<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 March 31, 1997
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 or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
16 Campus Boulevard, Newtown Square, Pennsylvania 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 9,570,062 Common Shares of Beneficial Interest were
outstanding as of May 5, 1997.
<PAGE>
BRANDYWINE REALTY TRUST
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheet as of March 31, 1997 (unaudited)
and December 31, 1996
Consolidated Statements of Operations for the three months
ended March 31, 1997 and March 31, 1996 (unaudited)
Consolidated Statements of Cash Flow for the three months
ended March 31, 1997 and March 31, 1996 (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 Form 8-K
Signatures
2
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. - Financial Statements
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
REAL ESTATE INVESTMENTS
Operating properties $ 220,090 $ 161,284
Accumulated depreciation (11,265) (9,383)
--------- ---------
208,825 151,901
CASH AND CASH EQUIVALENTS 18,398 18,279
ESCROWED CASH 1,612 2,044
ACCOUNTS RECEIVABLE 2,074 1,366
DUE FROM AFFILIATES 479 517
INVESTMENT IN MANAGEMENT COMPANY 116 --
DEFERRED COSTS AND OTHER ASSETS 4,850 4,219
--------- ---------
Total assets $ 236,354 $ 178,326
========= =========
LIABILITIES AND BENEFICIARIES' EQUITY
MORTGAGE NOTES PAYABLE $ 46,848 $ 36,644
ACCRUED INTEREST 257 202
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 3,223 3,119
DISTRIBUTIONS PAYABLE 4,064 2,255
EXCESS OF LOSSES OVER INVESTMENT IN MANAGEMENT
COMPANY -- 14
TENANT SECURITY DEPOSITS AND DEFERRED RENTS 2,157 1,324
--------- ---------
Total liabilities 56,549 43,558
--------- ---------
MINORITY INTEREST 6,356 6,398
--------- ---------
CONVERTIBLE PREFERRED SHARES $0.01 par value, 5,000,000
preferred shares authorized, 427,421 shares issued and outstanding 23,458 26,444
--------- ---------
BENEFICIARIES' EQUITY
Shares of beneficial interest, $0.01 par value,
25,000,000 common shares authorized, 9,570,062 shares
issued and outstanding 96 70
Additional paid-in capital 162,885 113,047
Share warrants 962 962
Cumulative deficit (1,198) (3,248)
Cumulative distributions (12,754) (8,905)
--------- ---------
Total beneficiaries' equity 149,991 101,926
--------- ---------
Total liabilities and beneficiaries' equity $ 236,354 $ 178,326
========= =========
</TABLE>
The accompanying notes are an integral part of
these condensed interim statements.
3
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(in thousands, except share and per share information)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------- ---------
<S> <C> <C>
Revenue:
Rents $ 6,999 $ 977
Tenant reimbursements 1,327 30
Other 272 38
----------- -----------
Total revenue 8,598 1,045
----------- -----------
Operating Expenses:
Interest 975 207
Depreciation and amortization 2,310 242
Property operating expenses 2,810 450
Management fees 315 12
Administrative expenses 169 122
----------- -----------
Total operating expenses 6,579 1,033
----------- -----------
Income before minority interest and equity in income
of management company 2,019 12
Minority interest in income (94) (2)
Equity in income of management company, net of minority interest 125 --
----------- -----------
Net income 2,050 10
----------- -----------
Income allocated to Preferred Shares 499 --
----------- -----------
Income allocated to Common Shares $ 1,551 $ 10
=========== ===========
PER SHARE DATA:
Earnings per share of beneficial interest
Income allocated to Common Shares $ 0.20 $ 0.02
=========== ===========
Weighted average number of shares outstanding
including share equivalents 7,776,607 625,648
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these condensed interim statements
4
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 2,050 $ 10
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Minority interest in income of affiliates 94 2
Depreciation and amortization 2,310 242
Equity in income of affiliate (125) --
Changes in assets and liabilities
(Increase) decrease in accounts receivable (709) (20)
Decrease in affiliate receivable 38 --
(Increase) decrease in other assets (103) 6
Increase (decrease) in accounts payable and accrued expenses 938 (21)
Increase (decrease) in accrued mortgage interest 55 --
Increase (decrease) in other liabilities 545 (23)
-------- --------
Net cash provided by operating activities 5,093 196
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of properties (58,143) --
Decrease (increase) in escrowed cash 432 395
Capital expenditures and leasing commissions paid (2,292) (439)
-------- --------
Net cash used in investing activities (60,003) (44)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares, net 45,534 --
Distributions paid to shareholders (2,127) (93)
Distributions paid to minority partners (54) (2)
Proceeds from mortgage notes payable 21,682 --
Repayment of mortgage notes payable (9,578) (26)
Costs associated with new mortgage loans and Credit Facility (549) (179)
Other 121 9
-------- --------
Net cash provided by (used in) financing activities 55,029 (291)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 119 (139)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,279 840
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,398 $ 701
======== ========
</TABLE>
The accompanying notes are an integral part of
these condensed interim statements.
5
<PAGE>
BRANDYWINE REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. ORGANIZATION AND NATURE OF OPERATIONS:
Brandywine Realty Trust (the "Company"), is a Maryland real estate
investment trust. As of March 31, 1997, the Company owns 50 properties
(collectively, the "Properties"). The Company's interest in 49 of the Properties
is held through Brandywine Operating Partnership, L.P. (the "Operating
Partnership"). The Company is the sole general partner of the Operating
Partnership and as of March 31, 1997, the Company held a 96.5% interest in the
Operating Partnership.
At March 31, 1997, the Company's portfolio aggregated approximately 2.6
million square feet available for lease for office and industrial purposes. As
of March 31, 1997, the overall occupancy rate of the Properties was
approximately 94.7%.
The Company's Properties are primarily located within the suburban
Philadelphia office and industrial market area. A downturn in business activity
in the greater Philadelphia market could negatively impact the Company. The
Company has fewer resources than many of the owners and developers it competes
against. The principal methods of competition include primarily the basis of
price, property quality and location.
2. GENERAL:
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 Company's acquisitions of 13 Properties during the
three months ended March 31, 1997 (See Note 3)) necessary to present fairly the
financial position of the Company as of March 31, 1997, and the results of its
operations and its cash flows for the three months ended March 31, 1997 and 1996
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 for the year ended
December 31, 1996.
Reclassifications
Certain 1996 amounts have been reclassified to conform to the current year
presentation.
Net Income (Loss) Per Share
Net income (loss) per share is based on the weighted average number of
common shares of beneficial interest ("Common Shares") outstanding adjusted to
give effect to common share equivalents. The Financial Accounting Standards
Board has recently issued Statements of Financial Accounting Standards
6
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No. 128, "Earnings per Share", which is effective for financial statements for
periods ending after December 15, 1997. This standard establishes new accounting
and disclosure for earnings per share ("EPS"). The EPS, as currently reported
for the three month period ended March 31, 1997 and 1996, are the same as the
basic EPS and diluted EPS required by the standard.
3. ACQUISITIONS OF REAL ESTATE INVESTMENTS:
On January 24, 1997, the Company acquired a portfolio of five office
buildings containing an aggregate of approximately 290,000 net rentable square
feet located in southern New Jersey (the "January Acquisition Properties"). The
net aggregate purchase price totaled approximately $31.3 million and was paid as
follows: (i) $7.0 million was paid through a borrowing under the revolving
credit facility previously established with Smith Barney Mortgage Capital Group,
Inc. and NationsBank, N.A. (the "Credit Facility"); (ii) approximately $12.1
million was paid through an assumption of mortgage indebtedness encumbering two
of the five acquired buildings; and (iii) the balance was paid with existing
cash reserves. Further, in connection with this transaction, the Company
obtained an option to acquire an unimproved parcel of land containing
approximately eight acres, located immediately adjacent to one of the acquired
buildings for a purchase price of $1.0 million. The Company may exercise the
option at any time through June 30, 1998 and may extend the option period until
June 30, 1999 by paying an extension fee of $100,000, subject to certain terms
and conditions.
In two separate transactions during March 1997, the Company acquired eight
office buildings (collectively the "March Acquisition Properties") for an
aggregate cash purchase price of $25.1 million. The eight office buildings
contain an aggregate of approximately 274,000 net rentable square feet. Seven of
the properties are located in Burlington County, New Jersey and one of the
properties is located in Chester County, Pennsylvania.
On March 7, 1997 the Company acquired a 6.8 acre parcel of undeveloped land
located in Montgomery County, Pennsylvania for a purchase price of $1.0 million
paid through a combination of $645,000 in cash and a promissory note to the
seller for $369,000. The promissory note is due without interest on the earlier
of the issuance of a building certificate in connection with the construction of
a second building on the land or March 1, 1998.
All acquisitions which occurred during the three months ended March 31,
1997 and the year ended December 31, 1996 were accounted for by the purchase
method. The results of operations for each of the acquisition properties have
been included from the respective purchase dates. The following unaudited pro
forma financial information of the Company for the three months ended March 31,
1997 and March 31, 1996 gives effect to the acquisition of 46 of the Company's
total Properties owned on March 31, 1997 as if the purchases had occurred on
January 1, 1997 and January 1, 1996, respectively. The pro forma financial
information is unaudited and is not necessarily indicative of the results which
actually would have occurred if the acquisitions had occurred on January 1, 1997
and January 1, 1996, respectively, nor does it purport to represent the results
of operations for future periods.
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
(Unaudited in thousands, except per
-----------------------------------
share amounts)
--------------
1997 1996
---- ----
<S> <C> <C>
Pro forma total revenues $9,693 $8,746
Pro forma net income (loss) allocated to Common Shares $1,916 $ 760
Pro forma net income (loss) per Common Share $ 0.25 $ 0.08
</TABLE>
4. MORTGAGE NOTES PAYABLE:
In connection with the Company's acquisition of the January Acquisition
Properties, the Company borrowed $7.0 million under the Credit Facility and
assumed two mortgage notes encumbering two of the January Acquisition
Properties. The two mortgage loans totaled $6.1 million and $6.0 million,
respectively, as of March 31, 1997. These two loans are due March 1, 2002 and
November 1, 2004, respectively, and bear interest at an annual rate of 9.875%
and 9.25%, respectively, with principal and interest payments due monthly. On
March 4, 1997, in connection with the 1997 Offering, discussed in Note 5 below,
the Company repaid the Credit Facility in full.
5. ISSUANCE OF SHARES AND WARRANTS
On March 4, 1997, the Company consummated an underwritten public offering
(the "1997 Offering") of 2,200,000 Common Shares at a price to the public of
$20-5/8 per share. Pursuant to exercise by the underwriters of their
over-allotment option, on March 17, 1997, the Company issued an additional
175,500 Common Shares at a price to the public of $20-5/8 per share. The Company
used the proceeds from this public offering to fund the purchase of additional
office properties and land parcels, to repay certain indebtedness and for
working capital purposes.
On March 19, 1997, 54,397 of the then issued and outstanding total of
481,818 preferred shares of beneficial interest, designated Series A Convertible
Preferred Shares ("Preferred Shares") were converted by the holder into 181,323
Common Shares.
6. DISTRIBUTIONS:
On March 31, 1997, the Company declared a distribution of $0.35 per share
payable on April 30, 1997 to shareholders of record as of April 15, 1997.
For the three months ended March 31, 1997, the Company declared distributions
allocable to preferred shareholders totaling $499,000.
8
<PAGE>
7. SUBSEQUENT EVENTS
On April 18, 1997, the Company acquired Greentree Executive Campus, a
multi-building garden office complex, and Five Eves Drive, a three story midrise
office building, for an aggregate cash purchase price of approximately $14.5
million. The properties are located in Burlington County, New Jersey and consist
of an aggregate of approximately 202,000 net rentable square feet.
On April 3, 1997, the Company purchased 201 and 221 King Manor Drive, two
industrial facilities, for a cash purchase price of approximately $3.5 million.
The properties are located in Montgomery County, Pennsylvania and consist of an
aggregate of approximately 125,000 net rentable square feet.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 1997 to the Three Months
Ended March 31, 1996. Primarily as a result of the Company's acquisition program
during 1996 and 1997, total revenue increased by approximately $7.6 million or
723% and property operating and management fee expenses increased by
approximately $2.7 million or 576% for the three months ended March 31, 1997 as
compared to the three months ended March 31, 1996.
Depreciation and amortization expense increased by approximately $2.1
million or 855% for the three months ended March 31, 1997 as compared to the
three months ended March 31, 1996 primarily as a result of the Company's
acquisition of real estate during 1996 and 1997. Interest expense increased by
approximately $768 million or 371% primarily as a result of additional
indebtedness associated with certain of the Company's acquisitions.
Administrative expenses increased by $47,000 or 38.5% primarily as a result of
the increase in management personnel associated with the Company's growth.
As a result of the foregoing, the Company's consolidated net income was
approximately $2.1 million, and, after income allocated to Preferred Shares of
approximately $499,000, the Company's income allocated to Common Shares was
approximately $1.6 million or $0.20 per share for the three months ended March
31, 1997 compared to consolidated net income of $10,000 or $0.02 per share for
the three months ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997 and December 31, 1996, cash and cash equivalents
totaled $18.4 million and $18.3 million, respectively. During the first quarter
of 1997, net cash provided by operating activities totaled approximately $5.1
million. On March 4, 1997, the Company consummated the 1997 Offering generating
net proceeds of approximately $45.5 million. During the first quarter of 1997,
the Company used its cash sources primarily: (i) to acquire additional
Properties totaling approximately $58.1 million using cash of approximately
$36.5 million and approximately $21.6 million in additional indebtedness; (ii)
to repay approximately $9.6 million in debt; (iii) to fund approximately $2.1
million in distributions paid to shareholders; and (iv) to fund approximately
$2.3 million in capital expenditures and leasing commissions, using cash of
approximately $1.7 million and additional borrowings and escrowed cash reserves
totaling $607,000 available for such expenditures.
As of March 31, 1997, the Company had approximately $46.8 million of debt
outstanding consisting of mortgage loans totaling $43.5 million and deferred
payments totaling $3.8 million (which amount has been discounted, as of March
31, 1997 to $3.3 million based on its terms). The mortgages mature between
December 1997 and November 2004. For the three months ended March 31, 1997, the
weighted average interest on the Company's debt was 8.0%.
The Company's Properties require periodic investments of capital for tenant
related capital expenditures and for general capital improvements. For the three
months ended March 31, 1997, such expenditures totaled $2.3 million. Sources
covering these expenditures included approximately $115,000 in financing
pursuant to an existing commitment from the lender on one of the Properties and
approximately $492,000 in escrowed cash reserves in connection with eleven of
the Company's Properties.
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 from providing services to third parties. The Company
intends to use these funds to pay operating expenses, pay debt
10
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service, fund recurring capital expenditures, fund tenant allowances and pay
regular quarterly distributions to shareholders.
For the quarter ended March 31, 1997, the Company's distributions totaled
$0.35 per Common Share amounting to approximately $1.6 million. In addition,
during this period, the Company's distributions to Preferred Shares totaled
approximately $499,000.
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 fund its short-term liquidity needs for the
foreseeable future.
The Company expects to meet its long-term liquidity requirements, such as
for property acquisitions, scheduled debt maturities, renovations, expansions
and other non-recurring capital improvements, through long-term secured and
unsecured indebtedness and the issuance of additional equity securities. The
Company also expects to use funds available under the Credit Facility to finance
acquisitions and capital improvements on an interim basis.
CASH FLOWS
Comparison of the Three Months Ended March 31, 1997 to the Three Months Ended
March 31, 1996. Net cash provided by operating activities increased in the three
months ended March 31, 1997 by $4.9 million in comparison to the three months
ended March 31, 1996. The increase was primarily attributable to operating
activities of the 46 Properties acquired by the Company during 1996 and through
March 31, 1997.
Net cash used in investing activities increased in the three months ended
March 31, 1997 by $60.0 million in comparison to the three months ended March
31, 1996. The increased cash use was primarily attributable to the Company's
acquisition of 13 Properties during the first three months of 1997 and capital
expenditures and leasing costs associated with the Company's Properties.
Net cash provided by financing activities increased by $54.7 million in the
three months ended March 31, 1997 in comparison to the three months ended March
31, 1996. The increase was primarily attributable to net proceeds received in
connection with the 1997 Offering and proceeds from mortgage notes in connection
with certain of the Properties acquired by the Company during 1997, offset, in
part, by the repayment of certain mortgage loans and distributions 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 the financial
statements included herein. 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.
11
<PAGE>
Funds from Operations for the three months ended March 31, 1997 and March
31, 1996 is summarized in the following table (in thousands, except share and
per share data).
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
FUNDS FROM OPERATIONS:
<S> <C> <C>
Income before minority interest and equity in income of management $ 2,019 $ 12
company
Add (Deduct):
Depreciation attributable to real property 1,969 202
Amortization attributable to leasing costs, tenant allowances
and improvements 179 32
Equity in income of management company 125 --
Minority interest not attributable to unit holders (11) (2)
----------- -----------
Funds from Operations before Minority Interest $ 4,281 $ 244
=========== ===========
Weighted average Common Shares outstanding, including common share
equivalents (1) 9,758,066 625,648
=========== ===========
Funds from Operations, per share $ 0.44 $ 0.39
=========== ===========
</TABLE>
(1) Includes the weighted average effect of 1,424,737 Common Shares issuable
upon the conversion of the Preferred Shares, the weighted average effect of
399,567 Common Shares issuable upon the conversion of 399,567 Operating
Partnership units and 762,104 Common Shares reserved for issuance upon the
exercise of outstanding warrants and options.
12
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The Company is not currently involved (nor was it involved at March 31,
1997) in any material legal proceedings nor, to the Company's knowledge, is any
material legal proceeding currently threatened against the company, other than
routine litigation arising in the ordinary course of business, substantially all
of which is expected to be covered by liability insurance.
Item 5. Other Events
The statements contained herein which are not historical facts may be
forward looking statements based on economic forecasts, budgets and other
factors which, by their nature, involve known risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results implied by such
statements. In particular, among the factors that could cause actual results to
differ materially are the following: business conditions and the general
economy; limited geographic concentration of the Company's Properties;
competitive factors; and interest rates and other risks inherent in the real
estate business. For future information on factors that could impact the Company
and the statements contained herein, reference is made to the Company's other
filings with the Securities and Exchange Commission.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.25 Separation Agreement between the Company and John P. Gallagher
27 Financial Data Schedule
(b) Reports on Form 8-K:
During the first quarter ended March 31, 1997, and through May 12, 1997, the
Company filed the following:
(i) a Current Report on Form 8-K/A No. 1 dated February 5, 1997
(amending Items 2 and 7, as originally filed) regarding the Company's
acquisition of nine commercial properties, containing an aggregate of
approximately 418,000 square feet and located in suburban Philadelphia. Such
Form 8-K/A No. 1 incorporated (x) an audited combined statement of revenue and
certain expenses of the acquired properties for the year ended December 31,
1995; (y) unaudited combined statements of revenue and certain expenses of the
acquired properties for the nine months ended September 30, 1995 and 1996; and
(z) pro forma financial information as of September 30, 1996 and for the year
ended December 31, 1995 and the nine months ended September 30, 1996.
(ii) a Current Report on Form 8-K dated February 7, 1997 (reporting
under Items 2 and 7) regarding the Company's acquisition of a portfolio of five
office buildings, containing an aggregate of approximately 290,000 square feet
and located in southern New Jersey.
(iii) a Current Report on Form 8-K/A No. 1 dated February 13, 1997
(amending Item 7, as originally filed) regarding the Company's acquisition of a
portfolio of five office buildings, containing an aggregate of approximately
290,000 square feet and located in southern New Jersey. Such Form 8-K/A No. 1
incorporated (x) an audited combined statement of revenue and certain expenses
of the acquired properties for the year ended December 31, 1996; (y) unaudited
combined statements of revenue and certain expenses of the acquired properties
for the year ended December 31, 1995 and the nine months ended September 30,
1996; and (z) pro forma financial information as of September 30, 1996 and for
the year ended December 31, 1995 and the nine months ended September 30, 1996.
(iv) a Current Report on Form 8-K/A No. 2 dated February 24, 1997
(amending Items 2 and 7, as originally filed) regarding the Company's
acquisition of a portfolio of five office buildings, containing an
13
<PAGE>
aggregate of approximately 290,000 square feet and located in southern New
Jersey. Such Form 8-K/A No. 2 incorporated (x) an audited combined statement of
revenue and certain expenses of the acquired properties for the year ended
December 31, 1996; (y) unaudited combined statements of revenue and certain
expenses of the acquired properties for the year ended December 31, 1995 and the
nine months ended September 30, 1996; and (z) pro forma financial information as
of September 30, 1996 and for the year ended December 31, 1995 and the nine
months ended September 30, 1996.
(v) a Current Report on Form 8-K dated February 27, 1997 (reporting
under Items 5 and 7) regarding the Company having entered into the underwriting
agreement in connection with the 1997 Offering and the Company having entered
into several agreements to acquire eight office buildings and two industrial
facilities.
(vi) a Current Report on Form 8-K dated March 18, 1997 (reporting under
Items 2, 5 and 7) regarding (a) the Company's acquisition of seven office
properties (the "Main Street Properties"), located in southern New Jersey; (b)
the Company's acquisition of a three story office building located in Chester
County, Pennsylvania; and (c) the Company's consummation of the 1997 Offering.
(vii) a Current Report on Form 8-K/A No. 1 dated April 29, 1997
(amending Item 7, as originally filed) regarding (a) the Company's acquisition
of the Main Street Properties, located in southern New Jersey. Such Form 8-K/A
No. 1 incorporated (x) an audited combined statement of revenue and certain
expenses of the Main Street Properties for the year ended December 31, 1996; and
(y) pro forma financial information as of December 31, 1996 and for the year
ended December 31, 1996.
(viii) a Current Report on Form 8-K dated April 18, 1997 (reporting
under Items 5 and 7) regarding the Company's acquisition of 201 and 221 King
Manor Drive, two industrial facilities, containing an aggregate of approximately
125,000 square feet and located in Montgomery County, Pennsylvania.
(ix) a Current Report on Form 8-K dated May 1, 1997 (reporting under
Items 5 and 7) regarding the Company's acquisitions of a 6.8 acre parcel of
undeveloped land located in Montgomery County, Pennsylvania, the Greentree
Executive Campus, a multi-building garden office complex located in Burlington
County, New Jersey and Five Eves Drive, a mid-rise office building, located in
Burlington County, New Jersey.
(x) a Current Report on Form 8-K dated May 9, 1997 (reporting under
Item 5) regarding the Company's earnings for the three months ended March 31,
1997 and certain other financial information.
14
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BRANDYWINE REALTY TRUST
SIGNATURES OF REGISTRANT
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, thereunto duly authorized.
BRANDYWINE REALTY TRUST
(Registrant)
Date: May 12, 1997 By: /s/ Gerard H. Sweeney
------------ ----------------------
Gerard H. Sweeney, President
and Chief Executive Officer
(Principal Executive Officer)
Date: May 12, 1997 By: /s/ Mark S. Kripke
------------ -------------------
Mark S. Kripke, Chief Financial Officer
and Secretary
(Principal Financial and Accounting Officer)
15
<PAGE>
Exhibit 10.25
- ------------------------------------------------------------------------------
SEPARATION AGREEMENT
- ------------------------------------------------------------------------------
THIS SEPARATION AGREEMENT is dated as of March 21, 1997 and is
made by and between JOHN P. GALLAGHER ("Gallagher"), an individual who resides
at 783 Valley Road, Blue Bell, Pennsylvania 19422, as well as each and every
dependent, heir, executor, legal representative and assign of Gallagher, and
BRANDYWINE REALTY TRUST ("BRT"), a Maryland real estate investment trust, having
its headquarters at 16 Campus Boulevard, Newtown Square, Pennsylvania 19073,
together with each and every one of its predecessors, successors (by merger or
otherwise), parents, subsidiaries (including but not limited to Brandywine
Realty Services Corporation ("BRSC")), affiliates, divisions, trustees,
directors, officers, employees and agents, whether present or former.
WHEREAS, Gallagher entered into an Employment Agreement dated
as of July 31, 1996 (the "Employment Agreement") with BRSC;
WHEREAS, BRSC assigned its rights and delegated its
obligations under the Employment Agreement to BRT;
WHEREAS, the parties intend that Gallagher's employment with
BRT will terminate on April 1, 1997 and that the Employment Agreement will
terminate on that date;
WHEREAS, Gallagher and BRT desire to part on an amicable
basis.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, Gallagher and BRT, acting of their own free will and
intending to be legally and irrevocably bound, hereby agree as follows:
1. Employment Termination. Gallagher agrees that his
employment with BRT is terminated, effective as of April 1, 1997, and Gallagher
resigns from all positions with BRT, effective as of April 1, 1997. Without
limiting the generality of the foregoing, all rights and obligations of BRT and
Gallagher under the Employment Agreement shall terminate, effective as of April
1, 1997. Gallagher waives any and all rights to reinstatement and/or
consideration for future employment with BRT.
2. Salary Continuation. BRT agrees to pay Gallagher salary
continuation in the total amount of One Hundred Four Thousand Five Hundred
Dollars ($104,500.00) for the period from April 1, 1997 to August 22, 1998. This
salary continuation will be paid in the same manner and with the same federal,
state and local tax withholdings as Gallagher's current salary.
3. COBRA. For the one-year period commencing April 1, 1997,
BRT will provide Gallagher with family coverage under the Company's group
medical plan subject to the
<PAGE>
terms of the plan as in effect from time to time. Any required employee
contribution to the medical plan premium will be deducted from Gallagher's
salary continuation payments. Gallagher's employment, for purposes of
continuation of benefits for himself and eligible dependents at his (or their)
own cost under COBRA, shall terminate on April 1, 1997. Accordingly, Gallagher's
statutory right under COBRA to continue participation in BRT's group medical
coverage for a period of up to eighteen (18) months, at his own cost, shall
terminate 18 months after April 1, 1997. Gallagher agrees to promptly notify BRT
by written notice to the President and Chief Executive Officer of BRT if he
becomes eligible to participate in a comparable medical plan with a new
employer.
4. Transfer of Partnership Interest. Gallagher agrees to
transfer all of his right, title and interest as a partner in Brandywine Realty
Services Partnership ("BRSP") to BRSP on April 1, 1997 in exchange for $25.00
and shall, on such date, withdraw as a partner of BRSP.
5. Confidentiality.
(a) Gallagher agrees that he will not disclose or
use, for his direct or indirect benefit or the direct or indirect benefit of any
third party, any Confidential Information (as hereinafter defined) of BRT.
"Confidential Information" means any and all proprietary or non-public
information of BRT, including without limitation, information as to BRT's
business and financial strategy and BRT's relationships with actual and
prospective sellers or buyers of real estate or tenants of real estate.
Confidential Information does not include information that is generally known in
the real estate industry.
(b) Gallagher agrees that he will, effective as of
April 1, 1997: (i) discontinue all use of Confidential Information; (ii) return
to BRT all material furnished by BRT that contains Confidential Information; and
(iii) erase any Confidential Information contained in computer memory under his
ownership or control.
(c) Gallagher agrees to return to BRT on April 1,
1997 any documents and material whatsoever relating to the business of BRT. He
also agrees that he will not make or retain copies of the foregoing.
6. Waiver and Release of Claims. Gallagher completely
releases, relinquishes, waives and discharges BRT, its officers, trustees,
directors, employees, agents, successors and assigns from all claims,
liabilities, demands and causes of action, known or unknown, filed or
contingent, which he may have or claim to have against BRT as of the date of
termination of his employment arising out of or in any way related to his
employment with BRT or the termination of that employment. Gallagher agrees that
he has executed this Agreement on his own behalf, and also on behalf of his
dependents, heirs, agents, representatives and assigns. This release includes,
but is not limited to, a release of any rights or claims he may have under:
-2-
<PAGE>
(a) the Age Discrimination in Employment Act, which
prohibits age discrimination in employment;
(b) Title VII of the Civil Rights Act of 1964, as
amended by the Civil Rights Act of 1991, which prohibits discrimination in
employment based on race, color, national origin, religion or sex;
(c) the Americans with Disabilities Act, which
prohibits discrimination on the basis of a covered disability;
(d) the Employer Retirement and Income Security Act,
which prohibits discrimination on the basis of entitlement to certain benefits;
(e) any other federal, state or local laws or
regulations prohibiting employment discrimination;
(f) breach of any express or implied contract claims;
(g) wrongful termination or any other tort claims,
including claims for attorney's fees, whether based on common law or otherwise;
(h) all claims to acquire or exercise any other
rights or entitlements of stock, warrants, options, or other securities of BRT;
provided that nothing contained herein shall terminate or restrict Gallagher's
rights under the warrants held by him on the date hereof exercisable for an
aggregate of 40,000 common shares of beneficial interest of BRT at any time
before 5:00 p.m. on August 22, 2002, as more fully provided in said warrants.
BRT agrees to release, relinquish, waive and discharge
Gallagher of all claims, liabilities, demands and causes of action, known or
unknown, which it may have or claim to have against Gallagher as of the date of
the signing of this Agreement. This release does not waive BRT's right to
enforce claims arising under this Agreement or any claims which by law may not
be waived.
7. Cooperation. Gallagher agrees to cooperate with BRT and its
executives in facilitating an orderly transition with respect to matters
relating to his responsibilities as a BRT executive, and, in furtherance of such
agreement, agrees to provide, at no additional compensation, reasonable
consultation to BRT's Chairman of the Board, President and Chief Executive
Officer and such other executives, including BRT's Chief Financial Officer, as
they may identify from time to time. Gallagher agrees that he will not in the
future voluntarily assist any individual or entity in preparing, or prosecuting
any action or proceeding against BRT, its trustees, directors, officers,
employees, or affiliates, including but not limited to, any administrative
agency claims. Gallagher also agrees that he will, at BRT's expense and without
-3-
<PAGE>
unreasonably interfering with his future employment obligations, cooperate with
and assist BRT in its defense of any such action or proceeding.
8. Arbitration of Disputes Under this Agreement. The parties
agree that any and all disputes arising out of the performance or breach of this
Agreement or any promise or covenant herein shall be resolved by submission to
arbitration in Philadelphia, Pennsylvania under, and in accordance with, the
rules and procedures of the American Arbitration Association.
9. Enforcement. All remedies at law and equity shall be
available for the enforcement of this Agreement. This Agreement may be pleaded
as a full bar to the enforcement of any claim in any way related to or arising
out of Gallagher's employment with BRT and/or the termination of his employment
to the extent of the waivers set forth in Paragraph 6 above.
All sums due to Gallagher hereunder shall be paid without
reduction for compensation earned by Gallagher in any subsequent employment and
shall be payable to Gallagher or his estate notwithstanding Gallagher's death,
disability or any other factor.
10. Opportunity to Review and Right to Revoke. Gallagher
acknowledges that he is acting of his own free will, that he has been afforded
twenty-one (21) days to read and review the terms of this Agreement, that he has
been advised to, and has had an opportunity to, seek the advice of counsel, and
that he is voluntarily entering into this Agreement with full knowledge of its
respective provisions and effects. Gallagher also acknowledges that he has seven
(7) days following his signing of this Agreement to revoke this Agreement in
which case BRT will have no obligation to make any payment to him.
11. Contractual Effect. The parties understand and acknowledge
that the terms of this Agreement are contractual and not a mere recital.
Consequently, they expressly consent that this Agreement shall be given full
force and effect according to each and all of its express terms and provisions,
and that it shall be binding upon the respective parties as well as their heirs,
executors, successors, administrators and assigns.
12. Governing Law. This Agreement shall be governed by the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Gallagher and BRT each acknowledge that
they are acting of their own free will, that they have had a sufficient
opportunity to read and review the terms of this Agreement, they have each
received the advice of their respective counsel with
-4-
<PAGE>
respect hereto, and that they have voluntarily caused the execution of this
Agreement and by reference herein as of the day and year set forth below.
/s/ John P. Gallagher Witness: /s/ Anthony A. Nichols, Sr.
------------------------------- ------------------------------------
John P. Gallagher
On behalf of Brandywine Realty Trust:
By: /s/ Gerard H. Sweeney Witness: /s/ Anthony A. Nichols, Sr.
------------------------------- ------------------------------------
Title: President and Chief Executive Officer
JOINDER
Pursuant to Paragraph 4 of the above agreement, Brandywine Realty
Services Partnership ("BRSP") hereby pays to John P. Gallagher the sum of $25.00
in exchange for his entire right, title and interest as a partner in BRSP.
BRANDYWINE REALTY SERVICES
PARTNERSHIP
By: /s/ Gerard H. Sweeney
------------------------------------
Gerard H. Sweeney, a General Partner
-5-
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<ARTICLE> 5
<CIK> 0000790816
<NAME> BRANDYWINE REALTY TRUST
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 20,010
<SECURITIES> 0
<RECEIVABLES> 2,553
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,563
<PP&E> 220,090
<DEPRECIATION> 11,265
<TOTAL-ASSETS> 236,354
<CURRENT-LIABILITIES> 7,544
<BONDS> 0
0
23,458
<COMMON> 149,991
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 236,354
<SALES> 0
<TOTAL-REVENUES> 8,598
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<INTEREST-EXPENSE> 975
<INCOME-PRETAX> 2,050
<INCOME-TAX> 2,050
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<EXTRAORDINARY> 0
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<EPS-PRIMARY> 0.20
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</TABLE>
