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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 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)
     
MARYLAND (Brandywine Realty Trust)   23-2413352
DELAWARE (Brandywine Operating Partnership L.P.)   23-2862640
     
(State or other jurisdiction of   (I.R.S. Employer Identification No.)
Incorporation or organization)    
     
555 East Lancaster Avenue    
Radnor, Pennsylvania   19087
     
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code (610) 325-5600
Securities registered pursuant to Section 12(b) of the Act:
     
    Name of each exchange
Title of each class   on which registered
     
Common Shares of Beneficial Interest,   New York Stock Exchange
par value $0.01 per share    
(Brandywine Realty Trust)    
     
7.50% Series C Cumulative Redeemable   New York Stock Exchange
Preferred Shares of Beneficial Interest    
par value $0.01 per share    
(Brandywine Realty Trust)    
     
7.375% Series D Cumulative Redeemable   New York Stock Exchange
Preferred Shares of Beneficial Interest    
par value $0.01 per share    
(Brandywine Realty Trust)    
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.
     
Brandywine Realty Trust
  Yes o No þ
Brandywine Operating Partnership, L.P.
  Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
     
Brandywine Realty Trust
  Yes o No þ
Brandywine Operating Partnership, L.P.
  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.
     
Brandywine Realty Trust
  Yes þ No o
Brandywine Operating Partnership, L.P.
  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 Registrant’s 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, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Brandywine Realty Trust:
             
Large accelerated filer þ    Accelerated filer o    Non-accelerated filer   o
(Do not check if a smaller reporting company)
  Smaller reporting company o 
Brandywine Operating Partnership, L.P.:
             
Large accelerated filer o    Accelerated filer þ    Non-accelerated filer   o
(Do not check if a smaller reporting company)
  Smaller reporting company o 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
     
Brandywine Realty Trust
  Yes o No þ
Brandywine Operating Partnership, L.P.
  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 registrant’s most recently completed second fiscal quarter was $1.4 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 88,600,253 Common Shares of Beneficial Interest were outstanding as of February 23, 2009.
As of June 30, 2008, the aggregate market value of the 2,356,593 common units of limited partnership (“Units”) held by non-affiliates of Brandywine Operating Partnership, L.P. was $37.1 million based upon the last reported sale price of $15.76 per share on the New York Stock Exchange on June 30, 2008 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 2009 Annual Meeting of Shareholders of Brandywine Realty Trust 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
         
    Page  
PART I
 
       
    5  
 
       
    13  
 
       
    23  
 
       
    23  
 
       
    34  
 
       
    34  
 
       
PART II
 
       
    34  
 
       
    38  
 
       
    40  
 
       
    65  
 
       
    65  
 
       
    65  
 
       
    65  
 
       
    66  
 
       
PART III
 
       
    66  
 
       
    66  
 
       
    66  
 
       
    66  
 
       
    66  
 
       
PART IV
 
       
    66  
 
       
    75  

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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:
    changes in general economic conditions;
 
    changes in local real estate conditions (including changes in rental rates and the number of properties that compete with our properties);
 
    changes in the economic conditions affecting industries in which our principal tenants compete;
 
    the unavailability of equity and debt financing, particularly in light of the current economic environment;
 
    our failure to lease unoccupied space in accordance with our projections;
 
    our failure to re-lease occupied space upon expiration of leases;
 
    tenant defaults and the bankruptcy of major tenants;
 
    changes in prevailing interest rates;
 
    the impact of unrealized hedging transactions;
 
    failure of acquisitions to perform as expected;
 
    unanticipated costs associated with the acquisition, integration and operation of, our acquisitions;
 
    unanticipated costs to complete, lease-up and operate our developments and redevelopments;
 
    impairment charges;
 
    increased costs for, or lack of availability of, adequate insurance, including for terrorist acts;
 
    risks associated with actual or threatened terrorist attacks;
 
    demand for tenant services beyond those traditionally provided by landlords;
 
    potential liability under environmental or other laws;

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    failure or bankruptcy of real estate venture partners;
 
    inability of real estate venture partners to fund venture obligations;
 
    failure of dispositions to close in a timely manner;
 
    failure of buyers to comport with terms of their financing agreements to us;
 
    earthquakes and other natural disasters;
 
    risks associated with federal, state and local tax audits;
 
    complex regulations relating to our status as a REIT and the adverse consequences of our failure to qualify as a REIT; and
 
    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, that provides leasing, property management, development, redevelopment, acquisition and other tenant-related services for a portfolio of office and industrial properties. As of December 31, 2008, we owned 214 office properties, 22 industrial facilities and one mixed-use property (collectively, the “Properties”) containing an aggregate of approximately 23.6 million net rentable square feet. We also have two properties under development and six properties under redevelopment containing an aggregate of 2.3 million net rentable square feet. As of December 31, 2008, we consolidated three office properties owned by real estate ventures containing 0.4 million net rentable square feet. Therefore, as of December 31, 2008 we own and consolidated 248 properties with an aggregate of 26.3 million net rentable square feet. As of December 31, 2008, we owned economic interests in 13 unconsolidated real estate ventures that contain approximately 4.2 million net rentable square feet (collectively, the “Real Estate Ventures”). In addition, as of December 31, 2008, we owned approximately 495 acres of undeveloped land. The Properties and the properties owned by the Real Estate Ventures are located in or near Philadelphia, Pennsylvania, Metropolitan Washington, D.C., Southern and Central New Jersey, Richmond, Virginia, Wilmington, Delaware, Austin, Texas and Oakland, Carlsbad and Rancho Bernardo, California. In addition to managing properties that we own and consolidated, as of December 31, 2008, we were managing approximately 12.4 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, 2008 owned a 96.9% 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, Suite 100, Radnor, Pennsylvania 19087 and our telephone number is (610) 325-5600. We have regional offices in Philadelphia, Pennsylvania; Falls Church, Virginia; Mount Laurel, New Jersey; Richmond, Virginia; Austin, 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.
2008 Transactions
Real Estate Acquisitions/Dispositions
In 2008, we sold nine properties, containing an aggregate of 2.4 million net rentable square feet and one land parcel containing 3.24 acres. Specifically:
— On January 14, 2008, we sold 7130 Ambassador Drive, an office property located in Allentown, Pennsylvania containing 114,049 net rentable square feet, for a sales price of $5.8 million.

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— On February 14, 2008, we sold a parcel of land located in Henrico, Virginia containing 3.24 acres, for a sales price of $0.4 million.
— On February 29, 2008, we sold 1400 Howard Boulevard, an office property located in Mount Laurel, New Jersey containing 75,590 net rentable square feet, for a sales price of $22.0 million.
— On April 25, 2008, we sold 100 Brandywine Boulevard, an office property located in Newtown, Pennsylvania containing 102,000 net rentable square feet, for a sales price of $28.0 million.
— On October 1, 2008, we sold Main Street Centre, a 426,103 net rentable square feet office property located in Richmond, Virginia, for a sales price of $48.8 million.
— On October 8, 2008, we sold five properties, totaling approximately 1,717,861 net rentable square feet, in Oakland, California for an aggregate sales price of $412.5 million (including debt assumption). We incurred an impairment charge of $6.85 million upon the classification of these five properties as held for sale in the quarter ended June 30, 2008.
— On November 17, 2008, we closed a transaction with US Bancorp related to the historic rehabilitation of the 30th Street Post Office whereby US Bancorp agreed to contribute approximately $67.9 million of project costs and advanced $10.2 million at the closing. The remaining funds are expected to be advanced later this year and in 2010 subject to our achievement of certain construction milestones and compliance with federal rehabilitation regulations. In return for its investment, US Bancorp will, upon completion of the project in 2010, receive substantially all of the rehabilitation credits available under section 47 of the Internal Revenue Code.
— On December 30, 2008, we closed a transaction with US Bancorp related to the development of the Cira South Garage whereby US Bancorp contributed approximately $9.0 million (net) towards past and future project costs in return for which it will receive all of the new markets tax credits available under section 45D of the Internal Revenue Code. As a result of this transaction, we held $31.4 million of cash in escrow at December 31, 2008. The escrowed cash will fund future development costs of the Cira South Garage during 2009.
Developments
In 2008, we placed in service four office properties that we developed or redeveloped and that contain an aggregate of 677,284 net rentable square feet. We place a property in service at the earlier of (i) the date the property reaches 95% occupancy and (ii) one year from the project completion date. At December 31, 2008, we had eight properties under development or redevelopment that contain an aggregate of 2.3 million net rentable square feet at an estimated total development cost of $440.7 million. We expect to place these projects in service at dates between the fourth quarter of 2009 and the third quarter of 2010.
During the year-ended December 31, 2008 land review, we identified a number of our land parcels that were impaired. In those circumstances, we recorded a non-cash impairment charge to write them down to their fair value. In the aggregate, a charge of $10.8 million was recorded in the fourth quarter of 2008. As of December 31, 2008, we owned approximately 495 acres of land.
Current Economic Climate
Deteriorating economic conditions have resulted in a reduction of the availability of financing and higher borrowing costs. These factors, coupled with a slowing economy, have reduced the volume of real estate transactions and created credit stresses on most businesses. We believe that vacancy rates may increase through 2009 and possibly beyond as the current economic climate negatively impacts tenants in our Properties.
We expect that the impact of the current state of the economy, including rising unemployment and the unprecedented volatility and illiquidity in the financial and credit markets, will continue to have a dampening effect on the fundamentals of our business, including increases in past due accounts, tenant defaults, lower occupancy and reduced effective rents. These conditions would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition. In addition to the financial constraints on our tenants, many of the debt capital markets that we and other real estate companies frequently access, such as the unsecured bond market and the convertible debt market, are not currently available on terms that management believes are

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economically attractive or at all. Although we believe that the quality of our assets and our strong balance sheet will enable us to raise debt capital from other sources such as traditional term or secured loans from banks, pension funds and life insurance companies, these sources are lending fewer dollars, under stricter terms and at higher borrowing rates, and there can be no assurance that we will be able to borrow funds on terms that are economically attractive or at all.
Unsecured Debt Activity
During the year ended December 31, 2008, we repurchased $78.3 million of our $275.0 million 2009 Notes in a series of transactions which resulted in a $4.1 million gain on the early extinguishment of debt.
During the year ended December 31, 2008, we repurchased $24.5 million of our $300.0 million 2010 Notes in a series of transactions which resulted in a $3.6 million gain on the early extinguishment of debt.
During the year ended December 31, 2008, we repurchased $63.0 million of our $345.0 million 3.875% Guaranteed Exchangeable Notes in a series of transactions which resulted in a $13.0 million gain on the early extinguishment of debt.
We funded these repurchases from a combination of proceeds from asset sales, cash flow from operations and borrowings under our unsecured revolving credit facility.
During the year ended December 31, 2008, we exercised the accordion feature on our $150.0 million unsecured term loan that we entered into on October 15, 2007 and funded an additional $33.0 million, bringing our total outstanding balance to $183.0 million. All outstanding borrowings under the term loan bear interest at a periodic rate of LIBOR plus 80 basis points. We used the net proceeds of the term loan increase to reduce indebtedness under our unsecured revolving credit facility.
During the second quarter of 2008, the borrowing rate on our $20.0 million Sweep Agreement, which we entered into in April 2007, increased from LIBOR plus 75 basis points to LIBOR plus 160 basis points in connection with its renewal at that time. The changed rate remains in effect through maturity in April 2009. We are currently pursuing an extension of this agreement but do not know if this will be achieved or if doing so will be comparable to those in place today. Borrowings on the Sweep Agreement are short term and used for cash management purposes.
On June 29, 2007, we amended our $600.0 million unsecured revolving credit facility (the “Credit Facility”). The amendment extended the maturity date of the Credit Facility from December 22, 2009 to June 29, 2011 (subject to an extension of one year, at our option, upon our payment of an extension fee equal to 15 basis points of the committed amount under the Credit Facility). The amendment also reduced the per annum variable interest rate on outstanding balances from Eurodollar plus 0.80% to Eurodollar plus 0.725% per annum. In addition, the amendment reduced the quarterly facility fee from 20 basis points to 17.5 basis points per annum. The interest rate and facility fee are subject to adjustment upon a change in our unsecured debt ratings. The amendment also lowered to 7.50% from 8.50% the capitalization rate used in the calculation of several of the financial covenants; increased our swing loan availability from $50.0 million to $60.0 million; and increased the number of competitive bid loan requests available to us from two to four in any 30 day period. Borrowings are available to the extent of borrowing capacity at the stated rates; however, the competitive bid feature allows banks that are part of the lender consortium under the Credit Facility to bid to make loans to us at a reduced Eurodollar rate. We have the option to increase the Credit Facility to $800.0 million subject to the absence of any defaults and our ability to acquire additional commitments from our existing lenders and new lenders.
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 to the greater of (i) an amount required for us to retain our qualification as a REIT and (ii) otherwise limits dividends to 95% 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

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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, 2008. Management continuously monitors the Company’s compliance with and anticipated compliance with the covenants. Certain of the covenants restrict management’s ability to obtain alternative sources of capital. While management currently believes it will remain in compliance with its covenants, in the event of a continued slow-down and continued crisis in the credit markets, we may not be able to remain in compliance with such covenants and if the lender would not provides us with a waiver, could result in an event of default.
On April 30, 2007, we consummated the public offering of $300.0 million aggregate principal amount of unsecured 5.70% Guaranteed Notes due 2017 and used the net proceeds from this offering to reduce borrowings under the 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:
    maximize cash flow through leasing strategies designed to capture rental growth as rental rates increase and as below-market leases are renewed;
 
    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;
 
    form joint venture opportunities with high-quality partners having attractive real estate holdings or significant financial resources;
 
    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; and
 
    increase the economic diversification of our tenant base while maximizing economies of scale.
Based on the current economic environment we consider the following to be important objectives, however, such objectives may be considered more long term in nature than they have been previously:
    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;
 
    capitalize on our redevelopment expertise to selectively acquire, redevelop and reposition properties in desirable locations; and
 
    as warranted by market conditions, acquire high-quality office and industrial properties and portfolios of such properties at attractive yields in markets that we expect will experience economic growth.
We expect to concentrate our real estate activities in markets where we believe that:
    current and projected market rents and absorption statistics justify construction activity;
 
    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
 
    there is potential for economic growth, particularly job growth and industry diversification.
Operating Strategy
In this current economic environment, 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. In particular, the lack of availability of financing in the current condition will result in our disposal of properties.
Our broader strategy remains focused on continuing to enhance liquidity and strengthen our balance sheet through capital retention, targeted sales activity and management of our existing and prospective liabilities. We intend to improve liquidity through a combination of secured mortgages and selective asset sales.
In the long term, we believe that we are well positioned in our current markets and have the expertise to take advantage of both development and acquisition opportunities, as warranted by market and economic conditions, 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, should allow us to achieve disciplined growth. 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.
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.
In order to fund developments, redevelopments and acquisitions, as well as refurbish and improve existing Properties, we must use excess cash from operations after satisfying our dividend and other requirements. The availability of funds for new investments and maintenance of existing Properties depends in large measure on capital markets and liquidity factors over which we can exert little control. Events over the past several months, including recent failures and near failures of a number of large financial service companies, have made the capital markets increasingly volatile. As a result, many property owners are finding financing to be increasingly expensive and difficult to obtain. In addition, downgrades of our public debt ratings by Standard & Poor’s, Moody’s Investor Service and Fitch could increase our cost of capital.
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 where a significant portion of the building is pre-leased before construction begins. It is unlikely we will start any new developments at this time or in the foreseeable future. We continue to participate with other entities in property ownership through existing 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. Due to current capital constraints, we do not anticipate making any new investments in the near term.

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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.
Dispositions
Our disposition of Properties is based upon management’s periodic review of our portfolio and the determination by management or our Board of Trustees that a disposition would be in our best interests. We intend to use selective dispositions to fund our capital and refinancing needs.
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 restrictions 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 and future maturing debt with the most advantageous source of capital then available to us. These sources may include selling common or preferred equity and debt securities sold through public offerings or private placements, utilizing availability under our unsecured revolving credit facility or incurring additional indebtedness through secured or unsecured borrowings. 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 limits our ability to fund future capital needs, including for acquisitions and developments, 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 equity 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. 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 and to buyers of our real estate. 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 wholly-owned subsidiaries (collectively, the “Management Companies”). As of December 31, 2008, the Management Companies were managing properties

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containing an aggregate of approximately 38.3 million net rentable square feet, of which approximately 25.9 million net rentable square feet related to Properties owned by us and approximately 12.4 million net rentable square feet related to properties owned by third parties and unconsolidated Real Estate Ventures.
Geographic Segments
As of December 31, 2008, we were managing our portfolio within six segments: (1) Pennsylvania, (2) Metropolitan Washington D.C, (3) New Jersey/Delaware, (4) Richmond, Virginia, (5) California and (6) Austin, TX. The Pennsylvania segment includes properties in Chester, Delaware, Bucks and Montgomery counties in the Philadelphia suburbs and the City of Philadelphia in Pennsylvania. The Metropolitan Washington, D.C. segment includes properties in Northern Virginia and suburban Maryland. The New Jersey/Delaware segment includes properties in counties in the southern and central part of New Jersey including Burlington, Camden and Mercer counties and in 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 California segment includes properties in Oakland, Concord, Carlsbad and Rancho Bernardo. The Austin, Texas segment includes properties in Coppell and Austin. Our corporate group is responsible for cash and investment management, development of 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, our ability to obtain necessary construction approvals, taxes, governmental regulations, legislation and population trends.
Insurance
We maintain commercial general liability and “all risk” property insurance on our properties. 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 war, terrorism, environmental issues, floods, hurricanes and earthquakes that are subject to limitations in certain areas or which may be uninsurable risks. 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, 2008, we had 482 full-time employees, including 41 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 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

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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, uninsured environmental liability. However, the assessments may have failed to reveal all environmental conditions, liabilities or compliance concerns; there may be material environmental conditions, liabilities or compliance concerns that a review failed to detect or which 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 businesses. 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, mold impact, 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 2008 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.

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Corporate Governance Principles and Board Committee Charters
Our Corporate Governance Principles and the charters of the Executive Committee, 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, Suite 100, 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 SEC’s 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, free of charge, upon written request to Investor Relations, Brandywine Realty Trust, 555 East Lancaster Avenue, Suite 100, Radnor, PA 19087.
Item 1A. Risk Factors
Our results from operations and ability to make distributions on our equity and to pay debt service on our indebtedness may be affected by the risk factors set forth below. All investors should consider the following risk factors before deciding to purchase our securities.
Adverse economic and geopolitical conditions could have a material adverse effect on our results of operations, financial condition and our ability to pay distributions to you.
Our business is affected by the unprecedented volatility and illiquidity in the financial and credit markets, the general global economic recession, and other market or economic challenges experienced by the U.S. economy or the real estate industry as a whole. Our portfolio consists primarily of office buildings (as compared to a more diversified real estate portfolio). If economic conditions persist or deteriorate, then our results of operations, financial condition, financial results and ability to service current debt and to pay distributions to our shareholders may be adversely affected by the following, among other potential conditions:
    significant job losses in the financial and professional services industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;
 
    our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to complete development opportunities and refinance existing debt, reduce our returns;
 
    from both our existing operations and our development activities and increase our future interest expense;
 
    reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;
 
    the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, the dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors;
 
    reduced liquidity in debt markets and increased credit risk premiums for certain market participants may impair our ability to access capital; and
 
    one or more lenders under our line of credit could refuse or be unable to fund their financing commitment to us and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.
These conditions, which could have a material adverse effect on our results of operations, financial condition and ability to pay distributions, may continue or worsen in the future.

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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:
    downturns in the national, regional and local economic climate including increases in the unemployment rate and inflation;
 
    competition from other office, industrial and commercial buildings;
 
    local real estate market conditions, such as oversupply or reduction in demand for office, industrial or commercial space;
 
    changes in interest rates and availability of financing;
 
    vacancies, changes in market rental rates and the need to periodically repair, renovate and re-lease space;
 
    increased operating costs, including insurance expense, utilities, real estate taxes, janitorial costs, state and local taxes, labor shortages and heightened security costs;
 
    civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war which may result in uninsured or underinsured losses;
 
    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
 
    declines in the financial condition of our tenants and our ability to collect rents from our tenants.
The disruption in the debt capital markets could adversely affect us.
Since mid-2007, there has been a marked deterioration in the credit markets affecting the availability of credit, the terms on which it can be sourced and the overall cost of debt capital. This could negatively affect us by:
    increasing the cost of debt we use to finance our ongoing operations and fund our development and redevelopment activities, thereby increasing their costs and reducing the associated returns;
 
    reducing the availability of potential bidders to bid attractively for our for-sale properties or to close on sales at all; and
 
    preventing us from accessing necessary debt capital on a timely basis leading us to consider potentially more dilutive capital transactions such as undesirable sales of properties or securities.
We may suffer adverse consequences due to the financial difficulties, bankruptcy or insolvency of our tenants.
The current economic conditions have caused our tenants to experience financial difficulties. If more of our tenants were to experience financial difficulties, including bankruptcy, insolvency or a general downturn in their 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

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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 general, 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 the remaining rent during the term.
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, 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, term loan and the indenture governing our unsecured public debt securities contain (and any new or amended facility will contain) 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 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, the term loan and the 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 will 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 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 BBB- by Fitch Ratings, Baa3 by Moody’s Investor Services and BBB- by Standard & Poor’s. 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.
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 through 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.

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Our investment in property development or redevelopment may be more costly or difficult to complete 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:
    the unavailability of favorable financing alternatives in the private and public debt markets;
 
    having sufficient capital to pay development costs;
 
    unprecedented market volatility in the share price of REITs;
 
    dependence on the financial services sector as part of our tenant base;
 
    construction costs exceeding original estimates due to rising interest rates, diminished availability of materials and labor, and increases in the costs of materials and labor;
 
    construction and lease-up delays resulting in increased debt service, fixed expenses and construction or renovation costs;
 
    expenditure of funds and devotion of management’s time to projects that we do not complete;
 
    the unavailability or scarcity of utilities;
 
    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;
 
    complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other governmental permits; and
 
    increased use restrictions by local zoning or planning authorities limiting our ability to develop and impacting the size of developments.
We face risks associated with property acquisitions.
We have in the past acquired, and may in the future acquire, properties and portfolios of properties, including large portfolios 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:
    we may not be able to obtain financing for acquisitions on favorable terms;
 
    acquired properties may fail to perform as expected;
 
    the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates;
 
    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
 
    we may not be able to efficiently integrate acquired properties, particularly portfolios of properties, into our organization and manage new properties in a way that allows us to realize cost savings and synergies.
We 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

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structure has the effect, among other factors, of reducing the amount of tax depreciation we can deduct over 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 during a specified time, or on terms, that would be favorable absent such restrictions.
Acquired properties may subject us to known and unknown liabilities.
Properties that we acquire may be subject to known and 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:
    liabilities for clean-up of pre-existing disclosed or undisclosed environmental contamination;
 
    claims by tenants, vendors or other persons arising on account of actions or omissions of the former owners of the properties; and
 
    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 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 sold 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 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; certain leases may expire early.
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 or if certain lease terms are not complied with.
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 (e.g., because their properties may have vacancy rates higher than those for our properties) to make space available at lower rental rates or with higher tenant concession percentages than available space in our properties. 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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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, 2008, we had investments in 13 unconsolidated real estate ventures and three additional real estate ventures that are consolidated in our financial statements. Our net investments in the 13 unconsolidated real estate ventures aggregated approximately $71.0 million as of December 31, 2008. 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 or the lenders to our joint ventures are inconsistent with our own objectives, we may not be able to act exclusively in our interests. Furthermore, if the current constrained credit conditions in the capital markets persist or deteriorate further, the value of our investments could deteriorate and we could be required to reduce the carrying value of our equity method investments if a loss in the carrying value of the investment is other than a temporary decline pursuant to APB 18, “The Equity Method of Accounting for Investments in Common Stock”.
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/flex properties like those that we own, often cannot be sold quickly. The capitalization rates at which properties may be sold has generally been rising, thereby reducing our potential proceeds from sale. 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.
Some potential losses are not covered by insurance.
We currently carry comprehensive “all-risk” property, rental loss insurance and commercial general liability coverage 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, biological, radiological and nuclear hazards 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 earthquake, 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. If one or more of our insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such claims could have an adverse effect on our financial condition and results of operations. In addition, if one or more of our insurance providers were to become subject to insolvency, bankruptcy or other proceedings and our insurance policies with the provider were terminated or canceled as a result of those proceedings, we cannot guarantee that we would be able to find alternative coverage in adequate amounts or at reasonable prices. In such case, we could experience a lapse in any or adequate insurance coverage with respect to one or more properties and be exposed to potential losses relating to any claims that may arise during such period of lapsed or inadequate coverage.

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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 and casualty 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 through 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 cost of capital, 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:
    the operational and financial performance of our properties;
 
    capital expenditures with respect to existing, developed and newly acquired properties;
 
    general and administrative costs associated with our operation as a publicly-held REIT;
 
    the amount of, and the interest rates on, our debt; and
 
    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 could result in a 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 in order to be compliant.
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. While we do maintain environmental insurance, we can not be assured that our insurance coverage will be sufficient to protect us from all of the aforesaid remediation costs. 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.

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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.
Americans with Disabilities Act compliance could be costly.
The Americans with Disabilities Act of 1990, as amended (“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 subsidiaries would be subject to federal income tax at regular corporate rates. Also, unless the IRS granted us or our affected REIT subsidiaries, 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 company’s 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 federal, 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. 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. We are currently being audited by the Internal Revenue Service for our 2004 tax year. The audit concerns the tax treatment of a transaction in September 2004 in which we acquired a portfolio of properties through the acquisition of a limited partnership. At this time it does not appear that an adjustment would result in a material tax liability for us. However, an adjustment could raise a question as to whether a contributor of partnership interests in the 2004 transaction could assert a claim against us under the tax protection agreement entered into as part of the transaction.

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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.
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. Although we believe that we could find replacements for these key personnel, 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 party’s 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:
    consider the transfer to be null and void;
 
    not reflect the transaction on our books;
 
    institute legal action to stop the transaction;
 
    not pay dividends or other distributions with respect to those shares;
 
    not recognize any voting rights for those shares; and
 
    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

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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 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 shareholder’s 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 shareholder’s 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:
    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;
 
    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);
 
    perception by market professionals of REITs generally and REITs comparable to us in particular;
 
    level of institutional investor interest in our securities;
 
    relatively low trading volumes in securities of REITs;
 
    our results of operations and financial condition; and
 
    investor confidence in the stock market generally.
The market value of our common shares is based primarily upon the market’s 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.

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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.
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 or the development of new properties which lack operating history with us may give rise to difficulties in predicting revenue potential.
We may continue to acquire additional properties and may seek to develop our existing land holdings strategically as warranted by market conditions. These acquisitions and developments 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 or a development 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 or developed 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 Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Texas, and California. Like other real estate markets, these commercial real estate markets have been impacted by the economic downturns during 2008, and future declines in 2009 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 did not acquire any properties during the year ended December 31, 2008.
Development Properties Placed in Service
We placed in service the following office properties during the year ended December 31, 2008:

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Month Placed           # of   Rentable
in Service   Property/Portfolio Name   Location   Buildings   Square Feet
Aug-08
  4000 Chemical Road (Metroplex I)   Plymouth Meeting, PA     1       120,877  
Oct-08
  1200 Lenox Drive   Lawrenceville, NJ     1       75,000  
Nov-08
  South Lake at Dulles   Herndon, VA     1       268,240  
Dec-08
  Park on Barton Creek   Austin, TX     1       213,167  
 
                       
 
  Total Properties Placed in Service         4       677,284  
 
                       
We place a property under development in service on the earlier of (i) the date the property reaches 95% occupancy and (ii) one year after the completion of shell construction.
Property Sales
We sold the following office properties during the year ended December 31, 2008:
                                 
Month of           # of     Rentable Square     Sales  
Sale   Property/Portfolio Name   Location   Bldgs.     Feet/ Acres     Price  
                            (in 000’s)  
Jan-08
  7130 Ambassador Drive   Allentown, PA     1       114,049     $ 5,800  
Feb-08
  1400 Howard Boulevard   Mount Laurel, NJ     1       75,590       22,000  
Apr-08
  100 Brandywine Boulevard   Newtown, PA     1       102,000       28,000  
Oct-08
  600 East Main Street (Main Street Centre)   Richmond, VA     1       426,103       48,820  
Oct-08
  Northern California Portfolio   Oakland, CA     5       1,717,861       412,500  
 
                         
 
  Total Office Properties Sold         9       2,435,603     $ 517,120  
 
                         
 
We sold the following land parcel during the year ended December 31, 2008:
 
Month of             # of     Rentable Square     Sales  
Sale   Property/Portfolio Name   Location     Bldgs.     Feet/ Acres     Price  
                            (in 000’s)  
Feb-08
  Dabney Westwood   Henrico, VA             3.2       376  
 
                           
 
  Total Land Sold                 3.2     $ 376  
 
                           
Properties
As of December 31, 2008, we owned 214 office properties, 22 industrial facilities and one mixed-use property that contain an aggregate of approximately 23.6 million net rentable square feet. We also have two properties under development and six properties under redevelopment containing an aggregate 2.3 million net rentable square feet. As of December 31, 2008, we consolidated three office properties owned by real estate ventures containing 0.4 million net rentable square feet. The properties are located in and surrounding Philadelphia, PA, Metropolitan Washington, D.C., Southern and Central New Jersey, Richmond, VA, Wilmington, DE, Austin, TX, and Oakland, Carlsbad and Rancho Bernardo, CA. As of December 31, 2008, the Properties were approximately 90.2% occupied by 1,423 tenants and had an average age of approximately 17.6 years. The office properties are primarily suburban office buildings containing an average of approximately 104,433 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.
We had the following projects in development or redevelopment as of December 31, 2008:

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                %    
                Leased    
        Rentable   as of   Stabilization
Project Name   Location   Square Feet   12/31/08   Date (a)
Under Development:
                       
Post Office/IRS
  Philadelphia, PA     862,692       100.0 %   Q3 ‘10
Cira South Garage
  Philadelphia, PA     542,273       94.3 %   Q3 ‘10
 
                       
 
        1,404,965              
 
                       
 
                       
Under Redevelopment:
                       
Radnor Corporate Center I
  Radnor, PA     190,219       64.0 %   Q4 ‘09
One Rockledge Associates
  Bethesda, MD     160,173       57.7 %   Q4 ‘09
300 Delaware Avenue
  Wilmington, DE     298,071       72.5 %   Q4 ‘09
Delaware Corporate Center II
  Wilmington, DE     95,514       68.7 %   Q4 ‘09
100 Lenox Drive
  Lawrenceville, NJ     91,450       67.6 %   Q4 ‘09
Atrium I
  Mount Laurel, NJ     97,158       89.2 %   Q4 ‘09
 
                       
 
        932,585              
 
                       
 
        2,337,550              
 
                       
 
(a)   Projected stabilization date represents the earlier of (i) the date the property reaches 95% occupancy and or (ii) one year from the project completion date.
As of December 31, 2008, the above eight projects accounted for $88.9 million of the $121.4 million of construction in process shown on our consolidated balance sheet.
As of December 31, 2008, we expect our development cost for these eight projects, including an estimate of the tenant improvement costs, to aggregate $440.7 million.
The following table sets forth information with respect to our core properties at December 31, 2008:

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                                            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   2008 (a)   2008 (b) (000’s)   2008 (c)
PENNSYLVANIA SEGMENT
                                               
2929 Arch Street
  (d)   Philadelphia   PA   2005     729,897       100.0 %     24,467       34.43  
100 North 18th Street
  (e)   Philadelphia   PA   1988     702,006       99.6 %     20,572       31.38  
130 North 18th Street
      Philadelphia   PA   1989     594,361       98.5 %     12,484       27.60  
150 Radnor Chester Road
      Radnor   PA   1983     340,262       98.4 %     9,417       28.71  
201 King of Prussia Road
      Radnor   PA   2001     251,372       86.7 %     6,194       30.34  
555 Lancaster Avenue
      Radnor   PA   1973     242,099       99.9 %     6,439       28.07  
401 Plymouth Road
      Plymouth Meeting   PA   2001     201,883       100.0 %     6,156       32.13  
Philadelphia Marine Center
  (d)   Philadelphia   PA   Various     181,900       91.2 %     1,177       4.76  
101 West Elm Street
      W. Conshohocken   PA   1999     175,009       97.3 %     4,099       25.92  
Four Radnor Corporate Center
      Radnor   PA   1995     165,138       73.2 %     3,001       24.75  
Five Radnor Corporate Center
      Radnor   PA   1998     164,577       87.4 %     4,142       31.83  
751-761 Fifth Avenue
      King Of Prussia   PA   1967     158,000       100.0 %     574       3.64  
630 Allendale Road
      King of Prussia   PA   2000     150,000       100.0 %     3,722       26.53  
640 Freedom Business Center
  (d)   King Of Prussia   PA   1991     132,000       89.3 %     1,975       23.89  
52 Swedesford Square
      East Whiteland Twp.   PA   1988     131,017       100.0 %     2,963       23.86  
400 Berwyn Park
      Berwyn   PA   1999     124,182       100.0 %     3,267       28.05  
4000 Chemical Road
      Plymouth Meeting   PA   2007     120,877       45.1 %     435       29.05  
Three Radnor Corporate Center
      Radnor   PA   1998     119,194       90.1 %     2,828       27.35  
101 Lindenwood Drive
      Malvern   PA   1988     118,121       80.5 %     1,961       22.24  
181 Washington Street
  (h)   Conshohocken   PA   1999     115,122       88.4 %     2,918       27.95  
300 Berwyn Park
      Berwyn   PA   1989     108,619       94.8 %     2,058       25.24  
442 Creamery Way
  (f)   Exton   PA   1991     104,500       100.0 %     598       6.71  
Two Radnor Corporate Center
      Radnor   PA   1998     100,973       65.6 %     1,964       29.64  
301 Lindenwood Drive
      Malvern   PA   1984     97,813       100.0 %     1,916       21.17  
1 West Elm Street
      W. Conshohocken   PA   1999     97,737       79.7 %     2,024       27.82  
555 Croton Road
      King of Prussia   PA   1999     96,909       84.0 %     2,211       31.49  
500 North Gulph Road
      King Of Prussia   PA   1979     93,082       87.1 %     1,228       18.69  
620 West Germantown Pike
      Plymouth Meeting   PA   1990     90,183       80.4 %     1,693       28.31  
610 West Germantown Pike
      Plymouth Meeting   PA   1987     90,152       90.8 %     1,752       29.72  
630 West Germantown Pike
      Plymouth Meeting   PA   1988     89,925       93.7 %     1,339       28.33  
600 West Germantown Pike
      Plymouth Meeting   PA   1986     89,681       81.2 %     1,629       24.85  
630 Freedom Business Center
  (d)   King Of Prussia   PA   1989     86,683       88.1 %     1,749       26.48  
1200 Swedesford Road
      Berwyn   PA   1994     86,622       76.5 %     1,407       28.65  
620 Freedom Business Center
  (d)   King Of Prussia   PA   1986     86,570       100.0 %     1,746       23.37  
200 Barr Harbour Drive
  (h)   Conshohocken   PA   1998     86,021       100.0 %     2,436       32.58  
595 East Swedesford Road
      Wayne   PA   1998     81,890       100.0 %     1,750       22.44  
1050 Westlakes Drive
      Berwyn   PA   1984     80,000       100.0 %     1,984       24.85  
One Progress Drive
      Horsham   PA   1986     79,204       100.0 %     841       13.45  
1060 First Avenue
  (e)   King Of Prussia   PA   1987     77,718       70.3 %     955       20.87  
741 First Avenue
      King Of Prussia   PA   1966     77,184       100.0 %     580       8.95  
1040 First Avenue
  (e)   King Of Prussia   PA   1985     75,488       90.9 %     1,219       27.86  
200 Berwyn Park
      Berwyn   PA   1987     75,025       98.6 %     1,574       24.63  
1020 First Avenue
  (e)   King Of Prussia   PA   1984     74,556       100.0 %     1,608       19.75  
1000 First Avenue
  (e)   King Of Prussia   PA   1980     74,139       88.9 %     1,209       19.13  
436 Creamery Way
      Exton   PA   1991     72,300       96.2 %     726       14.40  

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                                            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   2008 (a)   2008 (b) (000’s)   2008 (c)
130 Radnor Chester Road
      Radnor   PA   1983     71,349       100.0 %     2,150       30.00  
170 Radnor Chester Road
      Radnor   PA   1983     69,787       92.6 %     1,597       23.12  
14 Campus Boulevard
      Newtown Square   PA   1998     69,542       100.0 %     1,815       24.50  
500 Enterprise Road
      Horsham   PA   1990     66,751       0.0 %            
575 East Swedesford Road
      Wayne   PA   1985     66,265       100.0 %     958       26.45  
429 Creamery Way
      Exton   PA   1996     63,420       100.0 %     790       16.60  
610 Freedom Business Center
  (d)   King Of Prussia   PA   1985     62,991       54.9 %     723       23.05  
925 Harvest Drive
      Blue Bell   PA   1990     62,957       100.0 %     1,136       15.04  
980 Harvest Drive
      Blue Bell   PA   1988     62,379       100.0 %     1,382       23.56  
426 Lancaster Avenue
      Devon   PA   1990     61,102       100.0 %     1,213       19.17  
1180 Swedesford Road
      Berwyn   PA   1987     60,371       100.0 %     1,858       32.22  
1160 Swedesford Road
      Berwyn   PA   1986     60,099       100.0 %     1,465       25.51  
100 Berwyn Park
      Berwyn   PA   1986     57,731       98.0 %     1,060       22.11  
440 Creamery Way
      Exton   PA   1991     57,218       88.8 %     701       16.36  
640 Allendale Road
  (f)   King of Prussia   PA   2000     56,034       100.0 %     350       8.26  
565 East Swedesford Road
      Wayne   PA   1984     55,979       66.3 %     783       23.14  
650 Park Avenue
      King Of Prussia   PA   1968     54,338       100.0 %     807       16.55  
855 Springdale Drive
  (g)   Exton   PA   1986     52,714       87.8 %     820       21.16  
910 Harvest Drive
      Blue Bell   PA   1990     52,611       100.0 %     1,040       19.80  
680 Allendale Road
      King Of Prussia   PA   1962     52,528       0.0 %     421        
2240/50 Butler Pike
      Plymouth Meeting   PA   1984     52,229       100.0 %     1,089       22.09  
920 Harvest Drive
      Blue Bell   PA   1990     51,875       100.0 %     1,044       20.81  
486 Thomas Jones Way
      Exton   PA   1990     51,372       89.5 %     810       19.75  
660 Allendale Road
  (f)   King of Prussia   PA   1962     50,635       100.0 %     279       8.11  
875 First Avenue
      King Of Prussia   PA   1966     50,000       100.0 %     1,038       21.62  
630 Clark Avenue
      King Of Prussia   PA   1960     50,000       100.0 %     301       8.21  
620 Allendale Road
      King Of Prussia   PA   1961     50,000       67.0 %     761       16.87  
15 Campus Boulevard
      Newtown Square   PA   2002     49,621       100.0 %     1,018       24.22  
479 Thomas Jones Way
      Exton   PA   1988     49,264       66.7 %     564       18.32  
17 Campus Boulevard
      Newtown Square   PA   2001     48,565       100.0 %     1,224       29.91  
11 Campus Boulevard
      Newtown Square   PA   1998     47,699       100.0 %     1,093       25.50  
456 Creamery Way
      Exton   PA   1987     47,604       100.0 %     364       8.47  
585 East Swedesford Road
      Wayne   PA   1998     43,683       100.0 %     818       26.01  
1100 Cassett Road
      Berwyn   PA   1997     43,480       100.0 %     1,106       32.32  
467 Creamery Way
      Exton   PA   1988     42,000       77.3 %     455       18.76  
1336 Enterprise Drive
      West Goshen   PA   1989     39,330       100.0 %     796       23.60  
600 Park Avenue
      King Of Prussia   PA   1964     39,000       100.0 %     545       15.65  
412 Creamery Way
      Exton   PA   1999     38,098       100.0 %     824       23.20  
18 Campus Boulevard
      Newtown Square   PA   1990     37,374       100.0 %     827       24.11  
457 Creamery Way
      Exton   PA   1990     36,019       100.0 %     386       15.78  
100 Arrandale Boulevard
      Exton   PA   1997     34,931       100.0 %     456       17.14  
300 Lindenwood Drive
      Malvern   PA   1991     33,000       100.0 %     717       22.40  
2260 Butler Pike
      Plymouth Meeting   PA   1984     31,892       100.0 %     658       21.61  
120 West Germantown Pike
      Plymouth Meeting   PA   1984     30,574       100.0 %     540       22.11  
468 Thomas Jones Way
      Exton   PA   1990     28,934       100.0 %     550       19.00  
1700 Paoli Pike
      Malvern   PA   2000     28,000       100.0 %     505       22.25  
140 West Germantown Pike
      Plymouth Meeting   PA   1984     25,357       100.0 %     490       24.65  
  
                                               

-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   2008 (a)   2008 (b) (000’s)   2008 (c)
481 John Young Way
      Exton   PA   1997     19,275       100.0 %     405       22.79  
100 Lindenwood Drive
      Malvern   PA   1985     18,400       100.0 %     335       19.69  
748 Springdale Drive
  (g)   Exton   PA   1986     13,950       77.7 %     197       20.22  
200 Lindenwood Drive
      Malvern   PA   1984     12,600       65.3 %     148       19.83  
111 Arrandale Road
      Exton   PA   1996     10,479       100.0 %     198       18.77  
 
                                               
SUBTOTAL — PENNSYLVANIA SEGMENT
        9,511,397                          
 
METROPOLITAN WASHINGTON D.C. SEGMENT
                                               
1676 International Drive
      McLean   VA   1999     299,388       100.0 %     9,152       34.07  
13820 Sunrise Valley Drive
      Herndon   VA   2007     268,240       87.8 %            
2340 Dulles Corner Boulevard
      Herndon   VA   1987     264,405       100.0 %     8,038       30.27  
2291 Wood Oak Drive
      Herndon   VA   1999     227,574       100.0 %     5,326       29.13  
7101 Wisconsin Avenue
      Bethesda   MD   1975     223,054       95.9 %     6,426       31.46  
1900 Gallows Road
      Vienna   VA   1989     202,684       100.0 %     4,244       26.80  
3130 Fairview Park Drive
      Falls Church   VA   1999     180,645       85.2 %     4,380       35.95  
3141 Fairview Park Drive
      Falls Church   VA   1988     180,611       96.9 %     4,573       28.57  
2355 Dulles Corner Boulevard
      Herndon   VA   1988     179,176       84.0 %     4,433       31.70  
2411 Dulles Corner Park
      Herndon   VA   1990     176,618       100.0 %     5,611       31.75  
1880 Campus Commons Drive
      Reston   VA   1985     172,448       100.0 %     3,112       21.73  
2121 Cooperative Way
      Herndon   VA   2000     161,274       96.4 %     4,175       29.85  
8260 Greensboro Drive
      McLean   VA   1980     159,498       94.6 %     3,695       25.03  
2251 Corporate Park Drive
      Herndon   VA   2000     158,016       100.0 %     5,425       36.83  
12015 Lee Jackson Memorial Highway
      Fairfax   VA   1985     153,255       100.0 %     3,775       26.17  
13880 Dulles Corner Lane
      Herndon   VA   1997     151,747       100.0 %     4,686       34.95  
8521 Leesburg Pike
      Vienna   VA   1984     149,743       92.6 %     3,731       27.27  
2273 Research Boulevard
      Rockville   MD   1999     147,689       98.4 %     4,336       32.14  
2275 Research Boulevard
      Rockville   MD   1990     147,650       92.9 %     3,693       28.37  
2201 Cooperative Way
      Herndon   VA   1990     138,806       100.0 %     3,942       31.98  
2277 Research Boulevard
      Rockville   MD   1986     137,045       100.0 %     3,360       26.95  
11781 Lee Jackson Memorial Highway
      Fairfax   VA   1982     130,935       97.9 %     3,064       24.87  
11720 Beltsville Drive
      Beltsville   MD   1987     128,903       77.6 %     2,389       23.87  
7735 Old Georgetown Road
      Bethesda   MD   1964/1997     122,543       100.0 %     3,249       31.72  
13825 Sunrise Valley Drive
      Herndon   VA   1989     104,150       38.4 %     1,352       26.38  
198 Van Buren Street
      Herndon   VA   1996     98,934       100.0 %     3,043       33.18  
196 Van Buren Street
      Herndon   VA   1991     97,781       84.4 %     2,158       30.63  
11700 Beltsville Drive
      Beltsville   MD   1981     96,843       92.4 %     1,926       25.13  
11710 Beltsville Drive
      Beltsville   MD   1987     81,281       100.0 %     1,466       24.62  
4401 Fair Lakes Court
      Fairfax   VA   1988     55,972       100.0 %     1,413       27.58  
11740 Beltsville Drive
      Beltsville   MD   1987     6,783       100.0 %     140       23.18  
 
                                               
SUBTOTAL — METROPOLITAN WASHINGTON D.C. SEGMENT
        4,803,691                          
 
NEW JERSEY/DELAWARE SEGMENT
                                               
50 East State Street
      Trenton   NJ   1989     305,884       96.4 %     4,919       24.08  
920 North King Street
      Wilmington   DE   1989     203,328       96.7 %     4,504       26.44  
10000 Midlantic Drive
      Mt. Laurel   NJ   1990     183,147       97.5 %     2,453       25.17  
1009 Lenox Drive
      Lawrenceville   NJ   1989     180,734       100.0 %     4,346       19.28  
33 West State Street
      Trenton   NJ   1988     167,774       99.6 %     2,906       28.38  
525 Lincoln Drive West
      Marlton   NJ   1986     165,956       93.1 %     3,083       25.58  
Main Street — Plaza 1000
      Voorhees   NJ   1988     162,364       86.4 %     3,110       25.99  

-28-


 

                                                 
                                            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   2008 (a)   2008 (b) (000’s)   2008 (c)
400 Commerce Drive
      Newark   DE   1997     154,086       100.0 %     2,321       15.51  
457 Haddonfield Road
      Cherry Hill   NJ   1990     121,737       98.0 %     2,757       25.91  
2000 Midlantic Drive
      Mt. Laurel   NJ   1989     121,658       61.3 %     1,055       24.48  
700 East Gate Drive
      Mt. Laurel   NJ   1984     119,272       72.9 %     1,861       25.72  
2000 Lenox Drive
      Lawrenceville   NJ   2000     119,114       100.0 %     3,230       30.86  
989 Lenox Drive
      Lawrenceville   NJ   1984     112,055       85.3 %     2,635       29.44  
993 Lenox Drive
      Lawrenceville   NJ   1985     111,124       100.0 %     2,880       28.29  
1000 Howard Boulevard
      Mt. Laurel   NJ   1988     105,312       95.7 %     1,838       23.80  
One Righter Parkway
  (d)   Wilmington   DE   1989     104,761       97.0 %     2,501       23.87  
997 Lenox Drive
      Lawrenceville   NJ   1987     97,277       75.6 %     2,355       27.69  
1120 Executive Boulevard
      Mt. Laurel   NJ   1987     95,278       100.0 %     1,573       25.77  
15000 Midlantic Drive
      Mt. Laurel   NJ   1991     84,056       60.0 %     1,078       20.63  
220 Lake Drive East
      Cherry Hill   NJ   1988     78,509       93.6 %     1,360       23.04  
10 Lake Center Drive
      Marlton   NJ   1989     76,359       90.4 %     1,307       21.38  
200 Lake Drive East
      Cherry Hill   NJ   1989     76,352       96.2 %     1,451       24.38  
1200 Lenox Drive
      Lawrenceville   NJ   2007     75,000       49.3 %     174       28.46  
Three Greentree Centre
      Marlton   NJ   1984     69,300       94.8 %     1,381       24.88  
200 Commerce Drive
      Newark   DE   1998     68,034       100.0 %     1,327       19.44  
9000 Midlantic Drive
      Mt. Laurel   NJ   1989     67,299       100.0 %     836       26.05  
6 East Clementon Road
      Gibbsboro   NJ   1980     66,236       100.0 %     944       20.29  
100 Commerce Drive
      Newark   DE   1989     62,787       99.8 %     1,199       21.61  
701 East Gate Drive
      Mt. Laurel   NJ   1986     61,794       74.7 %     847       23.43  
210 Lake Drive East
      Cherry Hill   NJ   1986     60,604       67.5 %     988       22.92  
308 Harper Drive
      Moorestown   NJ   1976     59,500       45.7 %     609       23.49  
305 Fellowship Drive
      Mt. Laurel   NJ   1980     56,824       96.2 %     1,086       23.23  
Two Greentree Centre
      Marlton   NJ   1983     56,075       56.2 %     622       23.91  
309 Fellowship Drive
      Mt. Laurel   NJ   1982     55,911       82.1 %     1,149       24.98  
One Greentree Centre
      Marlton   NJ   1982     55,838       88.4 %     972       22.13  
8000 Lincoln Drive
      Marlton   NJ   1997     54,923       100.0 %     1,006       19.97  
307 Fellowship Drive
      Mt. Laurel   NJ   1981     54,485       70.8 %     909       25.90  
303 Fellowship Drive
      Mt. Laurel   NJ   1979     53,768       75.5 %     850       22.51  
1000 Bishops Gate
      Mt. Laurel   NJ   2005     53,281       100.0 %     1,208       23.96  
1000 Lenox Drive
      Lawrenceville   NJ   1982     52,264       100.0 %     1,329       29.63  
2 Foster Avenue
  (f)   Gibbsboro   NJ   1974     50,761       94.6 %     126       4.75  
4000 Midlantic Drive
      Mt. Laurel   NJ   1998     46,945       100.0 %     657       24.32  
Five Eves Drive
      Marlton   NJ   1986     45,564       96.2 %     817       21.07  
161 Gaither Drive
      Mount Laurel   NJ   1987     44,739       88.8 %     553       22.71  
Main Street — Piazza
      Voorhees   NJ   1990     44,708       89.6 %     670       20.59  
30 Lake Center Drive
      Marlton   NJ   1986     40,287       91.3 %     720       19.07  
20 East Clementon Road
      Gibbsboro   NJ   1986     38,260       93.5 %     504       18.84  
Two Eves Drive
      Marlton   NJ   1987     37,532       82.9 %     496       17.67  
304 Harper Drive
      Moorestown   NJ   1975     32,978       93.3 %     666       23.58  
Main Street — Promenade
      Voorhees   NJ   1988     31,445       80.0 %     401       18.99  
Four B Eves Drive
      Marlton   NJ   1987     27,011       99.4 %     408       16.88  
815 East Gate Drive
      Mt. Laurel   NJ   1986     25,500       100.0 %     296       18.38  
817 East Gate Drive
      Mt. Laurel   NJ   1986     25,351       100.0 %     225       13.15  

-29-


 

                                                 
                                            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   2008 (a)   2008 (b) (000’s)   2008 (c)
Four A Eves Drive
      Marlton   NJ   1987     24,687       82.8 %     356       16.56  
1 Foster Avenue
  (f)   Gibbsboro   NJ   1972     24,255       100.0 %     62       4.75  
4 Foster Avenue
  (f)   Gibbsboro   NJ   1974     23,372       100.0 %     152       9.34  
7 Foster Avenue
      Gibbsboro   NJ   1983     22,158       100.0 %     390       23.32  
10 Foster Avenue
      Gibbsboro   NJ   1983     18,651       100.0 %     252       18.23  
305 Harper Drive
      Moorestown   NJ   1979     14,980       0.0 %     96        
5 U.S. Avenue
  (f)   Gibbsboro   NJ   1987     5,000       100.0 %     24       5.00  
50 East Clementon Road
      Gibbsboro   NJ   1986     3,080       100.0 %     174       56.41  
5 Foster Avenue
      Gibbsboro   NJ   1968     2,000       100.0 %            
 
                                               
SUBTOTAL — NEW JERSEY/DELAWARE SEGMENT
        4,659,324                          
 
RICHMOND, VA SEGMENT
                                               
300 Arboretum Place
      Richmond   VA   1988     212,741       93.9 %     3,681       16.75  
6800 Paragon Place
      Richmond   VA   1986     144,722       94.3 %     2,674       20.54  
6802 Paragon Place
      Richmond   VA   1989     143,585       93.0 %     2,586       18.61  
7501 Boulders View Drive
      Richmond   VA   1990     137,283       86.3 %     2,387       20.03  
2511 Brittons Hill Road
  (f)   Richmond   VA   1987     132,548       100.0 %     674       6.55  
2100-2116 West Laburnam Avenue
      Richmond   VA   1976     127,502       84.4 %     1,621       16.10  
1957 Westmoreland Street
  (f)   Richmond   VA   1975     121,815       100.0 %     1,102       8.61  
7300 Beaufont Springs Drive
      Richmond   VA   2000     120,665       100.0 %     2,574       20.53  
1025 Boulders Parkway
      Richmond   VA   1994     93,143       96.8 %     1,807       19.67  
2201-2245 Tomlynn Street
  (f)   Richmond   VA   1989     85,860       97.2 %     475       7.98  
7401 Beaufont Springs Drive
      Richmond   VA   1998     82,639       87.3 %     1,382       19.90  
7325 Beaufont Springs Drive
      Richmond   VA   1999     75,218       100.0 %     1,553       20.09  
100 Gateway Centre Parkway
      Richmond   VA   2001     74,991       71.4 %     416       15.98  
6806 Paragon Place
      Richmond   VA   2007     74,480       100.0 %     1,692       22.37  
9011 Arboretum Parkway
      Richmond   VA   1991     73,183       100.0 %     1,329       18.41  
4805 Lake Brooke Drive
      Glen Allen   VA   1996     60,886       100.0 %     966       18.70  
9100 Arboretum Parkway
      Richmond   VA   1988     57,917       81.0 %     907       18.65  
2812 Emerywood Parkway
      Henrico   VA   1980     56,984       100.0 %     860       16.57  
4364 South Alston Avenue
      Durham   NC   1985     56,601       100.0 %     1,132       20.96  
2277 Dabney Road
  (f)   Richmond   VA   1986     50,400       100.0 %     270       7.54  
9200 Arboretum Parkway
      Richmond   VA   1988     49,542       77.0 %     304       14.87  
9210 Arboretum Parkway
      Richmond   VA   1988     48,012       100.0 %     648       15.10  
2212-2224 Tomlynn Street
  (f)   Richmond   VA   1985     45,353       100.0 %     225       7.53  
2221-2245 Dabney Road
  (f)   Richmond   VA   1994     45,250       100.0 %     237       7.97  
2251 Dabney Road
  (f)   Richmond   VA   1983     42,000       70.0 %     184       6.86  
2161-2179 Tomlynn Street
  (f)   Richmond   VA   1985     41,550       100.0 %     271       8.25  
2256 Dabney Road
  (f)   Richmond   VA   1982     33,413       100.0 %     224       8.51  
2246 Dabney Road
  (f)   Richmond   VA   1987     33,271       100.0 %     287       10.82  
2244 Dabney Road
  (f)   Richmond   VA   1993     33,050       100.0 %     297       11.23  
9211 Arboretum Parkway
      Richmond   VA   1991     30,791       100.0 %     407       14.37  
2248 Dabney Road
  (f)   Richmond   VA   1989     30,184       100.0 %     193       8.50  
2130-2146 Tomlynn Street
  (f)   Richmond   VA   1988     29,700       100.0 %     258       10.11  
2120 Tomlyn Street
  (f)   Richmond   VA   1986     23,850       100.0 %     132       7.32  
2240 Dabney Road
  (f)   Richmond   VA   1984     15,389       100.0 %     138       11.62  
 
                                               
SUBTOTAL — RICHMOND, VA SEGMENT
        2,484,518                          

-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   2008 (a)   2008 (b) (000’s)   2008 (c)
CALIFORNIA
                                               
155 Grand Avenue
      Oakland   CA   1990     204,278       63.4 %     4,579       39.47  
1220 Concord Avenue
      Concord   CA   1984     175,153       100.0 %     2,944       21.84  
1200 Concord Avenue
      Concord   CA   1984     175,103       100.0 %     4,170       25.21  
5780 & 5790 Fleet Street
      Carlsbad   CA   1999     121,381       79.6 %     3,381       32.85  
5900 & 5950 La Place Court
      Carlsbad   CA   1988     80,506       93.7 %     1,876       24.59  
16870 West Bernardo Drive
      Rancho Bernardo   CA   2002     68,708       76.1 %     1,724       34.31  
5963 La Place Court
      Carlsbad   CA   1987     61,587       53.7 %     764       25.73  
2035 Corte Del Nogal
      Carlsbad   CA   1991     53,982       62.5 %     1,038       23.64  
5973 Avendia Encinas
      Carlsbad   CA   1986     51,695       84.7 %     1,317       28.11  
 
                                               
SUBTOTAL — CALIFORNIA
        992,393                          
 
AUSTIN, TX
                                               
1250 Capital of Texas Highway South
      Austin   TX   1984     270,711       92.3 %     3,376       23.83  
1301 Mopac Expressway
      Austin   TX   2001     221,397       100.0 %     4,274       31.26  
3711 South Mopac Expressway
      Austin   TX   2007     213,167       30.7 %     615       30.65  
1601 Mopac Expressway
      Austin   TX   2000     195,639       100.0 %     2,960       27.04  
1501 South Mopac Expressway
      Austin   TX   1999     195,324       99.0 %     2,858       26.80  
1221 Mopac Expressway
      Austin   TX   2001     173,302       94.4 %     3,492       32.87  
1177 East Belt Line Road
  (h)   Coppell   TX   1998     150,000       100.0 %     1,833       14.87  
1801 Mopac Expressway
      Austin   TX   1999     58,576       100.0 %     1,017       31.05  
 
                                               
SUBTOTAL — AUSTIN, TX
        1,478,116                          
 
SUBTOTAL FULLY OWNED PROPERTIES / WEIGHTED AVG.         23,929,439       91.9 %                
 
                                               
2970 Market Street
      Philadelphia   PA   N/A     862,692       100.0 %     522        
2930 Chestnut Street
      Philadelphia   PA   N/A     542,273       94.0 %            
300 Delaware Avenue
      Wilmington   DE   1989     298,071       72.5 %     3,001       18.12  
One Radnor Corporate Center
      Radnor   PA   1998     190,219       64.0 %     3,957       35.61  
6600 Rockledge Drive
  (d)   Bethesda   MD   1981     160,173       57.7 %     2,963       28.93  
1000 Atrium Way
      Mt. Laurel   NJ   1989     97,158       88.6 %     1,016       23.09  
Two Righter Parkway
  (d)   Wilmington   DE   1987     95,514       68.7 %     1,429       25.55  
100 Lenox Drive
      Lawrenceville   NJ   1991     91,450       67.6 %     467       24.16  
 
                                               
SUBTOTAL DEVELOPMENT/REDEVELOPMENT PROPERTIES / WEIGHTED AVG.
        2,337,550       86.3 %                
 
                                               
TOTAL CORE PORTFOLIO
                    26,266,989       91.4 %                
 
                                               
 
(a)   Calculated by dividing net rentable square feet included in leases signed on or before December 31, 2008 at the property by the aggregate net rentable square feet of the property.
 
(b)   “Total Base Rent” for the twelve months ended December 31, 2008 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, 2008 plus the 2008 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, 2008. In both cases, the annualized rental rate is divided by the total square footage leased as of December 31, 2008 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 with a third party. 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.

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(f)   These properties are industrial facilities.
 
(g)   Property sold on February 4, 2009.
 
(h)   Property owned by consolidated real estate venture.
The following table shows information regarding rental rates and lease expirations for the Properties at December 31, 2008 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  
2009
    358       2,362,180     $ 50,817,534     $ 21.51       9.6 %     9.6 %
2010
    338       3,709,770       82,710,514       22.30       15.6 %     25.2 %
2011
    268       2,994,974       65,666,675       21.93       12.4 %     37.6 %
2012
    215       2,570,159       62,413,556       24.28       11.8 %     49.4 %
2013
    157       2,065,563       43,342,785       20.98       8.2 %     57.6 %
2014
    107       1,886,952       45,382,752       24.05       8.6 %     66.1 %
2015
    54       1,311,627       32,678,740       24.91       6.2 %     72.3 %
2016
    44       1,031,173       24,663,122       23.92       4.7 %     77.0 %
2017
    46       1,293,514       38,517,250       29.78       7.3 %     84.2 %
2018
    38       925,549       27,798,592       30.03       5.2 %     89.5 %
2019 and thereafter
    42       2,064,739       55,697,450       26.98       10.5 %     100.0 %
 
                                     
 
                                               
 
    1,667       22,216,200     $ 529,688,970     $ 23.84       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.

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At December 31, 2008, our Properties were leased to 1,423 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 Base Rent as of December 31, 2008:
                                                 
            Weighted                             Percentage of  
            Average     Aggregate     Percentage     Annualized     Aggregate  
    Number     Remaining     Leased     of Aggregate     Base     Annualized  
    of     Lease Term     Square     Leased     Rent (in     Base  
Tenant Name (a)   Leases     in Months     Feet     Square Feet     000) (b)     Rent  
Northrop Grumman Corporation
    5       85       468,332       2.1 %   $ 13,416       2.8 %
Wells Fargo Bank, N.A.
    18       31       486,087       2.1 %     10,642       2.2 %
Pepper Hamilton LLP
    2       71       305,073       1.3 %     10,243       2.1 %
Lockheed Martin
    9       43       554,940       2.5 %     8,745       1.8 %
State of New Jersey
    5       153       449,448       2.0 %     7,520       1.6 %
Dechert LLP
    1       129       218,565       1.0 %     7,213       1.5 %
KPMG, LLP
    2       67       245,828       1.1 %     6,938       1.4 %
Verizon
    4       30       302,087       1.3 %     5,858       1.2 %
Computer Associates International
    1       24       227,574       1.0 %     5,440       1.1 %
Blank Rome LLP
    1       157       239,236       1.1 %     5,355       1.1 %
AT&T
    5       10       206,414       0.9 %     5,033       1.0 %
Computer Sciences
    6       50       276,410       1.2 %     4,762       1.0 %
Marsh USA, Inc.
    2       52       145,566       0.6 %     4,550       0.9 %
Bearingpoint, Inc.
    2       16       119,293       0.5 %     4,319       0.9 %
United Healthcare Services
    2       100       132,685       0.6 %     3,860       0.8 %
Omnicare Clinical Research
    1       19       150,000       0.7 %     3,824       0.8 %
Lincoln National Management Co.
    1       139       193,626       0.9 %     3,751       0.8 %
Woodcock Washburn, LLC
    1       156       109,323       0.5 %     3,608       0.7 %
Deltek Systems, Inc.
    3       39       116,172       0.5 %     3,604       0.7 %
General Services Administration - U.S. Govt.
    12       30       157,144       0.7 %     3,581       0.7 %
 
                                   
 
                                               
Consolidated Total/Weighted Average
    83       71       5,103,803       22.6 %   $ 122,262       25.1 %
 
                                   
 
(a)   The identified tenant includes affiliates in certain circumstances.
 
(b)   Annualized Base Rent represents the monthly Base Rent, excluding tenant reimbursements, for each lease in effect at December 31, 2008 multiplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.
Real Estate Ventures
As of December 31, 2008, we had investments in five real estate ventures (including two VIE’s which are associated with our tax credit transactions) that are considered to be variable interest entities under FIN 46R and of which we are the primary beneficiary. We consolidate these five real estate ventures into our financial statements.
As of December 31, 2008, we also had an aggregate investment of approximately $71.0 million in our 13 unconsolidated Real Estate Ventures (net of returns of investment). We entered into 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 43 office buildings that contain an aggregate of approximately 4.2 million net rentable square feet; one Real Estate Venture developed a hotel property that contains 137 rooms in Conshohocken, PA; one Real Estate Venture constructed and sold condominiums in Charlottesville, VA; one Real Estate Venture is developing an office property located in Charlottesville, VA; and one Real Estate Venture is evaluating an office development in Conshohocken, PA.
We account for our non-controlling interests in these Real Estate Ventures using the equity method. Our non-controlling ownership interests range from 5% 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.
As of December 31, 2008, we had guaranteed repayment of approximately $2.2 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.

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Item 3. Legal Proceedings
We are involved from time to time in legal proceedings, including tenant disputes, employee disputes, disputes arising out of agreements to purchase or sell properties and disputes relating to state and local taxes. We generally consider these disputes to be routine to the conduct of our business and management believes that the final outcome of such proceedings will not have a material adverse effect on our financial position, results of operations or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
We did not submit any matters to a vote of our shareholders during the fourth quarter of the year ended December 31, 2008.
PART II
Item 5. Market for Registrant’s 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 23, 2009, there were 735 holders of record of our common shares and 44 holders of record of the Class A units (in addition to Brandywine Realty Trust). On February 23, 2009, the last reported sales price of the common shares on the NYSE was $5.25. The following table sets forth the quarterly high and low 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   Paid During Quarter
First Quarter 2007
  $ 36.14     $ 32.04     $ 0.44  
Second Quarter 2007
  $ 33.79     $ 28.43     $ 0.44  
Third Quarter 2007
  $ 28.58     $ 23.35     $ 0.44  
Fourth Quarter 2007
  $ 26.86     $ 17.78     $ 0.44  
First Quarter 2008
  $ 19.39     $ 15.70     $ 0.44  
Second Quarter 2008
  $ 19.86     $ 15.76     $ 0.44  
Third Quarter 2008
  $ 18.30     $ 13.48     $ 0.44  
Fourth Quarter 2008
  $ 15.22     $ 3.73     $ 0.44  
For each quarter in 2008 and 2007, the Operating Partnership paid a cash distribution per Class A unit in an amount equal to the dividend paid on a common share for each such quarter.
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 our 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, financial condition and 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.
On December 10, 2008, our Board of Trustees declared a quarterly dividend distribution of $0.30 per common share that was paid on January 20, 2009. Our Board of Trustees has adopted a dividend policy designed to match our distributions to our projected, normalized taxable income for 2009. The change from our 2008 annual dividends paid of $1.76 to the projected 2009 annual dividends expected to be paid of $1.20 is designed to preserve capital in this challenging economic environment.
We will continue to evaluate the potential of paying such dividends in stock versus cash. Our Board of Trustees has made no determination on our future dividend composition.

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On July 2, 2008, we filed with the NYSE our annual CEO Certification and Annual Written Affirmation pursuant to Section 303A.12 of the NYSE Listed Company Manual, each certifying that we were in compliance with all of the listing standards of the NYSE.
The following table provides information as of December 31, 2008 with respect to compensation plans under which our equity securities are authorized for issuance:
                         
    (a)   (b)   (c)
                    Number of securities
                    remaining available for
    Number of securities to be   Weighted-average   future issuance under
    issued upon exercise of   exercise price of   equity compensation plans
    outstanding options,   outstanding options,   (excluding securities
Plan category   warrants and rights   warrants and rights   reflected in column (a))
Equity compensation plans approved by security holders (1)
    1,754,648     $ 20.41       3,298,922  
Equity compensation plans not approved by security holders
                 
Total
    1,754,648     $ 20.41       3,298,922  
 
(1)   Relates to our Amended and Restated 1997 Long-Term Incentive Plan. In May 2007, our shareholders approved an amendment to our Amended and Restated 1997 Long-Term Incentive Plan (the “1997 Plan”). The amendment provided for the merger of the Prentiss Properties Trust 2005 Share Incentive Plan (the “Prentiss 2005 Plan”) with and into the 1997 Plan, thereby transferring into the 1997 Plan all of the shares that remained available for award under the Prentiss 2005 Plan. We had previously assumed the Prentiss 2005 Plan, together with other Prentiss incentive plans, as part of our January 2006 acquisition of Prentiss Properties Trust (“Prentiss”). The 1997 Plan reserves 500,000 common shares solely for awards under options and share appreciation rights that have an exercise or strike price at least equal to the market price of the common shares on the date of award and the remaining shares under the 1997 Plan are available for any type of award, including restricted share and performance share awards and options. Incentive stock options may not be granted with an exercise price below the market price of the common shares on the grant date. To date we have awarded incentive stock options and non-qualified stock options that generally have a ten year term and vest over a one to three year period.
The following table presents information related to our share repurchases during the year ended December. 31, 2008:

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                    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)
January 2008
    28,588  (b)   $ 17.93             539,200  
February 2008
                      539,200  
March 2008
    7,439  (b)     16.85             539,200  
April 2008
                      539,200  
May 2008
                      539,200  
June 2008
                      539,200  
July 2008
                      539,200  
August 2008
                      539,200  
September 2008
                      539,200  
October 2008
                      539,200  
November 2008
                      539,200  
December 2008
                      539,200  
 
                               
Total
    36,027                        
 
                               
 
(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 Board’s prior authorization from September 2001). There is no expiration date on the share repurchase program and the Board can cancel this program at any time.
 
(b)   Represents Common Shares cancelled by the Company upon vesting of restricted Common Shares previously awarded to Company employees in satisfaction of tax withholding obligations. Such shares do not impact the total number of shares that may yet to be purchased under the share repurchase program.

-36-


 

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, 2003 and ending December 31, 2008.
(PERFORMANCE GRAPH)
                                                                 
 
                  Period Ending        
  Index     12/31/03     12/31/04     12/31/05     12/31/06     12/31/07     12/31/08  
 
Brandywine Realty Trust
      100.00         116.65         117.88         146.28         83.71         40.05    
 
S&P500
      100.00         110.88         116.33         134.70         142.10         89.53    
 
Russell 2000
      100.00         118.33         123.72         146.44         144.15         95.44    
 
NAREIT All Equity REIT Index
      100.00         131.58         147.58         199.32         168.05         104.65    
 

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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 “Management’s 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 disposition of all properties since January 1, 2004, which have been reclassified as discontinued operations for all periods presented in accordance with SFAS No. 144. The selected financial data have also been revised to reflect other reclassifications that are disclosed in Note 2 of the Consolidated Financial Statements of each registrant.
Brandywine Realty Trust
(in thousands, except per common share data and number of properties)
                                         
Year Ended December 31,   2008   2007   2006   2005 (a)   2004 (a)
Operating Results
                                       
Total revenue
  $ 608,111     $ 622,897     $ 568,883     $ 347,845     $ 291,623  
Income (loss) from continuing operations
    13,670       18,584       (28,647 )     28,512       47,251  
Net income
    43,480       56,706       9,814       42,174       59,531  
Income allocated to Common Shares
    35,488       48,714       1,822       34,182       54,311  
Income (loss) from continuing operations per Common Share
                                       
Basic
  $ 0.07     $ 0.12     $ (0.41 )   $ 0.51     $ 0.99  
Diluted
  $ 0.07     $ 0.12     $ (0.41 )   $ 0.51     $ 0.98  
Earnings per Common Share
                                       
Basic
  $ 0.41     $ 0.56     $ 0.02     $ 0.61     $ 1.14  
Diluted
  $ 0.41     $ 0.56     $ 0.02     $ 0.61     $ 1.13  
Cash distributions paid per Common Share
  $ 1.76     $ 1.76     $ 1.76     $ 1.78  (b)   $ 1.76  
 
                                       
Balance Sheet Data
                                       
Real estate investments, net of accumulated depreciation
  $ 4,190,550     $ 4,656,925     $ 4,739,726     $ 2,541,486     $ 2,363,865  
Total assets
    4,737,690       5,214,099       5,509,018       2,805,745       2,633,984  
Total indebtedness
    2,753,672       3,100,969       3,152,230       1,521,384       1,306,669  
Total liabilities
    3,027,647       3,382,932       3,485,231       1,662,734       1,444,116  
Minority interest
    53,199       83,990       123,991       37,859       42,866  
Beneficiaries’ equity
    1,656,844       1,747,177       1,899,796       1,105,152       1,147,002  
 
                                       
Other Data
                                       
Cash flows from:
                                       
Operating activities
    231,334       224,392       238,299       125,147       152,890  
Investing activities
    164,455       39,575       (912,813 )     (252,417 )     (682,652 )
Financing activities
    (397,465 )     (283,746 )     692,719       119,098       536,556  
 
                                       
Property Data
                                       
Number of properties owned at year end
    248       257       313       251       246  
Net rentable square feet owned at year end
    26,257       28,888       31,764       19,600       19,150  
 
(a)   Income from continuing operations and net income have been reduced by $0.6 million and $0.8 million for the year ended December 31, 2005 and 2004, repectively, related to the Tax Witholding adjustment discussed in Note 2 of the Consolidated Financial Statements.
 
(b)   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).

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Brandywine Operating Partnership, L.P.
(in thousands, except per unit data and number of properties)
                                         
Year Ended December 31,   2008     2007     2006     2005 (a)     2004 (a)  
Operating Results
                                       
Total revenue
  $ 608,111     $ 622,897     $ 568,883     $ 347,845     $ 291,623  
Income (loss) from continuing operations
    13,847       19,019       (30,275 )     29,089       49,737  
Net income
    44,833       58,843       9,930       34,759       56,797  
Income from continuing operations per Common Partnership Unit
                                       
Basic
  $ 0.07     $ 0.12     $ (0.41 )   $ 0.50     $ 1.00  
Diluted
  $ 0.07     $ 0.12     $ (0.41 )   $ 0.50     $ 1.00  
Earnings per Common Partnership Units
                                       
Basic
  $ 0.41     $ 0.56     $ 0.02     $ 0.60     $ 1.15  
Diluted
  $ 0.41     $ 0.56     $ 0.02     $ 0.60     $ 1.14  
Cash distributions paid per Common Partnership Unit
  $ 1.76     $ 1.76     $ 1.76     $ 1.78  (b)   $ 1.76  
 
                                       
Balance Sheet Data
                                       
Real estate investments, net of accumulated depreciation
  $ 4,190,550     $ 4,656,925     $ 4,739,726     $ 2,541,486     $ 2,363,865  
Total assets
    4,737,690       5,214,099       5,509,018       2,805,745       2,633,984  
Total indebtedness
    2,753,672       3,100,969       3,152,230       1,521,384       1,306,669  
Total liabilities
    3,027,647       3,382,932       3,485,231       1,662,734       1,444,116  
Redeemable limited partnership units
    21,716       68,819       131,711       54,300       60,586  
Partners’ equity
    1,688,327       1,762,348       1,857,591       1,088,766       1,129,464  
 
                                       
Other Data
                                       
Cash flows from:
                                       
Operating activities
    231,334       224,392       238,299       125,147       152,890  
Investing activities
    164,455       39,575       (912,813 )     (252,417 )     (682,652 )
Financing activities
    (397,465 )     (283,746 )     692,719       119,098       536,556  
 
                                       
Property Data
                                       
Number of properties owned at year end
    248       257       313       251       246  
Net rentable square feet owned at year end
    26,257       28,888       31,764       19,600       19,150  
 
(a)   Income from continuing operations and net income have been reduced by $0.6 million and $0.8 million for the year ended December 31, 2005 and 2004, repectively, related to the Tax Witholding adjustment discussed in Note 2 of the Consolidated Financial Statements.
 
(b)   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).

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Item 7. Management’s 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, 2008, 2007 and 2006.
OVERVIEW
As of December 31, 2008, we managed our portfolio within six geographic segments: (1) Pennsylvania, (2) Metropolitan Washington D.C, (3) New Jersey/Delaware, (4) Richmond, Virginia, (5) California and (6) Austin, Texas. The Pennsylvania segment includes properties in Chester, Delaware, Bucks, and Montgomery counties in the Philadelphia suburbs and the City of Philadelphia in Pennsylvania. The Metropolitan Washington, D.C. segment includes properties in Northern Virginia and suburban Maryland. The New Jersey/Delaware segment includes properties in counties in the southern and central part of New Jersey including Burlington, Camden and Mercer counties and in 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 California segment includes properties in Oakland, Concord, Carlsbad and Rancho Bernardo. The Austin, Texas segment includes properties in Austin and Coppell.
We generate cash and revenue from leases of space at our properties and, to a lesser extent, from the management of properties owned by third parties and from investments in the Real Estate Ventures. Factors that we evaluate when leasing space include rental rates, costs of tenant improvements, tenant creditworthiness, current and expected operating costs, the length of the lease, vacancy levels and demand for office and industrial space. We also generate cash through sales of assets, including assets that we do not view as core to our portfolio, either because of location or expected growth potential, and assets that are commanding premium prices from third party investors.
Factors that May Influence Future Results of Operations
Global Market and Economic Conditions
In the U.S., recent market and economic conditions have been unprecedented and challenging with tighter credit conditions and slower growth through the fourth quarter of 2008. As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties specifically has led may lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers. Continued turbulence in the U.S. and international markets and economies may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our tenants. If these market conditions continue, they may limit our ability and the ability of our tenants, to timely refinance maturing liabilities and access the capital markets to meet liquidity needs.
Real Estate Asset Valuation
General economic conditions and the resulting impact on market conditions or a downturn in tenants’ businesses may adversely affect the value of our assets. Periods of economic slowdown or recession in the U.S., declining demand for leased office or industrial properties and/or a decrease in market rental rates and/or market values of real estate assets in our submarkets could have a negative impact on the value of our assets, including the value of our properties and related tenant improvements. If we were required under GAAP to write down the carrying value of any of our properties to the lower of cost or market due to impairment, or if as a result of an early lease termination we were required to remove or dispose of material amounts of tenant improvements that are not reusable to another tenant, our financial condition and results of operations would be negatively affected.
Leasing Activity and Rental Rates
The amount of net rental income generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space, newly developed or redeveloped properties and space available from unscheduled lease terminations. The amount of rental income we generate also depends on our ability to maintain or increase rental rates in our submarkets. Negative trends in one or more of these factors could adversely affect our rental income in future periods.

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Development and Redevelopment Programs
Historically, a significant portion of our growth has come from our development and redevelopment efforts. We have a proactive planning process by which we continually evaluate the size, timing, costs and scope of our development and redevelopment programs and, as necessary, scale activity to reflect the economic conditions and the real estate fundamentals that exist in our strategic submarkets. Given the economic conditions, we do not intend to commence new development or redevelopment projects in the foreseeable future. We believe that our current capital plan allows for us to continue the development and redevelopment projects that are currently underway.
We believe that a portion of our future potential growth will continue to come from our newly developed or redeveloped properties once current economic conditions normalize. However, we anticipate that the general economic conditions and the resulting impact on conditions in our core markets will delay timing and reduce the scope of our development program in the near future, which will further impact the average development and redevelopment asset balances qualifying for interest and other carry cost capitalization. We cease capitalizing such costs once a project does not qualify for interest and other carry cost capitalization under GAAP.
In addition, we may be unable to lease committed development or redevelopment properties at expected rental rates or within projected timeframes or complete development or redevelopment properties on schedule or within budgeted amounts, which could adversely affect our financial condition, results of operations and cash flow.
Financial and Operating Performance
Our financial and operating performance is dependent upon the demand for office, industrial and other commercial space in our markets, our leasing results, our acquisition, disposition and development activity, our financing activity, our cash requirements and economic and market conditions, including prevailing interest rates.
In seeking to increase revenue through our operating, financing and investment activities, we also seek 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 9.6% of our aggregate final annualized base rents as of December 31, 2008 (representing approximately 8.9% of the net rentable square feet of the Properties) expire without penalty in 2009. 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 2008 was 72.7%. If we are unable to renew leases or relet space under expiring leases, at anticipated rental rates, or if tenants terminate their leases early, 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 $15.5 million or 13.6% of total receivables (including accrued rent receivable) as of December 31, 2008 compared to $10.2 million or 9.2% of total receivables (including accrued rent receivable) as of December 31, 2007.
If economic conditions persist or deteriorate further, we may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents. This condition would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition.
Development Risk:
We plan to reduce capital expenditures during 2009 compared to prior years by concentrating only on those capital expenditures that are absolutely necessary. At December 31, 2008, we were proceeding on two developments and six redevelopments sites aggregating 2.3 million square feet with total projected costs of $440.7 million of which $294.3 million remained to be funded. These amounts include $355.5 million of total project costs for the combined 30th Street Post Office (100% pre-leased to the Internal Revenue Service) and Cira South Garage (94.3% pre-leased to the Internal Revenue Service) in Philadelphia, Pennsylvania of which $275.7 million remained to be funded at December 31, 2008. We are also finishing the lease-up of four recently completed developments for which we expect to spend

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an additional $38.0 million in 2009. 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, 2008, we owned approximately 495 acres of undeveloped land. We currently have no plans to develop these land parcels and instead will look to opportunistically dispose of them to generate additional liquidity. However, if circumstances change and we decide to proceed with development, we would be subject to risks associated with development of this land including 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
Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss 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. Capitalized costs include pre-construction costs essential to the development of the property, development and constructions costs, interest, property taxes, insurance, salaries and other project costs during the period of development. Estimates and judgments are required in determining when capitalization of certain costs such as interest should commence and cease. 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.46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). FIN 46R requires significant use of judgments and estimates in determining its application. 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”).
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

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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. On a periodic basis, management assesses whether there are any indicators that the value of our investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management’s estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the fair value of the investment. Our estimates of value for each investment (particularly in commercial real estate joint ventures) are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and operating costs. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions; accordingly, the values estimated by management in its impairment analyses may not be realized.
Impairment of Long-Lived Assets
We review long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on an estimate of the future undiscounted cash flows (excluding interest charges) expected to result from the long-lived asset’s use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a long-lived asset, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair-value of the property. We are required to make subjective assessments as to whether there are impairments in the values of the investments in long-lived assets. These assessments have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. There were also operating properties evaluated as they have been identified for potential sale. No impairment was determined; however, if actual cashflows or the estimated holding period change, an impairment could be recorded in the future and it could be material. Although our strategy is generally to hold our properties over the long-term, we will dispose of properties to meet our liquidity needs or for other strategic needs. If our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized to reduce the property to the lower of the carrying amount or fair value less costs to sell, and such loss could be material. If we determine that impairment has occurred, the affected assets must be reduced to their fair-value.
Where properties have been identified as having a potential for sale, additional judgments are required related to the determination as to the appropriate period over which the undiscounted cash flows should include the operating cash flows and the amount included as the estimated residual value. Management determines the amounts to be included based on a probability weighted cash flow. This requires significant judgment. In some cases, the results of whether an impairment is indicated are sensitive to changes in assumptions input into the estimates, including the hold period until expected sale. At December 31, 2008, we performed an impairment assessment of our land holdings as management determined that a sale scenario was the most likely source of future cash flows for the majority the land percels. This impairment assessment required management to estimate the expected proceeds from sale at some point in the future, to determine whether an impairment was indicated. This estimate requires significant judgment. Where impairment was indicated, an impairment charge was recorded to reduce the land to its estimated fair value. If the estimated fair value, our expectations as to the expected sales proceeds, or timing of the anticipated sale change based on market conditions or otherwise, our evaluation of impairment could be different and such differences could be material. We also recorded an impairment on properties designated as held for sale at June 30, 2008 of $6.85 million; these properties were sold in the quarter ending December 31, 2008.
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, the Company has several subsidiary REITs. In order to maintain their qualification as a REIT, the Company and each of its REIT subsidiaries are required to, among other things, distribute at least 90% of their 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 REITs. 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.

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The Company may elect to treat one or more of its 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. The Company has elected to treat certain of its corporate subsidiaries as TRSs; these entities provide third party property management services and certain services to tenants that could not otherwise be provided.
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 record 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 tenant’s 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 tenant’s 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.

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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.
RESULTS OF OPERATIONS
Comparison of the Year Ended December 31, 2008 to the Year Ended December 31, 2007
The table below shows selected operating information for the “Same Store Property Portfolio” and the “Total Portfolio.” The Same Store Property Portfolio consists of 224 properties containing an aggregate of approximately 21.5 million net rentable square feet that we owned for the entire twelve-month periods ended December 31, 2008 and 2007. This table also includes a reconciliation from the Same Store Property Portfolio to the Total Portfolio net income (i.e., all properties owned by us during the twelve-month periods ended December 31, 2008 and 2007) by providing information for the properties which were acquired, under development (including lease-up assets) or placed into service and administrative/elimination information for the twelve-month periods ended December 31, 2008 and 2007 (in thousands).
We have a significant, continuing involvement in the G&I Interchange Office LLC joint venture through our 20% ownership interest and the management and leasing services we provide for the venture. Accordingly, under EITF 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations”, we have determined that the operations of the properties owned by the joint venture (the “G&I properties”) should not be included in discontinued operations. This determination is reflected in the income statement comparisons below as we recognized revenue and expenses during the twelve-months ended December 31, 2007 for our 100% ownership interest through the date of sale on December 21, 2007 and such information related to the G&I properties is included in the Other (Eliminations) column.
The Total Portfolio net income presented in the table is equal to the net income of Brandywine Realty Trust. The only difference between the reported net income of Brandywine Realty Trust and Brandywine Operating Partnership is the allocation of the minority interest attributable to continuing and discontinued operations for limited partnership units that is on the statement of operations for Brandywine Realty Trust.

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Comparison of twelve-months ended December 31, 2008 to the twelve-months ended December 31, 2007
                                                                                                 
                            Acquired/Completed     Development/Redevelopment     Other/              
    Same Store Property Portfolio     Properties     Properties (a)     (Eliminations) (b)     Total Portfolio  
                    Increase/                                                                     Increase/  
(dollars in thousands)   2008     2007     (Decrease)     2008     2007     2008     2007     2008     2007     2008     2007     (Decrease)  
Revenue:
                                                                                               
Cash rents
  $ 423,112     $ 414,696     $ 8,416     $ 39,280     $ 25,416     $ 12,387     $ 8,738     $ (2,224 )   $ 20,992     $ 472,555     $ 469,842     $ 2,713  
Straight-line rents
    10,432       17,855       (7,423 )     4,375       7,286       1,169       966             627       15,976       26,734       (10,758 )
Rents — FAS 141
    6,065       8,761       (2,696 )     (89 )     (289 )     1,342       978                   7,318       9,450       (2,132 )
 
                                                                       
Total rents
    439,609       441,312       (1,703 )     43,566       32,413       14,898       10,682       (2,224 )     21,619       495,849       506,026       (10,177 )
Tenant reimbursements
    75,828       71,156       4,672       4,332       3,187       3,283       2,907       686       3,916       84,129       81,166       2,963  
Termination fees
    4,700       9,950       (5,250 )     100                   50             53       4,800       10,053       (5,253 )
Third party management fees, labor reimbursement and leasing
                                              20,401       19,691       20,401       19,691       710  
Other
    1,746       2,610       (864 )     99       39       (6 )     2       1,093       3,310       2,932       5,961       (3,029 )
 
                                                                       
Total revenue
    521,883       525,028       (3,145 )     48,097       35,639       18,175       13,641       19,956       48,589       608,111       622,897       (14,786 )
Property operating expenses
    152,177       149,484       2,693       12,229       10,653       8,228       6,337       (5,601 )     2,070       167,033       168,544       (1,511 )
Real estate taxes
    52,167       50,149       2,018       6,389       4,190       1,773       1,702       768       3,822       61,097       59,863       1,234  
Third party management expenses
                                              8,965       10,361       8,965       10,361       (1,396 )
 
                                                                                               
Subtotal
    317,539       325,395       (7,856 )     29,479       20,796       8,174       5,602       15,824       32,336       371,016       384,129       (13,113 )
 
                                                                                               
General & administrative expenses
                                              23,591       27,938       23,002       27,938       (4,936 )
Depreciation and amortization
    176,056       181,232       (5,176 )     19,286       16,813       6,708       8,689       3,855       16,493       205,905       223,227       (17,322 )
 
                                                                       
Operating Income (loss)
  $ 141,483     $ 144,163     $ (2,680 )   $ 10,193     $ 3,983     $ 1,466     $ (3,087 )   $ (11,622 )   $ (12,095 )   $ 142,109     $ 132,964     $ 9,145  
 
                                                                                               
Number of properties
    224       224               16       16       8       8                       248       248          
Square feet
    21,490       21,490               2,440       2,440       2,337       2,337                       26,267       26,267          
 
                                                                                               
Other Income (Expense):
                                                                                               
Interest income
                                                                            1,839       4,018       (2,179 )
Interest expense
                                                                            (142,770 )     (157,178 )     14,408  
Interest expense — Deferred financing costs
                                                                            (5,450 )     (4,496 )     (954 )
Loss on settlement of treasury lock agreements
                                                                                  (3,698 )     3,698  
Equity in income of real estate ventures
                                                                            8,447       6,955       1,492  
Net gain on disposition of depreciated assets
                                                                                  40,498       (40,498 )
Net (loss) gain on disposition of undepreciated assets
                                                                            (24 )     421       (445 )
Provision for impairment on land inventory
                                                                            (10,841 )           (10,841 )
Gain on early extinguishment of debt
                                                                            20,664             20,664  
 
                                                                                         
Income (loss) before minority interest
                                                                            13,974       19,484       (5,510 )
Minority interest — partners’ share of consolidated real estate ventures
                                                                            (127 )     (465 )     338  
Minority interest attributable to continuing operations — LP units
                                                                            (177 )     (435 )     258  
 
                                                                                         
Income (loss) from continuing operations
                                                                            13,670       18,584       (4,914 )
Income from discontinued operations
                                                                            29,810       38,122       (8,312 )
 
                                                                                         
Net Income
                                                                          $ 43,480     $ 56,706     $ (13,226 )
 
                                                                                         
Earnings per common share
                                                                          $ 0.41     $ 0.56     $ (0.15 )
 
                                                                                         
 
EXPLANATORY NOTES
 
(a)   - Results include: two developments and six redevelopment properties.
 
(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. Also included are revenues and expenses from the 29 G&I Properties.

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Total Revenue
Cash rents from the Total Portfolio increased by $2.7 million from 2007 to 2008, primarily reflecting:
  1)   An additional $8.4 million at the Same Store Portfolio from increased rents received on lease renewals and free rent periods converting to cash rent. This free rent conversion is the primary reason for the decrease in Total Portfolio straight-line rental income.
 
  2)   An additional $13.9 million from six properties that we acquired and ten development/redevelopment properties that we completed and placed in service subsequent to 2007.
 
  3)   An additional $3.6 million of rental income due to increased occupancy at eight development/redevelopment properties in 2008 in comparison to 2007.
 
  4)   The increase was offset by the decrease of $25.1 million of rental income earned from our G&I properties during 2007.
Tenant reimbursements increased by $3.0 million from 2007 to 2008 primarily due to the increase in property operating expenses at our Same Store Portfolio. Tenant reimbursements increased by $4.7 million at our same store portfolio and the property operating expenses at those properties increased by $4.7 million. These increases are offset by the activity of the G&I properties during 2007.
Third party management fees, labor reimbursement and leasing increased by $0.7 million from 2007 to 2008 as a result of a greater number of properties that we are managing for third parties. The 29 G&I properties make up a significant portion of the increase in the number of properties that we manage for third parties.
Property Operating Expenses
Property operating expenses, including real estate taxes and third party management expenses, at the Total Portfolio decreased by $1.7 million from 2007 to 2008, primarily due to $11.9 million of such expenses for the G&I properties in 2007. The decrease was offset by $3.8 million of property operating expenses and real estate taxes from six properties that we acquired and ten development/redevelopment properties that we completed and placed in service subsequent to 2007. Property operating expenses and real estate taxes at our Same Store Portfolio and our eight development/redevelopment properties also increased by $4.7 million and $2.0 million, respectively, from 2007 to 2008.
Depreciation and Amortization Expense
Depreciation and amortization decreased by $17.3 million from 2007 to 2008, primarily due to $11.3 million of depreciation and amortization expense recorded on the G&I properties during 2007. In addition, depreciation and amortization decreased by $5.2 million at our Same Store Portfolio due to assets within the Same Store Portfolio being fully amortized subsequent to 2007.
General & Administrative Expenses
General & administrative expenses decreased by $4.9 million from 2007 to 2008 of which approximately $2.3 million was a result of the final determination of 2007 bonus awards to our executive management, thereby resulting in a reduction to the estimated payout that was accrued during 2007. We incurred $2.4 million of severance costs in 2008 and $1.9 million of severance costs in 2007. These measures and other corporate level cost saving strategies resulted in the remainder of the decrease from the prior year.
Interest Income/ Expense
The decrease in interest income by approximately $2.2 million is due to lower cash balances during the period ended December 31, 2008.
Interest expense decreased by $14.4 million primarily due to lower mortgage notes payable outstanding during the year ending December 31, 2008 in comparison to December 31, 2007 as a result of certain mortgage notes payable being paid off subsequent to 2007. The decrease is also the result of a lower outstanding balance and lower weighted average interest rate on Credit Facility borrowings during 2008 in comparison to 2007.

-47-


 

Loss on Settlement of Treasury Lock Agreements
In July 2007, in anticipation of an expected debt offering, we entered into four treasury lock agreements. The treasury lock agreements were designated as cash flow hedges on interest rate risk and qualified for hedge accounting. The agreements were settled on September 21, 2007, the original termination date of each agreement, at a total cost of $3.7 million. During the fourth quarter of 2007, we determined that the planned debt issuance was remote and recorded $3.7 million as an expense for the residual balance of $3.7 million. No such settlement occurred during the year ending December 31, 2008.
Provision for impairment on land inventory
As part of our review of long-lived assets in accordance with FAS 144, during the quarter ending December 31, 2008, management determined that certain of the parcels in our land inventory had historical carrying values in excess of the current estimate of their fair value. These parcels are designated as parcels that are available for sale and as such, our impairment was recorded based on management’s estimate of the current fair value of the land inventory.
Gain on early extinguishment of debt
During the year-ended December 31, 2008, we repurchased $63.0 million of our $345.0 million 3.875% Guaranteed Exchangeable Notes, $78.3 million of our $275.0 million 4.500% Guaranteed Notes due 2009 and $24.5 million of our $300.0 million 5.625% Guaranteed Notes due 2010 which resulted in a $20.7 million gain that we reported for the early extinguishment of debt on our consolidated statement of operations. In addition, we accelerated amortization of the related deferred financing costs of $1.1 million.
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. Minority interests owned 3.1% and 4.2% of the Operating Partnership as of December 31, 2008 and 2007, respectively.
Discontinued Operations
During the twelve-month period ended December 31, 2008, we sold one property in Allentown, PA, one property in Mount Laurel, NJ, one property in Newtown, PA, five properties in Oakland, CA and one property in Richmond, VA. These properties had total revenue of $42.1 million, operating expenses of $18.6 million, depreciation and amortization expenses of $9.6 million and minority interest attributable to discontinued operations of $1.2 million. We also recorded a $6.85 million provision for impairment in connection with the five properties in Oakland, CA which reduced our income from discontinued operations.
The December 31, 2007 amount is reclassified to include the operations of the properties sold during the twelve-month period ended December 31, 2008, as well as the 20 properties that were sold during the year ended December 31, 2007. Therefore, the discontinued operations amount for the twelve-month period ended December 31, 2007 includes 29 sold properties with total revenue of $75.7 million, operating expenses of $32.3 million, depreciation and amortization expense of $23.8 million and minority interest attributable to discontinued operations of $1.7 million.
Net Income
Net income decreased by $13.2 million from the twelve-month period ended December 31, 2007 as a result of the factors described above. Net income is significantly impacted by depreciation of operating properties and amortization of acquired intangibles. These non-cash charges do not directly affect our ability to pay dividends. Such charges can be expected to continue until the lease intangibles are fully amortized. These intangibles are amortizing over the related lease terms or estimated duration of the tenant relationship.

-48-


 

Earnings per Common Share
Earnings per share (basic and diluted) were $0.41 for the twelve-month period ended December 31, 2008 as compared to $0.56 for the twelve-month period ended December 31, 2007 as a result of the factors described above and an increase in the average number of common shares outstanding. The increase in the average number of common shares outstanding is the result of a partnership unit conversion to common shares during 2008 and the issuance of common shares upon the vesting of restricted common shares.

-49-


 

RESULTS OF OPERATIONS
Comparison of the Year Ended December 31, 2007 to the Year Ended December 31, 2006
The table below shows selected operating information for the Same Store Properties and the Total Portfolio. The Same Store Properties consists of 228 properties containing an aggregate of approximately 22.5 million net rentable square feet that we owned for the entire twelve-month periods ended December 31, 2007 and substantially all of the period ended December 31, 2006. We consider the properties that we acquired in the Prentiss merger on January 5, 2006 as part of our Same Store Portfolio and, therefore, the results of operations for the year ended December 31, 2006 do not include four days of activity. 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, 2007 and 2006) by providing information for the properties which were acquired, under development, redevelopment or placed into service and administrative/elimination information for the years ended December 31, 2007 and 2006.
The Total Portfolio net income presented in the table agrees to the net income of Brandywine Realty Trust. The only difference between the reported net income of Brandywine Realty Trust and Brandywine Operating Partnership is the allocation of the minority interest attributable to continuing and discontinued operations for limited partnership units of the Operating Partnership that is reflected in the statement of operations for Brandywine Realty Trust.

-50-


 

Comparison of twelve-months ended December 31, 2007 to the twelve-months ended December 31, 2006
                                                                                                 
                            Acquired/Completed     Development/Redevelopment     Other/        
    Same Store Properties     Properties     Properties (a)     (Eliminations) (b)     All Properties  
                    Increase/                                                                     Increase/  
(dollars in thousands)   2007     2006     (Decrease)     2007     2006     2007     2006     2007     2006     2007     2006     (Decrease)  
Revenue:
                                                                                               
Cash rents
  $ 422,709     $ 417,427     $ 5,282     $ 66,306     $ 25,311     $ 13,142     $ 21,756     $ 20,979     $ 20,188     $ 523,136     $ 484,682     $ 38,454  
Straight-line rents
    12,808       15,214       (2,406 )     13,367       11,558       1,122       532       626       82     $ 27,923     $ 27,386       537  
Rents — FAS 141
    8,561       7,331       1,230       1,388       584       1,506       (701 )               $ 11,455     $ 7,214       4,241  
 
                                                                       
Total rents
    444,078       439,972       4,106       81,061       37,453       15,770       21,587       21,605       20,270       562,514       519,282       43,232  
Tenant reimbursements
    72,521       69,378       3,143       5,675       2,370       3,298       3,260       3,910       3,809       85,404       78,817       6,587  
Termination fees
    9,137       6,625       2,512       809       100       238       506       52             10,236       7,231       3,005  
Third party management fees, labor reimbursement and leasing
                                              19,691       19,453       19,691       19,453       238  
Other
    2,488       2,815       (327 )     361       121       (31 )     58       3,309       2,508       6,127       5,502       625  
 
                                                                       
Total revenue
    528,224       518,790       9,434       87,906       40,044       19,275       25,411       48,567       46,040       683,972       630,285       53,687  
 
                                                                                               
Operating Expenses:
                                                                                               
Property operating expenses
    159,265       154,340       4,925       24,105       13,547       8,944       9,640       (3,184 )     (5,603 )     189,130       171,924       17,206  
Real estate taxes
    52,227       51,311       916       6,438       3,531       2,408       2,219       3,822       3,747       64,895       60,808       4,087  
Management expenses
                                              10,361       10,675       10,361       10,675       (314 )
 
                                                                       
Subtotal
    211,492       205,651       5,841       30,543       17,078       11,352       11,859       10,999       8,819       264,386       243,407       20,979  
Net operating income
    316,732       313,139       3,593       57,363       22,966       7,923       13,552       37,568       37,221       419,586       386,878       32,708  
 
                                                                                               
Administrative expenses
                                              27,938       30,340       27,938       30,340       (2,402 )
Depreciation and amortization
    178,561       180,081       (1,520 )     37,543       15,539       11,459       12,167       14,749       22,923       242,312       230,710       11,602  
 
                                                                       
Operating Income (loss)
  $ 138,171     $ 133,058     $ 5,113     $ 19,820     $ 7,427     $ (3,536 )   $ 1,385     $ (5,119 )   $ (16,042 )   $ 149,336     $ 125,828     $ 23,508  
 
                                                                                               
Number of properties
    225                       18               14                               257                  
Square feet (in thousands)
    21,943                       3,292               3,653                               28,888                  
 
                                                                                               
Other Income (Expense):
                                                                                               
Interest income
                                                                            4,040       9,513       (5,473 )
Interest expense
                                                                            (162,675 )     (171,177 )     8,502  
Interest expense — Deferred financing costs
                                                                            (4,496 )     (4,607 )     111  
Loss on settlement of treasury lock agreements
                                                                            (3,698 )           (3,698 )
Equity in income of real estate ventures
                                                                            6,955       2,165       4,790  
Net gain on disposition of depreciated real estate
                                                                            40,498             40,498  
Net gain on disposition of undepreciated real estate
                                                                            421       14,190       (13,769 )
Gain on termination of purchase contract
                                                                                  3,147       (3,147 )
 
                                                                                         
Income (loss) before minority interest
                                                                            30,381       (20,941 )     51,322  
Minority interest — partners’ share of consolidated real estate ventures
                                                                            (465 )     270       (735 )
Minority interest attributable to continuing operations — LP units
                                                                            (902 )     1,274       (2,176 )
 
                                                                                         
Income (loss) from continuing operations
                                                                            29,014       (19,397 )     48,411  
Income (loss) from discontinued operations
                                                                            27,692       29,211       (1,519 )
 
                                                                                         
Net Income (loss)
                                                                          $ 56,706     $ 9,814     $ 46,892  
 
                                                                                         
Earnings per common share
                                                                          $ 0.56     $ 0.03     $ 0.53  
 
                                                                                         
EXPLANATORY NOTES
 
(a)   - Results include: seven developments and seven redevelopment properties.
 
(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. Also included are revenues and expenses from the 29 G&I properties.

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Total Revenue
Cash rents from the Total Portfolio increased by $38.5 million from 2006 to 2007, primarily reflecting:
  1)   An additional $5.3 million at the Same Store Portfolio from increased occupancy and increased rents received on lease renewals.
 
  2)   An additional $41.0 million from six properties that we acquired during 2007 and six development/redevelopment properties (including additional occupancy at Cira Centre) that we completed and placed in service in 2007 and two that were placed in service in December 2006.
 
  3)   These increases were offset by the decrease of $8.6 million in cash rents at our development/redevelopment properties primarily as a result of six buildings, which are now included in redevelopment, that were occupied during 2006.
Our rents at the Total Portfolio that we recognized from the net amortization of above and below market leases at acquired properties, in conformity with SFAS No. 141, increased by $4.2 million primarily as a result of $1.2 million of above market leases in our Same Store Portfolio being fully amortized and the acquisition of eight properties during 2007. Two of these properties are included in the Development/Redevelopment properties.
Tenant reimbursements at the Total Portfolio increased by $6.6 million primarily as a result of increased operating expenses of $21.0 million.
Operating Expenses and Real Estate Taxes
Property operating expenses, including real estate taxes, at the Total Portfolio increased by $21.0 million from 2006 to 2007, primarily reflecting:
  1)   An increase of $5.8 million at the Same Store Portfolio, primarily due to increased occupancy and real estate tax reassessments. Increased occupancy at our properties causes an increase in the amount of expense incurred for utilities, security, and janitorial services.
 
  2)   The incurrence of $13.5 million of property operating expenses for six of the properties acquired during 2007 and eight development/redevelopment properties that we completed and placed in service during or after December 2006.
Depreciation and Amortization Expense
Depreciation and amortization increased by $11.6 million in 2007 compared to 2006, primarily reflecting:
  1)   The incurrence of $22.0 million of depreciation and amortization expense on account of six properties that we acquired during 2007 and eight development/redevelopment properties (including additional occupancy at Cira Centre) that we completed and placed in service during or after December 2006.
 
  2)   This increase was offset by $11.9 million of accelerated depreciation expense for one of our properties (50 E. Swedesford Road) which was demolished as part of an office park development in suburban Philadelphia during 2006. This property is included in Development/Redevelopment Properties.
 
  3)   The increase is also offset by a decrease of $1.5 million in our Same Store Portfolio. This decrease is the result of assets within our Same Store Portfolio being fully amortized subsequent to 2006.
Administrative Expenses
Our administrative expenses decreased by approximately $1.5 million in 2007 compared to 2006, primarily reflecting higher costs that we incurred in 2006 as part of our integration activities following our January 2006 merger with Prentiss partially offset by the severance costs incurred in the third quarter of 2007.

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Interest Income/ Expense
We used our investment in marketable securities to pay down defeased debt in the fourth quarter of 2006. This pay down caused a decrease of $6.0 million in interest income. This decrease was partially offset by the amount of interest income earned on funds held in escrow with a qualified intermediary as part of completed 1031 like-kind transactions.
Interest expense decreased by $8.5 million primarily due to an increase in capitalized interest of $7.9 million during 2007 compared to 2006. The increased amount of capitalized interest is the result of a greater number of development and redevelopment projects and increased project funding for those projects that are under development in both periods. At December 31, 2007, we had seven projects under development and seven projects under redevelopment with total project costs of $249.8 million on which we are presently capitalizing interest. As of December 31, 2006, we had six projects under development and three projects under redevelopment with total project costs of $141.2 million on which we were capitalizing interest through that date.
This decrease was offset by increased interest expense on our unsecured debt based on the timing of the issuances of unsecured debt during 2007 and 2006 as noted in the liquidity and capital resources section below.
Loss on Settlement of Treasury Lock Agreements
In July 2007, in anticipation of an expected debt offering, we entered into four treasury lock agreements. The treasury lock agreements were designated as cash flow hedges on interest rate risk and qualified for hedge accounting. The agreements were settled on September 21, 2007, the original termination date of each agreement, at a total cost of $3.7 million. During the fourth quarter of 2007, we determined that the planned debt issuance was remote and recorded $3.7 million as an expense for the residual balance of $3.7 million.
Equity in income of Real Estate Ventures
The increase of $4.8 million over 2006 is primarily due to a distribution of $3.9 million received as a result of our residual profit interest in a Real Estate Venture and the completion of an office property that was placed in service by a Real Estate Venture during 2007.
Net gain on disposition of depreciated real estate
As more fully discussed in Note 3 to our Consolidated Financial Statements, we recognized a gain on the partial transfer of interests in properties to which we retained a significant continuing involvement with the properties through our joint venture interest and our management and leasing services. As a result of this continuing involvement, we have determined that the gain on disposition and the operations of the properties should not be included in discontinued operations.
Net gain on disposition of undepreciated real estate
This line represents the gain recorded in each year for undeveloped land parcels that were sold. The parcels are not included in discontinued operations since they were not developed prior to sale. We sold seven land parcels in 2007 and three in 2006.
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 Company’s 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

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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 our rights under a 1998 contribution agreement, modified in 2005, that entitled us to the fifty percent 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 Real Estate Ventures that is allocated to our minority interest partners.
As of December 31, 2007 we held an ownership interest in three properties through consolidated Real Estate Ventures, compared to 14 properties owned by consolidated Real Estate Ventures at December 31, 2006.
On March 1, 2007, we acquired the 49% minority interest in one of our consolidated real estate ventures that owned 10 office properties containing an aggregate of 1.1 million net rentable square feet for a purchase price of $63.7 million.
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. Minority interests owned 4.2% and 4.6% of the Operating Partnership as of December 31, 2007 and 2006, respectively.
Discontinued Operations
During 2007, we sold one property in East Norriton, PA, five properties in Dallas, TX, 11 properties in Reading and Harrisburg, PA, one in Voorhees, NJ, one property in West Norriton, PA and one property in Newark, DE. These properties had total revenue of $14.6 million, operating expenses of $11.4 million, gains on sale of $25.7 million and minority interest attributable to discontinued operations of $1.2 million.
The December 31, 2006 amount is reclassified to include the operations of the properties sold during 2007, as well as the 23 properties that were sold during the year ended December 31, 2006. Therefore, the discontinued operations amount for the year-ended 2006 includes 43 properties with total revenue of $92.7 million, operating expenses of $79.3 million, interest expense of $0.8 million and minority interest of $1.9 million. The eight properties that were sold in the first quarter of 2006 did not have gains on sale since such properties were acquired as part of the Prentiss merger and the value ascribed to those properties in purchase accounting was approximately the fair value amount for which the properties were sold.
Net Income
Net income increased by $47.5 million from 2006 primarily as a result of an increase of $22.6 million in Operating Income and the gain on disposition of depreciated real estate of $40.5 million noted above. These increases are offset by the gain on sale of undepreciated real estate of $14.2 million and gain on termination of our purchase contract of $3.1 million earned in 2006. Net income is significantly impacted by depreciation of operating properties and amortization of acquired intangibles. These charges do not affect our ability to pay dividends and may not be comparable to those of other real estate companies. 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 duration of the tenant relationship.
Earnings per Common Share
Earnings per share (basic and diluted) were $0.56 for 2007 as compared to $0.03 for 2006 as a result of the factors described above and a decrease in the average number of common shares outstanding. The

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decrease in the average number of common shares outstanding is the result of 1.8 million shares repurchased in 2007 and 1.2 million shares that we repurchased in 2006. This decrease in the number of shares was partially offset by the issuance of shares upon option exercises and restricted share vesting.

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LIQUIDITY AND CAPITAL RESOURCES
General
Our principal liquidity needs for the next twelve months are as follows:
    fund normal recurring expenses,
 
    fund capital expenditures, including capital and tenant improvements and leasing costs,
 
    fund repayment of certain debt instruments when they mature,
 
    fund current development and redevelopment costs, and
 
    fund distributions declared by our Board of Trustees.
We believe that with the general downturn in the economy, it is reasonably likely that vacancy rates may continue to increase, effective rental rates on new and renewed leases may continue to decrease and tenant installation costs, including concessions, may continue to increase in most or all of our markets in 2009 and possibly beyond. As a result of the potential negative effects on our revenue from the overall reduced demand for office space, our cash flow could be insufficient to cover increased tenant installation costs over the short-term. If this situation were to occur, we expect that we would finance any shortfalls through borrowings under our Credit Facility and other debt and equity financings.
We believe that our liquidity needs will be satisfied through cash flows generated by operations, financing activities and selective Property sales. 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. We seek to increase cash flows from our properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our revenue also includes third-party fees generated by our property management, leasing, developments and construction businesses. We believe our revenue, together with proceeds from property sales and secured 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 the financial performance covenants under our unsecured credit facility and unsecured notes.
Financial markets have recently experienced unusual volatility and uncertainty. Liquidity has tightened in all financial markets, including the debt and equity markets. Our ability to fund development projects, as well as our ability to repay or refinance debt maturities could be adversely affected by an inability to secure financing at reasonable terms, if at all. While we currently do not expect any difficulties, it is possible, in these unusual and uncertain times that one or more lenders in our revolving credit facility could fail to fund a borrowing request. Such an event could adversely affect our ability to access funds from its revolving credit facility when needed.
Our liquidity management remains a top priority. We continue to proactively pursue new financing opportunities to ensure an appropriate balance sheet position through 2009. As a result of these dedicated efforts, we are comfortable with our ability to meet future debt maturities and development funding needs. We believe that our current balance sheet and outlook for 2009 are in an adequate position at the date of this filing, despite the ongoing disruption in the credit markets. We have entered into a mortgage loan commitment for our Two Logan Square property which we expect will provide $89.8 million of debt, a portion of which would be used to satisfy the current mortgage on the property of $68.9 million that is due in July 2009. There is no assurance that the lender will ultimately provide the financing pursuant to the terms of the commitment letter or at all. We will also consider other properties within our portfolio where it may be in our best interest to obtain a secured mortgage. We will also consider sales of selected Properties as another source of managing our liquidity. In addition, during 2009, our expectation is that we will receive $23.8 million as the second contribution under the historic tax credit transaction that we entered into with US Bancorp.

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If economic conditions persist or deteriorate, we may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents. This condition would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition. We will also continue to evaluate the potential of paying our quarterly dividend in stock.
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.
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. Our senior unsecured debt is currently rated BBB- by Fitch Ratings, Baa3 by Moody’s Investor Services and BBB- by Standard & Poor’s. 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 and term loan would increase.
Our ability to sell common and preferred shares is dependent on, among other things, general market conditions for REITs, market perceptions about our company 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.
The asset sales during 2008 and 2007 have also been a significant source of cash. During 2008, we sold nine properties containing an aggregate of 2.4 million net rentable square feet and a 3.2 acre land parcel for aggregate net cash proceeds of $370.1 million. During 2007, we sold 49 properties containing an aggregate of 5.2 million net rentable square feet and eight land parcels containing an aggregate 56.2 acres for aggregate net cash proceeds of $472.6 million. Since mid-2007, we have used proceeds from these sales to repay existing indebtedness, provide capital for our development activities and strengthen our financial condition. There is no guarantee that we will be able to raise similar or even lesser amounts of capital from future asset sales.
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, 2008 and 2007, we maintained cash and cash equivalents of $3.9 million and $5.6 million, respectively. This $1.7 million decrease was the result of the following changes in cash flow from our various activities:
                         
Activity   2008     2007     2006  
Operating
  $ 231,334     $ 224,392     $ 238,299  
Investing
    164,455       39,575       (912,813 )
Financing
    (397,465 )     (283,746 )     692,719  
 
                 
Net cash flows
  $ (1,676 )   $ (19,779 )   $ 18,205  
 
                 
Our principal source of cash flows is from the operation of our properties. The decrease in cash flows from operating activities was primarily the result of the timing of cash receipts from our tenants and cash expenditures in the normal course of operations.
The increase in cash flows from investing activities is attributable to no acquisitions during the year ended December 31, 2008 compared to our acquisition of properties of $88.9 million and our acquisition of the 49% minority interest partners’ share in the Brandywine Office Investors real estate venture of $63.7 million during the year ended December 31, 2007.

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In addition, our capital expenditures for tenant and building improvements and leasing commissions decreased by $107.6 million in 2008 compared to 2007 as several of our developments are either close to completion or have already been placed in service. This was offset by the decrease in proceeds received in Property Sales of $472.6 million during the year ended December 31, 2007 to $370.1 million during the year ended December 31, 2008.
Decreased cash used in financing activities is primarily attributable to the timing of the activity in our credit facility offset by the repurchase of $59.4 million of our common shares in 2007 in comparison to no common share repurchases in 2008.
Capitalization
Indebtedness
During the year ended December 31, 2008, we repurchased $78.3 million of our $275.0 million 2009 Notes in a series of transactions which resulted in a $4.1 million gain on the early extinguishment of debt.
During the year ended December 31, 2008, we repurchased $24.5 million of our $300.0 million 2010 Notes in a series of transactions which resulted in a $3.6 million gain on the early extinguishment of debt.
During the year ended December 31, 2008, we repurchased $63.0 million of our $345.0 million 3.875% Guaranteed Exchangeable Notes in a series of transactions which resulted in a $13.0 million gain on the early extinguishment of debt.
During the year ended December 31, 2008, we exercised the accordion feature on our $150.0 million unsecured term loan which we entered into in October 2007 and borrowed an additional $33.0 million, bringing our total outstanding balance to $183.0 million. All outstanding borrowings under the term loan bear interest at a periodic rate of LIBOR plus 80 basis points. The net proceeds of the term loan increase were used to reduce indebtedness under our unsecured revolving credit facility. The term loan matures on October 18, 2010 and may be extended at our option for two one-year periods but not beyond the maturity date of our revolving credit facility.
During the second quarter of 2008, the borrowing rate on our $20.0 million Sweep Agreement, which we entered into in March 2007, increased from LIBOR plus 75 basis points to LIBOR plus 160 basis points which remains in effect through maturity in April 2009. Borrowings on the Sweep Agreement are short term and used for cash management purposes.
On June 29, 2007, we amended our $600.0 million unsecured revolving credit facility (the “Credit Facility”). The amendment extended the maturity date of the Credit Facility from December 22, 2009 to June 29, 2011 (subject to an extension of one year, at our option, upon our payment of an extension fee equal to 15 basis points of the committed amount under the Credit Facility). The amendment also reduced the per annum variable interest rate on outstanding balances from Eurodollar plus 0.80% to Eurodollar plus 0.725% per annum. In addition, the amendment reduced the quarterly facility fee from 20 basis points to 17.5 basis points per annum. The interest rate and facility fee are subject to adjustment upon a change in our unsecured debt ratings. The amendment also lowered to 7.50% from 8.50% the capitalization rate used in the calculation of several of the financial covenants; increased our swing loan availability from $50.0 million to $60.0 million; and increased the number of competitive bid loan requests available to us from two to four in any 30 day period. Borrowings are always available to the extent of borrowing capacity at the stated rates; however, the competitive bid feature allows banks that are part of the lender consortium under the Credit Facility to bid to make loans to us at a reduced Eurodollar rate. We have the option to increase the Credit Facility to $800.0 million subject to the absence of any defaults and our ability to acquire additional commitments from our existing lenders or new lenders.
On April 30, 2007, we consummated the public offering of $300.0 million aggregate principal amount of unsecured 5.70% Guaranteed Notes due 2017 and used the net proceeds from this offering to reduce borrowings under the Credit Facility.

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On November 29, 2006, we called for redemption of our $300.0 million Floating Rate Guaranteed Notes due 2009 and repaid these notes on January 2, 2007 in accordance with the November call using proceeds from our Credit Facility. As a result of the early repayment of these notes, we incurred accelerated amortization of $1.4 million in associated deferred financing costs in the fourth quarter 2006. We funded the prepayments of these notes from borrowings under our Credit Facility and there were no penalties associated with these prepayments.
On October 4, 2006, we sold $300.0 million aggregate principal amount of unsecured 3.875% Exchangeable Guaranteed Notes due 2026 in reliance upon an exemption from registration rights under Rule 144A under the Securities Act of 1933 and sold an additional $45.0 million of 3.875% Exchangeable Guaranteed Notes due 2026 on October 16, 2006 to cover over-allotments. We have registered the resale of the exchangeable notes. At certain times and upon certain events, the notes are exchangeable for 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 our common shares. The initial exchange rate is 25.4065 shares per $1,000 principal amount of notes (which is equivalent to an initial exchange price of $39.36 per share). We may not redeem the notes prior to October 20, 2011 (except to preserve our status as a REIT for U.S. federal income tax purposes), but we may redeem the notes at any time thereafter, in whole or in part, at a redemption price equal to the principal amount of the notes to be redeemed plus accrued and unpaid interest. In addition, on October 20, 2011, October 15, 2016 and October 15, 2021 as well as upon the occurrence of certain change in control transactions prior to October 20, 2011, holders of notes may require us to repurchase all or a portion of the notes at a purchase price equal to the principal amount of the notes to be purchased plus accrued and unpaid interest. We used net proceeds from the notes to repurchase approximately $60.0 million of common shares at a price of $32.80 per share and for general corporate purposes, including the repayment of outstanding borrowings under the Credit Facility.
On March 28, 2006, we consummated the public offering of $850.0 million of unsecured notes, consisting of (1) $300.0 million aggregate principal amount of Floating Rate Guaranteed Notes due 2009, (2) $300.0 million aggregate principal amount of 5.75% Guaranteed Notes due 2012 and (3) $250.0 million aggregate principal amount of 6.00% Guaranteed Notes due 2016. We used the net proceeds from this offering to repay a $750.0 million unsecured term loan and to reduce borrowings under the Credit Facility.
The Operating Partnership is the issuer of our unsecured notes, and Brandywine Realty Trust has fully and unconditionally guaranteed the payment of principal and interest on the notes.
As of December 31, 2008, we had approximately $2.8 billion of outstanding indebtedness. The table below summarizes our mortgage notes payable, our unsecured notes, and our revolving credit facility at December 31, 2008 and 2007:

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    December 31  
    2008     2007  
    (dollars in thousands)  
Balance:
               
Fixed rate
  $ 2,517,919     $ 2,741,632  
Variable rate
    235,836       359,337  
 
           
Total
  $ 2,753,755     $ 3,100,969  
 
           
 
               
Percent of Total Debt:
               
Fixed rate
    91.4 %     88.4 %
Variable rate
    8.6 %     11.6 %
 
           
Total
    100 %     100 %
 
           
 
               
Weighted-average interest rate at period end:
               
Fixed rate
    5.4 %     5.5 %
Variable rate
    2.1 %     5.8 %
Total
    5.1 %     5.6 %
The variable rate debt shown above generally bears interest based on various spreads over a LIBOR term periodically selected by us.
We use credit facility borrowings for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. We have an option to increase the maximum borrowings under the Credit Facility to $800.0 million subject to the absence of any defaults and our ability to obtain additional commitments from our existing or new lenders.
Our interest rate incurred under our revolving credit facility and term loan is subject to modification depending on our rating status with qualified agencies.
As of December 31, 2008, we had $153.0 million of borrowings, $15.2 million of letters of credit outstanding under the Credit Facility, and a $15.3 million holdback in connection with our historic tax credit transaction leaving $416.5 million of unused availability. For the years ended December 31, 2008 and 2007, our weighted average interest rates, including the effects of interest rate hedges discussed in Note 9 to the consolidated financial statements included herein, and including both the new Credit Facility and prior credit facility, were 4.35% and 6.25% 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 to the greater of (i) an amount required for us to retain our qualification as a REIT and (ii) otherwise limits dividends to 95% 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, 2008. Management continuously monitors the Company’s compliance with and anticipated compliance with the covenants. Certain of the covenants restrict management’s ability to obtain alternative sources of capital. While management currently believes it will remain in compliance with its covenants, in the event of a continued slow-down and continued crisis in the credit markets, we

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may not be able to remain in compliance with such covenants if the lender would not provides us with a waiver.
The indenture under which we issued our unsecured notes, and the note purchase agreement that governed an additional $113.0 million of 4.34% unsecured notes that matured in December 2008, contain (or contained) financial covenants, 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. We were in compliance with all covenants as of December 31, 2008.
We have mortgage loans that are collateralized by certain of our Properties. Payments on mortgage loans are generally due in monthly installments of principal and interest, or interest only.
We intend to refinance or repay our mortgage loans as they mature. Historically, this has been completed primarily through the use of unsecured debt or equity, however, in the current economic environment we will first look to selectively sell Properties or obtain secured mortgages on certain of our Properties. We have entered into a mortgage loan commitment for our Two Logan Square property which we expect will provide $89.8 million of debt, a portion of which would be used to satisfy the current mortgage on the property of $68.9 million that is due in July 2009. There is no assurance that the lender will ultimately provide the financing pursuant to the terms of the commitment letter or at all.
Our charter documents do not limit the amount or form of indebtedness that we may incur, and our policies on debt incurrence are solely within the discretion of our Board, subject to financial covenants in the Credit Facility, indenture and other credit agreements.
As of December 31, 2008, we had guaranteed repayment of approximately $2.2 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 certain of the Real Estate Ventures.
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 2007, we repurchased approximately 1.8 million common shares under this program at an average price of $33.36 per share, leaving approximately 0.5 million shares in remaining capacity at December 31, 2008. Our Board has not limited the duration of the program; however, it may be terminated at any time.
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”.
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 intend 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 our REIT qualification under the Internal Revenue Code.

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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 the Credit Facility, additional secured and unsecured indebtedness, the issuance of equity securities, contributions from joint venture investors and proceeds from asset dispositions.
Many commercial real estate lenders have substantially tightened underwriting standards or have withdrawn from the lending marketplace. Also, spreads in the investment grade bond market have substantially widened. These circumstances have materially impacted liquidity in the debt markets, making financing terms less attractive, and in certain cases have resulted in the unavailability of certain types of debt financing. As a result, we expect debt financings will be more difficult to obtain and that borrowing costs on new and refinanced debt will be more expensive. Moreover, the recent volatility in the financial markets, in general, will make it more difficult or costly, or even impossible, for us to raise capital through the issuance of common stock, preferred stock or other equity instruments or through public issuances of debt securities from our shelf registration statements as we have been able to do in the past. Such conditions would also limit our ability to raise capital through asset dispositions at attractive prices or at all.
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.
Commitments and Contingencies
The following table outlines the timing of payment requirements related to our contractual commitments as of December 31, 2008.

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    Payments by Period (in thousands)  
            Less than                     More than  
    Total     1 Year     1-3 Years     3-5 Years     5 Years  
Mortgage notes payable (a)
  $ 487,525     $ 78,226     $ 189,187     $ 112,201     $ 107,911  
Revolving credit facility
    153,000             153,000              
Unsecured term loan
    183,000             183,000              
Unsecured debt (a)
    1,932,865       196,680       557,575       550,000       628,610  
Ground leases (b)
    301,182       1,986       4,554       4,637       290,005  
Interest expense
    731,483       137,169       227,632       189,250       177,432  
Development contracts (c)
    83,701       58,531       25,170              
Other liabilities
    6,285       268                   6,017  
 
                             
 
  $ 3,879,041     $ 472,860     $ 1,340,118     $ 856,088     $ 1,209,975  
 
                             
 
(a)   Amounts do not include unamortized discounts and/or premiums.
 
(b)   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. Certain of the land leases provide for prepayment of rent on a present value basis using a fixed discount rate. Further, certain of the land lease for properties (currently under development) provide for contingent rent participation by the lessor in certain capital transactions and net operating cash flows of the property after certain returns are achieved by us. Such amounts, if any will be reflected as contingent rent when incurred. The leases also provide for payment by us of certain operating costs relating to the land, primarely real estate taxes. The above schedule of future minimum rental payments does not include any contingent rent amounts nor any reimbursed expenses.
 
(c)   Represents contractual obligations for certain development projects and does not contemplate all costs expected to be incurred for such developments
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 our ownership of a second and third mortgage secured by this property. This property is consolidated as the borrower is a variable interest entity and we, through our ownership of the second and third mortgages are the primary beneficiary. We currently do not expect to take title to Two Logan Square until, at the earliest, September 2019. If we take fee title to Two Logan Square upon a foreclosure of our mortgage, we have agreed to pay an unaffiliated third party that holds a residual interest in the fee owner of this property an amount equal to $0.6 million (if we must pay a state and local transfer upon taking title) and $2.9 million (if no transfer tax is payable upon the transfer).
We are currently being audited by the Internal Revenue Service for our 2004 tax year. The audit concerns the tax treatment of the transaction in September 2004 in which we acquired a portfolio of properties through the acquisition of a limited partnership. At this time it does not appear that an adjustment would result in a material tax liability for us. However, an adjustment could raise a question as to whether a contributor of partnership interests in the 2004 transaction could assert a claim against us under the tax protection agreement entered into as part of the transaction.
As part of our 2006 acquisition of Prentiss Properties Trust, the TRC acquisition in 2004 and several of our other transactions, we agreed not to sell certain of the properties we acquired in transactions that would trigger taxable income to the former owners. In the case of the TRC acquisition, we agreed not to sell acquired properties for periods up to 15 years from the acquisition date as follows: 201 King of Prussia Road, 555 East Lancaster Avenue and 300 Delaware Avenue (January 2008); One Rodney Square and 130/150/170 Radnor Financial Center (January 2015); and One Logan Square, Two Logan Square and Radnor Corporate Center (January 2020). In the Prentiss acquisition, we assumed the obligation of Prentiss not to sell Concord Airport Plaza before March 2018 and 6600 Rockledge before July 2008. We also agreed not sell 14 other properties that contain an aggregate of 1.2 million square feet for periods that expired at the end of 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

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Revenue Code or in other tax deferred transactions. If we were to sell a restricted property before expiration of the restricted period in a non-exempt transaction, we would be required to make significant payments to the parties who sold us the applicable property on account of tax liabilities triggered to them.
In connection with our development of the PO Box/IRS and Cira Garage projects, during 2008, we entered into a historic tax credit and new markets tax credit arrangement, respectively. We are required to be in compliance with various laws, regulations and contractual provisions that apply to our historic and new market tax credit arrangements. Non-compliance with applicable requirements could result in projected tax benefits not being realized and therefore, require a refund to USB or reduction of investor capital contributions, which are reported as deferred income in our consolidated balance sheet, until such time as our obligation to deliver tax benefits is relieved. The remaining compliance periods for our tax credit arrangements runs through 2015. We do not anticipate that any material refunds or reductions of investor capital contributions will be required in connection with these arrangements.
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.
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, 2008, our consolidated debt consisted of $487.5 million in fixed rate mortgages, $153.0 million borrowings under our Credit Facility, $183.0 million borrowings in an unsecured, term loan and $1.9 billion in unsecured notes (net of discounts) of which $1.8 billion are fixed rate borrowings and $53.0 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.
As of December 31, 2008, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was $1.2 billion.
We use derivative instruments to manage interest rate risk exposures and not for speculative purposes. As of December 31, 2008 we effectively hedged debt with a notional amount of $178.7 million through four interest rate swap agreements. These instruments have an aggregate fair value of $11.0 million at December 31, 2008.
We also have two forward starting swaps with a notional amount of $50.0 million at December 31, 2008 which we expect will be used as a cash flow hedge of the variability in 10 years of forecasted interest payments, beginning in December 2009.
The total carrying value of our variable rate debt was approximately $414.6 million and $367.1 million at December 31, 2008 and 2007, respectively. The total fair value of our debt, excluding the Notes, was approximately $398.7 million and $348.1 million at December 31, 2008 and 2007, respectively. For sensitivity purposes, a 100 basis point change in the discount rate equates to a change in the total fair value of our debt, excluding the Notes of approximately $2.4 million at December 31, 2008, and a 100 basis

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point change in the discount rate equates to a change in the total fair value of our debt of approximately $2.2 million at December 31, 2007.
If market rates of interest increase by 1%, the fair value of our outstanding fixed-rate debt would decrease by approximately $12.8 million. If market rates of interest decrease by 1%, the fair value of our outstanding fixed-rate debt would increase by approximately $13.3 million.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
See discussion in Management’s 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, an independent registered public accounting firm, 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 registrant’s management, including its principal executive officer and principal financial officer, each registrant’s management conducted an evaluation of the registrant’s 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 that each registrant’s disclosure controls and procedures were effective as of the end of the period covered by this annual report.
Management’s 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 registrant’s management, including its principal executive officer and principal financial officer, each registrant’s management conducted an evaluation of the effectiveness of the registrant’s 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 registrant’s management concluded that the registrant’s internal control over financial reporting was effective as of December 31, 2008.
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, 2008 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.” The total assets and total revenue of Four and Six Tower Bridge Associates represent, in the aggregate, less

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than 1% of our consolidated total assets and consolidated total revenue as of and for the year ended December 31, 2008.
The effectiveness of each registrant’s internal control over financial reporting as of December 31, 2008 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 registrant’s 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 registrant’s 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 Company’s definitive proxy statement to be filed with respect to its 2009 Annual Meeting of Shareholders.
Item 11. Executive Compensation
Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its 2009 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its 2009 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its 2009 Annual Meeting of Shareholders.
Item 14. Principal Accountant Fees and Services
Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its 2009 Annual Meeting of Shareholders.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
  (a)   1. and 2. Financial Statements and Schedules

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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.

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Index to Financial Statements and Schedules
BRANDYWINE REALTY TRUST
         
    Page
    F-1  
 
       
    F-2  
 
       
    F-3  
 
       
    F-4  
 
       
    F-5  
 
       
    F-6  
 
       
    F-8  
 
       
    F-44  
 
       
    F-45  
 
       
BRANDYWINE OPERATING PARTNERSHIP, L.P.
       
 
       
    F-50  
 
       
    F-51  
 
       
    F-52  
 
       
    F-53  
 
       
    F-54  
 
       
    F-55  
 
       
    F-57  
 
       
    F-93  
 
       
    F-94  
 
       
(c)(1) Financial Statements of G&I Interchange Office, LLC
    F-99  

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3. Exhibits
     
Exhibits No.   Description
 
   
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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s Form 8-K dated April 13, 1998 and incorporated herein by reference)
 
   
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 Trust’s Form 8-K dated May 14, 1998 and incorporated herein by reference)
 
   
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 Trust’s Form 8-K dated October 13, 1998 and incorporated herein by reference)
 
   
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 Trust’s Form 8-K dated October 13, 1998 and incorporated herein by reference)
 
   
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 Trust’s Form 8-K dated October 13, 1998 and incorporated herein by reference)
 
   
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 Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)
 
   
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 Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)
 
   
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 Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)
 
   
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 Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)

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Exhibits No.   Description
 
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 Trust’s 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 Trust’s 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 Trust’s Form 8-K dated September 21, 2004 and incorporated herein by reference)
 
   
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 Trust’s 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 Trust’s Form 8-K dated August 18, 2006 and incorporated herein by reference)
 
   
3.1.28
  List of partners of Brandywine Operating Partnership, L.P.
 
   
3.2
  Amended and Restated Bylaws of Brandywine Realty Trust (previously filed as an exhibit to Brandywine Realty Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s 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 Trust’s Form 8-K dated October 4, 2006 and incorporated herein by reference)
 
   
4.11
  Form of $300,000,000 aggregate principal amount of 5.70% Guaranteed Notes due 2017 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 30, 2007 and incorporated herein by reference)
 
   
10.1
  Second Amended and Restated Revolving Credit Agreement dated as of June 29, 2007** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated June 29, 2007 and incorporated herein by reference)
 
   
10.2
  Term Loan Agreement dated as of October 15, 2007 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 16, 2007 and incorporated herein by reference)
 
   
10.3
  Term Loan Agreement dated as of January 5, 2006 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 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 Trust’s 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 Trust’s Form 8-K dated July 30, 1998 and incorporated herein by reference)
 
   
10.6
  First Amendment to Contribution Agreement (with Donald E. Axinn) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 13, 1998 and incorporated herein by reference)
 
   
10.7
  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 Trust’s Form 8-K dated June 21, 2005 and incorporated herein by reference)

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Exhibits No.   Description
 
10.8
  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 Trust’s Form 8-K dated August 19, 2004 and incorporated herein by reference)
 
   
10.9
  Registration Rights Agreement (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated September 21, 2004 and incorporated herein by reference)
 
   
10.10
  Tax Protection Agreement (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated September 21, 2004 and incorporated herein by reference)
 
   
10.11
  Registration Rights Agreement dated as of October 3, 2005 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 4, 2005 and incorporated herein by reference)
 
   
10.12
  Letter to Cohen & Steers Capital Management, Inc. (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended June 30, 2003 and incorporated herein by reference)
 
   
10.13
  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 Trust’s Form 8-K dated October 4, 2006 and incorporated herein by reference)
 
   
10.14
  Common Share Delivery Agreement (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 4, 2006 and incorporated herein by reference)
 
   
10.15
  2006 Amended and Restated Agreement dated as of January 5, 2006 with Anthony A. Nichols, Sr.** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.16
  Amended and Restated Employment Agreement dated as of February 9, 2007 of Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 14, 2007 and incorporated herein by reference)
 
   
10.17
  Employment Agreement with Howard M. Sipzner** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 12, 2006 and incorporated herein by reference)
 
   
10.18
  Third Amended and Restated Employment Agreement with Michael V. Prentiss** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.19
  First Amendment to the Third Amended and Restated Employment Agreement with Michael V. Prentiss** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.20
  Second Amendment to the Third Amended and Restated Employment Agreement with Michael V. Prentiss** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.21
  Amended and Restated Employment Agreement with Thomas F. August** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.22
  First Amendment to the Amended and Restated Employment Agreement with Thomas F. August** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.23
  Second Amendment to the Amended and Restated Employment Agreement with Thomas F. August** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.24
  Employment Letter Agreement with Robert K. Wiberg dated January 15, 2008** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 22, 2008 and incorporated herein by reference)
 
   
10.25
  Change in Control and Severance Protection Agreement with Robert K. Wiberg** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 22, 2008 and incorporated herein by reference)
 
   
10.26
  Form of Acknowledgment and Waiver Agreement** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.27
  Amended and Restated 1997 Long-Term Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2007 and incorporated herein by reference)
 
   
10.28
  Amended and Restated Executive Deferred Compensation Plan effective March 25, 2004** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference)
 
   
10.29
  Amended and Restated Executive Deferred Compensation Plan effective January 1, 2009**
 
10.30
  2007 Non-Qualified Employee Share Purchase Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2007 and incorporated herein by reference)
 
   
10.31
  2005 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 15, 2005 and incorporated herein by reference)
 
   
10.32
  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 Trust’s Form 8-K dated February 15, 2005 and incorporated herein by reference)
 
   
10.33
  2006 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 15, 2006 and incorporated herein by reference)
 
   
10.34
  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 Trust’s Form 8-K dated February 15, 2006 and incorporated herein by reference)
 
   
10.35
  Form of 2006 Restricted Share Award to non-executive trustees** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2006 and incorporated herein by reference)

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Exhibits No.   Description
10.36
  Form of 2007 Restricted Share Award to non-executive trustee** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2007 and incorporated herein by reference)
 
   
10.37
  Performance Share Award to Howard M. Sipzner** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 12, 2006 and incorporated herein by reference)
 
   
10.38
  2007 Performance Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 14, 2007 and incorporated herein by reference)
 
   
10.39
  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 Trust’s Form 8-K dated February 14, 2007 and incorporated herein by reference)
 
   
10.40
  Form of Severance Agreement for executive officers** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 15, 2005 and incorporated herein by reference)
 
   
10.41
  Change of Control Agreement with Howard M. Sipzner** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 12, 2006 and incorporated herein by reference)
 
   
10.42
  Summary of Trustee Compensation** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated March 17, 2006 and incorporated herein by reference)
 
   
10.43
  Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.44
  First Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan**(previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.45
  Second Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.46
  Amendment No. 3 to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.47
  Fourth Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.48
  Amendment No. 5 to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.49
  Sixth Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.50
  Prentiss Properties Trust 2005 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.51
  Amended and Restated Prentiss Properties Trust Trustees’ Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.52
  Amendment No. 1 to the Amended and Restated Prentiss Properties Trust Trustees’ Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.53
  Second Amendment to the Amended and Restated Prentiss Properties Trust Trustees’ Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.54
  Form of Restricted Share Award** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.55
  2006 Long-Term Outperformance Compensation Program** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated September 1, 2006 and incorporated herein by reference)
 
   
10.56
  Form of Performance Share Award to the President and CEO and Executive Vice President and CFO** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 11, 2008 and incorporated herein by reference)
 
   
10.57
  Form of Performance Share Award to the executive officers (other than the President and CEO and Executive Vice President and CFO)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 11, 2008 and incorporated herein by reference)
 
   
10.58
  Form of Non-Qualified Share Option Agreement to the President and CEO and Executive Vice President and CFO** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 11, 2008 and incorporated herein by reference)
 
   
10.59
  Form of Non-Qualified Share Option Agreement to the executive officers (other than the President and CEO and Executive Vice President and CFO)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 11, 2008 and incorporated herein by reference)
 
   
10.60
  Form of Incentive Stock Option Agreement to the President and CEO and Executive Vice President and CFO ** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 11, 2008 and incorporated herein by reference)
 
   
10.61
  Form of Incentive Stock Option Agreement to the executive officers (other than the President and CEO and Executive Vice President and CFO)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 11, 2008 and incorporated herein by reference)
 
   
10.62
  Consulting Agreement with Anthony A. Nichols, Sr.**
 
   
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 Trust’s Form 8-K dated December 22, 2004 and incorporated herein by reference)
 
   
21
  List of subsidiaries

-73-


 

     
Exhibits No.   Description
 
   
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
  Certification of the Chief Executive Officer of Brandywine Realty Trust pursuant to 13a-14 under the Securities Exchange Act of 1934
 
   
31.2
  Certification of the Chief Financial Officer of Brandywine Realty Trust pursuant to 13a-14 under the Securities Exchange Act of 1934
 
   
31.3
  Certification of the Chief Executive Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., pursuant to 13a-14 under the Securities Exchange Act of 1934
 
   
31.4
  Certification of the Chief Financial Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., pursuant to 13a-14 under the Securities Exchange Act of 1934
 
   
32.1
  Certification of the Chief Executive Officer of Brandywine Realty Trust pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
32.2
  Certification of the Chief Financial Officer of Brandywine Realty Trust pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
32.3
  Certification of the Chief Executive Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
32.4
  Certification of the Chief Financial Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
99.1
  Material Tax Consequences
 
**   Management contract or compensatory plan or arrangement
 
(b)   Financial Statement Schedule: See Item 15 (a) (1) and (2) above
 
(c)(1)   The Financial Statements of G&I Interchange Office, LLC on page F-99

-74-


 

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: March 2, 2009
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 D’Alessio
 
Walter D’Alessio
  Chairman of the Board and Trustee   March 2, 2009
 
       
/s/ Gerard H. Sweeney
 
Gerard H. Sweeney
  President, Chief Executive Officer and Trustee
(Principal Executive Officer)
  March 2, 2009
 
       
/s/ Howard M. Sipzner
 
Howard M. Sipzner
  Executive Vice President and Chief Financial Officer (Principal Financial Officer)   March 2, 2009
 
       
/s/ Gabriel J. Mainardi
 
Gabriel J. Mainardi
  Vice President, Corporate Accounting
(Principal Accounting Officer)
  March 2, 2009
 
       
/s/ D. Pike Aloian
 
D. Pike Aloian
  Trustee   March 2, 2009
 
       
/s/ Donald E. Axinn
 
Donald E. Axinn
  Trustee   March 2, 2009
 
       
/s/ Wyche Fowler
 
Wyche Fowler
  Trustee   March 2, 2009
 
       
/s/ Michael J. Joyce
 
Michael J. Joyce
  Trustee   March 2, 2009
 
       
/s/ Anthony A. Nichols, Sr.
 
Anthony A. Nichols, Sr.
  Trustee   March 2, 2009
 
       
/s/ Charles P. Pizzi
 
Charles P. Pizzi
  Trustee   March 2, 2009

-75-


 

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: March 2, 2009
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 D’Alessio
 
Walter D’Alessio
  Chairman of the Board and Trustee   March 2, 2009
 
       
/s/ Gerard H. Sweeney
 
Gerard H. Sweeney
  President, Chief Executive Officer and Trustee
(Principal Executive Officer)
  March 2, 2009
 
       
/s/ Howard M. Sipzner
 
Howard M. Sipzner
  Executive Vice President and Chief Financial Officer (Principal Financial Officer)   March 2, 2009
 
       
/s/ Gabriel J. Mainardi
 
Gabriel J. Mainardi
  Vice President, Corporate Accounting
(Principal Accounting Officer)
  March 2, 2009
 
       
/s/ D. Pike Aloian
 
D. Pike Aloian
  Trustee   March 2, 2009
 
       
/s/ Donald E. Axinn
 
Donald E. Axinn
  Trustee   March 2, 2009
 
       
/s/ Wyche Fowler
 
Wyche Fowler
  Trustee   March 2, 2009
 
       
/s/ Michael J. Joyce
 
Michael J. Joyce
  Trustee   March 2, 2009
 
       
/s/ Anthony A. Nichols, Sr.
 
Anthony A. Nichols, Sr.
  Trustee   March 2, 2009
 
       
/s/ Charles P. Pizzi
 
Charles P. Pizzi
  Trustee   March 2, 2009

-76-


 

Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Brandywine Realty Trust:
In our opinion, the accompanying consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Brandywine Realty Trust and its subsidiaries (the “Company”) at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 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 accompanying 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. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and the financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s 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 company’s 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 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 company’s 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 Management’s Report on Internal Control Over Financial Reporting, management has excluded the Company’s investments in Four and Six Tower Bridge Associates from its assessment of internal control over financial reporting as of December 31, 2008 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 Associates 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. The total assets and total revenue of Four and Six Tower Bridge Associates represent, in the aggregate less than 1% and 1%, respectively, of the Company’s consolidated financial statement amounts as of and for the year ended December 31, 2008.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 2, 2009

F - 1


 

BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
                 
    December 31,     December 31,  
    2008     2007  
ASSETS
               
Real estate investments:
               
Rental properties
  $ 4,596,137     $ 4,813,563  
Accumulated depreciation
    (639,688 )     (558,908 )
 
           
Operating real estate investments, net
    3,956,449       4,254,655  
Construction-in-progress
    121,402       331,973  
Land inventory
    112,699       70,297  
 
           
Total real estate invesmtents, net
    4,190,550       4,656,925  
 
               
Cash and cash equivalents
    3,924       5,600  
Cash in escrow
    31,385        
Accounts receivable, net
    11,762       17,057  
Accrued rent receivable, net
    86,362       83,098  
Investment in real estate ventures, at equity
    71,028       71,598  
Deferred costs, net
    89,866       87,123  
Intangible assets, net
    145,757       218,149  
Notes receivable
    48,048       10,929  
Other assets
    59,008       63,620  
 
           
Total assets
  $ 4,737,690     $ 5,214,099  
 
           
 
LIABILITIES AND BENEFICIARIES’ EQUITY
               
Mortgage notes payable
  $ 487,525     $ 611,898  
Borrowing under credit facilities
    153,000       130,727  
Unsecured term loan
    183,000       150,000  
Unsecured senior notes, net of discounts
    1,930,147       2,208,344  
Accounts payable and accrued expenses
    74,824       76,919  
Distributions payable
    29,288       42,368  
Tenant security deposits and deferred rents
    58,692       65,241  
Acquired below market leases, net
    47,626       67,281  
Other liabilities
    63,545       30,154  
 
           
Total liabilities
    3,027,647       3,382,932  
 
               
Minority interest
    53,199       83,990  
 
               
Commitments and contingencies (Note 21)
               
 
               
Beneficiaries’ equity:
               
Preferred Shares (shares authorized-20,000,000):
               
7.50% Series C Preferred Shares, $0.01 par value; issued and outstanding- 2,000,000 in 2008 and 2007
    20       20  
7.375% Series D Preferred Shares, $0.01 par value; issued and outstanding- 2,300,000 in 2008 and 2007
    23       23  
Common Shares of beneficial interest, $0.01 par value; shares authorized 200,000,000; 88,610,053 and 88,623,635 issued in 2008 and 2007, respectively and 88,158,937 and 87,015,600 outstanding in 2008 and 2007, respectively
    882       870  
Additional paid-in capital
    2,327,617       2,324,342  
Deferred compensation payable in common stock
    6,274       5,651  
Common shares in treasury, at cost, 451,116 and 1,599,637 in 2008 and 2007, respectively
    (14,121 )     (53,449 )
Common shares in grantor trust, 215,742 in 2008 and 171,650 in 2007
    (6,274 )     (5,651 )
Cumulative earnings