Brandywine Realty Trust(BDN) - 2025 Q3 - Quarterly Report

Occupancy and Tenant Retention - As of September 30, 2025, occupancy at Core Properties was 88.8%, an increase from 87.2% at the same time in 2024[136] - The tenant retention rate improved to 67.8% for the three months ended September 30, 2025, compared to 42.0% in the same period of 2024[137] - The average occupancy percentage for Core Properties was 87.5% for the nine months ended September 30, 2025, compared to 87.8% in 2024[137] - The occupancy rate for same-store properties improved to 88.7% in Q3 2025, up from 86.4% in Q3 2024[157] - The Philadelphia CBD segment achieved an occupancy rate of 94.0% for the nine months ended September 30, 2025, up from 93.6% in 2024[142] Leasing and Rental Rates - New leases and expansions for the nine months ended September 30, 2025, totaled 382,163 square feet, up from 327,947 square feet in 2024, reflecting a growth of approximately 16.4%[137] - Average annual rent per square foot increased to $39.62 for the nine months ended September 30, 2025, compared to $40.08 in 2024[137] - The percentage change in rental rates for new and expansion leases was 9.0% for the nine months ended September 30, 2025, down from 19.8% in 2024[137] - Rents increased by $3.5 million or 3.4% to $105.9 million in Q3 2025, while total revenue from recently completed/acquired properties was $4.1 million[157] - Revenue from rents for the nine months ended September 30, 2025, was $314.4 million, an increase of $7.2 million or 2.3% compared to $307.2 million in 2024[168] Financial Performance - Total revenue for the three months ended September 30, 2025, was $106.2 million, an increase of $3.6 million or 3.5% compared to $102.6 million in the same period of 2024[157] - Total revenue for the nine months ended September 30, 2025, was $363.5 million, a decrease of $20.1 million or 5.2% from $383.6 million in 2024[168] - Net operating income for the period was $67.4 million, reflecting a $1.0 million increase or 1.5% from $66.4 million in Q3 2024[157] - Net operating income for the nine months ended September 30, 2025, was $225.1 million, a decrease of $18.5 million or 7.6% from $243.6 million in 2024[168] - The company reported a net loss attributable to common shareholders of $142.0 million for the nine months ended September 30, 2025, compared to a net loss of $151.9 million in 2024, reflecting an improvement of $9.9 million or 6.5%[170] Expenses and Impairments - Property operating expenses rose by $1.7 million or 6.5% to $27.9 million in Q3 2025, while real estate taxes increased by $0.9 million or 9.0% to $10.9 million[157] - General and administrative expenses decreased by $4.9 million or 38.6% to $7.8 million due to lower stock compensation expenses recognized in Q3 2025[163] - The company recognized a provision for impairment of $34.1 million on three properties during Q3 2024, impacting overall financial performance[164] - The company experienced a net loss attributable to common unitholders of $26,310,000 for the three months ended September 30, 2025[206] Development Projects - As of September 30, 2025, the company has a development project at 165 King of Prussia Road, Radnor, PA, with an estimated cost of $59,500,000 and a room count of 120, expected to be completed in Q2 2026[149] - The unconsolidated real estate venture at 3025 JFK Boulevard in Philadelphia, PA, has incurred costs of $325,000,000, with $304,855,000 funded and a remaining balance of $20,145,000 to be funded[150] - The 3151 Market Street project in Philadelphia, PA, has an estimated cost of $316,909,000, with $218,232,000 funded, and is expected to be completed in Q4 2024[150] - The One Uptown office project in Austin, TX, has incurred costs of $206,400,000, with $155,740,000 funded, and is projected to be completed in Q1 2024[150] - The company has classified one office building in Wilmington, Delaware, as redevelopment, but has not yet incurred material development costs[149] Debt and Financing - As of September 30, 2025, the company's total unsecured debt obligations amounted to $2,028.6 million, with secured debt obligations at $245.0 million[189] - The company completed an underwritten offering of $300 million aggregate principal amount of 6.125% Guaranteed Notes due 2031, with net proceeds totaling approximately $296.3 million[185] - Interest expense increased due to the issuance of $400 million in 2029 Notes in April 2024 and an additional $150 million in June 2025, with the interest rate on the 2028 Notes rising to 8.30% following credit rating downgrades[177] - The company expects to fund its capital requirements through cash flows from operations, financing activities, and real estate sales, while maintaining quality standards to promote high occupancy rates[182] - The company amended its Unsecured Credit Facility to allow for dividend payments not exceeding 100% of FFO for certain periods, ensuring compliance with REIT status[183] Cash Flow and Liquidity - As of September 30, 2025, the company had $75.5 million in cash and cash equivalents and $600 million available under its Unsecured Credit Facility[192] - The company reported a net cash flow of $(19.649) million for the nine months ended September 30, 2025, compared to $(24.841) million for the same period in 2024, reflecting an improvement of $5.192 million[194] - The company experienced a $111.959 million decrease in investing cash flows for the nine months ended September 30, 2025, compared to the same period in 2024[195] Accounting and Financial Metrics - The company uses NOI as a non-GAAP financial measure to evaluate the operating performance of its real estate assets, which excludes certain expenses like interest and depreciation[155] - There have been no significant changes in the company's critical accounting policies since December 31, 2024[153] - Operating margins for the Same Store Property Portfolio decreased to 63.3% for the three months ended September 30, 2025, down from 64.6% for the same period in 2024[202] - Funds from Operations (FFO) for the three months ended September 30, 2025, were $28,368,000, compared to $40,232,000 for the same period in 2024[206] - The debt service coverage ratio was maintained above the required 1.5 to 1.0 as of September 30, 2025, indicating compliance with financial covenants[198] Other Financial Information - Approximately 97% of leases included annual rent escalations, generally ranging from 2.0% to 3.0% per lease year, which helps mitigate inflation impacts[201] - The fair value of unsecured notes was $1,744,300,000 as of September 30, 2025, with a sensitivity of approximately $17,000,000 for a 100-basis point change in pricing[211] - The total outstanding principal balance of variable rate debt was approximately $328,600,000 as of September 30, 2025[212] - Operating expenses recovery rates for the Same Store Property Portfolio were 54.4% for the three months ended September 30, 2025, compared to 51.9% for the same period in 2024[202]