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) April 22, 2004
| BRANDYWINE REALTY TRUST |
| (Exact name of registrant as specified in its charter) |
| MARYLAND | 1-9106 | 23-2413352 | |||||
| (State or Other Jurisdiction | (Commission | (I.R.S. Employer | |||||
| of Incorporation) | file number) | Identification Number) |
| 401 Plymouth Road, Plymouth Meeting, Pennsylvania 19462 |
| (Address of principal executive offices) |
| (610) 325-5600 | |
| (Registrant’s telephone number, including area code) |
Item 7. Financial Statements and Exhibits.
| (c) | Exhibits. |
| 99.1 | Press Release dated April 22, 2004 | ||
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 April 22, 2004 reporting first quarter 2004 financial results.
The press release includes “non-GAAP financial measures” within the meaning of the Securities and Exchange Commission’s Regulation G. With respect to each such non-GAAP financial measure, the Company has disclosed in the press release the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles (“GAAP”) and has provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.
These non-GAAP financial measures have been presented because management uses this information in monitoring and evaluating the Company’s on-going financial results and trends and believes that as a result, this information will be useful to investors. The disclosure in this Form 8-K of any financial information shall not constitute an admission that such information is material.
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. Sweeney | |
| Title: President and Chief Executive Officer | ||
Date: April 22, 2004
-2-
[GRAPHIC OMITTED] FOR IMMEDIATE RELEASE 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 First Quarter 2004 Earnings PLYMOUTH MEETING, PA, April 22, 2004 - Brandywine Realty Trust (BDN-NYSE) announced today that net income was $12.5 million for the first quarter of 2004, a decrease of $1.4 million, as compared to $13.9 million for the first quarter of 2003. In accordance with Emerging Issues Task Force ("EITF") Topic D-42, the Company incurred a gain to Earnings Per Share (EPS) for the first quarter of 2004 of $4.5 million associated with the redemption of Series B Preferred Units in February 2004. Fully diluted EPS (which includes the gain of $0.10 per share) was $0.34 for the first quarter of 2004, an increase of $0.04 per share as compared to $0.30 for the first quarter of 2003. Fully diluted funds from operations (FFO) including a $0.09 per share gain associated with the redemption of the Series B Preferred Units were $34.4 million or $0.72 per share for the first quarter 2004 as compared to $30.1 million or $0.65 per share for the first quarter of 2003. Excluding this gain related to EITF Topic D-42, FFO for the first quarter of 2004 was $29.9 million or $0.63 per share as compared to $30.1 million or $0.65 per share for the comparable period in 2003. 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, "The first quarter was an active one for the Company. We seized the opportunities the strong capital markets afforded us and completed the remaining steps in our balance sheet strengthening program. Raising $120 million of common equity and an additional $56 million of perpetual preferred at pricing levels that are even more attractive when viewed by the standards of today's markets is very satisfying. These activities, when combined with all of the accomplishments of 2003, resulted in both Standard & Poor's and Fitch initiating coverage of the Company with BBB- ratings."
Brandywine Realty Trust Summary Portfolio Performance o Payout ratio of FFO (excluding redemption gain) was 70.2% for the quarter o Quarterly rental rate growth on new leases was negative 3.5% on a straight-line basis and negative 11.1% on a cash basis o Quarterly rental rate growth on renewals was positive 1.6% on a straight-line basis and negative 4.5% on a cash basis o Quarterly retention rate was 76.4% o Portfolio was 90.0% occupied and 90.9% leased as of March 31, 2004 o Leases expired or were terminated for approximately 971,000 square feet during the quarter o Leases were renewed for 742,000 square feet during the quarter and new leases were signed for 121,000 square feet during the quarter Distributions On March 25, 2004, the Board of Trustees declared a regular quarterly dividend distribution of $0.44 per common share that was paid April 15, 2004 to shareholders of record as of April 6, 2004. The Company also announced its dividend for the first quarter of 2004 was $.46875 per 7.50% Series C Cumulative Redeemable Preferred Shares and $.17413 per 7.375% Series D Cumulative Redeemable Preferred Shares (with such per share amount reflecting the issuance of the Series D Preferred Shares on February 27, 2004) that was paid on April 15, 2004 to holders of record of the Series C and Series D Preferred Shares as of April 5, 2004. Capital Transactions On January 12, 2004, the Company consummated a public offering of 2,300,000 Common Shares, plus an over-allotment option of an additional 345,000 Common Shares, with net proceeds to the Company of $69.3 million. Bear, Stearns & Co. Inc. served as the underwriter for this transaction. Proceeds from this offering were used to reduce indebtedness under the Company's revolving credit facility incurred in connection with the Series B Preferred Share redemption and the funding of a property acquisition in Lawrenceville, New Jersey in December 2003. In February 2004, the Company redeemed all of the outstanding Series B Preferred Units in our operating partnership (the "Series B Preferred Units") for an aggregate price of $93.0 million, together with accrued but unpaid distributions from January 1, 2004. The Series B Preferred Units had an aggregate stated value of $97.5 million and accrued distributions at 7.25% per annum. In accordance with EITF Topic D-42, the Company recorded a gain of $4.5 million related to the redemption, which was included in EPS and FFO per share for the first quarter of 2004. On February 27, 2004, the Company issued 2,000,000 shares, plus an over-allotment option of 300,000, of Series D Perpetual Preferred Shares with a 7.375% coupon rate for net proceeds of $55.7 million. The Series D Perpetual Preferred Shares may be redeemed, at the Company's option, on or after February 27, 2009, for $25 per share. Wachovia Securities was the book-running manager of the offering with Bear Stearns & Co. Inc. and Raymond James as co-managers. The proceeds from this offering were used to reduce indebtedness under the Company's revolving credit facility including funds used in the redemption of the Series B Preferred Units. On March 3, 2004, the Company consummated a public offering of 1,600,000 Common Shares, plus an over-allotment option of an additional 240,000 Common Shares, with net proceeds to the Company of $50.8 million. Citigroup served as the underwriter for this transaction. Proceeds from this offering were used to reduce indebtedness under the Company's revolving credit facility incurred in connection with the Series B Preferred Unit redemption. During the first quarter, the Company sold one industrial property containing 37,000 net rentable square feet and one office property containing 45,000 net rentable square feet for an aggregate of $6.1 million.
2004 Financial Outlook As a result of economic conditions in the Company's markets, we continue to experience operational challenges that result in difficult earnings visibility. Our expectations for 2004 are based on the following key factors: o A slight increase in average occupancy from levels achieved in 2003 of 1.0% to 1.5% o A slight increase in same-store net operating income ranging from 1.0% to 1.5% o Operating margins and general and administrative margins consistent with those experienced in 2003 Based on these key assumptions, we expect the second quarter 2004 FFO per share to be $0.62 to $0.63 and EPS to be $0.22 to $0.23 and full year 2004 FFO per share to be $2.60 to $2.65 and EPS to be $1.10 to $1.15. These estimates reflect management's view of current market conditions and certain assumptions with regard to rental rates, occupancy levels and various other assumptions and projections. The estimates may be positively or negatively impacted primarily by the timing and terms of property leases. 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, 2003. 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) March 31, December 31, 2004 2003 ---------- ---------- ASSETS Real estate investments: Operating properties $1,907,836 $1,869,744 Accumulated depreciation (286,682) (268,091) ---------- ---------- 1,621,154 1,601,653 Construction-in-progress 48,300 29,787 Land held for development 58,086 63,915 ---------- ---------- 1,727,540 1,695,355 Cash and cash equivalents 7,557 8,552 Escrowed cash 15,500 14,388 Accounts receivable, net 6,019 5,206 Accrued rent receivable 28,886 26,652 Investment in marketable securities 377 12,052 Assets held for sale - 5,317 Investment in unconsolidated joint ventures, at equity 13,282 15,853 Deferred costs, net 27,509 27,269 Other assets 40,915 45,132 ---------- ---------- Total assets $1,867,585 $1,855,776 ========== ========== LIABILITIES AND BENEFICIARIES' EQUITY Mortgage notes payable $ 452,049 $ 462,659 Borrowings under Credit Facility 265,000 305,000 Unsecured term loan 100,000 100,000 Accounts payable and accrued expenses 24,658 30,290 Distributions payable 23,014 20,947 Tenant security deposits and deferred rents 17,940 16,123 Other liabilities 4,250 15,360 Liabilities related to assets held for sale - 52 ---------- ---------- Total liabilities 886,911 950,431 Minority interest 36,526 134,357 Beneficiaries' equity: Preferred Shares (shares authorized-10,000,000): 7.25% Series A Preferred Shares, $0.01 par value; shares issued and outstanding-750,000 in 2004 and 2003 8 8 7.50% Series C Preferred Shares, $0.01 par value; shares issued and outstanding-2,000,000 in 2004 and 2003 20 20 7.375% Series D Preferred Shares, $0.01 par value; shares issued and outstanding-2,300,000 in 2004 and no shares in 2003 23 - Common Shares of beneficial interest, $0.01 par value; shares authorized-100,000,000; issued and outstanding-45,663,743 in 2004 and 41,040,710 in 2003 455 410 Additional paid-in capital 1,114,897 936,730 Share warrants 401 401 Cumulative earnings 321,753 309,343 Accumulated other comprehensive loss (1,881) (2,158) Cumulative distributions (491,528) (473,766) ---------- ---------- Total beneficiaries' equity 944,148 770,988 ---------- ---------- Total liabilities and beneficiaries' equity $1,867,585 $1,855,776 ========== ==========
BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except share and per share data) Three Months Ended March 31, ------------------------------ 2004 2003 ----------- ----------- Revenue Rents $ 63,763 $ 63,921 Tenant reimbursements 8,060 8,593 Other 2,037 2,727 ----------- ----------- Total revenue 73,860 75,241 Operating Expenses Property operating expenses 22,333 21,335 Real estate taxes 6,948 6,560 Interest 12,104 15,306 Depreciation and amortization 15,906 14,698 Administrative expenses 3,489 3,514 ----------- ----------- Total operating expenses 60,780 61,413 ----------- ----------- Income from continuing operations before equity in income of real estate ventures, net gain on sales of interests in real estate and minority interest 13,080 13,828 Equity in income of real estate ventures 234 158 ----------- ----------- Income from continuing operations before net gain on sales of interests in real estate and minority interest 13,314 13,986 Net gain on sales of interests in real estate - 1,152 Minority interest attributable to continuing operations (1,254) (2,315) ----------- ----------- Income from continuing operations 12,060 12,823 Discontinued operations: Income (loss) from discontinued operations 201 588 Net gain on disposition of discontinued operations 204 561 Minority interest (15) (55) ----------- ----------- 390 1,094 ----------- ----------- Net Income 12,450 13,917 Income allocated to Preferred Shares (2,018) (2,976) Redemption of Preferred Units 4,500 - ----------- ----------- Income allocated to Common Shares $ 14,932 $ 10,941 =========== =========== Earnings per Common Share after discontinued operations: Basic income per Common Share $ 0.34 $ 0.30 =========== =========== Basic weighted-average shares outstanding 44,036,842 35,300,142 =========== =========== Diluted income per Common Share $ 0.34 $ 0.30 =========== =========== Diluted weighted-average shares outstanding 44,361,585 35,369,883 =========== ===========
BRANDYWINE REALTY TRUST FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION (unaudited, in thousands, except share and per share data) Three Months Ended March 31, ------------------------------ 2004 2003 ----------- ----------- Reconciliation of Net Income to Funds from Operations (FFO): Net income $ 12,450 $ 13,917 Add (deduct): Minority interest attributable to continuing operations 1,254 2,315 Net gain on sale of interests in real estate - (1,152) Minority interest attributable to discontinued operations 15 55 Net gain on disposition of discontinued operations (204) (561) ----------- ----------- Income before net gains on sales of interests in real estate and minority interest 13,515 14,574 Add: Depreciation: Real property 13,337 13,388 Real estate ventures 749 493 Amortization of leasing costs 2,301 1,640 Redemption of Preferred Shares 4,500 - ----------- ----------- Funds from operations (FFO) $ 34,402 $ 30,095 =========== =========== FFO, excluding Preferred Share redemption gain (2) $ 29,902 $ 30,095 =========== =========== Number of weighted-average Common Shares 47,706,342 46,626,668 =========== =========== FFO per weighted-average Common Share - fully diluted $ 0.72 $ 0.65 =========== =========== FFO per weighted-average Common Share - fully diluted, excluding redemption charge (2) $ 0.63 $ 0.65 =========== =========== Dividend per Common Share $ 0.44 $ 0.44 Payout ratio of FFO (1) 61.0% 68.2% Payout ratio of FFO, excluding redemption gain (1)(2) 70.2% 68.2% EPS per weighted-average Common Share - fully diluted $ 0.34 $ 0.30 Cash Available for Distribution (CAD): FFO, excluding redemption gain (2) $ 29,902 $ 30,095 Add (deduct): Rental income from straight-line rents (1,925) (1,484) Deferred market rental income 24 (66) Amortization: Deferred financing costs 483 495 Deferred compensation costs 553 812 Impairment loss - - Second generation capital expenditures (3): Building and tenant improvements (6,685) (5,317) Lease commissions (884) (1,381) ----------- ----------- Cash available for distribution $ 21,468 $ 23,154 =========== =========== Number of weighted-average Common Shares 47,706,342 46,626,668 =========== =========== Dividend per Common Share $ 0.44 $ 0.44 Cash flows from: Operating activities $ 32,834 $ 25,339 Investing activities (18,408) (6,601) Financing activities (15,421) (36,996) (1) Payout ratio is calculated by dividing dividend per Common Share by FFO per weighted-average Common Share (2) Represents FFO excluding a gain of $4,500,000 related to Series B Preferred Unit redemption in February 2004. (3) 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 - QUARTER (unaudited) Of the 229 properties owned by the Company as of March 31, 2004, a total of 222 properties ("Same Store Properties") containing an aggregate of 14.9 million net rentable square feet were owned for the entire three-month periods ended March 31, 2004 and 2003. Average occupancy for the Same Store Properties was 90.6% during the quarter ended March 31, 2004 and 89.8% during the quarter ended March 31, 2003. The following table sets forth revenue and expense information for the Same Store Properties: Three Months Ended March 31, -------------------- Dollar Percent 2004 2003 Change Change ------- ------- ------ ------ (amounts in thousands) Revenue Rents (a) $60,534 $59,937 $ 597 1.0% Tenant reimbursements 7,726 6,999 727 10.4% Other (b) 274 1,212 (938) -77.4% ------- ------- ------ Total revenue 68,534 68,148 386 0.6% Operating Expenses Property operating expenses 22,512 21,923 589 2.7% Real estate taxes 6,414 5,922 492 8.3% ------- ------- ------ Total property operating expenses 28,926 27,845 1,081 3.9% ------- ------- ------ Net operating income $39,608 $40,303 $ (695) -1.7% ======= ======= ====== (a) Includes straight-line rental income of $1,356 for 2004 and $1,236 for 2003 (b) Includes termination fee income of $107 for 2004 and $1,104 for 2003 The following table is a reconciliation of income from continuing operations to Same Store net operating income: Three Months Ended December 31, --------------------- 2003 2002 ------- ------- (amounts in thousands) Income from continuing operations $12,060 $12,823 Add/(deduct): Interest expense 12,104 15,306 Depreciation and amortization 15,906 14,698 Administrative expenses 3,489 3,514 Equity in income of real estate ventures (234) (158) Net gain on sale of interests in real estate - (1,152) Minority interest attributable to continuing operations 1,254 2,315 ------- ------- Consolidated net operating income 44,579 47,346 Less: Net operating income of non same store properties (4,971) (7,043) ------- ------- Same Store Net Operating Income $39,608 $40,303 ======= =======
First Quarter Earnings Call and Supplemental Information Package Brandywine President and CEO, Gerard H. Sweeney, will be hosting a conference call on Friday, April 23, 2004 at 11:00 a.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, May 7, 2004 by calling 1-877-519-4471 - access code 4632079. 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 first 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 280 office and industrial properties, aggregating 20.3 million square feet. # # #