using cash on hand and our unsecured line of credit.

Dispositions

Northern Virginia Joint Venture

 

As previously announced on October 16, 2018, we entered into an agreement with the Rockpoint Group to sell a portfolio of 8 properties (the “Portfolio”) containing an aggregate of 1,293,197 square feet, located in the Northern Virginia, for a sales price of $312.0 million.  We retained a 15% equity interest in the Portfolio through an unconsolidated real estate venture (the “JV”).  The transaction closed on December 20, 2018 without mortgage financing and we net cash proceeds totaling $262.5 million.  The JV intends to obtain mortgage financing during the first quarter of 2019.

Silver Spring, Maryland

 

On December 28, 2018, the Allstate DC JV, in which we own a 50% interest, sold its interest in a portfolio of three office buildings containing 510,202 rentable square feet located in Silver Spring, Maryland, known as Station Square, for a gross sales price of $107.0 million.  After repayment of the first mortgage, our share of the cash received at settlement totaled $17.4 million.

Camden, New Jersey

 

As previously announced, on May 18, 2018, Subaru exercised its option to purchase the National Training Center in Camden, New Jersey.  During the third quarter 2018, we placed the National Training Center into service and Subaru took occupancy.  The sale closed on December 21, 2018 and we received net cash proceeds totaling $44.9 million and recorded a $2.6 million gain on sale.

Development

Austin, Texas

 

We will commence the development of 405 Colorado located in the Austin, Texas CBD during the first quarter of 2019.  The project is comprised of a 200,000 square foot office building above a structured parking garage containing 525 parking spaces.  We are currently in negotiations with an anchor tenant that will occupy approximately 35% of the project and total estimated cost to develop is $110.0 million.  We intend to fund the project with cash-on-hand and our unsecured line of credit.

 

 

 

-2-

 


 

Radnor, Pennsylvania

 

Penn Medicine has named Brandywine as the designated developer of a 250,000 square foot state-of-the-art multi-specialty outpatient facility located in Radnor, Pennsylvania.  In connection with the agreement, we will acquire adjacent land that can accommodate a 150,000 square foot building and a 125-room hotel.  Construction of the facility commenced during the fourth quarter 2018 and is scheduled for completion in the first half of 2020.  Once the new facility is complete, we will purchase Penn Medicine’s existing medical office building.

Finance / Capital Markets Activity

 

During the fourth quarter of 2018 and the first quarter of 2019, we acquired approximately 3.07 million common shares through our market buyback program at an average price of $12.76 per share, or $39.1 million.

 

 

During the fourth quarter of 2018, we redeemed 496,928 operating partnership units for $7.0 million of cash.

 

 

We have $92.5 million outstanding on our $600.0 million unsecured revolving credit facility as of December 31, 2018.

 

 

We have refinanced our $250 million Term Loan C, reducing our effective interest rate by 55 basis points.

 

We have $22.8 million of cash and cash equivalents on-hand as of December 31, 2018.

Results for the Three and Twelve-Month Periods Ended December 31, 2018

Net income allocated to common shares totaled $121.8 million, or $0.68 per diluted share, in the fourth quarter of 2018 compared to net income of $73.1 million or $0.41 per diluted share in the fourth quarter of 2017.  Our fourth quarter 2018 results include net gains on the sale of real estate totaling $107.9 million, or $0.60 per share and a gain on promoted interest totaling $28.3 million, or $0.16 per share.  Our fourth quarter 2017 results include net gains on the sale of real estate totaling $75.4 million, or $0.43 per diluted share.

FFO available to common shares and units in the fourth quarter of 2018 totaled $64.3 million or $0.36 per diluted share versus $53.7 million or $0.30 per diluted share in the fourth quarter of 2017.  Our fourth quarter 2017 results include one-time charges related to liability management totaling $3.9 million for early extinguishment of 2018 bonds, incremental interest totaling $0.8 million related to the make-whole provisions of our 2018 bonds, and $1.3 million charge for the early extinguishment of debt related to the sale of properties in our joint venture located in Austin, Texas.  Our fourth quarter 2018 FFO payout ratio ($0.18 common share distribution / $0.36 FFO per diluted share) was 50.0%.

Net income allocated to common shares totaled $136.0 million or $0.76 per diluted share for twelve months of 2018 compared to net income of $115.3 million or $0.65 per diluted share in the twelve months of 2017.  Our 2018 results include net gains on the sale of real estate totaling $145.2 million, or $0.81 per diluted share and a gain on promoted interest totaling $28.3 million, or $0.16 per share and provisions for impairment on real estate totaling ($71.7) million, or ($0.40) per diluted share.  Our 2017 results include net gains on the sale of real estate totaling $112.2 million, or $0.63 per diluted share.

Our FFO available to common shares and units for the twelve months ended 2018 totaled $247.7 million, or $1.37 per diluted share, compared to our FFO available to common shares and units for the twelve months of 2017, which totaled $229.2 million, or $1.29 per diluted share.  Our 2017 results include one-time charges related to liability management totaling $3.9 million for early extinguishment of 2018 bonds, incremental interest totaling $0.8 million related to the make-whole provisions of our 2018 bonds, and $1.3 million charge for the early extinguishment of debt related to the sale of properties in our joint venture located in Austin, Texas.  Our 2018 FFO payout ratio ($0.72 common share distribution / $1.37 FFO per diluted share) was 52.6%.

 

 

-3-

 


 

Operating and Leasing Activity

In the fourth quarter of 2018, our Net Operating Income (NOI) excluding termination revenues, write-off of prior straight-line rent receivable and other income items increased 2.3% on a GAAP basis and increased 8.7% on a cash basis for our 76 same store properties, which were 93.2% and 93.3% occupied on December 31, 2018 and 2017, respectively.

We leased approximately 613,000 square feet and commenced occupancy on 638,000 square feet during the fourth quarter of 2018.  The fourth quarter occupancy activity includes 409,000 square feet of renewals, 142,000 square feet of new leases and 87,000 square feet of tenant expansions.  We have an additional 353,000 square feet of executed new leasing scheduled to commence subsequent to December 31, 2018.

We achieved an 83% tenant retention ratio in our core portfolio with net absorption of 38,000 square feet during the fourth quarter of 2018.  Fourth quarter rental rate growth increased 10.8% as our renewal rental rates increased 6.4% and our new lease/expansion rental rates increased 29.5%, all on a GAAP basis.

At December 31, 2018, our core portfolio of 93 properties comprising 16.3 million square feet was 93.3% occupied and we are now 95.5% leased (reflecting new leases commencing after December 31, 2018).

5.6% Dividend Increase

On December 6, 2018, our Board of Trustees declared a quarterly cash dividend of $0.19 per common share and OP Unit payable on January 22, 2019 to holders of record on January 8, 2019.  The quarterly dividend is equivalent to an annual rate of $0.76 per common share representing a 5.6% increase from the previous annual dividend rate of $0.72 per common share.

2019 Earnings and FFO Guidance

Based on current plans and assumptions and subject to the risks and uncertainties more fully described in our Securities and Exchange Commission filings, our 2019 net income guidance of $0.36 - $0.46 per diluted share has been adjusted to $0.29 - $0.39 per diluted share and 2019 FFO guidance of $1.37 - $1.47 per diluted share remains unchanged.  This guidance is provided for informational purposes and is subject to change.  The following is a reconciliation of the calculation of 2019 FFO and earnings per diluted share:

Guidance for 2019

 

 

 

Range

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted share allocated to common shareholders

$

0.29

 

to

$

0.39

 

 

Plus: real estate depreciation, amortization

 

1.08

 

 

 

1.08

 

 

 

 

 

 

 

 

 

 

 

FFO per diluted share

$

1.37

 

to

$

1.47

 

 

Our 2019 FFO key assumptions to include:

 

Core Occupancy improving to a range of 94-95% by year-end 2019 and 95-96% leased;

 

8-10% GAAP increase in overall lease rates;

 

2-4% cash increase in overall lease rates;

 

0-2% increase in 2019 same store GAAP NOI;

 

1-3% increase in 2019 same store cash NOI;

 

Speculative Revenue Target:  $31.5 million, 77% achieved;

 

Change in Lease Accounting Treatment:  $4.6 million decrease to earnings, or $0.03 per diluted share;

 

$0.19 per share quarterly dividend;

 

Acquisition Activity:  none

 

Sales Activity:  none

-4-

 


 

 

One development start; 405 Colorado and

 

Annual earnings and FFO per diluted share based on 178.4 million fully diluted weighted average common shares.

About Brandywine Realty Trust

Brandywine Realty Trust (NYSE: BDN) is one of the largest, publicly traded, full-service, integrated real estate companies in the United States with a core focus in the Philadelphia, Washington, D.C., and Austin markets.  Organized as a real estate investment trust (REIT), we own, develop, lease and manage an urban, town center and transit-oriented portfolio comprising 181 properties and 24.8 million square feet as of December 31, 2018, which excludes assets held for sale.  Our purpose is to shape, connect and inspire the world around us through our expertise, the relationships we foster, the communities in which we live and work, and the history we build together.  For more information, please visit www.brandywinerealty.com.

Conference Call and Audio Webcast

BDN management will discuss 2018 financial results and earnings guidance for fiscal 2019 on Thursday, January 31, 2019 at 9:00 a.m. EST.  The conference call can be accessed by dialing 1-833-818-6810 and providing conference ID: 2863846.  Beginning two hours after the conference call, a taped replay of the call can be accessed through Friday, February 15, 2019, by calling 1-855-859-2056 and entering access code 2863846.  The conference call can also be accessed via a webcast on our website at www.brandywinerealty.com.

Looking Ahead – First Quarter 2019 Conference Call

We anticipate we will release our first quarter 2019 earnings on Wednesday, April 24, 2019, after the market close and will host our first quarter 2019 conference call on Thursday, April 25, 2019 at 9:00 a.m. Eastern Time.  We expect to issue a press release in advance of these events to reconfirm the dates and times and provide all related information.

Forward-Looking Statements

Estimates of future earnings per share, FFO per share, common share dividend distributions and certain other statements in this release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our and our affiliates’ actual results, performance, achievements or transactions to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements.  Such risks, uncertainties and other factors relate to, among others: our ability to lease vacant space and to renew or relet space under expiring leases at expected levels; competition with other real estate companies for tenants; the potential loss or bankruptcy of major tenants; interest rate levels; the availability of debt, equity or other financing; risks of acquisitions, dispositions and developments, including the cost of construction delays and cost overruns; unanticipated operating and capital costs; our ability to obtain adequate insurance, including coverage for terrorist acts; dependence upon certain geographic markets; and general and local economic and real estate conditions, including the extent and duration of adverse changes that affect the industries in which our tenants operate.  The declaration and payment of future dividends (both timing and amount) is subject to the determination of our Board of Trustees, in its sole discretion, after considering various factors, including the Company's financial condition, historical and forecast operating results, and available cash flow, as well as any applicable laws and contractual covenants and any other relevant factors.  The Company's practice regarding payment of dividends may be modified at any time and from time to time.  Additional information on factors which could impact us and the forward-looking statements contained herein are included in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2017.  We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events except as required by law.

-5-

 


 

 

 

Non-GAAP Supplemental Financial Measures

We compute our financial results in accordance with generally accepted accounting principles (GAAP).  Although FFO and NOI are non-GAAP financial measures, we believe that FFO and NOI calculations are helpful to shareholders and potential investors and are widely recognized measures of real estate investment trust performance.  At the end of this press release, we have provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measure.

Funds from Operations (FFO)

We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than us.  NAREIT defines FFO as net income (loss) before non-controlling interests and excluding gains (losses) on sales of depreciable operating property, impairment losses on depreciable consolidated real estate, impairment losses on investments in unconsolidated real estate ventures and extraordinary items (computed in accordance with GAAP); plus real estate related depreciation and amortization (excluding amortization of deferred financing costs), and after similar adjustments for unconsolidated joint ventures.  Net income, the GAAP measure that we believe to be most directly comparable to FFO, includes depreciation and amortization expenses, gains or losses on property sales, extraordinary items and non-controlling interests.  To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income (determined in accordance with GAAP) as presented in the financial statements included elsewhere in this release.  FFO does not represent cash flow from operating activities (determined in accordance with GAAP) and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders.

Net Operating Income (NOI)

NOI is a financial measure equal to net income available to common shareholders, the most directly comparable GAAP financial measure, plus corporate general and administrative expense, depreciation and amortization, interest expense, non-controlling interest in the Operating Partnership and losses from early extinguishment of debt, less interest income, development and management income, gains from property dispositions, gains on sale from discontinued operations, gains on early extinguishment of debt, income from discontinued operations, income from unconsolidated joint ventures and non-controlling interest in property partnerships.  In some cases we also present NOI on a cash basis, which is NOI after eliminating the effects of straight-lining of rent and deferred market intangible amortization.  NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently.  NOI should not be considered an alternative to net income as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.  NOI is a useful measure for evaluating the operating performance of our properties, as it excludes certain components from net income available to common shareholders in order to provide results that are more closely related to a property's results of operations.  NOI is used internally to evaluate the performance of our operating segments and to make decisions about resource allocations.  We concluded that NOI provides useful information to investors regarding our financial condition and results of operations, as it reflects only the income and expense items incurred at the property level, as well as the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unlevered basis.

Core Portfolio

Our core portfolio is comprised of our wholly-owned properties, excluding any properties currently in development, re-development or re-entitlement.


-6-

 


 

 

BRANDYWINE REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

ASSETS

 

(unaudited)

 

 

 

 

 

Real estate investments:

 

 

 

 

 

 

 

 

Operating properties

 

$

3,953,319

 

 

$

3,832,348

 

Accumulated depreciation

 

 

(865,462

)

 

 

(895,091

)

Operating real estate investments, net

 

 

3,087,857

 

 

 

2,937,257

 

Construction-in-progress

 

 

150,263

 

 

 

121,188

 

Land held for development

 

 

86,401

 

 

 

98,242

 

Prepaid leasehold interests in land held for development, net

 

 

39,999

 

 

 

-

 

Total real estate investments, net

 

 

3,364,520

 

 

 

3,156,687

 

Assets held for sale, net

 

 

11,599

 

 

 

392

 

Cash and cash equivalents

 

 

22,842

 

 

 

202,179

 

Accounts receivable, net of allowance of $1,653 and $3,467 as of December 31, 2018 and December 31, 2017, respectively

 

 

16,394

 

 

 

17,938

 

Accrued rent receivable, net of allowance of $11,266 and $13,645 as of December 31, 2018 and December 31, 2017, respectively

 

 

165,243

 

 

 

169,760

 

Investment in real estate ventures, at equity

 

 

169,100

 

 

 

194,621

 

Deferred costs, net

 

 

91,075

 

 

 

96,695

 

Intangible assets, net

 

 

131,348

 

 

 

64,972

 

Other assets

 

 

126,400

 

 

 

92,204

 

Total assets

 

$

4,098,521

 

 

$

3,995,448

 

LIABILITIES AND BENEFICIARIES' EQUITY

 

 

 

 

 

 

 

 

Mortgage notes payable, net

 

$

320,869

 

 

$

317,216

 

Unsecured credit facility

 

 

92,500

 

 

 

-

 

Unsecured term loan, net

 

 

248,042

 

 

 

248,429

 

Unsecured senior notes, net

 

 

1,366,635

 

 

 

1,365,183

 

Accounts payable and accrued expenses

 

 

125,696

 

 

 

107,074

 

Distributions payable

 

 

33,632

 

 

 

32,456

 

Deferred income, gains and rent

 

 

28,293

 

 

 

42,593

 

Acquired lease intangibles, net

 

 

31,783

 

 

 

20,274

 

Other liabilities

 

 

18,498

 

 

 

15,623

 

Total liabilities

 

$

2,265,948

 

 

$

2,148,848

 

 

 

 

 

 

 

 

 

 

Brandywine Realty Trust's Equity:

 

 

 

 

 

 

 

 

Common Shares of Brandywine Realty Trust's beneficial interest, $0.01 par value; shares authorized 400,000,000; 176,873,324 and 178,285,236 issued and outstanding as of December 31, 2018 and December 31, 2017, respectively

 

 

1,770

 

 

 

1,784

 

Additional paid-in-capital

 

 

3,200,850

 

 

 

3,218,564

 

Deferred compensation payable in common shares

 

 

14,021

 

 

 

12,445

 

Common shares in grantor trust, 977,120 and 894,736 issued and outstanding as of December 31, 2018 and December 31, 2017, respectively

 

 

(14,021

)

 

 

(12,445

)

Cumulative earnings

 

 

796,513

 

 

 

660,174

 

Accumulated other comprehensive income

 

 

5,029

 

 

 

2,399

 

Cumulative distributions

 

 

(2,183,909

)

 

 

(2,053,741

)

Total Brandywine Realty Trust's equity

 

 

1,820,253

 

 

 

1,829,180

 

Noncontrolling interests

 

 

12,320

 

 

 

17,420

 

Total beneficiaries' equity

 

 

1,832,573

 

 

 

1,846,600

 

Total liabilities and beneficiaries' equity

 

$

4,098,521

 

 

$

3,995,448

 

 


-7-

 


 

BRANDYWINE REALTY TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except share and per share data)

 

Three Months Ended December 31,

 

 

Twelve Months Ended December 31,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rents

$

109,059

 

 

$

104,887

 

 

$

430,656

 

 

$

412,333

 

Tenant reimbursements

 

23,531

 

 

 

18,808

 

 

 

82,625

 

 

 

72,620

 

Termination fees

 

133

 

 

 

357

 

 

 

1,763

 

 

 

2,370

 

Third party management fees, labor reimbursement and leasing

 

5,026

 

 

 

7,862

 

 

 

22,557

 

 

 

28,345

 

Other

 

1,454

 

 

 

1,430

 

 

 

6,744

 

 

 

4,825

 

Total revenue

 

139,203

 

 

 

133,344

 

 

 

544,345

 

 

 

520,493

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

39,720

 

 

 

39,888

 

 

 

154,772

 

 

 

150,835

 

Real estate taxes

 

14,069

 

 

 

11,142

 

 

 

51,341

 

 

 

45,204

 

Third party management expenses

 

2,305

 

 

 

2,569

 

 

 

11,910

 

 

 

9,960

 

Depreciation and amortization

 

43,351

 

 

 

46,773

 

 

 

174,259

 

 

 

179,357

 

General and administrative expenses

 

5,593

 

 

 

6,741

 

 

 

27,802

 

 

 

28,538

 

Provision for impairment

 

14,842

 

 

 

-

 

 

 

71,707

 

 

 

3,057

 

Total operating expenses

 

119,880

 

 

 

107,113

 

 

 

491,791

 

 

 

416,951

 

Operating income

 

19,323

 

 

 

26,231

 

 

 

52,554

 

 

 

103,542

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

2,139

 

 

 

478

 

 

 

4,703

 

 

 

1,113

 

Interest expense

 

(20,108

)

 

 

(20,413

)

 

 

(78,199

)

 

 

(81,886

)

Interest expense - amortization of deferred financing costs

 

(626

)

 

 

(628

)

 

 

(2,498

)

 

 

(2,435

)

Equity in loss of Real Estate Ventures

 

(14,049

)

 

 

(2,919

)

 

 

(15,231

)

 

 

(8,306

)

Net gain on disposition of real estate

 

2,967

 

 

 

23,246

 

 

 

2,932

 

 

 

31,657

 

Net gain on sale of undepreciated real estate

 

181

 

 

 

-

 

 

 

3,040

 

 

 

953

 

Net gain on real estate venture transactions

 

104,970

 

 

 

52,186

 

 

 

142,233

 

 

 

80,526

 

Gain on promoted interest in unconsolidated real estate venture

 

28,283

 

 

 

-

 

 

 

28,283

 

 

 

-

 

Loss on early extinguishment of debt

 

(105

)

 

 

(3,933

)

 

 

(105

)

 

 

(3,933

)

Net income before income taxes

 

122,975

 

 

 

74,248

 

 

 

137,712

 

 

 

121,231

 

Income tax (provision) benefit

 

(265

)

 

 

(404

)

 

 

(423

)

 

 

628

 

Net income

 

122,710

 

 

 

73,844

 

 

 

137,289

 

 

 

121,859

 

Net income attributable to noncontrolling interests

 

(798

)

 

 

(625

)

 

 

(965

)

 

 

(1,009

)

Net income attributable to Brandywine Realty Trust

 

121,912

 

 

 

73,219

 

 

 

136,324

 

 

 

120,850

 

Distribution to preferred shareholders

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,032

)

Preferred share redemption charge

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,181

)

Nonforfeitable dividends allocated to unvested restricted shareholders

 

(89

)

 

 

(82

)

 

 

(369

)

 

 

(327

)

Net income attributable to Common Shareholders of Brandywine Realty Trust

$

121,823

 

 

$

73,137

 

 

$

135,955

 

 

$

115,310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PER SHARE DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per Common Share

$

0.68

 

 

$

0.42

 

 

$

0.76

 

 

$

0.66

 

Basic weighted average shares outstanding

 

178,530,890

 

 

 

175,985,156

 

 

 

178,519,748

 

 

 

175,484,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income per Common Share

$

0.68

 

 

$

0.41

 

 

$

0.76

 

 

$

0.65

 

Diluted weighted average shares outstanding

 

179,300,321

 

 

 

177,426,365

 

 

 

179,641,492

 

 

 

176,808,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-8-

 


 

 

 

 

BRANDYWINE REALTY TRUST

FUNDS FROM OPERATIONS

(unaudited, in thousands, except share and per share data)

Three Months Ended December 31,

 

 

 

Twelve Months Ended December 31,

 

 

2018

 

 

2017

 

 

 

2018

 

 

2017

 

Reconciliation of Net Income to Funds from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common shareholders

$

121,823

 

 

$

73,137

 

 

 

$

135,955

 

 

$

115,310

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests - LP units

 

789

 

 

 

621

 

 

 

 

910

 

 

 

980

 

Nonforfeitable dividends allocated to unvested restricted shareholders

 

89

 

 

 

82

 

 

 

 

369

 

 

 

327

 

Net gain on real estate venture transactions

 

(104,970

)

 

 

(52,186

)

 

 

 

(142,233

)

 

 

(80,526

)

Net gain on disposition of real estate

 

(2,967

)

 

 

(23,246

)

 

 

 

(2,932

)

 

 

(31,657

)

Gain on promoted interest in unconsolidated real estate venture

 

(28,283

)

 

 

-

 

 

 

 

(28,283

)

 

 

-

 

Provision for impairment

 

14,842

 

 

 

-

 

 

 

 

71,707

 

 

 

2,730

 

Other than temporary impairment of equity method investment

 

4,076

 

 

 

-

 

 

 

 

4,076

 

 

 

4,844

 

Company's share of impairment of an unconsolidated real estate venture

 

10,416

 

 

 

-

 

 

 

 

10,416

 

 

 

-

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real property

 

32,663

 

 

 

38,208

 

 

 

 

137,461

 

 

 

142,548

 

Leasing costs including acquired intangibles

 

10,283

 

 

 

8,207

 

 

 

 

35,215

 

 

 

35,920

 

Company’s share of unconsolidated real estate ventures

 

5,717

 

 

 

9,117

 

 

 

 

25,947

 

 

 

39,622

 

Partners’ share of consolidated real estate ventures

 

(52

)

 

 

(54

)

 

 

 

(218

)

 

 

(231

)

Funds from operations

$

64,426

 

 

$

53,886

 

 

 

$

248,390

 

 

$

229,867

 

Funds from operations allocable to unvested restricted shareholders

 

(169

)

 

 

(137

)

 

 

 

(697

)

 

 

(648

)

Funds from operations available to common share and unit holders (FFO)

$

64,257

 

 

$

53,749

 

 

 

$

247,693

 

 

$

229,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per share - fully diluted

$

0.36

 

 

$

0.30

 

 

 

$

1.37

 

 

$

1.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares/units outstanding - fully diluted

 

180,620,723

 

 

 

178,906,164

 

 

 

 

181,081,114

 

 

 

178,287,965

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid per common share

$

0.18

 

 

$

0.16

 

 

 

$

0.72

 

 

$

0.64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO payout ratio (distributions paid per common share/FFO per diluted share)

 

50.0

%

 

 

53.3

%

 

 

 

52.6

%

 

 

49.6

%

 

 


-9-

 


 

BRANDYWINE REALTY TRUST

SAME STORE OPERATIONS – 4th QUARTER

(unaudited and in thousands)

 

 

Of the 97 properties owned by the Company as of December 31, 2018, a total of 76 properties ("Same Store Properties") containing an aggregate of 14.2 million net rentable square feet were owned for the entire three-month periods ended December 31, 2018 and 2017. As of December 31, 2018, 17 properties were recently completed/acquired, one property was in development and three properties were in redevelopment. Average occupancy for the Same Store Properties was 93.1% during 2018 and 92.8% during 2017. The following table sets forth revenue and expense information for the Same Store Properties:

 

 

Three Months Ended December 31,

 

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

 

Rents

 

$

92,880

 

 

$

91,847

 

Tenant reimbursements

 

 

20,581

 

 

 

17,876

 

Termination fees

 

 

133

 

 

 

357

 

Other

 

 

435

 

 

 

389

 

Total revenue

 

 

114,029

 

 

 

110,469

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Property operating expenses

 

 

33,749

 

 

 

32,937

 

Real estate taxes

 

 

11,297

 

 

 

9,205

 

Net operating income

 

$

68,983

 

 

$

68,327

 

 

 

 

 

 

 

 

 

 

Net operating income - percentage change over prior year

 

 

1.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other

 

$

69,142

 

 

$

67,581

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other - percentage change over prior year

 

 

2.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

$

68,983

 

 

$

68,327

 

Straight line rents & other

 

 

(1,223

)

 

 

(5,618

)

Above/below market rent amortization

 

 

(369

)

 

 

(456

)

Amortization of tenant inducements

 

 

240

 

 

 

338

 

Non-cash ground rent

 

 

22

 

 

 

22

 

Cash - Net operating income

 

$

67,653

 

 

$

62,613

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income - percentage change over prior year

 

 

8.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income, excluding net termination fees & other

 

$

67,023

 

 

$

61,664

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income, excluding net termination fees & other - percentage change over prior year

 

 

8.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

 

2018

 

 

2017

 

Net income:

 

$

122,710

 

 

$

73,844

 

Add/(deduct):

 

 

 

 

 

 

 

 

Interest income

 

 

(2,139

)

 

 

(478

)

Interest expense

 

 

20,108

 

 

 

20,413

 

Interest expense - amortization of deferred financing costs

 

 

626

 

 

 

628

 

Equity in loss of Real Estate Ventures

 

 

14,049

 

 

 

2,919

 

Net gain on real estate venture transactions

 

 

(104,970

)

 

 

(52,186

)

Net gain on disposition of real estate

 

 

(2,967

)

 

 

(23,246

)

Net gain on sale of undepreciated real estate

 

 

(181

)

 

 

-

 

Gain on promoted interest in unconsolidated real estate venture

 

 

(28,283

)

 

 

-

 

Loss on early extinguishment of debt

 

 

105

 

 

 

3,933

 

Depreciation and amortization

 

 

43,351

 

 

 

46,773

 

General & administrative expenses

 

 

5,593

 

 

 

6,741

 

Income tax provision

 

 

265

 

 

 

404

 

Provision for impairment

 

 

14,842

 

 

 

-

 

Consolidated net operating income

 

 

83,109

 

 

 

79,745

 

Less: Net operating income of non-same store properties and elimination of non-property specific operations

 

 

(14,126

)

 

 

(11,418

)

Same store net operating income

 

$

68,983

 

 

$

68,327

 

 

 

 

 

 

 

-10-

 


 

 

 

BRANDYWINE REALTY TRUST

SAME STORE OPERATIONS – TWELVE MONTHS

(unaudited and in thousands)

 

 

Of the 97 properties owned by the Company as of December 31, 2018, a total of 73 properties ("Same Store Properties") containing an aggregate of 13.0 million net rentable square feet were owned for the entire twelve-month periods ended December 31, 2018 and 2017. As of December 31, 2018, 20 properties were recently completed/acquired, one property was in development and three properties were in redevelopment. Average occupancy for the Same Store Properties was 93.0% during 2018 and 94.1% during 2017. The following table sets forth revenue and expense information for the Same Store Properties:

 

Twelve Months Ended December 31,

 

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

 

Rents

 

$

330,036

 

 

$

331,647

 

Tenant reimbursements

 

 

68,073

 

 

 

64,389

 

Termination fees

 

 

1,763

 

 

 

1,893

 

Other

 

 

1,617

 

 

 

1,803

 

Total revenue

 

 

401,489

 

 

 

399,732

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Property operating expenses

 

 

118,776

 

 

 

116,704

 

Real estate taxes

 

 

40,903

 

 

 

35,759

 

Net operating income

 

$

241,810

 

 

$

247,269

 

 

 

 

 

 

 

 

 

 

Net operating income - percentage change over prior year

 

 

-2.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other

 

$

239,157

 

 

$

243,573

 

 

 

 

 

 

 

 

 

 

Net operating income, excluding net termination fees & other - percentage change over prior year

 

 

-1.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

$

241,810

 

 

$

247,269

 

Straight line rents & other

 

 

(462

)

 

 

(5,933

)

Above/below market rent amortization

 

 

(1,628

)

 

 

(2,694

)

Amortization of tenant inducements

 

 

732

 

 

 

966

 

Non-cash ground rent

 

 

89

 

 

 

89

 

Cash - Net operating income

 

$

240,541

 

 

$

239,697

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income - percentage change over prior year

 

 

0.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income, excluding net termination fees & other

 

$

236,436

 

 

$

234,868

 

 

 

 

 

 

 

 

 

 

Cash - Net operating income, excluding net termination fees & other - percentage change over prior year

 

 

0.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended December 31,

 

 

 

2018

 

 

2017

 

Net income:

 

$

137,289

 

 

$

121,859

 

Add/(deduct):

 

 

 

 

 

 

 

 

Interest income

 

 

(4,703

)

 

 

(1,113

)

Interest expense

 

 

78,199

 

 

 

81,886

 

Interest expense - amortization of deferred financing costs

 

 

2,498

 

 

 

2,435

 

Equity in loss of real estate ventures

 

 

15,231

 

 

 

8,306

 

Net gain on real estate venture transactions

 

 

(142,233

)

 

 

(80,526

)

Net gain on disposition of real estate

 

 

(2,932

)

 

 

(31,657

)

Net gain on sale of undepreciated assets

 

 

(3,040

)

 

 

(953

)

Gain on promoted interest in unconsolidated real estate venture

 

 

(28,283

)

 

 

-

 

Loss on early extinguishment of debt

 

 

105

 

 

 

3,933

 

Depreciation and amortization

 

 

174,259

 

 

 

179,357

 

General & administrative expenses

 

 

27,802

 

 

 

28,538

 

Income tax provision (benefit)

 

 

423

 

 

 

(628

)

Provision for impairment

 

 

71,707

 

 

 

3,057

 

Consolidated net operating income

 

 

326,322

 

 

 

314,494

 

Less: Net operating income of non-same store properties and elimination of non-property specific operations

 

 

(84,512

)

 

 

(67,225

)

Same store net operating income

 

$

241,810

 

 

$

247,269

 

 

-11-