CEO Annual Letter

2024 Annual Report | Shareholder Letter

Last year marked our 30th anniversary as a publicly traded company. Over the years, we have consistently executed on our mission to create spaces that inspire and deliver long-term value. Our core values of quality, innovation, integrity, and community have guided all of our development undertakings and capital allocation decisions.

There is no doubt that commercial real estate – particularly the office sector – has had several challenging years. The duration of the pandemic recovery, higher interest rates, constrained capital markets have combined to create significant pressure on earnings growth and intermediate-term valuations.

We are, however, seeing sunshine behind the passing storm clouds: national vacancy rates have stabilized, more companies are returning to the office, the debt capital markets are functioning much better than a year ago, and leasing activity levels have significantly improved.

We see these trends, along with a clear customer preference for higher quality workspaces and minimal forward office supply, providing a solid foundation for sustainable growth in the years ahead.

Capitalizing on Flight to Quality

Brandywine is well positioned to capitalize on the flight to quality trend. As employers seek engaging work environments, we are their partner of choice. Notably, 62% of our new leases signed in 2024 were tenants moving up the quality curve.

We believe the Brandywine Experience, our best-in-class standard for operational excellence, attracts new business and drives customer retention. Our teams provide the best experience in the market, leveraging decades of expertise in property management, tenant engagement, design and operational innovation, and an unrelenting commitment to community and sustainability. In 2024, we captured 49% of all office space transactions in Philadelphia, well in excess of our market share. Our tenants are loyal and share our quality standard. As of 12/31/2024, our wholly-owned portfolio leasing and occupancy levels neared 90% and 88% respectively, with less than 5% annual lease rollover through 2026—one of the lowest in the office sector. Overall, we reported strong leasing activity in 2024, aggregating 1.3 million square feet during that year. As further evidence of the emerging market recovery, our current leasing pipeline exceeds pre-pandemic levels by over 65%.

Product Diversification as a Catalyst for Growth

Our mixed-use, master-planned communities, with all approvals in place, provide built-in revenue diversification. We are committed to creating innovative community hubs through the thoughtful integration of commercial, residential, retail, and public spaces.

Demand for state-of-the-art lab and research spaces in Philadelphia helped shape our plans for Schuylkill Yards, and we recently delivered our first life sciences building, 3151 Market. We signed a 16-year, 117,000 square foot lease with a major financial services firm to relocate and expand their headquarters at 3025 JFK Blvd, our first mixed-use tower in Schuylkill Yards. Our luxury residential component, Avira, continues to perform well and is more than 85% leased.

Austin has been slower to recover from the pandemic and is transitionally impacted by excess office and multi-family inventory, resulting in weakened market conditions. However, long-term demand drivers and our conviction on Austin’s ultimate recovery remain intact. Austin remains one of the country’s fastest growing markets that continues to attract employers and residents alike. Our Uptown ATX master plan will be Austin’s first transit-oriented development. Austin remains a magnet for innovation, and Uptown ATX is designed to meet the needs of a diverse tenant base. Our first phase One Uptown, a 348,000 SF office building, and Solaris House a 341-unit apartment project, were recently completed and in the lease-up mode. At Uptown ATX, the pipeline of the office component now stands at over 600,000 square feet, nearly double the amount of available space.

Looking ahead, our anticipated Company-wide development mix is primarily life science, residential, and office, with support from retail, entertainment, and hospitality.

Financial Stability

Our balance sheet remains strong. In 2024, we executed strategic capital recycling initiatives, completing over $298 million of dispositions that far exceeded our initial $90 million business plan target. This activity put us in an excellent year-end liquidity position with no borrowings on our $600 million unsecured line of credit, $90 million cash-on-hand, one 2025 maturity totaling $70 million and no bonds maturing until 2027. By divesting non-core assets and maintaining a low annual lease rollover rate, we plan to mitigate risk while optimizing cash flow, positioning Brandywine for sustainable long-term growth.

There is no question that the last several years have presented their share of challenges. We remain optimistic about the pace of recovery and are well-positioned to take advantage of opportunities. However, we are also disciplined pragmatists who recognize the risks presented by today’s environment. We will continue to operate with a clear recognition of current market realities and act accordingly.

None of our success would be possible without the trust and support of our stakeholders. To our shareholders, our Trustees, employees, partners, and lenders, thank you for believing in our mission and helping us turn opportunities into achievements.

Best personal regards,

Gerard H. Sweeney
President and Chief Executive Officer