<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A No. 2
CURRENT REPORT
FILED PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 24, 1997
BRANDYWINE REALTY TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 1-9106 23-2413352
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) file number) Identification Number)
16 CAMPUS BOULEVARD, NEWTOWN SQUARE, PENNSYLVANIA 19073
(Address of principal executive offices)
(610) 325-5600
(Registrant's telephone number, including area code)
-1-
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 24, 1997, Brandywine Operating Partnership, L.P.
(the "Operating Partnership"), a limited partnership of which Brandywine Realty
Trust (the "Company") is the sole general partner, acquired a portfolio of five
office buildings (collectively, the "Acquired Properties") containing an
aggregate of approximately 290,000 net rentable square feet, as more fully
described below:
1. 1120 Executive Plaza, Mt. Laurel, New Jersey, containing
approximately 95,124 net rentable square feet. As of January 24, 1997, this
property was 95.44% leased to seven (7) tenants.
2. 1000 Howard Boulevard, Mt. Laurel Corporate Park, Mt.
Laurel, New Jersey, containing approximately 105,312 net rentable square feet.
As of January 24, 1997, this property was 99.56% leased to four (4) tenants.
3. Building 2, Executive Court Business Park, Evesham
Township, New Jersey, containing approximately 37,517 net rentable square feet.
As of January 24, 1997, this property was 95.07% leased to twelve (12) tenants.
4. Building 4A, Executive Court Business Campus, Evesham
Township, New Jersey, containing approximately 24,687 net rentable square feet.
As of January 24, 1997, this property was 90.61% leased to six (6) tenants.
5. Building 4(B), Executive Court Business Campus, Evesham,
New Jersey, containing approximately 26,982 net rentable square feet. As of
January 24, 1997, this property was 82.84% leased to two (2).
The net purchase price for the Acquired Properties totaled
$31,299,721. The Operating Partnership paid the purchase price as follows: (i)
$7,000,000 was paid through a borrowing under the revolving credit facility
previously established with Smith Barney Mortgage Capital Group, Inc., and
NationsBank, N.A., (ii) $12,156,557.72 was paid through an assumption by the
Operating Partnership of mortgage indebtedness encumbering 1120 Executive Plaza
and 1000 Howard Boulevard, Mt. Laurel Corporate Park, held by Sun Life Assurance
Company of Canada (U.S.) ("Sun Life"), and (iii) the balance, including closing
expenses, was paid with existing cash reserves.
The debt held by Sun Life encumbering 1120 Executive Plaza
carried an outstanding principal balance of $6,137,968 as of January 24, 1997,
with principal and accrued interest paid through December 31, 1996; the next
installment of principal and interest being due
-2-
<PAGE> 3
February 1, 1997. Interest is payable at the contract rate of 9.875% per annum,
with monthly installments of principal and interest payable in the amount of
$69,353 each. The loan matures on March 1, 2002, and requires the payment of a
specified premium for prepayment.
The debt held by Sun Life encumbering 1000 Howard Boulevard,
Mt. Laurel Corporate Park carried an outstanding principal balance of $6,018,589
as of January 24, 1997, with principal and accrued interest paid through
December 31, 1996, the next installment of principal and interest being due
February 1, 1997. Interest is payable at the contract rate of 9.25% per annum,
with monthly installments of principal and interest payable in the amount of
$66,897 each. The loan matures on November 1, 2004 and requires the payment of a
specified premium for prepayment. The Operating Partnership's assumption of the
aforesaid debt was specifically approved by Sun Life.
In consideration for purchasing the Acquired Properties, the
Company also acquired from MLCP Associates Limited Partnership an option to
acquire a parcel of land containing approximately 8 acres, located in the Mt.
Laurel Corporate Park, Mt. Laurel, New Jersey, immediately adjacent to the 1000
Howard Boulevard property described above. The purchase price for the option
property is $1,000,000, and the option may be exercised at any time during the
Initial Option Period which expires July 23, 1999. The Operating Partnership has
the right to extend the Option Period until June 30, 2000, by paying an
extension fee of $100,000, and upon such other terms and conditions as are set
forth in the Option Agreement dated as of January 24, 1997. The Option Property
is currently unimproved.
The sellers of the Acquired Properties, 1120 Associates
Limited Partnership, a Delaware limited partnership, by Palomino Corporation,
its general partner, MLCP Associates Limited Partnership, a Delaware limited
partnership, by MLCP General Corporation, its general partner, and Executive
Court Associates Limited Partnership, a Delaware limited partnership, by
Palomino Corporation, its general partner, are parties unaffiliated with the
Company and the Operating Partnership. The purchase price for the Acquired
Properties was determined by arm's-length negotiation between the Company and
the sellers.
-3-
<PAGE> 4
The table set forth below shows certain information regarding
rental rates and lease expirations for the Acquired Properties.
Scheduled Lease Expirations
(The Acquired Properties)
<TABLE>
<CAPTION>
Number of Leases Rentable Square
Expiring Within Footage Subject to Final Annualized Base Percentage of Total Final
Year of the Year at Expiring Rent From Acquired Annualized Base Rent From
Lease Acquired Leases at Acquired Properties Acquired Properties
Expiration Properties(1) Properties Under Expiring Leases(2) Under Expiring Leases
- ---------- ------------- ---------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
1997 6 54,007 998,887 21.06%
1998 5 7,919 90,949 1.92%
1999 5 14,493 160,401 3.38%
2000 6 137,021 2,432,347 51.27%
2001 7 23,209 288,133 6.07%
2002 2 13,306 268,110 5.65%
2003
2004
2005
2006 and 1 26,070 504,976 10.65%
thereafter
Total 32 276,025 4,743,803 100.00%
=========== ============== ============ =================
</TABLE>
- ---------------------
(1) A lease is considered to expire if, and at any time, it is terminable
by the tenant without payment of penalty or premium.
(2) "Final Annualized Base Rent" for each lease scheduled to expire
represents the cash rental rate in the final month prior to expiration
multiplied by twelve.
-4-
<PAGE> 5
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired. The Financial
Statements of the Columbia Acquisition Properties are included on pages F-13 to
F-16.
(b) Pro Forma Financial Information. Pro Forma financial information
is included on pages F-2 to F-12.
(c) Exhibits.
<TABLE>
<S> <C>
10.1* Agreement of Sale - 1120 Executive Plaza, Mount Laurel Corporate Park,
Executive Court and Option Parcel.
10.2* Assumption, Modification and Release Agreement - 1120 Executive
Plaza.
10.3* Assumption, Modification and Release Agreement - 1000 Howard
Boulevard, Mt. Laurel, New Jersey.
10.4* Option Agreement - Lot 8, Block 1104, Mount Laurel, New Jersey.
10.5* Sun Life Mortgage Note - 1120 Associates Limited Partnership.
10.6* Sun Life Mortgage and Security Agreement - 1120 Associates Limited
Partnership.
10.7* Sun Life Letter - 1120 Associates Limited Partnership.
10.8* Sun Life Mortgage Note - MLCP Associates Limited Partnership.
10.9* Sun Life Mortgage and Security Agreement - MLCP Associates Limited
Partnership.
10.10* Sun Life Letter - MLCP Associates Limited Partnership.
23.1 Consent of Arthur Andersen LLP
- -------------
* Previously filed as an exhibit to the Form 8-K dated January 24, 1997.
</TABLE>
-5-
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BRANDYWINE REALTY TRUST
Date: February 24, 1997 By: /s/ Gerard H. Sweeney
----------------------------------
Title: President and Chief Executive
Officer
-6-
<PAGE> 7
BRANDYWINE REALTY TRUST
INDEX TO FINANCIAL STATEMENTS
I. UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
* Pro Forma Condensed Consolidating Balance Sheet as of
September 30, 1996. . . . . . . . . . . . . . . . . . . . . . . F-3
* Pro Forma Condensed Consolidating Statements of Operations
for the Year Ended December 31, 1995, and the Nine-Months Ended
September 30, 1996. . . . . . . . . . . . . . . . . . . . . . . F-4
* Notes and Management's Assumptions to Unaudited Pro Forma
Condensed Consolidating Financial Information . . . . . . . . . F-6
II. COLUMBIA ACQUISITION PROPERTIES
* Report of Independent Public Accountants. . . . . . . . . . . . F-13
* Statements of Revenue and Certain Expenses for the Year Ended
December 31, 1996, the Year Ended December 31, 1995 (Unaudited),
and the Nine-Months Ended September 30, 1996 (Unaudited). . . . F-14
* Notes to Statements of Revenue and Certain Expenses . . . . . . F-15
F-1
<PAGE> 8
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following sets forth the pro forma condensed consolidating balance
sheet of Brandywine Realty Trust ("the Company) as of September 30, 1996, and
the pro forma condensed consolidating statements of operations for the year
ended December 31, 1995 and the nine-month period ended September 30, 1996.
The unaudited pro forma condensed consolidating financial information is
presented as if the following transactions had been consummated on September 30,
1996, for balance sheet purposes, and at the beginning of the period presented,
for purposes of the statements of operations:
- This pro forma condensed consolidating financial information
should be read in conjunction with the historical financial statements
of the Company, the SSI/TNC Properties, the LibertyView Building,
the Acquisition Properties and the Columbia Acquisition Properties
(defined below) and the related notes thereto. In management's opinion,
all adjustments necessary to reflect the effects of the transactions
consummated have been made.
- The Company issued 4,600,000 Common Shares at $16.50 per share, of which
600,000 shares related to the underwriter's exercise of the
over-allotment option (the "Offering").
- The $774,000 loan from the RMO Fund was satisfied by the Company by the
issuance of 46,321 Paired Units to the RMO Fund.
- The Company acquired its partnership interests in the Operating
Partnership.
- The Operating Partnership acquired the 19 SSI/TNC Properties in
connection with the SSI/TNC transaction.
- The Company acquired the LibertyView Building.
- In conjunction with the Offering the Company acquired the SERS
Properties, Delaware Corporate Center I, 700/800 Business Center Drive,
and 8000 Lincoln Drive (hereinafter referred to as the "Acquisition
Properties") for $26,444,000 of Preferred Shares, $3,225,000 of deferred
payments, $56,000 of warrants and $23,658,000 of cash.
- The Company contributed the net proceeds from the Offering and related
transactions to the Operating Partnership in exchange for 6,206,060
GP Units.
- The Company issued 636,363 Common Shares at $16.50 per share to SERS
Voting Trust, in exchange for $10.5 million and contribute such proceeds
to the Operating Partnership in exchange for 636,363 GP Units.
- Following the Offering and the application of the net proceeds therefrom,
the Operating Partnership repaid $49,805,000 of indebtedness secured
by the Properties, $764,000 of loans made by SSI to the Operating
Partnership and a $500,000 prepayment penalty.
- The Company issued 709,090 Common Shares at $16.50 per share in the
Morgan Stanley Private Placement and contributed the proceeds to the
Operating Partnership in exchange for 709,090 GP Units.
- The Operating Partnership acquired the Columbia Acquisition Properties
for $31,300,000 paid as follows: (i) $7,000,000 of borrowings under the
Company's revolving credit facility, (ii) $12,157,000 through an
assumption by the Operating Partnership of mortgage indebtedness
encumbering two of the office buildings and (iii) the $12,324,000
balance, including closing costs of $181,000 in cash.
The pro forma condensed consolidating financial information is unaudited
and is not necessarily indicative of what the actual financial position would
have been at September 30, 1996, nor does it purport to represent the future
financial position and the results of operations of the Company.
F-2
<PAGE> 9
\
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 1996 (NOTES 1 AND 2)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
BRANDYWINE
REALTY TRUST COLUMBIA PRO FORMA
HISTORICAL ACQUISITION ACQUISITION OFFERING PRO FORMA
CONSOLIDATED(A) PROPERTIES(B) PROPERTIES(K) ADJUSTMENTS CONSOLIDATED
--------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
Real estate investments, net........... $ 98,818 $ 52,218 $ 31,481 $ -- $182,517
Cash and cash equivalents.............. 1,859 (23,658) (12,324) 39,952 (C) 5,829
Escrowed cash.......................... 966 1,355 -- (145)(D) 2,176
Deferred costs, net.................... 2,290 -- -- 355 (E) 2,645
Other assets........................... 2,250 (190) -- -- 2,060
-------- ------- ------- -------- --------
Total assets................... $ 106,183 $ 29,725 $ 19,157 40,162 $195,227
======== ======= ======= ======== ========
LIABILITIES:
Mortgages and notes payable............ $ 83,020 $ 3,225 $ 19,157 (51,343)(F) $ 54,059
Other liabilities...................... 3,096 -- -- (745)(G) 2,351
-------- ------- ------- -------- --------
Total liabilities.............. 86,116 3,225 19,157 (52,088) 56,410
-------- ------- ------- -------- --------
MINORITY INTEREST........................ 8,758 -- -- -- 8,758
-------- ------- ------- -------- --------
Convertible Preferred Shares............. -- 26,444 -- -- 26,444
-------- ------- ------- -------- --------
BENEFICIARIES' EQUITY:
Common shares of beneficial interest... 9 -- -- 60(H) 69
Additional paid-in capital............. 20,443 -- -- 91,942(I) 112,385
Stock warrants......................... 658 56 -- 248(J) 962
Accumulated equity (deficit)........... (9,801) -- -- -- (9,801)
-------- ------- ------- ------- --------
Total beneficiaries' equity.... 11,309 56 -- 92,250 103,615
-------- ------- ------- ------- --------
Total liabilities and
beneficiaries' equity........ $ 106,183 $ 29,725 $ 19,157 $40,162 $195,227
======== ======= ======= ======= ========
</TABLE>
The accompanying notes and management assumptions are an integral part of these
statements.
F-3
<PAGE> 10
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 (NOTES 1 AND 3)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TOTAL
ADJUSTED
SSI/TNC
PROPERTIES
BRANDYWINE AND
REALTY LIBERTYVIEW TOTAL
TRUST BUILDING ADJUSTED COLUMBIA
HISTORICAL COMBINED ACQUISITION ACQUISITION PRO FORMA TOTAL PRO
CONSOLIDATED HISTORICAL PROPERTIES PROPERTIES OFFERING FORMA
(A) (B) (C) (L) ADJUSTMENT CONSOLIDATED
------------ ------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Base rents........................... $ 3,517 $ 8,948 $ 6,348 $ 5,032 $ -- $ 23,845
Tenant reimbursements................ 66 3,430 450 393 -- 4,339
Other................................ 83 3 -- 31 -- 117
------ ------- ------ ------- ------- -------
Total revenue................ 3,666 12,381 6,798 5,456 -- 28,301
------ ------- ------ ------- ------- -------
Operating expenses:
Interest............................. 793 6,700 258 1,680 (4,529)(D) 4,902
Depreciation and amortization........ 1,402 4,090 1,671 1,007 415(E) 8,585
Property expenses.................... 1,608 4,222 3,408 2,004 891(G) 12,133
General and administrative........... 682 670 -- -- (562)(H) 790
------ ------- ------ ------- ------- -------
Total operating expenses..... 4,485 15,682 5,337 4,691 (3,785) 26,410
------ ------- ------ ------- ------- -------
Income (loss) before minority
interest................... (819) (3,301) 1,461 765 3,785 1,891
Minority interest in income (loss)..... 5 (1,182) -- -- 1,370(F) 193
------ ------- ------ ------- ------- -------
Income (loss) before uncombined entity
and extraordinary items.............. (824) (2,119) 1,461 765 2,415 1,698
Equity income of management company.... -- 179 -- -- (107)(I) 72
------ ------- ------ ------- ------- -------
Income (loss) before extraordinary
items................................ (824) (1,940) 1,461 765 2,308 1,770
Income allocated to Preferred Shares... -- -- -- -- 2,248(J) 2,248
------ ------- ------ ------- ------- -------
Income (loss) allocated to
Common Shares........................ $ (824) $(1,940) $ 1,461 $ 765 $ 60 $ (478)
====== ======= ====== ======= ======= =======
Earnings (loss) per share before
extraordinary items:.................
Income (loss) allocated to Common
Shares............................ $ (1.32) $ (0.07)
====== =======
Weighted average number of shares
outstanding including share
equivalents.......................... 624,791 6,909,016
====== =========
</TABLE>
The accompanying notes and management assumptions are an integral part of these
statements.
F-4
<PAGE> 11
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996 (NOTES 1 AND 3)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TOTAL
ADJUSTED
SSI/TNC
PROPERTIES
BRANDYWINE AND
REALTY LIBERTYVIEW TOTAL
TRUST BUILDING ADJUSTED COLUMBIA
HISTORICAL COMBINED ACQUISITION ACQUISITION PRO FORMA TOTAL PRO
CONSOLIDATED HISTORICAL PROPERTIES PROPERTIES OFFERING FORMA
(A) (B) (C) (L) ADJUSTMENT CONSOLIDATED
------------ ------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Base rents........................... $ 4,063 $ 5,714 $ 5,828 $ 3,882 $ -- $ 19,487
Tenant reimbursements................ 467 2,511 277 178 -- 3,433
Other................................ 69 100 -- 90 -- 259
------- ------- ------ ------- -------- ---------
4,599 8,325 6,105 4,150 -- 23,179
------- ------- ------ ------- -------- ---------
Operating expenses:
Interest............................. 1,342 3,783 194 1,260 (2,874)(D) 3,705
Depreciation and amortization........ 1,173 2,819 1,253 755 311(E) 6,311
Property expenses.................... 1,867 2,831 2,724 1,395 605(G) 9,422
General and administrative........... 439 715 -- -- (567)(H) 587
------- ------- ------ ------- -------- ---------
Total operating expenses..... 4,821 10,148 4,171 3,410 (2,525) 20,025
------- ------- ------ ------- -------- ---------
Income (loss) before minority
interest................... (222) (1,823) 1,934 740 2,525 3,154
Minority interest in income (loss)..... (40) (513) -- 796(F) 243
------- ------- ------ ------- -------- ---------
Income (loss) before uncombined entity
and extraordinary items.............. (182) (1,310) 1,934 740 1,729 2,911
Equity income of management company.... 54 75 -- 115(I) 244
------- ------- ------ ------- -------- ---------
Income (loss) before extraordinary
items................................ $ (128) $(1,235) $ 1,934 $ 740 1,844 $ 3,155
Income (loss) allocated to Preferred
Shares............................... -- -- -- -- 1,686(J) 1,686(I)
------- ------- ------ ------- -------- ---------
Income (loss) allocated to Common
Shares............................... $ (128) $(1,235) $ 1,934 $ 740 $ 158 $ 1,469
======= ======= ====== ======= ======== =========
Earnings per common share before
extraordinary items..................
Income (loss) allocated to Common
Shares............................ $ (0.19) $ 0.21
======= =========
Weighted average number of shares
outstanding.......................... 676,801 6,908,053(K)
======= =========
</TABLE>
The accompanying notes and management assumptions are an integral part of these
statements.
F-5
<PAGE> 12
BRANDYWINE REALTY TRUST
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING
FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE AMOUNTS)
1. BASIS OF PRESENTATION:
Brandywine Realty Trust (the "Company") is a Maryland real estate
investment trust. As of September 30, 1996, the Company owned interests in 24
properties, consisting of 23 suburban office buildings in three states and one
industrial property. The Company is the sole general partner and had an
approximately 59% interest in Brandywine Operating Partnership, L.P. (the
"Operating Partnership"). The minority interests in the Operating Partnership
included TNC and other owners, and SSI, which had ownership interests of 31% and
10%, respectively.
These pro forma financial statements should be read in conjunction with
the historical financial statements and notes thereto of the Company, the
SSI/TNC Properties, the LibertyView Building, the Acquisition Properties and the
Columbia Acquisition Properties. In management's opinion, all adjustments
necessary to reflect the effects of the Offering and the Concurrent
Investments, the acquisitions of the SSI/TNC Properties, the LibertyView
Building, the Acquisition Properties and the Columbia Acquisition Properties by
the Company have been made.
2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET:
(A) Reflects the historical consolidated balance sheet of the Company as of
September 30, 1996.
Acquisition Properties
(B) Reflects the combined balance sheets of the acquisitions of the
Acquisition Properties as follows:
<TABLE>
<CAPTION>
DELAWARE 700/800
CORPORATE BUSINESS 8000
SERS CENTER CENTER LINCOLN
PROPERTIES(I) I(II) DRIVE(II) DRIVE(II) COMBINED
------------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Real estate investments, net........ $29,232 $ 12,733 $ 7,225 $ 3,028 $ 52,218
Cash and cash equivalents........... (862) (12,618) (7,175) (3,003) (23,658)
Other assets........................ -- (115) (50) (25) (190)
Escrowed cash....................... 1,355 -- -- -- 1,355
------- -------- ------- ------- --------
Total assets.............. $29,725 $ -- $ -- $ -- $ 29,725
======= ======== ======= ======= ========
Liabilities:
Mortgages and notes payable....... $ 3,225 $ -- $ -- $ -- $ 3,225
------- -------- ------- ------- --------
Total liabilities......... 3,225 -- -- -- 3,225
------- -------- ------- ------- --------
Convertible Preferred Shares........ 26,444 -- -- -- 26,444
------- -------- ------- ------- --------
Total beneficiaries'
equity.................. 56 -- -- -- 56
------- -------- ------- ------- --------
Total liabilities and
beneficiaries' equity... $29,725 $ -- $ -- $ -- $ 29,725
======= ======== ======= ======= ========
</TABLE>
- ---------------
(i) The purchase price for the SERS Properties consists of: (i) 481,818 Series A
Preferred Shares, convertible, under certain circumstances, into 1,606,060
Common Shares; (ii) two year warrants to purchase 133,333 Common Shares at
an exercise price of $25.50 per share and based on a $.42 per warrant value
(based on a modified Black Scholes calculation); and (iii) deferred payments
aggregating $3.8 million, of which $2.5 million is payable in June 1998 and
$1.3 million is due in December 1999. The Company recorded a $575 adjustment
to the purchase price to reflect the fair value of the deferred payments. In
addition, closing costs of $862 have been capitalized to real estate
investments, net.
F-6
<PAGE> 13
(ii) Reflects the Company's acquisition of these properties based upon the
purchase price plus closing costs as follows:
<TABLE>
<CAPTION>
PURCHASE CLOSING
PRICE COSTS TOTAL
-------- ------- -------
<S> <C> <C> <C>
Delaware Corporate Center I............................. $ 12,700 $ 33 $12,733
700/800 Business Center Drive........................... 7,100 125 7,225
8000 Lincoln Drive...................................... 3,000 28 3,028
------- ---- -------
$ 22,800 $ 186 $22,986
======= ==== =======
</TABLE>
Offering
(C) Pro forma cash and cash equivalents were determined as follows:
<TABLE>
<S> <C> <C>
- Net proceeds from this Offering and from the exercise of the
over-allotment option after Underwriting discounts, commissions
and expenses of $6,028............................................ $ 69,872
- Net proceeds from the Morgan Stanley Private Placement............ 11,700
- Net proceeds from the SERS Private Placement...................... 10,500
- Repayment of mortgages and notes payable including related
costs............................................................. (51,069)
- Payment of commitment fee on the Credit Facility.................. (875)
Other cash activities --
- Release of escrowed cash resulting from the repayment of mortgage
notes payable..................................................... 145
- Payment of accrued interest....................................... (321)
--------
- Net increase in cash and cash equivalents......................... $ 39,952
========
(D) Release of escrowed cash resulting from the repayment of mortgage
notes payable....................................................... $ (145)
========
(E) Reflects the net increase in deferred financing costs as follows:
- Credit Facility................................................... $ 875
- Elimination of previously deferred costs.......................... (424)
- Repayment of mortgage notes....................................... (96)
--------
$ 355
========
(F) Reflects the net decrease in mortgages and notes payable:
- Repayment of mortgages and notes payable from net proceeds of this
Offering.......................................................... $(50,569)
- Payment of the note payable to the RMO Fund through the issuance
of Paired Units................................................... (774)
--------
$(51,343)
========
(G) Reflects the payment of accrued interest in connection with the
repayment of mortgages and notes payable and payment of previously
deferred costs...................................................... $ (745)
========
(H) Par value of the Common Shares to be issued......................... $ 60
========
</TABLE>
F-7
<PAGE> 14
<TABLE>
<CAPTION>
(I) Reflects (i) the issuance of 4,600,000 Common Shares, par value of $.01 per
share, at the offering price of $16.50 per share; (ii) the issuance of 709,090
Common Shares, at $16.50 per share in the Morgan Stanley private placement;
(iii) the issuance of 636,363 Common Shares at the offering price of $16.50
per share to SERS Voting Trust in connection with the SERS Private Placement;
and (iv) the issuance of 46,321 Paired Units to the RMO Fund. The following
table sets forth the adjustments to additional paid-in capital:
<S> <C> <C>
- Net proceeds from the Offering of Common Shares after
underwriting discounts and commissions and Offering
expenses................................................. $69,872
Less: Adjusted par value of Common Shares at $.01 par...... (46) $ 69,826
-------
- Net proceeds from the Concurrent Investments net of par
value of $13............................................. 22,187
- Write-off of deferred financing costs.................... (96)
- Prepayment of note payable to the RMO Fund, net of par
value of $1.............................................. 525
- Prepayment penalty....................................... (500)
-------
Net increase in additional paid-in capital................. $ 91,942
=======
(J) Reflects the issuance of 46,321 warrants to the RMO Fund,
based on a $5.40 per warrant value (based on a modified
Black Scholes calculation)................................. $ 248
=======
(K) Reflects the combined balance sheets of the Columbia
Acquisition Properties.
</TABLE>
3. ADJUSTMENTS TO PRO FORMA CONDENSED
CONSOLIDATING STATEMENTS OF OPERATIONS:
(A) Reflects the historical consolidated operations of the Company.
SSI/TNC Transaction and LibertyView Building Acquisition
(B) Reflects the adjusted historical operations of the SSI/TNC Properties
which were acquired on August 22, 1996 and LibertyView Building which
was acquired on July 19, 1996. The historical operations of the
SSI/TNC Properties exclude the extraordinary gains on restructuring
of debt of $5,559 and $494 for the year ended December 31, 1995 and
the nine-month period ended September 30, 1996, respectively.
F-8
<PAGE> 15
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
TOTAL ADJUSTED
SSI/TNC
PROPERTIES
AND
SSI/TNC LIBERTYVIEW
PROPERTIES LIBERTYVIEW BUILDING
HISTORICAL BUILDING PRO FORMA COMBINED
COMBINED HISTORICAL ADJUSTMENTS HISTORICAL
---------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Revenue:
Base rents............................... $ 7,829 $1,119 $ -- $ 8,948
Tenant reimbursements.................... 2,895 535 -- 3430
Management fees.......................... 617 -- (617)(iv) --
Other.................................... 3 -- -- 3
--------- ------ -------- --------
Total revenue......................... 11,344 1,654 (617) 12,381
--------- ------ -------- --------
Operating expenses:
Interest................................. 5,855 -- 845(i) 6,700
Depreciation and amortization............ 4,336 -- (246)(ii) 4,090
Property expenses........................ 3,424 798 -- 4,222
General and administrative............... 1,108 -- (438)(iv) 670
--------- ------ ------- --------
Total operating expenses.............. 14,723 798 161 15,682
Income (loss) before minority
interest............................ (3,379) 856 (778) (3,301)
Minority interest in income (loss)......... -- -- (1,182)(iii) (1,182)(iii)
--------- ------ ------- --------
Income (loss) before uncombined entity and
extraordinary items...................... (3,379) 856 404 (2,119)
Equity income of management company........ -- -- 179 179
--------- ------ ------- --------
Income (loss) before extraordinary items... $ (3,379) $ 856 $ 583 $ (1,940)
======== ====== ======= ========
</TABLE>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
TOTAL
ADJUSTED
SSI/TNC
SSI/TNC PROPERTIES AND
PROPERTIES LIBERTYVIEW LIBERTYVIEW
HISTORICAL PROPERTY BUILDING
COMBINED HISTORICAL PRO FORMA COMBINED
THRU 8/22/96 THRU 7/19/96 ADJUSTMENTS HISTORICAL
------------ ------------ ----------- --------------
<S> <C> <C> <C> <C>
Revenue:
Base rents............................. $ 5,059 $ 655 $ -- $ 5,714
Tenant reimbursements.................. 2,250 261 -- 2,511
Management fees........................ 778 -- (778)(iv) --
Other.................................. 100 -- -- 100
-------- ------ ------- --------
Total revenue....................... 8,187 916 (778) 8,325
-------- ------ ------- --------
Operating expenses:
Interest............................... 3,322 -- 461(i) 3,783
Depreciation and amortization.......... 2,717 -- 102(ii) 2,819
Property expenses...................... 2,831 -- -- 2,831
General and administrative............. 599 399 (283)(iv) 715
-------- ------ ------- --------
Total operating expenses............ 9,469 399 280 10,148
Income (loss) before minority
interest.......................... (1,282) 517 (1,058) (1,823)
Minority interest in income (loss)....... -- -- (513)(iii) (513)
-------- ------ --------- --------
Income (loss) before uncombined entity
and extraordinary items................ (1,282) 517 (545) (1,310)
Equity income of management company...... -- -- 75(iv) 75
-------- ------ --------- --------
Income (loss) before extraordinary
items.................................. $ (1,282) $ 517 $ (470) $ (1,235)
======== ====== ======= ========
</TABLE>
F-9
<PAGE> 16
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JANUARY 1, 1996
TO THE
FOR THE RESPECTIVE
YEAR ENDED ACQUISITION
DECEMBER 31, 1995 DATE
----------------- ---------------
<S> <C> <C> <C>
(i) Reflects the increase in interest expense resulting
from:
- the Note payable to SSI (which bears interest at
prime) assuming a prime rate of 8.25%................. $ 33 $ 21
- the Mortgage and notes payable of the LibertyView
Building, with effective rates of 8% per annum........ 750 406
- the Note payable to the RMO fund (which bears interest
at prime) assuming a prime rate of 8.25%.............. 62 34
----- -----
$ 845 $ 461
===== =====
(ii) Reflects the (decrease) increase in depreciation and
amortization as follows:
- Depreciation of capitalized costs from the SSI/TNC
Transaction included in real estate investments....... $ 33 $ 24
- Depreciation of buildings acquired over a 25-year
useful life and tenant improvements and other
furniture, fixtures and equipment (FF&E) over five
years in general...................................... (563) (76)
- Depreciation of the LibertyView Building over a
35-year useful life................................... 244 132
- Amortization of deferred financing costs related to
the LibertyView Building.............................. 40 22
----- -----
$(246) $ 102
======= =====
</TABLE>
(iii) Minority interest in income (loss) has been reflected in accordance
with the terms of the Operating Partnership Agreement. As of
September 30, 1996, the Company owns 59% of the Operating
Partnership. The remaining 41% of the Operating Partnership is owned
by TNC, SSI and the other owners whose interests are reflected as
minority interest. The adjustments to record the income effect of
minority interest share of loss for the periods ended December 31,
1995, and September 30, 1996, in the pro forma statements of
operations were computed as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED NINE-MONTHS
DECEMBER 31, ENDED
1995 SEPTEMBER 30, 1996
------------ ------------------
<S> <C> <C>
SSI/TNC Properties loss before Minority
Interest............................... $ (3,379) $ (1,282)
Impact of pro forma adjustments.......... 497 31
-------- --------
Total loss..................... $ (2,882) $ (1,251)
======== ========
Pro forma minority interest in loss
(41%).................................. $ (1,182) $ (513)
======== ========
</TABLE>
(iv) Reflects the results of operations of the Management Company from
third party management services as accounted for using the equity
method.
Acquisition Properties
(C) Reflects the combined pro forma statements of operations of the
Acquisition Properties for the year ended December 31, 1995 and the
nine months ended September 30, 1996, respectively.
F-10
<PAGE> 17
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
DELAWARE 700/800
SERS CORPORATE BUSINESS 8000 LINCOLN PRO FORMA COMBINED
PROPERTIES(I) CENTER I(I) CENTER DRIVE(I) DRIVE(I) ADJUSTMENTS(II) TOTAL
------------- ----------- ---------------- ------------ --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Base rents................ $ 4,366 $ 410 $567 $1,005 $ -- $6,348
Tenant reimbursements..... 238 -- 188 24 -- 450
------ ----- ---- ---- -------- ------
4,604 410 755 1,029 -- 6,798
------ ----- ---- ---- -------- ------
Operating expenses:
Interest.................. -- -- -- -- 258(ii) 258
Depreciation and
amortization............ -- -- -- -- 1,671(iii) 1,671
Property expenses......... 2,236 502 305 365 -- 3,408
------ ----- ---- ---- -------- ------
Total operating
expenses.............. 2,236 502 305 365 1,928 5,337
------ ----- ---- ---- -------- ------
Income (loss) before
minority interest..... $ 2,368 $ (92) $450 $ 664 $(1,928) $1,461
====== ===== ==== ==== ======== ======
</TABLE>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
DELAWARE 700/800
SERS CORPORATE BUSINESS 8000 LINCOLN PRO FORMA COMBINED
PROPERTIES(I) CENTER I(I) CENTER DRIVE(I) DRIVE(I) ADJUSTMENTS(II) TOTAL
------------- ----------- ---------------- ------------ --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Base rents................ $ 3,435 $ 1,666 $533 $194 $ -- $5,828
Tenant reimbursements..... 213 -- 62 2 -- 277
------ ----- ---- ---- -------- ------
3,648 1,666 595 196 -- 6,105
------ ----- ---- ---- -------- ------
Operating expenses:
Interest.................. -- -- -- -- 194(ii) 194
Depreciation and
amortization............ -- -- -- -- 1,253(iii) 1,253
Property expenses......... 1,862 452 221 189 -- 2,724
------ ----- ---- ---- -------- ------
Total operating
expenses.............. 1,862 452 221 189 1,447 4,171
------ ----- ---- ---- -------- ------
Income (loss) before
minority interest..... $ 1,786 $ 1,214 $374 $ 7 $(1,447) $1,934
====== ===== ==== ==== ======== ======
</TABLE>
- ---------------
(i) Reflects the historical operations of the Acquisition Properties, excluding
certain expenses such as interest, depreciation and amortization,
professional costs, and other costs not directly related to the future
operations of the Acquisition Properties.
(ii) Reflects the interest on the note payable to the Seller of the SERS
Properties using an effective rate of 8%.
(iii) Reflects the depreciation of the Acquisition Properties using a 25-year
useful life.
F-11
<PAGE> 18
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE
DECEMBER NINE-MONTHS
31, ENDED
1995 SEPTEMBER 30, 1996
----------- ------------------
<S> <C> <C> <C>
Offering
(D) Reflects the net reduction of interest expense
associated with the mortgages and notes payable
assumed to be repaid using net proceeds from the
Offering. ....................................... $(4,529) $ (2,874)
----------- ----------
(E) Reflects the net increase in amortization of
deferred financing costs related to the mortgage
notes paid off and the new Credit Facility. ..... $ 415 $ 311
----------- ----------
(F) Reflects adjustment for minority interest in the
Operating Partnership of 6%. .................... $ 1,370 $ 796
----------- ----------
(G) To record management fees charged by the
Management Company. ............................. $ 891 $ 605
----------- ----------
(H) To transfer general and administrative expenses
to the Management Company. ...................... $ (562) $ (567)
----------- ----------
(I) To record share of income (loss) from the
Management Company............................... $ (107) $ 115
----------- ----------
(J) To record dividends on 481,818 Preferred Shares
at an annual rate of $4.67 per share. ........... $ 2,248 $ 1,686
----------- ----------
(K) Reflects the weighted average number of Common
Shares outstanding including share equivalents.
If all Units (509,856) were converted as of
January 1, 1995, the weighted average number of
shares outstanding would have been 6,818,872 and
6,817,910, respectively. ........................
Columbia Acquisition Properties
(L) Reflects the combined pro forma statements of
operations of the Columbia Acquisition Properties
for the year ended December 31, 1995 and the nine
months ended September 30, 1996. Revenues and
property expenses reflect historical operations,
excluding certain expenses which are not directly
related to the future operations of the
properties. Interest expense reflects pro forma
interest on assumed debt using an effective rate
of 7.5% on borrowings under the revolving credit
facility, and an effective rate of 9.5% on assumed
debt. Depreciation expense is presented using a
25-year useful life.
</TABLE>
F-12
<PAGE> 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Brandywine Realty Trust:
We have audited the combined statement of revenue and certain expenses of the
Columbia Acquisition Properties described in Note 1 for the year ended December
31, 1996. This financial statement is the responsibility of management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit 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 the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The combined statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the current report on Form 8-K of
Brandywine Realty Trust as described in Note 1 and is not intended to be a
complete presentation of the Columbia Acquisition Properties' revenue and
expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of the Columbia
Acquisition Properties for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
February 11, 1997
F-13
<PAGE> 20
COLUMBIA ACQUISITION PROPERTIES
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES (Notes 1, 2 and 3)
(In Thousands)
<TABLE>
<CAPTION>
FOR THE
NINE-MONTH
PERIOD ENDED
FOR THE YEAR ENDED SEPTEMBER 30,
DECEMBER 31 1996
-------------------------- ------------
1995 1996 (UNAUDITED)
----------- -------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Base rents (Note 2) $ 5,032 $ 5,146 $ 3,882
Tenant reimbursements 393 360 178
Lease termination income (Note 2) 31 376 90
-------- -------- --------
Total revenue 5,456 5,882 4,150
CERTAIN EXPENSES:
Maintenance and other operating expenses 932 931 684
Utilities 620 610 379
Real estate taxes 452 438 332
-------- ------- --------
Total certain expenses 2,004 1,979 1,395
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 3,452 $ 3,903 $ 2,755
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE> 21
COLUMBIA ACQUISITION PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BASIS OF PRESENTATION:
On January 24, 1997, Brandywine Operating Partnership, L.P. (the "Operating
Partnership"), a limited partnership of which Brandywine Realty Trust (the
"Company") is the sole general partner, acquired the Columbia Acquisition
Properties, a portfolio of five office buildings containing an aggregate of net
rentable area of approximately 290,000 square feet, which were 92.6% leased as
of December 31, 1996. The net purchase price for the Columbia Acquisition
Properties was $31.3 million. The purchase price was paid as follows: (i) $7
million from borrowings under the Company's revolving credit facility, (ii)
$12.2 million through an assumption by the Operating Partnership of mortgage
indebtedness encumbering two of the office buildings, and (iii) the balance,
including closing expenses, from existing cash reserves.
The combined statement of revenue and certain expenses reflects the operations
of the Columbia Acquisition Properties located in Mt. Laurel and Evesham
Township, New Jersey. This combined statement of revenue and certain expenses is
to be included in the Company's current report on Form 8-K as the acquisition
has been deemed significant pursuant to the rules and regulations of the
Securities and Exchange Commission.
The accounting records of the Columbia Acquisition Properties are maintained on
the accounting basis used for federal income tax purposes. Adjusting entries
have been made to present the accompanying financial statements in accordance
with generally accepted accounting principles. The accompanying financial
statements exclude certain expenses such as interest, depreciation and
amortization, and other costs not directly related to the future operations of
the Columbia Acquisition Properties.
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 expense during the reporting period. The
ultimate results could differ from those estimates.
F-15
<PAGE> 22
2. OPERATING LEASES:
During 1996, the lease with Consolidated Rail Corporation ("Conrail") was
amended twice in order to accommodate Conrail's request to vacate a total of
12,779 square feet of leased space. In consideration for these lease
modifications, Conrail paid the landlord $41,000 in 1996 and $335,000 on January
15, 1997. These amounts were recorded as lease termination income in the
accompanying combined statement of revenue and certain expenses.
Rental revenues earned under leases with Conrail, Computer Sciences Corporation
and Fleer Corporation were $1,784,000, $861,000 and $613,000, respectively. All
were greater than 10% of the total base rents in 1996.
The Columbia Acquisition Properties are leased to tenants under operating leases
with expiration dates extending to the year 2007. Future minimum rentals under
noncancelable operating leases, excluding tenant reimbursements of operating
expenses, as of December 31, 1996, were as follows:
<TABLE>
<S> <C>
1997 $4,515,000
1998 4,025,000
1999 3,859,000
2000 2,286,000
2001 794,000
Thereafter 2,728,000
</TABLE>
Certain leases also include provisions requiring tenants to reimburse the
Company for management costs and other operating expenses up to stipulated
amounts.
3. RELATED PARTY:
The Company has landscaping services performed by Allen Landscaping Co., an
entity owned by a partner of the Columbia Acquisition Properties. Total expenses
incurred for these services were $131,000 in 1996.
F-16
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of our
report dated February 11, 1997 in this Form 8-K/A on the combined statement of
revenue and certain expenses of Columbia Acquisition Properties. It should be
noted that we have not audited any financial statements of the Columbia
Acquisition Properties subsequent to December 31, 1996 or performed any audit
procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
February 22, 1997
