UNITED STATES

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): February 4, 2016

 

Brandywine Realty Trust

Brandywine Operating Partnership, L.P.

(Exact name of registrant as specified in charter)

 

 

555 East Lancaster Avenue, Suite 100

Radnor, PA 19087

(Address of principal executive offices)

(610) 325-5600

(Registrant's telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

 

---

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

Brandywine Realty Trust (the "Parent Company") is the sole general partner of Brandywine Operating Partnership, L.P. (the "Operating Partnership") and owns its assets and conducts its operations through the Operating Partnership and subsidiaries of the Operating Partnership.  The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company.”

30^th Street Main Post Office Sale

On February 5, 2016, the Company completed the disposition of its equity interests in the office property located at 2970 Market Street in Philadelphia, Pennsylvania commonly known as 30^th Street Main Post Office (“Cira Square”), for a gross sales price of $354.0 million.  Cira Square, which contains 862,692 net rentable square feet of office space and is fully leased to a single tenant, was encumbered by mortgage indebtedness at December 31, 2015. The Company recorded a gain on disposition of $113.4 million and intends to use the net proceeds, totaling $350.3 million, to reduce debt, fund current development commitments and for general corporate purposes.

On January 14, 2016, the Company funded $221.4 million, consisting of $176.8 million of principal repayment, $44.5 million in prepayment charges and $0.1 million of accrued interest, in repayment of the mortgage indebtedness of Cira Square, ahead of its scheduled maturity date of September 10, 2030. The Company recognized a loss on extinguishment of debt in the amount of $55.3 million which is comprised of a cash prepayment penalty of $44.5 million and a non-cash charge for deferred financing costs of $10.8 million. The repayment was financed with funds available under the Company’s unsecured revolving credit facility.

The transaction agreements provide for the purchaser to engage our management company subsidiary to provide customary property management services for the property with an annual management fee (exclusive of expense reimbursement) not to exceed 1.5% of annual gross revenues of the property. Our agreement is for a ten-year term, subject to early termination by the purchaser in the event that we fail to fulfill our obligations at any time during the term of the agreement or upon sale by the purchaser of the property. If the purchaser terminates the agreement within seven years of the management agreement commencement date the Company shall be entitled to a termination fee in an amount equal to the management fee that would have been paid to us for the remainder of the seven-year term had such termination not occurred.

Och Ziff Sale

On February 4, 2016, the Company received $353.4 million in cash proceeds from a series of related transactions with affiliates of Och Ziff Capital Management Group LLC (“Och Ziff”) that resulted in the disposition of 58 properties that contain an aggregate of 3,924,783 square feet.  The properties are located in the Pennsylvania Suburbs, New Jersey/Delaware, Metropolitan Washington, D.C. and Richmond, Virginia segments. The transactions involved: (i) the sale to MAP Fee Owner LLC, an affiliate of Och-Ziff (the “O-Z Land Purchaser”), 100% of the Company’s fee interests in the land parcels (the “Land Parcels”) underlying the office properties, together with rights to be the lessor under long-term ground leases (the “Ground Leases”) covering the Land Parcels; (ii) the Company’s formation of a joint venture (the “Venture”) with MAP Ground Lease Owner LLC, an affiliate of Och-Ziff (the “O-Z Venture Partner”), and the Company’s sale to the Venture of the office buildings and related improvements (the “Buildings”) situated on the Land Parcels; and (iii) the retention of a non-controlling equity interest in the Venture. The Company

The transaction agreements provide for the Venture to engage a subsidiary of the Company to provide customary property management services in an amount equal to 2.5% of gross rental receipts. The initial term is through December 31, 2016 and is renewed automatically each year unless terminated.  The Company may be terminated without cause, subject to a ninety day notification.

The Company intends to use the net cash proceeds that it received in the transaction for general corporate purposes, including to reduce its outstanding debt and fund current development commitments.

2

---

 

 

 

 

Item 9.01 Financial Statements and Exhibits.

(a) Pro Forma Financial Information

The unaudited pro forma consolidated balance sheets of each of Brandywine Realty Trust and Brandywine Operating Partnership, L.P. as of September 30, 2015 and unaudited pro forma consolidated statements of operations of each of Brandywine Realty Trust and Brandywine Operating Partnership, L.P. for the nine months ended September 30, 2015 and for the year ended December 31, 2014, including notes thereto, are filed as Exhibit 99.1 hereto and incorporated herein by reference.

(b) Exhibit 99.1 Description

Exhibit 99.1 Unaudited pro forma consolidated balance sheets of each of Brandywine Realty Trust and Brandywine Operating Partnership, L.P. as of September 30, 2015 and the unaudited pro forma consolidated statements of operations of each of Brandywine Realty Trust and Brandywine Operating Partnership L.P., for the nine months ended September 30, 2015 and for the year ended December 31, 2015, including notes thereto.

(c) Exhibit 99.2 Properties List

Exhibit 99.2 Properties List of the individual properties included in the Och Ziff transaction and subject to this Form 8-K.

3

---

 

Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, hereunto duly authorized.

 

 

Date:  February 10, 2016

 

4

Exhibit 99.1

Exhibit Index

 

 

 

 

---

BRANDYWINE REALTY TRUST AND BRANDYWINE OPERATING PARTNERSHIP, L.P.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Brandywine Realty Trust (the "Parent Company") is the sole general partner of Brandywine Operating Partnership, L.P. (the "Operating Partnership") and owns its assets and conducts its operations through the Operating Partnership and subsidiaries of the Operating Partnership.  The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company.”

30^th Street Main Post Office Sale

On February 5, 2016, the Company completed the disposition of its equity interests in the office property located at 2970 Market Street in Philadelphia, Pennsylvania commonly known as 30^th Street Main Post Office (“Cira Square”), for a gross sales price of $354.0 million.  Cira Square, which contains 862,692 net rentable square feet of office space and is fully leased to a single tenant, was encumbered by mortgage indebtedness at December 31, 2015. The Company recorded a gain on disposition of $113.4 million and intends to use the net proceeds, totaling $350.3 million, to reduce debt, fund current development commitments and for general corporate purposes.

On January 14, 2016, the Company funded $221.4 million, consisting of $176.8 million of principal repayment, $44.5 million in prepayment charges and $0.1 million of accrued interest, in repayment of the mortgage indebtedness of Cira Square, ahead of its scheduled maturity date of September 10, 2030. The Company recognized a loss on extinguishment of debt in the amount of $55.3 million which is comprised of a cash prepayment penalty of $44.5 million and a non-cash charge for deferred financing costs of $10.8 million. The repayment was financed with funds available under the Company’s unsecured revolving credit facility.

The transaction agreements provide for the purchaser to engage our management company subsidiary to provide customary property management services for the property with an annual management fee (exclusive of expense reimbursement) not to exceed 1.5% of annual gross revenues of the property. Our agreement is for a ten-year term, subject to early termination by the purchaser in the event that we fail to fulfill our obligations at any time during the term of the agreement or upon sale by the purchaser of the property. If the purchaser terminates the agreement within seven years of the management agreement commencement date the Company shall be entitled to a termination fee in an amount equal to the management fee that would have been paid to us for the remainder of the seven-year term had such termination not occurred.

Och Ziff Sale

On February 4, 2016, the Company received $353.4 million in cash proceeds from a series of related transactions with affiliates of Och Ziff Capital Management Group LLC (“Och Ziff”) that resulted in the disposition of 58 properties that contain an aggregate of 3,924,783 square feet.  The properties are located in the Pennsylvania Suburbs, New Jersey/Delaware, Metropolitan Washington, D.C. and Richmond, Virginia segments. The transactions involved: (i) the sale to MAP Fee Owner LLC, an affiliate of Och-Ziff (the “O-Z Land Purchaser”), 100% of the Company’s fee interests in the land parcels (the “Land Parcels”) underlying the office properties, together with rights to be the lessor under long-term ground leases (the “Ground Leases”) covering the Land Parcels; (ii) the Company’s formation of a joint venture (the “Venture”) with MAP Ground Lease Owner LLC, an affiliate of Och-Ziff (the “O-Z Venture Partner”), and the Company’s sale to the Venture of the office buildings and related improvements (the “Buildings”) situated on the Land Parcels; and (iii) the retention of a non-controlling equity interest in the Venture. The Company

The transaction agreements provide for the Venture to engage a subsidiary of the Company to provide customary property management services in an amount equal to 2.5% of gross rental receipts. The initial term is through December 31, 2016 and is renewed automatically each year unless terminated.  The Company may be terminated without cause, subject to a ninety day notification.

The Company intends to use the net cash proceeds that it received in the transaction for general corporate purposes, including to reduce its outstanding debt and fund current development commitments.

The following unaudited pro forma consolidated financial statements of each of the Parent Company and the Operating Partnership have been prepared to reflect the effect of the transaction as described in Item 2.01 of the Current Report on Form 8-K with which this Exhibit 99.1 is filed. The following unaudited pro forma consolidated financial statements of the Company are presented to comply with Article 11 of Regulation S-X and follow guidelines of the Securities and Exchange Commission (“SEC”). The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2015 and the for the year ended December 31, 2014 are based on the historical consolidated statements of operations of each of the Parent Company and the Operating Partnership, and give effect to the sale as if it had occurred on January 1, 2014. The unaudited pro forma consolidated balance sheet as of September 30, 2015 is based on the balance sheet on that date of each of the Parent Company and Operating Partnership, and gives effect to the sale as if it occurred on September 30, 2015.

1

---

The unaudited pro forma consolidated financial statements presented below are based on assumptions and adjustments set forth in the notes thereto. The unaudited pro forma adjustments made in the compilation of the unaudited pro forma consolidated financial statements were directly attributable to the sale, are factually supportable, are based upon available information and assumptions that the Company considers reasonable, and have been made solely for purposes of developing such unaudited pro forma financial information for illustrative purposes in compliance with the disclosure requirements of the SEC. The unaudited pro forma consolidated financial information is presented for informational purposes only and should not be considered indicative of actual results that would have been achieved had the sale actually been consummated on the dates indicated and does not purport to be indicative of the financial condition as of any future date or results of operation for any future period.

The unaudited pro forma consolidated financial information, and the accompanying notes, should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 19, 2015 and the Quarterly Report on Form 10-Q for the period ended September 30, 2015 filed on October 27, 2015.

 

 

2

---

Brandywine Realty Trust

Unaudited Pro Forma Consolidated Balance Sheet

As of September 30, 2015

(in thousands, except per share data)

 

 

The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

 

 

3

---

Brandywine Realty Trust

Unaudited Pro Forma Consolidated Income Statement

For the nine months ended September 30, 2015

(in thousands, except per share data)

 

 

The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

 

 

4

---

Brandywine Realty Trust

Unaudited Pro Forma Consolidated Income Statement

For the twelve months ended December 31, 2014

(in thousands, except per share data)

 

 

The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

 

 

5

---

Brandywine Operating Partnership, L.P.

Unaudited Pro Forma Consolidated Balance Sheet

As of September 30, 2015

(in thousands, except per share data)

 

 

The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

 

 

6

---

Brandywine Operating Partnership, L.P.

Unaudited Pro Forma Consolidated Income Statement

For the nine months ended September 30, 2015

(in thousands, except per share data)

 

 

The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

 

 

7

---

Brandywine Operating Partnership, L.P.

Unaudited Pro Forma Consolidated Income Statement

For the twelve months ended December 31, 2014

(in thousands, except per share data)

 

The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

8

---

BRANDYWINE REALTY TRUST AND BRANDYWINE OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Pro Forma Adjustments

 

(i) Consists of $14.6 million share of leasehold interests (net of debt) and $11.0 million of escrow and working capital.

(ii) During the fourth quarter the Company recorded a provision for impairment on assets held for sale of $45.4 million.

(D1) Represents net proceeds received by Brandywine upon sale of the Buildings and Land Parcels, other dispositions and the proceeds on the disposition of our equity interests in Cira Square.

(D2) Represents net equity contributions of $14.6 million and $11.0 million of lender holdbacks and working capital contributions.

(D3(a)) There was no gain or loss on the sale of the Buildings and Land Parcels, as the net assets were impaired to fair value.  See adjustment column (C).

(D3(b)) Represents the estimated gain on the disposition of our equity interests in Cira Square recognized by the Company upon completion of the transaction as if the disposition occurred as of September 30, 2015, and was calculated as follows (in thousands):

 

 

 

(iii) Upon completion of the disposition on February 5, 2016 the Company recorded a gain on disposition of $113.4 million and a related loss on early extinguishment of debt related to prepayment penalties of $55.3 million (inclusive of $10.8 million of deferred financing costs).  The prepayment of the mortgage loan may occur prior to the disposition of our equity interests.

9

---

(D3(c)) Represents the estimated gain on sale recognized by the Company upon completion of the sale of the other dispositions as if the sales occurred as of September 30, 2015, and was calculated as follows (in thousands):

 

(iv) The Company recorded a total gain on sale as of December 29, 2015 of $3.9 million.

(G1) Represents management fee income and salary reimbursements pursuant to the Venture formation agreements.

(G2) Represents the Company's share of net income from the Venture, assuming the Venture commenced January 1, 2014.

(I1) Represents management fee income pursuant to the management agreement with the buyer.

(I2) Represents the reversal of the historic tax credit income, assuming the disposition transacted January 1, 2014.

 

10

 

Exhibit 99.2

Och Ziff Sale - Property List

 

1

 

---

 

 

2