SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 23, 2003
BRANDYWINE REALTY TRUST
(Exact name of registrant as specified in its charter)
| MARYLAND | 1-9106 | 23-2413352 | |||||||||||
| (State or Other Jurisdiction of Incorporation) |
(Commission file number) | (I.R.S. Employer Identification Number) |
401 Plymouth Road, Plymouth Meeting, Pennsylvania 19462
(Address of principal executive offices)
(610) 325-5600
(Registrant’s telephone number, including area code)
Page 1 of 3 pages
Item 7. Financial Statements and Exhibits.
| (c) | Exhibits. |
99.1 Press Release dated October 23, 2003
Item 9. Regulation FD Disclosure.
See Item 12, “Disclosure of Results of Operations and Financial Condition.”
Item 12. Results of Operations and Financial Condition.
Furnished pursuant to Exhibit 99.1 of this Form 8-K is a press release of the Company dated October 23, 2003 reporting third quarter 2003 financial results.
- -2-
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 hereunto duly authorized.
| BRANDYWINE REALTY TRUST | |||
| By: | /s/ Gerard H. Seeney | ||
| Title: President and Chief Executive Officer | |||
| Date: October 24, 2003 | |||
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[GRAPHIC OMITTED] Contact: Press Contact: Investor Contact: - -------------- ----------------- Michael Beckerman Gerard H. Sweeney Beckerman Public Relations Christopher P. Marr 908-781-6420 Brandywine Realty Trust michael@beckermanpr.com 610-325-5600 info@brandywinerealty.com Brandywine Realty Trust Announces Third Quarter 2003 Earnings PLYMOUTH MEETING, PA, October 23, 2003 - Brandywine Realty Trust (BDN-NYSE) announced today that fully diluted earnings per share (EPS) were $0.37 for the third quarter of 2003, an increase of $0.07 per share as compared to $0.30 for the third quarter of 2002. Net income was $17.4 million for the third quarter of 2003, an increase of $3.4 million, as compared to $14.0 million for the third quarter of 2002. The increase in net income and EPS in the third quarter of 2003 as compared to the similar period in 2002 was primarily due to increased other revenue resulting from bankruptcy settlement proceeds, a 3.1% increase in same-store net operating income and reduced interest expense. Fully diluted EPS was $0.96 for the nine-month period ended September 30, 2003, a decrease of $0.17 per share, as compared to $1.13 per share for the nine-month period ended September 30, 2002. Net income was $44.8 million for the nine-month period ended September 30, 2003, a decrease of $5.4 million, as compared to $50.2 million for the nine-month period ended September 30, 2002. The decrease in net income was primarily the result of net gains on disposition of discontinued operations of $2.7 million in 2003 as compared to $8.6 million in 2002. Fully diluted funds from operations (FFO) were $34.4 million or $0.71 per share for the third quarter 2003, a 12.1% increase as compared to $30.7 million or $0.66 per share for the third quarter of 2002. FFO for the nine-month period ended September 30, 2003 was $95.8 million or $2.02 per share as compared to $94.7 million or $2.01 per share for the same period in 2002. FFO represents a non-generally accepted accounting principle (GAAP) financial measure. A table reconciling FFO to net income, the GAAP measure that the Company believes to be most directly comparable, is within the consolidated financial statements included in this release. Brandywine President and Chief Executive Officer Gerard H. Sweeney commented, "We are very pleased with our results for the third quarter and our successful follow on equity offering of $64.1 million which closed on October 20. We continue to execute on our 2003 goals of maximizing our return on invested assets and strengthening our balance sheet. Our credit metrics are significantly improved from the beginning of the year and we have made excellent progress in continuing to selectively prune our portfolio. All of this is being accomplished consistent with our 2003 earnings guidance provided one year ago."
Brandywine Realty Trust Summary Portfolio Performance o FFO payout ratio was 62.3% for the quarter and 65.4% YTD o Quarterly rental rate decreases on new leases were 12.9% on a cash basis and 8.0% on a straight-line basis o Quarterly rental rate decreases on renewals were 7.8% on a cash basis and 4.1% on a straight-line basis o YTD rental rate decreases on new leases were 6.8% on a cash basis and 1.9% on a straight-line basis o YTD rental rate decreases on renewals were 5.5% on a cash basis and 2.2% on a straight-line basis o Quarterly retention rate was 82.4% and YTD retention rate was 81.1% o Portfolio was 90.7% occupied and 91.9% leased as of September 30, 2003 o Leases expired or were terminated for approximately 1,379,000 square feet during the quarter o Leases were renewed for 1,136,000 square feet during the quarter and new leases were signed for 127,000 square feet during the quarter Leases expired or were terminated for approximately 2,900,000 square feet YTD o Leases were renewed for 2,400,000 square feet YTD and new leases were signed for 494,000 square feet YTD Distributions On September 23, 2003, the Board of Trustees declared a regular quarterly dividend distribution of $0.44 per common share that was paid October 15, 2003 to shareholders of record as of October 6, 2003. Equity Offering On October 20, 2003, the Company consummated a public offering of 2,250,000 common shares, plus an over-allotment option of an additional 337,500 common shares (based on closing price of $25.98), with net proceeds to the Company of $64.1 million. Legg Mason Wood Walker Inc. and McDonald Investments Inc. served as the co-underwriters for this transaction. Proceeds from this offering will be used for the planned acquisition of an office property containing 248,000 net rentable square feet and to reduce outstanding indebtedness under the Company's unsecured line of credit. 2003 Financial Outlook Our outlook for the fourth quarter and full year 2003 are based on the following assumptions: o Average occupancy and the same-store net operating income growth for the fourth quarter of 2003 is expected to be consistent with that achieved in the third quarter of 2003. o Full year 2003 average occupancy is expected to decline slightly from the average levels achieved in 2002 and full year 2003 same-store net operating income is expected to decrease from 2002 in the range of 1.5% to 3.0%. o Operating expenses, real estate taxes and general and administrative expenses as a percentage of revenues are expected to be consistent in the fourth quarter with those experienced in the third quarter of 2003 and to be consistent for the full year 2003 (excluding snow removal) with those experienced in 2002. o The Company expects to incur slight dilution in the fourth quarter from its common equity offering on October 20, 2003 of 2,587,500 shares. Based on these key assumptions, we expect fourth quarter 2003 EPS to be $0.48 - $0.49 and FFO to be $0.66 - $0.67 per share and full year 2003 EPS to be $1.43 - $1.45 and FFO to be $2.68 - $2.69 per share. 2004 Financial Outlook As of the date of this release, we expect our full year 2004 EPS to be $1.18 to $1.31 and FFO to be $2.60 to $2.70 per share. The Company's projections are based on several key and variable assumptions and estimates, including the following:
Same-Store Results ------------------ In 2004, the Company expects its same-store portfolio (which represents 92.0% of total square footage owned and 95.2% of projected 2004 net operating income) to achieve the following percentage changes from currently projected 2003 results: % change 2003-2004 ------------------ GAAP rent and reimbursements: 1.5%-2.0% increase Expenses: 2.5%-3.0% increase NOI: 1.0%-1.5% increase Occupancy: 1.0%-1.5% increase in annual average physical occupancy The Company's projections for same-store activity are based upon competitive market conditions and continued downward pressure on market rents. The Company's projections for operating expenses include significant increases in utility expense, particularly electric expense in the New Jersey portfolio, and modest increases in real estate taxes, offset by lower snow removal costs as compared to record snowfall levels in 2003. The Company's financial outlook for 2004 as presented above does not take into account lease termination fees as management is unable to forecast reliably either the timing or amount of such fees. During the first nine months of 2003 the Company recognized $1.3 million of revenue on account of lease termination and similar fees. Acquisitions, Dispositions, Development --------------------------------------- For 2004 the Company anticipates an increasingly favorable acquisition climate in our core markets and priced at levels we find attractive. As such, the Company's 2004 outlook outlined above considers $50 to $75 million of acquisition activity in 2004. The outlook weights this activity towards the mid-point of the year and assumes acquisition yields in the range of 9.0-9.75%. The Company's 2004 outlook assumes that the assets identified for sale in its September 30, 2003 balance sheet are sold in the fourth quarter of 2003 and further assumes limited amounts of disposition activity. In addition to the completion of two of the currently in process redevelopment projects containing 165,587 square feet, the Company's outlook assumes that two additional redevelopment projects begin construction during 2004. Financing Activity ------------------ The Company has taken significant steps in 2003 toward strengthening its balance sheet and reducing its reliance on short-term borrowing. These efforts are reflected in improvements in the Company's leverage level, fixed charge coverage and maturity profile. The Company expects to continue these positive steps in 2004 with a focus on addressing its remaining secured debt maturities by utilizing unsecured debt, and extending the maturity on its line of credit and term loan. The Company expects to finance its operations in 2004 primarily through cash flow from operations and borrowings under its unsecured line of credit. The Company assumes that the base rate on its variable rate debt will rise from its current level of 1.10% throughout 2004. The 2004 guidance assumes that the effective rate in place on the $175 million of variable rate debt which is hedged through June of 2004 remains consistent for the balance of the year.
Forward-Looking Statements Estimates of future earnings per share and FFO per share and certain other statements in this release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or transactions of the Company and its affiliates to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors relate to, among others: the Company's ability to lease vacant space and to renew or relet space under expiring leases at expected levels, competition with other real estate companies for tenants, the potential loss or bankruptcy of major tenants, interest rate levels, the availability of debt and equity financing, competition for real estate acquisitions and risks of acquisitions, dispositions and developments, including the cost of construction delays and cost overruns, unanticipated operating and capital costs, the Company's ability to obtain adequate insurance, including coverage for terrorist acts, dependence upon certain geographic markets, and general and local economic and real estate conditions, including the extent and duration of adverse changes that affect the industries in which the Company's tenants compete. Additional information on factors which could impact the Company and the forward-looking statements contained herein are included in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report for the year ended December 31, 2002. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Non-GAAP Supplemental Financial Measures Funds from Operations (FFO) - --------------------------- FFO is a widely recognized measure of REIT performance. Although FFO is a non-GAAP financial measure, the Company believes that information regarding FFO is helpful to shareholders and potential investors. The Company computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than the Company. NAREIT defines FFO as net income (loss) before minority interest of unitholders (preferred and common) and excluding gains (losses) on sales of depreciable operating property and extraordinary items (computed in accordance with GAAP); plus real estate related depreciation and amortization (excluding amortization of deferred financing costs), and after adjustment for unconsolidated joint ventures. The GAAP measure that the Company believes to be most directly comparable to FFO, net income, includes depreciation and amortization expenses, gains or losses on property sales and minority interest. In computing FFO, the Company eliminates substantially all of these items because, in the Company's view, they are not indicative of the results from the Company's property operations. To facilitate a clear understanding of the Company's historical operating results, FFO should be examined in conjunction with net income (determined in accordance with GAAP) as presented in the financial statements included elsewhere in this release. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of the Company's financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it indicative of funds available for the Company's cash needs, including its ability to make cash distributions to shareholders. Cash Available for Distribution (CAD) - ------------------------------------- Cash available for distribution, CAD, is a non-GAAP financial measure that is not intended to represent cash flow for the period and is not indicative of cash flow provided by operating activities as determined under GAAP. CAD is presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company's ability to fund its dividends. Because all companies do not calculate CAD the same way, the presentation of CAD may not be comparable to similarly titled measures of other companies.
BRANDYWINE REALTY TRUST CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except per share information) September 30, December 31, 2003 2002 ---------- ---------- ASSETS Real estate investments: Operating properties $1,904,795 $1,890,009 Accumulated depreciation (272,859) (245,230) ---------- ---------- 1,631,936 1,644,779 Construction-in-progress 36,842 58,127 Land held for development 45,654 43,075 ---------- ---------- 1,714,432 1,745,981 Cash and cash equivalents 7,493 26,801 Escrowed cash 13,349 16,318 Accounts receivable, net 2,439 3,657 Accrued rent receivable 32,284 28,333 Investment in marketable securities 11,945 11,872 Assets held for sale 25,037 7,666 Investment in joint ventures, at equity 13,154 14,842 Deferred costs, net 27,664 29,271 Other assets 42,746 34,547 ---------- ---------- Total assets $1,890,543 $1,919,288 ========== ========== LIABILITIES AND BENEFICIARIES' EQUITY Mortgage notes payable $ 517,555 $ 597,729 Borrowings under Credit Facility 327,000 307,000 Unsecured term loan 100,000 100,000 Accounts payable and accrued expenses 24,746 27,576 Distributions payable 22,106 21,186 Tenant security deposits and deferred rents 19,958 22,276 Other liabilities 17,227 22,006 Liabilities related to assets held for sale 275 20 ---------- ---------- Total liabilities 1,028,867 1,097,793 Minority interest 133,413 135,052 Beneficiaries' equity: Preferred Shares: 7.25% Series A Preferred Shares, $0.01 par value; shares authorized-10,000,000; issued and outstanding-750,000 in 2003 and 2002 8 8 8.75% Series B Preferred Shares, $0.01 par value; shares authorized-10,000,000; issued and outstanding-4,375,000 in 2003 and 2002 44 44 Common Shares of beneficial interest, $0.01 par value; shares authorized-100,000,000; issued and outstanding-37,359,460 in 2003 and 35,226,315 in 2002 373 352 Additional paid-in capital 894,696 841,659 Share warrants 401 401 Cumulative earnings 268,744 225,010 Accumulated other comprehensive loss (3,547) (6,402) Cumulative distributions (432,456) (374,629) ---------- ---------- Total beneficiaries' equity 728,263 686,443 ---------- ---------- Total liabilities and beneficiaries' equity $1,890,543 $1,919,288 ========== ==========
BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Revenue Rents $ 64,512 $ 63,367 $ 193,044 $ 183,946 Tenant reimbursements 9,094 8,637 26,248 24,098 Other 3,604 2,443 7,687 8,028 ----------- ----------- ----------- ----------- Total revenue 77,210 74,447 226,979 216,072 Operating Expenses Property operating expenses 19,267 18,918 59,748 55,115 Real estate taxes 7,346 6,649 20,692 18,424 Interest 13,746 16,329 44,293 48,164 Depreciation and amortization 15,311 13,652 45,004 41,085 Administrative expenses 3,630 3,971 10,953 11,812 ----------- ----------- ----------- ----------- Total operating expenses 59,300 59,519 180,690 174,600 ----------- ----------- ----------- ----------- Income from continuing operations before equity in income of real estate ventures, net gain on sales of interests in real estate and minority interest 17,910 14,928 46,289 41,472 Equity in income of real estate ventures (531) 359 38 1,052 ----------- ----------- ----------- ----------- Income from continuing operations before net gain on sales of interests in real estate and minority interest 17,379 15,287 46,327 42,524 Net gain on sales of interests in real estate - - 1,152 - Minority interest attributable to continuing operations (2,365) (2,350) (6,973) (6,947) ----------- ----------- ----------- ----------- Income from continuing operations 15,014 12,937 40,506 35,577 Discontinued operations: Income from discontinued operations 756 1,086 1,852 6,957 Net gain on disposition of discontinued operations 1,741 - 2,692 8,562 Minority interest (111) (55) (209) (859) ----------- ----------- ----------- ----------- Income from discontinued operations 2,386 1,031 4,335 14,660 ----------- ----------- ----------- ----------- Net Income 17,400 13,968 44,841 50,237 Income allocated to Preferred Shares (2,976) (2,976) (8,928) (8,930) ----------- ----------- ----------- ----------- Income allocated to Common Shares $ 14,424 $ 10,992 $ 35,913 $ 41,307 =========== =========== =========== =========== Earnings per Common Share after discontinued operations: Basic income per Common Share $ 0.38 $ 0.30 $ 0.96 $ 1.13 =========== =========== =========== =========== Basic weighted-average shares outstanding 37,359,385 35,449,414 36,095,349 35,610,699 =========== =========== =========== =========== Diluted income per Common Share $ 0.37 $ 0.30 $ 0.96 $ 1.13 =========== =========== =========== =========== Diluted weighted-average shares outstanding 37,520,808 35,484,395 36,232,600 35,647,690 =========== =========== =========== ===========
BRANDYWINE REALTY TRUST FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION (unaudited, in thousands, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- -------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Reconciliation of Net Income to Funds from Operations (FFO): Net income $ 17,400 $ 13,968 $ 44,841 $ 50,237 Add (deduct): Minority interest attributable to continuing operations 2,365 2,350 6,973 6,947 Net gain on sale of interests in real estate - - (1,152) - Minority interest attributable to discontinued operations 111 55 209 859 Net gain on disposition of discontinued operations (1,741) - (2,692) (8,562) ----------- ----------- ----------- ----------- Income before net gains on sales of interests in real estate and minority interest 18,135 16,373 48,179 49,481 Add: Depreciation: Real property 13,590 12,544 40,489 39,419 Real estate ventures 876 463 1,889 1,783 Amortization of leasing costs 1,820 1,300 5,224 4,006 ----------- ----------- ----------- ----------- Funds from operations (FFO) $ 34,421 $ 30,680 $ 95,781 $ 94,689 =========== =========== =========== =========== Number of weighted-average Common Shares 48,727,360 46,751,866 47,468,409 47,069,717 =========== =========== =========== =========== FFO per weighted-average Common Share - fully diluted $ 0.71 $ 0.66 $ 2.02 $ 2.01 =========== =========== =========== =========== Dividend per Common Share $ 0.44 $ 0.44 $ 1.32 $ 1.32 Payout ratio of FFO (1) 62.3% 67.0% 65.4% 65.6% EPS per weighted-average Common Share - fully diluted $ 0.37 $ 0.30 $ 0.96 $ 1.13 Cash Available for Distribution (CAD): FFO $ 34,421 $ 30,680 $ 95,781 $ 94,689 Add (deduct): Rental income from straight-line rents (1,516) (1,274) (4,429) (4,211) Deferred market rental income (72) - (262) - Amortization: Deferred financing costs 529 536 1,533 1,543 Deferred compensation costs 691 818 2,191 2,417 Impairment loss 861 - 861 - Second generation capital expenditures (2): Building and tenant improvements (7,350) (3,415) (20,117) (12,015) Lease commissions (1,015) (2,069) (3,475) (5,679) ----------- ----------- ----------- ----------- Cash available for distribtution $ 26,549 $ 25,276 $ 72,083 $ 76,744 =========== =========== =========== =========== Number of weighted-average Common Shares 48,727,360 46,751,866 47,468,409 47,358,998 =========== =========== =========== =========== Dividend per Common Share $ 0.44 $ 0.44 $ 1.32 $ 1.32 Cash flows from: Operating activities $ 25,272 $ 37,494 $ 84,483 $ 93,165 Investing activities (8,089) 9,595 (27,882) 18,047 Financing activities (17,210) (50,356) (75,909) (103,462) (1) Payout ratio is calculated by dividing dividend per Common Share by FFO per weighted-average Common Share (2) Represents expenditures incurred during the period (regardless if lease commencement is after quarter end). Excludes first generation costs, which consist of capital expenditures, tenant improvements and leasing commissions associated with development and purchase price adjustments relating to acquisitions (including seller escrows, purchase price reduction or costs anticipated to initially lease-up acquired properties).
BRANDYWINE REALTY TRUST SAME STORE OPERATIONS (unaudited) Of the 233 properties owned by the Company as of September 30, 2003, a total of 228 properties ("Same Store Properties") containing an aggregate of 15.4 million net rentable square feet were owned for the entire three-month periods ended September 30, 2003 and 2002. Average occupancy for the Same Store Properties during the three-month periods ended September 30, was 92.2% during 2003 and 91.1% during 2002. The following table sets forth revenue and expense information for the Same Store Properties: Three Months Ended September 30, ------------------- Dollar Percent 2003 2002 Change Change ------- ------- ------ ------ (amounts in thousands) Revenue Rents (a) $63,404 $62,142 $1,262 2.0% Tenant reimbursements 9,193 8,697 496 5.7% Other (b) 499 323 176 54.5% ------- ------- ------ Total revenue 73,096 71,162 1,934 2.7% Operating Expenses Property operating expenses 21,544 21,175 369 1.7% Real estate taxes 6,915 6,699 216 3.2% ------- ------- ------ Total property operating expenses 28,459 27,874 585 2.1% ------- ------- ------ Net operating income $44,637 $43,288 $1,349 3.1% ======= ======= ====== (a) Includes straight-line rental income of $1,416 for 2003 and $1,201 for 2002 (b) Includes termination fee income of $376 for 2003 and $185 for 2002 The following table is a reconciliation of income from continuing operations to Same Store net operating income: Three Months Ended September 30, ------------------- 2003 2002 ------- ------- (amounts in thousands) Income from continuing operations $15,014 $12,937 Add/(deduct): Interest expense 13,746 16,329 Depreciation and amortization 15,311 13,652 Administrative expenses 3,630 3,971 Equity in income of real estate ventures 531 (359) Minority interest attributable to continuing operations 2,365 2,350 Income from discontinued operations 2,386 1,031 ------- ------- Consolidated net operating income 52,983 49,911 Less: Net operating income of non same store properties (8,346) (6,623) ------- ------- Same Store Net Operating Income $44,637 $43,288 ======= =======
Third Quarter Earnings Call and Supplemental Information Package Brandywine President and CEO, Gerard H. Sweeney, will be hosting a conference call on Friday, October 24, 2003 at 1:00 p.m. EST. Call 1-888-889-5602. After the conference, a taped replay of the call can be accessed 24 hours a day through Friday, November 7, 2003 by calling 1-877-519-4471 - access code 4192506. In addition, the conference call can be accessed via a webcast located on the Company's website @ brandywinerealty.com. The Company has prepared a Supplemental Information package that includes financial results and operational statistics to support the announcement of third quarter earnings. The Supplemental Information package is available through the Company's website @ brandywinerealty.com. The Supplemental Information Package will be found in the "Investor Relations - Financial Reports" section of the web page. Brandywine Realty Trust, with headquarters in Plymouth Meeting, PA and regional offices in Mount Laurel, NJ and Richmond, VA, is one of the Mid-Atlantic Region's largest full-service real estate companies. Brandywine owns, manages or has an ownership interest in 277 office and industrial properties, aggregating 20.0 million square feet. # # #