SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 30, 1997
BRANDYWINE REALTY TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 1-9106 23-2413352
(State or other jurisdiction (Commission file number) (I.R.S. Employer
of incorporation) Identification Number)
16 CAMPUS BOULEVARD, NEWTOWN SQUARE, PENNSYLVANIA 19073
(Address of principal executive offices)
(610) 325-5600
(Registrant's telephone number, including area code)
Page 1 of 6 pages
ITEM 5. OTHER EVENTS
(a) On October 9, 1997, Brandywine Operating Partnership, L.P. (the
"Operating Partnership"), a limited partnership in which Brandywine Realty
Trust ("the Company") is the sole general partner and in which, as of the
date of this Report, the Company owns an approximately 98.7% partnership
interest, acquired a five-story office building known as Atrium 1. This
building contains approximately 96,660 net rentable square feet and is
located in Mt. Laurel, New Jersey for a cash purchase price of approximately
$10.3 million. The Operating Partnership paid the purchase price and closing
expenses using borrowings under its existing revolving credit facility. As of
October 9, 1997, Atrium 1 was approximately 83.9% leased to 10 tenants. IBM;
Corporate Dynamics; and Janney, Montgomery, Scott are major tenants,
occupying approximately 17.7%, 14.3% and 11.9%, respectively, of the total
net rentable square feet of Atrium 1. Reference is made to Item 7 herein for
certain financial statements related to Atrium 1.
The seller of Atrium 1, Commercial Development Fund 85, a Connecticut real
estate limited partnership (the "Seller") is a party unaffiliated with the
Company and the Operating Partnership. The Company based its determination of
the purchase price on the expected cash flow, physical condition, location,
competitive advantages, existing tenancies and opportunities to retain and
attract additional tenants. The purchase price was determined by arm's-length
negotiation between the Company and the Seller.
-2-
The table below sets forth certain information regarding the rental rates
and lease expirations at Atrium 1 as of October 9, 1997.
RENTABLE SQUARE FINAL ANNUALIZED PERCENTAGE OF TOTAL
YEAR OF NUMBER OF LEASES FOOTAGE SUBJECT BASE RENT UNDER FINAL ANNUALIZED BASE RENT
LEASE EXPIRING WITHIN TO EXPIRING EXPIRING LEASES (2) UNDER EXPIRING LEASES
EXPIRATION THE YEAR AT (1) LEASES
------------------ ----------------- ----------------- ---------------- ---------------------------
1997 1 97 $ 1,940 0.1%
1998 1 4,537 86,203 5.7%
1999 4 19,851 384,683 25.4%
2000 1 4,770 82,044 5.4%
2001 2 26,617 489,751 32.4%
2002 1 11,460 212,010 14.0%
2003 -- -- -- --
2004 1 13,833 255,911 16.9%
2005 -- -- -- --
2006 and
Thereafter ---- -- -- -- --
---------- ---------- ----------- ----------
Total 11 81,165 $ 1,512,542 100.0%
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
- ------------------------
(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 acquisition of Atrium 1, the Company's portfolio
consists of 78 office properties and 16 industrial properties that contain an
aggregate of approximately 5.9 million net rentable square feet.
-3-
(b) As previously reported by the Company in a Current Report on Form 8-K
dated October 3, 1997 (the "Prior 8-K"), the Company, through a subsidiary,
entered into a joint venture, Christiana Center Operating Company I LLC
("Joint Venture I"). On October 20, 1997, and as contemplated by the Prior
8-K, Joint Venture I acquired approximately 13.3 acres of land in New Castle
County, Delaware for a cash purchase price of approximately $900,000. In
connection with the planned development of a three-story office building, on
October 20, 1997, Joint Venture I closed an approximately $14.5 million
construction loan (the "Construction Loan") provided by PNC Bank, Delaware
(the "Construction Lender"). In connection with the Construction Loan, the
Company delivered a $1.5 million letter of credit for the benefit of the
Construction Lender and a forward commitment (the "Loan Commitment Letter")
for up to $14.5 million of permanent financing for the Project as well as a
guaranty of payment (the "Guaranty") for the benefit of the Construction
Lender. The Construction Loan is also secured by a first mortgage on the
property being developed by Joint Venture I. Reference is made to the Loan
Commitment Letter and the Guaranty attached hereto as exhibits.
(c) On October 21, 1997, the Company's Common Shares commenced trading on
the New York Stock Exchange. The Company has applied to withdraw the listing
of the Common Shares from the American Stock Exchange.
(d) During the period January 1, 1997 through October 9, 1997, the Company
has acquired 21 individually insignificant properties from parties
unaffiliated with the Company and the Operating Partnership. The aggregate
purchase price for these properties was approximately $79.6 million. The
Company previously provided audited financial statements for five of the
individually insignificant property acquisitions in the Current Report on
Form 8-K dated June 26, 1997 and two of the individually insignificant
property acquisitions in the Current Report on Form 8-K dated September 10,
1997 in accordance with Regulation S-X, Rule 3-14. This Current Report on
Form 8-K provides audited financial statements for an additional eight of the
individually insignificant property acquisitions. After reasonable inquiry,
the Company is not aware of any material factors relating to the above
mentioned properties that would cause the reported financial information
relating to such properties not to be necessarily indicative of future
operating results.
-4-
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The audited statement of revenue and certain operating expenses of
the Metropolitan Industrial Center for the year ended December 31,
1996 and the unaudited statement of revenue and certain operating
expenses for the six months ended June 30, 1997 are included on pages
F-14 to F-17.
The audited statement of revenue and certain operating expenses of
Atrium 1 for the year ended December 31, 1996 and the unaudited
statement of revenue and certain operating expenses for the six
months ended June 30, 1997 are included on pages F-18 to F-21.
(b) Pro Forma Financial Information.
Pro forma financial information which reflects the Company's
acquisition of the Metropolitan Industrial Center and Atrium 1 as of
and for the six months ended June 30, 1997 and for the year ended
December 31, 1996 are included on pages F-3 to F-13.
(c) Exhibits.
10.1 Guaranty dated October 16, 1997 from Brock J. Vinton and
Brandywine Realty Trust in favor of PNC Bank, Delaware.
10.2 Loan Commitment Letter dated October 16, 1997 from Brandywine
Realty Trust to Christiana Operating Company I, LLC.
23.1 Consent of Arthur Andersen LLP
-5-
SIGNATURE
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
Date: October 30, 1997 By: /s/ Gerard H. Sweeney
-----------------------------------------
Gerard H. Sweeney, President and
Chief Executive Officer
(Principal Executive Officer)
Date: October 30, 1997 By: /s/ Mark S. Kripke
-----------------------------------------
Mark S. Kripke, Chief Financial Officer
and Secretary (Principal Financial and
Accounting Officer)
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. METROPOLITAN INDUSTRIAL CENTER
- - Report of Independent Public Accountants......................................... F--14
- - 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--15
- - Notes to Statements of Revenue and Certain Expenses.............................. F--16
III. ATRIUM 1
- - Report of Independent Public Accountants......................................... F--18
- - 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--19
- - Notes to Statements of Revenue and Certain Expenses.............................. F--20
F-1
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 11,500,000 Common Shares at $20.75 per share, of which
1,500,000 shares related to the underwriter's exercise of the
over-allotment option (the "July 1997 Offering"). The net proceeds from
the July 1997 Offering were contributed to the Operating Partnership in
exchange for 11,500,000 GP Units.
- The Operating Partnership repaid $160,775,000 of indebtedness under the
Company's revolving credit facility using proceeds from the July 1997
Offering.
- The Company issued 786,840 Common Shares at $22.31 per share (the
"September 1997 Offering"). The net proceeds from the September 1997
Offering were contributed to the Operating Partnership in exchange for
786,840 GP Units.
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.
F-2
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1997 (Notes 1 and 2)
(Unaudited)
(In thousands)
METRO-
BRANDYWINE 500 AND POLITAN
REALTY TRUST JULY 1997 GREEN 501 OFFICE SEPT. 1997 INDUST.
HISTORICAL OFFERING HILLS BERWYN CENTER OFFERING CENTER ATRIUM 1
CONSOLIDATED (A) (B) PARK (C) DRIVE (D) (E) (F) (G)
------------- --------- -------- --------- ---------- ---------- -------- --------
ASSETS:
Real estate
investments,
net......... $ 344,209 $ -- $ 40,444 $ 37,664 $ 17,091 $ -- $ 16,503 $ 10,295
Cash and cash
equivalents.. 10,777 64,965 (23,944) (37,664) (2,091) 16,606 -- --
Escrowed
cash........ 1,213 -- -- -- -- -- -- --
Accounts
receivable... 2,755 -- -- -- -- -- -- --
Due from
affiliates... 293 -- -- -- -- -- -- --
Investment in
management
company..... 202 -- -- -- -- -- -- --
Deferred costs
and other
assets...... 4,980 -- -- -- -- -- -- --
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
Total
assets...... 364,429 64,965 16,500 -- 15,000 16,606 16,503 10,295
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
LIABILITIES:
Mortgage notes
payable..... 46,960 -- 1,500 -- -- -- --
Notes payable,
Credit
Facility.... 130,775 (160,775) 15,000 -- 15,000 -- 16,503 10,295
Accrued
interest.... 395 -- -- -- -- -- -- --
Accounts
payable and
accrued
expenses.... 2,650 -- -- -- -- -- -- --
Distributions
payable..... 4,192 -- -- -- -- -- -- --
Tenant
security
deposits and
deferred
rents....... 2,721 -- -- -- -- -- -- --
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
Total
liabilities.. 187,693 (160,775) 16,500 -- 15,000 -- 16,503 10,295
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
MINORITY
INTEREST.... 5,508 -- -- -- -- -- -- --
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
BENEFICIARIES'
EQUITY:
Common shares
of
beneficial
interest.... 111 115 -- -- -- 8 -- --
Additional
paid-in
capital..... 186,426 225,625 -- -- -- 16,598 -- --
Share
warrants.... 962 -- -- -- -- -- -- --
Cumulative
earnings.... 460 -- -- -- -- -- -- --
Cumulative
distributions.. (16,731) -- -- -- -- -- -- --
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
Total
beneficiaries'
equity...... 171,228 225,740 -- -- -- 16,606 -- --
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
Total
liabilities
and
beneficiaries'
equity...... $ 364,429 $ 64,965 $ 16,500 $ -- $ 15,000 $ 16,606 $ 16,503 $ 10,295
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
-------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
PRO FORMA
CONSOLIDATED
------------
ASSETS:
Real estate
investments,
net......... $ 466,206
Cash and cash
equivalents.. 28,649
Escrowed
cash........ 1,213
Accounts
receivable... 2,755
Due from
affiliates... 293
Investment in
management
company..... 202
Deferred costs
and other
assets...... 4,980
--------
Total
assets...... 504,298
--------
--------
LIABILITIES:
Mortgage notes
payable..... 48,460
Notes payable,
Credit
Facility.... 26,798
Accrued
interest.... 395
Accounts
payable and
accrued
expenses.... 2,650
Distributions
payable..... 4,192
Tenant
security
deposits and
deferred
rents....... 2,721
--------
Total
liabilities.. 85,216
--------
--------
MINORITY
INTEREST.... 5,508
--------
BENEFICIARIES'
EQUITY:
Common shares
of
beneficial
interest.... 234
Additional
paid-in
capital..... 428,649
Share
warrants.... 962
Cumulative
earnings.... 460
Cumulative
distribution (16,731)
--------
Total
beneficiaries'
equity...... 413,574
--------
Total
liabilities
and
beneficiaries'
equity...... $ 504,298
--------
--------
F-3
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)
1997 EVENTS
----------------------------------------
BRANDYWINE
REALTY METRO-
TRUST 1997 POLITAN TOTAL
HISTORICAL 1996 OTHER INDUSTRIAL ATRIUM 1 PRO FORMA
CONSOLIDATED (A) EVENTS (B) SUBTOTAL EVENTS (C) CENTER (E) (F) CONSOLIDATED
-------------------- ------------ ----------- ------------ ------------- ----------- ----------------
REVENUE:
Base rents... $ 8,462 $ 12,646 $ 21,108 $ 37,644 $ 1,811 $ 1,226 $ 61,789
Tenant
reimbursements.. 1,372 2,838 4,210 6,714 406 33 11,363
Other........ 196 100 296 547 9 26 878
---------- ------------ ----------- ------------ ------ ----------- ----------------
Total
Revenue.... 10,030 15,584 25,614 44,905 2,226 1,285 74,030
---------- ------------ ----------- ------------ ------ ----------- ----------------
OPERATING
EXPENSES:
Interest..... 2,751 513 3,264 1,072 1,238 772 6,346
Depreciation
and
amortization.. 2,836 4,687 7,523 9,165 528 329 17,545
Property
expenses... 3,709 6,830 10,539 18,776 678 755 30,748
General and
administrative.. 825 148 973 -- -- -- 973
---------- ------------ ----------- ------------ ------ ----------- ----------------
Total
operating
expenses... 10,121 12,178 22,299 29,013 2,444 1,856 55,612
---------- ------------ ----------- ------------ ------ ----------- ----------------
---------- ------------ ----------- ------------ ------ ----------- ----------------
Income (loss)
before
minority
interest... (91) 3,406 3,315 15,892 (218) (571) 18,418
Minority
interest in
(income)
loss....... (45) (429) (474) 150 3 9 (312)
---------- ------------ ----------- ------------ ------ ----------- ----------------
---------- ------------ ----------- ------------ ------ ----------- ----------------
Income (loss)
before
uncombined
entity..... (136) 2,977 2,841 16,042 (215) (562) 18,106
Equity in
income of
management
company.... (26) 66 40 342 53 31 466
---------- ------------ ----------- ------------ ------ ----------- ----------------
Net income
(loss)..... (162) 3,043 2,881 16,384 (162) (531) 18,572
(Income) loss
allocated
to
Preferred
Shares..... (401) (1,847) (2,248) -- -- -- (2,248)
---------- ------------ ----------- ------------ ------ ----------- ----------------
---------- ------------ ----------- ------------ ------ ----------- ----------------
Income (loss)
allocated
to Common
Shares..... $ (563) $ 1,196 $ 633 $ 16,384 $(1,077) $ (531) $ 16,324
---------- ------------ ----------- ------------ ------ ----------- ----------------
---------- ------------ ----------- ------------ ------ ----------- ----------------
Earnings
(loss) per
Common
Share...... $(0.43) $ 0.76
---------- ----------------
---------- ----------------
Weighted
average
number of
shares..... 1,302,648 21,578,246
---------- ----------------
---------- ----------------
F-4
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)
1997 EVENTS
------------------------------------------
BRANDYWINE METRO-
REALTY POLITAN
TRUST 1997 INDUSTRIAL TOTAL
HISTORICAL OTHER CENTER ATRIUM 1 PRO FORMA
CONSOLIDATED (A) EVENTS (D) (E) (F) CONSOLIDATED
-------------------- ------------ ------------- ------------- ----------------
REVENUE:
Base rents................... $ 16,889 $ 14,105 $ 925 $ 638 $ 32,557
Tenant reimbursements........ 3,285 2,690 220 22 6,217
Other........................ 544 102 5 17 668
---------- ------------ ------------- ----- ----------------
Total Revenue............. 20,718 16,897 1,150 677 39,442
---------- ------------ ------------- ----- ----------------
---------- ------------ ------------- ----- ----------------
OPERATING EXPENSES:
Interest..................... 3,059 (1,022) 614 383 3,034
Depreciation and
amortization................ 5,775 3,413 262 163 9,613
Property operating expenses.. 7,032 6,707 313 368 14,420
Other expenses............... 1,187 -- -- -- 1,187
---------- ------------ ------------- ----- ----------------
Total operating expenses.. 17,053 9,098 1,189 914 28,254
---------- ------------ ------------- ----- ----------------
---------- ------------ ------------- ----- ----------------
Income (loss) before
minority interest........ 3,665 7,799 (39) (237) 11,188
Minority interest in (income)
loss........................ (174) (20) -- 4 (190)
---------- ------------ ------------- ----- ----------------
Income (loss) before
uncombined entity........... 3,491 7,779 (39) (233) 10,998
Equity in income of management
company..................... 217 151 26 15 409
---------- ------------ ------------- ----- ----------------
Net income (loss)............. 3,708 7,930 (13) (218) 11,407
(Income) loss allocated to
Preferred Shares............ (499) -- -- -- (499)
---------- ------------ ------------- ----- ----------------
Income (loss) allocated to
Common Shares............... $ 3,209 $ 7,930 $ (13) $(218) $ 10,908
---------- ------------ ------------- ----- ----------------
---------- ------------ ------------- ----- ----------------
Earnings (loss) per Common
Share....................... $ 0.36 $ 0.50
---------- ----------------
---------- ----------------
Weighted average number of
shares outstanding including
share equivalents........... 8,809,379 21,942,726
---------- ----------------
---------- ----------------
F-5
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 October 9, 1997, the Company owned 94 properties. The Company's
interest in 93 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 October 9, 1997, the Company held
a 98.6% 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, the Berwyn Park Properties, 500 &
501 Office Center Drive, Metropolitan Industrial Center and Atrium 1. 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 September 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, the Berwyn Park Properties, 500 & 501 Office Center
Drive, Metropolitan Industrial Center and Atrium 1 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 $160.8 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
F-6
(C) Reflects the Company's acquisition of Berwyn Park as follows:
Purchase Price........ $37,150
Closing Costs......... 514
-------
$37,664
(D) Reflects the Company's acquisition of 500 and 501 Office Center Drive as
follows:
Purchase Price........ $16,900
Closing Costs......... 191
-------
$17,091
(E) Reflects the September 1997 Offering.
(F) Reflects the Company's acquisition of the Metropolitan Industrial Center
as follows:
Purchase Price........ $16,300
Closing Costs......... 203
-------
$16,503
(G) Reflects the Company's acquisition of Atrium 1 as follows:
Purchase Price........ $10,250
Closing Costs......... 45
-------
$10,295
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 1996 PRO FORMA TOTAL
LIBERTY VIEW DELAWARE BUSINESS CENTER 8000 LINCOLN & OTHER OFFERING PRO FORMA
BUILDING SERS PROPERTIES CORPORATE CENTER DRIVE DRIVE ADJUSTMENTS 1996 EVENTS
-------------- --------------- ---------------- --------------- ------------ ---------------- -----------
Revenue:
Base rents........ $ 5,714 $4,008 $2,036 $651 $ 237 $ -- $12,646
Tenant
reimbursements... 2,511 249 -- 76 2 -- 2,838
Other............. 100 -- -- -- -- -- 100
------- ------ ------ ----- ----- ------ -------
Total revenue.... 8,325 4,257 2,036 727 239 -- 15,584
Operating Expenses:
Interest.......... 3,783 194 -- -- -- (3,464) 513
Depreciation and
amortization..... 2,819 818 374 212 89 375 4,687
Property
expenses......... 2,831 2,217 552 270 231 729 6,830
General and
administrative... 715 -- -- -- -- (567) 148
------- ------ ------ ----- ----- ------ -------
Total operating
expenses........ 10,148 3,229 926 482 320 (2,927) 12,178
Income (loss) before
minority interest. (1,823) 1,028 1,110 245 (81) 2,927 3,406
Minority interest in
(income)loss...... 513 -- -- -- -- (942) (429)
Income (loss)
before uncombined
entity............ (1,310) 1,028 1,110 245 (81) 1,985 2,977
Equity in income
of management
company........... 75 -- -- -- -- (9) 66
------- ------ ------ ----- ----- ------ -------
Net income (loss).. (1,235) 1,028 1,110 245 (81) 1,976 3,043
Income allocated
to Preferred
Shares............ -- -- -- -- -- 1,847 1,847
------- ------ ------ ----- ----- ------ -------
Income (loss)
allocated to
Common Shares..... $(1,235) $1,028 $1,110 $245 $ (81) $ 129 $ 1,196
------- ------ ------ ----- ----- ------ -------
F-7
(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,
the Berwyn Park Properties, the Green Hills Properties and 500/501 Office Center
Drive for the year ended December 31, 1996 and other pro forma adjustments to
reflect the March 1997 Offering and the July 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.
F-8
COLUMBIA MAIN STREET GREENTREE
ACQUISITION ACQUISITION 1336 ENTERPRISE EXECUTIVE
PROPERTIES PROPERTIES DRIVE KINGS 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)
----------- ----------- ----- ----- ---------
----------- ----------- ----- ----- ---------
748 & 855
SPRINGDALE
FIVE EVES DRIVE TA PROPERTIES EMMES PROPERTIES DRIVE 1974 SPROUL ROAD
--------------- ------------- ---------------- ---------- ----------------
Revenue:
Base rents.................. $ 348 $5,102 $ 6,214 $940 $774
Tenant reimbursements....... 39 735 2,681 -- 118
Other....................... 1 9 10 -- --
----- ------ ------- ----- -----
Total revenue........... 388 5,846 8,905 940 892
----- ------ ------- ----- -----
Operating Expenses:
Interest (i)................ 254 3,168 4,987 400 --
Depreciation and
amortization (ii)......... 108 1,352 2,128 171 134
Property expenses........... 151 1,962 3,482 250 492
General and
administrative............ -- -- -- -- --
----- ------ ------- ----- -----
Total operating
expenses.............. 513 6,482 10,597 821 626
----- ------ ------- ----- -----
Income (loss) before minority
interest.................... (125) (636) (1,692) 119 266
Minority interest in (income)
loss........................ 2 9 27 (2) (5)
----- ------ ------- ----- -----
Income (loss) before
uncombined entity........... (123) (627) (1,665) 117 261
Equity in income of management
company (iii)............... -- 105 65 23 22
----- ------ ------- ----- -----
Net income (loss)............. (123) (522) (1,600) 140 283
Income allocated to Preferred
Shares...................... -- -- -- -- --
Income (loss) allocated to
Common Shares............... $(123) $ (522) $(1,600) $140 $283
MARCH 1997 JULY 1997 BERWYN PARK GREEN HILLS 500/501 OFFICE TOTAL OTHER 1997
OFFERING OFFERING PROPERTIES PROPERTIES (IV) CENTER DRIVE EVENTS
---------- --------- ----------- --------------- -------------- ----------------
Revenue:
Base rents............. $-- $ -- $3,815 $7,700 $1,754 $37,644
Tenant
reimbursements....... -- -- 720 -- 1,358 6,714
Other.................. -- -- 108 -- 43 547
----- --------- ----------- ------ ------ -------
Total revenue...... -- -- 4,643 7,700 3,155 44,905
----- --------- ----------- ------ ------ -------
Operating Expenses:
Interest (i)........... (525) (12,058) -- 1,200 1,125 1,072
Depreciation and
amortization (ii).... -- -- 1,205 1,294 547 9,165
Property expenses...... -- -- 1,991 3,419 1,561 18,776
General and
administrative........ -- -- -- -- -- --
----- --------- ----------- ------ ------ -------
Total operating
expenses......... (525) (12,058) 3,196 5,913 3,233 29,013
----- --------- ----------- ------ ------ -------
Income (loss) before
minority interest...... 525 12,058 1,447 1,787 (78) 15,892
Minority interest in
(income) loss.......... 348 (137) (27) (28) -- 150
----- --------- ----------- ------ ------ -------
Income (loss) before
uncombined entity...... 873 11,921 1,420 1,759 (78) 16,042
Equity in income of
management company
(iii).................. -- -- 166 (115) 76 342
----- --------- ----------- ------ ------ -------
Net income (loss)........ 873 11,921 1,586 1,644 (2) 16,384
Income allocated to
Preferred Shares....... -- -- -- -- -- --
----- --------- ----------- ------ ------ -------
Income (loss) allocated
to Common Shares....... $ 873 $ 11,921 $1,586 $1,644 $ (2) $16,384
----- --------- ----------- ------ ------ -------
----- --------- ----------- ------ ------ -------
F-9
(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 adjustments for
the March 1997 Offering and the July 1997 Offering represent interest
savings related to the payoff of $7 million and $160.8 million,
respectively, 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.
(iv) Pro forma property expenses exclude $666,000 from historical amounts.
Such amount represents expected salary savings.
(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, 1974 Sproul Road, the Berwyn Park
Properties, the Green Hills Properties and 500/501 Office Center Drive for the
six months ended June 30, 1997 and other pro forma adjustments to reflect the
March 1997 Offering and the July 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.
F-10
COLUMBIA MAIN STREET GREENTREE
ACQUISITION ACQUISITION 1336 ENTERPRISE EXECUTIVE
PROPERTIES PROPERTIES DRIVE KINGS 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
(iii)...................................... -- -- -- -- --
----- ----- --- ----- -----
Net income (loss)............................ 80 112 50 59 (8)
Income allocated to Preferred Shares......... -- -- -- -- --
----- ----- --- ----- -----
Income (loss) allocated to Common Shares..... $ 80 $ 112 $ 50 $ 59 $(8)
----- ----- --- ----- -----
----- ----- --- ----- -----
748 & 855
SPRINGDALE
FIVE EVES DRIVE TA PROPERTIES EMMES PROPERTIES DRIVE 1974 SPROUL ROAD
----------------- ------------- ----------------- ------------- -------------------
Revenue:
Base rents.................... $ 103 $ 2,053 $ 2,570 $ 414 $ 354
Tenant reimbursements......... 12 299 1,130 -- 54
Other......................... -- 6 2 -- --
----- ------ ------ ----- -----
Total revenue.............. 115 2,358 3,702 414 408
----- ------ ------ ----- -----
Operating Expenses:
Interest (i).................. 75 1,241 2,049 171 --
Depreciation and amortization
(ii)......................... 32 530 875 73 61
Property expenses............. 45 698 1,332 99 225
General and administrative.... -- -- -- -- --
----- ------ ------ ----- -----
Total operating expenses... 152 2,469 4,256 343 286
----- ------ ------ ----- -----
Income (loss) before minority
interest...................... (37) (111) (554) 71 122
Minority interest in (income)
loss.......................... 1 1 9 (1) (2)
----- ------ ------ ----- -----
Income (loss) before uncombined
entity........................ (36) (110) (545) 70 120
Equity in income of management
company (iii)................. -- 41 27 10 10
----- ------ ------ ----- -----
Net income (loss)............... (36) (69) (518) 80 130
Income allocated to Preferred
Shares........................ -- -- -- -- --
----- ------ ------ ----- -----
Income (loss) allocated to
Common Shares................. $ (36) $ (69) $ (518) $ 80 $ 130
----- ------ ------ ----- -----
----- ------ ------ ----- -----
GREEN HILLS TOTAL OTHER
MARCH 1997 JULY 1997 BERWYN PARK PROPERTIES 500/501 OFFICE 1997
OFFERING OFFERING PROPERTIES (IV) CENTER DRIVE EVENTS
------------- ----------- ------------- ------------- --------------- ---------------
Revenue:
Base rents......................... $ -- $ -- $ 2,128 $ 3,936 $ 882 $ 14,105
Tenant reimbursements.............. -- -- 321 -- 733 2,690
Other.............................. -- -- 31 -- 38 102
----- ----------- ------ ------ ----- -------
Total revenue...................... -- -- 2,480 3,936 1,653 16,897
----- ----------- ------ ------ ----- -------
Operating Expenses:
Interest (i)....................... (91) (5,979) -- 595 558 (1,022)
Depreciation and amortization
(ii)............................. -- -- 598 642 271 3,413
Property expenses.................. -- -- 916 1,775 774 6,707
General and administrative......... -- -- -- -- -- --
----- ----------- ------ ------ ----- -------
Total operating expenses........... (91) (5,979) 1,514 3,012 1,603 9,098
----- ----------- ------ ------ ----- -------
Income (loss) before minority
interest......................... 91 5,979 966 924 50 7,799
Minority interest in (income)
loss............................. 36 (27) (17) (14) (1) (20)
----- ----------- ------ ------ ----- -------
Income (loss) before uncombined
entity........................... 127 5,952 949 910 49 7,779
Equity in income of management
company (iii).................... -- -- 82 (57) 38 151
----- ----------- ------ ------ ----- -------
Net income (loss).................. 127 5,952 1,031 853 87 7,930
Income allocated to Preferred
Shares........................... -- -- -- -- -- --
----- ----------- ------ ------ ----- -------
Income (loss) allocated to Common
Shares........................... $ 127 $ 5,952 $ 1,031 $ 853 $ 87 $ 7,930
----- ----------- ------ ------ ----- -------
----- ----------- ------ ------ ----- -------
F-11
(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 adjustments for
the March 1997 Offering and the July 1997 Offering represent interest
savings related to the payoff of $7 million and $160.8 million,
respectively, 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.
(iv) Pro forma property expenses exclude $333,000 from historical amounts. Such
amount represents expected salary savings.
(E) Reflects the pro forma statements of operations of the Metropolitan
Industrial Center 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:
METROPOLITAN INDUSTRIAL CENTER
---------------------------------
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED
1996 JUNE 30, 1997
------------ -------------------
Revenue:Base rents.................................................. $ 1,811 $ 925
Tenant reimbursements............................................. 406 220
Other............................................................. 9 5
------------ -----
Total revenue.................................................. 2,226 1,150
Operating Expenses:
Interest (i)...................................................... 1,238 614
Depreciation and amortization (ii)................................ 528 262
Property expenses................................................. 678 313
General and administrative........................................ -- --
------------ -----
Total operating expenses....................................... 2,444 1,189
Income (loss) before minority interest.............................. (218) (39)
Minority interest in (income) loss.................................. 3 --
Income (loss) before uncombined entity.............................. (215) (39)
Equity in income of management company (iii)........................ 53 26
------------ -----
Net income (loss)................................................... (162) (13)
Income allocated to Preferred Shares................................ -- --
------------ -----
Income (loss) allocated to Common Shares............................ $ (162) $ (13)
------------ -----
------------ -----
(i) Pro forma interest expense is presented assuming an effective rate of 7.5%
on $16.5 million of borrowings under the Company's revolving credit
facility.
(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.
(F) Reflects the pro forma statements of operations of Atrium 1 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:
F-12
ATRIUM 1
----------------------------------
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED
1996 JUNE 30, 1997
------------- -------------------
Revenue:
Base rents................................................ $ 1,226 $ 638
Tenant reimbursements..................................... 33 22
Other..................................................... 26 17
------ -----
Total revenue.......................................... 1,285 677
Operating Expenses:
Interest (i).............................................. 772 383
Depreciation and amortization (ii)........................ 329 163
Property expenses......................................... 755 368
General and administrative................................ -- --
------ -----
Total operating expenses............................... 1,856 914
Income (loss) before minority interest...................... (571) (237)
Minority interest in (income) loss.......................... 9 4
Income (loss) before uncombined entity...................... (562) (233)
Equity in income of management company (iii)................ 31 15
------ -----
Net income (loss)........................................... (531) (218)
Income allocated to Preferred Shares........................ -- --
------ -----
Income (loss) allocated to Common Shares.................... $ (531) $ (218)
------ -----
------ -----
(i) Pro forma interest expense is presented assuming an effective rate of 7.5%
on $10.3 million of borrowings under the Company's revolving credit
facility.
(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.
F-13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Brandywine Realty Trust:
We have audited the combined statement of revenue and certain expenses of
Metropolitan Industrial Center, 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 Metropolitan Industrial Center's 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 Metropolitan
Industrial Center for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
October 15, 1997
F-14
METROPOLITAN INDUSTRIAL CENTER
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)............................................................... $1,811,000 $ 925,000
Tenant reimbursements............................................................. 406,000 220,000
Other............................................................................. 9,000 5,000
------------ -------------
Total revenue.................................................................. 2,226,000 1,150,000
------------ -------------
CERTAIN EXPENSES:
Maintenance and other operating expenses.......................................... 247,000 107,000
Utilities......................................................................... 43,000 25,000
Real estate taxes................................................................. 388,000 181,000
------------ -------------
------------ -------------
Total certain expenses......................................................... 678,000 313,000
------------ -------------
REVENUE IN EXCESS OF CERTAIN EXPENSES............................................... $1,548,000 $ 837,000
------------ -------------
------------ -------------
The accompanying notes are an integral part of these financial statements.
F-15
METROPOLITAN INDUSTRIAL CENTER
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BASIS OF PRESENTATION:
On September 30, 1997, Brandywine Operating Partnership, L.P. (the "Operating
Partnership"), a limited partnership of which Brandywine Realty Trust (the
"Company") is the sole general partner, acquired Metropolitan Industrial
Center, a portfolio of seven office buildings located in Bensalem,
Pennsylvania. Metropolitan Industrial Center has an aggregate net rentable
area of approximately 447,000 square feet which was 85% leased as of December
31, 1996. The net purchase price for Metropolitan Industrial Center was $16.3
million.
The combined statements of revenue and certain expenses reflect the
operations of Metropolitan Industrial Center. These combined statements of
revenue and certain expenses are to be included in the Company's Current
Report on Form 8-K, pursuant to the rules and regulations of the Securities
and Exchange Commission.
The accounting records of Metropolitan Industrial Center are maintained on a
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 Metropolitan
Industrial Center.
The combined 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 of Metropolitan Industrial
Center for the six months ended June 30, 1997 have been included. The
combined revenue and certain expenses for such interim period is 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 decreases resulting from the straight-line adjustments for the
year ended December 31, 1996 and the six months ended June 30, 1997 were
$61,000 and $24,000 (unaudited), respectively.
Individual tenant minimum rental payments greater than 10% of the total base
rents in 1996 were as follows:
Northtec, Inc.............................................. $ 594,000
General Service Administration............................. 209,000
Picker International, Inc.................................. 208,000
F-16
The Metropolitan Industrial Center is leased to tenants under operating
leases with expiration dates extending to the year 2001. Future minimum
rentals under noncancelable operating leases, excluding tenant reimbursements
of operating expenses as of December 31, 1996, are as follows:
1997 $1,831,000
1998 1,487,000
1999 1,015,000
2000 418,000
2001 67,000
Certain leases also include provisions requiring tenants to reimburse
Metropolitan Industrial Center for management costs and other operating
expenses up to stipulated amounts.
F-17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Brandywine Realty Trust:
We have audited the statement of revenue and certain expenses of Atrium I,
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 Atrium I's 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 Atrium I for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
October 27, 1997
F-18
ATRIUM I
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).................................................... $1,225,519 $ 638,254
Tenant reimbursements.................................................. 32,877 22,470
Other.................................................................. 26,845 16,662
------------ -------------
Total revenue....................................................... 1,285,241 677,386
------------ -------------
CERTAIN EXPENSES:
Maintenance and other operating expenses............................... 362,900 189,269
Utilities.............................................................. 255,163 109,887
Real estate taxes...................................................... 136,996 68,498
------------ -------------
Total certain expenses.............................................. 755,059 367,654
------------ -------------
REVENUE IN EXCESS OF CERTAIN EXPENSES.................................... $ 530,182 $ 309,732
------------ -------------
------------ -------------
The accompanying notes are an integral part of these financial statements.
F-19
ATRIUM I
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
BASIS OF PRESENTATION:
On October 9, 1997, Brandywine Operating Partnership, L.P. (the "Operating
Partnership"), a limited partnership of which Brandywine Realty Trust (the
"Company") is the sole general partner, acquired Atrium I, a five story
office complex located in Mt. Laurel, New Jersey. Atrium I has an aggregate
net rentable area of approximately 98,000 square feet which was 84% leased as
of December 31, 1996. The net purchase price for Atrium I was $10,250,000.
The statements of revenue and certain expenses reflect the operations of
Atrium I. These statements of revenue and certain expenses are to be included
in the Company's Current Report on Form 8-K, pursuant to the rules and
regulations of the Securities and Exchange Commission.
The accounting records of Atrium I are maintained on a 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 Atrium I.
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 of Atrium I for the six months ended
June 30, 1997 have been included. The revenue and certain expenses for such
interim period is 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 increases/(decreases) resulting from the straight-line
adjustments for the year ended December 31, 1996 and the six months ended
June 30, 1997 were ($39,000) and $85,000 (unaudited), respectively.
Individual tenant minimum rental payments greater than 10% of the total base
rents in 1996 were as follows:
Navistar Credit.................................. $ 134,887
Navistar International........................... $ 134,299
Janney Montgomery Scott.......................... $ 170,721
IBM Corporation.................................. $ 326,768
F-20
Atrium I is leased to tenants under operating leases with expiration dates
extending to the year 2002. Future minimum rentals under noncancelable
operating leases, excluding tenant reimbursements of operating expenses as of
December 31, 1996, are as follows:
1997 $1,153,150
1998 $1,355,355
1999 $1,367,939
2000 $ 952,519
2001 $ 681,420
Thereafter $ 467,920
Certain leases also include provisions requiring tenants to reimburse Atrium
I for management costs and other operating expenses up to stipulated amounts.
F-21