PHILADELPHIA, Feb. 02, 2021 (GLOBE NEWSWIRE) -- Brandywine Realty Trust (NYSE:BDN) today reported its financial and operating results for the three and twelve-month periods ended December 31, 2020.

Management Comments

“As we begin a new year, the continued health and safety of our employees, tenants and stakeholders remain a top priority,” stated Jerry Sweeney, President and Chief Executive Officer of Brandywine Realty Trust. “Our operating platform remains strong. We exceeded our 2020 $26 million speculative revenue target, we achieved strong quarterly mark-to-market rents increasing 11.0% and 18.9% on a cash and accrual basis and our portfolio experienced 59,000 square feet of net absorption. We executed several successful capital markets transactions including a joint venture of a 1.1 million square foot office portfolio located in the Pennsylvania suburbs and suburban Maryland and a $50 million preferred equity investment in an office complex located in Austin, Texas. As result of our capital markets activity, at year-end, we had no outstanding balance on our $600 million unsecured line of credit and $46 million of cash-on-hand. While the pace of the economic recovery and a full reopening remains uncertain, we are introducing our 2021 FFO guidance range of $1.32 to $1.42 per share which reflects $0.04/share of net dilution from our recent joint venture sales activity."

Fourth Quarter 2020 Highlights

Financial Results

• Net income allocated to common shareholders; $18.9 million, or $0.11 per diluted share.
• Funds from Operations (FFO); $61.4 million, or $0.36 per diluted share.

Portfolio Results

• Core Portfolio: 91.9% occupied and 93.0% leased.
• New and renewal leases signed: 372,000 square feet.
• Rental Rate Mark-to-Market: 18.9% on an accrual basis and 11.0% on a cash basis.
• Tenant Retention Ratio: 46% in fourth quarter and 52% for 2020.

COVID-19 Update

We continue to monitor events related to COVID-19 and are taking steps to mitigate the potential impact and risks to Brandywine. While the duration and economic impact of the COVID-19 pandemic remains unknown, as of the date of this press release, we believe that the impact of COVID-19 has been reflected in our 2021 business plan and earnings estimates. We are continually assessing the ongoing effects of the pandemic to our business plan, our tenants and earnings estimates.

The following is a summary of our fourth quarter consolidated cash base rent collections as of February 1, 2021:

• 98.3% of total cash-based rent due has been received from our tenants during the fourth quarter 2020, which represents a 98.5% collection rate from our office tenants.
• We have granted rent relief requests primarily to our co-working and retail tenants, totaling approximately 0.8% of annualized billings. The relief requests have substantially all been in the form of rent deferrals that are primarily being repaid by year-end 2021.
• Through February 1, 2021, we have collected 30% of the rent deferrals.

Transaction Activity

Joint Venture Activity

• On December 21, 2020, we sold a portfolio of twelve suburban office properties containing an aggregate of 1.1 million square feet ("Mid-Atlantic Office Portfolio"), nine of which are located in the Pennsylvania suburbs and three of which are located in Maryland, for a gross sales price of $192.9 million. We retained a 20% interest in the Mid-Atlantic Office Portfolio through an unconsolidated joint venture ("Mid-Atlantic Office JV"). The joint venture simultaneously closed on a $121.0 million first mortgage loan secured by the properties and we invested $20 million through a preferred equity interest in the joint venture at closing. We earn a 9% current pay annual preferred return on the investment. We received $155.8 million in net cash proceeds at closing and recorded a gain on sale of $15.2 million. Brandywine will provide management, leasing and construction management services to the joint venture.

Acquisition Activity

• On November 5, 2020, we acquired an office building containing 119,763 rentable square feet located at 1505-11 Race Street in Philadelphia, Pennsylvania for a gross purchase price of $9.7 million. The building is 100% occupied by a single tenant and we intend to redevelop the building once the tenant vacates.
• On November 30, 2020, we acquired an office building containing 169,843 rentable square feet located at 250 King of Prussia Road in Radnor, Pennsylvania for a gross purchase price of $20.3 million. The acquisition was consummated in connection with our previously announced transaction with Penn Medicine. The property has minimal occupancy and our intention is to commence a redevelopment of the building during 2021.

Structured Finance Activity

• On December 31, 2020, we invested $50 million through a preferred equity interest in two office properties located in Austin, Texas. The investment has an initial term of 36 months with a one-year extension option. We earn a 9% current pay annual preferred return on the investment and the investment has a December 31, 2023 mandatory redemption date. The portfolio totals approximately 554,000 square feet and is secured by a $95.0 million first mortgage.

Finance Activity

• We had no outstanding balance on our $600.0 million unsecured revolving credit facility as of December 31, 2020.
• We had $46.3 million of unrestricted cash and cash equivalents as of December 31, 2020.
• Two Logan Square: We acquired the first mortgage, totaling $79.8 million on October 21, 2020. The first mortgage was acquired with cash-on-hand and proceeds from our unsecured line of credit.
• Four Tower Bridge: We repaid the first mortgage loan totaling $9.1 million, at par. As a result, our wholly-owned portfolio is now unencumbered and we have no secured mortgage debt. The first mortgage was repaid with cash-on-hand and proceeds from our unsecured line of credit.

Results for the Three and Twelve-Month Periods Ended December 31, 2020

Net income allocated to common shares totaled $18.9 million, or $0.11 per diluted share, in the fourth quarter of 2020 compared to net income of $16.7 million or $0.09 per diluted share in the fourth quarter of 2019.

FFO available to common shares and units in the fourth quarter of 2020 totaled $61.4 million or $0.36 per diluted share versus $67.0 million or $0.38 per diluted share in the fourth quarter of 2019. Our fourth quarter 2020 FFO payout ratio ($0.19 common share distribution / $0.36 FFO per diluted share) was 52.8%.

Net income allocated to common shares totaled $305.1 million or $1.77 per diluted share for the twelve months of 2020 compared to net income of $33.9 million or $0.19 per diluted share for the twelve months of 2019. The 2020 results include a $271.9 million, or $1.58 per diluted share, net gain on disposition of real estate from our previously announced joint venture of Commerce Square.

Our FFO available to common shares and units for the twelve months ended 2020 totaled $240.5 million, or $1.39 per diluted share, compared to our FFO available to common shares and units for the twelve months of 2019, which totaled $253.3 million, or $1.43 per diluted share. Our 2020 FFO payout ratio ($0.76 common share distribution / $1.39 FFO per diluted share) was 54.7%.

Operating and Leasing Activity

In the fourth quarter of 2020, our Net Operating Income (NOI) excluding termination revenues, write-off of prior straight-line rent receivables and other income items decreased (0.2%) on a GAAP basis and (3.5%) on a cash basis for our 75 same store properties, which were 91.8% and 92.5% occupied on December 31, 2020 and 2019, respectively.

We leased approximately 372,000 square feet and commenced occupancy on 305,000 square feet during the fourth quarter of 2020. The fourth quarter occupancy activity includes 80,000 square feet of renewals, 192,000 square feet of new leases and 33,000 square feet of tenant expansions. We have an additional 144,000 square feet of executed new leasing scheduled to commence subsequent to December 31, 2020.

We experienced a 46% tenant retention ratio in our core portfolio with net absorption of 59,000 square feet during the fourth quarter of 2020. Fourth quarter rental rate growth increased 18.9% as our renewal rental rates increased 20.7% and our new lease/expansion rental rates increased 17.9%, all on a GAAP basis.

At December 31, 2020, our core portfolio of 78 properties comprising 13.4 million square feet was 91.9% occupied and we are now 93.0% leased (reflecting new leases commencing after December 31, 2020).

Distributions

On December 8, 2020, our Board of Trustees declared a quarterly dividend distribution of $0.19 per common share that was paid on January 20, 2021 to shareholders of record as of January 6, 2021.

2021 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 initial 2021 net income guidance of $0.32 - $0.42 to per diluted share and 2021 FFO guidance of $1.32 - $1.42 per diluted share. This guidance is provided for informational purposes and is subject to change. The following is a reconciliation of the calculation of 2021 FFO and earnings per diluted share:

Our 2021 FFO key assumptions include:

• Year-end Core Occupancy Range: 91-93%;
• Year-end Core Leased Range: 92-94%;
• Rental Rate Mark-to-Market (accrual): 14-16%;
• Rental Rate Mark-to-Market (cash): 8-10%;
• Same Store (accrual) NOI Range: 0-2%;
• Same Store (cash) NOI Range: 3-5%;
• Speculative Revenue Range: $18.0-$22.0 million, $14.7 million achieved;
• Tenant Retention Rate Range: 51-53%;
• Property Acquisition Activity: None;
• Property Sales Activity: None;
• Joint Venture Activity: None;
• Development/Redevelopment Starts: Two starts;
• Core and Same Store Portfolio Adjustments: Effective January 1, 2021, we are removing 2340 Dulles (placed into redevelopment) and 905 Broadmoor (taken out of service);
• Financing Activity: None;
• Share Buyback Activity: None;
• Annual earnings and FFO per diluted share based on 173.0 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, Austin and Washington, D.C. markets. Organized as a real estate investment trust (REIT), we own, develop, lease and manage an urban, town center and transit-oriented portfolio comprising 175 properties and 24.7 million square feet as of December 31, 2020 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.