<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
For the quarterly period ended September 30, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934 (No Fee Required)
For the transition period from to
Commission file number 1-9106
Brandywine Realty Trust
(Exact name of registrant as specified in its charter)
Maryland 23-2413352
(State of Organization) (I.R.S. Employer Identification Number)
16 Campus Blvd, Suite 150, Newtown Square, PA 19073
(address of Principal executive offices) (Zip Code)
(610) 325-5600
(Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
A total of 2,733,554 Shares of Beneficial Interest were outstanding as of
October 31, 1996.
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BRANDYWINE REALTY TRUST
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996
(unaudited) and December 31, 1995
Consolidated Statements of Operations for the three months
ended September 30, 1996 and September 30, 1995 (unaudited)
Consolidated Statements of Operations for the nine months
ended September 30, 1996 and September 30, 1995 (unaudited)
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and September 30, 1995 (unaudited)
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities - Not applicable
Item 3. Defaults Upon Senior Securities - Not applicable
Item 4. Submission of Matters to a Vote of Security Holders -
Not applicable
Item 5. Other information
Item 6. Exhibits and Reports on Forms 8-K
Signatures
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
Item 1: Financial Statements
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
-------------------- -------------------
(Unaudited)
ASSETS
<S> <C> <C>
REAL ESTATE INVESTMENTS
Operating properties, at adjusted cost $ 106,744 $ 21,823
Accumulated depreciation (7,926) (8,114)
--------- --------
98,818 13,709
CASH AND CASH EQUIVALENTS 1,859 840
ESCROWED CASH 966 1,155
DEFERRED COSTS net of accumulated amortiza-
tion of $588 in 1996 and $507 in 1995 2,290 1,027
DUE FROM AFFILIATE 222 --
ACCOUNTS RECEIVABLE 1,102 261
INVESTMENT IN AFFILIATE 117 --
PREPAID EXPENSES AND OTHER ASSETS 809 113
--------- --------
Total assets $ 106,183 $ 17,105
========= ========
LIABILITIES AND BENEFICIARIES' EQUITY
MORTGAGE NOTES PAYABLE $ 81,482 $ 8,931
NOTES PAYABLE TO SHAREHOLDERS 1,538 --
ACCRUED INTEREST PAYABLE 529 60
TENANT SECURITY DEPOSITS AND DEFERRED RENTS 715 250
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 1,852 427
DISTRIBUTIONS PAYABLE -- 93
--------- --------
Total liabilities 86,116 9,761
--------- --------
MINORITY INTEREST 8,758 --
COMMITMENTS AND CONTINGENCIES
BENEFICIARIES' EQUITY
Shares of beneficial interest, $0.01 par value,
5,000,000 preferred shares
authorized, none outstanding; 75,000,000 common shares
authorized, 2,733,554 and 1,856,200
shares issued and outstanding at September 30,
1996 and December 31, 1995, respectively 28 19
Additional paid-in capital 20,424 16,772
Stock warrants 658 --
Cumulative deficit (3,214) (3,086)
Cumulative distributions (6,587) (6,361)
--------- --------
Total beneficiaries' equity 11,309 7,344
--------- --------
Total liabilities and beneficiaries' equity $ 106,183 $ 17,105
========= ========
</TABLE>
The accompanying notes and management's discussion and analysis of
financial condition and results of operations are an integral part of these
statements.
3
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(in thousands, except per share information)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
REVENUE:
Base rents $ 2,136 $ 837
Tenant reimbursement 419 17
Other income 17 31
----------- -----------
Total revenue 2,572 885
EXPENSES:
Interest 926 176
Depreciation and amortization 708 285
Utilities 230 148
Real estate taxes 235 102
Maintenance 394 143
Management fees 86 25
Other operating expenses 41 13
Administrative expenses 180 145
----------- -----------
Total expenses 2,800 1,037
LOSS BEFORE MINORITY INTEREST (228) (152)
MINORITY INTEREST IN LOSS OF AFFILIATES (45) --
----------- -----------
LOSS BEFORE EQUITY IN NET INCOME OF MANAGEMENT
COMPANY (183) (152)
EQUITY IN NET INCOME OF MANAGEMENT COMPANY 54 --
----------- -----------
NET LOSS $ (129) $ (152)
=========== ===========
PER SHARE DATA:
Earnings (loss) per share of beneficial interest $ (0.06) $ (0.08)
=========== ===========
Weighted average number of shares outstanding
including share equivalents 2,311,118 1,874,041
=========== ===========
</TABLE>
The accompanying notes and management's discussion and analysis of
financial condition and results of operations are an integral part of these
statements.
4
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(in thousands, except per share information)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
REVENUE:
Base rents $ 4,063 $ 2,608
Tenant reimbursements 467 29
Other income 69 54
----------- -----------
Total revenue 4,599 2,691
EXPENSES:
Interest 1,342 572
Depreciation and amortization 1,173 1,084
Utilities 491 397
Real estate taxes 432 297
Maintenance 776 407
Management fees 108 44
Other operating expenses 60 43
Administrative expenses 439 439
----------- -----------
Total expenses 4,821 3,283
LOSS BEFORE MINORITY INTEREST (222) (592)
MINORITY INTEREST IN LOSS OF AFFILIATES (40) --
----------- -----------
LOSS BEFORE EQUITY IN NET INCOME OF MANAGEMENT
COMPANY (182) (592)
EQUITY IN NET INCOME OF MANAGEMENT COMPANY 54 --
----------- -----------
NET LOSS $ (128) $ (592)
=========== ===========
PER SHARE DATA:
Earnings (loss) per share of beneficial interest $ (0.06) $ (0.32)
=========== ===========
Weighted average number of shares outstanding
including share equivalents 2,030,404 1,874,860
=========== ===========
</TABLE>
The accompanying notes and management's discussion and analysis of
financial condition and results of operations are an integral part of these
statements.
5
<PAGE> 6
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES :
NET LOSS $ (128) $ (592)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Minority interest in loss of affiliates (40) --
Depreciation and amortization 1,173 1,084
Equity in net income of management company (54) --
Changes in assets and liabilities, net of effect of acquisitions:
Increase in accounts receivable (452) (25)
(Increase) decrease in prepaid expenses and other assets 77 (124)
Increase (decrease) in accounts payable 302 82
Increase (decrease) in accrued mortgage interest payable 190 (38)
Increase (decrease) in other liabilities (181) (24)
-------- -------
Net cash provided by operating activities 887 363
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of SSI/TNC Properties, net of cash acquired 287 --
Acquisition of LibertyView Building (9,809) --
Decrease (Increase) in escrowed cash 323 (572)
Capital expenditures and leasing commissions paid (715) (371)
-------- -------
Net cash used in investing activities (9,914) (943)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock and warrants 1,003 --
Distributions paid to shareholders (319) (2,134)
Distributions paid to minority partner (7) --
Proceeds from notes payable to shareholders 1,392 --
Proceeds from mortgage notes payable 8,574 9,000
Repayment of mortgage notes payable (350) (6,942)
Costs associated with new mortgage loans (128) (250)
Costs associated with new ventures (198) --
Increase in tenant security deposits and other financing activities 79 --
-------- -------
Net cash provided by (used in) financing activities 10,046 (326)
-------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,019 (906)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 840 1,766
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,859 $ 860
======== =======
</TABLE>
SEE NOTE 4 FOR SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The accompanying notes and management's discussion and analysis of
financial condition and results of operations are an integral part of these
statements.
6
<PAGE> 7
BRANDYWINE REALTY TRUST
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. ORGANIZATION AND NATURE OF OPERATIONS AND BASIS OF PRESENTATION.
Brandywine Realty Trust (the "Company") was formed on February 26, 1986 as a
real estate investment trust. The Company utilized the proceeds from an initial
public offering in 1986 to acquire its interest in Brandywine Realty Partners
("Brandywine"). As of September 30, 1996 the Company continues to hold four of
the properties originally acquired plus an additional 20 properties
(collectively, the "Properties").
On July 19, 1996, the Company acquired a 122,000 square foot office building
(the "LibertyView Building") in Cherry Hill, New Jersey. On August 22, 1996, the
Company closed on the acquisition of 19 additional properties (the "SSI/TNC
Properties") and in the transaction (the "SSI/TNC Transaction") the Company
became the sole general partner of and obtained a 59% interest in Brandywine
Operating Partnership, L.P. (the "Operating Partnership") (see Note 4).
At September 30, 1996, the Company's portfolio was comprised of 23 suburban
office buildings and one industrial facility aggregating approximately 1.3
million net rentable square feet located primarily in the suburban Philadelphia
office and industrial markets. As of September 30, 1996, the Properties were
approximately 94.7% leased. Existing leases totaling approximately 61,000 square
feet or 4.6% of the total square feet are scheduled to expire during the
remaining three months of 1996 and approximately 111,000 square feet or 10.6% of
the total square feet are scheduled to expire during 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements have been prepared by the Company 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 pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of the Company, all adjustments
(consisting of normal recurring adjustments, except for the adjustments to
record the effects of the acquisitions of the LibertyView Building and the
SSI/TNC Properties (See Note 4)) necessary to present fairly the financial
position of the Company as of September 30, 1996, and the results of its
operations for the three and nine months ended September 30, 1996 and 1995 and
its cash flows for the nine months ended September 30, 1996 and 1995 have been
included. The results of operations for such interim periods are not necessarily
indicative of the results for the full year. For further information, refer to
the Company's consolidated financial statements and footnotes thereto included
in the Annual Report on Form 10-K/A for the year ended December 31, 1995.
Principles of Consolidation
The Company consolidates the accounts of Brandywine and the Operating
Partnership and reflects the remaining interests in Brandywine and the Operating
Partnership as Minority Interest. All significant intercompany accounts and
transactions have been eliminated in consolidation.
7
<PAGE> 8
Capitalization of Costs
In connection with the Company's pursuit of potential acquisitions of additional
real estate and third party debt investments, as of September 30, 1996 and
December 31, 1995, the Company had deposited $225,000 and $95,000, respectively,
with several unrelated parties. Such deposits are included in prepaid expenses
and other assets on the balance sheets as of September 30, 1996 and December 31,
1995.
Investment in Management Company
Investment in Brandywine Realty Services Corporation (the "Management Company")
in which the Operating Partnership owns all of the nonvoting Preferred Stock and
5% of the Common Stock is accounted for by the equity method.
Earnings (Loss) Per Share
Earnings (loss) per share is calculated based upon the weighted average shares
outstanding which were 2,030,404 and 1,874,860 for the nine months ended
September 30, 1996 and 1995, respectively. Earnings per share for 1996 and 1995
have been computed by considering any share equivalents applying the "treasury
stock" method and assuming that all options and warrants were exercised on date
of issue. The proceeds obtained from the exercise of any options or warrants
would be utilized to purchase outstanding shares at the average market price for
the primary earnings per share calculation and at the higher of the average
market price or the closing market price as of September 30, 1996 and September
30, 1995, respectively, for the fully diluted earnings per share calculation. No
such options or warrants have been exercised as of September 30, 1996. If these
options or warrants had been exercised, the per share results would not be
materially different from the primary earnings per share presented.
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
September 30, 1996 and December 31, 1995, cash and cash equivalents totaling
$1,859,000 and $840,000, respectively included tenant escrow deposits of
$616,000 and $198,000, respectively.
Reclassifications
Certain 1995 amounts have been reclassified to conform to the current year
presentation.
3. REAL ESTATE INVESTMENTS:
Real estate investments are carried at the lower of adjusted cost or estimated
net realizable value.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed of." This statement requires that long-lived
assets to be held and used by the Company be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. In performing the review for recoverability, the Company
should estimate the future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the
8
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asset, an impairment loss should be recognized. Measurement of an impairment
loss for these assets should be based on the fair market value of the asset. On
January 1, 1996, the Company adopted this statement. There was no effect from
adopting this statement on the Company's financial position or results of
operations.
4. ACQUISITIONS AND PRO FORMA DATA:
On July 19, 1996, the Company acquired the LibertyView Building for $10.7
million, of which $9.8 million was paid and the remainder is due to the seller
between July 1997 and December 1997. The effect of the acquisition was to
increase real estate investments by $10.7 million, including costs associated
with the acquisition and to increase mortgage indebtedness by $9.5 million.
On August 22, 1996, the Company closed on the acquisition of substantially all
of the real estate holdings of Safeguard Scientifics, Inc. ("SSI") and SSI's
real estate affiliate, The Nichols Company ("TNC"), a private real estate
development and management services company. In the SSI/TNC Transaction, the
Company acquired 19 properties at a purchase price of $75.5 million subject to
related mortgage debt of $63.6 million.
Upon the August 22, 1996 closing of the SSI/TNC Transaction, the Company became
the sole general partner of and holds a 59% interest in the Operating
Partnership. The following is a summary of the Operating Partnership units
issued in connection with the SSI/TNC Transaction:
<TABLE>
<CAPTION>
Company TNC SSI Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
General Partner interest 182(1) -- -- 182
Limited Partner interests:
Class A units -- 1,216,659(2) 403,818(2) 1,620,477
Class B units 715,818(1) -- -- 715,818
Class C units 1,600,000(3)(4) -- -- 1,600,000
--------- --------- --------- ---------
2,316,000 1,216,659 403,818 3,936,477
--------- --------- --------- ---------
Ownership interest 59%(4) 31% 10% 100%
--------- --------- --------- ---------
</TABLE>
(1) The Company issued 775,000 common shares of beneficial interest of the
Company, par value $.01 per share ("Common Shares") and Warrants for an
additional 775,000 Common Shares to SSI in exchange for SSI's ownership
interest ("Ownership Interest") in certain of the SSI/TNC Properties
and $426,250 in cash. The Company contributed this investment (other
than the cash) to the Operating Partnership and obtained the general
partnership interest and all of the Class B limited partnership
interest (715,818 Units) in the Operating Partnership. The Company
issued 699,289 Common Shares and Warrants in exchange for the SSI
Ownership Interest at a value of $3,937,000. The $5.63 per Common Share
and Warrant value is based on the range of trading prices of the Common
Shares at the time the SSI/TNC Transaction was announced ($4-7/8 and
$4-7/16 being the high and low sales prices on March 27, 1996, the last
full trading day prior to the public announcement) and based on a $0.70
per warrant value (based on a modified Black Scholes calculation). The
Company issued 75,711 Common Shares and Warrants at the same $5.63 per
unit in exchange for $426,250 in cash.
(2) Units issued to TNC, other owners and SSI resulting from the sale to
the Operating Partnership by TNC, SSI and other owners of substantially
all of their ownership interest in the SSI/TNC Properties. The
1,620,477 Class A Units include 132,967 Units to be issued by September
1999 in exchange for residual
9
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interests in the SSI/TNC Properties (of which 123,227 will be issued to
TNC and other Owners and 9,740 will be issued to SSI). SSI owns 40% of
the capital stock of TNC.
(3) Units issued to the Company at the closing of the SSI/TNC Transaction
in exchange for the contribution to the Operating Partnership of a
majority of the Company's general partnership interest in Brandywine.
(4) On August 23, 1997, the Company will contribute its remaining general
partnership interest in Brandywine in exchange for an additional
256,200 Class C Units.
The costs associated with the acquisition of the SSI/TNC Properties and the
issuance of Common Shares and other equity interests totaled $1,700,000. The
costs associated with the acquisition totaled $935,000 and have been capitalized
to real estate investments. The remaining costs attributed to issuing Common
Shares to SSI and other equity interests of the Company have been recorded as a
$620,000 reduction of additional paid-in capital and a $145,000 reduction of
minority interest. The acquisition of the SSI/TNC Properties by the Company in
exchange for 1,620,477 Class A Units at $5.50 per unit ($8,913,000) and 715,818
Class B Units at $5.50 per unit ($3,937,000) for a total consideration value of
$12,850,000 was recorded by the Company based upon fair value of the real estate
assets and other assets received net of total liabilities encumbering the
SSI/TNC Properties as of August 22, 1996 as follows (in thousands):
<TABLE>
<S> <C> <C>
Real estate investments acquired at fair value $74,903
Other assets acquired 2,723
Mortgage notes (63,576)
Other liabilities (1,200)
--------
(64,776)
-------
Total equity consideration $12,850
=======
</TABLE>
The SSI/TNC Transaction included the consolidation of the managements of the
Company and TNC and the expansion of the Company's Board of Trustees to include
designees of SSI and TNC. The new management company responsible for the
managing, leasing and developing of the Company's Properties is owned by the
Operating Partnership and a partnership comprised of four officers of the
Company. In addition, employment agreements were executed with four key
executives and provide for compensation aggregating $513,000 annually through
August 22, 1998 and the issuance of six-year warrants for an aggregate of
660,000 Common Shares at a per share price of $6.50.
5. INVESTMENT IN MANAGEMENT COMPANY
The investment in management company was acquired by the Operating Partnership
through an initial contribution totaling $25,000 on August 22, 1996 and consists
of a 100% ownership interest in the preferred stock and a 5% ownership interest
in the common stock of Brandywine Realty Services Company (the "Management
Company"). The Management Company is responsible for the managing, leasing and
developing of the Company's Properties. Total management fees paid by the
Company's Properties to the Management Company are included in management fee
expense in the accompanying statements of operations and amounted to $76,000 for
the period August 22, 1996 (inception) to September 30, 1996. The Management
Company also receives reimbursements of certain direct costs attributable to the
operation of the Properties. Such reimbursements are included in maintenance
expense in the accompanying statements of operations and amounted to $36,000 for
the period August 22, 1996 (inception) to September 30, 1996. Summary unaudited
financial information for the Management Company as of September 30, 1996 and
for the period from August 22, 1996 (inception) through September 30, 1996 is as
follows:
10
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<TABLE>
<CAPTION>
September 30, 1996
<S> <C>
Total assets $ 266,000
Total revenue $ 164,000
Net income $ 97,000
Allocated net income from Management
Company, net of $38,000 allocated
to minority interest $ 54,000
</TABLE>
6. MORTGAGE NOTES PAYABLE:
At December 31, 1995, the Company's mortgage loans totaled $8.9 million and were
cross collateralized by the Company's four Properties. The mortgage loans were
obtained through a refinancing on April 21, 1995. Such loans are due on April
15, 2001 and provide for a fixed rate of interest which, as of December 31, 1995
and September 30, 1996, was set at 8.75% and 9.00%, respectively. As of
September 30, 1996, such mortgage loans total $8.9 million.
In connection with the Company's acquisition of the LibertyView Building on July
19, 1996, the Company obtained two mortgage loans which at September 30, 1996
aggregate $9.4 million. Of these mortgage loans, $8.4 million bears interest at
a fixed rate of 8% per annum and matures on January 1, 1999. The second mortgage
loan totaling $1.0 million was provided by the seller with no interest payable
and principal payments due between July 1997 and December 1997. The Company
recorded a $104,000 adjustment to the purchase price to reflect the fair value
of the note payable to the seller. Both mortgage loans are secured by the
LibertyView Building.
In connection with the SSI/TNC Transaction, the Company acquired 19 properties
encumbered by mortgage debt totaling $63.6 million. As of September 30, 1996,
such mortgage loans aggregate $63.3 million and are due between July 1997 and
June 2004. The mortgage notes are collateralized by the SSI/TNC Properties and
the assignment of rents and generally require monthly principal and interest
payments. Of these mortgage notes payable, mortgage notes aggregating $30.5
million at September 30, 1996, bear fixed annual interest ranging from 7% to
9.25%. One mortgage note payable encumbering one of the SSI/TNC Properties
totals $1.6 million at September 30, 1996 and bears interest at a variable rate
of interest based upon prime plus 1%. Further, one mortgage note payable
encumbering certain of the SSI/TNC Properties totals $31.2 million and bears
interest at a variable rate of interest based upon the lender's commercial paper
rate plus 2.75%. Interest payments on this note are due monthly through
maturity, November 30, 2000, and minimum monthly principal payments are equal to
1/12 of 0.5% of the principal balance outstanding on the first day of each loan
year beginning December 1, 1996. Additional principal payments are due monthly
based on 100% of net cash flow from the Properties, as defined, including, among
other items, the deduction of $354,000 as a preference to the Company. No
principal payments were made from these participating interests in cash flows
during the nine months ended September 30, 1996. The loans are
cross-collateralized and cross-defaulted. The loan is further secured by a $1.5
million letter of credit provided by SSI, which security is scheduled to expire
in November 1996. The loans are subject to certain prepayment penalties, as
defined. As additional consideration, the lender may receive additional
contingent interest, as defined, at scheduled maturity or upon early loan
repayment. The percentage used to compute the additional contingent interest may
vary based upon the level of any additional drawdowns under the loan and was 25%
at September 30, 1996. No additional contingent interest was paid during the
nine months ended September 30, 1996.
Guarantees by SSI, TNC and certain other Class A Unit holders against certain
mortgage debt totaled $10,527,000 as of September 30, 1996. Further, at
September 30, 1996, two mortgage notes totaling $13,426,000 and $3,218,000, are
entitled to receive additional interest in the form of 50% and 80%,
respectively, of the cash flows, as defined. During the nine months ended
September 30, 1996, no additional interest expense was incurred.
The weighted average interest rate on the Company's mortgage loans for the nine
months ended September 30, 1996 and September 30, 1995 was 8.2% and 9.4%,
respectively.
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<PAGE> 12
7. ISSUANCE OF STOCK AND WARRANTS AND NOTES PAYABLE TO SHAREHOLDERS:
On June 21, 1996, an entity (the RMO Fund") controlled by Richard M. Osborne, a
shareholder and Trustee of the Company, made an investment in the Company in the
aggregate amount of $1,330,000 (the "Aggregate Investment"). The Company issued
59,949 units (each consisting of one Common Share and one warrant exercisable
for six years for an additional Common Share at an initial exercise price of
$6.50) in exchange for $338,000 of the Aggregate Investment. Of the $338,000
total equity investment, the stock warrants totaled $42,000 and were recorded
based on a $0.70 per warrant value (based on a modified Black Scholes
calculation). Of the Aggregate Investment, the balance of $992,000 was made in
the form of a loan (the "Loan") that will be subject to prepayment, under
certain circumstances, through the issuance by the Company of additional units.
Proceeds of the investment were used by the Company in its acquisition of the
LibertyView Building on July 19, 1996 (see Note 4).
The Loan is unsecured and under its terms, the principal sum outstanding from
time to time will bear interest at an annual rate equal to the prime rate of
interest, and interest will be payable quarterly in arrears, provided that the
Company will have the right to have such accrued interest added to the principal
balance of the Loan. Principal and accrued interest will be payable in full on
the third anniversary of the date of the Loan. Under certain circumstances, the
Company will be required to repay principal plus accrued interest on the Loan by
delivering to the RMO Fund additional units at $5.63 per unit, each unit
comprised of one share of Common Stock and an additional six-year warrant
exercisable for an additional share of Common Stock with an initial exercise
price of $6.50. In connection with the SSI/TNC Transaction, the Company was
required to pay down principal on the Loan totaling $239,000 through the
issuance of 42,405 units (each consisting of one Common Share and one warrant
exercisable for six years for an additional Common Share at an initial exercise
price of $6.50). Of the $239,000 equity issuance, the stock warrants totaled
$73,000 and were recorded based on $1.73 per warrant value (based on a modified
Black Scholes calculation).As of September 30, 1996, the remaining Loan totaled
$774,000, including accrued interest of $20,000.
In connection with the SSI/TNC Transaction, SSI advanced to the Operating
Partnership $400,000 to pay for a portion of the expenses incurred by the
Operating Partnership in connection with the SSI/TNC Transaction. As of
September 30, 1996, $400,000 was outstanding on such loan. Further in connection
with the SSI/TNC Transaction, SSI committed to loan the Operating Partnership
$700,000 to fund working capital requirements of the Operating Partnership,
subject to certain limitations. SSI's commitment will remain in effect until the
earlier of: (1) January 31, 1998; (ii) a qualified offering by the Company;
(iii) a refinancing by the Operating Partnership of indebtedness secured by one
or more of the SSI/TNC Properties which results in net proceeds sufficient to
repay amounts loaned to the Operating Partnership by SSI; or (iv) a liquidation
of the Operating Partnership. As of September 30, 1996, no amount was
outstanding on such loan. Each of the above loans bear interest at prime with
payments of interest only due quarterly. Further, the loans mature on the
earliest to occur of (i) the completion of a secondary stock offering by the
Company; (ii) a refinancing by the Operating Partnership of indebtedness secured
by one or more of the SSI/TNC Properties which results in net proceeds
sufficient to repay amounts loaned to the Operating Partnership by SSI; or (iii)
a liquidation of the Operating Partnership; (iv) July 31, 1999, if the Operating
Partnership has sufficient funds for repayment; or (v) December 31, 2001.
Certain tenant improvements and leasing costs associated with one of the SSI/TNC
Properties have been financed by a loan from SSI which is secured by a second
mortgage on the property. The loan provides for an aggregate balance of $460,000
of which $364,000 was outstanding as of September 30, 1996. The loan requires
interest payable monthly at the prime rate and matures on the earlier of: (i)
the completion of a secondary stock offering by the Company; (ii) a sale or
refinance of the property providing sufficient funds to satisfy all other
priority debts of the property; or (iii) July 31, 1999.
12
<PAGE> 13
8. BENEFICIARIES' SHAREHOLDERS' EQUITY:
For the year ended December 31, 1995, the Company declared distributions
totaling $0.55 per share. For the nine months ended September 30, 1996, the
Company declared distributions totaling $0.12 per share. On November 1, 1996,
the Company declared a distribution of $0.07 per share payable on November 22,
1996 to shareholders of record as of November 11, 1996.
9. STOCK OPTIONS AND WARRANTS:
In 1994 the Board of Trustees adopted a stock option compensatory plan
benefiting an executive officer of the Company covering 140,000 common shares of
beneficial interest. The plan includes options exercisable for 100,000 shares at
an exercise price of $6.50. All the remaining 40,000 shares subject to options
are vested. The exercise price of the 40,000 options was set at $3.80. The per
share exercise price of the options covering all 140,000 shares is subject to
reduction as proceeds from the sale of, or refinancing of debt secured by, any
of the Company's originally owned and currently remaining 4 properties are
distributed by the Company to shareholders by an amount equal to the amount so
distributed, from time to time, on account of each share. Accordingly, the per
share exercise prices of the options have been reduced to $4.77 and $2.07
respectively, as a result of distributions to shareholders from proceeds of 1994
property sales and the April 21, 1995 mortgage refinancing.
During the first nine months of 1996, the Company issued six-year warrants to
the RMO Fund exercisable for an aggregate of 102,354 Common Shares (see Note 7).
In connection with the SSI/TNC Transaction, the Company issued a six-year
warrant to SSI exercisable for an aggregate of 775,000 Common Shares at a per
share exercisable price of $6.50. Further, in connection with the employment
agreements entered into upon the SSI/TNC Transaction, six-year warrants were
granted to four executive officers exercisable for an aggregate of 660,000
Common Shares at a per share exercise price of $6.50 and additional six-year
warrants for an aggregate of 70,000 Common Shares at a per share exercise price
of $6.50 were granted to employees of the Company's affiliated management
company (see Note 4).
During the nine months ended September 30, 1996 and the year ended December 31,
1995, there were no options exercised, canceled or expired.
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", which establishes
financial accounting and reporting standards for stock-based employee
compensation plans. The statement encourages all entities to adopt a new method
of accounting to measure compensation cost of all employee stock compensation
plans based on the estimated fair value of the award at the date it is granted.
Companies are, however, allowed to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting, which only
requires footnote disclosures concerning this new accounting pronouncement.
Management of the Company has adopted the pro forma method of disclosure as
described above.
10. SUBSEQUENT EVENT:
The Company has filed a Form S-11 Registration Statement with the Securities and
Exchange Commission registering the offer and sale of Common Shares (the
"Offering"). The Company anticipates contributing the net proceeds to the
Operating Partnership, to repay debt and provide funds for acquisitions and
retain any excess for working capital needs. Costs associated with the proposed
Offering are included in deferred costs and other liabilities on the Company's
balance sheet as of September 30, 1996.
Subsequent to September 30, 1996, the Company entered into agreements to
purchase 13 properties ("Acquisition Properties") which contain an aggregate of
approximately 700,000 net rentable square feet located in the suburban
Philadelphia markets. Nine of the properties will be acquired from an unrelated
party for an aggregate purchase
13
<PAGE> 14
price of $30.3 million, consisting of: (i) 481,818 Series A preferred shares of
beneficial interest, par value $.01 per share, of the Company ("Preferred
Shares") that will be convertible into Common Shares, on a one-for-ten basis,
under certain circumstances; (ii) two-year warrants to purchase 400,000 Common
Shares at an exercise price of $8.50 per share; and (iii) deferred payments
aggregating $3.8 million. The purchase prices for the other four properties
aggregate $22.9 million and will be paid in cash to unrelated parties. In
connection with the Company's pursuit of these acquisitions, as of September 30,
1996, the Company had deposited $190,000 with third parties. Such deposits are
included in prepaid expenses and other assets on the Company's balance sheet as
of September 30, 1996.
14
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations Results of Operations
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 1996 to the Nine Months Ended
September 30, 1995. Rental revenue increased by approximately $1.9 million or
71.8% for the nine months ended September 30,1996 compared to the nine months
ended September 30,1995. This increase was primarily due to increased revenue
attributable to the Company's acquisitions of the Liberty View Building and the
SSI/TNC Properties during the third quarter of 1996.
Interest expense increased by $770,000 or 134.6% for the nine months ended
September 30, 1996 compared to the nine months ended September 30, 1995. This
increase was primarily due to interest on increased debt attributable to the
Company's acquisitions of the LibertyView Building and the SSI/TNC Properties
during the third quarter of 1996. Depreciation and amortization expense
increased by $89,000 or 8.2% for the nine months ended September 30, 1996
compared to the nine months ended September 30, 1995. This increase was
primarily due to increased depreciation and amortization attributable to the
Company's acquisitions of the Liberty View Building and the SSI/TNC Properties
during the third quarter of 1996, offset by the non-recurring write-off of
approximately $254,000 in 1995 of deferred loan costs associated with
refinancing of mortgage debt in April 1995. For the nine months ended September
30, 1996 compared to the nine months ended September 30, 1995, utilities expense
increased by $94,000 or 23.7%, real estate taxes increased by $135,000 or 45.5%,
maintenance expense increased by $369,000 or 90.7%, management fees increased by
$64,000 or 145.5%, and other operating expenses increased by $17,000 or 39.5%.
Each of these increases was primarily due to increased expenses attributable to
the Company's acquisitions of the LibertyView Building and the SSI/TNC
Properties during the third quarter of 1996.
Equity in net income of Management Company totaled $54,000 for the nine months
ended September 30, 1996 as compared to zero for the nine months ended September
30, 1995. This variance is wholly a result of the Company's formation of the
Management Company in connection with the SSI/TNC Transaction during the third
quarter of 1996.
As a result of the foregoing, the Company's consolidated net loss for the period
January 1, 1996 to September 30, 1996 was $128,000 or $0.06 per share as
compared to a consolidated net loss of $592,000 or $0.32 per share for the
period January 1, 1995 to September 30, 1995.
Comparison of the Three Months Ended September 30, 1996 to the Three Months
Ended September 30, 1995. Rental revenue increased by approximately $1.7 million
or 199.2% for the three months ended September 30, 1996 compared to the three
months ended September 30, 1995. This increase was primarily due to increased
revenue attributable to the Company's acquisitions of the LibertyView Building
and the SSI/TNC Properties during the third quarter of 1996.
Interest expense increased by $750,000 or 426.1% for the three months ended
September 30, 1996 compared to the three months ended September 30, 1995. This
increase was primarily due to interest on increased debt attributable to the
Company's acquisitions of the LibertyView Building and the SSI/TNC Properties
during the third quarter of 1996. Depreciation and amortization expense
increased by $423,000 or 148.4% for the three months ended September 30, 1996
compared to the three months ended September 30, 1995. This increase was
primarily due to increased depreciation and amortization attributable to the
Company's acquisitions of the LibertyView Building and the SSI/TNC Properties
during the third quarter of 1996. For the three months ended September 30, 1996
compared to the three months ended September 30, 1995 utilities expense
increased by $82,000 or 55.4%, real estate taxes increased by $133,000 or
130.4%, maintenance expense increased by $251,000 or 175.5%, management fees
increased by $61,000 or 244.0%, and other operating expenses increased by
$28,000 or 215.4%. Each of these increases was primarily due to increased
expenses attributable to the Company's acquisitions of the LibertyView Building
and the SSI/TNC Properties during the third quarter of 1996.
15
<PAGE> 16
Equity in net income of Management Company totaled $54,000 for the three months
ended September 30, 1996 as compared to zero for the three months ended
September 30, 1995. This variance is wholly a result of the Company's formation
of the Management Company in connection with the SSI/TNC Transaction during the
third quarter of 1996.
As a result of the foregoing, the Company's consolidated net loss for the period
July 1, 1996 to September 30, 1996 was $129,000 or $0.06 per share as compared
to a consolidated net loss of $152,000 or $0.08 per share for the period July 1,
1995 to September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has filed a Form S-11 Registration Statement with the Securities and
Exchange Commission registering the offer and sale of Common Shares (the
"Offering"). The Company anticipates contributing the net proceeds to the
Operating Partnership to repay debt and provide funds for acquisitions and
retain any excess for working capital needs. Costs associated with the proposed
Offering are included in deferred costs and other liabilities on the Company's
balance sheet as of September 30, 1996. Contemporaneously with the Offering, the
Company intends to enter into a credit facility. The credit facility is intended
to be used to finance the acquisition of properties, provide funds for tenant
improvements and capital expenditures and for general working capital purposes.
There can be no assurance that the Company will be able to close on the Offering
or to enter into the credit facility on terms satisfactory to it.
Subsequent to September 30, 1996, the Company entered into agreements to
purchase 13 properties ("Acquisition Properties") which contain an aggregate of
approximately 700,000 net rentable square feet located in the suburban
Philadelphia markets. Nine of the properties will be acquired from an unrelated
party for an aggregate purchase price of $30.3 million, consisting of: (I)
481,818 Series A preferred shares of beneficial interest, par value $.01 per
share, of the Company ("Preferred Shares") that will be convertible into Common
Shares, on a one-for-ten basis, under certain circumstances; (ii) two-year
warrants to purchase 400,000 Common Shares at an exercise price of $8.50 per
share; and (iii) deferred payments aggregating $3.8 million. The purchase prices
for the other four properties aggregate $22.9 million and will be paid in cash
to unrelated parties. In connection with the Company's pursuit of these
acquisitions, as of September 30, 1996, the Company had deposited $190,000 with
third parties. Such deposits are included in prepaid expenses and other assets
on the Company's balance sheet as of September 30, 1996.
As of September 30, 1996, the Company had approximately $81.5 million in total
debt outstanding consisting of twelve mortgage notes which have a weighted
average interest rate of 8.0%. The notes mature between June 1997 and June 2004.
The mortgage note on one of the Properties matures in June 1997, and totaled
approximately $1.6 million at September 30, 1996. The Company is currently
pursuing extending the maturity date or refinancing the mortgage. If the Company
does not extend or refinance this mortgage note, the Company could either repay
the debt using cash reserves or borrow on the credit facility after the closing
of the Offering.
The Company's primary sources of Cash Available for Distribution will be from
rental revenues and operating expense reimbursements from tenants and the
management services income (and dividends) from providing services to the
Properties and for third parties. The Company intends to use these funds to pay
operating expenses, pay debt service, fund recurring capital expenditures, make
acquisitions, fund tenant allowances and pay regular quarterly distributions to
shareholders.
The Company expects to meet its short-term liquidity requirements generally
through its working capital and net cash provided by operations. The Company
believes that its net cash provided by operations will be sufficient to allow
the Company to make distributions necessary to enable the Company to continue to
remain qualified as a REIT. The Company also believes that the foregoing sources
of liquidity will be sufficient to funds its short-term liquidity needs for the
foreseeable future.
16
<PAGE> 17
The Company expects to meet its long-term liquidity requirements such as
property acquisitions, scheduled debt maturities, renovations, expansions and
other non-recurring capital improvement through long-term secured and unsecured
indebtedness and the issuance of additional equity securities. The Company also
expects to use funds from the proposed Offering and credit facility to finance
acquisitions and capital improvements on an short term basis.
CASH FLOWS
Cash and cash equivalents were $1,859,000 and $840,000 at September 30,1996 and
December 31, 1995, respectively. The increase in cash and cash equivalents
primarily resulted from cash flows provided by operating and financing
activities of $887,000 and $10,046,000, respectively, in excess of cash used in
investing activities of $9,914,000, including the impact of the Company's
acquisitions of the Liberty View Building and the SSI/TNC Properties.
Net cash provided by operating activities increased for the nine months ended
September 30, 1995 compared to the nine months ended September 30, 1995 by
$524,000. The increase was primarily attributable to a reduction in the
Company's net loss resulting primarily from operations of the Company's
acquisitions of the LibertyView Building and the SSI/TNC Properties.
Net cash used in investing activities increased for the nine months ended
September 30, 1996 compared to the nine months ended September 30, 1995 by
$8,971,000. The increase was primarily attributable to the Company's acquisition
of the Liberty View Building. Net cash provided by financing activities
increased for the nine months ended September 30, 1996 compared to the nine
months ended September 30, 1995 by $10,372,000. The increase was primarily
attributable to the Company's acquisition of the Liberty View Building, the
issuance of stocks and warrants and proceeds from notes payable to shareholders.
FUNDS FROM OPERATIONS
Management generally considers Funds from Operations as one measure of REIT
performance. The Company adopted the NAREIT definition of Funds from Operations
in 1996 and has used this definition for all periods presented in this Form
10-Q. Funds from Operations is calculated as net income (loss) adjusted for
depreciation expense attributable to real property, amortization expense
attributable to capitalized leasing costs, tenant allowances and improvements,
gains on sales of real estate investments and extraordinary and nonrecurring
items. Funds from Operations should not be considered as an alternative to net
income as an indication of the Company's performance or to cash flows as a
measure of liquidity.
Funds from Operations for the nine months ended September 30, 1996 and September
30, 1995 is summarized in the following table (in thousands, except share and
per share date).
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
<S> <C> <C>
Net loss $ (128) $ (592)
Add
Depreciation attributable
to real property, net of
minority interest 832 691
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
<S> <C> <C>
Amortization attributable
to leasing costs, tenant
allowances and
improvements, net of
minority interest 133 100
Write-off of deferred loan
costs in connection with
refinancing -- 254
---------- ----------
Funds from Operations $ 837 $ 453
========== ==========
Weighted average Common Shares
outstanding 2,030,404 1,874,851
========== ==========
Funds from Operations, per share $ 0.41 $ 0.24
========== ==========
</TABLE>
On May 1, 1995 and July 11, 1996, the Company declared distributions of $0.06
and $0.06 per share, respectively. Subsequent to September 30, 1996, the Company
declared a distribution of $0.07 per share payable on November 22, 1996 to
shareholders of record as of November 11, 1996.
18
<PAGE> 19
Part II. Other Information
Item 1. Legal Proceedings
Neither the Trust nor Brandywine is a party to any material pending legal
proceedings as of September 30, 1996 nor as of the date of this Form 10-Q.
Item 5. Other Events
REGISTRATION STATEMENT
The Company has filed a Registration Statement on Form S-11 to
register the offer and sale of Common Shares (the "Offering"). There can be no
assurance that the Company will be able to close on the Offering.
THE SERS TRANSACTION
The Company has entered into an agreement with RAI Real Estate
Advisers, Inc. (the "Voting Trustee"), as voting trustee of a voting trust to be
established for the benefit of the Commonwealth of Pennsylvania State Employes'
Retirement System (the "SERS Voting Trust"), to purchase nine properties in
suburban Philadelphia (the "SERS Properties"). The SERS Properties aggregate
approximately 418,000 net rentable square feet, have an average age of
approximately 12 years and are located in the Market. As of September 30, 1996,
the SERS Properties were approximately 92.4% leased to 62 tenants. The SERS
Properties will be acquired by the Company for an aggregate purchase price of
$30.3 million, payable as follows: (I) by issuing to SERS preferred shares of
beneficial interest (the "Preferred Shares") (convertible under certain
circumstances into 4,818,180 Common Shares (the "Conversion Number")) at a price
per share of $5.50; (ii) deferred payments aggregating $3.8 million; and (iii)
by issuing to SERS two-year warrants to purchase 400,000 Common Shares at an
exercise price of $8.50 per share.
The Preferred Shares will entitle the holder to: (I) receive
distributions equal to the distributions payable in respect of a number of
Common Shares equal to the Conversion Number, (ii) vote, together with holders
of Common Shares, as a class, and to cast the number of votes equal to the
Conversion Number; and (iii) a liquidation preference equal to the greater of
(a) the amount as would have been payable with respect to the Common Shares into
which such Preferred Share would have been convertible immediately prior to the
liquidation had the condition to convertibility been satisfied and (b) the
product of $5.50 multiplied by the Conversion Number plus all declared but
unpaid dividends. The Company will be required to pay $2.5 million of the
deferred purchase price on June 30, 1998 and $1.3 million on December 31, 1999
in cash or, at the Company's option, through the issuance of additional
Preferred Shares that will be convertible, subject to certain conditions, into a
number of Common Shares equal to the applicable amount of the deferred purchase
price divided by the greater of the market value per share or the book value per
share.
Prior to Shareholder approval of the unlimited conversion of
Preferred Shares into Common Shares, Preferred Shares will be convertible into
up to 543,975 Common Shares. In the event that a Conversion Approval has not
occurred by July 1, 1997, holders of Preferred Shares will become entitled to
receive distributions equal to 120% of the distributions payable in respect of a
number of Common Shares equal to the Conversion Number. In the event that a
Conversion Approval has not occurred by July 1, 1998, holders of Preferred
Shares will have the right to require the Company to redeem their Preferred
Shares at the Redemption Price.
Concurrent with the closing of the Offering, the Company has
agreed to issue to the Voting Trustee, in a private placement, in exchange for
$10.5 million, a number of Common Shares equal to $10.5 million divided by the
price to public in the Offering being made by the Registration Statement.
19
<PAGE> 20
OTHER PENDING ACQUISITIONS
- The Company has signed an agreement of sale to
purchase the Delaware Corporate Center (One Righter
Parkway), a 104,828 net rentable square foot office
building, built in 1989 and located in New Castle
County, Delaware for $12.7 million in cash. The
building was built in 1989 and was 100% leased as of
September 30, 1996.
- The Company has signed an agreement of sale to
purchase two buildings in Horsham, Pennsylvania for
an aggregate purchase price of $7.1 million in cash.
The Buildings include: 700 Business Center Drive, a
30,773 net rentable square foot office building built
in 1986 and 800 Business Center Drive, a 51,236 net
rentable square foot office building built in 1986.
700 and 800 Business Center Drive were each 100%
leased as of September 30, 1986.
- The Company has signed an agreement of sale to
purchase 8000 Lincoln Drive, a 54,923 net rentable
square foot office building built in 1983 and located
in Evesham, New Jersey, for $3.0 million in cash. The
building was 100% leased as of September 30, 1996.
These pending acquisitions are subject to completion of
customary closing conditions (other than the completion of due diligence, which
has occurred) and, as a result, no assurance can be given that these, or any
other, acquisitions will be completed. If these acquisitions are consummated,
the Company's portfolio will consist of 37 properties aggregating approximately
2.0 million net rentable square feet.
SERS PRIVATE PLACEMENT
Concurrent with the closing of the Offering, the SERS Voting
Trust has agreed, subject to certain conditions, to purchase Common Shares from
the Company in a private placement at a price per share equal to the price to
public in the Offering being made by the Registration Statement, for an
aggregate purchase price of $10.5 million.
MORGAN STANLEY PRIVATE PLACEMENT
Concurrent with the closing of the Offering two investment
funds advised by Morgan Stanley Asset Management Inc. have agreed to purchase an
aggregate of 2,127,273 Common Shares directly from the Company in a private
placement at a purchase price of $5.50 per share for an aggregate purchase price
of $11.7 million.
20
<PAGE> 21
Item 6. Exhibits and Reports on Form 8-K
Exhibits: None
Reports on Form 8-K:
The Trust filed a report on Form 8-K dated August 22, 1996 regarding the
Company's acquisition of 19 properties in the closing of the SSI/TNC Transaction
on that date.
21
<PAGE> 22
BRANDYWINE REALTY TRUST
SIGNATURES OF REGISTRANT
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRANDYWINE REALTY TRUST
(Registrant)
Date: November , 1996 By: /s/ Gerard H. Sweeney
---------------------------
Gerard H. Sweeney, President and Chief Executive
Officer
(Principal Executive Officer)
Date: November , 1996 By: /s/ John P. Gallagher
---------------------------
John P. Gallagher, Executive Vice President
(Principal Financial and Accounting Officer)
22
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,859
<SECURITIES> 0
<RECEIVABLES> 1,102
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 106,744
<DEPRECIATION> (7,926)
<TOTAL-ASSETS> 106,183
<CURRENT-LIABILITIES> 2,381
<BONDS> 83,020
<COMMON> 28
0
0
<OTHER-SE> 11,281
<TOTAL-LIABILITY-AND-EQUITY> 106,183
<SALES> 4,530
<TOTAL-REVENUES> 4,599
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,479
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,342
<INCOME-PRETAX> (128)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
