UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ___________ to ___________
Commission file number 1-9106
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Brandywine Realty Trust
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(Exact name of registrant as specified in its charter)
Maryland 23-2413352)
-------------------------------- -------------------
State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
16 Campus Boulevard, Newtown Square, Pennsylvania 19073
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(Address of principal executive offices) (Zip Code)
(610) 325-5600
-----------------------------
Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
A total of 21,045,040 Common Shares of Beneficial Interest were outstanding
as of August 13, 1997.
BRANDYWINE REALTY TRUST
TABLE OF CONTENTS
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30,
1997 (unaudited) and December 31, 1996
Consolidated Statements of Operations for the
three months ended June 30, 1997
(unaudited) and June 30, 1996 (unaudited)
Consolidated Statements of Operations for the
six months ended June 30, 1997 (unaudited)
and June 30, 1996 (unaudited)
Consolidated Statements of Cash Flow for the
six months ended June 30, 1997 (unaudited)
and June 30, 1996 (unaudited)
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures
about Market Risk--Not applicable
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities--Not applicable
Item 3. Defaults Upon Senior Securities--Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
PART I--FINANCIAL INFORMATION
ITEM 1.--FINANCIAL STATEMENTS
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands)
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
ASSETS
Real estate investments
Operating properties..................................... $ 358,597 $ 161,284
Accumulated depreciation................................. (14,388) (9,383)
----------- ------------
344,209 151,901
Cash and cash equivalents................................. 10,777 18,279
Escrowed cash............................................. 1,213 2,044
Accounts receivable....................................... 2,755 1,366
Due from affiliates....................................... 293 517
Investment in management company.......................... 202 --
Deferred costs and other assets........................... 4,980 4,219
----------- ------------
Total assets............................................ $ 364,429 $ 178,326
----------- ------------
----------- ------------
LIABILITIES AND BENEFICIARIES' EQUITY
Mortgage notes payable.................................... $ 46,960 $ 36,644
Notes payable, Credit Facility............................ 130,775 --
Accrued interest.......................................... 395 202
Accounts payable and accrued expenses..................... 2,650 3,119
Distributions payable..................................... 4,192 2,255
Excess of losses over investment in management company.... -- 14
Tenant security deposits and deferred rents............... 2,721 1,324
----------- ------------
Total liabilities....................................... 187,693 43,558
----------- ------------
Minority interest......................................... 5,508 6,398
----------- ------------
Convertible preferred shares--$0.01 par value, 5,000,000
preferred shares authorized............................ -- 26,444
----------- ------------
Beneficiaries' equity
Shares of beneficial interest, $0.01 par value, 25,000,000
common shares authorized, 11,045,040 shares issued and
outstanding............................................ 111 70
Additional paid-in capital............................... 186,426 113,047
Share warrants........................................... 962 962
Cumulative earnings (deficit)............................ 460 (3,248)
Cumulative distributions................................. (16,731) (8,905)
----------- ------------
Total beneficiaries' equity............................. 171,228 101,926
----------- ------------
Total liabilities and beneficiaries' equity............. $ 364,429 $ 178,326
----------- ------------
----------- ------------
The accompanying condensed notes are an integral part of these consolidated
financial statements.
3
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share information)
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
Rents................................................... $ 9,890 $ 930 $ 16,889 $ 1,907
Tenant reimbursements................................... 1,958 38 3,285 68
Other................................................... 272 14 544 52
---------- ------- ----------- --------
Total revenue.......................................... 12,120 982 20,718 2,027
---------- ------- ----------- --------
Operating Expenses:
Interest................................................ 2,084 209 3,059 416
Depreciation and amortization........................... 3,465 223 5,775 465
Property operating expenses............................. 4,222 409 7,032 859
Management fees......................................... 442 10 757 22
Administrative expenses................................. 261 137 430 259
---------- ------- ----------- --------
Total operating expenses............................... 10,474 988 17,053 2,021
---------- ------- ----------- --------
Income (loss) before equity in income of management
company and minority interest............................ 1,646 (6) 3,665 6
Equity in income of management company................... 92 -- 217
---------- ------- ----------- --------
Income (loss) before minority interest................... 1,738 (6) 3,882 6
Minority interest in income.............................. (80) (3) (174) (5)
---------- ------- ----------- --------
Net Income (loss)........................................ 1,658 (9) 3,708 1
Income allocated to Preferred Shares..................... -- -- (499) --
---------- ------- ----------- --------
Income (loss) allocated to Common Shares................. $ 1,658 $ (9) $ 3,209 $ 1
---------- ------- ----------- --------
---------- ------- ----------- --------
PER SHARE DATA:
Earnings per share of beneficial interest
Income (loss) allocated to Common Shares................ $ 0.17 $(0.01) $ 0.36 $ 0.00
----------- ------- ----------- --------
----------- ------- ----------- --------
Weighted average number of shares outstanding, including
share equivalents...................................... 9,830,234 635,510 8,809,379 629,641
----------- ------- ----------- --------
----------- ------- ----------- --------
The accompanying condensed notes are an integral part of these consolidated
financial statements.
4
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOW
SIX MONTHS
ENDED JUNE 30,
---------------------
1997 1996
---------- ---------
(UNAUDITED AND IN
THOUSANDS)
Cash flows from operating activities:
Net income.................................................................. $ 3,708 $ 1
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest in income of affiliates................................. 174 5
Depreciation and amortization............................................. 5,775 465
Equity in income of affiliate............................................. (216) --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable.............................. (1,389) (33)
Decrease in affiliate receivable........................................ 224 --
(Increase) decrease in other assets..................................... 69 (19)
Increase (decrease) in accounts payable and accrued expenses............ 565 --
Increase (decrease in accrued mortgage interest......................... 193 --
Increase (decrease) in other liabilities................................ 1,397 (25)
---------- ---------
Net cash provided by operating activites............................ 10,500 394
---------- ---------
Cash flows from investing activities:
Acquisition of properties................................................... (194,604) --
Decrease (increase) in escrowed cash........................................ 831 526
Capital expenditures and leasing commissions paid........................... (4,573) (633)
---------- ---------
Net cash used in investing activities............................... (198,346) (107)
---------- ---------
Cash flows from financing activites:
Proceeds from issuance of shares, net....................................... 45,404 338
Distributions paid to shareholders.......................................... (5,975) (204)
Distributions paid to minority partners..................................... (177) (5)
Proceeds from note payable to shareholder................................... -- 992
Proceeds from mortgage notes payable........................................ 13,277 --
Repayment of mortgage notes payable......................................... (2,961) (53)
Proceeds from notes payable, Credit Facility................................ 137,775 --
Repayment of notes payable, Credit Facility................................. (7,000) --
Costs associated with new ventures.......................................... -- (560)
Other....................................................................... 1 8
---------- ---------
Net cash provided by (used in) financing activities................. 180,344 516
---------- ---------
Increase (decrease) in cash and cash equivalents.............................. (7,502) 803
Cash and cash equivalents at beginning of period.............................. 18,279 840
---------- ---------
Cash and cash equivalents at end of period.................................... $ 10,777 $ 1,643
---------- ---------
---------- ---------
The accompanying condensed notes are an integral part of these consolidated
financial statements.
5
BRANDYWINE REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. ORGANIZATION AND NATURE OF OPERATIONS:
Brandywine Realty Trust (the "Company"), is a Maryland real estate investment
trust. As of June 30, 1997, the Company owned 75 properties (collectively,
the "Properties"). The Company's interest in 74 of the Properties is held
through Brandywine Operating Partnership, L.P. (the "Operating Partnership").
The Company is the sole general partner of the Operating Partnership and as
of June 30, 1997, the Company held a 96.9% interest in the Operating
Partnership. Brandywine Realty Services Corporation (the "Management
Company"), is owned by the Operating Partnership through a 100% interest in
the non-voting preferred stock and a 5% interest in the voting common stock.
The Management Company is responsible for managing and leasing 74 of the
Company's Properties and other properties on behalf of third parties, as well
as development opportunities as they arise.
As of June 30, 1997, the Company's portfolio aggregated approximately 4.3
million square feet available for lease for office and industrial purposes.
As of June 30, 1997, the overall occupancy rate of the Properties was
approximately 92.8%. The Company's Properties are primarily located within
the suburban Philadelphia office and industrial market area.
2. GENERAL:
BASIS OF PRESENTATION
The financial statements have been prepared by the Company without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. In the opinion of
the Company, all adjustments (consisting solely of normal recurring matters)
necessary to fairly present the financial position of the Company as of June
30, 1997, and the results of its operations and its cash flows for the three
and six month periods ended June 30, 1997 and 1996 have been included. The
results of operations for such interim periods are not necessarily indicative
of the results for a full year. For further information, refer to the
Company's consolidated financial statements and footnotes thereto included in
the Annual Report on Form 10-K (as amended by Form 10-K/A) for the year ended
December 31, 1996.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform to the
current presentation.
Net Income (Loss) Per Share
Net income (loss) per share is based on the weighted average number of common
shares of beneficial interest ("Common Shares") outstanding adjusted to give
effect to common share equivalents. In February, 1997, the Financial
Accounting Standards Board issued Statement No. 128, "Earnings per Share",
which is effective for financial statements for periods ending after December
15, 1997. At that time, the Company will be required to change the method
currently used to compute and disclose earnings per share and to restate all
6
prior periods. The impact of Statement No. 128 on the calculation of primary
and fully diluted earnings per share for the interim periods presented is
expected to be immaterial.
3. ACQUISITIONS OF REAL ESTATE INVESTMENTS:
All acquisitions since January 1, 1996 were accounted for by the purchase
method. For the year ended December 31, 1996, the Company acquired 33
properties aggregating 1.7 million net rentable square feet. During the
period January 1, 1997 through June 30, 1997, the Company acquired 38
properties (32 office and 6 industrial) totaling 2.3 million net rentable
square feet.
The following table summarizes certain information regarding acquisition
activity from January 1, 1997 through June 30, 1997:
NET PURCHASE
DATE OF NUMBER OF RENTABLE PRICE
ACQUISITION PROPERTIES TYPE LOCATION SQUARE FEET (IN MILLIONS)
- ---------------------- --------------- ----------- ------------------------------ ----------- -------------
January 24 3 Office Marlton, NJ 89,186 (a)
2 Office Mt. Laurel, NJ 200,436 (a)
March 4 7 Office Voorhees, NJ 235,209 $ 21.5
March 6 1 Office East Goshen, PA 38,470 $ 3.6
April 3 2 Industrial King of Prussia, PA 124,960 $ 3.5
April 18 4 Office Marlton, NJ 201,970 $ 14.5
May 23 4 Industrial Westampton, NJ 388,767 (b)
1 Office Marlton, NJ 43,719 (b)
3 Office Langhorne, PA 115,390 (b)
2 Office Lower Gwynedd, PA 139,467 (b)
May 30 5 Office Mt. Laurel, NJ 495,103 (c)
1 Office King of Prussia, PA 112,905 (c)
June 5 2 Office Exton, PA 64,594 $ 5.3
June 16 1 Office Broomall, PA 62,934 $ 4.1
--- ----------
38 2,313,110
- ------------------------
(a) These properties were acquired for an aggregate purchase price of $31.3
million.
(b) These properties were acquired for an aggregate purchase price of $41.6
million.
(c) These properties were acquired for an aggregate purchase price of $66.2
million.
On July 29, 1997, the Company purchased three office properties (the "Berwyn
Park Properties") containing an aggregate of approximately 241,458 net
rentable square feet located in Tredyffrin Township, Chester County,
Pennsylvania and approximately 12.5 acres of land adjacent to such properties
for an aggregate cash purchase price of approximately $37.2 million (the
"Berwyn Park Acquisition").
On July 31, 1997, the Company purchased five office properties (the "Green
Hills Properties") containing an aggregate of approximately 574,241 net
rentable square feet located in Reading, Berks County, Pennsylvania and
approximately 133 acres of additional unimproved land for an aggregate
purchase price of approximately $40.0 million (the "Green Hills
Acquisition"). A $38.5 million cash payment was made at closing funded with
$15.0 million of Credit Facility borrowings and $23.5 million from existing
cash reserves. The $1.5 million balance of the purchase price is payable in
equal installments on August 1, 1998, 1999 and 2000, subject to a 5% interest
rate.
7
As of August 13, 1997, the Company's portfolio consists of 83 properties (74
office and 9 industrial) aggregating approximately 5.1 million net rentable
square feet.
The results of operations for each of the properties acquired since January
1, 1996 have been included from their respective purchase dates. The
following unaudited pro forma financial information of the Company has been
prepared as if the sales of securities in 1996 (refer to the Company's Form
10-K for the year ended December 31, 1996 for more information), the March
1997 Offering (see Note 5), the July 1997 Offering (see Note 5), and the
acquisitions of the 79 properties (including the eight properties acquired
subsequent to June 30, 1997) acquired from July 19, 1996 through July 31,
1997 had all occurred on January 1, 1996. The pro forma financial information
is unaudited and is not necessarily indicative of the results which actually
would have occurred if the acquisitions had occurred on January 1, 1996, nor
does it purport to represent the results of operations for future periods.
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
-------------- ------------
(UNAUDITED AND IN THOUSANDS)
Pro forma total revenues........................................................... $ 35,962 $ 67,364
Pro forma net income............................................................... $ 10,455 $ 17,054
Pro forma net income per Common Share.............................................. $ 0.51 $ 0.77
4. INDEBTEDNESS:
As of June 30, 1997, the Company had notes payable under its revolving credit
facility (the "Credit Facility") and an interim credit facility of $130.8
million. The Credit Facility, which was established in December 1996, is
secured by mortgages on certain of the Company's properties and enables
borrowings to fund acquisitions, working capital and other business needs.
During July 1997, the maximum amount of borrowings available under the Credit
Facility was increased from $80 million to $150 million. At the time of such
increase, the interim credit facility was no longer necessary and was fully
satisfied. On July 28, 1997, amounts outstanding under the Credit Facility
were repaid in full using proceeds from the July 1997 Offering (see Note 5
below). The Company borrowed $15 million under the Credit Facility on July
31, 1997 in connection with the Green Hills Acquisition.
5. ISSUANCE OF SHARES AND WARRANTS:
In March 1997, the Company completed the sale of 2,375,500 Common Shares to
the public at a price of $20 5/8 per share (the "March 1997 Offering"). The
net proceeds of the March 1997 Offering were used to fund the Company's
acquisitions, repay certain indebtedness and for working capital purposes.
In March 1997, 54,397 of the Series A Convertible Preferred Shares
("Preferred Shares") were converted into 181,323 Common Shares. In June 1997,
the remaining 427,421 Preferred Shares were converted into 1,424,736 Common
Shares.
On July 28, 1997, the Company completed the sale of 10,000,000 Common Shares
to the public at a price of $20 3/4 per share (the "July 1997 Offering").
Although not exercised as of August 13, 1997, the underwriters have the right
to exercise their over-allotment option, which (if exercised) would result in
the Company issuing up to an additional 1,500,000 Common Shares at a price of
$20 3/4. The net proceeds of the July 1997 Offering were used by the Company
to repay approximately $130.8 million of indebtedness under the Credit
Facility and for working capital and investment purposes.
8
6. DISTRIBUTIONS:
On June 23, 1997, the Company declared a distribution of $0.36 per share
which was paid on July 10, 1997 to shareholders of record as of June 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1993 and Section 21E of the Securities
Exchange Act of 1934. The words "believe", "expect", "anticipate", "intend",
"estimate" and other expressions which are predictions of or indicate future
events and trends and which do not relate to historical matters identify
forward-looking statements. The Company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference include the following: Real estate
investment considerations, such as the effect of economic and other
conditions in the market area on cash flows and values; the need to renew
leases or relet space upon the expiration of current leases, and the ability
of a property to generate revenues sufficient to meet debt service payments
and other operating expenses; and risks associated with borrowings, such as
the possibility that the Company will not have sufficient funds available to
make principal payments on outstanding debt, outstanding debt may be
refinanced at higher interest rates or otherwise on terms less favorable to
the Company and interest rates under the Credit Facility may increase.
The following discussion and analysis of the financial condition and results
of operations should be read in conjunction with the accompanying financial
statements and notes thereto.
RESULTS OF OPERATIONS
Comparison of Three and Six Months Ended June 30, 1997 and June 30, 1996
Net income for the three and six months ended June 30, 1997 was $1.7 million
and $3.7 million, respectively, compared with a net loss of $9,000 and net
income of $1,000 for the corresponding periods in 1996. The increase in net
income was primarily attributable to the operating results contributed by the
71 properties (the "Acquisition Properties") acquired during 1996 and through
June 30, 1997.
The Acquisition Properties have increased the Company's leaseable area from
approximately 254,000 net rentable square feet on June 30, 1996 to
approximately 4.3 million net rentable square feet on June 30, 1997.
Revenues, which include rental income, recoveries from tenants and other
income, increased by $11.1 million and $18.7 million for the three and six
months ended June 30, 1997, respectively, as compared to the corresponding
prior year period as a result of the Acquisition Properties. The impact of
the straight-line rent adjustment increased revenues by $521,000 for the six
months ended June 30, 1997.
Property expenses, depreciation and amortization and management fees
increased in aggregate by $7.5 million and $12.2 million for the three and
six months ended June 30, 1997 as compared with the corresponding prior year
periods primarily as a result of the Acquisition Properties. Interest expense
increased as a result of additional indebtedness incurred to finance certain
of the Company's acquisitions. Administrative expenses increased primarily as
a result of the increase in management personnel, professional fees and
public filing costs associated with the Company's growth.
Minority interest primarily represents the portion of the Operating
Partnership which is not owned by the Company.
9
LIQUIDITY AND CAPITAL RESOURCES
STATEMENT OF CASH FLOWS
During the six months ended June 30, 1997, the Company generated $10.5
million in cash flow from operating activities, and together with $137.8
million in borrowings under the Company's Credit Facility, $13.3 million in
additional mortgage notes payable, $45.4 million in net proceeds from share
issuances, escrowed cash of $0.8 million and existing cash reserves of $7.5
million, used an aggregate $215.3 million to (i) purchase 38 Properties for
$194.6 million, (ii) fund capital expenditures and leasing commissions of
$4.6 million, (iii) pay distributions to shareholders and minority partners
totaling $6.1 million, (iv) pay scheduled amortization on mortgage principal
of $0.5 million, (v) satisfy $2.5 million of mortgage notes payable, and (vi)
pay down its outstanding borrowings on its Credit Facility by $7.0 million.
CAPITALIZATION
As of June 30, 1997, the Company had approximately $177.7 million of debt
outstanding, consisting of mortgage loans totaling $47.0 million and notes
payable under the Company's revolving Credit Facility of $130.8 million. The
mortgage loans mature between December 1997 and November 2004. The Credit
Facility provides for borrowings up to $150.0 million and bears interest at a
per annum floating rate equal to the 30, 60 or 90-day LIBOR, plus 175 basis
points. For the six months ended June 30, 1997, the weighted average interest
on the Company's debt was 8.99%.
The Company's debt to market capitalization was 43.5% as of June 30, 1997 (at
the June 30, 1997 closing share price of $20.25). After application of the
net proceeds from the July 1997 Offering and the subsequent acquisitions of
the Berwyn Park Properties and the Green Hills Properties, the Company's debt
to market capitalization decreased to 12.3% (based on the $20.75 per share
pricing). As a general policy, the Company intends, but is not obligated, to
adhere to a policy of maintaining a debt to market capitalization ratio of no
more than 50%. This policy is intended to provide the Company with financial
flexibility to select the optimal source of capital to finance its growth.
SHORT AND LONG TERM LIQUIDITY
The Company believes that its cash flow from operations is adequate to fund
its short-term liquidity requirements for the foreseeable future. Cash flow
from operations is generated primarily from rental revenues and operating
expense reimbursements from tenants and the management services income from
providing services to third parties. The Company intends to use these funds
to meet its principal short-term liquidity needs which are to fund operating
expenses, debt service requirements, recurring capital expenditures, tenant
allowances, leasing commissions and the minimum distribution required to
maintain the Company's REIT qualifications under the Internal Revenue Code.
For the quarter ended June 30, 1997, the Company declared distributions
totaling $0.36 per Common Share amounting to approximately $4.0 million. In
addition, during this period, the Company's distributions declared to
minority partners totaled approximately $126,000.
The Company expects to meet its long-term liquidity requirements, such as for
property acquisitions and development, scheduled debt maturities,
renovations, expansions and other non-recurring capital improvements, through
its Credit Facility and other long-term secured and unsecured indebtedness
and the issuance of additional Operating Partnership units and equity
securities.
FUNDS FROM OPERATIONS
Management generally considers Funds from Operations ("FFO") as one measure
of REIT performance. The Company adopted the NAREIT definition of FFO in 1996
and has used this definition for all periods presented in the financial
statements included herein. FFO is calculated as net income (loss) adjusted
10
for depreciation expense attributable to real property, amortization expense
attributable to capitalized leasing costs, gains on sales of real estate
investments and extraordinary and nonrecurring items. FFO should not be
considered an alternative to net income as an indication of the Company's
performance or to cash flows as a measure of liquidity.
FFO for the three and six months ended June 30, 1997 and June 30, 1996 is
summarized in the following table (in thousands, except share and per share
data).
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1997 1996 1997 1996
------------ --------- ---------- ------------
Income before minority interest........................... $ 1,738 $ (6) $ 3,882 $ 6
Add (Deduct):
Depreciation attributable to real property.............. 3,124 182 5,093 384
Amortization attributable to leasing costs.............. 160 33 339 65
Minority interest not attributable to unit holders...... (5) (3) (16) (5)
------------ --------- --------- ------------
Funds from Operations before minority interest............ $ 5,017 $ 206 $ 9,298 $ 450
------------ --------- --------- ------------
------------ --------- --------- ------------
Weighted average Common Shares, including common share
equivalents............................................. 11,423,396(1) 635,510 10,595,612(1) 629,641
------------ --------- ---------- ------------
------------ --------- ---------- ------------
Funds from Operations per share........................... $ 0.44 $ 0.32 $ 0.88 $ 0.71
------------ --------- ---------- ------------
------------ --------- ---------- ------------
- ------------------------
(1) Includes the weighted average effect of 1,424,736 Common Shares issued upon
the conversion of the Preferred Shares for the period prior to conversion,
the weighted average effect of 349,325 Common Shares issuable upon the
conversion of 349,325 Operating Partnership units and the weighted average
effect of the 50,242 Common Shares issued upon the conversion of 50,242
Operating Partnership units for the period prior to conversion.
11
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved (nor was it involved at June 30,
1997) in any material legal proceedings nor, to the Company's knowledge, is
any material legal proceeding currently threatened against the company, other
than routine litigation arising in the ordinary course of business,
substantially all of which is expected to be covered by liability insurance.
ITEM 2. CHANGES IN SECURITIES
(a) On May 12, 1997, the Company held its Annual Meeting of Shareholders. At
the Meeting, the shareholders approved an amendment to the Company's Declaration
of Trust to permit the Board of Trustees to alter the number of authorized
shares of beneficial interest of the Company. Reference is hereby made to the
discussion of the amendment contained in the Company's Proxy Statement prepared
in connection with the Annual Meeting of Shareholders and filed with the
Securities and Exchange Commission.
(b) Not applicable.
(c) During the three months ended June 30, 1997, the Company issued an
aggregate of 50,242 common shares upon the conversion of units of limited
partnership interest in Brandywine Operating Partnership, L.P. by the holders of
such units. In addition, during such three month period, an aggregate of 427,421
preferred shares were converted by the holder into 1,424,736 Common Shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 12, 1997, the Company held its Annual Meeting of Shareholders.
Reference is hereby made to the information contained in Item 5 of the Company's
Current Report on Form 8-K dated June 9, 1997 filed with the Securities and
Exchange Commission with respect to the business transacted at the Annual
Meeting of Shareholders.
ITEM 5. OTHER INFORMATION
As previously reported in a Current Report on Form 8-K dated June 27, 1997,
the Company: (i) entered into an agreement of sale to purchase three office
properties (the "Berwyn Park Properties") containing an aggregate of
approximately 241,458 net rentable square feet located in Tredyffrin Township,
Chester County, Pennsylvania and approximately 12.5 acres of land adjacent to
such properties for an aggregate purchase price of approximately $37.2 million
(the "Berwyn Park Acquisition") and (ii) entered into an agreement of sale to
purchase five office properties (the "Green Hills Properties") containing an
aggregate of approximately 574,241 net rentable square feet located in Reading,
Berks County, Pennsylvania and approximately 133 additional acres of unimproved
land for an aggregate purchase price of approximately $40.0 million (the "Green
Hills Acquisition").
On July 29, 1997, the Company consummated the Berwyn Park Acquisition and
on July 31, 1997, the Company consummated the Green Hills Acquisition.
The Company based its determination of the price that was paid for each
of the above acquisitions on the expected cash flow, physical condition,
location, competitive advantages, existing tenancies and opportunities to
retain and attract additional tenants. The purchase price of each of the
above acquisitions was determined by arm's-length negotiation between the
Company and the sellers.
12
As of July 31, 1997: (i) the Berwyn Park Properties were approximately 98.7%
leased to 21 tenants, with a remaining weighted average lease term of
approximately 50 months and (ii) the Green Hills Properties were approximately
84.2% leased to 15 tenants, with a remaining weighted average lease term of
approximately 84 months.
The table set forth below shows certain information regarding rental rates
and lease expirations for the Green Hills Properties.
Scheduled Lease Expirations
(Green Hills Properties)
RENTABLE SQUARE FINAL ANNUALIZED PERCENTAGE OF TOTAL
YEAR OF NUMBER OF LEASES FOOTAGE SUBJECT BASE RENT UNDER FINAL ANNUALIZED
LEASE EXPIRING WITHIN TO EXPIRING EXPIRING LEASES BASE RENT UNDER
EXPIRATION THE YEAR (1) LEASES (2) EXPIRING LEASES
- -------------- ------------------- ----------------- ------------------ -------------------
1997 ............ 2 515 $ 6,946 0.1%
1998 ............ 2 2,173 27,299 0.3%
1999 ............ 1 6,946 37,925 0.4%
2000 ............ 5 13,217 185,696 2.0%
2001 ............ 1 10,306 123,672 1.3%
2002 ............ 1 14,951 242,954 2.6%
2003 ............ 4 53,295 1,296,294 14.0%
2004 ............ 8 182,064 3,442,657 37.1%
2005 ............ 4 200,000 3,914,000 42.2%
2006 and
Thereafter ...... -- -- -- 0.0%
---- --------- ------------- ------
Total ......... 28 483,467 $ 9,277,443 100.0%
------ --------- ------------- ------
------ --------- ------------- ------
(1) A lease is considered to expire if, and at any time, it is terminable by the
tenant without payment of penalty or premium.
(2) "Final Annualized Base Rent" for each lease scheduled to expire represents
the cash rental rate in the final month prior to expiration multiplied by
twelve.
13
The table set forth below shows certain information regarding rental rates
and lease expirations for the Berwyn Park Properties.
Scheduled Lease Expirations
(Berwyn Park Properties)
RENTABLE SQUARE FINAL ANNUALIZED PERCENTAGE OF TOTAL
YEAR OF NUMBER OF LEASES FOOTAGE SUBJECT BASE RENT UNDER FINAL ANNUALIZED
LEASE EXPIRING WITHIN TO EXPIRING EXPIRING LEASES BASE RENT UNDER
EXPIRATION THE YEAR (1) LEASES (2) EXPIRING LEASES
- ----------------------- --------------------- ----------------- ------------------ -------------------
1997 .................. 3 4,240 $ 45,495 1.0%
1998 .................. 11 42,609 729,203 15.8%
1999 .................. 3 17,577 368,721 8.0%
2000 .................. 2 11,897 234,541 5.1%
2001 .................. 6 63,089 1,306,256 28.2%
2002 .................. 5 34,456 780,390 16.9%
2003 .................. -- -- -- 0.0%
2004 .................. 4 64,460 1,164,297 25.2%
2005 .................. -- -- -- 0.0%
2006 and
Thereafter ............ -- -- -- 0.0%
---- ------- ------------ ------
Total ............... 34 238,328 $ 4,628,903 100.0%
---- ------- ------------ ------
---- ------- ------------ -------
(1) A lease is considered to expire if, and at any time, it is terminable by the
tenant without payment of penalty or premium.
(2) "Final Annualized Base Rent" for each lease scheduled to expire represents
the cash rental rate in the final month prior to expiration multiplied by
twelve.
After giving effect to the Berwyn Park Acquisition and the Green Hills
Acquisition, the Company's portfolio consists of 74 office properties and nine
industrial properties that contain an aggregate of approximately 5.1 million net
rentable square feet.
The audited statement of revenue and certain expenses of the Green Hills
Properties for the year ended December 31, 1996 and the unaudited statement of
revenue and certain expenses for the six months ended June 30, 1997 are included
on pages F-13 to F-16.
The audited combined statement of revenue and certain expenses of the Berwyn
Park Properties for the year ended December 31, 1996 and the unaudited combined
statement of revenue and certain expenses for the six months ended June 30, 1997
are included on pages F-17 to F-20.
Pro forma financial information which reflects the Company's acquisition of
the Green Hills Properties and the Berwyn Park Properties and the effects of the
July 1997 Offering as of and for the six months ended June 30, 1997 and for the
year ended December 31, 1996 is included on pages F-1 to F-12.
14
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Agreement of Sale dated June 26, 1997 between the Company and Salient 3
Communications, Inc. relating to the Green Hills Acquisition.
10.2 Sale Agreement dated July 7, 1997 between the Company and Berwyn
Development Associates relating to the Berwyn Park Acquisition.
10.3 Separation Agreement between the Company and Brian Belcher.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
During the three months ended June 30, 1997, and through August 13, 1997,
the Company filed the following:
(i) a Current Report on Form 8-K dated April 18, 1997 (reporting under
Items 5 and 7) regarding the Company's acquisition of 201 and 221 King Manor
Drive, two industrial facilities, containing an aggregate of approximately
125,000 square feet and located in Montgomery County, Pennsylvania.
(ii) a Current Report on Form 8-K/A No. 1 dated April 29, 1997 (amending
Item 7, as originally filed) regarding the Company's acquisition of the Main
Street Properties, located in southern New Jersey. Such Form 8-K/A No. 1
incorporated an audited combined statement of revenue and certain expenses of
the Main Street Properties for the year ended December 31, 1996; and pro forma
financial information as of and for the year ended December 31, 1996.
(iii) a Current Report on Form 8-K dated May 1, 1997 (reporting under Items
5 and 7) regarding the Company's acquisitions of a 6.8 acre parcel of
undeveloped land located in Montgomery County, Pennsylvania, the Greentree
Executive Campus, a multi-building garden office complex located in Burlington
County, New Jersey, and Five Eves Drive, a midrise office building, located in
Burlington County, New Jersey.
(iv) a Current Report on Form 8-K dated May 9, 1997 (reporting under Item 5)
regarding the Company's earnings for the three months ended March 31, 1997 and
certain other financial information.
(v) a Current Report on Form 8-K dated June 9, 1997 (reporting under Item
2, Item 5 and Item 7) regarding the Company's acquisitions of the TA
Properties (a ten property portfolio of office and flex/ warehouse space
containing an aggregate of approximately 687,821 net rentable square feet
located in Langhorne, Bucks County, PA; Lower Gwynedd, Montgomery County, PA;
Evesham Township, Burlington County, NJ; and Westampton, Burlington County,
NJ, and eight undeveloped parcels with an area of approximately 37 acres) and
the Emmes Properties (a six property portfolio of office space containing an
aggregate of approximately 608,008 net rentable square feet located in Mount
Laurel, NJ and King of Prussia, PA). The Current Report also included the
voting results on matters considered at the Annual Meeting of Shareholders of
the Company held on May 12, 1997. Such Form 8-K also included audited
combined statements of revenue and certain expenses of the TA Properties and
the Emmes Properties for the year ended December 31, 1996 and pro forma
financial information as of and for the three months ended March 31, 1997 and
for the year ended December 31, 1996.
15
(vi) a Current Report on Form 8-K dated June 26, 1997 (reporting under Item
5 and Item 7) regarding the Company's acquisition of 1974 Sproul Road, an office
property located in Broomall, Pennsylvania containing approximately 62,934 net
rentable square feet. Such Form 8-K also included audited combined statements of
revenue and certain expenses of the Greentree Executive Campus and of 748 & 855
Springdale Drive for the year ended December 31, 1996 and pro forma financial
information as of and for the three months ended March 31, 1997 and for the year
ended December 31, 1996.
(vii) a Current Report on Form 8-K dated June 27, 1997 (reporting under Item
5 and Item 7) regarding the Company entering into an agreement of sale to
purchase five office properties containing an aggregate of approximately 574,241
net rentable square feet located in Reading, Berks County, Pennsylvania and
approximately 147 acres of land; and an agreement of sale to purchase three
office properties containing approximately 241,458 net rentable square feet
located in Tredyffrin Township, Chester County, Pennsylvania and approximately
12.5 acres of land.
(viii) a Current Report on Form 8-K/A No. 1 dated July 21, 1997 (amending
Item 5 as originally filed) regarding the Company's acquisition of a 6.8 acre
parcel of undeveloped land located in Montgomery County, Pennsylvania, the
Greentree Executive Campus, a multi-building garden office complex located in
Burlington County, New Jersey and Five Eves Drive, a midrise office building,
located in Burlington County, New Jersey.
(ix) a Current Report on Form 8-K dated July 23, 1997 (reporting under Item
5 and Item 7) regarding the Company increasing the amount available for
borrowing under its revolving credit facility to up to $150.0 million and the
Company entering into an underwriting agreement with various underwriters
pursuant to which the Company agreed to sell an aggregate of 10,000,000 common
shares of beneficial interest, $.01 par value per share, and granted the
underwriters an option to purchase up to an additional 1,500,000 common shares
solely to cover over-allotments, if any.
(x) a Current Report on Form 8-K dated August 7, 1997 (reporting under Item
5) regarding the Company's earnings for the three and six months ended June 30,
1997 and certain other financial information.
16
BRANDYWINE REALTY TRUST
SIGNATURES OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRANDYWINE REALTY TRUST
(Registrant)
Date: August 13, 1997 By: /s/ Gerard H. Sweeney
-------------------------------------
Gerard H. Sweeney, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1997 By: /s/ Mark S. Kripke
--------------------------------------
Mark S. Kripke, Chief Financial Officer
and Secretary
(Principal Financial and Accounting
Officer)
17
BRANDYWINE REALTY TRUST
INDEX TO FINANCIAL STATEMENTS
I. UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
- Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1997............... F-3
- Pro Forma Condensed Consolidating Statement of Operations for the
Year Ended December 31, 1996.................................................... F-4
- Pro Forma Condensed Consolidating Statement of Operations for the
Six Months Ended June 30, 1997.................................................. F-5
- Notes and Management's Assumptions to Unaudited Pro Forma Condensed
Consolidating Financial Information............................................. F-6
II. GREEN HILLS PROPERTIES
- Report of Independent Public Accountants........................................... F-12
- Statements of Revenue and Certain Expenses for the
Year Ended December 31, 1996 (audited) and for the
Six Month Period Ended June 30, 1997 (unaudited)................................ F-13
- Notes to Statements of Revenue and Certain Expenses................................ F-14
III. BERWYN PARK PROPERTIES
- Report of Independent Public Accountants........................................... F-16
- Combined Statements of Revenue and Certain Expenses for the
Year Ended December 31, 1996 (audited) and for the
Six Month Period Ended June 30, 1997 (unaudited)................................ F-17
- Notes to Combined Statements of Revenue and Certain Expenses....................... F-18
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following sets forth the pro forma condensed consolidating balance sheet
of Brandywine Realty Trust ("the Company") as of June 30, 1997 and the pro forma
condensed consolidating statements of operations for the six months ended June
30, 1997 and for the year ended December 31, 1996.
The pro forma condensed consolidating financial information should be read
in conjunction with the historical financial statements of the Company and those
acquisitions deemed significant pursuant to the rules and regulations of the
Securities and Exchange Commission.
The unaudited pro forma condensed consolidating financial information is
presented as if the following events occurred no later than June 30, 1997, for
balance sheet purposes, and at the beginning of the period presented, for
purposes of the statements of operations:
- The Company acquired the properties described in Note 1 to these pro
forma financial statements.
- The Company acquired its partnership interests in Brandywine Operating
Partnership, L.P. (the "Operating Partnership").
- The Company issued 4,600,000 Common Shares at $16.50 per share, of which
600,000 shares related to the underwriter's exercise of the
over-allotment option (the "1996 Offering").
- The Company issued 636,363 Common Shares at $16.50 per share to a voting
trust established for the benefit of the Pennsylvania State Employees
Retirement System ("SERS"), in exchange for $10.5 million (the "SERS
Offering") and contributed such proceeds to the Operating Partnership in
exchange for 636,363 units of general partnership interest ("GP Units")
in the Operating Partnership.
- The Company issued 709,090 Common Shares at $16.50 per share to two
investment funds managed by Morgan Stanley Asset Management Inc. (the
"Morgan Stanley Offering") and contributed the proceeds to the Operating
Partnership in exchange for 709,090 GP Units.
- The Operating Partnership repaid $49,805,000 of mortgage indebtedness and
$764,000 of loans made by Safeguard Scientifics, Inc. and paid a $500,000
prepayment penalty with a portion of the proceeds of the 1996 Offering,
the SERS Offering and the Morgan Stanley Offering.
- The Company issued 2,375,500 Common Shares at $20.625 per share, of which
175,500 shares related to the underwriter's exercise of the
over-allotment option (the "March 1997 Offering").
- The Company issued 10,000,000 Common Shares at $20.75 per share (the
"July 1997 Offering"). The net proceeds from the July 1997 Offering were
contributed to the Operating Partnership in exchange for 10,000,000 GP
Units.
- The Operating Partnership repaid $130,775,000 of indebtedness under the
Company's revolving credit facility using proceeds from the July 1997
Offering.
The pro forma condensed consolidating financial information is unaudited
and is not necessarily indicative of what the actual financial position
would have been at June 30, 1997, nor does it purport to represent the
future financial position and the results of operations of the Company.
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1997 (NOTES 1 AND 2)
(UNAUDITED)
(IN THOUSANDS)
BRANDYWINE
REALTY TRUST GREEN HILLS BERWYN PARK
HISTORICAL JULY 1997 PROPERTIES PROPERTIES PRO FORMA
CONSOLIDATED OFFERING(A) (B) (C) CONSOLIDATED
------------ ----------- ----------- ------------ ------------
ASSETS:
Real estate investments, net............... $ 344,209 $ -- $ 40,444 $ 37,664 $ 422,317
Cash and cash equivalents.................. 10,777 65,475 (23,944) (37,664) 14,644
Escrowed cash.............................. 1,213 -- -- -- 1,213
Accounts receivable........................ 2,755 -- -- -- 2,755
Due from affiliates........................ 293 -- -- -- 293
Investment in management company........... 202 -- -- -- 202
Deferred costs and other assets............ 4,980 -- -- -- 4,980
------------ ----------- ----------- ------------ ------------
Total assets........................... 364,429 65,475 16,500 -- 446,404
------------ ----------- ----------- ------------ ------------
------------ ----------- ----------- ------------ ------------
LIABILITIES:
Mortgage notes payable..................... 46,960 -- 1,500 -- 48,460
Notes payable, Credit Facility............. 130,775 (130,775) 15,000 15,000
Accrued interest........................... 395 -- -- -- 395
Accounts payable and accrued expenses...... 2,650 -- -- -- 2,650
Distributions payable...................... 4,192 -- -- -- 4,192
Tenant security deposits and deferred
rents.................................... 2,721 -- -- -- 2,721
------------ ----------- ----------- ------------ ------------
Total liabilities...................... 187,693 (130,775) 16,500 -- 73,418
------------ ----------- ----------- ------------ ------------
MINORITY INTEREST............................ 5,508 -- -- -- 5,508
------------ ----------- ----------- ------------ ------------
BENEFICIARIES' EQUITY:
Common shares of beneficial interest....... 111 100 -- -- 211
Additional paid-in capital................. 186,426 196,150 -- -- 382,576
Share warrants............................. 962 -- -- -- 962
Cumulative earnings........................ 460 -- -- -- 460
Cumulative distributions................... (16,731) -- -- -- (16,731)
------------ ----------- ----------- ------------ ------------
Total beneficiaries' equity............ 171,228 196,250 -- -- 367,478
------------ ----------- ----------- ------------ ------------
Total liabilities and beneficiaries'
equity............................... $ 364,429 $ 65,475 $ 16,500 $ -- $ 446,404
------------ ----------- ----------- ------------ ------------
------------ ----------- ----------- ------------ ------------
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 (NOTES 1 AND 3)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
BRANDYWINE
REALTY
TRUST
HISTORICAL 1996
CONSOLIDATED (A) EVENTS (B) SUBTOTAL
---------------- ---------- --------
REVENUE:
Base rents...................................... $ 8,462 $12,646 $21,108
Tenant reimbursements........................... 1,372 2,838 4,210
Other........................................... 196 100 296
---------------- ---------- --------
Total Revenue............................... 10,030 15,584 25,614
---------------- ---------- --------
OPERATING EXPENSES:
Interest........................................ 2,751 513 3,264
Depreciation and amortization................... 2,836 4,687 7,523
Property expenses............................... 3,709 6,830 10,539
General and administrative...................... 825 148 973
---------------- ---------- --------
Total operating expenses.................... 10,121 12,178 22,299
---------------- ---------- --------
Income (loss) before minority interest...... (91) 3,406 3,315
Minority interest in (income) loss................ (45) (429) (474)
---------------- ---------- --------
Income (loss) before uncombined entity............ (136) 2,977 2,841
Equity in income of management company............ (26) 66 40
---------------- ---------- --------
Net income (loss)................................. (162) 3,043 2,881
(Income) loss allocated to Preferred Shares....... (401) (1,847) (2,248)
---------------- ---------- --------
Income (loss) allocated to Common Shares.......... $ (563) $ 1,196 $ 633
---------------- ---------- --------
---------------- ---------- --------
Earnings (loss) per Common Share.................. $ (0.43)
----------------
----------------
Weighted average number of shares
outstanding including share equivalents.......... 1,302,648
----------------
----------------
1997 EVENTS
-------------------------------------------------
JULY
1997 1997 GREEN HILLS BERWYN PARK
OTHER OFFERING PROPERTIES PROPERTIES
EVENTS (C) (E) (F) (G)
---------- -------- ----------- -----------
REVENUE:
Base rents..................................... $24,375 $ -- $7,700 $3,815
Tenant reimbursements.......................... 4,636 -- -- 720
Other.......................................... 396 -- -- 108
---------- -------- ----------- -----------
Total Revenue.............................. 29,407 -- 7,700 4,643
---------- -------- ----------- -----------
OPERATING EXPENSES:
Interest....................................... 10,805 (9,808) 1,200 --
Depreciation and amortization.................. 6,119 -- 1,294 1,205
Property expenses.............................. 11,805 -- 3,419 1,991
General and administrative..................... -- -- -- --
---------- -------- ----------- -----------
Total operating expenses................... 28,729 (9,808) 5,913 3,196
---------- -------- ----------- -----------
Income (loss) before minority interest..... 678 9,808 1,787 1,447
Minority interest in (income) loss............... 342 (100) (28) (27)
---------- -------- ----------- -----------
Income (loss) before uncombined entity........... 1,020 9,708 1,759 1,420
Equity in income of management company........... 215 -- (115) 166
---------- -------- ----------- -----------
Net income (loss)................................ 1,235 9,708 1,644 1,586
(Income) loss allocated to Preferred Shares...... -- -- -- --
---------- -------- ----------- -----------
Income (loss) allocated to Common Shares......... $ 1,235 $ 9,708 $1,644 $1,586
---------- -------- ----------- -----------
---------- -------- ----------- -----------
Earnings (loss) per Common Share.................
Weighted average number of shares
outstanding including share equivalents.........
TOTAL
PRO FORMA
CONSOLIDATED
------------
REVENUE:
Base rents..................................... $ 56,998
Tenant reimbursements.......................... 9,566
Other.......................................... 800
------------
Total Revenue.............................. 67,364
------------
OPERATING EXPENSES:
Interest....................................... 5,461
Depreciation and amortization.................. 16,141
Property expenses.............................. 27,754
General and administrative..................... 973
------------
Total operating expenses................... 50,329
------------
Income (loss) before minority interest..... 17,035
Minority interest in (income) loss............... (287)
------------
Income (loss) before uncombined entity........... 16,748
Equity in income of management company........... 306
------------
Net income (loss)................................ 17,054
(Income) loss allocated to Preferred Shares...... (2,248)
------------
Income (loss) allocated to Common Shares......... $ 14,806
------------
------------
Earnings (loss) per Common Share................. $ 0.77
------------
------------
Weighted average number of shares
outstanding including share equivalents....... 19,291,406
------------
------------
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (NOTES 1 AND 3)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
BRANDYWINE 1997 EVENTS
REALTY ------------------------------------------------------------
TRUST 1997 TOTAL
HISTORICAL OTHER JULY 1997 GREEN HILLS BERWYN PARK PRO FORMA
CONSOLIDATED (A) EVENTS (D) OFFERING (E) PROPERTIES (F) PROPERTIES (G) CONSOLIDATED
---------------- ----------- ------------- --------------- --------------- ------------
REVENUE:
Base rents...................... $ 16,889 $ 7,159 $ -- $ 3,936 $ 2,128 $ 30,112
Tenant reimbursements........... 3,285 1,636 -- -- 321 5,242
Other........................... 544 33 -- -- 31 608
---------------- ----------- ------------- ------------ --------------- ------------
Total Revenue............... 20,718 8,828 -- 3,936 2,480 35,962
---------------- ----------- ------------- ------------ --------------- ------------
OPERATING EXPENSES:
Interest........................ 3,059 3,804 (4,864) 595 -- 2,594
Depreciation and amortization... 5,775 1,902 -- 642 598 8,917
Property operating expenses..... 7,032 3,242 -- 1,775 916 12,965
Other expenses.................. 1,187 -- -- -- -- 1,187
---------------- ----------- ------------- ------------ --------------- ------------
Total operating expenses.... 17,053 8,948 (4,864) 3,012 1,514 25,663
---------------- ----------- ------------- ------------ --------------- ------------
Income (loss) before
minority interest......... 3,665 (120) 4,864 924 966 10,299
Minority interest in (income)
loss............................ (174) 39 (8) (14) (17) (174)
---------------- ----------- ------------- ------------ --------------- ------------
Income (loss) before uncombined
entity.......................... 3,491 (81) 4,856 910 949 10,125
Equity in income of management
company......................... 217 88 -- (57) 82 330
---------------- ----------- ------------- ------------ --------------- ------------
Net income (loss)................. 3,708 7 4,856 853 1,031 10,455
(Income) loss allocated to
Preferred Shares................ (499) -- -- -- -- (499)
---------------- ----------- ------------- ------------ --------------- ------------
Income (loss) allocated to Common
Shares.......................... $ 3,209 $ 7 $ 4,856 $ 853 $ 1,031 $ 9,956
---------------- ----------- ------------- ------------ --------------- ------------
---------------- ----------- ------------- ------------ --------------- ------------
Earnings (loss) per Common
Share........................... $ 0.36 $ 0.51
---------------- ------------
---------------- ------------
Weighted average number of shares
outstanding including share
equivalents..................... 8,809,379 19,655,886
---------------- ------------
---------------- ------------
BRANDYWINE REALTY TRUST
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING
FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION:
Brandywine Realty Trust (the "Company") is a Maryland real estate investment
trust. As of August 13, 1997, the Company owned 83 properties. The Company's
interest in 82 of the Properties is held through Brandywine Operating
Partnership, L.P. (the "Operating Partnership"). The Company is the sole general
partner of the Operating Partnership and as of August 13, 1997, the Company held
a 98.4% interest in the Operating Partnership.
These pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto of the Company, the SSI/TNC
Properties, the LibertyView Building, the nine properties (the "SERS
Properties") acquired in November 1996 from SERS and its subsidiaries, Delaware
Corporate Center I, 700/800 Business Center Drive, the Columbia Acquisition
Properties, the Main Street Acquisition Properties, the TA Properties, the Emmes
Properties, the Greentree Executive Campus Acquisition Properties, 748 & 855
Springdale Drive, the Green Hills Properties and the Berwyn Park Properties. In
management's opinion, all adjustments necessary to reflect the effects of the
1996 Offering, the SERS Offering, the Morgan Stanley Offering, the March 1997
Offering, the July 1997 Offering, the acquisitions of the SSI/TNC Properties,
the LibertyView Building, the 1996 Additional Acquisition Properties (consisting
of the SERS Properties, Delaware Corporate Center I, 700/800 Business Center
Drive and 8000 Lincoln Drive), the Columbia Acquisition Properties, the Main
Street Acquisition Properties, 1336 Enterprise Drive, the Greentree Executive
Campus, Five Eves Drive, Kings Manor, the TA Properties, the Emmes Properties,
748 & 855 Springdale Drive, 1974 Sproul Road, the Green Hills Properties and the
Berwyn Park Properties by the Company have been made.
2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET:
(A) Reflects the July 1997 Offering and the use of a portion of the net
proceeds to repay $130.8 million of indebtedness under the Credit Facility.
(B) Reflects the Company's acquisition of the Green Hills Properties as
follows:
GREEN HILLS
PROPERTIES
-----------
Purchase Price....................................................................................... $ 40,000
Closing Costs........................................................................................ 444
-----------
$ 40,444
(C) Reflects the Company's acquisition of Berwyn Park as follows:
BERWYN PARK
PROPERTIES
------------
Purchase Price.............................. $ 37,150
Closing Costs............................... 514
------------
$ 37,664
3. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS:
(A) Reflects the historical consolidated operations of the Company.
(B) Reflects the historical operations of the SSI/TNC Properties,
LibertyView Building and the 1996 Additional Acquisition Properties from January
1, 1996 through the respective dates of acquisition, plus the pro forma 1996
Offering adjustments. The table below reflects the adjustments:
SSI/TNC
PROPERTIES
AND 700/800
LIBERTYVIEW DELAWARE BUSINESS CENTER
BUILDING SERS PROPERTIES CORPORATE CENTER DRIVE
----------- --------------- ---------------- ---------------
Revenue:
Base rents............. $ 5,714 $4,008 $2,036 $651
Tenant reimbursements.. 2,511 249 -- 76
Other.................. 100 -- -- --
----------- ------ ------ -----
Total revenue...... 8,325 4,257 2,036 727
Operating Expenses:
Interest............... 3,783 194 -- --
Depreciation and
amortization......... 2,819 818 374 212
Property expenses...... 2,831 2,217 552 270
General and
administrative....... 715 -- -- --
----------- ------ ------ -----
Total operating
expenses......... 10,148 3,229 926 482
Income (loss) before
minority interest...... (1,823) 1,028 1,110 245
Minority interest in
(income) loss.......... 513 -- -- --
Income (loss) before
uncombined entity...... (1,310) 1,028 1,110 245
Equity in income of
management company..... 75 -- -- --
----------- ------ ------ -----
Net income (loss)........ (1,235) 1,028 1,110 245
Income allocated to
Preferred Shares....... -- -- -- --
----------- ------ ------ -----
Income (loss) allocated
to Common Shares....... $(1,235) $1,028 $1,110 $245
----------- ------ ------ -----
----------- ------ ------ -----
1996 PRO FORMA
8000 LINCOLN & OTHER OFFERING TOTAL PRO FORMA
DRIVE ADJUSTMENTS 1996 EVENTS
--------------- ---------------- ---------------
Revenue:
Base rents............. $237 $-- $12,646
Tenant reimbursements.. 2 -- 2,838
Other.................. -- -- 100
----- ------- -------
Total revenue...... 239 -- 15,584
Operating Expenses:
Interest............... -- (3,464) 513
Depreciation and
amortization......... 89 375 4,687
Property expenses...... 231 729 6,830
General and
administrative....... -- (567) 148
----- ------- -------
Total operating
expenses......... 320 (2,927) 12,178
Income (loss) before
minority interest...... (81) 2,927 3,406
Minority interest in
(income) loss.......... -- (942) (429)
Income (loss) before
uncombined entity...... (81) 1,985 2,977
Equity in income of
management company..... -- (9) 66
----- ------- -------
Net income (loss)........ (81) 1,976 3,043
Income allocated to
Preferred Shares....... -- 1,847 1,847
----- ------- -------
Income (loss) allocated
to Common Shares....... $(81) $ 129 $ 1,196
----- ------- -------
----- ------- -------
(C) Reflects the pro forma statements of operations of the Columbia
Acquisition Properties, the Main Street Acquisition Properties, 1336 Enterprise
Drive, Kings Manor, Greentree Executive Campus, Five Eves Drive, the TA
Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974 Sproul Road
for the year ended December 31, 1996 and other pro forma adjustments to reflect
the March 1997 Offering for the year ended December 31, 1996. The operating
results reflected below include the historical results and related pro forma
adjustments to reflect the period January 1, 1996 through the earlier of the
respective acquisition dates or December 31, 1996. Operating results from those
dates forward are included in the historical results of the Company.
COLUMBIA MAIN STREET 1336 GREENTREE
ACQUISITION ACQUISITION ENTERPRISE KINGS EXECUTIVE
PROPERTIES PROPERTIES DRIVE MANOR CAMPUS
------------- ----------- ------------- ----------- -----------
Revenue:
Base rents....................................... $ 5,146 $ 3,141 $ 437 $ 411 $ 1,862
Tenant reimbursements............................ 359 347 75 107 175
Other............................................ 376 -- -- -- --
------ ----------- ----- ----- -----------
Total revenue................................ 5,881 3,488 512 518 2,037
------ ----------- ----- ----- -----------
Operating Expenses:
Interest (i)..................................... 1,680 -- -- -- 841
Depreciation and amortization (ii)............... 1,007 629 117 114 359
Property expenses................................ 1,979 2,194 107 170 1,018
General and administrative....................... -- -- -- -- --
------ ----------- ----- ----- -----------
Total operating expenses..................... 4,666 2,823 224 284 2,218
------ ----------- ----- ----- -----------
Income (loss) before minority interest............. 1,215 665 288 234 (181)
Minority interest in (income) loss................. (20) (11) (5) (4) 3
------ ----------- ----- ----- -----------
Income (loss) before uncombined entity............. 1,195 654 283 230 (178)
Equity in income of management company (iii)....... -- -- -- -- --
------ ----------- ----- ----- -----------
Net income (loss).................................. 1,195 654 283 230 (178)
Income allocated to Preferred Shares............... -- -- -- -- --
------ ----------- ----- ----- -----------
Income (loss) allocated to Common Shares........... $ 1,195 $ 654 $ 283 $ 230 $ (178)
------ ----------- ----- ----- -----------
------ ----------- ----- ----- -----------
FIVE EVES
DRIVE
-----------
Revenue:
Base rents....................................... $ 348
Tenant reimbursements............................ 39
Other............................................ 1
-----------
Total revenue................................ 388
-----------
Operating Expenses:
Interest (i)..................................... 254
Depreciation and amortization (ii)............... 108
Property expenses................................ 151
General and administrative....................... --
-----------
Total operating expenses..................... 513
-----------
Income (loss) before minority interest............. (125)
Minority interest in (income) loss................. 2
-----------
Income (loss) before uncombined entity............. (123)
Equity in income of management company (iii)....... --
-----------
Net income (loss).................................. (123)
Income allocated to Preferred Shares............... --
-----------
Income (loss) allocated to Common Shares........... $ (123)
-----------
-----------
748 & 855
EMMES SPRINGDALE 1974 SPROUL MARCH 1997 TOTAL OTHER
TA PROPERTIES PROPERTIES DRIVE ROAD OFFERING 1997 EVENTS
------------- ----------- ------------- ------------- ------------- -----------
Revenue:
Base rents................................ $ 5,102 $ 6,214 $ 940 $ 774 $ -- $ 24,375
Tenant reimbursements..................... 735 2,681 -- 118 -- 4,636
Other..................................... 9 10 -- -- -- 396
------ ----------- ----- ----- ----- -----------
Total revenue......................... 5,846 8,905 940 892 -- 29,407
------ ----------- ----- ----- ----- -----------
Operating Expenses:
Interest (i).............................. 3,168 4,987 400 -- (525) 10,805
Depreciation and amortization (ii)........ 1,352 2,128 171 134 -- 6,119
Property expenses......................... 1,962 3,482 250 492 -- 11,805
General and administrative................ -- -- -- -- -- --
------ ----------- ----- ----- ----- -----------
Total operating expenses.............. 6,482 10,597 821 626 (525) 28,729
------ ----------- ----- ----- ----- -----------
Income (loss) before minority interest...... (636) (1,692) 119 266 525 678
Minority interest in (income) loss.......... 9 27 (2) (5) 348 342
------ ----------- ----- ----- ----- -----------
Income (loss) before uncombined entity...... (627) (1,665) 117 261 873 1,020
Equity in income of management company
(iii)..................................... 105 65 23 22 -- 215
------ ----------- ----- ----- ----- -----------
Net income (loss)........................... (522) (1,600) 140 283 873 1,235
Income allocated to Preferred Shares........ -- -- -- -- -- --
------ ----------- ----- ----- ----- -----------
Income (loss) allocated to Common Shares.... $ (522) $ (1,600) $ 140 $ 283 $ 873 $ 1,235
------ ----------- ----- ----- ----- -----------
------ ----------- ----- ----- ----- -----------
(i) Pro forma interest expense is presented assuming an effective rate of
7.5% on borrowings under the Company's revolving credit facility. The
adjustment for the Columbia Acquisition Properties also reflects an
effective interest rate of 9.5% on assumed debt. The adjustment for the
March 1997 Offering represents interest savings related to the payoff of
$7 million of credit facility borrowings at an effective rate of 7.5%.
(ii) Pro forma depreciation expense is presented assuming an 80% building and
20% land allocation of the purchase price and capitalized closing costs
and assumes a useful life of 25 years.
(iii) Pro forma equity in income of management company is presented based on
management fees less incremental costs estimated to be incurred.
(D) Reflects the pro forma adjustments relating to the Columbia Acquisition
Properties, the Main Street Acquisition Properties, 1336 Enterprise Drive, Kings
Manor, Greentree Executive Campus, Five Eves Drive, the TA Properties, the Emmes
Properties, 748 & 855 Springdale Drive and 1974 Sproul Road for the six months
ended June 30, 1997 and other pro forma adjustments to reflect the March 1997
Offering for the six months ended June 30, 1997. The operating results reflected
below include the historical results and related pro forma adjustments to
reflect the period January 1, 1997 through the earlier of the respective
acquisition date or June 30, 1997.
COLUMBIA MAIN STREET 1336 GREENTREE
ACQUISITION ACQUISITION ENTERPRISE KINGS EXECUTIVE
PROPERTIES PROPERTIES DRIVE MANOR CAMPUS
--------------- ------------- ------------- ----------- -----------
Revenue:
Base rents....................................... $ 338 $ 542 $ 78 $ 105 $ 602
Tenant reimbursements............................ 24 60 13 27 17
Other............................................ 25 -- -- -- --
----- ----- --- ----- -----
Total revenue................................ 387 602 91 132 619
----- ----- --- ----- -----
Operating Expenses:
Interest (i)..................................... 110 -- -- -- 249
Depreciation and amortization (ii)............... 66 109 21 29 106
Property expenses................................ 130 379 19 43 272
General and administrative....................... -- -- -- -- --
----- ----- --- ----- -----
Total operating expenses..................... 306 488 40 72 627
----- ----- --- ----- -----
Income (loss) before minority interest............. 81 114 51 60 (8)
Minority interest in (income) loss................. (1) (2) (1) (1) --
----- ----- --- ----- -----
Income (loss) before uncombined entity............. 80 112 50 59 (8)
Equity in income of management company............. -- -- -- -- --
----- ----- --- ----- -----
Net income (loss).................................. 80 112 50 59 (8)
Income allocated to Preferred Shares............... -- -- -- -- --
----- ----- --- ----- -----
Income (loss) allocated to Common Shares........... $ 80 $ 112 $ 50 $ 59 $ (8)
----- ----- --- ----- -----
----- ----- --- ----- -----
FIVE EVES
DRIVE
-----------
Revenue:
Base rents....................................... $ 103
Tenant reimbursements............................ 12
Other............................................ --
-----
Total revenue................................ 115
-----
Operating Expenses:
Interest (i)..................................... 75
Depreciation and amortization (ii)............... 32
Property expenses................................ 45
General and administrative....................... --
-----
Total operating expenses..................... 152
-----
Income (loss) before minority interest............. (37)
Minority interest in (income) loss................. 1
-----
Income (loss) before uncombined entity............. (36)
Equity in income of management company............. --
-----
Net income (loss).................................. (36)
Income allocated to Preferred Shares............... --
-----
Income (loss) allocated to Common Shares........... $ (36)
-----
-----
748 & 855
EMMES SPRINGDALE 1974 SPROUL MARCH 1997 TOTAL OTHER
TA PROPERTIES PROPERTIES DRIVE ROAD OFFERING 1997 EVENTS
------------- ----------- ------------- ------------- ------------- -----------
Revenue:
Base rents................................ $ 2,053 $ 2,570 $ 414 $ 354 $ -- $ 7,159
Tenant reimbursements..................... 299 1,130 -- 54 -- 1,636
Other..................................... 6 2 -- -- -- 33
------ ----------- ----- ----- ----- -----------
Total revenue......................... 2,358 3,702 414 408 -- 8,828
------ ----------- ----- ----- ----- -----------
Operating Expenses:
Interest (i).............................. 1,241 2,049 171 -- (91) 3,804
Depreciation and amortization (ii)........ 530 875 73 61 -- 1,902
Property expenses......................... 698 1,332 99 225 -- 3,242
General and administrative................ -- -- -- -- -- --
------ ----------- ----- ----- ----- -----------
Total operating expenses.............. 2,469 4,256 343 286 (91) 8,948
------ ----------- ----- ----- ----- -----------
Income (loss) before minority interest...... (111) (554) 71 122 91 (120)
Minority interest in (income) loss.......... 1 9 (1) (2) 36 39
------ ----------- ----- ----- ----- -----------
Income (loss) before uncombined entity...... (110) (545) 70 120 127 (81)
Equity in income of management company
(iii)..................................... 41 27 10 10 -- 88
------ ----------- ----- ----- ----- -----------
Net income (loss)........................... (69) (518) 80 130 127 7
Income allocated to Preferred Shares........ -- -- -- -- -- --
------ ----------- ----- ----- ----- -----------
Income (loss) allocated to Common Shares.... $ (69) $ (518) $ 80 $ 130 $ 127 $ 7
------ ----------- ----- ----- ----- -----------
------ ----------- ----- ----- ----- -----------
(i) Pro forma interest expense is presented assuming an effective rate of 7.5%
on borrowings under the Company's revolving credit facility. The
adjustment for the Columbia Acquisition Properties also reflects an
effective interest rate of 9.5% on assumed debt. The adjustment for the
March 1997 Offering represents interest savings related to the payoff of
$7 million of credit facility borrowings at an effective rate of 7.5%.
(ii) Pro forma depreciation expense is presented assuming an 80% building and
20% land allocation of the purchase price and capitalized closing costs
and assumes a useful life of 25 years.
(iii) Pro forma equity in income of management company is presented based on
management fees less incremental costs estimated to be incurred.
(E) Reflects pro forma adjustments to reflect interest savings related to
the repayment of $130,775,000 of Credit Facility borrowings at an effective
interest rate of 7.5% with proceeds from the July 1997 Offering.
(F) Reflects the pro forma statements of operations of the Green Hills
Properties for the six months ended June 30, 1997 and for the year ended
December 31, 1996. All amounts represent historical operations except for the
pro forma adjustments noted:
GREEN HILLS PROPERTIES
--------------------------------
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED
1996 JUNE 30, 1997
------------- -----------------
Revenue:
Base rents.................................................................... $ 7,700 $ 3,936
Tenant reimbursements......................................................... -- --
Other......................................................................... -- --
------ ------
Total revenue............................................................. 7,700 3,936
Operating Expenses:
Interest (i).................................................................. 1,200 595
Depreciation and amortization (ii)............................................ 1,294 642
Property expenses (iii)....................................................... 3,419 1,775
General and administrative.................................................... -- --
------ ------
Total operating expenses.................................................. 5,913 3,012
Income (loss) before minority interest.......................................... 1,787 924
Minority interest in (income) loss.............................................. (28) (14)
Income (loss) before uncombined entity.......................................... 1,759 910
Equity in income of management company (iv)..................................... (115) (57)
------ ------
Net income (loss)............................................................... 1,644 853
Income allocated to Preferred Shares............................................ -- --
------ ------
Income (loss) allocated to Common Shares........................................ $ 1,644 $ 853
------ ------
------ ------
(i) Pro forma interest expense is presented assuming an effective rate of 7.5%
on $15 million of borrowings under the Company's revolving credit facility
and an effective rate of 5% on $1.5 million of borrowings under a mortgage
note payable to the seller.
(ii) Pro forma depreciation expense is presented assuming an 80% building and
20% land allocation of the purchase price and capitalized closing costs
and assumes a useful life of 25 years.
(iii) Pro forma property expenses exclude $666,000 and $333,000 from historical
amounts for the year ended December 31, 1996 and the six months ended
June 30, 1997, respectively. Such amounts represent expected salary
savings.
(iv) Pro forma equity in income of management company is presented based on
management fees less incremental costs estimated to be incurred.
(G) Reflects the pro forma statements of operations of the Berwyn Park
Properties for the six months ended June 30, 1997 and for the year ended
December 31, 1996. All amounts represent historical operations except for the
pro forma adjustments noted:
BERWYN PARK PROPERTIES
------------------------------
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1996 1997
------------- ---------------
Revenue:
Base rents....................................................................... $ 3,815 $ 2,128
Tenant reimbursements............................................................ 720 321
Other............................................................................ 108 31
------ ------
Total revenue................................................................ 4,643 2,480
Operating Expenses:
Interest......................................................................... -- --
Depreciation and amortization (i)................................................ 1,205 598
Property expenses................................................................ 1,991 916
General and administrative....................................................... -- --
------ ------
Total operating expenses..................................................... 3,196 1,514
Income (loss) before minority interest............................................. 1,447 966
Minority interest in (income) loss................................................. (27) (17)
Income (loss) before uncombined entity............................................. 1,420 949
Equity in income of management company (ii)........................................ 166 82
------ ------
Net income (loss).................................................................. 1,586 1,031
Income allocated to Preferred Shares............................................... -- --
------ ------
Income (loss) allocated to Common Shares........................................... $ 1,586 $ 1,031
------ ------
------ ------
(i) Pro forma depreciation expense is presented assuming an 80% building and
20% land allocation of the purchase price and capitalized closing costs and
assumes a useful life of 25 years.
(ii) Pro forma equity in income of management company is presented based on
management fees less incremental costs estimated to be incurred.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Salient 3 Communications, Inc.:
We have audited the statement of revenue and certain expenses of the Green Hills
Properties for the year ended December 31, 1996. This financial statement is the
responsibility of the Properties' management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The statement of revenue and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Current Report on Form 8-K of Brandywine Realty
Trust, as described in Note 1, and is not intended to be a complete presentation
of the Green Hills Properties' revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of the Green Hills
Properties for the year ended December 31, 1996 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
July 21, 1997
GREEN HILLS PROPERTIES
STATEMENTS OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ -------------
(UNAUDITED)
REVENUE:
Base rents (Notes 2 and 3)........................................................ $7,700,000 $ 3,936,000
CERTAIN EXPENSES:
Maintenance and other operating expenses.......................................... 2,083,000 1,084,000
Utilities......................................................................... 1,111,000 534,000
Real estate taxes................................................................. 891,000 490,000
------------ -------------
Total certain expenses........................................................ 4,085,000 2,108,000
------------ -------------
REVENUE IN EXCESS OF CERTAIN EXPENSES............................................... $3,615,000 $ 1,828,000
------------ -------------
------------ -------------
The accompanying notes are an integral part of these financial statements.
GREEN HILLS PROPERTIES
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1.BASIS OF PRESENTATION:
The statements of revenue and certain expenses reflect the operations of the
Green Hills Properties, located in Berks County, Pennsylvania. The Green Hills
Properties are expected to be acquired by Brandywine Realty Trust (the
"Company") from Salient 3 Communications, Inc. The Green Hills Properties have
an aggregate net rentable area of approximately 550,000 square feet and are
approximately 90% leased as of December 31, 1996.
The accounting records of the Green Hills Properties are maintained on a
modified cash basis. Adjusting entries have been made to present the
accompanying financial statements in accordance with generally accepted
accounting principles. The accompanying financial statements exclude certain
expenses such as interest, depreciation and amortization, and other costs not
directly related to the future operations of the Green Hills Properties,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The statement of revenue and certain expenses for the six months ended June
30, 1997 is unaudited. In the opinion of management, all adjustments, consisting
solely of normal recurring adjustments, necessary to present fairly the revenue
and certain expenses for the six months ended June 30, 1997 have been included.
The results for such interim period are not necessarily indicative of the
results for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenue and expenses during the
reporting period. The ultimate results could differ from such estimates.
2. OPERATING LEASES:
Base rents presented for the year ended December 31, 1996 and for the six
months ended June 30, 1997 include straight-line adjustments for rental revenue
increases in accordance with generally accepted accounting principles. The
aggregate rental revenue increase resulting from the straight-line adjustment
for the year ended December 31, 1996 and for the six months ended June 30, 1997
were $288,000 and $144,000 (unaudited), respectively.
Tenants whose minimum rental payments equaled 10% or more of total base
rents in 1996 were as follows:
Parsons................................................. $3,068,000
Penske.................................................. 2,562,000
UGI..................................................... 758,000
The Green Hills Properties are leased to tenants under operating leases with
expiration dates extending to the year 2005. Future minimum rentals under
noncancelable operating leases as of December 31, 1996, are as follows:
1997........................................................ $ 7,653,000
1998........................................................ 7,806,000
1999........................................................ 7,812,000
2000........................................................ 7,443,000
2001........................................................ 7,267,000
Thereafter.................................................. 20,556,000
3. RELATED PARTY TRANSACTIONS:
Salient rents office space from the Green Hills Properties under the terms
of a net operating lease. During 1996, Salient paid $196,000 in minimum rent
under this lease which expires in December 31, 1997.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Brandywine Realty Trust:
We have audited the combined statement of revenue and certain expenses of Berwyn
Park Properties, described in Note 1, for the year ended December 31, 1996. This
financial statement is the responsibility of management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The combined statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Current Report on Form 8-K of
Brandywine Realty Trust as described in Note 1 and is not intended to be a
complete presentation of the Berwyn Park Properties' revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of the Berwyn Park
Properties for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
July 21, 1997
BERWYN PARK PROPERTIES
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ -------------
(UNAUDITED)
REVENUE:
Base rents (Note 2)............................................................... $3,815,000 $ 2,128,000
Tenant reimbursements............................................................. 720,000 321,000
Other............................................................................. 108,000 31,000
------------ -------------
Total revenue................................................................. 4,643,000 2,480,000
------------ -------------
CERTAIN EXPENSES:
Maintenance and other operating expenses.......................................... 1,020,000 425,000
Utilities......................................................................... 591,000 296,000
Real estate taxes................................................................. 380,000 195,000
------------ -------------
Total certain expenses........................................................ 1,991,000 916,000
------------ -------------
REVENUE IN EXCESS OF CERTAIN EXPENSES............................................... $2,652,000 $ 1,564,000
------------ -------------
------------ -------------
The accompanying notes are an integral part of these financial statements.
BERWYN PARK PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BASIS OF PRESENTATION:
The combined statements of revenue and certain expenses reflect the
operations of Berwyn Park Properties located in Berwyn, Pennsylvania which are
expected to be acquired by Brandywine Realty Trust (the "Company") from Berwyn
Development Associates in the third quarter of 1997. Berwyn Park Properties has
an aggregate net rentable area of approximately 241,000 square feet (92% leased
as of December 31, 1996).
The combined statements of revenue and certain expenses reflect the
operations of Berwyn Park Properties. These combined statements of revenue and
certain expenses are to be included in the Company's Current Report on Form 8-K,
as the acquisition has been deemed significant pursuant to the rules and
regulations of the Securities and Exchange Commission.
The accounting records of Berwyn Park Properties are maintained on a
modified cash basis. Adjusting entries have been made to present the
accompanying financial statements in accordance with generally accepted
accounting principles. The accompanying financial statements exclude certain
expenses such as interest, depreciation and amortization, professional fees, and
other costs not directly related to the future operations of Berwyn Park
Properties.
The combined statement of revenue and certain expenses for the six months
ended June 30, 1997 are unaudited. In the opinion of management, all
adjustments, consisting solely of normal recurring adjustments, necessary to
present fairly the revenue and certain expenses of Berwyn Park Properties for
the six months ended June 30, 1997 have been included. The combined revenue and
certain expenses for such interim periods are not necessarily indicative of the
results for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities which
affect the reported amounts of revenue and expenses during the reporting period.
The ultimate results could differ from those estimates.
2. OPERATING LEASES:
Base rents for the year ended December 31, 1996 and for the six months ended
June 30, 1997, include straight-line adjustments for rental revenue increases in
accordance with generally accepted accounting principles. The aggregate rental
revenue increase resulting from the straight-line adjustments for the year ended
December 31, 1996 and the six months ended June 30, 1997 were $152,000 and
($17,000) (unaudited), respectively.
During 1996, rental revenues earned under leases with Devon Direct
Advertising, Inc. and Delaware Valley Financial were $637,000 and $798,000,
respectively. Each of these leases individually represented greater than 10% of
Berwyn Park Properties' total rental revenue in 1996.
The Berwyn Park Properties is leased to tenants under operating leases with
expiration dates extending to the year 2004. Future minimum rentals under
noncancelable operating leases, excluding tenant reimbursements of operating
expenses as of December 31, 1996, are as follows:
1997........................................................ $4,152,000
1998........................................................ 3,658,000
1999........................................................ 3,430,000
2000........................................................ 2,955,000
2001........................................................ 2,215,000
Thereafter.................................................. 2,890,000
Certain leases also include provisions requiring tenants to reimburse Berwyn
Park Properties for management costs and other operating expenses up to
stipulated amounts.
3. RELATED PARTY TRANSACTIONS:
An affiliate of Berwyn Park Properties performs various services on behalf
of the property, including accounting, data processing, leasing and maintenance
services, among others. Total costs for these services was $188,000 in 1996 and
are included in maintenance and other operating expenses in the accompanying
statements of revenue and certain expenses.
Berwyn Park Properties leases office space to certain affiliates at market
rental rates. Total rental payments during 1996 to Berwyn Park Properties under
these lease agreements was approximately $163,000.