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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES ACT OF 1934
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BRANDYWINE OPERATING PARTNERSHIP, L.P.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 23-2862640
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16 Campus Boulevard
Newtown Square, PA 19073
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (610) 325-5600
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Not Applicable Not Applicable
Securities to be registered pursuant to Section 12(g) of the Act:
Units of General Partnership Interest
(Title of Class)
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TABLE OF CONTENTS
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Page
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Item 1. Business.................................................................................................1
Item 2. Financial Information....................................................................................7
Item 3. Properties..............................................................................................11
Item 4. Security Ownership of Certain Beneficial Owners and Management..........................................13
Item 5. Directors and Executive Officers........................................................................14
Item 6. Executive Compensation..................................................................................14
Item 7. Certain Relationships and Related Transactions..........................................................14
Item 8. Legal Proceedings.......................................................................................14
Item 9. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters.........14
Item 10. Recent Sales of Unregistered Securities................................................................15
Item 11. Description of Registrant's Securities to be Registered................................................17
Item 12. Indemnification of Directors and Officers..............................................................18
Item 13. Financial Statements and Supplementary Data............................................................19
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................19
Item 15. Financial Statements and Exhibits......................................................................19
</TABLE>
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Item 1. Business
General
Brandywine Operating Partnership, L.P. (the "Operating Partnership") is
a Delaware limited partnership active in acquiring, developing, redeveloping,
leasing and managing office and industrial properties. Brandywine Realty Trust
("Brandywine" and, collectively with its subsidiaries, the "Company") is the
sole general partner of the Operating Partnership and is a self-administered,
self-managed and fully integrated real estate investment trust (a "REIT").
Brandywine commenced its operations in 1986 and since August 22, 1996 has owned
its assets and conducted its operations through the Operating Partnership. As of
March 31, 1998 and June 1, 1998, Brandywine's ownership interest in the
Operating Partnership was approximately 98.4% and 97.4%, respectively.
As of June 1, 1998, the Operating Partnership's portfolio included 151
office properties and 28 industrial facilities (the "Properties") that contained
an aggregate of approximately 12.2 million net rentable square feet. As of June
1, 1998, the Properties (excluding three Properties under development or
redevelopment) were approximately 94.4% leased to 1,014 tenants and had an
average age of approximately 15 years. One hundred forty-four of the 179
Properties (approximately 71.3% of the Company's portfolio based on net rentable
square feet) were located in the Suburban Philadelphia Office and Industrial
Market. "Suburban Philadelphia Office and Industrial Market" or "Market" means
the areas comprised of the following counties: Berks, Bucks, Chester, Delaware,
Lehigh, Montgomery and Northampton in Pennsylvania and Burlington and Camden in
New Jersey.
The Properties consist primarily of Class A suburban office and
industrial properties. The Operating Partnership considers Class A suburban
office and industrial properties to be those that have desirable locations, are
well-maintained and professionally managed and have the potential of achieving
rental and occupancy rates that are typically at or above those prevailing in
their respective markets. Certain of the Properties serve as flex facilities,
accommodating office use, warehouse space and research and development
activities.
As of June 1, 1998, the Operating Partnership was in the process of
developing two suburban office buildings that are expected to contain an
aggregate of approximately 69,000 and 38,000 net rentable square feet,
respectively, upon completion. The Operating Partnership expects completion to
occur during the fourth quarter of 1998. As of June 1, 1998, the Operating
Partnership also owned or held options to purchase approximately 302.5 acres of
land for future development.
In addition, as of June 1, 1998, the Operating Partnership owned
economic interests, ranging from 35% to 65%, in eight office development joint
ventures (the "Development Entities"). Two of the Development Entities own two
suburban office buildings that contain an aggregate of approximately 233,000 net
rentable square feet. A third Development Entity is in the process of
constructing a suburban office building that is expected to contain
approximately 85,000 net rentable square feet upon completion. The Operating
Partnership expects this building to be completed during 1998. As of June 1,
1998, the Development Entities also owned or held options to purchase
approximately 46.8 acres of land for future development. The Operating
Partnership has invested or committed to invest a total of approximately $27.4
million in the Development Entities.
References in this Form 10 to the number of Properties owned by the
Operating Partnership and the square footage in the Operating Partnership's
portfolio assume consummation of the Operating Partnership's acquisition of an
approximately 209,000 net rentable square foot office property in Frederick,
Maryland that is currently under construction. The Operating Partnership agreed
to acquire this Property upon completion of its construction. The Operating
Partnership expects construction to be completed during the second quarter of
1998.
The Operating Partnership's business objective is to:
o maximize cash flow through leasing strategies designed to capture
potential rental growth as rental rates increase and as below-market
leases are renewed;
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o ensure a high tenant retention rate through an aggressive tenant
services program responsive to the varying needs of the Operating
Partnership's diverse base of 1,014 tenants as of June 1, 1998;
o broaden its geographic and economic diversification while maximizing
economies of scale;
o acquire high-quality office and industrial properties and portfolios
of such properties at attractive yields in selected submarkets within
the Mid-Atlantic region (including Delaware, Maryland, New Jersey,
New York, Ohio, Pennsylvania, Virginia and the District of Columbia),
which management expects will experience economic growth;
o capitalize on management's redevelopment expertise to selectively
acquire, redevelop and reposition
underperforming Properties in desirable locations;
o acquire land in anticipation of developing office or industrial
properties on a build-to-suit basis, under circumstances where
significant pre-leasing can be arranged or as otherwise warranted by
market conditions;
o enhance the Operating Partnership's investment strategy through the
pursuit of joint venture opportunities with high quality partners
having attractive real estate holdings or significant financial
resources; and
o optimize the use of debt and equity financing to create a flexible
and conservative capital structure that will enable the Operating
Partnership to continue its aggressive growth strategy.
As a result of its business objectives, the Operating Partnership has
recently experienced rapid growth. Between January 1, 1997 and June 1, 1998, the
Operating Partnership has acquired 117 office properties containing
approximately 8.6 million net rentable square feet and 25 industrial facilities
containing approximately 1.7 million net rentable square feet and, together with
the Development Entities, has acquired ownership of, or rights to acquire,
approximately 349.3 acres of undeveloped land. The aggregate purchase price for
the 142 Properties acquired by the Operating Partnership between January 1, 1997
and June 1, 1998 was approximately $986.5 million. The Operating Partnership
believes that, through the expertise and extensive relationships of its
management and its flexible capital structure, it will continue to identify and
capitalize on substantial opportunities for additional real estate investments
from a variety of sources, including institutional and private holders of real
estate seeking liquidity or reduction in their holdings or tax-deferred
dispositions.
The Operating Partnership expects to continue to concentrate its real
estate activities in submarkets within the Mid-Atlantic region where it believes
that: (i) barriers to entry (such as zoning restrictions, infrastructure
limitations and limited developable land) are likely to create supply
constraints on office and industrial space; (ii) current market rents do not
justify new construction; (iii) it can maximize market penetration by
accumulating a critical mass of properties and thereby enhance operating
efficiencies; and (iv) there is potential for economic growth.
The Operating Partnership's executive offices are located at 16 Campus
Boulevard, Newtown Square, Pennsylvania 19073 and its telephone number is (610)
325-5600.
Organization
The Operating Partnership was organized and commenced its operations in
August 1996. Brandywine is the sole general partner of the Operating Partnership
and, through its Board of Trustees, manages the activities of the Operating
Partnership. Brandywine owns its assets and conducts its operations through the
Operating Partnership and subsidiaries of the Operating Partnership. The
structure of the Company as an "UPREIT" is designed to permit persons
contributing properties or interests in properties to the Company to defer some
or all of the tax liability they might otherwise incur. The Operating
Partnership conducts its real estate management services through a
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management company (the "Management Company"). The Operating Partnership,
through its ownership of preferred and common stock of the Management Company,
is entitled to receive 95% of amounts paid as dividends by the Management
Company. See "-- Management Company."
Recent Acquisitions
At March 31, 1998, the Operating Partnership's portfolio consisted of
167 Properties totaling approximately 11.5 million net rentable square feet,
compared to 117 Properties containing approximately 7.1 million net rentable
square feet at December 31, 1997, 37 Properties containing approximately 2.0
million net rentable square feet at December 31, 1996, and 24 Properties
containing approximately 1.3 million net rentable square feet upon commencement
of the Operating Partnership's operations on August 22, 1996. Between April 1,
1998 and June 1, 1998, the Operating Partnership acquired 12 office properties
containing approximately 733,000 net rentable square feet for an aggregate
purchase price of approximately $90.1 million for a weighted average purchase
price of approximately $123 per square foot. The following table sets forth
certain information regarding Property acquisitions completed between April 1,
1998 and June 1, 1998:
<TABLE>
<CAPTION>
Percent
Net Leased Purchase
Number Rentable as of Purchase Price
of Square June 1, Price Per Square
Property Location Properties Feet 1998 (in 000's) Foot
- --------------------------------------------------- ------------ ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE PROPERTIES
Pennsylvania
Harrisburg 11 411,639 95.0% $48,500 $ 118
Delaware 1 321,511 99.3% 41,625 129
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TOTAL - OFFICE PROPERTIES / WEIGHTED AVERAGE 12 733,150 96.9% $90,125 $ 123
========= ======= ==== ======= =====
</TABLE>
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Credit Facility
On January 5, 1998, Brandywine and the Operating Partnership replaced
their $150 million secured revolving credit facility (the "1997 Credit
Facility") with a $300 million unsecured revolving credit facility (the "Credit
Facility"). On March 15, 1998, the maximum amount available to be borrowed under
the Credit Facility was increased from $300 million to $330 million. The Credit
Facility permits funds to be borrowed at an interest rate equal to the one, two,
three or six month LIBOR, plus, in each case, a range of 100 to 137.5 basis
points, depending on the Operating Partnership's then existing leverage and debt
rating. Alternatively, funds may be borrowed at a Base Rate equal to the higher
of (i) the Prime Rate or (ii) the Fed Funds Rate plus 50 basis points. As of
June 1, 1998, approximately $326.8 million was outstanding under the Credit
Facility and such amounts bore interest at an average rate of 6.9% per annum.
The Credit Facility matures on January 5, 2001 and is extendible to January 5,
2002 by the Company in the absence of default and upon payment of a fee. The
Credit Facility requires the Operating Partnership to maintain compliance with
customary financial and other covenants, including leverage ratios based on
gross implied asset value and debt service coverage ratios, limitations on
additional indebtedness, liens and distributions and a minimum net worth
requirement. A structuring fee equal to .15% of the maximum amount available
under the Credit Facility and a commitment fee equal to .15% of the first
$150,000,000 of availability under the Credit Facility plus .375% of the second
$150,000,000 of availability under the Credit Facility were paid to the lender
at the closing of the Credit Facility. In addition, an unused credit fee is
payable at the end of each quarter with respect to the portion of the Credit
Facility which is unutilized during such quarter. The fee is equal to .15% per
annum if at least fifty percent of the available credit under the Credit
Facility was utilized, based on daily averages, during such quarter and equal to
.20% per annum if less than fifty percent of the available credit under the
Credit Facility was utilized, based on daily averages, during such quarter. An
annual fee in the amount of $25,000 is payable annually in advance to
NationsBank, N.A. as compensation for administration of the Credit Facility.
Additional Facility
On May 7, 1998, Brandywine and the Operating Partnership entered into
an unsecured credit facility (the "Additional Facility") with NationsBank, N.A.
permitting advances of up to $150 million, subject to certain conditions. As of
June 1, 1998, approximately $25.0 million was outstanding under the Additional
Facility and such amounts bore interest at an average rate of 7.2% per annum.
The Additional Facility matures on November 7, 1998 and, in the absence of a
default by the Company, is subject to one two-month extension at the option of
the Company upon payment to NationsBank, N.A. of an extension fee equal to
one-fourth of one percent of the then principal amount outstanding under the
Additional Facility. The Additional Facility enables the Company to borrow funds
at an interest rate equal to LIBOR plus 150 basis points (LIBOR plus 175 basis
points during the two-month extension
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period) or, at the Company's option, the Prime Rate plus 25 basis points (Prime
Rate plus 50 basis points during the two-month extension period). Amounts repaid
by the Company under the Additional Facility are not subject to reborrowing. The
Additional Facility incorporates the covenants contained in the Credit Facility.
In addition, the Additional Facility contains provisions requiring Brandywine
and the Operating Partnership to obtain a debt financing commitment and enter
into an underwriting agreement which together will provide sufficient funds for
repayment of the Additional Facility. At the closing of the Additional Facility,
the Company paid NationsBank, N.A. a $300,000 origination fee.
Mortgage and Other Debt
Mortgage Indebtedness. The following table sets forth the Operating
Partnership's mortgage indebtedness outstanding at March 31, 1998.
Properties--Indebtedness
<TABLE>
<CAPTION>
Principal
Balance
as of Interest Annual
March 31, Rate at Debt
1998 March 31, Service Maturity Prepayment
Property / Location (in 000's) 1998 (in 000's)(1) Date Premiums
- ----------------------------------------- ------------ ------------ -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Exton, PA
486 Thomas Jones Way (2) $ 6,246 8.00% $ 159 7/1998 None
468 Creamery Way(2)
Newtown Square, PA
Lots 7, 8 and 9 7/1998 to
Newtown Square Business Campus 1,638 9.00% 905 2/1999 None
Allentown, PA
7310 Tilghman Street 2,498 9.25% 257 3/2000 (5)
6575 Snowdrift Road 2,283 8.00% 57 7/1998 None
8/1998,
Reading, PA 8/1999 and
Green Hills (undeveloped land) 1,500 5.00% 565 8/2000 None
Marlton, NJ
One Greentree Centre (3) 7,096 7.56% 708 1/2002 (6)
Two Greentree Centre (3)
Three Greentree Centre (3)
Cherry Hill, NJ
457 Haddonfield Road (4) 8,256 8.00% 814 1/1999 (7)
Mt. Laurel, NJ
1120 Executive Plaza 5,859 9.875% 832 3/2002 (8)
1000 Howard Boulevard 5,717 9.25% 803 11/2004 (9)
Raleigh, NC
5910 - 6090 Six Forks 2,642 7.56% 264 1/2002 (10)
East Norriton, PA
Norriton Office Center 5,657 8.50% 528 10/2007 (11)
Lawrenceville, NJ
1009 Lenox Drive 15,362 8.75% 1,632 7/2003 None
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Total Mortgage Indebtedness $ 64,754 $ 7,524
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</TABLE>
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(1) "Annual Debt Service" is calculated for the twelve-month period ending
December 31, 1998 and represents normal principal and interest
amortization. For loans that bear interest at a variable rate, the rates in
effect at March 15, 1998 have been assumed to remain constant.
(2) Both of these Properties secure a single loan.
(3) All of these Properties secure a single loan.
(4) Pursuant to the terms of this loan, the Operating Partnership has the right
to borrow up to approximately $1.3 million to fund tenant improvements and
leasing commissions and has a current outstanding balance of $805,000.
(5) Two percent through December 31, 1998, which prepayment penalty is reduced
by 1% in 1999.
(6) This loan may not be prepaid unless the Six Forks loan is also prepaid. The
prepayment penalty equals the greater of 1% of the principal amount prepaid
or a yield maintenance premium.
(7) One percent of the portion of the loan prepaid.
(8) No prepayment is permitted until November, 1999, at which time the loan can
be prepaid in full (but not in part) along with a penalty equal to the
greater of 1% of this outstanding principal balance being prepaid or a
yield maintenance premium.
(9) No prepayment is permitted until March, 1999, at which time the loan can be
prepaid in full (but not in part) along with a penalty equal to the greater
of 1% the outstanding principal balance being prepaid or a yield
maintenance premium.
(10) This loan may be prepaid without prepayment of the loan secured by One
Greentree Centre, Two Greentree Centre and Three Greentree Centre, provided
certain loan-to-value ratios and coverage tests with regard to the
Greentree Centre loan are satisfied and upon payment of a premium equal to
the greater of 1% of the principal amount prepaid or a yield maintenance
premium.
(11) No prepayment is permitted until September, 2000, at which time the loan
can be prepaid in full along with a penalty at a yield maintenance based
upon treasury rates.
<PAGE>
Other Indebtedness. The Operating Partnership incurred unsecured debt
in the principal amount of $3.8 million on November 14, 1996 in connection with
its acquisition of a property portfolio. The debt does not bear interest and is
payable in two installments: $2.5 million on June 30, 1998 and $1.3 million on
December 31, 1999. The Operating Partnership recorded a $548,000 adjustment to
the purchase price and a corresponding reduction in debt to reflect the fair
value of the note payable to the seller and will accrue interest expense to the
date of maturity.
Guaranties. As of June 1, 1998, the Operating Partnership has
guaranteed: (i) repayment of a $16.8 million construction loan made to a
Development Entity; and (ii) repayment of a $500,000 loan made to a Development
Entity. Payment under these guaranties would constitute loan obligations of, or
preferred equity positions in, the applicable Development Entity in favor of the
Operating Partnership.
Management Company
The Operating Partnership conducts its real estate management services
business through the Management Company. The Operating Partnership manages,
through the Management Company, certain of the Properties and additional
properties on behalf of unaffiliated third parties. As of March 31, 1998, the
Management Company was managing properties containing an aggregate of
approximately 11.6 million net rentable square feet, of which approximately 11.5
million net rentable square feet related to Properties then owned by the
Operating Partnership or subject to purchase options held by the Operating
Partnership, and approximately 102,000 net rentable square feet related to
properties owned by unaffiliated third parties. Through its ownership of 100% of
the preferred stock and 5% of the common stock of the Management Company, the
Operating Partnership is entitled to receive 95% of amounts paid as dividends by
the Management Company.
Industry Segments
The Operating Partnership operates in one industry segment. The
Operating Partnership does not have any foreign operations and its business is
not seasonal.
Competition
The leasing of real estate is highly competitive. The Properties
compete for tenants with similar properties located in its markets primarily on
the basis of location, rent charged, services provided, and the design and
condition of the improvements. The Operating Partnership also experiences
competition when attempting to acquire
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real estate, including competition from domestic and foreign financial
institutions, other REIT's, life insurance companies, pension trusts, trust
funds, partnerships and individual investors.
Possible Environmental Liabilities
Under various Federal, state and local laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or releases
at such property and may be held liable to a governmental entity or to third
parties for property damage and for investigation and clean-up costs incurred by
such parties in connection with contamination. The cost of investigation,
remediation or removal of such substances may be substantial, and the presence
of such substances, or the failure to properly remediate such substances, may
adversely affect the owner's ability to sell or rent such property or to borrow
using such property as collateral. In connection with the ownership (direct or
indirect), operation, management and development of real properties, the Company
may be considered an owner or operator of such properties or as having arranged
for the disposal or treatment of hazardous or toxic substances and, therefore,
potentially liable for removal or remediation costs, as well as certain other
related costs, including governmental fines and injuries to persons and
property. All of the Properties have been subject to a Phase I or similar
environmental site assessment (which involves general inspections without soil
sampling or groundwater analysis) completed by independent environmental
consultants. Except as indicated below with respect to 110 Summit Drive at the
Whitelands Business Park in Exton, Pennsylvania (the " Whitelands Property") and
the Affected Properties at the Paint Works (as defined below), the Operating
Partnership is not aware of any environmental liability with respect to the
Properties that management believes would have a material adverse effect on the
Operating Partnership.
An environmental assessment has identified environmental contamination
of potential concern with respect to the Whitelands Property. Petroleum
products, solvents and heavy metals were detected in the groundwater. These
contaminants are believed to be associated with debris deposited by third
parties in a quarry formerly located on the Whitelands Property. The Whitelands
Property previously appeared on the Comprehensive Environmental Response
Compensation and Liability Information System List, a list maintained by the
United States Environmental Protection Agency (the "EPA") of abandoned, inactive
or uncontrolled hazardous waste sites which may require cleanup. The EPA
conducted a preliminary assessment of the Whitelands Property in 1984, and
subsequently the Whitelands Property was removed from the list. While the
Operating Partnership believes it is unlikely that it will be required to
undertake remedial action with respect to such contamination, there can be no
assurance in this regard. If the Operating Partnership were required to
undertake remedial action on the Whitelands Property, it has been indemnified
through August 2001 against the cost of such remediation by Safeguard
Scientifics, Inc. ("SSI") subject to a limitation of approximately $2.0 million.
In the event SSI is unable to fulfill its obligations under its indemnity
agreement or the Operating Partnership is required to undertake remedial action
after the expiration of the indemnity, the costs associated with any remediation
could materially and adversely impact the Operating Partnership. Because the
Operating Partnership does not believe that any remediation at the Whitelands
Property is probable, no amounts have been accrued for any such potential
liability.
An environmental assessment has identified environmental contamination
at land acquired by the Operating Partnership as part of its acquisition of
certain Properties that include 6 East Clementon and 1, 4, 5, 7 and 10 Foster
Avenue and an adjacent parking lot. These Properties (the "Affected Properties")
and certain non-affected Properties are commonly referred to as the Paint Works
Corporate Center ("Paint Works"). Volatile organic compounds, semi-volatile
organic compounds and metals were detected in the groundwater, surface soils and
sub-surface soils, principally on land acquired by the Operating Partnership
that is adjacent to the buildings located on the Affected Properties. These
contaminants are associated with the use by prior owners and operators of the
properties and are believed to be associated with the historic use of the
Affected Properties as a paint and varnish factory since the mid-nineteenth
century. The Affected Properties have been the subject of investigation by the
New Jersey Department of Environmental Protection ("NJDEP") since the
mid-1970's. The NJDEP has issued two directives to the former owners and
operators of the site, ordering them to investigate and remediate the
contamination at the site. The NJDEP has also entered into two administrative
consent orders (the "ACO's") with Sherwin-Williams, the former owner and
operator primarily responsible for the environmental contamination at the site,
pursuant to which
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Sherwin-Williams has agreed to investigate and commence certain remediation. The
NJDEP has provided written assurances to the Company that the NJDEP will not
require the Company to investigate or remediate the site so long as
Sherwin-Williams continues to comply with the ACO's. In addition to the
foregoing, the NJDEP has also issued a letter of non-applicability for the
remainder of the Paint Works properties owned by the Operating Partnership at
the site. The Operating Partnership has also been indemnified against
Sherwin-Williams' failure to comply with the ACO's and from any migration of the
aforesaid compounds onto the adjacent Operating Partnership-owned properties
which are not part of the Affected Properties by PWCCW, a New Jersey general
partnership, and Robert K. Scarborough (collectively, "Scarborough"). In the
event that Sherwin-Williams ceases to comply with the ACO's and Scarborough is
unable to fulfill its obligations under its agreement with the Operating
Partnership, the Operating Partnership could potentially be responsible for
costs associated with any remediation. Because the Operating Partnership does
not believe that the occurrence of both of these events is probable, no amounts
have been accrued for any such potential liability.
No assurance can be given that existing environmental studies with
respect to the Properties reveal all environmental liabilities or that any prior
owner of any such property did not create any material environmental condition
not known to the Operating Partnership. Moreover, no assurance can be given
that: (i) future laws, ordinances or regulations will not impose any material
environmental liability on the Operating Partnership, or (ii) the current
environmental condition of the Properties will not be affected by tenants and
occupants of the Properties, by the condition of properties in the vicinity of
the Properties (such as the presence of underground storage tanks) or by third
parties unrelated to the Operating Partnership.
Employees
As of March 31, 1998, the Operating Partnership had no employees and
the Company had 129 employees.
Legal Proceedings
The Operating Partnership is not currently involved in any material
legal proceedings nor, to the Operating Partnership's knowledge, is any material
legal proceeding currently threatened against it, other than routine litigation
arising in the ordinary course of business, substantially all of which is
expected to be covered by existing liability insurance.
Interests in the Operating Partnership
Economic interests in the Operating Partnership are evidenced by units
of partnership interest ("Units"). The interest of the general partner is
evidenced by general partner units ("GP Units"), and interests of the limited
partners are evidenced by limited partner units ("LP Units"). The limited
partners of the Operating Partnership are persons who received LP Units in
connection with their contributions of direct or indirect interests in certain
Properties to the Operating Partnership. As of the date of this Form 10, the
Operating Partnership has only one class of LP Units outstanding, although the
Operating Partnership is permitted under its agreement of limited partnership
(the "Partnership Agreement") to issue additional classes or series of
partnership interest that have such rights, privileges, preferences and
designations as Brandywine, as the general partner, may specify.
Although the Partnership Agreement does not obligate Brandywine to
contribute net proceeds of any equity offering to the Operating Partnership, the
Partnership Agreement provides that if Brandywine contributes the net proceeds
of a Common Share offering to the Operating Partnership, the Operating
Partnership shall issue to Brandywine a number of GP Units equal to the number
of Common Shares so issued.
Holders of LP Units have the right, subject to certain time
restrictions, to tender their LP Units to the Operating Partnership for
redemption for cash equal to the fair market value of a common share of
beneficial interest, par value $.01 per share ("Common Share"), of Brandywine at
the time of such redemption. Brandywine, at its option, may elect to acquire any
such LP Unit presented for redemption for either one Common Share or cash.
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Brandywine presently anticipates that it will elect to issue Common Shares to
acquire LP Units tendered for redemption, rather than paying cash. With each
such redemption, Brandywine's percentage ownership interest in the Operating
Partnership will increase. In addition, whenever Brandywine issues Common
Shares, Brandywine anticipates that it will contribute the net proceeds of the
issuance to the Operating Partnership and the Operating Partnership will issue
an equivalent number of GP Units to Brandywine.
Item 2. Financial Information
Selected Financial Data
(in thousands, except per Unit/share data and number of properties)
<TABLE>
<CAPTION>
Brandywine Operating Partnership, L.P.
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Three months ended For the period
March 31, Year ended August 22, 1996
---------------------------------- December 31, to December 31,
1998 1997 1997 1996
----------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Operating Results:
Total revenue $ 33,102 $ 8,598 $ 61,060 $ 7,202
Income (loss) from continuing operations 8,933 2,144 15,377 (26)
Income (loss) from continuing operations
per Unit/Common Share - diluted $ 0.28 $ 0.22 $ 0.95 $ (0.01)
Cash distributions declared per Common
Share/Unit $ 0.37 $ 0.35 $ 1.44 $ 0.46
Balance Sheet Data:
Real estate investments, net of
accumulated depreciation $1,045,154 $ 208,825 $ 563,557 $ 151,901
Total assets 1,106,344 236,354 621,481 178,326
Total mortgage and notes payable and notes
payable under Credit Facility 347,470 46,848 163,964 36,644
Total liabilities 378,499 56,549 181,576 43,558
Limited partner capital interest/Minority interest 23,775 8,091 17,774 7,792
Partners'/Beneficiaries' equity 704,070 171,714 422,131 126,976
Other Data:
Cash flows provided by (used in):
Operating activities $ 21,468 $ 5,093 $ 33,572 $ 2,107
Investing activities (452,622) (60,003) (418,256) (24,834)
Financing activities 439,754 55,029 395,847 40,845
Property Data:
Number of properties owned at period end 167 50 117 37
Net rentable square feet owned at
period end 11,470 2,557 7,131 1,994
</TABLE>
<PAGE>
[Restubed Table]
<TABLE>
<CAPTION>
Brandywine Realty Trust
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For the period
January 1, 1996 Year ended December 31,
to August 21, --------------------------------------------
1996 1995 1994 1993
--------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Operating Results:
Total revenue $ 2,828 $ 3,666 $ 4,192 $ -
Income (loss) from continuing operations (91) (824) (1,841) 2,468
Income (loss) from continguing operations -
per Unit/Common Share (diluted) $ (0.14) $ (1.33) $ (0.64) $ 3.99
Cash distributions declared per Common
Share/Unit $ 0.36 $ 1.65 $ 4.71 $ -
Balance Sheet Data:
Real estate investments, net of
accumulated depreciation $ 24,329 $ 13,709 $13,948 $ -
Total assets 27,189 17,105 17,873 4,604
Total mortgage and notes payable and notes
payable under Credit Facility 19,243 8,931 6,899 -
Total liabilities 19,826 9,761 8,684 68
Limited partner capital interest/Minority interest - - - -
Partners'/Beneficiaries' equity 7,363 7,344 9,189 4,536
Other Data:
Cash flows provided by (used in):
Operating activities $ 461 $ 497 $ (628) $ -
Investing activities (10,567) (701) 9,559 2,469
Financing activities 9,427 (722) (9,635) -
Property Data:
Number of properties owned at period end 4 4 4 7
Net rentable square feet owned at
period end 255 255 255 546
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion should be read in conjunction with the
financial statements appearing elsewhere herein. The results of operations,
liquidity and capital resources and cash flows of the Operating Partnership
include the historical results of operations of the Properties held by the
Operating Partnership (or Brandywine for those periods prior to August 22, 1996)
during the three months ended March 31, 1998 and 1997 and during the years ended
December 31, 1997, 1996 and 1995. This Form 10 contains forward-looking
statements for purposes of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Operating Partnership to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. Although the Operating
Partnership believes that the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, there can be no assurance that
these expectations will be realized. Factors that could cause actual results to
differ materially from current expectations include changes in general economic
conditions, changes in local real estate conditions, changes in industries in
which the Operating Partnership's principal tenants compete, the failure to
timely lease unoccupied space, the failure to timely re-lease occupied space
upon expiration of leases, the inability to generate sufficient revenues to meet
debt service payments and operating expenses, the unavailability of financing
and the failure of the Operating Partnership to manage its growth effectively.
Overview
The Operating Partnership believes it has established an effective
platform in the suburban Philadelphia, Pennsylvania market that provides a
foundation for achieving the Operating Partnership's goal of maximizing market
penetration and operating economies of scale. The Operating Partnership believes
this platform provides a basis to continue its penetration into additional
targeted markets in the Mid-Atlantic United States through strategic
acquisitions intended to maximize Unit value.
In 1997, the Operating Partnership purchased 80 office and industrial
properties for an aggregate purchase price of approximately $403.7 million and
invested approximately $5.5 million in unconsolidated real estate ventures,
which are referred to elsewhere in this Form 10 as Development Entities. The
Operating Partnership continued its growth during the three months ended March
31, 1998. During this period, the Operating Partnership acquired 50 office and
industrial properties for an aggregate purchase price of approximately $492.7
million and invested approximately $1.8 million in unconsolidated real estate
ventures (the "First Quarter Acquisitions"). These acquisitions and investments
increased the Operating Partnership's market share in the Suburban Philadelphia
Office and Industrial Market, and expanded the Operating Partnership's presence
into several other markets within Maryland, Delaware and New Jersey.
The 1997 acquisitions were financed through a combination of proceeds
received by the Company from four public offerings of an aggregate of
approximately 15.4 million Common Shares which raised gross proceeds of
-7-
<PAGE>
approximately $323.7 million (which were contributed to the Operating
Partnership in exchange for approximately 15.4 million GP Units), borrowings
under the Company's revolving credit facility and the issuance of 389,976 LP
Units valued at approximately $9.5 million. The First Quarter Acquisitions were
financed through a combination of proceeds received by the Company from three
public offerings of an aggregate of approximately 12.6 million Common Shares
which raised gross proceeds of approximately $303.4 million (which were
contributed to the Operating Partnership in exchange for approximately 12.6
million GP Units), borrowings under the Company's revolving credit facility and
the issuance of 153,036 LP Units valued at approximately $3.6 million.
During the period from April 1, 1998 through June 1, 1998, the
Operating Partnership acquired 12 additional office properties containing an
aggregate of approximately 733,000 net rentable square feet for a total purchase
price of approximately $90.1 million and invested approximately $4.0 million in
unconsolidated real estate ventures. These acquisitions and investments expanded
the Operating Partnership's presence into Harrisburg, Pennsylvania while
reinforcing the Operating Partnership's presence in Delaware and the Suburban
Philadelphia Office and Industrial Market.
The Operating Partnership receives income primarily from rental revenue
(including tenant reimbursements) from the Properties and, to a lesser extent,
from the management of certain properties owned by third parties. The Operating
Partnership expects that revenue growth in the next two years will result
primarily from additional acquisitions, as well as from rent increases in its
current portfolio.
Results of Operations
For discussion purposes, (i) the results of operations for the year
ended December 31, 1996 combine the operating results of Brandywine, the
Operating Partnership's predecessor, for the period from January 1, 1996 to
August 21, 1996 and the operating results of the Operating Partnership for the
period from August 22, 1996 to December 31, 1996 and (ii) the results of
operations for the year ended December 31, 1995 reflect the operating results of
Brandywine for such year.
Comparison of the Three Months Ended March 31, 1998 to the Three Months Ended
March 31, 1997
Net income before extraordinary items for the three months ended March
31, 1998 was $8.9 million compared with net income of $2.1 million for the
corresponding period in 1997. The increase was primarily attributable to the
operating results contributed by the 130 properties acquired by the Operating
Partnership between January 1, 1997 and March 31, 1998. The extraordinary item
included in the statement of operations for the three months ended March 31,
1998 reflects the Operating Partnership's write-off of costs associated with its
then existing secured credit facility which was replaced by an unsecured credit
facility (see "Liquidity and Capital Resources" for further discussion).
Revenues, which include rental income, recoveries from tenants and
other income, increased by $24.5 million for the three months ended March 31,
1998 as compared to the corresponding prior year period primarily as a result of
property acquisitions and, to a lesser extent, increased occupancy. The impact
of the straight-line rent adjustment increased revenues by $924,000 for the
three months ended March 31, 1998.
Property operating expenses, depreciation and amortization and
management fees increased in the aggregate by $13.7 million for the three months
ended March 31, 1998 as compared to the corresponding prior year period
primarily as a result of property acquisitions. Interest expense increased by
$3.4 million as a result of additional indebtedness incurred to finance certain
of the Operating Partnership's acquisitions. Administrative expenses increased
by approximately $467,000 primarily as a result of management and staffing
additions to support the Company's growth.
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
-8-
<PAGE>
Net income for the year ended December 31, 1997 was $15.4 million
compared with a net loss of $117,000 for the corresponding period in 1996. The
increase in net income was primarily attributable to the operating results
contributed by the 112 properties acquired from August 22, 1996 through December
31, 1997, and to a lesser extent attributable to a 1.9% increase in occupancy
from 1996 to 1997 at Properties owned on December 31, 1996.
Revenues, which include rental income, recoveries from tenants and
other income, increased by $51.0 million for the year ended December 31, 1997 as
compared to the corresponding prior year period primarily as a result of
property acquisitions and, to a lesser extent, increased occupancy. The impact
of the straight-line rent adjustment increased revenues by $1.7 million for the
year ended December 31, 1997.
Property operating expenses, depreciation and amortization and
management fees increased in the aggregate by $31.5 million for the year ended
December 31, 1997 as compared with the prior year period primarily as a result
of property acquisitions. Interest expense increased by $4.3 million as a result
of additional indebtedness incurred to finance certain of the Operating
Partnership's acquisitions.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
The Operating Partnership had a net loss of $117,000 for the year ended
December 31, 1996 compared with a net loss of $819,000 for the corresponding
period in 1995. Revenues, which include rental income, recoveries from tenants
and other income, increased by $6.4 million for the year ended December 31, 1996
as compared to 1995 primarily as a result of property acquisitions. These
increases were primarily attributable to the operating results contributed by
the 33 properties acquired during 1996. The impact of the straight-line rent
adjustment increased revenues by $337,000 for the year ended December 31, 1996.
Property operating expenses, depreciation and amortization and
management fees increased in aggregate by $3.5 million for the year ended
December 31, 1996 as compared with the prior year period primarily as a result
of property acquisitions. Interest expense increased by $2.0 million as a result
of additional indebtedness incurred to finance certain of the Operating
Partnership's acquisitions.
Liquidity and Capital Resources
During the three months ended March 31, 1998, the Operating Partnership
generated $21.5 million in cash flow from operating activities. Other sources of
cash flow consisted of (i) $163.1 million in net additional borrowings under the
Operating Partnership's revolving credit facility and (ii) $287.5 million in net
proceeds from share issuances. During the three months ended March 31, 1998, the
Operating Partnership used its cash to (i) finance the cash portion ($445.0
million) of the acquisition cost of 50 Properties, (ii) invest $1.8 million in
unconsolidated real estate ventures, (iii) fund capital expenditures and leasing
commissions of $4.8 million, (iv) pay distributions totaling $8.8 million to
Brandywine and its other partners, (v) pay scheduled amortization on mortgage
principal of $0.6 million, (vi) increase escrowed cash by $1.0 million, (vii)
pay other debt costs of $1.4 million and (viii) increase existing cash reserves
by $8.6 million.
During the year ended December 31, 1997, the Operating Partnership
generated $33.6 million in cash flow from operating activities. Other sources of
cash flow consisted of (i) $115.2 million in net additional borrowings under the
Operating Partnership's revolving credit facility, (ii) $0.4 million in
additional mortgage notes payable, (iii) $305.1 million in net proceeds from
share issuances and (iv) escrowed cash of $1.8 million. During the year ended
December 31, 1997, the Company used an aggregate $456.1 million to (i) finance
the cash portion ($406.9 million) of the acquisition cost of 80 Properties, (ii)
invest $5.5 million in unconsolidated real estate ventures, (iii) fund capital
expenditures and leasing commissions of $7.7 million, (iv) pay distributions
totaling $18.5 million to Brandywine and its other partners, (v) pay scheduled
amortization on mortgage principal of $1.0 million, (vi) satisfy $3.5 million of
mortgage notes payable, (vii) purchase LP Units in the Operating Partnership for
$0.5 million, (viii) pay other debt costs of $1.3 million and (ix) increase
existing cash reserves by $11.2 million.
-9-
<PAGE>
Capitalization
During the first quarter of 1998, the Operating Partnership replaced
the 1997 Credit Facility with the 1998 Credit Facility. The interest rate borne
by the 1998 Credit Facility may be reduced by 37.5 to 75 basis points depending
on the Company's leverage and credit rating. On May 20, 1998, the 1998 Credit
Facility received an investment grade rating, reducing the interest rate by an
additional 60 basis points. The 1998 Credit Facility matures on January 5, 2001
and is extendible, under certain circumstances, at the Company's option to
January 5, 2002.
As of March 31, 1998, the Operating Partnership had approximately
$347.5 million of debt outstanding, consisting of mortgage loans totaling $69.2
million and notes payable under the 1998 Credit Facility of $278.3 million. The
mortgage loans mature between July 1998 and November 2004. As of March 31, 1998,
the Operating Partnership had $51.7 million of remaining availability under the
1998 Credit Facility, which provides for total borrowings up to $330 million and
bore interest at a per annum floating rate equal to the 30, 60 or 90-day LIBOR,
plus 137.5 basis points. For the three months ended March 31, 1998, the weighted
average interest rates on the Operating Partnership's debt were 7.1% and 8.3%
for borrowings under the 1998 Credit Facility and mortgage notes payable,
respectively.
Primarily, to provide financing for the Operating Partnership's
property acquisitions, on May 7, 1998 Brandywine and the Operating Partnership
entered into an unsecured credit facility (the "Additional Facility") with
NationsBank, N.A. permitting advances of up to $150 million, subject to certain
conditions. The Additional Facility matures on November 7, 1998, subject to a
two-month extension under certain circumstances, and allows the Operating
Partnership to borrow funds at an interest rate equal to LIBOR plus 150 basis
points or, at the Operating Partnership's option, the Prime Rate plus 25 basis
points. Amounts repaid by the Operating Partnership under the Additional
Facility are not subject to reborrowing. The Additional Credit Facility
incorporates the covenants contained in the 1998 Credit Facility.
During the period January 1, 1998 through March 31, 1998, Brandywine
sold an aggregate 12,642,741 Common Shares for gross proceeds of $303.4 million
pursuant to 3 public offerings, which proceeds were contributed to the Operating
Partnership in exchange for 12,642,741 GP Units.
Short and Long Term Liquidity
The Operating Partnership believes that its cash flow from operations
is adequate to fund its short-term liquidity requirements for the foreseeable
future. Cash flow from operations is generated primarily from rental revenues
and operating expense reimbursements from tenants and management services income
from the provision of services to third parties. The Operating Partnership
intends to use these funds to meet its short-term liquidity needs, which are to
fund operating expenses, debt service requirements, recurring capital
expenditures, tenant allowances, leasing commissions and the minimum
distribution required to maintain Brandywine's REIT qualification under the
Internal Revenue Code.
As of March 31, 1998, the Operating Partnership had entered into
guaranties, and agreements contemplating the provision of guaranties, for the
benefit of unconsolidated real estate ventures, aggregating approximately $33.3
million. Payment under these guaranties would constitute loan obligations of, or
preferred equity positions in, the applicable unconsolidated real estate
venture.
The Operating Partnership expects to meet its long-term liquidity
requirements, such as for property acquisitions and development, scheduled debt
maturities, renovations, expansions and other non-recurring capital
improvements, through the 1998 Credit Facility and other long-term secured and
unsecured indebtedness and the issuance of additional Units and the receipt of
additional cash contributions from Brandywine representing the proceeds of
Brandywine's issuance of equity securities.
-10-
<PAGE>
Year 2000 Issue
The Operating Partnership has recognized the need to ensure that its
systems, equipment and operations will not be adversely impacted upon the
arrival of the calendar year 2000. The Operating Partnership has initiated the
process of identifying potential areas of risk and the related effects on
planning, purchasing and daily operations. The Operating Partnership has not
quantified the potential adverse impact resulting from the failure of third
party suppliers and tenants to prepare for the year 2000. However, the Operating
Partnership does not anticipate the total cost of successfully converting all
internal systems, equipment and operations to year 2000 compliance to be
material.
Inflation
A majority of the Operating Partnership's leases provide for separate
escalations of real estate taxes and operating expenses either on a triple net
basis or over a base amount. In addition, many of the office leases provide for
fixed base rent increases or indexed escalations (based on the CPI or other
measure). The Operating Partnership believes that inflationary increases in
expenses will be significantly offset by the expense reimbursement and
contractual rent increases.
Item 3. Properties
As of March 31, 1998, the Operating Partnership owned a portfolio of
139 office properties and 28 industrial facilities that contained an aggregate
of approximately 11.5 million net rentable square feet. One hundred forty-four
of the Properties (approximately 75.8% of the Operating Partnership's portfolio
based on net rentable square feet) were located in the Suburban Philadelphia
Office and Industrial Market. As of March 31, 1998, the Properties (excluding
three Properties under development or redevelopment) were approximately 93.3%
leased to 967 tenants. The office Properties are primarily one to three story
suburban office buildings containing an average of 68,818 net rentable square
feet. The industrial Properties accommodate a variety of tenant uses including
light manufacturing, assembly, distribution and warehousing. The Operating
Partnership carries comprehensive liability, fire, extended coverage and rental
loss insurance covering all of the Properties, with policy specifications and
insured limits which the Operating Partnership believes are adequate.
The following table sets forth certain information with respect to the
Properties at March 31, 1998:
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ------------------------------------------- ------------ ------------- -------------
<S> <C> <C> <C>
OFFICE PROPERTIES
NORTHERN PHILADELPHIA SUBURBS
Horsham/Willow Grove/Jenkingtown, PA
700 Business Center Drive (2) 1986 82,009 99.2%
800 Business Center Drive (2) 1986
One Progress Avenue 1986 79,204 100.0%
500 Enterprise Road 1990 67,800 98.5%
300 Welsh Road 1980 57,793 100.0%
1155 Business Center Drive 1990 51,388 94.9%
650 Dresher Road 1984 30,138 100.0%
655 Business Center Drive 1997 30,000 72.1%
------- -------
398,332 96.8%
------- -------
Blue Bell/Plymouth Meeting/Fort Washington
501 Office Center Drive 1974 110,514 74.6%
920 Harvest Drive 1990 104,505 100.0%
500 Office Center Drive 1974 100,447 97.8%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ---------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
323 Norristown Road 1988 79,083 100.0%
160 - 180 West Germantown Pike 1982 73,750 100.0%
321 Norristown Road 1988 60,384 99.4%
2240/50 Butler Pike 1984 52,183 99.4%
520 Virginia Drive 1987 48,122 100.0%
220 Commerce Drive 1985 46,366 100.0%
2260 Butler Pike 1984 31,892 100.0%
120 West Germantown Pike 1984 30,546 100.0%
140 West Germantown Pike 1984 25,947 98.7%
------------ -----------
763,739 95.9%
------------ -----------
Southern Bucks County
3329 Street Road -Greenwood Square(2) 1985 165,929 75.8%
3331 Street Road -Greenwood Square(2) 1986
3333 Street Road -Greenwood Square(2) 1988
105 Terry Drive 1982 84,730 94.2%
2010 Cabot Boulevard 1985 53,421 98.9%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ------------------------------------------------------- ------------- -------------
<S> <C> <C> <C>
140 Terry Drive 1982 43,929 93.3%
2000 Cabot Boulevard 1985 39,969 81.4%
3000 Cabot Boulevard 1986 34,640 96.3%
2260/70 Cabot Boulevard 1984 29,638 95.4%
2005 Cabot Boulevard 1985 22,000 100.0%
------------- -------------
474,256 87.6%
------------- -------------
TOTAL NORTHERN PHILADELPHIA SUBURBS 1,636,327 93.7%
------------- -------------
WESTERN PHILADELPHIA SUBURBS
Southern Route 202 Corridor, PA
486 Thomas Jones Way 1990 51,500 80.5%
855 Springdale Drive 1986 50,750 100.0%
456 Creamery Way 1987 47,604 100.0%
110 Summit Drive 1985 43,660 100.0%
1336 Enterprise Drive 1989 38,470 100.0%
468 Creamery Way 1990 28,934 100.0%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ------------------------------------- ---------- ------------- -------------
<S> <C> <C> <C>
748 Springdale Drive 1986 13,844 100.0%
------------- -------------
274,762 96.3%
------------- -------------
Main Line, PA
300 Berwyn Park 1989 107,919 100.0%
200 Berwyn Park 1987 76,065 100.0%
16 Campus Boulevard 1990 65,463 100.0%
1974 Sproul Road 1995 62,934 99.0%
426 Lancaster Avenue 1990 61,102 100.0%
100 Berwyn Park 1986 58,612 98.5%
18 Campus Boulevard 1990 37,700 47.6%
------------- -------------
469,795 95.5%
------------- -------------
King of Prussia / Valley Forge
751-761 Fifth Avenue 1967 158,000 100.0%
640 Freedom Business Center (3) 1991 132,000 100.0%
7000 Geerdes Boulevard 1988 112,905 100.0%
1111 Old Eagle School Road 1962 107,000 100.0%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ------------------------------------- ------------ ------------- -------------
<S> <C> <C> <C>
500 North Gulph Road 1979 92,851 99.9%
620 Freedom Business Center 1986 86,559 100.0%
630 Freedom Business Center 1989 86,291 99.9%
741 First Avenue 1966 77,184 100.0%
610 Freedom Business Center 1985 63,031 99.6%
680 Allendale Road 1962 52,528 100.0%
650 Park Avenue 1968 51,711 100.0%
875 First Avenue 1966 50,000 100.0%
630 Clark Avenue 1960 50,000 100.0%
620 Allendale Road 1961 50,000 100.0%
600 Park Avenue 1964 39,000 100.0%
2490 Boulevard of the Generals 1975 20,600 100.0%
1,229,660 100.0%
------------- -------------
Bala Cynwyd
111 Presidential Boulevard 1997 173,079 99.4%
------------- -------------
TOTAL WESTERN PHILADELPHIA SUBURBS 2,147,296 98.5%
------------- -------------
READING / ALLENTOWN, PA
100-300 Gundy Drive 1970 443,165 83.8%
100 Katchel Blvd 1970 131,076 97.5%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ----------------------------------- ----------- ------------- -------------
<S> <C> <C> <C>
1105 Berkshire Boulevard 1987 68,984 91.4%
6575 Snowdrift Road 1988 46,250 100.0%
7248 Tilghman Street 1987 42,863 93.8%
7310 Tilghman Street 1985 40,000 78.0%
1150 Berkshire Boulevard 1979 26,821 91.7%
799,159 88.1%
------------- -------------
SOUTHERN NEW JERSEY
Burlington County
10000 Midlantic Drive 1990 175,573 96.2%
2000 Midlantic Drive 1989 121,658 84.9%
1000 Howard Boulevard 1988 105,312 99.6%
1000 Atrium Way 1989 96,660 90.3%
1120 Executive Boulevard 1987 95,124 93.0%
15000 Midlantic Drive 1991 84,056 100.0%
Three Greentree Centre 1984 69,101 88.2%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ---------------------------------- -------------- ------------- -------------
<S> <C> <C> <C>
9000 Midlantic Drive 1989 67,299 100.0%
4000/5000 West Lincoln Drive 1982 60,010 89.9%
1000/2000 West Lincoln Drive 1982 60,001 95.2%
Two Greentree Centre 1983 56,075 81.0%
One Greentree Centre 1982 55,838 93.2%
8000 Lincoln Drive 1997 54,923 100.0%
4000 Midlantic Drive 1998 46,945 0.0%
Five Eves Drive 1986 45,889 90.1%
9000 West Lincoln Drive 1983 43,719 93.2%
Two Eves Drive 1987 37,517 91.4%
3000 West Lincoln Drive 1982 36,070 82.5%
Four B Eves Drive 1987 27,038 99.9%
Four A Eves Drive 1987 24,631 80.8%
------------- -------------
1,363,439 89.6%
------------- -------------
Camden County
Main Street - Plaza 1000 1988 162,364 99.1%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ----------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
457 Haddonfield Road 1990 121,737 82.9%
One South Union Place 1982 105,972 0.0%
1007 Laurel Oak Road 1996 78,205 100.0%
6 East Clementon Road 1980 66,043 94.1%
King & Harvard 1974 65,223 13.6%
Main Street - Piazza 1990 41,400 100.0%
20 East Clementon Road 1986 40,755 90.4%
Main Street - Promenade 1988 31,445 94.4%
7 Foster Avenue 1983 21,843 90.2%
10 Foster Avenue 1983 18,941 98.5%
50 East Clementon Road 1986 3,080 100.0%
5 Foster Avenue 1968 2,000 50.0%
------------- -------------
759,008 94.0%
------------- -------------
Atlantic County
500 Scarborough Drive 1987 44,750 66.4%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ----------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
501 Scarborough Drive 1987 44,750 100.0%
------------- -------------
89,500 83.2%
------------- -------------
TOTAL SOUTHERN NEW JERSEY 2,211,947 91.0%
------------- -------------
CENTRAL NEW JERSEY
50 East State Street 1989 305,699 92.9%
1009 Lenox Drive 1989 183,342 97.3%
33 West State Street 1988 168,216 99.7%
993 Lenox Drive 1985 111,137 100.0%
997 Lenox Drive 1987 97,277 92.4%
104 Windsor Center Drive 1987 66,855 100.0%
168 Franklin Corner Drive 1976 32,000 56.1%
------------- -------------
TOTAL CENTRAL NEW JERSEY 964,526 94.9%
------------- -------------
DELAWARE
Northern Suburban Wimington
201 North Walnut Street 1988 311,286 99.6%
256-263 Chapman Road (2) 1983 179,722 85.3%
4550 New Linden Hill Road 1974 105,000 96.8%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ----------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
One Righter Parkway (3) 1989 104,828 100.0%
100 Commerce Drive 1989 63,898 98.3%
------------- -------------
TOTAL DELAWARE PROPERTIES 764,734 95.8%
------------- -------------
OTHER MARKETS
Twin Forks Office Park, Raleigh, NC
5910 -6090 Six Forks 1982 73,340 95.9%
Saddlebrook, NJ
Gardenstate Parkway & Route 80
Park 80 West Plaza II 1988 266,173 87.8%
Park 80 West Plaza I 1970 217,016 91.8%
Frederick, MD
Bowman Plains Industrial Park 1998 208,774 0.0%
Towson, MD
100 West Road 1988 120,234 95.6%
Cincinnati, OH
5300 Kings Island Drive 1987 156,175 100.0%
TOTAL - OFFICE PROPERTIES 9,565,701 92.3%
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ----------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
INDUSTRIAL PROPERTIES
NORTHERN PHILADELPHIA SUBURBS
Southern Bucks County, PA
4667 Somerton Road 1974 118,000 83.1%
2595 Metropolitan Drive 1981 80,000 100.0%
180 Wheeler Court 1975 78,213 100.0%
2575 Metropolitan Drive 1981 60,000 64.6%
2560 Metropolitan Drive 1983 70,000 99.9%
2535 Metropolitan Drive 1974 42,000 0.0%
2512 Metropolitan Drive 1981 37,000 100.0%
2510 Metropolitan Drive 1981 40,000 100.0%
2250 Cabot Boulevard 1982 40,000 100.0%
2200 Cabot Boulevard 1979 55,081 98.2%
------------- -------------
TOTAL NORTHERN PHILADELPHIA SUBURBS 620,294 86.4%
------------- -------------
WESTERN PHILADELPHIA SUBURBS
Lansdale, PA
1510 Gehman Road 1990 152,625 100.0%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ----------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
King of Prussia, PA
201/221 King Manor Drive 1964 124,960 100.0%
640-660 Allendale Road 1962 106,635 100.0%
780 Third Avenue 1967 72,000 83.3%
820 Third Avenue 1970 56,200 100.0%
650 Clark Avenue 1965 50,000 86.4%
741 Third Avenue 1962 50,000 75.0%
TOTAL WESTERN PHILADELPHIA SUBURBS 612,420 94.9%
------------- -------------
SOUTHERN NEW JERSEY
Burlington County, NJ
500 Highland Drive 1990 127,340 100.0%
300 Highland Drive 1990 126,905 100.0%
400 Highland Drive 1990 68,660 100.0%
600 Highland Drive 1990 65,862 82.5%
1000 East Lincoln Drive 1981 40,600 100.0%
------------- -------------
429,367 97.3%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Percentage
Rentable Leased as of
Year Square March 31,
Property Name Built Feet 1998 (1)
- ----------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Camden County, NJ
55 U.S. Avenue 1982 138,700 59.1%
2 Foster Avenue 1974 50,761 94.6%
1 Foster Avenue 1972 24,255 100.0%
4 Foster Avenue 1974 23,372 100.0%
5 U.S. Avenue 1987 5,000 100.0%
------------- -------------
242,088 75.4%
------------- -------------
TOTAL SOUTHERN NEW JERSEY 671,455 89.4%
------------- -------------
TOTAL - INDUSTRIAL PROPERTIES 1,904,169 90.2%
------------- -------------
TOTAL ALL PROPERTIES / WEIGHTED AVG. 11,469,870 93.3%
============= =============
</TABLE>
(1) Calculated by dividing net rentable square feet included in leases dated on
or before June 1, 1998 by the aggregate net rentable square feet included in
the Property.
(2) The data reflected for these properties are presented on a consolidated
basis.
(3) This Property is subject to a ground lease.
The following table sets forth certain information regarding rental
rates and lease expirations for the Properties owned by the Operating
Partnership at March 31, 1998, assuming none of the tenants exercise renewal
options or termination rights, if any, at or prior to scheduled expirations:
<PAGE>
<TABLE>
<CAPTION>
Final Percentage
Rentable Final Annualized of Total Final
Number of Square Annualized Base Rent Annualized
Year of Leases Footage Base Rent (1) 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 Leases Leases Total
- ---------------- ----------- ------------- ---------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1998 304 1,305,144 $ 17,140,604 $ 13.13 11.6% 11.6%
1999 216 1,269,982 14,127,101 11.12 9.6% 21.2%
2000 181 1,413,028 17,936,757 12.69 12.1% 33.3%
2001 166 1,601,299 23,470,989 14.66 15.9% 49.2%
2002 146 1,659,712 22,566,572 13.60 15.3% 64.5%
2003 67 542,590 8,969,644 16.53 6.1% 70.5%
2004 25 317,420 5,648,838 17.80 3.8% 74.4%
2005 28 847,172 15,390,635 18.17 10.4% 84.8%
2006 12 422,107 4,317,557 10.23 2.9% 87.7%
2007 8 118,880 2,135,510 17.96 1.4% 89.2%
2008 and after 33 907,673 16,011,478 17.64 10.8% 100.0%
----------- ----------- ------------- ----------- ---------
1,186 10,405,007 $ 147,715,685 $ 14.20 100.0%
=========== ============= ================ =========== =========
</TABLE>
(1) "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.
The Properties owned by the Operating Partnership at March 31, 1998
were leased to 967 tenants that are engaged in a variety of businesses. The
following table sets forth information regarding leases at these Properties with
the 20 largest tenants as of March 31, 1998:
<TABLE>
<CAPTION>
Percentage of
Remaining Aggregate Percentage Annualized Aggregate
Number Lease Square of Aggregate Escalated Annualized
of Term in Feet Leased Rent (in Escalated
Tenant Name (a) Leases Months Leased Square Feet thousands) (b) Rent
- ------------------------------------- ------------ ------------ ----------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
State of New Jersey 3 (c) 383,616 3.7% $ 9,690 5.5%
General Electric 4 (d) 350,268 3.4% 6,396 3.6%
Lockheed Martin Corporation 7 (e) 395,548 3.8% 4,819 2.7%
First USA Bank 22 (f) 273,574 2.6% 4,202 2.4%
Penske Truck Leasing 9 93 194,740 1.9% 3,610 2.1%
Parsons Corporation 4 84 200,000 1.9% 3,583 2.0%
Computer Sciences Corporation 3 (g) 99,006 1.0% 2,335 1.3%
Kimberly Clark Corporation 1 93 93,014 0.9% 2,000 1.1%
Aetna Life Insurance Corporation 1 51 100,670 1.0% 1,858 1.1%
Consolidated Rail Corporation ('Conrail") 1 27 69,511 0.7% 1,746 1.0%
Reliance Insurance Company 4 (h) 73,748 0.7% 1,575 0.9%
New Jersey Bell Telephone 1 100 74,728 0.7% 1,482 0.8%
QAD, Inc. 1 41 61,900 0.6% 1,377 0.8%
Axiom, Inc. 2 121 62,752 0.6% 1,335 0.8%
Automotive Rentals, Inc. 1 29 67,299 0.6% 1,322 0.8%
Delaware Valley Financial Services, Inc. 7 (i) 57,057 0.5% 1,293 0.7%
Stark & Stark, Inc. 1 77 63,038 0.6% 1,292 0.7%
PECO 1 27 107,000 1.0% 1,231 0.7%
Telespectrum Worldwide, Inc. 2 (j) 166,635 1.6% 1,048 0.6%
American Business Financial Services, Inc. 16 58 40,277 0.4% 1,035 0.6%
------------ ------------ ----------- ------------ -------------- ------------
Consolidated Total / Weighted Average 91 77 2,934,381 28% $ 53,229 30.4%
============ ============ =========== ============ ============== ============
</TABLE>
<PAGE>
(a) The identified tenant may include affiliates in certain circumstances.
(b) Annualized Escalated Rent represents the monthly Escalated Rent for each
lease in effect at March 31, 1998 multiplied by 12. Escalated Rent
represents fixed base rental amounts plus pass-throughs of operating
expenses, including electricity costs. The Operating Partnership estimates
operating expense pass-throughs based on historical amounts and comparable
market data.
(c) Consists of three leases: a lease representing 222,987 net rentable square
feet that expires in September 2009, a lease representing 117,428 net
rentable square feet that expires in August 2008 and a lease representing
43,201 net rentable square feet that expires in July 2000.
(d) Consists of four leases: a lease representing 156,175 net rentable square
feet that expires in May 2005, a lease representing 132,000 net rentable
square feet that expires in September 2001, a lease representing 61,102 net
rentable square feet that expires in September 2003 and a lease representing
991 net rentable square feet that expires in June 1999.
(e) Consists of seven leases: a lease representing 158,000 net rentable square
feet that expires in September 2002, a lease representing 112,905 net
rentable square feet that expires in December 1998, a lease representing
53,159 net rentable square feet that expires in October 1998, a lease
representing 30,280 net rentable square feet that expires in May 1999, a
lease representing 14,750 net rentable square feet that expires in January
2001, a lease representing 13,956 net rentable square feet that expires in
October 2004 and a lease representing 12,498 net rentable square feet that
expires in June 1998.
(f) Consists of twenty two leases: twenty one leases representing 271,894 net
rentable square feet that expire in January 2012 and a lease representing
1,680 net rentable square feet that expires in July 2012.
(g) Consists of three leases: a lease representing 41,176 net rentable square
feet that expires in May 2002, a lease representing 36,830 net rentable
square feet that expires in November 2001 and a lease representing 15,000
net rentable square feet that expires in October 2000.
(h) Consists of four leases: an aggregate of two leases representing 68,841 net
rentable square feet that expire in October 2002, a lease representing 3,499
net rentable square feet that expires in April 1999 and a lease representing
1,408 net rentable square feet, which the tenant occupies on a
month-to-month basis.
(i) Consists of seven leases: six leases representing 55,857 net rentable square
feet in the aggregate that expire in March 2004 and a lease representing
1,200 net rentable square feet (storage) that is leased on a month-to-month
basis.
(j) Consists of two leases: a lease representing 106,635 net rentable square
feet that expires in August 2002 and a lease representing 60,000 net
rentable square feet that expires in December 1998.
-11-
<PAGE>
Development Entities
Since January 1, 1997, the Operating Partnership and subsidiaries
wholly-owned by the Operating Partnership have entered into eight Development
Entities.
On September 19, 1997, the Operating Partnership acquired a 50%
interest in a newly-formed limited liability company that developed a
three-story office property in Newark, Delaware containing approximately 150,000
net rentable square feet. Development of this property was completed in May 1998
and Computer Sciences Corporation has leased the entire facility through May 31,
2007. The Operating Partnership's equity contribution to this company was
approximately $2.0 million. Total project costs were approximately $17.0
million. Project costs have been financed primarily through a third party loan.
On September 19, 1997, the Operating Partnership also acquired a 50%
membership interest in a newly-formed limited liability company that acquired
two parcels of undeveloped land containing an aggregate of approximately 11
acres in Newark, Delaware for a purchase price of approximately $1.0 million in
anticipation of the construction on such land of two office buildings. The
Operating Partnership's initial equity contribution to this company was $1.0
million. Architectural plans for the development of the land have not been
completed and development of the land is subject to receipt of a construction
loan as well as certain land development and other necessary approvals.
On November 4, 1997, the Operating Partnership acquired a 65% general
partner interest in a newly-formed limited partnership that is currently in the
process of developing a four-story office property in West Conshohocken,
Pennsylvania which is expected to contain approximately 85,000 net rentable
square feet upon completion. The Operating Partnership has committed to make an
equity investment of an estimated $6.75 million upon maturity of the
construction loan that is financing construction of the office property. Total
project costs are estimated to be approximately $16.8 million, with construction
scheduled to be completed during the fourth quarter of 1998. Project costs are
being financed primarily through a $16.8 million third party construction loan,
the repayment of which has been guaranteed by the Operating Partnership.
On November 4, 1997, the Operating Partnership also acquired a 65%
general partner interest in a newly-formed limited partnership that acquired an
option to purchase approximately 9.3 acres of undeveloped land in West
Conshohocken, Pennsylvania for approximately $3.2 million, subject to reduction
in certain circumstances. The Operating Partnership believes this land can
accommodate an office building containing approximately 210,000 net rentable
square feet. The term of the option is one-year, subject to extension for an
additional one-year period. The Operating Partnership's initial equity
contribution to this partnership was approximately $48,000.
As part of the November 4, 1997 transactions, the Operating Partnership
also acquired the right to become a 35% general partner in an existing limited
partnership that owns a four-story office property containing approximately
83,000 net rentable square feet in Conshohocken, Pennsylvania. On May 11, 1998,
the Operating Partnership acquired such 35% interest for approximately $2.7
million. As of May 11, 1998, this property was fully leased to seven tenants.
On December 31, 1997, the Operating Partnership acquired a 50% general
partner interest in a newly-formed general partnership that was established to
own and operate a project involving the redevelopment of a building situated on
approximately five acres in Delaware County, Pennsylvania. The building has
previously been used for retail and office purposes, and the partnership intends
to redevelop the building in 1998 at an estimated cost of approximately $1.0
million for office purposes. The Operating Partnership's initial equity
contribution to this partnership was approximately $850,000, and the Operating
Partnership has agreed to contribute up to $650,000 in connection with the
redevelopment of the building. The Operating Partnership has also guaranteed
payment of $500,000 to secure a $1.75 million bank loan that funded a portion of
the purchase price of the building and related land.
-12-
<PAGE>
On February 3, 1998, the Operating Partnership acquired an
approximately 60% economic interest in a partnership that owns approximately
12.5 acres of land in Plymouth Meeting, Pennsylvania. The Operating Partnership
believes the land (on which an inn is currently situated) can accommodate an
office building containing approximately 130,000 net rentable square feet. The
Operating Partnership acquired its interest through a loan and equity
contribution aggregating approximately $4.2 million. As of the date of this Form
10, the partnership has not determined its plans for the land.
On February 25, 1998, the Operating Partnership acquired a 50% general
partner interest in a newly-formed general partnership that was established to
develop a three-story office property containing approximately 180,000 net
rentable square feet in Chester County, Pennsylvania. Total project costs are
estimated to be approximately $35.9 million. The Operating Partnership has
agreed to contribute $5.4 million to the partnership, and the other partner has
agreed to contribute approximately 12.5 acres of undeveloped land to the
partnership upon receipt of a construction loan. Architectural plans for the
development of the land have not been completed and development of the land is
subject to receipt of a construction loan as well as certain land development
and other necessary approvals.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The Operating Partnership is managed by Brandywine, as the sole general
partner of the Operating Partnership. The following table sets forth the
beneficial ownership of LP Units as of June 1, 1998 for each person that the
Operating Partnership believes is the beneficial owner of more than 5% of the
outstanding LP Units. With the exception of Anthony A. Nichols, Sr., whose
beneficial ownership of LP Units as of June 1, 1998 is also set forth below, no
trustee or executive officer of Brandywine beneficially owned any LP Units as of
June 1, 1998.
Name and Business Number of Percentage of
Address of Beneficial Owner LP Units LP Units
------------------------------------------ ------------- ---------------
Brandywine Realty Trust 415,786 30.4%
Robert K. Scarborough(1) 265,384 19.4%
Ronald Berman(2) 153,036 11.2%
Blair S. Trogner, Sr.(3) 138,128 10.1%
John S. Trogner, Sr.(3) 89,801 6.6%
John S. Trogner, Jr.(3) 73,048 5.3%
Anthony A. Nichols, Sr.(4) 2,742 *
All Trustees and executive officers
of Brandywine as a group (8 persons) 2,742 *
- -------------
* less than one percent
(1) Such LP holder has a business address of: c/o Scarborough Properties, 20 E.
Clementon Road, Suite 201, Gibbsboro, NJ 08026.
(2) Includes (i) 57, 126 LP Units held by Brookstone Holdings I, L.L.C., (ii)
7,579 LP Units held by Brookstone Holdings of Del.-4, L.L.C., (iii) 80,445
LP Units held by Brookstone Holdings of Del.-5, L.L.C. and (iv) 7,886 LP
Units held by Brookstone Holdings of Del.-6, L.L.C. Mr. Berman holds
investment and voting power over the LP Units held by all such entities.
Mr. Berman has a business address of: c/o R. Berman Development Co.,
L.L.C., 150 West State Street, P.O. Box 4571, Trenton, NJ 08611.
(3) Such LP holders have a business address of: P.O. Box 0779, Camp Hill, PA
17001.
-13-
<PAGE>
(4) All such LP Units are held by The Nichols Company ("TNC"). Mr. Nichols,
Chairman of the Board of Trustees of the Company, shares investment and
voting power over the LP Units held by TNC. Mr. Nichols has a business
address of : 16 Campus Boulevard, Newtown Square, PA 19073.
The information concerning the beneficial ownership of Common Shares by
the Trustees and executive officers of Brandywine, as well as by persons
believed by Brandywine to be the beneficial owners of more than 5% of the
outstanding Common Shares, is hereby incorporated by reference to the material
appearing under Item 12 "Security Ownership of Certain Beneficial Owners and
Management" in Brandywine's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "Brandywine 1997 Form 10-K").
Item 5. Directors and Executive Officers
The Operating Partnership is managed by Brandywine, as the sole general
partner of the Operating Partnership. The information required by this Item is
hereby incorporated by reference to the material appearing under Item 10
"Trustees and Executive Officers of the Registrant" in the Brandywine 1997 Form
10-K.
Item 6. Executive Compensation
The Operating Partnership is managed by Brandywine, as the sole general
partner of the Operating Partnership. Consequently, the Operating Partnership
has no executive officers. The information required by this Item reflects
compensation paid to the executive officers of Brandywine and is hereby
incorporated by reference to the material appearing under Item 11 "Executive
Compensation" in the Brandywine 1997 Form 10-K.
Item 7. Certain Relationships and Related Transactions
The Operating Partnership is managed by Brandywine, as the sole general
partner of the Operating Partnership. Walter D'Alessio, a member of Brandywine's
Board of Trustees and Compensation Committee, is President of Legg Mason Real
Estate Services, Inc., a mortgage banking firm and a subsidiary of Legg Mason,
Inc. Legg Mason, Inc. is the parent of Legg Mason Wood Walker, Incorporated,
which was an underwriter of a public offering of Common Shares consummated by
Brandywine on April 21, 1998. The additional information required by this Item
is hereby incorporated by reference to the material appearing under Item 13
"Certain Relationships and Related Transactions" in the Brandywine 1997 Form
10-K.
Item 8. Legal Proceedings
The Operating Partnership is not currently involved in any material
legal proceedings nor, to the Operating Partnership's knowledge, is any material
legal proceeding currently threatened against it, other than routine litigation
arising in the ordinary course of business, substantially all of which is
expected to be covered by existing liability insurance.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
There is no established public trading market for the Units. As of June
1, 1998, 37,636,457 GP Units were outstanding and 1,369,908 LP Units were
outstanding. As of June 1, 1998, Brandywine was the only holder of GP Units and
there were 23 holders of record of LP Units (including Brandywine). The
Operating Partnership has agreed to issue an additional 44,322 LP Units by
September 1, 1999 to two contributors of Properties.
To the Operating Partnership's knowledge, there have been no bids for
the Units and, accordingly, there is no available information with respect to
high and low quotations of the Units. The following table sets forth the
quarterly distributions paid by the Operating Partnership to holders of its LP
Units with respect to each full quarterly period since the Operating Partnership
commenced operations on August 22, 1996.
-14-
<PAGE>
Distributions
Declared For Quarter
---------------------------
Third Quarter 1996 $0.21 (1)
Fourth Quarter 1996 $0.25 (2)
First Quarter 1997 $0.35
Second Quarter 1997 $0.36
Third Quarter 1997 $0.36
Fourth Quarter 1997 $0.37
First Quarter 1998 $0.37
- --------------
(1) On November 1, 1996, the Operating Partnership declared a distribution
of $0.21 per LP Unit relating to third quarter operations that was paid
to LP holders of record as of November 11, 1996.
(2) Represents a distribution at a rate per LP Unit of $0.21 for the period
from October 1, 1996 through December 1, 1996 (the day prior to the
closing of Brandywine's December 2, 1996 public offering of Common
Shares) and a distribution at a rate per share of $0.35 for the period
from December 2, 1996 through December 31, 1996.
As of the date of this Form 10, (i) there are no Units subject to
outstanding options or warrants to purchase, or securities convertible into,
Units, (ii) there are 20,741 Units which could be sold pursuant to Rule 144
under the Securities Act of 1933, as amended, subject to other restrictions on
transfer in the securities laws or in the Partnership Agreement and (iii) there
are no Units that have been, or are proposed to be, publicly offered by the
Operating Partnership. The Operating Partnership has agreed to pay three
contributors of Properties an aggregate of approximately $1.3 million by June 7,
2001, and such contributors may elect to receive payment in the form of LP Units
valued at $23.75 each. Although the Operating Partnership has not entered into
any agreements to register the Units under the Securities Act of 1933, as
amended, Brandywine has agreed to register the offer and sale by the holders of
Common Shares issuable upon redemption of LP Units.
Item 10. Recent Sales of Unregistered Securities
Since its formation in August 1996, the Operating Partnership has
issued Units in private placements in reliance on an exemption under Section
4(2) of the Securities Act of 1933, as amended, in the amounts and for the
consideration set forth below.
Common Share Offerings of Brandywine
On December 2, 1996, the Operating Partnership issued 1,345,454 GP
Units to Brandywine in exchange for the contribution of the net proceeds
(approximately $22.2 million) from two concurrent private offerings of
Brandywine. The Operating Partnership used the proceeds to fund the purchase of
additional properties, to repay indebtedness and for working capital purposes.
On December 2, 1996, the Operating Partnership issued 4,000,000 GP
Units to Brandywine in exchange for the contribution of the net proceeds
(approximately $61.9 million) from an underwritten public offering of
Brandywine. On December 13, 1997, the Operating Partnership issued an additional
600,000 GP Units to
-15-
<PAGE>
Brandywine in exchange for the contribution of the net proceeds (approximately
$9.3 million) from the exercise of the underwriters' over-allotment option
granted by Brandywine in such public offering. The Operating Partnership used
the proceeds to fund the purchase of additional properties, to repay
indebtedness and for working capital purposes.
On March 4, 1997, the Operating Partnership issued 2,200,000 GP Units
to Brandywine in exchange for the contribution of the net proceeds
(approximately $43.0 million) from an underwritten public offering of
Brandywine. On March 17, 1997, the Operating Partnership issued an additional
175,000 GP Units to Brandywine in exchange for the contribution of the net
proceeds (approximately $3.4 million) from the exercise of the underwriter's
over-allotment option granted by Brandywine in such public offering. The
Operating Partnership used the proceeds to fund the purchase of additional
properties, to repay indebtedness and for working capital purposes.
On July 28, 1997, the Operating Partnership issued 10,000,000 GP Units
to Brandywine in exchange for the contribution of the net proceeds
(approximately $196.6 million) from an underwritten public offering of
Brandywine. On August 20, 1997, the Operating Partnership issued an additional
1,500,000 GP Units to Brandywine in exchange for the contribution of the net
proceeds (approximately $29.5 million) from the exercise of the underwriter's
over-allotment option granted by Brandywine in such public offering. The
Operating Partnership used the proceeds to fund the purchase of additional
properties, to repay indebtedness and for working capital purposes.
On September 16, 1997, the Operating Partnership issued 786,840 GP
Units to Brandywine in exchange for the contribution of the net proceeds
(approximately $16.7 million) from an underwritten public offering of
Brandywine. The Operating Partnership used the proceeds to fund the purchase of
additional properties and for working capital purposes.
On December 23, 1997, the Operating Partnership issued 751,269 GP Units
to Brandywine in exchange for the contribution of the net proceeds
(approximately $17.7 million) from an underwritten public offering of
Brandywine. The Operating Partnership used the proceeds to repay indebtedness.
On February 4, 1998, the Operating Partnership issued 10,000,000 GP
Units to Brandywine in exchange for the contribution of the net proceeds
(approximately $227.7 million) from an underwritten public offering of
Brandywine. On March 6, 1998, the Operating Partnership issued an additional
1,000,000 GP Units to Brandywine in exchange for the contribution of the net
proceeds (approximately $22.8 million) from the exercise of the underwriter's
over-allotment option granted by Brandywine in such public offering. The
Operating Partnership used the proceeds to repay indebtedness and for working
capital purposes.
On February 18, 1998, the Operating Partnership issued 1,012,820 GP
Units to Brandywine in exchange for the contribution of the net proceeds
(approximately $23.2 million) from an underwritten public offering of
Brandywine. The Operating Partnership used the proceeds to repay indebtedness.
On February 27, 1998, the Operating Partnership issued 629,921 GP Units
to Brandywine in exchange for the contribution of the net proceeds
(approximately $14.3 million) from an underwritten public offering of
Brandywine. The Operating Partnership used the proceeds to repay indebtedness.
On April 21, 1998, the Operating Partnership issued 625,000 GP Units to
Brandywine in exchange for the contribution of the net proceeds (approximately
$14.3 million) from an underwritten public offering of Brandywine.
The Operating Partnership used the proceeds to repay indebtedness.
On May 20, 1998, the Operating Partnership issued 1,248 GP Units to
Brandywine in exchange for 1,248 Common Shares from Brandywine, and transferred
these Common Shares to three members of Brandywine's Board of Trustees in
payment of one-half of the annual trustee fee payable to non-employee Trustees.
-16-
<PAGE>
Property Acquisitions
On August 22, 1996, the Operating Partnership issued 495,829 LP Units
as part of the acquisition price for a portfolio of 19 office and industrial
properties. The Operating Partnership also agreed to issue to two of the
contributors of these properties an additional 44,322 LP Units by September 1,
1999.
On December 11, 1997, the Operating Partnership issued 389,976 LP
Units as part of the acquisition price for a portfolio of 14 office and
industrial properties.
On March 31, 1998, the Operating Partnership issued 153,036 LP Units as
part of the acquisition price for a portfolio of six office properties.
On May 11, 1998, the Operating Partnership issued 390,364 LP Units as
part of the acquisition price for a portfolio of 11 office properties.
Item 11. Description of Registrant's Securities to be Registered
The following description is only a summary of the material provisions
of the Partnership Agreement and is subject to, and qualified in its entirety
by, the Partnership Agreement.
Management. The Operating Partnership is organized as a Delaware
limited partnership pursuant to the terms of the Partnership Agreement.
Generally, pursuant to the Partnership Agreement, Brandywine, as the sole
general partner of the Operating Partnership, has full, exclusive and complete
responsibility and discretion in the management, operation and control of the
Operating Partnership, including the ability to cause the Operating Partnership
to enter into certain major or extraordinary transactions, including mergers,
acquisitions and refinancings. Holders of LP Units do not have the right to
remove the general partner, to compel dissolution of the Partnership or to vote
in the election of Trustees of Brandywine. Holders of LP Units do not have
appraisal or dissenter's rights. The consent of holders of at least fifty
percent of the outstanding LP Units is required with respect to a general
assignment by the Operating Partnership for the benefit of creditors or the
appointment of a custodian, receiver or trustee for any of the assets of the
Operating Partnership or the institution of any proceeding for bankruptcy of the
Operating Partnership.
Transfer of LP Units. The Partnership Agreement provides that holders
of LP Units may transfer all or a portion of their LP Units without the consent
of the general partner subject to certain regulatory and other restrictions set
forth in the Partnership Agreement. These restrictions include provisions
intended to ensure compliance with securities and tax laws. Brandywine may not
transfer its GP Units except in limited circumstances such as to an entity that
is acquiring substantially all of its assets.
Issuance of Additional Units; No Preemptive Rights. The Operating
Partnership is authorized to issue Units and other partnership interests to such
persons, for such consideration and on such terms and conditions as Brandywine,
as the general partner, in its sole discretion, may deem appropriate, provided
that if Brandywine issues additional Common Shares and contributes the net
proceeds to the Operating Partnership, then the Operating Partnership will issue
to Brandywine a number of GP Units equal to the number of Common Shares so
issued. No holder of LP Units has preemptive or preferential rights with respect
to the issuance of additional Units by the Operating Partnership.
Distributions and Allocations. In general, the Partnership Agreement
provides the general partner with sole discretion to determine the amount and
timing of any distributions to the partners, which distributions shall be made
to the partners pro rata based on the number of Units held by them as of the
applicable record date, subject to such preferential or subordinated
distributions as may be required to be made by the Operating Partnership on any
additional class of Units that are then outstanding. Upon liquidation of the
Operating Partnership, after payment of, or adequate provision for, debts and
obligations of the Operating Partnership, including any partner loans, any
-17-
<PAGE>
remaining assets of the Operating Partnership will be distributed to all
partners with positive capital accounts in accordance with their respective
positive capital account balances. If the general partner has a negative balance
in its capital account following a liquidation of the Operating Partnership, it
will be obligated to contribute cash to the Operating Partnership equal to the
negative balance in its capital account.
Additional Capital Contributions; Limited Liability. The Partnership
Agreement provides that no holder of LP Units shall be required to contribute
capital to the Operating Partnership except to the extent such holder agrees to
make a capital contribution to the Operating Partnership. The Partnership
Agreement also provides that holders of LP Units shall not be personally liable
for any obligations of the Operating Partnership except to the extent provided
by law.
Profit and loss of the Operating Partnership for each fiscal year of
the Operating Partnership generally will be allocated among the partners in
accordance with their respective interests in the Operating Partnership. Taxable
income and loss will be allocated in the same manner, subject to compliance with
the provisions of Code sections 704(b) and 704(c) and Treasury Regulations
promulgated thereunder.
Redemption Right. Pursuant to the Partnership Agreement, each holder of
LP Units has the right, subject to certain limitations, to require the Operating
Partnership to redeem all or a portion of the LP Units held by such holder for
the cash equivalent of an equal number of Common Shares or, at the option of
Brandywine, Brandywine may elect to acquire LP Units presented for redemption
for such cash amount or for an equal number of Common Shares.
Management Fees and Expenses. Brandywine is not entitled to
compensation for services rendered to the Operating Partnership solely in its
capacity as general partner. The Partnership Agreement provides that Brandywine
shall be reimbursed for (i) all fees and other costs incurred by Brandywine for
legal, accounting and other services provided on behalf of, or for the benefit
of, the Operating Partnership and (ii) all fees, costs and expenses incurred by
Brandywine for employee salaries, as well as for legal, accounting and other
services in connection with the preparation and maintenance of Brandywine's
books and records, financial statements, tax returns and reports to shareholders
and the Securities and Exchange Commission.
Access to Books and Records. Upon prior notice as provided in the
Partnership Agreement, holders of LP Units have the right, to the extent
provided by Delaware law, to inspect and copy the books and records of the
Operating Partnership during normal business hours.
Amendments. Except for certain conforming amendments including those to
reflect the issuance or transfer of additional Units, an amendment to the
Partnership Agreement must generally be approved by a majority of the LP Units
then outstanding (including LP Units held by the general partner). An amendment
which would require a limited partner to make additional capital contributions
or restore a negative balance on its capital account or alter such limited
partner's limited liability requires the consent of such limited partner.
Termination. The Operating Partnership will continue until December 31,
2094, or until sooner dissolved upon (i) the sale of all or substantially all of
the assets of the Operating Partnership, (ii) the withdrawal of the general
partner (unless the limited partners elect to continue the Operating
Partnership), (iii) the acquisition by a single person of all of the Units, (iv)
the entry of a decree of judicial dissolution or (v) the election to dissolve
the Operating Partnership made by the general partner with the consent of the
holders of at least a majority of the LP Units then outstanding.
Item 12. Indemnification of Directors and Officers
The information required by this item is hereby incorporated by
reference to the material appearing under Item 15 "Indemnification of Directors
and Officers" in the Registration Statement on Form S-3 filed by Brandywine and
the Operating Partnership with the Securities and Exchange Commission
concurrently with this Form 10.
-18-
<PAGE>
Item 13. Financial Statements and Supplementary Data
See "Index to Financial Statements" on page F-1 of this Registration
Statement on Form 10.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 15. Financial Statements and Exhibits
(a) Financial Statements and Financial Statement Schedules
See "Index to Financial Statements" on page F-1 of this Registration
Statement on Form 10.
(b) Exhibits
(1)3.1.1 Amended and Restated Agreement of Limited Partnership of
Brandywine Operating Partnership, L.P. (the "Operating
Partnership").
(1)3.1.2 First Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
(2)3.1.3 Second Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
(3)3.1.3 Third Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
(4)10.1 Amended and Restated Credit Agreement
(5)10.2 Second Amendment to Amended and Restated Credit Agreement
(3)10.2 Promissory Note (Additional Credit Facility)
21.1 List of Subsidiaries
27.1 Financial Data Schedule
99.1 The following sections of Brandywine's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, which
sections are incorporated into this Registration Statement on
Form 10 by reference to such report: the descriptions of
"Trustees and Executive Officers of the Registrant" in Item
10, "Executive Compensation" in Item 11, "Security Ownership
of Certain Beneficial Owners and Management" in Item 12, and
"Certain Relationships and Related Transactions" in Item 13.
99.2 The following section of the Operating Partnership's and
Brandywine's Registration Statement on Form S-3 filed
concurrently with this Form 10, which section is incorporated
into this Form 10 by reference to such registration statement:
the description of "Indemnification of Directors and Officers"
in Item 15.
- ----------------------
(1) Previously filed as an exhibit to Brandywine's Form 8-K dated
December 17, 1997 and incorporated herein by reference.
(2) Previously filed as an exhibit to Brandywine's Form 8-K dated April
13, 1998 and incorporated herein by reference.
(3) Previously filed as an exhibit to Brandywine's Form 8-K dated May
14, 1998 and incorporated herein by reference.
(4) Previously filed as an exhibit to Brandywine's Form 8-K dated
January 8, 1998 and incorporated herein by reference.
(5) Previously filed as an exhibit to Brandywine's Form 8-K dated March
17, 1998 and incorporated herein by reference.
-19-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Brandywine Operating Partnership, L.P.:
We have audited the accompanying consolidated balance sheets of Brandywine
Operating Partnership, L.P. (the "Operating Partnership") and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, partners' capital and cash flows for the year ended December 31,
1997 and for the period August 22, 1996 to December 31, 1996. We have also
audited the consolidated statements of operations, shareholders' equity and cash
flows of Brandywine Realty Trust for the period January 1, 1996 to August 21,
1996 and for the year ended December 31, 1995. These consolidated financial
statements and the schedule referred to below are the responsibility of the
Operating Partnership's management. Our responsibility is to express an opinion
on these consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Brandywine
Operating Partnership, L.P. and subsidiaries as of December 31, 1997 and 1996,
and the consolidated results of their operations and their cash flows for the
year ended December 31, 1997 and for the period August 22, 1996 to December 31,
1996, and the consolidated results of operations and cash flows of Brandywine
Realty Trust for the period January 1, 1996 to August 21, 1996 and for the year
ended December 31, 1995 in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule III is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subject to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
June 3, 1998
F-1
<PAGE>
BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of Units)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
March 31, December 31, December 31,
1998 1997 1996
----------- ------------- -----------
(unaudited)
ASSETS
<S> <C> <C> <C>
Real estate investments
Operating properties $ 1,075,077 $ 586,414 $ 161,284
Accumulated depreciation (29,923) (22,857) (9,383)
----------- --------- ---------
1,045,154 563,557 151,901
Cash and cash equivalents 38,042 29,442 18,279
Escrowed cash 1,241 212 2,044
Accounts receivable 4,877 3,689 1,366
Due from affiliates 348 214 517
Investment in management company 109 74 -
Investment in unconsolidated real estate ventures 7,276 5,480 -
Deposits 100 12,133 -
Deferred costs and other assets 9,197 6,680 4,219
----------- --------- ---------
Total assets $ 1,106,344 $ 621,481 $ 178,326
=========== ========= =========
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $ 69,170 $ 48,731 $ 36,644
Notes payable, Credit Facility 278,300 115,233 -
Accrued interest 1,164 857 202
Accounts payable and accrued expenses 6,875 2,377 3,119
Distributions payable 14,091 8,843 2,255
Excess of losses over investment in management company - - 14
Tenant security deposits and deferred rents 8,899 5,535 1,324
----------- --------- ---------
Total liabilities 378,499 181,576 43,558
----------- --------- ---------
Commitments and contingencies
Limited partners' capital interest (998,439, 707,426 and 399,567
Units at redemption value at March 31, 1998, December 31, 1997
and December 31, 1996, respectively) 23,775 17,774 7,792
----------- --------- ---------
Partners' Capital
General partner's capital (37,010,209, 23,923,911 and 8,323,514
Units at March 31, 1998, December 31, 1997 and December 31,
1996, respectively) 694,665 419,064 124,868
Limited partners' capital (415,791, 163,404, 110,281
Units at March 31, 1998, December 31, 1997 and December 31,
1996, respectively) 9,405 3,067 2,108
----------- --------- ---------
Total partners' capital 704,070 422,131 126,976
----------- --------- ---------
Total liabilities and partners' capital $ 1,106,344 $ 621,481 $ 178,326
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
BRANDYWINE OPERATING PARTNERSHIP, L.P.
AND BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit information)
<TABLE>
<CAPTION>
Brandywine Operating Partnership, L.P. Brandywine Realty Trust
----------------------------------------- -------------------------------
For the For the
Period Period
For the Three Months For the August 22, January 1, For the
Ended March 31, Year Ended 1996 to 1996 to Year Ended
---------------------- December 31, December 31, August 21, December 31,
1998 1997 1997 1996 1996 1995
---------- --------- ---------- --------- ------- --------
unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rents $ 28,495 $ 6,999 $ 49,928 $ 5,800 $ 2,662 $ 3,517
Tenant reimbursements 3,823 1,327 9,396 1,264 108 66
Other 784 272 1,736 138 58 83
--------- --------- ---------- --------- ------- --------
Total revenue 33,102 8,598 61,060 7,202 2,828 3,666
---------- --------- ---------- --------- ------- --------
Operating Expenses:
Interest 4,387 975 7,079 2,086 665 793
Depreciation and amortization 7,713 2,310 15,589 2,192 644 1,402
Property operating expenses 10,137 2,810 20,144 2,198 1,205 1,561
Management fees 1,331 315 2,301 261 45 47
Administrative expenses 636 169 659 465 360 687
---------- --------- ---------- --------- ------- -------
Total operating expenses 24,204 6,579 45,772 7,202 2,919 4,490
---------- --------- ---------- --------- ------- -------
Income (loss) before equity in income of management
company and extraordinary item 8,898 2,019 15,288 - (91) (824)
Equity in income (loss) of management company 35 125 89 (26) - -
---------- --------- ---------- --------- ------- -------
Net income (loss) before extraordinary item 8,933 2,144 15,377 (26) (91) (824)
Extraordinary item (858) - - - - -
---------- --------- ---------- --------- ------- -------
Net income (loss) $ 8,075 $ 2,144 $ 15,377 $ (26) $ (91) $ (824)
========== ========= ========== ========= ======= =======
Earnings per Unit/Common Share:
Before extraordinary item
Basic $ 0.28 $ 0.22 $ 0.96 $ (0.01) $ (0.15) $ (1.33)
========== ========= ========== ========= ======== =======
Diluted $ 0.28 $ 0.22 $ 0.95 $ (0.01) $ (0.14) $ (1.33)
========== ========= ========== ========= ======= =======
After extraordinary item
Basic $ 0.25 $ 0.22 $ 0.96 $ (0.01) $ (0.15) $ (1.33)
========== ========= ========== ========= ======= =======
Diluted $ 0.25 $ 0.22 $ 0.95 $ (0.01) $ (0.14) $ (1.33)
========== ========= ========== ========= ======== ========
Weighted average number of Units/Common Shares
outstanding:
Basic 32,011,173 9,732,560 16,098,145 3,629,575 623,965 618,733
---------- ---------- ---------- --------- ------- -------
Diluted 32,144,526 9,784,451 16,175,258 3,644,543 635,578 618,733
---------- --------- ---------- --------- ------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
BRANDYWINE OPERATING PARTNERSHIP, L.P. AND BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL AND SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1995, THE PERIOD JANUARY 1, 1996
TO AUGUST 21, 1996, THE PERIOD AUGUST 22, 1996 TO DECEMBER 31, 1996
AND THE THREE MONTHS ENDED MARCH 31, 1998 (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Brandywine Realty Trust's
Ownership Interests
----------------------------------
General Limited Total Limited
Partner Partner Partners' Partners'
Capital Capital Capital Capital Interest
--------- ------- --------- ----------------
BRANDYWINE REALTY TRUST
<S> <C> <C> <C> <C>
Shareholders' equity at January 1, 1995 $ 9,189 $ - $ 9,189 $ -
Distributions ($1.65 per share) (1,021) - (1,021) -
Net loss (824) - (824) -
--------- ------- --------- --------
Shareholders' equity at December 31, 1995 7,344 - 7,344 -
--------- ------- -------------- --------
Issuance of Common Shares and warrants 337 - 337 -
Distributions ($0.36 per share) (226) - (226) -
Net loss (91) - (91) -
--------- ------- --------- --------
Shareholders' equity August 21, 1996 $ 7,364 $ - $ 7,364 $ -
========= ======= ========= ========
BRANDYWINE OPERATING PARTNERSHIP, L.P.
Partners' capital at August 22, 1996 (inception) $ 7,364 $ - $ 7,364 $ -
Issuance of Common and Preferred Shares and warrants 121,246 - 121,246 -
Issuance of Units - - - 8,768
Redemption of Units - 2,150 2,150 (2,288)
Distributions ($0.46 per Unit) (2,296) (23) (2,319) (127)
Net income (loss) (70) (1) (71) 45
Adjustment to reflect limited partners' redeemable
capital at redemption value at balance sheet date (1,376) (18) (1,394) 1,394
--------- ------- --------- --------
Partners' capital at December 31, 1996 124,868 2,108 126,976 7,792
--------- ------- --------- --------
Issuance of Common Shares and warrants 305,664 - 305,664 -
Issuance of Units - - - 9,508
Redemption of Units - 1,069 1,069 (1,374)
Distributions ($1.44 per Unit) (24,330) (246) (24,576) (531)
Net income 14,851 150 15,001 376
Adjustment to reflect limited partners' redeemable
capital at redemption value at balance sheet date (1,989) (14) (2,003) 2,003
--------- ------- --------- --------
Partners' capital at December 31, 1997 419,064 3,067 422,131 17,774
--------- ------- --------- --------
Issuance of Common Shares and warrants (unaudited) 287,679 - 287,679 -
Issuance of Units (unaudited) - - - 3,612
Redemption of Units (unaudited) - 6,467 6,467 (3,877)
Distributions ($0.37 per Unit) (unaudited) (13,710) (138) (13,848) (168)
Net income (unaudited) 7,866 79 7,945 130
Adjustment to reflect limited partners' redeemable
capital at redemption value at balance sheet date (unaudited) (6,234) (70) (6,304) 6,304
--------- -------- --------- --------
Partners' capital at March 31, 1998 (unaudited) $ 694,665 $ 9,405 $ 704,070 $ 23,775
========= ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
BRANDYWINE OPERATING PARTNERSHIP, L.P. AND BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1995, THE PERIOD JANUARY 1, 1996 TO
AUGUST 21, 1996, THE PERIOD AUGUST 22, 1996 TO DECEMBER 31, 1996,
AND THE THREE MONTHS ENDED MARCH 31, 1998 (unaudited) and 1997 (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Brandywine Operating Brandywine
Partnership, L.P. Realty Trust
------------------------------------- ----------------------
For the For the
Period Period
For the Three Months For the August 22, January 1, Year
Ended March 31, Year Ended 1996 to 1996 to Ended
--------------------- December 31, December 31, August 21, December 31,
1998 1997 1997 1996 1996 1995
--------- --------- --------- --------- -------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 8,075 $ 2,144 $ 15,377 $ (26) $ (91) $ (824)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,713 2,310 15,589 2,192 644 1,402
Equity in (income) loss of management
company (35) (125) (89) 26 - -
Amortization of deferred compensation 372 - - - - -
Amortization of discounted notes payable 67 - 334 26 6
Extraordinary item - write off of deferred
financing costs 858 - - - - -
Changes in assets and liabilities:
Accounts receivable (1,188) (709) (2,323) (86) (407) (54)
Affiliate receivable (134) 38 303 (517) - -
Other assets (1,057) (103) (1,303) (271) 226 18
Accounts payable and accrued expenses 3,066 938 818 783 (57) (50)
Accrued mortgage interest 367 55 655 (191) 54 24
Other liabilities 3,364 545 4,211 171 86 (19)
-------- -------- -------- -------- ----- -----
Net cash provided by operating activites 21,468 5,093 33,572 2,107 461 497
-------- -------- -------- -------- ----- -----
Cash flows from investing activities:
Purchase of properties (445,035) (58,143) (406,871) (23,732) (10,186) -
Investment in real estate ventures (1,796) - (5,480) - - -
Decrease (increase) in escrowed cash (1,029) 432 1,832 393 207 (41)
Capital expenditures and leasing
commissions paid (4,762) (2,292) (7,737) (1,495) (588) (660)
-------- -------- -------- -------- ----- -----
Net cash used in investing activities (452,622) (60,003) (418,256) (24,834) (10,567 (701)
-------- -------- -------- -------- ----- -----
Cash flows from financing activites:
Proceeds from issuance of units /
shares, net 287,462 45,534 305,055 90,960 337 -
Distributions paid to general
partner / shareholders (8,634) (2,127) (18,069) (191) (319)( 2,227)
Distributions paid to limited
partners / minority partners (134) (54) (448) (9) - (5)
Proceeds from note payable to related party - - - 387 1,005 -
Proceeds from mortgage notes payable - 21,682 388 1,322 8,574 9,000
Repayment of mortgage notes payable (646) (9,578) (4,485) (50,703) (170)( 6,968)
Proceeds from notes payable, Credit Facility 570,867 - 293,208 - - -
Repayment of notes payable, Credit Facility (407,800) - (177,975) - - -
Purchase of limited partnership units - - (531) - - -
Other debt costs (1,361) (428) (1,296) (921) - (522)
-------- -------- -------- -------- ----- -----
Net cash provided by (used in)
financing activities 439,754 55,029 395,847 40,845 9,427 (722)
-------- -------- -------- -------- ----- -----
Increase (decrease) in cash and cash equivalents 8,600 119 11,163 18,118 (679) (926)
Cash and cash equivalents at beginning of period 29,442 18,279 18,279 161 840 1,766
-------- -------- -------- -------- ----- -----
Cash and cash equivalents at end of period $ 38,042 $ 18,398 $ 29,442 $ 18,279 $ 161 $840
======== ======== ======== ======== ===== =====
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
BRANDYWINE OPERATING PARTNERSHIP, L.P. AND BRANDYWINE REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS:
--------------------------------------
Brandywine Operating Partnership, L.P. (the "Operating Partnership") is a
Delaware limited partnership active in acquiring, developing, redeveloping,
leasing and managing office and industrial properties. The Operating Partnership
is the entity through which Brandywine Realty Trust ("Brandywine," and
collectively with its subsidiaries, the "Company"), a self-administered and
self-managed Maryland real estate investment trust (a "REIT"), conducts
substantially all of its business. Brandywine commenced its operations in 1986
and since August 22, 1996 has owned substantially all of its assets and
conducted its operations through the Operating Partnership. As of June 1, 1998,
Brandywine's ownership interest in the Operating Partnership was approximately
97.4%.
Brandywine controls the Operating Partnership as its sole general partner (this
structure is commonly referred to as an umbrella partnership REIT or "UPREIT").
The Board of Trustees of Brandywine manages the affairs of the Operating
Partnership. Brandywine's general and limited partner interests in the Operating
Partnership entitle it to share in cash distributions from, and in the profits
and losses of, the Operating Partnership in proportion to its ownership interest
therein and Brandywine's limited partner interests entitle Brandywine to vote on
all matters requiring a vote of the limited partners.
The other limited partners of the Operating Partnership are persons who
contributed their direct or indirect interests in certain properties to the
Operating Partnership. The Operating Partnership is obligated to redeem each
unit of partnership interest ("Unit") held by a person other than Brandywine, at
the request of the holder thereof and subject to certain time restrictions, for
cash equal to the fair market value of a share of Brandywine's common shares of
beneficial interest ("Common Shares"), par value $.01 per share, at the time of
such redemption, provided that Brandywine, at its option, may elect to acquire
any such Unit presented for redemption for one Common Share or cash. Brandywine
presently anticipates that it will elect to issue its Common Shares to acquire
Units presented for redemption, rather than paying cash. Such limited partners'
redemption rights are reflected in "limited partners' capital interest" in the
accompanying consolidated balance sheets at the cash redemption amount at the
balance sheet date. With each such redemption Brandywine's percentage ownership
interest in the Operating Partnership will increase. In addition, whenever
Brandywine issues Common Shares or preferred shares of beneficial interest
("Preferred Shares"), par value $.01 per share, Brandywine may contribute any
net proceeds therefrom to the Operating Partnership and the Operating
Partnership is obligated to issue an equivalent number of Units to Brandywine.
Distributions to holders of Units are made to enable distributions to be made to
Brandywine's shareholders under its dividend policy. Federal income tax laws
require Brandywine, as a REIT, to distribute 95% of its ordinary taxable income.
The Operating Partnership makes distributions to Brandywine to enable it to
satisfy this requirement.
As of December 31, 1997, the Operating Partnership's portfolio included 95
office properties and 22 industrial facilities (the "Properties") that contained
an aggregate of approximately 7.1 million net rentable square feet. As of
December 31, 1997, the Properties (excluding two Properties under development or
redevelopment) were approximately 91.2% leased to 688 tenants and had an average
age of approximately 14 years. Approximately 96% of the Operating Partnership's
portfolio based on net rentable square feet (113 of the 117 Properties) was
located in the Suburban Philadelphia Office and Industrial Market. "Suburban
Philadelphia Office and Industrial Market" or "Market" means the areas comprised
of the following counties: Berks, Bucks, Chester, Delaware, Lehigh, Montgomery
and Northampton in Pennsylvania and Burlington and Camden in New Jersey.
F-6
<PAGE>
The Operating Partnership holds a 95% economic interest in Brandywine Realty
Services Corporation (the "Management Company") through its ownership of 100% of
the Management Company's non-voting preferred stock and 5% of its voting common
stock. As of December 31, 1997, the Management Company was responsible for
managing and leasing 115 of the Operating Partnership's Properties and other
properties on behalf of third parties.
A majority of the Properties are located within the Suburban Philadelphia Office
and Industrial Market. As such, a downturn in business activity in this market
could negatively impact the Company. Management believes the Market provides a
well-diversified economic base which helps to insulate the region from the types
of market vicissitudes that can adversely affect a single-sector economy.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Principles of Consolidation
- ---------------------------
The accompanying financial statements of the Operating Partnership have been
prepared on a consolidated basis and include all the accounts of the Operating
Partnership and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The accompanying financial
statements of Brandywine have also been presented on a consolidated basis.
Use of Estimates in the Preparation of Financial Statements
- -----------------------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Capitalization of Costs
- -----------------------
The Operating Partnership has capitalized as deferred costs certain expenditures
related to the financing and leasing of the Properties. Capitalized loan fees
are being amortized over the terms of the related loans and leasing commissions
are being amortized over the term of the related leases. Deferred costs and
other assets are presented net of accumulated amortization totaling $1,994,000
and $729,000 as of December 31, 1997 and 1996, respectively.
Real estate investments
- -----------------------
Real estate investments are carried at cost, less accumulated depreciation. It
is the policy of the Operating Partnership and Brandywine to review the carrying
value of long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying value of such assets may not be
recoverable. Measurement of the impairment loss is based on fair value of the
asset. Generally, fair value will be determined using valuation techniques such
as the present value of expected future cash flows. No impairment adjustments
have been made as a result of this review process by the Operating Partnership
or Brandywine during any of the periods presented.
Depreciation and Amortization
- -----------------------------
Depreciation is computed using the straight-line method. Estimated useful lives
range from 25 to 35 years for buildings and improvements and five years for
personal property. Amortization of tenant improvements is provided over the
shorter of the lease term or the life of the assets.
F-7
<PAGE>
Investment in Management Company
- --------------------------------
Investment in the Management Company is accounted for using the equity method.
See Note 4 for further discussion.
Investment in Unconsolidated Real Estate Ventures
The Operating Partnership accounts for its non-controlling interests in office
development joint ventures using the equity method. Non-controlling ownership
interests range from 35% - 65%. These investments are recorded initially at the
Operating Partnership's cost and subsequently adjusted for the Operating
Partnership's net equity in income and cash contributions and distributions.
Federal Income Taxes
- --------------------
The Operating Partnership is taxed as a partnership under the provisions of the
Internal Revenue Code. As a result, the Operating Partnership is not subject to
federal income taxes, and the taxable income of the Operating Partnership has
been included in the individual tax returns of the Operating Partnership's
partners. Accordingly, no provision for federal or state income taxes has been
recorded in the accompanying financial statements.
The Management Company is subject to Federal and state income taxes. The
operating results of the Management Company include a provision for income
taxes.
Revenue Recognition
- -------------------
Rental revenue from tenants is recognized on a straight-line basis over the term
of the lease agreements regardless of when payments are due and accrued rents
are included in accounts receivable on the balance sheets. Certain lease
agreements contain provisions which provide for reimbursement of the tenants'
share of real estate taxes and certain common area maintenance costs. These
reimbursements are reflected on the accrual basis.
No tenant represented 10% or more of the Operating Partnership's or Brandywine's
rental revenue in 1997 or 1996. During 1995, two tenants each individually
represented approximately 10% of Brandywine's total rental revenue.
Fair Value of Financial Instruments
- -----------------------------------
The carrying amounts reported in the balance sheet for cash, accrued
liabilities, and short-term borrowings approximate their fair values due to the
short-term nature of these instruments. Accordingly, these items have been
excluded from the fair value disclosures included elsewhere in these notes.
Statements of Cash Flows
- ------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and short-term investments with original maturities of 90 days or less. At
December 31, 1997, 1996 and 1995, cash and cash equivalents totaling
$29,442,000, $18,279,000 and $840,000, respectively, included tenant escrow
deposits of $2,739,000, $789,000 and $198,000, respectively.
Interim Unaudited Financial Statements
- --------------------------------------
Certain of the financial statements included herein have been prepared by the
Operating Partnership without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
F-8
<PAGE>
pursuant to such rules and regulations, although Management believes that the
included disclosures are adequate to make the information presented not
misleading. In the opinion of Management, all adjustments (consisting solely of
normal recurring matters) necessary to fairly present the financial position of
the Operating Partnership as of March 31, 1998, and the results of its
operations and its cash flows for the three month periods ended March 31, 1998
and 1997 have been included. The results of operations for such interim periods
are not necessarily indicative of the results for a full year.
3. ACQUISITIONS OF REAL ESTATE INVESTMENTS:
----------------------------------------
1998
- ----
Subsequent to December 31, 1997 and through March 31, 1998, the Operating
Partnership purchased 50 Properties (44 office properties and 6 industrial
facilities) which contain an aggregate of approximately 4.3 million net rentable
square feet. The purchase price for the 50 Properties was approximately $492.6
million.
Subsequent to March 31, 1998 and through June 1, 1998, the Operating Partnership
purchased 12 office Properties which contain an aggregate of approximately
733,000 net rentable square feet. The purchase price for the 12 Properties was
approximately $90.1 million.
The following unaudited pro forma financial information of the Operating
Partnership for the three months ended March 31, 1998 and 1997 gives effect to
the properties acquired and the Unit issuances during 1998 and 1997 as if the
purchases and issuances had occurred on January 1, 1998 and 1997, respectively.
Three Months Ended December 31,
--------------------------------------------------
1998 1997
------------ ------------
(Unaudited and in thousands, except per Unit data)
Pro forma total revenues $48,129 $44,529
Pro forma net income before
extraordinary items $15,545 $11,810
Diluted pro forma net income per
Unit before extraordiarny items $0.41 $0.31
1997
- ----
During 1997, the Operating Partnership acquired 80 properties (61 office
properties and 19 industrial facilities) which contained an aggregate of
approximately 5.1 million net rentable square feet. The aggregate purchase price
for the 1997 property acquisitions was $403.7 million, consisting of $378.3
million of cash, $15.9 million of debt assumed and $9.5 million in Units.
The following unaudited pro forma financial information of the Operating
Partnership for the years ended December 31, 1997 and 1996 gives effect to the
properties acquired and the Unit issuances during 1997 and 1996 as if the
purchases had occurred on January 1, 1997 and 1996, respectively.
Year Ended December 31,
--------------------------------------------------
1997 1996
------------ ------------
(Unaudited and in thousands, except per Unit data)
Pro forma total revenues $ 94,856 $ 86,309
Pro forma net income $ 25,117 $ 18,227
Pro forma net income per Unit $ 1.01 $ 0.75
F-9
<PAGE>
1996
The Operating Partnership acquired 33 properties in 1996 (30 office properties
and 3 industrial facilities) which contain an aggregate of approximately 1.7
million net rentable square feet. The purchase price for the 1996 property
acquisitions was $139.7 million.
The following unaudited pro forma financial information of the Operating
Partnership for the years ended December 31, 1996 and 1995 gives effect to the
properties acquired and the Unit issuances during 1996 as if the purchases had
occurred on January 1, 1996 and 1995, respectively.
Year Ended December 31,
--------------------------------------------------
1996 1995
------------ ------------
(Unaudited and in thousands, except per Unit data)
Pro forma total revenues $ 25,614 $ 22,845
Pro forma net income $ 3,190 $ 1,198
Pro forma net income
per Unit $ 0.37 $ 0.14
All acquisitions described above were accounted for by the purchase method. The
results of operations for each of the acquired properties have been included
from the respective purchase dates. All pro forma financial information
presented within this footnote is unaudited and is not necessarily indicative of
the results which actually would have occurred if acquisitions had been
consummated on the respective dates indicated, nor does the pro forma
information purport to represent the results of operations for future periods.
4. MANAGEMENT COMPANY
------------------
On August 22, 1996, the Management Company commenced operations and is
responsible for various activities including: management, leasing, construction,
redevelopment and development of the Operating Partnership's Properties and
properties on behalf of third parties as well as providing other real estate
related services for third parties. Total management fees paid by the Operating
Partnership's Properties to the Management Company are included in management
fee expense in the accompanying statements of operations and amounted to
$2,263,000 during 1997 and $263,000 for the period from August 22, 1996 to
December 31, 1996. The Management Company also receives payments of certain
costs attributable to the operation of the Properties. Such reimbursements are
included in property operating expenses in the accompanying statements of
operations and amounted to $1.9 million during 1997 and $147,000 for the period
from August 22, 1996 to December 31, 1996. Summarized unaudited financial
information for the Management Company as of December 31, 1997 and 1996, for the
year ended December 31, 1997 and for the period from August 22, 1996 to December
31, 1996 is as follows:
Period Ended December 31,
----------------------------
1997 1996
------------ ------------
(Unaudited and in thousands)
Total assets $ 924 $ 345
Total revenue $ 5,077 $ 301
Net income (loss) $ 93 $ (42)
Operating Partnership's share of net income (loss) $ 89 $ (26)
F-10
<PAGE>
5. INDEBTEDNESS
------------
Notes Payable Credit Facility - The Operating Partnership utilizes credit
facility borrowings for general business purposes, including the acquisition of
office and industrial properties and the repayment of certain outstanding debt.
On July 15, 1997, the Operating Partnership's increased the availability for
borrowing under its revolving credit facility (the "1997 Credit Facility") from
$80.0 million to $150.0 million. At year end, $34.8 million remained available
for borrowing under this facility. The 1997 Credit Facility was secured by 39 of
the Properties and bore interest at a per annum floating rate equal to the
Operating Partnership's choice of 30, 60 or 90-day LIBOR, plus 175 basis points.
The weighted average interest rate during 1997 for borrowings under the 1997
Credit Facility was 7.4%. No amounts were borrowed under the facility in 1996.
During the first quarter of 1998, the Operating Partnership replaced the 1997
Credit Facility with a $330 million unsecured revolving credit facility (the
"1998 Credit Facility"). The new facility enables the Operating Partnership to
borrow funds at a reduced interest rate equal to the 30, 60, 90 or 180-day
LIBOR, plus, in each case, a range of 100 to 137.5 basis points, depending on
the Operating Partnership's then existing leverage and debt rating.
Alternatively, the Operating Partnership can borrow funds at a base rate equal
to the higher of (i) the Prime Rate or (ii) the Fed Funds Rate plus 50 basis
points. The 1998 Credit Facility matures on January 5, 2001 and is extendible,
under certain circumstances, at the Operating Partnership's option to January 5,
2002.
The 1998 Credit Facility requires the Operating Partnership to maintain ongoing
compliance with a number of customary financial and other covenants, including
leverage ratios based on gross implied asset value and debt service coverage
ratios, limitations on liens and distributions and a minimum net worth
requirement.
On May 7, 1998 the Operating Partnership entered into an unsecured credit
facility (the "Additional Facility") with NationsBank, N.A. permitting advances
of up to $150 million, subject to certain conditions. The Additional Facility
matures on November 7, 1998, subject to a two-month extension under certain
circumstances, and allows the Operating Partnership to borrow funds at an
interest rate equal to LIBOR plus 150 basis points or, at the Operating
Partnership's option, the Prime Rate plus 25 basis points. Amounts repaid by the
Operating Partnership under the Additional Facility are not subject to
reborrowing. The Additional Credit Facility incorporates the covenants contained
in the 1998 Credit Facility.
Mortgage Notes Payable - Mortgage loans encumbered 20 and 18 of the Properties
as of December 31, 1997 and 1996, respectively. Additionally, as of December 31,
1997, mortgage loans encumbered certain of the Operating Partnership's land
holdings. Interest rates on the mortgage loans ranged from 5.0% to 9.9% and the
mortgage loans had weighted average interest rates of 8.3%, 8.4% and 9.2% during
1997, 1996 and 1995, respectively.
Included in mortgage notes payable are non-interest bearing loans which have an
imputed 8% interest rate. On December 31, 1997, these loans totaled $3.8 million
with unamortized discounts of $254,000. On December 31, 1996, non-interest
bearing loans totaled $4.8 million with unamortized discounts of $587,000.
Amortization of the discounts aggregated $333,000, $49,000 and $14,000 during
the year ended 1997, the period August 22, 1996 to December 31, 1996 and the
period January 1, 1996 to August 21, 1996, respectively.
F-11
<PAGE>
Aggregate principal payments on mortgage notes payable at December 31, 1997 are
due as follows:
1998 $ 13,092,000
1999 12,823,000
2000 3,883,000
2001 1,021,000
2002 13,835,000
2003 and thereafter 4,077,000
------------
$ 48,731,000
============
As of December 31, 1997, the Operating Partnership was in compliance with all
debt covenants. During the years ended December 31, 1997, 1996 and 1995,
interest paid totaled $6,071,000, $2,827,000 and $784,000, respectively. As of
December 31, 1997, 59 of the 117 Properties were mortgaged or subject to liens
under the secured Credit Facility and mortgage notes payable and had an
aggregate net book value of $308.1 million. As of December 31, 1997, the fair
values of mortgage notes payable and notes payable under the Credit Facility
approximate carrying costs.
As of December 31, 1997, the Operating Partnership had entered into guaranties,
and agreements contemplating the provision of guaranties, for the benefit of
unconsolidated real estate ventures, aggregating approximately $33.3 million.
Payment under these guaranties would constitute loan obligations of, or
preferred equity positions in, the applicable unconsolidated real estate
venture.
6. ISSUANCE OF UNITS:
------------------
The agreement of limited partnership of the Operating Partnership provides that
if Brandywine contributes the net proceeds of a Common Share offering to the
Operating Partnership, the Operating Partnership will issue to Brandywine a
number of Units equal to the number of Common Shares issued. Since the inception
of the Operating Partnership, Brandywine has contributed, and expects to
continue to contribute, all of the net proceeds received upon Common Share
offerings to the Operating Partnership.
1998
- ----
During the three months ended March 31, 1998, the Operating Partnership issued
13,086,298 Units to Brandywine in exchange for the net proceeds from the
issuance of 13,086,298 Common Shares to the public. In addition, the Operating
Partnership issued 543,400 Units as part of the purchase price for certain
property acquisitions.
1997
- ----
During 1997, the Operating Partnership issued 15,413,609 Units to Brandywine in
exchange for the net proceeds from the issuance of 15,413,609 Common Shares to
the public. In addition, the Operating Partnership issued 576,764 Units as part
of the purchase price for certain property acquisitions. During 1997, the
Operating Partnership paid cash to satisfy obligations of certain limited
partners in exchange for 28,994 Units.
1996
- ----
For the period August 22, 1996 through December 31, 1996, the Operating
Partnership issued 7,551,514 Units to Brandywine in exchange for the net
proceeds from the issuance of 5,945,454 Common Shares and 1,606,060 Preferred
Shares to the public and through private placements. In addition, the Operating
Partnership issued 1,281,848 Units as part of the purchase price for certain
property acquisitions.
The Company had reserved, as of December 31, 1997, 762,105 Common Shares for
issuance upon the exercise of share options and warrants described above. At
December 31, 1997, all options and warrants outstanding were exercisable and
were granted with an exercise price equal to the fair market value on the date
of grant. Outstanding options and warrants have a weighted average remaining
contractual life of 4.0 years, an average exercise price of $20.09 per share and
an aggregate purchase price of $15,311,000. During 1997 and 1996, there were no
options or warrants exercised or canceled and no options or warrants expired.
F-12
<PAGE>
During 1996, the Operating Partnership adopted a stock-based compensation
accounting standard, "Accounting for Stock-Based Compensation" ("SFAS No. 123").
SFAS No. 123 encourages a fair value method of accounting for employee stock
options and similar equity instruments. The statement also allows an entity to
account for stock-based compensation using the intrinsic value based method in
APB Opinion No. 25. As provided for in the statement, the Operating Partnership
elected to utilize the intrinsic value method of expense recognition. If
compensation cost for the warrants and options granted to executive officers and
employees of the Company during 1996 had been determined using the fair value
method prescribed by SFAS No. 123, the Operating Partnership's net earnings and
earnings per Unit would have been the pro forma amounts indicated below:
Year ended December 31,
--------------------------------
1997 1996
-------------- --------------
(unaudited and in thousands, except per unit data)
Net income (loss):
As reported $ 15,377 $ (117)
Pro forma 15,078 (448)
Earnings (loss) per unit:
As reported
Basic $ 0.96 $ (0.07)
Diluted $ 0.95 $ (0.07)
Pro forma
Basic $ 0.94 $ (0.26)
Diluted $ 0.93 $ (0.26)
The pro forma effect on results may not be representative of the impact in
future years because the fair value method was not applied to options granted
before 1995.
The weighted average fair value of each warrant issued in 1996 was $1.38 for
warrants issued to the executive officers and $1.13 for warrants issued to
Company employees. Fair value was estimated on the grant date using the
Black-Scholes option pricing model with the following assumptions:
Executive Company
officers employees
------------ -----------
Expected life in years 5 3
Risk-free interest rate 6.0% 6.0%
Volatility 17.5% 17.5%
Dividend yield 7.0% 7.0%
On January 2, 1998, the Company awarded an aggregate of 443,557 "restricted"
Common Shares to six of the Company's executives. These restricted shares vest
over five to eight year periods and were valued at approximately $11.2 million
(based on the closing price of Common Shares on January 2, 1998). Also on
January 2, 1998, the Company awarded certain of its employees options
exercisable for an aggregate 2,043,704 Common Shares. These options vest over
two to five years and have exercise prices ranging from $25.25 to $29.04.
F-13
<PAGE>
7. EARNINGS PER UNIT:
------------------
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" ("SFAS 128"). SFAS 128 establishes standards for
computing and presenting earnings per share. Basic earnings per Unit are based
on the weighted average number of Units outstanding during the year. Diluted
earnings per Unit are based on the weighted average number of Units outstanding
during the year adjusted to give effect to Unit equivalents. All per Unit
amounts for all periods presented have been presented in conformity SFAS 128. A
reconciliation between basic and diluted average Units outstanding is shown
below.
<TABLE>
<CAPTION>
Brandywine Operating Partnership, L.P.
-------------------------------------------------------------------------
For the Three Months For the For the Period
Ended March 31, Year Ended August 22, 1996
--------------------------------- December 31, to December 31,
1998 1997 1997 1996
---------------- --------------- ------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Average Units outstanding - basic 32,011,173 9,732,560 16,098,145 3,629,575
Incremental Units from assumed
conversions of share options 133,353 51,891 77,113 14,968
----------- ----------- ----------- -----------
Average Units outstanding - diluted 32,144,526 9,784,451 16,175,258 3,644,543
=========== =========== =========== ===========
</TABLE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
Brandywine Realty Trust
--------------------------------------
For the Period For the
January 1, 1996 Year Ended
to August 21, December 31,
1996 1995
------------------- ---------------
<S> <C> <C>
Average Units outstanding - basic 623,965 618,733
Incremental Units from assumed
conversions of share options 11,613 6,057
----------- -----------
Average Units outstanding - diluted 635,578 624,790
=========== ===========
</TABLE>
<PAGE>
8. RELATED-PARTY TRANSACTIONS:
---------------------------
During 1996, the Operating Partnership consummated a transaction (the "SSI/TNC
Transaction") in which the Operating Partnership acquired substantially all of
the real estate holdings of Safeguard Scientifics, Inc. ("SSI") and SSI's real
estate affiliate, The Nichols Company ("TNC"), then a private real estate
development and management services company. The then President of TNC, Anthony
A. Nichols, Sr. and the Chairman and Chief Executive Officer of SSI, Warren V.
Musser, became members of Brandywine's Board of Trustees.
Approximately 21,580 net rentable square feet of office space is leased by the
Operating Partnership to an affiliate of SSI at an average rental rate of $9.66
per square foot under a lease that expires in April 1999.
In March 1997, the Operating Partnership acquired a parcel of undeveloped land
from Horsham Valley, Inc., an entity in which Mr. Nichols, Sr., Chairman of the
Board of Brandywine, holds an approximate 25% interest. The purchase price of
approximately $1.0 million was determined through arm's-length negotiation
between the Operating Partnership and the seller.
In August 1997, the Operating Partnership satisfied obligations of TNC (a
company controlled by Mr. Nichols, Sr.) on account of brokerage commissions and
tenant improvements. In exchange, TNC forfeited 28,944 Units.
Walter D'Alessio, a member of Brandywine's Board of Trustees, is President and
Chief Executive Officer of a subsidiary of Legg Mason Wood Walker Incorporated,
which performed investment banking services and other financial advisory
services for the Company during 1997 and 1996.
Mr. D'Alessio is a director of PECO Energy Company. In December 1997, the
Operating Partnership acquired an office property from PECO Energy Company for a
purchase price of $9.5 million. Mr. D'Alessio was not a participant in the
committee which made the decision to purchase the property and negotiated the
related terms of the transaction.
F-14
<PAGE>
9. OPERATING LEASES:
-----------------
The Operating Partnership leases its properties to tenants under operating
leases with various expiration dates extending to the year 2012. At December 31,
1997, leases covering approximately 1.0 million square feet or 14% of the net
leasable space at the Properties were scheduled to expire during 1998. Gross
minimum future rentals and accrued rental income on noncancelable leases at
December 31, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
Accrued rental Total accrual basis
Year Cash rentals income rental income
-------- ---------------- ------------------ ---------------------
<S> <C> <C> <C>
1998 $ 73,646 $ 2,048 $ 75,694
1999 64,175 1,125 65,300
2000 54,020 206 54,226
2001 41,779 (539) 41,240
2002 29,416 (854) 28,562
2003 and thereafter 68,743 (4,217) 64,526
---------- --------- -----------
$ 331,779 $ (2,231) $ 329,548
========== ========= ===========
</TABLE>
The total minimum future rentals presented above do not include amounts that may
be received as tenant reimbursements for charges to cover increases in certain
operating costs.
F-15
<PAGE>
SCHEDULE III
Real Estate and Accumulated Depreciation - December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Initial Cost
--------------------------------------
Net
Encumberances Improvements
at (Retirements)
December 31, Building and Since
Property Name 1997 Land Improvements Acquisition
- ----------------------------------------------------------------------------------------------
OFFICE PROPERTIES
NORTHERN PHILADELPHIA SUBURBS
<S> <C> <C> <C> <C>
Horsham / Willow Grove / Jenkingtown, PA
700 Business Center Drive $ - $ 550 $ 2,201 $ 13
800 Business Center Drive - 895 3,585 47
One Progress Avenue - 1,403 5,629 51
500 Enterprise Road - 1,302 5,188 -
300 Welsh Road - 1,289 5,157 -
1155 Business Center Drive - 1,029 4,124 10
650 Dresher Road - 635 2,501 64
655 Business Center Drive 369 1,218 2,529 524
Blue Bell / Plymouth Meeting / Fort Washington
501 Office Center Drive - 1,796 7,192 46
500 Office Center Drive - 1,617 6,480 -
323 Norristown Road - 1,685 6,751 -
321 Norristown Road - 1,286 5,176 89
2240/50 Butler Pike - 1,103 4,627 29
220 Commerce Drive - 1,086 4,338 -
2260 Butler Pike - 661 2,727 73
120 West Germantown Pike - 684 2,773 51
140 West Germantown Pike - 481 1,976 13
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried
December 31, 1997
----------------------------------------------
Accumulated
Building Depreciation at
and December 31, Date of Date Depreciable
Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life
- ------------------------------------------- ---------------------------------------------- ---------------------------------------
OFFICE PROPERTIES
<S> <C> <C> <C> <C> <C> <C> <C>
NORTHERN PHILADELPHIA SUBURBS
Horsham / Willow Grove / Jenkingtown, PA
700 Business Center Drive $ 550 $ 2,214 $ 2,764 $ 96 1986 1996 25
800 Business Center Drive 895 3,632 4,527 179 1986 1996 25
One Progress Avenue 1,403 5,680 7,083 306 1986 1996 25
500 Enterprise Road 1,302 5,188 6,490 508 1990 1996 25
300 Welsh Road 1,289 5,157 6,446 31 1985 1997 25
1155 Business Center Drive 1,029 4,134 5,163 451 1990 1996 25
650 Dresher Road 635 2,565 3,200 189 1984 1996 25
655 Business Center Drive 1,218 3,053 4,271 120 1997 1997 31.5
Blue Bell / Plymouth Meeting / Fort Washington
501 Office Center Drive 1,796 7,238 9,034 109 1974 1997 25
500 Office Center Drive 1,617 6,480 8,097 99 1974 1997 25
323 Norristown Road 1,685 6,751 8,436 164 1988 1997 25
321 Norristown Road 1,286 5,265 6,551 137 1972 1997 25
2240/50 Butler Pike 1,103 4,656 5,759 383 1984 1996 25
220 Commerce Drive 1,086 4,338 5,424 27 1985 1997 25
2260 Butler Pike 661 2,800 3,461 211 1984 1996 25
120 West Germantown Pike 684 2,824 3,508 183 1984 1996 25
140 West Germantown Pike 481 1,989 2,470 167 1984 1996 25
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
Initial Cost
----------------------
Encumberances
at
December 31, Building and
Property Name 1997 Land Improvements
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Southern Bucks County
33 Street Road - Greenwood Square I - 851 3,407
33 Street Road - Greenwood Square II - 1,126 4,511
33 Street Road - Greenwood Square III - 350 1,401
2010 Cabot Boulevard - 760 3,091
2000 Cabot Boulevard - 569 2,281
3000 Cabot Boulevard - 485 1,940
2260/70 Cabot Boulevard - 415 1,661
2005 Cabot Blolevard - 313 1,257
------ ------ ------
Total Northern Philadelphia Suburbs 369 23,589 92,503
------ ------ ------
WESTERN PHILADELPHIA SUBURBS
Southern Route 202 Corridor, PA
486 Thomas Jones Way 6,279 (1) 805 3,256
855 Springdale Drive - 838 3,370
456 Creamery Way - 635 2,548
110 Summit Drive - 402 1,647
1336 Enterprise Drive - 731 2,946
468 Creamery Way - (1) 526 2,112
748 Springdale Drive - 231 931
Main Line, PA
300 Berwyn Park - 3,358 13,422
200 Berwyn Park - 2,364 9,460
16 Campus Boulevard - 1,152 4,627
Campus Boulevard - Lot 13 - 912 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Intial Gross Amount at Which Carried
Cost December 31, 1997
-------------- ------------------------------------------------
Net
Improvements Accumulated
(Retirements) Building Depreciation at Depre-
Since and December 31, Date of Date ciable
Property Name Acquisition Land Improvements Total(3) 1997 (4) Construction Acquired Life
- -------------------------------------------------------- ---------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Southern Bucks County
33 Street Road - Greenwood Square I 289 851 3,696 4,547 209 1985 1996 25
33 Street Road - Greenwood Square II 226 1,126 4,737 5,863 238 1985 1996 25
33 Street Road - Greenwood Square III 270 350 1,671 2,021 79 1985 1996 25
2010 Cabot Boulevard - 760 3,091 3,851 79 1985 1997 25
2000 Cabot Boulevard 28 569 2,309 2,878 62 1985 1997 25
3000 Cabot Boulevard 27 485 1,967 2,452 91 1986 1996 25
2260/70 Cabot Boulevard 66 415 1,727 2,142 88 1984 1996 25
2005 Cabot Boulevard - 313 1,257 1,570 31 1985 1997 25
-------------- ----------------------------------------------
Total Northern Philadelphia Suburbs 1,916 23,589 94,419 118,008 4,237
-------------- ----------------------------------------------
WESTERN PHILADELPHIA SUBURBS
Southern Route 202 Corridor, PA
486 Thomas Jones Way 215 805 3,471 4,276 357 1990 1996 25
855 Springdale Drive - 838 3,370 4,208 77 1986 1997 25
456 Creamery Way - 635 2,548 3,183 163 1987 1996 25
110 Summit Drive 145 402 1,792 2,194 124 1985 1996 25
1336 Enterprise Drive - 731 2,946 3,677 97 1989 1997 25
468 Creamery Way 10 526 2,122 2,648 167 1990 1996 25
748 Springdale Drive - 231 931 1,162 21 1986 1997 25
Main Line, PA
300 Berwyn Park - 3,358 13,422 16,780 228 1989 1997 25
200 Berwyn Park 4 2,364 9,464 11,828 161 1987 1997 25
16 Campus Boulevard 28 1,152 4,655 5,807 350 1990 1996 25
Campus Boulevard - Lot 13 - 912 - 912 - 1997
</TABLE>
F-17
<PAGE>
<TABLE>
<CAPTION>
Initial Cost
------------------------------------
Net
Encumberances Improvements
at Building (Retirements)
December 13, and Since
Property Name 1997 Land Improvements Acquisition
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Campus Boulevard - Lot 7, 8 & 9 1,638 2,527 - -
1974 Sproul Road - 841 3,368 37
100 Berwyn Park - 1,821 7,290 -
18 Campus Boulevard - 786 3,312 (104)
King of Prussia / Valley Forge
7000 Geerdes Boulevard - 2,664 10,670 -
1111 Old Eagle School Road - 1,932 7,721 -
500 North Gulph Road - 1,299 5,201 381
Bala Cynwyd
111 Presidential Boulevard - 5,412 21,612 -
--------- -------- -------- ------
Total Western Philadelphia Suburbs 7,917 29,236 103,493 716
--------- -------- -------- ------
READING / ALLENTOWN, PA
100-300 Gundy Drive 1,500 6,295 25,180 9
100 Katchel Blvd - 1,854 7,423 1
6575 Snowdrift Road 2,294 600 2,411 -
7248 Tilghman Street - 731 2,969 (69)
7310 Tilghman Street 2,504 553 2,246 -
--------- -------- -------- ------
Total Reading/Allentown 6,298 10,033 40,229 (59)
--------- -------- -------- ------
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried
December 31, 1997
-----------------------------------------------
Accumulated
Building Depreciation at
and December 31, Date of Date Depreciable
Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life
- ------------------------------------------ ----------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Campus Boulevard - Lot 7, 8 & 9 2,527 - 2,527 - 1997
1974 Sproul Road 841 3,405 4,246 74 1972 1997 25
100 Berwyn Park 1,821 7,290 9,111 124 1986 1997 25
18 Campus Boulevard 786 3,208 3,994 325 1990 1996 25
King of Prussia / Valley Forge
7000 Geerdes Boulevard 2,664 10,670 13,334 251 1988 1997 25
1111 Old Eagle School Road 1,932 7,721 9,653 30 1962 1997 25
500 North Gulph Road 1,299 5,582 6,881 294 1979 1996 25
Bala Cynwyd
111 Presidential Boulevard 5,412 21,612 27,024 62 1974 1997 25
-----------------------------------------------
Total Western Philadelphia Suburbs 29,236 104,209 133,445 133,445
-----------------------------------------------
READING / ALLENTOWN, PA
100-300 Gundy Drive 6,295 25,189 31,484 424 1970 1997 25
100 Katchel Blvd 1,854 7,424 9,278 124 1970 1997 25
6575 Snowdrift Road 600 2,411 3,011 229 1988 1996 25
7248 Tilghman Street 731 2,900 3,631 208 1987 1996 25
7310 Tilghman Street 553 2,246 2,799 307 1985 1996 25
-----------------------------------------------
Total Reading/Allentown 10,033 40,170 50,203 1,292
-----------------------------------------------
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
Initial Cost
------------------------------------
Net
Encumberances Improvements
at Building (Retirements)
December 31, and Since
Property Name 1997 Land Improvements Acquisition
- --------------------------------------------------------------------------------------------------
SOUTHERN NEW JERSEY
Burlington County
<S> <C> <C> <C> <C> <C>
10000 Midlantic Drive - 3,206 12,857 151
2000 Midlantic Drive - 2,203 8,823 1
1000 Howard Boulevard 5,784 2,297 9,288 417
1000 Atrium Way - 2,060 8,180 -
1120 Executive Boulevard 5,922 2,074 8,415 373
15000 Midlantic Drive - 3,061 12,254 104
Three Greentree Centre 9,796 (2) 324 6,024 115
9000 Midlantic Drive - 1,472 5,895 -
4000/5000 West Lincoln Drive - 877 3,526 5
1000/2000 West Lincoln Drive - 888 3,568 27
Two Greentree Centre - (2) 264 4,693 41
One Greentree Centre - (2) 345 4,440 34
8000 Lincoln Drive - 606 2,887 770
4000 Midlantic Drive - 714 2,947 89
Five Eves Drive - 703 2,819 -
9000 West Lincoln Drive - 610 2,422 26
Two Eves Drive - 818 3,461 35
3000 West Lincoln Drive - 569 2,293 -
Four B Eves Drive - 588 2,369 30
Four A Eves Drive - 539 2,168 -
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried
December 31, 1997
----------------------------------------------
Accumulated
Building Depreciation at
and December 31, Date of Date Depreciable
Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life
- ---------------------------------------------------------------------------------------- -----------------------------------------
SOUTHERN NEW JERSEY
Burlington County
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10000 Midlantic Drive 3,206 13,008 16,214 303 1990 1997 25
2000 Midlantic Drive 2,203 8,824 11,027 208 1989 1997 25
1000 Howard Boulevard 2,297 9,705 12,002 421 1988 1997 25
1000 Atrium Way 2,060 8,180 10,240 72 1989 1997 25
1120 Executive Boulevard 2,074 8,788 10,862 367 1987 1997 25
15000 Midlantic Drive 3,061 12,358 15,419 293 1991 1997 25
Three Greentree Centre 324 6,139 6,463 2,817 1984 1986
9000 Midlantic Drive 1,472 5,895 7,367 139 1989 1997 25
4000/5000 West Lincoln Drive 877 3,531 4,408 99 1982 1997 25
1000/2000 West Lincoln Drive 888 3,595 4,483 111 1982 1997 25
Two Greentree Centre 264 4,734 4,998 2,213 1983 1986
One Greentree Centre 345 4,474 4,819 2,072 1982 1986
8000 Lincoln Drive 606 3,657 4,263 344 1983 1996 25
4000 Midlantic Drive 714 3,036 3,750 69 1981 1997 25
Five Eves Drive 703 2,819 3,522 79 1986 1997 25
9000 West Lincoln Drive 610 2,448 3,058 64 1983 1997 25
Two Eves Drive 818 3,496 4,314 182 1987 1997 25
3000 West Lincoln Drive 569 2,293 2,862 64 1982 1997 25
Four B Eves Drive 588 2,399 2,987 98 1987 1997 25
Four A Eves Drive 539 2,168 2,707 81 1987 1997 25
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
Initial Cost
------------------------------------
Net
Encumberances Improvements
at Building (Retirements)
December 31, and Since
Property Name 1997 Land Improvements Acquisition
- --------------------------------------------------------------------------------------------------
Camden County
<S> <C> <C> <C> <C>
Main Street - Plaza 1000 - 2,726 10,931 27
Main Street- CAM - 1 11 -
457 Haddonfield Road 9,099 2,142 9,120 464
One South Union Place - 445 1,803 -
1007 Laurel Oak Road - 1,225 4,900 -
6 East Clementon Road - 564 2,253 -
King & Harvard - 263 1,069 -
Main Street - Piazza - 695 2,802 -
20 East Clementon Road - 517 2,070 -
Main Street - Promenade - 531 2,052 -
7 Foster Avenue - 174 696 -
10 Foster Avenue - 152 609 -
50 East Clementon Road - 640 2,561 -
5 Foster Avenue - 16 64 -
------- -------- --------- -------
Total Southern New Jersey 30,601 34,309 150,270 2,709
------- -------- --------- -------
DELAWARE
Northern Suburban Wimington
One Righter Parkway - 2,545 10,195 22
100 Commerce Drive - 1,158 4,633 8
------- -------- --------- -------
Total Delaware Properties - 3,703 14,828 30
------- -------- --------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried
December 31, 1997
----------------------------------------------
Accumulated
Building Depreciation at
and December 31, Date of Date Depreciable
Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life
- ----------------------------------------------------------------------------------- ----------------------------------------
Camden County
<S> <C> <C> <C> <C> <C> <C> <C>
Main Street - Plaza 1000 2,726 10,958 13,684 364 1988 1997 25
Main Street- CAM 1 11 12 2 1997 25
457 Haddonfield Road 2,142 9,584 11,726 529 1990 1996 31.5
One South Union Place 445 1,803 2,248 12 1997 25
1007 Laurel Oak Road 1,225 4,900 6,125 11 1996 1997 25
6 East Clementon Road 564 2,253 2,817 5 1980 1997 25
King & Harvard 263 1,069 1,332 7 1997 25
Main Street - Piazza 695 2,802 3,497 93 1990 1997 25
20 East Clementon Road 517 2,070 2,587 5 1986 1997 25
Main Street - Promenade 531 2,052 2,583 68 1988 1997 25
7 Foster Avenue 174 696 870 2 1983 1997 25
10 Foster Avenue 152 609 761 1 1983 1997 25
50 East Clementon Road 640 2,561 3,201 6 1986 1997 25
5 Foster Avenue 16 64 80 - 1968 1997 25
----------------------------------------------
Total Southern New Jersey 34,309 152,979 187,288 11,201
----------------------------------------------
DELAWARE
Northern Suburban Wimington
One Righter Parkway 2,545 10,217 12,762 443 1989 1996 25
100 Commerce Drive 1,158 4,641 5,799 53 1989 1997 25
----------------------------------------------
Total Delaware Properties 3,703 14,858 18,561 496
----------------------------------------------
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
Initial Cost
-------------------------------------
Net
Encumberances Improvements
at Building (Retirements)
December 31, and Since
Property Name 1997 Land Improvements Acquisition
- ---------------------------------------------------------------------------------------------------
OTHER MARKETS
<S> <C> <C> <C> <C>
Twin Forks Office Park, - (2) 2,194 3,324 239
Raleigh, NC
5910 -6090 Six Forks
Lawrenceville, NJ
168 Franklin Corner Drive - 398 1,597 39
Atlantic County
500 Scarborough Drive - 1,233 4,932 -
501 Scarborough Drive - 1,241 4,966 -
------- -------- -------- -------
Subtotal - Office Properties 45,185 105,936 416,142 5,590
------- -------- -------- -------
INDUSTRIAL PROPERTIES
NORTHERN PHILADELPHIA SUBURBS
Southern Bucks County, PA
2200 Cabot Boulevard - 770 3,117 -
2250 Cabot Boulevard - 559 2,240 -
2510 Metropolitan Drive - 3,304 13,218 -
------- -------- -------- -------
Total Northern Philadelphia Suburbs - 4,633 18,575 -
------- -------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried
December 31, 1997
-----------------------------------------------
Accumulated
Building Depreciation at
and December 31, Date of Date Depreciable
Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life
- -------------------------------------- ----------------------------------------------- -----------------------------------------
OTHER MARKETS
<S> <C> <C> <C> <C> <C> <C> <C>
Twin Forks Office Park, 2,194 3,563 5,757 1,546 1982 1986 25
Raleigh, NC
5910 -6090 Six Forks
Lawrenceville, NJ
168 Franklin Corner Drive 398 1,636 2,034 88 1976 1996 25
Atlantic County
500 Scarborough Drive 1,233 4,932 6,165 11 1987 1997 25
501 Scarborough Drive 1,241 4,966 6,207 11 1987 1997 25
-----------------------------------------------
Subtotal - Office Properties 105,936 421,732 527,668 21,787
-----------------------------------------------
INDUSTRIAL PROPERTIES
NORTHERN PHILADELPHIA SUBURBS
Southern Bucks County, PA
2200 Cabot Boulevard 770 3,117 3,887 141 1985 1996 25
2250 Cabot Boulevard 559 2,240 2,799 101 1985 1996 25
2510 Metropolitan Drive 3,304 13,218 16,522 133 1981 1997 25
-----------------------------------------------
Total Northern Philadelphia Suburbs 4,633 18,575 23,208 375
-----------------------------------------------
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
Initial Cost
---------------------------------------
Net
Encumberances Improvements
at Building (Retirements)
December 31, and Since
Property Name 1997 Land Improvements Acquisition
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WESTERN PHILADELPHIA SUBURBS
Lansdale, PA
1510 Gehman Road - 1,201 4,846 (225)
King of Prussia, PA
201/221 King Manor Drive - 713 2,898 -
-------- --------- --------- -------
Total Western Philadelphia Suburbs - 1,914 7,744 (225)
-------- --------- --------- -------
SOUTHERN NEW JERSEY
Burlington County, NJ
500 Highland Drive - 1,062 4,265 -
300 Highland Drive - 1,069 4,247 28
400 Highland Drive - 572 2,299 -
600 Highland Drive - 549 2,205 -
1000 East Lincoln Drive - 263 1,059 -
Camden County, NJ
2 Foster Avenue - 404 1,618 -
1 Foster Avenue - 198 790 -
4 Foster Avenue - 187 746 -
55 U.S. Avenue - 869 3,476 -
5 U.S. Avenue - 40 159 -
-------- --------- --------- -------
Total Southern New Jersey - 5,213 20,864 28
-------- --------- --------- -------
Subtotal - Industrial Properties - 11,760 47,183 (197)
-------- --------- --------- -------
Grand Total - All Properties $ 45,185 $ 117,696 $ 463,325 $ 5,393
======== ========= ========= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried
December 31, 1997
---------------------------------------------------
Accumulated
Building Depreciation at
and December 31, Date of Date Depreciable
Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life
- --------------------------------------- --------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
WESTERN PHILADELPHIA SUBURBS
Lansdale, PA
1510 Gehman Road 1,201 4,621 5,822 273 1990 1996 25
King of Prussia, PA
201/221 King Manor Drive 713 2,898 3,611 86 1964 1997 25
---------------------------------------------------
Total Western Philadelphia Suburbs 1,914 7,519 9,433 359
---------------------------------------------------
SOUTHERN NEW JERSEY
Burlington County, NJ
500 Highland Drive 1,062 4,265 5,327 104 1990 1997 25
300 Highland Drive 1,069 4,275 5,344 107 1990 1997 25
400 Highland Drive 572 2,299 2,871 56 1990 1997 25
600 Highland Drive 549 2,205 2,754 54 1990 1997 25
1000 East Lincoln Drive 263 1,059 1,322 1 1981 1997 25
Camden County, NJ
2 Foster Avenue 404 1,618 2,022 4 1974 1997 25
1 Foster Avenue 198 790 988 1 1972 1997 25
4 Foster Avenue 187 746 933 1 1974 1997 25
55 U.S. Avenue 869 3,476 4,345 8 1982 1997 25
5 U.S. Avenue 40 159 199 - 1987 1997 25
---------------------------------------------------
Total Southern New Jersey 5,213 20,892 26,105 336
---------------------------------------------------
Subtotal - Industrial Properties 11,760 46,986 58,746 1,070
---------------------------------------------------
Grand Total - All Properties $ 117,696 $ 468,718 $ 586,414 $ 22,857
===================================================
</TABLE>
F-22
<PAGE>
(1) Both of these properties secure a single loan.
(2) At December 31, 1997, the two mortgage loans total $2,658,000 and
$7,138,000, receptively. The loans are cross-collateralized and are secured
by first mortgages on each property.
(3) Reconciliation of Real Estate:
The following table reconciles the real estate investments from January 1,
1997 to December 31, 1997(in thousands):
Balance at beginning of year $161,284
Additions during year:
Acquisitions 419,502
Capital expenditures 6,120
Deletions during year:
Retirements (492)
Balance at end of year $586,414
(4) Reconciliation of Accumulated Depreciation:
The following table reconciles the accumulated depreciation on real estate
investments from January 1, 1997 to December 31, 1997(in thousands):
Balance at beginning of year $ 9,383
Additions during year:
Depreciation expense 13,966
Deletions during year:
Retirements (492)
--------
Balance at end of year $22,857
F-23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
BRANDYWINE OPERATING PARTNERSHIP, L.P.
By: Brandywine Realty Trust
Its: General Partner
Date: June 5, 1998 By: /s/ Gerard H. Sweeney
----------------------
Gerard H. Sweeney
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
21.1 List of Subsidiaries
27.1 Financial Data Schedule
<PAGE>
Exhibit 21.1
Subsidiaries of the Operating Partnership
Witmer Operating Partnership I, L.P., a Delaware limited partnership
Fifteen Horsham, L.P., a Pennsylvania limited partnership
C/N Oaklands Limited Partnership I, a Pennsylvania limited partnership
Newtech IV Limited Partnership, a Pennsylvania limited partnership
Newtech III Limited Partnership, a Pennsylvania limited partnership
LC/N Keith Valley Limited Partnership I, a Pennsylvania limited partnership
LC/N Horsham Limited Partnership, a Pennsylvania limited partnership
Nichols Lansdale Limited Partnership III, a Pennsylvania limited partnership
C/N Leedom Limited Partnership II, a Pennsylvania limited partnership
C/N Oaklands Limited Partnership III, a Pennsylvania limited partnership
Iron Run Limited Partnership V, a Pennsylvania limited partnership
C/N Iron Run Limited Partnership III, a Pennsylvania limited partnership
Brandywine Central, L.P.
Brandywine TB I, L.P., a Pennsylvania limited partnership
Brandywine TB II, L.P., a Pennsylvania limited partnership
Brandywine TB III, L.P., a Pennsylvania limited partnership
Brandywine Dominion, L.P., a Pennsylvania limited partnership
Brandywine P.M., L.P., a Pennsylvania limited partnership
Brandywine I.S., L.P., a Pennsylvania limited partnership
Brandywine F.C., L.P., a Pennsylvania limited partnership
Brandywine Norriton, L.P., a Pennsylvania limited partnership
Brandywine Realty Partners, a Pennsylvania general partnership
Brandywine Holdings I, Inc., a Pennsylvania corporation
Brandywine Holdings II, Inc., a Pennsylvania corporation
Brandywine Holdings III, Inc., a Pennsylvania corporation
Brandywine Realty Services Corporation, a Pennsylvania corporation
Brandywine Main Street, LLC, a Delaware limited liability company
Brandywine Acquisitions, LLC, a Delaware limited liability company
1100 Brandywine, LLC, a Delaware limited liability company
Brandywine Leasing, LLC, a Delaware limited liability company
Brandywine Trenton Urban Renewal, LLC, a Delaware limited liability company
Brandywine New Brunswick Urban Renewal, LLC, a Delaware limited liability
company
Brandywine TBI, LLC, a Pennsylvania limited liability company
Brandywine TB II, LLC, a Pennsylvania limited liability company
Brandywine TB III, LLC, a Pennsylvania limited liability company
Brandywine Witmer, LLC, a Pennsylvania limited liability company
Brandywine Dominion, LLC, a Pennsylvania limited liability company
Brandywine P.M., LLC, a Pennsylvania limited liability company
Brandywine I.S., LLC, a Pennsylvania limited liability company
Brandywine F.C., LLC, a Pennsylvania limited liability company
Brandywine Norriton, LLC, a Pennsylvania limited liability company
Christiana Center Operating Company I, LLC, a Delaware limited liability company
Christiana Center Operating II, LLC, a Delaware limited liability company
Four Tower Bridge Associates, a Pennsylvania limited partnership
Five Tower Bridge Associates, a Pennsylvania limited partnership
Plymouth Meeting General Partnership, a Pennsylvania general partnership
1000 Chesterbrook Boulevard Partnership, a Pennsylvania general partnership
Interstate 202 General Partnership, a Pennsylvania general partnership
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 29,442
<SECURITIES> 0
<RECEIVABLES> 3,689
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,343
<PP&E> 586,414
<DEPRECIATION> 22,857
<TOTAL-ASSETS> 621,481
<CURRENT-LIABILITIES> 17,612
<BONDS> 163,964
0
0
<COMMON> 241
<OTHER-SE> 425,287
<TOTAL-LIABILITY-AND-EQUITY> 621,481
<SALES> 0
<TOTAL-REVENUES> 61,060
<CGS> 0
<TOTAL-COSTS> 45,772
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,079
<INCOME-PRETAX> 14,502
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,502
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.95
</TABLE>
