SEC Filing | Brandywine Realty Trust

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Prepared and filed by St Ives Financial

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2005

		or

		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ___________

Commission file number 001-9106

Brandywine Realty Trust
(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization)

23-2413352
(I.R.S. Employer Identification No.)

401 Plymouth Road, Plymouth Meeting, Pennsylvania
(Address of principal executive offices)

19462
(Zip Code)

(610) 325-5600
Registrant’s telephone number

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No

A total of 56,179,075 Common Shares of Beneficial Interest, par value $0.01 per share, were outstanding as of November 9, 2005.

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BRANDYWINE REALTY TRUST
TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

		Page
Item 1.	Financial Statements (unaudited)

	Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004	3

	Consolidated Statements of Operations for the three- and nine-month periods ended September 30, 2005 and 2004	4

	Consolidated Statements of Other Comprehensive Income for the three- and nine-month periods ended September 30, 2005 and 2004	5

	Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2005 and 2004	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	37

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Submission of Matters to a Vote of Security Holders	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

	Signatures	40

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PART I – FINANCIAL INFORMATION
Item 1. – Financial Statements

BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share information)

				September 30, 2005			December 31, 2004

ASSETS
Real estate investments:
	Operating properties			$	2,568,070		$	2,483,134
	Accumulated depreciation				(373,127	)		(325,802	)

			Operating real estate investments, net		2,194,943			2,157,332
	Construction-in-progress				240,749			145,016
	Land held for development				86,086			61,517

			Total real estate investments, net		2,521,778			2,363,865

Cash and cash equivalents					23,340			15,346
Escrowed cash					16,174			17,980
Accounts receivable, net					7,955			11,999
Accrued rent receivable, net					42,977			32,641
Marketable securities					—			423
Investment in real estate ventures					13,335			12,754
Deferred costs, net					34,624			34,449
Intangible assets, net					81,275			101,056
Other assets					52,457			43,471

	Total assets			$	2,793,915		$	2,633,984

LIABILITIES AND BENEFICIARIES’ EQUITY
Mortgage notes payable				$	504,669		$	518,234
Unsecured notes					636,582			636,435
Unsecured credit facility					340,000			152,000
Accounts payable and accrued expenses					60,294			49,242
Distributions payable					27,712			27,363
Tenant security deposits and deferred rents					21,621			20,046
Acquired below market leases, net of accumulated amortization of $5,691 and $2,341					36,013			39,271
Other liabilities					3,825			1,525

	Total liabilities				1,630,716			1,444,116

Minority interest					38,333			42,866
Commitments and contingencies (Note 15)
Beneficiaries’ equity:
	Preferred Shares (shares authorized-10,000,000):
		7.50% Series C Preferred Shares, $0.01 par value; issued and outstanding-
			2,000,000 in 2005 and 2004		20			20
		7.375% Series D Preferred Shares, $0.01 par value; issued and outstanding-
			2,300,000 in 2005 and 2004		23			23
	Common Shares of beneficial interest, $0.01 par value; shares authorized
		100,000,000; issued and outstanding-56,179,075 in 2005 and 55,292,752 in 2004			562			553
	Additional paid-in capital				1,370,197			1,346,651
	Cumulative earnings				404,656			370,515
	Accumulated other comprehensive loss				(2,810	)		(3,130	)
	Cumulative distributions				(647,782	)		(567,630	)

			Total beneficiaries’ equity		1,124,866			1,147,002

	Total liabilities and beneficiaries’ equity			$	2,793,915		$	2,633,984

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share information)

				For the three-month periods ended September 30,						For the nine-month periods ended September 30,

					2005			2004			2005			2004

Revenue:
	Rents			$	81,348		$	66,528		$	244,232		$	194,524
	Tenant reimbursements				11,803			9,612			34,922			25,663
	Other				2,627			2,555			10,612			7,921

			Total revenue		95,778			78,695			289,766			228,108

Operating Expenses:
	Property operating expenses				27,078			21,890			84,652			64,094
	Real estate taxes				9,866			7,648			29,121			21,375
	Depreciation and amortization				28,535			18,280			84,790			50,913
	Administrative expenses				4,486			3,534			13,616			10,977

			Total operating expenses		69,965			51,352			212,179			147,359

Operating income					25,813			27,343			77,587			80,749

Other Income (Expense):
	Interest income				707			763			2,174			1,815
	Interest expense				(17,762	)		(11,474	)		(53,366	)		(35,526	)
	Equity in income of real estate ventures				745			665			2,296			1,573
	Net gain on sales of real estate				4,640			1,753			4,640			2,901

Income before minority interest					14,143			19,050			33,331			51,512
Minority interest attributable to continuing operations					(452	)		(254	)		(1,160	)		(2,139	)

Income from continuing operations					13,691			18,796			32,171			49,373

Discontinued operations:
	Loss from discontinued operations				(19	)		(27	)		(159	)		(241	)
	Net gain on disposition of discontinued operations				2,196			2,486			2,196			2,735
	Minority interest				(74	)		(89	)		(69	)		(91	)

Income from discontinued operations					2,103			2,370			1,968			2,403

Net income					15,794			21,166			34,139			51,776
Income allocated to Preferred Shares					(1,998	)		(2,677	)		(5,994	)		(7,372	)
Preferred Share redemption benefit					—			—			—			4,500

Income allocated to Common Shares				$	13,796		$	18,489		$	28,145		$	48,904

Basic earnings per Common Share:
		Continuing operations		$	0.21		$	0.34		$	0.47		$	1.02
		Discontinued operations			0.04			0.05			0.04			0.05

				$	0.25		$	0.39		$	0.50		$	1.07

Diluted earnings per Common Share:
		Continuing operations		$	0.21		$	0.34		$	0.47		$	1.02
		Discontinued operations			0.04			0.05			0.04			0.05

				$	0.24		$	0.39		$	0.50		$	1.07

Dividends declared per common share				$	0.44		$	0.44		$	1.32		$	1.32

Basic weighted average shares outstanding					56,071,973			46,929,049			55,734,114			45,565,650

Diluted weighted average shares outstanding					56,372,013			47,169,893			55,968,657			45,803,996

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
(unaudited, in thousands)

				For the three-month periods ended September 30,					For the nine-month periods ended September 30,

					2005			2004		2005			2004

Net Income				$	15,794		$	21,166	$	34,139		$	51,776
	Other comprehensive income:
		Unrealized gain on derivative financial instruments			—			—		—			305
		Reclassification of realized losses on derivative financial
			instruments to operations		113			—		340			2,723
		Unrealized gain (loss) on available-for-sale securities			—			227		237			(658	)
		Reclassification of realized gains on available for sale
			securities to operations		(257	)		—		(257	)		(154	)

	Total other comprehensive income (loss)				(144	)		227		320			2,216

Comprehensive income				$	15,650		$	21,393	$	34,459		$	53,992

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

	Nine-month periods ended September 30,

	2005			2004

Cash flows from operating activities:
Net income	$	34,139		$	51,776
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation		63,588			41,948
Amortization:
Deferred financing costs		1,939			1,559
Deferred leasing costs		6,425			7,614
Acquired above (below) market leases, net		(1,050	)		(120	)
Assumed lease intangibles		14,854			1,556
Deferred compensation costs		1,618			1,647
Straight-line rent		(10,852	)		(3,880	)
Provision for doubtful accounts		600			467
Real estate venture income in excess of distributions		(697	)		—
Net gain on sale of interests in real estate		(6,820	)		(5,636	)
Minority interest		1,229			2,230
Changes in assets and liabilities:
Accounts receivable		4,469			(2,417	)
Other assets		(12,837	)		6,156
Accounts payable and accrued expenses		5,861			(4,383	)
Tenant security deposits and deferred rents		628			713
Other liabilities		672			1,480

Net cash from operating activities		103,766			100,710

Cash flows from investing activities:
Acquisition of properties		(92,674	)		(569,454	)
Sales of properties, net		29,428			20,710
Capital expenditures		(136,801	)		(79,191	)
Investment in unconsolidated Real Estate Ventures		(258	)		(241	)
Escrowed cash		1,806			(641	)
Investment in marketable securities		404			—
Cash distributions from unconsolidated Real Estate Ventures
in excess of equity in income		390			255
Increase in cash due to consolidation of variable interest
entities		—			426
Leasing costs		(8,445	)		(6,580	)

Net cash from investing activities		(206,150	)		(634,716	)

Cash flows from financing activities:
Proceeds from Credit Facility borrowings		250,000			540,000
Repayments of Credit Facility borrowings		(62,000	)		(523,000	)
Repayments of mortgage notes payable		(13,565	)		(45,824	)
Proceeds from term loan borrowings		—			433,000
Repayments of term loan borrowing		—			(100,000	)
Repayments on employee stock loans		50			1,012
Debt financing costs		(234	)		(3,788	)
Exercise of stock options		19,283			4,868
Proceeds from issuance of shares, net		—			392,337
Minority partner contributions		—			19
Repurchases of Common Shares and minority interest units		(240	)		(95,436	)
Distributions paid to shareholders		(79,752	)		(63,786	)
Distributions to minority interest holders		(3,164	)		(3,967	)
Distributions to outside joint venture partners of consolidated
variable interest entities		—			(118	)

Net cash from financing activities		110,378			535,317

Increase in cash and cash equivalents		7,994			1,311
Cash and cash equivalents at beginning of period		15,346			8,552

Cash and cash equivalents at end of period	$	23,340		$	9,863

Supplemental disclosure:
Cash paid for interest, net of capitalized interest	$	27,374		$	27,911

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

1. THE COMPANY

Brandywine Realty Trust, a Maryland real estate investment trust (collectively with its subsidiaries, the “Company”), is a self-administered and self-managed real estate investment trust (a “REIT”) active in acquiring, developing, redeveloping, leasing and managing office and industrial properties. As of September 30, 2005, the Company’s portfolio included 227 office properties, 23 industrial facilities and one mixed-use property (collectively, the “Properties”) that contained an aggregate of approximately 19.6 million net rentable square feet. The Properties are located in the office and industrial markets in and surrounding Philadelphia, Pennsylvania, New Jersey and Richmond, Virginia. As of September 30, 2005, the Company held economic interests in nine unconsolidated real estate ventures that contained approximately 1.6 million net rentable square feet (the “Real Estate Ventures”) formed with third parties to develop or own commercial properties. In addition, the Company owns interests in two consolidated real estate ventures that own two office properties containing approximately 0.2 million net rentable square feet.

The Company owns its assets through Brandywine Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership and, as of September 30, 2005, owned a 96.6% interest in the Operating Partnership. The Operating Partnership owns a 95% interest in a taxable REIT subsidiary, Brandywine Realty Services Corporation, a Pennsylvania corporation (“BRSCO”). The remaining 5% of BRSCO is owned by a partnership comprised of a current executive and former executive of the Company, each of whom is a member of the Company’s Board of Trustees. The Operating Partnership owns a 100% interest in a taxable REIT subsidiary, BTRS, Inc., a Pennsylvania corporation (“BTRS”) (collectively, BRSCO and BTRS are known as the “Management Companies”). As of September 30, 2005, the Operating Partnership and the Management Companies were performing management and leasing services for 41 properties containing an aggregate of approximately 3.6 million net rentable square feet (including four of the Company’s Real Estate Ventures).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The consolidated financial statements have been prepared by the Company without audit except as to the balance sheet as of December 31, 2004, which has been derived from audited data, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the included disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting solely of normal recurring matters) for a fair statement of the financial position of the Company as of September 30, 2005, the results of its operations for the three- and nine-month periods ended September 30, 2005 and 2004 and its cash flows for the nine-month periods ended September 30, 2005 and 2004 have been included. The results of operations for such interim periods are not necessarily indicative of the results for a full year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation
The accompanying consolidated financial statements include all accounts of the Company, its majority-owned and/or controlled subsidiaries, which consist principally of the Operating Partnership as well as the Management Companies. The portions of these entities not owned by the Company are presented as minority interest as of and during the periods consolidated. All intercompany accounts and transactions have been eliminated in consolidation.

When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). The Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company controls. Entities that the Company accounts for under the equity method (i.e. at cost, increased or decreased by the Company’s share of earnings or losses, less distributions) include (i) entities that are VIEs and of which the Company is not deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company does not control, but over which the Company has the ability to exercise significant influence. The Company will reconsider its determination of whether an entity is a VIE and who the primary beneficiary is if certain events occur that are likely to cause a change in the original determinations.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue, impairment of long-lived assets and the allowance for doubtful accounts.

Operating Properties
Operating properties are carried at historical cost less accumulated depreciation and impairment losses. The cost of operating properties reflects their purchase price or development cost. Costs incurred for the acquisition and renovation of an operating property are capitalized to the Company’s investment in that property. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.

Purchase Price Allocation
The Company allocates the purchase price of properties to net tangible and identified intangible assets acquired based on fair values. Above-market and below-market in-place lease values for acquired properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) the Company’s estimate of the fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancellable term of the lease. Capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancellable terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining non-cancellable terms of the respective leases, including any fixed-rate renewal periods.

Other intangible assets also include amounts representing the value of tenant relationships and in-place leases based on the Company’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant. The Company estimates the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, include leasing commissions, legal and other related expenses. This intangible asset is amortized to expense over the remaining term of the respective leases. Company estimates of value are made using methods similar to those used by independent appraisers or by using independent appraisals. Factors considered by the Company in their analysis include an estimate of the carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from three to twelve months.

Characteristics considered by the Company in allocating value to its tenant relationships include the nature and extent of the Company’s business relationship with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The value of tenant relationship intangibles is amortized over the remaining initial lease term and expected renewals, but in no event longer than the remaining depreciable life of the building. The value of in-place leases is amortized over the remaining non-cancellable term of the respective leases and any fixed-rate renewal periods.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

In the event that a tenant terminates its lease, the unamortized portion of each intangible, including market rate adjustments, in-place lease values and tenant relationship values, would be charged to expense.

Revenue Recognition and Accounts Receivable
Rental revenue is recognized on the straight-line basis regardless of when payments are due. The cumulative difference between lease revenue recognized under the straight-line method and contractual lease payment terms is recorded as “accrued rent receivable” on the accompanying balance sheets. The straight-line rent adjustment increased revenue by approximately $4.4 million and $10.9 million for the three- and nine-month periods ended September 30, 2005 and approximately $1.0 million and $3.9 million for the three- and nine-month periods ended September 30, 2004. Tenant receivables and accrued rent receivables are carried net of the allowances for doubtful accounts of $4.7 million as of September 30, 2005 and $4.1 million as of December 31, 2004. The allowance is based on management’s evaluation of the collectability of receivables, taking into account tenant specific considerations as well as the overall credit of the tenant portfolio. The leases also typically provide for tenant reimbursement of common area maintenance and other operating expenses. Tenant reimbursement revenue is recorded when earned, as the underlying expense of the Properties is incurred. Other income is recorded when earned and is primarily comprised of termination fees received from tenants, bankruptcy settlement fees, third party leasing commissions, and third party management fees. Other income includes net termination fees of $1.0 million and $5.9 million for the three- and nine-month periods ended September 30, 2005, and $.03 million and $1.2 million during for the three- and nine-month periods ended September 30, 2004. Deferred rental revenue represents rental revenue received from tenants prior to their due dates.

Beginning in 2002, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, required us to separately report as discontinued operations the historical operating results attributable to operating properties sold and the applicable gain or loss on the disposition of the properties. The consolidated statements of operations for prior periods are also adjusted to conform with this classification. There is no impact on our previously reported consolidated financial position, net income or cash flows. In all cases, gains and losses are recognized using the full accrual method of accounting. Gains relating to transactions which do not meet the requirements of the full accrual method of accounting are deferred and recognized when the full accrual method of accounting criteria are met.

Stock-Based Compensation Plans
In December 2002, the Financial Accounting Standards Board issued SFAS 148 (“SFAS 148”), Accounting for Stock-Based Compensation – Transition and Disclosure. SFAS 148 amends SFAS 123 (“SFAS 123”), Accounting for Stock-Based Compensation, to provide alternative methods of transition for an entity that voluntarily adopts the fair value recognition method of recording stock option expense. SFAS 148 also amends the disclosure provisions of SFAS 123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock options on reported net income and earnings per share in annual and interim financial statements. The Company adopted SFAS 148 on a prospective basis for all grants subsequent to January 1, 2002.

Prior to 2002, the Company accounted for stock options issued under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees and Related Interpretations. The following table illustrates the effect on net income available to common shares and earnings per share if the fair value based method had been applied to all outstanding and unvested awards in each period (in thousands, except per share amounts):

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

	Three-month periods ended September 30,						Nine-month periods ended September 30,

		2005			2004			2005			2004

Net Income Available to Common Shares, as reported	$	13,796		$	18,489		$	28,145		$	48,904

Add: Stock based compensation expense included in reported net income		684			520			2,072			1,647
Deduct: Total stock based compensation expense determined under
fair value recognition method for all awards		(808	)		(659	)		(2,452	)		(2,064	)

Pro forma net income available to Common Shares	$	13,672		$	18,350		$	27,765		$	48,487

Earnings per Common Shares
Basic – as reported	$	0.25		$	0.39		$	0.50		$	1.07

Basic – pro forma	$	0.24		$	0.39		$	0.50		$	1.06


Diluted – as reported	$	0.24		$	0.39		$	0.50		$	1.07

Diluted – pro forma	$	0.24		$	0.39		$	0.50		$	1.06

Accounting for Derivative Instruments and Hedging Activities
The Company accounts for its derivative instruments and hedging activities under SFAS No. 133 (“SFAS 133”), Accounting for Derivative Instruments and Hedging Activities, and its corresponding amendments under SFAS No. 138, Accounting for Certain Derivative Instruments and Hedging Activities – An Amendment of SFAS 133. SFAS 133 requires the Company to measure every derivative instrument (including certain derivative instruments embedded in other contracts) at fair value and record them in the balance sheet as either an asset or liability. For derivatives designated as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in the fair value of the derivative are reported in other comprehensive income. Changes in the ineffective portions of hedges are recognized in earnings in the current period. For the nine-month periods ended September 30, 2005 and 2004, the Company was not party to any derivative contract designated as a fair value hedge.

The Company actively manages its ratio of fixed-to-floating rate debt. To manage its fixed and floating rate debt in a cost-effective manner, the Company, from time to time, enters into interest rate swap agreements as cash flow hedges, under which it agrees to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts.

As of June 30, 2004, the Company had in place an interest rate cap agreement designated as a cash flow hedge that was designed to reduce the impact of interest rate changes on its variable rate debt. The interest rate cap agreement effectively limited the interest rate on a mortgage with a notional value of $28 million at 8.7% per annum until July 2004. The notional amount at June 30, 2004 provided an indication of the extent of the Company’s involvement in these instruments at that time, but did not represent exposure to credit, interest rate or market risks. Prior to June 30, 2004, the Company had entered into interest rate swap agreements to effectively fix the LIBOR rate on $175 million of its credit facility borrowings at approximately 4.2%. On June 29, 2004, these hedges expired and all amounts held in accumulated other comprehensive income relating to these hedges have been reclassified to operations.

Income Taxes
The Company has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to maintain its qualification as a REIT, the Company is required, among other things, to distribute at least 90% of its REIT taxable income to its shareholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income tax with respect to that portion of its income which meets certain criteria and is distributed annually to the shareholders. Accordingly, no provision for federal income taxes is included in the accompanying consolidated financial statements. The Company plans to continue to operate so that it meets the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. If the Company were to fail to meet these requirements, the Company would be subject to federal income tax. The Company is subject to certain state and local taxes. Provision for such taxes has been included in general and administrative expenses in the Company’s consolidated statements of operations.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

New Pronouncements
In October 2004, the Financial Accounting Standards Board issued SFAS No. 123R (revised 2004), “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires companies to categorize share-based payments as either liability or equity awards. For liability awards, companies will remeasure the award at fair value at each balance sheet date until the award is settled. Equity classified awards are measured at the fair value and are not remeasured. SFAS 123R will be effective for annual periods beginning January 1, 2006. Awards issued, modified, or settled after the effective date will be measured and recorded in accordance with SFAS 123R. The Company believes that the implementation of this standard will not have a material effect on the Company’s consolidated financial position or results of operations.

In December 2004, the Financial Accounting Standards Board issued SFAS No. 153, “Accounting for Non-monetary Transactions” (“SFAS 153”). SFAS 153 requires non-monetary exchanges to be accounted for at fair value, recognizing any gain or loss, if the transactions meet a commercial-substance criterion and fair value is determinable. SFAS No. 153 is effective for non-monetary transactions occurring in fiscal years beginning after June 15, 2005. The Company believes that the implementation of this standard will not have a material effect on the Company’s consolidated financial position or results of operations.

In June 2005, the Financial Accounting Standards Board ratified the Emerging Issues Task Force (“EITF”) Consensus on Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.” The EITF agreed on a framework for evaluating when a general partner controls, and should consolidate, a limited partnership or a similar entity. The EITF is effective after June 29, 2005, for all newly formed limited partnerships and for any pre-existing limited partnerships that modify their partnership agreements after that date. General partners of all other limited partnerships must apply the consensus no later that the first reporting period in fiscal years beginning after December 15, 2005. The adoption of EITF 04-5 is not expected to have a material impact on the Company’s financial position or results of operations.

3. REAL ESTATE INVESTMENTS

As of September 30, 2005 and December 31, 2004, the carrying value of the Company’s operating properties was as follows:

	September 30, 2005		December 31, 2004

	(amounts in thousands)
Land	$	464,098	$	452,602
Building and improvements		1,958,458		1,892,153
Tenant improvements		145,514		138,379

	$	2,568,070	$	2,483,134

Acquisitions and Dispositions

The Company’s acquisitions are accounted for by the purchase method. The results of each acquired property are included in the Company’s results of operations from their respective purchase dates.

2005

During the nine-month period ended September 30, 2005, the Company acquired one industrial property containing 385,884 net rentable square feet, two office properties containing 283,511 net rentable square feet and 36.4 acres of developable land for an aggregate purchase price of $94.5 million. The Company sold one industrial property containing 385,884 net rentable square feet and three parcels of land containing 18.0 acres for an aggregate $30.2 million, realizing net gains totaling $6.8 million.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

During the three-month period ended September 30, 2005, the Company acquired two office properties containing 283,511 net rentable square feet and 8 acres of developable land for an aggregate purchase price of $52.7 million. The Company sold one industrial property containing 385,884 net rentable square feet and three parcels of land containing 18.0 acres for an aggregate $30.2 million, realizing net gains totaling $6.8 million.

2004

On September 21, 2004, the Operating Partnership completed the acquisition of 100% of the partnership interests in The Rubenstein Company, L.P. (“TRC”). Through the acquisition, the Operating Partnership acquired 14 office properties (the “TRC Properties”) located in Pennsylvania and Delaware that contain approximately 3.5 million net rentable square feet. The results of TRC’s operations have been included in the consolidated financial statements since that date.

The aggregate consideration for the TRC Properties was $631.3 million, including $29.3 million of closing costs, debt prepayment penalties and debt premiums that are included in the basis of the assets acquired. The consideration was paid with $540.4 million of cash, $79.3 million of debt assumed, $1.6 million of other liabilities assumed, and 343,006 Class A Units valued at $10.0 million. The value of the debt assumed was based on prevailing market rates at the time of acquisition. The value of the Class A Units was based on the average trading price of the Company’s common shares.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

	At September 21, 2004

Real estate investments
Land	$	105,302
Building and imp rovements		434,795
Tenant imp rovements		20,322

Total real estate investments acquired		560,419
Rent receivables		5,537
Other assets acquired:
Intangible assets:
In-Place leases		49,455
Relationship values		35,548
Above-market leases		13,240

Total intangible assets acquired		98,243
Other assets		6,292

Total Other assets		104,535

Total assets acquired		670,491
Liabilities assumed:
Mortgage notes payable		79,330
Security dep osits and deferred rent		618
Other liabilities:
Below-market leases		39,204
Other liabilities		943

Total other liabilities assumed		40,147

Total liabilities assumed		120,095

Net assets acquired	$	550,396

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

The Operating Partnership agreed to issue the sellers up to a maximum of $9.7 million of additional Class A Units if certain of the TRC Properties achieve at least 95% occupancy prior to September 21, 2007. At September 30, 2005, the maximum amount payable under this arrangement was $5.7 million. Any contingent amounts ultimately payable would represent additional purchase price and would be reflected within the basis of the assets acquired and liabilities assumed.

At the closing of this transaction, the Operating Partnership agreed not to sell the TRC Properties in a transaction that would trigger taxable income to the contributors (i.e., sellers) for periods ranging from three to 15 years. In the event that the Operating Partnership sells any of the properties in such a transaction within the applicable restricted period, the Operating Partnership will be required to pay significant tax liabilities that would be incurred by the contributors.

Pro forma information relating to the acquisition of TRC is presented below as if TRC was acquired and the related financing transactions occurred on January 1, 2004. These pro forma results are not necessarily indicative of the results which actually would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods (in thousands, except per share amounts):

	Three-month period ended September 30, 2004		Nine-month period ended September 30, 2004

	(unaudited)			(unaudited)
Pro forma revenue	$	98,901	$	288,048
Pro forma income from continuing operations		20,465		54,220

Earnings per share from continuing operations
Basic -- as reported	$	.34	$	1.02

Basic -- as pro forma	$	.33	$	.98

Diluted - as reported	$	.34	$	1.02

Diluted - as pro forma	$	.33	$	.98

In addition to the TRC acquisition discussed above, during the three-month period ended September 30, 2004, the Company acquired one office property containing approximately 170,000 rentable square feet and 59 acres of developable land in separate transactions for an aggregate purchase price of $22.9 million. Additionally, the Company purchased and sold a land parcel containing 93 acres in two separate transactions with unrelated third parties. The purchase and sale resulted in a net gain of approximately $1.5 million.

During the three-month period ended September 30, 2004, the Company recognized a $2.5 million deferred gain from the sale of a property in 2002 that did not qualify for gain recognition under the full-accrual method. During the third quarter 2004, the buyer of the property repaid the seller provided financing and the criteria for full-accrual method was met. The deferred gain recognized was presented within discontinued operations consistent with the historical operating results from the property.

During the nine-month period ended September 30, 2004, the Company sold two office properties containing 141,000 net rentable square feet, one industrial property containing 45,000 net rentable square feet and three land parcels containing 29.3 acres for an aggregate of $25.9 million, realizing a net gain of $1.7 million. During the three-month period ended September 30, 2004, the Company sold two land parcels containing 24.0 acres for an aggregate price of $1.6 million, realizing net gains totaling $0.2 million.

4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

As of September 30, 2005, the Company had an aggregate investment of approximately $13.3 million in nine unconsolidated Real Estate Ventures (net of returns of investment). The Company formed these ventures with unaffiliated third parties to develop office properties or to acquire land in anticipation of possible development of office properties. Seven of the Real Estate Ventures own eight office buildings that contain an aggregate of approximately 1.6 million net rentable square feet, one Real Estate Venture developed a hotel property that contains 137 rooms and one Real Estate Venture is developing an office property located in Charlottesville, Virginia.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

The Company also has investments in two real estate ventures (Four Tower Bridge Associates and Six Tower Bridge Associates) that are considered to be variable interest entities under FIN 46R and of which the Company is the primary beneficiary. The financial information for these two real estate ventures was consolidated into the Company’s consolidated financial statements effective March 31, 2004. Prior to March 31, 2004, the Company accounted for its investment in these two ventures under the equity method.

The Company accounts for its non-consolidating interests in its Real Estate Ventures using the equity method. Non-consolidating ownership interests range from 6% to 50%, subject to specified priority allocations in certain of the Real Estate Ventures. The Company’s investments, initially recorded at cost, are subsequently adjusted for the Company’s share of the Real Estate Ventures’ income or loss and cash contributions and distributions.

The following is a summary of the financial position of the Real Estate Ventures as of September 30, 2005 and December 31, 2004 (in thousands):

	September 30, 2005		December 31, 2004

Operating property, net of accumulated depreciation	$	286,704	$	294,378
Other assets		28,989		29,944
Liabilities		25,937		26,989
Debt		205,559		209,624
Equity		84,197		87,709
Company’s share of equity (Company basis)		13,335		12,754
		—		—

The following is a summary of results of operations of the Real Estate Ventures for the three- and nine-month periods ended September 30, 2005 and 2004 (in thousands):

	Three-month periods ended September 30,				Nine-month periods ended September 30,

		2005		2004		2005		2004

Revenue	$	14,800	$	11,740	$	46,938	$	33,370
Operating expenses		7,123		4,484		24,573		13,533
Interest expense, net		3,238		3,003		8,844		8,847
Depreciation and amortization		2,255		1,690		6,697		5,902
Net income		2,184		2,563		6,824		5,087
Company’s share of income (Company basis)		745		665		2,296		1,573

As of September 30, 2005, the Company had guaranteed repayment of approximately $0.6 million of loans for the Real Estate Ventures. The Company also provides customary environmental indemnities in connection with construction and permanent financing both for its own account and on behalf of the Real Estate Ventures.

5. INTANGIBLE ASSETS

As of September 30, 2005 and December 31, 2004, the Company’s intangible assets were comprised of the following (in thousands):

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

	September 30, 2005

	Total Cost		Accumulated Amortization			Deferred Costs, net

In-place lease value	$	48,118	$	(11,148	)	$	36,970
Tenant relationship value		37,540		(4,522	)		33,018
Above market leases acquired		14,819		(3,532	)		11,287

Total	$	100,477	$	(19,202	)	$	81,275


	December 31, 2004

	Total Cost		Accumulated Amortization			Deferred Costs, net

In-place lease value	$	55,165	$	(6,117	)	$	49,048
Tenant relationship value		40,570		(2,377	)		38,193
Above market leases acquired		15,685		(1,870	)		13,815

Total	$	111,420	$	(10,364	)	$	101,056

The reductions in the historical cost values during the nine-month period ended September 30, 2005 were due to re-allocations of the Company’s purchase price for the TRC Properties among the assets acquired and liabilities assumed based on final appraisals and the retirement of assets that became fully amortized during the aforementioned period.

6. MORTGAGE NOTES PAYABLE

The following table sets forth information regarding our mortgage indebtedness outstanding at September 30, 2005 and December 31, 2004 (in thousands):

Property / Location	September 30, 2005		December 31, 2004		Effective Interest Rate		Maturity Date

Grande B	$	79,398	$	80,429	7.48%		Jul-27
Two Logan Square		72,736		73,511	5.78%	(a)	Jul-09
Newtown Square/Berwyn Park/Libertyview		64,640		65,442	7.25%		May-13
Midlantic Drive/Lenox Drive/DCC I		64,146		64,942	8.05%		Oct-11
Grande A		61,374		62,177	7.48%		Jul-27
Plymouth Meeting Exec.		44,826		45,226	7.00%	(a)	Dec-10
Arboretum I, II, III & V		23,354		23,690	7.59%		Jul-11
Six Tower Bridge		15,162		15,394	7.79%		Aug-12
Grande A		12,214		17,157	6.60%	(b)	Jul-27
400 Commerce Drive		12,038		12,175	7.12%		Jun-08
Four Tower Bridge		10,795		10,890	6.62%		Feb-11
Croton Road		6,012		6,100	7.81%		Jan-06
200 Commerce Drive		5,928		5,976	7.12%	(a)	Jan-10
Southpoint III		5,545		5,877	7.75%		Apr-14
440 & 442 Creamery Way		5,619		5,728	8.55%		Jul-07
Norriton Office Center		5,211		5,270	8.50%		Oct-07
429 Creamery Way		2,968		3,087	8.30%		Sep-06
481 John Young Way		2,375		2,420	8.40%		Nov-07
Grande A		2,085		3,040	6.77%	(b)	Jul-27
111 Arrandale Blvd		1,058		1,100	8.65%		Aug-06
Interstate Center		817		959	5.06%	(b)	Mar-07

Principal balance outstanding		498,301		510,590
Plus: unamortized fixed-rate debt premiums		6,368		7,644

Total mortgage indebtedness	$	504,669	$	518,234

(a)		Loans were assumed upon acquisition of the related property. Interest rates presented above reflect the market rate at the time of acquisition.

(b)		For loans that bear interest at a variable rate, the rates in effect at September 30, 2005 have been presented. During the nine-month periods ended September 30, 2005 and 2004, the Company’s weighted-average interest rate on its mortgage notes payable was 7.21% and 7.12%, respectively.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

7. UNSECURED NOTES

The following table sets forth information regarding our unsecured notes outstanding (in thousands):

Year	September 30, 2005			December 31, 2004			Maturity	Stated Interest Rate		Effective Interest Rate (1)

2008	$	113,000		$	113,000		Dec-08	4.34	%	4.34	%
2009		275,000			275,000		Nov-09	4.50	%	4.62	%
2014		250,000			250,000		Nov-14	5.40	%	5.53	%

Total face amount	$	638,000		$	638,000
Less: unamortized discounts		(1,418	)		(1,565	)
Total unsecured notes	$	636,582		$	636,435

(1) Rates include the effect of amortization related to discounts and costs related to settlement of treasury lock agreements.

The indenture relating to the 2009 and 2014 unsecured notes contains various financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40%, (3) a debt service coverage ratio of greater than 1.5 to 1.0, and (4) an unencumbered asset value of not less than 150% of unsecured debt. In addition, the note purchase agreement relating to the 2008 unsecured notes contains covenants that are similar to the above covenants.

8. UNSECURED CREDIT FACILITY

The Company utilizes credit facility borrowings for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. The Company maintains a $450.0 million unsecured credit facility (the “Credit Facility”) that matures in May 2007. Borrowings under the Credit Facility generally bear interest at LIBOR plus a spread over LIBOR ranging from 0.65% to 1.2% based on the Company’s unsecured senior debt rating. The Company has the option to increase the Credit Facility to $600.0 million subject to the absence of any defaults and the Company’s ability to acquire additional commitments from our existing lenders or new lenders. As of September 30, 2005, the Company had $340.0 million of borrowings and $10.7 million of letters of credit outstanding under the Credit Facility, leaving $99.3 million of unused availability. For the nine-month periods ended September 30, 2005 and 2004, the weighted-average interest rate on the Company’s unsecured credit facilities, including the effect of interest rate hedges during 2004, was 4.40% during 2005 and 3.98% during 2004.

The Credit Facility requires the maintenance of certain ratios related to minimum net worth, debt-to-total capitalization and fixed charge coverage and various non-financial covenants.

9. RISK MANAGEMENT AND USE OF FINANCIAL INSTRUMENTS

Risk Management
In the normal course of its on-going business operations, the Company encounters economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk on its interest-bearing liabilities. Credit risk is the risk of inability or unwillingness of tenants to make contractually required payments. Market risk is the risk of declines in the value of properties due to changes in rental rates, occupancy levels, interest rates or other market factors affecting the valuation of properties held by the Company.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

Use of Derivative Financial Instruments
The Company’s use of derivative instruments is limited to the utilization of interest rate agreements or other instruments to manage interest rate risk exposures and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure, as well as to hedge specific transactions. The counterparties to these arrangements are major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company is potentially exposed to credit loss in the event of non-performance by these counterparties. However, because of the high credit ratings of the counterparties, the Company does not anticipate that any of the counterparties will fail to meet these obligations as they come due. The Company does not hedge credit or property value market risks.

The Company formally assesses, both at inception of the hedge and on an on-going basis, whether each derivative is highly-effective in offsetting changes in cash flows of the hedged item. If management determines that a derivative is not highly-effective as a hedge or if a derivative ceases to be a highly-effective hedge, the Company will discontinue hedge accounting prospectively.

As of September 30, 2005 and December 31, 2004, the Company was not party to any derivative financial instruments.

In October 2004, in anticipation of the offering of the 2009 and 2014 unsecured notes, the Company entered into treasury lock agreements. The treasury lock agreements were designated as cash flow hedges of interest rate risk and qualified for hedge accounting. The treasury lock agreements were for notional amounts totaling $194.8 million for an expiration of five years at an all-in-rate of 4.8% and for notional amounts totaling $188.0 million for an expiration of 10 years at an all-in-rate of 5.6%. The treasury lock agreements were settled in October 2004 upon the completion of the offering of the 2009 and 2014 unsecured notes at a total cost of approximately $3.2 million. The cost was recorded as a component of accumulated other comprehensive loss and is being amortized to interest expense over the terms of the respective unsecured notes.

Concentration of Credit Risk
Concentrations of credit risk arise when a number of tenants related to the Company’s investments or rental operations are engaged in similar business activities, or are located in the same geographic region, or have similar economic features that would cause their inability to meet contractual obligations, including those to the Company, to be similarly affected. The Company regularly monitors its tenant base to assess potential concentrations of credit risk. Management believes the current portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk. No tenant accounted for 5% or more of the Company’s rents during the three- and nine-month periods ended September 30, 2005 or 2004.

10. DISCONTINUED OPERATIONS

For the three- and nine-month periods ended September 30, 2005, income from discontinued operations relates to one property that the Company sold during 2005. The following table summarizes the revenue and expense information for the three- and nine-month periods ended September 30, 2005 (in thousands):

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

	Three-month period ended September 30, 2005			Nine-month period ended September 30, 2005

Revenue:
Rents	$	74		$	206
Tenant reimbursements		22			63
Other		–			6

Total revenue		96			275
Expenses:
Property operating expenses		72			178
Real estate taxes		-			85
Depreciation and amortization		43			171

Total operating expenses		115			434
Loss from discontinued operations before net gain
on sale of interests in real estate and minority interest		(19	)		(159	)
Net gain on sales of interest in real estate		2,196			2,196
Minority interest		(74	)		(69	)

Income from discontinued operations	$	2,103		$	1,968

For the three- and nine-month periods ended September 30, 2004, income from discontinued operations relates to one property that the Company sold during 2004. The following table summarizes the revenue and expense information for the three- and nine-month periods ended September 30, 2004 (in thousands):

	Three-month period ended September 30, 2004			Nine-month period ended September 30, 2004

Revenue:
Rents	$	109		$	377
Tenant reimbursements		77			373
Other		–			17

Total revenue		186			767
Expenses:
Property operating expenses		125			586
Real estate taxes		61			215
Depreciation and amortization		27			207

Total operating expenses		213			1,008
Loss from discontinued operations before net gain
on sale of interests in real estate and minority interest		(27	)		(241	)
Net gain on sales of interest in real estate		2,486			2,735
Minority interest		(89	)		(91	)

Income from discontinued operations	$	2,370		$	2,403

Discontinued operations have not been segregated in the consolidated statements of cash flows. Therefore, amounts for certain captions will not agree with respective data in the consolidated statements of operations.

11. MINORITY INTEREST

On September 20, 2005, the Operating Partnership declared a $0.44 per unit cash distribution to holders of Class A Units totaling $0.9 million.

In February 2004, the Operating Partnership redeemed all of its outstanding 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. We recorded a gain of $4.5 million related to the redemption.

BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

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12. BENEFICIARIES’ EQUITY

On September 20, 2005, the Company declared a distribution of $0.44 per Common Share, totaling $24.9 million, which was paid on October 17, 2005 to shareholders of record as of October 5, 2005. On September 20, 2005, the Company declared distributions on its Series C Preferred Shares and Series D Preferred Shares to holders of record as of September 30, 2005. These shares are entitled to a preferential return of 7.50% and 7.375%, respectively. Distributions paid on October 17, 2005 to holders of Series C Preferred Shares and Series D Preferred Shares totaled $0.9 million and $1.1 million, respectively.

13. EARNINGS PER COMMON SHARE

The following table details the number of shares and net income used to calculate basic and diluted earnings per share (in thousands, except share and per share amounts; results may not add due to rounding):

	Three-month periods ended September 30,

	2005						2004

		Basic			Diluted			Basic			Diluted

Income from continuing operations	$	13,691		$	13,691		$	18,796		$	18,796
Income from discontinued operations		2,103			2,103			2,370			2,370
Income allocated to Preferred Shares		(1,998	)		(1,998	)		(2,677	)		(2,677	)

Net income available to common shareholders	$	13,796		$	13,796		$	18,489		$	18,489


Weighted-average shares outstanding		56,071,973			56,071,973			46,929,049			46,929,049
Options		—			300,040			—			240,844

Total weighted-average shares outstanding		56,071,973			56,372,013			46,929,049			47,169,893

Earnings per Common Share:
Continuing operations	$	0.21		$	0.21		$	0.34		$	0.34
Discontinued operations		0.04			0.04			0.05			0.05

	$	0.25		$	0.24		$	0.39		$	0.39

	Nine-month periods ended September 30,

	2005						2004

		Basic			Diluted			Basic			Diluted

Income from continuing operations	$	32,171		$	32,171		$	49,373		$	49,373
Income from discontinued operations		1,968			1,968			2,403			2,403
Income allocated to Preferred Shares		(5,994	)		(5,994	)		(7,372	)		(7,372	)
Preferred share redemption gain		—			—			4,500			4,500

Net income available to common shareholders	$	28,145		$	28,145		$	48,904		$	48,904


Weighted-average shares outstanding		55,734,114			55,734,114			45,565,650			45,565,650
Options		—			234,543			—			238,346

Total weighted-average shares outstanding		55,734,114			55,968,657			45,565,650			45,803,996

Earnings per Common Share:
Continuing operations	$	0.47		$	0.47		$	1.02		$	1.02
Discontinued operations		0.04			0.04			0.05			0.05

	$	0.50		$	0.50		$	1.07		$	1.07

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

Securities (including Series A Preferred Shares of the Company and Class A Units of the Operating Partnership) totaling 1,945,267 and 10,933,632 as of September 30, 2005 and 2004, respectively, were excluded from the earnings per share computations because their effect would have been antidilutive. The Series A Preferred Shares were converted to Common Shares in November 2004.

14. SEGMENT INFORMATION

The Company currently manages its portfolio within five segments: (1) Pennsylvania–West, (2) Pennsylvania–North, (3) New Jersey, (4) Urban and (5) Virginia. The Pennsylvania–West segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs of Pennsylvania. The Pennsylvania–North segment includes properties north of Philadelphia in Berks, Bucks, Cumberland, Dauphin, Lehigh and Montgomery counties. The New Jersey segment includes properties in counties in the southern part of New Jersey including Burlington, Camden and Mercer counties and in Bucks County, Pennsylvania. The Urban segment includes properties in the City of Philadelphia, Pennsylvania and the state of Delaware. The Virginia segment includes properties primarily in Albemarle, Chesterfield and Henrico counties, the City of Richmond and Durham, North Carolina. Corporate is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions.

Segment information as of and for the three-month periods ended September 30, 2005 and 2004 is as follows (in thousands):

		Pennsylvania – West		Pennsylvania – North		New Jersey		Urban		Virginia		Corporate		Total

As of September 30, 2005:
Real estate investments, at cost:
Operating properties	$	887,637	$	556,987	$	553,213	$	350,563	$	219,670	$	-	$	2,568,070
Construction-in-progress		22,494		24,251		14,542		7,854		2,325		169,283		240,749
Land held for development		10,655		31,928		28,769		6,059		7,960		715		86,086

As of December 31, 2004:
Real estate investments, at cost:
Operating properties	$	830,622	$	533,142	$	553,969	$	349,911	$	215,490	$	-	$	2,483,134
Construction-in-progress		13,140		24,591		10,994		3,581		3,789		88,921		145,016
Land held for development		9,820		27,964		14,585		516		7,959		673		61,517

For the three-months ended September 30, 2005:
Total revenue	$	25,964	$	19,388	$	24,845	$	16,389	$	7,336	$	1,856	$	95,778
Property operating expenses
and real estate taxes		8,226		8,809		10,540		6,546		2,818		5		36,944

Net operating income	$	17,738	$	10,579	$	14,305	$	9,843	$	4,518	$	1,851	$	58,834


For the three-months ended September 30, 2004:
Total revenue	$	20,837	$	19,390	$	25,304	$	4,276	$	6,637	$	2,251	$	78,695
Property operating expenses
and real estate taxes		6,999		8,278		9,848		1,520		2,851		42		29,538

Net operating income	$	13,838	$	11,112	$	15,456	$	2,756	$	3,786	$	2,209	$	49,157

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

Segment information for the nine-month periods ended September 30, 2005 and 2004 is as follows (in thousands):

		Pennsylvania – West		Pennsylvania – North		New Jersey		Urban		Virginia		Corporate		Total

For the nine-months ended September 30, 2005:
Total revenue	$	82,340	$	57,864	$	74,724	$	48,814	$	21,653	$	4,371	$	289,766
Property operating expenses
and real estate taxes		28,396		26,404		30,726		19,584		8,515		148		113,773

Net operating income	$	53,944	$	31,460	$	43,998	$	29,230	$	13,138	$	4,223	$	175,993

For the nine-months ended September 30, 2004:
Total revenue	$	60,458	$	56,910	$	73,799	$	10,895	$	20,028	$	6,018	$	228,108
Property operating expenses
and real estate taxes		19,793		24,844		27,847		4,265		8,423		297		85,469

Net operating income	$	40,665	$	32,066	$	45,952	$	6,630	$	11,605	$	5,721	$	142,639

Net operating income is defined as total revenue less property operating expenses and real estate taxes. Below is a reconciliation of consolidated net operating income to net income (in thousands):

		Three-month periods ended September 30,						Nine-month period ended September 30,

			2005			2004			2005			2004

Consolidated net operating income		$	58,834		$	49,157		$	175,993		$	142,639
Less:
	Interest income		707			763			2,174			1,815
	Interest expense		(17,762	)		(11,474	)		(53,366	)		(35,526	)
	Depreciation and amortization		(28,535	)		(18,280	)		(84,790	)		(50,913	)
	Administrative expenses		(4,486	)		(3,534	)		(13,616	)		(10,977	)
	Minority interest attributable to continuing
	operations		(452	)		(254	)		(1,160	)		(2,139	)
Plus:
	Equity in income of real estate ventures		745			665			2,296			1,573
	Net gain on sales of interests in real estate		4,640			1,753			4,640			2,901

Income from continuing operations			13,691			18,796			32,171			49,373
Income from discontinued operations			2,103			2,370			1,968			2,403

Net income		$	15,794		$	21,166		$	34,139		$	51,776

15. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is involved from time to time in litigation on various matters, including disputes with tenants and disputes arising out of agreements to purchase or sell properties. Given the nature of the Company’s business activities, these lawsuits are considered routine to the conduct of its business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state, and local governments. The Company’s compliance with existing laws has not had a material adverse effect on its financial condition and results of operations, and the Company does not believe it will have a material adverse effect in the future. However, the Company cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on its current Properties or on properties that the Company may acquire.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

Related Party Transaction

We are a party to an agreement with one of our Trustees (Donald E. Axinn) in which we agreed to fund $5.5 million in September 2010 to acquire a fifty percent interest in an approximately 141,725 square foot office building located at 101 Paragon Drive, Montvale, New Jersey. Our agreement provides for proceeds of our $5.5 million payment to be used (together with funds provided by Mr. Axinn) to repay in full the third party loan that encumbers this property.

Ground Rent

Future minimum rental payments under the terms of all non-cancelable ground leases under which the Company is the lessee are expensed on a straight-line basis regardless of when payments are due.

Other Commitments or Contingencies

As part of our TRC acquisition, the Operating Partnership agreed to issue to the sellers up to a maximum of $9.7 million of Class A Units of the Operating Partnership if certain of the acquired properties achieve at least 95% occupancy prior to September 21, 2007. At September 30, 2005, the maximum amount payable under this arrangement was $5.7 million.

As part of the TRC acquisition, the Company acquired an interest in Two Logan Square, a 696,477 square foot office building in Philadelphia, Pennsylvania, primarily through a second and third mortgage secured by this property pursuant to which the Company receives substantially all cash flows from the property. The Company currently does not expect to take title to Two Logan Square until, at the earliest, September 2019. In the event that the Company takes title to Two Logan Square upon a foreclosure of its mortgages, the Company has agreed to make a payment to an unaffiliated third party with a residual interest as a fee owner of this property. The amount of the payment would be $0.6 million if we must pay a state and local transfer tax upon taking title, or $2.9 million if no transfer tax is payable upon the transfer.

As part of the TRC acquisition and several of our other acquisitions, the Company has agreed not to sell the acquired properties. In the case of TRC, the Company agreed not to sell the acquired properties for periods ranging from three to 15 years from the acquisition date as follows: 201 Radnor Financial Center, 555 Radnor Financial Center and 300 Delaware Avenue (three years); One Rodney Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square and Radnor Corporate Center (15 years). The Company also owns 14 other properties that aggregate 1.0 million square feet and have agreed not to sell these properties for periods that expire through 2008. These agreements generally provide that we may dispose of the subject Properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Code or in other tax deferred transactions. In the event that the Company sells any of the properties within the applicable restricted period in non-exempt transactions, the Company has agreed to pay significant tax liabilities that would be incurred by the parties who sold the applicable property

The Company invests in its Properties and regularly incurs capital expenditures in the ordinary course of business to maintain the Properties. The Company believes that such expenditures enhance the competitiveness of the Properties. The Company also enters into construction, utility and service contracts in the ordinary course of business which may extend beyond one year. These contracts include terms that provide for cancellation with insignificant or no cancellation penalties.

16. SUBSEQUENT EVENT

Prentiss Transaction

On October 3, 2005, we, together with Brandywine Operating Partnership, entered into an agreement and plan of merger (the “Merger Agreement”) that provides for our acquisition of Prentiss Properties Trust (“Prentiss”) and its operating subsidiary, Prentiss Properties Acquisition Partners, L.P. (“Prentiss OP”). In the merger, each Prentiss common share (a “Prentiss Common Share”) will be converted into the right to receive 0.69 of a Brandywine common share (a “Brandywine Common Share”) and $21.50 in cash, subject to adjustment if a pre-closing cash dividend is paid as described below (the “Per Share Merger Consideration”). Cash will be paid instead of fractional shares. In the merger, each unit of a limited partnership interest in Prentiss OP (“Prentiss OP Units”) will, at the option of the holder, be converted into Prentiss Common Shares with the right to receive the Per Share Merger Consideration or 1.3799 of our Class A Units (“Brandywine Class A Units”), subject to adjustment if the pre-closing cash dividend described below is paid. In addition, each series D preferred share of Prentiss outstanding at closing of the merger will be converted into one newly created Brandywine series E preferred share.

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BRANDYWINE REALTY TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

As part of the merger transaction, we and Prentiss have entered into separate agreements with The Prudential Insurance Company of America (“Prudential”) that provide for the acquisition by insurance company separate accounts or funds managed by Prudential (either on the day prior to, or the day of, the closing of the merger) of Prentiss properties that contain approximately 4.32 million net rentable square feet (“Prudential Properties”) for total consideration of approximately $747.7 million. If the Prudential Properties are sold on the day prior to the closing of the merger, then the Prentiss Board would declare a cash dividend that would be payable to holders of Prentiss Common Shares of record on such date and the cash portion of the Per Share Merger Consideration would be reduced by the per share amount of such dividend.

The total consideration payable in the merger (including the proceeds from the sale of the Prudential Properties described below and excluding transaction and severance expenses that will be incurred in connection with the merger) will be approximately $3.2 billion, consisting of $2.1 billion in cash and assumption of Prentiss debt and approximately 35.5 million Brandywine Common Shares.

Completion of the merger is subject to a number of closing conditions, including approval of the merger by holders of Prentiss Common Shares and approval by holders of Brandywine Common Shares of the issuance of Brandywine Common Shares in the merger.

We have provided additional information about this transaction in our Current Report on Form 8-K that we filed with the SEC on October 4, 2005.

Interest Rate Swap

In October 2005, the Company entered into forward starting swaps in anticipation of a long-term fixed rate financing transaction. The forward starting swaps are for notional amounts totaling $125.0 million for an expiration of five years at a fixed rate of 4.9% and for notional amounts totaling $125.0 million for an expiration of ten years at a fixed rate of 5.1%.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein. This Form 10-Q contains forward-looking statements for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934 and as such may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that these expectations will be realized. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Factors that could cause actual results to differ materially from management’s current expectations include, but are not limited to, changes in general economic conditions, changes in local real estate conditions (including changes in rental rates and the number of competing properties), changes in the economic conditions affecting industries in which the Company’s principal tenants compete, the Company’s failure to lease unoccupied space in accordance with the Company’s projections, the failure of the Company to re-lease occupied space upon expiration of leases, the bankruptcy of major tenants, changes in prevailing interest rates, the unavailability of equity and debt financing, unanticipated costs associated with the acquisition and integration of the Company’s acquisitions (including the Company’s pending acquisition by merger of Prentiss), costs to complete and lease-up pending developments, increased costs for, or lack of availability of, adequate insurance, including for terrorist acts, demand for tenant services beyond those traditionally provided by landlords, potential liability under environmental or other laws, the existence of complex regulations relating to the Company’s status as a REIT and to the Company’s acquisition, disposition and development activities, the adverse consequences of the Company’s failure to qualify as a REIT and the other risks identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

OVERVIEW

The Company currently manages its portfolio within five geographic segments: (1) Pennsylvania–West, (2) Pennsylvania–North, (3) New Jersey, (4) Urban and (5) Virginia. The Company believes it has established an effective platform in these office and industrial markets that provides a foundation for achieving its goals of maximizing market penetration, optimizing operating economies of scale and creating long-term investment value.

As of September 30, 2005, the Company’s portfolio consisted of 227 office properties, 23 industrial facilities and one mixed-use property that contained an aggregate of approximately 19.6 million net rentable square feet. As of September 30, 2005, we held economic interests in nine unconsolidated real estate ventures that contained approximately 1.6 million net rentable square feet (the “Real Estate Ventures”) formed with third parties to develop or own commercial properties. In addition, we own interests in two consolidated real estate ventures that own two office properties containing approximately 0.2 million net rentable square feet.

On October 3, 2005, we entered into a merger agreement with Prentiss, a Dallas, Texas-based REIT focused on office and industrial properties. Under the merger agreement, we will acquire Prentiss and its subsidiaries for a combination of cash, debt assumption and common equity. We currently expect the transaction to close in December or the first quarter of 2006. Consummation of the transaction is subject to customary closing conditions and a shareholder vote.

The Company receives income primarily from rental revenue (including tenant reimbursements) from the Properties and, to a lesser extent, from the management of properties owned by third parties and from investments in the Real Estate Ventures.

The Company’s financial performance is dependent upon the demand for office and other commercial space in its markets. Current economic conditions, including recessionary pressures and capital market volatility, have enhanced the challenges facing the Company.

The Company seeks revenue growth through an increase in occupancy of its portfolio (90.2% at September 30, 2005, 86.9% including the five lease-up assets acquired as part of the TRC acquisition in September 2004) and through acquisitions. However, with a downturn in general leasing activity, owners of commercial real estate, including the Company, are experiencing longer periods of rental downtime and are incurring higher capital costs and leasing commissions to achieve targeted tenancies.

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As the Company seeks to increase revenue, management also focuses on strategies to minimize operating risks, including (i) tenant rollover risk, (ii) tenant credit risk and (iii) development risk.

Tenant Rollover Risk:
The Company is subject to the risk that, upon expiration, leases may not be renewed, the space may not be re-leased, or the terms of renewal or re-leasing (including the cost of renovations) may be less favorable than the current lease terms. Leases totaling approximately 2.8% of the net rentable square feet of the Properties as of September 30, 2005 expire without penalty through the end of 2005. In addition, leases totaling approximately 11.3% of the net rentable square feet of the Properties as of September 30, 2005 are scheduled to expire without penalty in 2006. The Company maintains an active dialogue with its tenants in an effort to achieve lease renewals. The Company’s retention rate for leases that were scheduled to expire in the nine-month period ended September 30, 2005 was 73.3%. If the Company is unable to renew leases for a substantial portion of the space under expiring leases, or promptly re-lease this space at anticipated rental rates, the Company’s cash flow could be adversely impacted.

Tenant Credit Risk:
In the event of a tenant default, the Company may experience delays in enforcing its rights as a landlord and may incur substantial costs in protecting its investment. Management regularly evaluates its accounts receivable reserve policy in light of its tenant base and general and local economic conditions. The accounts receivable allowances were $4.7 million or 8.5% of total receivables (including accrued rent receivable) as of September 30, 2005 compared to $4.1 million or 8.4% of total receivables (including accrued rent receivable) as of December 31, 2004.

Development Risk:
As of September 30, 2005, the Company had in development two office properties and had in redevelopment three office properties aggregating 1.2 million square feet. The total net investment in these projects is estimated to be $233.8 million of which $178.4 million had been incurred as of September 30, 2005. As of September 30, 2005, these projects were approximately 67% leased. One of these development properties is Cira Centre, a 29-story office tower located adjacent to Amtrak’s 30^th Street Station in the University City District of Philadelphia. The total net investment in this project is estimated to be $177.6 million and the Company expects to complete the project in the fourth quarter of 2005. As of September 30, 2005, the office portion of this project was approximately 93% leased with occupancy to occur over the next several quarters. While the Company is actively marketing space at these projects to prospective tenants, management cannot provide assurance as to the timing or terms of any leases for such space. If one or more of the Company’s assumptions regarding the successful efforts of development and leasing are incorrect, the resulting adjustments could impact earnings.

ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS

On October 3, 2005, we entered into an agreement and plan of merger (the “Merger Agreement”) that provides for our acquisition of Prentiss and its operating subsidiary, Prentiss Properties Acquisition Partners, L.P. (“Prentiss OP”). In the merger, each Prentiss common share (a “Prentiss Common Share”) will be converted into the right to receive 0.69 of a Brandywine common share (a “Brandywine Common Share”) and $21.50 in cash, subject to adjustment if a pre-closing cash dividend is paid as described below (the “Per Share Merger Consideration”). Cash will be paid instead of fractional shares. In the merger, each unit of a limited partnership interest in Prentiss OP (“Prentiss OP Units”) will, at the option of the holder, be converted into Prentiss Common Shares with the right to receive the Per Share Merger Consideration or 1.3799 of our Class A Units (“Brandywine Class A Units”), subject to adjustment if the pre-closing cash dividend described below is paid. In addition, each series D preferred share of Prentiss outstanding at closing of the merger will be converted into one newly created Brandywine series E preferred share.

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We have provided additional information about this transaction in our Current Report on Form 8-K that we filed with the SEC on October 4, 2005.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and assumptions on historical experience and current economic conditions. On an on-going basis, management evaluates its estimates and assumptions including those related to revenue, impairment of long-lived assets and the allowance for doubtful accounts. Actual results may differ from those estimates and assumptions.

The Company’s Annual Report on Form 10-K for the year ended December 31, 2004, contains a discussion of the Company’s critical accounting policies. There have been no significant changes in the Company’s critical accounting policies since December 31, 2004. See also Note 2 in the Company’s unaudited consolidated financial statements for the nine-month period ended September 30, 2005 as set forth herein. Management discusses the Company’s critical accounting policies and management’s judgments and estimates with the Company’s Audit Committee.

RESULTS OF OPERATIONS

Comparison of the Three-Month Periods Ended September 30, 2005 and 2004

The table below shows selected operating information for the Same Store Property Portfolio and the Total Portfolio. The Same Store Property Portfolio consists of 226 Properties containing an aggregate of approximately 15.0 million net rentable square feet that were owned for the entire three-month periods ended September 30, 2005 and 2004. This table also includes a reconciliation from the Same Store Property Portfolio to the Total Portfolio net income (i.e., all properties owned by us as during the three-month periods ended September 30, 2005 and 2004) by providing information for the properties which were acquired, sold, or placed into service and administrative/elimination information for the three-month periods ended September 30, 2005 and 2004.

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	Same Store Property Portfolio						Properties Acquired (a)		Development Properties		Administrative/ Eliminations (b)				Total Portfolio

(dollars in thousands)	2005	2004	Increase/ (Decrease)		% Change		2005	2004	2005	2004	2005		2004		2005		2004		Increase/ (Decrease)		% Change

Revenue:
Rents	$60,973	$62,004	($1,031	)	-2	%	$18,737	$1,730	$1,638	$2,794	$0		$0		$81,348		$66,528		$14,820		22	%
Tenant reimbursements	8,023	8,093	(70	)	-1	%	2,999	192	156	120	625		1,207		11,803		9,612		2,191		23	%
Other	658	277	381		100	%	140	1	503	26	1,326		2,251		2,627		2,555		72		3	%

Total revenue	69,654	70,374	(720	)	-1	%	21,876	1,923	2,297	2,940	1,951		3,458		95,778		78,695		17,083		22	%
Operating Expenses:
Property operating expenses	21,776	22,406	(630	)	-3	%	7,374	693	698	563	(2,770	)	(1,772	)	27,078		21,890		5,188		24	%
Real estate taxes	7,254	7,107	147		2	%	2,278	71	334	470	-		-		9,866		7,648		2,218		29	%
Depreciation and amortization	16,964	16,281	683		4	%	10,506	912	1,169	427	(104	)	660		28,535		18,280		10,255		56	%
Administrative expenses	-	-	-		0	%	-	3	-	-	4,486		3,531		4,486		3,534		952		27	%

Total property operating expenses	45,994	45,794	200		0	%	20,158	1,679	2,201	1,460	1,612		2,419		69,965		51,352		18,613		36	%

Operating Income	23,660	24,580	(920	)	-4	%	1,718	244	96	1,480	339		1,039		25,813		27,343		(1,530	)	-6	%
Other Income (Expense):
Interest income															707		763		(56	)	-7	%
Interest expense															(17,762	)	(11,474	)	(6,288	)	55	%
Equity in income of real estate ventures															745		665		80		12	%
Net gain on sales of interest in real estate															4,640		1,753		2,887		100	%

Income before minority interest															14,143		19,050		(4,907	)	-26	%
Minority interest attributable to
continuing operations															(452	)	(254	)	(198	)	-78	%

Income from continuing operations															13,691		18,796		(5,105	)	-27	%
Income from discontinued operations															2,103		2,370		(267	)	-11	%

Net Income															$15,794		$21,166		($5,372	)	-25	%

EXPLANATORY NOTES
(a)	-	Represents the operations of properties acquired that are not included in the definition of the Same Store Property Portfolio, primarily the TRC Properties.
(b)	-	Represents certain revenue and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation.

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Revenue

Revenue increased by $17.1 million primarily due to properties that were acquired in 2004, most significantly the TRC Properties. Revenue for Same Store Properties decreased by $0.7 million as a result of the timing of leases being entered into as well as a decrease in average rents collected. Average occupancy for the Same Store Properties increased to 90.9 % in 2005 from 90.7% in 2004.

Operating Expenses and Real Estate Taxes

Property operating expenses increased by $5.2 million in 2005 primarily due to the properties acquired in the latter half of 2004 and higher expense levels in 2005 on the Same Store Properties. Property operating expenses for the Same Store Properties decreased by $0.6 million in 2005 over 2004 due to decreases in repairs and maintenance expenses at various Same Store Properties.

Real estate taxes increased by $2.2 million primarily due to the properties acquired in the latter half of 2004, most significantly the TRC acquisition. Real estate taxes for the Same Store Properties increased by $0.1 million in 2005 as a result of higher tax rates and property assessments.

Depreciation and Amortization Expense

Depreciation and amortization expense increased by $10.3 million in 2005 primarily due to the properties acquired in the second half of 2004 and amortization from additional tenant improvements and leasing commissions incurred over the year.

Administrative Expenses

Administrative expenses increased by $1.0 million in 2005 primarily due to the cost of additional personnel hired as part of the TRC acquisition in September 2004 and higher compensation and benefits costs for employees.

Interest Expense

Interest expense increased by $6.3 million in 2005 primarily due to increased debt from the Company’s fixed rate unsecured notes issued in the fourth quarter of 2004 offset by a decrease in the effective borrowing cost under the Company’s unsecured credit facilities, including the effect of interest rate hedges during 2004, as well as an increase in the amount of interest capitalized during 2005 over the comparable 2004 period.

Net Gain on Sales of Real Estate

During the three-month period ended September 30, 2005, the Company sold three parcels of land, realizing net gains totaling $4.6 million, an increase from a net gain of $1.8 million in 2004 for sales of non-operating parcels of land.

Minority Interest

Minority interest from continuing operations represents the equity in income attributable to the portion of the Operating Partnership not owned by the Company. Minority interest from continuing operations increased by $0.2 million in 2005 primarily due to the proportionate share of the gain on two land parcels during the third quarter of 2005.

Discontinued Operations

Discontinued operations decreased by $0.3 million in 2005 primarily due to the timing of sales for assets included in discontinued operations.

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Comparison of the Nine-Month Periods Ended September 30, 2005 and 2004

The table below shows selected operating information for the Same Store Property Portfolio and the Total Portfolio. The Same Store Property Portfolio consists of 226 Properties containing an aggregate of approximately 15.0 million net rentable square feet that were owned for the entire nine-month periods ended September 30, 2005 and 2004. This table also includes a reconciliation from the Same Store Property Portfolio to the Total Portfolio (i.e., all properties owned by us during the nine-month periods ended September 30, 2005 and 2004) by providing information for the properties which were acquired, sold, or placed into service and administrative/elimination information for the nine-month periods ended September 30, 2005 and 2004.

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	Same Store Property Portfolio						Properties Acquired (a)		Development Properties			Administrative/ Eliminations (b)				Total Portfolio

(dollars in thousands)	2005	2004	Increase/ (Decrease)		% Change		2005	2004	2005		2004	2005		2004		2005		2004		Increase/ (Decrease)		% Change

Revenue:
Rents	$184,982	$186,411	($1,429	)	-1	%	$55,230	$3,229	$4,020		$4,884	$0		$0		$244,232		$194,524		$49,708		26	%
Tenant reimbursements	24,265	23,808	457		2	%	8,968	384	439		178	1,250		1,293		34,922		25,663		9,259		36	%
Other	5,486	1,814	3,672		100	%	702	12	582		51	3,842		6,044		10,612		7,921		2,691		34	%

Total revenue	214,733	212,033	2,700		1	%	64,900	3,625	5,041		5,113	5,092		7,337		289,766		228,108		61,658		27	%

Operating Expenses:
Property operating expenses	68,226	67,308	918		1	%	22,060	1,211	1,965		1,869	(7,599	)	(6,294	)	84,652		64,094		20,558		32	%
Real estate taxes	21,267	20,343	924		5	%	6,971	94	871		740	12		198		29,121		21,375		7,746		36	%
Depreciation and amortization	51,150	47,219	3,931		8	%	29,475	541	2,395		1,227	1,770		1,926		84,790		50,913		33,877		67	%
Administrative expenses	1	-	1		0	%	2	-	-		63	13,613		10,914		13,616		10,977		2,639		24	%

Total property operating expenses	140,644	134,870	5,774		4	%	58,508	1,846	5,231		3,899	7,796		6,744		212,179		147,359		64,820		44	%

Operating Income	74,089	77,163	(3,074	)	-4	%	6,392	1,779	(190	)	1,214	(2,704	)	593		77,587		80,749		(3,162	)	-4	%
Other Income (Expense):
Interest income																2,174		1,815		359		20	%
Interest expense																(53,366	)	(35,526	)	(17,840	)	50	%
Equity in income of real estate ventures																2,296		1,573		723		46	%
Net gain on sales of interest in real estate																4,640		2,901

Income before minority interest																33,331		51,512		(19,920	)	-39	%
Minority interest attributable to
continuing operations																(1,160	)	(2,139	)	979		46	%

Income from continuing operations																32,171		49,373		(18,941	)	-38	%
Income from discontinued operations																1,968		2,403		(435	)	-18	%

Net Income																$34,139		$51,776		($19,376	)	-37	%

EXPLANATORY NOTE
(a)	-	Represents the operations of properties acquired that are not included in the definition of the Same Store Property Portfolio, primarily the TRC Properties.
(b)	-	Represents certain revenue and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation.

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Revenue

Revenue increased by $61.7 million primarily due to properties that were acquired in 2004, primarily the TRC Properties, and an increase in other income in 2005 as compared to 2004. Other revenue represents lease termination fees, bankruptcy settlement proceeds, leasing commissions and third-party management fees. Total portfolio other revenue increased by $2.7 million when comparing the nine-month period ended September 30, 2005 to the comparable period in 2004 primarily due to an increase in net termination fee associated with tenant terminations in 2005 offset by the settlement of litigation totaling $1.0 million plus accrued interest on the Company’s security deposit in 2004.

Operating Expenses and Real Estate Taxes

Property operating expenses increased by $20.6 million in 2005 primarily due to the properties acquired in the latter half of 2004 and higher expense levels in 2005 on the Same Store Properties. Property operating expenses for the Same Store Properties increased by $0.9 million in 2005 over 2004 due to increases in snow removal costs, utility expenses and repairs and maintenance expenses at various Same Store Properties.

Real estate taxes increased by $7.7 million primarily due to the properties acquired in the latter half of 2004 most significantly the TRC acquisition. Real estate taxes for the Same Store Properties increased by $0.9 million in 2005 as a result of higher tax rates and property assessments.

Depreciation and Amortization Expense

Depreciation and amortization expense increased by $33.9 million in 2005 primarily due to the properties acquired in the second half of 2004 and amortization from additional tenant improvements and leasing commissions incurred over the year.

Administrative Expenses

Administrative expenses increased by $2.6 million in 2005 primarily due to the cost of additional personnel hired as part of the TRC acquisition in September 2004, higher compensation and benefits costs for employees and increased spending on process and technology improvements.

Interest Expense

Interest expense increased by $17.8 million in 2005 primarily due to increased debt from the Company’s fixed rate unsecured notes issued in the fourth quarter of 2004 offset by a decrease in the effective borrowing cost under the Company’s unsecured credit facilities, including the effect of interest rate hedges during 2004, as well as an increase in the amount of interest capitalized during 2005 over the comparable 2004 period.

Equity in Income of Real Estate Ventures

Equity in income of Real Estate Ventures increased by $0.7 million in 2005 as a result of increased net income from the Real Estate Ventures.

Net Gain on Sales of Real Estate

During the nine-month period ended September 30, 2005, the Company sold three parcels of land, realizing net gains totaling $4.6 million, an increase from a net gain of $2.9 million in 2004.

Minority Interest

Minority interest from continuing operations represents the equity in income attributable to the portion of the Operating Partnership not owned by the Company. Minority interest from continuing operations decreased by $1.0 million in 2005 primarily due to decreased net income (as a result of a decrease in net gain on sales of interest in real estate and increased depreciation and interest expense).

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Discontinued Operations

Discontinued operations decreased by $0.4 million in 2005 primarily due to the timing of sales for assets included in discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

General

Our principal liquidity needs for the next twelve months are as follows:

	•	fund normal recurring expenses,
	•	fund acquisition and transaction costs in our pending acquisition by merger of Prentiss,
	•	meet debt service requirements,
	•	fund capital expenditures, including capital and tenant improvements and leasing costs,
	•	fund current development costs, including continued development of Cira Centre in University City, Philadelphia, and
	•	fund distributions declared by our Board of Trustees.

We believe that these needs will be satisfied using cash flows generated by operations and provided by financing activities. Rental revenue, recovery income from tenants, and other income from operations are our principal sources of cash used to pay operating expenses, debt service, recurring capital expenditures and the minimum distribution required to maintain our REIT qualification. We seek to increase cash flows from our existing properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our sources of revenue also include third-party fees generated by our property management, leasing, development and construction businesses. Consequently, we believe our revenue, together with proceeds from financing activities, will continue to provide the necessary funds for our short-term liquidity needs. However, material changes in these factors may adversely affect our net cash flows. Such changes, in turn, would adversely affect our ability to fund distributions, debt service payments and tenant improvements. In addition, a material adverse change in our cash provided by operations may affect the financial performance covenants under our unsecured Credit Facility and unsecured notes.

Our principal recurring liquidity needs for periods beyond twelve months are for the costs of developments, redevelopments, property acquisitions, scheduled debt maturities, major renovations, expansions and other non-recurring capital improvements. We draw on multiple financing sources to fund our principal recurring long-term capital needs. Our Credit Facility is utilized for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. In the fourth quarter of 2004 we completed two offerings of unsecured notes and expect to utilize the debt market and common equity as capital sources for other long-term capital needs.

As a result of our pending acquisition by merger of Prentiss, we will have additional short and long-term liquidity requirements. Historically, we have satisfied these types of requirements principally through the most advantageous source of capital at that time, which has included public offerings of unsecured debt and private placements of secured and unsecured debt, sales of equity, capital raised through the disposition of assets, and joint venture capital transactions. We believe these sources of capital will continue to be available in the future to fund our capital needs. In conjunction with our pending acquisition, we received a commitment from affiliates of JPMorgan for (i) a 364-day term loan in the amount of $750 million, (ii) an interim term loan in the amount of $240 million, and (iii) a back-stop revolving credit facility in the amount of $600 million. We expect to use proceeds from borrowings under the 364-day term loan to fund a portion of the cash component of the merger consideration. The interim term loan will only be drawn if certain properties owned by Prentiss and anticipated to be sold prior to or concurrently with the merger are not sold by such times. The interim term loan will have a term of 60 days. The back-stop revolving credit facility will only be put into place if we are not successful in completing, prior to the merger, an amendment and restatement of our existing revolving credit facility on terms which allow for the consummation of the merger and are otherwise satisfactory to us. The back-stop revolving credit facility will have a term of 60 days from the closing of the REIT Merger. The financing commitments are subject to completion of definitive loan documents and customary closing conditions.

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Our ongoing ability to incur additional debt is dependent upon a number of factors, including our credit ratings, the value of our unencumbered assets, our degree of leverage and borrowing restrictions imposed by our current lenders. We currently have investment grade ratings for prospective unsecured debt offerings from three major rating agencies. If we experienced a credit downgrade, we may be limited in our access to capital in the unsecured debt market, which we have used to fund investment activities, and the interest rate we are paying under our existing credit facility would increase.

Our ability to raise funds through sales of common and preferred shares is dependent on, among other things, general market conditions for REITs, market perceptions about our company and the current trading price of our shares. We will continue to analyze which source of capital is most advantageous to us at any particular point in time, but the equity markets may not be consistently available on terms that are attractive.

Cash Flows

The following summary discussion of our cash flows is based on the consolidated statement of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented.

As of September 30, 2005 and December 31, 2004, we maintained cash and cash equivalents of $23.3 million and $15.3 million, respectively, an increase of $8.0 million. This increase was the result of the following changes in cash flow from our activities for the nine-month period ended September 30:

Activity		2005			2004

Operating	$	103,766		$	100,710
Investing		(206,150	)		(634,716	)
Financing		110,378			535,317

Net cash flows	$	7,994		$	1,311

Our principle source of cash flows is from the operations of our Properties. Our increased cash flow from operating activities in the nine-months ended September 30, 2005 compared to the same period in 2004 is primarily attributable to reductions in other assets which generated positive cash flow of $6.2 million in the 2004 period, the timing of real estate tax and other payments which generated higher cash outflows in the 2005 period, and greater net cash inflows from a larger asset base in 2005 as compared to 2004.

Increased cash flows from investing activities in the nine-months ended September 30, 2005 compared to the same period in 2004 were attributable to the decrease in our acquisition of properties and developable land parcels to $92.7 million in 2005 from $569.5 million in 2004 and was offset by an increase of $57.6 million in construction costs related to our Cira Centre development project and various other capital and tenant improvement. 2004 included the TRC acquisition.

Decreased cash flows from financing activities were due to the absence of term loan borrowings in 2005 ($433.0 million in 2004) and the decrease in net proceeds from share issuances of $392.3 million in 2004 which were offset by the increase in net proceeds from draws on the Credit Facility to $188.0 million in 2005 from $17.0 million in 2004 and the absence of cash outflow from term loan repayments ($100.0 million in 2004).

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Capitalization

Indebtedness

As of September 30, 2005, we had approximately $1.5 billion of outstanding indebtedness. The table below summarizes our mortgage notes payable, our unsecured notes and our revolving credit facility at September 30, 2005 and December 31, 2004:

	September 30, 2005			December 31, 2004

	(dollars in thousands)
*Balance:*
Fixed	$	1,126,135		$	1,133,513
Variable		355,116			173,156

	$	1,481,251		$	1,306,669

*Percent of Total Debt:*
Fixed		76	%		87	%
Variable		24	%		13	%

		100	%		100	%

*Weighted-average interest rate at period end:*
Fixed		5.9	%		5.9	%
Variable		4.6	%		3.5	%
Total		5.6	%		5.6	%

The variable rate debt shown above generally bears interest based on various spreads over LIBOR (the term of which is selected by the Company).

The Company utilizes credit facility borrowings for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. The Company maintains a $450 million unsecured credit facility (the “Credit Facility”) that matures in May 2007, subject to a one year extension option upon payment of a fee and absence any defaults at the time of the extension. Borrowings under the Credit Facility generally bear interest at LIBOR plus a spread over LIBOR ranging from 0.65% to 1.20% based on the Company’s unsecured senior debt rating. The Company has an option to increase its maximum borrowings under the Credit Facility to $600 million subject to the absence of any defaults and our ability to acquire additional commitments from our existing lenders or new lenders. The Credit Facility contains various financial and non-financial covenants. As of September 30, 2005, the Company was in compliance with all such covenants.

The Company utilizes unsecured notes as a long-term financing alternative. The indentures and note purchase agreements contain various financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40%, (3) a debt service coverage ratio of greater than 1.5 to 1.0, and (4) an unencumbered asset value of not less than 150% of unsecured debt. In addition, the note purchase agreement relating to the 2008 Notes contains covenants that are similar to the above covenants. At September 30, 2005, the Company was in compliance with each of these financial restrictions and requirements.

The Company has mortgages, loans payable and other obligations which consist of various loans collateralized by certain of the Company’s Properties. Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.

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The Company intends to refinance its mortgage indebtedness as it matures primarily through the use of unsecured debt or equity.

As of September 30, 2005, the Company’s debt-to-market capitalization ratio was 46.8%. As a general policy, the Company intends, but is not obligated, to adhere to a policy of maintaining a debt-to-market capitalization ratio of no more than 50%.

Equity

On September 20, 2005, the Company declared a distribution of $0.44 per Common Share, totaling $24.9 million, which was paid on October 17, 2005 to shareholders of record as of October 5, 2005. The Operating Partnership simultaneously declared a $0.44 per unit cash distribution to holders of Class A Units totaling $0.9 million.

On September 20, 2005, the Company declared distributions on its Series C Preferred Shares and Series D Preferred Shares to holders of record on September 30, 2005. These shares are entitled to a preferential return of 7.50% and 7.375%, respectively. Distributions paid on October 17, 2005 to holders of Series C Preferred Shares and Series D Preferred Shares totaled $0.9 million and $1.1 million, respectively.

The Company’s Board of Trustees approved a share repurchase program authorizing the Company to repurchase up to 4.0 million of its outstanding Common Shares. Through September 30, 2005, the Company had repurchased 3.2 million of its Common Shares at an average price of $17.75 per share. Under the share repurchase program, the Company has the authority to repurchase an additional 762,000 shares. No Common Shares were repurchased during the nine-month period ended September 30, 2005 under the share repurchase program. No time limit has been placed on the duration of the share repurchase program.

Shelf Registration Statement

The Company and the Operating Partnership have an effective shelf registration statement on Form S-3 filed with the Securities and Exchange Commission that registered $750 million in common shares, preferred shares, depositary shares and warrants and $750 million in debt securities. As of September 30, 2005, the registration statement had the entire $750 million of capacity for future issuances of common shares, preferred shares, depositary shares and warrants and had the entire $750 million of capacity for future issuances of debt securities.

Short- and Long-Term Liquidity

The Company believes that its cash flow from operations is adequate to fund its short-term liquidity requirements. Cash flow from operations is generated primarily from rental revenues and operating expense reimbursements from tenants and management services income from providing services to third parties. The Company intends to use these funds to meet short-term liquidity needs, which are to fund operating expenses, debt service requirements, recurring capital expenditures, tenant allowances, leasing commissions and the minimum distributions required to maintain the Company’s REIT qualification under the Internal Revenue Code.

The Company expects to meet its long-term liquidity requirements, such as for property acquisitions, development, investments in real estate ventures, scheduled debt maturities, major renovations, expansions and other significant capital improvements, through cash from operations, borrowings under its Credit Facility, other long-term secured and unsecured indebtedness, the issuance of equity securities and the proceeds from the disposition of selected assets.

Inflation

A majority of the Company’s leases provide for separate escalations of real estate taxes and operating expenses either on a triple net basis or over a base amount. In addition, many of the office leases provide for fixed base rent increases. The Company believes that inflationary increases in expenses will be significantly offset by increases in expense reimbursement from tenants and contractual rent increases.

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Commitments and Contingencies

The following table outlines the timing of payment requirements related to the Company’s contractual commitments as of September 30, 2005:

	Payments by Period (in thousands)

		Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years

Mortgage notes payable (a)	$	498,301	$	18,923	$	43,568	$	86,395	$	349,415
Revolving credit facility		340,000		—		340,000		—		—
Unsecured debt (a)		638,000		—		—		388,000		250,000
Ground leases (b)		259,990		1,435		2,869		2,993		252,693
Other liabilities		1,525		837		—		—		688

	$	1,737,816	$	21,195	$	386,437	$	477,388	$	852,796

(a)

Amounts do not include unamortized discounts and/or premiums.

(b)

Future minimum rental payments under the terms of all non-cancelable ground leases under which the Company is the lessee are expensed on a straight-line basis regardless of when payments are due.

The Company intends to refinance its mortgage notes payable as they become due or repay those that are secured by properties being sold. The Company expects to renegotiate its Credit Facility prior to maturity or extend its term.

As part of our purchase of the TRC Properties in September 2004, the Operating Partnership agreed to issue to the sellers up to a maximum of $9.7 million of Class A Units of the Operating Partnership if certain of the acquired properties achieve at least 95% occupancy prior to September 21, 2007. At September 30, 2005, the maximum amount payable under this arrangement was $5.7 million.

As part of the TRC acquisition, we acquired our interest in Two Logan Square, a 696,477 square foot office building in Philadelphia, primarily through a second and third mortgage secured by this property. We currently do not expect to take title to Two Logan Square until, at the earliest, September 2019. In the event that we take title to Two Logan Square upon a foreclosure of our mortgage, we have agreed to make a payment to an unaffiliated third party with a residual interest in the fee owner of this property. The amount of the payment would be $0.6 million if we must pay a state and local transfer upon taking title, and $2.9 million if no transfer tax is payable upon the transfer.

In our acquisition of the TRC Properties and several of our other acquisitions, we agreed not to sell the acquired properties. In the case of the TRC Properties, we agreed not to sell the acquired properties for periods ranging from three to 15 years from the acquisition date as follows: 201 Radnor Financial Center, 555 Radnor Financial Center and 300 Delaware Avenue (three years); One Rodney Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square and Radnor Corporate Center (15 years). We also own 14 properties that aggregate 1.0 million square feet and have agreed not to sell these properties for periods that expire through 2008. These agreements generally provide that we may dispose of the subject Properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Code or in other tax deferred transactions. In the event that we sell any of the properties within the applicable restricted period in non-exempt transactions, we have agreed to pay significant tax liabilities that would be incurred by the parties who sold us the applicable property.

We invest in our Properties and regularly incur capital expenditures in the ordinary course to maintain the Properties. We believe that such expenditures enhance the competitiveness of the Properties. We also enter into construction, utility and service contracts in the ordinary course of business which may extend beyond one year. These contracts include terms that provide for cancellation with insignificant or no cancellation penalties.

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Interest Rate Risk and Sensitivity Analysis

The analysis below presents the sensitivity of the market value of the Company’s financial instruments to selected changes in market rates. The range of changes chosen reflects the Company’s view of changes which are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates chosen.

The Company’s financial instruments consist of both fixed and variable rate debt. As of September 30, 2005, the Company’s consolidated debt consisted of $483.2 million in fixed rate mortgages and $15.1 million in variable rate mortgage notes, $340.0 million borrowings under its Credit Facility and $636.6 million in unsecured notes (net of discounts). All financial instruments were entered into for other than trading purposes and the net market value of these financial instruments is referred to as the net financial position. Changes in interest rates have different impacts on the fixed and variable rate portions of the Company’s debt portfolio. A change in interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position, but has no impact on interest incurred or cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position.

If market rates of interest on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $3.6 million. If market rates of interest on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $3.6 million.

If market rates of interest increase by 1%, the fair value of our outstanding fixed-rate mortgage debt would decrease by approximately $28.9 million. If market rates of interest decrease by 1%, the fair value of our outstanding fixed-rate mortgage debt would increase by approximately $31.8 million.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the exposure to loss resulting from changes in interest rates, commodity prices and equity prices. In pursuing its business plan, the primary market risk to which the Company is exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Company’s yield on invested assets and cost of funds and, in turn, the Company’s ability to make distributions or payments to its shareholders. While the Company has not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in losses to the Company which adversely affect its operating results and liquidity.

There have been no material changes in Quantitative and Qualitative disclosures in 2005 from the disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. Reference is made to Item 7 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 and the caption “Interest Rate Risk and Sensitivity Analysis” under Item 2 of this Quarterly Report on Form 10-Q.

Item 4. Controls and Procedures

(a)		Evaluation of disclosure controls and procedures. The Company’s Chief Executive Officer and its Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report, have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

(b)		Changes in internal controls over financial reporting. There was no change in the Company’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes the share repurchases during the three-month period ended September 30, 2005:

	Total Number of Shares Purchased (A)		Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs

2005:
July	—	$	—	—	762,000
August	—		—	—	762,000
September	—	$	—	—	762,000

Total	—	$	—	—	762,000

(A) Represent Common Shares cancelled by the Company upon vesting of restricted Common Shares previously awarded to Company employees, in satisfaction of tax withholding obligations.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

(a) Exhibits
2.1		Agreement and Plan of Merger dated as of October 3, 2005, by and among Brandywine, Brandywine Operating Partnership, Merger Sub I, L.P., Merger Sub, Prentiss, and Prentiss Acquisition Partners (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on October 4, 2005)
3.1		Articles of Amendment to Declaration of Trust of Brandywine (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on October 4, 2005)
10.2		Voting Agreement dated as of October 3, 2005 among Brandywine Realty Trust, Brandywine Operating Partnership and Michael V. Prentiss (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on October 4, 2005)
10.3		Voting Agreement dated as of October 3, 2005 among Brandywine Realty Trust, Brandywine Operating Partnership and Thomas F. August (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on October 4, 2005)
10.4		Master Agreement dated as of October 3, 2005 by and between Brandywine Operating Partnership, L.P. and The Prudential Insurance Company of America (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on October 4, 2005)
10.5		Asset Purchase Agreement dated as of October 3, 2005 between Prentiss and The Prudential Insurance Company of America (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on October 4, 2005)
10.6		Registration Rights Agreement (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on October 4, 2005)
12.1		Statement re Computation of Ratios
31.1		Certification Pursuant to 13a-14 under the Securities Exchange Act of 1934
31.2		Certification Pursuant to 13a-14 under the Securities Exchange Act of 1934
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Financing Commitment Letter from JP Morgan Chase bank, N.A. and J.P. Morgan Securities, Inc. (incorporated by reference to Brandywine’s Current Report on Form 8-K filed on October 4, 2005)

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SIGNATURES OF REGISTRANT

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 thereunto duly authorized.

BRANDYWINE REALTY TRUST
(Registrant)

Date: November 9, 2005		By: /s/ Gerard H. Sweeney
		Gerard H. Sweeney, President and Chief Executive Officer
		(Principal Executive Officer)

Date: November 9, 2005		By: /s/ Christopher P. Marr
		Christopher P. Marr, Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date: November 9, 2005		By: /s/ Timothy M. Martin
		Timothy M. Martin, Vice President-Finance and Chief Accounting Officer
		(Principal Accounting Officer)

Prepared and filed by St Ives Financial

Brandywine Realty Trust
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Distributions
(in thousands)

		For the nine months ended September 30,							For the years ended December 31,

			2005			2004			2004			2003			2002			2001			2000
Earnings before fixed charges:
Add:
	Income from continuing operations (a)	$	32,171		$	49,373		$	57,604		$	75,832		$	47,643		$	19,462		$	38,953
	Minority interest attributable to continuing operations		1,160			2,139			2,472			9,294			9,375			7,760			8,800
	Fixed charges – per below		62,236			40,806			61,894			69,476			76,950			83,627			84,604
Less:
	Income from equity method investments not distributed		—			—			—			—			—			—			(518	)
	Capitalized interest		(6,902	)		(1,785	)		(3,030	)		(1,503	)		(2,949	)		(5,178	)		(8,182	)
	Preferred Distributions of consolidated subsidiaries		—			(832	)		(832	)		(7,069	)		(7,069	)		(7,069	)		(7,069	)

Earnings before fixed charges		$	88,665		$	89,701		$	118,108		$	146,030		$	123,950		$	98,602		$	116,588

Fixed charges and Preferred Distributions:
Interest expense (including amortization)		$	53,366		$	35,526		$	55,061		$	57,835		$	63,522		$	67,496		$	64,746
Capitalized interest			6,902			1,785			3,030			1,503			2,949			5,178			8,182
Proportionate share of interest for unconsolidated real estate ventures			1,968			2,663			2,971			3,069			3,410			3,884			4,607
Distributions to preferred unitholders in Operating Partnership			—			832			832			7,069			7,069			7,069			7,069

	Total Fixed Charges		62,236			40,806			61,894			69,476			76,950			83,627			84,604

Income allocated to preferred shareholders			5,994			7,372			9,720			11,906			11,906			11,906			11,906

	Total Preferred Distributions		5,994			7,372			9,720			11,906			11,906			11,906			11,906

	Total combined fixed charges and preferred distributions	$	68,230		$	48,178		$	71,614		$	81,382		$	88,856		$	95,533		$	96,510

Ratio of earnings to combined fixed charges and preferred distributions			1.30			1.86			1.65			1.79			1.39			1.03			1.21

(a)

Amounts for the nine months ended September 30, 2005 and 2004 and for the years ended December 31, 2004, 2003, 2002, 2001 and 2000 have been reclassified to present properties identified as held for sale consistent with the presentation for the period ended September 30, 2005. As a result, operations have been reclassified to discontinued operations from continuing operations for all periods presented.

Prepared and filed by St Ives Financial

Exhibit 31.1

CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED

I, Gerard H. Sweeney, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Brandywine Realty Trust:

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered in this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by other within those entities, particularly during the period in which this report is being prepared;

	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2005

/s/ Gerard H. Sweeney
Gerard H. Sweeney
President and Chief Executive Officer

Prepared and filed by St Ives Financial

Exhibit 31.2

CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED

I, Christopher P. Marr, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Brandywine Realty Trust:

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered in this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by other within those entities, particularly during the period in which this report is being prepared;

	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2005

/s/ Christopher P. Marr
Christopher P. Marr
Senior Vice President and Chief Financial Officer

Prepared and filed by St Ives Financial

Exhibit 32.1

RULE 13(a)-14(b) CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Quarterly Report of Brandywine Realty Trust (the “Company”) on Form 10-Q for the quarter ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gerard H. Sweeney, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Gerard H. Sweeney
Gerard H. Sweeney
President and Chief Executive Officer
Date: November 9, 2005

* A signed original of this written statement required by Section 906 has been provided to Brandywine Realty Trust and will be retained by Brandywine Realty Trust and furnished to the Securities and Exchange Commission or its staff upon request.

Prepared and filed by St Ives Financial

Exhibit 32.2

RULE 13(a)-14(b) CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Quarterly Report of Brandywine Realty Trust (the “Company”) on Form 10-Q for the quarter ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher P. Marr, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Christopher P. Marr
Christopher P. Marr
Senior Vice President and Chief Financial Officer
Date: November 9, 2005