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): April 21, 2005
BRANDYWINE REALTY TRUST
(Exact name of issuer as specified in charter)
| MARYLAND (State or Other Jurisdiction of Incorporation or Organization) |
001-9106 (Commission file number) |
23-2413352 (I.R.S. Employer Identification Number) |
401 Plymouth Road, Suite 500
Plymouth Meeting, Pennsylvania 19462
(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):
 |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 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 21, 2005.
The press release includes a “non-GAAP financial measure” within the meaning of the Securities and Exchange Commission’s Regulation G. With respect to 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 such non-GAAP financial measure to the most directly comparable GAAP financial measure.
Item 8.01 Other Events
On April 22, 2005, we adopted revisions to our policy on executive severace, the full text of which is attached to this Current Report as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits
| Exhibits | |
| 99.1 | Press Release dated April 21, 2005 |
| 99.2 | Policy Regarding Severance Agreements with Senior Executives |
Pursuant to the requirements of the Securities and 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 | ||
| Date: April 22, 2005 | By: | /s/ Gerard H. Sweeney |
| Gerard H. Sweeney | ||
| President and Chief Executive Officer | ||
EXHIBIT INDEX
| Exhibit No. | Description |
| 99.1 | Press Release dated April 21, 2005 |
| 99.2 | Policy Regarding Severance Agreements with Senior Executives |
 |
FOR IMMEDIATE RELEASE |
| Contact: | |
Press
Contact: Michael Beckerman Beckerman Public Relations 908-781-6420 michael@beckermanpr.com |
Investor
Contact: Gerard H. Sweeney Christopher P. Marr Brandywine Realty Trust 610-325-5600 info@brandywinerealty.com |
Brandywine Realty Trust Announces First Quarter 2005 Earnings
Cira Centre Office Pre-Leasing reaches 87%
PLYMOUTH MEETING, PA, April 21, 2005– Brandywine Realty Trust (NYSE:BDN) announced today that diluted earnings per share (EPS) was $0.13 for the first quarter of 2005, a decrease of $0.21 per share as compared to $0.34 for the first quarter of 2004. Net income was $9.4 million for the first quarter, a decrease of $3.1 million, as compared to $12.5 million for the first quarter of 2004. The decrease in net income for the first quarter of 2005 as compared to the similar period in 2004 was primarily attributable to an increase of $5.7 million in interest expense offset by an increase in operating income of $1.3 million (net of an increase in depreciation expense of $12.6 million) resulting from the properties acquired from The Rubenstein Company, L.P. in September 2004, and a decrease in minority interest of $1.0 million.
Diluted funds from operations (FFO) was $36.3 million or $0.63 per share for the first quarter of 2005 compared to $28.6 million or $0.59 per share for the first quarter of 2004. FFO for the first quarter of 2004 excludes a $4.5 million gain related to the February 2004 Series B Preferred Unit redemption.
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 delighted with the continuation of successful leasing activity at Cira Centre. We recently signed leases with six tenants totaling 152,000 square feet, bringing our pre-leasing to 87% of the square feet available for office use. These tenants, in the investment management, legal, consulting, and private equity professions, will take occupancy at various times during 2006. We are pleased that the quality, location and economic value of this project have attracted over 700 new jobs to the City of Philadelphia. Construction continues on budget and on schedule for a fourth quarter 2005 completion. This activity, when combined with the continued strength of our core portfolio operations, puts us in excellent position to accelerate our growth into 2006.”
Brandywine Realty Trust Summary Portfolio Performance
| • | FFO payout ratio was 70.1% for the quarter |
| • | Quarterly rental rate growth on new leases declined 9.6% on a straight-line basis |
| • | Quarterly rental rate growth on renewals increased 0.6% on a straight-line basis |
| • | Quarterly retention rate was 69.3% |
| 401 Plymouth Road, Suite 500 • Plymouth Meeting, PA 19462 | Phone: (610) 325-5600 • Fax: (610) 325-5622 • www.brandywinerealty.com |
| • | Portfolio was 91.3% occupied and 92.1% leased as of March 31, 2005 |
| • | Leases expired or were terminated for approximately 1,221,000 square feet during the quarter |
| • | Leases were renewed for approximately 846,000 square feet during the quarter |
| • | New leases were signed for approximately 273,000 square feet during the quarter |
“Our portfolio performance in the first quarter was in-line with our expectations. Average rental rates on renewals remain flat, we have seen the expected downward pressure on new lease rates, and our tenant retention rate was slightly higher than our forecast. The market remains challenging, but we are encouraged by the activity we have generated thus far in 2005”, Mr. Sweeney said.
Distributions
On March 16, 2005, the Board of Trustees declared a regular quarterly dividend distribution of $0.44 per common share that was paid April 15, 2005 to shareholders of record as of April 6, 2005. The Company also declared its dividend for the first quarter of $0.46875 per 7.50% Series C Cumulative Redeemable Preferred Share and $0.46094 per 7.375% Series D Cumulative Redeemable Preferred Share that was paid on April 15, 2005 to holders of record of the Series C and Series D Preferred Shares as of March 30, 2005.
2005 Financial Outlook
The Company’s 2005 financial outlook continues to be predicated upon the following key and variable assumptions:
| • | The same-store portfolio (which represents approximately 79% of total square footage and 77% of projected 2005 net operating income) to achieve the following percentage changes from 2004 results: | |
| o | GAAP rents and reimbursements (not including termination fees) to decline 0.50% to 1.50% |
| o | Net operating income to range from unchanged to a decline of 2.0% |
| o | Average occupancy to range from an increase of 0.50% to a decrease of 0.50% |
| • | The completion of all development projects in accordance with the estimates identified in our supplemental disclosure as of December 31, 2004. |
| • | While targeted acquisitions are a component of the Company’s 2005 strategy, there are no acquisitions factored into the 2005 financial outlook. |
Based on these key assumptions, we affirm our guidance from our February 24, 2005 press release and expect our full year 2005 EPS to be $0.41 to $0.48 and FFO per share to be $2.48 to $2.55.
We are introducing second quarter 2005 guidance and expect FFO per share to be $0.58 to $0.59 and EPS to be $0.07 to $0.08. These estimates may be positively or negatively impacted primarily by the timing and terms of property leases, and actual operating expenses and interest rates as compared to our forecast.
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, 2004. 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 unit holders (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.
First Quarter Earnings Call and Supplemental Information Package
Brandywine President and CEO, Gerard H. Sweeney, will be hosting a conference call on Friday, April 22, 2005 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 6, 2005 by calling– 1-877-519-4471 – access code 5947324. In addition, the conference call can be accessed via a webcast located on the Company’s website @ www.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 @ www.brandywinerealty.com.
The Supplemental Information package can be found in the “Investor Relations – Financial Reports” section of the web page.
About Brandywine Realty Trust
Brandywine Realty Trust, with headquarters in Plymouth Meeting, PA and regional
offices in Mt. Laurel, NJ, Philadelphia, PA 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 294 office and industrial properties,
aggregating 24.1 million square feet.
For more information, visit Brandywine’s website at www.brandywinerealty.com.
# # #
Note: Certain 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 or industry results 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, the potential loss of major tenants, interest rate levels, the availability and terms of debt and equity financing, competition with other real estate companies for tenants and acquisitions, risks of real estate acquisitions, dispositions and developments, including cost overruns and construction delays, unanticipated operating costs and the effects of general and local economic and real estate conditions. Additional information or 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. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
# # #
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
| March 31, 2005 |
December 31, 2004 |
|||||||
ASSETS |
||||||||
Real
estate investments: |
||||||||
Operating
properties |
$ | 2,484,932 | $ | 2,483,134 | ||||
Accumulated
depreciation |
(339,709 | ) | (325,802 | ) | ||||
| 2,145,223 | 2,157,332 | |||||||
Construction-in-progress |
172,585 | 145,016 | ||||||
Land
held for development |
74,051 | 61,517 | ||||||
| 2,391,859 | 2,363,865 | |||||||
Cash
and cash equivalents |
15,473 | 15,346 | ||||||
Escrowed
cash |
18,791 | 17,980 | ||||||
Accounts
receivable, net |
12,575 | 11,999 | ||||||
Accrued
rent receivable |
35,668 | 32,641 | ||||||
Investment
in marketable securities |
615 | 423 | ||||||
Investment
in real estate ventures |
12,741 | 12,754 | ||||||
Deferred
costs, net |
34,696 | 34,449 | ||||||
Intangible
assets, net |
91,004 | 101,056 | ||||||
Other
assets |
47,661 | 43,471 | ||||||
Total
assets |
$ | 2,661,083 | $ | 2,633,984 | ||||
LIABILITIES
AND BENEFICIARIES’ EQUITY |
||||||||
Mortgage
notes payable |
$ | 513,329 | $ | 518,234 | ||||
Borrowings
under credit facilities |
200,000 | 152,000 | ||||||
Unsecured
senior notes, net of discounts |
636,485 | 636,435 | ||||||
Accounts
payable and accrued expenses |
44,011 | 49,242 | ||||||
Distributions
payable |
27,517 | 27,363 | ||||||
Tenant
security deposits and deferred rents |
19,630 | 20,046 | ||||||
Acquired
lease intangibles, net |
37,806 | 39,271 | ||||||
Other
liabilities |
1,525 | 1,525 | ||||||
Total
liabilities |
1,480,303 | 1,444,116 | ||||||
Minority
interest |
42,022 | 42,866 | ||||||
Beneficiaries’ equity: |
||||||||
Preferred
shares – Series C |
20 | 20 | ||||||
Preferred
shares – Series D |
23 | 23 | ||||||
Common
shares |
557 | 553 | ||||||
Additional
paid-in capital |
1,355,297 | 1,346,651 | ||||||
Cumulative
earnings |
379,930 | 370,515 | ||||||
Accumulated
other comprehensive loss |
(2,825 | ) | (3,130 | ) | ||||
Cumulative
distributions |
(594,244 | ) | (567,630 | ) | ||||
Total
beneficiaries’ equity |
1,138,758 | 1,147,002 | ||||||
| 1,180,780 | 1,189,868 | |||||||
Total
liabilities and beneficiaries’ equity |
$ | 2,661,083 | $ | 2,633,984 | ||||
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share data)
| Three Months Ended | ||||||||
| March 31, 2005 |
March 31, 2004 |
|||||||
Revenue |
||||||||
Rents |
$ | 81,228 | $ | 63,680 | ||||
Tenant
reimbursements |
12,082 | 7,993 | ||||||
Other |
5,614 | 1,526 | ||||||
Total
revenue |
98,924 | 73,199 | ||||||
Operating
Expenses |
||||||||
Property
operating expenses |
29,879 | 22,150 | ||||||
Real
estate taxes |
9,657 | 6,881 | ||||||
Depreciation
and amortization |
28,435 | 15,804 | ||||||
Administrative
expenses |
4,752 | 3,489 | ||||||
Total
operating expenses |
72,723 | 48,324 | ||||||
Operating
income |
26,201 | 24,875 | ||||||
Other
income (expense) |
||||||||
Interest
income |
780 | 511 | ||||||
Interest
expense |
(17,797 | ) | (12,104 | ) | ||||
Equity
in income of real estate ventures |
558 | 234 | ||||||
Income
before minority interest |
9,742 | 13,516 | ||||||
Minority
interest attributable to continuing operations |
(327 | ) | (1,261 | ) | ||||
Income
from continuing operations |
9,415 | 12,255 | ||||||
Discontinued
operations: |
||||||||
(Loss)
income from discontinued operations |
— | (1 | ) | |||||
Net
gain on disposition of discontinued operations |
— | 204 | ||||||
Minority
interest |
— | (8 | ) | |||||
| — | 195 | |||||||
Net
income |
9,415 | 12,450 | ||||||
Income
allocated to Preferred Shares |
(1,998 | ) | (2,018 | ) | ||||
Preferred
Share redemption gain (charge) |
— | 4,500 | ||||||
Income
allocated to Common Shares |
$ | 7,417 | $ | 14,932 | ||||
PER
SHARE DATA |
||||||||
Basic
income per Common Share |
$ | 0.13 | $ | 0.34 | ||||
Basic
weighted-average shares outstanding |
55,441,773 | 44,036,842 | ||||||
Diluted
income per Common Share |
$ | 0.13 | $ | 0.34 | ||||
Diluted
weighted-average shares outstanding |
55,682,792 | 44,324,050 | ||||||
BRANDYWINE REALTY TRUST
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
(unaudited, in thousands, except share and per share data)
| Three Months Ended | ||||||||
| 3/31/05 | 3/31/04 | |||||||
Reconciliation
of Net Income to Funds from Operations (FFO): |
||||||||
Net
income |
$ | 9,415 | $ | 12,450 | ||||
Add
(deduct): |
||||||||
Minority
interest attributable to continuing operations |
327 | 1,261 | ||||||
Minority
interest attributable to discontinued operations |
— | 8 | ||||||
Net
gains on disposition of discontinued operations |
— | (204 | ) | |||||
Income
before net gains on sale of interests in real estate and minority interest |
9,742 | 13,515 | ||||||
Add: |
||||||||
Depreciation: |
||||||||
Real
property |
20,924 | 13,337 | ||||||
Real
estate ventures |
354 | 749 | ||||||
Amortization
of leasing costs |
7,232 | 2,301 | ||||||
Perpetual
Preferred Share distributions |
(1,998 | ) | (1,338 | ) | ||||
Preferred
Share redemption gain (charge) |
— | 4,500 | ||||||
Funds
from operations (FFO) |
$ | 36,254 | $ | 33,064 | ||||
FFO,
excluding non-recurring items (1) |
$ | 36,254 | $ | 28,564 | ||||
FFO
per share – fully diluted |
$ | 0.63 | $ | 0.68 | ||||
FFO
per share – fully diluted, excluding non-recurring items (1) |
$ | 0.63 | $ | 0.59 | ||||
Weighted-average
shares/units outstanding – fully diluted |
57,743,873 | 48,763,372 | ||||||
EPS – diluted |
$ | 0.13 | $ | 0.34 | ||||
Weighted-average
shares outstanding – fully diluted |
55,682,792 | 44,324,050 | ||||||
Dividend
per Common Share |
$ | 0.44 | $ | 0.44 | ||||
Payout
ratio of FFO (Dividend per Common Share divided by FFO per Common Share) |
70.1 | % | 64.9 | % | ||||
Payout
ratio of FFO, excluding non recurring items (1) |
70.1 | % | 75.1 | % | ||||
CASH
AVAILABLE FOR DISTRIBUTION (CAD): |
||||||||
FFO,
excluding non-recurring items (1) |
$ | 36,254 | $ | 28,564 | ||||
Add
(deduct): |
||||||||
Rental
income from straight-line rents |
(3,275 | ) | (1,925 | ) | ||||
Deferred
market rental income |
(505 | ) | 24 | |||||
Amortization: |
||||||||
Deferred
financing costs |
481 | 483 | ||||||
Deferred
compensation costs |
691 | 553 | ||||||
Second
generation capital expenditures (2): |
||||||||
Building
and tenant improvements |
(6,637 | ) | (6,685 | ) | ||||
Lease
commissions |
(916 | ) | (884 | ) | ||||
Cash
available for distribution |
$ | 26,093 | $ | 20,130 | ||||
Weighted-average
shares/units outstanding – fully diluted |
57,743,873 | 48,763,372 | ||||||
Dividend
per Common Share |
$ | 0.44 | $ | 0.44 | ||||
Cash
flows from: |
||||||||
Operating
activities |
$ | 26,621 | $ | 33,068 | ||||
Investing
activities |
(48,873 | ) | (18,642 | ) | ||||
Financing
activities |
22,379 | (15,421 | ) | |||||
| (1) | Represents FFO excluding a gain of $4.5 million related to the Series B Preferred Unit redemption in February 2004. | |
| (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 – QUARTER
(unaudited and in thousands)
Of the 247 Properties owned by the Company as of March 31, 2005, a total of 227 Properties (“Same Store Properties”) containing an aggregate of 15.1 million net rentable square feet were owned for the entire three-month periods ended March 31, 2005 and 2004. Average occupancy for the Same Store Properties was 92.0% during 2005 and 91.3% during 2004. The following table sets forth revenue and expense information for the Same Store Properties:
| Quarter Ended March 31, | ||||||||
| 2005 | 2004 | |||||||
Revenue |
||||||||
Rents
(a) |
$ | 62,208 | $ | 62,930 | ||||
Tenant
reimbursements |
9,316 | 7,971 | ||||||
Other
(b) |
3,913 | 278 | ||||||
| 75,437 | 71,179 | |||||||
Operating
expenses |
||||||||
Property
operating expenses |
24,275 | 23,800 | ||||||
Real
estate taxes |
7,099 | 6,663 | ||||||
| 31,374 | 30,463 | |||||||
Net
operating income |
$ | 44,063 | $ | 40,716 | ||||
| (a) | Includes straight-line rental income of $1,870 for 2005 and $1,806 for 2004 |
| (b) | Includes net termination fee income of $3,721 for 2005 and $105 for 2004 |
The following table is a reconciliation of Net Income to Same Store net operating income:
| Quarter Ended March 31, | ||||||||
| 2005 | 2004 | |||||||
Net
Income |
$ | 9,415 | $ | 12,450 | ||||
Add/(deduct): |
||||||||
Interest
income |
(780 | ) | (511 | ) | ||||
Interest
expense |
17,797 | 12,104 | ||||||
Administrative
expenses |
4,752 | 3,489 | ||||||
Equity
in income of real estate ventures |
(558 | ) | (234 | ) | ||||
Depreciation
and amortization – continuing operations |
28,435 | 15,804 | ||||||
Depreciation
and amortization – discontinued operations |
— | 103 | ||||||
Net
gain on sale of interests in real estate – discontinued operations |
— | (204 | ) | |||||
Minority
interest attributable to continuing operations |
327 | 1,261 | ||||||
Minority
interest attributable to discontinued operations |
— | 8 | ||||||
Consolidated
net operating income |
59,388 | 44,270 | ||||||
Less:
Net operating income of non same store properties |
(11,374 | ) | (9 | ) | ||||
Less:
Eliminations and non-property specific net operating income |
(3,951 | ) | (3,545 | ) | ||||
Same
Store net operating income |
$ | 44,063 | $ | 40,716 | ||||
POLICY REGARDING SEVERANCE AGREEMENTS WITH SENIOR EXECUTIVES
BRANDYWINE REALTY TRUST
Overview
The Board of Trustees (the “Board”) of Brandywine Realty Trust (the “Company”) desires to attract, retain and motivate qualified executives to lead the Company and promote the interests of the Company’s shareholders. In furtherance of this objective, the Board has delegated to its Compensation Committee the authority to determine the compensation of the Company’s senior executives. The Compensation Committee is comprised solely of independent non-employee members of the Board.
The Compensation Committee seeks to set executive compensation at levels that are sufficiently competitive so that the Company may attract, retain and motivate high quality executives to contribute to the Company’s success. The Compensation Committee believes that severance arrangements can form a key component of the compensation packages for the Company’s senior executives, protecting them from an unexpected change in circumstances and allowing them to assess objectively transactions that could potentially impact their job security.
Recognizing the importance of severance arrangements to the Company and its shareholders, the Compensation Committee and the non-management Trustees adopted the following policy for shareholder approval of certain severance arrangements.
Policy
The Company will submit for approval by holders of its common shares any Future Severance Arrangement with a Senior Executive Officer of the Company that would provide for Severance Benefits that exceed 2.99 times the sum of the Senior Executive Officer’s Salary and Bonus (the “Policy”). The Company may, however, agree to provide Severance Benefits conditioned on a subsequent favorable shareholder vote of such agreement.
Policy Effective Date
The Policy shall become effective on February 15, 2005 (the “Effective Date”).
Senior Executive Officers
The Senior Executive Officers subject to the Policy shall be employees of the Company holding the office of Chief Executive Officer, President, Chief Financial Officer or Senior Vice President.
Severance Agreements
For the purposes of the Policy, a “Future Severance Arrangement” shall mean an employment agreement, a retirement agreement or a change in control agreement containing severance provisions with a Senior Executive Officer entered into with the Senior Executive Officer after the Effective Date; provided, however that a “Future Severance Arrangement” shall not include any agreement entered into with an individual who at the time of the effectiveness of such agreement was not a Senior Executive Officer, even if that individual later becomes a Senior Executive Officer. Any agreement entered into with a Senior Executive Officer prior to the Effective Date is not a Future Severance Agreement even if the agreement is renewed or amended after the Effective Date (provided that if an amendment to the agreement increases the numerical multiplier set forth therein above 2.99, or otherwise materially modifies the formula for calculating severance thereunder, then the agreement will at such time become a Future Severance Agreement and, therefore, subject to the Policy).
Salary and Bonus
“Salary and Bonus” subject to the Policy means the sum of (i) the greater of a Senior Executive Officer’s base annual salary in effect (a) on the date of the termination of employment of the Senior Executive Officer or (b) for the fiscal year immediately preceding the fiscal year in which such employment termination occurs plus (ii) the greater of the Senior Executive Officer’s (x) targeted annual bonus for the year in which the Senior Executive Officer’s employment terminates or (y) the annual bonus paid or payable to the Senior Executive Officer for the fiscal year immediately preceding the fiscal year in which such employment termination occurs.
Severance Benefits
“Severance Benefits” subject to the Policy mean cash separation benefits that directly relate to salary and bonus and extraordinary benefits that are not of a type available to groups of employees other than Senior Executive Officers upon termination of employment. Notwithstanding the foregoing, the following are not “Severance Benefits” and are not limited by the Policy:
| • | Amounts earned or accrued for services prior to termination (such as earned but unpaid salary, pro rata bonus or unused vacation pay). | |
| • | Retirement benefits earned or accrued under qualified and non-qualified retirement plans or deferred compensation plans. | |
| • | Amounts payable for the uncompleted term of an employment agreement. | |
| • | The value of benefits provided under programs generally applicable to Company’s employees. | |
| • | Accelerated vesting of restricted shares, options to acquire shares, share appreciation rights or other long term equity or cash incentives, or the value or payment on account of any shares, options, rights or other incentives awarded prior to the executive’s termination of employment. | |
| • | The value of the continued use of a corporate office or administrative support. | |
| • | Any benefit or payment required by law. | |
| • | Amounts paid for post-termination covenants (such as a covenant not to compete). | |
| • | Tax “gross-up” payments made in connection with severance benefits, including “gross-up” payments under Internal Revenue Code Section 280G. |
Vote Required
A Future Severance Agreement subject to shareholder approval under the Policy will be deemed to have been approved if it receives the affirmative vote of a majority of all votes cast on the matter by holders of common shares.
Reservation of Rights
The Board reserves the right to modify, terminate or waive the Policy at any time in its discretion; provided, however, that any modification or termination of the Policy shall be effective only upon approval of such modification or termination by the affirmative vote of a majority of all votes cast on the matter by holders of common shares, and any waiver of the Policy shall be conditioned on the approval of the waiver within twelve (12) months following the waiver by the affirmative vote of a majority of all votes cast on the matter by holders of common shares (and the matter subject to the waiver shall be rescinded in the event that such approval has not been received within the foregoing time period). All interpretations of the policy by the Board or the Compensation Committee shall be final.