SOURCE: Brandywine Realty Trust

May 01, 2007 17:33 ET

Brandywine Realty Trust First Quarter FFO per Share Increases 6.8%

RADNOR, PA -- (MARKET WIRE) -- May 1, 2007 -- Brandywine Realty Trust (NYSE: BDN), a real estate investment trust focused on the ownership, management and development of class A, suburban and urban office properties in selected markets throughout the United States, announced today its financial results for the three month period ended March 31, 2007. The highlights are as follows:

Financial Highlights

--  Net income totaled $19.4 million or $0.19 per diluted share in the
    first quarter of 2007, compared to a $2.6 million loss or ($0.05) per
    diluted share in the first quarter of 2006.  Net income in the first
    quarter of 2007 included a $26.0 million gain on the sale of real estate
    while there was no corresponding gain in the first quarter of 2006.
    
--  Funds from operations (FFO) totaled $58.6 million or $0.63 per diluted
    share in the first quarter of 2007, compared to $55.2 million or $0.59 per
    diluted share in the first quarter of 2006.  Our FFO payout ratio was 69.8%
    for the first quarter of 2007.
    
Portfolio Highlights
--  At March 31, 2007, the core portfolio was 93.0% occupied and 94.3%
    leased (reflecting signed leases) versus 90.0% and 91.7%, respectively, at
    March 31, 2006.  Overall, we owned 281 properties at March 31, 2007
    encompassing 263 properties in the core portfolio and 18 properties under
    development or redevelopment.
    
--  Net operating income (NOI) on a same store basis increased 2.7% on a
    GAAP basis and 4.9% on a cash basis in the first quarter of 2007 versus the
    first quarter of 2006 for the 257 same store properties which were 93.3%
    occupied on March 31, 2007 versus 91.7% on March 31, 2006.  Our overall NOI
    margin on a GAAP basis was 62.5% for the first quarter of 2007.
    
--  For the first quarter of 2007, our core portfolio retention rate was
    72% with net absorption of 145,110 square feet.
    
Investment Highlights
--  During the first quarter of 2007, we spent $63.7 million to purchase
    the minority interest position related to one of our consolidated joint
    ventures which held ten office properties aggregating approximately 1.1
    million square feet.
    
--  During the first quarter of 2007, we completed five sales for total
    proceeds of $234.1 million and generated $26.0 million of gains on sale. As
    of March 31, 2007, our Cityplace asset was reflected as held for sale on
    our balance sheet; the associated $115 million sale closed on April 30,
    2007.
    
--  At March 31, 2007, our development and redevelopment activity
    encompassed eighteen major projects, a range of smaller projects and eight
    active land developments with a total projected cost of $445.7 million of
    which $147.0 million remained to be funded.  In addition, we held $60.4
    million of land for future development and were in the process of
    completing a range of tenant and building improvement projects aggregating
    $47.9 million.
    
Capital Markets Highlights
--  During the first quarter of 2007 and through April 30, 2007, we
    purchased a total of 1,566,000 common shares at an average price of $34.18
    per share under our existing Board authorization.
    
--  During the first quarter, we entered into a $10 million (subsequently
    increased to $20 million) unsecured credit facility with Wachovia Bank to
    facilitate our cash management activities.
    
--  Subsequent to quarter end, we priced and closed a $300 million 5.70%
    senior unsecured note due May 1, 2017.
    
"We are very pleased with our first quarter performance," stated Gerard H. Sweeney, Brandywine Realty Trust's President and Chief Executive Officer. "Through a combination of operational and financial measures, we met our internal goals and are executing on all aspects of our business plan. Specifically, we achieved over 145,000 square feet of positive absorption in our core portfolio driving quarter-end occupancy to a high of 93.0%, and benefiting from same-store NOI growth of 2.7%. While capital costs remain relatively high, we are pleased by distinctly positive trends in our rental rate growth. With the Park West and Cityplace sales, we have now achieved our goal of completely exiting the Dallas market -- a full 21 months ahead of schedule. In addition, we made progress in exiting non-core markets by selling assets in Reading and Harrisburg, Pennsylvania, and will seek to recycle the sale proceeds into higher-growth markets. On the investment side, we deployed $53.5 million of sales proceeds to repurchase our common stock and utilized another $63.7 million to consolidate our ownership in one of our existing joint ventures. Following the repayment of certain floating rate property loans, we took advantage of credit market conditions and issued $300 million of unsecured senior notes at a 5.72% yield."

Distributions

On March 14, 2007, the Board of Trustees declared a quarterly dividend distribution of $0.44 per common share that was paid on April 18, 2007 to shareholders of record as of April 4, 2007. The Board also declared quarterly dividends of $0.46875 per 7.50% Series C Cumulative Redeemable Preferred Share and $0.460938 per 7.375% Series D Cumulative Redeemable Preferred Share that were paid on April 16, 2007 to holders of record as of March 30, 2007 of the Series C and Series D Preferred Shares, respectively.

Share Repurchase Program

As of May 1, 2007, the Company may purchase an additional 753,800 common shares under its Board-approved share repurchase program. Repurchases may be made from time to time in the open market or in privately negotiated transactions, subject to market conditions and compliance with legal requirements. The share repurchase program does not contain any time limitation and does not obligate the Company to repurchase any shares. The Company may discontinue the program at any time.

2007 FFO Guidance

Based on current plans and assumptions and subject to the risks and uncertainties more fully described in Brandywine's reports filed with the Securities and Exchange Commission, we are maintaining our previously announced guidance for full year 2007 FFO per diluted share to be in a range of $2.57 to $2.65. This guidance is provided for informational purposes and is subject to change. The following is a reconciliation of the calculation of FFO per diluted share and earnings per diluted share:

Guidance for 2007                                           Range or Value
-----------------                                           ---------------
Earnings (loss) per diluted share allocated to common
 shareholders                                               $0.12 to $0.21
Less:  Gains on sales of real estate                        (0.28)to (0.28)
Plus:   real estate depreciation and amortization            2.73 to  2.74
                                                            -----    -----
FFO per diluted share                                       $2.57 to $2.65
                                                            =====    =====
For guidance purposes, we have not considered gains from the sale of real estate not otherwise disclosed, the impact on operating income from future sales of properties or losses from impairment write-downs of our assets or securities. Our 2007 FFO guidance does not include any income from the sale of undepreciated real estate, in line with our prior practice.

Forward-Looking Statements

Estimates of future earnings per share and FFO per share and certain other statements in this release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or transactions of the Company and its affiliates to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors relate to, among others: the Company's ability to lease vacant space and to renew or relet space under expiring leases at expected levels, competition with other real estate companies for tenants, the potential loss or bankruptcy of major tenants, interest rate levels, the availability of debt and equity financing, competition for real estate acquisitions and risks of acquisitions, dispositions and developments, including the cost of construction delays and cost overruns, unanticipated operating and capital costs, the Company's ability to obtain adequate insurance, including coverage for terrorist acts, dependence upon certain geographic markets, and general and local economic and real estate conditions, including the extent and duration of adverse changes that affect the industries in which the Company's tenants compete.

Additional information on factors which could impact the Company and the forward-looking statements contained herein are included in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report for the year ended December 31, 2006. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events except as required by law.

NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES

Funds from Operations

The Company computes its financial results in accordance with generally accepted accounting principles (GAAP). Although FFO is a non-GAAP financial measure, the Company believes that information regarding FFO is helpful to shareholders and potential investors and is a widely recognized measure of real estate investment trust (REIT) performance. The Company computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than the Company. NAREIT defines FFO as net income (loss) before minority interest of unit holders (preferred and common) and excluding gains (losses) on sales of property and extraordinary items (computed in accordance with GAAP); plus real estate related depreciation and amortization (excluding amortization of deferred financing costs), and after similar adjustments for unconsolidated joint ventures. Net income, the GAAP measure that the Company believes to be most directly comparable to FFO, includes depreciation and amortization expenses, gains or losses on property sales, extraordinary items and minority interest. To facilitate a clear understanding of the Company's historical operating results, FFO should be examined in conjunction with net income (determined in accordance with GAAP) as presented in the financial statements included elsewhere in this release. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of the Company's financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it indicative of funds available for the Company's cash needs, including its ability to make cash distributions to shareholders.

For information purposes, we also provide FFO adjusted for debt extinguishment costs. Although our FFO as adjusted differs from NAREIT's definition of FFO, and may not be comparable to that of other REITs and real estate companies, we believe it provides a meaningful supplemental measure of our operating performance because we believe that by excluding the effects of debt extinguishment, management and investors are presented with an indicator of our operating performance that more closely achieves the objectives of the real estate industry in presenting FFO.

Cash Available for Distribution

Cash available for distribution is a non-GAAP financial measure that is not intended to represent cash flow for the period and is not indicative of cash flow provided by operating activities as determined under GAAP. CAD is presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company's ability to fund its dividends. Because all companies do not calculate CAD the same way, the presentation of CAD may not be comparable to similarly titled measures of other companies.

First Quarter Earnings Call and Supplemental Information Package

The Company will be hosting a conference call on Wednesday, May 2, 2007 at 11:00 a.m. EDT. The conference call can be accessed by calling 1-800-683-1525 and referencing conference ID #8622931. Beginning two hours after the conference call, a taped replay of the call can be accessed 24 hours a day through Wednesday, May 16, 2007 by calling 1-877-519-4471 and providing access code 8622931. In addition, the conference call can be accessed via a web cast located on the Company's website at www.brandywinerealty.com.

The Company has prepared a Supplemental Information package that includes financial results and operational statistics to support the announcement of first quarter earnings. The Supplemental Information package is available in the "Investor Relations - Financial Reports" section of the Company's website at www.brandywinerealty.com.

Looking Ahead - Second Quarter 2007 Conference Call

We anticipate that we will release our second quarter 2007 earnings on Tuesday, July 31, 2007, after the market close and will host our second quarter 2007 conference call on Wednesday, August 1, 2007, at 11:00 a.m. EDT. We expect to issue a press release in advance of these events to confirm the dates and times and provide all related information.

About Brandywine Realty Trust

Brandywine Realty Trust is one of the largest, publicly-traded, full-service, integrated real estate companies in the United States. Organized as a real estate investment trust (REIT) and operating in selected markets, Brandywine owns, develops and manages a primarily class A, suburban and urban office portfolio aggregating approximately 43 million square feet. For more information, visit Brandywine's website at www.brandywinerealty.com.


                          BRANDYWINE REALTY TRUST
                        CONSOLIDATED BALANCE SHEETS
                         (unaudited, in thousands)


                                                  March 31,    December 31,
                                                     2007          2006
                                                 -----------   -----------

ASSETS
Real estate investments:
  Operating properties                           $ 4,773,814   $ 4,927,305
  Accumulated depreciation                          (522,286)     (515,698)
                                                 -----------   -----------
                                                   4,251,528     4,411,607
  Development land and construction-in-progress      346,555       328,119
                                                 -----------   -----------
                                                   4,598,083     4,739,726

Cash and cash equivalents                              3,885        25,379
Cash in escrow                                       109,102             -
Accounts receivable, net                              18,339        19,957
Accrued rent receivable, net                          72,433        71,589
Assets held for sale, net                            127,333       126,016
Investment in real estate ventures                    72,983        74,574
Deferred costs, net                                   77,002        73,708
Intangible assets, net                               248,384       281,251
Other assets                                         107,936        96,818
                                                 -----------   -----------

  Total assets                                   $ 5,435,480   $ 5,509,018
                                                 ===========   ===========



LIABILITIES AND BENEFICIARIES' EQUITY
Mortgage notes payable                           $   879,232   $   883,920
Borrowings under credit facilities                   404,000        60,000
Unsecured senior notes, net of discounts           1,908,435     2,208,310
Accounts payable and accrued expenses                103,650       108,400
Distributions payable                                 42,321        42,760
Tenant security deposits and deferred rents           58,655        55,697
Acquired lease intangibles, net                       76,639        92,527
Other liabilities                                     16,620        14,661
Mortgage note payable and other liabilities held
 for sale, net                                        14,404        20,826
                                                 -----------   -----------
  Total liabilities                                3,503,956     3,487,101

Minority interest                                     87,664       123,991

Beneficiaries' equity:
 Preferred shares - Series C                              20            20
 Preferred shares - Series D                              23            23
 Common shares                                           872           883
 Additional paid-in capital                        2,277,828     2,311,541
 Cumulative earnings                                 443,137       423,764
 Accumulated other comprehensive income                2,427         1,576
 Cumulative distributions                           (880,447)     (839,881)
                                                 -----------   -----------
  Total beneficiaries' equity                      1,843,860     1,897,926
                                                 -----------   -----------

    Total liabilities and beneficiaries' equity  $ 5,435,480   $ 5,509,018
                                                 ===========   ===========



                          BRANDYWINE REALTY TRUST
                  CONSOLIDATED STATEMENTS OF OPERATIONS
        (unaudited, in thousands, except share and per share data)


                                               Three Months Ended March 31,
                                                 -------------------------
                                                     2007          2006
                                                 -----------   -----------
Revenue
  Rents                                          $   137,940   $   123,069
  Tenant reimbursements                               20,823        16,634
  Other                                                4,338         4,215
                                                 -----------   -----------
   Total revenue                                     163,101       143,918

Operating Expenses
  Property operating expenses                         61,232        55,181
  Depreciation and amortization                       62,047        51,212
  Administrative expenses                              7,269         8,490
                                                 -----------   -----------
   Total operating expenses                          130,548       114,883
                                                 -----------   -----------

Operating income                                      32,553        29,035
Other income (expense)
  Interest income                                        787         2,650
  Interest expense                                   (40,358)      (40,378)
  Deferred financing costs                            (1,258)         (479)
  Equity in income of real estate ventures               754           965
                                                 -----------   -----------
Income (loss) before minority interest                (7,522)       (8,207)
Minority interest - partners' share of
 consolidated real estate ventures                      (116)          298
Minority interest attributable to continuing
 operations - LP units                                   411           435

                                                 -----------   -----------
Income (loss) from continuing operations              (7,227)       (7,474)

Discontinued operations:
  Income from discontinued operations                  1,776         5,246
  Net gain on disposition of discontinued
   operations                                         26,009             -
  Minority interest - partners' share of
   consolidated real estate venture                        -          (187)
  Minority interest attributable to discontinued
   operations - LP units                              (1,186)         (227)
                                                 -----------   -----------
                                                      26,599         4,832
                                                 -----------   -----------
Net income (loss)                                     19,372        (2,642)
Income allocated to Preferred Shares                  (1,998)       (1,998)
                                                 -----------   -----------
Income (loss) allocated to Common Shares         $    17,374   $    (4,640)
                                                 ===========   ===========

PER SHARE DATA
Basic income (loss) per Common Share             $      0.20   $     (0.05)
                                                 ===========   ===========
Basic weighted-average shares outstanding         88,287,426    89,299,967

Diluted income (loss) per Common Share           $      0.19   $     (0.05)
                                                 ===========   ===========
Diluted weighted-average shares outstanding       89,236,342    89,742,981




                          BRANDYWINE REALTY TRUST
        FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
        (unaudited, in thousands, except share and per share data)


                                               Three Months Ended March 31,
                                                 -------------------------
                                                     2007          2006
                                                 -----------   -----------
Reconciliation of Net Income to Funds from
 Operations (FFO):
Net income (loss) allocated to common shares     $    17,374   $    (4,640)

Add (deduct):
   Minority interest attributable to continuing
    operations - LP units                               (411)         (435)
   Net gains on sale of undepreciated real
    estate                                                 -             -
   Minority interest attributable to
    discontinued operations - LP units                 1,186           227
   Net gains on disposition of discontinued
    operations                                       (26,009)            -
   Minority Interest - partners' share of net
    gain on sale                                           -             -
                                                 -----------   -----------
Income (loss) before net gains on sale of
 interests in real estate and minority interest       (7,860)       (4,848)

Add:
   Depreciation and amortization:
      Real property - continuing operations           43,275        31,865
      Leasing costs (includes acquired
       intangibles) - continuing operations           18,090        19,219
      Real property - discontinued operations          4,594         9,123
      Company's share of unconsolidated real
       estate ventures                                 1,444         1,515
      Partners' share of consolidated real
       estate ventures                                  (954)       (1,657)
Funds from operations                            $    58,589   $    55,216
                                                 ===========   ===========
FFO per share - fully diluted                    $      0.63   $      0.59
                                                 ===========   ===========
Weighted-average shares/units outstanding -
 fully diluted                                    93,175,950    93,761,849

Distributions per Common Share                   $      0.44   $      0.44
                                                 ===========   ===========
Payout ratio of FFO (Distribution per Common
 Share divided by FFO per Share)                     69.8%         74.6%

CASH AVAILABLE FOR DISTRIBUTION (CAD):
Funds from operations                            $    58,589   $    55,216

Add (deduct):
   Rental income from straight-line rent              (8,632)       (7,708)
   Deferred market rental income                      (3,613)       (1,939)
   Operating expense from straight-line rent             374             -
   Revenue maintaining capital expenditures
        Building improvements                           (707)         (381)
        Tenant improvements                          (11,236)       (7,281)
        Lease commissions                             (3,143)         (897)
                                                 -----------   -----------
   Total revenue maintaining capital
    expenditures                                     (15,086)       (8,559)

Cash available for distribution                  $    31,632   $    37,010
                                                 ===========   ===========
CAD per share - fully diluted                    $      0.34   $      0.39
                                                 ===========   ===========
Weighted-average shares/units outstanding -
 fully diluted                                    93,175,950    93,761,849
Distributions per Common Share                   $      0.44   $      0.44
                                                 ===========   ===========
Payout ratio of CAD (Distribution per Common
 Share divided by CAD per Share)                    129.4%        112.8%



                          BRANDYWINE REALTY TRUST
                      SAME STORE OPERATIONS - QUARTER
                       (unaudited and in thousands)


Of the 281 properties owned by the Company as of March 31, 2007, a total of
257 properties ("Same Store Properties") containing an aggregate of 25.3
million net rentable square feet were owned for the entire three-month
periods ended March 31, 2007 and 2006. Average occupancy for the Same Store
Properties was 92.8% during 2007 and 91.3% during 2006. The following table
sets forth revenue and expense information for the Same Store Properties:


                                               Three Months Ended March 31,
                                                 -------------------------
                                                     2007        2006 (1)
                                                 -----------   -----------

Revenue
  Rents                                          $   118,980   $   117,155
  Tenant reimbursements                               19,346        15,739
  Termination fees                                       558           589
  Other, excluding termination fees                      661           785
                                                 -----------   -----------
                                                     139,545       134,268

Operating expenses
  Property operating expenses                         56,439        53,367
                                                 -----------   -----------
 Net operating income                            $    83,106   $    80,901
                                                 ===========   ===========

 Net operating income percentage increase over   ===========
  prior year                                             2.7%
                                                 ===========


Net operating income                             $    83,106   $    80,901
       Straight line rents                            (3,372)       (5,004)
       FAS 141 rents                                  (2,258)       (2,064)
                                                 -----------   -----------

 Cash - Net operating income                     $    77,476   $    73,833
                                                 ===========   ===========

 Cash - Net operating income percentage increase ===========
  over prior year                                        4.9%
                                                 ===========


The following table is a reconciliation of Net Income to Same Store net
 operating income:


                                               Three Months Ended March 31,
                                                 -------------------------
                                                     2007          2006
                                                 -----------   -----------

Net Income (loss)                                $    19,372   $    (2,642)
Add/(deduct):
  Interest income                                       (787)       (2,650)
  Interest expense                                    40,358        40,378
  Deferred financing costs                             1,258           479
  Equity in income of real estate ventures              (754)         (965)
  Depreciation and amortization                       62,047        51,212
  Administrative expenses                              7,269         8,490
  Minority interest - partners' share of
   consolidated real estate ventures                     116          (298)
  Minority interest attributable to continuing
   operations - LP units                                (411)         (435)
  Income from discontinued operations                (26,599)       (4,832)
                                                 -----------   -----------
   Consolidated net operating income                 101,869        88,737
Less:  Net operating income of non same store
 properties                                          (13,724)       (3,885)
Less:  Eliminations and non-property specific
 net operating income (loss)                          (5,039)       (3,951)
                                                 -----------   -----------
   Same Store net operating income               $    83,106   $    80,901
                                                 ===========   ===========

(1) The Prentiss properties were acquired on January 5, 2006. For
 comparative purposes, the Prentiss assets in the same store portfolio have
 been adjusted to refelect a full three-month period for 2006 and allow a
 more meaningful comparsion, with the addition of $1,529 and $ 1,455 to net
 operating income and cash net operating income, respectively.

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