<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, 2000
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
14 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 36,138,110 Common Shares of Beneficial Interest were
outstanding as of May 2, 2000.
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BRANDYWINE REALTY TRUST
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999
Consolidated Statements of Operations for the three
months ended March 31, 2000 and March 31, 1999
Consolidated Statements of Cash Flow for the three
months ended March 31, 2000 and March 31, 1999
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
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PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Real estate investments:
Operating properties $ 1,851,256 $ 1,828,097
Accumulated depreciation (141,683) (125,744)
----------- -----------
1,709,573 1,702,353
Cash and cash equivalents 8,452 5,692
Escrowed cash 13,154 10,814
Accounts receivable, net 28,565 25,893
Due from affiliates 9,515 7,361
Investment in management company, at equity 241 228
Investment in real estate ventures, at equity 38,166 35,682
Deferred costs, net 18,295 17,960
Other assets 24,285 23,933
----------- -----------
Total assets $ 1,850,246 $ 1,829,916
=========== ===========
LIABILITIES AND BENEFICIARIES' EQUITY
Mortgage notes payable $ 465,512 $ 462,809
Borrowings under Credit Facility 416,824 376,825
Accounts payable and accrued expenses 17,403 17,596
Distributions payable 20,066 18,982
Tenant security deposits and deferred rents 17,225 18,871
----------- -----------
Total liabilities 937,030 895,083
Minority interest 145,494 145,941
Preferred Shares, 8.75% Series B Preferred Shares, $0.01 par value;
shares authorized-10,000,000; issued and outstanding-4,375,000
in 2000 and 1999 94,841 94,841
Commitments and Contingencies
Beneficiaries' equity:
Preferred Shares, 7.25% Series A Preferred Shares, $0.01 par value;
shares authorized-10,000,000; issued and outstanding-750,000
in 2000 and 1999 8 8
Common Shares of beneficial interest, $0.01 par value;
shares authorized-100,000,000; issued and outstanding-35,707,473
in 2000 and 36,372,590 in 1999 356 364
Additional paid-in capital 754,849 769,165
Share warrants 908 908
Cumulative earnings 81,506 73,892
Cumulative distributions (164,746) (150,286)
----------- -----------
Total beneficiaries' equity 672,881 694,051
----------- -----------
Total liabilities and beneficiaries' equity $ 1,850,246 $ 1,829,916
=========== ===========
</TABLE>
The accompanying condensed notes are integral part of these
consolidated financial statements.
3
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------------------
2000 1999
-------- --------
<S> <C> <C>
Revenue:
Rents $ 60,531 $ 59,439
Tenant reimbursements 8,956 8,734
Other 1,957 2,610
-------- --------
Total revenue 71,444 70,783
Operating Expenses:
Property operating expenses 16,363 15,987
Real estate taxes 6,284 6,199
Interest 15,954 18,762
Depreciation and amortization 16,563 17,065
Amortization of deferred compensation costs 497 360
Management fees 3,309 3,141
Administrative expenses 358 403
-------- --------
Total operating expenses 59,328 61,917
Income before equity in income of management company, equity in
income of real estate ventures and minority interest 12,116 8,866
Equity in income of management company 13 33
Equity in income of real estate ventures 643 149
-------- --------
Income before minority interest 12,772 9,048
Minority interest (2,182) (1,850)
-------- --------
Net income 10,590 7,198
Income allocated to Preferred Shares (2,977) (680)
-------- --------
Income allocated to Common Shares $ 7,613 $ 6,518
======== ========
Earnings per Common Share:
Basic $ 0.21 $ 0.17
======== ========
Diluted $ 0.21 $ 0.17
======== ========
</TABLE>
The accompanying condensed notes are an integral part of these
consolidated financial statements.
4
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited and in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------------------------
2000 1999
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,590 $ 7,198
Adjustments to reconcile net income to net cash from
operating activities:
Minority interest 2,182 1,850
Depreciation and amortization 17,378 17,769
Straight-line rent (1,872) (2,175)
Equity in income of management company (13) (33)
Equity in income of real estate ventures (643) (149)
Amortization of deferred compensation costs 497 360
Amortization of discounted notes payable 21 41
Changes in assets and liabilities:
Accounts receivable (800) (5,303)
Due from affiliates (2,154) (1,172)
Deferred costs and other assets (352) 1,969
Accounts payable and accrued expenses 133 (414)
Tenant security deposits and deferred rents (1,646) 3,915
-------- -------
Net cash from operating activites 23,321 23,856
Cash flows from investing activities:
Acquisitions of properties (5,250) -
Sales of properties - 23,161
Capital expenditures (17,917) (8,742)
Investment in real estate ventures (1,841) (3,658)
Increase in escrowed cash (2,340) (4,396)
Leasing costs (1,605) (1,926)
-------- -------
Net cash from investing activities (28,953) 4,439
Cash flows from financing activites:
Proceeds from notes payable, Credit Facility 39,999 -
Repayment of notes payable, Credit Facility - (150,000)
Proceeds from mortgage notes payable 8,235 195,695
Repayments of mortgage notes payable (6,067) (9,565)
Debt financing costs (161) (1,482)
Repurchases of Common Shares (14,632) -
Distributions paid to shareholders (16,352) (15,540)
Distributions paid to minority partners (2,630) (2,993)
-------- -------
Net cash from financing activities 8,392 16,115
-------- -------
Increase in cash and cash equivalents 2,760 44,410
Cash and cash equivalents at beginning of period 5,692 13,075
-------- -------
Cash and cash equivalents at end of period $ 8,452 $ 57,485
======== ========
</TABLE>
The accompanying condensed notes are an integral part of these
consolidated financial statements.
5
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
1. THE COMPANY
-----------
Brandywine Realty Trust (collectively with its subsidiaries, the "Company") is a
self-administered and self-managed real estate investment trust (a "REIT")
active in acquiring, developing, redeveloping, leasing and managing office and
industrial properties. As of March 31, 2000, the Company's portfolio included
199 office properties, 51 industrial facilities and one mixed-use property
(collectively, the "Properties") that contained an aggregate of approximately
16.6 million net rentable square fee. A majority of the Properties were located
in the office and industrial markets surrounding Philadelphia (Northern and
Western Suburbs and Wilmington, Delaware) and Southern and Central New Jersey.
The balance of the Properties were primarily located in Northern New Jersey and
Long Island, New York; and Northern and Richmond, Virginia. As of March 31,
2000, the Company also held economic interests in twelve office real estate
ventures (the "Real Estate Ventures").
The Company's interest in its assets 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, 2000, held an
approximate 87.7% interest in the Operating Partnership and was entitled to
approximately 94.4% of the Operating Partnership's income after distributions to
holders of Series B Preferred Units. The Operating Partnership holds a 95%
economic interest in Brandywine Realty Services Corporation (the "Management
Company") through its ownership of 100% of the Management Company's non-voting
preferred stock and 5% of its voting common stock. As of March 31, 2000, the
Management Company was managing and leasing properties containing an aggregate
of approximately 20.5 million net rentable square feet, of which 16.5 million
net rentable square feet related to properties owned by the Company or subject
to purchase options held by the Company, and approximately 4.0 million net
rentable square feet related to properties owned by unaffiliated third parties.
Minority interest relates to interests in the Operating Partnership that are not
owned by the Company. Income allocated to the minority interest is based on the
percentage ownership of the Operating Partnership held by third parties
throughout the year. Minority Interest is comprised of Class A Units of limited
partnership interest ("Class A Units") and Series B Preferred Units of limited
partnership interest ("Series B Preferred Units"). The Operating Partnership
issued these interests to persons that contributed assets to the Operating
Partnership. The Operating Partnership is obligated to redeem, at the request of
a holder, each Class A Unit for cash or one Common Share, at the option of the
Company. Each Series B Preferred Unit has a stated value of $50.00 and is
convertible, at the option of the holder, into Class A Units at a conversion
price of $28.00. The conversion price declines to $26.50, if the average trading
price of the Common Shares during the 60-day period ending December 31, 2003 is
$23.00 or less. The Series B Preferred Units bear a preferred distribution of
7.25% per annum, subject to an increase in the event quarterly distributions
paid to holders of Common Shares exceed $0.51 per share. As of March 31, 2000,
there were 2,156,150 Class A Units and 1,950,000 outstanding Series B Preferred
Units held by third party investors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis of Presentation
- ---------------------
The consolidated financial statements have been prepared by the Company without
audit except as to the balance sheet as of December 31, 1999, which has been
prepared from audited data, 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 included
disclosures are adequate to make the information presented not misleading. In
the opinion of the Company, all adjustments (consisting solely of normal
recurring matters) necessary to fairly present the financial position of the
Company as of March 31, 2000, the results of its operations for the three month
periods ended March 31, 2000 and 1999, and its cash flows for the three month
periods ended March 31, 2000 and 1999 have been included. The results of
operations for such interim periods are not necessarily indicative of the
results for a full year. For further information, refer to the Company's
6
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consolidated financial statements and footnotes included in the Annual Report on
Form 10-K for the year ended December 31, 1999. Certain prior year amounts have
been reclassified to conform with the current year presentation.
Real Estate Investments
- -----------------------
Real estate investments include direct construction costs totaling $250,000 in
2000 and $221,000 in 1999. Interest totaling $1.4 million in 2000 and $137,000
in 1999 was capitalized related to the development of certain Properties and
land holdings.
Deferred Costs
- --------------
Deferred costs include direct leasing costs totaling $839,000 in 2000 and
$310,000 in 1999.
New Pronouncements
- ------------------
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The FASB also issued SFAS No. 137 that
delays the effective date for SFAS 133 until fiscal years beginning after June
15, 2000. SFAS 133 establishes accounting and reporting standards for the
recognition and measurement of derivative instruments and hedging activities.
The Company has not quantified the impact of SFAS 133 on the Company's future
financial position or result of operations.
3. ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS
--------------------------------------------------------
First Quarter 2000
- ------------------
In January 2000, the Company purchased a 21 acre parcel of land for $5.3
million.
First Quarter 1999
- ------------------
During the first quarter of 1999, the Company sold three office properties,
containing an aggregate of 324,000 net rentable square feet, for $23.2 million.
The acquisition described above was accounted for by the purchase method. The
results of the acquired property are included in the Company's results of
operations from its purchase date. The results of operations on a pro forma
basis on the above acquisition and dispositions are not material.
4. INDEBTEDNESS
------------
The Company uses credit facility borrowings for general business purposes,
including the acquisition of properties and the repayment of debt. At March 31,
2000, the Company had a $450.0 million unsecured credit facility (the "Credit
Facility") that matures in September 2001, which can be extended through
September 2002 upon payment of a fee. The Credit Facility bears interest at
LIBOR (LIBOR was 5.97% at March 31, 2000) plus 1.5%, with the spread over LIBOR
subject to reductions from .125% to .35% and a possible increase of .25% based
on the Company's leverage. As of March 31, 2000, the Company had $416.8 million
outstanding under the Credit Facility. The weighted-average interest rate on the
Company's unsecured Credit Facility was 7.56% in 2000. The Company is currently
in compliance with all covenants related to the Credit Facility.
As of March 31, 2000, the Company had $465.5 million of mortgage notes payable
secured by 97 of the Properties and certain land holdings. Fixed rate mortgages,
totaling $338.4 million, require payments of principal and/or interest (or
imputed interest) at rates ranging from 5.0% to 9.88% and mature at various
dates from August 2000 through July 2027. The weighted-average interest rate on
the Company's mortgages was 6.86% in 2000.
The Company paid interest (including capitalized interest) totaling $16.7
million in 2000 and $18.8 million in 1999.
5. BENEFICIARIES' EQUITY
---------------------
On March 23, 2000, the Company declared a distribution of $0.40 per Common
Share, totaling $14.5 million, which was paid on April 17, 2000 to shareholders
of record as of April 5, 2000. The Operating Partnership simultaneously declared
a $0.40 per unit cash distribution to holders of Class A Units totaling
$862,000.
7
<PAGE>
On March 23, 2000, the Company and the Operating Partnership, respectively, also
declared distributions to holders of Series A Preferred Shares, Series B
Preferred Shares and Preferred Units, which are each currently entitled to a
preferential return of 7.25%, 8.75% and 7.25%, respectively. Distributions paid
on April 17, 2000 to holders of Series A Preferred Shares, Series B Preferred
Shares and Preferred Units totaled $680,000, $2.3 million and $1.8 million,
respectively.
During the first quarter of 2000, the Company repurchased 917,996 Common Shares
for an aggregate of $14.6 million (an average price of $15.94 per share).
6. SEGMENT INFORMATION
-------------------
The Company has four reportable segments: (1) Pennsylvania Suburbs (includes
Berks, Bucks, Chester, Cumberland, Dauphin, Delaware, Lehigh, Montgomery,
Northampton and Philadephia counties and Wilmington, Delaware), (2) Southern and
Central New Jersey (includes Atlantic, Burlington, Camden and Mercer counties),
(3) New York (includes Northern New Jersey and Long Island, New York) and (4)
Virginia (includes Northern Virginia and Richmond, Virginia). Corporate is
responsible for cash and investment management and certain other general support
functions.
Segment information for the three months ended March 31, 2000 and 1999 is as
follows (in thousands):
<TABLE>
<CAPTION>
Southern
Pennsylvania and Central
Suburbs New Jersey New York Virginia Corporate Total
------------ ------------ -------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
2000:
- -----
Real estate investments, at cost $ 912,897 $ 462,893 $ 169,808 $ 305,658 $ - $ 1,851,256
Total revenue 35,096 19,426 6,585 9,580 757 71,444
Property operating expenses
and real estate taxes 11,353 6,432 1,949 2,913 - 22,647
Interest 1,859 2,517 737 543 10,298 15,954
Depreciation & amortization 8,216 4,389 1,789 2,444 540 17,378
1999:
- -----
Real estate investments, at cost $ 967,333 $ 466,448 $ 151,884 $ 307,601 $ - $ 1,893,266
Total revenue 36,846 18,539 6,110 8,971 317 70,783
Property operating expenses
and real estate taxes 11,212 6,417 1,757 2,800 - 22,186
Interest 1,384 1,528 714 680 14,456 18,762
Depreciation & amortization 9,047 4,610 1,300 2,159 653 17,769
</TABLE>
8
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7. EARNINGS PER COMMON SHARE
-------------------------
The following table details the number of shares and net income used to
calculate basic and diluted earnings per share (in thousands, except per share
amounts).
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------------
2000 1999
--------------------------------- ----------------------------
Basic Diluted Basic Diluted
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 10,590 $ 10,590 $ 7,198 $ 7,198
Income allocated to Preferred Shares (2,977) (2,977) (680) (680)
----------- ----------- ----------- -----------
Net income available to common shareholders $ 7,613 $ 7,613 $ 6,518 $ 6,518
=========== =========== =========== ===========
Weighted-average shares outstanding 36,144,013 36,144,013 37,573,381 37,573,381
Options and warrants - 12,072 - 13,974
----------- ----------- ----------- -----------
Total weighted-average shares outstanding 36,144,013 36,156,085 37,573,381 37,587,355
=========== =========== =========== ===========
Earnings per share $ 0.21 $ 0.21 $ 0.17 $ 0.17
=========== =========== =========== ===========
</TABLE>
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
------------------------------------------------------------------------
The following discussion should be read in conjunction with the financial
statements appearing elsewhere herein. This Form 10-Q contains forward-looking
statements for purposes of the Securities Act of 1933 and the Securities
Exchange Act of 1934 and as such may involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are based upon reasonable assumptions, there can
be no assurance that these expectations will be realized. Factors that could
cause actual results to differ materially from current expectations include, but
are not limited to, changes in general economic conditions, changes in local
real estate conditions (including rental rates and competing properties),
changes in industries in which the Company's principal tenants compete, the
failure to timely lease unoccupied space, the failure to timely re-lease
occupied space upon expiration of leases, the inability to generate sufficient
revenues to meet debt service payments and operating expenses, the
unavailability of equity and debt financing, unanticipated costs associated with
the acquisition and integration of the Company's acquisitions, potential
liability under environmental or other laws and regulations, the failure of the
Company to manage its growth effectively and the other risks identified in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
OVERVIEW
The Company operates in four geographic segments: (1) Pennsylvania Suburbs
(includes Berks, Bucks, Chester, Cumberland, Dauphin, Delaware, Lehigh,
Montgomery, Northampton and Philadelphia counties and Wilmington, Delaware), (2)
Southern and Central New Jersey (includes Atlantic, Burlington, Camden and
Mercer counties), (3) New York (includes Northern New Jersey and Long Island,
New York), and (4) Virginia (includes Northern Virginia and Richmond, Virginia).
The Company believes it has established an effective platform in these office
and industrial markets that provides a foundation for achieving its goals of
maximizing market penetration and operating economies of scale. As of March 31,
2000, the Company's portfolio consisted of 199 office properties, 51 industrial
facilities and one mixed-use property totaling approximately 16.6 million net
rentable square feet.
The Company receives income primarily from rental revenue (including tenant
reimbursements) from the Properties and, to a lesser extent, from the management
of certain properties owned by third parties. The Company expects that revenue
growth in the next two years will result primarily from rent increases in its
current portfolio.
RESULTS OF OPERATIONS
The results of operations for the three months ended March 31, 2000 and 1999
include the respective operations of the Company. For comparative purposes, the
Company had a total of 242 of the Properties ("Same Store Properties") for the
entire three months ended March 31, 2000 and 1999 as compared to 251 properties
as of March 31, 2000.
Comparison of the Three Months Ended March 31, 2000 and March 31, 1999
Revenue (which includes rental income, recoveries from tenants and other income)
increased to $71.4 million for the three months ended March 31, 2000 as compared
to $70.8 million for the comparable period in 1999. The straight-line rent
adjustment increased revenues by $1.9 million for the three months ended March
31, 2000 and $2.2 million for three months ended March 31, 1999. Rental income
for the Same Store Properties increased from $53.4 million for three months
ended March 31, 1999 to $57.3 million for the comparable period in 2000. This
increase of $3.9 million was primarily attributable to increased rental rates
and increased occupancy during 2000 as compared to 1999.
Property operating expenses and real estate taxes increased to $22.6 million for
the three months ended March 31, 2000 as compared to $22.2 million for the
comparable period in 1999. Property operating expenses and real estate taxes for
the Same Store Properties increased from $21.3 million for the three months
ended March 31, 1999 to $21.7 million for the comparable period in 2000. This
increase was primarily attributable to increases in real estate taxes and snow
removal expenses offset by expense savings from the Company's "Preferred Vendor
Program," designed to take advantage of economies of scale.
10
<PAGE>
Interest expense decreased to $16.0 million for the three months ended March 31,
2000 from $18.8 million for the comparable period in 1999 as a result of
decreased average outstanding borrowings on the Company's Credit Facility.
Average debt balances outstanding for the three months ended March 31, 2000 were
$861.0 million as compared to $1.0 billion for the three months ended March 31,
1999. For the three months ended March 31, 2000, the weighted-average interest
rate on the Credit Facility and borrowings under mortgage notes payable were
7.56% and 6.86%, respectively, as compared to 6.83% and 7.27% for the comparable
period in 1999.
Depreciation and amortization expense decreased to $16.6 million for the three
months ended March 31, 2000 from $17.1 million for the comparable period in 1999
as a result of property dispositions during the second half of 1999.
Amortization of deferred compensation costs increased to $.5 million for the
three months ended March 31, 2000 as compared to $.4 million for the comparable
period in 1999 due to the issuance of additional restricted Common Shares to
Company executives in the latter part of 1999.
Management fees increased to $3.3 million for the three months ended March 31,
2000 from $3.2 million for the comparable period in 1999. This increase was
attributable to increased management fee rates in 2000 offset by properties sold
during the second half of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
During the three months ended March 31, 2000, the Company generated $23.3
million in cash flow from operating activities. Other sources of cash flow
consisted of: (i) $40.0 million of proceeds from draws on the Credit Facility
and (ii) $8.2 million in additional mortgage notes payable. During the three
months ended March 31, 2000, cash out-flows consisted of: (i) $19.0 million of
distributions to shareholders and minority partners in the Operating
Partnership, (ii) $17.9 million to fund development and capital expenditures,
(iii) $14.6 million to repurchase Common Shares, (iv) $6.1 million of mortgage
note repayments, (v) $5.3 million for property acquisitions, (vi) $2.3 million
of escrowed cash, (vii) $1.8 million of investment in unconsolidated real estate
ventures and (viii) $1.8 million in deferred leasing and financing costs.
Development
The Company is in the process of developing three sites and redeveloping three
sites. These projects are in various stages of development and there can be no
assurance that any of these projects will be completed or opened on schedule.
The total projected costs of these developments are $92.3 million, of which
$52.5 million has been incurred as of March 31, 2000. During the three months
ended March 31, 2000, the Company capitalized interest totaling approximately
$1.4 million related to development and redevelopment projects.
Capitalization
At March 31, 2000, the Company maintained a $450.0 million Credit Facility.
As of March 31, 2000, the Company had approximately $882.3 million of debt
outstanding, consisting of $416.8 million of borrowings under the Credit
Facility and $465.5 million of mortgage notes payable. The mortgage notes
payable consists of $338.4 million of fixed rate loans and $127.1 million of
variable rate loans. The mortgage loans mature between August 2000 and July
2027. As of March 31, 2000, the Company had $16.5 million of letters of credit
outstanding and $16.7 million of availability remaining under the Credit
Facility. For the quarter ended March 31, 2000, the weighted-average interest
rate under the Company's Credit Facility was 7.56%, and the weighted-average
interest rate for borrowings under mortgage notes payable was 6.86%.
As of March 31, 2000, the Company's debt-to-market capitalization ratio was 49%.
As a general policy, the Company intends to maintain a long-term average
debt-to-market capitalization ratio of no more than 50%.
The Company's Board of Trustees previously approved a program authorizing the
Company to repurchase up to 3,000,000 of its outstanding Common Shares. The
Board imposes no time limit on the share repurchase program. During the first
quarter of 2000, the Company repurchased 917,996 Common Shares for an aggregate
of $14.6 million (an average price of $15.94 per share). Under the share
repurchase program, the Company is able to repurchase an additional 657,020
shares.
11
<PAGE>
Short- and Long-Term Liquidity
The Company believes that cash flow from operations is adequate to fund
short-term liquidity requirements for the foreseeable future. Cash flow from
operations is generated primarily from rental revenues and operating expense
reimbursements from tenants and management services income from the provision of
services to third parties. The Company intends to use these funds to meet
short-term liquidity needs, which are to fund operating expenses, debt service
requirements, recurring capital expenditures, tenant allowances, leasing
commissions and the minimum distribution required to maintain the Company's REIT
qualification under the Internal Revenue Code.
On March 23, 2000, the Company declared a distribution of $0.40 per Common
Share, totaling $14.5 million, which was paid on April 17, 2000 to shareholders
of record as of April 5, 2000. The Operating Partnership simultaneously declared
a $0.40 per unit cash distribution to holders of Class A Units totaling
$862,000.
On March 23, 2000, the Company and the Operating Partnership, respectively, also
declared distributions to holders of Series A Preferred Shares, Series B
Preferred Shares and Preferred Units, which are each currently entitled to a
preferential return of 7.25%, 8.75% and 7.25%, respectively. Distributions paid
on April 17, 2000 to holders of Series A Preferred Shares, Series B Preferred
Shares and Preferred Units totaled $680,000, $2.3 million and $1.8 million,
respectively.
The Company expects to meet long-term liquidity requirements, such as for
property acquisitions, development, investments in unconsolidated real estate
ventures, scheduled debt maturities, renovations, expansions and other
non-recurring capital improvements, through asset dispositions, long-term
secured and unsecured indebtedness and the issuance of equity securities.
Funds from Operations
Management generally considers Funds from Operations ("FFO") as one measure of
REIT performance. FFO is calculated as net income (loss) adjusted for
depreciation expense attributable to real property, amortization expense
attributable to capitalized leasing costs, gains on sales of real estate
investments and extraordinary items and comparable adjustments for real estate
ventures accounted for using the equity method. Management believes that FFO is
a useful disclosure in the real estate industry, however, the Company's
disclosure may not be comparable to other REIT's. FFO should not be considered
an alternative to net income as an indication of the Company's performance or to
cash flows as a measure of liquidity.
FFO for the three months ended March 31, 2000 and 1999 is summarized in the
following table (in thousands, except share data):
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Income before gains on sales and minority interest $ 12,772 $ 9,048
Add:
Depreciation:
Real property 15,947 16,340
Real estate ventures 616 726
Amortization of leasing costs 537 241
----------- -----------
Funds from operations before minority interest $ 29,872 $ 26,355
=========== ===========
Weighted-average Common Shares (including Common
Share equivalents) and Operating Partnership units 47,781,584 44,085,536
=========== ===========
</TABLE>
12
<PAGE>
Year 2000 Compliance
The Company has not experienced any problems relating to the Year 2000 issue on
or after January 1, 2000. The Company implemented its Year 2000 compliance
program and intends to maintain its contingency plans until satisfied that
Company operations will not be adversely impacted by the possibility of a Year
2000 issue.
Inflation
A majority of the Company's leases provide for separate escalations of real
estate taxes and operating expenses either on a triple net basis or over a base
amount. In addition, many of the office leases provide for fixed base rent
increases or indexed escalations (based on the CPI or other measure). The
Company believes that inflationary increases in expenses will be significantly
offset by expense reimbursement and contractual rent increases.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
There have been no material changes in Quantitative and Qualitative disclosures
in 2000. Reference is made to Item 7 included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
------------------
The Company is a defendant in a case which the plaintiffs allege that the
Company breached its obligation to purchase a portfolio of properties for
approximately $83.0 million. In July 1999, the complaint against the Company was
dismissed with prejudice. The plaintiffs then appealed the dismissal and filed a
motion for reconsideration. The case is currently on appeal before the Appellate
Division of the Superior Court of New Jersey. Briefing on the appeal has been
completed and the parties are awaiting a decision.
In November 1999, a third-party complaint was filed in the Superior Court of New
Jersey, Burlington County, by BRI OP Limited Partnership ("BRI OP") against the
Company as well as several persons and entities, including against several
former affiliates of the Company, relative to Greentree Shopping Center located
in Marlton, New Jersey ("Subject Property"). The Subject Property was owned and
managed by a subsidiary of the Company between 1986 and 1988. BRI OP, also a
former owner of the Subject Property, has been sued by the present owner and
manager of the Subject Property, seeking indemnification and contribution for
costs related to the remediation of environmental contamination allegedly caused
by a dry cleaning business, which was a tenant of the Subject Property. BRI OP,
in turn, brought a third-party action against the Company and others seeking
indemnification for environmental remediation and clean up costs for which it
may be held liable. The litigation is presently in the early stages of
discovery; however, plaintiff's response to the Company's interrogatories
indicates that the estimated cost of remediation and/or clean-up is
approximately $150,000. As of this date, the Company is unable to determine its
ultimate responsibility for such costs.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
---------
27.1 Financial Data Schedule (electronic filers)
(b) Reports on Form 8-K:
--------------------
During the three months ended March 31, 2000, and through May 15, 2000, the
Company did not file any Reports on Form 8-K.
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 15, 2000 By: /s/ Gerard H. Sweeney
------------ ---------------------------------
Gerard H. Sweeney, President
and Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 2000 By: /s/ Jeffrey F. Rogatz
------------ --------------------------------
Jeffrey F. Rogatz, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: May 15, 2000 By: /s/ Bradley W. Harris
------------ --------------------------------
Bradley W. Harris, Vice President
and Chief Accounting Officer
(Principal Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,452
<SECURITIES> 0
<RECEIVABLES> 28,565
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50,171
<PP&E> 1,851,256
<DEPRECIATION> 141,683
<TOTAL-ASSETS> 1,850,246
<CURRENT-LIABILITIES> 54,694
<BONDS> 882,336
0
94,841
<COMMON> 356
<OTHER-SE> 672,525
<TOTAL-LIABILITY-AND-EQUITY> 1,850,246
<SALES> 0
<TOTAL-REVENUES> 71,444
<CGS> 0
<TOTAL-COSTS> 59,328
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,954
<INCOME-PRETAX> 10,590
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,590
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.21
</TABLE>
