e10vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2006
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from to
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Commission
file number |
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001-9106 (Brandywine Realty Trust) 000-24407 (Brandywine Operating Partnership, L.P.) |
Brandywine Realty Trust
Brandywine Operating Partnership, L.P.
(Exact name of registrant as specified in its charter)
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MARYLAND (Brandywine Realty Trust)
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23-2413352 |
DELAWARE (Brandywine Operating Partnership L.P.
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23-2862640 |
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.) |
Incorporation or organization) |
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555 East Lancaster Avenue |
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Radnor, Pennsylvania
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19087 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code (610) 325-5600
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange |
Title of each class
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on which registered |
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Common Shares of Beneficial Interest, |
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par value $0.01 per share |
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(Brandywine Realty Trust)
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New York Stock Exchange |
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7.50% Series C Cumulative Redeemable |
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Preferred Shares of Beneficial Interest
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New York Stock Exchange |
par value $0.01 per share |
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(Brandywine Realty Trust) |
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7.375% Series D Cumulative Redeemable |
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Preferred Shares of Beneficial Interest
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New York Stock Exchange |
par value $0.01 per share |
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(Brandywine Realty Trust) |
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Securities registered pursuant to Section 12(g) of the Act:
Units of General Partnership Interest (Brandywine Operating Partnership, L.P.)
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
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Brandywine Realty Trust
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Yes þ No o |
Brandywine Operating Partnership, L.P.
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Yes þ No o |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
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Brandywine Realty Trust
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Yes o No þ |
Brandywine Operating Partnership, L.P.
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Yes o No þ |
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.
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Brandywine Realty Trust
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Yes þ No o |
Brandywine Operating Partnership, L.P.
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Yes þ No o |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act (Check one):
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Brandywine Realty Trust
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Large accelerated filer þ Accelerated filer o Non-accelerated filer o |
Brandywine Operating Partnership, L.P.
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Large accelerated filer
o Accelerated filer
þ Non-accelerated filer o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
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Brandywine Realty Trust
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Yes o No þ |
Brandywine Operating Partnership, L.P.
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Yes o No þ |
The aggregate market value of the Common Shares of Beneficial Interest held by non-affiliates of
Brandywine Realty Trust as of the last day of the registrants most recently completed second
fiscal quarter was $2.9 billion. The aggregate market value has been computed by reference to the
closing price of the Common Shares of Beneficial Interest on the New York Stock Exchange on such
date. An aggregate of 88,599,963 Common Shares of Beneficial Interest were outstanding as of
February 22, 2007.
As of June 30, 2006, the aggregate market value of the 2,309,051 common units of limited
partnership (Units) held by non-affiliates of Brandywine Operating Partnership, L.P. was $74.3
million based upon the last report sale price of $32.17 per share on the New York Stock Exchange on
June 30, 2006 of the Common Shares of Beneficial Interest of Brandywine Realty Trust, the sole
general partner of Brandywine Operating Partnership, L.P. (For this computation, the Registrant
has excluded the market value of all Units beneficially owned by
Brandywine Realty Trust.)
Documents Incorporated By Reference
Portions of the proxy statement for the Annual Meeting of Shareholders of Brandywine Realty Trust
to be held on May 9, 2007 are incorporated by reference into Part III of this Form 10-K.
The exhibit index as required by Item 601(a) of Regulation S-K is included in Item 15 of Part IV of this report.
TABLE OF CONTENTS
FORM 10-K
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Filing Format
This combined Form 10-K is being filed separately by Brandywine Realty Trust and Brandywine
Operating Partnership, L.P.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. This Annual Report on Form 10-K and other materials filed by us with the SEC (as well
as information included in oral or other written statements made by us) contain statements that are
forward-looking, including statements relating to business and real estate development activities,
acquisitions, dispositions, future capital expenditures, financing sources, governmental regulation
(including environmental regulation) and competition. We intend such forward-looking statements to
be covered by the safe-harbor provisions of the 1995 Act. The words anticipate, believe,
estimate, expect, intend, will, should and similar expressions, as they relate to us, are
intended to identify forward-looking statements. Although we believe that the expectations
reflected in such forward-looking statements are based on reasonable assumptions, we can give no
assurance that our expectations will be achieved. As forward-looking statements, these statements
involve important risks, uncertainties and other factors that could cause actual results to differ
materially from the expected results and, accordingly, such results may differ from those expressed
in any forward-looking statements made by us or on our behalf. Factors that could cause actual
results to differ materially from our expectations include, but are not limited to:
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changes in general economic conditions; |
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changes in local real estate conditions (including changes in rental rates and the
number of properties that compete with our properties); |
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changes in the economic conditions affecting industries in which our principal tenants compete; |
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our failure to lease unoccupied space in accordance with our projections; |
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our failure to re-lease occupied space upon expiration of leases; |
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the bankruptcy of major tenants; |
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changes in prevailing interest rates; |
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the unavailability of equity and debt financing; |
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failure of acquisitions to perform as expected; |
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unanticipated costs associated with, and integration of, our acquisitions; |
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unanticipated costs to complete and lease-up pending developments; |
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impairment charges; |
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increased costs for, or lack of availability of, adequate insurance, including for terrorist acts; |
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demand for tenant services beyond those traditionally provided by landlords; |
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potential liability under environmental or other laws; |
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earthquakes and other natural disasters; |
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complex regulations relating to our status as a REIT and to our acquisition,
disposition and development activities; |
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the adverse consequences of our failure to qualify as a REIT; and |
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the impact of newly adopted accounting principles on our accounting policies and on
period-to-period comparisons of financial results. |
Given these uncertainties, and the other risks identified in the Risk Factors section and
elsewhere in this Annual Report on Form 10-K, we caution readers not to place undue reliance on
forward-looking statements. We assume no obligation to update or supplement forward-looking
statements that become untrue because of subsequent events.
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PART I
Item 1. Business
Introduction
The terms we, us, our or the Company refer to Brandywine Realty Trust, a Maryland real
estate investment trust, individually or together with its consolidated subsidiaries, including
Brandywine Operating Partnership, L.P. (the Operating Partnership), a Delaware limited
partnership.
We are a self-administered and self-managed real estate investment trust, or REIT, active in
acquiring, developing, redeveloping, leasing and managing office and industrial properties. As of
December 31, 2006, we owned 261 office properties, 23 industrial facilities and one mixed-use
property (which we refer to collectively, the Properties) containing an aggregate of
approximately 28.2 million net rentable square feet. We also
have six properties under development,
three properties under redevelopment and four lease-up properties containing an aggregate of 2.1 million
net rentable square feet. As of December 31, 2006, we owned economic interests in 11
unconsolidated real estate ventures that contain approximately 2.7 million net rentable square feet
and in four consolidated real estate ventures that own 15 office properties containing
approximately 1.5 million net rentable square feet (which we refer to collectively as the Real
Estate Ventures). In addition, as of December 31, 2006, we owned approximately 490 acres of
undeveloped land. The Properties are located in and surrounding Philadelphia, Wilmington, Southern
and Central New Jersey, Richmond, Metropolitan Washington, D.C., Dallas/Fort Worth, Austin,
Oakland, San Diego and Los Angeles. In addition to managing properties that we own, as of December
31, 2006, we were managing approximately 13.0 million square feet of office and industrial
properties for third parties and Real Estate Ventures. Unless otherwise indicated, all references
to square feet represent net rentable area.
Organization
Brandywine Realty Trust was organized and commenced its operations in 1986 as a Maryland REIT.
Brandywine Realty Trust owns its assets and conducts its operations through the Operating
Partnership and subsidiaries of the Operating Partnership. Brandywine Realty Trust controls the
Operating Partnership as its sole general partner and as of
December 31, 2006 owned a 95.7%
interest in the Operating Partnership. The holders of the remaining interests in the Operating
Partnership, consisting of Class A units of limited partnership interest, have the right to require
redemption of their units at any time. At our option, we may satisfy the redemption either for an
amount, per unit, of cash equal to the then market price of one Brandywine common share (based on
the prior ten-day trading average) or for one Brandywine common share. Our structure as an
UPREIT is designed, in part, to permit persons contributing properties to us to defer some or all
of the tax liability they might otherwise incur in a sale of properties.
Our executive offices are located at 555 East Lancaster Avenue, Radnor, Pennsylvania 19087 and our
telephone number is (610) 325-5600. We have regional offices in Mount Laurel, New Jersey;
Philadelphia, Pennsylvania; Richmond, Virginia; Falls Church, Virginia; Austin, Texas; Dallas,
Texas; Oakland, California; and Carlsbad, California. We have an internet website at
www.brandywinerealty.com. We are not incorporating by reference into this Annual Report on Form
10-K any material from our website. The reference to our website is an inactive textual reference
to the uniform resource locator (URL) and is for your reference only.
Acquisition of Prentiss Properties Trust in January 2006
On January 5, 2006, we acquired Prentiss Properties Trust (Prentiss) under an agreement and plan
of merger that we entered into with Prentiss on October 3, 2005. In conjunction with our
acquisition of Prentiss, designees of The Prudential Insurance Company of America (Prudential)
acquired Prentiss properties that contain an aggregate of approximately 4.32 million net rentable
square feet for total consideration of approximately $747.7 million. Through our acquisition of
Prentiss (and after giving effect to the Prudential acquisition of Prentiss properties), we
acquired a portfolio of 79 office properties (including 13 properties that are owned by
consolidated Real Estate Ventures and seven properties that are owned by unconsolidated Real Estate
Ventures) that contain an aggregate of 14.0 million net rentable square feet. In addition, through
our acquisition of Prentiss we entered into new
geographic markets, primarily Southern and Northern California, Dallas/Fort Worth and Austin, Texas
and
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Metropolitan Washington, D.C. and decreased our relative concentration in Philadelphia and the
Mid-Atlantic region.
In our acquisition of Prentiss, each then outstanding Prentiss common share was converted into the
right to receive 0.69 of a Brandywine common share and $21.50 in cash (the Per Share Merger
Consideration) except that 497,884 Prentiss common shares held in the Prentiss deferred
compensation plan converted solely into 720,737 Brandywine common shares. In addition, each then
outstanding unit (each, a Prentiss OP Unit) of limited partnership interest in Prentisss
operating partnership subsidiary was, at the option of the holder, converted into Prentiss Common
Shares with the right to receive the Per Share Merger Consideration or 1.3799 Class A units of our
Operating Partnership. Accordingly, based on 49,375,723 Prentiss common shares outstanding at
closing of the acquisition, we issued 34,446,446 Brandywine common shares and paid an aggregate of
approximately $1.05 billion in cash for the accounts of the former Prentiss shareholders. Based on
1,572,612 Prentiss OP Units outstanding at closing of the acquisition, we issued 2,170,047 Class A
units. In addition, options issued by Prentiss that were exercisable for an aggregate of 342,662
Prentiss common shares were converted into options exercisable for an aggregate of 496,037
Brandywine common shares at a weighted average exercise price of $22.00 per share. Through our
acquisition of Prentiss we also assumed approximately $647.3 million in aggregate principal amount
of Prentiss debt.
We funded the approximately $1.05 billion cash portion of the merger consideration, related
transaction costs and prepayments of approximately $543.3 million in Prentiss mortgage debt at the
closing of the acquisition through (i) a $750 million unsecured term loan that we repaid in full on
March 28, 2006; (ii) approximately $676.5 million of cash received from Prudentials acquisition of
the Prentiss properties; and (iii) approximately $195.0 million through borrowing under our
revolving credit facility.
2006 Transactions
Real Estate Acquisitions/Dispositions
In addition to our January 2006 acquisition of properties through our merger with Prentiss, and the
concurrent disposition of properties to Prudential, in 2006 we acquired five office properties that
contain an aggregate of 839,704 net rentable square feet and 93.4 acres of land, and we sold
23 office properties that contain an aggregate of 3,364,215 net rentable square feet and
76.7 acres of land, as indicated below:
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In January 2006, we sold 850/950 Warrenville Road, two properties totaling 99,470 square
feet in Chicago, Illinois for a sales price of $15.3 million. |
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In February 2006, we acquired 100 Lenox Drive, a property totaling 92,980 square feet in
Lawrenceville, New Jersey for a purchase price of $10.2 million. |
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In February 2006, we sold 550/650 Warrenville Road, 1050 Warrenville Road, 701
Warrenville Road and 801 Cherry Street, five properties totaling 1,316,744 square feet in
Chicago, Illinois and Fort Worth, Texas for an aggregate sales price of $207.3 million. |
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In March 2006, we sold 8755 W. Higgins Road, a property totaling 237,320 square feet in
Chicago, Illinois for a sales price of $30.0 million. |
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In April 2006, we acquired One Paragon, a property totaling 145,127 square feet in
Richmond, Virginia for a purchase price of $24.0 million. We also acquired a 47.9 acre
land parcel in Mt. Laurel, New Jersey and a 5.5 acre land parcel in Newtown (Delaware
County), Pennsylvania for a total purchase price of $8.6 million. |
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In April 2006, we sold 1.3 acres of land in Radnor, Pennsylvania for a sales price of
$4.5 million. |
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In June 2006, we acquired a 23.2 acre land parcel in Goochland County, Virginia for a
purchase price of $4.6 million. |
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In June 2006, we sold 505 Millenium Drive, a property totaling 98,586 square feet in
Allen, Texas and 5.5 acres of land in Westampton, New Jersey for a an aggregate sales price
of $6.4 million. |
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In July 2006, we sold 110 Summit Drive, a property totaling 43,660 square feet in Exton,
Pennsylvania for a sales price of $3.7 million. |
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In August 2006, we acquired 2340 Dulles Corner Boulevard, a property totaling 264,405
square feet in Herndon, Virginia, for a purchase price of $79.0 million and 2355 Dulles
Corner Boulevard, a property totaling 179,176 square feet in Herndon, Virginia for a
purchase price of $55.0 million. |
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In August 2006, we sold 8144 Walnut Hill Lane, property totaling 464,470 square feet in
Dallas, Texas, 111 Presidential Boulevard, a property totaling 172,894 square feet in Bala
Cynwyd, Pennsylvania, 220 Cabot Drive, a property totaling 124,327 square feet in Lisle,
Texas and 10.9 acres of land in Sacramento, California for an aggregate sales price of
$127.6 million. |
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In October 2006, we acquired a 16.8 acre land parcel in Austin, Texas for a purchase
price of $2.5 million. |
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In November 2006, we sold King & Harvard Drive and One South Union Avenue, two
properties totaling 167,017 square feet in Cherry Hill, New Jersey and 1255 Corporate
Drive, a property totaling 150,019 square feet in Irving, Texas for an aggregate sales
price of $37.8 million. |
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In November 2006, we acquired 2251 Corporate Park Drive, a property totaling 158,016
square feet in Herndon, Virginia for a purchase price of $59.0 million. |
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In December 2006, we sold 2110 Walnut Hill Lane, three properties totaling 164,782
square feet in Irving, Texas, 105/140 Terry Drive, two properties totaling 128,666 square
feet in Newtown, Pennsylvania and 3890/3860 West Northwest Highway, two properties totaling
196,260 square feet in Dallas, Texas for an aggregate sales price of $45.0 million. We
also sold 59.0 acres of land in Newtown, Pennsylvania for a sales price of $19.0 million. |
Developments
In 2006 we placed in service two office properties that we developed and that contain an aggregate
of 782,595 net rentable square feet. We place a property in services at the earlier of (i) the
date at which we estimate the property to be 95% occupied and (ii) one year from the project
completion date. At December 31, 2006 we had nine properties under development or redevelopment that
contain an aggregate of 1.4 million net rentable square feet at an estimated total development cost
of $304.3 million. We expect to place these projects in service at dates between between the
second quarter of 2007 and the fourth quarter of 2008.
Unsecured Debt Financings
On March 28, 2006, we completed an underwritten public offering of (1) $300,000,000 aggregate
principal amount of floating rate guaranteed notes due 2009, (2) $300,000,000 aggregate principal
amount of 5.75% guaranteed notes due 2012 and (3) $250,000,000 aggregate principal amount of 6.00%
guaranteed notes due 2016. We used proceeds from these notes to repay a term loan that we obtained
to finance a portion of the consideration that we paid in the Prentiss merger and to reduce
borrowings under our revolving credit facility.
On October 4, 2006, we completed an offering of $300.0 million aggregate principal amount of 3.875%
senior convertible notes due 2026 in an offering made in reliance upon an exemption from
registration rights under Rule 144A under the Securities Act of 1933 and issued an additional $45
million of exchangeable notes on October 16, 2006 to cover over-allotments. At certain times and
upon the occurrence of certain events, the notes are exchangable into cash up to their principal
amount and, with respect to the remainder, if any, of the exchange value in excess of such
principal amount, cash or shares of the Companys common shares.
The initial exchange rate is 25.4065 shares per $1,000 principal amount of notes (which is equivalent to an initial
conversion price of $39.36 per share). The notes may not be redeemed by us prior to October 20,
2011 (except to preserve the Companys status as a REIT), but
are redeemable anytime thereafter, in whole
or in part, at a redemption price equal to the principal amount of the notes plus any accrued and
unpaid interest (including additional interest), if any. In addition, on October 20, 2011, October
15, 2016, and October 15, 2021, or upon the occurrence of certain change in control transactions
prior to October 20, 2011, note holders may require us to repurchase all or a portion of the notes
at a purchase price equal to the principal amount plus any accrued and unpaid interest on the
notes. Net
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proceeds
from the October 2006 note offering were used to repurchase approximately
$60.0 million of common shares at an average price of $32.80 per share and for general
corporate purposes, including the repayment of outstanding borrowings under our unsecured revolving
credit facility.
Business Objective and Strategies for Growth
Our business objective is to deploy capital effectively to maximize our return on investment and
thereby maximize our total return to shareholders. To accomplish this objective we seek to:
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maximize cash flow through leasing strategies designed to capture rental growth
as rental rates increase and as below-market leases are renewed; |
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attain a high tenant retention rate by providing a full array of property
management and maintenance services and tenant service programs responsive to the varying
needs of our diverse tenant base; |
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increase the economic diversification of our tenant base while maximizing
economies of scale; |
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as warranted by market conditions, deploy our land inventory and seek new land
parcels on which to develop high-quality office and industrial properties to service our
tenant base; |
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capitalize on our redevelopment expertise to selectively acquire, redevelop and
reposition properties in desirable locations; |
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acquire high-quality office and industrial properties and portfolios of such
properties at attractive yields in markets that we expect will experience economic growth; |
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form joint venture opportunities with high-quality partners having attractive
real estate holdings or significant financial resources; and |
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utilize our reputation as a full-service real estate development and management
organization to identify opportunities that will expand our business and create long-term
value. |
We expect to concentrate our real estate activities in markets where we believe that:
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current and projected market rents and absorption statistics justify
construction activity; |
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we can maximize market penetration by accumulating a critical mass of
properties and thereby enhance operating efficiencies; |
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barriers to entry (such as zoning restrictions, utility availability,
infrastructure limitations, development moratoriums and limited developable land) will
create supply constraints on office and industrial space; and |
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there is potential for economic growth, particularly job growth and industry
diversification. |
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Operating Strategy
We believe that we are well positioned in our current markets and have the expertise to take
advantage of both development and acquisition opportunities in new markets that have healthy
long-term fundamentals and strong growth projections. This capability, combined with what we
believe is a conservative financial structure, allows us to concentrate our growth efforts towards
selective development alternatives and acquisition opportunities. These abilities are integral to
our strategy of having a geographically and physically diverse portfolio of assets, which will
meet the needs of our tenants. Through our merger with Prentiss and our 2006 development and
disposition activities, we commenced operations in Southern and Northern California, Austin and
Dallas, TX and Metropolitan Washington D.C. metropolitan region and have decreased our relative
concentrations in Philadelphia and the Mid-Atlantic region. We have also expanded our overall
development pipeline and are pursuing acquisitions of sites on which we can capitalize on our own
development and market expertise.
We expect that selective development of new office properties will continue to be important to the
growth of our portfolio over the next several years. We use experienced on site construction
superintendents, operating under the supervision of project managers and senior management, to
control the construction process and mitigate the various risks associated with real estate
development. We believe we understand and effectively manage the risks associated with development
and construction, and these risks are justified by higher potential yields.
We expect to continue to operate in markets where we have a concentration advantage due to
economies of scale. We believe that where possible, it is best to operate with a strong base of
properties in order to benefit from the personnel allocation and the market strength associated
with managing several properties in the same market. However, we intend to selectively dispose of
properties and redeploy capital if we determine a property cannot meet long term earnings growth
expectations. We believe that recycling capital is an important aspect of maintaining the overall
quality of our portfolio.
Policies With Respect To Certain Activities
The following is a discussion of our investment, financing and other policies. These policies have
been determined by our Board of Trustees and our Board may revise these policies without a vote of
shareholders.
Investments in Real Estate or Interests in Real Estate
We may develop, purchase or lease income-producing properties for long-term investment, expand and
improve
the properties presently owned or other properties purchased, or sell such
properties, in whole or in part, as circumstances warrant. Although there is no limitation on the
types of development activities that we may undertake, we expect that our development activities
will meet current market demand and will generally be on a build-to-suit basis for particular
tenants, or where a significant portion of the building is pre-leased before construction begins.
We may also participate with other entities in property ownership through joint ventures or other
types of co-ownership. Our equity investments may be subject to existing or future
mortgage financing and other indebtedness that will have priority over our equity investments.
Securities of or Interests in Entities Primarily Engaged in Real Estate Activities and Other
Issuers
Subject to the percentage of ownership limitations and gross income tests necessary for REIT
qualification, we may invest in securities of other REITs, other entities engaged in real estate
activities or securities of other issuers. We may enter into joint ventures or partnerships for
the purpose of obtaining an equity interest in a particular property. We do not currently intend
to invest in the securities of other issuers except in connection with joint ventures or
acquisitions of indirect interests in properties.
Investments in Real Estate Mortgages
While our current portfolio consists of, and our business objectives emphasize, equity investments
in commercial real estate, we may, at the discretion of management or our Board of Trustees, invest
in other types of equity real estate investments, mortgages and other real estate interests. We do
not presently intend to invest to a significant extent in mortgages or deeds of trust, but may
invest in participating mortgages if we conclude that we may benefit from the cash flow or any
appreciation in the value of the property securing a mortgage.
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Dispositions
Our disposition of properties is based upon managements periodic review of our portfolio and the
determination by management or our Board of Trustees that a disposition would be in our best
interests.
Financing Policies
A primary objective of our financing policy has been to manage our financial position to allow
us to raise capital from a variety of sources at competitive rates. Our mortgages, credit
facilities and unsecured debt securities contain customary restrictions and limitations on our
ability to incur indebtedness. Our charter documents do not limit the indebtedness that we may
incur. Our financing strategy is to maintain a strong and flexible financial position by limiting
our debt to a prudent level and minimizing our variable interest rate exposure. We intend to
finance future growth with the most advantageous source of capital available to us at the time of
an acquisition. These sources may include selling common stock, preferred stock, debt securities,
depository shares or warrants through public offerings or private placements, utilizing
availability under our unsecured revolving credit facilities or incurring additional indebtedness
through secured or unsecured borrowings either or through mortgages with recourse limited to
specific properties. To qualify as a REIT, we must distribute to our shareholders each year at
least ninety percent of our net taxable income, excluding any net capital gain. This distribution
requirement makes it unlikely that we will be able to fund future capital needs, including for
acquisitions and developments, substantially from income from operations. Therefore, we expect to
continue to rely on third party sources of capital to fund future capital needs.
Working Capital Reserves
We maintain working capital reserves and access to borrowings in amounts that our management
determines to be adequate to meet our normal contingencies.
Policies with Respect to Other Activities
We expect to issue additional common and preferred shares of beneficial interest in the future and
may authorize our Operating Partnership to issue additional common and preferred units of limited
partnership interest, including to persons who contribute their interests in properties to us in
exchange for such units. We have not engaged in trading, underwriting or agency distribution or
sale of securities of unaffiliated issuers and we do not intend to do so. At all times, we intend
to make investments consistent with our qualification as a REIT, unless because of circumstances or
changes in the Internal Revenue Code of 1986, as amended (or the Treasury Regulations), our Board
of Trustees determines that it is no longer in our best interests to qualify as a REIT. We may
make loans to third parties, including to joint ventures in which we participate. We intend to
make investments in such a way that we will not be treated as an investment company under the
Investment Company Act of 1940.
Management Activities
We provide third-party real estate management services primarily through four subsidiaries
(collectively, the Management Companies): Brandywine Realty Services Corporation (BRSCO), BTRS,
Inc. (BTRS), Brandywine Properties I Limited, Inc. (BPI) and Brandywine Properties Management,
L.P. (BPM). BRSCO, BTRS and BPI are taxable REIT subsidiaries. The Operating Partnership owns a
95% interest in BRSCO and the remaining 5% interest is owned by a partnership comprised of a
current executive and former executive of the Company, each of whom is a member of our Board of
Trustees. The Operating Partnership owns, directly and indirectly, 100% of each of BTRS, BPI and
BPM.
As of December 31, 2006, the Management Companies were managing properties containing an aggregate
of approximately 42.3 million net rentable square feet, of which approximately 28.2 million net
rentable square feet related to Properties owned by us and approximately 13.0 million net rentable
square feet related to properties owned by third parties and unconsolidated Real Estate Ventures.
Geographic Segments
As of December 31, 2006 we were managing our portfolio within nine segments: (1)
PennsylvaniaWest, (2) PennsylvaniaNorth, (3) New Jersey, (4) Urban, (5) Richmond, Virginia, (6)
CaliforniaNorth, (7) CaliforniaSouth, (8) Mid-Atlantic and (9) Southwest. The PennsylvaniaWest
segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia
suburbs of Pennsylvania. The PennsylvaniaNorth segment includes properties north of Philadelphia
in Berks, Bucks, Cumberland, Dauphin, Lehigh and Montgomery
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counties. The New Jersey segment
includes properties in counties in the southern and central part of New Jersey including
Burlington, Camden and Mercer counties and in Bucks County, Pennsylvania. The Urban segment
includes properties in the City of Philadelphia, Pennsylvania and the state of Delaware. The
Richmond,
Virginia segment includes properties primarily in Albemarle, Chesterfield and Henrico counties, the
City of Richmond and Durham, North Carolina. The CaliforniaNorth segment includes properties in
the City of Oakland and Concord. The CaliforniaSouth segment includes properties in the City of
Carlsbad and San Diego. The Mid-Atlantic segment includes properties in Northern Virginia and the
suburban Maryland. The Southwest segment includes properties in Dallas and Travis counties of
Texas. Our corporate group is responsible for cash and investment management, development of
certain real estate properties during the construction period and general support functions.
Competition
The real estate business is highly competitive. Our properties compete for tenants with similar
properties primarily on the basis of location, total occupancy costs (including base rent and
operating expenses), services provided, and the design and condition of the improvements. We also
face competition when attempting to acquire or develop real estate, including competition from
domestic and foreign financial institutions, other REITs, life insurance companies, pension funds,
partnerships and individual investors. Additionally, our ability to compete depends upon trends in
the economies of our markets, investment alternatives, financial condition and operating results of
current and prospective tenants, availability and cost of capital, construction and renovation
costs, land availability, completion of construction approvals, taxes, governmental regulations,
legislation and population trends.
Insurance
We maintain comprehensive liability and property insurance on our properties, including for
liability, fire and flood. We intend to obtain similar coverage for properties we acquire in the
future. There are types of losses, generally of a catastrophic nature, such as losses from
terrorism, environmental issues, floods, hurricanes or earthquakes that may be subject to
limitations in certain areas. We exercise our discretion in determining amounts, coverage limits
and deductibility provisions of insurance, with a view to maintaining appropriate insurance on our
investments at a reasonable cost and on suitable terms. If we suffer a substantial loss, our
insurance coverage may not be sufficient to pay the full current market value or current
replacement cost of our lost investment. Inflation, changes in building codes and ordinances,
environmental considerations and other factors also might make it impractical to use insurance
proceeds to fully replace or restore a property after it has been damaged or destroyed.
Employees
As of December 31, 2006, we had 599 full-time employees, including 40 union employees.
Government Regulations Relating to the Environment
Many laws and governmental regulations relating to the environment apply to us and changes in these
laws and regulations, or their interpretation by agencies and the courts, occur frequently and may
adversely affect us.
Existing conditions at some of our Properties. Independent environmental consultants have
conducted Phase I or similar environmental site assessments on all of our properties. We generally
obtain these assessments prior to the acquisition of a property and may later update them as
required for subsequent financing of the property or as requested by a tenant. Site assessments
are generally performed to ASTM standards then existing for Phase I site assessments, and typically
include a historical review, a public records review, a visual inspection of the surveyed site, and
the issuance of a written report. These assessments do not generally include any soil samplings or
subsurface investigations. Depending on the age of the property, the Phase I may have included an
assessment of asbestos-containing materials. For properties where asbestos-containing materials
were identified or suspected, an operations and maintenance plan was generally prepared and
implemented. See Note 2 to our consolidated financial statements for our evaluation in accordance
with FIN 47, Accounting for Conditional Asset Retirement Obligations.
Historical operations at or near some of our properties, including the operation of underground
storage tanks, may have caused soil or groundwater contamination. We are not aware of any such
condition, liability or concern by any other means that would give rise to material environmental
liability. However, the assessments may have failed to reveal all environmental conditions,
liabilities or compliance concerns; there may be material environmental
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conditions, liabilities or
compliance concerns that arose at a property after the review was
completed; future laws, ordinances or regulations may impose material additional environmental
liability; and current environmental conditions at our Properties may be affected in the future by
tenants, third parties or the condition of land or operations near our Properties, such as the
presence of underground storage tanks. We cannot be certain that costs of future environmental
compliance will not affect our ability to make distributions to our shareholders.
Use of hazardous materials by some of our tenants. Some of our tenants handle hazardous substances
and wastes on our properties as part of their routine operations. Environmental laws and
regulations may subject these tenants, and potentially us, to liability resulting from such
activities. We generally require our tenants, in their leases, to comply with these environmental
laws and regulations and to indemnify us for any related liabilities. These tenants are primarily
involved in the life sciences and the light industrial and warehouse business. We are not aware of
any material noncompliance, liability or claim relating to hazardous or toxic substances or
petroleum products in connection with any of our Properties, and we do not believe that on-going
activities by our tenants will have a material adverse effect on our operations.
Costs related to government regulation and private litigation over environmental matters. Under
environmental laws and regulations, we may be liable for the costs of removal, remediation or
disposal of hazardous or toxic substances present or released on our Properties. These laws could
impose liability without regard to whether we are responsible for, or knew of, the presence or
release of the hazardous materials. Government investigations and remediation actions may entail
substantial costs and the presence or release of hazardous substances on a property could result in
governmental cleanup actions or personal injury or similar claims by
private plaintiffs.
Potential environmental liabilities may exceed our environmental insurance coverage limits. We
carry what we believe to be sufficient environmental insurance to cover potential liability for
soil and groundwater contamination and the presence of asbestos-containing materials at the
affected sites identified in our environmental site assessments. Our insurance policies are
subject to conditions, qualifications and limitations. Therefore, we cannot provide any assurance
that our insurance coverage will be sufficient to cover all liabilities for losses.
Other
We do not have any foreign operations and our business is not seasonal. Our operations are not
dependent on a single tenant or a few tenants and no single tenant accounted for more than 10% of
our total 2006 revenue.
Code of Conduct
We maintain a Code of Business Conduct and Ethics applicable to our Board and all of our officers
and employees, including our principal executive officer, principal financial officer, principal
accounting officer, controller and persons performing similar functions. A copy of our Code of
Business Conduct and Ethics is available on our website, www.brandywinerealty.com. In addition to
being accessible through our website, copies of our Code of Business Conduct and Ethics can be
obtained, free of charge, upon written request to Investor Relations, 555 East Lancaster Avenue,
Suite 100, Radnor, PA 19087. Any amendments to or waivers of our Code of Business Conduct and
Ethics that apply to our principal executive officer, principal financial officer, principal
accounting officer, controller and persons performing similar functions and that relate to any
matter enumerated in Item 406(b) of Regulation S-K promulgated by the SEC will be disclosed on our
website.
Corporate Governance Principles and Board Committee Charters
Our Corporate Governance Principles and the charters of the Audit Committee, Compensation Committee
and Corporate Governance Committee of the Board of Trustees of Brandywine Realty Trust and
additional information regarding our corporate governance are available on our website,
www.brandywinerealty.com. In addition to being accessible through our website, copies of our
Corporate Governance Principles and charters of our Board Committees can be obtained, free of
charge, upon written request to Investor Relations, 555 Lancaster Avenue, Radnor, PA 19087.
Availability of SEC Reports
We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K
and other information with the SEC. Members of the public may read and copy materials that we file
with the SEC at the
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SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
Members of the public may also obtain information on the Public Reference Room by calling the SEC
at 1-800-732-0330. The SEC also maintains an Internet web site that contains reports, proxy and
information statements and other information regarding issuers, including us, that file
electronically with the SEC. The address of that site is http://www.sec.gov. Our annual reports
on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information
filed by us with the SEC are available, without charge, on our Internet web site,
http://www.brandywinerealty.com, as soon as reasonably practicable after they are filed
electronically with the SEC. Copies are also available, without charge, from Secretary, Brandywine
Realty Trust, 555 East Lancaster Avenue, Suite 100, Radnor, PA 19087.
Item 1A. Risk Factors
Our performance is subject to risks associated with our properties and with the real estate
industry.
Our economic performance and the value of our real estate assets, and consequently the value of our
securities, are subject to the risk that if our properties do not generate revenues sufficient to
meet our operating expenses, including debt service and capital expenditures, our cash flow and
ability to pay distributions to our shareholders will be adversely affected. Events or conditions
beyond our control that may adversely affect our operations or the value of our properties include:
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downturns in the national, regional and local economic climate; |
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competition from other office, industrial and commercial buildings; |
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local real estate market conditions, such as oversupply or reduction in demand for
office, or other commercial or industrial space; |
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changes in interest rates and availability of financing; |
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vacancies, changes in market rental rates and the need to periodically repair, renovate and re-lease space; |
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increased operating costs, including insurance expense, utilities, real estate taxes,
state and local taxes and heightened security costs; |
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civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts
of war which may result in uninsured or underinsured losses; |
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significant expenditures associated with each investment, such as debt service payments,
real estate taxes, insurance and maintenance costs which are generally not reduced when
circumstances cause a reduction in revenues from a property; and |
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declines in the financial condition of our tenants and our ability to collect rents from
our tenants. |
We may experience increased operating costs, which might reduce our profitability.
Our properties are subject to increases in operating expenses such as for cleaning, electricity,
heating, ventilation and air conditioning, administrative costs and other costs associated with
security, landscaping and repairs and maintenance of our properties. In general, under our leases
with tenants, we pass on all or a portion of these costs to them. We cannot assure you, however,
that tenants will actually bear the full burden of these higher costs, or that such increased costs
will not lead them, or other prospective tenants, to seek office space elsewhere. If operating
expenses increase, the availability of other comparable office space in our core geographic markets
might limit our ability to increase rents; if operating expenses increase without a corresponding
increase in revenues, our profitability could diminish and limit our ability to make distributions
to shareholders.
Our investment in property development or redevelopment may be more costly than we anticipate.
We intend to continue to develop properties where market conditions warrant such investment. Once
made, these investments may not produce results in accordance with our expectations. Risks
associated with our development and construction activities include:
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the unavailability of favorable financing alternatives in the private and public debt
markets; |
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construction costs exceeding original estimates due to rising interest rates and
increases in the costs of materials and labor; |
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construction and lease-up delays resulting in increased debt service, fixed expenses and
construction or renovation costs; |
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expenditure of funds and devotion of managements time to projects that we do not complete; |
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the unavailability utilities; |
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occupancy rates and rents at newly completed properties may fluctuate depending on a
number of factors, including market and economic conditions, resulting in lower than
projected rental rates and a corresponding lower return on our investment; and |
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complications (including building moratoriums and anti-growth legislation) in obtaining
necessary zoning, occupancy and other governmental permits. |
We may not successfully integrate our historic operations with those of Prentiss and the intended
benefits of our acquisition of Prentiss may not be realized.
Our January 2006 acquisition of Prentiss presents challenges to management, including the
integration of our historic operations, properties and personnel with those of Prentiss. The
acquisition also poses other risks commonly associated with similar transactions, including
unanticipated liabilities, unexpected costs and the diversion of managements attention to the
integration of the operations of the combined companies. Any difficulties that our combined
company encounters in the transition and integration processes, and any level of integration that
is not successfully achieved, could have an adverse effect on our revenue, level of expenses and
operating results. We may also experience operational interruptions or the loss of key employees,
tenants and customers. As a result, notwithstanding our expectations, we may not realize any of
the anticipated benefits or cost savings of the Prentiss acquisition.
We face risks associated with property acquisitions.
We have in the past acquired, and intend in the future to acquire, properties and portfolios of
properties, including large portfolios, such as our acquisition of Prentiss, that would increase
our size and potentially alter our capital structure. Although we believe that the acquisitions
that we have completed in the past and that we expect to undertake in the future have, and will,
enhance our future financial performance, the success of such transactions is subject to a number
of factors, including the risk that:
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we may not be able to obtain financing for acquisitions on favorable terms; |
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acquired properties may fail to perform as expected; |
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the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates; |
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acquired properties may be located in new markets where we may have limited knowledge
and understanding of the local economy, an absence of business relationships in the area or
unfamiliarity with local governmental and permitting procedures; and |
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we may not be able to efficiently integrate acquired properties, particularly portfolios
of properties, into our organization and to manage new properties in a way that allows us
to realize cost savings and synergies. |
We have acquired in the past and in the future may acquire properties or portfolios of properties
through tax deferred contribution transactions in exchange for partnership interests in our
Operating Partnership. This acquisition structure has the effect, among others, of reducing the
amount of tax depreciation we can deduct over
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the tax life of the acquired properties, and
typically requires that we agree to protect the contributors ability to defer recognition of
taxable gain through restrictions on our ability to dispose of the acquired properties and/or the
allocation of partnership debt to the contributors to maintain their tax bases. These restrictions
on dispositions could limit our ability to sell an asset at a time, or on terms, that would be
favorable absent such restrictions.
Acquired properties may subject us to unknown liabilities.
Properties that we acquire may be subject to unknown liabilities for which we would have no
recourse, or only limited recourse, to the former owners of such properties. As a result, if a
liability were asserted against us based upon ownership of an acquired property, we might be
required to pay significant sums to settle it, which could adversely affect our financial results
and cash flow. Unknown liabilities relating to acquired properties could include:
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liabilities for clean-up of undisclosed environmental contamination; |
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claims by tenants, vendors or other persons arising on account of actions or omissions
of the former owners of the properties; and |
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liabilities incurred in the ordinary course of business. |
We have agreed not to sell certain of our properties and to maintain indebtedness subject to
guarantees.
We have agreed not to sell some of our properties for varying periods of time, in transactions that
would trigger taxable income to the former owners, and we may enter into similar arrangements as a
part of future property acquisitions. One of these tax protection agreements is with one of our
current trustees. These agreements generally provide that we may dispose of the subject properties
only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue
Code or in other tax deferred transactions. Such transactions can be difficult to complete and can
result in the property acquired in exchange for the disposed of property inheriting the tax
attributes (including tax protection covenants) of the disposed of property. Violation of these
tax protection agreements would impose significant costs on us. As a result, we are restricted
with respect to decisions related to financing, encumbering, expanding or selling of these
properties.
We have also entered into agreements that provide prior owners of properties with the right to
guarantee specific amounts of indebtedness and, in the event that the specific indebtedness that
they guarantee is repaid or reduced, we would be required to provide substitute indebtedness for
them to guarantee. These agreements may hinder actions that we may otherwise desire to take to
repay or refinance guaranteed indebtedness because we would be required to make payments to the
beneficiaries of such agreements if we violate these agreements.
We may be unable to renew leases or re-lease space as leases expire.
If tenants do not renew their leases upon expiration, we may be unable to re-lease the space. Even
if the tenants do renew their leases or if we can re-lease the space, the terms of renewal or
re-leasing (including the cost of required renovations) may be less favorable than current lease
terms. Certain leases grant the tenants an early termination right upon payment of a termination
penalty.
We face significant competition from other real estate developers.
We compete with real estate developers, operators and institutions for tenants and acquisition and
development opportunities. Some of these competitors have significantly greater financial
resources than we have. Such competition may reduce the number of suitable investment
opportunities available to us, may interfere with our ability to attract and retain tenants and may
increase vacancies, which could result in increased supply and lower market rental rates, reducing
our bargaining leverage and adversely affect our ability to improve our operating
leverage. In addition, some of our competitors may be willing (because their properties may have
vacancy rates higher than those for our properties) to make space available at lower prices than
available space in our properties or for other reasons. We cannot assure you that this competition
will not adversely affect our cash flow and our ability to make distributions to shareholders.
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Changes in market conditions including capitalization rates applied in real estate acquisitions
could impact our ability to grow through acquisitions.
We selectively pursue acquisitions in our core markets when long-term yields make acquisitions
attractive. We compete with numerous property owners for the acquisition of real estate
properties. Some of these competitors may be willing to accept lower yields on their investments
impacting our ability to acquire real estate assets and thus limit our external growth. We cannot
assure you that this competition will not adversely affect our cash flow and our ability to make
distributions to shareholders.
Property ownership through joint ventures may limit our ability to act exclusively in our interest.
We develop and acquire properties in joint ventures with other persons or entities when we believe
circumstances warrant the use of such structures. As of December 31, 2006, we had investments in
eleven unconsolidated real estate ventures and four additional real estate ventures that are
consolidated in our financial statements. Our investments in the eleven unconsolidated real estate
ventures aggregated approximately $74.6 million (net of returns of investment amounts) as of
December 31, 2006. We could become engaged in a dispute with one or more of our joint venture
partners that might affect our ability to operate a jointly-owned property. Moreover, our joint
venture partners may, at any time, have business, economic or other objectives that are
inconsistent with our objectives, including objectives that relate to the appropriate timing and
terms of any sale or refinancing of a property. In some instances, our joint venture partners may
have competing interests in our markets that could create conflicts of interest. If the objectives
of our joint venture partners are inconsistent with our own objectives, we will not be able to act
exclusively in our interests.
Because real estate is illiquid, we may not be able to sell properties when appropriate.
Real estate investments generally, and in particular large office and industrial properties like
those that we own, often cannot be sold quickly. Consequently, we may not be able to alter our
portfolio promptly in response to changes in economic or other conditions. In addition, the
Internal Revenue Code limits our ability to sell properties that we have held for fewer than four
years without resulting in adverse consequences to our shareholders. Furthermore, properties that
we have developed and have owned for a significant period of time or that we acquired in exchange
for partnership interests in our operating partnership often have a low tax basis. If we were to
dispose of any of these properties in a taxable transaction, we may be required under provisions of
the Internal Revenue Code applicable to REITs to distribute a significant amount of the taxable
gain to our shareholders and this could, in turn, impact our cash flow. In some cases, tax
protection agreements with third parties will prevent us from selling certain properties in a
taxable transaction without incurring substantial costs. In addition, purchase options and rights
of first refusal held by tenants or partners in joint ventures may also limit our ability to sell
certain properties. All of these factors reduce our ability to respond to changes in the
performance of our investments and could adversely affect our cash flow and ability to make
distributions to shareholders as well as the ability of someone to purchase us, even if a purchase
were in our shareholders best interests.
We may suffer adverse consequences due to the financial difficulties, bankruptcy or insolvency of
our tenants.
If one or more of our tenants were to experience financial difficulties, including bankruptcy,
insolvency or a general downturn of business, there could be an adverse effect on our financial
performance and distributions to shareholders. We cannot assure you that any tenant that files for
bankruptcy protection will continue to pay us rent. A bankruptcy filing by or relating to one of
our tenants or a lease guarantor would bar efforts by us to collect pre-bankruptcy debts from that
tenant or lease guarantor, or its property, unless we receive an order permitting us to do so from
the bankruptcy court. In addition, we cannot evict a tenant solely because of bankruptcy. The
bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances
under the relevant leases, and could ultimately preclude collection of these sums. If a lease is
assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid
to us in full. If, however, a lease is rejected by a tenant in bankruptcy, we would have only a
general unsecured claim for damages. Any such unsecured claim would only be paid to the extent
that funds are available and only in the same percentage as is paid to all other
holders of unsecured claims. Restrictions under the bankruptcy laws further limit the amount of
any other claims that we can make if a lease is rejected. As a result, it is likely that we would
recover substantially less than the full value of any such unsecured claims that we might hold.
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Some potential losses are not covered by insurance.
We currently carry comprehensive liability, fire, extended coverage and rental loss insurance on
all of our properties. We believe the policy specifications and insured limits of these policies
are adequate and appropriate. There are, however, types of losses, such as lease and other
contract claims and terrorism and acts of war that generally are not insured. We cannot assure you
that we will be able to renew insurance coverage in an adequate amount or at reasonable prices. In
addition, insurance companies may no longer offer coverage against certain types of losses, such as
losses due to terrorist acts and mold, or, if offered, these types of insurance may be
prohibitively expensive. Should an uninsured loss or a loss in excess of insured limits occur, we
could lose all or a portion of the capital we have invested in a property, as well as the
anticipated future revenue from the property. In such an event, we might nevertheless remain
obligated for any mortgage debt or other financial obligations related to the property. We cannot
assure you that material losses in excess of insurance proceeds will not occur in the future. If
any of our properties were to experience a catastrophic loss, it could seriously disrupt our
operations, delay revenue and result in large expenses to repair or rebuild the property. Such
events could adversely affect our cash flow and ability to make distributions to shareholders.
Terrorist attacks and other acts of violence or war may adversely impact our performance and may
affect the markets on which our securities are traded.
Terrorist attacks against our properties, or against the United States or our interests, may
negatively impact our operations and the value of our securities. Attacks or armed conflicts could
result in increased operating costs; for example, it might cost more in the future for building
security, property/casualty and liability insurance, and property maintenance. As a result of
terrorist activities and other market conditions, the cost of insurance coverage for our properties
could also increase. We might not be able to pass along the increased costs associated with such
increased security measures and insurance to our tenants, which could reduce our profitability and
cash flow. Furthermore, any terrorist attacks or armed conflicts could result in increased
volatility in or damage to the United States and worldwide financial markets and economy. Such
adverse economic conditions could affect the ability of our tenants to pay rent and our costs of
capitals, which could have a negative impact on our results.
Our ability to make distributions is subject to various risks.
Historically, we have paid quarterly distributions to our shareholders. Our ability to make
distributions in the future will depend upon:
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the operational and financial performance of our properties; |
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capital expenditures with respect to existing and newly acquired properties; |
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general and administrative costs associated with our operation as a publicly-held REIT; |
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the amount of, and the interest rates on, our debt; and |
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the absence of significant expenditures relating to environmental and other regulatory matters. |
Certain of these matters are beyond our control and any significant difference between our
expectations and actual results could have a material adverse effect on our cash flow and our
ability to make distributions to shareholders.
Changes in the law may adversely affect our cash flow.
Because increases in income and service taxes are generally not passed through to tenants under
leases, such increases may adversely affect our cash flow and ability to make expected
distributions to shareholders. Our properties are also subject to various regulatory requirements,
such as those relating to the environment, fire and safety. Our failure to comply with these
requirements could result in the imposition of fines and damage awards and default under some of
our tenant leases. Moreover, the costs to comply with any new or different regulations
could adversely affect our cash flow and our ability to make distributions. Although we believe
that our properties are in material compliance with all such requirements, we cannot assure you
that these requirements will not change or that newly imposed requirements will not require
significant expenditures.
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The terms and covenants relating to our indebtedness could adversely impact our economic
performance.
Like other real estate companies which incur debt, we are subject to risks associated with debt
financing, such as the insufficiency of cash flow to meet required debt service payment obligations
and the inability to refinance existing indebtedness. If our debt cannot be paid, refinanced or
extended at maturity, in addition to our failure to repay our debt, we may not be able to make
distributions to shareholders at expected levels or at all. Furthermore, an increase in our
interest expense could adversely affect our cash flow and ability to make distributions to
shareholders. If we do not meet our debt service obligations, any properties securing such
indebtedness could be foreclosed on, which would have a material adverse effect on our cash flow
and ability to make distributions and, depending on the number of properties foreclosed on, could
threaten our continued viability.
Our credit facilities and the indenture governing our unsecured public debt securities contain (and
any new or amended facility will contain) customary restrictions, requirements and other
limitations on our ability to incur indebtedness, including total debt to asset ratios, secured
debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets
to unsecured debt which we must maintain. Our ability to borrow under our credit facilities is
(and any new or amended facility will be) subject to compliance with such financial and other
covenants. In the event that we fail to satisfy these covenants, we would be in default under the
credit facilities and indenture and may be required to repay such debt with capital from other
sources. Under such circumstances, other sources of capital may not be available to us, or may be
available only on unattractive terms.
Increases in interest rates on variable rate indebtedness would increase our interest expense,
which could adversely affect our cash flow and ability to make distributions to shareholders.
Rising interest rates could also restrict our ability to refinance existing debt when it matures.
In addition, an increase in interest rates could decrease the amounts that third parties are
willing to pay for our assets, thereby limiting our ability to alter our portfolio promptly in
relation to economic or other conditions. We have entered into and may, from time to time, enter
into agreements such as interest rate hedges, swaps, floors, caps and other interest rate hedging
contracts with respect to a portion of our variable rate debt. Although these agreements may
lessen the impact of rising interest rates on us, they also expose us to the risk that other
parties to the agreements will not perform or that we cannot enforce the agreements.
Our degree of leverage could limit our ability to obtain additional financing or affect the market
price of our equity shares or debt securities.
Our degree of leverage could affect our ability to obtain additional financing for working capital
expenditures, development, acquisitions or other general corporate purposes. Our senior unsecured
debt is currently rated investment grade by the three major rating agencies. We cannot, however,
assure you that we will be able to maintain this rating. In the event that our unsecured debt is
downgraded from the current rating, we would likely incur higher borrowing costs and the market
prices of our common shares and debt securities might decline. Our degree of leverage could also
make us more vulnerable to a downturn in business or the economy generally.
Potential liability for environmental contamination could result in substantial costs.
Under various federal, state and local laws, ordinances and regulations, we may be liable for the
costs to investigate and remove or remediate hazardous or toxic substances on or in our properties,
often regardless of whether we know of or are responsible for the presence of these substances.
These costs may be substantial. Also, if hazardous or toxic substances are present on a property,
or if we fail to properly remediate such substances, our ability to sell or rent the property or to
borrow using that property as collateral may be adversely affected.
Additionally, we develop, manage, lease and/or operate various properties for third parties.
Consequently, we may be considered to have been or to be an operator of these properties and,
therefore, potentially liable for removal or remediation costs or other potential costs that could
relate to hazardous or toxic substances.
An earthquake or other natural disasters could adversely affect our business.
Some of our properties are located in California which is a high risk geographical area for
earthquakes or other natural disasters. Depending upon its magnitude, an earthquake could severely
damage our properties which would adversely affect our business. We maintain earthquake insurance
for our California properties and the resulting business interruption. We cannot assure you that
our insurance will be sufficient if there is a major earthquake.
-18-
Americans with Disabilities Act compliance could be costly.
The Americans with Disabilities Act of 1990 (ADA) requires that all public accommodations and
commercial facilities, including office buildings, meet certain federal requirements related to
access and use by disabled persons. Compliance with ADA requirements could involve the removal of
structural barriers from certain disabled persons entrances which could adversely affect our
financial condition and results of operations. Other federal, state and local laws may require
modifications to or restrict further renovations of our properties with respect to such accesses.
Although we believe that our properties are in material compliance with present requirements,
noncompliance with the ADA or similar or related laws or regulations could result in the United
States government imposing fines or private litigants being awarded damages against us. In
addition, changes to existing requirements or enactments of new requirements could require
significant expenditures. Such costs may adversely affect our cash flow and ability to make
distributions to shareholders.
Our status as a REIT (or any of our REIT subsidiaries) is dependent on compliance with federal
income tax requirements.
If we (or any of our REIT subsidiaries) fail to qualify as a REIT, we or the affected REIT
subsidiary would be subject to federal income tax at regular corporate rates. Also, unless the IRS
granted us or our affected REIT subsidiary, as the case may be, relief under certain statutory
provisions, we or it would remain disqualified as a REIT for four years following the year it first
failed to qualify. If we or any of our REIT subsidiaries fails to qualify as a REIT, we or they
would be required to pay significant income taxes and would, therefore, have less money available
for investments or for distributions to shareholders. This would likely have a material adverse
effect on the value of the combined companys securities. In addition, we or our affected REIT
subsidiaries would no longer be required to make any distributions to shareholders.
Failure of the Operating Partnership (or a subsidiary partnership) to be treated as a partnership
would have serious adverse consequences to our shareholders. If the IRS were to successfully
challenge the tax status of the Operating Partnership or any of its subsidiary partnerships for
federal income tax purposes, the Operating Partnership or the affected subsidiary partnership would
be taxable as a corporation. In such event we would cease to qualify as a REIT and the imposition
of a corporate tax on the Operating Partnership or a subsidiary partnership would reduce the amount
of cash available for distribution from the Operating Partnership to us and ultimately to our
shareholders.
Even if we qualify as a REIT, we will be required to pay certain federal, state and local taxes on
our income and properties. In addition, our taxable REIT subsidiaries will be subject to federal,
state and local income tax at regular corporate rates on their net taxable income derived from
management, leasing and related service business. If we have net income from a prohibited
transaction, such income will be subject to a 100% tax.
We face possible state and local tax audits.
Because we are organized and qualify as a REIT, we are generally not subject to federal income
taxes, but are subject to certain state and local taxes. In the normal course of business, certain
entities through which we own real estate either have undergone, or are currently undergoing, tax
audits. Although we believe that we have substantial arguments in favor of our positions in the
ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the
specific point at issue. Collectively, tax deficiency notices received to date from the
jurisdictions conducting the ongoing audits have not been material. However, there can be no
assurance that future audits will not occur with increased frequency or that the ultimate result of
such audits will not have a material adverse effect on our results of operations.
Competition for skilled personnel could increase labor costs.
We compete with various other companies in attracting and retaining qualified and skilled
personnel. We depend on our ability to attract and retain skilled management personnel who are
responsible for the day-to-day operations of our company. Competitive pressures may require that
we enhance our pay and benefits package to compete effectively for such personnel. We may not be
able to offset such added costs by increasing the rates we charge tenants. If there is an increase
in these costs or if we fail to attract and retain qualified and skilled personnel, our business
and operating results could be harmed.
-19-
We are dependent upon our key personnel.
We are dependent upon our key personnel whose continued service is not guaranteed. We are
dependent on our executive officers for strategic business direction and real estate experience.
In connection with the acquisition of Prentiss, we entered into employment agreements with several
former officers of Prentiss. Although we believe that we could find replacements for these key
personnel (including the former Prentiss officers), loss of their services could adversely affect
our operations.
Although we have an employment agreement with Gerard H. Sweeney, our President and Chief Executive
Officer, for a term extending to February 9, 2010, this agreement does not restrict his ability to
become employed by a competitor following the termination of his employment. We do not have key
man life insurance coverage on our executive officers.
Certain limitations will exist with respect to a third partys ability to acquire us or effectuate
a change in control.
Limitations imposed to protect our REIT status. In order to protect us against the loss of our
REIT status, our Declaration of Trust limits any shareholder from owning more than 9.8% in value of
our outstanding shares, subject to certain exceptions. The ownership limit may have the effect of
precluding acquisition of control of us. If anyone acquires shares in excess of the ownership
limit, we may:
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consider the transfer to be null and void; |
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not reflect the transaction on our books; |
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institute legal action to stop the transaction; |
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not pay dividends or other distributions with respect to those shares; |
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not recognize any voting rights for those shares; and |
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consider the shares held in trust for the benefit of a person to whom such shares may be transferred. |
Limitation due to our ability to issue preferred shares. Our Declaration of Trust authorizes our
Board of Trustees to cause us to issue preferred shares, without limitation as to amount and
without shareholder consent. Our Board of Trustees is able to establish the preferences and rights
of any preferred shares issued and these shares could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our shareholders best
interests.
Limitation imposed by the Maryland Business Combination Law. The Maryland General Corporation Law,
as applicable to Maryland REITs, establishes special restrictions against business combinations
between a Maryland REIT and interested shareholders or their affiliates unless an exemption is
applicable. An interested shareholder includes a person who beneficially owns, and an affiliate or
associate of the trust who, at any time within the two-year period prior to the date in question,
was the beneficial owner of, ten percent or more of the voting power of our then-outstanding voting
shares. Among other things, Maryland law prohibits (for a period of five years) a merger and
certain other transactions between a Maryland REIT and an interested shareholder unless the board
of trustees had approved the transaction before the party became an interested shareholder. The
five-year period runs from the most recent date on which the interested shareholder became an
interested shareholder. Thereafter, any such business combination must be recommended by the board
of trustees and approved by two super-majority shareholder votes unless, among other conditions,
the common shareholders receive a minimum price for their
shares and the consideration is received in cash or in the same form as previously paid by the
interested shareholder for our shares or unless the board of trustees approved the transaction
before the party in question became an interested shareholder. The business combination statute
could have the effect of discouraging offers to acquire us and of increasing the difficulty of
consummating any such offers, even if the acquisition would be in our shareholders best interests.
Maryland Control Share Acquisition Act. Maryland law provides that control shares of a REIT
acquired in a control share acquisition shall have no voting rights except to the extent approved
by a vote of two-thirds of the vote eligible to be cast on the matter under the Maryland Control
Share Acquisition Act. Control Shares means
-20-
shares that, if aggregated with all other shares
previously acquired by the acquirer or in respect of which the acquirer is able to exercise or
direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle
the acquirer to exercise voting power in electing trustees within one of the following ranges of
voting power: one-tenth or more but less than one-third, one-third or more but less than a majority
or a majority or more of all voting power. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained shareholder approval. A
control share acquisition means the acquisition of control shares, subject to certain exceptions.
If voting rights or control shares acquired in a control share acquisition are not approved at a
shareholders meeting, then subject to certain conditions and limitations the issuer may redeem any
or all of the control shares for fair value. If voting rights of such control shares are approved
at a shareholders meeting and the acquirer becomes entitled to vote a majority of the shares
entitled to vote, all other shareholders may exercise appraisal rights. Any control shares
acquired in a control share acquisition which are not exempt under our Bylaws are subject to the
Maryland Control Share Acquisition Act. Our Bylaws contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of our shares. We cannot assure
you that this provision will not be amended or eliminated at any time in the future.
Advance Notice Provisions for Shareholder Nominations and Proposals. Our bylaws require advance
notice for shareholders to nominate persons for election as trustees at, or to bring other business
before, any meeting of our shareholders. This bylaw provision limits the ability of shareholders
to make nominations of persons for election as trustees or to introduce other proposals unless we
are notified in a timely manner prior to the meeting.
Many factors can have an adverse effect on the market value of our securities.
A number of factors might adversely affect the price of our securities, many of which are beyond
our control. These factors include:
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increases in market interest rates, relative to the dividend yield on our shares. If
market interest rates go up, prospective purchasers of our securities may require a higher
yield. Higher market interest rates would not, however, result in more funds for us to
distribute and, to the contrary, would likely increase our borrowing costs and potentially
decrease funds available for distribution. Thus, higher market interest rates could cause
the market price of our common shares to go down; |
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anticipated benefit of an investment in our securities as compared to investment in
securities of companies in other industries (including benefits associated with tax
treatment of dividends and distributions); |
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perception by market professionals of REITs generally and REITs comparable to us in particular; |
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level of institutional investor interest in our securities; |
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relatively low trading volumes in securities of REITs; |
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our results of operations and financial condition; and |
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investor confidence in the stock market generally. |
The market value of our common shares is based primarily upon the markets perception of our growth
potential and our current and potential future earnings and cash distributions. Consequently, our
common shares may trade
at prices that are higher or lower than our net asset value per common share. If our future
earnings or cash distributions are less than expected, it is likely that the market price of our
common shares will diminish.
Additional issuances of equity securities may be dilutive to shareholders.
The interests of our shareholders could be diluted if we issue additional equity securities to
finance future developments or acquisitions or to repay indebtedness. Our Board of Trustees may
authorize the issuance of additional equity securities without shareholder approval. Our ability
to execute our business strategy depends upon our access to an appropriate blend of debt financing,
including unsecured lines of credit and other forms of secured and unsecured debt, and equity
financing, including the issuance of common and preferred equity.
-21-
The issuance of preferred securities may adversely affect the rights of holders of our common
shares.
Because our Board of Trustees has the power to establish the preferences and rights of each class
or series of preferred shares, we may afford the holders in any series or class of preferred shares
preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders
of common shares. Our Board of Trustees also has the power to establish the preferences and rights
of each class or series of units in Brandywine Operating Partnership, and may afford the holders in
any series or class of preferred units preferences, distributions, powers and rights, voting or
otherwise, senior to the rights of holders of common units.
The acquisition of new properties which lack operating history with us may give rise to
difficulties in predicting revenue potential.
We will continue to acquire additional properties. These acquisitions could fail to perform in
accordance with expectations. If we fail to accurately estimate occupancy levels, operating costs
or costs of improvements to bring an acquired property up to the standards established for our
intended market position, the performance of the property may be below expectations. Acquired
properties may have characteristics or deficiencies affecting their valuation or revenue potential
that we have not yet discovered. We cannot assure you that the performance of properties acquired
by us will increase or be maintained under our management.
Our performance is dependent upon the economic conditions of the markets in which our properties
are located.
Our properties are located in the Mid-Atlantic, Southwest, Northern California and Southern
California markets. Like other real estate markets, these commercial real estate markets have
experienced economic downturns in the past, and future declines in any of these economies or real
estate markets could adversely affect cash available for distribution. Our financial performance
and ability to make distributions to our shareholders will be particularly sensitive to the
economic conditions in these markets. The local economic climate, which may be adversely impacted
by business layoffs or downsizing, industry slowdowns, changing demographics and other factors, and
local real estate conditions, such as oversupply of or reduced demand for office, industrial and
other competing commercial properties, may affect revenues and the value of properties, including
properties to be acquired or developed. We cannot assure you that these local economies will grow
in the future.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
Property Acquisitions
We acquired the following properties during the year ended December 31, 2006:
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Month of |
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# of |
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Rentable Square |
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Purchase |
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Acquisition |
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Property/Portfolio Name |
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Location |
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Buildings |
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Feet/ Acres |
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Price |
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(in 000s) |
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Office: |
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Jan-06 |
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Prentiss Properties |
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Various |
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79 |
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14,043,326 |
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$ |
2,701,652 |
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Feb-06 |
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100 Lenox Drive |
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Lawrenceville, NJ |
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1 |
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92,980 |
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10,150 |
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Apr-06 |
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One Paragon Place |
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Richmond, VA |
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1 |
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145,127 |
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24,000 |
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Aug-06 |
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2340 Dulles Corner Boulevard |
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Herndon, VA |
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1 |
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264,405 |
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79,000 |
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Aug-06 |
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2355 Dulles Corner Boulevard |
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Herndon, VA |
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1 |
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179,176 |
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55,000 |
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Nov-06 |
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2251 Corporate Park Drive |
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Herndon, VA |
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1 |
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158,016 |
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59,000 |
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Total Office Properties Acquired |
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84 |
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14,883,030 |
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$ |
2,928,802 |
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Land Parcels: |
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Mar-06 |
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101-103 Juniper Street (parking garage) |
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Philadelphia, PA |
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$ |
2,250 |
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Apr-06 |
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Bishops Gate South |
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Mount Laurel, NJ |
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47.9 |
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6,700 |
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Apr-06 |
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Gradyville Road |
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Newtown (Delaware County), PA |
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5.5 |
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1,900 |
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Jun-06 |
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West Creek Land |
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Goochland County, VA |
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23.2 |
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4,636 |
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Oct-06 |
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Rob Roy Land |
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Austin, TX |
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16.8 |
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2,475 |
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Total Land Acquired |
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93.4 |
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$ |
17,961 |
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-22-
The purchase prices above do not include transaction costs, excluding the Prentiss properties.
Development Properties Placed in Service
We placed in service the following properties during the year ended December 31, 2006:
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Month Placed |
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# of |
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Rentable |
in Service |
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Property/Portfolio Name |
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Location |
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Buildings |
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Square Feet |
Office: |
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Nov-06 |
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Cira Centre |
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Philadelphia, PA |
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1 |
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731,852 |
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Dec-06 |
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855 Springdale Drive |
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West Whiteland, PA |
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1 |
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52,500 |
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Total Properties Placed in Service |
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2 |
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784,352 |
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We place a property under development in service once a property reaches 95% occupancy or one year
after the completion of shell construction, whichever is earlier.
-23-
Property Sales
We sold the following properties during the year ended December 31, 2006:
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Month of |
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# of |
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Rentable Square |
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Sales |
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Sale |
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Property/Portfolio Name |
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Location |
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Bldgs. |
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Feet/ Acres |
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Price |
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(in 000s) |
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Office: |
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Jan-06 |
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850/950 Warrenville Road |
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Chicago, IL |
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2 |
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99,470 |
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$ |
15,250 |
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Feb-06 |
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550/650 Warrenville Road |
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Chicago, IL |
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2 |
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169,115 |
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22,250 |
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Feb-06 |
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1050 Warrenville Road |
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Chicago, IL |
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1 |
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53,982 |
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3,500 |
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Feb-06 |
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701 Warrenville Road |
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Chicago, IL |
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1 |
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68,046 |
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9,500 |
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Feb-06 |
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801 Cherry Street |
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Fort Worth, TX |
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1 |
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1,025,601 |
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172,000 |
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Mar-06 |
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8755 W. Higgins Road |
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Chicago, IL |
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1 |
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237,320 |
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30,000 |
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Jun-06 |
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505 Millenium Drive |
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Allen, TX |
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1 |
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98,586 |
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5,943 |
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Jul-06 |
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110 Summit Drive |
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Exton, PA |
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1 |
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43,660 |
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3,690 |
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Aug-06 |
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8144 Walnut Hill Lane |
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Dallas, TX |
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1 |
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464,470 |
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63,300 |
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Aug-06 |
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111 Presidential Boulevard |
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Bala Cynwyd, PA |
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1 |
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172,894 |
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34,868 |
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Aug-06 |
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2200 Cabot Drive |
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Lisle, IL |
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1 |
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124,327 |
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24,250 |
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Nov-06 |
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King & Harvard Drive |
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Cherry Hill, NJ |
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1 |
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67,444 |
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6,600 |
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Nov-06 |
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One South Union Avenue |
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Cherry Hill, NJ |
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1 |
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99,573 |
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11,000 |
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Nov-06 |
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1255 Corporate Drive |
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Irving, TX |
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1 |
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150,019 |
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20,200 |
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Dec-06 |
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2110 Walnut Hill Lane |
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Irving, TX |
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3 |
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164,782 |
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11,825 |
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Dec-06 |
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105/140 Terry Drive |
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Newtown (Bucks County), PA |
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2 |
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128,666 |
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16,150 |
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Dec-06 |
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3890 West Northwest Highway |
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Dallas, TX |
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1 |
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126,132 |
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11,000 |
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Dec-06 |
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3860 West Northwest Highway |
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Dallas, TX |
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1 |
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70,128 |
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6,000 |
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Total Office Properties Sold |
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23 |
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3,364,215 |
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$ |
467,326 |
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Land Parcels: |
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Apr-06 |
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Radnor Chester Road |
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Radnor, PA |
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1.3 |
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$ |
4,500 |
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Jun-06 |
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Highland Drive |
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Westampton, NJ |
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5.5 |
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427 |
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Aug-06 |
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Natomas Land |
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Sacramento, CA |
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10.9 |
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5,223 |
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Dec-06 |
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Newtown Land |
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Newtown (Bucks County), PA |
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59.0 |
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19,000 |
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Total Land Sold |
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76.7 |
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$ |
29,150 |
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Properties
As of December 31, 2006, we owned 261 office properties, 23 industrial facilities and one mixed-use
property that contain an aggregate of approximately 28.2 million net rentable square feet. We also
have 6 properties under development, 3 properties under redevelopment and 4 lease-up properties
containing an aggregate 2.1 million net rentable square feet. The properties are located in and
surrounding Philadelphia, Wilmington, Southern and Central New Jersey, Richmond, Metropolitan
Washington, D.C., Dallas/Fort Worth, Austin, Oakland, San Diego and Los Angeles. As of December
31, 2006, the Properties were approximately 91.5% occupied by 1,623 tenants and had an average age
of approximately 17.8 years. The office properties are primarily two to three story
suburban office buildings containing an average of approximately 108,019 net rentable square feet.
The industrial properties accommodate a variety of tenant uses, including light manufacturing,
assembly, distribution and warehousing. We carry comprehensive liability, fire, extended coverage
and rental loss insurance covering all of the Properties, with policy specifications and insured
limits which we believe are adequate.
-24-
We had the following projects in development or redevelopment as of December 31, 2006:
|
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|
|
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% |
|
|
|
|
|
|
|
|
|
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Leased |
|
Projected |
|
|
|
|
Rentable |
|
as of |
|
In-Service |
Project Name |
|
Location |
|
Square Feet |
|
12/31/06 |
|
Date (a) |
Under Development: |
|
|
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|
|
|
|
|
|
|
|
|
|
|
Three Paragon |
|
Richmond, VA |
|
|
72,561 |
|
|
|
71 |
% |
|
Jun-07 |
Metroplex |
|
Plymouth Meeting, PA |
|
|
120,877 |
|
|
|
0 |
% |
|
Apr-08 |
1200 Lenox Drive |
|
Lawrenceville, NJ |
|
|
71,250 |
|
|
|
0 |
% |
|
Apr-08 |
Park on Barton Creek |
|
Austin, TX |
|
|
213,255 |
|
|
|
0 |
% |
|
Jun-08 |
2150 Franklin |
|
Oakland, CA |
|
|
215,000 |
|
|
|
0 |
% |
|
Oct-08 |
South Lake at Dulles |
|
Herndon, VA |
|
|
267,350 |
|
|
|
0 |
% |
|
Aug-08 |
|
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|
|
|
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|
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960,293 |
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|
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|
|
Under Redevelopment: |
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|
|
|
555 East
Lancaster Avenue |
|
Radnor, PA |
|
|
242,032 |
|
|
|
92 |
%(b) |
|
May-07 |
500 Office Center Drive |
|
Fort Washington, PA |
|
|
104,303 |
|
|
|
36 |
% |
|
Oct-07 |
100 Lenox Drive |
|
Lawrenceville, NJ |
|
|
92,980 |
|
|
|
0 |
% |
|
May-08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,399,608 |
|
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|
|
|
|
(a) |
|
Projected in-service date represents the earlier of (i) the date at which the property is
estimated to be 95% occupied or (ii) one year from the project completion date. |
|
(b) |
|
Includes the portion of the building we occupied in the second quarter of 2006. |
As of December 31, 2006, the above nine projects accounted for $141.2 million of the $217.9 million
of construction in process on our consolidated balance sheet.
As of December 31, 2006, we expect our total investment in these nine projects, including an
estimate of the tenant improvement costs, to be approximately $304.3 million.
The following table sets forth information with respect to our operating properties at December 31,
2006:
-25-
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Average |
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|
|
|
|
|
Total Base Rent |
|
Annualized |
|
|
|
|
|
|
|
|
|
|
Net |
|
Percentage |
|
for the Twelve |
|
Rental Rate |
|
|
|
|
|
|
|
|
Year |
|
Rentable |
|
Leased as of |
|
Months Ended |
|
as of |
|
|
|
|
|
|
|
|
Built/ |
|
Square |
|
December 31, |
|
December 31, |
|
December 31, |
Property Name |
|
|
|
Location |
|
State |
|
Renovated |
|
Feet |
|
2006 (a) |
|
2006
(b) (000s) |
|
2006 (c) |
CALIFORNIA NORTH SEGMENT |
|
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|
|
|
|
|
|
1 Kaiser Plaza |
|
|
|
Oakland |
|
CA |
|
1970 |
|
|
530,887 |
|
|
|
98.1 |
% |
|
$ |
16,028 |
|
|
$ |
34.34 |
|
2101 Webster Street |
|
|
|
Oakland |
|
CA |
|
1985 |
|
|
464,424 |
|
|
|
93.2 |
% |
|
|
11,538 |
|
|
|
29.01 |
|
1901 Harrison Street |
|
|
|
Oakland |
|
CA |
|
1985 |
|
|
272,100 |
|
|
|
95.3 |
% |
|
|
7,565 |
|
|
|
32.05 |
|
1220 Concord Avenue |
|
|
|
Concord |
|
CA |
|
1984 |
|
|
175,153 |
|
|
|
100.0 |
% |
|
|
2,944 |
|
|
|
22.06 |
|
1200 Concord Avenue |
|
|
|
Concord |
|
CA |
|
1984 |
|
|
175,103 |
|
|
|
100.0 |
% |
|
|
4,161 |
|
|
|
24.47 |
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
MID-ATLANTIC REGION SEGMENT |
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|
|
|
|
|
7101 Wisconsin Avenue |
|
|
|
Bethesda |
|
MD |
|
1975 |
|
|
223,054 |
|
|
|
76.1 |
% |
|
|
4,640 |
|
|
|
21.88 |
|
6600 Rockledge Drive |
|
(d) |
|
Bethesda |
|
MD |
|
1981 |
|
|
156,325 |
|
|
|
100.0 |
% |
|
|
4,993 |
|
|
|
36.27 |
|
2273 Research Boulevard |
|
|
|
Rockville |
|
MD |
|
1999 |
|
|
147,689 |
|
|
|
85.0 |
% |
|
|
2,751 |
|
|
|
24.53 |
|
2275 Research Boulevard |
|
|
|
Rockville |
|
MD |
|
1990 |
|
|
147,267 |
|
|
|
91.2 |
% |
|
|
2,993 |
|
|
|
23.17 |
|
2277 Research Boulevard |
|
|
|
Rockville |
|
MD |
|
1986 |
|
|
137,045 |
|
|
|
100.0 |
% |
|
|
3,012 |
|
|
|
24.29 |
|
11720 Beltsville Drive |
|
|
|
Beltsville |
|
MD |
|
1987 |
|
|
132,252 |
|
|
|
58.8 |
% |
|
|
875 |
|
|
|
17.72 |
|
7735 Old Georgetown Road |
|
|
|
Bethesda |
|
MD |
|
1964/1997 |
|
|
124,480 |
|
|
|
98.4 |
% |
|
|
3,233 |
|
|
|
30.38 |
|
11700 Beltsville Drive |
|
|
|
Beltsville |
|
MD |
|
1981 |
|
|
95,983 |
|
|
|
71.1 |
% |
|
|
1,517 |
|
|
|
21.75 |
|
11710 Beltsville Drive |
|
|
|
Beltsville |
|
MD |
|
1987 |
|
|
77,869 |
|
|
|
80.0 |
% |
|
|
1,586 |
|
|
|
25.05 |
|
11740 Beltsville Drive |
|
|
|
Beltsville |
|
MD |
|
1987 |
|
|
6,783 |
|
|
|
100.0 |
% |
|
|
160 |
|
|
|
26.41 |
|
1676 International Drive |
|
|
|
McLean |
|
VA |
|
1999 |
|
|
299,413 |
|
|
|
100.0 |
% |
|
|
9,152 |
|
|
|
31.59 |
|
2340 Dulles Corner Boulevard |
|
|
|
Herndon |
|
VA |
|
1987 |
|
|
264,405 |
|
|
|
96.8 |
% |
|
|
2,443 |
|
|
|
26.04 |
|
1900 Gallows Road |
|
|
|
Vienna |
|
VA |
|
1989 |
|
|
202,684 |
|
|
|
100.0 |
% |
|
|
4,244 |
|
|
|
23.65 |
|
3130 Fairview Park Drive |
|
|
|
Falls Church |
|
VA |
|
1999 |
|
|
183,111 |
|
|
|
72.4 |
% |
|
|
5,213 |
|
|
|
30.96 |
|
3141 Fairview Park Drive |
|
|
|
Falls Church |
|
VA |
|
1988 |
|
|
180,041 |
|
|
|
92.9 |
% |
|
|
3,886 |
|
|
|
24.36 |
|
2355 Dulles Corner Boulevard |
|
|
|
Herndon |
|
VA |
|
1988 |
|
|
179,074 |
|
|
|
98.7 |
% |
|
|
1,311 |
|
|
|
15.63 |
|
2411 Dulles Corner Park |
|
|
|
Herndon |
|
VA |
|
1990 |
|
|
177,072 |
|
|
|
95.4 |
% |
|
|
5,078 |
|
|
|
30.10 |
|
1880 Campus Commons Drive |
|
|
|
Reston |
|
VA |
|
1985 |
|
|
172,448 |
|
|
|
100.0 |
% |
|
|
3,110 |
|
|
|
19.78 |
|
2121 Cooperative Way |
|
|
|
Herndon |
|
VA |
|
2000 |
|
|
161,274 |
|
|
|
100.0 |
% |
|
|
4,435 |
|
|
|
27.74 |
|
8260 Greensboro Drive |
|
|
|
McLean |
|
VA |
|
1980 |
|
|
161,229 |
|
|
|
93.3 |
% |
|
|
3,667 |
|
|
|
25.03 |
|
2251 Corporate Park Drive |
|
|
|
Herndon |
|
VA |
|
2000 |
|
|
158,016 |
|
|
|
100.0 |
% |
|
|
664 |
|
|
|
32.93 |
|
13880 Dulles Corner Lane |
|
|
|
Herndon |
|
VA |
|
1997 |
|
|
151,747 |
|
|
|
100.0 |
% |
|
|
4,686 |
|
|
|
30.83 |
|
8521 Leesburg Pike |
|
|
|
Vienna |
|
VA |
|
1984 |
|
|
150,919 |
|
|
|
92.2 |
% |
|
|
3,161 |
|
|
|
24.54 |
|
12015 Lee Jackson Memorial Highway |
|
|
|
Fairfax |
|
VA |
|
1985 |
|
|
150,432 |
|
|
|
92.7 |
% |
|
|
3,335 |
|
|
|
24.52 |
|
2201 Cooperative Way |
|
|
|
Herndon |
|
VA |
|
1990 |
|
|
138,545 |
|
|
|
100.0 |
% |
|
|
3,829 |
|
|
|
28.41 |
|
11781 Lee Jackson Memorial Highway |
|
|
|
Fairfax |
|
VA |
|
1982 |
|
|
127,227 |
|
|
|
96.8 |
% |
|
|
3,048 |
|
|
|
24.26 |
|
13825 Sunrise Valley Drive |
|
|
|
Herndon |
|
VA |
|
1989 |
|
|
104,466 |
|
|
|
100.0 |
% |
|
|
2,484 |
|
|
|
24.67 |
|
4401 Fair Lakes Court |
|
|
|
Fairfax |
|
VA |
|
1988 |
|
|
55,972 |
|
|
|
98.7 |
% |
|
|
1,573 |
|
|
|
24.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PENNSYLVANIA NORTH SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100-300 Gundy Drive |
|
|
|
Reading |
|
PA |
|
1970 |
|
|
452,902 |
|
|
|
100.0 |
% |
|
|
7,222 |
|
|
|
15.64 |
|
401 Plymouth Road |
|
|
|
Plymouth Meeting |
|
PA |
|
2001 |
|
|
201,528 |
|
|
|
100.0 |
% |
|
|
5,880 |
|
|
|
27.08 |
|
300 Corporate Center Drive |
|
|
|
Camp Hill |
|
PA |
|
1989 |
|
|
175,280 |
|
|
|
91.3 |
% |
|
|
1,920 |
|
|
|
10.23 |
|
7535 Windsor Drive |
|
|
|
Allentown |
|
PA |
|
1988/2004 |
|
|
132,375 |
|
|
|
76.0 |
% |
|
|
1,372 |
|
|
|
16.01 |
|
100 Kachel Blvd |
|
|
|
Reading |
|
PA |
|
1970 |
|
|
131,082 |
|
|
|
100.0 |
% |
|
|
2,960 |
|
|
|
21.45 |
|
501 Office Center Drive |
|
|
|
Fort Washington |
|
PA |
|
1974/2005 |
|
|
114,795 |
|
|
|
98.0 |
% |
|
|
2,340 |
|
|
|
20.83 |
|
7130 Ambassador Drive |
|
(f) |
|
Allentown |
|
PA |
|
1991 |
|
|
114,049 |
|
|
|
100.0 |
% |
|
|
430 |
|
|
|
3.76 |
|
7350 Tilghman Street |
|
|
|
Allentown |
|
PA |
|
1987 |
|
|
111,500 |
|
|
|
100.0 |
% |
|
|
1,983 |
|
|
|
20.11 |
|
7450 Tilghman Street |
|
|
|
Allentown |
|
PA |
|
1986 |
|
|
100,000 |
|
|
|
100.0 |
% |
|
|
1,545 |
|
|
|
18.02 |
|
-26-
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Total Base Rent |
|
Annualized |
|
|
|
|
|
|
|
|
|
|
Net |
|
Percentage |
|
for the Twelve |
|
Rental Rate |
|
|
|
|
|
|
|
|
Year |
|
Rentable |
|
Leased as of |
|
Months Ended |
|
as of |
|
|
|
|
|
|
|
|
Built/ |
|
Square |
|
December 31, |
|
December 31, |
|
December 31, |
Property Name |
|
|
|
Location |
|
State |
|
Renovated |
|
Feet |
|
2006 (a) |
|
2006
(b) (000s) |
|
2006 (c) |
620 West Germantown Pike |
|
|
|
Plymouth Meeting |
|
PA |
|
1990 |
|
|
90,175 |
|
|
|
89.3 |
% |
|
|
1,772 |
|
|
|
27.91 |
|
610 West Germantown Pike |
|
|
|
Plymouth Meeting |
|
PA |
|
1987 |
|
|
90,152 |
|
|
|
100.0 |
% |
|
|
2,406 |
|
|
|
30.12 |
|
630 West Germantown Pike |
|
|
|
Plymouth Meeting |
|
PA |
|
1988 |
|
|
89,925 |
|
|
|
88.8 |
% |
|
|
1,768 |
|
|
|
24.05 |
|
600 West Germantown Pike |
|
|
|
Plymouth Meeting |
|
PA |
|
1986 |
|
|
89,681 |
|
|
|
97.4 |
% |
|
|
2,237 |
|
|
|
20.77 |
|
3331 Street Road -Greenwood Square |
|
|
|
Bensalem |
|
PA |
|
1986 |
|
|
81,575 |
|
|
|
98.8 |
% |
|
|
1,447 |
|
|
|
20.45 |
|
One Progress Drive |
|
|
|
Horsham |
|
PA |
|
1986 |
|
|
79,204 |
|
|
|
100.0 |
% |
|
|
848 |
|
|
|
13.40 |
|
323 Norristown Road |
|
|
|
Lower Gwyned |
|
PA |
|
1988 |
|
|
76,287 |
|
|
|
100.0 |
% |
|
|
1,447 |
|
|
|
19.16 |
|
160 - 180 West Germantown Pike |
|
|
|
East Norriton |
|
PA |
|
1982 |
|
|
73,394 |
|
|
|
69.4 |
% |
|
|
902 |
|
|
|
17.15 |
|
500 Enterprise Road |
|
|
|
Horsham |
|
PA |
|
1990 |
|
|
66,751 |
|
|
|
100.0 |
% |
|
|
506 |
|
|
|
13.53 |
|
925 Harvest Drive |
|
|
|
Blue Bell |
|
PA |
|
1990 |
|
|
62,957 |
|
|
|
100.0 |
% |
|
|
1,060 |
|
|
|
19.22 |
|
980 Harvest Drive |
|
|
|
Blue Bell |
|
PA |
|
1988 |
|
|
62,379 |
|
|
|
100.0 |
% |
|
|
1,317 |
|
|
|
21.32 |
|
3329 Street Road -Greenwood Square |
|
|
|
Bensalem |
|
PA |
|
1985 |
|
|
60,705 |
|
|
|
100.0 |
% |
|
|
1,146 |
|
|
|
21.02 |
|
200 Corporate Center Drive |
|
|
|
Camp Hill |
|
PA |
|
1989 |
|
|
60,000 |
|
|
|
100.0 |
% |
|
|
1,051 |
|
|
|
17.23 |
|
321 Norristown Road |
|
|
|
Lower Gwyned |
|
PA |
|
1971 |
|
|
59,994 |
|
|
|
95.0 |
% |
|
|
1,056 |
|
|
|
19.22 |
|
520 Virginia Drive |
|
|
|
Fort Washington |
|
PA |
|
1987 |
|
|
56,454 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
910 Harvest Drive |
|
|
|
Blue Bell |
|
PA |
|
1990 |
|
|
52,611 |
|
|
|
100.0 |
% |
|
|
704 |
|
|
|
13.72 |
|
2240/50 Butler Pike |
|
|
|
Plymouth Meeting |
|
PA |
|
1984 |
|
|
52,229 |
|
|
|
100.0 |
% |
|
|
1,119 |
|
|
|
20.96 |
|
920 Harvest Drive |
|
|
|
Blue Bell |
|
PA |
|
1990 |
|
|
51,894 |
|
|
|
77.8 |
% |
|
|
554 |
|
|
|
17.71 |
|
1155 Business Center Drive |
|
|
|
Horsham |
|
PA |
|
1990 |
|
|
51,388 |
|
|
|
94.2 |
% |
|
|
803 |
|
|
|
18.55 |
|
800 Business Center Drive |
|
|
|
Horsham |
|
PA |
|
1986 |
|
|
51,236 |
|
|
|
100.0 |
% |
|
|
598 |
|
|
|
15.71 |
|
7150 Windsor Drive |
|
|
|
Allentown |
|
PA |
|
1988 |
|
|
49,420 |
|
|
|
100.0 |
% |
|
|
542 |
|
|
|
14.41 |
|
6575 Snowdrift Road |
|
|
|
Allentown |
|
PA |
|
1988 |
|
|
47,091 |
|
|
|
100.0 |
% |
|
|
396 |
|
|
|
13.31 |
|
220 Commerce Drive |
|
|
|
Fort Washington |
|
PA |
|
1985 |
|
|
46,080 |
|
|
|
94.5 |
% |
|
|
794 |
|
|
|
21.39 |
|
6990 Snowdrift Road (A) |
|
|
|
Allentown |
|
PA |
|
2003 |
|
|
44,200 |
|
|
|
100.0 |
% |
|
|
763 |
|
|
|
18.30 |
|
7248 Tilghman Street |
|
|
|
Allentown |
|
PA |
|
1987 |
|
|
43,782 |
|
|
|
73.2 |
% |
|
|
535 |
|
|
|
17.56 |
|
7360 Windsor Drive |
|
|
|
Allentown |
|
PA |
|
2001 |
|
|
43,600 |
|
|
|
100.0 |
% |
|
|
935 |
|
|
|
24.41 |
|
300 Welsh Road Building I |
|
|
|
Horsham |
|
PA |
|
1980 |
|
|
40,042 |
|
|
|
100.0 |
% |
|
|
679 |
|
|
|
18.65 |
|
7310 Tilghman Street |
|
|
|
Allentown |
|
PA |
|
1985 |
|
|
40,000 |
|
|
|
83.5 |
% |
|
|
472 |
|
|
|
17.73 |
|
150 Corporate Center Drive |
|
|
|
Camp Hill |
|
PA |
|
1987 |
|
|
39,401 |
|
|
|
94.1 |
% |
|
|
703 |
|
|
|
18.84 |
|
755 Business Center Drive |
|
|
|
Horsham |
|
PA |
|
1998 |
|
|
38,050 |
|
|
|
100.0 |
% |
|
|
576 |
|
|
|
24.98 |
|
7010 Snowdrift Road |
|
|
|
Allentown |
|
PA |
|
1991 |
|
|
33,029 |
|
|
|
60.5 |
% |
|
|
145 |
|
|
|
15.67 |
|
2260 Butler Pike |
|
|
|
Plymouth Meeting |
|
PA |
|
1984 |
|
|
31,892 |
|
|
|
100.0 |
% |
|
|
654 |
|
|
|
14.59 |
|
700 Business Center Drive |
|
|
|
Horsham |
|
PA |
|
1986 |
|
|
30,773 |
|
|
|
100.0 |
% |
|
|
434 |
|
|
|
14.78 |
|
120 West Germantown Pike |
|
|
|
Plymouth Meeting |
|
PA |
|
1984 |
|
|
30,574 |
|
|
|
100.0 |
% |
|
|
562 |
|
|
|
20.10 |
|
650 Dresher Road |
|
|
|
Horsham |
|
PA |
|
1984 |
|
|
30,071 |
|
|
|
100.0 |
% |
|
|
684 |
|
|
|
23.71 |
|
655 Business Center Drive |
|
|
|
Horsham |
|
PA |
|
1997 |
|
|
29,849 |
|
|
|
94.3 |
% |
|
|
399 |
|
|
|
19.70 |
|
630 Dresher Road |
|
|
|
Horsham |
|
PA |
|
1987 |
|
|
28,894 |
|
|
|
100.0 |
% |
|
|
717 |
|
|
|
25.95 |
|
6990 Snowdrift Road (B) |
|
|
|
Allentown |
|
PA |
|
2004 |
|
|
27,900 |
|
|
|
100.0 |
% |
|
|
401 |
|
|
|
17.71 |
|
140 West Germantown Pike |
|
|
|
Plymouth Meeting |
|
PA |
|
1984 |
|
|
25,357 |
|
|
|
100.0 |
% |
|
|
488 |
|
|
|
23.09 |
|
3333 Street Road -Greenwood Square |
|
|
|
Bensalem |
|
PA |
|
1988 |
|
|
25,000 |
|
|
|
100.0 |
% |
|
|
539 |
|
|
|
23.89 |
|
800 Corporate Circle Drive |
|
|
|
Harrisburg |
|
PA |
|
1979 |
|
|
24,862 |
|
|
|
49.7 |
% |
|
|
197 |
|
|
|
17.80 |
|
500 Nationwide Drive |
|
|
|
Harrisburg |
|
PA |
|
1977 |
|
|
18,027 |
|
|
|
75.5 |
% |
|
|
211 |
|
|
|
18.85 |
|
600 Corporate Circle Drive |
|
|
|
Harrisburg |
|
PA |
|
1978 |
|
|
17,858 |
|
|
|
100.0 |
% |
|
|
287 |
|
|
|
18.41 |
|
300 Welsh Road Building II |
|
|
|
Horsham |
|
PA |
|
1980 |
|
|
17,750 |
|
|
|
100.0 |
% |
|
|
333 |
|
|
|
17.29 |
|
2404 Park Drive |
|
|
|
Harrisburg |
|
PA |
|
1983 |
|
|
11,000 |
|
|
|
100.0 |
% |
|
|
215 |
|
|
|
19.00 |
|
2401 Park Drive |
|
|
|
Harrisburg |
|
PA |
|
1984 |
|
|
10,074 |
|
|
|
100.0 |
% |
|
|
183 |
|
|
|
18.74 |
|
-27-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Base Rent |
|
Annualized |
|
|
|
|
|
|
|
|
|
|
Net |
|
Percentage |
|
for the Twelve |
|
Rental Rate |
|
|
|
|
|
|
|
|
Year |
|
Rentable |
|
Leased as of |
|
Months Ended |
|
as of |
|
|
|
|
|
|
|
|
Built/ |
|
Square |
|
December 31, |
|
December 31, |
|
December 31, |
Property Name |
|
|
|
Location |
|
State |
|
Renovated |
|
Feet |
|
2006 (a) |
|
2006
(b) (000s) |
|
2006 (c) |
George Kachel Farmhouse |
|
|
|
Reading |
|
PA |
|
2000 |
|
|
1,664 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
PENNSYLVANIA WEST SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 West Elm Street |
|
|
|
W. Conshohocken |
|
PA |
|
1999 |
|
|
185,774 |
|
|
|
77.2 |
% |
|
|
3,371 |
|
|
|
25.18 |
|
One Radnor Corporate Center |
|
|
|
Radnor |
|
PA |
|
1998 |
|
|
185,166 |
|
|
|
65.9 |
% |
|
|
4,743 |
|
|
|
31.86 |
|
Four Radnor Corporate Center |
|
|
|
Radnor |
|
PA |
|
1995 |
|
|
165,138 |
|
|
|
78.5 |
% |
|
|
2,988 |
|
|
|
21.02 |
|
Five Radnor Corporate Center |
|
|
|
Radnor |
|
PA |
|
1998 |
|
|
164,577 |
|
|
|
91.9 |
% |
|
|
4,755 |
|
|
|
32.70 |
|
751-761 Fifth Avenue |
|
|
|
King Of Prussia |
|
PA |
|
1967 |
|
|
158,000 |
|
|
|
100.0 |
% |
|
|
532 |
|
|
|
3.39 |
|
630 Allendale Road |
|
|
|
King of Prussia |
|
PA |
|
2000 |
|
|
150,000 |
|
|
|
100.0 |
% |
|
|
3,722 |
|
|
|
25.40 |
|
640 Freedom Business Center |
|
(d) |
|
King Of Prussia |
|
PA |
|
1991 |
|
|
132,000 |
|
|
|
84.1 |
% |
|
|
2,796 |
|
|
|
25.65 |
|
52 Swedesford Square |
|
|
|
East Whiteland Twp. |
|
PA |
|
1988 |
|
|
131,017 |
|
|
|
100.0 |
% |
|
|
2,677 |
|
|
|
21.18 |
|
400 Berwyn Park |
|
|
|
Berwyn |
|
PA |
|
1999 |
|
|
124,182 |
|
|
|
100.0 |
% |
|
|
3,256 |
|
|
|
26.72 |
|
Three Radnor Corporate Center |
|
|
|
Radnor |
|
PA |
|
1998 |
|
|
119,194 |
|
|
|
80.0 |
% |
|
|
2,635 |
|
|
|
28.38 |
|
101 Lindenwood Drive |
|
|
|
Malvern |
|
PA |
|
1988 |
|
|
118,121 |
|
|
|
100.0 |
% |
|
|
2,114 |
|
|
|
19.36 |
|
300 Berwyn Park |
|
|
|
Berwyn |
|
PA |
|
1989 |
|
|
109,919 |
|
|
|
98.8 |
% |
|
|
2,180 |
|
|
|
24.12 |
|
442 Creamery Way |
|
(f) |
|
Exton |
|
PA |
|
1991 |
|
|
104,500 |
|
|
|
100.0 |
% |
|
|
598 |
|
|
|
6.28 |
|
Two Radnor Corporate Center |
|
|
|
Radnor |
|
PA |
|
1998 |
|
|
100,973 |
|
|
|
69.0 |
% |
|
|
2,156 |
|
|
|
30.10 |
|
301 Lindenwood Drive |
|
|
|
Malvern |
|
PA |
|
1984 |
|
|
97,813 |
|
|
|
99.3 |
% |
|
|
1,766 |
|
|
|
18.63 |
|
1 West Elm Street |
|
|
|
W. Conshohocken |
|
PA |
|
1999 |
|
|
97,737 |
|
|
|
100.0 |
% |
|
|
2,744 |
|
|
|
28.44 |
|
555 Croton Road |
|
|
|
King of Prussia |
|
PA |
|
1999 |
|
|
96,909 |
|
|
|
100.0 |
% |
|
|
2,696 |
|
|
|
29.74 |
|
500 North Gulph Road |
|
|
|
King Of Prussia |
|
PA |
|
1979 |
|
|
93,082 |
|
|
|
80.8 |
% |
|
|
2,184 |
|
|
|
19.09 |
|
630 Freedom Business Center |
|
(d) |
|
King Of Prussia |
|
PA |
|
1989 |
|
|
86,683 |
|
|
|
97.0 |
% |
|
|
1,986 |
|
|
|
25.71 |
|
620 Freedom Business Center |
|
(d) |
|
King Of Prussia |
|
PA |
|
1986 |
|
|
86,570 |
|
|
|
100.0 |
% |
|
|
1,569 |
|
|
|
16.93 |
|
1200 Swedsford Road |
|
|
|
Berwyn |
|
PA |
|
1994 |
|
|
86,000 |
|
|
|
100.0 |
% |
|
|
2,111 |
|
|
|
26.99 |
|
595 East Swedesford Road |
|
|
|
Wayne |
|
PA |
|
1998 |
|
|
81,890 |
|
|
|
100.0 |
% |
|
|
1,573 |
|
|
|
21.35 |
|
1050 Westlakes Drive |
|
|
|
Berwyn |
|
PA |
|
1984 |
|
|
80,000 |
|
|
|
100.0 |
% |
|
|
719 |
|
|
|
|
|
1060 First Avenue |
|
|
|
King Of Prussia |
|
PA |
|
1987 |
|
|
77,718 |
|
|
|
90.6 |
% |
|
|
1,380 |
|
|
|
22.03 |
|
741 First Avenue |
|
|
|
King Of Prussia |
|
PA |
|
1966 |
|
|
77,184 |
|
|
|
100.0 |
% |
|
|
580 |
|
|
|
8.85 |
|
1040 First Avenue |
|
|
|
King Of Prussia |
|
PA |
|
1985 |
|
|
75,488 |
|
|
|
93.6 |
% |
|
|
1,321 |
|
|
|
21.97 |
|
200 Berwyn Park |
|
|
|
Berwyn |
|
PA |
|
1987 |
|
|
75,025 |
|
|
|
100.0 |
% |
|
|
1,574 |
|
|
|
23.40 |
|
1020 First Avenue |
|
|
|
King Of Prussia |
|
PA |
|
1984 |
|
|
74,556 |
|
|
|
100.0 |
% |
|
|
1,639 |
|
|
|
23.37 |
|
1000 First Avenue |
|
|
|
King Of Prussia |
|
PA |
|
1980 |
|
|
74,139 |
|
|
|
56.8 |
% |
|
|
921 |
|
|
|
23.38 |
|
436 Creamery Way |
|
|
|
Exton |
|
PA |
|
1991 |
|
|
72,300 |
|
|
|
87.8 |
% |
|
|
616 |
|
|
|
13.53 |
|
14 Campus Boulevard |
|
|
|
Newtown Square |
|
PA |
|
1998 |
|
|
69,542 |
|
|
|
100.0 |
% |
|
|
1,466 |
|
|
|
25.83 |
|
575 East Swedesford Road |
|
|
|
Wayne |
|
PA |
|
1985 |
|
|
66,265 |
|
|
|
100.0 |
% |
|
|
1,251 |
|
|
|
21.43 |
|
429 Creamery Way |
|
|
|
Exton |
|
PA |
|
1996 |
|
|
63,420 |
|
|
|
100.0 |
% |
|
|
777 |
|
|
|
14.94 |
|
610 Freedom Business Center |
|
(d) |
|
King Of Prussia |
|
PA |
|
1985 |
|
|
62,991 |
|
|
|
100.0 |
% |
|
|
1,420 |
|
|
|
26.90 |
|
426 Lancaster Avenue |
|
|
|
Devon |
|
PA |
|
1990 |
|
|
61,102 |
|
|
|
100.0 |
% |
|
|
1,213 |
|
|
|
17.63 |
|
1180 Swedesford Road |
|
|
|
Berwyn |
|
PA |
|
1987 |
|
|
60,371 |
|
|
|
100.0 |
% |
|
|
1,847 |
|
|
|
32.05 |
|
1160 Swedesford Road |
|
|
|
Berwyn |
|
PA |
|
1986 |
|
|
60,099 |
|
|
|
100.0 |
% |
|
|
1,413 |
|
|
|
24.49 |
|
100 Berwyn Park |
|
|
|
Berwyn |
|
PA |
|
1986 |
|
|
57,731 |
|
|
|
98.0 |
% |
|
|
1,087 |
|
|
|
22.66 |
|
440 Creamery Way |
|
|
|
Exton |
|
PA |
|
1991 |
|
|
57,218 |
|
|
|
100.0 |
% |
|
|
446 |
|
|
|
7.78 |
|
640 Allendale Road |
|
(f) |
|
King of Prussia |
|
PA |
|
2000 |
|
|
56,034 |
|
|
|
100.0 |
% |
|
|
350 |
|
|
|
7.83 |
|
565 East Swedesford Road |
|
|
|
Wayne |
|
PA |
|
1984 |
|
|
55,979 |
|
|
|
100.0 |
% |
|
|
1,010 |
|
|
|
19.95 |
|
650 Park Avenue |
|
|
|
King Of Prussia |
|
PA |
|
1968 |
|
|
54,338 |
|
|
|
97.1 |
% |
|
|
796 |
|
|
|
15.36 |
|
855 Springdale Drive |
|
|
|
Exton |
|
PA |
|
1986 |
|
|
53,500 |
|
|
|
33.3 |
% |
|
|
44 |
|
|
|
|
|
-28-
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Average |
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Total Base Rent |
|
Annualized |
|
|
|
|
|
|
|
|
|
|
Net |
|
Percentage |
|
for the Twelve |
|
Rental Rate |
|
|
|
|
|
|
|
|
Year |
|
Rentable |
|
Leased as of |
|
Months Ended |
|
as of |
|
|
|
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|
Built/ |
|
Square |
|
December 31, |
|
December 31, |
|
December 31, |
Property Name |
|
|
|
Location |
|
State |
|
Renovated |
|
Feet |
|
2006 (a) |
|
2006
(b) (000s) |
|
2006 (c) |
680 Allendale Road |
|
|
|
King Of Prussia |
|
PA |
|
1962 |
|
|
52,528 |
|
|
|
100.0 |
% |
|
|
544 |
|
|
|
13.34 |
|
486 Thomas Jones Way |
|
|
|
Exton |
|
PA |
|
1990 |
|
|
51,372 |
|
|
|
81.6 |
% |
|
|
677 |
|
|
|
19.83 |
|
660 Allendale Road |
|
(f) |
|
King of Prussia |
|
PA |
|
1962 |
|
|
50,635 |
|
|
|
100.0 |
% |
|
|
365 |
|
|
|
9.17 |
|
875 First Avenue |
|
|
|
King of Prussia |
|
PA |
|
1966 |
|
|
50,000 |
|
|
|
100.0 |
% |
|
|
1,038 |
|
|
|
21.15 |
|
630 Clark Avenue |
|
|
|
King of Prussia |
|
PA |
|
1960 |
|
|
50,000 |
|
|
|
100.0 |
% |
|
|
301 |
|
|
|
7.36 |
|
620 Allendale Road |
|
|
|
King of Prussia |
|
PA |
|
1961 |
|
|
50,000 |
|
|
|
100.0 |
% |
|
|
978 |
|
|
|
21.38 |
|
15 Campus Boulevard |
|
|
|
Newtown Square |
|
PA |
|
2002 |
|
|
49,621 |
|
|
|
100.0 |
% |
|
|
991 |
|
|
|
21.56 |
|
479 Thomas Jones Way |
|
|
|
Exton |
|
PA |
|
1988 |
|
|
49,264 |
|
|
|
100.0 |
% |
|
|
765 |
|
|
|
17.30 |
|
17 Campus Boulevard |
|
|
|
Newtown Square |
|
PA |
|
2001 |
|
|
48,565 |
|
|
|
100.0 |
% |
|
|
1,224 |
|
|
|
28.52 |
|
11 Campus Boulevard |
|
|
|
Newtown Square |
|
PA |
|
1998 |
|
|
47,700 |
|
|
|
100.0 |
% |
|
|
1,064 |
|
|
|
18.64 |
|
456 Creamery Way |
|
|
|
Exton |
|
PA |
|
1987 |
|
|
47,604 |
|
|
|
100.0 |
% |
|
|
364 |
|
|
|
7.89 |
|
585 East Swedesford Road |
|
|
|
Wayne |
|
PA |
|
1998 |
|
|
43,683 |
|
|
|
100.0 |
% |
|
|
1,018 |
|
|
|
24.76 |
|
1100 Cassett Road |
|
|
|
Berwyn |
|
PA |
|
1997 |
|
|
43,480 |
|
|
|
100.0 |
% |
|
|
1,106 |
|
|
|
29.65 |
|
467 Creamery Way |
|
|
|
Exton |
|
PA |
|
1988 |
|
|
42,000 |
|
|
|
100.0 |
% |
|
|
554 |
|
|
|
18.20 |
|
1336 Enterprise Drive |
|
|
|
West Goshen |
|
PA |
|
1989 |
|
|
39,330 |
|
|
|
100.0 |
% |
|
|
796 |
|
|
|
22.43 |
|
600 Park Avenue |
|
|
|
King of Prussia |
|
PA |
|
1964 |
|
|
39,000 |
|
|
|
100.0 |
% |
|
|
536 |
|
|
|
15.02 |
|
412 Creamery Way |
|
|
|
Exton |
|
PA |
|
1999 |
|
|
38,098 |
|
|
|
77.3 |
% |
|
|
677 |
|
|
|
23.33 |
|
18 Campus Boulevard |
|
|
|
Newtown Square |
|
PA |
|
1990 |
|
|
37,374 |
|
|
|
52.6 |
% |
|
|
740 |
|
|
|
21.94 |
|
457 Creamery Way |
|
|
|
Exton |
|
PA |
|
1990 |
|
|
36,019 |
|
|
|
100.0 |
% |
|
|
386 |
|
|
|
14.70 |
|
100 Arrandale Boulevard |
|
|
|
Exton |
|
PA |
|
1997 |
|
|
34,931 |
|
|
|
100.0 |
% |
|
|
550 |
|
|
|
20.01 |
|
300 Lindenwood Drive |
|
|
|
Malvern |
|
PA |
|
1991 |
|
|
33,000 |
|
|
|
0.0 |
% |
|
|
376 |
|
|
|
|
|
468 Thomas Jones Way |
|
|
|
Exton |
|
PA |
|
1990 |
|
|
28,934 |
|
|
|
100.0 |
% |
|
|
483 |
|
|
|
18.00 |
|
1700 Paoli Pike |
|
|
|
Malvern |
|
PA |
|
2000 |
|
|
28,000 |
|
|
|
100.0 |
% |
|
|
504 |
|
|
|
20.65 |
|
2490 Boulevard of the Generals |
|
|
|
King of Prussia |
|
PA |
|
1975 |
|
|
20,600 |
|
|
|
100.0 |
% |
|
|
434 |
|
|
|
20.77 |
|
481 John Young Way |
|
|
|
Exton |
|
PA |
|
1997 |
|
|
19,275 |
|
|
|
100.0 |
% |
|
|
405 |
|
|
|
22.50 |
|
100 Lindenwood Drive |
|
|
|
Malvern |
|
PA |
|
1985 |
|
|
18,400 |
|
|
|
100.0 |
% |
|
|
319 |
|
|
|
19.79 |
|
748 Springdale Drive |
|
|
|
Exton |
|
PA |
|
1986 |
|
|
13,950 |
|
|
|
77.7 |
% |
|
|
209 |
|
|
|
18.62 |
|
200 Lindenwood Drive |
|
|
|
Malvern |
|
PA |
|
1984 |
|
|
12,600 |
|
|
|
65.3 |
% |
|
|
148 |
|
|
|
18.39 |
|
111 Arrandale Road |
|
|
|
Exton |
|
PA |
|
1996 |
|
|
10,479 |
|
|
|
100.0 |
% |
|
|
196 |
|
|
|
17.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEW JERSEY SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 East State Street |
|
|
|
Trenton |
|
NJ |
|
1989 |
|
|
305,884 |
|
|
|
91.3 |
% |
|
|
5,278 |
|
|
|
29.88 |
|
1009 Lenox Drive |
|
|
|
Lawrenceville |
|
NJ |
|
1989 |
|
|
180,460 |
|
|
|
89.8 |
% |
|
|
3,777 |
|
|
|
28.42 |
|
10000 Midlantic Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1990 |
|
|
179,098 |
|
|
|
90.0 |
% |
|
|
2,727 |
|
|
|
22.82 |
|
33 West State Street |
|
|
|
Trenton |
|
NJ |
|
1988 |
|
|
167,774 |
|
|
|
99.6 |
% |
|
|
2,987 |
|
|
|
31.17 |
|
525 Lincoln Drive West |
|
|
|
Marlton |
|
NJ |
|
1986 |
|
|
165,956 |
|
|
|
96.7 |
% |
|
|
2,562 |
|
|
|
20.28 |
|
Main Street Plaza 1000 |
|
|
|
Voorhees |
|
NJ |
|
1988 |
|
|
162,364 |
|
|
|
94.6 |
% |
|
|
3,247 |
|
|
|
24.44 |
|
457 Haddonfield Road |
|
|
|
Cherry Hill |
|
NJ |
|
1990 |
|
|
121,737 |
|
|
|
100.0 |
% |
|
|
2,689 |
|
|
|
24.13 |
|
2000 Midlantic Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1989 |
|
|
121,658 |
|
|
|
100.0 |
% |
|
|
2,022 |
|
|
|
24.06 |
|
700 East Gate Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1984 |
|
|
119,272 |
|
|
|
79.2 |
% |
|
|
2,061 |
|
|
|
24.45 |
|
2000 Lenox Drive |
|
|
|
Lawrenceville |
|
NJ |
|
2000 |
|
|
119,114 |
|
|
|
100.0 |
% |
|
|
3,208 |
|
|
|
30.57 |
|
989 Lenox Drive |
|
|
|
Lawrenceville |
|
NJ |
|
1984 |
|
|
112,055 |
|
|
|
91.3 |
% |
|
|
2,734 |
|
|
|
30.46 |
|
993 Lenox Drive |
|
|
|
Lawrenceville |
|
NJ |
|
1985 |
|
|
111,124 |
|
|
|
100.0 |
% |
|
|
2,882 |
|
|
|
29.00 |
|
1000 Howard Boulevard |
|
|
|
Mt. Laurel |
|
NJ |
|
1988 |
|
|
105,312 |
|
|
|
100.0 |
% |
|
|
1,934 |
|
|
|
22.85 |
|
100 Brandywine Boulevard |
|
|
|
Newtown |
|
PA |
|
2002 |
|
|
102,000 |
|
|
|
100.0 |
% |
|
|
2,681 |
|
|
|
25.73 |
|
997 Lenox Drive |
|
|
|
Lawrenceville |
|
NJ |
|
1987 |
|
|
97,277 |
|
|
|
100.0 |
% |
|
|
2,387 |
|
|
|
27.27 |
|
1000 Atrium Way |
|
|
|
Mt. Laurel |
|
NJ |
|
1989 |
|
|
97,158 |
|
|
|
47.7 |
% |
|
|
1,020 |
|
|
|
21.48 |
|
-29-
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Average |
|
|
|
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|
|
Total Base Rent |
|
Annualized |
|
|
|
|
|
|
|
|
|
|
Net |
|
Percentage |
|
for the Twelve |
|
Rental Rate |
|
|
|
|
|
|
|
|
Year |
|
Rentable |
|
Leased as of |
|
Months Ended |
|
as of |
|
|
|
|
|
|
|
|
Built/ |
|
Square |
|
December 31, |
|
December 31, |
|
December 31, |
Property Name |
|
|
|
Location |
|
State |
|
Renovated |
|
Feet |
|
2006 (a) |
|
2006
(b) (000s) |
|
2006 (c) |
1120 Executive Boulevard |
|
|
|
Mt. Laurel |
|
NJ |
|
1987 |
|
|
95,278 |
|
|
|
98.8 |
% |
|
|
1,503 |
|
|
|
17.14 |
|
15000 Midlantic Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1991 |
|
|
84,056 |
|
|
|
100.0 |
% |
|
|
1,355 |
|
|
|
19.75 |
|
220 Lake Drive East |
|
|
|
Cherry Hill |
|
NJ |
|
1988 |
|
|
78,509 |
|
|
|
76.1 |
% |
|
|
1,198 |
|
|
|
22.95 |
|
1007 Laurel Oak Road |
|
|
|
Voorhees |
|
NJ |
|
1996 |
|
|
78,205 |
|
|
|
100.0 |
% |
|
|
621 |
|
|
|
7.94 |
|
10 Lake Center Drive |
|
|
|
Marlton |
|
NJ |
|
1989 |
|
|
76,359 |
|
|
|
95.2 |
% |
|
|
1,117 |
|
|
|
20.10 |
|
200 Lake Drive East |
|
|
|
Cherry Hill |
|
NJ |
|
1989 |
|
|
76,352 |
|
|
|
96.0 |
% |
|
|
1,609 |
|
|
|
22.92 |
|
1400 Howard Boulevard |
|
|
|
Mt. Laurel |
|
NJ |
|
1995/2005 |
|
|
75,590 |
|
|
|
100.0 |
% |
|
|
1,431 |
|
|
|
23.20 |
|
Three Greentree Centre |
|
|
|
Marlton |
|
NJ |
|
1984 |
|
|
69,300 |
|
|
|
96.1 |
% |
|
|
1,313 |
|
|
|
22.66 |
|
9000 Midlantic Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1989 |
|
|
67,299 |
|
|
|
100.0 |
% |
|
|
836 |
|
|
|
22.86 |
|
6 East Clementon Road |
|
|
|
Gibbsboro |
|
NJ |
|
1980 |
|
|
66,236 |
|
|
|
87.1 |
% |
|
|
981 |
|
|
|
18.75 |
|
701 East Gate Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1986 |
|
|
61,794 |
|
|
|
100.0 |
% |
|
|
1,280 |
|
|
|
22.55 |
|
210 Lake Drive East |
|
|
|
Cherry Hill |
|
NJ |
|
1986 |
|
|
60,604 |
|
|
|
94.2 |
% |
|
|
1,214 |
|
|
|
22.25 |
|
308 Harper Drive |
|
|
|
Moorestown |
|
NJ |
|
1976 |
|
|
59,500 |
|
|
|
79.5 |
% |
|
|
1,001 |
|
|
|
22.57 |
|
305 Fellowship Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1980 |
|
|
56,824 |
|
|
|
100.0 |
% |
|
|
1,068 |
|
|
|
22.14 |
|
Two Greentree Centre |
|
|
|
Marlton |
|
NJ |
|
1983 |
|
|
56,075 |
|
|
|
69.6 |
% |
|
|
836 |
|
|
|
22.86 |
|
309 Fellowship Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1982 |
|
|
55,911 |
|
|
|
100.0 |
% |
|
|
1,217 |
|
|
|
26.19 |
|
One Greentree Centre |
|
|
|
Marlton |
|
NJ |
|
1982 |
|
|
55,838 |
|
|
|
95.1 |
% |
|
|
1,072 |
|
|
|
20.96 |
|
8000 Lincoln Drive |
|
|
|
Marlton |
|
NJ |
|
1997 |
|
|
54,923 |
|
|
|
100.0 |
% |
|
|
1,003 |
|
|
|
18.47 |
|
307 Fellowship Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1981 |
|
|
54,485 |
|
|
|
93.6 |
% |
|
|
1,047 |
|
|
|
24.71 |
|
303 Fellowship Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1979 |
|
|
53,768 |
|
|
|
100.0 |
% |
|
|
1,037 |
|
|
|
22.43 |
|
1000 Bishops Gate |
|
|
|
Mt. Laurel |
|
NJ |
|
2005 |
|
|
53,281 |
|
|
|
100.0 |
% |
|
|
1,167 |
|
|
|
22.53 |
|
1000 Lenox Drive |
|
|
|
Lawrenceville |
|
NJ |
|
1982 |
|
|
52,264 |
|
|
|
100.0 |
% |
|
|
1,329 |
|
|
|
28.83 |
|
2 Foster Avenue |
|
(f) |
|
Gibbsboro |
|
NJ |
|
1974 |
|
|
50,761 |
|
|
|
100.0 |
% |
|
|
165 |
|
|
|
5.11 |
|
4000 Midlantic Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1998 |
|
|
46,945 |
|
|
|
100.0 |
% |
|
|
657 |
|
|
|
22.34 |
|
Five Eves Drive |
|
|
|
Marlton |
|
NJ |
|
1986 |
|
|
45,564 |
|
|
|
100.0 |
% |
|
|
815 |
|
|
|
19.68 |
|
161 Gaither Drive |
|
|
|
Mount Laurel |
|
NJ |
|
1987 |
|
|
44,739 |
|
|
|
96.0 |
% |
|
|
647 |
|
|
|
16.64 |
|
Main Street Piazza |
|
|
|
Voorhees |
|
NJ |
|
1990 |
|
|
44,708 |
|
|
|
97.3 |
% |
|
|
725 |
|
|
|
17.92 |
|
30 Lake Center Drive |
|
|
|
Marlton |
|
NJ |
|
1986 |
|
|
40,287 |
|
|
|
48.1 |
% |
|
|
750 |
|
|
|
22.14 |
|
20 East Clementon Road |
|
|
|
Gibbsboro |
|
NJ |
|
1986 |
|
|
38,260 |
|
|
|
100.0 |
% |
|
|
549 |
|
|
|
17.77 |
|
Two Eves Drive |
|
|
|
Marlton |
|
NJ |
|
1987 |
|
|
37,532 |
|
|
|
82.9 |
% |
|
|
564 |
|
|
|
17.98 |
|
304 Harper Drive |
|
|
|
Moorestown |
|
NJ |
|
1975 |
|
|
32,978 |
|
|
|
97.5 |
% |
|
|
655 |
|
|
|
23.39 |
|
Main Street Promenade |
|
|
|
Voorhees |
|
NJ |
|
1988 |
|
|
31,445 |
|
|
|
96.5 |
% |
|
|
502 |
|
|
|
17.58 |
|
Four B Eves Drive |
|
|
|
Marlton |
|
NJ |
|
1987 |
|
|
27,011 |
|
|
|
82.8 |
% |
|
|
376 |
|
|
|
16.59 |
|
815 East Gate Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1986 |
|
|
25,500 |
|
|
|
100.0 |
% |
|
|
246 |
|
|
|
11.72 |
|
817 East Gate Drive |
|
|
|
Mt. Laurel |
|
NJ |
|
1986 |
|
|
25,351 |
|
|
|
38.5 |
% |
|
|
142 |
|
|
|
16.16 |
|
Four A Eves Drive |
|
|
|
Marlton |
|
NJ |
|
1987 |
|
|
24,687 |
|
|
|
100.0 |
% |
|
|
327 |
|
|
|
15.49 |
|
1 Foster Avenue |
|
(f) |
|
Gibbsboro |
|
NJ |
|
1972 |
|
|
24,255 |
|
|
|
100.0 |
% |
|
|
62 |
|
|
|
4.45 |
|
4 Foster Avenue |
|
(f) |
|
Gibbsboro |
|
NJ |
|
1974 |
|
|
23,372 |
|
|
|
100.0 |
% |
|
|
150 |
|
|
|
8.65 |
|
7 Foster Avenue |
|
|
|
Gibbsboro |
|
NJ |
|
1983 |
|
|
22,158 |
|
|
|
100.0 |
% |
|
|
367 |
|
|
|
21.19 |
|
10 Foster Avenue |
|
|
|
Gibbsboro |
|
NJ |
|
1983 |
|
|
18,651 |
|
|
|
100.0 |
% |
|
|
259 |
|
|
|
17.26 |
|
305 Harper Drive |
|
|
|
Moorestown |
|
NJ |
|
1979 |
|
|
14,980 |
|
|
|
100.0 |
% |
|
|
127 |
|
|
|
9.61 |
|
5 U.S. Avenue |
|
(f) |
|
Gibbsboro |
|
NJ |
|
1987 |
|
|
5,000 |
|
|
|
100.0 |
% |
|
|
23 |
|
|
|
4.40 |
|
50 East Clementon Road |
|
|
|
Gibbsboro |
|
NJ |
|
1986 |
|
|
3,080 |
|
|
|
100.0 |
% |
|
|
145 |
|
|
|
47.01 |
|
5 Foster Avenue |
|
|
|
Gibbsboro |
|
NJ |
|
1968 |
|
|
2,000 |
|
|
|
100.0 |
% |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOUTHWEST SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2711 North Haskell Avenue |
|
|
|
Dallas |
|
TX |
|
1988 |
|
|
1,303,161 |
|
|
|
90.4 |
% |
|
|
19,900 |
|
|
|
18.65 |
|
-30-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Base Rent |
|
Annualized |
|
|
|
|
|
|
|
|
|
|
Net |
|
Percentage |
|
for the Twelve |
|
Rental Rate |
|
|
|
|
|
|
|
|
Year |
|
Rentable |
|
Leased as of |
|
Months Ended |
|
as of |
|
|
|
|
|
|
|
|
Built/ |
|
Square |
|
December 31, |
|
December 31, |
|
December 31, |
Property Name |
|
|
|
Location |
|
State |
|
Renovated |
|
Feet |
|
2006 (a) |
|
2006
(b) (000s) |
|
2006 (c) |
1501/1503 LBJ Freeway |
|
|
|
Dallas |
|
TX |
|
1985 |
|
|
355,895 |
|
|
|
72.1 |
% |
|
|
4,891 |
|
|
|
19.60 |
|
1505/1507 LBJ Freeway |
|
|
|
Dallas |
|
TX |
|
1989 |
|
|
352,177 |
|
|
|
94.1 |
% |
|
|
7,414 |
|
|
|
24.23 |
|
1250 Capital of Texas Highway South |
|
|
|
Austin |
|
TX |
|
1984 |
|
|
269,321 |
|
|
|
90.1 |
% |
|
|
3,232 |
|
|
|
22.62 |
|
1301 Mopac Expressway |
|
|
|
Austin |
|
TX |
|
2001 |
|
|
222,581 |
|
|
|
99.1 |
% |
|
|
4,441 |
|
|
|
29.60 |
|
1603 LBJ Freeway |
|
|
|
Dallas |
|
TX |
|
1985 |
|
|
200,375 |
|
|
|
69.4 |
% |
|
|
2,049 |
|
|
|
12.22 |
|
1601 Mopac Expressway |
|
|
|
Austin |
|
TX |
|
2000 |
|
|
195,639 |
|
|
|
100.0 |
% |
|
|
2,562 |
|
|
|
25.20 |
|
1501 South Mopac Expressway |
|
|
|
Austin |
|
TX |
|
1999 |
|
|
195,164 |
|
|
|
100.0 |
% |
|
|
3,026 |
|
|
|
25.76 |
|
1601 LBJ Freeway |
|
|
|
Dallas |
|
TX |
|
1982 |
|
|
182,739 |
|
|
|
100.0 |
% |
|
|
3,085 |
|
|
|
15.60 |
|
1221 Mopac Expressway |
|
|
|
Austin |
|
TX |
|
2001 |
|
|
173,302 |
|
|
|
96.0 |
% |
|
|
3,541 |
|
|
|
30.62 |
|
1801 Mopac Expressway |
|
|
|
Austin |
|
TX |
|
1999 |
|
|
58,576 |
|
|
|
100.0 |
% |
|
|
974 |
|
|
|
29.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
URBAN SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2929 Arch Street |
|
|
|
Philadelphia |
|
PA |
|
2006 |
|
|
729,723 |
|
|
|
99.4 |
% |
|
|
16,653 |
|
|
|
22.61 |
|
100 North 18th Street |
|
(e) |
|
Philadelphia |
|
PA |
|
1988 |
|
|
701,645 |
|
|
|
99.1 |
% |
|
|
20,235 |
|
|
|
31.52 |
|
130 North 18th Street |
|
|
|
Philadelphia |
|
PA |
|
1998 |
|
|
594,361 |
|
|
|
100.0 |
% |
|
|
12,852 |
|
|
|
29.54 |
|
Philadelphia Marine Center |
|
(d) |
|
Philadelphia |
|
PA |
|
Various |
|
|
181,900 |
|
|
|
100.0 |
% |
|
|
1,491 |
|
|
|
5.45 |
|
300 Delaware Avenue |
|
|
|
Wilmington |
|
DE |
|
1989 |
|
|
310,929 |
|
|
|
79.5 |
% |
|
|
3,613 |
|
|
|
15.08 |
|
920 North King Street |
|
|
|
Wilmington |
|
DE |
|
1989 |
|
|
203,328 |
|
|
|
100.0 |
% |
|
|
4,604 |
|
|
|
24.61 |
|
400 Commerce Drive |
|
|
|
Newark |
|
DE |
|
1997 |
|
|
154,086 |
|
|
|
100.0 |
% |
|
|
2,229 |
|
|
|
15.82 |
|
One Righter Parkway |
|
(d) |
|
Wilmington |
|
DE |
|
1989 |
|
|
105,237 |
|
|
|
93.1 |
% |
|
|
1,719 |
|
|
|
18.40 |
|
Two Righter Parkway |
|
(d) |
|
Wilmington |
|
DE |
|
1987 |
|
|
95,514 |
|
|
|
0.0 |
% |
|
|
1,759 |
|
|
|
|
|
200 Commerce Drive |
|
|
|
Newark |
|
DE |
|
1998 |
|
|
68,034 |
|
|
|
100.0 |
% |
|
|
1,327 |
|
|
|
18.51 |
|
100 Commerce Drive |
|
|
|
Newark |
|
DE |
|
1989 |
|
|
62,787 |
|
|
|
99.8 |
% |
|
|
1,106 |
|
|
|
15.35 |
|
111/113 Pencader Drive |
|
|
|
Newark |
|
DE |
|
1990 |
|
|
52,665 |
|
|
|
100.0 |
% |
|
|
505 |
|
|
|
12.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VIRGINIA SEGMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600 East Main Street |
|
|
|
Richmond |
|
VA |
|
1986 |
|
|
420,575 |
|
|
|
93.8 |
% |
|
|
6,957 |
|
|
|
19.14 |
|
300 Arboretum Place |
|
|
|
Richmond |
|
VA |
|
1988 |
|
|
212,647 |
|
|
|
100.0 |
% |
|
|
3,822 |
|
|
|
18.97 |
|
6800 Paragon Place |
|
|
|
Richmond |
|
VA |
|
1986 |
|
|
145,127 |
|
|
|
98.9 |
% |
|
|
2,075 |
|
|
|
19.22 |
|
6802 Paragon Place |
|
|
|
Richmond |
|
VA |
|
1989 |
|
|
143,585 |
|
|
|
87.4 |
% |
|
|
2,311 |
|
|
|
18.07 |
|
2511 Brittons Hill Road |
|
(f) |
|
Richmond |
|
VA |
|
1987 |
|
|
132,548 |
|
|
|
100.0 |
% |
|
|
673 |
|
|
|
6.20 |
|
2100-2116 West Laburnam Avenue |
|
|
|
Richmond |
|
VA |
|
1976 |
|
|
127,287 |
|
|
|
95.6 |
% |
|
|
1,929 |
|
|
|
16.01 |
|
1957 Westmoreland Street |
|
(f) |
|
Richmond |
|
VA |
|
1975 |
|
|
121,815 |
|
|
|
100.0 |
% |
|
|
656 |
|
|
|
8.25 |
|
2201-2245 Tomlynn Street |
|
(f) |
|
Richmond |
|
VA |
|
1989 |
|
|
85,860 |
|
|
|
100.0 |
% |
|
|
543 |
|
|
|
5.30 |
|
100 Gateway Centre Parkway |
|
|
|
Richmond |
|
VA |
|
2001 |
|
|
74,585 |
|
|
|
0.0 |
% |
|
|
1,348 |
|
|
|
|
|
9011 Arboretum Parkway |
|
|
|
Richmond |
|
VA |
|
1991 |
|
|
72,949 |
|
|
|
98.0 |
% |
|
|
1,225 |
|
|
|
17.52 |
|
4805 Lake Brooke Drive |
|
|
|
Glen Allen |
|
VA |
|
1996 |
|
|
61,347 |
|
|
|
94.8 |
% |
|
|
878 |
|
|
|
15.50 |
|
9100 Arboretum Parkway |
|
|
|
Richmond |
|
VA |
|
1988 |
|
|
57,838 |
|
|
|
100.0 |
% |
|
|
1,005 |
|
|
|
19.02 |
|
2812 Emerywood Parkway |
|
|
|
Henrico |
|
VA |
|
1980 |
|
|
56,984 |
|
|
|
100.0 |
% |
|
|
841 |
|
|
|
15.49 |
|
2277 Dabney Road |
|
(f) |
|
Richmond |
|
VA |
|
1986 |
|
|
50,400 |
|
|
|
100.0 |
% |
|
|
267 |
|
|
|
7.28 |
|
9200 Arboretum Parkway |
|
|
|
Richmond |
|
VA |
|
1988 |
|
|
49,542 |
|
|
|
71.4 |
% |
|
|
523 |
|
|
|
14.06 |
|
9210 Arboretum Parkway |
|
|
|
Richmond |
|
VA |
|
1988 |
|
|
48,012 |
|
|
|
100.0 |
% |
|
|
670 |
|
|
|
13.85 |
|
2212-2224 Tomlynn Street |
|
(f) |
|
Richmond |
|
VA |
|
1985 |
|
|
45,353 |
|
|
|
100.0 |
% |
|
|
215 |
|
|
|
6.91 |
|
2221-2245 Dabney Road |
|
(f) |
|
Richmond |
|
VA |
|
1994 |
|
|
45,250 |
|
|
|
100.0 |
% |
|
|
274 |
|
|
|
8.28 |
|
2251 Dabney Road |
|
(f) |
|
Richmond |
|
VA |
|
1983 |
|
|
42,000 |
|
|
|
100.0 |
% |
|
|
183 |
|
|
|
5.85 |
|
2161-2179 Tomlynn Street |
|
(f) |
|
Richmond |
|
VA |
|
1985 |
|
|
41,550 |
|
|
|
100.0 |
% |
|
|
245 |
|
|
|
7.95 |
|
2256 Dabney Road |
|
(f) |
|
Richmond |
|
VA |
|
1982 |
|
|
33,600 |
|
|
|
86.0 |
% |
|
|
185 |
|
|
|
7.85 |
|
-31-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Base Rent |
|
Annualized |
|
|
|
|
|
|
|
|
|
|
Net |
|
Percentage |
|
for the Twelve |
|
Rental Rate |
|
|
|
|
|
|
|
|
Year |
|
Rentable |
|
Leased as of |
|
Months Ended |
|
as of |
|
|
|
|
|
|
|
|
Built/ |
|
Square |
|
December 31, |
|
December 31, |
|
December 31, |
Property Name |
|
|
|
Location |
|
State |
|
Renovated |
|
Feet |
|
2006 (a) |
|
2006
(b) (000s) |
|
2006 (c) |
2246 Dabney Road |
|
(f) |
|
Richmond |
|
VA |
|
1987 |
|
|
33,271 |
|
|
|
100.0 |
% |
|
|
280 |
|
|
|
10.29 |
|
2244 Dabney Road |
|
(f) |
|
Richmond |
|
VA |
|
1993 |
|
|
33,050 |
|
|
|
100.0 |
% |
|
|
297 |
|
|
|
10.53 |
|
9211 Arboretum Parkway |
|
|
|
Richmond |
|
VA |
|
1991 |
|
|
30,791 |
|
|
|
100.0 |
% |
|
|
438 |
|
|
|
14.23 |
|
2248 Dabney Road |
|
(f) |
|
Richmond |
|
VA |
|
1989 |
|
|
30,184 |
|
|
|
100.0 |
% |
|
|
207 |
|
|
|
8.23 |
|
2130-2146 Tomlynn Street |
|
(f) |
|
Richmond |
|
VA |
|
1988 |
|
|
29,700 |
|
|
|
100.0 |
% |
|
|
249 |
|
|
|
10.66 |
|
2120 Tomlyn Street |
|
(f) |
|
Richmond |
|
VA |
|
1986 |
|
|
23,850 |
|
|
|
100.0 |
% |
|
|
142 |
|
|
|
8.07 |
|
2240 Dabney Road |
|
(f) |
|
Richmond |
|
VA |
|
1984 |
|
|
15,389 |
|
|
|
100.0 |
% |
|
|
139 |
|
|
|
10.88 |
|
4364 South Alston Avenue |
|
|
|
Durham |
|
NC |
|
1985 |
|
|
56,601 |
|
|
|
100.0 |
% |
|
|
1,132 |
|
|
|
20.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUBTOTAL FULLY OWNED
PROPERTIES / WEIGHTED AVG. |
|
|
|
|
|
|
|
|
|
|
28,180,705 |
|
|
|
93.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1333 Broadway |
|
|
|
Oakland |
|
CA |
|
1972 |
|
|
238,392 |
|
|
|
93.7 |
% |
|
|
5,822 |
|
|
|
25.94 |
|
5780 & 5790 Feet Street |
|
|
|
Carlsbad |
|
CA |
|
1999 |
|
|
121,381 |
|
|
|
97.3 |
% |
|
|
3,406 |
|
|
|
32.02 |
|
5900 & 5950 La Place Court |
|
|
|
Carlsbad |
|
CA |
|
1988 |
|
|
80,506 |
|
|
|
98.4 |
% |
|
|
1,675 |
|
|
|
24.08 |
|
16870 West Bernardo Drive |
|
|
|
San Diego |
|
CA |
|
2002 |
|
|
68,708 |
|
|
|
100.0 |
% |
|
|
2,175 |
|
|
|
34.68 |
|
5963 La Place Court |
|
|
|
Carlsbad |
|
CA |
|
1987 |
|
|
61,587 |
|
|
|
87.4 |
% |
|
|
1,321 |
|
|
|
26.02 |
|
2035 Corte Del Nogal |
|
|
|
Carlsbad |
|
CA |
|
1991 |
|
|
53,982 |
|
|
|
88.5 |
% |
|
|
1,040 |
|
|
|
21.23 |
|
5973 Avendia Encinas |
|
|
|
Carlsbad |
|
CA |
|
1986 |
|
|
51,695 |
|
|
|
100.0 |
% |
|
|
1,325 |
|
|
|
26.88 |
|
2291 Wood Oak Drive |
|
|
|
Herndon |
|
VA |
|
1999 |
|
|
227,574 |
|
|
|
100.0 |
% |
|
|
5,152 |
|
|
|
27.70 |
|
198 Van Buren Street |
|
|
|
Herndon |
|
VA |
|
1996 |
|
|
99,214 |
|
|
|
80.2 |
% |
|
|
2,119 |
|
|
|
29.92 |
|
196 Van Buren Street |
|
|
|
Herndon |
|
VA |
|
1991 |
|
|
97,781 |
|
|
|
87.2 |
% |
|
|
2,081 |
|
|
|
26.78 |
|
1177 East Belt Line Road |
|
|
|
Coppell |
|
TX |
|
1998 |
|
|
150,000 |
|
|
|
100.0 |
% |
|
|
1,728 |
|
|
|
12.87 |
|
200 Barr Harbour Drive |
|
|
|
Conshohocken |
|
PA |
|
1998 |
|
|
85,867 |
|
|
|
77.7 |
% |
|
|
2,251 |
|
|
|
31.90 |
|
181 Washington Street |
|
|
|
Conshohocken |
|
PA |
|
1999 |
|
|
115,122 |
|
|
|
100.0 |
% |
|
|
3,078 |
|
|
|
28.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUBTOTAL CONSOLIDATED JOINT
VENTURES / WEIGHTED AVG. |
|
|
|
|
|
|
|
|
|
|
1,451,809 |
|
|
|
94.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 Office Center Drive |
|
|
|
Fort Washington |
|
PA |
|
1974 |
|
|
104,303 |
|
|
|
35.7 |
% |
|
|
357 |
|
|
|
21.50 |
|
555 Lancaster Avenue |
|
|
|
Radnor |
|
PA |
|
1973 |
|
|
242,099 |
|
|
|
92.5 |
% |
|
|
2,700 |
|
|
|
17.89 |
|
100 Lenox Drive |
|
|
|
Lawrenceville |
|
NJ |
|
1991 |
|
|
92,980 |
|
|
|
0.0 |
% |
|
|
225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUBTOTAL REDEVELOPMENT
PROPERTIES / WEIGHTED AVG. |
|
|
|
|
|
|
|
|
|
|
439,382 |
|
|
|
59.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150 Radnor Chester Road |
|
|
|
Radnor |
|
PA |
|
1983 |
|
|
335,458 |
|
|
|
78.5 |
% |
|
|
5,419 |
|
|
|
23.20 |
|
201 King of Prussia Road |
|
|
|
Radnor |
|
PA |
|
2001 |
|
|
251,372 |
|
|
|
57.1 |
% |
|
|
3,352 |
|
|
|
33.71 |
|
170 Radnor Chester Road |
|
|
|
Radnor |
|
PA |
|
1983 |
|
|
72,962 |
|
|
|
88.6 |
% |
|
|
115 |
|
|
|
5.34 |
|
130 Radnor Chester Road |
|
|
|
Radnor |
|
PA |
|
1983 |
|
|
71,349 |
|
|
|
32.2 |
% |
|
|
270 |
|
|
|
11.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUBTOTAL LEASE-UP
PROPERTIES / WEIGHTED AVG. |
|
|
|
|
|
|
|
|
|
|
395,683 |
|
|
|
59.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-32-
(a) |
|
Calculated by dividing net rentable square feet included in leases signed on or before
December 31, 2006 at the property by the aggregate net rentable square feet of the property. |
|
(b) |
|
Total Base Rent for the twelve months ended December 31, 2006 represents base rents
received during such period, excluding tenant reimbursements, calculated in accordance with
generally accepted accounting principles (GAAP) determined on a straight-line basis. |
|
(c) |
|
Average Annualized Rental Rate is calculated as follows: (i) for office leases written on
a triple net basis, the sum of the annualized contracted base rental rates payable for all
space leased as of December 31, 2006 (without giving effect to free rent or scheduled rent
increases that would be taken into account under GAAP) plus the 2006 budgeted operating
expenses excluding tenant electricity; and (ii) for office leases written on a full service
basis, the annualized contracted base rent payable for all space leased as of December 31,
2006. In both cases, the annualized rental rate is divided by the total square footage leased
as of December 31, 2006 without giving effect to free rent or scheduled rent increases that
would be taken into account under GAAP. |
|
(d) |
|
These properties are subject to a ground lease with a third party. |
|
(e) |
|
We hold our interest in Two Logan Square (100 North 18th Street) primarily through
our ownership of second and third mortgages that are secured by this property and that are
junior to a first mortgage. Our ownership of these two mortgages currently provides us with
all of the cash flows from Two Logan Square after the payment of operating expenses and debt
service on the first mortgage. |
|
(f) |
|
These properties are industrial facilities. |
The following table shows information regarding rental rates and lease expirations for the
Properties at December 31, 2006 and assumes that none of the tenants exercises renewal options or
termination rights, if any, at or prior to scheduled expirations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final |
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Rentable |
|
|
Final |
|
|
Annualized |
|
|
of Total Final |
|
|
|
|
|
|
Number of |
|
|
Square |
|
|
Annualized |
|
|
Base Rent |
|
|
Annualized |
|
|
|
|
Year of |
|
Leases |
|
|
Footage |
|
|
Base Rent |
|
|
Per Square |
|
|
Base Rent |
|
|
|
|
Lease |
|
Expiring |
|
|
Subject to |
|
|
Under |
|
|
Foot Under |
|
|
Under |
|
|
|
|
Expiration |
|
Within the |
|
|
Expiring |
|
|
Expiring |
|
|
Expiring |
|
|
Expiring |
|
|
Cumulative |
|
December 31, |
|
Year |
|
|
Leases |
|
|
Leases (a) |
|
|
Leases |
|
|
Leases |
|
|
Total |
|
2007 |
|
|
405 |
|
|
|
3,093,670 |
|
|
$ |
65,018,414 |
|
|
$ |
21.02 |
|
|
|
11.2 |
% |
|
|
11.2 |
% |
2008 |
|
|
319 |
|
|
|
3,224,632 |
|
|
|
68,055,879 |
|
|
|
21.11 |
|
|
|
11.8 |
% |
|
|
23.0 |
% |
2009 |
|
|
340 |
|
|
|
3,651,654 |
|
|
|
79,335,298 |
|
|
|
21.73 |
|
|
|
13.7 |
% |
|
|
36.7 |
% |
2010 |
|
|
274 |
|
|
|
3,669,111 |
|
|
|
80,071,219 |
|
|
|
21.82 |
|
|
|
13.9 |
% |
|
|
50.6 |
% |
2011 |
|
|
248 |
|
|
|
3,377,304 |
|
|
|
73,218,213 |
|
|
|
21.68 |
|
|
|
12.7 |
% |
|
|
63.3 |
% |
2012 |
|
|
99 |
|
|
|
1,620,205 |
|
|
|
39,995,511 |
|
|
|
24.69 |
|
|
|
6.9 |
% |
|
|
70.2 |
% |
2013 |
|
|
49 |
|
|
|
1,109,288 |
|
|
|
24,415,811 |
|
|
|
22.01 |
|
|
|
4.2 |
% |
|
|
74.4 |
% |
2014 |
|
|
43 |
|
|
|
1,463,277 |
|
|
|
31,220,832 |
|
|
|
21.34 |
|
|
|
5.4 |
% |
|
|
79.8 |
% |
2015 |
|
|
31 |
|
|
|
1,346,511 |
|
|
|
33,219,278 |
|
|
|
24.67 |
|
|
|
5.7 |
% |
|
|
85.5 |
% |
2016 |
|
|
35 |
|
|
|
630,168 |
|
|
|
15,738,836 |
|
|
|
24.98 |
|
|
|
2.7 |
% |
|
|
88.2 |
% |
2017 and thereafter |
|
|
51 |
|
|
|
2,608,623 |
|
|
|
67,760,193 |
|
|
|
25.98 |
|
|
|
11.8 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,894 |
|
|
|
25,794,443 |
|
|
$ |
578,049,484 |
|
|
$ |
22.41 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Final Annualized Base Rent for each lease scheduled to expire represents the cash
rental rate of base rents, excluding tenant reimbursements, in the final month prior to
expiration multiplied by 12. Tenant reimbursements generally include payment of real estate
taxes, operating expenses and common area maintenance and utility charges. |
-33-
At
December 31, 2006, the Properties were leased to 1,623 tenants that are engaged in a
variety of businesses. The following table sets forth information regarding leases at the
Properties with the 20 tenants with the largest amounts leased based upon Annualized Escalated Rent
as of December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
Average |
|
|
Aggregate |
|
|
Percentage |
|
|
Annualized |
|
|
Aggregate |
|
|
|
Number |
|
|
Remaining |
|
|
Square |
|
|
of Aggregate |
|
|
Escalated |
|
|
Annualized |
|
|
|
of |
|
|
Lease Term |
|
|
Feet |
|
|
Leased |
|
|
Rent (in |
|
|
Escalated |
|
Tenant Name (a) |
|
Leases |
|
|
in Months |
|
|
Leased |
|
|
Square Feet |
|
|
000) (b) |
|
|
Rent |
|
Kaiser Foundation Health Plan |
|
|
2 |
|
|
|
47 |
|
|
|
483,693 |
|
|
|
1.8 |
% |
|
$ |
17,682 |
|
|
|
2.9 |
% |
Northrop Grumman Corporation |
|
|
5 |
|
|
|
63 |
|
|
|
519,493 |
|
|
|
2.0 |
% |
|
|
15,379 |
|
|
|
2.5 |
% |
State of New Jersey |
|
|
7 |
|
|
|
33 |
|
|
|
441,488 |
|
|
|
1.7 |
% |
|
|
13,323 |
|
|
|
2.2 |
% |
7-Eleven, Inc. |
|
|
1 |
|
|
|
4 |
|
|
|
504,351 |
|
|
|
1.9 |
% |
|
|
12,222 |
|
|
|
2.0 |
% |
Pepper Hamilton LLP |
|
|
2 |
|
|
|
94 |
|
|
|
295,873 |
|
|
|
1.1 |
% |
|
|
11,101 |
|
|
|
1.8 |
% |
Lockheed Martin |
|
|
9 |
|
|
|
48 |
|
|
|
548,579 |
|
|
|
2.1 |
% |
|
|
10,385 |
|
|
|
1.7 |
% |
Wells Fargo Bank, N.A. |
|
|
6 |
|
|
|
43 |
|
|
|
368,879 |
|
|
|
1.4 |
% |
|
|
9,379 |
|
|
|
1.5 |
% |
Verizon |
|
|
6 |
|
|
|
46 |
|
|
|
409,574 |
|
|
|
1.6 |
% |
|
|
8,990 |
|
|
|
1.5 |
% |
Dechert LP |
|
|
2 |
|
|
|
139 |
|
|
|
242,288 |
|
|
|
0.9 |
% |
|
|
8,086 |
|
|
|
1.3 |
% |
IBM |
|
|
5 |
|
|
|
43 |
|
|
|
284,940 |
|
|
|
1.1 |
% |
|
|
7,811 |
|
|
|
1.3 |
% |
Bearingpoint, Inc. |
|
|
2 |
|
|
|
95 |
|
|
|
243,122 |
|
|
|
0.9 |
% |
|
|
7,655 |
|
|
|
1.2 |
% |
AT&T |
|
|
8 |
|
|
|
25 |
|
|
|
335,223 |
|
|
|
1.3 |
% |
|
|
7,397 |
|
|
|
1.2 |
% |
General Services
Administration U.S. Govt. |
|
|
17 |
|
|
|
40 |
|
|
|
330,242 |
|
|
|
1.3 |
% |
|
|
7,374 |
|
|
|
1.2 |
% |
Drinker Biddle & Reath |
|
|
2 |
|
|
|
87 |
|
|
|
218,743 |
|
|
|
0.8 |
% |
|
|
6,476 |
|
|
|
1.0 |
% |
Blank Rome LLP |
|
|
1 |
|
|
|
181 |
|
|
|
223,886 |
|
|
|
0.8 |
% |
|
|
6,419 |
|
|
|
1.0 |
% |
Penske Truck Leasing |
|
|
1 |
|
|
|
198 |
|
|
|
352,641 |
|
|
|
1.3 |
% |
|
|
6,006 |
|
|
|
1.0 |
% |
Marsh USA, Inc. |
|
|
3 |
|
|
|
30 |
|
|
|
154,797 |
|
|
|
0.6 |
% |
|
|
5,344 |
|
|
|
0.9 |
% |
World Savings & Loan
Corporation |
|
|
1 |
|
|
|
132 |
|
|
|
148,175 |
|
|
|
0.6 |
% |
|
|
5,265 |
|
|
|
0.9 |
% |
Computer Sciences |
|
|
5 |
|
|
|
71 |
|
|
|
252,765 |
|
|
|
1.0 |
% |
|
|
5,130 |
|
|
|
0.8 |
% |
Vignette Corporation |
|
|
2 |
|
|
|
49 |
|
|
|
142,745 |
|
|
|
0.5 |
% |
|
|
4,927 |
|
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total/Weighted Average |
|
|
87 |
|
|
|
66 |
|
|
|
6,501,497 |
|
|
|
24.7 |
% |
|
$ |
176,351 |
|
|
|
28.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The identified tenant includes affiliates in certain circumstances. |
|
(b) |
|
Annualized Escalated Rent represents the monthly Escalated Rent for each lease in
effect at December 31, 2006 multiplied by 12. Escalated Rent represents fixed base rental
amounts plus tenant reimbursements which include payment of real estate taxes, operating
expenses and common area maintenance and utility charges. We estimate operating expense
reimbursements based on historical amounts and comparable market data. |
Real Estate Ventures
As of December 31, 2006, we had an aggregate investment of approximately $74.6 million in eleven
unconsolidated Real Estate Ventures (net of returns of investment). We 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 fifteen office
buildings that contain an aggregate of approximately 2.7 million net rentable square feet, one Real
Estate Venture developed a hotel property that contains 137 rooms and one Real Estate Venture is
developing an office property located in Charlottesville, Virginia.
As of December 31, 2006, we also had investments in three Real Estate Ventures that are considered
to be variable interest entities under FIN 46R and of which we are the primary beneficiary. We
also have an investment in one Real Estate Venture where we serve as the general partner and are
deemed to control the entity based on the fact that the limited partner does not have substantive
participating rights in accordance with EITF 04-05. The financial information for two of these
four Real Estate Ventures (Four and Six Tower Bridge) was consolidated into our consolidated
financial statements effective March 31, 2004. Prior to March 31, 2004, we accounted for our
investment in these two Real Estate Ventures under the equity method.
We account for our remaining non-controlling interests in the Real Estate Ventures using the equity
method. Our non-controlling ownership interests range from 6% to 50%, subject to specified
priority allocations in certain of the Real Estate Ventures. Our investments, initially recorded
at cost, are subsequently adjusted for our share of the Real Estate Ventures income or loss and
contributions to capital and distributions.
-34-
As of December 31, 2006, we had guaranteed repayment of approximately $0.6 million of loans for the
Real Estate Ventures. We also provide customary environmental indemnities and completion
guarantees in connection with construction and permanent financing both for our own account and on
behalf of the Real Estate Ventures.
Item 3. Legal Proceedings
We are involved from time to time in litigation, including in disputes with tenants and arising out
of agreements to purchase or sell properties. Given the nature of our business activities, we
generally consider these lawsuits to be routine to the conduct of our business. Because of the
very nature of litigation, including its adversarial nature and the jury system, we cannot predict
the result of any lawsuit.
Lawsuits have been brought against owners and managers of multifamily and office properties that
assert claims of personal injury and property damage caused by the presence of mold in the
properties. We have been named as a defendant in two lawsuits in the State of New Jersey that
allege personal injury as a result of the presence of mold. In 2005, one of these lawsuits was
dismissed by way of summary judgment with prejudice. The plaintiffs seek unspecified damages in
the remaining lawsuit. We referred this lawsuit to our environmental insurance carrier and, as of
the date of this Form 10-K, the insurance carrier is defending this claim.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our shareholders during the fourth quarter of the year ended
December 31, 2006.
PART II
Item 5. Market for Registrants Common Equity and Related Shareholder Matters and Issuer Purchases
of Equity Securities
Our common shares are traded on the New York Stock Exchange (NYSE) under the symbol BDN. There
is no established trading market for the Class A units of the Operating Partnership. On February
22, 2007, there were 720 holders of record of our common shares and 51 holders of record of the
Class A units (in addition to Brandywine Realty Trust). On February 22, 2007, the last reported
sales price of the common shares on the NYSE was $35.18. The following table sets forth the
quarterly high and low closing sales price per common share reported on the NYSE for the indicated
periods and the distributions paid by us with respect to each such period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Price |
|
Share Price |
|
Distributions |
|
|
High |
|
Low |
|
Declared For Quarter |
First Quarter 2005 |
|
$ |
30.06 |
|
|
$ |
27.61 |
|
|
$ |
0.44 |
|
Second Quarter 2005 |
|
$ |
30.90 |
|
|
$ |
27.49 |
|
|
$ |
0.44 |
|
Third Quarter 2005 |
|
$ |
32.71 |
|
|
$ |
29.56 |
|
|
$ |
0.44 |
|
Fourth Quarter 2005 |
|
$ |
29.69 |
|
|
$ |
26.30 |
|
|
$ |
0.44 |
|
First Quarter 2006 |
|
$ |
31.90 |
|
|
$ |
28.94 |
|
|
$ |
0.44 |
|
Second Quarter 2006 |
|
$ |
32.17 |
|
|
$ |
27.65 |
|
|
$ |
0.44 |
|
Third Quarter 2006 |
|
$ |
33.83 |
|
|
$ |
30.98 |
|
|
$ |
0.44 |
|
Fourth Quarter 2006 |
|
$ |
35.37 |
|
|
$ |
31.55 |
|
|
$ |
0.44 |
|
In
connection with our merger with Prentess, we declared a dividend of
$0.02 per common share on December 21, 2005, paid on January 17,
2006 to shareholders of record on January 4, 2006.
For each quarter during 2006 and 2005, the Operating Partnership paid a cash distribution to
holders of its Class A units equal in amount to the dividends paid on the Companys common shares
for such quarter.
-35-
In order to maintain the status of Brandywine Realty Trust as a REIT, we must make annual
distributions to shareholders of at least 90% of its taxable income (not including net capital
gains). Future distributions will be declared at the discretion of our Board of Trustees and will
depend on our actual cash flow, our financial condition, capital requirements, the annual
distribution requirements under the REIT provisions of the Internal Revenue Code of 1986 and such
other factors as our Board deems relevant.
The following table provides information as of December 31, 2006 with respect to compensation plans
under which our equity securities are authorized for issuance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
Plan category |
|
Number of securities to be |
|
|
Weighted-average exercise |
|
|
Number of securities |
|
|
|
issued upon exercise of |
|
|
price of outstanding |
|
|
remaining available for |
|
|
|
outstanding options, |
|
|
options, warrants and |
|
|
future issuance under |
|
|
|
warrants and rights |
|
|
rights |
|
|
equity compensation plans |
|
|
|
|
|
|
|
|
|
|
|
(excluding securities |
|
|
|
|
|
|
|
|
|
reflected in column (a)) |
|
Equity compensation
plans approved by
security holders
(1) |
|
1,286,075 |
|
|
$ |
26.45(2) |
|
4,129,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved
by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
1,286,075 |
|
|
$ |
26.45(2) |
|
4,129,630 |
|
|
|
(1) |
|
Relates to our Amended and Restated 1997 Long-Term Incentive Plan and the Prentiss
Properties Trust 2005 Share Incentive Plan that we assumed in our January 2006 merger with
Prentiss Properties Trust. Under each of these two plans, the Compensation Committee of our
Board of Trustees may award restricted or unrestricted common shares, options to acquire
common shares and performance shares or units or other instruments that have a value tied to
our common shares. In May 2005, our shareholders authorized an increase to the number of
common shares that may be issued or subject to award under the 1997 Long-Term Incentive Plan,
from 5,000,000 to 6,600,000. The May 2005 amendment provides that 500,000 of the shares under
the 1997 Plan are available solely for awards under options and share appreciation rights that
have an exercise or strike price not less than the market price of our common shares on the
date of award, and the remaining 6,100,000 shares are available for any type of award under
the Plan. |
|
(2) |
|
Weighted-average exercise price of outstanding options; excludes restricted common
shares. |
The following table presents information related to our share repurchases:
-36-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased as Part of |
|
|
Shares that May Yet Be |
|
|
|
Total Number of |
|
|
Average Price Paid |
|
|
Publicly Announced |
|
|
Purchased Under the |
|
Period |
|
Shares Purchased |
|
|
per Share |
|
|
Plans or Programs |
|
|
Plans or Programs (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
October 2006 |
|
|
1,829,000 |
|
|
$ |
32.80 |
|
|
|
|
|
|
|
2,319,800 |
|
November 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,319,800 |
|
December 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,319,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,829,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
On May 2, 2006, our Board of Trustees authorized an increase in the number of common shares that we may
repurchase, whether in open-market or privately negotiated transactions. The Board authorized us to purchase up
to an aggregate of 3,500,000 common shares (inclusive of remaining share repurchase availability under the Boards
prior authorization from September 2001). There is no expiration date on the share repurchase program. The
1,829,000 shares shown above were purchased with proceeds of our 3.875% exchangeable notes and did not reduce
capacity under the share repurchase plan. |
-37-
SHARE PERFORMANCE GRAPH
The Securities and Exchange Commission requires us to present a chart comparing the cumulative
total shareholder return on the common shares with the cumulative total shareholder return of (i) a
broad equity index and (ii) a published industry or peer group index. The following chart compares
the cumulative total shareholder return for the common shares with the cumulative shareholder
return of companies on (i) the S&P 500 Index (ii) the Russell 2000 and (iii) the NAREIT ALL-REIT
Total Return Index as provided by NAREIT for the period beginning December 31, 2001 and ending
December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ending |
|
Index |
|
12/31/01 |
|
|
12/31/02 |
|
|
12/31/03 |
|
|
12/31/04 |
|
|
12/31/05 |
|
|
12/31/06 |
|
|
|
|
|
|
Brandywine Realty Trust |
|
|
100.00 |
|
|
|
111.81 |
|
|
|
147.33 |
|
|
|
171.86 |
|
|
|
173.68 |
|
|
|
215.51 |
|
S&P 500 |
|
|
100.00 |
|
|
|
77.90 |
|
|
|
100.24 |
|
|
|
111.14 |
|
|
|
116.59 |
|
|
|
135.00 |
|
Russell 2000 |
|
|
100.00 |
|
|
|
79.52 |
|
|
|
117.09 |
|
|
|
138.55 |
|
|
|
144.86 |
|
|
|
171.47 |
|
NAREIT All Equity REIT Index |
|
|
100.00 |
|
|
|
103.82 |
|
|
|
142.37 |
|
|
|
187.33 |
|
|
|
210.12 |
|
|
|
283.78 |
|
-38-
Item 6. Selected Financial Data
The following table sets forth selected financial and operating data and should be read in
conjunction with the financial statements and related notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations included in this Annual Report on Form
10-K. The selected data have been revised to reflect the reclassification of losses from early
extinguishments of debt, in accordance with SFAS No. 145, and the disposition of all properties
since January 1, 2002, which have been reclassified as discontinued operations for all periods
presented in accordance with SFAS No. 144.
Brandywine Realty Trust
(in thousands, except per common share data and number of properties)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
|
|
Operating Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
662,801 |
|
|
$ |
380,624 |
|
|
$ |
316,557 |
|
|
$ |
293,108 |
|
|
$ |
277,553 |
|
Income (loss) from continuing operations |
|
|
(14,031 |
) |
|
|
38,179 |
|
|
|
56,483 |
|
|
|
72,774 |
|
|
|
43,445 |
|
Net income |
|
|
10,482 |
|
|
|
42,766 |
|
|
|
60,301 |
|
|
|
86,678 |
|
|
|
62,984 |
|
Income allocated to Common Shares |
|
|
2,490 |
|
|
|
34,774 |
|
|
|
55,081 |
|
|
|
54,174 |
|
|
|
51,078 |
|
Income from continuing operations per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.25 |
) |
|
$ |
0.54 |
|
|
$ |
1.07 |
|
|
$ |
1.05 |
|
|
$ |
0.85 |
|
Diluted |
|
$ |
(0.24 |
) |
|
$ |
0.54 |
|
|
$ |
1.07 |
|
|
$ |
1.05 |
|
|
$ |
0.84 |
|
Earnings per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.03 |
|
|
$ |
0.62 |
|
|
$ |
1.15 |
|
|
$ |
1.43 |
|
|
$ |
1.40 |
|
Diluted |
|
$ |
0.03 |
|
|
$ |
0.62 |
|
|
$ |
1.15 |
|
|
$ |
1.43 |
|
|
$ |
1.39 |
|
Cash distributions declared per Common Share |
|
$ |
1.76 |
|
|
$ |
1.78 |
(a) |
|
$ |
1.76 |
|
|
$ |
1.76 |
|
|
$ |
1.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investments, net of
accumulated depreciation |
|
$ |
4,739,726 |
|
|
$ |
2,541,486 |
|
|
$ |
2,363,865 |
|
|
$ |
1,695,355 |
|
|
$ |
1,745,981 |
|
Total assets |
|
|
5,508,263 |
|
|
|
2,805,745 |
|
|
|
2,633,984 |
|
|
|
1,855,776 |
|
|
|
1,919,288 |
|
Total indebtedness |
|
|
3,152,230 |
|
|
|
1,521,384 |
|
|
|
1,306,669 |
|
|
|
867,659 |
|
|
|
1,004,729 |
|
Total liabilities |
|
|
3,486,346 |
|
|
|
1,663,022 |
|
|
|
1,444,116 |
|
|
|
950,431 |
|
|
|
1,097,793 |
|
Minority interest |
|
|
123,991 |
|
|
|
37,859 |
|
|
|
42,866 |
|
|
|
133,488 |
|
|
|
135,052 |
|
Convertible preferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500 |
|
|
|
132,300 |
|
Beneficiaries equity |
|
|
1,897,926 |
|
|
|
1,104,864 |
|
|
|
1,147,002 |
|
|
|
771,857 |
|
|
|
686,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
241,566 |
|
|
|
125,147 |
|
|
|
152,890 |
|
|
|
118,793 |
|
|
|
128,836 |
|
Investing activities |
|
|
(915,794 |
) |
|
|
(252,417 |
) |
|
|
(682,652 |
) |
|
|
(34,068 |
) |
|
|
5,038 |
|
Financing activities |
|
|
692,433 |
|
|
|
119,098 |
|
|
|
536,556 |
|
|
|
(102,974 |
) |
|
|
(120,532 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of properties owned at year end |
|
|
313 |
|
|
|
251 |
|
|
|
246 |
|
|
|
234 |
|
|
|
238 |
|
Net rentable square feet owned at year end |
|
|
31,764 |
|
|
|
19,600 |
|
|
|
19,150 |
|
|
|
15,733 |
|
|
|
16,052 |
|
|
|
|
(a) |
|
Includes $0.02 special distribution declared in December 2005 for shareholders of record for the period
January 1, 2006 through January 4, 2006 (pre-Prentiss merger period). |
-39-
Brandywine Operating Partnership, L.P.
(in thousands, except per unit data and number of properties)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
|
|
Operating Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
662,801 |
|
|
$ |
380,624 |
|
|
$ |
316,557 |
|
|
$ |
293,108 |
|
|
$ |
277,553 |
|
Income (loss) from continuing operations |
|
|
(15,059 |
) |
|
|
39,262 |
|
|
|
59,118 |
|
|
|
82,068 |
|
|
|
52,820 |
|
Net income |
|
|
10,626 |
|
|
|
44,013 |
|
|
|
63,081 |
|
|
|
96,467 |
|
|
|
73,136 |
|
Income from
continuing operations per Common Partnership Unit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.25 |
) |
|
$ |
0.54 |
|
|
$ |
1.07 |
|
|
$ |
1.06 |
|
|
$ |
0.86 |
|
Diluted |
|
$ |
(0.24 |
) |
|
$ |
0.54 |
|
|
$ |
1.07 |
|
|
$ |
1.06 |
|
|
$ |
0.86 |
|
Earnings per Common Partnership Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.03 |
|
|
$ |
0.62 |
|
|
$ |
1.15 |
|
|
$ |
1.43 |
|
|
$ |
1.41 |
|
Diluted |
|
$ |
0.03 |
|
|
$ |
0.62 |
|
|
$ |
1.14 |
|
|
$ |
1.43 |
|
|
$ |
1.40 |
|
Cash
distributions declared per Common Partnership Unit |
|
$ |
1.76 |
|
|
$ |
1.78 |
(a) |
|
$ |
1.76 |
|
|
$ |
1.76 |
|
|
$ |
1.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investments, net of
accumulated depreciation |
|
$ |
4,739,726 |
|
|
$ |
2,541,486 |
|
|
$ |
2,363,865 |
|
|
$ |
1,695,355 |
|
|
$ |
1,745,981 |
|
Total assets |
|
|
5,508,263 |
|
|
|
2,805,745 |
|
|
|
2,633,984 |
|
|
|
1,855,776 |
|
|
|
1,919,288 |
|
Total indebtedness |
|
|
3,152,230 |
|
|
|
1,521,384 |
|
|
|
1,306,669 |
|
|
|
867,659 |
|
|
|
1,004,729 |
|
Total liabilities |
|
|
3,486,346 |
|
|
|
1,662,967 |
|
|
|
1,443,934 |
|
|
|
951,484 |
|
|
|
1,098,846 |
|
Series B Preferred Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,500 |
|
|
|
97,500 |
|
Redeemable limited partnership units |
|
|
131,711 |
|
|
|
54,300 |
|
|
|
60,586 |
|
|
|
46,505 |
|
|
|
38,984 |
|
Partners equity |
|
|
1,855,770 |
|
|
|
1,088,478 |
|
|
|
1,129,464 |
|
|
|
760,287 |
|
|
|
683,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
241,566 |
|
|
|
125,147 |
|
|
|
152,890 |
|
|
|
118,793 |
|
|
|
128,836 |
|
Investing activities |
|
|
(915,794 |
) |
|
|
(252,417 |
) |
|
|
(682,652 |
) |
|
|
(34,068 |
) |
|
|
5,038 |
|
Financing activities |
|
|
692,433 |
|
|
|
119,098 |
|
|
|
536,556 |
|
|
|
(102,974 |
) |
|
|
(120,532 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of properties owned at year end |
|
|
313 |
|
|
|
251 |
|
|
|
246 |
|
|
|
234 |
|
|
|
238 |
|
Net rentable square feet owned at year end |
|
|
31,764 |
|
|
|
19,600 |
|
|
|
19,150 |
|
|
|
15,733 |
|
|
|
16,052 |
|
|
|
|
(a) |
|
Includes $0.02 special distribution declared in
December 2005 for unitholders of record for the period
January 1, 2006 through January 4, 2006 (pre-Prentiss merger period). |
-40-
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements
appearing elsewhere herein and is based primarily on our consolidated financial statements for the
years ended December 31, 2006, 2005 and 2004.
OVERVIEW
As of December 31, 2006 we managed our portfolio within nine geographic segments: (1)
PennsylvaniaWest, (2) PennsylvaniaNorth, (3) New Jersey, (4) Urban, (5) Richmond, Virginia, (6)
CaliforniaNorth, (7) CaliforniaSouth, (8) Mid-Atlantic and (9) Southwest. The PennsylvaniaWest
segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia
suburbs of Pennsylvania. The PennsylvaniaNorth segment includes properties north of Philadelphia
in Berks, Bucks, Cumberland, Dauphin, Lehigh and Montgomery counties. The New Jersey segment
includes properties in counties in the southern and central parts of New Jersey including
Burlington, Camden and Mercer counties and in Bucks County, Pennsylvania. The Urban segment
includes properties in the City of Philadelphia, Pennsylvania and the state of Delaware. The
Richmond, Virginia segment includes properties primarily in Albemarle, Chesterfield and Henrico
counties, the Cities of Richmond and Durham, North Carolina. The CaliforniaNorth segment includes
properties in the Cities of Oakland and Concord. The CaliforniaSouth segment includes properties
in the Cities of Carlsbad and San Diego. The Mid-Atlantic segment includes properties in Northern
Virginia and the Cities of Bethesda and Rockville, Maryland. The Southwest segment includes
properties in Dallas and Travis counties of Texas.
We receive income primarily from rental revenue (including tenant reimbursements) from our
properties and, to a lesser extent, from the management of properties owned by third parties and
from investments in the Real Estate Ventures.
Our financial performance is dependent upon the demand for office, industrial and other commercial
space in our markets and prevailing interest rates.
Through our January 2006 acquisition of Prentiss, we acquired interests in properties that contain
an aggregate of 14.0 million net rentable square feet. Through this acquisition, we also entered
into new markets, including markets in California, Metropolitan Washington, D.C., and Texas.
Accordingly, the reported historical financial information for periods prior to this transaction is
not believed to be fully indicative of our future operating results or financial condition.
As we seek to increase revenue through our operating activities, our management also seeks to
minimize operating risks, including (i) tenant rollover risk, (ii) tenant credit risk and (iii)
development risk.
Tenant Rollover Risk:
We are subject to the risk that tenant leases, upon expiration, are not renewed, that space may not
be relet, or that the terms of renewal or reletting (including the cost of renovations) may be less
favorable to us than the current lease terms. Leases accounting for approximately 11.2% of our
aggregate annualized base rents as of December 31, 2006 (representing approximately 11.0% of the
net rentable square feet of the Properties) expire without penalty in 2007. We maintain an active
dialogue with our tenants in an effort to maximize lease renewals. Our retention rate for leases
that were scheduled to expire in 2006 was 78.7%. If we are unable to renew leases or relet space
under expiring leases, at anticipated rental rates, our cash flow would be adversely impacted.
Tenant Credit Risk:
In the event of a tenant default, we may experience delays in enforcing our rights as a landlord
and may incur substantial costs in protecting our investment. Our management regularly evaluates
our accounts receivable reserve policy in light of our tenant base and general and local economic
conditions. Our accounts receivable allowance was $9.3 million or 9.0% of total receivables
(including accrued rent
-41-
receivable) as of December 31, 2006 compared to $4.9 million or 7.6% of total receivables
(including accrued rent receivable) as of December 31, 2005.
Development Risk:
As of December 31, 2006, we had in development or redevelopment nine sites aggregating
approximately 1.4 million square feet. We estimate the total cost of these projects to be $304.4
million and we had incurred $141.2 million of these costs as of December 31, 2006. We are actively
marketing space at these projects to prospective tenants but can provide no assurance as to the
timing or terms of any leases of space at these projects. As of December 31, 2006, we owned
approximately 490 acres of undeveloped land. Risks associated with development of this land
include construction cost increases or overruns and construction delays, insufficient occupancy
rates, building moratoriums and inability to obtain necessary zoning, land-use, building, occupancy
and other required governmental approvals.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Managements Discussion and Analysis of Financial Condition and Results of Operations discusses our
consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. 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, liabilities, and the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses for the reporting periods.
Certain accounting policies are considered to be critical accounting policies, as they require
management to make assumptions about matters that are highly uncertain at the time the estimate is
made and changes in the accounting estimate are reasonably likely to occur from period to period.
Management believes the following critical accounting policies reflect our more significant
judgments and estimates used in the preparation of our consolidated financial statements. For a
summary of all of our significant accounting policies, see Note 2 to our consolidated financial
statements included elsewhere in this report.
Revenue Recognition
We recognize rental revenue on the straight-line basis from the later of the date of the
commencement of the lease or the date of acquisition of the property subject to existing leases,
which averages minimum rents over the terms of the leases. Certain lease agreements contain
provisions that require tenants to reimburse a pro rata share of real estate taxes and common area
maintenance costs.
Real Estate Investments
Real estate investments are carried at cost. We record acquisition of real estate investments
under the purchase method of accounting and allocate the purchase price to land, buildings and
intangible assets on a relative fair value basis. Depreciation is computed using the straight-line
method over the useful lives of buildings and capital improvements (5
to 55 years) and over the
shorter of the lease term or the life of the asset for tenant improvements. Direct construction
costs related to the development of Properties and land holdings are capitalized as incurred. We
expense routine repair and maintenance expenditures and capitalize those items that extend the
useful lives of the underlying assets.
Real Estate Ventures
When we obtain an economic interest in an entity, we evaluate the entity to determine if the entity
is deemed a variable interest entity (VIE), and if we are deemed to be the primary beneficiary,
in accordance with FASB Interpretation No.46 R, Consolidation of Variable Interest Entities (FIN
46R). If the entity is not deemed to be a VIE, and we serve as the general partner within the
entity, we evaluate to determine if our presumed control as the general partner is overcome by the
kick out rights and other substantive participating rights of the limited partners in accordance
with EITF 04-05, Determining Whether a General Partner, or the General Partners as a Group,
Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights
(EITF 04-05).
-42-
We consolidate (i) entities that are VIEs and of which we are deemed to be the primary beneficiary
and (ii) entities that are non-VIEs which we control. Entities that we account for under the
equity method (i.e. at cost, increased or decreased by our share of earnings or losses, less
distributions) include (i) entities that are VIEs and of which we are not deemed the primary
beneficiary and (ii) entities that are non-VIEs which we do not control, but over which we have the
ability to exercise significant influence. We will reconsider our determination of whether an
entity is a VIE and who the primary beneficiary is if events occur that are likely to cause a
change in the original determinations.
Impairment of Long-Lived Assets
Our management reviews investments in real estate and real estate ventures for impairment if facts
and circumstances indicate that the carrying value of such assets may not be recoverable.
Measurement of any impairment loss is based on the fair value of the asset, determined using
customary valuation techniques, such as the present value of expected future cash flows.
In accordance with SFAS No. 144 (SFAS 144), Accounting for the Impairment or Disposal of
Long-Lived Assets, long-lived assets, such as real estate investments and purchased intangibles
subject to amortization, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed
of would be separately presented in the balance sheet and reported at the lower of the carrying
amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities
relating to assets classified as held-for-sale would be presented separately in the appropriate
asset and liability sections of the balance sheet.
Income Taxes
The Company has elected to be treated as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the Code). In addition, we have several subsidiary REITs. In
order to maintain their qualification as a REIT, the Company and its REIT subsidiaries are required
to, among other things, distribute at least 90% of its REIT taxable income to its stockholders and
meet certain tests regarding the nature of its income and assets. As REITs, the Company and its
REIT subsidiaries are not subject to federal income tax with respect to the portion of its income
that meets certain criteria and is distributed annually to the stockholders. Accordingly, no
provision for federal income taxes is included in the accompanying consolidated financial
statements with respect to the operations of these operations. The Company and its REIT
subsidiaries intend to continue to operate in a manner that allows them to continue to meet the
requirements for taxation as REITs. Many of these requirements, however, are highly technical and
complex. If the Company or one of its REIT subsidiaries were to fail to meet these requirements,
the Company would be subject to federal income tax. The Company is subject to certain state and
local taxes. Provision for such taxes has been included in general and administrative expenses in
the Companys Consolidated Statements of Operations and Comprehensive Income.
We may elect to treat one or more of our subsidiaries as a taxable REIT subsidiary (TRS). In
general, a TRS of the Company may perform additional services for our tenants and generally may
engage in any real estate or non-real estate related business (except for the operation or
management of health care facilities or lodging facilities or the provision to any person, under a
franchise, license or otherwise, of rights to any brand name under which any lodging facility or
health care facility is operated). A TRS is subject to corporate federal income tax. We have
elected to treat certain of our corporate subsidiaries as TRSs, these entities provide third party
property management services and certain services to tenants that could not otherwise be provided.
At December 31, 2006, our TRSs had tax net operating loss (NOL) carryforward of approximately
$3.0 million, expiring from 2013 to 2020. We have ascribed a full valuation allowance to our net
deferred tax assets.
-43-
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts that represents an estimate of losses that may be
incurred from the inability of tenants to make required payments. The allowance is an estimate
based on two calculations that are combined to determine the total amount reserved. First, we
evaluate specific accounts where we have determined that a tenant may have an inability to meet its
financial obligations. In these situations, we use our judgment, based on the facts and
circumstances, and records a specific reserve for that tenant against amounts due to reduce the
receivable to the amount that we expect to collect. These reserves are re-evaluated and adjusted
as additional information becomes available. Second, a reserve is established for all tenants
based on a range of percentages applied to receivable aging categories. If the financial condition
of our tenants were to deteriorate, additional allowances may be required.
Deferred Costs
We incur direct costs related to the financing, development and leasing of our properties.
Management exercises judgment in determining whether such costs meet the criteria for
capitalization or must be expensed. Capitalized financing fees are amortized over the related loan
term and capitalized leasing costs are amortized over the related lease term. Management
re-evaluates the remaining useful lives of leasing costs as the creditworthiness of our tenants and
economic and market conditions change.
Purchase Price Allocation
We allocate the purchase price of properties to net tangible and identified intangible assets
acquired based on fair values. Above-market and below-market in-place lease values for acquired
properties are recorded based on the present value (using an interest rate which reflects the risks
associated with the leases acquired) of the difference between (i) the contractual amounts to be
paid pursuant to the in-place leases and (ii) our estimate of the fair market lease rates for the
corresponding in-place leases, measured over a period equal to the remaining non-cancellable term
of the lease. Capitalized above-market lease values are amortized as a reduction of rental income
over the remaining non-cancellable terms of the respective leases. Capitalized below-market lease
values are amortized as an increase of rental income over the remaining non-cancellable terms of
the respective leases, including any fixed-rate renewal periods.
Other intangible assets also include amounts representing the value of tenant relationships and
in-place leases based on our evaluation of the specific characteristics of each tenants lease and
our overall relationship with the respective tenant. We estimate the cost to execute leases with
terms similar to the remaining lease terms of the in-place leases, include leasing commissions,
legal and other related expenses. This intangible asset is amortized to expense over the remaining
term of the respective leases. We estimate fair value through methods similar to those used by
independent appraisers or by using independent appraisals. Factors that we consider in our analysis
include an estimate of the carrying costs during the expected lease-up periods considering current
market conditions and costs to execute similar leases. We also consider information obtained about
each property as a result of our pre-acquisition due diligence, marketing and leasing activities in
estimating the fair value of the tangible and intangible assets acquired. In estimating carrying
costs, we include real estate taxes, insurance and other operating expenses and estimates of lost
rentals at market rates during the expected lease-up periods, which primarily range from three to
twelve months.
Characteristics that we consider in allocating value to our tenant relationships include the nature
and extent of our business relationship with the tenant, growth prospects for developing new
business with the tenant, the tenants credit quality and expectations of lease renewals. The value
of tenant relationship intangibles is amortized over the remaining initial lease term and expected
renewals, but in no event longer than the remaining depreciable life of the building. The value of
in-place leases is amortized over the remaining non-cancellable term of the respective leases and
any fixed-rate renewal periods.
In the event that a tenant terminates its lease, the unamortized portion of each intangible,
including market rate adjustments, in-place lease values and tenant relationship values, would be
charged to expense.
-44-
RESULTS OF OPERATIONS
Comparison of the Year Ended December 31, 2006 to the Year Ended December 31, 2005
The table below shows selected operating information for the Same Store Properties and the Total
Portfolio. The Same Store Properties consists of 234 properties containing an aggregate of
approximately 17.5 million net rentable square feet that we owned for the entire twelve-month
periods ended December 31, 2006 and 2005. This table also includes a reconciliation from the Same
Store Properties to the Total Portfolio (i.e., all properties owned by us as of December 31, 2006
and 2005) by providing information for the properties which were acquired, sold, or placed into
service and administrative/elimination information for the years ended December 31, 2006 and 2005.
-45-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired |
|
|
Development |
|
|
Other/ |
|
|
|
|
|
|
Same Store Properties |
|
|
Properties |
|
|
Properties (a) |
|
|
Eliminations (b) |
|
|
All Properties |
|
|
|
|
|
|
|
|
|
|
|
Increase/ |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/ |
|
|
% |
|
(dollars in thousands) |
|
2006 |
|
|
2005 |
|
|
(Decrease) |
|
|
Change |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
(Decrease) |
|
|
Change |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash rents |
|
$ |
296,811 |
|
|
$ |
292,439 |
|
|
$ |
4,372 |
|
|
|
1.5 |
% |
|
$ |
200,753 |
|
|
$ |
1,342 |
|
|
$ |
24,163 |
|
|
$ |
8,400 |
|
|
$ |
(912 |
) |
|
$ |
297 |
|
|
$ |
520,815 |
|
|
$ |
302,478 |
|
|
$ |
218,337 |
|
|
|
72.2 |
% |
Straight-line rents |
|
|
8,636 |
|
|
|
11,141 |
|
|
|
(2,505 |
) |
|
|
-22.5 |
% |
|
|
9,111 |
|
|
|
165 |
|
|
|
11,504 |
|
|
|
2,984 |
|
|
|
|
|
|
|
|
|
|
|
29,251 |
|
|
|
14,290 |
|
|
|
14,961 |
|
|
|
104.7 |
% |
Rents FAS 141 |
|
|
2,713 |
|
|
|
1,546 |
|
|
|
1,167 |
|
|
|
75.5 |
% |
|
|
7,405 |
|
|
|
(33 |
) |
|
|
(249 |
) |
|
|
(243 |
) |
|
|
1 |
|
|
|
180 |
|
|
|
9,870 |
|
|
|
1,450 |
|
|
|
8,420 |
|
|
|
580.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rents |
|
|
308,160 |
|
|
|
305,126 |
|
|
|
3,034 |
|
|
|
1.0 |
% |
|
|
217,269 |
|
|
|
1,474 |
|
|
|
35,418 |
|
|
|
11,141 |
|
|
|
(911 |
) |
|
|
477 |
|
|
|
559,936 |
|
|
|
318,218 |
|
|
|
241,718 |
|
|
|
76.0 |
% |
Tenant reimbursements |
|
|
48,086 |
|
|
|
46,705 |
|
|
|
1,381 |
|
|
|
3.0 |
% |
|
|
28,698 |
|
|
|
98 |
|
|
|
3,007 |
|
|
|
1,130 |
|
|
|
679 |
|
|
|
629 |
|
|
|
80,470 |
|
|
|
48,562 |
|
|
|
31,908 |
|
|
|
65.7 |
% |
Other (c) |
|
|
9,499 |
|
|
|
8,153 |
|
|
|
1,346 |
|
|
|
16.5 |
% |
|
|
2,195 |
|
|
|
|
|
|
|
108 |
|
|
|
613 |
|
|
|
10,593 |
|
|
|
5,078 |
|
|
|
22,395 |
|
|
|
13,844 |
|
|
|
8,551 |
|
|
|
61.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
365,745 |
|
|
|
359,984 |
|
|
|
5,761 |
|
|
|
1.6 |
% |
|
|
248,162 |
|
|
|
1,572 |
|
|
|
38,533 |
|
|
|
12,884 |
|
|
|
10,361 |
|
|
|
6,184 |
|
|
|
662,801 |
|
|
|
380,624 |
|
|
|
282,177 |
|
|
|
74.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
|
114,455 |
|
|
|
112,656 |
|
|
|
1,799 |
|
|
|
1.6 |
% |
|
|
72,798 |
|
|
|
552 |
|
|
|
14,454 |
|
|
|
7,614 |
|
|
|
(13,706 |
) |
|
|
(9,630 |
) |
|
|
188,001 |
|
|
|
111,192 |
|
|
|
76,809 |
|
|
|
69.1 |
% |
Real estate taxes |
|
|
36,682 |
|
|
|
34,387 |
|
|
|
2,295 |
|
|
|
6.7 |
% |
|
|
24,422 |
|
|
|
190 |
|
|
|
4,124 |
|
|
|
3,320 |
|
|
|
356 |
|
|
|
283 |
|
|
|
65,584 |
|
|
|
38,180 |
|
|
|
27,404 |
|
|
|
71.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
151,137 |
|
|
|
147,043 |
|
|
|
4,094 |
|
|
|
2.8 |
% |
|
|
97,220 |
|
|
|
742 |
|
|
|
18,578 |
|
|
|
10,934 |
|
|
|
(13,350 |
) |
|
|
(9,347 |
) |
|
|
253,585 |
|
|
|
149,372 |
|
|
|
104,213 |
|
|
|
69.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
|
|
214,608 |
|
|
|
212,941 |
|
|
|
1,667 |
|
|
|
0.8 |
% |
|
|
150,942 |
|
|
|
830 |
|
|
|
19,955 |
|
|
|
1,950 |
|
|
|
23,711 |
|
|
|
15,531 |
|
|
|
409,216 |
|
|
|
231,252 |
|
|
|
177,964 |
|
|
|
77.0 |
% |
|
Administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,647 |
|
|
|
17,982 |
|
|
|
29,647 |
|
|
|
17,982 |
|
|
|
11,665 |
|
|
|
64.9 |
% |
Depreciation and amortization |
|
|
113,247 |
|
|
|
101,074 |
|
|
|
12,173 |
|
|
|
12.0 |
% |
|
|
117,175 |
|
|
|
461 |
|
|
|
15,313 |
|
|
|
5,326 |
|
|
|
2,394 |
|
|
|
2,257 |
|
|
|
248,129 |
|
|
|
109,118 |
|
|
|
139,011 |
|
|
|
127.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (loss) |
|
$ |
101,361 |
|
|
$ |
111,867 |
|
|
$ |
(10,506 |
) |
|
|
-9.4 |
% |
|
$ |
33,767 |
|
|
$ |
369 |
|
|
$ |
4,642 |
|
|
$ |
(3,376 |
) |
|
$ |
(8,330 |
) |
|
$ |
(4,708 |
) |
|
$ |
131,440 |
|
|
$ |
104,152 |
|
|
$ |
27,288 |
|
|
|
26.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of properties |
|
|
234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Square feet (in thousands) |
|
|
17,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,261 |
|
|
|
|
|
|
|
2,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,513 |
|
|
|
1,370 |
|
|
|
8,143 |
|
|
|
594 |
% |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(171,177 |
) |
|
|
(70,152 |
) |
|
|
(101,025 |
) |
|
|
144 |
% |
Interest expense Deferred
Financing Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,607 |
) |
|
|
(3,766 |
) |
|
|
(841 |
) |
|
|
22 |
% |
Equity in income of real
estate ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,165 |
|
|
|
3,172 |
|
|
|
(1,007 |
) |
|
|
-32 |
% |
Net gain on sales of
interests in real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,190 |
|
|
|
4,640 |
|
|
|
9,550 |
|
|
|
206 |
% |
Gain on termination of
purchase contract |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,147 |
|
|
|
|
|
|
|
3,147 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority
interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,329 |
) |
|
|
39,416 |
|
|
|
(54,745 |
) |
|
|
-139 |
% |
Minority interest partners share of
consolidated real estate ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270 |
|
|
|
|
|
|
|
270 |
|
|
|
100 |
% |
Minority interest
attributable to continuing
operations LP units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,028 |
|
|
|
(1,237 |
) |
|
|
2,265 |
|
|
|
183 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,031 |
) |
|
|
38,179 |
|
|
|
(52,210 |
) |
|
|
-137 |
% |
Income (loss) from
discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,513 |
|
|
|
4,588 |
|
|
|
19,925 |
|
|
|
434 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,482 |
|
|
$ |
42,767 |
|
|
$ |
(32,285 |
) |
|
|
-75 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.03 |
|
|
$ |
0.62 |
|
|
$ |
(0.59 |
) |
|
|
-95 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPLANATORY
NOTES
|
|
(a) |
- Results include: nine developments/redevelopments, four lease-up assets and three properties
placed in service |
|
(b) |
- Represents certain revenues and expenses at the corporate level as well as various
intercompany costs that are eliminated in consolidation and third-party management fees |
|
(c) |
- Includes net termination fee income of $6,133 for 2006 and $5,583 for 2005 for the same store
property portfolio and $948 for 2006 for the acquired properties |
-46-
Total Revenue
Revenue increased by $282.2 million primarily due to the acquired properties (primarily Prentiss),
which represents $246.6 million of this increase. The increase is also the result of 4 properties
placed in service, including Cira Centre, which contributed $25.7 million to this increase.
The increase in total revenue from our same store properties of $5.8 million is primarily
attributable to increased occupancy as well as increased tenant reimbursements resulting from
higher property operating expenses.
Operating Expenses and Real Estate Taxes
Property operating expenses increased by $76.3 million primarily due to the acquisition of Prentiss
and other properties, which represents $72.2 million of this increase. Property operating expenses
attributable to the increased occupancy of Cira Centre and other completed developments resulted in
an additional $6.8 million of property operating expense.
Real estate taxes increased by $27.4 million primarily due to the acquisition of Prentiss and other
properties, which represents $24.2 million of this increase. The remainder of the increase
primarily is the result of increased real estate tax assessments in our same store portfolio and
properties placed in service.
Depreciation and Amortization Expense
Depreciation and amortization increased by $139.0 million primarily due to the acquisition of
Prentiss and other properties, which increased total portfolio depreciation expense by $116.7
million. A significant portion of the increase, $11.9 million, is also due to accelerated
depreciation expense associated with the demolition of one of our properties as part of an office
park development in suburban Philadelphia. This property was part of our same store portfolio;
therefore the remaining increase in depreciation and amortization for our same store portfolio is
$0.3 million. This increase resulted from the timing of assets being placed in service upon
completion of tenant improvement and capital improvement projects subsequent to the end of the nine
month period ending September 30, 2005. The depreciation and amortization for our development
properties increased by $10.0 million as a result of timing of the properties being completed and
placed into service.
Administrative Expenses
Administrative expenses increased by approximately $11.9 million primarily due to the acquisition
of Prentiss. Of this increase, $3.6 million was primarily attributable to increased payroll and
related costs associated with employees that we hired as part of the acquisition of Prentiss. We
also incurred an additional $4.1 million in professional fees in connection with our merger
integration activities. The remainder of the increase reflects other increased costs of the
combined companies which includes an increase in deferred compensation expense of $2.2 million.
Interest Income/ Expense
Interest
expense and deferred financing costs increased by approximately $101.9 million primarily
as a result of 14 fixed rate mortgages, three unsecured notes, and one note secured by U.S.
treasury notes (PPREFI debt) that we assumed or entered into to finance the Prentiss merger. The
mortgages assumed have maturity dates ranging from 2009 through 2016 and the unsecured notes have
maturities ranging from 2008 through 2035.
The PPREFI debt had a maturity of February 2007, but we elected to prepay this debt in November
2006. The PPREFI debt was defeased by Prentiss in the fourth quarter of 2005 and was secured by an
investment in U.S. treasury notes. The interest earned on the treasury notes is included in
interest income and
-47-
substantially offsets the amount of interest expense incurred on the PPREFI debt, resulting in an
immaterial amount of net interest expense incurred. The increase of $8.1 million in interest
income is primarily attributable to the interest income earned on these treasury notes.
See the Notes to Consolidated Financial in Part IV, Item 15 for details of our mortgage
indebtedness and unsecured notes outstanding.
Gain on termination of purchase contract
We held a fifty percent economic interest in an approximately 141,724 square foot office building
located at 101 Paragon Drive, Montvale, New Jersey. The remaining fifty percent interest was held
by Donald E. Axinn, one of the Companys Trustees. Although we and Mr. Axinn had each committed to
provide one half of the $11 million necessary to repay the mortgage loan secured by this property
at the maturity of the loan, in February 2006 an unaffiliated third party entered into an agreement
to purchase this property for $18.3 million. As a result of the purchase by an unaffiliated third
party during August 2006, we recognized a $3.1 million gain on termination of its rights under a
1998 contribution agreement, modified in 2005, that entitled the Partnership to the 50% interest in
the joint venture to operate the property.
Minority Interest-partners share of consolidated real estate ventures
Minority interest-partners share of consolidated real estate ventures represents the portion of
income from our consolidated joint ventures that is allocated to our minority interest partners.
As of December 31, 2006 we held an ownership interest in 15 properties through consolidated Real
Estate Ventures, compared to two properties owned by consolidated Real Estate Ventures at December
31, 2005.
Minority Interest attributable to continuing operations LP units
Minority interest attributable to continuing operations LP units represents the equity in loss
(income) attributable to the portion of the Operating Partnership not owned by us. The increase
from the prior year is primarily the result of the fact that at December 31, 2006 the LP units
share in our net loss from continuing operations compared to their share of net income from
continuing operations in the prior year. Minority interests owned 4.6% and 3.4% of the Operating
Partnership as of December 31, 2006 and 2005, respectively. The change in minority interest
ownership is primarily the result of the Class A units that we issued in the Prentiss acquisition.
Discontinued Operations
Income
from discontinued operations increased by $19.9 million from the prior year as a result of
the sale of eight properties in Chicago, IL, five in Dallas, TX, and one in Allen, TX that we
acquired in the Prentiss acquisition. We also sold five properties that were previously included
in our same store portfolio. These 19 properties combined had net income of $7.7 million and gain
on sale of $20.2 million during the year ended December 31, 2006 before minority interest.
Included in the gain on sale amount was $1.8 million attributable to minority interest in the
Chicago property that was sold by one of our consolidated Real Estate Ventures.
Net Income
Net income
declined by $32.3 million in the year ended December 31, 2006, compared to the same
period in 2005 as increased revenues in 2006 were offset by increases in operating expenses
(primarily depreciation and amortization) and financing costs. All major financial statement
captions increased as a result of our acquisition of Prentiss and the related financing required to
complete the transaction. A significant element of these increases relate to additional
depreciation and amortization charges from the significant property additions (including both the
TRC acquisition in 2004 and the Prentiss acquisition) and
-48-
the values ascribed to related acquired intangibles (e.g., in-place leases). These charges do not
affect our ability to pay dividends and may not be comparable to those of other real estate
companies that have not made such acquisitions. Such charges can be expected to continue until the
values ascribed to the lease intangibles are fully amortized. These intangibles are amortizing
over the related lease terms or estimated tenant relationship. In addition, a significant portion
of the decrease in net income is attributable to the $11.9 million in depreciation expense
described in the Depreciation and Amortization Expense section above.
Earnings per Common Share
Earnings
per common share of $0.03 for the year ended December 31, 2006 as compared to earnings per common share of
$0.62 in 2005 declined as a result of the factors described in Net Income above and an increase in the
average number of common shares outstanding. We issued 34.6 million common shares in our
acquisition of Prentiss.
Comparison of the Year Ended December 31, 2005 to the Year Ended December 31, 2004
The table below shows selected operating information for the Same Store Property Portfolio and the
Total Portfolio. The Same Store Property Portfolio consists of 226 Properties containing an
aggregate of approximately 15.0 million net rentable square feet that we owned for the entire
twelve-month periods ended December 31, 2005 and 2004. This table also includes a reconciliation
from the Same Store Property Portfolio to the Total Portfolio (i.e., all properties owned by us as
of December 31, 2005 and 2004) by providing information for the properties which were acquired,
sold, or placed into service and administrative/elimination information for the years ended
December 31, 2005 and 2004.
-49-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired |
|
|
Development |
|
|
Other/ |
|
|
|
|
|
|
Same Store Properties |
|
|
Properties (a) |
|
|
Properties |
|
|
Eliminations (b) |
|
|
All Properties |
|
|
|
|
|
|
|
|
|
|
|
Increase/ |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/ |
|
|
% |
|
(dollars in thousands) |
|
2005 |
|
|
2004 |
|
|
(Decrease) |
|
|
Change |
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
(Decrease) |
|
|
Change |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rents |
|
$ |
245,234 |
|
|
$ |
248,725 |
|
|
|
(3,491 |
) |
|
|
-1.4 |
% |
|
$ |
75,500 |
|
|
$ |
22,177 |
|
|
$ |
7,338 |
|
|
$ |
4,729 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
328,072 |
|
|
$ |
275,631 |
|
|
$ |
52,441 |
|
|
|
19.0 |
% |
Tenant reimbursements |
|
|
37,071 |
|
|
|
34,037 |
|
|
|
3,034 |
|
|
|
8.9 |
% |
|
|
11,460 |
|
|
|
3,040 |
|
|
|
753 |
|
|
|
549 |
|
|
|
225 |
|
|
|
(54 |
) |
|
|
49,509 |
|
|
|
37,572 |
|
|
|
11,937 |
|
|
|
31.8 |
% |
Other |
|
|
7,329 |
|
|
|
3,967 |
|
|
|
3,362 |
|
|
|
84.7 |
% |
|
|
907 |
|
|
|
326 |
|
|
|
594 |
|
|
|
60 |
|
|
|
5,049 |
|
|
|
7,665 |
|
|
|
13,879 |
|
|
|
12,018 |
|
|
|
1,861 |
|
|
|
15.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
289,634 |
|
|
|
286,729 |
|
|
|
2,905 |
|
|
|
1.0 |
% |
|
|
87,867 |
|
|
|
25,543 |
|
|
|
8,685 |
|
|
|
5,338 |
|
|
|
5,274 |
|
|
|
7,611 |
|
|
|
391,460 |
|
|
|
325,221 |
|
|
|
66,239 |
|
|
|
20.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
|
91,423 |
|
|
|
88,266 |
|
|
|
3,157 |
|
|
|
3.6 |
% |
|
|
30,079 |
|
|
|
7,883 |
|
|
|
3,615 |
|
|
|
2,218 |
|
|
|
(10,241 |
) |
|
|
(8,510 |
) |
|
|
114,876 |
|
|
|
89,857 |
|
|
|
25,019 |
|
|
|
27.8 |
% |
Real estate taxes |
|
|
28,814 |
|
|
|
27,399 |
|
|
|
1,415 |
|
|
|
5.2 |
% |
|
|
9,402 |
|
|
|
2,563 |
|
|
|
1,164 |
|
|
|
1,069 |
|
|
|
31 |
|
|
|
31 |
|
|
|
39,411 |
|
|
|
31,062 |
|
|
|
8,349 |
|
|
|
26.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
120,237 |
|
|
|
115,665 |
|
|
|
4,572 |
|
|
|
4.0 |
% |
|
|
39,481 |
|
|
|
10,446 |
|
|
|
4,779 |
|
|
|
3,287 |
|
|
|
(10,210 |
) |
|
|
(8,479 |
) |
|
|
154,287 |
|
|
|
120,919 |
|
|
|
33,368 |
|
|
|
27.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Income |
|
|
169,397 |
|
|
|
171,064 |
|
|
|
(1,667 |
) |
|
|
-1.0 |
% |
|
|
48,386 |
|
|
|
15,097 |
|
|
|
3,906 |
|
|
|
2,051 |
|
|
|
15,484 |
|
|
|
16,090 |
|
|
|
237,173 |
|
|
|
204,302 |
|
|
|
32,871 |
|
|
|
16.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,982 |
|
|
|
15,100 |
|
|
|
17,982 |
|
|
|
15,100 |
|
|
|
2,882 |
|
|
|
19.1 |
% |
Depreciation and amortization |
|
|
68,744 |
|
|
|
63,968 |
|
|
|
4,776 |
|
|
|
7.5 |
% |
|
|
38,776 |
|
|
|
13,221 |
|
|
|
3,313 |
|
|
|
1,669 |
|
|
|
1,053 |
|
|
|
1,046 |
|
|
|
111,886 |
|
|
|
79,904 |
|
|
|
31,982 |
|
|
|
40.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
100,653 |
|
|
|
107,096 |
|
|
|
(6,443 |
) |
|
|
-6.0 |
% |
|
|
9,610 |
|
|
|
1,876 |
|
|
|
593 |
|
|
|
382 |
|
|
|
(3,551 |
) |
|
|
(56 |
) |
|
|
107,305 |
|
|
|
109,298 |
|
|
|
(1,993 |
) |
|
|
-1.8 |
% |
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,376 |
|
|
|
840 |
|
|
|
536 |
|
|
|
63.8 |
% |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(74,363 |
) |
|
|
(55,061 |
) |
|
|
(19,302 |
) |
|
|
35.1 |
% |
Equity in income of real estate ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,172 |
|
|
|
2,024 |
|
|
|
1,148 |
|
|
|
56.7 |
% |
Net gain on sales of interest in real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,640 |
|
|
|
2,975 |
|
|
|
1,665 |
|
|
|
56.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,130 |
|
|
|
60,076 |
|
|
|
(17,946 |
) |
|
|
-29.9 |
% |
Minority interest attributable to
continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,331 |
) |
|
|
(2,472 |
) |
|
|
1,141 |
|
|
|
-46.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,799 |
|
|
|
57,604 |
|
|
|
(16,805 |
) |
|
|
-29.2 |
% |
Income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,968 |
|
|
|
2,699 |
|
|
|
(731 |
) |
|
|
-27.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,767 |
|
|
|
60,303 |
|
|
|
(17,536 |
) |
|
|
-29.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.62 |
|
|
$ |
1.15 |
|
|
$ |
(0.53 |
) |
|
|
-46.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPLANATORY
NOTES
|
|
(a) |
- Represents the operations of properties acquired that are not included in the definition of
the Same Store Property Portfolio, primarily the TRC properties acquired on September 21, 2004. |
|
(b) |
- Represents certain revenue and expenses at the corporate level as well as various
intercompany costs that are eliminated in consolidation. |
-50-
Revenue
Revenue increased by $66.2 million primarily due to properties that were acquired in 2005 and a
full year of operations of those properties acquired in 2004, primarily the TRC Properties acquired
in September 2004. Revenue for Same Store Properties increased by $2.9 million due to increased
tenant reimbursement revenue resulting from increased property operating expenses in 2005 as
compared to 2004. Other revenue represents lease termination fees, bankruptcy settlement proceeds,
leasing commissions and third-party management fees. Total Portfolio other revenue increased by
$1.9 million in 2005 primarily due to an increase in net termination fees associated with tenant
terminations in 2005 offset by the settlement of a previously disclosed litigation in 2004 ($1.0
million plus accrued interest on our security deposit that was released).
Operating Expenses and Real Estate Taxes
Property operating expenses increased by $25.0 million in 2005 primarily due to properties acquired
in 2005 and a full year of operations of properties acquired in 2004 as well as increased repairs
and maintenance costs, snow removal costs, electric expense, security expense, janitorial costs and
HVAC maintenance expense at existing properties in our same store property portfolio and our
development properties.
Real estate taxes increased by $8.3 million primarily due to properties acquired in 2005 and a full
year of real estate taxes for our properties acquired in 2004 as well as increased real estate tax
assessments in 2005 at existing properties in our same store property portfolio and our development
properties as a result of higher tax rates and property assessments.
Interest Expense
Interest expense increased by $19.3 million in 2005 primarily due to: (i) an increase in average
debt as a result of debt incurred to finance our acquisitions in 2005/2004 and our increased
development activity and (ii) an increase in average rates on debt outstanding as a result of the
increase in LIBOR rates on our credit facilities. These increases were partially offset by an
increase in the amount of interest capitalized which is primarily attributable to our development
of Cira Centre.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by $32.0 million in 2005 primarily due to
properties acquired in 2005, a full year of depreciation and amortization of properties acquired
during 2004 and additional amortization from tenant improvements and leasing commissions paid
during 2005. Depreciation and amortization expense for the same store properties increased by $4.8
million primarily as a result of the write-off of tenant improvements and intangibles for spaces
that were vacated during 2005.
Administrative Expenses
Administrative expenses increased by $2.9 million in 2005 primarily due to increased payroll and
related costs associated with employees that we hired as part of our TRC acquisition in September
2004, higher compensation and benefits costs for employees and increased spending on process and
technology improvements.
Equity in Income of Real Estate Ventures
Equity in income of Real Estate Ventures increased by $1.1 million in 2005 as a result of increased
net income from the Real Estate Ventures. The increased net income resulted from the sale of
condominium units by one of the Real Estate Venture in 2005.
-51-
Net Gains on Sales of Interests in Real Estate
During 2005, we sold three parcels of land, realizing net gains totaling $4.6 million. The
increase from the prior year of $1.6 million is a result of the value of the land parcels sold in
each year compared to their carrying values at the time of sale.
Minority Interest
Minority interest from continuing operations represents the equity in income attributable to the
portion of the Operating Partnership and the consolidated Real Estate Ventures not owned by us.
Minority interest from continuing operations decreased by $1.1 million in 2005 primarily due to
decreased net income from our Operating Partnership and a decrease in the minority interest
ownership percentage.
Discontinued Operations
Discontinued operations decreased by $0.7 million in 2005 primarily due to the timing of property
sales for assets included in discontinued operations in 2005 as compared to 2004.
Net Income
Net income declined in 2005 by $17.5 million as increased revenues were not sufficient to offset
increases in operating and financing costs. All major financial statement captions increased as a
result of the Companys significant property acquisitions in fiscal 2004 and 2005 and the related
financing required to complete those transactions. It should be noted that a significant element
of these costs relate to additional depreciation and amortization charges relating to the
significant property additions and the values ascribed to related acquired intangibles (e.g.,
in-place leases). These charges do not affect the Companys ability to pay dividends and may not
be comparable to those of other real estate companies that have not made such acquisitions. Such
charges can be expected to continue until the values ascribed to the lease intangibles are fully
amortized. These intangibles are amortizing over the related lease terms or estimated tenant
relationship. The size of these non-cash charges are expected to increase in the future as a
result of the Prentiss transaction.
Earnings per Common Share
Earnings per common share of $0.62 in 2005 as compared to earnings per common share of $1.15 in
2004 as a result of the factors described in net income above and an increase in the average number
of shares outstanding as a result of offerings completed in 2004.
LIQUIDITY AND CAPITAL RESOURCES
General
Our principal liquidity needs for the next twelve months are as follows:
|
|
|
fund normal recurring expenses, |
|
|
|
|
meet debt service requirements, |
|
|
|
|
fund capital expenditures, including capital and tenant improvements and leasing costs, |
|
|
|
|
fund current development and redevelopment costs, and |
|
|
|
|
fund distributions declared by our Board of Trustees. |
We believe that our liquidity needs will be satisfied through cash flows generated by operations
and financing activities. Rental revenue, expense recoveries from tenants, and other income from
operations are our principal sources of cash that we use to pay operating expenses, debt service,
recurring capital
expenditures and the minimum distributions required to maintain our REIT qualification. Our revenue
also
-52-
includes third-party fees generated by our property management, leasing, development and
construction businesses. We believe our revenue, together with proceeds from equity and debt
financings, will continue to provide funds for our short-term liquidity needs. However, material
changes in our operating or financing activities may adversely affect our net cash flows. Such
changes, in turn, would adversely affect our ability to fund distributions, debt service payments
and tenant improvements. In addition, a material adverse change in our cash provided by operations
would affect our compliance with covenants under our unsecured credit facility and unsecured notes.
Our principal liquidity needs for periods beyond twelve months are for costs of developments,
redevelopments, property acquisitions, scheduled debt maturities, major renovations, expansions and
other non-recurring capital improvements. We draw on multiple financing sources to fund our
long-term capital needs. We use our credit facility for general business purposes, including the
acquisition, development and redevelopment of properties and the repayment of other debt.
As a result of our acquisition of Prentiss, we have additional short and long-term liquidity
requirements. Historically, we have satisfied these requirements principally through the most
advantageous source of capital at that time, including public offerings of unsecured debt and
private placements of secured and unsecured debt, sales of common and preferred equity, capital
raised through the disposition of assets, and joint venture transactions. We believe these sources
of capital will continue to be available to fund our capital needs.
We funded the approximately $1.05 billion cash portion of the Prentiss merger consideration,
related transaction costs and prepayments of approximately $543.3 million in Prentiss mortgage debt
at the closing of the merger through (i) a $750 million unsecured term loan that we repaid in March 2006; (ii) approximately $676.5 million of cash from Prudentials
acquisition of Prentiss properties; and (iii) approximately $195.0 million through our revolving
credit facility.
Our ability to incur additional debt is dependent upon a number of factors, including our credit
ratings, the value of our unencumbered assets, our degree of leverage and borrowing restrictions
imposed by our current lenders. We currently have investment grade ratings for prospective
unsecured debt offerings from three major rating agencies. If a rating agency were to downgrade our
credit rating, our access to capital in the unsecured debt market would be more limited and the
interest rate under our existing credit facility would increase.
Our ability to sell common and preferred shares is dependent on, among other things, general market
conditions for REITs, market perceptions about us and the current trading price of our shares. We
regularly analyze which source of capital is most advantageous to us at any particular point in
time. The equity markets may not be consistently available on terms that we consider attractive.
Cash Flows
The following summary discussion of our cash flows is based on the consolidated statement of cash
flows included in our consolidated financial statements and is not meant to be an all-inclusive
discussion of the changes in our cash flows for the periods presented.
As of December 31, 2006 and 2005, we maintained cash and cash equivalents of $25.4 million and $7.2
million, respectively. This $18.2 million increase was the result of the following changes in cash
flow from our various activities:
-53-
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Operating |
|
$ |
241,566 |
|
|
$ |
125,147 |
|
|
$ |
152,890 |
|
Investing |
|
|
(915,794 |
) |
|
|
(252,417 |
) |
|
|
(682,652 |
) |
Financing |
|
|
692,433 |
|
|
|
119,098 |
|
|
|
536,556 |
|
|
|
|
|
|
|
|
|
|
|
Net cash flows |
|
$ |
18,205 |
|
|
$ |
(8,172 |
) |
|
$ |
6,794 |
|
|
|
|
|
|
|
|
|
|
|
Our principal source of cash flows is from the operation of our properties. Our increased cash
flow from operating activities is primarily attributable our acquisition of Prentiss.
The increase in our investing activities in 2006 over 2005 is primarily attributable to our
acquisition of Prentiss in January 2006 and other property and land acquisitions totaling $1,167.1
million. In addition, we incurred approximately $242.5 million of capital expenditures for the
properties that we own. These increases in investing activities are offset by the net proceeds of
$257.6 million received from the sale of eight properties in Chicago and seven properties in Texas
that we acquired in our acquisition of Prentiss and subsequently sold. We received net proceeds of
$92.0 million from sales of properties and land in our same store portfolio. We redeemed
marketable securities of $181.6 million that had been escrowed to secure a secured notes payable.
The increase in our financing activities in 2006 as compared to 2005 is primarily attributable to
the issuance in 2006 of $1,195.0 million of unsecured notes resulting in net proceeds of $1,186.0
million. The proceeds were used to repay the $750.0 million term loan that we obtained in
connection with our acquisition of Prentiss, as well as to repay a portion of the outstanding
borrowings on our credit facility. This cash inflow is offset by our repurchase of common shares
totaling $94.5 million and our four distribution payments totaling $151.1 million.
Capitalization
Indebtedness
As of December 31, 2006, we had approximately $3.16 billion of outstanding indebtedness. The table
below summarizes our mortgage notes payable, our unsecured notes, and our revolving credit facility
at December 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
|
|
2006 |
|
|
2005 |
|
|
|
(dollars in thousands) |
|
Balance: |
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
2,718,171 |
|
|
$ |
1,417,611 |
|
Variable rate |
|
|
439,162 |
|
|
|
103,773 |
|
|
|
|
|
|
|
|
Total |
|
$ |
3,157,333 |
|
|
$ |
1,521,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Total Debt: |
|
|
|
|
|
|
|
|
Fixed rate |
|
|
86.1 |
% |
|
|
93.2 |
% |
Variable rate |
|
|
13.9 |
% |
|
|
6.8 |
% |
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average interest rate at period end: |
|
|
|
|
|
|
|
|
Fixed rate |
|
|
5.6 |
% |
|
|
5.9 |
% |
Variable rate |
|
|
6.0 |
% |
|
|
5.3 |
% |
The variable rate debt shown above generally bears interest based on various spreads over LIBOR
(the term of which we select). The December 31, 2006 fixed rate balance includes $90.0 million of
variable rate debt that is effectively fixed at 6% via an interest rate hedge.
-54-
Unsecured Credit Facility
We use credit facility borrowings for general business purposes, including the acquisition,
development and redevelopment of properties and the repayment of other debt. In December 2005,we
replaced our then existing unsecured credit facility with a $600 million unsecured credit facility
(the Credit Facility) that matures in December 2009, subject to a one year extension option upon
payment of a fee and the absence of any defaults. Borrowings under the new Credit Facility
generally bear interest at LIBOR (LIBOR was 5.33% as of December 31, 2006) plus a spread over LIBOR
ranging from 0.55% to 1.10% based on our unsecured senior debt rating. We have an option to
increase the maximum borrowings under the Credit Facility to $800 million subject to the absence of
any defaults and our ability to obtain additional commitments from our existing or new lenders.
As of December 31, 2006, we had $60 million of borrowings and $24 million of letters of credit
outstanding under the Credit Facility, leaving $516 million of
unused availability. On January 2, 2007, we used
$300 million of borrowings under the Credit Facility to payoff
the $300 million unsecured floating rate notes due 2009; notice
of this payoff was given in November 2006. For the years
ended December 31, 2006 and 2005, our weighted average interest rates, including the effects of
interest rate hedges discussed in Note 12 to the consolidated financial statements included herein,
and including both the new Credit Facility and prior credit facility, were 5.93% and 4.58 % per
annum, respectively.
The Credit Facility contains financial and non-financial covenants, including covenants that relate
to our incurrence of additional debt; the granting of liens; consummation of mergers and
consolidations; the disposition of assets and interests in subsidiaries; the making of loans and
investments; and the payment of dividends. The restriction on dividends permits us to pay
dividends in the amount required for us to retain our qualification as a REIT and otherwise limits
dividends to 90% of our funds from operations. The Credit Facility also contains financial
covenants that require us to maintain an interest coverage ratio, a fixed charge coverage ratio, an
unsecured debt ratio and an unencumbered cash flow ratio above certain specified minimum levels; to
maintain net worth above an amount determined on a specified formula; and to maintain a leverage
ratio and a secured debt ratio below certain maximum levels. Another financial covenant limits the
ratio of unsecured debt to unencumbered properties. We were in compliance with all financial
covenants as of December 31, 2006.
Unsecured Notes
On March 28, 2006, the Operating Partnership consummated the public offering of (1) $300,000,000
aggregate principal amount of its unsecured floating rate notes due 2009, (2) $300,000,000
aggregate principal amount of its 5.75% notes due 2012 and (3) $250,000,000 aggregate principal
amount of its 6.00% notes due 2016. The Company guaranteed the payment of principal and interest
on these notes.
On October 4, 2006, we completed an offering of $300.0 million aggregate principal amount of 3.875%
senior convertible notes due 2026 in an offering made in reliance upon an exemption from
registration rights under Rule 144A under the Securities Act of 1933 and issued an additional $45
million of exchangeable notes on October 16, 2006 to cover over-allotments. At certain times and
upon the occurrence of certain events, the notes are convertible into cash up to their principal
amount and, with respect to the remainder, if any, of the conversion value in excess of such
principal amount, cash or shares of the Companys common stock. The initial conversion rate will
be 25.4065 shares per $1,000 principal amount of notes (which is equivalent to an initial
conversion price of $39.36 per share). The notes may not be redeemed by us prior to October 20,
2011 (except to preserve the Companys status as a REIT for U.S, federal income tax purposes), but
are redeemable anytime thereafter, in whole or in part, at a redemption price equal to the
principal amount of the notes plus any accrued and unpaid interest (including additional interest),
if any. In addition, on October 20, 2011, October 15, 2016, and October 15, 2021, or upon the
occurrence of certain change in control transactions prior to October 20, 2011, note holders may
require us to repurchase all or a portion of the notes at a purchase price equal to the principal
amount plus any accrued and unpaid interest on the notes. Net proceeds from the October 2006 Debt
Offering were used to repurchase approximately $60.0 million of the Companys common stock at a
price of $32.80 per share and for general corporate purposes, including the repayment of
outstanding borrowings under our unsecured
revolving credit facility.
-55-
On November 29, 2006, we gave notice of redemption of the $300 million floating rate guaranteed
notes due 2009 issued by the Operating Partnership and repaid these notes on March 28, 2006. The
Operating Partnership repaid the 2009 Notes on January 2, 2007 and incurred accelerated
amortization of the associated deferred financing costs of $1.4 million in the fourth quarter 2006
after giving prepayment notice in November 2006.
The indenture relating to our unsecured notes contains various financial restrictions and
requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio
not to exceed 40%, (3) a debt service coverage ratio of greater than 1.5 to 1.0, and (4) an
unencumbered asset value of not less than 150% of unsecured debt. In addition, the note purchase
agreement relating to our $113 million unsecured notes that mature in 2008 contains covenants that
are similar to the above covenants.
Unsecured Term Loans
On March 28, 2006, we terminated and repaid all amounts outstanding under the $750 million term
loan agreement that we had entered into on January 5, 2006 in connection with our acquisition of
Prentiss.
-56-
Mortgage Indebtedness
The following table sets forth information regarding our mortgage indebtedness outstanding at
December 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective |
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
Interest Rate |
|
|
Maturity |
|
Property / Location |
|
2006 |
|
|
2005 |
|
|
@ 12/31/06 |
|
|
Date |
|
111 Arrandale Blvd |
|
$ |
|
|
|
$ |
1,043 |
|
|
|
|
|
|
Aug-06 |
429 Creamery Way |
|
|
|
|
|
|
2,927 |
|
|
|
|
|
|
Sep-06 |
Interstate Center |
|
|
552 |
|
|
|
766 |
|
|
|
6.19 |
%(b) |
|
Mar-07 |
440 & 442 Creamery Way |
|
|
5,421 |
|
|
|
5,581 |
|
|
|
8.55 |
% |
|
Jul-07 |
Norriton Office Center |
|
|
|
|
|
|
5,191 |
|
|
|
8.50 |
% |
|
Oct-07 |
481 John Young Way |
|
|
2,294 |
|
|
|
2,360 |
|
|
|
8.40 |
% |
|
Nov-07 |
400 Commerce Drive |
|
|
11,797 |
|
|
|
11,989 |
|
|
|
7.12 |
% |
|
Jun-08 |
Two Logan Square |
|
|
71,348 |
|
|
|
72,468 |
|
|
|
5.78 |
%(a) |
|
Jul-09 |
The Bluffs |
|
|
10,700 |
|
|
|
|
|
|
|
6.00 |
%(a) |
|
Jul-09 |
Pacific Ridge |
|
|
14,500 |
|
|
|
|
|
|
|
6.00 |
%(a) |
|
Aug-09 |
Pacific View/Camino |
|
|
26,000 |
|
|
|
|
|
|
|
6.00 |
%(a) |
|
Aug-09 |
Computer Associates Building |
|
|
31,000 |
|
|
|
|
|
|
|
6.00 |
%(a) |
|
Aug-09 |
200 Commerce Drive |
|
|
5,841 |
|
|
|
5,911 |
|
|
|
7.12 |
%(a) |
|
Jan-10 |
Presidents Plaza |
|
|
30,900 |
|
|
|
|
|
|
|
6.00 |
%(a) |
|
May-10 |
1333 Broadway |
|
|
24,418 |
|
|
|
|
|
|
|
5.18 |
%(a) |
|
May-10 |
The Ordway |
|
|
46,199 |
|
|
|
|
|
|
|
7.95 |
%(a) |
|
Aug-10 |
World Savings Center |
|
|
27,524 |
|
|
|
|
|
|
|
7.91 |
%(a) |
|
Nov-10 |
Plymouth Meeting Exec. |
|
|
44,103 |
|
|
|
44,687 |
|
|
|
7.00 |
%(a) |
|
Dec-10 |
Four Tower Bridge |
|
|
10,626 |
|
|
|
10,763 |
|
|
|
6.62 |
% |
|
Feb-11 |
Arboretum I, II, III & V |
|
|
22,750 |
|
|
|
23,238 |
|
|
|
7.59 |
% |
|
Jul-11 |
Midlantic Drive/Lenox Drive/DCC I |
|
|
62,678 |
|
|
|
63,803 |
|
|
|
8.05 |
% |
|
Oct-11 |
Research Office Center |
|
|
42,205 |
|
|
|
|
|
|
|
7.64 |
%(a) |
|
Oct-11 |
Concord Airport Plaza |
|
|
38,461 |
|
|
|
|
|
|
|
7.20 |
%(a) |
|
Jan-12 |
Six Tower Bridge |
|
|
14,744 |
|
|
|
15,083 |
|
|
|
7.79 |
% |
|
Aug-12 |
Newtown Square/Berwyn Park/Libertyview |
|
|
63,231 |
|
|
|
64,429 |
|
|
|
7.25 |
% |
|
May-13 |
Coppell Associates |
|
|
3,737 |
|
|
|
|
|
|
|
6.89 |
% |
|
Dec-13 |
Southpoint III |
|
|
4,949 |
|
|
|
5,431 |
|
|
|
7.75 |
% |
|
Apr-14 |
Tysons Corner |
|
|
100,000 |
|
|
|
|
|
|
|
4.84 |
%(a) |
|
Aug-15 |
Coppell Associates |
|
|
16,600 |
|
|
|
|
|
|
|
5.75 |
% |
|
Mar-16 |
Grande A |
|
|
59,513 |
|
|
|
61,092 |
|
|
|
7.48 |
% |
|
Jul-27 |
Grande A |
|
|
|
|
|
|
11,456 |
|
|
|
|
|
|
Jul-27 |
Grande A |
|
|
|
|
|
|
1,551 |
|
|
|
|
|
|
Jul-27 |
Grande B |
|
|
77,535 |
|
|
|
79,036 |
|
|
|
7.48 |
% |
|
Jul-27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal balance outstanding |
|
|
869,626 |
|
|
|
488,805 |
|
|
|
|
|
|
|
|
|
Plus: unamortized fixed-rate debt premiums |
|
|
14,294 |
|
|
|
5,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage indebtedness |
|
$ |
883,920 |
|
|
$ |
494,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Loans were assumed upon acquisition of the related property. Interest rates presented
above reflect the market rate at the time of acquisition. |
|
(b) |
|
For loans that bear interest at a variable rate, the rates in effect at December 31, 2006
have been presented. |
The mortgage note payable balance of $5.1 million for Norriton Office Center as of December
31, 2006, not included in the table above, is included in Mortgage notes payable and other
liabilities held for sale on the balance sheet.
Guaranties. As of December 31, 2006, we had guaranteed repayment of approximately $0.6 million of
loans on behalf of certain Real Estate Ventures. See Item 2. Properties Real Estate Ventures.
We also provide customary environmental indemnities and completion guarantees in connection with
construction and permanent financing both for our own account and on behalf of Real Estate
Ventures.
-57-
Share
Repurchases
We maintain a share repurchase program under which our Board has authorized us to repurchase our
common shares from time to time. Our Board initially authorized this program in 1998 and has
periodically replenished capacity under the program, including, most recently, on May 2, 2006 when
our Board restored capacity to 3.5 million common shares. During the year ended December 31, 2006,
we repurchased approximately 1.2 million common shares under this program at an average price of
$29.22 per share, leaving approximately 2.3 million in remaining capacity. Our Board has not
limited the duration of the program.
On October 4, 2006 we repurchased 1,829,000 common shares with a portion of the proceeds of our
3.875% Exchangeable Guaranteed Notes at an average purchase price of $32.80 per share
(approximately $60.0 million in aggregate). We repurchased these shares under a separate Board
authorization that provided that the shares repurchased did not reduce capacity under the share
repurchase program.
Off-Balance Sheet Arrangements
We are not dependent on any off-balance sheet financing arrangements for liquidity. Our
off-balance sheet arrangements are discussed in Note 4 to the financial statements, Investment in
Unconsolidated Real Estate Ventures. Additional information about the debt of our unconsolidated
Real Estate Ventures is included in Item 2 Properties.
Our interest rate incurred under our revolving credit facility is subject to modification depending
on our rating status with qualified agencies.
Shelf Registration Statement
We
maintain a shelf registration statement for the issuance of common shares, preferred shares,
depositary shares and warrants and unsecured debt securities. Subject to our ongoing compliance
with securities laws, and if warranted by market conditions, we may offer and sell equity and debt
securities from time to time under the registration statement.
Short- and Long-Term Liquidity
We believe that our cash flow from operations is adequate to fund our short-term liquidity
requirements. 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. We 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 Companys REIT
qualification under the Internal Revenue Code.
We expect to meet our 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 cash from operations, borrowings
under our Credit Facility, other long-term secured and unsecured indebtedness, the issuance of
equity securities and the proceeds from the disposition of selected assets.
Inflation
A majority of our leases provide for reimbursement of real estate taxes and operating expenses
either on a triple net basis or over a base amount. In addition, many of our office leases provide
for fixed base rent increases. We believe that inflationary increases in expenses will be
partially offset by expense reimbursement and contractual rent increases.
-58-
Commitments
The following table outlines the timing of payment requirements related to our contractual
commitments as of December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments by Period (in thousands) |
|
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
|
More than |
|
|
|
Total |
|
|
1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
5 Years |
|
Mortgage notes payable (a) |
|
$ |
869,626 |
|
|
$ |
20,232 |
|
|
$ |
190,733 |
|
|
$ |
320,864 |
|
|
$ |
337,797 |
|
Mortgage notes payable on
asset classified as held for sale (a) |
|
|
5,105 |
|
|
|
5,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit facility (b) |
|
|
60,000 |
|
|
|
|
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
Unsecured debt (a), (b) |
|
|
2,211,610 |
|
|
|
|
|
|
|
688,000 |
|
|
|
945,000 |
|
|
|
578,610 |
|
Ground leases (c) |
|
|
280,185 |
|
|
|
1,736 |
|
|
|
3,472 |
|
|
|
3,637 |
|
|
|
271,340 |
|
Other liabilities |
|
|
2,495 |
|
|
|
|
|
|
|
1,807 |
|
|
|
|
|
|
|
688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,429,021 |
|
|
$ |
27,073 |
|
|
$ |
944,012 |
|
|
$ |
1,269,501 |
|
|
$ |
1,188,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amounts do not include unamortized discounts and/or premiums. |
|
(b) |
|
Our revolving credit facility was used to repay the $300 million floating rate notes due 2009
on January 2, 2007. Accordingly, these amounts are shown as payable in 2009, which is the maturity
of the credit facility. |
|
(c) |
|
Future minimum rental payments under the terms of all non-cancelable ground leases under which
we are the lessee are expensed on a straight-line basis regardless of when payments are due. |
As part of our acquisition of the TRC Properties in September 2004, we agreed to issue to the
sellers up to a maximum of $9.7 million of Class A Units of the Operating Partnership if certain of
the acquired properties achieve at least 95% occupancy prior to September 21, 2007. The maximum
number of Units that we are obligated to issue declines monthly and, as of December 31, 2006, the
maximum balance payable under this arrangement was $1.8 million, with no amount currently due.
As part of the TRC acquisition, we acquired our interest in Two Logan Square, a 696,477 square foot
office building in Philadelphia, primarily through a second and third mortgage secured by this
property. We currently do not expect to take title to Two Logan Square until, at the earliest,
September 2019. In the event that we take title to Two Logan Square upon a foreclosure of our
mortgage, we have agreed to make a payment to an unaffiliated third party with a residual interest
in the fee owner of this property. The amount of the payment would be $0.6 million if we must pay
a state and local transfer tax upon taking title, and $2.9 million if no transfer tax is payable
upon the transfer.
As part of the TRC acquisition and several of our other acquisitions, we agreed not to sell the
acquired properties. In the case of the TRC Properties, we agreed not to sell the acquired
properties for periods ranging from three to 15 years from the acquisition date as follows: 201
King of Prussia Road, 555 East Lancaster Avenue and 300 Delaware Avenue (three years); One Rodney
Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square
and Radnor Corporate Center (15 years). At December 31, 2006, we had agreed not to sell 14
properties that aggregate 1.0 million square feet for periods that expire through 2008. Our
agreements generally provide that we may dispose of the subject properties only in transactions
that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax
deferred transactions. In the event that we sell any of the properties within the applicable
restricted period in non-exempt transactions, we would be required to pay significant tax
liabilities that would be incurred by the parties who sold us the applicable property.
We invest in our properties and regularly incur capital expenditures in the ordinary course to
maintain the properties. We believe that such expenditures enhance our competitiveness. We also
enter into construction, utility and service contracts in the ordinary course of business which may
extend beyond one year. These contracts typically provide for cancellation with insignificant or
no cancellation penalties.
-59-
Interest Rate Risk and Sensitivity Analysis
The analysis below presents the sensitivity of the market value of our financial instruments to
selected changes in market rates. The range of changes chosen reflects our view of changes which
are reasonably possible over a one-year period. Market values are the present value of projected
future cash flows based on the market rates chosen.
Our financial instruments consist of both fixed and variable rate debt. As of December 31, 2006,
our consolidated debt consisted of $889.0 million (including $90.0 million of variable interest
rate debt that is fixed through interest rate swaps) in fixed rate mortgages and $0.6 million in
variable rate mortgage notes, $60.0 million borrowings under our Credit Facility and $2.3 billion
in unsecured notes (net of discounts) of which $1.8 billion are fixed rate borrowings and $439.0
million are variable rate borrowings. All financial instruments were entered into for other than
trading purposes and the net market value of these financial instruments is referred to as the net
financial position. Changes in interest rates have different impacts on the fixed and variable
rate portions of our debt portfolio. A change in interest rates on the fixed portion of the debt
portfolio impacts the net financial instrument position, but has no impact on interest incurred or
cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the
interest incurred and cash flows, but does not impact the net financial instrument position.
If market rates of interest on our variable rate debt increase by 1%, the increase in annual
interest expense on our variable rate debt would decrease future earnings and cash flows by
approximately $4.4 million. If market rates of interest on our variable rate debt decrease by 1%,
the decrease in interest expense on our variable rate debt would increase future earnings and cash
flows by approximately $4.4 million.
If market rates of interest increase by 1%, the fair value of our outstanding fixed-rate debt would
decrease by approximately $102.8 million. If market rates of interest decrease by 1%, the fair
value of our outstanding fixed-rate mortgage debt would increase by approximately $109.9 million.
As of December 31, 2006, based on prevailing interest rates and credit spreads, the fair value of
our unsecured notes was $1.83 billion.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
See discussion in Managements Discussion and Analysis included in Item 7 herein.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary financial data of Brandywine Realty Trust and Brandywine
Operating Partnership, L.P. and the reports thereon of PricewaterhouseCoopers LLP with respect
thereto are listed under Item 15(a) and filed as part of this Annual Report on Form 10-K. See Item
15.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of each registrants management, including its
principal executive officer and principal financial officer, each registrants management conducted
an evaluation of the registrants disclosure controls and procedures, as such term is defined under
Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange
Act). Based on this evaluation, the principal executive officer and the principal financial
officer of each registrant concluded
-60-
that each registrants disclosure controls and procedures were
effective as of the end of the period covered by this annual report. There were no changes in the
internal control over financial reporting of each registrant that occurred during the three-month
period ended December 31, 2006 that have materially affected, or are reasonably likely to
materially affect, its internal control over financial reporting.
Managements Report on Internal Control Over Financial Reporting
The management of each registrant is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).
Under the supervision and with the participation of each registrants management, including its
principal executive officer and principal financial officer, each registrants management conducted
an evaluation of the effectiveness of the registrants internal control over financial reporting
based on the framework in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the framework
in Internal Control Integrated Framework, each registrants management concluded that the
registrants internal control over financial reporting was effective as of December 31, 2006.
Management of each registrant has excluded our investments in Four and Six Tower Bridge Associates
from its evaluation of the effectiveness of internal control over financial reporting as of
December 31, 2006 because we do not have the right or authority to assess the internal controls of
the individual entities and we also lack the ability, in practice, to make the assessment. Four
and Six Tower Bridge Associates are two real estate partnerships, created prior to December 15,
2003, which we consolidate under Financial Accounting Standards Board Interpretation (FIN) 46R,
Consolidation of Variable Interest Entities. We started consolidating Four and Six Tower Bridge
Associates on March 31, 2004. The total assets and total revenue of Four and Six Tower Bridge
Associates represent, in the aggregate, less than 1% of our consolidated total assets and
consolidated total revenue as of and for the year ended December 31, 2006.
The management assessment of the effectiveness of each registrants internal control over financial
reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their reports which are included herein.
Changes in Internal Control over Financial Reporting.
There have not been any changes in either registrants internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth
fiscal quarter to which this report relates that have materially affected, or are reasonably likely
to materially affect, either registrants internal control over financial reporting.
Item 9B. Other Information
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference to the Companys definitive proxy statement to be filed with
respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
Item 11. Executive Compensation
-61-
Incorporated herein by reference to the Companys definitive proxy statement to be filed with
respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters
Incorporated herein by reference to the Companys definitive proxy statement to be filed with
respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the Companys definitive proxy statement to be filed with
respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
Item 14. Principal Accountant Fees and Services
Incorporated herein by reference to the Companys definitive proxy statement to be filed with
respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) 1. and 2. Financial Statements and Schedules
The financial statements and schedules of Brandywine Realty Trust and Brandywine Operating
Partnership listed below are filed as part of this annual report on the pages indicated.
-62-
Index to Financial Statements and Schedules
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Page |
BRANDYWINE REALTY TRUST |
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F-1 |
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F-3 |
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F-4 |
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F-5 |
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F-6 |
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F-7 |
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F-8 |
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F-40 |
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F-41 |
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BRANDYWINE OPERATING PARTNERSHIP, L.P.
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F-47 |
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F-49 |
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F-50 |
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F-51 |
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F-52 |
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F-53 |
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F-54 |
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F-86 |
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F-87 |
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-63-
3. Exhibits
|
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|
Exhibits No. |
|
Description |
|
|
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2
|
|
Agreement and Plan of Merger dated as of October 3, 2005 by and among Brandywine Realty Trust,
Brandywine Operating Partnership, L.P., Brandywine Cognac I, LLC, Brandywine Cognac II, LLC,
Prentiss Properties Trust and Prentiss Properties Acquisition Partners, L.P. (previously filed
as an exhibit to Brandywine Realty Trusts Form 8-K dated October 4, 2005 and incorporated
herein by reference) |
|
|
|
3.1.1
|
|
Amended and Restated Declaration of Trust of Brandywine Realty Trust (amended and restated as of
May 12, 1997) (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated June
9, 1997 and incorporated herein by reference) |
|
|
|
3.1.2
|
|
Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (September 4, 1997)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated September 10, 1997
and incorporated herein by reference) |
|
|
|
3.1.3
|
|
Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated June 3, 1998 and incorporated herein by
reference) |
|
|
|
3.1.4
|
|
Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (September 28, 1998)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated October 13, 1998 and
incorporated herein by reference) |
|
|
|
3.1.5
|
|
Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (March 19, 1999)
(previously filed as an exhibit to Brandywine Realty Trusts Form 10-K for the fiscal year ended
December 31, 1998 and incorporated herein by reference) |
|
|
|
3.1.6
|
|
Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (April 19, 1999)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated April 26, 1999 and
incorporated herein by reference) |
|
|
|
3.1.7
|
|
Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (December 30, 2003)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-A dated December 29, 2003
and incorporated herein by reference) |
|
|
|
3.1.8
|
|
Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (February 5, 2004)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-A dated February 5, 2004 and
incorporated herein by reference) |
|
|
|
3.1.9
|
|
Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (October 3, 2005)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated October 4, 2005 and
incorporated herein by reference) |
|
|
|
3.1.10
|
|
Second Amended and Restated Partnership Agreement of Brandywine Realty Services Partnership
(previously filed as an exhibit to Brandywine Realty Trusts Registration statement of Form S-11
(File No. 33-4175) and incorporated herein by reference) |
|
|
|
3.1.11
|
|
Amended and Restated Articles of Incorporation of Brandywine Realty Services Corporation
(previously filed as an exhibit to Brandywine Realty Trusts Form 10-K for the fiscal year ended
December 31, 2002 and incorporated herein by reference) |
|
|
|
3.1.12
|
|
Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P.
(the Operating Partnership) (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated December 17, 1997 and incorporated herein by reference) |
|
|
|
3.1.13
|
|
First Amendment to Amended and Restated Agreement of Limited Partnership of Brandywine Operating
Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated
December 17, 1997 and incorporated herein by reference) |
|
|
|
3.1.14
|
|
Second Amendment to the Amended and Restated Agreement of Limited Partnership Agreement of
Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty
Trusts Form 8-K dated April 13, 1998 and incorporated herein by reference) |
|
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|
3.1.15
|
|
Third Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated May 14, 1998 and incorporated herein by reference) |
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|
|
3.1.16
|
|
Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated October 13, 1998 and incorporated herein by reference) |
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3.1.17
|
|
Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated October 13, 1998 and incorporated herein by reference) |
|
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|
3.1.18
|
|
Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated October 13, 1998 and incorporated herein by reference) |
|
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3.1.19
|
|
Seventh Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
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3.1.20
|
|
Eighth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
-64-
|
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Exhibits No. |
|
Description |
|
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3.1.21
|
|
Ninth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
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3.1.22
|
|
Tenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
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3.1.23
|
|
Eleventh Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
|
|
|
3.1.24
|
|
Twelfth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
|
|
|
3.1.25
|
|
Thirteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated September 21, 2004 and incorporated herein by reference) |
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3.1.26
|
|
Fourteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
3.1.27
|
|
Fifteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated August 18, 2006 and incorporated herein by reference) |
|
|
|
3.1.28
|
|
List of partners of Brandywine Operating Partnership, L.P. |
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|
|
3.2
|
|
Amended and Restated Bylaws of Brandywine Realty Trust (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 14, 2003 and incorporated herein by reference) |
|
|
|
4.1
|
|
Form of 7.50% Series C Cumulative Redeemable Preferred Share Certificate (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-A dated December 29, 2003 and incorporated herein by
reference) |
|
|
|
4.2
|
|
Form of 7.375% Series D Cumulative Redeemable Preferred Share Certificate (previously filed as
an exhibit to Brandywine Realty Trusts Form 8-A dated February 5, 2004 and incorporated herein
by reference) |
|
|
|
4.3.1
|
|
Indenture dated October 22, 2004 by and among Brandywine Operating Partnership, L.P., Brandywine
Realty Trust, certain subsidiaries of Brandywine Operating Partnership, L.P. named therein and
The Bank of New York, as Trustee (previously filed as an exhibit to Brandywine Realty Trusts
Form 8-K dated October 22, 2004 and incorporated herein by reference) |
|
|
|
4.3.2
|
|
First Supplemental Indenture dated as of May 25, 2005 by and among Brandywine Operating
Partnership, L.P., Brandywine Realty Trust, certain subsidiaries of Brandywine Operating
Partnership, L.P. named therein and The Bank of New York, as Trustee (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated May 26, 2005 and incorporated herein by
reference) |
|
|
|
4.3.3
|
|
Second Supplemental Indenture dated as of October 4, 2006 by and among Brandywine Operating
Partnership, L.P., Brandywine Realty Trust and the Bank of New York, as Trustee (previously
filed as an exhibit to Brandywine Realty Trusts Form 8-K dated October 4, 2006 and incorporated
herein by reference) |
|
|
|
4.4
|
|
Form of $275,000,000 4.50% Guaranteed Note due 2009 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 22, 2004 and incorporated herein by reference) |
|
|
|
4.5
|
|
Form of $250,000,000 5.40% Guaranteed Note due 2014 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 22, 2004 and incorporated herein by reference) |
|
|
|
4.6
|
|
Form of $300,000,000 5.625% Guaranteed Note due 2010 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated December 20, 2005 and incorporated herein by reference) |
|
|
|
4.7
|
|
Form of $300,000,000 aggregate principal amount of Floating Rate Guaranteed Note due 2009
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated March 28, 2006 and
incorporated herein by reference). |
|
|
|
4.8
|
|
Form of $300,000,000 aggregate principal amount of 5.75% Guaranteed Note due 2012 (previously
filed as an exhibit to Brandywine Realty Trusts Form 8-K dated March 28, 2006 and incorporated
herein by reference). |
|
|
|
4.9
|
|
Form of $250,000,000 aggregate principal amount of 6.00% Guaranteed Note due 2016 (previously
filed as an exhibit to Brandywine Realty Trusts Form 8-K dated March 28, 2006 and incorporated
herein by reference). |
|
|
|
4.10
|
|
Form of 3.875% Exchangeable Guaranteed Notes due 2026 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 4, 2006 and incorporated herein by reference) |
|
|
|
10.1
|
|
Amended and Restated Revolving Credit Agreement dated as of December 22, 2005 (previously filed
as an exhibit to Brandywine Realty Trusts Form 8-K dated December 23, 2005 and incorporated
herein by reference) |
|
|
|
10.2
|
|
Term Loan Agreement dated as of January 5, 2006 (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
10.3
|
|
Note Purchase Agreement dated as of November 15, 2004 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated November 15, 2004 and incorporated herein by reference) |
|
|
|
10.4
|
|
Tax Indemnification Agreement dated May 8, 1998, by and between Brandywine Operating
Partnership, L.P. and the parties identified on the signature page (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated May 14, 1998 and incorporated herein by
reference) |
|
|
|
10.5
|
|
Contribution Agreement dated as of July 10, 1998 (with Donald E. Axinn) (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated July 30, 1998 and incorporated herein by
reference) |
-65-
|
|
|
Exhibits No. |
|
Description |
|
|
|
10.6
|
|
First Amendment to Contribution Agreement (with Donald E. Axinn) (previously filed as an exhibit
to Brandywine Realty Trusts Form 8-K dated October 13, 1998 and incorporated herein by
reference) |
|
|
|
10.7
|
|
Form of Donald E. Axinn Options** (previously filed as an exhibit to Brandywine Realty Trusts
Form 8-K dated July 30, 1998 and incorporated herein by reference) |
|
|
|
10.8
|
|
Modification Agreement dated as of June 20, 2005 between Brandywine Operating Partnership, L.P.
and Donald E. Axinn (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated
June 21, 2005 and incorporated herein by reference) |
|
|
|
10.9
|
|
Consent and Confirmation Agreement with Donald E. Axinn (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated February 15, 2006 and incorporated herein by reference) |
|
|
|
10.10
|
|
Contribution Agreement dated August 18, 2004 with TRC Realty, Inc.-GP, TRC-LB LLC and TRC
Associates Limited Partnership (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated August 19, 2004 and incorporated herein by reference) |
|
|
|
10.11
|
|
Registration Rights Agreement (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated September 21, 2004 and incorporated herein by reference) |
|
|
|
10.12
|
|
Tax Protection Agreement (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K
dated September 21, 2004 and incorporated herein by reference) |
|
|
|
10.13
|
|
Alternative Asset Purchase Agreement (previously filed as an exhibit to Brandywine Realty
Trusts Form 8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
10.14
|
|
Registration Rights Agreement dated as of October 3, 2005 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 4, 2005 and incorporated herein by reference) |
|
|
|
10.15
|
|
Letter to Cohen & Steers Capital Management, Inc. (previously filed as an exhibit to Brandywine
Realty Trusts Form 10-Q for the quarter ended June 30, 2003 and incorporated herein by
reference) |
|
|
|
10.16
|
|
Sales Agreement with Brinson Patrick Securities Corporation (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated November 29, 2004 and incorporated herein by reference) |
|
|
|
10.17
|
|
Registration Rights Agreement dated as of October 4, 2006 relating to 3.875% Exchangeable
Guaranteed Notes due 2026 (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K
dated October 4, 2006 and incorporated herein by reference) |
|
|
|
10.18
|
|
Common Share Delivery Agreement (previously filed as an exhibit to Brandywine Realty Trusts
Form 8-K dated October 4, 2006 and incorporated herein by reference) |
|
|
|
10.19
|
|
2006 Amended and Restated Agreement dated as of January 5, 2006 with Anthony A. Nichols, Sr.**
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and
incorporated herein by reference) |
|
|
|
10.20
|
|
Amended and Restated Employment Agreement dated as of February 9, 2007 of Gerard H. Sweeney**
(previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated February 14, 2007 and incorporated herein by reference) |
|
|
|
10.21
|
|
Employment Agreement with Robert K. Wiberg (previously filed as an exhibit to Brandywine Realty
Trusts Form 8-K dated as of November 2, 2005 and incorporated herein by reference) |
|
|
|
10.22
|
|
Employment Agreement with Daniel K. Cushing (previously filed as an exhibit to Brandywine Realty
Trusts Form 8-K dated as of November 2, 2005 and incorporated herein by reference) |
|
|
|
10.23
|
|
Employment Agreement with Christopher M. Hipps (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated as of November 2, 2005 and incorporated herein by reference) |
|
|
|
10.24
|
|
Employment Agreement with Michael J. Cooper (previously filed as an exhibit to Brandywine Realty
Trusts Form 8-K dated as of November 2, 2005 and incorporated herein by reference) |
|
|
|
10.25
|
|
Employment Agreement with Gregory S. Imhoff** (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
10.26
|
|
Employment Agreement with Howard M. Sipzner** (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated December 12, 2006 and incorporated herein by reference) |
|
|
|
10.27
|
|
Employment Agreement with Darryl M. Dunn** (previously filed as an exhibit to Brandywine Realty
Trusts Form 8-K dated January 10, 2007 and incorporated herein by reference) |
|
|
|
10.28
|
|
Consulting Agreement with Michael V. Prentiss** (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
10.29
|
|
Consulting Agreement with Thomas F. August** (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
10.30
|
|
Third Amended and Restated Employment Agreement with Michael V. Prentiss**(previously filed as
an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein
by reference) |
|
|
|
10.31
|
|
First Amendment to the Third Amended and Restated Employment Agreement with Michael V.
Prentiss** (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January
10, 2006 and incorporated herein by reference) |
|
|
|
10.32
|
|
Second Amendment to the Third Amended and Restated Employment Agreement with Michael V.
Prentiss** (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January
10, 2006 and incorporated herein by reference) |
|
|
|
10.33
|
|
Amended and Restated Employment Agreement with Thomas F. August** (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by
reference) |
|
|
|
10.34
|
|
First Amendment to the Amended and Restated Employment Agreement with Thomas F. August**
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and
incorporated herein by reference) |
-66-
|
|
|
Exhibits No. |
|
Description |
|
|
|
10.35
|
|
Second Amendment to the Amended and Restated Employment Agreement with Thomas F. August**
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and
incorporated herein by reference) |
|
|
|
10.36
|
|
Form of Acknowledgment and Waiver Agreement** (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
10.37
|
|
1997 Long-Term Incentive Plan (previously filed as an exhibit to Brandywine Realty Trusts Form
10-Q for the quarter ended March 31, 2005 and incorporated herein by reference) |
|
|
|
10.38
|
|
Amended and Restated Executive Deferred Compensation Plan effective March 25, 2004** (previously
filed as an exhibit to Brandywine Realty Trusts Form 10-Q for the quarter ended March 31, 2004
and incorporated herein by reference) |
|
|
|
10.39
|
|
Amended and Restated Executive Deferred Compensation Plan effective January 1, 2006**
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated December 26, 2006
and incorporated herein by reference) |
|
|
|
10.40
|
|
Amended and Restated Non-Qualified Stock Option Award to Gerard H. Sweeney** (previously filed
as an exhibit to Brandywine Realty Trusts Form 10-K for the fiscal year ended December 31, 1998
and incorporated herein by reference) |
|
|
|
10.41
|
|
2002 Restricted Share Award for Gerard H. Sweeney** (previously filed as an exhibit to
Brandywine Realty Trusts Form 10-Q for the quarter ended June 30, 2002 and incorporated herein
by reference) |
|
|
|
10.42
|
|
2002 Form of Restricted Share Award for Executive Officers (other than the President and Chief
Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trusts Form 10-Q for
the quarter ended June 30, 2002 and incorporated herein by reference) |
|
|
|
10.43
|
|
2002 Restricted Share Award to Christopher P. Marr** (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated August 27, 2002 and incorporated herein by reference) |
|
|
|
10.44
|
|
2002 Non-Qualified Option to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine
Realty Trusts Form 10-Q for the quarter ended September 30, 2002 and incorporated herein by
reference) |
|
|
|
10.45
|
|
2003 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine
Realty Trusts Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by
reference) |
|
|
|
10.46
|
|
2003 Restricted Share Award to Anthony S. Rimikis** (previously filed as an exhibit to
Brandywine Realty Trusts Form 10-K for the fiscal year ended December 31, 2002 and incorporated
herein by reference) |
|
|
|
10.47
|
|
2003 Restricted Share Award to H. Jeffrey De Vuono** (previously filed as an exhibit to
Brandywine Realty Trusts Form 10-K for the fiscal year ended December 31, 2002 and incorporated
herein by reference) |
|
|
|
10.48
|
|
2003 Restricted Share Award to George D. Sowa** (previously filed as an exhibit to Brandywine
Realty Trusts Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by
reference) |
|
|
|
10.49
|
|
2003 Restricted Share Award to Brad A. Molotsky** (previously filed as an exhibit to Brandywine
Realty Trusts Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by
reference) |
|
|
|
10.50
|
|
2003 Restricted Share Award to Christopher P. Marr** (previously filed as an exhibit to
Brandywine Realty Trusts Form 10-K for the fiscal year ended December 31, 2002 and incorporated
herein by reference) |
|
|
|
10.51
|
|
2004 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine
Realty Trusts Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by
reference) |
|
|
|
10.52
|
|
Form of 2004 Restricted Share Award to executive officers (other than the President and Chief
Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trusts Form 10-Q for
the quarter ended March 31, 2004 and incorporated herein by reference) |
|
|
|
10.53
|
|
Form of 2004 Restricted Share Award to non-executive trustees** (previously filed as an exhibit
to Brandywine Realty Trusts Form 10-Q for the quarter ended June 30, 2004 and incorporated
herein by reference) |
|
|
|
10.54
|
|
Form of 2004 Restricted Share Award to non-executive trustee (Wyche Fowler)** (previously filed
as an exhibit to Brandywine Realty Trusts Form 8-K dated December 22, 2004 and incorporated
herein by reference) |
|
|
|
10.55
|
|
2005 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated February 15, 2005 and incorporated herein by reference) |
|
|
|
10.56
|
|
Form of 2005 Restricted Share Award to executive officers (other than the President and Chief
Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated
February 15, 2005 and incorporated herein by reference) |
|
|
|
10.57
|
|
Form of 2005 Restricted Share Award to non-executive trustees** (previously filed as an exhibit
to Brandywine Realty Trusts Form 8-K dated May 26, 2005 and incorporated herein by reference) |
|
|
|
10.58
|
|
2006 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated February 15, 2006 and incorporated herein by reference) |
|
|
|
10.59
|
|
Form of 2006 Restricted Share Award to executive officers (other than the President and Chief
Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated
February 15, 2006 and incorporated herein by reference) |
|
|
|
10.60
|
|
Form of 2006 Restricted Share Award to non-executive trustees** (previously filed as an exhibit
to Brandywine Realty Trusts Form 10-Q for the quarter ended March 31, 2006 and incorporated
herein by reference) |
|
|
|
10.61
|
|
Performance Share Award to Howard M. Sipzner ** (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated December 12, 2006 and incorporated herein by reference) |
|
|
|
10.62
|
|
2007 Performance Share Award to Gerard H. Sweeney** (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated February 14, 2007 and incorporated herein by reference) |
-67-
|
|
|
Exhibits No. |
|
Description |
|
|
|
10.63
|
|
Form of 2007 Performance Share Award to executive officers (other than the President and Chief
Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated
February 14, 2007 and incorporated herein by reference) |
|
|
|
10.64
|
|
Form of Severance Agreement for executive officers** (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated February 15, 2005 and incorporated herein by reference) |
|
|
|
10.65
|
|
Change of Control Agreement with Howard M. Sipzner** (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated December 12, 2006 and incorporated herein by reference) |
|
|
|
10.66
|
|
Summary of Trustee Compensation** (previously filed as an exhibit to Brandywine Realty Trusts
Form 8-K dated March 17, 2006 and incorporated herein by reference) |
|
|
|
10.67
|
|
Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
10.68
|
|
First Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan**(previously filed as
an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein
by reference) |
|
|
|
10.69
|
|
Second Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan**(previously filed
as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated
herein by reference) |
|
|
|
10.70
|
|
Amendment No. 3 to the Prentiss Properties Trust 1996 Share Incentive Plan**(previously filed as
an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein
by reference) |
|
|
|
10.71
|
|
Fourth Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed
as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated
herein by reference) |
|
|
|
10.72
|
|
Amendment No. 5 to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed
as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated
herein by reference) |
|
|
|
10.73
|
|
Sixth Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed
as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated
herein by reference) |
|
|
|
10.74
|
|
Prentiss Properties Trust 2005 Share Incentive Plan** (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
10.75
|
|
Amended and Restated Prentiss Properties Trust Trustees Share Incentive Plan**(previously filed
as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated
herein by reference) |
|
|
|
10.76
|
|
Amendment No. 1 to the Amended and Restated Prentiss Properties Trust Trustees Share Incentive
Plan** (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10,
2006 and incorporated herein by reference) |
|
|
|
10.77
|
|
Second Amendment to the Amended and Restated Prentiss Properties Trust Trustees Share Incentive
Plan** (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10,
2006 and incorporated herein by reference) |
|
|
|
10.78
|
|
Form of Restricted Share Award** (previously filed as an exhibit to Brandywine Realty Trusts
Form 8-K dated January 10, 2006 and incorporated herein by reference) |
|
|
|
10.79
|
|
2006 Long-Term Outperformance Compensation Program (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated September 1, 2006 and incorporated herein by reference) |
|
|
|
12.1
|
|
Statement re Computation of Ratios of Brandywine Realty Trust |
|
|
|
12.2
|
|
Statement re Computation of Ratios of Brandywine Operating Partnership, L.P. |
|
|
|
14.1
|
|
Code of Business Conduct and Ethics (previously filed as an exhibit to Brandywine Realty Trusts
Form 8-K dated December 22, 2004 and incorporated herein by reference) |
|
|
|
21
|
|
List of subsidiaries |
|
|
|
23.1
|
|
Consent of PricewaterhouseCoopers LLP relating to financial statements of Brandywine Realty Trust |
|
|
|
23.2
|
|
Consent of PricewaterhouseCoopers LLP relating to financial statements of Brandywine Operating
Partnership, L.P. |
|
|
|
31.1
|
|
Certifications of the Chief Executive Officer of Brandywine Realty Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934. |
|
|
|
31.2
|
|
Certifications of the Chief Financial Officer of Brandywine Realty Trust required by Rule
13a-14(a) under the Securities Exchange Act of 1934. |
|
|
|
31.3
|
|
Certifications of the Chief Executive Officer of Brandywine Realty Trust in its capacity as the
general partner of Brandywine Operating Partnership, L.P., required by Rule 13a-14(a) under the
Securities Exchange Act of 1934. |
|
|
|
31.4
|
|
Certifications of the Chief Financial Officer of Brandywine Realty Trust, in its capacity as the
general partner of Brandywine Operating Partnership, L.P., required by Rule 13a-14(a) under the
Securities Exchange Act of 1934. |
|
|
|
32.1
|
|
Certifications of the Chief Executive Officer of Brandywine Realty Trust required under Rule
13a-14(b) of the Securities Exchange Act of 1934. |
|
|
|
32.2
|
|
Certifications of the Chief Financial Officer of Brandywine Realty Trust required by Rule
13a-14(b) under the Securities Exchange Act of 1934. |
|
|
|
32.3
|
|
Certifications of the Chief Executive Officer of Brandywine Realty Trust, in its capacity as the
general partner of Brandywine Operating Partnership, L.P., required by Rule 13a-14(b) under the
Securities Exchange Act of 1934. |
|
|
|
32.4
|
|
Certifications of the Chief Financial Officer of Brandywine Realty Trust, in its capacity as the
general partner of Brandywine Operating Partnership, L.P., required by Rule 13a-14(b) under the
Securities Exchange Act of 1934. |
|
|
|
** |
|
Management contract or compensatory plan or arrangement. |
-68-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Gerard H. Sweeney
|
|
|
|
|
|
|
|
|
|
|
|
Gerard H. Sweeney
President and Chief Executive Officer |
|
|
Date: February 28, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Walter DAlessio
Walter DAlessio
|
|
Chairman of the Board and
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Gerard H. Sweeney
Gerard H. Sweeney
|
|
President, Chief Executive
Officer and Trustee (Principal
Executive Officer)
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Howard M. Sipzner
Howard M. Sipzner
|
|
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Darryl M. Dunn
Darryl M. Dunn
|
|
Vice President, Chief
Accounting Officer & Treasurer
(Principal Accounting Officer)
|
|
February 28,
2007 |
|
|
|
|
|
/s/ D. Pike Aloian
D. Pike Aloian
|
|
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Thomas F. August
Thomas F. August
|
|
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Donald E. Axinn
Donald E. Axinn
|
|
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Wyche Fowler
Wyche Fowler
|
|
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Michael J. Joyce
Michael J. Joyce
|
|
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Anthony A. Nichols, Sr.
Anthony A. Nichols, Sr.
|
|
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Charles P. Pizzi
Charles P. Pizzi
|
|
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Michael V. Prentiss
Michael V. Prentiss
|
|
Trustee
|
|
February 28,
2007 |
-69-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 OPERATING PARTNERSHIP, L.P. |
|
|
|
|
|
|
|
|
|
|
|
By: Brandywine Realty Trust, its General Partner |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Gerard H. Sweeney |
|
|
|
|
|
|
|
|
|
|
|
Gerard H. Sweeney
President and Chief Executive Officer |
|
|
Date: February 28, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Walter DAlessio
Walter DAlessio
|
|
Chairman of the Board and
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Gerard H. Sweeney
Gerard H. Sweeney
|
|
President, Chief Executive
Officer and Trustee (Principal
Executive Officer)
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Howard M. Sipzner
Howard M. Sipzner
|
|
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Darryl M. Dunn
Darryl M. Dunn
|
|
Vice President, Chief
Accounting Officer & Treasurer
(Principal Accounting Officer)
|
|
February 28,
2007 |
|
|
|
|
|
/s/ D. Pike Aloian
D. Pike Aloian
|
|
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Thomas F. August
Thomas F. August
|
|
Trustee
|
|
February 28,
2007 |
|
|
|
|
|
/s/ Donald E. Axinn
Donald E. Axinn
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Trustee
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February 28,
2007 |
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/s/ Wyche Fowler
Wyche Fowler
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Trustee
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February 28,
2007 |
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/s/ Michael J. Joyce
Michael J. Joyce
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Trustee
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February 28,
2007 |
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/s/ Anthony A. Nichols, Sr.
Anthony A. Nichols, Sr.
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Trustee
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February 28,
2007 |
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/s/ Charles P. Pizzi
Charles P. Pizzi
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Trustee
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February 28,
2007 |
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/s/ Michael V. Prentiss
Michael V. Prentiss
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Trustee
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February 28,
2007 |
-70-
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Brandywine Realty Trust:
We have completed integrated audits of Brandywine Realty Trusts and its subsidiaries (collectively the
Company) consolidated financial statements and of its internal control over financial reporting as of
December 31, 2006, in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement schedules
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(2)
present fairly, in all material respects, the financial position of Brandywine Realty Trust and its
subsidiaries (collectively the Company) at December 31, 2006 and 2005, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2006 in
conformity with accounting principles generally accepted in the United States of America. In addition, in
our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present
fairly, in all material respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and financial statement schedules
are the responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We conducted our audits of
these statements in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit of financial statements
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
Internal control over financial reporting
Also, in our opinion, managements assessment, included in the accompanying Form 10-K appearing under
Item 9A, that the Company maintained effective internal control over financial reporting as of December
31, 2006 based on criteria established in Internal Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material
respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2006, based on criteria
established in Internal Control Integrated Framework issued by the COSO. The Companys management is
responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting. Our responsibility is to express
opinions on managements assessment and on the effectiveness of the Companys internal control over
financial reporting based on our audit. We conducted our audit of internal control over financial
reporting in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. An
audit of internal control over financial reporting includes obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing such other procedures as we consider
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the
F - 1
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
As described in Managements Report on Internal Control Over Financial Reporting, management has
excluded the Companys investments in Four and Six Tower Bridge Associates from its assessment of
internal control over financial reporting as of December 31, 2006 because the Company does not have
the right and authority to assess the internal control over financial reporting of the individual
entities and it lacks the ability to influence or modify the internal control over financial
reporting of the individual entities. Four and Six Tower Bridge are two real estate partnerships,
created prior to December 13, 2003, which the Company started consolidating under Financial
Accounting Standards Board Interpretation No. 46R, Consolidation of Variable Interest Entities on
March 31, 2004. We have also excluded Four and Six Tower Bridge Associates from our audit of
internal control over financial reporting. Four and Six Tower Bridge are two consolidated real
estate partnerships whose total assets and total revenues represent less than 1% and 1%,
respectively, of the related consolidated financial statement amounts as of and for the year ended
December 31, 2006.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 28, 2007
F - 2
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
ASSETS |
|
|
|
|
|
|
|
|
Real estate investments: |
|
|
|
|
|
|
|
|
Operating properties |
|
$ |
4,927,305 |
|
|
$ |
2,560,061 |
|
Accumulated depreciation |
|
|
(515,698 |
) |
|
|
(390,333 |
) |
|
|
|
|
|
|
|
Operating real estate investments, net |
|
|
4,411,607 |
|
|
|
2,169,728 |
|
Construction-in-progress |
|
|
217,886 |
|
|
|
273,240 |
|
Land held for development |
|
|
110,233 |
|
|
|
98,518 |
|
|
|
|
|
|
|
|
Total real estate investments, net |
|
|
4,739,726 |
|
|
|
2,541,486 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
25,379 |
|
|
|
7,174 |
|
Restricted cash |
|
|
22,557 |
|
|
|
18,498 |
|
Accounts receivable, net |
|
|
19,957 |
|
|
|
12,874 |
|
Accrued rent receivable, net |
|
|
71,589 |
|
|
|
47,034 |
|
Asset held for sale |
|
|
126,016 |
|
|
|
|
|
Investment in real estate ventures, at equity |
|
|
74,574 |
|
|
|
13,331 |
|
Deferred costs, net |
|
|
73,708 |
|
|
|
37,602 |
|
Intangible assets, net |
|
|
281,251 |
|
|
|
78,097 |
|
Other assets |
|
|
73,506 |
|
|
|
49,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,508,263 |
|
|
$ |
2,805,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND BENEFICIARIES EQUITY |
|
|
|
|
|
|
|
|
Mortgage notes payable |
|
$ |
883,920 |
|
|
$ |
494,777 |
|
Unsecured notes |
|
|
2,208,310 |
|
|
|
936,607 |
|
Unsecured credit facility |
|
|
60,000 |
|
|
|
90,000 |
|
Accounts payable and accrued expenses |
|
|
108,400 |
|
|
|
52,635 |
|
Distributions payable |
|
|
42,760 |
|
|
|
28,880 |
|
Tenant security deposits and deferred rents |
|
|
55,697 |
|
|
|
20,953 |
|
Acquired below market leases, net of accumulated amortization of
$26,009 and $6,931 |
|
|
92,527 |
|
|
|
34,704 |
|
Other liabilities |
|
|
13,906 |
|
|
|
4,466 |
|
Mortgage notes payable and other liabilities held for sale |
|
|
20,826 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,486,346 |
|
|
|
1,663,022 |
|
Minority interest partners share of consolidated real estate ventures |
|
|
34,428 |
|
|
|
|
|
Minority interest attributable to continuing operations LP units |
|
|
89,563 |
|
|
|
37,859 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 22) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficiaries equity: |
|
|
|
|
|
|
|
|
Preferred Shares (shares authorized-20,000,000): |
|
|
|
|
|
|
|
|
7.50% Series C Preferred Shares, $0.01 par value; issued and
outstanding2,000,000 in 2006 and 2005 |
|
|
20 |
|
|
|
20 |
|
7.375% Series D Preferred Shares, $0.01 par value; issued and
outstanding2,300,000 in 2006 and 2005 |
|
|
23 |
|
|
|
23 |
|
Common Shares of beneficial interest, $0.01 par value; shares authorized
200,000,000; issued and outstanding88,327,041 in 2006 and
56,179,075 in 2005 |
|
|
883 |
|
|
|
562 |
|
Additional paid-in capital |
|
|
2,311,541 |
|
|
|
1,369,913 |
|
Cumulative earnings |
|
|
423,764 |
|
|
|
413,282 |
|
Accumulated other comprehensive income (loss) |
|
|
1,576 |
|
|
|
(3,169 |
) |
Cumulative distributions |
|
|
(839,881 |
) |
|
|
(675,767 |
) |
|
|
|
|
|
|
|
Total beneficiaries equity |
|
|
1,897,926 |
|
|
|
1,104,864 |
|
|
|
|
|
|
|
|
Total liabilities, minority interest and beneficiaries equity |
|
$ |
5,508,263 |
|
|
$ |
2,805,745 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F - 3
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share information)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Rents |
|
$ |
559,936 |
|
|
$ |
318,218 |
|
|
$ |
267,710 |
|
Tenant reimbursements |
|
|
80,470 |
|
|
|
48,562 |
|
|
|
36,849 |
|
Other |
|
|
22,395 |
|
|
|
13,844 |
|
|
|
11,998 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
662,801 |
|
|
|
380,624 |
|
|
|
316,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
|
188,001 |
|
|
|
111,192 |
|
|
|
86,358 |
|
Real estate taxes |
|
|
65,584 |
|
|
|
38,180 |
|
|
|
29,895 |
|
Depreciation and amortization |
|
|
248,132 |
|
|
|
109,118 |
|
|
|
77,521 |
|
Administrative expenses |
|
|
29,644 |
|
|
|
17,982 |
|
|
|
15,100 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
531,361 |
|
|
|
276,472 |
|
|
|
208,874 |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
131,440 |
|
|
|
104,152 |
|
|
|
107,683 |
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
9,513 |
|
|
|
1,370 |
|
|
|
841 |
|
Interest expense |
|
|
(171,177 |
) |
|
|
(70,152 |
) |
|
|
(52,642 |
) |
Interest expense Deferred financing costs |
|
|
(4,607 |
) |
|
|