Brandywine Realty Trust (NYSE:BDN) today reported its financial and
operating results for the three and twelve-month periods ended
December 31, 2023.
Management Comments
“We accomplished or exceeded many of our 2023
business plan objectives including our same store results and
rental rate mark-to-markets,” stated Jerry Sweeney, President and
Chief Executive Officer of Brandywine Realty Trust. “In
addition to our operating metrics, we were able to contain our
capital costs resulting in lower capital costs as a percentage of
new lease revenue and better than forecasted cash flow. Our
liquidity position is in excellent shape with no borrowings on our
$600 million unsecured line of credit and 96% of our wholly-owned
debt is fixed. Other than our October 2024 bond maturity, we have
no other bond maturities until 2027. Looking forward, we are
introducing our 2024 FFO guidance range of $0.90 to $1.00 per
diluted share which is impacted by higher anticipated refinancing
interest costs and costs related to our multi-family development
projects entering their lease-up phase.”
Fourth Quarter Highlights
Financial Results
- Net loss
available to common shareholders: $(157.4) million, or $(0.91) per
share. These results include a $(152.6) million, or $(0.89) per
share, non-cash impairment charge related to four wholly-owned
operating properties located in the metropolitan D.C. area and our
unconsolidated joint ventures.
- Funds from
Operations (FFO) available to common shareholders: $47.2 million,
or $0.27 per diluted share.
Portfolio Results
- Operating
Portfolio: 88.0% occupied and 89.6% leased.
- New and Renewal
Leases Signed: 240,000 square feet in the fourth quarter and
1,517,000 square feet for the full year 2023 in our wholly-owned
portfolio and including our joint ventures totaled 552,000 square
feet in the fourth quarter and 2,746,000 square feet for the full
year 2023.
- Rental Rate
Growth: 13.4% on an accrual basis and 7.5% on a cash basis.
- Tenant
Retention Ratio: 45% in fourth quarter and 49% for 2023.
- Same Store
Results: Increased 1.2% on an accrual basis and 8.3% on a cash
basis.
Transaction Activity
Disposition Activity
- On October 31, 2023, we sold a retail property, located at 200
North Radnor Chester Road in Radnor, Pennsylvania for a gross sales
price of $14.2 million or $794 per square foot. We received net
cash proceeds of $13.8 million and recorded a gain of $7.7 million
during the fourth quarter of 2023.
- On December 1,
2023, we sold an office property, located at 8521 Leesburg Pike in
Vienna, Virginia for a gross sales price of $11.0 million or $73
per square foot. We received net cash proceeds of $10.2 million.
Prior to the sale, we recognized an impairment loss of $12.3
million on the property based upon the executed purchase and sale
agreement during the fourth quarter of 2023.
- We owned an
option to purchase 50 acres of land located at 15000 Roosevelt Blvd
in Philadelphia, Pennsylvania. During December 2023, we sold that
option for a gross sales price of $9.6 million and received net
cash proceeds of $8.7 million and recorded income of $4.0 million
during the fourth quarter of 2023.
Finance Activity
- During December
2023, we repurchased $10.0 million of our outstanding unsecured
notes due 2024 at a price of $98.6 and paid accrued interest of
$0.1 million. As a result of the repurchase, we recorded a gain
from the early extinguishment of debt of $0.1 million.
- We had no
outstanding balance on our $600.0 million unsecured revolving
credit facility as of December 31, 2023.
- We had $58.3
million of cash and cash equivalents on-hand as of December 31,
2023.
Results for the Three and Twelve-Month
Periods Ended December 31, 2023
Net loss available to common shareholders
totaled $(157.4) million or $(0.91) per share in the fourth quarter
of 2023 compared to a net income of $29.5 million or $0.17 per
diluted share in the fourth quarter of 2022. Our 2023 results
include a $(152.6) million or $(0.89) per share, non-cash
impairment charge related to four wholly-owned operating properties
and unconsolidated joint ventures.
FFO available to common shareholders and units
in the fourth quarter of 2023 totaled $47.2 million or $0.27 per
diluted share versus $55.7 million or $0.32 per diluted share in
the fourth quarter of 2022. Our fourth quarter 2023 FFO payout
ratio ($0.15 common share distribution / $0.27 FFO per diluted
share) was 55.6%.
Net loss totaled $(197.4) million or $(1.15) per
share for the twelve months of 2023 compared to net income of $53.4
million allocated to common shares or $0.31 per diluted share in
the twelve months of 2022. Our 2023 results include non-cash
impairment charges totaling $(168.7) million or $(0.98) per share,
related to our wholly-owned operating properties and unconsolidated
joint ventures.
FFO available to common shareholders and units
for the year ended 2023 totaled $198.3 million, or $1.15 per
diluted share compared to $238.2 million, or $1.38 per diluted
share for the year ended 2022. Our 2023 FFO payout ratio ($0.72
common share distribution / $1.15 FFO per diluted share) was
62.6%.
Operating and Leasing
Activity
In the fourth quarter of 2023, our Net Operating
Income (NOI), excluding termination fees, bad debt expense and
other income items increased 1.2% on an accrual basis and increased
8.3% on a cash basis for our 68 same store properties, which were
88.0% and 90.3% occupied on December 31, 2023 and 2022,
respectively.
We leased approximately 240,000 square feet and
we commenced occupancy on 209,000 square feet during the fourth
quarter of 2023. The fourth quarter occupancy activity includes
86,000 square feet of renewals, 88,000 square feet of new leases
and 35,000 square feet of tenant expansions. We have an additional
195,000 square feet of executed new leases scheduled to commence
subsequent to December 31, 2023.
We experienced 45% tenant retention ratio in our
core portfolio with net negative absorption of (63,000) square feet
during the fourth quarter of 2023. Fourth quarter rental rate
growth increased 13.4% as our renewal rental rates increased 5.9%
and our new lease/expansion rental rates increased 24.6%, all on an
accrual basis.
For the year, our 2023 leasing activity totaled
approximately 1,517,000 square feet and commenced occupancy on
767,000 square feet. Our 2023 occupancy activity includes 424,000
of renewals, 242,000 of new leases and 101,000 square feet of
tenant expansions.
At December 31, 2023, our operating portfolio of
69 properties comprising 12.7 million square feet was 88.0%
occupied and we are now 89.6% leased (reflecting executed leases
commencing after December 31, 2023).
Distributions
On December 5, 2023, our Board of Trustees
declared a quarterly dividend distribution of $0.15 per common
share that was paid on January 18, 2024 to shareholders of record
as of January 4, 2024.
2024 Earnings and FFO
Guidance
Based on current plans and assumptions and
subject to the risks and uncertainties more fully described in our
Securities and Exchange Commission filings, we are providing our
2024 loss per share guidance of $(0.36) - $(0.26) per share and
2024 FFO guidance of $0.90 - $1.00 per diluted share. This guidance
is provided for informational purposes and is subject to change.
The following is a reconciliation of the calculation of 2024 FFO
and earnings per diluted share:
Guidance for 2024 |
Range |
Loss
per diluted share allocated to common shareholders |
$(0.36) |
to |
$(0.26) |
Plus: real estate depreciation,
amortization |
1.26 |
|
1.26 |
FFO per diluted share |
$0.90 |
to |
$1.00 |
Our 2024 FFO key assumptions include:
- Year-end Core
Occupancy Range: 87-88%;
- Year-end Core
Leased Range: 88-89%;
- Rental Rate
Growth (accrual): 11-13%;
- Rental Rate
Growth (cash): 0-2%;
- Same Store
(accrual) NOI Growth Range: (1)-1%;
- Same Store
(cash) NOI Growth Range: 1-3%;
- Speculative
Revenue Target: $24.0 - $25.0 million, $19.3 million achieved;
- Tenant
Retention Rate Range: 51-53%;
- Property
Acquisition Activity: None;
- Property Sales
Activity (excluding land): $80 - $100 million;
- Joint Venture
Activity: None;
- Development
Starts: None;
- Financing
Activity: Refinance our unsecured bonds due October 2024 ($340
million outstanding);
- Share Buyback
Activity: None; and
- Annual
earnings and FFO per diluted share based on 174.0 million fully
diluted weighted average common shares.
About Brandywine Realty
Trust
Brandywine Realty Trust (NYSE: BDN) is one of
the largest, publicly traded, full-service, integrated real estate
companies in the United States with a core focus in the
Philadelphia and Austin markets. Organized as a real estate
investment trust (REIT), we own, develop, lease and manage an
urban, town center and transit-oriented portfolio comprising 158
properties and 22.4 million square feet as of December 31, 2023
which excludes assets held for sale. Our purpose is to shape,
connect and inspire the world around us through our expertise, the
relationships we foster, the communities in which we live and work,
and the history we build together. For more information, please
visit www.brandywinerealty.com.
Conference Call and Audio
Webcast
We will release our fourth quarter earnings
after the market close on Wednesday January 31, 2024, and will hold
our fourth quarter conference call on Thursday February 1, 2024 at
9:00 a.m. Eastern Time. To access the conference call by phone,
please visit this link here, and you will be provided with dial in
details. A live webcast of the conference call will also be
available on the Investor Relations page of our website
at www.brandywinerealty.com.
Looking Ahead – First Quarter 2024
Conference Call
We anticipate we will release our first quarter
2024 earnings on Wednesday, April 17, 2024, after the market close
and will host our first quarter 2024 conference call on Thursday,
April 18, 2024 at 9:00 a.m. Eastern Time. We expect to issue a
press release in advance of these events to reconfirm the dates and
times and provide all related information.
Press Release
Our Complete press release and related financial
statements and schedules are available on the Investor Relations
page of our website at www.brandywinerealty.com
Forward-Looking Statements
This press release contains certain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking
statements can generally be identified by our use of
forward-looking terminology such as “will,” “strategy,” “expects,”
“seeks,” “believes,” “potential,” or other similar words. Because
such statements involve known and unknown risks, uncertainties and
contingencies, actual results may differ materially from the
expectations, intentions, beliefs, plans or predictions of the
future expressed or implied by such forward-looking statements.
These forward-looking statements, including our 2024 guidance and
the progress of our projects under development, are based upon the
current beliefs and expectations of our management and are
inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are
difficult to predict and not within our control. Such risks,
uncertainties and contingencies include, among others: risks
related to the impact of COVID-19 and other potential future
outbreaks of infectious diseases on our financial condition,
results of operations and cash flows and those of our tenants as
well as on the economy and real estate and financial markets;
reduced demand for office space and pricing pressures, including
from competitors, that could limit our ability to lease space or
set rents at expected levels or that could lead to declines in
rent; uncertainty and volatility in capital and credit markets,
including changes that reduce availability, and increase costs, of
capital or that delay receipt of our planned debt financings and
refinancings; the effect of inflation and interest rate
fluctuations, including on the costs of our planned debt financings
and refinancings; the potential loss or bankruptcy of tenants or
the inability of tenants to meet their rent and other lease
obligations; risks of acquisitions and dispositions, including
unexpected liabilities and integration costs; delays in completing,
and cost overruns incurred in connection with, our developments and
redevelopments; disagreements with joint venture partners;
unanticipated operating and capital costs; uninsured casualty
losses and our ability to obtain adequate insurance, including
coverage for terrorist acts; additional asset impairments; our
dependence upon certain geographic markets; changes in governmental
regulations, tax laws and rates and similar matters; unexpected
costs of REIT qualification compliance; and costs and disruptions
as the result of a cybersecurity incident or other technology
disruption. The declaration and payment of future dividends (both
timing and amount) is subject to the determination of our Board of
Trustees, in its sole discretion, after considering various
factors, including our financial condition, historical and forecast
operating results, and available cash flow, as well as any
applicable laws and contractual covenants and any other relevant
factors. Our Board’s practice regarding declaration of dividends
may be modified at any time and from time to time. Additional
information on factors which could impact us and the
forward-looking statements contained herein are included in our
filings with the Securities and Exchange Commission, including our
Form 10-K for the year ended December 31, 2022. We assume no
obligation to update or supplement forward-looking statements that
become untrue because of subsequent events except as required by
law.
Non-GAAP Supplemental Financial
Measures
We compute our financial results in accordance
with generally accepted accounting principles (GAAP). Although FFO
and NOI are non-GAAP financial measures, we believe that FFO and
NOI calculations are helpful to shareholders and potential
investors and are widely recognized measures of real estate
investment trust performance. At the end of this press release, we
have provided a reconciliation of the non-GAAP financial measures
to the most directly comparable GAAP measure.
Funds from Operations (FFO)
We compute FFO in accordance with standards
established by the National Association of Real Estate Investment
Trusts (NAREIT), which may not be comparable to FFO reported by
other REITs that do not compute FFO in accordance with the NAREIT
definition, or that interpret the NAREIT definition differently
than us. NAREIT defines FFO as net income (loss) before
non-controlling interests and excluding gains (losses) on sales of
depreciable operating property, impairment losses on depreciable
consolidated real estate, impairment losses on investments in
unconsolidated real estate ventures and extraordinary items
(computed in accordance with GAAP); plus real estate related
depreciation and amortization (excluding amortization of deferred
financing costs), and after similar adjustments for unconsolidated
joint ventures. Net income, the GAAP measure that we believe to be
most directly comparable to FFO, includes depreciation and
amortization expenses, gains or losses on property sales,
extraordinary items and non-controlling interests. To facilitate a
clear understanding of our historical operating results, FFO should
be examined in conjunction with net income (determined in
accordance with GAAP) as presented in the financial statements
included elsewhere in this release. FFO does not represent cash
flow from operating activities (determined in accordance with GAAP)
and should not be considered to be an alternative to net income
(loss) (determined in accordance with GAAP) as an indication of our
financial performance or to be an alternative to cash flow from
operating activities (determined in accordance with GAAP) as a
measure of our liquidity, nor is it indicative of funds available
for our cash needs, including our ability to make cash
distributions to shareholders. We generally consider FFO and FFO
per share to be useful measures for understanding and comparing our
operating results because, by excluding gains and losses related to
sales of previously depreciated operating real estate assets,
impairment losses and real estate asset depreciation and
amortization (which can differ across owners of similar assets in
similar condition based on historical cost accounting and useful
life estimates), FFO and FFO per share can help investors compare
the operating performance of a company’s real estate across
reporting periods and to the operating performance of other
companies.
Net Operating Income (NOI)
NOI (accrual basis) is a financial measure equal
to net income available to common shareholders, the most directly
comparable GAAP financial measure, plus corporate general and
administrative expense, depreciation and amortization, interest
expense, non-controlling interest in the Operating Partnership and
losses from early extinguishment of debt, less interest income,
development and management income, gains from property
dispositions, gains on sale from discontinued operations, gains on
early extinguishment of debt, income from discontinued operations,
income from unconsolidated joint ventures and non-controlling
interest in property partnerships. In some cases we also present
NOI on a cash basis, which is NOI after eliminating the effects of
straight-lining of rent and deferred market intangible
amortization. NOI presented by us may not be comparable to NOI
reported by other REITs that define NOI differently. NOI should not
be considered an alternative to net income as an indication of our
performance or to cash flows as a measure of the Company's
liquidity or its ability to make distributions. We believe NOI is a
useful measure for evaluating the operating performance of our
properties, as it excludes certain components from net income
available to common shareholders in order to provide results that
are more closely related to a property's results of operations. We
use NOI internally to evaluate the performance of our operating
segments and to make decisions about resource allocations. We
concluded that NOI provides useful information to investors
regarding our financial condition and results of operations, as it
reflects only the income and expense items incurred at the property
level, as well as the impact on operations from trends in occupancy
rates, rental rates, operating costs and acquisition and
development activity on an unlevered basis.
Same Store Properties
In our analysis of NOI, particularly to make
comparisons of NOI between periods meaningful, it is important to
provide information for properties that were in-service and owned
by us throughout each period presented. We refer to properties
acquired or placed in-service prior to the beginning of the
earliest period presented and owned by us through the end of the
latest period presented as Same Store Properties. Same Store
Properties exclude properties placed in-service, acquired,
repositioned, held for sale or in development or redevelopment
after the beginning of the earliest period presented or disposed of
prior to the end of the latest period presented. Accordingly, it
takes at least one year and one quarter after a property is
acquired for that property to be included in Same Store
Properties.
Core Portfolio
Our core portfolio is comprised of our
wholly-owned properties, excluding any properties currently in
development, re-development, re-entitlement or recently completed
and not stabilized.
Company / Investor Contact:Tom WirthEVP &
CFO610-832-7434 tom.wirth@bdnreit.com
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