Brandywine Realty Trust(US:BDN)2022-10-27 16:00PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, and cash flows, for both Brandywine Realty Trust and its Operating Partnership Brandywine Realty Trust Financial Statements Brandywine Realty Trust reported $3.97 billion in total assets, $125.6 million in Q3 2022 revenue, and $148.2 million in nine-month operating cash flow Brandywine Realty Trust - Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $3,974,187 | $3,846,196 | | Total Real Estate Investments, net | $2,909,307 | $2,955,068 | | Total Liabilities | $2,339,238 | $2,144,977 | | Unsecured Senior Notes, net | $1,580,579 | $1,580,978 | | Total Beneficiaries' Equity | $1,634,949 | $1,701,219 | Brandywine Realty Trust - Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $125,569 | $120,418 | $377,116 | $361,289 | | Operating Income | $37,037 | $19,025 | $90,116 | $69,862 | | Net Income Attributable to Common Shareholders | $13,336 | $876 | $23,820 | $7,390 | | Diluted EPS | $0.08 | $0.01 | $0.14 | $0.04 | Brandywine Realty Trust - Consolidated Cash Flow Highlights (9 Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $148,162 | $140,719 | | Net Cash used in Investing Activities | ($255,400) | ($44,921) | | Net Cash from (used in) Financing Activities | $111,039 | ($99,578) | | Increase/(Decrease) in Cash | $3,801 | ($3,780) | Brandywine Operating Partnership, L.P. Financial Statements The Operating Partnership's financial statements mirror the Parent Company's, showing $3.97 billion in total assets and $125.6 million in Q3 2022 revenue, with equity reflecting partners' capital Brandywine Operating Partnership - Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $3,974,187 | $3,846,196 | | Total Liabilities | $2,339,238 | $2,144,977 | | Total Partners' Equity | $1,631,416 | $1,690,079 | Brandywine Operating Partnership - Consolidated Statement of Operations Highlights (in thousands, except per unit data) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $125,569 | $120,418 | $377,116 | $361,289 | | Operating Income | $37,037 | $19,025 | $90,116 | $69,862 | | Net Income Attributable to Common Partnership Unitholders | $13,374 | $885 | $23,884 | $7,436 | | Diluted Income per Common Partnership Unit | $0.08 | $0.01 | $0.14 | $0.04 | Notes to Unaudited Consolidated Financial Statements These notes detail the company's organization, property portfolio, real estate investments, unconsolidated ventures, debt obligations, and segment performance - The company is a self-administered REIT focused on office and mixed-use properties, primarily operating through the Brandywine Operating Partnership, in which the Parent Company holds a 99.7% interest54 Property Portfolio as of September 30, 2022 | Property Type | Number of Properties | Rentable Square Feet | | :--- | :--- | :--- | | Office properties | 67 | 11,848,707 | | Mixed-use properties | 5 | 942,334 | | Core Properties | 72 | 12,791,041 | | Development/Redevelopment/Other | 6 | 873,168 | | Total Properties | 78 | 13,664,209 | - During the nine months ended September 30, 2022, the company acquired land and a leasehold interest for a total of $31.0 million and disposed of properties, generating gains over $16.6 million6465 - The company holds interests in thirteen unconsolidated real estate ventures with a net investment balance of $546.9 million, owning approximately 9.1 million sq. ft. of office space68 - Total consolidated debt outstanding was approximately $2.07 billion as of September 30, 2022, with 84.4% being fixed-rate, following a new credit agreement in June 20228788193 Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial performance, covering revenue growth, operating results, liquidity, capital resources, and key risks, reporting a 6.4% increase in Q3 2022 Total Portfolio NOI Overview and Key Risks This section outlines the company's operating segments and key risks, including tenant rollover, credit risk, and development risks associated with its active project pipeline Selected Operating and Leasing Statistics (Core Properties) | Metric | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | | Occupancy Percentage (end of period) | 90.8% | 90.3% | | Leased Percentage (end of period) | 90.7% | 90.2% | | Rental Rate Mark-to-Market (Cash) | 15.0% | 13.1% | | Rental Rate Mark-to-Market (GAAP) | 18.5% | 17.6% | | Tenant Retention | 69.0% | 55.3% | - Key risks include tenant rollover, tenant credit risk amid economic uncertainty, and development risks such as cost overruns and leasing challenges130131134 - As of September 30, 2022, three wholly-owned development/redevelopment projects are under construction with total estimated costs of $280.8 million, of which $146.8 million has been funded135 Results of Operations Q3 2022 total revenue increased 4.2% to $125.6 million, with Net Operating Income (NOI) growing 6.4% to $78.2 million, driven by rent increases and higher occupancy Q3 2022 vs Q3 2021 Performance (Total Portfolio, in millions) | Metric | Q3 2022 | Q3 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $125.6 | $120.5 | $5.1 | 4.2% | | Net Operating Income (NOI) | $78.2 | $73.5 | $4.7 | 6.4% | | Operating Income | $37.1 | $19.0 | $18.1 | 95.3% | | Net Income | $13.5 | $1.0 | $12.5 | 1250.0% | Nine Months 2022 vs 2021 Performance (Total Portfolio, in millions) | Metric | 9 Months 2022 | 9 Months 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $377.1 | $361.3 | $15.8 | 4.4% | | Net Operating Income (NOI) | $232.0 | $220.1 | $11.9 | 5.4% | | Operating Income | $90.1 | $69.9 | $20.2 | 28.9% | | Net Income | $24.2 | $7.8 | $16.4 | 210.3% | - The significant increase in Q3 2022 net income was primarily due to an $8.7 million gain on real estate disposition and a $3.0 million gain on sale of undepreciated real estate151152 Liquidity and Capital Resources The company maintains liquidity through operations, its credit facility, and asset sales, with $31.2 million cash and $349.7 million available on its credit facility as of September 30, 2022 - Primary liquidity sources include cash from operations, JV distributions, the unsecured credit facility, and proceeds from asset sales or joint venture contributions174 Capitalization Summary as of Sep 30, 2022 (in thousands) | Metric | Amount | | :--- | :--- | | Cash and Cash Equivalents | $31,198 | | Availability under Credit Facility | $349,700 | | Total Liquidity | $380,898 | | Total Debt Principal | $2,074,610 | | Fixed Rate Debt % | 84.4% | - The company was in compliance with all debt covenants as of September 30, 2022, and plans to refinance $350 million in notes due February 2023194195 Funds from Operations (FFO) This section reconciles net income to Funds from Operations (FFO), a key REIT performance metric, reporting $61.8 million in FFO for Q3 2022 FFO Reconciliation Highlights (in thousands) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Common Unitholders | $13,374 | $885 | $23,884 | $7,436 | | Real Estate Depreciation & Amortization Adjustments | $57,139 | $59,700 | $167,711 | $169,541 | | FFO Available to Common Share and Unit Holders | $61,751 | $61,061 | $182,543 | $177,190 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate risk, with 84.4% of debt fixed-rate, and uses derivatives to manage variable-rate exposure - The primary market risk exposure is interest rate risk, impacting the cost of funds and valuation of financial instruments203 - As of September 30, 2022, consolidated debt was $2.07 billion, with approximately $574.6 million variable-rate, managed through interest rate swaps193204205 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting - The principal executive and financial officers confirmed effective disclosure controls and procedures for both entities as of September 30, 2022206207 - No material changes to internal control over financial reporting occurred during the quarter206207 PART II — OTHER INFORMATION Legal Proceedings The company reports no material legal proceedings for the period - There are no material legal proceedings to report for the period209 Risk Factors No material changes to previously disclosed risk factors were reported as of September 30, 2022 - No material changes to the previously disclosed risk factors were reported as of September 30, 2022210 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or common share repurchases during the quarter, with $82.9 million remaining for future repurchases - No common shares were repurchased during the third quarter of 2022211 - As of September 30, 2022, $82.9 million remained authorized for future repurchases under the company's share repurchase program211 Other Part II Items This section confirms no defaults on senior securities, notes mine safety disclosures are inapplicable, reports no other material information, and lists filed exhibits - The company reported no defaults upon senior securities211 - The report includes required certifications from the CEO and CFO as exhibits213