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, 2004	
 	 	 	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	19462	
(Address of principal executive offices)	(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 Act).
Yes 	No 	
A total of 53,559,258 Common Shares of Beneficial Interest, par value $0.01 per share, were outstanding as of November 5, 2004.

 
BRANDYWINE REALTY TRUST
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
 	 	 	Page	
				
Item 1.	Financial Statements (unaudited)	 	 	
 	 	 	 	
 	Condensed Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003 	 	3	
 	 	 	 	
 	Condensed Consolidated Statements of Operations for the three- and nine-month periods ended September 30, 2004 and September 30, 2003	 	4	
 	 	 	 	
 	Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2004 and September 30, 2003	 	5	
 	 	 	 	
 	Notes to Condensed Consolidated Financial Statements	 	6	
 	 	 	 	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	19	
 	 	 	 	
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	 	27	
 	 	 	 	
Item 4.	Controls and Procedures	 	27	
 	 	 	 	
 	PART II – OTHER INFORMATION	 	 	
 	 	 	 	
Item 1.	Legal Proceedings	 	27	
 	 	 	 	
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	 	28	
 	 	 	 	
Item 3.	Defaults Upon Senior Securities	 	28	
 	 	 	 	
Item 4.	Submission of Matters to a Vote of Security Holders	 	28	
 	 	 	 	
Item 5.	Other Information	 	29	
 	 	 	 	
Item 6.	Exhibits 	 	29	
 	 	 	 	
 	Signatures	 	30	
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PART I – FINANCIAL INFORMATION
Item 1. – Financial Statements
BRANDYWINE REALTY TRUST	 	
CONDENSED CONSOLIDATED BALANCE SHEETS	 	
(unaudited and in thousands, except share and per share information)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	September 30,	 	 	 	 	 	December 31,	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2004	 	 	 	 	 	2003	 	
 	 	 	 	 	 	 	 	 	 	 			 	 	 	 			 	
ASSETS:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Real estate investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Operating properties	 	 	 	 	$	2,503,890 	 	 	 	 	$	1,869,744 	 	
 	 	 	Accumulated depreciation	 	 	 	 	 	(311,109	)	 	 	 	 	(268,091	)	
 	 	 	 	 	 	 	 	 	 	 			 	 	 	 			 	
 	 	 	 	 	 	Operating properties, net	 	 	 	 	 	2,192,781 	 	 	 	 	 	1,601,653 	 	
 	 	 	Construction-in-progress	 	 	 	 	 	89,092 	 	 	 	 	 	29,787 	 	
 	 	 	Land held for development	 	 	 	 	 	59,413 	 	 	 	 	 	63,915 	 	
 	 	 	 	 	 	 	 			 	 	 	 			 	
 	 	 	 	 	 	Total real estate investments, net	 	 	2,341,286 	 	 	 	 	 	1,695,355 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	 	 	 	9,863 	 	 	 	 	 	8,552 	 	
Escrowed cash	 	 	 	 	 	 	 	 	17,301 	 	 	 	 	 	14,388 	 	
Accounts receivable, net	 	 	 	 	 	13,138 	 	 	 	 	 	5,206 	 	
Accrued rent receivable, net	 	 	 	 	 	30,511 	 	 	 	 	 	26,652 	 	
Marketable securities	 	 	 	 	 	 	 	 	462 	 	 	 	 	 	12,052 	 	
Assets held for sale	 	 	 	 	 	 	 	 	3,565 	 	 	 	 	 	5,317 	 	
Investment in unconsolidated Real Estate Ventures	 	 	13,459 	 	 	 	 	 	15,853 	 	
Deferred costs, net	 	 	 	 	 	 	 	 	32,259 	 	 	 	 	 	26,071 	 	
Other assets	 	 	 	 	 	 	 	 	126,043 	 	 	 	 	 	46,330 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 			 	 	 	 			 	
 	 	 	Total assets	 	 	 	 	 	 	 	$	2,587,887 	 	 	 	 	$	1,855,776 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 			 	 	 	 			 	
LIABILITIES AND BENEFICIARIES’ EQUITY:	 	 	 	 	 	 	 	 	 	 	
Mortgage notes payable	 	 	 	 	$	522,717 	 	 	 	 	$	462,659 	 	
Borrowings under Credit Facility	 	 	 	 	 	322,000 	 	 	 	 	 	305,000 	 	
Unsecured term loans	 	 	 	 	 	 	 	 	433,000 	 	 	 	 	 	100,000 	 	
Accounts payable and accrued expenses	 	 	28,421 	 	 	 	 	 	30,290 	 	
Distributions payable	 	 	 	 	 	 	 	 	27,179 	 	 	 	 	 	20,947 	 	
Tenant security deposits and deferred rents 	 	 	17,628 	 	 	 	 	 	16,123 	 	
Other liabilities	 	 	 	 	 	 	 	 	34,551 	 	 	 	 	 	15,360 	 	
Liabilities related to assets held for sale	 	 	—	 	 	 	 	 	52 	 	
 	 	 	 	 	 	 	 	 	 	 			 	 	 	 			 	
 	 	 	Total liabilities	 	 	 	 	 	 	 	 	1,385,496 	 	 	 	 	 	950,431 	 	
Minority interest	 	 	 	 	 	 	 	 	43,592 	 	 	 	 	 	133,488 	 	

Commitments and contingencies	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beneficiaries’ equity:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Preferred Shares (shares authorized-10,000,000):	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	7.25% Series A Preferred Shares, $0.01 par value;	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	issued and outstanding-750,000 in 2004 and 2003	 	 	8 	 	 	 	 	 	8 	 	
 	 	 	 	 	 	7.50% Series C Preferred Shares, $0.01 par value;	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	issued and outstanding-2,000,000 in 2004 and 2003	 	 	20 	 	 	 	 	 	20 	 	
 	 	 	 	 	 	7.375% Series D Preferred Shares, $0.01 par value;	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	issued and outstanding-2,300,000 in 2004	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	and no shares issued and outstanding in 2003	 	 	23 	 	 	 	 	 	—	 	
 	 	 	Common Shares of Beneficial Interest, $0.01 par value; 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	shares authorized-100,000,000; issued and outstanding-	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	53,559,258 in 2004 and 41,040,710 in 2003	 	 	533 	 	 	 	 	 	410 	 	
 	 	 	Additional paid-in capital	 	 	 	 	 	1,336,574 	 	 	 	 	 	936,730 	 	
 	 	 	Share warrants	 	 	 	 	 	 	 	 	401 	 	 	 	 	 	401 	 	
 	 	 	Cumulative earnings	 	 	 	 	 	362,003 	 	 	 	 	 	310,212 	 	
 	 	 	Accumulated other comprehensive income (loss)	 	 	58 	 	 	 	 	 	(2,158	)	
 	 	 	Cumulative distributions	 	 	 	 	 	(540,821	)	 	 	 	 	(473,766	)	
 	 	 	 	 	 	 	 			 	 	 	 			 	
 	 	 	 	 	 	 	 	 	Total beneficiaries’ equity	 	 	1,158,799 	 	 	 	 	 	771,857 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 			 	 	 	 			 	
 	 	 	Total liabilities and beneficiaries’ equity	 	$	2,587,887 	 	 	 	 	$	1,855,776 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 			 	 	 	 			 	
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BRANDYWINE REALTY TRUST    	
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS    	
(unaudited and in thousands, except per share information)    	

 	 	 	 	Three-Month Periods	 	 	 	Nine-Month Periods	 	
 	 	 	 	Ended September 30,	 	 	 	Ended September 30,	 	
 	 	 			 	 			 	
 	 	 	 	2004	 	 	 	2003	 	 	 	2004	 	 	 	2003	 	
 	 	 			 	 			 	 			 	 			 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Rents	$	66,637 	 	 	$	64,354 	 	 	$	194,703 	 	 	$	192,570 	 	
 	Tenant reimbursements	 	9,689 	 	 	 	9,045 	 	 	 	25,838 	 	 	 	26,101 	 	
 	Other	 	3,318 	 	 	 	3,604 	 	 	 	9,736 	 	 	 	7,678 	 	
 	 	 			 	 			 	 			 	 			 	
 	 	Total revenue	 	79,644 	 	 	 	77,003 	 	 	 	230,277 	 	 	 	226,349 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Property operating expenses	 	21,972 	 	 	 	19,183 	 	 	 	64,338 	 	 	 	59,559 	 	
 	Real estate taxes	 	7,686 	 	 	 	7,301 	 	 	 	21,471 	 	 	 	20,593 	 	
 	Interest	 	11,474 	 	 	 	13,746 	 	 	 	35,526 	 	 	 	44,293 	 	
 	Depreciation and amortization	 	18,293 	 	 	 	15,196 	 	 	 	50,936 	 	 	 	44,795 	 	
 	Administrative expenses	 	3,534 	 	 	 	3,630 	 	 	 	10,977 	 	 	 	10,953 	 	
 	 	 			 	 			 	 			 	 			 	
 	 	Total operating expenses	 	62,959 	 	 	 	59,056 	 	 	 	183,248 	 	 	 	180,193 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations before equity in income of 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	unconsolidated Real Estate Ventures, net gain on sales of 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	interests in real estate and minority interest	 	16,685 	 	 	 	17,947 	 	 	 	47,029 	 	 	 	46,156 	 	
Equity in income (loss) of unconsolidated Real Estate Ventures	 	665 	 	 	 	(531	)	 	 	1,573 	 	 	 	38 	 	
 	 	 			 	 			 	 			 	 			 	
Income from continuing operations before gain on sale of interests	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	in real estate and minority interest 	 	17,350 	 	 	 	17,416 	 	 	 	48,602 	 	 	 	46,194 	 	
Gain on sale of interests in real estate	 	1,753 	 	 	 	—	 	 	 	2,901 	 	 	 	1,152 	 	
Minority interest attributable to continuing operations	 	(257	)	 	 	(2,367	)	 	 	(2,140	)	 	 	(6,967	)	
 	 	 			 	 			 	 			 	 			 	
Income from continuing operations 	 	18,846 	 	 	 	15,049 	 	 	 	49,363 	 	 	 	40,379 	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Income from discontinued operations	 	(80	)	 	 	719 	 	 	 	(232	)	 	 	1,985 	 	
 	Gains on disposition of discontinued operations	 	2,486 	 	 	 	1,741 	 	 	 	2,735 	 	 	 	2,692 	 	
 	Minority interest	 	(86	)	 	 	(109	)	 	 	(90	)	 	 	(215	)	
 	 	 			 	 			 	 			 	 			 	
Income from discontinued operations	 	2,320 	 	 	 	2,351 	 	 	 	2,413 	 	 	 	4,462 	 	
 	 	 			 	 			 	 			 	 			 	
Net income 	 	21,166 	 	 	 	17,400 	 	 	 	51,776 	 	 	 	44,841 	 	
Income allocated to Preferred Shares	 	(2,677	)	 	 	(2,976	)	 	 	(7,372	)	 	 	(8,928	)	
Preferred Unit redemption gain	 	—	 	 	 	—	 	 	 	4,500 	 	 	 	—	 	
 	 	 			 	 			 	 			 	 			 	
Income available to Common Shares	$	18,489 	 	 	$	14,424 	 	 	$	48,904 	 	 	$	35,913 	 	

Basic earnings per Common Share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Continuing operations	$	0.34 	 	 	$	0.32 	 	 	$	1.02 	 	 	$	0.84 	 	
 	 	Discontinued operations	 	0.05 	 	 	 	0.06 	 	 	 	0.05 	 	 	 	0.12 	 	
 	 	 			 	 			 	 			 	 			 	
 	Total basic earnings per Common Share	$	0.39 	 	 	$	0.38 	 	 	$	1.07 	 	 	$	0.96 	 	
 	 	 			 	 			 	 			 	 			 	
Diluted earnings per Common Share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Continuing operations	$	0.34 	 	 	$	0.31 	 	 	$	1.02 	 	 	$	0.84 	 	
 	 	Discontinued operations	 	0.05 	 	 	 	0.06 	 	 	 	0.05 	 	 	 	0.12 	 	
 	 	 			 	 			 	 			 	 			 	
 	Total diluted earnings per Common Share	$	0.39 	 	 	$	0.37 	 	 	$	1.07 	 	 	$	0.96 	 	

The accompanying notes are an integral part of these condensed consolidated financial statements.
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BRANDYWINE REALTY TRUST  	
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  	
(unaudited and in thousands)  	
 	 	 	 	 	Nine-Month Period Ended	 	
 	 	 	 	 	September 30,	 	
 	 	 	 			 	
 	 	 	 	 	2004	 	 	 	2003	 	
 	 	 	 			 	 			 	
Cash flows from operating activities:	 	 	 	 	 	 	 	
 	Net income	$	51,776 	 	 	$	44,841 	 	
  	  	Adjustments to reconcile net income to net cash from operating activities:	 	  	 	 	 	  	 	
 	 	 	Depreciation 	 	43,504 	 	 	 	40,489 	 	
 	 	 	Amortization:	 	 	 	 	 	 	 	
 	 	 	     Deferred financing costs	 	1,559 	 	 	 	1,533 	 	
 	 	 	     Deferred leasing costs	 	7,614 	 	 	 	5,224 	 	
 	 	 	     Deferred compensation costs	 	1,647 	 	 	 	2,191 	 	
 	 	 	Straight-line rent	 	(3,880	)	 	 	(4,429	)	
 	 	 	Provision for doubtful accounts	 	467 	 	 	 	300 	 	
 	 	 	Net gain on sale of interests in real estate	 	(5,636	)	 	 	(3,844	)	
 	 	 	Impairment loss on real estate venture	 	—	 	 	 	861 	 	
 	 	 	Minority interest	 	2,230 	 	 	 	7,182 	 	
 	 	 	Changes in assets and liabilities:	 	 	 	 	 	 	 	
 	 	 	     Accounts receivable	 	(2,417	)	 	 	1,156 	 	
 	 	 	     Other assets	 	6,608 	 	 	 	(3,674	)	
 	 	 	     Accounts payable and accrued expenses	 	(4,383	)	 	 	(3,189	)	
 	 	 	     Tenant security deposits and deferred rents	 	713 	 	 	 	(2,021	)	
 	 	 	     Other liabilities	 	908 	 	 	 	(1,276	)	
 	 	 	 			 	 			 	
 	 	 	          Net cash from operating activities	 	100,710 	 	 	 	85,344 	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
 	Acquisition of properties	 	(569,454	)	 	 	—	 	
 	Proceeds from sales of properties	 	20,710 	 	 	 	6,819 	 	
 	Capital expenditures	 	(79,191	)	 	 	(33,500	)	
 	Investment in unconsolidated Real Estate Ventures	 	(241	)	 	 	(511	)	
 	Escrowed cash	 	(641	)	 	 	2,969 	 	
 	Cash distributions from unconsolidated Real Estate Ventures	 	 	 	 	 	 	 	
 	 	in excess of equity in income	 	255 	 	 	 	1,338 	 	
 	Increase in cash due to consolidation of variable interest entities	 	426 	 	 	 	—	 	
 	Leasing costs	 	(6,580	)	 	 	(5,858	)	
 	 	 	 			 	 			 	
 	 	 	          Net cash from investing activities	 	(634,716	)	 	 	(28,743	)	
 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	
 	Proceeds from (repayments of ) Credit Facility borrowings	 	17,000 	 	 	 	20,000 	 	
 	Proceeds from term loan borrowings	 	433,000 	 	 	 	—	 	
 	Repayments of term loan borrowings	 	(100,000	)	 	 	—	 	
 	Repayments of mortgage notes payable	 	(45,824	)	 	 	(80,174	)	
 	Debt financing costs	 	(3,788	)	 	 	(112	)	
 	Repayments on employee stock loans	 	1,012 	 	 	 	1,857 	 	
 	Exercise of stock options	 	4,868 	 	 	 	—	 	
 	Proceeds from issuance of shares, net	 	392,337 	 	 	 	47,042 	 	
 	Minority partner contributions	 	19 	 	 	 	—	 	
 	Repurchases of minority interest units	 	(95,436	)	 	 	—	 	
 	Distributions paid to shareholders	 	(63,786	)	 	 	(56,883	)	
 	Distributions to minority interest holders of the operating partnership	 	(3,967	)	 	 	(7,639	)	
 	Distributions to outside joint venture partners of consolidated	 	 	 	 	 	 	 	
 	 	variable interest entities	 	(118	)	 	 	—	 	
 	 	 	 			 	 			 	
 	 	 	          Net cash from financing activities	 	535,317 	 	 	 	(75,909	)	
 	 	 	 			 	 			 	
Increase (decrease) in cash and cash equivalents	 	1,311 	 	 	 	(19,308	)	
Cash and cash equivalents at beginning of period	 	8,552 	 	 	 	26,801 	 	
 	 	 	 			 	 			 	
Cash and cash equivalents at end of period	$	9,863 	 	 	$	7,493 	 	

Supplemental Cash Flow Information:	 	 	 	 	 	 	 	
 	Cash paid for interest, net of interest capitalized	$	27,911 	 	 	$	40,341 	 	
 	Debt assumed in asset acquisitions	 	79,330 	 	 	 	—	 	
 	Class A Units issued in asset acquisitions	 	10,000 	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
1.	THE COMPANY	
Brandywine Realty 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, 2004, the Company’s portfolio included 222 office properties (excluding two office properties that are held by two consolidated real estate ventures), 24 industrial properties and one mixed-use property (collectively, the “Properties”) that contained an aggregate of 19.3 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, 2004, the Company also held ownership interests in nine unconsolidated real estate ventures formed with third parties to develop commercial properties.
The Company owns its assets and conducts its operations through Brandywine Operating Partnership, L.P. (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership and, as of September 30, 2004, owned a 96.3% interest in the Operating Partnership. The Operating Partnership owns a 95% interest in Brandywine Realty Services Corporation (the “Management Company”), a taxable REIT subsidiary that, as of September 30, 2004, was performing management and leasing services for 35 properties owned by third-parties.
As of September 30, 2004, minority interest was comprised of Class A Units of limited partnership interest (“Class A Units”). The Operating Partnership issued these Class A Units to persons that contributed assets to the Operating Partnership. The Operating Partnership is obligated to redeem each Class A Unit, at the request of the holder, for cash or one Common Share, at the option of the Company. Income allocated to minority interest includes the pro rata share of net income of the Operating Partnership allocated to the Class A Units held by third parties. As of September 30, 2004, 2,061,459 Class A Units were outstanding and held by third party investors. In addition, as of September 30, 2004, minority interest included the 5% interest in the Management Company that is owned by a partnership comprised of two Company executives and the interests of the outside joint venture partners in two consolidated real estate ventures. As of December 31, 2003, minority interest also included Class B Units of limited partnership interest in the Operating Partnership which were redeemed in full by the Company in February 2004.
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	
Basis of Presentation
The condensed consolidated financial statements have been prepared by the Company without audit except as to the balance sheet as of December 31, 2003, which has been prepared 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) necessary to fairly present the financial position of the Company as of September 30, 2004, the results of its operations for the three-and nine-month periods ended September 30, 2004 and 2003, and its cash flows for the nine-month periods ended September 30, 2004 and 2003 have been included. The results of operations for such interim periods are not necessarily indicative of the results for a full year. For further information, refer to the Company’s consolidated financial statements and footnotes included in the Company’s Current Report on Form 8-K filed on September 3, 2004. Certain prior period amounts have been reclassified to conform with 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 Company. The portions of these entities not owned by the Company are presented as minority interest as of and during the periods consolidated. 
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
See “Investment in Unconsolidated Real Estate Ventures” in Note 4 for the Company’s treatment of its interest in unconsolidated Real Estate Ventures. 
All significant intercompany accounts and transactions have been eliminated.
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, allowance for doubtful accounts and deferred costs.
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, including tenant improvements and major replacements, are capitalized to the Company’s investment in that property. Ordinary repairs and maintenance are expensed as incurred. Fully-depreciated assets are removed from the accounts. 
Depreciation and Amortization
The costs of buildings and improvements are depreciated using the straight-line method based on the following useful lives: buildings and improvements (five to 40 years) and tenant improvements (the shorter of the lease term or the life of the asset). 
Construction in Progress
Project costs directly associated with the development and construction of a real estate project are capitalized as construction in progress. In addition, interest, real estate taxes and general and administrative expenses that are directly associated with the Company’s development activities are capitalized until completion of the building shell. Once the building shell of a real estate project is completed, the costs capitalized to construction in progress are transferred to land and buildings. The Company capitalized direct internal construction costs totaling $0.8 million and $2.3 million for the three- and nine-month periods ended September 30, 2004, and $0.5 million and $1.4 million for the three-and nine-month periods ended September 30, 2003. The Company capitalized interest totaling $0.8 million and $1.8 million for the three-and nine-month periods ended September 30, 2004 and $0.6 million and $1.2 million for the three-and nine-month periods ended September 30, 2003 related to development of certain Properties and land holdings.
Assets Held for Sale and Impairment of Long-Lived Assets 
In accordance with Statement of Financial Accounting Standards No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as real estate investments and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The other assets and liabilities related to assets classified as held-for-sale are presented separately in the consolidated balance sheet.
No significant impairment losses were recorded for the three-and nine-month periods ended September 30, 2004 and 2003.
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Cash and cash equivalents
Cash and cash equivalents are highly-liquid investments with original maturities of three months or less. The Company maintains cash equivalents in financial institutions in excess of insured limits, but believes that maintaining accounts in or through major financial institutions mitigates this risk.
Investment in Unconsolidated Real Estate Ventures
The Company currently accounts for its investments in unconsolidated Real Estate Ventures (the “Real Estate Ventures”) under the equity method of accounting as certain Real Estate Ventures are either not variable interest entities or the Company is not considered the primary beneficiary of a variable interest entity. These investments are recorded initially at cost, as Investment in Real Estate Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions.
On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in Real Estate Ventures may be impaired. An investment is impaired only if the value of the investment, as estimated by management, is less than the carrying value of the investment. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over its fair value.
Deferred Costs
Costs incurred in connection with property leasing are capitalized as deferred leasing costs. Deferred leasing costs consist primarily of external leasing commissions and internal direct leasing costs that are amortized on the straight-line method over the term of the respective lease. Lease terms generally range from one to 15 years. Management evaluates the deferred leasing costs for potential impairment as economic and market conditions change. In the event a tenant terminates its lease, the unamortized leasing cost is charged to expense. Internal direct leasing costs deferred totaled $0.8 million and $3.0 million for the three-and nine-month periods ended September 30, 2004, and $1.0 million and $2.9 million for the three-and nine-month periods ended September 30, 2003.
Costs incurred in obtaining long-term debt financing are amortized and charged to interest expense over the terms of the related debt agreements. This approach approximates the effective interest rate method. 
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-cancelable term of the lease. Capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. Capitalized below-market lease values are amortized as an increase of rental income over the remaining non-cancelable terms of the respective leases, including any fixed-rate renewal periods.
The aggregate value of other intangibles acquired is measured based on the difference between (i) the property valued with in-place leases adjusted to market rental rates and (ii) the property valued as if it was vacant. The Company estimates the cost to execute leases (including leasing commissions, legal and other related expenses) with terms similar to the remaining lease terms of the in-place leases. 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. 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 36 months.
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
The total amount of these other intangible assets is further allocated to 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. 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 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-cancelable term of the respective leases and any fixed-rate renewal periods. 
In the event that a tenant terminates its lease, the unamortized portion of each intangible associated with the lease, including market rate adjustments, in-place lease values and tenant relationship values, would be charged to expense.
Revenue Recognition
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 $1.0 million and $3.9 million for the three-and nine-month periods ended September 30, 2004 and by approximately $1.5 million and $4.4 million for the three-and nine-month periods ended September 30, 2003. Tenant receivables and accrued rent receivables are carried net of the allowances for doubtful accounts of $4.1 million as of September 30, 2004 and $4.0 million as of December 31, 2003. 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. Deferred rental revenue represents rental revenue received from tenants prior to their due dates.
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.
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
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): 
 	 	 	Three-month periods	 	 	 	Nine-month periods	 	
 	 	 	ended September 30, 	 	 	 	ended September 30, 	 	
 	 			 	 			 	
 	 	 	2004	 	 	 	2003	 	 	 	2004	 	 	 	2003	 	

Net income available to Common Shares, as reported	$	18,489 	 	 	$	14,424 	 	 	$	48,904 	 	 	$	35,913 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add: Stock based compensation expense included in reported net income	 	520 	 	 	 	692 	 	 	 	1,647 	 	 	 	2,064 	 	
Deduct: Total stock based compensation expense determined under 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	fair value recognition method for all awards	 	(659	)	 	 	(805	)	 	 	(2,064	)	 	 	(2,401	)	
 	 			 	 			 	 			 	 			 	
Pro forma net income available to Common Shares	$	18,350 	 	 	$	14,311 	 	 	$	48,487 	 	 	$	35,576 	 	
 	 			 	 			 	 			 	 			 	
Earnings per Common Share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Basic – as reported	$	0.39 	 	 	$	0.38 	 	 	$	1.07 	 	 	$	0.96 	 	
 	 			 	 			 	 			 	 			 	
 	Basic – pro forma	$	0.39 	 	 	$	0.37 	 	 	$	1.06 	 	 	$	0.95 	 	

 	Diluted – as reported	$	0.39 	 	 	$	0.37 	 	 	$	1.07 	 	 	$	0.96 	 	
 	 			 	 			 	 			 	 			 	
 	Diluted – pro forma	$	0.39 	 	 	$	0.37 	 	 	$	1.06 	 	 	$	0.95 	 	
 	 			 	 			 	 			 	 			 	
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 period ended September 30, 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. 
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, among other things, the Company is required 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Recently Issued Accounting Standards
In January 2003, FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”), an interpretation of Accounting Research Bulletin (ARB) 51. FIN 46 provides guidance on identifying entities for which control is achieved through means other than through voting rights, variable interest entities (“VIE’s”), and how to determine when and which business enterprises should consolidate the VIE. The consolidation provisions of FIN 46 were effective immediately for variable interests in VIE’s created after January 31, 2003. In December 2003, FASB revised Interpretation FIN No. 46, which adopted several Financial Statement Positions and provided transitional guidance for relationships with VIE’s that are special purpose entities (“SPEs”) versus non-SPE’s. The Company has no SPE’s. The Company implemented the revised guidance to previously existing non-SPE relationships as of March 31, 2004. In connection with the full adoption, the Company concluded that two previously unconsolidated real estate ventures (Four Tower Bridge Associates and Six Tower Bridge Associates) are VIE’s and that the Company is the primary beneficiary. As a consequence, effective March 31, 2004, these investments have been consolidated in the Company’s balance sheet, with the interests of the outside joint venture partners reflected as a minority interest. The results of operations for these investments subsequent to March 31, 2004 have been included in the Company’s condensed consolidated statement of operations with the portion of net income for the investments attributable to outside venture partners is reflected as minority interest attributable to continuing operations. There was no cumulative effect gain or loss upon adoption on March 31, 2004. 
With respect to the Company’s remaining investments in unconsolidated Real Estate Ventures, the Company has concluded that these investments are not VIE’s or that the Company is not the primary beneficiary based on the terms of the arrangements. Accordingly, the Company will continue to reflect these arrangements using the equity method. 
In March 2004, the Emerging Issues Task Force reached a final consensus regarding Issue 03-6, Participating Securities and the Two-Class Method under SFAS 128, (“EITF 03-6”). The issue addresses a number of questions regarding the computation of earnings per share by companies that have issued securities other than common stock that participate in dividends and earnings of the issuing entity. Such securities are contractually entitled to receive dividends when and if the entity declares dividends on common stock. The issue also provides further guidance on applying the two-class method of calculating earnings per share once it is determined that a security is participating. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. This consensus is effective for periods ending after March 31, 2004 and should be applied by restating previously reported earnings per share. Upon adoption of EITF 03-6, the Company determined that its Series A Preferred Shares and Series B Preferred Shares are participating securities; however, their classification as participating securities had no impact on the Company’s computation or presentation of basic or diluted earnings per share. See note 11 for the Company’s computation and presentation of earnings per share.
3.	ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS	
The Company’s acquisitions were accounted for by the purchase method. The results of each acquired property are included in the Company’s results of operations from its purchase date.
2004
On September 21, 2004, the Operating Partnership completed the acquisition of 100% of the partnership interests in The Rubenstein Company, L.P. (“TRC”). In 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 condensed consolidated financial statements since that date.
The aggregate consideration was $624.8 million including $22.8 million of closing costs and debt prepayment penalties that are included in the basis of the assets acquired. The consideration was paid with $541.0 million of cash, $73.8 million of debt assumed and valued at $79.6 million 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.
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition. The Operating Partnership is in the process of obtaining third-party valuations of certain tangible and intangible assets; thus, the allocation of the purchase price is subject to refinement.
 	 	 	At September 21,
2004 	 	
 			 	
Real estate investments	 	 	 	
 	Land	$	115,397 	 	
 	Building and improvements	 	461,589 	 	
 			 	
 	Total real estate investments acquired	 	576,986 	 	
 	 	 	 	 	
Rent receivables	 	5,534 	 	
Other assets acquired:	 	 	 	
 	Intangible assets:	 	 	 	
 	 	In-Place leases	 	35,311 	 	
 	 	Relationship values	 	25,554 	 	
 	 	Above-market leases	 	12,235 	 	
 			 	
 	 	Total intangible assets acquired	 	73,100 	 	
 	Other assets	 	6,291 	 	
 			 	
 	Total Other assets	 	79,391 	 	
 			 	
Total assets acquired	 	661,911 	 	
 	 	 	 	 	
Liabilities assumed:	 	 	 	
 	Mortgage notes payable	 	79,330 	 	
 	Security deposits and deferred rent	 	781 	 	
 	Other liabilities:	 	 	 	
 	 	Below-market leases	 	31,422 	 	
 	 	Other liabilities	 	689 	 	
 			 	
 	 	Total other liabilities assumed	 	32,111 	 	
 			 	
 	Total liabilities assumed	 	112,222 	 	
 			 	
Net assets acquired	$	549,689 	 	
 	 			 	
The net assets acquired above do not include any amounts potentially due to the sellers as contingent consideration as part of the transaction. The Operating Partnership has agreed to issue the sellers up to a maximum of $9.7 million of additional Class A Units if certain TRC Properties achieve at least 95% occupancy prior to September 21, 2007. 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.
The Operating Partnership financed the TRC acquisition using the net proceeds from its September 17, 2004 Common Share offering, after repayment of the Operating Partnership’s $100 million unsecured term loan facility, and the net proceeds received from two unsecured term loans. See Notes 5 and 8 for further details.
Pro forma information relating to the acquisition of TRC is presented below as if TRC was acquired and the related financing transactions occurred as of the first day of the periods presented. 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:
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
 	 	 	Three-month periods	 	 	 	Nine-month periods	 	
 	 	 	ended September 30, 	 	 	 	ended September 30, 	 	
 	 			 	 			 	
 	 	 	2004	 	 	 	2003	 	 	 	2004	 	 	 	2003	 	

Pro forma revenue	$	98,901 	 	 	$	96,260 	 	 	$	288,048 	 	 	$	284,120 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pro forma income from continuing operations	 	20,465 	 	 	 	16,668 	 	 	 	54,220 	 	 	 	45,236 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share from continuing operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Basic – as reported	$	0.34 	 	 	$	0.32 	 	 	$	1.02 	 	 	$	0.84 	 	
 	 			 	 			 	 			 	 			 	
 	Basic – as pro forma	$	0.33 	 	 	$	0.30 	 	 	$	0.98 	 	 	$	0.83 	 	

 	Diluted – as reported	$	0.34 	 	 	$	0.31 	 	 	$	1.02 	 	 	$	0.84 	 	
 	 			 	 			 	 			 	 			 	
 	Diluted – as pro forma	$	0.33 	 	 	$	0.30 	 	 	$	0.98 	 	 	$	0.82 	 	

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 were 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 a net gain of $0.2 million.
2003
During the nine-month period ended September 30, 2003, the Company sold two office properties and two industrial properties containing 172,000 net rentable square feet and one parcel of land containing 3.1 acres for an aggregate of $13.0 million, realizing a net gain of $3.8 million. During the three-month period ended September 30, 2003, the Company sold one office property and two industrial properties containing an aggregate of 141,000 net rentable square feet for $8.3 million, realizing a net gain of $1.7 million.
4.	INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES	
As of September 30, 2004, the Company had an aggregate investment of approximately $13.5 million in nine 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.
The Company also has investments in two real estate ventures that are considered to be variable interest entities under FIN No. 46 and of which the Company is the primary beneficiary. The financial information for these two real estate ventures (Four and Six Tower Bridge) were consolidated into the Company’s condensed 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. 
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
The Company accounts for its non-controlling interests in its Real Estate Ventures using the equity method. Non-controlling 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, 2004 and December 31, 2003 (in thousands):
 	September 30,	 	 	December 31,	 	
 	2004	 	 	2003	 	
 			 	 			 	
Operating property, net of accumulated depreciation	$	292,848 	 	 	$	322,196 	 	
Other assets	 	29,683 	 	 	 	29,982 	 	
Liabilities 	 	29,603 	 	 	 	27,900 	 	
Debt	 	206,397 	 	 	 	231,401 	 	
Equity	 	86,531 	 	 	 	92,877 	 	
Company’s share of equity	 	13,459 	 	 	 	15,853 	 	
 	 	 	 	 	 	 	 	
 The following is a summary of results of operations of the Real Estate Ventures for the three- and nine-month periods ended September 30, 2004 and 2003 (in thousands):	
 	
 	 	Three-month periods ended
September 30, 	 	 	 	Nine-month periods ended
September 30, 	 	
 			 	 			 	
 	 	2004	 	 	 	 	2003	 	 	 	2004	 	 	 	 	2003	 	

Revenue	$	11,740 	 	 	 	$	6,253 	 	 	$	33,370 	 	 	 	$	20,395 	 	
Operating expenses	 	4,484 	 	 	 	 	2,493 	 	 	 	13,533 	 	 	 	 	9,636 	 	
Interest expense, net	 	3,003 	 	 	 	 	1,949 	 	 	 	8,847 	 	 	 	 	6,026 	 	
Depreciation and amortization	 	1,690 	 	 	 	 	1,395 	 	 	 	5,902 	 	 	 	 	4,019 	 	
Net income	 	2,563 	 	 	 	 	416 	 	 	 	5,087 	 	 	 	 	714 	 	
Company’s share of income	 	665 	 	 	 	 	(531	)	 	 	1,573 	 	 	 	 	38 	 	

During the three-month period ended September 30, 2003, the Company recorded an impairment charge of $861,000 associated with a non-operating Real Estate Venture. The amount consisted primarily of legal and acquisition costs related to a parcel of land that ultimately was not acquired.
As of September 30, 2004, the Company had guaranteed repayment of approximately $1.1 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.	INDEBTEDNESS	
The Company utilizes various forms of indebtedness to finance its operations. Following is a summary and description of the Company’s indebtedness as of September 30, 2004:
	(a)	Mortgage notes payable	
	 	 	
	 	As of September 30, 2004 and December 31, 2003, the Company’s mortgage notes payable were comprised of the following:	
 	 	
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
 	 	 	Principal Balance	 	 	 	 	
 	 			 	 	 	 	
Mortgage	 	 	September 30,
2004	 	 	December 31,
2003	 	Interest Rates as of
September 30, 2004	 	Maturity Dates	

Variable rate mortgages	 	$	23,248 	 	$	60,337 	 	3.56% to 4.77%	 	March 2007 to July 2027	
Fixed rate mortgages	 	 	499,469 	 	 	402,322 	 	5.78% to 8.65%	 	January 2006 to July 2027	
	 			 			 		 		
Total mortgage notes payable	 	$	522,717 	 	$	462,659 	 		 		
	 			 			 		 		
 	 	 	The weighted average interest rate on the Company’s mortgages was 7.32% and 7.11% for the nine-month periods ended September 30, 2004 and 2003. 	
			 	 	
	(b)	Borrowings under credit facilities	
 	 	 	
 	 	The Company utilizes credit facility borrowings for general business purposes, including the acquisition of properties and the repayment of other debt. In May 2004, the Company replaced its existing credit facility with 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 new Credit Facility 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. The Credit Facility contains various financial and non-financial covenants. As of September 30, 2004, the Company was in compliance with all such covenants. 	
 	 	 	
 	 	As of September 30, 2004, the Company had $322.0 million of borrowings and $10.7 million of letters of credit outstanding under the Credit Facility, leaving $117.3 million of unused availability. As of September 30, 2004, the Company’s interest rate was 2.74% (LIBOR was 1.84% at September 30, 2004 plus a spread of 0.90%). For the nine-month periods ended September 30, 2004 and 2003, the Company’s average interest rate, including the effects of interest rate hedges as discussed in Note 6 and including both the new Credit Facility and prior credit facility, was 3.98% and 4.57% per annum.	
		 	 	
	(c)	Unsecured Term Loans	
 	 	 	
 	 	The Company uses unsecured term loans for general business purposes and the acquisition of properties. The Company’s term loans are as follows: 	
		 	 	 	
		 	(a)	2005 Term Loan – In connection with the TRC acquisition, the Company repaid all amounts due under the 2005 Term Loan. The 2005 Term Loan had a principal amount of $100 million and bore interest at LIBOR plus a spread ranging from 1.05% to 1.09% based on the Company’s unsecured senior debt rating. The average interest rate on the Company’s 2005 Term Loan was 2.5% and 3.0% for the nine-month periods ended September 30, 2004 and 2003. 	
		 	 	 	
		 	(b)	2007 Term Loan – The 2007 Term Loan was obtained in September 2004 and had a principal amount of $320 million, was scheduled to mature on May 24, 2007, and was subject to certain mandatory prepayment provisions. In October 2004, the 2007 Term Loan was repaid in full with a portion of the proceeds from the Operating Partnership’s unsecured notes. See Note 13. While outstanding, the 2007 Term Loan bore interest at a per annum floating rate equal to: (i) the higher of (x) the prime rate announced publicly by JP Morgan Chase Bank or (y) the federal funds rate plus .50% per annum, plus, in either case, between .05% and .70%, depending on the Company’s debt rating, whether the 2007 Term Loan was outstanding more than 90 days and the Company’s leverage ratio or (ii) a Eurodollar rate that is the rate at which Eurodollar deposits for similar interest periods are offered plus between 1.05% and 1.70%, depending on the Company’s debt rating, whether the 2007 Term Loan was outstanding for more than 90 days and the Company’s leverage ratio. As of September 30, 2004, the Company’s interest rate was 2.94% (LIBOR rate of 1.84% plus a spread of 1.10%). 	
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
		 	(c)	2008 Term Loan – The 2008 Term Loan was obtained in September 2004 and has a principal amount of $113 million, matures on September 20, 2008, and is subject to certain mandatory prepayment provisions. The 2008 Term Loan has no scheduled principal amortization and bears interest at a per annum floating rate equal to: (i) the higher of (x) the prime rate announced publicly by JP Morgan Chase Bank or (y) the federal funds rate plus .50% per annum, plus, in either case, between .30% and .95%, depending on the Company’s debt rating, whether the 2008 Term Loan is outstanding for more than 90 days and the Company’s leverage ratio or (ii) a Eurodollar rate that is the rate at which Eurodollar deposits for similar interest periods are offered plus between 1.30% and 1.95%, depending on the Company’s debt rating, whether the 2008 Term Loan is outstanding for more than 90 days and our leverage ratio. As of September 30, 2004, the Company’s interest rate was 3.19% (LIBOR rate of 1.84% plus a spread of 1.35%).	
 	 	 	 	 	
 	 	 	 	The 2007 Term Loan contained and the 2008 Term Loans contains financial and operating covenants similar to those in the Credit Facility. As of September 30, 2004, the Company was in compliance with all such financial and operating covenants. 	
 	 	
6.	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.
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, 2004, the Company was not party to any derivative financial instruments. 
Prior to September 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. 
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
In October 2004 and in anticipation of the issuance of unsecured notes, the Operating Partnership entered into treasury lock agreements. See Note 13.
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 credit risk 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 nine-month periods ended September 30, 2004 or 2003. See Note 10 for geographic segment information.
7.	DISCONTINUED OPERATIONS	
For the three-and nine-month periods ended September 30, 2004 and 2003, income from discontinued operations relates to 13 properties that the Company sold from January 1, 2003 to September 30, 2004. One property was designated as held-for-sale as of September 30, 2004. The following table summarizes the balance sheet information for the one property identified as held for sale at September 30, 2004:
Real Estate Investments:	 	 	 	
 	Operating Properties	$	3,815 	 	
 	Accumulated depreciation	 	(497	)	
 	 			 	
 	 	 	3,318 	 	
 	 	 	 	 	
Other assets	 	247 	 	
 			 	
 	 Total Assets Held for Sale	$	3,565 	 	
 	 			 	
The following table summarizes revenue and expense information for the 13 properties sold since January 1, 2003 and the one property held for sale as of September 30, 2004 (in thousands):
 	 	 	 	 	Three-month periods	 	 	 	Nine-month periods	 	
 	 	 	 	 	ended September 30,	 	 	 	ended September 30,	 	
 	 	 	 			 	  			 	
 	 	 	 	 	2004	 	 	 	2003	 	 	 	2004	 	 	 	2003	 	
 	 			 	 			 	 			 	 			 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Rents	 	$	—	 	 	$	1,545 	 	 	$	198 	 	 	$	5,088 	 	
 	Tenant reimbursements	 	 	—	 	 	 	273 	 	 	 	198 	 	 	 	734 	 	
 	Other	 	 	—	 	 	 	3 	 	 	 	17 	 	 	 	28 	 	
 	 			 	 			 	 			 	 			 	
 	 	Total revenue	 	 	—	 	 	 	1,821 	 	 	 	413 	 	 	 	5,850 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Property operating expenses	 	 	44 	 	 	 	576 	 	 	 	343 	 	 	 	2,050 	 	
 	Real estate taxes	 	 	23 	 	 	 	312 	 	 	 	119 	 	 	 	897 	 	
 	Depreciation and amortization	 	 	13 	 	 	 	214 	 	 	 	183 	 	 	 	918 	 	
 	 			 	 			 	 			 	 			 	
 	 	Total operating expenses	 	 	80 	 	 	 	1,102 	 	 	 	645 	 	 	 	3,865 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from discontinued operations before net gain	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	on sale of interests in real estate and minority interest	 	 	(80	)	 	 	719 	 	 	 	(232	)	 	 	1,985 	 	
Net gain on sales of interest in real estate	 	 	2,486 	 	 	 	1,741 	 	 	 	2,735 	 	 	 	2,692 	 	
Minority interest 	 	 	(86	)	 	 	(109	)	 	 	(90	)	 	 	(215	)	
 	 			 	 			 	 			 	 			 	
Income from discontinued operations 	 	$	2,320 	 	 	$	2,351 	 	 	$	2,413 	 	 	$	4,462 	 	
 	 			 	 			 	 			 	 			 	
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 were met. The deferred gain recognized was presented within discontinued operations consistent with the historical operating results from the property.
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Discontinued operations have not been segregated in the condensed consolidated statements of cash flows. Therefore, amounts for certain captions will not agree with respective data in the condensed consolidated statements of operations.
8.	BENEFICIARIES’ EQUITY	
On September 17, 2004, the Company sold 7,750,000 Common Shares in an underwritten public offering for net proceeds of approximately $217.1 million.
On September 20, 2004, the Company declared a distribution of $0.44 per Common Share, totaling $23.7 million, which was paid on October 15, 2004 to shareholders of record as of October 5, 2004. 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, 2004, the Company declared distributions on its Series A Preferred Shares, Series C Preferred Shares and Series D Preferred Shares to holders of record on September 30, 2004. These shares are currently entitled to a preferential return of 7.25%, 7.50% and 7.375%, respectively. Distributions paid on October 15, 2004 to holders of Series A Preferred Shares, Series C Preferred Shares and Series D Preferred Shares totaled $.7 million, $.9 million and $1.1 million, respectively.
9.	COMPREHENSIVE INCOME	
Comprehensive income represents net income, plus the results of certain beneficiaries’ equity changes not reflected in the condensed consolidated statements of operations. The components of comprehensive income are as follows (in thousands): 
 	 	 	 	 	Three-month periods 	 	 	 	Nine-month periods 	 	
 	 	 	 	 	Ended September 30,	 	 	 	Ended September 30,	 	
 	 	 	 			 	 			 	
 	 	 	 	 	2004	 	 	 	2003	 	 	 	2004	 	 	 	2003	 	

 	Net income	$	21,166 	 	 	$	17,400 	 	 	$	51,776 	 	 	$	44,841 	 	
 	Other comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Reclassification adjustment for gains reclassified	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	into operations	 	—	 	 	 	—	 	 	 	(233	)	 	 	—	 	
 	 	Reclassification adjustments for losses reclassified 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	into operations	 	—	 	 	 	1,366 	 	 	 	2,802 	 	 	 	3,928 	 	
 	 	Unrealized derivative gain (loss) on cash flow hedges	 	—	 	 	 	(17	)	 	 	305 	 	 	 	(1,146	)	
 	 	Unrealized gain (loss) on available-for-sale securities	 	227 	 	 	 	27 	 	 	 	(658	)	 	 	73 	 	
 	 	 	 			 	 			 	 			 	 			 	
 	Other Comprehensive income	$	21,393 	 	 	$	18,776 	 	 	$	53,992 	 	 	$	47,696 	 	

10.	SEGMENT INFORMATION	
In connection with the TRC acquisition, the Company restructured its operating regions into five segments: (1) Pennsylvania–North, (2) Pennsylvania–West, (3) New Jersey (including New York in 2003 periods), (4) Virginia and (5) Urban. Prior to the TRC acquisition, the Company operated in four segments: (1) Pennsylvania–North, (2) Pennsylvania–West, (3) New Jersey, and (4) Virginia. The corresponding segment disclosures below for the three- and nine-month periods ended September 30, 2004 and 2003 have been restated to reflect the change in the Company’s operating segments. Corporate is responsible for cash and investment management, certain construction projects, and certain other general support functions.
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Segment information for the three-month periods ended September 30, 2004 and 2003 is as follows (in thousands):
  	 	Pennsylvania
North	 	 	 	Pennsylvania
West	 	 	 	 New Jersey	 	 	 	 Virginia	 	 	 	 Urban	 	 	 	 Corporate	 	 	 	 Total	 	
 			 	 			 	 			 	 			 	 			 	 			 	 			 	
As of September 30, 2004:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
																												
Real estate investments, at cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Operating properties	$	526,600 	 	 	$	843,381 	 	 	$	558,839 	 	 	$	215,696 	 	 	$	359,374 	 	 	$	—	 	 	$	2,503,890 	 	
     Construction-in-progress	 	20,118 	 	 	 	6,471 	 	 	 	10,740 	 	 	 	1,470 	 	 	 	1,397 	 	 	 	48,896 	 	 	 	89,092 	 	
     Land held for development	 	22,016 	 	 	 	9,817 	 	 	 	18,592 	 	 	 	7,960 	 	 	 	515 	 	 	 	513 	 	 	 	59,413 	 	
Assets held for sale, at cost	 	3,565 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	3,565 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As of December 31, 2003:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
																												
Real estate investments, at cost:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Operating properties	$	480,469 	 	 	$	573,300 	 	 	$	536,264 	 	 	$	214,488 	 	 	$	65,223 	 	 	$	—	 	 	$	1,869,744 	 	
     Construction-in-progress	 	20,115 	 	 	 	4,546 	 	 	 	4,081 	 	 	 	582 	 	 	 	446 	 	 	 	17 	 	 	 	29,787 	 	
     Land held for development	 	21,764 	 	 	 	11,469 	 	 	 	13,378 	 	 	 	8,576 	 	 	 	515 	 	 	 	8,213 	 	 	 	63,915 	 	
Assets held for sale, at cost	 	—	 	 	 	—	 	 	 	3,649 	 	 	 	1,668 	 	 	 	—	 	 	 	—	 	 	 	5,317 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
For three months ended September 30, 2004:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
																										
Total revenue	$	19,390 	 	 	$	20,969 	 	 	$	25,492 	 	 	$	6,640 	 	 	$	4,550 	 	 	$	2,603 	 	 	$	79,644 	 	
Property operating expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     and real estate taxes	 	8,211 	 	 	 	6,999 	 	 	 	10,035 	 	 	 	2,851 	 	 	 	1,520 	 	 	 	42 	 	 	 	29,658 	 	
 			 	 			 	 			 	 			 	 			 	 			 	 			 	
Net operating income	$	11,179 	 	 	$	13,970 	 	 	$	15,457 	 	 	$	3,789 	 	 	$	3,030 	 	 	$	2,561 	 	 	$	49,986 	 	

For three months ended September 30, 2003:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
																										
Total revenue	$	17,687 	 	 	$	23,658 	 	 	$	22,956 	 	 	$	7,071 	 	 	$	3,033 	 	 	$	2,598 	 	 	$	77,003 	 	
Property operating expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     and real estate taxes	 	6,924 	 	 	 	7,139 	 	 	 	8,367 	 	 	 	2,739 	 	 	 	1,315 	 	 	 	—	 	 	 	26,484 	 	
 			 	 			 	 			 	 			 	 			 	 			 	 			 	
Net operating income	$	10,763 	 	 	$	16,519 	 	 	$	14,589 	 	 	$	4,332 	 	 	$	1,718 	 	 	$	2,598 	 	 	$	50,519 	 	

Segment information for the nine-month periods ended September 30, 2004 and 2003 is as follows (in thousands):
  	 	 	Pennsylvania
North	 	 	 	Pennsylvania
West	 	 	 	 New Jersey	 	 	 	 Virginia	 	 	 	 Urban	 	 	 	 Corporate	 	 	 	 Total	 	

For nine month period ended September 30, 2004:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
																								
Total revenue	 	$	56,764 	 	 	$	61,656 	 	 	$	74,319 	 	 	$	20,018 	 	 	$	10,895 	 	 	$	6,625 	 	 	$	230,277 	 	
Property operating expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
and real estate taxes	 	 	24,691 	 	 	 	19,576 	 	 	 	28,562 	 	 	 	8,418 	 	 	 	4,265 	 	 	 	297 	 	 	 	85,809 	 	
 	 			 	 			 	 			 	 			 	 			 	 			 	 			 	
Net operating income	 	$	32,073 	 	 	$	42,080 	 	 	$	45,757 	 	 	$	11,600 	 	 	$	6,630 	 	 	$	6,328 	 	 	$	144,468 	 	

For nine month period ended September 30, 2003:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
																								
Total revenue	 	$	54,118 	 	 	$	70,281 	 	 	$	68,191 	 	 	$	20,780 	 	 	$	8,581 	 	 	$	4,398 	 	 	$	226,349 	 	
Property operating expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
and real estate taxes	 	 	22,203 	 	 	 	20,804 	 	 	 	25,280 	 	 	 	8,159 	 	 	 	3,706 	 	 	 	—	 	 	 	80,152 	 	
 	 			 	 			 	 			 	 			 	 			 	 			 	 			 	
Net operating income	 	$	31,915 	 	 	$	49,477 	 	 	$	42,911 	 	 	$	12,621 	 	 	$	4,875 	 	 	$	4,398 	 	 	$	146,197 	 	
 	 			 	 			 	 			 	 			 	 			 	 			 	 			 	
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):
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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
 	 	 	Three-month period	 	 	 	Nine-month period	 	
 	 	 	ended September 30,	 	 	 	ended September 30,	 	
 	 	 	2004	 	 	 	2003	 	 	 	2004	 	 	 	2003	 	

Consolidated net operating income	$	49,986 	 	 	$	50,519 	 	 	$	144,468 	 	 	$	146,197 	 	
Less:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Interest expense	 	(11,474	)	 	 	(13,746	)	 	 	(35,526	)	 	 	(44,293	)	
 	Depreciation and amortization	 	(18,293	)	 	 	(15,196	)	 	 	(50,936	)	 	 	(44,795	)	
 	Administrative expenses	 	(3,534	)	 	 	(3,630	)	 	 	(10,977	)	 	 	(10,953	)	
 	Minority interest attributable to continuing 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	     operations	 	(257	)	 	 	(2,367	)	 	 	(2,140	)	 	 	(6,967	)	
Plus:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Equity in income of real estate ventures	 	665 	 	 	 	(531	)	 	 	1,573 	 	 	 	38 	 	
 	Net gains on sales of interests in real estate	 	1,753 	 	 	 	—	 	 	 	2,901 	 	 	 	1,152 	 	
 	 			 	 			 	 			 	 			 	
Income from continuing operations 	 	18,846 	 	 	 	15,049 	 	 	 	49,363 	 	 	 	40,379 	 	
Income from discontinued operations	 	2,320 	 	 	 	2,351 	 	 	 	2,413 	 	 	 	4,462 	 	

Net income 	$	21,166 	 	 	$	17,400 	 	 	$	51,776 	 	 	$	44,841 	 	

11.	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):
 	 	Three-month period ended September 30, 	 	
 			 	
 	2004	 	 	 	2003	 	
 		 	 			 	
 	 	Basic	 	 	 	Diluted	 	 	 	Basic	 	 	 	Diluted	 	

Income from continuing operations	$	18,846 	 	 	$	18,846 	 	 	$	15,049 	 	 	$	15,049 	 	
Income from discontinued operations	 	2,320 	 	 	 	2,320 	 	 	 	2,351 	 	 	 	2,351 	 	
Income allocated to Preferred Shares	 	(2,677	)	 	 	(2,677	)	 	 	(2,976	)	 	 	(2,976	)	
 			 	 			 	 			 	 			 	
 	 	18,489 	 	 	 	18,489 	 	 	 	14,424 	 	 	 	14,424 	 	
Preferred Share discount amortization	 	—	 	 	 	—	 	 	 	(369	)	 	 	(369	)	
 			 	 			 	 			 	 			 	
Net income available to common shareholders	$	18,489 	 	 	$	18,489 	 	 	$	14,055 	 	 	$	14,055 	 	
 			 	 			 	 			 	 			 	
Weighted-average shares outstanding	 	46,929,049 	 	 	 	46,929,049 	 	 	 	37,359,385 	 	 	 	37,359,385 	 	
Options and warrants	 	—	 	 	 	240,844 	 	 	 	—	 	 	 	161,423 	 	
 			 	 			 	 			 	 			 	
Total weighted-average shares outstanding	 	46,929,049 	 	 	 	47,169,893 	 	 	 	37,359,385 	 	 	 	37,520,808 	 	

Earnings per Common Share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing operations	$	0.34 	 	 	$	0.34 	 	 	$	0.32 	 	 	$	0.31 	 	
Discontinued operations	 	0.05 	 	 	 	0.05 	 	 	 	0.06 	 	 	 	0.06 	 	
 			 	 			 	 			 	 			 	
 	$	0.39 	 	 	$	0.39 	 	 	$	0.38 	 	 	$	0.37 	 	

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BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
 	 	Nine-month period ended September 30, 	 	
 			 	
 	 	2004	 	 	 	2003	 	
 			 	 			 	
 	 	Basic	 	 	 	Diluted	 	 	 	Basic	 	 	 	Diluted	 	

Income from continuing operations	$	49,363 	 	 	$	49,363 	 	 	$	40,379 	 	 	$	40,379 	 	
Income from discontinued operations	 	2,413 	 	 	 	2,413 	 	 	 	4,462 	 	 	 	4,462 	 	
Preferred Share redemption gain	 	4,500 	 	 	 	4,500 	 	 	 	—	 	 	 	—	 	
Income allocated to Preferred Shares	 	(7,372	)	 	 	(7,372	)	 	 	(8,928	)	 	 	(8,928	)	
 			 	 			 	 			 	 			 	
 	 	48,904 	 	 	 	48,904 	 	 	 	35,913 	 	 	 	35,913 	 	
Preferred Share discount amortization	 	—	 	 	 	—	 	 	 	(1,107	)	 	 	(1,107	)	
 			 	 			 	 			 	 			 	
Net income available to common shareholders	$	48,904 	 	 	$	48,904 	 	 	$	34,806 	 	 	$	34,806 	 	
 			 	 			 	 			 	 			 	
Weighted-average shares outstanding	 	45,565,650 	 	 	 	45,565,650 	 	 	 	36,095,349 	 	 	 	36,095,349 	 	
Options and warrants	 	—	 	 	 	238,346 	 	 	 	—	 	 	 	137,251 	 	
 			 	 			 	 			 	 			 	
Total weighted-average shares outstanding	 	45,565,650 	 	 	 	45,803,996 	 	 	 	36,095,349 	 	 	 	36,232,600 	 	

Earnings per Common Share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Continuing operations	$	1.02 	 	 	$	1.02 	 	 	$	0.84 	 	 	$	0.84 	 	
     Discontinued operations	 	0.05 	 	 	 	0.05 	 	 	 	0.12 	 	 	 	0.12 	 	
 			 	 			 	 			 	 			 	
 	$	1.07 	 	 	$	1.07 	 	 	$	0.96 	 	 	$	0.96 	 	
 			 	 			 	 			 	 			 	
Securities (including Series A Preferred Shares and Series B Preferred Shares of the Company, and Series B Preferred Units and Class A Units of the Operating Partnership) totaling 3,400,745 and 10,933,632 as of September 30, 2004 and September 30, 2003 were excluded from the earnings per share computations for the three- and nine-month periods ended September 30, 2004 and 2003 because their effect would have been antidilutive. All of the Series B Preferred Shares were redeemed, or were converted into Common Shares, in December 2003 and are no longer outstanding. All of the Series B Preferred Units were redeemed by the Operating Partnership in February 2004 and are no longer outstanding.
12.	COMMITMENTS AND CONTINGENCIES	
Legal Proceedings
Reference is made to Note 12 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 involving litigation in the State of New Jersey. As reported in the Form 10-Q, on April 26, 2004, the Appellate Division affirmed the Chancery Division’s summary judgment ruling in the Company’s favor on all counts. In lieu of an appeal to the New Jersey Supreme Court, the parties agreed to a final settlement and consented to the release of a security deposit and interest thereon to the Company. In exchange, the Company agreed to waive its claim for counsel fees. As a result of the foregoing, the Company recorded $1.0 million plus accrued interest on the Company’s security deposit that was released in other revenue for the nine-month period ended September 30, 2004. 
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.
13.	SUBSEQUENT EVENT	
On October 22, 2004, the Operating Partnership issued $275.0 million of its 2009 4.5% unsecured notes (the “2009 Notes”) and $250.0 million of its 2014 5.4% unsecured notes (the “2014 Notes”, collectively, the “Notes”). The Company received net proceeds after discounts and underwriting discounts of approximately $520.1 million. The Company and certain of the wholly-owned subsidiaries of the Operating Partnership fully and unconditionally guaranteed the payment of principal of and interest on the Notes. In anticipation of the issuance of the Notes, the Company entered into treasury lock agreements with notional amounts totaling $194.8 million with an expiration of 5 years at an all-in rate of 4.7% and with notional amounts totaling $188.0 million with an expiration of 10 years at an all-in rate of 5.6%. Upon issuance of the Notes, the Company terminated the treasury lock agreements at a total cost of $3.2 million that will be amortized to interest expense over the life of the respective notes. The net proceeds of the Notes were used to repay the $320 million 2007 Term Loan, to settle the treasury lock agreements discussed above and to reduce borrowings outstanding under the Company’s revolving credit facility. 
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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, 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 Current Report on Form 8-K for the year ended December 31, 2003, filed September 3, 2004.
OVERVIEW
The Company currently manages its portfolio within five segments: (1) Pennsylvania–West, (2) Pennsylvania–North, (3) New Jersey (including New York in 2003), (4) Virginia and (5) Urban areas. As of September 30, 2004, the Company’s portfolio consisted of 222 office properties (excluding two office properties held by two consolidated real estate ventures), 24 industrial facilities and one mixed-use property that contain an aggregate of approximately 19.3 million net rentable square feet. As of September 30, 2004, the Company held ownership interests in nine unconsolidated Real Estate Ventures.
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.
In the current economic climate, the Company continues to seek revenue growth through an increase in occupancy of its portfolio (90.5% at September 30, 2004, 85.6% including the five lease-up assets acquired as part of the TRC Properties) 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. 
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 4.3% of the net rentable square feet of the Properties as of September 30, 2004 expire without penalty through the end of 2004. In addition, leases totaling approximately 16.4% of the net rentable square feet of the Properties as of September 30, 2004 are scheduled to expire without penalty in 2005. 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, 2004 was 77.3%. 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. 
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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 $4.1 million or 8.6% of total receivables (including accrued rent receivable) as of September 30, 2004 compared to $4.0 million or 11.2% of total receivables (including accrued rent receivable) as of December 31, 2003. 
Development Risk:
As of September 30, 2004, the Company had in development four office properties and had in redevelopment three office properties aggregating 1.2 million square feet. The total cost of these projects is estimated to be $222.5 million of which $70.2 million had been incurred as of September 30, 2004. As of September 30, 2004, these projects were approximately 57% leased. One of these development properties is Cira Centre, a 28-story office tower located adjacent to Amtrak’s 30th Street Station in the University City District of Philadelphia. The total cost of 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, 2004, this project was approximately 65% leased. 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. As of September 30, 2004, the Company owned approximately 469 acres of undeveloped land. Risks associated with development include construction cost overruns, construction delays, insufficient occupancy rates and inability to obtain necessary zoning, land-use, building, occupancy and other required governmental approvals. 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.
RECENT ACTIVITY
On September 21, 2004, the Operating Partnership completed the acquisition of 100% of the partnership interests in The Rubenstein Company, L.P. (“TRC”) for a total purchase price of $600 million, excluding transaction costs and debt prepayment penalties. In 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 condensed consolidated financial statements since that date.
The Operating Partnership has agreed to issue the sellers up to a maximum of $9.7 million of additional Class A Units if certain TRC Properties achieve at least 95% occupancy prior to September 21, 2007. 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.
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In addition to the TRC acquisition, the Company acquired the following properties during the nine-month period ended September 30, 2004:
 	Purchase	 	 	 	 	# of	 	Rentable 	 	 	Purchase	 	
 	Date	Property/Portfolio Name	 	Location	 	Bldgs. 	 	Square Feet/Acres 	 	 	Price	 	
 			 		 		 		 			 	
 	 	 	 	 	 	 	 	 	 	 	(in 000’s)	 	
Office/Industrial Properties:	 	 	 	 	 	 	 	 	 	 	
 	Jul-04	Five Greentree	 	Mount Laurel, NJ 	 	1 	 	169,534 	 	 	18,353 	 	
 	 	 	 	 	 		 		 	 		 	
 	 	Total Office/Industrial Properties Acquired	 	 	 	1 	 	169,534 	 	$	18,353 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Land Parcels: 	 	 	 	 	 	 	 	 	 	 	
 	Sep-04	Newtown Land	 	Newtown, Pa	 	—	 	58.4 	 	$	4,500 	 	
 	 	 	 	 	 		 		 	 		 	
 	 	Total Land Acquired	 	 	 	—	 	58.4 	 	$	4,500 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
The Company disposed of the following properties during the nine-month period ended September 30, 2004:
 	Sale	 	 	 	 	 	# of	 	Rentable 	 	 	Disposition	 	
 	Date	 	Property/Portfolio Name	 	Location	 	Bldgs. 	 	Square Feet/Acres 	 	 	Price	 	
 		 		 		 		 		 	 		 	
 	 	 	 	 	 	 	 	 	 	 	 	(in 000’s)	 	
Office/Industrial Properties:	 	 	 	 	 	 	 	 	 	 	
 	Mar-04	 	2201 Dabney Road	 	Richmond, VA 	 	1 	 	45,000 	 	$	2,100 	 	
 	Mar-04	 	1255 Broad Street	 	Bloomfield, NJ 	 	1 	 	37,478 	 	 	3,960 	 	
 	Jun-04	 	935 First Avenue	 	Montgomery, PA 	 	1 	 	103,090 	 	 	17,000 	 	
 	 	 	 	 	 	 		 		 	 		 	
 	 	 	Total Office/Industrial Properties Sold	 	 	 	3 	 	185,568 	 	$	23,060 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Land Parcels:	 	 	 	 	 	 	 	 	 	 	 	 	
 	May-04	 	Twin Hickory Land	 	Richmond, VA	 	—	 	5.3 	 	$	1,242 	 	
 	Aug-04	 	East Gate Land	 	Mount Laurel, NJ	 	—	 	19.4 	 	 	1,300 	 	
 	Sep-04	 	Dabney Plot B Land	 	Richmond, VA	 	—	 	4.6 	 	 	341 	 	
 	 	 	 	 	 	 		 		 	 		 	
 	 	 	Total Land Sold	 	 	 	—	 	29.3 	 	$	2,883 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The above tables exclude a purchase and sale of a land parcel totaling 95 acres in two separate transactions with unrelated third parties. The purchase and sale resulted in a net gain of approximately $1.5 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s condensed 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, allowance for doubtful accounts, deferred costs, contingencies and litigation. Actual results may differ from those estimates and assumptions. 
The Company’s Current Report on Form 8-K for the year ended December 31, 2003, filed on September 3, 2004, contains a discussion of the Company’s critical accounting policies. See also Note 2 in the Company’s unaudited condensed consolidated financial statements for the nine-month period ended September 30, 2004 as set forth herein. Management discusses the Company’s critical accounting policies and estimates with the Company’s Audit Committee.
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RESULTS OF OPERATIONS
Comparison of the Three Month Periods Ended September 30, 2004 and September 30, 2003 
 	 	 	 	 	Three-month periods ended
September 30, 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 		 	 	 	 	Dollar	 	 	 	Percent	 	
 	 	 	 	 	2004	 	 	 	2003	 	 	 	 	Change	 	 	 	Change	 	
 	 	 	 			 	 			 	 	 			 	 			 	
 	 	 	 	 	(amounts in thousands)	 	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Rents	$	66,637 	 	 	$	64,354 	 	 	 	$	2,283 	 	 	 	3.5	%	
 	Tenant reimbursements	 	9,689 	 	 	 	9,045 	 	 	 	 	644 	 	 	 	7.1	%	
 	Other	 	3,318 	 	 	 	3,604 	 	 	 	 	(286	)	 	 	-7.9	%	
 	 	 	 			 	 			 	 	 			 	 	 	 	 	
 	 	 	Total revenue	 	79,644 	 	 	 	77,003 	 	 	 	 	2,641 	 	 	 	3.4	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Property operating expenses	 	21,972 	 	 	 	19,183 	 	 	 	 	2,789 	 	 	 	14.5	%	
 	Real estate taxes	 	7,686 	 	 	 	7,301 	 	 	 	 	385 	 	 	 	5.3	%	
 	Interest	 	11,474 	 	 	 	13,746 	 	 	 	 	(2,272	)	 	 	-16.5	%	
 	Depreciation and amortization	 	18,293 	 	 	 	15,196 	 	 	 	 	3,097 	 	 	 	20.4	%	
 	Administrative expenses	 	3,534 	 	 	 	3,630 	 	 	 	 	(96	)	 	 	-2.6	%	
 	 	 	 			 	 			 	 	 			 	 	 	 	 	
 	 	 	Total operating expenses	 	62,959 	 	 	 	59,056 	 	 	 	 	3,903 	 	 	 	6.6	%	

Income from continuing operations before equity in 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	income of unconsolidated Real Estate Ventures, 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	net gain on sales and minority interest	 	16,685 	 	 	 	17,947 	 	 	 	 	(1,262	)	 	 	-7.0	%	
Equity in income (loss) of unconsolidated Real Estate Ventures	 	665 	 	 	 	(531	)	 	 	 	1,196 	 	 	 	-225.2	%	
 	 	 	 			 	 			 	 	 			 	 	 	 	 	
Income from continuing operations before net gain 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	on sales and minority interest 	 	17,350 	 	 	 	17,416 	 	 	 	 	(66	)	 	 	-0.4	%	
Gain on sale of interests in real estate	 	1,753 	 	 	 	—	 	 	 	 	1,753 	 	 	 	100.0	%	
Minority interest 	 	(257	)	 	 	(2,367	)	 	 	 	2,110 	 	 	 	89.1	%	
 	 	 	 			 	 			 	 	 			 	 	 	 	 	
Income from continuing operations 	 	18,846 	 	 	 	15,049 	 	 	 	 	3,797 	 	 	 	25.2	%	
Income from discontinued operations (including gains on	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	dispositions), net of minority interest	 	2,320 	 	 	 	2,351 	 	 	 	 	(31	)	 	 	-1.3	%	

 	Net income 	$	21,166 	 	 	$	17,400 	 	 	 	$	3,766 	 	 	 	21.6	%	
 	 	 	 			 	 			 	 	 			 	 	 	 	 	
Of the 247 Properties owned by the Company as of September 30, 2004, a total of 221 Properties containing an aggregate of 14.7 million net rentable square feet (“Same Store Properties”) were owned for the entire three-month periods ended September 30, 2004 and 2003. 
Revenue increased to $79.6 million for the three-month period ended September 30, 2004 as compared to $77.0 million for the comparable period in 2003, primarily due to revenue from two consolidated real estate ventures (Four and Six Tower Bridge Associates) that were consolidated for the three months ended September 30, 2004 and approximately $1.8 million of revenue earned from the 14 properties acquired as part of the acquisition of TRC. The revenue and expenses relating to TRC are included in the income statement from the date of acquisition. The straight-line rent adjustment, which reflects the difference between rents accrued in accordance with generally accepted accounting principles and rents billed, increased revenues over contract rents by $1.0 million for the three-month period ended September 30, 2004 and $1.5 million for the comparable period in 2003. Other revenue includes lease termination fees, leasing commissions, third-party management fees and interest income. Revenue for the Same Store Properties increased to $69.1 million for the three months ended September 30, 2004 as compared to $68.5 million for the comparable period in 2003. This increase was the result of increased tenant reimbursement revenue resulting from increased property operating expenses at the Same Store Properties in 2004. Occupancy for the Same Store Properties as of September 30, 2004 decreased to 90.6% from 91.6% as of September 30, 2003. 
Property operating expenses increased to $22.0 million for the three-month period ended September 30, 2004 as compared to $19.2 million for the comparable period in 2003, primarily due to the additional property operating expenses associated with the consolidation of two real estate ventures (Four and Six Tower Bridge Associates) effective March 31, 2004 and operating expenses associated with the 14 properties acquired in the TRC acquisition. Additionally, the increase in property operating expenses is attributable to increased repairs and maintenance and utilities expenses in 2004 as compared to 2003. Property operating expenses for the Same Store Properties increased to $21.2 million for the three months ended September 30, 2004 as compared to $19.7 million for the comparable period in 2003 as a result of increased repairs and maintenance expenditures and utilities expenses in 2004 as compared to 2003.
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Real estate taxes increased to $7.7 million for the three-month period ended September 30, 2004 as compared to $7.3 million for the comparable period in 2003, primarily due additional real estate taxes relating to the 14 TRC Properties and to higher tax rates and property assessments. Real estate taxes for the Same Store Properties increased to $6.8 million for the three months ended September 30, 2004 as compared to $6.4 million for the comparable period in 2003 as a result of higher tax rates and property assessments in 2004.
Interest expense decreased to $11.5 million for the three-month period ended September 30, 2004 as compared to $13.7 million for the comparable period in 2003, primarily due to decreased average borrowings and decreased interest rates. Average outstanding debt balances for the three months ended September 30, 2004 were $821.1 million as compared to approximately $942.2 million for the comparable period in 2003. The Company’s weighted-average interest rate on its outstanding indebtedness (after giving effect to hedging activities) decreased to 4.62% as of September 30, 2004 from 5.56% as of September 30, 2003. The decrease in interest expense was offset by additional interest expense associated with two consolidated real estate ventures that were consolidated effective March 31, 2004 and additional borrowings under the revolving Credit Facility and the unsecured term loans used to fund the acquisition of TRC. 
Depreciation and amortization expense increased to $18.3 million for the three-month period ended September 30, 2004 as compared to $15.2 million for the comparable period in 2003 primarily due to additional depreciation recorded from the acquisition of TRC, other property acquisitions from October 2003 through September 2004, increased tenant improvements in the second half of 2003 and 2004 and depreciation and amortization expense associated with two real estate ventures that were consolidated effective March 31, 2004.
Administrative expenses decreased to $3.5 million for the three-month period ended September 30, 2004 as compared to $3.6 million for the comparable period in 2003.
Equity in income of Real Estate Ventures increased to $0.7 million for the three-month period ended September 30, 2004 as compared to a loss of $0.5 million for the comparable period in 2003, primarily due to increased income from the One and Three Christina Center joint venture formed in December 2003, in which the Company retains a 20% interest and an impairment charge recorded during the third quarter 2003 associated with a non-operating joint venture. This increase was offset by the reclassification of income from the Four and Six Tower Bridge joint ventures that were consolidated into the Company’s statement of operations for the three-month period ended September 30, 2004. 
Gain on sale of real estate interests increased to $1.8 million in 2004 from zero in 2003 primarily due the purchase and sale of a land parcel in two separate transactions during the third quarter 2004 in which the Company recorded a net gain of approximately $1.5 million. 
Minority interest from continuing operations primarily represents the equity in income attributable to the portion of the Operating Partnership not owned by the Company. Minority interest decreased to $0.3 million for the three-month period ended September 30, 2004 as compared to $2.4 million for the comparable period in 2003 primarily due to Series B Preferred Units that were outstanding for the full period in 2003 and were not outstanding during the full period in 2004. The Company redeemed the Series B Preferred Units in February 2004 and recorded a related redemption charge at that time. 
Discontinued operations decreased to $2.3 million for the three-month period ended September 30, 2004 as compared to $2.4 million for the comparable period in 2003 primarily due to the operations of the properties included in discontinued operations in 2004 as compared to 2003. During the third quarter of 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 were met. 
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Comparison of the Nine Month Periods Ended September 30, 2004 and September 30, 2003 
 	 	 	 	Nine-month periods ended
September 30, 	 	 	 	 	 	 	 	 	 	
 	 	 	 		 	 	 	Dollar	 	 	 	Percent	 	
 	 	 	 	2004	 	 	 	2003	 	 	 	Change	 	 	 	Change	 	
 	 	 			 	 			 	 			 	 			 	
 	 	 	 	(amounts in thousands)	 	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Rents	$	194,703 	 	 	$	192,570 	 	 	$	2,133 	 	 	 	1.1	%	
 	Tenant reimbursements	 	25,838 	 	 	 	26,101 	 	 	 	(263	)	 	 	-1.0	%	
 	Other	 	9,736 	 	 	 	7,678 	 	 	 	2,058 	 	 	 	26.8	%	
 	 	 			 	 			 	 			 	 	 	 	 	
 	 	Total revenue	 	230,277 	 	 	 	226,349 	 	 	 	3,928 	 	 	 	1.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Property operating expenses	 	64,338 	 	 	 	59,559 	 	 	 	4,779 	 	 	 	8.0	%	
 	Real estate taxes	 	21,471 	 	 	 	20,593 	 	 	 	878 	 	 	 	4.3	%	
 	Interest	 	35,526 	 	 	 	44,293 	 	 	 	(8,767	)	 	 	-19.8	%	
 	Depreciation and amortization	 	50,936 	 	 	 	44,795 	 	 	 	6,141 	 	 	 	13.7	%	
 	Administrative expenses	 	10,977 	 	 	 	10,953 	 	 	 	24 	 	 	 	0.2	%	
 	 	 			 	 			 	 			 	 	 	 	 	
 	 	Total operating expenses	 	183,248 	 	 	 	180,193 	 	 	 	3,055 	 	 	 	1.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations before equity in 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	income of unconsolidated Real Estate Ventures, 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	net gain on sales and minority interest	 	47,029 	 	 	 	46,156 	 	 	 	873 	 	 	 	1.9	%	
Equity in income of unconsolidated Real Estate Ventures	 	1,573 	 	 	 	38 	 	 	 	1,535 	 	 	 	4039.5	%	
 	 	 			 	 			 	 			 	 	 	 	 	
Income from continuing operations before net gain 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	on sales and minority interest 	 	48,602 	 	 	 	46,194 	 	 	 	2,408 	 	 	 	5.2	%	
Gain on sale of interests in real estate	 	2,901 	 	 	 	1,152 	 	 	 	1,749 	 	 	 	151.8	%	
Minority interest 	 	(2,140	)	 	 	(6,967	)	 	 	4,827 	 	 	 	69.3	%	
 	 	 			 	 			 	 			 	 	 	 	 	
Income from continuing operations 	 	49,363 	 	 	 	40,379 	 	 	 	8,984 	 	 	 	22.2	%	
Income from discontinued operations (including gains on	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	dispositions), net of minority interest	 	2,413 	 	 	 	4,462 	 	 	 	(2,049	)	 	 	-45.9	%	

 	Net income 	$	51,776 	 	 	$	44,841 	 	 	$	6,935 	 	 	 	15.5	%	
 	 	 			 	 			 	 			 	 	 	 	 	
Of the 247 Properties owned by the Company as of September 30, 2004, a total of 221 Properties containing an aggregate of 14.7 million net rentable square feet (“Same Store Properties”) were owned for the entire nine-month periods ended September 30, 2004 and 2003. 
Revenue increased to $230.3 million for the nine-month period ended September 30, 2004 as compared to $226.4 million for the comparable period in 2003, primarily due to approximately $1.8 million of additional revenue earned from the 14 TRC Properties acquired as part of the acquisition of TRC and revenue from two consolidated real estate ventures (Four and Six Tower Bridge Associates) that were consolidated effective March 31, 2004. These two real estate ventures were not consolidated in 2003. Additionally, this increase is also due to increased other revenue in 2004 as compared to 2003. The straight-line rent adjustment, which reflects the difference between rents accrued in accordance with generally accepted accounting principles and rents billed, increased revenues over contract rents by $3.3 million for the nine-month period ended September 30, 2004 and $4.4 million for the comparable period in 2003. Other revenue includes income from the settlement of a previously disclosed litigation, lease termination fees, leasing commissions, third-party management fees and interest income. Other revenue increased to $9.7 million for the nine-month period ended September 30, 2004 as compared to $7.7 million for the comparable period in 2003 primarily due to the settlement of a previously disclosed litigation totaling $1.0 million plus accrued interest on the Company’s security deposit that was released in 2004. Revenue for the Same Store Properties increased to $206.3 million for the nine-months ended September 30, 2004 as compared to $203.9 million for the comparable period in 2003. This increase was the result of increased termination fees received in 2004 as compared to 2003 and increased tenant reimbursement revenue resulting from increased property operating expenses at the Same Store Properties in 2004. Occupancy for the Same Store Properties as of September 30, 2004 decreased to 90.6% from 91.6% as of September 30, 2003. 
Property operating expenses increased to $64.4 million for the nine-month period ended September 30, 2004 as compared to $59.6 million for the comparable period in 2003, primarily due to property operating expenses associated with the 14 TRC Properties acquired as part of the acquisition of TRC, and additional property operating expenses associated with two consolidated real estate ventures that were consolidated effective March 31, 2004. Additionally, the increase in property operating expenses is attributable to increased snow removal costs, repairs and maintenance expenditures and utilities expenses in 2004 as compared to 2003. Property operating expenses for the Same Store Properties increased to $21.2 million for the three-months ended September 30, 2004 as compared to $19.7 million for the comparable period in 2003 as a result of increased snow removal costs, repairs and maintenance expenditures and utility expenses in 2004 as compared to 2003.
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Real estate taxes increased to $21.5 million for the nine-month period ended September 30, 2004 as compared to $20.6 million for the comparable period in 2003, primarily due to higher tax rates and property assessments. Real estate taxes for the Same Store Properties increased to $19.6 million for the nine-months ended September 30, 2004 as compared to $18.4 million for the comparable period in 2003 as a result of higher tax rates and property assessments in 2004.
Interest expense decreased to $35.5 million for the nine-month period ended September 30, 2004 as compared to $44.3 million for the comparable period in 2003, primarily due to decreased average borrowings and decreased interest rates. Average outstanding debt balances for the nine-months ended September 30, 2004 were $775.5 million as compared to approximately $968.9 million for the comparable period in 2003. The Company’s weighted-average interest rate on its outstanding indebtedness (after giving effect to hedging activities) decreased to 4.62% as of September 30, 2004 from 5.56% as of September 30, 2003. The decrease in interest expense was offset by additional interest expense associated with two consolidated real estate ventures that were consolidated effective March 31, 2004 and additional borrowings under the revolving Credit Facility and the unsecured term loans used to fund the acquisition of TRC. 
Depreciation and amortization expense increased to $50.9 million for the nine-month period ended September 30, 2004 as compared to $44.8 million for the comparable period in 2003 primarily due to additional depreciation recorded from the TRC Properties, other property acquisitions from October 2003 to September 2004, increased tenant improvements in the second half of 2003 and 2004 and depreciation and amortization expense associated with two consolidated real estate ventures that were consolidated effective March 31, 2004.
Administrative expenses were $11.0 million for the nine-month periods ended September 30, 2004 and 2003. 
Equity in income of Real Estate Ventures increased to $1.6 million for the nine-month period ended September 30, 2004 as compared to $0.1 million for the comparable period in 2003, primarily due to increased income from the One and Three Christina Center real estate venture formed in December 2003, in which the Company retains a 20% interest and an impairment charge recorded during the third quarter 2003 associated with a non-operating joint venture. This increase was offset by the reclassification of income from our Four and Six Tower Bridge joint ventures that were consolidated into the Company’s statement of operations effective March 31, 2004. 
Gain on sale of real estate interests increased to $2.9 million in 2004 from $1.2 million in 2003 primarily due to the purchase and sale of a land parcel to two separate third parties during the third quarter 2004 in which the Company recorded a net gain of approximately $1.5 million.
Minority interest decreased to $2.1 million for the nine-month period ended September 30, 2004 as compared to $7.0 million for the comparable period in 2003 primarily due to Series B Preferred Units that were outstanding for the full period in 2003 and were not outstanding during the full period in 2004. The Company redeemed the Series B Preferred Units in February 2004 and recorded a related redemption charge at that time.
Discontinued operations decreased to $2.4 million for the nine-month period ended September 30, 2004 as compared to $4.5 million for the comparable period in 2003 primarily due to the operations of the properties included in discontinued operations in 2004 as compared to 2003. During the third quarter of 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 were met.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
During the nine-month period ended September 30, 2004, the Company generated $100.7 million in cash flow from operating activities. Other sources of cash flow for the nine-month period consisted of: (i) $392.3 million in net proceeds from share issuances, (ii) $17.0 million of proceeds from draws on the Credit Facility, net of Credit Facility payments, (iii) $433.0 million from term loan borrowings, (iv) $20.7 million of proceeds from sales of properties, (v) $4.9 million of proceeds from exercise of stock options, (vi) $0.3 million of cash distributions from Real Estate Ventures in excess of equity in income (vii) $0.4 million from the consolidation of variable interest entities and (viii) $1.0 million from repayments on employee stock loans. During the nine-month period ended September 30, 2004, cash out-flows consisted of: (i)$100 million of term loan repayments, (ii)$93.8 million of repurchases of Series B Preferred Units and Class A Units, (iii) $79.2 million to fund development and capital expenditures, (iv) $45.8 million of mortgage note repayments, (v) $67.9 million of distributions to shareholders and minority interest holders, (vi) $6.6 million of leasing costs, (vii) $3.8 million in debt financing costs, (viii) $1.6 million for redemption of Class A Units, (ix) $0.6 million of escrowed cash and (x) $0.2 million of additional investments in Real Estate Ventures.
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During the nine-month period ended September 30, 2003, the Company generated $85.3 million in cash flow from operating activities. Other sources of cash flow for the nine-month period consisted of: (i) $20.0 million of proceeds from draws on the Credit Facility, net of repayment on the Credit Facility, (ii) $47.0 million in net proceeds from share issuances, (iii) $6.8 million of proceeds from sales of properties, (iv) $3.0 million of escrowed cash, (v) $1.9 million from payments on employee loans and (vi) $1.3 million of cash distributions from Real Estate Ventures. During the nine-month period ended September 30, 2003, cash out-flows consisted of: (i) $80.2 million of mortgage note repayments, (ii) $64.5 million of distributions to shareholders and minority interest holders, (iii) $33.5 million to fund development and capital expenditures, (iv) $5.9 million of leasing costs, (v) $.5 million of additional investment in Real Estate Ventures and (vi) $.1 million of debt financing costs.
Capitalization
During the nine-month period ended September 30, 2004, the Company replaced its existing credit facility with a $450 million unsecured Credit Facility that matures in May 2007, subject to a one-year extension option. The Company may elect to increase the Credit Facility to $600 million subject to the absence of any defaults and the Company’s ability to acquire additional commitments from its existing lenders or new lenders. The Credit Facility bears interest at LIBOR plus a spread over LIBOR ranging from 0.65% to 1.20% based on the Company’s unsecured senior debt rating. As of September 30, 2004, the Company’s interest rate was 2.74% (LIBOR rate of 1.84% plus a spread of 0.90%). 
During the nine-month period ended September 30, 2004, the Company repaid all amounts due under its existing $100.0 million unsecured term loan and obtained two additional unsecured term loans in the principal amounts of $320.0 million (the 2007 Term Loan) and $113.0 million (the 2008 Term Loan). The 2007 Term Loan was scheduled to mature in September 2007 and the 2008 Term Loan matures in September 2008. As of September 30, 2004, the Company’s interest rate under the 2007 and 2008 Term Loans were 2.94% and 3.19% (LIBOR rate of 1.84% plus a spread of 1.10% and 1.35%). 
On October 22, 2004, the Operating Partnership issued $275.0 million of its 2009 4.5% unsecured notes (the “2009 Notes”) and $250.0 million of its 2014 5.4% unsecured notes (the “2014 Notes”). The Company received net proceeds after discounts and underwriting discounts of approximately $520.1 million. The Company and certain of the wholly-owned subsidiaries of the Operating Partnership fully and unconditionally guaranteed the payment of principal of and interest on the Notes. In anticipation of the issuance of the Notes, the Company entered into treasury lock agreements with notional amounts totaling $194.8 million with an expiration of 5 years at an all-in rate of 4.7% and with notional amounts totaling $188.0 million with an expiration of 10 years at an all-in rate of 5.6%. Upon issuance of the Notes, the Company terminated the treasury lock agreements at a total cost of $3.2 million that will be amortized to interest expense over the life of the respective notes. The net proceeds of the Notes were used to repay the $320 million 2007 Term Loan, to settle the treasury lock agreements discussed above and to reduce borrowings outstanding under the Company’s revolving credit facility. 
As of September 30, 2004, the Company had approximately $1,277.7 million of debt outstanding, consisting of $322.0 million of borrowings under the Credit Facility, $433.0 million under two unsecured term loans and $522.7 million of mortgage notes payable. The mortgage loans mature between January 2006 and July 2027. As of September 30, 2004, the Company also had $10.7 million of letters of credit outstanding under the Credit Facility and $117.3 million of unused availability under the Credit Facility. 
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Previously, the Company had entered into interest rate swap agreements to fix the LIBOR component of the Company’s interest rate on $175 million of the Credit Facility at approximately 4.2%. These interest rate swaps expired on June 29, 2004. 
The Company intends to refinance its mortgage notes payable as they become due primarily through the use of unsecured debt or equity. The Company expects to renegotiate its Credit Facility prior to maturity or extend its term.
On January 12, 2004, the Company sold 2,645,000 Common Shares in an underwritten public offering for net proceeds (net of transaction costs) of approximately $69.3 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. The Company recorded a gain of $4.5 million related to the redemption.
On February 27, 2004, the Company sold 2,300,000 7.375% Series D Cumulative Redeemable Preferred Shares, each with a liquidation preference of $25.00 per share, in an underwritten public offering for net proceeds (net of transaction costs) of $55.5 million.
On March 3, 2004, the Company sold 1,840,000 Common Shares in an underwritten public offering for net proceeds (net of transaction costs) of $50.7 million.
On September 17, 2004, the Company sold 7,750,000 Common Shares in an underwritten public offering for net proceeds (net of transaction costs) of $217.1 million.
As of September 30, 2004, the Company’s debt-to-market capitalization ratio was 44.1%. 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%.
The Company’s Board of Trustees approved a share repurchase program authorizing the Company to repurchase up to 4,000,000 of its outstanding Common Shares. Through September 30, 2004, 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 periods ended September 30, 2004 and 2003 under the share repurchase program. No time limit has been placed on the duration of the share repurchase program. 
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.
On September 20, 2004, the Company declared a distribution of $0.44 per Common Share, totaling $23.7 million, which was paid on October 15, 2004 to shareholders of record as of October 5, 2004. 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, 2004, the Company declared distributions on its Series A Preferred Shares, Series C Preferred Shares and Series D Preferred Shares to holders of record on September 30, 2004. These shares are currently entitled to a preferential return of 7.25%, 7.50% and 7.375%, respectively. Distributions paid on October 15, 2004 to holders of Series A Preferred Shares, Series C Preferred Shares and Series D Preferred Shares totaled $.7 million, $.9 million and $1.1 million, respectively.
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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 expense reimbursement and contractual rent increases.
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. 
The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates. The range of changes chosen reflects our 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 prevailing market conditions at September 30, 2004.
Our financial instruments consist of both fixed and variable rate debt. As of September 30, 2004, our consolidated debt consisted of $499.5 million in fixed rate mortgages and $23.2 million in variable rate mortgage notes, $322.0 million borrowings under our credit facility and $433.0 million under our term loans. 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 our debt portfolio. A change in interest rates on the fixed portion of the debt portfolio impacts the net financial 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 position.
As of September 30, 2004, the carrying value of our fixed rate debt was $499.5 million and had a fair value of $553.7 million. Changes in market interest rates on our fixed-rate debt impacts the fair value of the debt, but it has no impact on interest incurred or cash flow. The sensitivity analysis related to our fixed debt assumes an immediate 100 basis point move in interest rates from their actual September 30, 2004 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair market value of our fixed-rate debt by $32.3 million at September 30, 2004. A 100 basis point decrease in market interest rates would result in an increase in the fair market value of our fixed-rate debt by $35.6 million at September 30, 2004. 
Based on our variable rate debt as of September 30, 2004, a 1% increase in interest rates would result in an additional $7.8 million in interest expense per year and a 1% decrease would reduce interest expense by $7.8 million per year.
On October 22, 2004, the Operating Partnership issued $275.0 million of its 2009 4.5% unsecured notes (the “2009 Notes”) and $250.0 million of its 2014 5.4% unsecured notes (the “2014 Notes”). In anticipation of the issuance of the Notes, the Company entered into treasury lock agreements with notional amounts totaling $194.8 million with an expiration of 5 years at an all-in rate of 4.7% and with notional amounts totaling $188.0 million with an expiration of 10 years at an all-in rate of 5.6%. Upon issuance of the Notes, the Company terminated the treasury lock agreements at a total cost of $3.2 million that will be amortized to interest expense over the life of the respective notes. On a pro forma basis after these financing transactions, the Company’s variable rate debt has decreased by $525.0 million to $253.2 million. Based on the pro forma variable rate debt, a 1% increase would result in an additional $2.5 million of interest expense per year and a 1% decrease would reduce interest expense by $2.5 million per year. 
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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.	
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, 2004:
 	 	 	 	 	 	 	 	 	 	Total	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	Number of	 	 	Maximum	 	
 	 	 	 	 	 	 	 	 	 	Shares 	 	 	Number of	 	
 	 	 	Total	 	 	 	 	 	 	Purchased as	 	 	Shares that May	 	
 	 	 	Number of	 	 	 	Average	 	 	Part of Publicly	 	 	Yet Be Purchased	 	
 	 	 	Shares 	 	 	 	Price Paid Per	 	 	Announced Plans	 	 	Under the Plans	 	
 	 	 	Purchased	 	 	 	Share	 	 	or Programs (1)	 	 	or Programs (1)	 	

2004:	 	 	 	 	 	 	 	 	 	 	 	 	 	
July	 	—	 	 	$	—	 	 	—	 	 	762,000 	 	
August	 	—	 	 	$	—	 	 	—	 	 	762,000 	 	
September	 	—	 	 	$	—	 	 	—	 	 	762,000 	 	
 	Total	 	—	 	 	`	—	 	 	—	 	 	762,000 	 	

    	(1) In 1998, the Company’s Board of Trustees approved an open market share repurchase program and in 2001 authorized an increase in the total number of Common Shares that may be repurchased under the program to 4,000,000 Common Shares. The share repurchase program does not have an expiration date.    	
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.
32

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Item 6.     Exhibits 
(a)       Exhibits
10.1	 	Contribution Agreement (Incorporated by reference to Exhibit 10.1 to Brandywine’s Current Report on Form 8-K filed August 19, 2004)	 	
10.2	 	Amendment No. 1 to Credit Agreement (Incorporated by reference to Exhibit 10.1 to Brandywine’s Current Report on Form 8-K filed September 13, 2004)	 	
10.3	 	Term Loan Credit Agreement (2007) (Incorporated by reference to Exhibit 10.1 to Brandywine’s Current Report on Form 8-K filed September 21, 2004)	 	
10.4	 	Term Loan Credit Agreement (2008) (Incorporated by reference to Exhibit 10.2 to Brandywine’s Current Report on Form 8-K filed September 21, 2004)	 	
10.5	 	Registration Rights Agreement (Incorporated by reference to Exhibit 10.3 to Brandywine’s Current Report on Form 8-K filed September 21, 2004)	 	
10.6	 	Tax Protection Agreement (Incorporated by reference to Exhibit 10.4 to Brandywine’s Current Report on Form 8-K filed September 21, 2004)	 	
10.7	 	Indenture (Incorporated by reference to Exhibit 4.1 to Brandywine’s Current Report on Form 8-K filed October 22, 2004)	 	
10.8	 	Form of $275,000,000 4.50% Guaranteed Note due 2009 (Incorporated by reference to Exhibit 4.2 to Brandywine’s Current Report on Form 8-K filed October 22, 2004)	 	
10.9	 	Form of $250,000,000 5.40% Guaranteed Note due 2014 (Incorporated by reference to Exhibit 4.3 to Brandywine’s Current Report on Form 8-K filed October 22, 2004)	 	
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	 	
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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, 2004	By: /s/ Gerard H. Sweeney	
 	Gerard H. Sweeney, President and Chief Executive Officer	
 	(Principal Executive Officer)	

 	 	
Date: November 9, 2004	By: /s/ Christopher P. Marr	
 	Christopher P. Marr, Senior Vice President and Chief Financial Officer	
 	(Principal Financial Officer)	

 	 	
Date: November 9, 2004	By: /s/ Timothy M. Martin	
 	Timothy M. Martin, Vice President-Finance and Chief Accounting Officer	
 	(Principal Accounting Officer)	
34

Exhibit 31.1
SECTION 302 CERTIFICATION
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)) 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.	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	
 	 	 	
 	c.	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, 2004	/s/ Gerard H. Sweeney	
		
 	Gerard H. Sweeney	
 	President and Chief Executive Officer	

Exhibit 31.2
SECTION 302 CERTIFICATION
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)) 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.	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	
 	 	 	
 	c.	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, 2004	/s/ Christopher P. Marr	
 	 		
 	 	Christopher P. Marr	
 	 	Senior Vice President & Chief Financial Officer	

 	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 June 30, 2004 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, 2004
* 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. 

 	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 June 30, 2004 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, 2004
* 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.