million necessary to repay the mortgage loan secured by this property, in February 2006, an unaffiliated third party entered into an agreement to purchase this property for $18.3 million. Closing is scheduled for August 2006 and is subject to standard closing conditions.
Future minimum rental payments under the terms of all non-cancelable ground leases under which the Partnership is the lessee are expensed on a straight-line basis regardless of when payments are due.
As part of the Partnership’s September 2004 acquisition of a portfolio of 14 properties (the “TRC Acquisition”, the Partnership agreed to issue to the sellers up to a maximum of $9.7 million of Class A Units of the Partnership if certain of the acquired properties achieve at least 95% occupancy prior to September 21, 2007. At March 31, 2006, the maximum amount payable under this arrangement was $4.2 million.
As part of the TRC acquisition, the Partnership acquired an interest in Two Logan Square, a 696,477 square foot office building in Philadelphia, Pennsylvania, primarily through a second and third mortgage secured by this property pursuant to which the Partnership receives substantially all cash flows from the property. The Partnership currently does not expect to take title to Two Logan Square until, at the earliest, September 2019. In the event that the Partnership takes title to Two Logan Square upon a foreclosure of its mortgages, the Partnership has agreed to make a payment to an unaffiliated third party with a residual interest as a fee owner of this property. The amount of the payment would be $0.6 million if we must pay a state and local transfer tax upon taking title, or $2.9 million if no transfer tax is payable upon the transfer.
As part of the Prentiss acquisition, TRC acquisition and several of our other acquisitions, the Partnership has agreed not to sell the acquired properties. In the case of TRC, the Partnership agreed not to sell the acquired properties for periods ranging from three to 15 years from the acquisition date as follows: 201 Radnor Financial Center, 555 Radnor Financial Center and 300 Delaware Avenue (three years); One Rodney Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square and Radnor Corporate Center (15 years). In the case of the Prentiss acquisition, we assumed the obligation of Prentiss not to sell Concord Airport Plaza before March 2018 and 6600 Rockledge before July 2008. The Partnership also owns 14 other properties that aggregate 1.0 million square feet and has agreed not to sell these properties for periods that expire through 2008. These agreements generally provide that we may dispose of the subject Properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Code or in other tax deferred transactions. In the event that the Partnership sells any of the properties within the applicable restricted period in non-exempt transactions, the Partnership has agreed to pay significant tax liabilities that would be incurred by the parties who sold the applicable property.
The Partnership invests in its Properties and regularly incurs capital expenditures in the ordinary course of business to maintain the Properties. The Partnership believes that such expenditures enhance the competitiveness of the Properties. The Partnership also enters into construction, utility and service contracts in the ordinary course of business which may extend beyond one year. These contracts include terms that provide for cancellation with insignificant or no cancellation penalties.
In April 2006, the Partnership acquired one office property, One Paragon Place, which contains 145,127 net rentable square feet for $24.0 million.
In May 2006, through the date of the filing of its quarterly report on Form 10-Q, the Company repurchased 146,700 shares at an average price of $28.87 per share under its share repurchase program.
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This Quarterly Report on Form 10-Q and other materials filed by us with the SEC (as well as information included in oral or other written statements made by us) contain statements that are forward-looking, including statements relating to business and real estate development activities, acquisitions, dispositions, future capital expenditures, financing sources, governmental regulation (including environmental regulation) and competition. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statement. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. As forward-looking statements, these statements involve important risks, uncertainties and other factors that could cause actual results to differ materially from the expected results and, accordingly, such results may differ from those expressed in any forward-looking statements made by us or on our behalf. Factors that could cause actual results to differ materially from our expectations include, but are not limited to, changes in general economic conditions, changes in local real estate conditions (including changes in rental rates and the number of competing properties), changes in the economic conditions affecting industries in which our principal tenants compete, our failure to lease unoccupied space in accordance with our projections, our failure to re-lease occupied space upon expiration of leases, the bankruptcy of major tenants, changes in prevailing interest rates, the unavailability of equity and debt financing, unanticipated costs associated with the acquisition and integration of our acquisitions, unanticipated costs to complete and lease-up pending developments, impairment charges, increased costs for, or lack of availability of, adequate insurance, including for terrorist acts, demand for tenant services beyond those traditionally provided by landlords, potential liability under environmental or other laws, earthquakes and other natural disasters, the existence of complex regulations relating to our general partner’s status as a REIT and to our acquisition, disposition and development activities, the adverse consequences of our general partner’s failure to qualify as a REIT, the impact of newly adopted accounting principles on our accounting policies and on period-to-period comparisons of financial results and the other risks identified in the “Risk Factors” section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2005. Given these uncertainties, we caution readers not to place undue reliance on forward-looking statements. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
As of March 31, 2006, we managed our portfolio within nine geographic segments: (1) PennsylvaniaWest, (2) PennsylvaniaNorth, (3) New Jersey, (4) Urban, (5) Virginia, (6) CaliforniaNorth, (7) CaliforniaSouth, (8) Mid-Atlantic and (9) Southwest. We believe we have established an effective platform in these office and industrial markets for maximizing market penetration, optimizing operating economies of scale and creating long-term investment value.
Subsequent to our acquisition of Prentiss and the related sale of certain of Prentiss’s properties to Prudential, we sold eight additional properties that contain an aggregate of 1.6 million net rentable square feet.
Our portfolio consists of 279 office properties, 23 industrial facilities and one mixed-use property that contain an aggregate of approximately 30.3 million net rentable square feet. We held economic interests in ten unconsolidated real estate ventures that contained approximately 2.7 million net rentable square feet (the “Real Estate Ventures”) formed with third parties to develop or own commercial properties. In addition, we owned interests in four consolidated real estate ventures that own 16 office properties containing approximately 1.6 million net rentable square feet.
We receive income primarily from rental revenue (including tenant reimbursements) from our properties and, to a lesser extent, from the management of properties owned by third parties and from investments in the Real Estate Ventures.
Our financial performance is dependent upon the demand for office, industrial and other commercial space in our markets and upon prevailing interest rates.
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We continue to seek revenue growth through an increase in occupancy of our portfolio and our investment strategies. Our occupancy was 90.0% at March 31, 2006, or 88.8% including four lease-up properties that we acquired in our September 2004 acquisition of a portfolio of 14 properties (the “TRC Properties” or the “TRC acquisition”).
The Prentiss acquisition and the acquisition of TRC, and to a lesser extent, other property acquisitions have already or will materially impact our operations. Accordingly, the reported historical financial information for periods prior to these transactions is not believed to be fully indicative of our operating results or financial condition.
Through our January 2006 acquisition of Prentiss, we acquired interests in properties that contain an aggregate of 14.0 million net rentable square feet. Through this acquisition, we also entered into new markets, including markets in California, Northern Virginia and Texas.
As we seek to increase revenue through our operating activities, our management also focuses on strategies to minimize operating risks, including (i) tenant rollover risk, (ii) tenant credit risk and (iii) development risk.
We are subject to the risk that tenant leases, upon expiration, are not renewed, that space may not be relet, or that the terms of renewal or reletting (including the cost of renovations) may be less favorable to us than the current lease terms. Leases accounting for approximately 10.0% of our aggregate annualized base rents as of March 31, 2006 (representing approximately 9.4% of the net rentable square feet of the Properties) expire without penalty through the end of 2006. We maintain an active dialogue with our tenants in an effort to achieve a high level of lease renewals. Our retention rate for leases that were scheduled to expire in the three-month period ended March 31, 2006 was 78.3%. If we were unable to renew leases for a substantial portion of the space under expiring leases, or to promptly relet this space, at anticipated rental rates, our cash flow would be adversely impacted.
In the event of a tenant default, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. Our management regularly evaluates our accounts receivable reserve policy in light of its tenant base and general and local economic conditions. The accounts receivable allowances were $6.9 million or 8.0% of total receivables (including accrued rent receivable) as of March 31, 2006 compared to $4.9 million or 7.6% of total receivables (including accrued rent receivable) as of December 31, 2005.
As of March 31, 2006, we had in development or redevelopment nine sites aggregating approximately 1.8 million square feet. We estimate the total cost of these projects to be $427.9 million and we had incurred $237.8 million of these costs as of March 31, 2006. We are actively marketing space at these projects to prospective tenants but can provide no assurance as to the timing or terms of any leases of space at these projects. As of March 31, 2006, we owned approximately 359 acres of undeveloped land. Risks associated with development of this land include construction cost increases or overruns and construction delays, insufficient occupancy rates, building moratoriums and inability to obtain zoning, land-use, building, occupancy and other required governmental approvals.
| ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS |
On January 5, 2006, we acquired Prentiss under an Agreement and Plan of Merger that we entered into with Prentiss on October 3, 2005. In conjunction with our acquisition of Prentiss, designees of The Prudential Insurance Company of America (“Prudential”) acquired certain Prentiss properties that contain an aggregate of approximately 4.32 million net rentable square feet for total consideration of approximately $747.7 million. Through our acquisition of Prentiss (and after giving effect to the Prudential acquisition of certain Prentiss properties), we acquired a portfolio of 79 office properties (including 13 properties that are owned by consolidated real estate ventures and seven properties that are owned by unconsolidated real estate ventures) that contain an aggregate of 14.0 million net rentable square feet.
Subsequent to our acquisition of Prentiss and the related sale of properties to Prudential, through March 31, 2006, we sold eight additional properties that contain an aggregate of 1.6 million net rentable square feet.
In our acquisition of Prentiss, each then outstanding Prentiss common share was converted into the right to receive 0.69 of a Brandywine common share and $21.50 in cash except that 497,884 Prentiss common shares held in the Prentiss
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Deferred Compensation Plan converted solely into 720,737 Brandywine common shares. In addition, each then outstanding unit of limited partnership interest in Prentiss’s operating partnership subsidiary was, at the option of the holder, converted into Prentiss Common Shares with the right to receive the per share merger consideration or 1.3799 Class A Units of our Partnership. Accordingly, based on 49,375,723 Prentiss common shares outstanding and 139,000 Prentiss OP Units electing to receive merger consideration at closing of the acquisition, we issued 34,541,946 Brandywine common shares and paid an aggregate of approximately $1.05 billion in cash for the accounts of the former Prentiss shareholders. Based on 1,572,612 Prentiss OP Units outstanding at closing of the acquisition, we issued 2,170,047 Brandywine Class A Units. In addition, options issued by Prentiss that were exercisable for an aggregate of 342,662 Prentiss common shares were converted into options exercisable for an aggregate of 496,037 Brandywine common shares at a weighted average exercise price of $22.00 per share. Through our acquisition of Prentiss we assumed approximately $611.2 million in aggregate principal amount of Prentiss debt.
Each Brandywine Class A Unit that we issued in the merger is subject to redemption at the option of the holder. At our option, we may satisfy the redemption either for an amount, per unit, of cash equal to the then market price of one Brandywine common share (based on the prior ten-day trading average) or for one Brandywine common share. The Brandywine Class A Units issued in the merger were not registered under the Securities Act of 1933, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from registration.
| CRITICAL ACCOUNTING POLICIES AND ESTIMATES |
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Certain accounting policies are considered to be critical accounting policies, as it requires management to make assumptions about matters that are highly uncertain at the time the estimate is made and changes in accounting policies are reasonably likely to occur from period to period. Management bases its estimates and assumptions on historical experience and current economic conditions. On an on-going basis, management evaluates its estimates and assumptions including those related to revenue, impairment of long-lived assets and the allowance for doubtful accounts. Actual results may differ from those estimates and assumptions.
Our Annual Report on Form 10-K for the year ended December 31, 2005 contains a discussion of our critical accounting policies. There have been no significant changes in our critical accounting policies since December 31, 2005. See also Note 2 in our unaudited consolidated financial statements for the three-month period ended March 31, 2006 as set forth herein. Management discusses our critical accounting policies and management’s judgments and estimates with our Audit Committee.
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Comparison of the Three-Month Periods Ended March 31, 2006 and 2005 |
The table below shows selected operating information for the Same Store Property Portfolio and the Total Portfolio. The Same Store Property Portfolio consists of 241 Properties containing an aggregate of approximately 18.2 million net rentable square feet that we owned for the entire three-month periods ended March 31, 2006 and 2005. This table also includes a reconciliation from the Same Store Property Portfolio to the Total Portfolio net income (i.e., all properties owned by us during the three-month periods ended March 31, 2006 and 2005) by providing information for the properties which were acquired, under development or placed into service and administrative/elimination information for the three-month periods ended March 31, 2006 and 2005 (in thousands).
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| | | | | | | | | | | Prentiss | | Properties | | Development | | Administrative/ | | | | | | | | | | | | | |
| | | Same Store Property Portfolio
| | Portfolio
| | Acquired
| | Properties (a)
| | Eliminations (b)
| | Total Portfolio
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| | | | | | | Increase/ | | % | | | | | | | | | | | | | | | | | | | | | | Increase/ | | % | |
(dollar in thousands) | | 2006 | | 2005 | | (Decrease) | | Change | | 2006 | | 2005 | | 2006 | | 2005 | | 2006 | | 2005 | | 2006 | | 2005 | | 2006 | | 2005 | | (Decrease) | | Change |
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| Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash rents | | $ | 75,700 | | $ | 75,909 | | $ | (209 | ) | | 0% | | $ | 52,064 | | $ | — | | $ | 1,400 | | $ | — | | $ | 4,720 | | $ | 1,509 | | $ | 104 | | $ | 31 | | $ | 133,988 | | $ | 77,449 | | $ | 56,539 | | | 73% |
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| Straight-line rents | | | 2,968 | | | 2,835 | | | 133 | | | 5% | | | 3,110 | | | — | | | 107 | | | — | | | 1,295 | | | 439 | | | — | | | — | | | 7,480 | | | 3,274 | | $ | 4,206 | | | 100% |
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| Rent- FAS 141 | | | 533 | | | 561 | | | (28 | ) | | -5% | | | 1,501 | | | — | | | (33 | ) | | — | | | (62 | ) | | (56 | ) | | — | | | — | | | 1,939 | | | 505 | | $ | 1,434 | | | 100% |
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| Total rents | | | 79,201 | | | 79,305 | | | (104 | ) | | 0% | | | 56,675 | | | — | | | 1,474 | | | — | | | 5,953 | | | 1,892 | | | 104 | | | 31 | | | 143,407 | | | 81,228 | | | 62,179 | | | 77% | |
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| Tenant reimbursements | | | 11,365 | | | 11,917 | | | (552 | ) | | -5% | | | 5,824 | | | — | | | 153 | | | — | | | 505 | | | 165 | | | 123 | | | — | | | 17,970 | | | 12,082 | | | 5,888 | | | 49% | |
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| Other (c) | | | 1,208 | | | 4,627 | | | (3,419 | ) | | -74% | | | 396 | | | — | | | — | | | — | | | 24 | | | 62 | | | 2,759 | | | 1,327 | | | 4,387 | | | 6,016 | | | (1,629 | ) | | -27% | |
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| Total revenue | | | 91,774 | | | 95,849 | | | (4,075 | ) | | -4% | | | 62,895 | | | — | | | 1,627 | | | — | | | 6,482 | | | 2,119 | | | 2,986 | | | 1,358 | | | 165,764 | | | 99,326 | | | 66,438 | | | 67% |
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| Operating Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property operating expenses | | | 29,302 | | | 30,330 | | | (1,028 | ) | | -3% | | | 18,844 | | | — | | | 601 | | | — | | | 2,917 | | | 1,938 | | | (2,682 | ) | | (2,389 | ) | | 48,982 | | | 29,879 | | | 19,103 | | | 64% | |
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| Real estate taxes | | | 9,351 | | | 8,734 | | | 617 | | | 7% | | | 6,256 | | | — | | | 200 | | | — | | | 936 | | | 872 | | | 107 | | | 51 | | | 16,850 | | | 9,657 | | | 7,193 | | | 74% | |
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| Administrative expenses | | | — | | | — | | | — | | | 0% | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,490 | | | 4,752 | | | 8,490 | | | 4,752 | | | 3,738 | | | 79% | |
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| Total property operating expenses | | | 38,653 | | | 39,064 | | | (411 | ) | | -1% | | | 25,100 | | | — | | | 801 | | | — | | | 3,853 | | | 2,810 | | | 5,915 | | | 2,414 | | | 74,322 | | | 44,288 | | | 30,034 | | | 68% |
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| Subtotal | | | 53,121 | | | 56,785 | | | (3,664 | ) | | -6% | | | 37,795 | | | — | | | 826 | | | — | | | 2,629 | | | (691 | ) | | (2,929 | ) | | (1,056 | ) | | 91,442 | | | 55,038 | | | 36,404 | | | 66% | |
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| Depreciation and amortization | | | 25,383 | | | 26,961 | | | (1,578 | ) | | -6% | | | 32,104 | | | — | | | 452 | | | — | | | 1,947 | | | 1,017 | | | 448 | | | 457 | | | 60,334 | | | 28,435 | | | 31,899 | | | 100% | |
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| Operating Income (loss) | | $ | 27,738 | | $ | 29,824 | | $ | (2,086 | ) | | -7% | | $ | 5,691 | | $ | — | | $ | 374 | | $ | — | | $ | 682 | | $ | (1,708) | | $ | (3,377) | | $ | (1,513) | | $ | 31,108 | | $ | 26,603 | | $ | 4,505 | | | 17% | |
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| Number of properties | | | 241 | | | | | | | | | | | | 64 | (d) | | | | | 3 | | | | | | 11 | | | | | | — | | | | | | 319 | | | | | | | | | |
| Square feet | | | 18,151 | | | | | | | | | | | | 11,276 | | | | | | 377 | | | | | | 2,101 | | | | | | — | | | | | | 31,905 | | | | | | | | | |
| Other Income (Expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,650 | | | 378 | | | 2,272 | | | 100% |
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| Interest expense | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (40,967 | ) | | (17,797 | ) | | (23,170 | ) | | 100% | |
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| Equity in income of real estate ventures | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 965 | | | 558 | | | 407 | | | 73% | |
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| Income (loss) before minority interest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (6,244 | ) | | 9,742 | | | (15,986 | ) | | -164% | |
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| Minority interest - partners’ share of consolidated real estate ventures | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 298 | | | — | | | 298 | | | 0% | |
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| Income (loss) from continuing operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (5,946 | ) | | 9,742 | | | (15,688 | ) | | 100% | |
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| Income from discontinued operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,096 | | | — | | | 3,096 | | | 0% | |
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| Net Income (loss) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | | (2,850 | ) | $ | 9,742 | $ | | (12,592 | ) | | 100% | |
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| Earnings per common partnership unit | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | | (0.05 | ) | $ | 0.13 | $ | | (0.18 | ) | | -138% | |
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| (a) | - Results include: three redevelopments; four lease-up assets; three properties placed in service; and CIRA Centre |
| (b) | - Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation |
| (c) | - Includes net termination fee income of $482 for 2006 and $4,020 for 2005 for the same store portfolio |
| (d) | - Operations of one property classified as held for sale are included in income from discontinued operations |
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Revenue increased by $66.4 million primarily due to the acquisition of Prentiss, which represents $62.9 million of this increase. The increase is also the result of two properties that were acquired in the fourth quarter of 2005 as well as additional tenant occupancy at Cira Centre that will continue throughout 2006.
Revenue for same store properties decreased by $4.1 million primarily as a result of a $3.5 million decrease in termination fee income received during the first quarter of 2006 compared to the similar period in 2005. Occupancy for the same store properties was 90.9% at March 31, 2006 compared to 91.3% at March 31, 2005.
Operating Expenses and Real Estate Taxes |
Property operating expenses increased by $19.1 million primarily due to the acquisition of Prentiss, which represents $18.8 million of this increase. The occupied portion of Cira Centre and the two properties acquired in the 4th quarter of 2005 accounted for an additional $1.4 million and $0.6 million, respectively. These increases are offset by a $1.0 million decrease in operating expenses for our same store properties. The decrease in the operating expenses of the same store properties is attributable to less snow removal costs and HVAC maintenance costs incurred.
Real estate taxes increased by $7.2 million primarily due to the acquisition of Prentiss, which represents $6.3 million of this increase. The increase of $0.6 million at our same store properties is the result of increased real estate tax assessments.
Depreciation and Amortization Expense |
Depreciation and amortization increased by $31.9 million primarily due to the acquisition of Prentiss, which increased total portfolio depreciation expense by $32.1 million. This increase was offset by the $1.6 million decrease in the depreciation and amortization of our same store properties. The decrease in the depreciation expense of our same store properties is the result of certain property assets having been fully depreciated subsequent to March 31, 2005. Assets are fully depreciated at the end of their economic useful life, or if a tenant vacates a space, the associated tenant improvements and intangibles related to the space are written off.
Administrative expenses increased by approximately $3.7 million primarily due to the acquisition of Prentiss. Of this increase, $1.4 million was primarily attributable to increased payroll and related costs associated with employees that we hired as part of the acquisition of Prentiss. We also incurred an additional $1.2 million and $0.3 million in professional fees and travel costs, respectively, in connection with our merger integration activities. The remainder of the increase reflects other increased costs of the combined companies. We anticipate that synergies resulting in lowered administrative expense for the combined companies will occur throughout 2006.
Interest expense increased by approximately $23.2 million primarily as a result of 14 fixed rate mortgages, three unsecured notes, and one note secured by U.S. treasury notes (“PPREFI debt”) that we assumed in the Prentiss merger. The mortgages assumed have maturity dates ranging from July 2009 through March 2016 and the unsecured notes have maturities of March, April, and July 2035, and the PPREFI debt has a maturity of February 2007.
The PPREFI debt was defeased by Prentiss in the fourth quarter of 2005 and is secured by an investment in U.S. treasury notes. The interest earned on the treasury notes is included in interest income and substantially offsets the amount of interest expense incurred on the PPREFI debt, resulting in an immaterial amount of net interest expense incurred.
See the Notes to the Unconsolidated Combined Financial Statements in Part I, Item I for details of our mortgage indebtedness and unsecured notes outstanding.
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Minority Interest-partners’ share of consolidated real estate ventures |
Minority interest-partners’ share of consolidated real estate ventures increased by $0.3 million from the prior year as a result of our acquisition of one consolidated joint venture as part of our acquisition of Prentiss. This consolidated joint venture, of which we own 51%, owns 13 properties which aggregate approximately 1.2 million square feet of office space.
Subsequent to our acquisition of Prentiss, we entered into a joint venture with IBM. We consolidate this joint venture, and own a 50% interest in it.
As of March 31, 2006 we hold an ownership interest in 16 properties through consolidated joint ventures, compared to 2 properties owned by consolidated joint ventures at March 31, 2005.
Discontinued operations increased by $3.0 million from the prior year as a result of the sale of seven properties in Chicago, IL and one in Dallas, TX that we acquired in the Prentiss acquisition. We also have one property in Chicago, IL that we classified as held for sale at March 31, 2006. These nine properties combined had net operating income of $3.0 million during the quarter ended March 31, 2006. There were no gains or losses recognized on the properties that were sold, or held for sale, as the proceeds received from the sale of these properties was equal to the amount of the total purchase price allocated to these assets.
Net income declined in the first quarter of 2006, compared to the first quarter of 2005, by $12.1 million as increased revenues were not sufficient to offset increases in operating and financing costs. All major financial statement captions increased as a result of our acquisition of Prentiss and the related financing required to complete the transaction. A significant element of these costs relate to additional depreciation and amortization charges relating to the significant property additions (including both the TRC acquisition and the Prentiss acquisition) and the values ascribed to related acquired intangibles (e.g., in-place leases). These charges do not affect our ability to pay dividends and may not be comparable to those of other real estate companies that have not made such acquisitions. Such charges can be expected to continue until the values ascribed to the lease intangibles are fully amortized. These intangibles are amortizing over the related lease terms or estimated tenant relationship.
Earnings Per Common Partnership Unit |
Earnings per unit has declined from $0.13 in the first quarter of 2005 to $(0.05) in the first quarter of 2006 as a result of the factors described in “Net Income” above and an increase in the average number of common units outstanding. We issued 34.6 million of our common units in our acquisition of Prentiss.
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| LIQUIDITY AND CAPITAL RESOURCES |
Our principal liquidity needs for the next twelve months are as follows:
| | • | fund normal recurring expenses, |
| | | |
| | • | fund capital expenditures, including capital and tenant improvements and leasing costs, |
| | | |
| | • | fund current development and redevelopment costs, and |
| | | |
| | • | fund distributions declared by our Board of Trustees. |
We believe that our liquidity needs will be satisfied through cash flows generated by operations and financing activities. Rental revenue, expense recoveries from tenants, and other income from operations are our principal sources of cash that we use to pay operating expenses, debt service, recurring capital expenditures and the minimum distributions required to maintain the Company’s REIT qualification. We seek to increase cash flows from our properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our revenue also includes third-party fees generated by our property management, leasing, development and construction businesses. We believe our revenue, together with proceeds from equity and debt financings, will continue to provide funds for our short-term liquidity needs. However, material changes in our operating or financing activities may adversely affect our net cash flows. Such changes, in turn, would adversely affect our ability to fund distributions, debt service payments and tenant improvements. In addition, a material adverse change in our cash provided by operations would affect the financial performance covenants under our unsecured credit facility and unsecured notes.
Our principal liquidity needs for periods beyond twelve months are for costs of developments, redevelopments, property acquisitions, scheduled debt maturities, major renovations, expansions and other non-recurring capital improvements. We draw on multiple financing sources to fund our long-term capital needs. We use our credit facility for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. In March 2006 and December 2005, we sold $850 million and $300 million, respectively of unsecured notes and expect to utilize the debt and equity markets for other long-term capital needs.
As a result of our acquisition of Prentiss, we will have additional short and long-term liquidity requirements. Historically, we have satisfied these types of requirements principally through the most advantageous source of capital at that time, which has included public offerings of unsecured debt and private placements of secured and unsecured debt, sales of common and preferred equity, capital raised through the disposition of assets, and joint venture transactions. We believe these sources of capital will continue to be available in the future to fund our capital needs.
We funded the approximately $1.05 billion cash portion of the Prentiss merger consideration, related transaction costs and prepayments of approximately $543.3 million in Prentiss mortgage debt at the closing of the merger through (i) a $750 million unsecured term loan that originally matured on January 4, 2007; (ii) approximately $676.5 million of cash from Prudential’s acquisition of certain of the Prentiss properties; and (iii) approximately $195.0 million through borrowing under our revolving credit facility. We repaid in full the $750 million term loan on March 28, 2006 with the proceeds of the $850 million unsecured notes described more fully in Capitalization below.
Our ability to incur additional debt is dependent upon a number of factors, including our credit ratings, the value of our unencumbered assets, our degree of leverage and borrowing restrictions imposed by our current lenders. We currently have investment grade ratings for prospective unsecured debt offerings from three major rating agencies. If a rating agency were to downgrade our credit rating, our access to capital in the unsecured debt market would be more limited and the interest rate under our existing credit facility would increase.
The Company’s ability to sell common and preferred shares is dependent on, among other things, general market conditions for REITs, market perceptions about the Company and the current trading price of the Company’s shares. We regularly analyze which source of capital is most advantageous to us at any particular point in time. The equity markets may not be consistently available on terms that we consider attractive.
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The following summary discussion of our cash flows is based on the consolidated statement of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented.
As of March 31, 2006 and December 31, 2005, we maintained cash and cash equivalents of $36.3 million and $7.2 million, respectively, an increase of $29.1 million. This increase was the result of the following changes in cash flow from our activities for the three-month period ended March 31 (in thousands):
Activity | | 2006 | | 2005 | |
| |
|
| |
|
| |
| Operating | | $ | 55,692 | | $ | 26,475 | |
| Investing | | | (868,352 | ) | | (48,727 | ) |
| Financing | | | 841,787 | | | 22,379 | |
| | |
|
| |
|
| |
| Net cash flows | | $ | 29,127 | | $ | 127 | |
| | |
|
| |
|
| |
Our increased cash flow from operating activities in the quarter ended March 31, 2006 compared to the same period in 2005 is primarily attributable to our acquisition of Prentiss.
The increase in cash outflows from investing activities is primarily attributable to our acquisition of Prentiss and one other property in the first quarter of 2006 totaling $948.0 million. This increase in investing activity was offset by the net proceeds of $134.1 million received from the sale of seven properties in Chicago and one in Dallas that we acquired in our acquisition of Prentiss and subsequently sold.
Increased cash flow from financing activities is primarily attributable to the issuance of $850.0 million of unsecured notes resulting in net proceeds of $847.6 million. The proceeds of the note issuance were used to satisfy the $750.0 million term loan that was obtained in connection with the acquisition of Prentiss, as well as a portion of the outstanding borrowings on our credit facility.
On March 28, 2006, we consummated the public offering of (1) $300,000,000 aggregate principal amount of our unsecured floating rate notes due 2009 (the “2009 Notes”), (2) $300,000,000 aggregate principal amount of our 5.75% notes due 2012 (the “2012 Notes”) and (3) $250,000,000 aggregate principal amount of our 6.00% notes due 2016 (the “2016 Notes” and, together with the 2009 Notes and 2012 Notes, the “Notes”). Our general partner guaranteed the payment of principal of and interest on the Notes.
On March 28, 2006, we terminated, and repaid all amounts outstanding under, the $750 million Term Loan Agreement that we entered into on January 5, 2006 with JPMorgan Chase Bank, N.A., as Administrative Agent and Syndication Agent, J.P. Morgan Securities Inc., as Lead Arranger and Sole Bookrunner, and the lenders identified therein. We entered into the Term Loan Agreement in connection with our acquisition through the merger of Prentiss on January 5, 2006.
As of March 31, 2006, we had approximately $3.1 billion of outstanding indebtedness. The table below summarizes our mortgage notes payable, our unsecured notes and our revolving credit facility at March 31, 2006 and December 31, 2005:
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| | | March 31,
2006 | | December 31,
2005 | |
| | |
|
| |
|
| |
| | | (dollars in thousands) | |
Balance: | | | | | | | |
| Fixed rate | | $ | 2,587,244 | | $ | 1,417,611 | |
| Variable rate | | | 489,294 | | | 103,773 | |
| | |
|
| |
|
| |
| Total | | $ | 3,076,538 | | $ | 1,521,384 | |
| | |
|
| |
|
| |
Percent of Total Debt: | | | | | | | |
| Fixed rate | | | 84% | | | 93% | |
| Variable rate | | | 16% | | | 7% | |
| | |
|
| |
|
| |
| Total | | | 100% | | | 100% | |
| | |
|
| |
|
| |
Weighted-average interest rate at period end: | | | | | | | |
| Fixed rate | | | 5.5% | | | 5.9% | |
| Variable rate | | | 5.8% | | | 5.3% | |
| Total | | | 5.8% | | | 5.8% | |
The variable rate debt shown above generally bears interest based on various spreads over LIBOR (the term of which is selected by us).
We use credit facility borrowings for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. In December 2005, we replaced our then existing unsecured credit facility with a $600 million unsecured credit facility (the “Credit Facility”) that matures in December 2009, subject to a one year extension option upon payment of a fee and the absence of any defaults. Borrowings under the new Credit Facility generally bear interest at LIBOR (LIBOR was 4.96% as of March 31, 2006) plus a spread over LIBOR ranging from 0.55% to 1.10% based on our unsecured senior debt rating. We have an option to increase the maximum borrowings under the Credit Facility to $800 million subject to the absence of any defaults and our ability to obtain additional commitments from our existing or new lenders. The Credit Facility requires the maintenance of certain ratios related to minimum net worth, debt to total capitalization and fixed charge coverage and various non-financial covenants. We believe that we are in compliance with all financial covenants as of March 31, 2006.
We utilize unsecured notes as a long-term financing alternative. The indentures and note purchase agreements contain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40%, (3) a debt service coverage ratio of greater than 1.5 to 1.0, and (4) an unencumbered asset value of not less than 150% of unsecured debt. In addition, the note purchase agreement relating to the 2008 Notes contains covenants that are similar to the above covenants. At March 31, 2006, we were in compliance with each of these financial restrictions and requirements.
We have mortgage loans that are collateralized by certain of our properties. Payments on mortgage loans are generally due in monthly installments of principal and interest, or interest only.
We intend to refinance our mortgage loans as they mature primarily through the use of unsecured debt or equity.
The amount of indebtedness that we may incur, and the policies with respect thereto, are not limited by our declaration of trust and bylaws, and are solely within the discretion of our board of trustees, limited only by various financial covenants in our credit agreements.
On March 15, 2006, the Company declared a distribution of $0.42 per Common Share, totaling $38.3 million, which it paid on April 17, 2006 to shareholders of record as of April 5, 2006. We simultaneously declared a $0.42 per unit cash distribution to holders of Class A Units totaling $1.7 million. In January 2006, we and the Company paid a distribution of $0.02 to holders of record for the period from January 1, 2006 through January 4, 2006.
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On April 15, 2006, the Company declared distributions on its Series C Preferred Shares and Series D Preferred Shares to holders of record as of April 5, 2006. These shares are entitled to a preferential return of 7.50% and 7.375%, respectively. Distributions paid on April 17, 2006 to holders of Series C Preferred Shares and Series D Preferred Shares totaled $0.9 million and $1.1 million, respectively.
At March 31, 2006, the Company had a share repurchase program under which its Board had authorized it to repurchase from time to time up to 4,000,000 common shares. Through March 31, 2006, the Company had repurchased approximately 3.2 million common shares under this program at an average price of $17.75 per share. The Company’s Board placed no time limit on the duration of the program. No Common Shares were repurchased during the three-month period ended March 31, 2006 under the share repurchase program. On May 2, 2006, the Board authorized an increase in the number of Common Shares that the Company may repurchase under the program. The Board authorized an increase so that the Company may purchase up to 3,500,000 additional Common Shares (including unused availability from the prior authorization).
| | Shelf Registration Statement |
Together with the Company, we maintain a shelf registration statement that registered common shares, preferred shares, depositary shares and warrants and unsecured debt securities. Subject to our ongoing compliance with securities laws, and if warranted by market conditions, we may offer and sell equity and debt securities from time to time under the registration statement.
Short- and Long-Term Liquidity |
We believe that our cash flow from operations is adequate to fund our short-term liquidity requirements. Cash flow from operations is generated primarily from rental revenues and operating expense reimbursements from tenants and management services income from providing services to third parties. We intend 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 distributions required to maintain the Company’s REIT qualification under the Internal Revenue Code.
We expect to meet our long-term liquidity requirements, such as for property acquisitions, development, investments in real estate ventures, scheduled debt maturities, major renovations, expansions and other significant capital improvements, through cash from operations, borrowings under our Credit Facility, other long-term secured and unsecured indebtedness, the issuance of equity securities and the proceeds from the disposition of selected assets.
A majority of our leases provide for reimbursement of real estate taxes and operating expenses either on a triple net basis or over a base amount. In addition, many of our office leases provide for fixed base rent increases. We believe that inflationary increases in expenses will be significantly offset by expense reimbursement and contractual rent increases.
Commitments and Contingencies |
The following table outlines the timing of payment requirements related to our contractual commitments as of March 31, 2006:
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| | | Payments by Period (in thousands) | |
| | |
| |
| | | | Total | | | Less than
1 Year | | | 1-3 Years | | | 3-5 Years | | | More than
5 Years | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
| Mortgage notes payable (a) | | $ | 898,175 | | $ | 16,639 | | $ | 146,919 | | $ | 263,909 | | $ | 470,708 | |
| Mortgage notes payable on assets classified as held for sale (a) | | | 13,500 | | | — | | | — | | | 13,500 | | | — | |
| Revolving credit facility | | | 100,000 | | | — | | | 100,000 | | | — | | | — | |
| Unsecured debt (a) | | | 2,051,257 | | | 184,647 | | | 388,000 | | | 600,000 | | | 878,610 | |
| Ground leases (b) | | | 280,870 | | | 1,736 | | | 3,472 | | | 3,636 | | | 272,026 | |
| Other liabilities | | | 688 | | | — | | | — | | | — | | | 688 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
| | | $ | 3,344,490 | | $ | 203,022 | | $ | 638,391 | | $ | 881,045 | | $ | 1,622,032 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
| | (a) Amounts do not include unamortized discounts and/or premiums. |
| | (b) Future minimum rental payments under the terms of all non-cancelable ground leases under which the Partnership
is the lessee are expensed on a straight-line basis regardless of when payments are due. |
We intend to refinance our mortgage notes payable as they become due or repay those that are secured by properties being sold.
As part of our acquisition of the TRC Properties in September 2004, we agreed to issue to the sellers up to a maximum of $9.7 million of our Class A Units if certain of the acquired properties achieve at least 95% occupancy prior to September 21, 2007. The maximum number of Units that we are obligated to issue declines monthly and, as of March 31, 2006, the maximum balance payable under this arrangement was $4.2 million, with no amount currently due.
As part of the TRC acquisition, we acquired our interest in Two Logan Square, a 696,477 square foot office building in Philadelphia, primarily through a second and third mortgage secured by this property. We currently do not expect to take title to Two Logan Square until, at the earliest, September 2019. In the event that we take fee title to Two Logan Square upon a foreclosure of our mortgage, we have agreed to make a payment to an unaffiliated third party with a residual interest in the fee owner of this property. The amount of the payment would be $0.6 million if we must pay a state and local transfer upon taking title, and $2.9 million if no transfer tax is payable upon the transfer.
As part of the Prentiss acquisition, the TRC acquisition and several of our other acquisitions, we agreed not to sell certain of the acquired properties. In the case of the TRC acquisition, we agreed not to sell the acquired properties for periods ranging from three to 15 years from the acquisition date as follows: 201 Radnor Financial Center, 555 Radnor Financial Center and 300 Delaware Avenue (three years); One Rodney Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square and Radnor Corporate Center (15 years). In the case of the Prentiss acquisition, we assumed the obligation of Prentiss not to sell Concord Airport Plaza before March 2018 and 6600 Rockledge before July 2008. We also own 14 other properties that aggregate 1.0 million square feet and have agreed not to sell these properties for periods that expire by the end of 2008. Our agreements generally provide that we may dispose of the subject properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax deferred transactions. In the event that we sell any of the properties within the applicable restricted period in non-exempt transactions, we would be required to pay significant tax liabilities that would be incurred by the parties who sold us the applicable property.
We hold a fifty percent economic interest in an approximately 141,724 square foot office building located at 101 Paragon Drive, Montvale, New Jersey. The remaining fifty percent interest is held by Donald E. Axinn, one of the Company’s Trustees. Although we and Mr. Axinn have each committed to provide one half of the $11 million necessary to repay the mortgage loan secured by this property, in February 2006, an unaffiliated third party entered into an agreement to purchase this property for $18.3 million. Closing is scheduled for August 2006 and is subject to standard closing conditions.
We invest in our properties and regularly incur capital expenditures in the ordinary course to maintain the properties. We believe that such expenditures enhance our competitiveness. We also enter into construction, utility and service contracts in the ordinary course of business which may extend beyond one year. These contracts typically provide for cancellation with insignificant or no cancellation penalties.
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Interest Rate Risk and Sensitivity Analysis |
The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates. The range of changes chosen reflects our view of changes which are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates chosen.
Our financial instruments consist of both fixed and variable rate debt. As of March 31, 2006, our consolidated debt consisted of $918.3 million in fixed rate mortgages and $10.7 million in variable rate mortgage notes, $100.0 million borrowings under our Credit Facility and $2.0 billion in unsecured notes (net of discounts). All financial instruments were entered into for other than trading purposes and the net market value of these financial instruments is referred to as the net financial position. Changes in interest rates have different impacts on the fixed and variable rate portions of our debt portfolio. A change in interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position, but has no impact on interest incurred or cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position.
If market rates of interest on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $4.9 million. If market rates of interest on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $4.9 million.
If market rates of interest increase by 1%, the fair value of our outstanding fixed-rate mortgage debt would decrease by approximately $42.0 million. If market rates of interest decrease by 1%, the fair value of our outstanding fixed-rate mortgage debt would increase by approximately $45.4 million.
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Market risk is the exposure to loss resulting from changes in interest rates, commodity prices and equity prices. In pursuing its business plan, the primary market risk to which we are exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between our yield on invested assets and cost of funds and, in turn, our ability to make distributions or payments to its shareholders. While we have not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in losses to us which adversely affect our operating results and liquidity.
There have been no material changes in Quantitative and Qualitative disclosures in 2006 from the disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2005. Reference is made to Item 7 included in our Annual Report on Form 10-K for the year ended December 31, 2005 and the caption “Interest Rate Risk and Sensitivity Analysis” under Item 2 of this Quarterly Report on Form 10-Q.
| Item 4. | Controls and Procedures |
| | | |
| | (a) | Evaluation of disclosure controls and procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of the end of the period covered by this quarterly report, have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. |
| | | |
| | (b) | Changes in internal controls over financial reporting. There was no change in our internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. |
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| Part II. | OTHER INFORMATION |
Not applicable.
There has been no material change to the risk factors previously disclosed by us in our Form 10-K for the fiscal year ended December 31, 2005.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
The following table summarizes the unit repurchases during the three-month period ended March 31, 2006:
| | | | | | | Total | | | | |
| | | | | | | Number of | | Maximum | |
| | | | | | | Units | | Number of | |
| | | Total | | | | Purchased as | | Units that May | |
| | | Number of | | Average | | Part of Publicly | | Yet Be Purchased | |
| | | Units | | Price Paid Per | | Announced Plans | | Under the Plans | |
| | | Purchased (a) | | Unit | | or Programs | | or Programs (b) | |
| | |
|
| |
|
| |
|
| |
|
| |
2006: | | | | | | | | | | | | | |
| January | | | 50,628 | | $ | 28.49 | | | — | | | 762,000 | |
| February | | | — | | | — | | | — | | | 762,000 | |
| March | | | — | | | — | | | — | | | 762,000 | |
| | |
|
| |
|
| |
|
| |
|
| |
| Total | | | 50,628 | | $ | 28.49 | | | — | | | 762,000 | |
| | |
|
| |
|
| |
|
| |
|
| |
| | | | | | | | | | | | | | |
| (a) | Represent Common Partnership Units that relate to Common Shares cancelled by the Company upon vesting of restricted Common Shares previously awarded to Company employees, in satisfaction of tax withholding obligations. |
| (b) | Represents activity related only to our general partner’s 4.0 million share repurchase program. No time limit has been placed on the duration of the share repurchase program. As of March 31, 2006, we have purchased $56.8 million related to this program. |
| | |
| Item 3. | Defaults Upon Senior Securities |
Not applicable.
| Item 4. | Submission of Matters to a Vote of Security Holders |
Not applicable.
(I)
| | • | The Company held its annual meeting of shareholders on May 2, 2006. At the meeting, each of the ten individuals nominated for election to the Company’s Board of Trustees was elected to the Board. These individuals will serve on the Board until the next annual meeting of shareholders and until their successors are elected and qualified or until their earlier resignation. The number of shares cast for or withheld for each nominee is set forth below: |
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Trustee | | For | | Withheld | |
| |
|
| |
|
| |
| Walter D’Alessio | | | 85,145,970 | | | 1,186,457 | |
| D. Pike Aloian | | | 85,160,346 | | | 1,172,081 | |
| Thomas F. August | | | 82,650,395 | | | 3,682,032 | |
| Donald E. Axinn | | | 83,447,094 | | | 2,885,333 | |
| Wyche Fowler | | | 85,159,281 | | | 1,173,146 | |
| Michael J. Joyce | | | 83,438,318 | | | 2,894,109 | |
| Anthony A. Nichols Sr. | | | 84,474,348 | | | 1,858,079 | |
| Michael V. Prentiss | | | 82,732,788 | | | 3,599,639 | |
| Charles P. Pizzi | | | 85,183,303 | | | 1,149,124 | |
| Gerard H. Sweeney | | | 84,473,685 | | | 1,858,742 | |
| | | |
| | • | At the Company’s annual meeting of shareholders, the shareholders voted as follows to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the calendar year 2006 as follows: |
| | | | – | Votes For | | | 86,287,028 | |
| | | | – | Votes Against | | | 17,875 | |
| | | | – | Abstentions | | | 27,524 | |
| | | | – | Broker Non-Votes | | | zero | |
(II)
| | • | At the Company’s annual meeting of shareholders, each non-employee Trustee received his annual trustee fee of $35,000, payable in cash or common shares at the election of the non-employee Trustee, and his $40,000 annual restricted share award (1,147 shares), the form of which is attached as Exhibit 10.33. |
| | | |
| | 4.1 | Form of $300,000,000 aggregate principal amount of Floating Rate Guaranteed Note due 2009 (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on March 28, 2006) |
| | | |
| | 4.2 | Form of $300,000,000 aggregate principal amount of 5.75% Guaranteed Note due 2012 (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on March 28, 2006) |
| | | |
| | 4.3 | Form of $250,000,000 aggregate principal amount of 6.00% Guaranteed Note due 2016 (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on March 28, 2006) |
| | | |
| | 10.1 | Form of Fourteenth Amendment to Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006) |
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| | 10.2 | List of partners of Brandywine Operating Partnership, L.P. (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006) |
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| | 10.3 | Term Loan Agreement dated as of January 5, 2006 among Brandywine Realty Trust and Brandywine Operating Partnership, L.P., as Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent and Syndication Agent, J.P. Morgan Securities Inc., as Lead Arranger and Sole Bookrunner, and the lenders identified therein (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006) |
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| | 10.4 | 2006 Amended and Restated Agreement with Anthony A. Nichols, Sr. (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.5 | Consulting Agreement with Michael V. Prentiss (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.6 | Consulting Agreement with Thomas F. August (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.7 | Employment Agreement with Gregory S. Imhoff (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.8 | Employment Agreement with Scott W. Fordham (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.9 | Prentiss Properties Trust 1996 Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.10 | First Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.11 | Second Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.12 | Amendment No. 3 to the Prentiss Properties Trust 1996 Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.13 | Fourth Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.14 | Amendment No. 5 to the Prentiss Properties Trust 1996 Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.15 | Sixth Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.16 | Prentiss Properties Trust 2005 Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.17 | Amended and Restated Prentiss Properties Trust Trustees’ Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.18 | Amendment No. 1 to the Amended and Restated Prentiss Properties Trust Trustees’ Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.19 | Second Amendment to the Amended and Restated Prentiss Properties Trust Trustees’ Share Incentive Plan (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.20 | Form of Restricted Share Award (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.21 | Form of Acknowledgment and Waiver Agreement (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.22 | Third Amended and Restated Employment Agreement with Michael V. Prentiss (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.23 | First Amendment to the Third Amended and Restated Employment Agreement with Michael V. Prentiss (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.24 | Second Amendment to the Third Amended and Restated Employment Agreement with Michael V. Prentiss (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.25 | Amended and Restated Employment Agreement with Thomas F. August (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.26 | First Amendment to the Amended and Restated Employment Agreement with Thomas F. August (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.27 | Second Amendment to the Amended and Restated Employment Agreement with Thomas F. August (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.28 | Alternative Asset Purchase Agreement (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on January 10, 2006)** |
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| | 10.29 | Restricted Share Award to President and Chief Executive Officer of Brandywine Realty Trust (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on February 15, 2006)** |
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| | 10.30 | Form of Restricted Share Award to Executives other than President and Chief Executive Officer of Brandywine Realty Trust (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on February 15, 2006)** |
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| | 10.31 | Consent and Confirmation Agreement between Brandywine Operating Partnership, L.P. and Donald E. Axinn (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on February 15, 2006) |
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| | 10.32 | Trustee Compensation (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on March 17, 2006)** |
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| | 10.33 | Form of Restricted Share Award for Non-Employee Trustees** |
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| | 12.1 | Statement re Computation of Ratios |
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| | 31.1 | Certification Pursuant to 13a-14 under the Securities Exchange Act of 1934 |
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| | 31.2 | Certification Pursuant to 13a-14 under the Securities Exchange Act of 1934 |
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| | 32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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| | 32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
** Management contract or compensatory plan or arrangement
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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 OPERATING PARTNERSHIP, L.P. (Registrant)
BRANDYWINE REALTY TRUST, as general partner
| Date: May 15, 2006 | By: /s/ Gerard H. Sweeney |
| | Gerard H. Sweeney, President and Chief Executive Officer |
| | (Principal Executive Officer) |
| | |
| | |
| | |
| Date: May 15, 2006 | By: /s/ Christopher P. Marr |
| | Christopher P. Marr, Senior Vice President and Chief Financial Officer |
| | (Principal Financial Officer) |
| | |
| | |
| | |
| Date: May 15, 2006 | By: /s/ Scott W. Fordham |
| | Scott W. Fordham, Vice President and Chief Accounting Officer |
| | (Principal Accounting Officer) |
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