[GRAPHIC OMITTED]
Contact:
Press Contact: Investor Contact:
- -------------- -----------------
Michael Beckerman Gerard H. Sweeney
Beckerman Public Relations Christopher P. Marr
908-781-6420 Brandywine Realty Trust
michael@beckermanpr.com 610-325-5600
info@brandywinerealty.com
Brandywine Realty Trust Announces Third Quarter 2003 Earnings
PLYMOUTH MEETING, PA, October 23, 2003 - Brandywine Realty Trust (BDN-NYSE)
announced today that fully diluted earnings per share (EPS) were $0.37 for the
third quarter of 2003, an increase of $0.07 per share as compared to $0.30 for
the third quarter of 2002. Net income was $17.4 million for the third quarter of
2003, an increase of $3.4 million, as compared to $14.0 million for the third
quarter of 2002. The increase in net income and EPS in the third quarter of 2003
as compared to the similar period in 2002 was primarily due to increased other
revenue resulting from bankruptcy settlement proceeds, a 3.1% increase in
same-store net operating income and reduced interest expense.
Fully diluted EPS was $0.96 for the nine-month period ended September 30, 2003,
a decrease of $0.17 per share, as compared to $1.13 per share for the nine-month
period ended September 30, 2002. Net income was $44.8 million for the nine-month
period ended September 30, 2003, a decrease of $5.4 million, as compared to
$50.2 million for the nine-month period ended September 30, 2002. The decrease
in net income was primarily the result of net gains on disposition of
discontinued operations of $2.7 million in 2003 as compared to $8.6 million in
2002.
Fully diluted funds from operations (FFO) were $34.4 million or $0.71 per share
for the third quarter 2003, a 12.1% increase as compared to $30.7 million or
$0.66 per share for the third quarter of 2002. FFO for the nine-month period
ended September 30, 2003 was $95.8 million or $2.02 per share as compared to
$94.7 million or $2.01 per share for the same period in 2002. FFO represents a
non-generally accepted accounting principle (GAAP) financial measure. A table
reconciling FFO to net income, the GAAP measure that the Company believes to be
most directly comparable, is within the consolidated financial statements
included in this release.
Brandywine President and Chief Executive Officer Gerard H. Sweeney commented,
"We are very pleased with our results for the third quarter and our successful
follow on equity offering of $64.1 million which closed on October 20. We
continue to execute on our 2003 goals of maximizing our return on invested
assets and strengthening our balance sheet. Our credit metrics are significantly
improved from the beginning of the year and we have made excellent progress in
continuing to selectively prune our portfolio. All of this is being accomplished
consistent with our 2003 earnings guidance provided one year ago."
Brandywine Realty Trust Summary Portfolio Performance
o FFO payout ratio was 62.3% for the quarter and 65.4% YTD
o Quarterly rental rate decreases on new leases were 12.9% on a cash basis and
8.0% on a straight-line basis
o Quarterly rental rate decreases on renewals were 7.8% on a cash basis and
4.1% on a straight-line basis
o YTD rental rate decreases on new leases were 6.8% on a cash basis and 1.9% on
a straight-line basis
o YTD rental rate decreases on renewals were 5.5% on a cash basis and 2.2% on a
straight-line basis
o Quarterly retention rate was 82.4% and YTD retention rate was 81.1%
o Portfolio was 90.7% occupied and 91.9% leased as of September 30, 2003
o Leases expired or were terminated for approximately 1,379,000 square feet
during the quarter
o Leases were renewed for 1,136,000 square feet during the quarter and new
leases were signed for 127,000 square feet during the quarter Leases expired
or were terminated for approximately 2,900,000 square feet YTD
o Leases were renewed for 2,400,000 square feet YTD and new leases were signed
for 494,000 square feet YTD
Distributions
On September 23, 2003, the Board of Trustees declared a regular quarterly
dividend distribution of $0.44 per common share that was paid October 15, 2003
to shareholders of record as of October 6, 2003.
Equity Offering
On October 20, 2003, the Company consummated a public offering of 2,250,000
common shares, plus an over-allotment option of an additional 337,500 common
shares (based on closing price of $25.98), with net proceeds to the Company of
$64.1 million. Legg Mason Wood Walker Inc. and McDonald Investments Inc. served
as the co-underwriters for this transaction. Proceeds from this offering will be
used for the planned acquisition of an office property containing 248,000 net
rentable square feet and to reduce outstanding indebtedness under the Company's
unsecured line of credit.
2003 Financial Outlook
Our outlook for the fourth quarter and full year 2003 are based on the following
assumptions:
o Average occupancy and the same-store net operating income growth for the
fourth quarter of 2003 is expected to be consistent with that achieved in
the third quarter of 2003.
o Full year 2003 average occupancy is expected to decline slightly from the
average levels achieved in 2002 and full year 2003 same-store net operating
income is expected to decrease from 2002 in the range of 1.5% to 3.0%.
o Operating expenses, real estate taxes and general and administrative expenses
as a percentage of revenues are expected to be consistent in the fourth
quarter with those experienced in the third quarter of 2003 and to be
consistent for the full year 2003 (excluding snow removal) with those
experienced in 2002.
o The Company expects to incur slight dilution in the fourth quarter from its
common equity offering on October 20, 2003 of 2,587,500 shares.
Based on these key assumptions, we expect fourth quarter 2003 EPS to be $0.48 -
$0.49 and FFO to be $0.66 - $0.67 per share and full year 2003 EPS to be $1.43 -
$1.45 and FFO to be $2.68 - $2.69 per share.
2004 Financial Outlook
As of the date of this release, we expect our full year 2004 EPS to be $1.18 to
$1.31 and FFO to be $2.60 to $2.70 per share. The Company's projections are
based on several key and variable assumptions and estimates, including the
following:
Same-Store Results
------------------
In 2004, the Company expects its same-store portfolio (which represents 92.0% of
total square footage owned and 95.2% of projected 2004 net operating income) to
achieve the following percentage changes from currently projected 2003 results:
% change 2003-2004
------------------
GAAP rent and reimbursements: 1.5%-2.0% increase
Expenses: 2.5%-3.0% increase
NOI: 1.0%-1.5% increase
Occupancy: 1.0%-1.5% increase in annual average
physical occupancy
The Company's projections for same-store activity are based upon competitive
market conditions and continued downward pressure on market rents. The Company's
projections for operating expenses include significant increases in utility
expense, particularly electric expense in the New Jersey portfolio, and modest
increases in real estate taxes, offset by lower snow removal costs as compared
to record snowfall levels in 2003.
The Company's financial outlook for 2004 as presented above does not take into
account lease termination fees as management is unable to forecast reliably
either the timing or amount of such fees. During the first nine months of 2003
the Company recognized $1.3 million of revenue on account of lease termination
and similar fees.
Acquisitions, Dispositions, Development
---------------------------------------
For 2004 the Company anticipates an increasingly favorable acquisition climate
in our core markets and priced at levels we find attractive. As such, the
Company's 2004 outlook outlined above considers $50 to $75 million of
acquisition activity in 2004. The outlook weights this activity towards the
mid-point of the year and assumes acquisition yields in the range of 9.0-9.75%.
The Company's 2004 outlook assumes that the assets identified for sale in its
September 30, 2003 balance sheet are sold in the fourth quarter of 2003 and
further assumes limited amounts of disposition activity. In addition to the
completion of two of the currently in process redevelopment projects containing
165,587 square feet, the Company's outlook assumes that two additional
redevelopment projects begin construction during 2004.
Financing Activity
------------------
The Company has taken significant steps in 2003 toward strengthening its balance
sheet and reducing its reliance on short-term borrowing. These efforts are
reflected in improvements in the Company's leverage level, fixed charge coverage
and maturity profile. The Company expects to continue these positive steps in
2004 with a focus on addressing its remaining secured debt maturities by
utilizing unsecured debt, and extending the maturity on its line of credit and
term loan. The Company expects to finance its operations in 2004 primarily
through cash flow from operations and borrowings under its unsecured line of
credit. The Company assumes that the base rate on its variable rate debt will
rise from its current level of 1.10% throughout 2004. The 2004 guidance assumes
that the effective rate in place on the $175 million of variable rate debt which
is hedged through June of 2004 remains consistent for the balance of the year.
Forward-Looking Statements
Estimates of future earnings per share and FFO per share and certain other
statements in this release constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance, achievements or
transactions of the Company and its affiliates to be materially different from
any future results, performance, achievements or transactions expressed or
implied by such forward-looking statements. Such risks, uncertainties and other
factors relate to, among others: the Company's ability to lease vacant space and
to renew or relet space under expiring leases at expected levels, competition
with other real estate companies for tenants, the potential loss or bankruptcy
of major tenants, interest rate levels, the availability of debt and equity
financing, competition for real estate acquisitions and risks of acquisitions,
dispositions and developments, including the cost of construction delays and
cost overruns, unanticipated operating and capital costs, the Company's ability
to obtain adequate insurance, including coverage for terrorist acts, dependence
upon certain geographic markets, and general and local economic and real estate
conditions, including the extent and duration of adverse changes that affect the
industries in which the Company's tenants compete. Additional information on
factors which could impact the Company and the forward-looking statements
contained herein are included in the Company's filings with the Securities and
Exchange Commission, including the Company's Annual Report for the year ended
December 31, 2002. The Company assumes no obligation to update or supplement
forward-looking statements that become untrue because of subsequent events.
Non-GAAP Supplemental Financial Measures
Funds from Operations (FFO)
- ---------------------------
FFO is a widely recognized measure of REIT performance. Although FFO is a
non-GAAP financial measure, the Company believes that information regarding FFO
is helpful to shareholders and potential investors. The Company computes FFO in
accordance with standards established by the National Association of Real Estate
Investment Trusts (NAREIT), which may not be comparable to FFO reported by other
REITs that do not compute FFO in accordance with the NAREIT definition, or that
interpret the NAREIT definition differently than the Company. NAREIT defines FFO
as net income (loss) before minority interest of unitholders (preferred and
common) and excluding gains (losses) on sales of depreciable operating property
and extraordinary items (computed in accordance with GAAP); plus real estate
related depreciation and amortization (excluding amortization of deferred
financing costs), and after adjustment for unconsolidated joint ventures. The
GAAP measure that the Company believes to be most directly comparable to FFO,
net income, includes depreciation and amortization expenses, gains or losses on
property sales and minority interest. In computing FFO, the Company eliminates
substantially all of these items because, in the Company's view, they are not
indicative of the results from the Company's property operations. To facilitate
a clear understanding of the Company's historical operating results, FFO should
be examined in conjunction with net income (determined in accordance with GAAP)
as presented in the financial statements included elsewhere in this release. FFO
does not represent cash generated from operating activities in accordance with
GAAP and should not be considered to be an alternative to net income (loss)
(determined in accordance with GAAP) as an indication of the Company's financial
performance or to be an alternative to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company's liquidity,
nor is it indicative of funds available for the Company's cash needs, including
its ability to make cash distributions to shareholders.
Cash Available for Distribution (CAD)
- -------------------------------------
Cash available for distribution, CAD, is a non-GAAP financial measure that is
not intended to represent cash flow for the period and is not indicative of cash
flow provided by operating activities as determined under GAAP. CAD is presented
solely as a supplemental disclosure with respect to liquidity because the
Company believes it provides useful information regarding the Company's ability
to fund its dividends. Because all companies do not calculate CAD the same way,
the presentation of CAD may not be comparable to similarly titled measures of
other companies.
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share information)
September 30, December 31,
2003 2002
---------- ----------
ASSETS
Real estate investments:
Operating properties $1,904,795 $1,890,009
Accumulated depreciation (272,859) (245,230)
---------- ----------
1,631,936 1,644,779
Construction-in-progress 36,842 58,127
Land held for development 45,654 43,075
---------- ----------
1,714,432 1,745,981
Cash and cash equivalents 7,493 26,801
Escrowed cash 13,349 16,318
Accounts receivable, net 2,439 3,657
Accrued rent receivable 32,284 28,333
Investment in marketable securities 11,945 11,872
Assets held for sale 25,037 7,666
Investment in joint ventures, at equity 13,154 14,842
Deferred costs, net 27,664 29,271
Other assets 42,746 34,547
---------- ----------
Total assets $1,890,543 $1,919,288
========== ==========
LIABILITIES AND BENEFICIARIES' EQUITY
Mortgage notes payable $ 517,555 $ 597,729
Borrowings under Credit Facility 327,000 307,000
Unsecured term loan 100,000 100,000
Accounts payable and accrued expenses 24,746 27,576
Distributions payable 22,106 21,186
Tenant security deposits and deferred rents 19,958 22,276
Other liabilities 17,227 22,006
Liabilities related to assets held for sale 275 20
---------- ----------
Total liabilities 1,028,867 1,097,793
Minority interest 133,413 135,052
Beneficiaries' equity:
Preferred Shares:
7.25% Series A Preferred Shares, $0.01 par value;
shares authorized-10,000,000; issued and
outstanding-750,000 in 2003 and 2002 8 8
8.75% Series B Preferred Shares, $0.01 par value;
shares authorized-10,000,000; issued and
outstanding-4,375,000 in 2003 and 2002 44 44
Common Shares of beneficial interest, $0.01 par value;
shares authorized-100,000,000; issued and
outstanding-37,359,460 in 2003 and 35,226,315 in 2002 373 352
Additional paid-in capital 894,696 841,659
Share warrants 401 401
Cumulative earnings 268,744 225,010
Accumulated other comprehensive loss (3,547) (6,402)
Cumulative distributions (432,456) (374,629)
---------- ----------
Total beneficiaries' equity 728,263 686,443
---------- ----------
Total liabilities and beneficiaries' equity $1,890,543 $1,919,288
========== ==========
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- -------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenue
Rents $ 64,512 $ 63,367 $ 193,044 $ 183,946
Tenant reimbursements 9,094 8,637 26,248 24,098
Other 3,604 2,443 7,687 8,028
----------- ----------- ----------- -----------
Total revenue 77,210 74,447 226,979 216,072
Operating Expenses
Property operating expenses 19,267 18,918 59,748 55,115
Real estate taxes 7,346 6,649 20,692 18,424
Interest 13,746 16,329 44,293 48,164
Depreciation and amortization 15,311 13,652 45,004 41,085
Administrative expenses 3,630 3,971 10,953 11,812
----------- ----------- ----------- -----------
Total operating expenses 59,300 59,519 180,690 174,600
----------- ----------- ----------- -----------
Income from continuing operations before equity in income of
real estate ventures, net gain on sales of interests in
real estate and minority interest 17,910 14,928 46,289 41,472
Equity in income of real estate ventures (531) 359 38 1,052
----------- ----------- ----------- -----------
Income from continuing operations before net gain on sales of
interests in real estate and minority interest 17,379 15,287 46,327 42,524
Net gain on sales of interests in real estate - - 1,152 -
Minority interest attributable to continuing operations (2,365) (2,350) (6,973) (6,947)
----------- ----------- ----------- -----------
Income from continuing operations 15,014 12,937 40,506 35,577
Discontinued operations:
Income from discontinued operations 756 1,086 1,852 6,957
Net gain on disposition of discontinued operations 1,741 - 2,692 8,562
Minority interest (111) (55) (209) (859)
----------- ----------- ----------- -----------
Income from discontinued operations 2,386 1,031 4,335 14,660
----------- ----------- ----------- -----------
Net Income 17,400 13,968 44,841 50,237
Income allocated to Preferred Shares (2,976) (2,976) (8,928) (8,930)
----------- ----------- ----------- -----------
Income allocated to Common Shares $ 14,424 $ 10,992 $ 35,913 $ 41,307
=========== =========== =========== ===========
Earnings per Common Share after discontinued operations:
Basic income per Common Share $ 0.38 $ 0.30 $ 0.96 $ 1.13
=========== =========== =========== ===========
Basic weighted-average shares outstanding 37,359,385 35,449,414 36,095,349 35,610,699
=========== =========== =========== ===========
Diluted income per Common Share $ 0.37 $ 0.30 $ 0.96 $ 1.13
=========== =========== =========== ===========
Diluted weighted-average shares outstanding 37,520,808 35,484,395 36,232,600 35,647,690
=========== =========== =========== ===========
BRANDYWINE REALTY TRUST
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
(unaudited, in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Reconciliation of Net Income to Funds from Operations (FFO):
Net income $ 17,400 $ 13,968 $ 44,841 $ 50,237
Add (deduct):
Minority interest attributable to continuing operations 2,365 2,350 6,973 6,947
Net gain on sale of interests in real estate - - (1,152) -
Minority interest attributable to discontinued operations 111 55 209 859
Net gain on disposition of discontinued operations (1,741) - (2,692) (8,562)
----------- ----------- ----------- -----------
Income before net gains on sales of interests in real estate and
minority interest 18,135 16,373 48,179 49,481
Add:
Depreciation:
Real property 13,590 12,544 40,489 39,419
Real estate ventures 876 463 1,889 1,783
Amortization of leasing costs 1,820 1,300 5,224 4,006
----------- ----------- ----------- -----------
Funds from operations (FFO) $ 34,421 $ 30,680 $ 95,781 $ 94,689
=========== =========== =========== ===========
Number of weighted-average Common Shares 48,727,360 46,751,866 47,468,409 47,069,717
=========== =========== =========== ===========
FFO per weighted-average Common Share - fully diluted $ 0.71 $ 0.66 $ 2.02 $ 2.01
=========== =========== =========== ===========
Dividend per Common Share $ 0.44 $ 0.44 $ 1.32 $ 1.32
Payout ratio of FFO (1) 62.3% 67.0% 65.4% 65.6%
EPS per weighted-average Common Share - fully diluted $ 0.37 $ 0.30 $ 0.96 $ 1.13
Cash Available for Distribution (CAD):
FFO $ 34,421 $ 30,680 $ 95,781 $ 94,689
Add (deduct):
Rental income from straight-line rents (1,516) (1,274) (4,429) (4,211)
Deferred market rental income (72) - (262) -
Amortization:
Deferred financing costs 529 536 1,533 1,543
Deferred compensation costs 691 818 2,191 2,417
Impairment loss 861 - 861 -
Second generation capital expenditures (2):
Building and tenant improvements (7,350) (3,415) (20,117) (12,015)
Lease commissions (1,015) (2,069) (3,475) (5,679)
----------- ----------- ----------- -----------
Cash available for distribtution $ 26,549 $ 25,276 $ 72,083 $ 76,744
=========== =========== =========== ===========
Number of weighted-average Common Shares 48,727,360 46,751,866 47,468,409 47,358,998
=========== =========== =========== ===========
Dividend per Common Share $ 0.44 $ 0.44 $ 1.32 $ 1.32
Cash flows from:
Operating activities $ 25,272 $ 37,494 $ 84,483 $ 93,165
Investing activities (8,089) 9,595 (27,882) 18,047
Financing activities (17,210) (50,356) (75,909) (103,462)
(1) Payout ratio is calculated by dividing dividend per Common Share by FFO
per weighted-average Common Share
(2) Represents expenditures incurred during the period (regardless if lease
commencement is after quarter end). Excludes first generation costs, which
consist of capital expenditures, tenant improvements and leasing
commissions associated with development and purchase price adjustments
relating to acquisitions (including seller escrows, purchase price
reduction or costs anticipated to initially lease-up acquired properties).
BRANDYWINE REALTY TRUST
SAME STORE OPERATIONS
(unaudited)
Of the 233 properties owned by the Company as of September 30, 2003, a total of
228 properties ("Same Store Properties") containing an aggregate of 15.4 million
net rentable square feet were owned for the entire three-month periods ended
September 30, 2003 and 2002. Average occupancy for the Same Store Properties
during the three-month periods ended September 30, was 92.2% during 2003 and
91.1% during 2002. The following table sets forth revenue and expense
information for the Same Store Properties:
Three Months Ended
September 30,
------------------- Dollar Percent
2003 2002 Change Change
------- ------- ------ ------
(amounts in thousands)
Revenue
Rents (a) $63,404 $62,142 $1,262 2.0%
Tenant reimbursements 9,193 8,697 496 5.7%
Other (b) 499 323 176 54.5%
------- ------- ------
Total revenue 73,096 71,162 1,934 2.7%
Operating Expenses
Property operating expenses 21,544 21,175 369 1.7%
Real estate taxes 6,915 6,699 216 3.2%
------- ------- ------
Total property operating expenses 28,459 27,874 585 2.1%
------- ------- ------
Net operating income $44,637 $43,288 $1,349 3.1%
======= ======= ======
(a) Includes straight-line rental income of $1,416 for 2003 and $1,201 for
2002
(b) Includes termination fee income of $376 for 2003 and $185 for 2002
The following table is a reconciliation of income from continuing operations to
Same Store net operating income:
Three Months Ended
September 30,
-------------------
2003 2002
------- -------
(amounts in thousands)
Income from continuing operations $15,014 $12,937
Add/(deduct):
Interest expense 13,746 16,329
Depreciation and amortization 15,311 13,652
Administrative expenses 3,630 3,971
Equity in income of real estate ventures 531 (359)
Minority interest attributable to continuing operations 2,365 2,350
Income from discontinued operations 2,386 1,031
------- -------
Consolidated net operating income 52,983 49,911
Less: Net operating income of non same store properties (8,346) (6,623)
------- -------
Same Store Net Operating Income $44,637 $43,288
======= =======
Third Quarter Earnings Call and Supplemental Information Package
Brandywine President and CEO, Gerard H. Sweeney, will be hosting a conference
call on Friday, October 24, 2003 at 1:00 p.m. EST. Call 1-888-889-5602. After
the conference, a taped replay of the call can be accessed 24 hours a day
through Friday, November 7, 2003 by calling 1-877-519-4471 - access code
4192506. In addition, the conference call can be accessed via a webcast located
on the Company's website @ brandywinerealty.com.
The Company has prepared a Supplemental Information package that includes
financial results and operational statistics to support the announcement of
third quarter earnings. The Supplemental Information package is available
through the Company's website @ brandywinerealty.com. The Supplemental
Information Package will be found in the "Investor Relations - Financial
Reports" section of the web page.
Brandywine Realty Trust, with headquarters in Plymouth Meeting, PA and regional
offices in Mount Laurel, NJ and Richmond, VA, is one of the Mid-Atlantic
Region's largest full-service real estate companies. Brandywine owns, manages or
has an ownership interest in 277 office and industrial properties, aggregating
20.0 million square feet.
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