SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 23, 1999
BRANDYWINE REALTY TRUST
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(Exact name of registrant as specified in its charter)
MARYLAND 1-9106 23-2413352
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) file number) Identification Number)
14 Campus Boulevard, Newtown Square, Pennsylvania 19073
(Address of principal executive offices)
(610) 325-5600
(Registrant's telephone number, including area code)
Item 5. Other Events
(i) Five Arrows Transaction:
On April 19, 1999, Brandywine Realty Trust (the "Company") entered into
an agreement with Five Arrows Realty Securities III L.L.C. ("Five Arrows"), an
investment fund managed by Rothschild Realty Inc., a member of the Rothschild
Group. The agreement provides for the sale by the Company of up to 4,375,000
preferred shares of beneficial interest, designated as 8.75% Series B Senior
Cumulative Convertible Preferred Shares (the "Series B Preferred Shares") for an
aggregate gross purchase price of $105 million ($24 per share) or $98,700,000,
net of the offering discount.
The Company will issue to Five Arrows 1,041,667 Series B Preferred
Shares at the initial draw-down on or about April 23, and may sell the remaining
3,333,333 shares at up to three additional closings during 1999. The Company has
agreed to sell a minimum of 2,291,667 shares to Five Arrows. At part of the
transaction, Five Arrows acquired a seven-year warrant (the "Warrant") to
purchase 500,000 common shares of beneficial interest ("Common Shares") at an
exercise price of $24.00 per share.
Distributions. Distributions on the Series B Preferred Shares are
cumulative from the date of issuance and are payable quarterly at the greater of
(i) $0.525 per share and (ii) the amount of the quarterly distribution payable
on the number of Common Shares into which a Series B Preferred Share is
convertible. The Series B Preferred Shares rank pari passu as to distributions
with the Company's currently outstanding 7.25% Series A Preferred Shares. The
Company may not pay distributions on the Common Shares, or other shares that
rank junior to the Series B Preferred Shares as to distributions, until all
cumulative unpaid distributions on the Series B Preferred Shares have been paid.
Conversion Feature / Antidilution Feature. Each Series B Preferred
Share is immediately convertible at the option of the holder into one Common
Share at a conversion price of $24 per Common Share. The conversion price of the
Series B Preferred Shares, and the exercise price of the Warrant, are subject to
reduction if the Company issues Common Shares or securities convertible into
Common Shares at less than $24 per share during the twenty-four month period
ending April 19, 2001, subject to exceptions, including shares issued to acquire
additional office or industrial properties and shares issued to acquire 100% of
a public company whether by merger, consolidation or exchange offer.
Liquidation Preference. The liquidation value of each Series B
Preferred Share equals $24 plus accrued distributions. The Series B Preferred
Shares rank pari passu upon liquidation with the Company's 7.25% Series A
Preferred Shares.
Mandatory Conversion into Common Shares. At any time on or after April
19, 2004, the Company may require the conversion of the Series B Preferred
Shares into Common Shares if
the Common Shares have traded, during any consecutive 90-day period following
such date, at a price in excess of 130% of the conversion price and the Common
Shares to be issued are freely transferable and listed on the New York Stock
Exchange.
Redemption at Company's Option. The Company may, at its option, redeem
all (but not less than all) of the outstanding Series B Preferred Shares at any
time on or after April 19, 2007 for $24 per share plus accrued distributions. In
addition, the Company has the option to redeem up to $50 million of Series B
Preferred Shares prior to April 19, 2000 at a per share price of $22.44 plus
accrued distributions so long as, after the redemption, at least $55 million of
Series B Preferred Shares remain outstanding. Alternatively, the Company may
elect to issue no more than $55 million of Series B Preferred Shares on the
condition that it pays Five Arrows $0.44 for each share not issued.
Redemption upon Change of Control and Other Events. If the Company
experiences a change of control, becomes a closely-held or a Pension-held REIT,
or fails to qualify as a REIT, in each case other than through action of Five
Arrows, Five Arrows has the right to require the Company to purchase the
outstanding Series B Preferred Shares for $24.48 per share plus accrued
distributions. Under certain circumstances, the Company may, in lieu of making
such payment, revise the conversion ratio so that, based on the then current
market price of the Common Shares, each Series B Preferred Share will thereafter
be convertible into that number of Common Shares having an aggregate market
value equal to at least $28.80. In certain transactions involving a merger or
consolidation of the Company as to which holders of Series B Preferred Shares
have a separate voting right, holders who do not vote in favor of the
transaction will have the right to require the Company to redeem their shares
for $24.96 per share plus accrued distributions.
Voting Rights. Five Arrows has the right to vote on all matters as a
single class with holders of Common Shares, and as a separate class on certain
matters affecting the rights of the Series B Preferred Shares. So long as Five
Arrows beneficially owns at least 50% of the outstanding Series B Preferred
Shares, Five Arrows has the right to appoint one member to the Board of
Trustees. In the event that the Company (i) fails to pay distributions on Common
Shares equal to at least $0.32 for two consecutive quarters, (ii) reduces the
annual distribution on its Common Shares to below $1.28 per share, (iii) fails
to pay timely distributions on the Series B Preferred Shares, (iv) is in
material default of it credit facility or (v) fails to maintain a debt service
coverage ratio of at least 1.25 or a debt to market capitalization ratio no
higher .70, then Five Arrows will have the right to appoint a second member to
the Board of Trustees. In addition, certain mergers, consolidations and similar
transactions require a favorable vote of the Series B Preferred Shares. However,
because each holder of Series B Preferred Shares will have the right to require
the Company to redeem its shares, as indicated above, the documents provide that
even if holders of Series B Preferred Shares do not vote in favor of the
transaction, the Company will be permitted to consummate the transaction, and
certain specified approval rights of the Series B Preferred Shares will
thereupon terminate.
Transfer and Certain Other Restrictions. Until April 19, 2000, Five
Arrows may not transfer the Series B Preferred Shares, the Warrant or any Common
Shares obtained upon conversion of the Series B Preferred Shares or exercise of
the Warrant, except to affiliates, who will be similarly restricted. In
addition, so long as a designee of Five Arrows occupies a seat on the Company's
Board of Trustees, Five Arrows may not increase its equity ownership in the
Company without the Company's consent or commence a tender or exchange offer or
become involved in a proxy contest.
Registration Rights. None of the Series B Preferred Shares nor the
Common Shares issuable upon conversion of the Series B Preferred Shares or upon
exercise of the Warrant has been registered under the Securities Act of 1933 or
any state securities laws, and none of such securities may be offered and sold
in the United States absent registration or an applicable exemption from
registration. Five Arrows may make two written demands on the Company to
register the Series B Preferred Shares, the underlying Common Shares and the
Common Shares issued or issuable upon exercise of the Warrant (collectively,
"Registrable Securities"). Five Arrows has also been granted piggyback
registration rights and the right to have the Company maintain a shelf
registration covering its securities.
Use of Proceeds. The Company expects to use the net proceeds from the
sale of Series B Preferred Shares to repay outstanding indebtedness and to fund
continued growth. The Company will contribute the net proceeds from the Series B
Preferred Shares to Brandywine Operating Partnership, L.P. (the "Operating
Partnership") in exchange for the issuance by the Operating Partnership to the
Company of a newly created class of limited partnership interest designated as
the Series C Preferred Mirror Units (the "Mirror Units"). The stated value of
each Mirror Unit is $24. The distribution rights and the distribution and
liquidation preferences of the Mirror Units "mirror" those of the Series B
Preferred Shares. Upon conversion of Series B Preferred Shares into Common
Shares, an equal number of Mirror Units will convert into an equal number of
Class A Units of the Operating Partnership. Upon redemption of Series B
Preferred Shares for cash, an equal number of Mirror Units will be canceled.
Copies of the principal documents executed by the Company in connection
with the issuance of the Series B Preferred Shares are included with this Form
8-K as exhibits 3.1, 10.1, 10.2, 10.3 and 10.4. Reference is made to these
documents for a more detailed description of the Series B Preferred Shares.
(ii) Merrill Lynch Loan:
On March 26, 1999, two subsidiaries of the Company (collectively, the
"Borrowers") closed on a mortgage loan financing (the "Financing"). Under the
Financing, the Borrowers borrowed an aggregate of $75.0 million from Merrill
Lynch Mortgage Capital, Inc. at a blended interest rate of LIBOR plus 2.50% per
annum with a maturity of March 31, 2002. To offset the risks of a variable
interest rate, the Borrowers have purchased, through Merrill Lynch, a two year
interest rate cap agreement that protects the Borrowers in the event that the
LIBOR exceeds 6.25%. The Borrowers have also obtained an interest rate agreement
that commences in two
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years and protects the Borrower until the maturity date of the Financing in the
event that the LIBOR exceeds 7%. The Financing is secured by two properties
owned by Brandywine Trenton Urban Renewal, L.L.C. located in Trenton, New
Jersey, known as 33 West State Street and Capital Center, and by three
properties which are ground leased by Brandywine Berwyn SPE, L.P. located in
Berwyn, Pennsylvania, known as 100, 200 and 300 Berwyn Park. The Financing is
nonrecourse to the Borrowers except in certain limited circumstances. The
Operating Partnership has guaranteed those limited obligations that are recourse
to the Borrowers. Seventy million dollars of the proceeds of the Financing were
used to repay the remaining amounts outstanding under the bridge loan from
NationsBank. The documentation executed to effect the Financing contains certain
covenants which the Company believes to be customary for secured, nonrecourse
real estate financings such as the Financing.
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(iii) Property Sales:
During March 1999, the Company consummated the sale of three office
properties containing approximately 323,671 net rentable square feet for an
aggregate sales price of $23.8 million. The property sales were made through
three separate transactions as follows:
o On March 23, 1999, the Company sold one office property
located in Bristol, Pa. (known as 180 Rittenhouse Circle)
containing 96,000 net rentable square feet for
approximately $8.8 million.
o On March 25, 1999, the Company sold one office property
located in Blue Bell, Pa. (known as 1720 Walton Road)
containing 15,918 net rentable square feet for
approximately $2.0 million.
o On March 31, 1999, the Company sold one office property
located in Bryn Athyn, Pa. (Buildings 1-14, Mason's Mill
Business Park) containing 211,753 net rentable square feet
for approximately $13.0 million.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
3.1 - Articles Supplementary of the Company dated April 19, 1999
creating the Company's Series B Cumulative Convertible Preferred
Shares.
10.1 -Investment Agreement dated as of April 19, 1999 between the
Company and Five Arrows.
10.2 -Warrant dated April 19, 1999 issued to Five Arrows.
10.3 -Operating Agreement dated as of April 19, 1999 between the
Company and Five Arrows.
10.4 -Agreement and Waiver dated as of April 19, 1999 between the
Company and Five Arrows.
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SIGNATURE
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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 hereunto duly authorized.
BRANDYWINE REALTY TRUST
Date: April 26, 1999 By: /s/ Gerard H. Sweeney
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Title: President and Chief
Executive Officer