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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2008
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from to
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)
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MARYLAND (Brandywine Realty Trust)
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23-2413352 |
DELAWARE (Brandywine Operating Partnership L.P.)
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23-2862640 |
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.) |
Incorporation or organization) |
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555 East Lancaster Avenue |
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Radnor, Pennsylvania
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19087 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code (610) 325-5600
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange |
Title of each class
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on which registered |
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Common Shares of Beneficial Interest,
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New York Stock Exchange |
par value $0.01 per share |
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(Brandywine Realty Trust) |
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7.50% Series C Cumulative Redeemable
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New York Stock Exchange |
Preferred Shares of Beneficial Interest |
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par value $0.01 per share |
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(Brandywine Realty Trust) |
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7.375% Series D Cumulative Redeemable
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New York Stock Exchange |
Preferred Shares of Beneficial Interest |
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par value $0.01 per share |
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(Brandywine Realty Trust) |
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Securities registered pursuant to Section 12(g) of the Act:
Units of General Partnership Interest (Brandywine Operating Partnership, L.P.)
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
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Brandywine Realty Trust
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Yes o No þ |
Brandywine Operating Partnership, L.P.
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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.
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Brandywine Realty Trust
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Yes o No þ |
Brandywine Operating Partnership, L.P.
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Yes o No þ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
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Brandywine Realty Trust
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Yes þ No o |
Brandywine Operating Partnership, L.P.
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Yes þ No o |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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:
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Large accelerated filer þ |
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Accelerated filer o |
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Non-accelerated filer o
(Do not check if a smaller reporting company) |
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Smaller reporting company o |
Brandywine Operating Partnership, L.P.:
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Large accelerated filer o |
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Accelerated filer þ |
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Non-accelerated filer o
(Do not check if a smaller reporting company) |
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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).
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Brandywine Realty Trust
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Yes o No þ |
Brandywine Operating Partnership, L.P.
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Yes o No þ |
The aggregate market value of the Common Shares of Beneficial Interest held by non-affiliates of
Brandywine Realty Trust as of the last day of the registrants most recently completed second
fiscal quarter was $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
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Filing Format
This combined Form 10-K is being filed separately by Brandywine Realty Trust and Brandywine
Operating Partnership, L.P.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. This Annual Report on Form 10-K and other materials filed by us with the SEC (as well
as information included in oral or other written statements made by us) contain statements that are
forward-looking, including statements relating to business and real estate development activities,
acquisitions, dispositions, future capital expenditures, financing sources, governmental regulation
(including environmental regulation) and competition. We intend such forward-looking statements to
be covered by the safe-harbor provisions of the 1995 Act. The words anticipate, believe,
estimate, expect, intend, will, should and similar expressions, as they relate to us, are
intended to identify forward-looking statements. Although we believe that the expectations
reflected in such forward-looking statements are based on reasonable assumptions, we can give no
assurance that our expectations will be achieved. As forward-looking statements, these statements
involve important risks, uncertainties and other factors that could cause actual results to differ
materially from the expected results and, accordingly, such results may differ from those expressed
in any forward-looking statements made by us or on our behalf. Factors that could cause actual
results to differ materially from our expectations include, but are not limited to:
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changes in general economic conditions; |
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changes in local real estate conditions (including changes in rental rates and the
number of properties that compete with our properties); |
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changes in the economic conditions affecting industries in which our principal
tenants compete; |
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the unavailability of equity and debt financing, particularly in light of the
current economic environment; |
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our failure to lease unoccupied space in accordance with our projections; |
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our failure to re-lease occupied space upon expiration of leases; |
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tenant defaults and the bankruptcy of major tenants; |
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changes in prevailing interest rates; |
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the impact of unrealized hedging transactions; |
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failure of acquisitions to perform as expected; |
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unanticipated costs associated with the acquisition, integration and operation of,
our acquisitions; |
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unanticipated costs to complete, lease-up and operate our developments and
redevelopments; |
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impairment charges; |
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increased costs for, or lack of availability of, adequate insurance, including for
terrorist acts; |
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risks associated with actual or threatened terrorist attacks; |
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demand for tenant services beyond those traditionally provided by landlords; |
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potential liability under environmental or other laws; |
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failure or bankruptcy of real estate venture partners; |
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inability of real estate venture partners to fund venture obligations; |
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failure of dispositions to close in a timely manner; |
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failure of buyers to comport with terms of their financing agreements to us; |
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earthquakes and other natural disasters; |
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risks associated with federal, state and local tax audits; |
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complex regulations relating to our status as a REIT and the adverse consequences of
our failure to qualify as a REIT; and |
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the impact of newly adopted accounting principles on our accounting policies and on
period-to-period comparisons of financial results. |
Given these uncertainties, and the other risks identified in the Risk Factors section and
elsewhere in this Annual Report on Form 10-K, we caution readers not to place undue reliance on
forward-looking statements. We assume no obligation to update or supplement forward-looking
statements that become untrue because of subsequent events.
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PART I
Item 1. Business
Introduction
The terms we, us, our or the Company refer to Brandywine Realty Trust, a Maryland real
estate investment trust, individually or together with its consolidated subsidiaries, including
Brandywine Operating Partnership, L.P. (the Operating Partnership), a Delaware limited
partnership.
We are a self-administered and self-managed real estate investment trust, or REIT, 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 Companys compliance with and anticipated compliance with the covenants. Certain of the
covenants restrict managements 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:
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maximize cash flow through leasing strategies designed to capture rental growth as
rental rates increase and as below-market leases are renewed; |
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attain a high tenant retention rate by providing a full array of property management and
maintenance services and tenant service programs responsive to the varying needs of our
diverse tenant base; |
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form joint venture opportunities with high-quality partners having attractive real
estate holdings or significant financial resources; |
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utilize our reputation as a full-service real estate development and management
organization to identify opportunities that will expand our business and create long-term
value; and |
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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:
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as warranted by market conditions, deploy our land inventory and seek new land parcels
on which to develop high-quality office and industrial properties to service our tenant
base; |
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capitalize on our redevelopment expertise to selectively acquire, redevelop and
reposition properties in desirable locations; and |
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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:
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current and projected market rents and absorption statistics justify construction
activity; |
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we can maximize market penetration by accumulating a critical mass of properties and
thereby enhance operating efficiencies; |
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barriers to entry (such as zoning restrictions, utility availability, infrastructure
limitations, development moratoriums and limited developable land) will create supply
constraints on office and industrial space; and |
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there is potential for economic growth, particularly job growth and industry
diversification. |
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 &
Poors, Moodys 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 managements periodic review of our portfolio and the
determination by management or our Board of Trustees that a disposition would be in our best
interests. 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 SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
Members of the public may also obtain information on the Public Reference Room by calling the SEC
at 1-800-732-0330. The SEC also maintains an Internet web site that contains reports, proxy and
information statements and other information regarding issuers, including us, that file
electronically with the SEC. The address of that site is http://www.sec.gov. Our annual reports
on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information
filed by us with the SEC are available, without charge, on our Internet web site,
http://www.brandywinerealty.com as soon as reasonably practicable after they are filed
electronically with the SEC. Copies are also available, 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:
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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; |
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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; |
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from both our existing operations and our development activities and increase our future
interest expense; |
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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; |
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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; |
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reduced liquidity in debt markets and increased credit risk premiums for certain market
participants may impair our ability to access capital; and |
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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:
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downturns in the national, regional and local economic climate including increases in
the unemployment rate and inflation; |
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competition from other office, industrial and commercial buildings; |
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local real estate market conditions, such as oversupply or reduction in demand for
office, industrial or commercial space; |
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changes in interest rates and availability of financing; |
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vacancies, changes in market rental rates and the need to periodically repair, renovate
and re-lease space; |
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increased operating costs, including insurance expense, utilities, real estate taxes,
janitorial costs, state and local taxes, labor shortages and heightened security costs; |
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civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts
of war which may result in uninsured or underinsured losses; |
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significant expenditures associated with each investment, such as debt service payments,
real estate taxes, insurance and maintenance costs which are generally not reduced when
circumstances cause a reduction in revenues from a property; and |
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declines in the financial condition of our tenants and our ability to collect rents from
our tenants. |
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:
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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; |
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reducing the availability of potential bidders to bid attractively for our for-sale
properties or to close on sales at all; and |
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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 Moodys Investor Services and BBB- by
Standard & Poors. 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:
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the unavailability of favorable financing alternatives in the private and public debt
markets; |
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having sufficient capital to pay development costs; |
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unprecedented market volatility in the share price of REITs; |
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dependence on the financial services sector as part of our tenant base; |
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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; |
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construction and lease-up delays resulting in increased debt service, fixed expenses and
construction or renovation costs; |
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expenditure of funds and devotion of managements time to projects that we do not
complete; |
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the unavailability or scarcity of utilities; |
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occupancy rates and rents at newly completed properties may fluctuate depending on a
number of factors, including market and economic conditions, resulting in lower than
projected rental rates and a corresponding lower return on our investment; |
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complications (including building moratoriums and anti-growth legislation) in obtaining
necessary zoning, occupancy and other governmental permits; and |
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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:
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we may not be able to obtain financing for acquisitions on favorable terms; |
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acquired properties may fail to perform as expected; |
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the actual costs of repositioning or redeveloping acquired properties may be higher than
our estimates; |
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acquired properties may be located in new markets where we may have limited knowledge
and understanding of the local economy, an absence of business relationships in the area or
unfamiliarity with local governmental and permitting procedures; and |
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we may not be able to efficiently integrate acquired properties, particularly portfolios
of properties, into our organization and 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:
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liabilities for clean-up of pre-existing disclosed or undisclosed environmental
contamination; |
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claims by tenants, vendors or other persons arising on account of actions or omissions
of the former owners of the properties; and |
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liabilities incurred in the ordinary course of business. |
We have agreed not to sell certain of our properties and to maintain indebtedness subject to
guarantees.
We 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.
-18-
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:
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the operational and financial performance of our properties; |
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capital expenditures with respect to existing, developed and newly acquired properties; |
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general and administrative costs associated with our operation as a publicly-held REIT; |
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the amount of, and the interest rates on, our debt; and |
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the absence of significant expenditures relating to environmental and other regulatory
matters. |
Certain of these matters are beyond our control and any significant difference between our
expectations and actual results could have a material adverse effect on our cash flow and our
ability to make distributions to shareholders.
Changes in the law may adversely affect our cash flow.
Because increases in income and service taxes are generally not passed through to tenants under
leases, such increases may adversely affect our cash flow and ability to make expected
distributions to shareholders. Our properties are also subject to various regulatory requirements,
such as those relating to the environment, fire and safety. Our failure to comply with these
requirements could result in the imposition of fines and damage awards and 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.
-19-
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 companys securities. In addition, we or our affected
REIT subsidiaries would no longer be required to make any distributions to shareholders.
Failure of the Operating Partnership (or a subsidiary partnership) to be treated as a partnership
would have serious adverse consequences to our shareholders. If the IRS were to successfully
challenge the tax status of the Operating Partnership or any of its subsidiary partnerships for
federal income tax purposes, the Operating Partnership or the affected subsidiary partnership would
be taxable as a corporation. In such event we would cease to qualify as a REIT and the imposition
of a corporate tax on the Operating Partnership or a subsidiary partnership would reduce the amount
of cash available for distribution from the Operating Partnership to us and ultimately to our
shareholders.
Even if we qualify as a REIT, we will be required to pay certain federal, state and local taxes on
our income and properties. In addition, our taxable REIT subsidiaries will be subject to federal,
state and local income tax at regular corporate rates on their net taxable income derived from
management, leasing and related service business. If we have net income from a prohibited
transaction, such income will be subject to a 100% tax.
We face possible 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.
-20-
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 partys ability to acquire us or effectuate
a change in control.
Limitations imposed to protect our REIT status. In order to protect us against the loss of our
REIT status, our Declaration of Trust limits any shareholder from owning more than 9.8% in value of
our outstanding shares, subject to certain exceptions. The ownership limit may have the effect of
precluding acquisition of control of us. If anyone acquires shares in excess of the ownership
limit, we may:
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consider the transfer to be null and void; |
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not reflect the transaction on our books; |
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institute legal action to stop the transaction; |
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not pay dividends or other distributions with respect to those shares; |
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not recognize any voting rights for those shares; and |
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consider the shares held in trust for the benefit of a person to whom such shares may be
transferred. |
Limitation due to our ability to issue preferred shares. Our Declaration of Trust authorizes our
Board of Trustees to cause us to issue preferred shares, without limitation as to amount and
without shareholder consent. Our Board of Trustees is able to establish the preferences and rights
of any preferred shares issued and these shares could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our shareholders best
interests.
Limitation imposed by the Maryland Business Combination Law. The Maryland General Corporation Law,
as applicable to Maryland REITs, establishes special restrictions against business combinations
between a Maryland REIT and interested shareholders or their affiliates unless an exemption is
applicable. An interested shareholder includes a person, who beneficially owns, and an affiliate
or associate of the trust who, at any time within the two-
year period prior to the date in question, was the beneficial owner of, ten percent or more of the
voting power of our then-outstanding voting shares. Among other things, Maryland law prohibits
(for a period of five years) a merger and certain other transactions between a Maryland REIT and an
interested shareholder unless the board of trustees had approved the transaction before the party
became an interested shareholder. The five-year period runs from the most recent date on which the
interested shareholder became an interested shareholder. Thereafter, any such business combination
must be recommended by the board of trustees and approved by two super-majority shareholder votes
unless, among other conditions, the common shareholders receive a minimum price for their shares
and the consideration is received in cash or in the same form as previously paid by the interested
shareholder for our shares or unless the board of trustees approved the transaction before the
party in question became an
-21-
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
shareholders meeting, then subject to certain conditions and limitations the issuer may redeem any
or all of the control shares for fair value. If voting rights of such control shares are approved
at a shareholders meeting and the acquirer becomes entitled to vote a majority of the shares
entitled to vote, all other shareholders may exercise appraisal rights. Any control shares
acquired in a control share acquisition which are not exempt under our Bylaws are subject to the
Maryland Control Share Acquisition Act. Our Bylaws contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of our shares. We cannot assure
you that this provision will not be amended or eliminated at any time in the future.
Advance Notice Provisions for Shareholder Nominations and Proposals. Our bylaws require advance
notice for shareholders to nominate persons for election as trustees at, or to bring other business
before, any meeting of our shareholders. This bylaw provision limits the ability of shareholders
to make nominations of persons for election as trustees or to introduce other proposals unless we
are notified in a timely manner prior to the meeting.
Many factors can have an adverse effect on the market value of our securities.
A number of factors might adversely affect the price of our securities, many of which are beyond
our control. These factors include:
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increases in market interest rates, relative to the dividend yield on our shares. If
market interest rates go up, prospective purchasers of our securities may require a higher
yield. Higher market interest rates would not, however, result in more funds for us to
distribute and, to the contrary, would likely increase our borrowing costs and potentially
decrease funds available for distribution. Thus, higher market interest rates could cause
the market price of our common shares to go down; |
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anticipated benefit of an investment in our securities as compared to investment in
securities of companies in other industries (including benefits associated with tax
treatment of dividends and distributions); |
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perception by market professionals of REITs generally and REITs comparable to us in
particular; |
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level of institutional investor interest in our securities; |
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relatively low trading volumes in securities of REITs; |
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our results of operations and financial condition; and |
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investor confidence in the stock market generally. |
The market value of our common shares is based primarily upon the markets perception of our growth
potential and our current and potential future earnings and cash distributions. Consequently, our
common shares may trade at prices that are higher or lower than our net asset value per common
share. If our future earnings or cash distributions are less than expected, it is likely that the
market price of our common shares will diminish.
-22-
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:
-23-
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Month Placed |
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# of |
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Rentable |
in Service |
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Property/Portfolio Name |
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Location |
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Buildings |
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Square Feet |
Aug-08 |
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4000 Chemical Road (Metroplex I) |
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Plymouth Meeting, PA |
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1 |
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120,877 |
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Oct-08 |
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1200 Lenox Drive |
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Lawrenceville, NJ |
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1 |
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75,000 |
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Nov-08 |
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South Lake at Dulles |
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Herndon, VA |
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1 |
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268,240 |
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Dec-08 |
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Park on Barton Creek |
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Austin, TX |
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1 |
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213,167 |
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Total Properties Placed in Service |
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4 |
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677,284 |
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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:
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Month of |
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# of |
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Rentable Square |
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Sales |
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Sale |
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Property/Portfolio Name |
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Location |
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Bldgs. |
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Feet/ Acres |
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Price |
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(in 000s) |
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Jan-08 |
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7130 Ambassador Drive |
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Allentown, PA |
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1 |
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114,049 |
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$ |
5,800 |
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Feb-08 |
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1400 Howard Boulevard |
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Mount Laurel, NJ |
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1 |
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75,590 |
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22,000 |
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Apr-08 |
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100 Brandywine Boulevard |
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Newtown, PA |
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1 |
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102,000 |
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28,000 |
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Oct-08 |
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600 East Main Street (Main Street Centre) |
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Richmond, VA |
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1 |
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426,103 |
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48,820 |
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Oct-08 |
|
Northern California Portfolio |
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Oakland, CA |
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5 |
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1,717,861 |
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412,500 |
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Total Office Properties Sold |
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9 |
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2,435,603 |
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$ |
517,120 |
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We sold the following land parcel during the year ended December 31, 2008: |
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Month of |
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# of | |
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Rentable Square |
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Sales |
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Sale |
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Property/Portfolio Name |
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Location |
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Bldgs. |
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Feet/ Acres |
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Price |
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| | |
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(in 000s) |
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Feb-08 |
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Dabney Westwood |
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Henrico, VA |
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| |
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3.2 |
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376 |
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| |
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Total Land Sold |
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3.2 |
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$ |
376 |
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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:
-24-
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% |
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Leased |
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Rentable |
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as of |
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Stabilization |
Project Name |
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Location |
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Square Feet |
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12/31/08 |
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Date (a) |
Under Development: |
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Post Office/IRS
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Philadelphia, PA
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862,692 |
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100.0 |
% |
|
Q3 10 |
Cira South Garage
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Philadelphia, PA
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542,273 |
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94.3 |
% |
|
Q3 10 |
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1,404,965 |
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Under Redevelopment: |
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Radnor Corporate Center I
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Radnor, PA
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190,219 |
|
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64.0 |
% |
|
Q4 09 |
One Rockledge Associates
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Bethesda, MD
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|
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160,173 |
|
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57.7 |
% |
|
Q4 09 |
300 Delaware Avenue
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Wilmington, DE
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|
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298,071 |
|
|
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72.5 |
% |
|
Q4 09 |
Delaware Corporate Center II
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Wilmington, DE
|
|
|
95,514 |
|
|
|
68.7 |
% |
|
Q4 09 |
100 Lenox Drive
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Lawrenceville, NJ
|
|
|
91,450 |
|
|
|
67.6 |
% |
|
Q4 09 |
Atrium I
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Mount Laurel, NJ
|
|
|
97,158 |
|
|
|
89.2 |
% |
|
Q4 09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
932,585 |
|
|
|
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|
|
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:
-25-
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|
Average |
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
Total Base Rent |
|
Annualized |
|
|
|
|
|
|
|
|
|
|
Net |
|
Percentage |
|
for the Twelve |
|
Rental Rate |
|
|
|
|
|
|
|
|
Year |
|
Rentable |
|
Leased as of |
|
Months Ended |
|
as of |
|
|
|
|
|
|
|
|
Built/ |
|
Square |
|
December 31, |
|
December 31, |
|
December 31, |
Property Name |
|
|
|
Location |
|
State |
|
Renovated |
|
Feet |
|
2008 (a) |
|
2008 (b) (000s) |
|
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 |
|
-26-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) (000s) |
|
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) (000s) |
|
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) (000s) |
|
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) (000s) |
|
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) (000s) |
|
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. |
-31-
|
|
|
(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. |
-32-
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 VIEs 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.
-33-
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 Registrants Common Equity and Related Shareholder Matters and Issuer Purchases
of Equity Securities
Our common shares are traded on the New York Stock Exchange (NYSE) under the symbol BDN. There
is no established trading market for the Class A units of the Operating Partnership. On February
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.
-34-
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:
-35-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Boards 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
-37-
Item 6. Selected Financial Data
The following table sets forth selected financial and operating data and should be read in
conjunction with the financial statements and related notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations included in this Annual Report on Form
10-K. The selected data have been revised to reflect 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). |
-38-
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). |
-39-
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements
appearing elsewhere herein and is based primarily on our consolidated financial statements for the
years ended December 31, 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.
-40-
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
-41-
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
Managements 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
-42-
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
managements 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 managements 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 assets 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.
-43-
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 tenants lease and
our overall relationship with the respective tenant. We estimate the cost to execute leases with
terms similar to the remaining lease terms of the in-place leases, include leasing commissions,
legal and other related expenses. This intangible asset is amortized to expense over the remaining
term of the respective leases. We estimate fair value through methods similar to those used by
independent appraisers or by using independent appraisals. Factors that we consider in our analysis
include an estimate of the carrying costs during the expected lease-up periods considering current
market conditions and costs to execute similar leases. We also consider information obtained about
each property as a result of our pre-acquisition due diligence, marketing and leasing activities in
estimating the fair value of the tangible and intangible assets acquired. In estimating carrying
costs, we include real estate taxes, insurance and other operating expenses and estimates of lost
rentals at market rates during the expected lease-up periods, which primarily range from three to
twelve months.
Characteristics that we consider in allocating value to our tenant relationships include the nature
and extent of our business relationship with the tenant, growth prospects for developing new
business with the tenant, the tenants credit quality and expectations of lease renewals. The value
of tenant relationship intangibles is amortized over the remaining initial lease term and expected
renewals, but in no event longer than the remaining depreciable life of the building. The value of
in-place leases is amortized over the remaining non-cancellable term of the respective leases and
any fixed-rate renewal periods.
-44-
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.
-45-
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.
|
-46-
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 managements 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. |
-51-
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.
-52-
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 Companys Trustees. Although we and Mr. Axinn had each committed to
provide one half of the $11 million necessary to repay the mortgage loan secured by this property
at the maturity of the
-53-
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
-54-
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.
-55-
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.
-56-
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 Moodys Investor Services and BBB- by Standard & Poors. 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.
-57-
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.
-58-
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:
-59-
|
|
|
|
|
|
|
|
|
|
|
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 Companys
compliance with and anticipated compliance with the covenants. Certain of the covenants restrict
managements 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
-60-
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.
-61-
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.
-62-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
-63-
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
-64-
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 Managements Discussion and Analysis included in Item 7 herein.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary financial data of Brandywine Realty Trust and Brandywine
Operating Partnership, L.P. and the reports thereon of PricewaterhouseCoopers LLP, 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 registrants management, including its
principal executive officer and principal financial officer, each registrants management conducted
an evaluation of the registrants disclosure controls and procedures, as such term is defined under
Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange
Act). Based on this evaluation, the principal executive officer and the principal financial officer of each registrant
concluded that each registrants disclosure controls and procedures were effective as of the end of
the period covered by this annual report.
Managements Report on Internal Control Over Financial Reporting
The management of each registrant is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).
Under the supervision and with the participation of each registrants management, including its
principal executive officer and principal financial officer, each registrants management conducted
an evaluation of the effectiveness of the registrants internal control over financial reporting
based on the framework in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the framework
in Internal Control Integrated Framework, each registrants management concluded that the
registrants internal control over financial reporting was effective as of December 31, 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 registrants 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 registrants internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth
fiscal quarter to which this report relates that have materially affected, or are reasonably likely
to materially affect, either registrants internal control over financial reporting.
Item 9B. Other Information
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference to the Companys definitive proxy statement to be filed with
respect to its 2009 Annual Meeting of Shareholders.
Item 11. Executive Compensation
Incorporated herein by reference to the Companys 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 Companys 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 Companys 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 Companys definitive proxy statement to be filed with
respect to its 2009 Annual Meeting of Shareholders.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
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(a) |
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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.
-67-
Index to Financial Statements and Schedules
BRANDYWINE REALTY TRUST
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Page |
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F-1 |
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F-2 |
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F-3 |
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F-4 |
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F-5 |
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F-6 |
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F-8 |
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F-44 |
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F-45 |
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BRANDYWINE OPERATING PARTNERSHIP, L.P. |
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F-50 |
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F-51 |
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F-52 |
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F-53 |
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F-54 |
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F-55 |
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F-57 |
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F-93 |
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F-94 |
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(c)(1) Financial Statements of G&I Interchange Office, LLC |
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F-99 |
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-69-
3. Exhibits
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Exhibits No. |
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Description |
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3.1.1
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Amended and Restated Declaration of Trust of Brandywine Realty Trust (amended and restated as of
May 12, 1997) (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated June
9, 1997 and incorporated herein by reference) |
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3.1.2
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Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (September 4, 1997)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated September 10, 1997
and incorporated herein by reference) |
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3.1.3
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Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated June 3, 1998 and incorporated herein by
reference) |
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3.1.4
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Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (September 28, 1998)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated October 13, 1998 and
incorporated herein by reference) |
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3.1.5
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Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (March 19, 1999)
(previously filed as an exhibit to Brandywine Realty Trusts Form 10-K for the fiscal year ended
December 31, 1998 and incorporated herein by reference) |
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3.1.6
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Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (April 19, 1999)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated April 26, 1999 and
incorporated herein by reference) |
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3.1.7
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Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (December 30, 2003)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-A dated December 29, 2003
and incorporated herein by reference) |
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3.1.8
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Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (February 5, 2004)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-A dated February 5, 2004 and
incorporated herein by reference) |
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3.1.9
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Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (October 3, 2005)
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated October 4, 2005 and
incorporated herein by reference) |
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3.1.10
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Second Amended and Restated Partnership Agreement of Brandywine Realty Services Partnership
(previously filed as an exhibit to Brandywine Realty Trusts Registration statement of Form S-11
(File No. 33-4175) and incorporated herein by reference) |
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3.1.11
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Amended and Restated Articles of Incorporation of Brandywine Realty Services Corporation
(previously filed as an exhibit to Brandywine Realty Trusts Form 10-K for the fiscal year ended
December 31, 2002 and incorporated herein by reference) |
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3.1.12
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Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P.
(the Operating Partnership) (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated December 17, 1997 and incorporated herein by reference) |
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3.1.13
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First Amendment to Amended and Restated Agreement of Limited Partnership of Brandywine Operating
Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated
December 17, 1997 and incorporated herein by reference) |
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3.1.14
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Second Amendment to the Amended and Restated Agreement of Limited Partnership Agreement of
Brandywine Operating Partnership, L.P.** (previously filed as an exhibit to Brandywine Realty
Trusts Form 8-K dated April 13, 1998 and incorporated herein by reference) |
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3.1.15
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Third Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated May 14, 1998 and incorporated herein by reference) |
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3.1.16
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Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated October 13, 1998 and incorporated herein by reference) |
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3.1.17
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Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated October 13, 1998 and incorporated herein by reference) |
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3.1.18
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Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated October 13, 1998 and incorporated herein by reference) |
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3.1.19
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Seventh Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
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3.1.20
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Eighth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
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3.1.21
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Ninth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
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3.1.22
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Tenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
-70-
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Exhibits No. |
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Description |
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3.1.23 |
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Eleventh Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
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3.1.24
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Twelfth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) |
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3.1.25
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Thirteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated September 21, 2004 and incorporated herein by reference) |
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3.1.26
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Fourteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated January 10, 2006 and incorporated herein by reference) |
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3.1.27
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Fifteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine
Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated August 18, 2006 and incorporated herein by reference) |
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3.1.28
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List of partners of Brandywine Operating Partnership, L.P. |
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3.2
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Amended and Restated Bylaws of Brandywine Realty Trust (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 14, 2003 and incorporated herein by reference) |
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4.1
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Form of 7.50% Series C Cumulative Redeemable Preferred Share Certificate (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-A dated December 29, 2003 and incorporated herein by
reference) |
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4.2
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Form of 7.375% Series D Cumulative Redeemable Preferred Share Certificate (previously filed as
an exhibit to Brandywine Realty Trusts Form 8-A dated February 5, 2004 and incorporated herein
by reference) |
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4.3.1
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Indenture dated October 22, 2004 by and among Brandywine Operating Partnership, L.P., Brandywine
Realty Trust, certain subsidiaries of Brandywine Operating Partnership, L.P. named therein and
The Bank of New York, as Trustee (previously filed as an exhibit to Brandywine Realty Trusts
Form 8-K dated October 22, 2004 and incorporated herein by reference) |
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4.3.2
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First Supplemental Indenture dated as of May 25, 2005 by and among Brandywine Operating
Partnership, L.P., Brandywine Realty Trust, certain subsidiaries of Brandywine Operating
Partnership, L.P. named therein and The Bank of New York, as Trustee (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated May 26, 2005 and incorporated herein by
reference) |
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4.3.3
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Second Supplemental Indenture dated as of October 4, 2006 by and among Brandywine Operating
Partnership, L.P., Brandywine Realty Trust and the Bank of New York, as Trustee (previously
filed as an exhibit to Brandywine Realty Trusts Form 8-K dated October 4, 2006 and incorporated
herein by reference) |
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4.4
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Form of $275,000,000 4.50% Guaranteed Note due 2009 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 22, 2004 and incorporated herein by reference) |
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4.5
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Form of $250,000,000 5.40% Guaranteed Note due 2014 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 22, 2004 and incorporated herein by reference) |
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4.6
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Form of $300,000,000 5.625% Guaranteed Note due 2010 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated December 20, 2005 and incorporated herein by reference) |
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4.7
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Form of $300,000,000 aggregate principal amount of Floating Rate Guaranteed Note due 2009
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated March 28, 2006 and
incorporated herein by reference). |
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4.8
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Form of $300,000,000 aggregate principal amount of 5.75% Guaranteed Note due 2012 (previously
filed as an exhibit to Brandywine Realty Trusts Form 8-K dated March 28, 2006 and incorporated
herein by reference). |
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4.9
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Form of $250,000,000 aggregate principal amount of 6.00% Guaranteed Note due 2016 (previously
filed as an exhibit to Brandywine Realty Trusts Form 8-K dated March 28, 2006 and incorporated
herein by reference). |
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4.10
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Form of 3.875% Exchangeable Guaranteed Notes due 2026 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 4, 2006 and incorporated herein by reference) |
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4.11
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Form of $300,000,000 aggregate principal amount of 5.70% Guaranteed Notes due 2017 (previously
filed as an exhibit to Brandywine Realty Trusts Form 8-K dated April 30, 2007 and incorporated
herein by reference) |
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10.1
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Second Amended and Restated Revolving Credit Agreement dated as of June 29, 2007** (previously
filed as an exhibit to Brandywine Realty Trusts Form 8-K dated June 29, 2007 and incorporated
herein by reference) |
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10.2
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Term Loan Agreement dated as of October 15, 2007 (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated October 16, 2007 and incorporated herein by reference) |
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10.3
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Term Loan Agreement dated as of January 5, 2006 (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by reference) |
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10.4
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Tax Indemnification Agreement dated May 8, 1998, by and between Brandywine Operating
Partnership, L.P. and the parties identified on the signature page (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated May 14, 1998 and incorporated herein by
reference) |
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10.5
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Contribution Agreement dated as of July 10, 1998 (with Donald E. Axinn) (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated July 30, 1998 and incorporated herein by
reference) |
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10.6
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First Amendment to Contribution Agreement (with Donald E. Axinn) (previously filed as an exhibit
to Brandywine Realty Trusts Form 8-K dated October 13, 1998 and incorporated herein by
reference) |
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10.7
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Modification Agreement dated as of June 20, 2005 between Brandywine Operating Partnership, L.P.
and Donald E. Axinn (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated
June 21, 2005 and incorporated herein by reference) |
-71-
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Exhibits No. |
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Description |
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10.8
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Contribution Agreement dated August 18, 2004 with TRC Realty, Inc.-GP, TRC-LB LLC and TRC
Associates Limited Partnership (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated August 19, 2004 and incorporated herein by reference) |
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10.9
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Registration Rights Agreement (previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated September 21, 2004 and incorporated herein by reference) |
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10.10
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Tax Protection Agreement (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K
dated September 21, 2004 and incorporated herein by reference) |
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10.11
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Registration Rights Agreement dated as of October 3, 2005 (previously filed as an exhibit to
Brandywine Realty Trusts Form 8-K dated October 4, 2005 and incorporated herein by reference) |
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10.12
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Letter to Cohen & Steers Capital Management, Inc. (previously filed as an exhibit to Brandywine
Realty Trusts Form 10-Q for the quarter ended June 30, 2003 and incorporated herein by
reference) |
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10.13
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Registration Rights Agreement dated as of October 4, 2006 relating to 3.875% Exchangeable
Guaranteed Notes due 2026 (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K
dated October 4, 2006 and incorporated herein by reference) |
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10.14
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Common Share Delivery Agreement (previously filed as an exhibit to Brandywine Realty Trusts
Form 8-K dated October 4, 2006 and incorporated herein by reference) |
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10.15
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2006 Amended and Restated Agreement dated as of January 5, 2006 with Anthony A. Nichols, Sr.**
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and
incorporated herein by reference) |
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10.16
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Amended and Restated Employment Agreement dated as of February 9, 2007 of Gerard H. Sweeney**
(previously filed as an exhibit to Brandywine Realty Trusts Form
8-K dated February 14, 2007 and incorporated herein by reference) |
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10.17
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Employment Agreement with Howard M. Sipzner** (previously filed as an exhibit to Brandywine
Realty Trusts Form 8-K dated December 12, 2006 and incorporated herein by reference) |
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10.18
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Third Amended and Restated Employment Agreement with Michael V. Prentiss** (previously filed as
an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein
by reference) |
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10.19
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First Amendment to the Third Amended and Restated Employment Agreement with Michael V.
Prentiss** (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January
10, 2006 and incorporated herein by reference) |
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10.20
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Second Amendment to the Third Amended and Restated Employment Agreement with Michael V.
Prentiss** (previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January
10, 2006 and incorporated herein by reference) |
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10.21
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Amended and Restated Employment Agreement with Thomas F. August** (previously filed as an
exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and incorporated herein by
reference) |
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10.22
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First Amendment to the Amended and Restated Employment Agreement with Thomas F. August**
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and
incorporated herein by reference) |
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10.23
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Second Amendment to the Amended and Restated Employment Agreement with Thomas F. August**
(previously filed as an exhibit to Brandywine Realty Trusts Form 8-K dated January 10, 2006 and
incorporated herein by reference) |
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10.24
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Employment Letter Agreement with Robert K. Wiberg dated January 15, 2008** (previously filed as
an exhibit to Brandywine Realty Trusts Form 8-K dated January 22, 2008 and incorporated herein
by reference) |
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|
10.25
|
|
Change in Control and Severance Protection Agreement with Robert K. Wiberg** (previously filed
as an exhibit to Brandywine Realty Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts Form 10-Q for the quarter ended March 31, 2006 and incorporated
herein by reference) |
-72-
|
|
|
Exhibits No. |
|
Description |
10.36 |
|
Form of 2007 Restricted Share Award to non-executive trustee** (previously filed as an exhibit
to Brandywine Realty Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts
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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts 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 Trusts
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 Trusts 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 Trusts 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 Trusts
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 Trusts 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 Trusts 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 Trusts 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
Trusts 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
Trusts 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 DAlessio
Walter DAlessio
|
|
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 DAlessio
Walter DAlessio
|
|
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 Companys 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
Managements 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 Companys 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 companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the companys assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
As described in Managements Report on Internal Control Over Financial Reporting, management has
excluded the Companys investments in Four and Six Tower Bridge Associates from its assessment of
internal control over financial reporting as of December 31, 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 Companys 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 |
|
|
|