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 SeptemberJune 30, 20212022
or
| | | | | |
| ☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Brandywine Realty Trust
Brandywine Operating Partnership, L.P.
(Exact name of registrant as specified in its charter)
Registrant’s telephone number, including area code (610) 325-5600
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Maryland | | | | | | | | |
| (Brandywine Realty Trust) | | | | 001-9106 | | | | 23-2413352 |
| Delaware | | | | | | | | |
| (Brandywine Operating Partnership, L.P.) | | | | 000-24407 | | | | 23-2862640 |
(State or Other Jurisdiction of Incorporation
or Organization) | | | | (Commission file number) | | | | (I.R.S. Employer Identification Number) |
2929 Arch Street
Suite 1800
Philadelphia, PA 19104
(Address of principal executive offices) (Zip Code)
(610) 325-5600
(Registrant’s telephone number, including area code)
2929 Walnut Street
Suite 1700
Philadelphia, PA 19104
(Former address)
Securities registered pursuant to section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Shares of Beneficial Interest | | BDN | | NYSE |
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.
| | | | | | | | | | | |
| Brandywine Realty Trust | Yes | ☒ No ☐ | |
| Brandywine Operating Partnership, L.P. | Yes | ☒ No ☐ | |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| | | | | | | | | | | |
| Brandywine Realty Trust | Yes | ☒ No ☐ | |
| Brandywine Operating Partnership, L.P. | Yes | ☒ No ☐ | |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Brandywine Realty Trust:
| | | | | | | | | | | |
| Large accelerated filer | ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ |
| Smaller reporting company | ☐ | Emerging growth company | ☐ |
Brandywine Operating Partnership, L.P.:
| | | | | | | | | | | |
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer | ☒ |
Smaller reporting company ☐ | Emerging growth company | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| | | | | | | | | | | |
| Brandywine Realty Trust | Yes | ☐ | No ☒ |
| Brandywine Operating Partnership, L.P. | Yes | ☐ | No ☒ |
A total of 171,126,257171,569,807 Common Shares of Beneficial Interest, par value $0.01 per share of Brandywine Realty Trust, were outstanding as of OctoberJuly 25, 2021.2022.
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended SeptemberJune 30, 20212022 of Brandywine Realty Trust (the “Parent Company”) and Brandywine Operating Partnership L.P. (the “Operating Partnership”). The Parent Company is a Maryland real estate investment trust, or REIT, that owns its assets and conducts its operations through the Operating Partnership, a Delaware limited partnership, and subsidiaries of the Operating Partnership. The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company”. In addition, as used in this report, terms such as “we”, “us”, and ��our”“our” may refer to the Company, the Parent Company, or the Operating Partnership.
The Parent Company is the sole general partner of the Operating Partnership and, as of SeptemberJune 30, 2021,2022, owned a 99.5%99.7% interest in the Operating Partnership. The remaining 0.5%0.3% interest consists of common units of limited partnership interest issued by the Operating Partnership to third parties in exchange for contributions of properties to the Operating Partnership. As the sole general partner of the Operating Partnership, the Parent Company has full and complete authority over the Operating Partnership’s day-to-day operations and management.
Management operates the Parent Company and the Operating Partnership as one enterprise. The management of the Parent Company consists of the same members as the management of the Operating Partnership.
As general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the Parent Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Parent Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company's operations on a consolidated basis and how management operates the Company.
The Company believes that combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into a single report will:
•facilitate a better understanding by the investors of the Parent Company and the Operating Partnership by enabling them to view the business as a whole in the same manner as management views and operates the business;
•remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a substantial portion of the disclosure applies to both the Parent Company and the Operating Partnership; and
•create time and cost efficiencies through the preparation of one combined report instead of two separate reports.
There are few differences between the Parent Company and the Operating Partnership, which are reflected in the footnote disclosures in this report. The Company believes it is important to understand the differences between the Parent Company and the Operating Partnership in the context of how these entities operate as an interrelated consolidated company. The Parent Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing equity from time to time (and contributing the net proceeds of such issuances to the Operating Partnership) and guaranteeing the debt obligations of the Operating Partnership. The Operating Partnership holds substantially all the assets of the Company, including the Company's ownership interests in the real estate ventures described below. The Operating Partnership conducts the operations of the Company’s business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s incurrence of indebtedness (directly and through subsidiaries) and through the issuance of partnership units of the Operating Partnership or equity interests in subsidiaries of the Operating Partnership.
The equity and non-controlling interests in the Parent Company and the Operating Partnership’s equity are the main areas of difference between the consolidated financial statements of the Parent Company and the Operating Partnership. The common units of limited partnership interest in the Operating Partnership are accounted for as partners’ equity in the Operating Partnership’s financial statements while the common units of limited partnership interests held by parties other than the Parent Company are presented as non-controlling interests in the Parent Company’s financial statements. The differences between the Parent Company and the Operating Partnership’s equity relate to the differences in the equity issued at the Parent Company and Operating Partnership levels.
To help investors understand the significant differences between the Parent Company and the Operating Partnership, this report presents the following as separate notes or sections for each of the Parent Company and the Operating Partnership:
•Consolidated Financial Statements; and
•Notes to the Parent Company’s and Operating Partnership’s Equity.
This report also includes separate Item 4. (Controls and Procedures) disclosures and separate Exhibit 31 and 32 certifications for each of the Parent Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Parent Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and 18 U.S.C. § 1350.
In order to highlight the differences between the Parent Company and the Operating Partnership, the separate sections in this report for the Parent Company and the Operating Partnership specifically refer to the Parent Company and the Operating Partnership. In the sections that combine disclosures of the Parent Company and the Operating Partnership, this report refers to such disclosures as those of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and real estate ventures and holds assets and incurs debt, reference to the Company is appropriate because the business is one enterprise and the Parent Company operates the business through the Operating Partnership.
TABLE OF CONTENTS
Filing Format
This combined Form 10-Q is being filed separately by Brandywine Realty Trust and Brandywine Operating Partnership, L.P.
PART I - FINANCIAL INFORMATION
Item 1. — Financial Statements
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share information)
| | | September 30,
2021 | | December 31,
2020 | | June 30,
2022 | | December 31,
2021 |
| ASSETS | ASSETS | | | | ASSETS | | | |
| Real estate investments: | Real estate investments: | | Real estate investments: | |
| Operating properties | Operating properties | $ | 3,437,074 | | | $ | 3,474,109 | | Operating properties | $ | 3,545,102 | | | $ | 3,472,602 | |
| Accumulated depreciation | Accumulated depreciation | (957,793) | | | (896,561) | | Accumulated depreciation | (1,009,108) | | | (957,450) | |
| Right of use asset - operating leases, net | Right of use asset - operating leases, net | 20,478 | | | 20,977 | | Right of use asset - operating leases, net | 19,988 | | | 20,313 | |
| Operating real estate investments, net | Operating real estate investments, net | 2,499,759 | | | 2,598,525 | | Operating real estate investments, net | 2,555,982 | | | 2,535,465 | |
| Construction-in-progress | Construction-in-progress | 266,263 | | | 210,311 | | Construction-in-progress | 366,823 | | | 277,237 | |
| Land held for development | Land held for development | 118,684 | | | 117,984 | | Land held for development | 93,887 | | | 114,604 | |
| Prepaid leasehold interests in land held for development, net | Prepaid leasehold interests in land held for development, net | 27,762 | | | 39,185 | | Prepaid leasehold interests in land held for development, net | 35,576 | | | 27,762 | |
| Total real estate investments, net | Total real estate investments, net | 2,912,468 | | | 2,966,005 | | Total real estate investments, net | 3,052,268 | | | 2,955,068 | |
| Assets held for sale, net | Assets held for sale, net | 562 | | | 7,349 | | Assets held for sale, net | — | | | 562 | |
| Cash and cash equivalents | Cash and cash equivalents | 42,484 | | | 46,344 | | Cash and cash equivalents | 28,849 | | | 27,463 | |
| Accounts receivable | Accounts receivable | 11,645 | | | 13,536 | | Accounts receivable | 13,584 | | | 11,875 | |
| Accrued rent receivable, net of allowance of $4,133 and $5,086 as of September 30, 2021 and December 31, 2020, respectively | 165,564 | | | 155,372 | | |
| Accrued rent receivable, net of allowance of $4,049 and $4,133 as of June 30, 2022 and December 31, 2021, respectively | | Accrued rent receivable, net of allowance of $4,049 and $4,133 as of June 30, 2022 and December 31, 2021, respectively | 172,076 | | | 167,210 | |
| Investment in unconsolidated real estate ventures | Investment in unconsolidated real estate ventures | 449,658 | | | 401,327 | | Investment in unconsolidated real estate ventures | 458,840 | | | 435,506 | |
| Deferred costs, net | Deferred costs, net | 81,632 | | | 84,856 | | Deferred costs, net | 93,570 | | | 86,862 | |
| Intangible assets, net | Intangible assets, net | 34,514 | | | 48,570 | | Intangible assets, net | 23,015 | | | 28,556 | |
| Other assets | Other assets | 131,230 | | | 176,747 | | Other assets | 124,486 | | | 133,094 | |
| Total assets | Total assets | $ | 3,829,757 | | | $ | 3,900,106 | | Total assets | $ | 3,966,688 | | | $ | 3,846,196 | |
| LIABILITIES AND BENEFICIARIES' EQUITY | LIABILITIES AND BENEFICIARIES' EQUITY | | | | LIABILITIES AND BENEFICIARIES' EQUITY | | | |
| | Unsecured credit facility | | Unsecured credit facility | $ | 214,000 | | | $ | 23,000 | |
| Unsecured term loan, net | Unsecured term loan, net | $ | 249,477 | | | $ | 249,084 | | Unsecured term loan, net | 248,047 | | | 249,608 | |
| Unsecured senior notes, net | Unsecured senior notes, net | 1,581,112 | | | 1,581,511 | | Unsecured senior notes, net | 1,580,712 | | | 1,580,978 | |
| Accounts payable and accrued expenses | Accounts payable and accrued expenses | 133,615 | | | 121,982 | | Accounts payable and accrued expenses | 131,669 | | | 150,151 | |
| Distributions payable | Distributions payable | 32,763 | | | 32,706 | | Distributions payable | 32,800 | | | 32,765 | |
| Deferred income, gains and rent | Deferred income, gains and rent | 21,861 | | | 21,396 | | Deferred income, gains and rent | 21,195 | | | 23,849 | |
| Intangible liabilities, net | Intangible liabilities, net | 14,451 | | | 18,448 | | Intangible liabilities, net | 11,277 | | | 12,981 | |
| | Lease liability - operating leases | Lease liability - operating leases | 22,911 | | | 22,758 | | Lease liability - operating leases | 23,066 | | | 22,962 | |
| Other liabilities | Other liabilities | 48,090 | | | 47,573 | | Other liabilities | 52,359 | | | 48,683 | |
| Total liabilities | Total liabilities | $ | 2,104,280 | | | $ | 2,095,458 | | Total liabilities | $ | 2,315,125 | | | $ | 2,144,977 | |
| Commitments and contingencies (See Note 15) | 0 | | 0 | |
| Commitments and contingencies (See Note 14) | | Commitments and contingencies (See Note 14) | 0 | | 0 |
| Brandywine Realty Trust's Equity: | Brandywine Realty Trust's Equity: | | Brandywine Realty Trust's Equity: | |
| Common Shares of Brandywine Realty Trust's beneficial interest, $0.01 par value; shares authorized 400,000,000; 171,126,257 and 170,572,964 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 1,712 | | | 1,707 | | |
| Common Shares of Brandywine Realty Trust's beneficial interest, $0.01 par value; shares authorized 400,000,000; 171,575,280 and 171,126,257 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | | Common Shares of Brandywine Realty Trust's beneficial interest, $0.01 par value; shares authorized 400,000,000; 171,575,280 and 171,126,257 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 1,716 | | | 1,712 | |
| Additional paid-in-capital | Additional paid-in-capital | 3,145,209 | | | 3,138,152 | | Additional paid-in-capital | 3,149,146 | | | 3,146,786 | |
| Deferred compensation payable in common shares | Deferred compensation payable in common shares | 18,491 | | | 17,516 | | Deferred compensation payable in common shares | 19,601 | | | 18,491 | |
| Common shares in grantor trust, 1,169,703 and 1,160,494 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | (18,491) | | | (17,516) | | |
| Common shares in grantor trust, 1,202,385 and 1,169,703 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | | Common shares in grantor trust, 1,202,385 and 1,169,703 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | (19,601) | | | (18,491) | |
| Cumulative earnings | Cumulative earnings | 1,117,804 | | | 1,110,083 | | Cumulative earnings | 1,133,102 | | | 1,122,372 | |
| Accumulated other comprehensive loss | (4,333) | | | (7,561) | | |
| Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | 3,849 | | | (2,020) | |
| Cumulative distributions | Cumulative distributions | (2,545,979) | | | (2,448,238) | | Cumulative distributions | (2,643,999) | | | (2,578,583) | |
| Total Brandywine Realty Trust's equity | Total Brandywine Realty Trust's equity | 1,714,413 | | | 1,794,143 | | Total Brandywine Realty Trust's equity | 1,643,814 | | | 1,690,267 | |
| Noncontrolling interests | Noncontrolling interests | 11,064 | | | 10,505 | | Noncontrolling interests | 7,749 | | | 10,952 | |
| Total beneficiaries' equity | Total beneficiaries' equity | $ | 1,725,477 | | | $ | 1,804,648 | | Total beneficiaries' equity | $ | 1,651,563 | | | $ | 1,701,219 | |
| Total liabilities and beneficiaries' equity | Total liabilities and beneficiaries' equity | $ | 3,829,757 | | | $ | 3,900,106 | | Total liabilities and beneficiaries' equity | $ | 3,966,688 | | | $ | 3,846,196 | |
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share information)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| Revenue | Revenue | | | | | | | | Revenue | | | | | | | |
| Rents | Rents | $ | 112,159 | | | $ | 121,277 | | | $ | 336,878 | | | $ | 392,661 | | Rents | $ | 116,897 | | | $ | 111,235 | | | $ | 232,798 | | | $ | 224,719 | |
| Third party management fees, labor reimbursement and leasing | Third party management fees, labor reimbursement and leasing | 6,500 | | | 4,324 | | | 19,778 | | | 13,339 | | Third party management fees, labor reimbursement and leasing | 5,924 | | | 6,627 | | | 11,032 | | | 13,278 | |
| Other | Other | 1,759 | | | 505 | | | 4,633 | | | 2,031 | | Other | 1,221 | | | 2,240 | | | 7,717 | | | 2,874 | |
| Total revenue | Total revenue | 120,418 | | | 126,106 | | | 361,289 | | | 408,031 | | Total revenue | 124,042 | | | 120,102 | | | 251,547 | | | 240,871 | |
| Operating expenses | Operating expenses | | Operating expenses | |
| Property operating expenses | Property operating expenses | 30,304 | | | 31,567 | | | 88,503 | | | 102,320 | | Property operating expenses | 33,111 | | | 29,264 | | | 64,659 | | | 58,199 | |
| Real estate taxes | Real estate taxes | 13,421 | | | 14,923 | | | 42,784 | | | 48,525 | | Real estate taxes | 13,746 | | | 14,602 | | | 27,559 | | | 29,363 | |
| Third party management expenses | Third party management expenses | 3,327 | | | 2,509 | | | 9,866 | | | 7,546 | | Third party management expenses | 2,792 | | | 3,561 | | | 5,349 | | | 6,539 | |
| Depreciation and amortization | Depreciation and amortization | 48,175 | | | 43,533 | | | 131,303 | | | 145,314 | | Depreciation and amortization | 43,959 | | | 42,785 | | | 87,741 | | | 83,128 | |
| General and administrative expenses | General and administrative expenses | 7,076 | | | 7,069 | | | 22,016 | | | 23,973 | | General and administrative expenses | 8,328 | | | 8,356 | | | 18,328 | | | 14,940 | |
| | Total operating expenses | Total operating expenses | 102,303 | | | 99,601 | | | 294,472 | | | 327,678 | | Total operating expenses | 101,936 | | | 98,568 | | | 203,636 | | | 192,169 | |
| Gain on sale of real estate | Gain on sale of real estate | | | | | | | | Gain on sale of real estate | | | | | | | |
| Net gain on disposition of real estate | Net gain on disposition of real estate | — | | | 271,901 | | | 142 | | | 274,487 | | Net gain on disposition of real estate | 144 | | | 68 | | | 144 | | | 142 | |
| Net gain on sale of undepreciated real estate | Net gain on sale of undepreciated real estate | 910 | | | — | | | 2,903 | | | 201 | | Net gain on sale of undepreciated real estate | 4,127 | | | — | | | 5,024 | | | 1,993 | |
| Total gain on sale of real estate | Total gain on sale of real estate | 910 | | | 271,901 | | | 3,045 | | | 274,688 | | Total gain on sale of real estate | 4,271 | | | 68 | | | 5,168 | | | 2,135 | |
| Operating income | Operating income | 19,025 | | | 298,406 | | | 69,862 | | | 355,041 | | Operating income | 26,377 | | | 21,602 | | | 53,079 | | | 50,837 | |
| Other income (expense): | Other income (expense): | | Other income (expense): | |
| Interest and investment income | Interest and investment income | 4,494 | | | 467 | | | 7,845 | | | 1,487 | | Interest and investment income | 449 | | | 1,677 | | | 889 | | | 3,351 | |
| Interest expense | Interest expense | (15,190) | | | (16,310) | | | (46,973) | | | (56,510) | | Interest expense | (16,341) | | | (15,490) | | | (32,083) | | | (31,783) | |
| Interest expense - amortization of deferred financing costs | Interest expense - amortization of deferred financing costs | (709) | | | (715) | | | (2,127) | | | (2,195) | | Interest expense - amortization of deferred financing costs | (805) | | | (709) | | | (1,514) | | | (1,418) | |
| | Equity in loss of unconsolidated real estate ventures | Equity in loss of unconsolidated real estate ventures | (6,634) | | | (5,788) | | | (20,798) | | | (9,882) | | Equity in loss of unconsolidated real estate ventures | (4,981) | | | (7,240) | | | (9,544) | | | (14,164) | |
| | Net gain on real estate venture transactions | — | | | 75 | | | — | | | 75 | | |
| | Net income before income taxes | 986 | | | 276,135 | | | 7,809 | | | 288,016 | | |
| Income tax (provision) benefit | (12) | | | (2) | | | (46) | | | 224 | | |
| Net income | 974 | | | 276,133 | | | 7,763 | | | 288,240 | | |
| Net income attributable to noncontrolling interests | (7) | | | (1,612) | | | (42) | | | (1,701) | | |
| Net income attributable to Brandywine Realty Trust | 967 | | | 274,521 | | | 7,721 | | | 286,539 | | |
| | Net income (loss) before income taxes | | Net income (loss) before income taxes | 4,699 | | | (160) | | | 10,827 | | | 6,823 | |
| Income tax provision | | Income tax provision | (48) | | | (15) | | | (75) | | | (34) | |
| Net income (loss) | | Net income (loss) | 4,651 | | | (175) | | | 10,752 | | | 6,789 | |
| Net (income) loss attributable to noncontrolling interests | | Net (income) loss attributable to noncontrolling interests | (14) | | | 8 | | | (22) | | | (35) | |
| Net income (loss) attributable to Brandywine Realty Trust | | Net income (loss) attributable to Brandywine Realty Trust | 4,637 | | | (167) | | | 10,730 | | | 6,754 | |
| | Nonforfeitable dividends allocated to unvested restricted shareholders | Nonforfeitable dividends allocated to unvested restricted shareholders | (91) | | | (93) | | | (331) | | | (317) | | Nonforfeitable dividends allocated to unvested restricted shareholders | (98) | | | (94) | | | (246) | | | (240) | |
| Net income attributable to Common Shareholders of Brandywine Realty Trust | $ | 876 | | | $ | 274,428 | | | $ | 7,390 | | | $ | 286,222 | | |
| Net income (loss) attributable to Common Shareholders of Brandywine Realty Trust | | Net income (loss) attributable to Common Shareholders of Brandywine Realty Trust | $ | 4,539 | | | $ | (261) | | | $ | 10,484 | | | $ | 6,514 | |
| | Basic income per Common Share | Basic income per Common Share | $ | 0.01 | | | $ | 1.61 | | | $ | 0.04 | | | $ | 1.66 | | Basic income per Common Share | $ | 0.03 | | | $ | — | | | $ | 0.06 | | | $ | 0.04 | |
| | Diluted income per Common Share | Diluted income per Common Share | $ | 0.01 | | | $ | 1.60 | | | $ | 0.04 | | | $ | 1.66 | | Diluted income per Common Share | $ | 0.03 | | | $ | — | | | $ | 0.06 | | | $ | 0.04 | |
| | Basic weighted average shares outstanding | Basic weighted average shares outstanding | 170,907,018 | | | 170,573,028 | | | 170,794,585 | | | 172,380,410 | | Basic weighted average shares outstanding | 171,527,031 | | | 170,848,894 | | | 171,411,631 | | | 170,737,437 | |
| Diluted weighted average shares outstanding | Diluted weighted average shares outstanding | 172,237,194 | | | 171,026,492 | | | 172,077,950 | | | 172,735,436 | | Diluted weighted average shares outstanding | 172,260,429 | | | 170,848,894 | | | 172,575,408 | | | 171,996,119 | |
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Net income | $ | 974 | | | $ | 276,133 | | | $ | 7,763 | | | $ | 288,240 | |
| Comprehensive income (loss): | | | | | | | |
| Unrealized gain (loss) on derivative financial instruments | 911 | | | 1,040 | | | 2,681 | | | (6,979) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Amortization of interest rate contracts (1) | 188 | | | 188 | | | 564 | | | 564 | |
| Total comprehensive income (loss) | 1,099 | | | 1,228 | | | 3,245 | | | (6,415) | |
| Comprehensive income | 2,073 | | | 277,361 | | | 11,008 | | | 281,825 | |
| Comprehensive income attributable to noncontrolling interest | (12) | | | (1,619) | | | (59) | | | (1,665) | |
| Comprehensive income attributable to Brandywine Realty Trust | $ | 2,061 | | | $ | 275,742 | | | $ | 10,949 | | | $ | 280,160 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Net income (loss) | $ | 4,651 | | | $ | (175) | | | $ | 10,752 | | | $ | 6,789 | |
| Comprehensive income: | | | | | | | |
| Unrealized gain on derivative financial instruments | 1,747 | | | 860 | | | 5,511 | | | 1,770 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Amortization of interest rate contracts (1) | 188 | | | 188 | | | 376 | | | 376 | |
| Total comprehensive income | 1,935 | | | 1,048 | | | 5,887 | | | 2,146 | |
| Comprehensive income | 6,586 | | | 873 | | | 16,639 | | | 8,935 | |
| Comprehensive (income) loss attributable to noncontrolling interest | (20) | | | 2 | | | (40) | | | (47) | |
| Comprehensive income attributable to Brandywine Realty Trust | $ | 6,566 | | | $ | 875 | | | $ | 16,599 | | | $ | 8,888 | |
(1)Amounts reclassified from comprehensive income to interest expense within the Consolidated Statements of Operations.
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF BENEFICIARIES’ EQUITY
(unaudited, in thousands, except number of shares)
| | | Number of Common Shares | | Number of Rabbi
Trust/Deferred
Compensation Shares | | Common Shares of
Brandywine Realty
Trust's beneficial
interest | | Additional Paid-in
Capital | | Deferred Compensation
Payable
in Common
Shares | | Common Shares in
Grantor Trust | | Cumulative Earnings | | Accumulated Other
Comprehensive Income (Loss) | | Cumulative Distributions | | Noncontrolling Interests | | Total | | Number of Common Shares | | Number of Rabbi
Trust/Deferred
Compensation Shares | | Common Shares of
Brandywine Realty
Trust's beneficial interest | | Additional Paid-in
Capital | | Deferred Compensation
Payable in Common
Shares | | Common Shares in
Grantor Trust | | Cumulative Earnings | | Accumulated Other
Comprehensive Income (Loss) | | Cumulative Distributions | | Noncontrolling Interests | | Total |
| BALANCE, beginning of period | 170,572,964 | | | 1,160,494 | | | $ | 1,707 | | | $ | 3,138,152 | | | $ | 17,516 | | | $ | (17,516) | | | $ | 1,110,083 | | | $ | (7,561) | | | $ | (2,448,238) | | | $ | 10,505 | | | $ | 1,804,648 | | |
| | BALANCE, December 31, 2021 | | BALANCE, December 31, 2021 | 171,126,257 | | | 1,169,703 | | | $ | 1,712 | | | $ | 3,146,786 | | | $ | 18,491 | | | $ | (18,491) | | | $ | 1,122,372 | | | $ | (2,020) | | | $ | (2,578,583) | | | $ | 10,952 | | | $ | 1,701,219 | |
| Net income | Net income | | 6,921 | | | 43 | | | 6,964 | | Net income | | 6,093 | | | 8 | | | 6,101 | |
| Other comprehensive income | Other comprehensive income | | 1,092 | | | 6 | | | 1,098 | | Other comprehensive income | | 3,940 | | | 12 | | | 3,952 | |
| | Redemption of LP Units | | Redemption of LP Units | | (4,006) | | | (4,006) | |
| Share-based compensation activity | | Share-based compensation activity | 277,061 | | | 68,540 | | | 2 | | | 1,653 | | | 1,655 | |
| Share Issuance from/(to) Deferred Compensation Plan | | Share Issuance from/(to) Deferred Compensation Plan | (19,406) | | | (52,702) | | | (249) | | | 895 | | | (895) | | | (249) | |
| Reallocation of Noncontrolling interest | | Reallocation of Noncontrolling interest | | (959) | | | 959 | | — | |
| Distributions declared $0.19 per share) | | Distributions declared $0.19 per share) | | (32,711) | | | (98) | | | (32,809) | |
| BALANCE, March 31, 2022 | | BALANCE, March 31, 2022 | 171,383,912 | | | 1,185,541 | | | $ | 1,714 | | | $ | 3,147,231 | | | $ | 19,386 | | | $ | (19,386) | | | $ | 1,128,465 | | | $ | 1,920 | | | $ | (2,611,294) | | | $ | 7,827 | | | $ | 1,675,863 | |
| Net income | | Net income | | | | | | | | | | | | | 4,637 | | | | | | | 14 | | | 4,651 | |
| Other comprehensive income | | Other comprehensive income | | 1,929 | | | 6 | | | 1,935 | |
| | Share-based compensation activity | Share-based compensation activity | 108,345 | | | 12,719 | | | 2,502 | | | 2,502 | | Share-based compensation activity | 191,368 | | | 16,844 | | | 2 | | | 1,915 | | | 1,917 | |
| Share Issuance from/(to) Deferred Compensation Plan | Share Issuance from/(to) Deferred Compensation Plan | (18,058) | | | (61,436) | | | (198) | | | 142 | | | (142) | | | (198) | | Share Issuance from/(to) Deferred Compensation Plan | 0 | | 0 | | 0 | | 215 | | | (215) | | | — | |
| | Distributions declared ($0.19 per share) | | (32,573) | | | (187) | | | (32,760) | | |
| BALANCE, March 31, 2021 | 170,663,251 | | | 1,111,777 | | | $ | 1,707 | | | $ | 3,140,456 | | | $ | 17,658 | | | $ | (17,658) | | | $ | 1,117,004 | | | $ | (6,469) | | | $ | (2,480,811) | | | $ | 10,367 | | | $ | 1,782,254 | | |
| Net loss | | | | | | | | | | | | | (167) | | | | | | | (8) | | | (175) | | |
| Other comprehensive income | | 1,042 | | | 6 | | | 1,048 | | |
| Issuance of partnership interest in consolidated real estate ventures | | 2,289 | | | 2,289 | | |
| Redemption of LP Units | | (2,334) | | | (2,334) | | |
| Share-based compensation activity | 237,240 | | | 63,566 | | | 2 | | | 688 | | | 690 | | |
| Share Issuance from/(to) Deferred Compensation Plan | | 833 | | | (833) | | | — | | |
| Reallocation of Noncontrolling interest | | (569) | | | 569 | | | — | | |
| Distributions declared ($0.19 per share) | | (32,562) | | | (157) | | | (32,719) | | |
| BALANCE, June 30, 2021 | 170,900,491 | | | 1,175,343 | | | $ | 1,709 | | | $ | 3,140,575 | | | $ | 18,491 | | | $ | (18,491) | | | $ | 1,116,837 | | | $ | (5,427) | | | $ | (2,513,373) | | | $ | 10,732 | | | $ | 1,751,053 | | |
| Net income | | | | | | | | | | | | | 967 | | | | | | | 7 | | | 974 | | |
| Other comprehensive income | | 1,094 | | | 5 | | | 1,099 | | |
| Issuance of Common Shares of Beneficial Interest | 226,695 | | | 3 | | | 3,049 | | | 3,052 | | |
| Issuance of partnership interest in consolidated real estate ventures | | 476 | | | 476 | | |
| Share-based compensation activity | (929) | | | (5,640) | | | 1,585 | | | 1,585 | | |
| Distributions declared $0.19 per share) | | Distributions declared $0.19 per share) | | (32,705) | | | (98) | | | (32,803) | |
| BALANCE, June 30, 2022 | | BALANCE, June 30, 2022 | 171,575,280 | | | 1,202,385 | | | $ | 1,716 | | | $ | 3,149,146 | | | $ | 19,601 | | | $ | (19,601) | | | $ | 1,133,102 | | | $ | 3,849 | | | $ | (2,643,999) | | | $ | 7,749 | | | $ | 1,651,563 | |
| | Distributions declared $0.19 per share) | | (32,606) | | | (156) | | | (32,762) | | |
| BALANCE, September 30, 2021 | 171,126,257 | | | 1,169,703 | | | $ | 1,712 | | | $ | 3,145,209 | | | $ | 18,491 | | | $ | (18,491) | | | $ | 1,117,804 | | | $ | (4,333) | | | $ | (2,545,979) | | | $ | 11,064 | | | $ | 1,725,477 | | |
|
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENT OF BENEFICIARIES’ EQUITY
(unaudited, in thousands, except number of shares)
| | | Number of Common Shares | | Number of Rabbi
Trust/Deferred
Compensation Shares | | Common Shares of
Brandywine Realty
Trust's beneficial interest | | Additional Paid-in
Capital | | Deferred Compensation
Payable in Common
Shares | | Common Shares in
Grantor Trust | | Cumulative Earnings | | Accumulated Other
Comprehensive Income (Loss) | | Cumulative Distributions | | Noncontrolling Interests | | Total | | Number of Common Shares | | Number of Rabbi
Trust/Deferred
Compensation Shares | | Common Shares of
Brandywine Realty
Trust's beneficial
interest | | Additional Paid-in
Capital | | Deferred Compensation
Payable
in Common
Shares | | Common Shares in
Grantor Trust | | Cumulative Earnings | | Accumulated Other
Comprehensive Income (Loss) | | Cumulative Distributions | | Noncontrolling Interests | | Total |
| BALANCE, beginning of period | 176,480,095 | | | 1,105,542 | | | $ | 1,766 | | | $ | 3,192,158 | | | $ | 16,216 | | | $ | (16,216) | | | $ | 804,556 | | | $ | (2,370) | | | $ | (2,318,233) | | | $ | 10,426 | | | $ | 1,688,303 | | |
| BALANCE, December 31, 2020 | | BALANCE, December 31, 2020 | 170,572,964 | | | 1,160,494 | | | $ | 1,707 | | | $ | 3,138,152 | | | $ | 17,516 | | | $ | (17,516) | | | $ | 1,110,083 | | | $ | (7,561) | | | $ | (2,448,238) | | | $ | 10,505 | | | $ | 1,804,648 | |
| | Net income | Net income | | 8,022 | | | 65 | | | 8,087 | | Net income | | 6,921 | | | 43 | | | 6,964 | |
| Other comprehensive loss | | (7,825) | | | (44) | | | (7,869) | | |
| Repurchase and retirement of Common Shares of Beneficial Interest | (5,644,200) | | | (57) | | | (53,801) | | | (53,858) | | |
| Other comprehensive income | | Other comprehensive income | | 1,092 | | | 6 | | | 1,098 | |
| | Share-based compensation activity | Share-based compensation activity | 142,468 | | | 50,967 | | | 1 | | | 2,030 | | | 2,031 | | Share-based compensation activity | 108,345 | | | 12,719 | | | 2,502 | | | 2,502 | |
| Share Issuance from/(to) Deferred Compensation Plan | Share Issuance from/(to) Deferred Compensation Plan | (12,376) | | | (38,726) | | | (193) | | | 796 | | | (796) | | | (193) | | Share Issuance from/(to) Deferred Compensation Plan | (18,058) | | | (61,436) | | | (198) | | | 142 | | | (142) | | | (198) | |
| | Distributions declared $0.19 per share) | | (32,500) | | | (187) | | | (32,687) | | |
| BALANCE, March 31, 2020 | 170,965,987 | | | 1,117,783 | | | $ | 1,710 | | | $ | 3,140,194 | | | $ | 17,012 | | | $ | (17,012) | | | $ | 812,578 | | | $ | (10,195) | | | $ | (2,350,733) | | | $ | 10,260 | | | $ | 1,603,814 | | |
| Net income | | | | | | | | | | | | | 3,996 | | | | | | | 24 | | | 4,020 | | |
| Distributions declared ($0.19 per share) | | Distributions declared ($0.19 per share) | | (32,573) | | | (187) | | | (32,760) | |
| BALANCE, March 31, 2021 | | BALANCE, March 31, 2021 | 170,663,251 | | | 1,111,777 | | | $ | 1,707 | | | $ | 3,140,456 | | | $ | 17,658 | | | $ | (17,658) | | | $ | 1,117,004 | | | $ | (6,469) | | | $ | (2,480,811) | | | $ | 10,367 | | | $ | 1,782,254 | |
| Net loss | | Net loss | | | | | | | | | | | | | (167) | | | | | | | (8) | | | (175) | |
| Other comprehensive income | Other comprehensive income | | 225 | | | 1 | | | 226 | | Other comprehensive income | | 1,042 | | | 6 | | | 1,048 | |
| Repurchase and retirement of Common Shares of Beneficial Interest | (604,283) | | | (5) | | | (6,136) | | | (6,141) | | |
| Issuance of partnership interest in consolidated real estate ventures | | Issuance of partnership interest in consolidated real estate ventures | | 2,289 | | | 2,289 | |
| Redemption of LP Units | | Redemption of LP Units | | (2,334) | | | (2,334) | |
| Share-based compensation activity | Share-based compensation activity | 166,628 | | | 2 | | | 1,666 | | | 1,668 | | Share-based compensation activity | 237,240 | | | 63,566 | | | 2 | | | 688 | | | 690 | |
| Share Issuance from/(to) Deferred Compensation Plan | Share Issuance from/(to) Deferred Compensation Plan | 44,827 | | | 42,906 | | | (11) | | | 504 | | | (504) | | | (11) | | Share Issuance from/(to) Deferred Compensation Plan | | 833 | | | (833) | | | — | |
| Reallocation of Noncontrolling interest | Reallocation of Noncontrolling interest | | (123) | | | 123 | | | — | | Reallocation of Noncontrolling interest | | (569) | | | 569 | | | — | |
| Distributions declared ($0.19 per share) | Distributions declared ($0.19 per share) | | (32,540) | | | (187) | | | (32,727) | | Distributions declared ($0.19 per share) | | (32,562) | | | (157) | | | (32,719) | |
| BALANCE, June 30, 2020 | 170,573,159 | | | 1,160,689 | | | $ | 1,707 | | | $ | 3,135,590 | | | $ | 17,516 | | | $ | (17,516) | | | $ | 816,574 | | | $ | (9,970) | | | $ | (2,383,273) | | | $ | 10,221 | | | $ | 1,570,849 | | |
| Net income | | | | | | | | | | | | | 274,521 | | | | | | | 1,612 | | | 276,133 | | |
| Other comprehensive income | | 1,221 | | | 7 | | | 1,228 | | |
| Impact of deconsolidation of real estate venture | | (1,017) | | | (1,017) | | |
| Distributions from consolidated real estate ventures | | (22) | | | (22) | | |
| Share-based compensation activity | | 1,263 | | | 1,263 | | |
| Share Issuance from/(to) Deferred Compensation Plan | (195) | | | (195) | | | (2) | | | (2) | | |
| Distributions declared $0.19 per share) | | (32,463) | | | (187) | | | (32,650) | | |
| BALANCE, September 30, 2020 | 170,572,964 | | | 1,160,494 | | | $ | 1,707 | | | $ | 3,136,851 | | | $ | 17,516 | | | $ | (17,516) | | | $ | 1,091,095 | | | $ | (8,749) | | | $ | (2,415,736) | | | $ | 10,614 | | | $ | 1,815,782 | | |
| BALANCE, June 30, 2021 | | BALANCE, June 30, 2021 | 170,900,491 | | | 1,175,343 | | | $ | 1,709 | | | $ | 3,140,575 | | | $ | 18,491 | | | $ | (18,491) | | | $ | 1,116,837 | | | $ | (5,427) | | | $ | (2,513,373) | | | $ | 10,732 | | | $ | 1,751,053 | |
|
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
| Net income | Net income | $ | 7,763 | | | $ | 288,240 | | Net income | $ | 10,752 | | | $ | 6,789 | |
| Adjustments to reconcile net income to net cash from operating activities: | Adjustments to reconcile net income to net cash from operating activities: | | Adjustments to reconcile net income to net cash from operating activities: | |
| Depreciation and amortization | Depreciation and amortization | 131,303 | | | 145,314 | | Depreciation and amortization | 87,741 | | | 83,128 | |
| Amortization of deferred financing costs | Amortization of deferred financing costs | 2,127 | | | 2,195 | | Amortization of deferred financing costs | 1,514 | | | 1,418 | |
| Amortization of debt discount/(premium), net | Amortization of debt discount/(premium), net | (1,463) | | | (55) | | Amortization of debt discount/(premium), net | (975) | | | (975) | |
| Amortization of stock compensation costs | Amortization of stock compensation costs | 5,732 | | | 5,544 | | Amortization of stock compensation costs | 5,419 | | | 4,324 | |
| Straight-line rent income | Straight-line rent income | (10,641) | | | (8,903) | | Straight-line rent income | (5,042) | | | (7,472) | |
| Amortization of acquired above (below) market leases, net | Amortization of acquired above (below) market leases, net | (3,929) | | | (3,657) | | Amortization of acquired above (below) market leases, net | (1,664) | | | (2,573) | |
| Ground rent expense | Ground rent expense | 712 | | | 1,092 | | Ground rent expense | 408 | | | 505 | |
| Provision for doubtful accounts | Provision for doubtful accounts | 940 | | | 1,041 | | Provision for doubtful accounts | — | | | 67 | |
| | Net gain on sale of interests in real estate | (3,045) | | | (274,688) | | |
| Total gain on sale of real estate | | Total gain on sale of real estate | (5,168) | | | (2,135) | |
| | Loss from unconsolidated real estate ventures, net of distributions | Loss from unconsolidated real estate ventures, net of distributions | 20,798 | | | 9,880 | | Loss from unconsolidated real estate ventures, net of distributions | 9,544 | | | 14,164 | |
| Income tax provision (benefit) | 46 | | | (224) | | |
| Income tax provision | | Income tax provision | 75 | | | 34 | |
| Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
| Accounts receivable | Accounts receivable | 672 | | | (6,263) | | Accounts receivable | (1,254) | | | 2,513 | |
| Other assets | Other assets | (8,562) | | | (7,527) | | Other assets | (2,711) | | | (2,405) | |
| Accounts payable and accrued expenses | Accounts payable and accrued expenses | 3,650 | | | 10,782 | | Accounts payable and accrued expenses | (19,484) | | | (12,431) | |
| Deferred income, gains and rent | Deferred income, gains and rent | 914 | | | (8,856) | | Deferred income, gains and rent | (2,487) | | | 1,887 | |
| Other liabilities | Other liabilities | (6,298) | | | 8,549 | | Other liabilities | 1,826 | | | (7,712) | |
| Net cash provided by operating activities | Net cash provided by operating activities | 140,719 | | | 162,464 | | Net cash provided by operating activities | 78,494 | | | 79,126 | |
| Cash flows from investing activities: | Cash flows from investing activities: | | | | Cash flows from investing activities: | | | |
| Acquisition of properties | Acquisition of properties | — | | | (11,432) | | Acquisition of properties | (3,446) | | | — | |
| Proceeds from the sale of properties | Proceeds from the sale of properties | 10,303 | | | 122,055 | | Proceeds from the sale of properties | 34,146 | | | 79 | |
| | Proceeds from insurance | Proceeds from insurance | 1,250 | | | — | | Proceeds from insurance | — | | | 1,250 | |
| Proceeds from note receivable | 50,000 | | | — | | |
| | | Capital expenditures for tenant improvements | Capital expenditures for tenant improvements | (30,168) | | | (55,262) | | Capital expenditures for tenant improvements | (35,545) | | | (20,573) | |
| Capital expenditures for redevelopments | Capital expenditures for redevelopments | (18,705) | | | (18,664) | | Capital expenditures for redevelopments | (56,472) | | | (10,005) | |
| Capital expenditures for developments | Capital expenditures for developments | (26,694) | | | (51,435) | | Capital expenditures for developments | (82,252) | | | (18,746) | |
| Advances for the purchase of tenant assets, net of repayments | Advances for the purchase of tenant assets, net of repayments | 279 | | | 1,265 | | Advances for the purchase of tenant assets, net of repayments | (447) | | | 290 | |
| Investment in unconsolidated real estate ventures | Investment in unconsolidated real estate ventures | (27,210) | | | (719) | | Investment in unconsolidated real estate ventures | (27,807) | | | (16,662) | |
| | Deposits for real estate | | Deposits for real estate | (7,550) | | | — | |
| | Capital distributions from unconsolidated real estate ventures | Capital distributions from unconsolidated real estate ventures | 7,499 | | | 6,916 | | Capital distributions from unconsolidated real estate ventures | 5,720 | | | 5,151 | |
| Leasing costs paid | Leasing costs paid | (11,475) | | | (16,747) | | Leasing costs paid | (15,209) | | | (9,187) | |
| Net cash used in investing activities | Net cash used in investing activities | (44,921) | | | (24,023) | | Net cash used in investing activities | (188,862) | | | (68,403) | |
| Cash flows from financing activities: | Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
| Repayments of mortgage notes payable | — | | | (6,105) | | |
| | Proceeds from credit facility borrowings | Proceeds from credit facility borrowings | 116,000 | | | 170,500 | | Proceeds from credit facility borrowings | 196,000 | | | 96,000 | |
| Repayments of credit facility borrowings | Repayments of credit facility borrowings | (116,000) | | | (170,500) | | Repayments of credit facility borrowings | (5,000) | | | (38,000) | |
| | Debt financing costs paid | | Debt financing costs paid | (6,641) | | | — | |
| Exercise of stock options, net | Exercise of stock options, net | (63) | | | 47 | | Exercise of stock options, net | — | | | (63) | |
| | Shares used for employee taxes upon vesting of share awards | Shares used for employee taxes upon vesting of share awards | (1,762) | | | (1,346) | | Shares used for employee taxes upon vesting of share awards | (2,935) | | | (1,823) | |
| Partner contributions to consolidated real estate venture | Partner contributions to consolidated real estate venture | 2,765 | | | — | | Partner contributions to consolidated real estate venture | — | | | 2,289 | |
| | Repurchase and retirement of common shares | — | | | (60,000) | | |
| | Redemption of limited partnership units | Redemption of limited partnership units | (2,334) | | | — | | Redemption of limited partnership units | (4,006) | | | (2,234) | |
| Distributions paid to shareholders | Distributions paid to shareholders | (97,637) | | | (98,651) | | Distributions paid to shareholders | (65,315) | | | (65,074) | |
| Distributions to noncontrolling interest | Distributions to noncontrolling interest | (547) | | | (561) | | Distributions to noncontrolling interest | (255) | | | (383) | |
| Net cash used in financing activities | (99,578) | | | (166,616) | | |
| Decrease in cash and cash equivalents and restricted cash | (3,780) | | | (28,175) | | |
| Net cash provided by (used in) financing activities | | Net cash provided by (used in) financing activities | 111,848 | | | (9,288) | |
| Increase in cash and cash equivalents and restricted cash | | Increase in cash and cash equivalents and restricted cash | 1,480 | | | 1,435 | |
| Cash and cash equivalents and restricted cash at beginning of period | Cash and cash equivalents and restricted cash at beginning of period | 47,077 | | | 91,170 | | Cash and cash equivalents and restricted cash at beginning of period | 28,300 | | | 47,077 | |
| Cash and cash equivalents and restricted cash at end of period | Cash and cash equivalents and restricted cash at end of period | $ | 43,297 | | | $ | 62,995 | | Cash and cash equivalents and restricted cash at end of period | $ | 29,780 | | | $ | 48,512 | |
| | Reconciliation of cash and cash equivalents and restricted cash: | Reconciliation of cash and cash equivalents and restricted cash: | | Reconciliation of cash and cash equivalents and restricted cash: | |
| Cash and cash equivalents, beginning of period | Cash and cash equivalents, beginning of period | $ | 46,344 | | | $ | 90,499 | | Cash and cash equivalents, beginning of period | $ | 27,463 | | | $ | 46,344 | |
| Restricted cash, beginning of period | Restricted cash, beginning of period | 733 | | | 671 | | Restricted cash, beginning of period | 837 | | | 733 | |
| Cash and cash equivalents and restricted cash, beginning of period | Cash and cash equivalents and restricted cash, beginning of period | $ | 47,077 | | | $ | 91,170 | | Cash and cash equivalents and restricted cash, beginning of period | $ | 28,300 | | | $ | 47,077 | |
| Cash and cash equivalents, end of period | Cash and cash equivalents, end of period | $ | 42,484 | | | $ | 62,256 | | Cash and cash equivalents, end of period | $ | 28,849 | | | $ | 47,730 | |
| Restricted cash, end of period | Restricted cash, end of period | 813 | | | 739 | | Restricted cash, end of period | 931 | | | 782 | |
| Cash and cash equivalents and restricted cash, end of period | Cash and cash equivalents and restricted cash, end of period | $ | 43,297 | | | $ | 62,995 | | Cash and cash equivalents and restricted cash, end of period | $ | 29,780 | | | $ | 48,512 | |
| Supplemental disclosure: | Supplemental disclosure: | | | | Supplemental disclosure: | | | |
| Cash paid for interest, net of capitalized interest during the nine months ended September 30, 2021 and 2020 of $6,348 and $3,462, respectively | $ | 45,786 | | | $ | 51,733 | | |
| Cash paid for interest, net of capitalized interest during the six months ended June 30, 2022 and 2021 of $4,442 and $3,734, respectively | | Cash paid for interest, net of capitalized interest during the six months ended June 30, 2022 and 2021 of $4,442 and $3,734, respectively | $ | 37,961 | | | $ | 36,961 | |
| Cash paid for income taxes | Cash paid for income taxes | 23 | | | 719 | | Cash paid for income taxes | 902 | | | 21 | |
| Supplemental disclosure of non-cash activity: | Supplemental disclosure of non-cash activity: | | Supplemental disclosure of non-cash activity: | |
| Dividends and distributions declared but not paid | Dividends and distributions declared but not paid | 32,763 | | | 32,705 | | Dividends and distributions declared but not paid | 32,800 | | | 32,727 | |
| | Change in investment in real estate ventures as a result of dispositions | 32,761 | | | — | | |
| | | Change in investment in real estate ventures as a result of deconsolidation | | Change in investment in real estate ventures as a result of deconsolidation | — | | | 32,761 | |
| Change in operating real estate from deconsolidation of operating properties | Change in operating real estate from deconsolidation of operating properties | (30,073) | | | 269,268 | | Change in operating real estate from deconsolidation of operating properties | — | | | (30,073) | |
| Change in investment in real estate ventures from deconsolidation of operating properties | — | | | (263,358) | | |
| Change in mortgage notes payable from deconsolidation of operating properties | — | | | (220,271) | | |
| | Change in other assets as a result of deconsolidation of operating properties | Change in other assets as a result of deconsolidation of operating properties | (2,688) | | | — | | Change in other assets as a result of deconsolidation of operating properties | — | | | (2,688) | |
| Change in other assets as a result of investing activities | | Change in other assets as a result of investing activities | 13,396 | | | — | |
| Change in capital expenditures financed through accounts payable at period end | Change in capital expenditures financed through accounts payable at period end | 6,653 | | | (8,244) | | Change in capital expenditures financed through accounts payable at period end | 10,283 | | | (653) | |
| Change in capital expenditures financed through retention payable at period end | Change in capital expenditures financed through retention payable at period end | (1,473) | | | 754 | | Change in capital expenditures financed through retention payable at period end | (1,097) | | | (2,339) | |
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except unit and per unit information)
| | | September 30,
2021 | | December 31,
2020 | | June 30,
2022 | | December 31,
2021 |
| ASSETS | ASSETS | | | | ASSETS | | | |
| Real estate investments: | Real estate investments: | | Real estate investments: | |
| Operating properties | Operating properties | $ | 3,437,074 | | | $ | 3,474,109 | | Operating properties | $ | 3,545,102 | | | $ | 3,472,602 | |
| Accumulated depreciation | Accumulated depreciation | (957,793) | | | (896,561) | | Accumulated depreciation | (1,009,108) | | | (957,450) | |
| Right of use asset - operating leases, net | Right of use asset - operating leases, net | 20,478 | | | 20,977 | | Right of use asset - operating leases, net | 19,988 | | | 20,313 | |
| Operating real estate investments, net | Operating real estate investments, net | 2,499,759 | | | 2,598,525 | | Operating real estate investments, net | 2,555,982 | | | 2,535,465 | |
| Construction-in-progress | Construction-in-progress | 266,263 | | | 210,311 | | Construction-in-progress | 366,823 | | | 277,237 | |
| Land held for development | Land held for development | 118,684 | | | 117,984 | | Land held for development | 93,887 | | | 114,604 | |
| Prepaid leasehold interests in land held for development, net | Prepaid leasehold interests in land held for development, net | 27,762 | | | 39,185 | | Prepaid leasehold interests in land held for development, net | 35,576 | | | 27,762 | |
| Total real estate investments, net | Total real estate investments, net | 2,912,468 | | | 2,966,005 | | Total real estate investments, net | 3,052,268 | | | 2,955,068 | |
| Assets held for sale, net | Assets held for sale, net | 562 | | | 7,349 | | Assets held for sale, net | — | | | 562 | |
| Cash and cash equivalents | Cash and cash equivalents | 42,484 | | | 46,344 | | Cash and cash equivalents | 28,849 | | | 27,463 | |
| Accounts receivable | Accounts receivable | 11,645 | | | 13,536 | | Accounts receivable | 13,584 | | | 11,875 | |
| Accrued rent receivable, net of allowance of $4,133 and $5,086 as of September 30, 2021 and December 31, 2020, respectively | 165,564 | | | 155,372 | | |
| Accrued rent receivable, net of allowance of $4,049 and $4,133 as of June 30, 2022 and December 31, 2021, respectively | | Accrued rent receivable, net of allowance of $4,049 and $4,133 as of June 30, 2022 and December 31, 2021, respectively | 172,076 | | | 167,210 | |
| Investment in unconsolidated real estate ventures | Investment in unconsolidated real estate ventures | 449,658 | | | 401,327 | | Investment in unconsolidated real estate ventures | 458,840 | | | 435,506 | |
| Deferred costs, net | Deferred costs, net | 81,632 | | | 84,856 | | Deferred costs, net | 93,570 | | | 86,862 | |
| Intangible assets, net | Intangible assets, net | 34,514 | | | 48,570 | | Intangible assets, net | 23,015 | | | 28,556 | |
| Other assets | Other assets | 131,230 | | | 176,747 | | Other assets | 124,486 | | | 133,094 | |
| Total assets | Total assets | $ | 3,829,757 | | | $ | 3,900,106 | | Total assets | $ | 3,966,688 | | | $ | 3,846,196 | |
| LIABILITIES AND PARTNERS' EQUITY | LIABILITIES AND PARTNERS' EQUITY | | | | LIABILITIES AND PARTNERS' EQUITY | | | |
| | Unsecured credit facility | | Unsecured credit facility | $ | 214,000 | | | $ | 23,000 | |
| Unsecured term loan, net | Unsecured term loan, net | $ | 249,477 | | | $ | 249,084 | | Unsecured term loan, net | 248,047 | | | 249,608 | |
| Unsecured senior notes, net | Unsecured senior notes, net | 1,581,112 | | | 1,581,511 | | Unsecured senior notes, net | 1,580,712 | | | 1,580,978 | |
| Accounts payable and accrued expenses | Accounts payable and accrued expenses | 133,615 | | | 121,982 | | Accounts payable and accrued expenses | 131,669 | | | 150,151 | |
| Distributions payable | Distributions payable | 32,763 | | | 32,706 | | Distributions payable | 32,800 | | | 32,765 | |
| Deferred income, gains and rent | Deferred income, gains and rent | 21,861 | | | 21,396 | | Deferred income, gains and rent | 21,195 | | | 23,849 | |
| Intangible liabilities, net | Intangible liabilities, net | 14,451 | | | 18,448 | | Intangible liabilities, net | 11,277 | | | 12,981 | |
| | Lease liability - operating leases | Lease liability - operating leases | 22,911 | | | 22,758 | | Lease liability - operating leases | 23,066 | | | 22,962 | |
| Other liabilities | Other liabilities | 48,090 | | | 47,573 | | Other liabilities | 52,359 | | | 48,683 | |
| Total liabilities | Total liabilities | $ | 2,104,280 | | | $ | 2,095,458 | | Total liabilities | $ | 2,315,125 | | | $ | 2,144,977 | |
| Commitments and contingencies (See Note 15) | 0 | | 0 | |
| Redeemable limited partnership units at redemption value; 823,983 and 981,634 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 11,170 | | | 11,566 | | |
| Commitments and contingencies (See Note 14) | | Commitments and contingencies (See Note 14) | 0 | | 0 |
| Redeemable limited partnership units at redemption value; 516,467 and 823,983 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | | Redeemable limited partnership units at redemption value; 516,467 and 823,983 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 5,059 | | | 11,140 | |
| Brandywine Operating Partnership, L.P.'s equity: | Brandywine Operating Partnership, L.P.'s equity: | | Brandywine Operating Partnership, L.P.'s equity: | |
| General Partnership Capital; 171,126,257 and 170,572,964 units issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 1,718,929 | | | 1,800,945 | | |
| Accumulated other comprehensive loss | (4,690) | | | (7,935) | | |
| General Partnership Capital; 171,575,280 and 171,126,257 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | | General Partnership Capital; 171,575,280 and 171,126,257 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 1,640,153 | | | 1,689,611 | |
| Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | 3,521 | | | (2,366) | |
| Total Brandywine Operating Partnership, L.P.'s equity | Total Brandywine Operating Partnership, L.P.'s equity | 1,714,239 | | | 1,793,010 | | Total Brandywine Operating Partnership, L.P.'s equity | 1,643,674 | | | 1,687,245 | |
| Noncontrolling interest - consolidated real estate ventures | Noncontrolling interest - consolidated real estate ventures | 68 | | | 72 | | Noncontrolling interest - consolidated real estate ventures | 2,830 | | | 2,834 | |
| Total partners' equity | Total partners' equity | $ | 1,714,307 | | | $ | 1,793,082 | | Total partners' equity | $ | 1,646,504 | | | $ | 1,690,079 | |
| Total liabilities and partners' equity | Total liabilities and partners' equity | $ | 3,829,757 | | | $ | 3,900,106 | | Total liabilities and partners' equity | $ | 3,966,688 | | | $ | 3,846,196 | |
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except unit and per unit information)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| Revenue | Revenue | | | | | | | | Revenue | | | | | | | |
| Rents | Rents | $ | 112,159 | | | $ | 121,277 | | | $ | 336,878 | | | $ | 392,661 | | Rents | $ | 116,897 | | | $ | 111,235 | | | $ | 232,798 | | | $ | 224,719 | |
| Third party management fees, labor reimbursement and leasing | Third party management fees, labor reimbursement and leasing | 6,500 | | | 4,324 | | | 19,778 | | | 13,339 | | Third party management fees, labor reimbursement and leasing | 5,924 | | | 6,627 | | | 11,032 | | | 13,278 | |
| Other | Other | 1,759 | | | 505 | | | 4,633 | | | 2,031 | | Other | 1,221 | | | 2,240 | | | 7,717 | | | 2,874 | |
| Total revenue | Total revenue | 120,418 | | | 126,106 | | | 361,289 | | | 408,031 | | Total revenue | 124,042 | | | 120,102 | | | 251,547 | | | 240,871 | |
| Operating expenses | Operating expenses | | Operating expenses | |
| Property operating expenses | Property operating expenses | 30,304 | | | 31,567 | | | 88,503 | | | 102,320 | | Property operating expenses | 33,111 | | | 29,264 | | | 64,659 | | | 58,199 | |
| Real estate taxes | Real estate taxes | 13,421 | | | 14,923 | | | 42,784 | | | 48,525 | | Real estate taxes | 13,746 | | | 14,602 | | | 27,559 | | | 29,363 | |
| Third party management expenses | Third party management expenses | 3,327 | | | 2,509 | | | 9,866 | | | 7,546 | | Third party management expenses | 2,792 | | | 3,561 | | | 5,349 | | | 6,539 | |
| Depreciation and amortization | Depreciation and amortization | 48,175 | | | 43,533 | | | 131,303 | | | 145,314 | | Depreciation and amortization | 43,959 | | | 42,785 | | | 87,741 | | | 83,128 | |
| General and administrative expenses | General and administrative expenses | 7,076 | | | 7,069 | | | 22,016 | | | 23,973 | | General and administrative expenses | 8,328 | | | 8,356 | | | 18,328 | | | 14,940 | |
| | Total operating expenses | Total operating expenses | 102,303 | | | 99,601 | | | 294,472 | | | 327,678 | | Total operating expenses | 101,936 | | | 98,568 | | | 203,636 | | | 192,169 | |
| Gain on sale of real estate | Gain on sale of real estate | | | | | | | | Gain on sale of real estate | | | | | | | |
| Net gain on disposition of real estate | Net gain on disposition of real estate | — | | | 271,901 | | | 142 | | | 274,487 | | Net gain on disposition of real estate | 144 | | | 68 | | | 144 | | | 142 | |
| Net gain on sale of undepreciated real estate | Net gain on sale of undepreciated real estate | 910 | | | — | | | 2,903 | | | 201 | | Net gain on sale of undepreciated real estate | 4,127 | | | — | | | 5,024 | | | 1,993 | |
| Total gain on sale of real estate | Total gain on sale of real estate | 910 | | | 271,901 | | | 3,045 | | | 274,688 | | Total gain on sale of real estate | 4,271 | | | 68 | | | 5,168 | | | 2,135 | |
| Operating income | Operating income | 19,025 | | | 298,406 | | | 69,862 | | | 355,041 | | Operating income | 26,377 | | | 21,602 | | | 53,079 | | | 50,837 | |
| Other income (expense): | Other income (expense): | | Other income (expense): | |
| Interest and investment income | Interest and investment income | 4,494 | | | 467 | | | 7,845 | | | 1,487 | | Interest and investment income | 449 | | | 1,677 | | | 889 | | | 3,351 | |
| Interest expense | Interest expense | (15,190) | | | (16,310) | | | (46,973) | | | (56,510) | | Interest expense | (16,341) | | | (15,490) | | | (32,083) | | | (31,783) | |
| Interest expense - amortization of deferred financing costs | Interest expense - amortization of deferred financing costs | (709) | | | (715) | | | (2,127) | | | (2,195) | | Interest expense - amortization of deferred financing costs | (805) | | | (709) | | | (1,514) | | | (1,418) | |
| | Equity in loss of unconsolidated real estate ventures | Equity in loss of unconsolidated real estate ventures | (6,634) | | | (5,788) | | | (20,798) | | | (9,882) | | Equity in loss of unconsolidated real estate ventures | (4,981) | | | (7,240) | | | (9,544) | | | (14,164) | |
| | Net gain on real estate venture transactions | — | | | 75 | | | — | | | 75 | | |
| | Net income before income taxes | 986 | | | 276,135 | | | 7,809 | | | 288,016 | | |
| Income tax (provision) benefit | (12) | | | (2) | | | (46) | | | 224 | | |
| Net income | 974 | | | 276,133 | | | 7,763 | | | 288,240 | | |
| Net (income) loss attributable to noncontrolling interests - consolidated real estate ventures | 2 | | | 2 | | | 4 | | | (20) | | |
| Net income attributable to Brandywine Operating Partnership | 976 | | | 276,135 | | | 7,767 | | | 288,220 | | |
| | Net income (loss) before income taxes | | Net income (loss) before income taxes | 4,699 | | | (160) | | | 10,827 | | | 6,823 | |
| Income tax provision | | Income tax provision | (48) | | | (15) | | | (75) | | | (34) | |
| Net income (loss) | | Net income (loss) | 4,651 | | | (175) | | | 10,752 | | | 6,789 | |
| Net loss attributable to noncontrolling interests - consolidated real estate ventures | | Net loss attributable to noncontrolling interests - consolidated real estate ventures | 2 | | | 1 | | | 4 | | | 2 | |
| Net income (loss) attributable to Brandywine Operating Partnership | | Net income (loss) attributable to Brandywine Operating Partnership | 4,653 | | | (174) | | | 10,756 | | | 6,791 | |
| | Nonforfeitable dividends allocated to unvested restricted unitholders | Nonforfeitable dividends allocated to unvested restricted unitholders | (91) | | | (93) | | | (331) | | | (317) | | Nonforfeitable dividends allocated to unvested restricted unitholders | (98) | | | (94) | | | (246) | | | (240) | |
| Net income attributable to Common Partnership Unitholders of Brandywine Operating Partnership, L.P. | $ | 885 | | | $ | 276,042 | | | $ | 7,436 | | | $ | 287,903 | | |
| Net income (loss) attributable to Common Partnership Unitholders of Brandywine Operating Partnership, L.P. | | Net income (loss) attributable to Common Partnership Unitholders of Brandywine Operating Partnership, L.P. | $ | 4,555 | | | $ | (268) | | | $ | 10,510 | | | $ | 6,551 | |
| | Basic income per Common Partnership Unit | Basic income per Common Partnership Unit | $ | 0.01 | | | $ | 1.61 | | | $ | 0.04 | | | $ | 1.66 | | Basic income per Common Partnership Unit | $ | 0.03 | | | $ | — | | | $ | 0.06 | | | $ | 0.04 | |
| | Diluted income per Common Partnership Unit | Diluted income per Common Partnership Unit | $ | 0.01 | | | $ | 1.60 | | | $ | 0.04 | | | $ | 1.66 | | Diluted income per Common Partnership Unit | $ | 0.03 | | | $ | — | | | $ | 0.06 | | | $ | 0.04 | |
| | Basic weighted average common partnership units outstanding | Basic weighted average common partnership units outstanding | 171,731,001 | | | 171,554,662 | | | 171,710,387 | | | 173,362,044 | | Basic weighted average common partnership units outstanding | 172,043,498 | | | 171,792,415 | | | 171,985,863 | | | 171,699,909 | |
| Diluted weighted average common partnership units outstanding | Diluted weighted average common partnership units outstanding | 173,061,177 | | | 172,008,126 | | | 172,993,752 | | | 173,717,070 | | Diluted weighted average common partnership units outstanding | 172,776,896 | | | 171,792,415 | | | 173,149,640 | | | 172,958,591 | |
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Net income | $ | 974 | | | $ | 276,133 | | | $ | 7,763 | | | $ | 288,240 | |
| Comprehensive income (loss): | | | | | | | |
| Unrealized gain (loss) on derivative financial instruments | 911 | | | 1,040 | | | 2,681 | | | (6,979) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Amortization of interest rate contracts (1) | 188 | | | 188 | | | 564 | | | 564 | |
| Total comprehensive income (loss) | 1,099 | | | 1,228 | | | 3,245 | | | (6,415) | |
| Comprehensive income | 2,073 | | | 277,361 | | | 11,008 | | | 281,825 | |
| Comprehensive (income) loss attributable to noncontrolling interest - consolidated real estate ventures | 2 | | | 2 | | | 4 | | | (20) | |
| Comprehensive income attributable to Brandywine Operating Partnership | $ | 2,075 | | | $ | 277,363 | | | $ | 11,012 | | | $ | 281,805 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Net income (loss) | $ | 4,651 | | | $ | (175) | | | $ | 10,752 | | | $ | 6,789 | |
| Comprehensive income: | | | | | | | |
| Unrealized gain on derivative financial instruments | 1,747 | | | 860 | | | 5,511 | | | 1,770 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Amortization of interest rate contracts (1) | 188 | | | 188 | | | 376 | | | 376 | |
| Total comprehensive income | 1,935 | | | 1,048 | | | 5,887 | | | 2,146 | |
| Comprehensive income | 6,586 | | | 873 | | | 16,639 | | | 8,935 | |
| Comprehensive loss attributable to noncontrolling interest - consolidated real estate ventures | 2 | | | 1 | | | 4 | | | 2 | |
| Comprehensive income attributable to Brandywine Operating Partnership | $ | 6,588 | | | $ | 874 | | | $ | 16,643 | | | $ | 8,937 | |
(1)Amounts reclassified from comprehensive income to interest expense within the Consolidated Statements of Operations.
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
(unaudited, in thousands, except number of units)
| | | General Partner Capital | | | General Partner Capital | |
| | Units | | Amount | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interest - Consolidated Real Estate Ventures | | Total Partners' Equity | | Units | | Amount | | Accumulated Other Comprehensive Income | | Noncontrolling Interest - Consolidated Real Estate Ventures | | Total Partners' Equity |
| BALANCE, beginning of period | 170,572,964 | | | $ | 1,800,945 | | | $ | (7,935) | | | $ | 72 | | | $ | 1,793,082 | | |
| | Net income | | 6,965 | | | (1) | | | 6,964 | | |
| BALANCE, December 31, 2021 | | BALANCE, December 31, 2021 | 171,126,257 | | | $ | 1,689,611 | | | $ | (2,366) | | | $ | 2,834 | | | $ | 1,690,079 | |
| Net income (loss) | | Net income (loss) | | 6,103 | | | (2) | | | 6,101 | |
| Other comprehensive income | Other comprehensive income | | 1,098 | | | 1,098 | | Other comprehensive income | | 3,952 | | | 3,952 | |
| Deferred compensation obligation | Deferred compensation obligation | (18,058) | | | (198) | | | (198) | | Deferred compensation obligation | (19,406) | | | (249) | | | (249) | |
| Repurchase and retirement of LP units | | Repurchase and retirement of LP units | | | (4,006) | | | (4,006) | |
| Share-based compensation activity | | Share-based compensation activity | 277,061 | | | 1,655 | | | 1,655 | |
| Adjustment of redeemable partnership units to liquidation value at period end | | Adjustment of redeemable partnership units to liquidation value at period end | | 3,704 | | | 3,704 | |
| Distributions declared to general partnership unitholders ($0.19 per unit) | | Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,711) | | | (32,711) | |
| BALANCE, March 31, 2022 | | BALANCE, March 31, 2022 | 171,383,912 | | | $ | 1,664,107 | | | $ | 1,586 | | | $ | 2,832 | | | $ | 1,668,525 | |
| Net income (loss) | | Net income (loss) | | | 4,653 | | | | | (2) | | | 4,651 | |
| Other comprehensive income | | Other comprehensive income | | 1,935 | | | 1,935 | |
| | Share-based compensation activity | Share-based compensation activity | 108,345 | | | 2,502 | | | 2,502 | | Share-based compensation activity | 191,368 | | | 1,917 | | | 1,917 | |
| Adjustment of redeemable partnership units to liquidation value at period end | Adjustment of redeemable partnership units to liquidation value at period end | | (1,294) | | | (1,294) | | Adjustment of redeemable partnership units to liquidation value at period end | | 2,181 | | | 2,181 | |
| Distributions declared to general partnership unitholders ($0.19 per unit) | Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,573) | | | (32,573) | | Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,705) | | | (32,705) | |
| BALANCE, March 31, 2021 | 170,663,251 | | | $ | 1,776,347 | | | $ | (6,837) | | | $ | 71 | | | $ | 1,769,581 | | |
| Net loss | | | (174) | | | | | (1) | | | (175) | | |
| Other comprehensive income | | 1,048 | | | 1,048 | | |
| BALANCE, June 30, 2022 | | BALANCE, June 30, 2022 | 171,575,280 | | | $ | 1,640,153 | | | $ | 3,521 | | | $ | 2,830 | | | $ | 1,646,504 | |
| | Repurchase and retirement of LP units | | (2,334) | | | (2,334) | | |
| Issuance of partnership interest in consolidated real estate ventures | | 2,289 | | | 2,289 | | |
| Share-based compensation activity | 237,240 | | | 690 | | | 690 | | |
| Adjustment of redeemable partnership units to liquidation value at period end | | 1,066 | | | 1,066 | | |
| Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,562) | | | (32,562) | | |
| BALANCE, June 30, 2021 | 170,900,491 | | | $ | 1,745,322 | | | $ | (5,789) | | | $ | 70 | | | $ | 1,739,603 | | |
| Net income | | | 976 | | | | | (2) | | | 974 | | |
| Other comprehensive income | | 1,099 | | | 1,099 | | |
| Issuance of LP Units | 226,695 | | | 3,052 | | | 3,052 | | |
| | Issuance of partnership interest in consolidated real estate ventures | | 476 | | 476 | | |
| Share-based compensation activity | (929) | | | 1,585 | | | 1,585 | | |
| Adjustment of redeemable partnership units to liquidation value at period end | | 124 | | | 124 | | |
| Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,606) | | | (32,606) | | |
| BALANCE, September 30, 2021 | 171,126,257 | | | $ | 1,718,929 | | | $ | (4,690) | | | $ | 68 | | | $ | 1,714,307 | | |
|
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENT OF PARTNERS’ EQUITY
(unaudited, in thousands, except number of units)
| | | General Partner Capital | | | General Partner Capital | |
| | Units | | Amount | | Accumulated Other Comprehensive Income | | Noncontrolling Interest - Consolidated Real Estate Ventures | | Total Partners' Equity | | Units | | Amount | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interest - Consolidated Real Estate Ventures | | Total Partners' Equity |
| BALANCE, beginning of period | 176,480,095 | | | $ | 1,674,539 | | | $ | (2,715) | | | $ | 1,091 | | | $ | 1,672,915 | | |
| Net income | | 8,075 | | | 12 | | | 8,087 | | |
| Other comprehensive loss | | (7,869) | | | (7,869) | | |
| BALANCE, December 31, 2020 | | BALANCE, December 31, 2020 | 170,572,964 | | | $ | 1,800,945 | | | $ | (7,935) | | | $ | 72 | | | $ | 1,793,082 | |
| | Net income (loss) | | Net income (loss) | | 6,965 | | | (1) | | | 6,964 | |
| Other comprehensive income | | Other comprehensive income | | 1,098 | | | 1,098 | |
| Deferred compensation obligation | Deferred compensation obligation | (12,376) | | | (193) | | | (193) | | Deferred compensation obligation | (18,058) | | | (198) | | | (198) | |
| Repurchase and retirement of LP units | (5,644,200) | | | (53,858) | | | (53,858) | | |
| | Share-based compensation activity | Share-based compensation activity | 142,468 | | | 2,031 | | | 2,031 | | Share-based compensation activity | 108,345 | | | 2,502 | | | 2,502 | |
| Adjustment of redeemable partnership units to liquidation value at period end | Adjustment of redeemable partnership units to liquidation value at period end | | 5,220 | | | 5,220 | | Adjustment of redeemable partnership units to liquidation value at period end | | (1,294) | | | (1,294) | |
| Distributions declared to general partnership unitholders ($0.19 per unit) | Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,500) | | | (32,500) | | Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,573) | | | (32,573) | |
| BALANCE, March 31, 2020 | 170,965,987 | | | $ | 1,603,314 | | | $ | (10,584) | | | $ | 1,103 | | | $ | 1,593,833 | | |
| Net income | | | 4,010 | | | | | 10 | | | 4,020 | | |
| BALANCE, March 31, 2021 | | BALANCE, March 31, 2021 | 170,663,251 | | | $ | 1,776,347 | | | $ | (6,837) | | | $ | 71 | | | $ | 1,769,581 | |
| Net loss | | Net loss | | | (174) | | | | | (1) | | | (175) | |
| Other comprehensive income | Other comprehensive income | | 226 | | | 226 | | Other comprehensive income | | 1,048 | | | 1,048 | |
| Deferred compensation obligation | 44,827 | | | (11) | | | (11) | | |
| | Repurchase and retirement of LP units | Repurchase and retirement of LP units | (604,283) | | | (6,141) | | | (6,141) | | Repurchase and retirement of LP units | | (2,334) | | | (2,334) | |
| Issuance of partnership interest in consolidated real estate ventures | | Issuance of partnership interest in consolidated real estate ventures | | 2,289 | | | 2,289 | |
| Share-based compensation activity | Share-based compensation activity | 166,628 | | | 1,668 | | | 1,668 | | Share-based compensation activity | 237,240 | | | 690 | | | 690 | |
| Adjustment of redeemable partnership units to liquidation value at period end | Adjustment of redeemable partnership units to liquidation value at period end | | (743) | | | (743) | | Adjustment of redeemable partnership units to liquidation value at period end | | 1,066 | | | 1,066 | |
| Distributions declared to general partnership unitholders ($0.19 per unit) | Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,540) | | | (32,540) | | Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,562) | | | (32,562) | |
| BALANCE, June 30, 2020 | 170,573,159 | | | $ | 1,569,557 | | | $ | (10,358) | | | $ | 1,113 | | | $ | 1,560,312 | | |
| Net income | | | 276,135 | | | | | (2) | | | 276,133 | | |
| Other comprehensive income | | 1,228 | | | 1,228 | | |
| Deferred compensation obligation | (195) | | | (2) | | | (2) | | |
| Distributions from consolidated real estate ventures | | (22) | | | (22) | | |
| Share-based compensation activity | | 1,263 | | | 1,263 | | |
| Impact of deconsolidation of real estate venture | | (1,017) | | | (1,017) | | |
| Adjustment of redeemable partnership units to liquidation value at period end | | 400 | | | 400 | | |
| Distributions declared to general partnership unitholders ($0.19 per unit) | | (32,463) | | | (32,463) | | |
| BALANCE, September 30, 2020 | 170,572,964 | | | $ | 1,814,890 | | | $ | (9,130) | | | $ | 72 | | | $ | 1,805,832 | | |
| BALANCE, June 30, 2021 | | BALANCE, June 30, 2021 | 170,900,491 | | | $ | 1,745,322 | | | $ | (5,789) | | | $ | 70 | | | $ | 1,739,603 | |
|
The accompanying notes are an integral part of these consolidated financial statements.
BRANDYWINE OPERATING PARTNERSHIP L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
| Net income | Net income | $ | 7,763 | | | $ | 288,240 | | Net income | $ | 10,752 | | | $ | 6,789 | |
| Adjustments to reconcile net income to net cash from operating activities: | Adjustments to reconcile net income to net cash from operating activities: | | Adjustments to reconcile net income to net cash from operating activities: | |
| Depreciation and amortization | Depreciation and amortization | 131,303 | | | 145,314 | | Depreciation and amortization | 87,741 | | | 83,128 | |
| Amortization of deferred financing costs | Amortization of deferred financing costs | 2,127 | | | 2,195 | | Amortization of deferred financing costs | 1,514 | | | 1,418 | |
| Amortization of debt discount/(premium), net | Amortization of debt discount/(premium), net | (1,463) | | | (55) | | Amortization of debt discount/(premium), net | (975) | | | (975) | |
| Amortization of stock compensation costs | Amortization of stock compensation costs | 5,732 | | | 5,544 | | Amortization of stock compensation costs | 5,419 | | | 4,324 | |
| Straight-line rent income | Straight-line rent income | (10,641) | | | (8,903) | | Straight-line rent income | (5,042) | | | (7,472) | |
| Amortization of acquired above (below) market leases, net | Amortization of acquired above (below) market leases, net | (3,929) | | | (3,657) | | Amortization of acquired above (below) market leases, net | (1,664) | | | (2,573) | |
| Ground rent expense | Ground rent expense | 712 | | | 1,092 | | Ground rent expense | 408 | | | 505 | |
| Provision for doubtful accounts | Provision for doubtful accounts | 940 | | | 1,041 | | Provision for doubtful accounts | — | | | 67 | |
| | Net gain on sale of interests in real estate | (3,045) | | | (274,688) | | |
| Total gain on sale of real estate | | Total gain on sale of real estate | (5,168) | | | (2,135) | |
| | Loss from unconsolidated real estate ventures, net of distributions | Loss from unconsolidated real estate ventures, net of distributions | 20,798 | | | 9,880 | | Loss from unconsolidated real estate ventures, net of distributions | 9,544 | | | 14,164 | |
| Income tax provision (benefit) | 46 | | | (224) | | |
| Income tax provision | | Income tax provision | 75 | | | 34 | |
| Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
| Accounts receivable | Accounts receivable | 672 | | | (6,263) | | Accounts receivable | (1,254) | | | 2,513 | |
| Other assets | Other assets | (8,562) | | | (7,527) | | Other assets | (2,711) | | | (2,405) | |
| Accounts payable and accrued expenses | Accounts payable and accrued expenses | 3,650 | | | 10,782 | | Accounts payable and accrued expenses | (19,484) | | | (12,431) | |
| Deferred income, gains and rent | Deferred income, gains and rent | 914 | | | (8,856) | | Deferred income, gains and rent | (2,487) | | | 1,887 | |
| Other liabilities | Other liabilities | (6,298) | | | 8,549 | | Other liabilities | 1,826 | | | (7,712) | |
| Net cash provided by operating activities | Net cash provided by operating activities | 140,719 | | | 162,464 | | Net cash provided by operating activities | 78,494 | | | 79,126 | |
| Cash flows from investing activities: | Cash flows from investing activities: | | | | Cash flows from investing activities: | | | |
| Acquisition of properties | Acquisition of properties | — | | | (11,432) | | Acquisition of properties | (3,446) | | | — | |
| Proceeds from the sale of properties | Proceeds from the sale of properties | 10,303 | | | 122,055 | | Proceeds from the sale of properties | 34,146 | | | 79 | |
| | Proceeds from insurance | Proceeds from insurance | 1,250 | | | — | | Proceeds from insurance | — | | | 1,250 | |
| Proceeds from note receivable | 50,000 | | | — | | |
| | | Capital expenditures for tenant improvements | Capital expenditures for tenant improvements | (30,168) | | | (55,262) | | Capital expenditures for tenant improvements | (35,545) | | | (20,573) | |
| Capital expenditures for redevelopments | Capital expenditures for redevelopments | (18,705) | | | (18,664) | | Capital expenditures for redevelopments | (56,472) | | | (10,005) | |
| Capital expenditures for developments | Capital expenditures for developments | (26,694) | | | (51,435) | | Capital expenditures for developments | (82,252) | | | (18,746) | |
| Advances for the purchase of tenant assets, net of repayments | Advances for the purchase of tenant assets, net of repayments | 279 | | | 1,265 | | Advances for the purchase of tenant assets, net of repayments | (447) | | | 290 | |
| Investment in unconsolidated real estate ventures | Investment in unconsolidated real estate ventures | (27,210) | | | (719) | | Investment in unconsolidated real estate ventures | (27,807) | | | (16,662) | |
| | Deposits for real estate | | Deposits for real estate | (7,550) | | | — | |
| | Capital distributions from unconsolidated real estate ventures | Capital distributions from unconsolidated real estate ventures | 7,499 | | | 6,916 | | Capital distributions from unconsolidated real estate ventures | 5,720 | | | 5,151 | |
| Leasing costs paid | Leasing costs paid | (11,475) | | | (16,747) | | Leasing costs paid | (15,209) | | | (9,187) | |
| Net cash used in investing activities | Net cash used in investing activities | (44,921) | | | (24,023) | | Net cash used in investing activities | (188,862) | | | (68,403) | |
| Cash flows from financing activities: | Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
| Repayments of mortgage notes payable | — | | | (6,105) | | |
| | Proceeds from credit facility borrowings | Proceeds from credit facility borrowings | 116,000 | | | 170,500 | | Proceeds from credit facility borrowings | 196,000 | | | 96,000 | |
| Repayments of credit facility borrowings | Repayments of credit facility borrowings | (116,000) | | | (170,500) | | Repayments of credit facility borrowings | (5,000) | | | (38,000) | |
| | Debt financing costs paid | | Debt financing costs paid | (6,641) | | | — | |
| Exercise of stock options, net | Exercise of stock options, net | (63) | | | 47 | | Exercise of stock options, net | — | | | (63) | |
| | Shares used for employee taxes upon vesting of share awards | Shares used for employee taxes upon vesting of share awards | (1,762) | | | (1,346) | | Shares used for employee taxes upon vesting of share awards | (2,935) | | | (1,823) | |
| Partner contributions to consolidated real estate venture | Partner contributions to consolidated real estate venture | 2,765 | | | — | | Partner contributions to consolidated real estate venture | — | | | 2,289 | |
| | Repurchase and retirement of common shares | — | | | (60,000) | | |
| | Redemption of limited partnership units | Redemption of limited partnership units | (2,334) | | | — | | Redemption of limited partnership units | (4,006) | | | (2,234) | |
| Distributions paid to preferred and common partnership units | Distributions paid to preferred and common partnership units | (98,184) | | | (99,212) | | Distributions paid to preferred and common partnership units | (65,570) | | | (65,457) | |
| Net cash used in financing activities | (99,578) | | | (166,616) | | |
| Decrease in cash and cash equivalents and restricted cash | (3,780) | | | (28,175) | | |
| Net cash provided by (used in) financing activities | | Net cash provided by (used in) financing activities | 111,848 | | | (9,288) | |
| Increase in cash and cash equivalents and restricted cash | | Increase in cash and cash equivalents and restricted cash | 1,480 | | | 1,435 | |
| Cash and cash equivalents and restricted cash at beginning of period | Cash and cash equivalents and restricted cash at beginning of period | 47,077 | | | 91,170 | | Cash and cash equivalents and restricted cash at beginning of period | 28,300 | | | 47,077 | |
| Cash and cash equivalents and restricted cash at end of period | Cash and cash equivalents and restricted cash at end of period | $ | 43,297 | | | $ | 62,995 | | Cash and cash equivalents and restricted cash at end of period | $ | 29,780 | | | $ | 48,512 | |
| | Reconciliation of cash and cash equivalents and restricted cash: | Reconciliation of cash and cash equivalents and restricted cash: | | Reconciliation of cash and cash equivalents and restricted cash: | |
| Cash and cash equivalents, beginning of period | Cash and cash equivalents, beginning of period | $ | 46,344 | | | $ | 90,499 | | Cash and cash equivalents, beginning of period | $ | 27,463 | | | $ | 46,344 | |
| Restricted cash, beginning of period | Restricted cash, beginning of period | 733 | | | 671 | | Restricted cash, beginning of period | 837 | | | 733 | |
| Cash and cash equivalents and restricted cash, beginning of period | Cash and cash equivalents and restricted cash, beginning of period | $ | 47,077 | | | $ | 91,170 | | Cash and cash equivalents and restricted cash, beginning of period | $ | 28,300 | | | $ | 47,077 | |
| | Cash and cash equivalents, end of period | Cash and cash equivalents, end of period | $ | 42,484 | | | $ | 62,256 | | Cash and cash equivalents, end of period | $ | 28,849 | | | $ | 47,730 | |
| Restricted cash, end of period | Restricted cash, end of period | 813 | | | 739 | | Restricted cash, end of period | 931 | | | 782 | |
| Cash and cash equivalents and restricted cash, end of period | Cash and cash equivalents and restricted cash, end of period | $ | 43,297 | | | $ | 62,995 | | Cash and cash equivalents and restricted cash, end of period | $ | 29,780 | | | $ | 48,512 | |
| Supplemental disclosure: | Supplemental disclosure: | | | | Supplemental disclosure: | | | |
| Cash paid for interest, net of capitalized interest during the nine months ended September 30, 2021 and 2020 of $6,348 and $3,462, respectively | $ | 45,786 | | | $ | 51,733 | | |
| Cash paid for interest, net of capitalized interest during the six months ended June 30, 2022 and 2021 of $4,442 and $3,734, respectively | | Cash paid for interest, net of capitalized interest during the six months ended June 30, 2022 and 2021 of $4,442 and $3,734, respectively | $ | 37,961 | | | $ | 36,961 | |
| Cash paid for income taxes | Cash paid for income taxes | 23 | | | 719 | | Cash paid for income taxes | 902 | | | 21 | |
| Supplemental disclosure of non-cash activity: | Supplemental disclosure of non-cash activity: | | Supplemental disclosure of non-cash activity: | |
| Dividends and distributions declared but not paid | Dividends and distributions declared but not paid | 32,763 | | | 32,705 | | Dividends and distributions declared but not paid | 32,800 | | | 32,727 | |
| | Change in investment in real estate ventures as a result of dispositions | 32,761 | | | — | | |
| | | Change in investment in real estate ventures as a result of deconsolidation | | Change in investment in real estate ventures as a result of deconsolidation | — | | | 32,761 | |
| Change in operating real estate from deconsolidation of operating properties | Change in operating real estate from deconsolidation of operating properties | (30,073) | | | 269,268 | | Change in operating real estate from deconsolidation of operating properties | — | | | (30,073) | |
| Change in investment in real estate ventures from deconsolidation of operating properties | — | | | (263,358) | | |
| Change in mortgage notes payable from deconsolidation of operating properties | — | | | (220,271) | | |
| | Change in other assets as a result of deconsolidation of operating properties | Change in other assets as a result of deconsolidation of operating properties | (2,688) | | | — | | Change in other assets as a result of deconsolidation of operating properties | — | | | (2,688) | |
| Change in other assets as a result of investing activities | | Change in other assets as a result of investing activities | 13,396 | | | — | |
| Change in capital expenditures financed through accounts payable at period end | Change in capital expenditures financed through accounts payable at period end | 6,653 | | | (8,244) | | Change in capital expenditures financed through accounts payable at period end | 10,283 | | | (653) | |
| Change in capital expenditures financed through retention payable at period end | Change in capital expenditures financed through retention payable at period end | (1,473) | | | 754 | | Change in capital expenditures financed through retention payable at period end | (1,097) | | | (2,339) | |
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION OF THE PARENT COMPANY AND THE OPERATING PARTNERSHIP
Brandywine Realty Trust (the "Parent Company") is a self-administered and self-managed real estate investment trust (“REIT”) engaged in the acquisition, development, redevelopment, ownership, management, and operation of a portfolio of office and mixed-use properties. The Parent Company owns its assets and conducts its operations through Brandywine Operating Partnership, L.P. (the "Operating Partnership") and subsidiaries of the Operating Partnership. The Parent Company is the sole general partner of the Operating Partnership and, as of SeptemberJune 30, 2021,2022, owned a 99.5%99.7% interest in the Operating Partnership. The Parent Company’s common shares of beneficial interest are publicly traded on the New York Stock Exchange under the ticker symbol “BDN”.“BDN.” The Parent Company, the Operating Partnership, and their consolidated subsidiaries are collectively referred to as the "Company"."Company."
As of SeptemberJune 30, 2021,2022, the Company owned 8178 properties that contained an aggregate of approximately 13.713.6 million net rentable square feet (collectively, the “Properties”). The Company’s core portfolio of operating properties (the “Core Properties”) excludes development properties, redevelopment properties, and properties held for sale. The Properties were comprised of the following as of SeptemberJune 30, 2021:2022:
| | | Number of Properties | | Rentable Square Feet | | Number of Properties | | Rentable Square Feet |
| Office properties | Office properties | 71 | | | 12,006,744 | | Office properties | 69 | | | 12,054,491 | |
| Mixed-use properties | Mixed-use properties | 5 | | | 942,334 | | Mixed-use properties | 5 | | | 942,334 | |
| | Core Properties | Core Properties | 76 | | | 12,949,078 | | Core Properties | 74 | | | 12,996,825 | |
| Development property | Development property | 1 | | | 205,803 | | Development property | 1 | | | 205,803 | |
| Redevelopment properties | Redevelopment properties | 4 | | | 496,769 | | Redevelopment properties | 3 | | | 436,659 | |
| | The Properties | The Properties | 81 | | | 13,651,650 | | The Properties | 78 | | | 13,639,287 | |
In addition to the Properties, as of SeptemberJune 30, 2021,2022, the Company owned 176.1164.6 acres of land held for development, of which 10.0 acres were held for sale.development. The Company also held a leasehold interest in 12 land parcelparcels totaling 0.81.6 acres, acquired through a prepaid 99-year ground lease,leases, and held options to purchase approximately 55.554.7 additional acres of undeveloped land. As of SeptemberJune 30, 2021,2022, the total potential development that this inventory of land could support under current zoning and entitlements, including the parcels under option, amounted to an estimated 13.413.1 million square feet of which 0.1 million square feet relates to 10.0 acres held for sale.feet.
As of SeptemberJune 30, 2021,2022, the Company also owned economic interests in 10 unconsolidated real estate ventures (see Note 4, ''Investment in Unconsolidated Real Estate Ventures”Ventures,” for further information). The Properties and the properties owned by the unconsolidated real estate ventures are primarily located in or near Philadelphia, Pennsylvania; Austin, Texas; Metropolitan Washington, D.C.; Southern New Jersey; and Wilmington, Delaware.
The Company conducts its third-party real estate management services business primarily through wholly-owned management company subsidiaries. As of SeptemberJune 30, 2021,2022, the management company subsidiaries were managing properties containing an aggregate of approximately 24.423.0 million net rentable square feet, of which approximately 13.713.6 million net rentable square feet related to Properties owned by the Company and approximately 10.79.4 million net rentable square feet related to properties owned by third parties and unconsolidated real estate ventures.
Unless otherwise indicated, all references in this Form 10-Q to square feet represent net rentable area.
2. BASIS OF PRESENTATION
Basis of Presentation
The consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments consist solely of normal recurring matters, and result in a fair statement of the financial position of the Company as of SeptemberJune 30, 2021,2022, the results of its operations for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 and its cash flows for the ninesix months ended SeptemberJune 30, 20212022 and 2020.2021. The results of operations for such interim periods are not necessarily indicative of the results for a full year. These consolidated financial statements should be read in conjunction with the Parent Company’s and the Operating Partnership’s consolidated financial statements and footnotes included in their combined Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the SEC on February 24, 2021.
The consolidated balance sheet at December 31, 20202021 has been derived from the audited financial statements as of that date but does not include all the information and footnotes required by accounting principles generally accepted in the United StatesGAAP for complete financial statements.
The Company's Annual Report on Form 10-K for the year ended December 31, 20202021 contains a discussion of its significant accounting policies under Note 2, "Summary of Significant Accounting Policies". There have been no significant changes in the Company's significant accounting policies since December 31, 2020.
Change in Depreciable Lives of Real Estate Investments
In accordance with its policy, the Company reviews the estimated useful lives of its real estate investments on an ongoing basis. Pursuant to our Broadmoor master development plans, the estimated useful lives of 7 properties in Austin, Texas were modified to reflect the estimated periods during which these assets will remain in service. The estimated useful lives of the properties that were approximately 35 years were decreased to approximately 12 years. The effect of this change in estimate was a $3.3 million and $6.5 million increase in depreciation expense during the three and nine months ended September 30, 2021, respectively.2021.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and is effective between March 12, 2020 and December 31, 2022. The guidance may be elected over time as reference rate reform activities occur. During the second quarter of 2022, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. In addition, the Company elected to apply the hedge accounting expedients related to changes in critical terms of derivative or hedged transactions, and bilaterally negotiated contract changes for the refinance of the Company's term loan and associated interest rate swap. The Company continues to evaluate the impact of the guidance and may apply elections as applicable as additional changes in the market occur.
3. REAL ESTATE INVESTMENTS
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the gross carrying value of the operating properties was as follows (in thousands):
| | | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| Land | Land | $ | 391,261 | | | $ | 407,514 | | Land | $ | 410,891 | | | $ | 410,144 | |
| Building and improvements | Building and improvements | 2,640,229 | | | 2,665,232 | | Building and improvements | 2,710,368 | | | 2,653,492 | |
| Tenant improvements | Tenant improvements | 405,584 | | | 401,363 | | Tenant improvements | 423,843 | | | 408,966 | |
| | Total | Total | $ | 3,437,074 | | | $ | 3,474,109 | | Total | $ | 3,545,102 | | | $ | 3,472,602 | |
Acquisitions
The following table summarizes the property acquisitions during the six months ended June 30, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property/Portfolio Name | | Acquisition Date | | Location | | Property Type | | Rentable Square Feet/Acres | | Purchase Price |
| 631 Park Avenue | | January 21, 2022 | | King of Prussia, PA | | Land | | 3.3 acres | | $ | 3,650 | |
| 3151 Market Street (a) | | April 29, 2022 | | Philadelphia, PA | | Leasehold Interest | | 0.8 acres | | $ | 27,349 | |
(a)On April 29, 2022, the Company acquired, through a 99-year ground lease, the leasehold interest in a 0.8-acre land parcel, located at 3151 Market Street, in Philadelphia, Pennsylvania. The Company prepaid $19.5 million of the ground lease, representing 500,000 square feet of buildable floor to area ratio ("FAR") to be used for the development of 3151 Market Street, and paid $7.8 million for 200,000 square feet of FAR density usable pursuant to the Schuylkill Yards Project master development agreement. The ground lease and additional density are included in construction in progress and prepaid leasehold interests in land held for development, respectively, in the consolidated balance sheets. See Note 15, ''Subsequent Events," for further information.
Dispositions
The following table summarizes the property dispositions during the ninesix months ended SeptemberJune 30, 20212022 (dollars in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property/Portfolio Name | | Disposition Date | | Location | | Property Type | | Rentable Square Feet/Acres | | Sales Price | | Gain/(Loss) on Sale (a) |
| 2100-2200 Lenox Drive | | July 6, 2021 | | Lawrenceville, NJ | | Land | | 35.2 acres | | $ | 8,900 | | | $ | 842 | |
| 1100 Lenox Drive | | September 8, 2021 | | Lawrenceville, NJ | | Land | | 5.0 acres | | $ | 2,575 | | | $ | 68 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property/Portfolio Name | | Disposition Date | | Location | | Property Type | | Rentable Square Feet/Acres | | Sales Price | | Gain/(Loss) on Sale (a) | |
| Gateway G & H | | January 20, 2022 | | Richmond, VA | | Land | | 10.0 acres | | $ | 1,600 | | | $ | 897 | | |
| 25 M Street | | April 14, 2022 | | Washington, D.C. | | Land | | 0.8 acres | | $ | 29,675 | | | $ | 3,436 | | |
| Gibbsboro Portfolio | | June 28, 2022 | | Gibbsboro, NJ | | Office/Land | | 42,809/4.0 acres | | $ | 4,100 | | | $ | 831 | | (b) |
(a)Gain/(Loss) on Sale is net of closing and other transaction related costs.
In addition, on February 2, 2021, the Company contributed its investment in a 99-year prepaid leasehold interest in a 1-acre land parcel held for development at 3025 JFK Boulevard in Philadelphia, Pennsylvania to a newly formed joint venture with an unaffiliated third party. The project is part(b)Includes $0.7 million of the Schuylkill Yards master development. The transaction valued the Company's investment in the project at $34.8 million and resulted in deconsolidation of the property and conversion of Brandywine Opportunity Fund, L.P. to a real estate venture ("3025 JFK Venture"). The Company recorded its investment at fair value and recognized a gain of $2.0 million in "Net gain on sale of undepreciated real estate"estate and $0.1 million of gain on disposition of real estate included within the consolidated statements of operations. See Note 4, "Investment in Unconsolidated Real Estate Ventures,"operations for further information.
Held for Sale
As of Septemberthe six months ended June 30, 2021, the Company determined that the sale of 2 adjacent parcels of land within the Other segment totaling 10.0 acres was probable and classified these properties as held for sale. As such, $0.6 million was classified as “Assets held for sale, net” on the consolidated balance sheets.2022.
One Uptown Venture
On December 1, 2021, the Company entered into 2 joint venture agreements with affiliates of Canyon Partners Real Estate to commence development of One Uptown, a $328.4 million mixed-use project in Austin, Texas. One Uptown has been designed to deliver 348,000 square feet of Class-A workspace and 15,000 square feet of street-level retail space (through the "office" joint venture) and 341 apartment residences and a public park (through the "multifamily" joint venture) and a six-story parking garage to be shared by the 2 joint ventures. The Company's partner in each of the 2 joint ventures has agreed, subject to customary funding conditions, including closing of the applicable construction loan, to fund approximately $61.0 million of the combined project costs in exchange for a 50% preferred equity interest in each of the 2 joint ventures, with the Company retaining a 50% common equity interest in each. As of June 30, 2022, the Company was in the process of securing a construction loan for each of the 2 joint ventures that would total approximately $206.7 million, representing 63% of the combined project costs. Under the terms of each of the joint venture agreements, the joint venture partner has no obligation to fund any portion of the applicable project costs until the closing of the applicable construction loan. This right prevented the Company from meeting the sale recognition criteria of ASC 606 until the applicable closings of the construction loans. On July 29, 2022, the One Uptown Ventures closed on 2 separate construction loans. The office joint venture closed on a $121.7 million construction loan which bears interest at SOFR plus 3.00% and the multifamily joint venture closed on an $85.0 million construction which bears interest at SOFR plus 2.45%, plus, in each case, a daily SOFR adjustment of 10 basis points. Both loans mature in July 2026. The Company has also provided a carry guarantee and limited payment guarantee up to 30% and 15% of the principal balance of the $121.7 million and $85 million construction loan, respectively. The Company subsequently recognized the formation of the joint ventures and deconsolidated the projects.
4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
As of SeptemberJune 30, 2021,2022, the Company held ownership interests in 10 unconsolidated real estate ventures for a net aggregate investment balance of $427.4$429.3 million, which includes a negative investment balance in 1 unconsolidated real estate venture of $22.2$29.6 million, reflected within "Other liabilities" on the consolidated balance sheets. As of SeptemberJune 30, 2021,2022, 5 of the real estate ventures owned properties that contained an aggregate of approximately 8.49.1 million net rentable square feet of office space; 2 real estate ventures owned 1.4 acres of land held for development; 1 real estate venture owned 1.0 acres of land in active development; 1 real estate venture owned a mixed used tower comprised of 250 apartment units and 0.2 million net rentable square feet of office/retail space; and 1 real estate venture owned a residential tower that contained 321 apartment units.
The Company accounts for its interests in the unconsolidated real estate ventures, which range from 15% to 70%, using the equity method. Certain of the unconsolidated real estate ventures are subject to specified priority allocations of distributable cash.
The Company earned management fees from the unconsolidated real estate ventures of $2.1 million and $1.3$2.1 million for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and $6.2$4.0 million and $3.2$4.1 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.
The Company earned leasing commissions from the unconsolidated real estate ventures of $0.7$0.8 million and $0.2$0.6 million for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and $2.6$1.1 million and $0.9$1.9 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.
The Company had outstanding accounts receivable balances from the unconsolidated real estate ventures of $2.0$2.8 million and $1.2$2.5 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively.
The amounts reflected in the following tables (except for the Company’s share of equity in income) are based on the financial information of the individual unconsolidated real estate ventures.
The following is a summary of the financial position of the unconsolidated real estate ventures in which the Company held interests as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands):
| | | September 30, 2021 | | December 31, 2020 | | | June 30, 2022 | | December 31, 2021 | |
| Net property | Net property | $ | 1,573,569 | | | $ | 1,520,804 | | | Net property | $ | 1,962,902 | | | $ | 1,563,263 | | |
| Other assets | Other assets | 443,610 | | | 488,805 | | | Other assets | 516,328 | | | 434,687 | | |
| Other liabilities | Other liabilities | 328,446 | | | 333,049 | | | Other liabilities | 415,816 | | | 331,947 | | |
| Debt, net | Debt, net | 954,213 | | | 956,688 | | | Debt, net | 1,218,561 | | | 956,668 | | |
| Equity (a) | Equity (a) | 734,520 | | | 719,872 | | | Equity (a) | 844,853 | | | 709,335 | | |
(a)This amount does not include the effect of the basis difference between the Company's historical cost basis and the basis recorded at the real estate venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials occur from the impairment of investments, purchases of third party interests in existing real estate ventures and upon the transfer of assets that were previously owned by the Company into a real estate venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the real estate venture level.
The following is a summary of results of operations of the unconsolidated real estate ventures in which the Company held interests during the three and ninesix month periods ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| Revenue | Revenue | $ | 53,991 | | | $ | 43,109 | | | $ | 160,576 | | | $ | 105,554 | | Revenue | $ | 64,957 | | | $ | 53,228 | | | $ | 118,173 | | | $ | 106,585 | |
| Operating expenses | Operating expenses | (29,650) | | | (23,870) | | | (87,266) | | | (59,838) | | Operating expenses | (31,671) | | | (28,629) | | | (60,263) | | | (57,616) | |
| Interest expense, net | Interest expense, net | (8,024) | | | (6,175) | | | (23,414) | | | (16,320) | | Interest expense, net | (11,663) | | | (8,017) | | | (19,132) | | | (15,391) | |
| Depreciation and amortization | Depreciation and amortization | (23,038) | | | (22,345) | | | (73,431) | | | (47,493) | | Depreciation and amortization | (27,927) | | | (25,500) | | | (49,210) | | | (50,393) | |
| Provision for impairment | (1,125) | | | — | | | (1,125) | | | — | | |
| | | Net loss | Net loss | $ | (7,846) | | | $ | (9,281) | | | $ | (24,660) | | | $ | (18,097) | | Net loss | $ | (6,304) | | | $ | (8,918) | | | $ | (10,432) | | | $ | (16,815) | |
| Ownership interest % | Ownership interest % | Various | | Various | | Various | | Various | Ownership interest % | Various | | Various | | Various | | Various |
| Company's share of net loss | Company's share of net loss | $ | (6,572) | | | $ | (5,812) | | | $ | (20,394) | | | $ | (9,892) | | Company's share of net loss | $ | (4,822) | | | $ | (7,281) | | | $ | (9,439) | | | $ | (13,822) | |
| | Basis adjustments and other | Basis adjustments and other | (62) | | | 24 | | | (404) | | | 10 | | Basis adjustments and other | (159) | | | 41 | | | (105) | | | (342) | |
| Equity in loss of unconsolidated real estate ventures | Equity in loss of unconsolidated real estate ventures | $ | (6,634) | | | $ | (5,788) | | | $ | (20,798) | | | $ | (9,882) | | Equity in loss of unconsolidated real estate ventures | $ | (4,981) | | | $ | (7,240) | | | $ | (9,544) | | | $ | (14,164) | |
Brandywine - AI
Cira Square Venture
DuringOn March 17, 2022, the three months ended September 30, 2021, Brandywine - AI Venture,Company formed a joint venture, Cira Square REIT, LLC (“Cira Square Venture”), for the purpose of acquiring Cira Square, an office property located at 2970 Market Street in which thePhiladelphia, Pennsylvania containing 862,692 rentable square feet for a gross purchase price of $383.0 million. The Company owns a 50% interest, recorded a $1.1 million held for sale impairment charge related to 3141 Fairview Park Drive. The Company’s share of the impairment charge was $0.6 million, which is reflected in “Equity in loss of Real Estate Ventures” in the consolidated statements of operations for the three months ended September 30, 2021. The impairment was measured based on an executed sale agreement with a third-party. The Company determined that its investment in the real estate venture is not impaired as the Company's share of the distributable cash is in excess of the Company's basis in the real estate venture.
3025 JFK Venture
On February 2, 2021, the Company contributed its investment in a 99-year prepaid leasehold interest in a 1-acre land parcel held for development at 3025 JFK Boulevard in Philadelphia, Pennsylvania to the 3025 JFK Venture. The Company's initial investment in this real estate venture at February 2, 2021 was $34.8 million. The real estate venture was formed to develop a 570,000 square foot mixed-use building at property under the long-term ground lease. The estimated project cost is approximately $287.3 million, and the joint venture partner has agreed, subject to customary funding conditions, to fund up to approximately $45.2 million of the project costs in exchange for a 45% preferred20% common equity interest in the ventureCira Square Venture and the Company will retain a 55% preferred equity interest. In addition to its $34.8 million credit forprovided an initial capital contribution of $28.6 million on the leasehold interest at 3025 JFKclosing date.
On the closing date, Cira Square Venture the Company has funded $20.5also obtained $257.7 million of project costs as of September 30, 2021. On July 23, 2021,third-party debt financing secured by the 3025 JFK Venture closed on a $186.7 million constructionproperty. The loan which will bearbears interest at 3.50% plus LIBOR (subject to a LIBOR floor of 0.25%over one-month term Secured Overnight Financing Rate ("SOFR") per annum and matures in July 2025. TheMarch 2024.
Based on the facts and circumstances at the formation of Cira Square Venture, the Company has determined that the 3025 JFK Ventureventure is not a variable interest entity ("VIE"). in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the VIEvoting interest model under the accounting standard for consolidation in order to determine whether to consolidate the 3025 JFKCira Square Venture. Based upon each member’s shared powermember's substantive participating rights over the activities of 3025 JFKCira Square Venture under the operating and related agreements, andit is not consolidated by the Company’s lack of control over the developmentCompany, and construction phases of the project, 3025 JFK Venture is accounted for under the equity method of accounting.
5. DEBT AND PREFERRED EQUITY INVESTMENTS
Austin Preferred Equity Investment
On December 31, 2020, the Company invested $50.0 million in exchange for a preferred equity interest in a single-purpose entity that owned 2 stabilized office buildings located in Austin, Texas. The Company accounted for this mandatorily redeemable investment as a note receivable, which was included within “Other assets” on the consolidated balance sheets. The preferred equity interest accrued a 9.0% annual return, compounded and paid monthly. The investment was required to be redeemed no later than December 31, 2023 (subject to a one-year extension option). On September 3, 2021, the $50.0 million investment was redeemed prior to maturity. As a result, the Company recognized an incremental $2.8 million of income on early redemption related to its accelerated minimum return and exit fees paid in cash on the redemption date during the three months ended September 30, 2021, which is included in "Interest and investment income" on the consolidated statements of operations.
1919 Venture Note Receivable
During 2018, each of the Company and the other equity partner in 1919 Venture, an unconsolidated real estate venture, provided a $44.4 million mortgage loan to 1919 Venture and, as a result, the Company recorded a $44.4 million related-party note receivable from 1919 Venture. The loan bears interest at a fixed 4.0% per annum interest rate with a scheduled maturity on June 25, 2023. 1919 Venture used the proceeds from the loans to repay its then outstanding $88.8 million construction loan. As of September 30, 2021, the debt investment was performing in accordance with its terms and remains on accrual status.
6. LEASES
Lessor Accounting
The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| Lease Revenue | Lease Revenue | | 2021 | | 2020 | | 2021 | | 2020 | Lease Revenue | | 2022 | | 2021 | | 2022 | | 2021 |
| Fixed contractual payments | Fixed contractual payments | | $ | 87,498 | | | $ | 95,751 | | | $ | 259,995 | | | $ | 302,146 | | Fixed contractual payments | | $ | 88,672 | | | $ | 86,117 | | | $ | 177,435 | | | $ | 172,497 | |
| Variable lease payments | Variable lease payments | | 21,265 | | | 22,716 | | | 67,473 | | | 80,824 | | Variable lease payments | | 25,234 | | | 22,060 | | | 49,565 | | | 46,208 | |
| Total | Total | | $ | 108,763 | | | $ | 118,467 | | | $ | 327,468 | | | $ | 382,970 | | Total | | $ | 113,906 | | | $ | 108,177 | | | $ | 227,000 | | | $ | 218,705 | |
7.
6. INTANGIBLE ASSETS AND LIABILITIES
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company’s intangible assets/liabilities were comprised of the following (in thousands):
| | | September 30, 2021 | | June 30, 2022 |
| | Total Cost | | Accumulated Amortization | | Intangible Assets, net | | Total Cost | | Accumulated Amortization | | Intangible Assets, net |
| Intangible assets, net: | Intangible assets, net: | | | | | | Intangible assets, net: | | | | | |
| In-place lease value | In-place lease value | $ | 80,630 | | | $ | (46,386) | | | $ | 34,244 | | In-place lease value | $ | 59,582 | | | $ | (36,770) | | | $ | 22,812 | |
| Tenant relationship value | Tenant relationship value | 167 | | | (95) | | | 72 | | Tenant relationship value | 167 | | | (100) | | | 67 | |
| Above market leases acquired | Above market leases acquired | 486 | | | (288) | | | 198 | | Above market leases acquired | 331 | | | (195) | | | 136 | |
| | Total intangible assets, net | Total intangible assets, net | $ | 81,283 | | | $ | (46,769) | | | $ | 34,514 | | Total intangible assets, net | $ | 60,080 | | | $ | (37,065) | | | $ | 23,015 | |
| | | Total Cost | | Accumulated Amortization | | Intangible Liabilities, net | | Total Cost | | Accumulated Amortization | | Intangible Liabilities, net |
| Intangible liabilities, net: | Intangible liabilities, net: | | | | | | Intangible liabilities, net: | | | | | |
| Below market leases acquired | Below market leases acquired | $ | 28,881 | | | $ | (14,430) | | | $ | 14,451 | | Below market leases acquired | $ | 22,268 | | | $ | (10,991) | | | $ | 11,277 | |
|
| | | December 31, 2020 | | December 31, 2021 |
| | Total Cost | | Accumulated Amortization | | Intangible Assets, net | | Total Cost | | Accumulated Amortization | | Intangible Assets, net |
| Intangible assets, net: | Intangible assets, net: | | | | | | Intangible assets, net: | | | | | |
| In-place lease value | In-place lease value | $ | 91,552 | | | $ | (43,400) | | | $ | 48,152 | | In-place lease value | $ | 72,376 | | | $ | (44,066) | | | $ | 28,310 | |
| Tenant relationship value | Tenant relationship value | 2,091 | | | (1,938) | | | 153 | | Tenant relationship value | 167 | | | (97) | | | 70 | |
| Above market leases acquired | Above market leases acquired | 530 | | | (265) | | | 265 | | Above market leases acquired | 486 | | | (310) | | | 176 | |
| | Total intangible assets, net | Total intangible assets, net | $ | 94,173 | | | $ | (45,603) | | | $ | 48,570 | | Total intangible assets, net | $ | 73,029 | | | $ | (44,473) | | | $ | 28,556 | |
| | | Total Cost | | Accumulated Amortization | | Intangible Liabilities, net | | Total Cost | | Accumulated Amortization | | Intangible Liabilities, net |
| Intangible liabilities, net: | Intangible liabilities, net: | | | | | | Intangible liabilities, net: | | | | | |
| Below market leases acquired | Below market leases acquired | $ | 31,263 | | | $ | (12,815) | | | $ | 18,448 | | Below market leases acquired | $ | 27,025 | | | $ | (14,044) | | | $ | 12,981 | |
As of SeptemberJune 30, 2021,2022, the Company’s annual amortization for its intangible assets/liabilities, assuming no prospective early lease terminations, was as follows (dollars in thousands):
| | | | | | | | | | | |
| Assets | | Liabilities |
| 2022 (six months remaining) | $ | 4,100 | | | $ | 883 | |
| 2023 | 6,724 | | | 1,540 | |
| 2024 | 4,433 | | | 1,321 | |
| 2025 | 3,255 | | | 1,044 | |
| 2026 | 1,195 | | | 754 | |
| Thereafter | 3,308 | | | 5,735 | |
| | | |
| | | |
| Total | $ | 23,015 | | | $ | 11,277 | |
| | | | | | | | | | | |
| Assets | | Liabilities |
| 2021 (three months remaining) | $ | 3,711 | | | $ | 1,129 | |
| 2022 | 9,807 | | | 2,645 | |
| 2023 | 7,218 | | | 1,609 | |
| 2024 | 4,993 | | | 1,392 | |
| 2025 | 3,805 | | | 1,115 | |
| Thereafter | 4,980 | | | 6,561 | |
| | | |
| | | |
| Total | $ | 34,514 | | | $ | 14,451 | |
8.7. DEBT OBLIGATIONS
The following table sets forth information regarding the Company’s consolidated debt obligations outstanding as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands):
| | | September 30, 2021 | | December 31, 2020 | | Effective
Interest Rate | | Maturity
Date | | | June 30, 2022 | | December 31, 2021 | | Effective
Interest Rate | | Maturity
Date | |
| | UNSECURED DEBT | UNSECURED DEBT | | | | | | | | | UNSECURED DEBT | | | | | | | | |
| $600 million Unsecured Credit Facility | $600 million Unsecured Credit Facility | $ | — | | | $ | — | | | LIBOR + 1.10% | | July 2022 | (a) | $600 million Unsecured Credit Facility | $ | 214,000 | | | $ | 23,000 | | | SOFR + 1.15% | | June 2026 | (a) |
Seven-Year Term Loan - Swapped to fixed | 250,000 | | | 250,000 | | | 2.87% | | October 2022 | | |
| Term Loan - Swapped to fixed | | Term Loan - Swapped to fixed | 250,000 | | | 250,000 | | | 2.87% | | June 2027 | (b) |
| $350.0M 3.95% Guaranteed Notes due 2023 | $350.0M 3.95% Guaranteed Notes due 2023 | 350,000 | | | 350,000 | | | 3.87% | | February 2023 | | $350.0M 3.95% Guaranteed Notes due 2023 | 350,000 | | | 350,000 | | | 3.87% | | February 2023 | |
| $350.0M 4.10% Guaranteed Notes due 2024 | $350.0M 4.10% Guaranteed Notes due 2024 | 350,000 | | | 350,000 | | | 3.78% | | October 2024 | | $350.0M 4.10% Guaranteed Notes due 2024 | 350,000 | | | 350,000 | | | 3.78% | | October 2024 | |
| $450.0M 3.95% Guaranteed Notes due 2027 | $450.0M 3.95% Guaranteed Notes due 2027 | 450,000 | | | 450,000 | | | 4.03% | | November 2027 | | $450.0M 3.95% Guaranteed Notes due 2027 | 450,000 | | | 450,000 | | | 4.03% | | November 2027 | |
| $350.0M 4.55% Guaranteed Notes due 2029 | $350.0M 4.55% Guaranteed Notes due 2029 | 350,000 | | | 350,000 | | | 4.30% | | October 2029 | | $350.0M 4.55% Guaranteed Notes due 2029 | 350,000 | | | 350,000 | | | 4.30% | | October 2029 | |
| Indenture IA (Preferred Trust I) | Indenture IA (Preferred Trust I) | 27,062 | | | 27,062 | | | LIBOR + 1.25% | | March 2035 | | Indenture IA (Preferred Trust I) | 27,062 | | | 27,062 | | | LIBOR + 1.25% | | March 2035 | |
| Indenture IB (Preferred Trust I) | Indenture IB (Preferred Trust I) | 25,774 | | | 25,774 | | | LIBOR + 1.25% | | April 2035 | | Indenture IB (Preferred Trust I) | 25,774 | | | 25,774 | | | LIBOR + 1.25% | | April 2035 | |
| Indenture II (Preferred Trust II) | Indenture II (Preferred Trust II) | 25,774 | | | 25,774 | | | LIBOR + 1.25% | | July 2035 | | Indenture II (Preferred Trust II) | 25,774 | | | 25,774 | | | LIBOR + 1.25% | | July 2035 | |
| Principal balance outstanding | Principal balance outstanding | 1,828,610 | | | 1,828,610 | | | Principal balance outstanding | 2,042,610 | | | 1,851,610 | | |
| Plus: original issue premium (discount), net | Plus: original issue premium (discount), net | 8,675 | | | 10,137 | | | Plus: original issue premium (discount), net | 7,212 | | | 8,187 | | |
| Less: deferred financing costs | Less: deferred financing costs | (6,696) | | | (8,152) | | | Less: deferred financing costs | (7,063) | | | (6,211) | | |
| Total unsecured indebtedness | Total unsecured indebtedness | $ | 1,830,589 | | | $ | 1,830,595 | | | Total unsecured indebtedness | $ | 2,042,759 | | | $ | 1,853,586 | | |
|
(a)Spread includes a 10 basis point daily SOFR adjustment.
(b)On June 30, 2022, the Company executed the 2022 Credit Agreement (as defined below), that provides for, among other things, the Term Loan (as defined below), which replaced the Company's $250.0 million term loan that had been scheduled to mature on October 22, 2022. As of June 30, 2022, based on the Operating Partnership's unsecured senior debt rating, the applicable margin for the Term Loan was 120.0 basis points, plus a daily SOFR adjustment of 10 basis points. Through a series of interest rate swaps, the $250.0 million principal amount of the Term Loan has a fixed interest rate of 2.87% until October 8, 2022.
On June 30, 2022, the Company executed the Second Amended and Restated Credit Agreement (as amended and restated, the “2022 Credit Agreement”). The 2022 Credit Agreement among other things: (i) maintains the total commitment under the line credit of $600.0 million (the "Revolving Credit Facility") and provides an unsecured term loan in the initial amount of $250.0 million (the "Term Loan") with a scheduled maturity date of June 30, 2027; (ii) extended the maturity date of the Revolving Credit Facility from July 15, 2022 to June 30, 2026, with 2 six-month extensions at the Company’s election subject to specified conditions and subject to payment of an extension fee; (iii) reduced the interest rate margins applicable to SOFR revolving loans; and (iv) provides for an additional interest rate option based on a floating SOFR rate. In connection with the amendments, the Company capitalized $4.7 million and $2.0 million in financing costs, related to the Revolving Credit Facility and the Term Loan, respectively. The financing costs will be amortized through the maturity dates for each of the Revolving Credit Facility and the Term Loan.
Under the 2022 Credit Agreement, the Company may, subject to specified terms and conditions (including receipt of commitments from one or more lenders, whether or not currently parties to the 2022 Credit Agreement), elect to increase the amount of the Revolving Credit Facility and/or Term Loan or request one or more new pari passu tranches of unsecured term loans (each, an "Incremental Facility"), provided that the aggregate amount of all such increases is limited to $500.0 million. Up to $50.0 million of borrowing availability under the Restated Credit Agreement is available for the issuance of letter of credits.
Borrowings under the Revolving Credit Facility bear interest at a rate equal to either (i) the SOFR rate plus a margin of 72.5 to 140 basis points, or (ii) a base rate plus a margin of 0 to 40 basis points: and the Term Loan and borrowings under an Incremental Facility bear interest at a rate equal to either (i) the SOFR rate plus a margin of 80 to 160 basis points, or (ii) a base rate plus a margin of 0 to 60 basis points. The applicable margin will be determined based upon the unsecured senior debt rating of the Operating Partnership or the absence of such a rating. The Company hasalso pays a quarterly facility fee on the ability to extendtotal commitments under the termRevolving Credit Facility. As of June 30, 2022, based on the Operating Partnership's unsecured senior debt rating, the applicable margin for SOFR revolving loans under the Revolving Credit Facility was 105 basis points (excluding the applicable facility fee rate of 25 basis points) and was 120.0 basis points for the Term Loan, plus, in each case, a daily SOFR adjustment of 10 basis points.
The terms of the Unsecured2022 Credit Facility until July 2023 through two successive six-month extension options.
TheAgreement require that the Company utilizes borrowings under its unsecured revolving credit facility (the “Unsecured Credit Facility”) for general business purposes, includingmaintain customary financial and other covenants, including: (i) a fixed charge coverage ratio greater than or equal to fund costs of acquisitions, developments and redevelopments of properties, fund share repurchases and repay other debt. The Unsecured Credit Facility provides for borrowings of up1.5 to $600.0 million and the per annum variable interest rate on borrowings is LIBOR plus 1.10%. The interest rate and facility fee are1.00; (ii) a leverage ratio less than or equal to 0.60 to 1.00, subject to adjustment uponspecified exceptions; (iii) a change in the Company’sratio of unsecured indebtedness to unencumbered asset value less than or equal to 0.60 to 1.00, subject to specified exceptions; (iv) a ratio of secured indebtedness to total asset value less than or equal to 0.40 to
1.00; and (v) a ratio of unencumbered cash flow to interest expense on unsecured debt ratings. greater than 1.75 to 1.00. In addition, the 2022 Credit Agreement restricts payments of dividends and distributions on shares in excess of 95% of the Company's funds from operations (FFO) except to the extent necessary to enable the Company to continue to qualify as a REIT for federal income tax purposes.
During the ninesix months ended SeptemberJune 30, 2021,2022, the weighted-average interest rate on Unsecured Credit Facilityunsecured credit facility borrowings was 1.21%1.72% resulting in $0.3$1.2 million of interest expense. As of June 30, 2022, the Company had $381.7 million of available borrowings under its unsecured credit facility, net of $4.3 million in letters of credit outstanding.
The Parent Company unconditionally guarantees the unsecured debt obligations of the Operating Partnership (or is a co-borrower with the Operating Partnership) but does not by itself incur unsecured indebtedness. The Parent Company has no material assets other than its investment in the Operating Partnership.
The Company was in compliance with all financial covenants as of SeptemberJune 30, 2021.2022. Certain of the covenants restrict the Company’s ability to obtain alternative sources of capital.
As of SeptemberJune 30, 2021,2022, the aggregate scheduled principal payments on the Company's debt obligations were as follows (in thousands): | | | | | |
| 2021 (three months remaining) | $ | — | |
| 2022 | 250,000 | |
| 2023 | 350,000 | |
| 2024 | 350,000 | |
| 2025 | — | |
| Thereafter | 878,610 | |
| Total principal payments | 1,828,610 | |
| Net unamortized premiums/(discounts) | 8,675 | |
| Net deferred financing costs | (6,696) | |
| Outstanding indebtedness | $ | 1,830,589 | |
| |
| |
| | | | | |
| 2022 (six months remaining) | $ | — | |
| 2023 | 350,000 | |
| 2024 | 350,000 | |
| 2025 | — | |
| 2026 | 214,000 | |
| Thereafter | 1,128,610 | |
| Total principal payments | 2,042,610 | |
| Net unamortized premiums/(discounts) | 7,212 | |
| Net deferred financing costs | (7,063) | |
| Outstanding indebtedness | $ | 2,042,759 | |
| |
| |
9.8. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
•Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access;
•Level 2 inputs are inputs, other than quoted prices included in Level 1, which are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals; and
•Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity or information.
The Company determined the fair values disclosed below using available market information and discounted cash flow analyses as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. The discount rate used in calculating fair value is the sum of the current risk free rate and the risk premium on the date of measurement of the instruments or obligations. Considerable judgment is necessary to interpret market data and to develop the related estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize upon disposition. The use of different estimates and valuation methodologies may have a material effect on the fair value amounts shown. The Company believes that the carrying amounts reflected in the consolidated balance sheets at SeptemberJune 30, 20212022 and December 31, 20202021 approximate the fair values for cash and cash equivalents, accounts receivable, other assets and liabilities, accounts payable and accrued expenses because they are short-term in duration. The following are financial instruments for which the Company’s estimates of fair value differ from the carrying amounts (in thousands):
| | | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| | Carrying Amount (a) | | Fair Value | | Carrying Amount (a) | | Fair Value | | Carrying Amount (a) | | Fair Value | | Carrying Amount (a) | | Fair Value |
| Unsecured notes payable | Unsecured notes payable | $ | 1,502,502 | | | $ | 1,623,840 | | | $ | 1,502,901 | | | $ | 1,607,310 | | Unsecured notes payable | $ | 1,502,102 | | | $ | 1,461,960 | | | $ | 1,502,368 | | | $ | 1,588,780 | |
| Variable rate debt | Variable rate debt | $ | 328,087 | | | $ | 309,523 | | | $ | 327,694 | | | $ | 308,838 | | Variable rate debt | $ | 540,657 | | | $ | 542,610 | | | $ | 351,218 | | | $ | 344,754 | |
| Notes receivable (b) | Notes receivable (b) | $ | 44,430 | | | $ | 46,266 | | | $ | 94,430 | | | $ | 97,372 | | Notes receivable (b) | $ | 44,430 | | | $ | 44,058 | | | $ | 44,430 | | | $ | 45,230 | |
(a)Net of deferred financing costs of $6.2$5.1 million and $7.2$5.8 million for unsecured notes payable and $0.5$2.0 million and $0.9$0.4 million for variable rate debt as of SeptemberJune 30, 20212022 and December 31, 2020.
(b)For further detail, refer to Note 5, ''Debt and Preferred Equity Investments."2021.
The Company used quoted market prices as of SeptemberJune 30, 20212022 and December 31, 20202021 to value the unsecured notes payable and, as such, categorized them as Level 2.
The inputs utilized to determine the fair value of the Company’s variable rate debt are categorized as Level 3. The fair value of the variable rate debt was determined using a discounted cash flow model that considered borrowing rates available to the Company for loans with similar terms and characteristics.
The inputs utilized to determine fair value of the Company's notes receivable are unobservable and, as such, were categorized as Level 3. Fair value was determined using a discounted cash flow model that considered the contractual interest and principal payments discounted at a blended interest rate of the notes receivable.
For the Company’s levelLevel 3 financial instruments for which fair value is disclosed, an increase in the discount rate used to determine fair value would result in a decrease to the fair value. Conversely, a decrease in the discount rate would result in an increase to the fair value.
Disclosure about the fair value of financial instruments is based upon pertinent information available to management as of SeptemberJune 30, 20212022 and December 31, 2020.2021. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts were not comprehensively revalued for purposes of these financial statements since SeptemberJune 30, 2021.2022. Current estimates of fair value may differ from the amounts presented herein.
10.9. DERIVATIVE FINANCIAL INSTRUMENTS
The following table summarizes the terms and fair values of the Company’s derivative financial instruments as of SeptemberJune 30, 20212022 and December 31, 2020.2021. The notional amounts provide an indication of the extent of the Company’s involvement in these instruments at that time, but do not represent exposure to credit, interest rate or market risks (amounts presented in thousands).
| | Hedge Product | Hedge Product | | Hedge Type | | Designation | | Notional Amount | | Strike | | Trade Date | | Maturity Date | | Fair value | Hedge Product | | Hedge Type | | Designation | | Notional Amount | | Strike | | Trade Date | | Maturity Date | | Fair value |
| | | | | | | | 6/30/2022 | | 12/31/2021 | | | | | | | | 6/30/2022 | | 12/31/2021 |
| Assets | | Assets | | | | | | | | |
| Swap | | Swap | | Interest Rate | | Cash Flow | (a) | $ | 250,000 | | | $ | 250,000 | | | 2.868 | % | | October 8, 2015 | | October 8, 2022 | | $ | 415 | | | $ | (2,461) | |
| | | | | | | 9/30/2021 | | 12/31/2020 | | | | | | | | 9/30/2021 | | 12/31/2020 | |
| | | | $ | 250,000 | | | $ | 250,000 | | |
| Liabilities | | | | | | | | | |
| Swap | | Interest Rate | | Cash Flow | (a) | $ | 250,000 | | | $ | 250,000 | | | 2.868 | % | | October 8, 2015 | | October 8, 2022 | | $ | (3,872) | | | $ | (6,627) | | |
| Swap | | Interest Rate | | Cash Flow | (b) | — | | | 25,774 | | | 3.300 | % | | December 22, 2011 | | January 30, 2021 | | — | | | (120) | | |
| $ | 250,000 | | | $ | 275,774 | | | |
(a)Hedging unsecured variable rate debt.
(b)On January 30, 2021, the interest rate hedge contract for this swap expired.
The Company measures its derivative instruments at fair value and records them in “Other assets” and (“Other liabilities”) on the Company’s consolidated balance sheets.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that the inputs utilized to determine the fair value of derivative instruments are classified in Level 2 of the fair value hierarchy.
Disclosure about the fair value of derivative instruments is based upon pertinent information available to management as of September 30, 2021 and December 31, 2020. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since September 30, 2021. Current estimates of fair value may differ from the amounts presented herein.
11.10. LIMITED PARTNERS' NONCONTROLLING INTERESTS IN THE PARENT COMPANY
Noncontrolling interests in the Parent Company’s financial statements relate to redeemable common limited partnership interests in the Operating Partnership held by parties other than the Parent Company and properties which are consolidated but not wholly owned by the Operating Partnership.
Operating Partnership
During the six months ended June 30, 2022, 307,516 Class A units of limited partnership interest held by unaffiliated third parties were redeemed for a total cash payment of $4.0 million.
The aggregate book value of the noncontrolling interests associated with the redeemable common limited partnership interests in the accompanying consolidated balance sheet of the Parent Company was $8.3$5.0 million and $10.5$8.2 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. Under the applicable accounting guidance, the redemption value of limited partnership units are carried at fair value. The Parent Company believes that the aggregate settlement value of these interests (based on the
number of units outstanding and the average closing price of the common shares during the last five business days of the quarter) was approximately $11.2$5.1 million and $11.7$11.1 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively.
12.11. BENEFICIARIES' EQUITY OF THE PARENT COMPANY
Earnings per Share (EPS)
The following table details the number of shares and net income used to calculate basic and diluted earnings per share (in thousands, except share and per share amounts; results may not add due to rounding):
| | | Three Months Ended September 30, | | Three Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted |
| Numerator | Numerator | | | | | | | | Numerator | | | | | | | |
| Net income | Net income | $ | 974 | | | $ | 974 | | | $ | 276,133 | | | $ | 276,133 | | Net income | $ | 4,651 | | | $ | 4,651 | | | $ | (175) | | | $ | (175) | |
| Net income attributable to noncontrolling interests | (7) | | | (7) | | | (1,612) | | | (1,612) | | |
| Net (income) loss attributable to noncontrolling interests | | Net (income) loss attributable to noncontrolling interests | (14) | | | (14) | | | 8 | | | 8 | |
| Nonforfeitable dividends allocated to unvested restricted shareholders | Nonforfeitable dividends allocated to unvested restricted shareholders | (91) | | | (91) | | | (93) | | | (93) | | Nonforfeitable dividends allocated to unvested restricted shareholders | (98) | | | (98) | | | (94) | | | (94) | |
| | Net income attributable to common shareholders | $ | 876 | | | $ | 876 | | | $ | 274,428 | | | $ | 274,428 | | |
| Net income (loss) attributable to common shareholders | | Net income (loss) attributable to common shareholders | $ | 4,539 | | | $ | 4,539 | | | $ | (261) | | | $ | (261) | |
| Denominator | Denominator | | | | | | | | Denominator | | | | | | | |
| Weighted-average shares outstanding | Weighted-average shares outstanding | 170,907,018 | | | 170,907,018 | | | 170,573,028 | | | 170,573,028 | | Weighted-average shares outstanding | 171,527,031 | | | 171,527,031 | | | 170,848,894 | | | 170,848,894 | |
| Contingent securities/Share based compensation | Contingent securities/Share based compensation | — | | | 1,330,176 | | | — | | | 453,464 | | Contingent securities/Share based compensation | — | | | 733,398 | | | — | | | — | |
| Weighted-average shares outstanding | Weighted-average shares outstanding | 170,907,018 | | | 172,237,194 | | | 170,573,028 | | | 171,026,492 | | Weighted-average shares outstanding | 171,527,031 | | | 172,260,429 | | | 170,848,894 | | | 170,848,894 | |
| Earnings per Common Share: | Earnings per Common Share: | | | | | | | | Earnings per Common Share: | | | | | | | |
| Net income attributable to common shareholders | Net income attributable to common shareholders | $ | 0.01 | | | $ | 0.01 | | | $ | 1.61 | | | $ | 1.60 | | Net income attributable to common shareholders | $ | 0.03 | | | $ | 0.03 | | | $ | — | | | $ | — | |
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted |
| Numerator | Numerator | | | | | | | | Numerator | | | | | | | |
| Net income | Net income | $ | 7,763 | | | $ | 7,763 | | | $ | 288,240 | | | $ | 288,240 | | Net income | $ | 10,752 | | | $ | 10,752 | | | $ | 6,789 | | | $ | 6,789 | |
| Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | (42) | | | (42) | | | (1,701) | | | (1,701) | | Net income attributable to noncontrolling interests | (22) | | | (22) | | | (35) | | | (35) | |
| Nonforfeitable dividends allocated to unvested restricted shareholders | Nonforfeitable dividends allocated to unvested restricted shareholders | (331) | | | (331) | | | (317) | | | (317) | | Nonforfeitable dividends allocated to unvested restricted shareholders | (246) | | | (246) | | | (240) | | | (240) | |
| | Net income attributable to common shareholders | Net income attributable to common shareholders | $ | 7,390 | | | $ | 7,390 | | | $ | 286,222 | | | $ | 286,222 | | Net income attributable to common shareholders | $ | 10,484 | | | $ | 10,484 | | | $ | 6,514 | | | $ | 6,514 | |
| Denominator | Denominator | | | | | | | | Denominator | | | | | | | |
| Weighted-average shares outstanding | Weighted-average shares outstanding | 170,794,585 | | | 170,794,585 | | | 172,380,410 | | | 172,380,410 | | Weighted-average shares outstanding | 171,411,631 | | | 171,411,631 | | | 170,737,437 | | | 170,737,437 | |
| Contingent securities/Share based compensation | Contingent securities/Share based compensation | — | | | 1,283,365 | | | — | | | 355,026 | | Contingent securities/Share based compensation | — | | | 1,163,777 | | | — | | | 1,258,682 | |
| Weighted-average shares outstanding | Weighted-average shares outstanding | 170,794,585 | | | 172,077,950 | | | 172,380,410 | | | 172,735,436 | | Weighted-average shares outstanding | 171,411,631 | | | 172,575,408 | | | 170,737,437 | | | 171,996,119 | |
| Earnings per Common Share: | Earnings per Common Share: | | | | | | | | Earnings per Common Share: | | | | | | | |
| Net income attributable to common shareholders | Net income attributable to common shareholders | $ | 0.04 | | | $ | 0.04 | | | $ | 1.66 | | | $ | 1.66 | | Net income attributable to common shareholders | $ | 0.06 | | | $ | 0.06 | | | $ | 0.04 | | | $ | 0.04 | |
Redeemable common limited partnership units totaling 516,467 at June 30, 2022 and 823,983 at SeptemberJune 30, 2021, and 981,634 at September 30, 2020, were excluded from the diluted earnings per share computations because they are not dilutive.
Unvested restricted shares are considered participating securities which require the use of the two-class method for the computation of basic and diluted earnings per share. For the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, earnings representing nonforfeitable dividends as noted in the table above were allocated to the unvested restricted shares issued to the Company’s executives and other employees under the Company's shareholder-approved long-term incentive plan.
Common Shares
On September 14, 2021,May 18, 2022, the Parent Company declared a distribution of $0.19 per common share, totaling $32.8 million, which was paid on OctoberJuly 20, 20212022 to shareholders of record as of OctoberJuly 6, 2021.2022.
The Parent Company maintains a common share repurchase program under which the Board of Trustees has authorized the Parent Company to repurchase common shares. On January 3, 2019, the Board of Trustees authorized the repurchase of up to $150.0 million common shares from and after January 3, 2019. During the ninesix months ended SeptemberJune 30, 2022 and June 30, 2021, the Company did not repurchase any common shares. During the nine months ended September 30, 2020, the Company repurchased and retired 6,248,483 common shares at an average price of $9.60 per share, totaling $60.0 million.
During the nine months ended September 30, 2021, the Company issued 226,695 common shares of beneficial interest in a private placement to an unaffiliated third party in exchange for a third party's 1% residual ownership interest in One and Two Commerce Square, an unconsolidated joint venture.
13.12. PARTNERS' EQUITY OF THE PARENT COMPANY
Earnings per Common Partnership Unit
The following table details the number of units and net income used to calculate basic and diluted earnings per common partnership unit (in thousands, except unit and per unit amounts; results may not add due to rounding):
| | | Three Months Ended September 30, | | Three Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted |
| Numerator | Numerator | | | | | | | | Numerator | | | | | | | |
| Net income | $ | 974 | | | $ | 974 | | | $ | 276,133 | | | $ | 276,133 | | |
| Net income (loss) | | Net income (loss) | $ | 4,651 | | | $ | 4,651 | | | $ | (175) | | | $ | (175) | |
| Net loss attributable to noncontrolling interests | Net loss attributable to noncontrolling interests | 2 | | | 2 | | | 2 | | | 2 | | Net loss attributable to noncontrolling interests | 2 | | | 2 | | | 1 | | | 1 | |
| Nonforfeitable dividends allocated to unvested restricted unitholders | Nonforfeitable dividends allocated to unvested restricted unitholders | (91) | | | (91) | | | (93) | | | (93) | | Nonforfeitable dividends allocated to unvested restricted unitholders | (98) | | | (98) | | | (94) | | | (94) | |
| | Net income attributable to common unitholders | $ | 885 | | | $ | 885 | | | $ | 276,042 | | | $ | 276,042 | | |
| Net income (loss) attributable to common unitholders | | Net income (loss) attributable to common unitholders | $ | 4,555 | | | $ | 4,555 | | | $ | (268) | | | $ | (268) | |
| Denominator | Denominator | | | | | | | | Denominator | | | | | | | |
| Weighted-average units outstanding | Weighted-average units outstanding | 171,731,001 | | | 171,731,001 | | | 171,554,662 | | | 171,554,662 | | Weighted-average units outstanding | 172,043,498 | | | 172,043,498 | | | 171,792,415 | | | 171,792,415 | |
| Contingent securities/Share based compensation | Contingent securities/Share based compensation | — | | | 1,330,176 | | | — | | | 453,464 | | Contingent securities/Share based compensation | — | | | 733,398 | | | — | | | — | |
| Total weighted-average units outstanding | Total weighted-average units outstanding | 171,731,001 | | | 173,061,177 | | | 171,554,662 | | | 172,008,126 | | Total weighted-average units outstanding | 172,043,498 | | | 172,776,896 | | | 171,792,415 | | | 171,792,415 | |
| Earnings per Common Partnership Unit: | Earnings per Common Partnership Unit: | | | | | | | | Earnings per Common Partnership Unit: | | | | | | | |
| Net income attributable to common unitholders | Net income attributable to common unitholders | $ | 0.01 | | | $ | 0.01 | | | $ | 1.61 | | | $ | 1.60 | | Net income attributable to common unitholders | $ | 0.03 | | | $ | 0.03 | | | $ | — | | | $ | — | |
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted |
| Numerator | Numerator | | | | | | | | Numerator | | | | | | | |
| Net income | Net income | $ | 7,763 | | | $ | 7,763 | | | $ | 288,240 | | | $ | 288,240 | | Net income | $ | 10,752 | | | $ | 10,752 | | | $ | 6,789 | | | $ | 6,789 | |
| Net (income) loss attributable to noncontrolling interests | 4 | | | 4 | | | (20) | | | (20) | | |
| Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | 4 | | | 4 | | | 2 | | | 2 | |
| Nonforfeitable dividends allocated to unvested restricted unitholders | Nonforfeitable dividends allocated to unvested restricted unitholders | (331) | | | (331) | | | (317) | | | (317) | | Nonforfeitable dividends allocated to unvested restricted unitholders | (246) | | | (246) | | | (240) | | | (240) | |
| | Net income attributable to common unitholders | Net income attributable to common unitholders | $ | 7,436 | | | $ | 7,436 | | | $ | 287,903 | | | $ | 287,903 | | Net income attributable to common unitholders | $ | 10,510 | | | $ | 10,510 | | | $ | 6,551 | | | $ | 6,551 | |
| Denominator | Denominator | | | | | | | | Denominator | | | | | | | |
| Weighted-average units outstanding | Weighted-average units outstanding | 171,710,387 | | | 171,710,387 | | | 173,362,044 | | | 173,362,044 | | Weighted-average units outstanding | 171,985,863 | | | 171,985,863 | | | 171,699,909 | | | 171,699,909 | |
| Contingent securities/Share based compensation | Contingent securities/Share based compensation | — | | | 1,283,365 | | | — | | | 355,026 | | Contingent securities/Share based compensation | — | | | 1,163,777 | | | — | | | 1,258,682 | |
| Total weighted-average units outstanding | Total weighted-average units outstanding | 171,710,387 | | | 172,993,752 | | | 173,362,044 | | | 173,717,070 | | Total weighted-average units outstanding | 171,985,863 | | | 173,149,640 | | | 171,699,909 | | | 172,958,591 | |
| Earnings per Common Partnership Unit: | Earnings per Common Partnership Unit: | | | | | | | | Earnings per Common Partnership Unit: | | | | | | | |
| Net income attributable to common unitholders | Net income attributable to common unitholders | $ | 0.04 | | | $ | 0.04 | | | $ | 1.66 | | | $ | 1.66 | | Net income attributable to common unitholders | $ | 0.06 | | | $ | 0.06 | | | $ | 0.04 | | | $ | 0.04 | |
Unvested restricted units are considered participating securities which require the use of the two-class method for the computation of basic and diluted earnings per share.unit. For the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, earnings representing nonforfeitable dividends were allocated to the unvested restricted units issued to the Parent Company's executives and other employees under the Parent Company's shareholder-approved long-term incentive plan.
Common Partnership Units
On September 14, 2021,May 18, 2022, the Operating Partnership declared a distribution of $0.19 per common partnership unit, totaling $32.8 million, which was paid on OctoberJuly 20, 20212022 to unitholders of record as of OctoberJuly 6, 2021.2022.
In connection with the Parent Company’s common share repurchase program, 1 common unit of the Operating Partnership is retired for each common share repurchased. During the ninesix months ended SeptemberJune 30, 2022 and June 30, 2021, the Company did not repurchase any units. During the nine months ended September 30, 2020, the Company retired 6,248,483 common partnership units at an average price of $9.60 per unit, totaling $60.0 million, in connection with an equal number of share repurchases.
During the nine months ended September 30, 2021, the Operating Partnership issued 226,695 common partnership units to the Parent Company in connection with the Company's acquisition of a third party's 1% residual interest in One and Two Commerce Square, as described in Note 12, ''Beneficiaries' Equity of the Parent Company."
14.13. SEGMENT INFORMATION
As of SeptemberJune 30, 2021,2022, the Company owns and manages properties within 5 segments: (1) Philadelphia Central Business District ("Philadelphia CBD"), (2) Pennsylvania Suburbs, (3) Austin, Texas (4) Metropolitan Washington, D.C. and (5) Other.
The Philadelphia CBD segment includes properties located in the City of Philadelphia, Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Metropolitan Washington, D.C. segment includes properties in the District of Columbia, Northern Virginia and Southern Maryland. The Other segment includes properties located in Camden County, New Jersey and New Castle County, Delaware. In addition to the 5 segments, the corporate
group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions. Land held for development and construction in progress is transferred to operating properties by region upon completion of the associated construction or project.
The following tables provide selected asset information and results of operations of the Company's reportable segments (in thousands):
| | Real estate investments, at cost: | Real estate investments, at cost: | | Real estate investments, at cost: | |
| | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| Philadelphia CBD | Philadelphia CBD | $ | 1,430,724 | | | $ | 1,433,927 | | Philadelphia CBD | $ | 1,506,350 | | | $ | 1,460,510 | |
| Pennsylvania Suburbs | Pennsylvania Suburbs | 875,586 | | | 871,530 | | Pennsylvania Suburbs | 870,510 | | | 866,223 | |
| Austin, Texas | Austin, Texas | 771,977 | | | 728,741 | | Austin, Texas | 794,734 | | | 778,145 | |
| Metropolitan Washington, D.C. | Metropolitan Washington, D.C. | 271,929 | | | 352,794 | | Metropolitan Washington, D.C. | 287,215 | | | 280,921 | |
| Other | Other | 86,858 | | | 87,117 | | Other | 86,293 | | | 86,803 | |
| | Operating Properties | Operating Properties | $ | 3,437,074 | | | $ | 3,474,109 | | Operating Properties | $ | 3,545,102 | | | $ | 3,472,602 | |
| | Corporate | Corporate | | Corporate | |
| Right of use asset - operating leases, net | Right of use asset - operating leases, net | $ | 20,478 | | | $ | 20,977 | | Right of use asset - operating leases, net | $ | 19,988 | | | $ | 20,313 | |
| Construction-in-progress | Construction-in-progress | $ | 266,263 | | | $ | 210,311 | | Construction-in-progress | $ | 366,823 | | | $ | 277,237 | |
| Land held for development | Land held for development | $ | 118,684 | | | $ | 117,984 | | Land held for development | $ | 93,887 | | | $ | 114,604 | |
| Prepaid leasehold interests in land held for development, net | Prepaid leasehold interests in land held for development, net | $ | 27,762 | | | $ | 39,185 | | Prepaid leasehold interests in land held for development, net | $ | 35,576 | | | $ | 27,762 | |
Net operating income:
| | | Three Months Ended September 30, | | Three Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | Total revenue | | Operating expenses (a) | | Net operating income | | Total revenue | | Operating expenses (a) | | Net operating income (loss) | | Total revenue | | Operating expenses (a) | | Net operating income | | Total revenue | | Operating expenses (a) | | Net operating income |
| Philadelphia CBD | Philadelphia CBD | $ | 51,587 | | | $ | (18,823) | | | $ | 32,764 | | | $ | 52,640 | | | $ | (18,522) | | | $ | 34,118 | | Philadelphia CBD | $ | 55,426 | | | $ | (20,538) | | | $ | 34,888 | | | $ | 51,445 | | | $ | (18,259) | | | $ | 33,186 | |
| Pennsylvania Suburbs | Pennsylvania Suburbs | 31,327 | | | (10,154) | | | 21,173 | | | 34,649 | | | (11,141) | | | 23,508 | | Pennsylvania Suburbs | 31,333 | | | (10,258) | | | 21,075 | | | 30,294 | | | (9,777) | | | 20,517 | |
| Austin, Texas | Austin, Texas | 24,813 | | | (9,580) | | | 15,233 | | | 25,328 | | | (9,944) | | | 15,384 | | Austin, Texas | 23,921 | | | (10,438) | | | 13,483 | | | 25,513 | | | (9,962) | | | 15,551 | |
| Metropolitan Washington, D.C. | Metropolitan Washington, D.C. | 5,224 | | | (3,806) | | | 1,418 | | | 9,675 | | | (5,236) | | | 4,439 | | Metropolitan Washington, D.C. | 5,486 | | | (3,116) | | | 2,370 | | | 4,812 | | | (3,902) | | | 910 | |
| Other | Other | 3,638 | | | (2,534) | | | 1,104 | | | 3,188 | | | (2,374) | | | 814 | | Other | 3,919 | | | (2,342) | | | 1,577 | | | 3,662 | | | (2,528) | | | 1,134 | |
| Corporate | Corporate | 3,829 | | | (2,155) | | | 1,674 | | | 626 | | | (1,782) | | | (1,156) | | Corporate | 3,957 | | | (2,957) | | | 1,000 | | | 4,376 | | | (2,999) | | | 1,377 | |
| Operating properties | Operating properties | $ | 120,418 | | | $ | (47,052) | | | $ | 73,366 | | | $ | 126,106 | | | $ | (48,999) | | | $ | 77,107 | | Operating properties | $ | 124,042 | | | $ | (49,649) | | | $ | 74,393 | | | $ | 120,102 | | | $ | (47,427) | | | $ | 72,675 | |
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | Total revenue | | Operating expenses (a) | | Net operating income | | Total revenue | | Operating expenses (a) | | Net operating income (loss) | | Total revenue | | Operating expenses (a) | | Net operating income | | Total revenue | | Operating expenses (a) | | Net operating income |
| Philadelphia CBD | Philadelphia CBD | $ | 154,259 | | | $ | (54,493) | | | $ | 99,766 | | | $ | 181,203 | | | $ | (65,615) | | | 115,588 | | Philadelphia CBD | $ | 108,897 | | | $ | (40,281) | | | $ | 68,616 | | | $ | 102,672 | | | $ | (35,670) | | | 67,002 | |
| Pennsylvania Suburbs | Pennsylvania Suburbs | 93,361 | | | (30,625) | | | 62,736 | | | 106,569 | | | (34,980) | | | 71,589 | | Pennsylvania Suburbs | 63,140 | | | (20,416) | | | 42,724 | | | 62,034 | | | (20,471) | | | 41,563 | |
| Austin, Texas | Austin, Texas | 76,501 | | | (29,262) | | | 47,239 | | | 76,921 | | | (30,032) | | | 46,889 | | Austin, Texas | 48,836 | | | (20,731) | | | 28,105 | | | 51,688 | | | (19,682) | | | 32,006 | |
| Metropolitan Washington, D.C. | Metropolitan Washington, D.C. | 14,711 | | | (11,907) | | | 2,804 | | | 30,520 | | | (15,678) | | | 14,842 | | Metropolitan Washington, D.C. | 10,681 | | | (6,544) | | | 4,137 | | | 9,487 | | | (8,101) | | | 1,386 | |
| Other | Other | 10,513 | | | (7,344) | | | 3,169 | | | 10,221 | | | (7,434) | | | 2,787 | | Other | 7,523 | | | (4,352) | | | 3,171 | | | 6,875 | | | (4,810) | | | 2,065 | |
| Corporate | Corporate | 11,944 | | | (7,522) | | | 4,422 | | | 2,597 | | | (4,652) | | | (2,055) | | Corporate | 12,470 | | | (5,243) | | | 7,227 | | | 8,115 | | | (5,367) | | | 2,748 | |
| Operating properties | Operating properties | $ | 361,289 | | | $ | (141,153) | | | $ | 220,136 | | | $ | 408,031 | | | $ | (158,391) | | | $ | 249,640 | | Operating properties | $ | 251,547 | | | $ | (97,567) | | | $ | 153,980 | | | $ | 240,871 | | | $ | (94,101) | | | $ | 146,770 | |
(a)Includes property operating expenses, real estate taxes and third party management expense.
| | Unconsolidated real estate ventures: | Unconsolidated real estate ventures: | | Unconsolidated real estate ventures: | | |
| | Investment in real estate ventures | | Equity in income (loss) of real estate venture | | Investment in real estate ventures | | Equity in income (loss) of real estate venture |
| | As of | | Three Months Ended September 30, | | Nine Months Ended September 30, | | As of | | Three Months Ended June 30, | |
| | September 30, 2021 | | December 31, 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | June 30, 2022 | | December 31, 2021 | | 2022 | | 2021 | |
| Philadelphia CBD | Philadelphia CBD | $ | 319,645 | | | $ | 268,562 | | | $ | (3,602) | | | $ | (2,737) | | | $ | (12,542) | | | $ | (2,576) | | Philadelphia CBD | $ | 341,748 | | | $ | 317,959 | | | $ | (2,574) | | | $ | (4,661) | | |
| Metropolitan Washington, D.C. | Metropolitan Washington, D.C. | 97,972 | | | 99,769 | | | (1,173) | | | (1,367) | | | (2,368) | | | (2,463) | | Metropolitan Washington, D.C. | 85,614 | | | 85,867 | | | (381) | | | (778) | | |
| Mid-Atlantic Office JV | Mid-Atlantic Office JV | 32,041 | | | 32,996 | | | 310 | | | — | | | 634 | | | — | | Mid-Atlantic Office JV | 31,478 | | | 31,680 | | | (101) | | | 117 | | |
| MAP Venture | MAP Venture | (22,247) | | | (11,516) | | | (2,169) | | | (1,684) | | | (6,522) | | | (4,843) | | MAP Venture | (29,594) | | | (24,396) | | | (1,925) | | | (1,918) | | |
| | Total | Total | $ | 427,411 | | | $ | 389,811 | | | $ | (6,634) | | | $ | (5,788) | | | $ | (20,798) | | | $ | (9,882) | | Total | $ | 429,246 | | | $ | 411,110 | | | $ | (4,981) | | | $ | (7,240) | | |
Net operating income (“NOI”) is a non-GAAP financial measure, which we define as total revenue less property operating expenses, real estate taxes and third party management expenses. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance and management fees. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards and professional fees that are incurred as part of corporate office management. NOI presented by the Company may not be comparable to NOI reported by other companies that define NOI differently. NOI is the primary measure that is used by the Company’s management to evaluate the operating performance of the Company’s real estate assets by segment. The Company believes NOI provides useful information to investors regarding the financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairment losses, depreciation and amortization costs, capital expenditures and leasing costs. The Company believes that net income (loss), as defined by GAAP, is the most appropriate earnings measure. The following is a reconciliation of consolidated net income (loss), as defined by GAAP, to consolidated NOI, (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| Net income | $ | 974 | | | $ | 276,133 | | | $ | 7,763 | | | $ | 288,240 | | |
| Net income (loss) | | Net income (loss) | $ | 4,651 | | | $ | (175) | | | $ | 10,752 | | | $ | 6,789 | |
| Plus: | Plus: | | Plus: | |
| Interest expense | Interest expense | 15,190 | | | 16,310 | | | 46,973 | | | 56,510 | | Interest expense | 16,341 | | | 15,490 | | | 32,083 | | | 31,783 | |
| Interest expense - amortization of deferred financing costs | Interest expense - amortization of deferred financing costs | 709 | | | 715 | | | 2,127 | | | 2,195 | | Interest expense - amortization of deferred financing costs | 805 | | | 709 | | | 1,514 | | | 1,418 | |
| | Depreciation and amortization | Depreciation and amortization | 48,175 | | | 43,533 | | | 131,303 | | | 145,314 | | Depreciation and amortization | 43,959 | | | 42,785 | | | 87,741 | | | 83,128 | |
| General and administrative expenses | General and administrative expenses | 7,076 | | | 7,069 | | | 22,016 | | | 23,973 | | General and administrative expenses | 8,328 | | | 8,356 | | | 18,328 | | | 14,940 | |
| Equity in loss of unconsolidated real estate ventures | Equity in loss of unconsolidated real estate ventures | 6,634 | | | 5,788 | | | 20,798 | | | 9,882 | | Equity in loss of unconsolidated real estate ventures | 4,981 | | | 7,240 | | | 9,544 | | | 14,164 | |
| | Less: | Less: | | Less: | |
| Interest and investment income | Interest and investment income | 4,494 | | | 467 | | | 7,845 | | | 1,487 | | Interest and investment income | 449 | | | 1,677 | | | 889 | | | 3,351 | |
| Income tax (provision) benefit | (12) | | | (2) | | | (46) | | | 224 | | |
| Income tax provision | | Income tax provision | (48) | | | (15) | | | (75) | | | (34) | |
| | Net gain on disposition of real estate | Net gain on disposition of real estate | — | | | 271,901 | | | 142 | | | 274,487 | | Net gain on disposition of real estate | 144 | | | 68 | | | 144 | | | 142 | |
| Net gain on sale of undepreciated real estate | Net gain on sale of undepreciated real estate | 910 | | | — | | | 2,903 | | | 201 | | Net gain on sale of undepreciated real estate | 4,127 | | | — | | | 5,024 | | | 1,993 | |
| Net gain on real estate venture transactions | — | | | 75 | | | — | | | 75 | | |
| | | Consolidated net operating income | Consolidated net operating income | $ | 73,366 | | | $ | 77,107 | | | $ | 220,136 | | | $ | 249,640 | | Consolidated net operating income | $ | 74,393 | | | $ | 72,675 | | | $ | 153,980 | | | $ | 146,770 | |
15.14. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is involved from time to time in litigation on various matters, including disputes with tenants, vendors and disputes arising out of agreements to purchase or sell properties. Given the nature of the Company’s business activities, these lawsuits are considered routine to the conduct of its business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. The Company will establish reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is probable and when the amount of loss is reasonably estimable. The Company does not expect that the liabilities, if any, that may ultimately result from such legal actions will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.
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.
Debt Guarantees
As of SeptemberJune 30, 2021,2022, the Company’s unconsolidated real estate ventures had aggregate indebtedness of $958.8$1,224.5 million. These loans are generally mortgage or construction loans, most of which are nonrecourse to the Company, except for customary recourse carve-outs. As of September 30, 2021, the $150.0 million construction loan obtained by 4040 Wilson, located in Arlington, Virginia, for which the Company has a payment guarantee up to $41.3 million, is recourse to the Company. In addition, during construction undertaken by the unconsolidated real estate ventures, including 4040 Wilson andthe 3025 JFK Venture, the Company has provided, and expects to continue to provide, cost overrun and completion guarantees, as well as customary environmental indemnities and guarantees of customary exceptions to nonrecourse provisions in loan agreements. In the agreement with its partner in the 3025 JFK Venture, the Company agreed to provide cost overrun and completion guaranties for the project under development. With respect to the construction loan obtained by 3025 JFK Venture on July 23, 2021, the Company has also provided a carry guarantee and limited payment guarantee up to 25% of the principal balance.balance of the $186.7 million construction loan.
Impact of Natural Disasters and Casualty
The Company carries liability insurance to mitigate its exposure to certain losses, including those relating to property damage. The Company records the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the amount of the losses is considered a gain contingency and is not recorded until the proceeds are received.
In February 2021, 1 of the Company's properties in Austin, Texas sustained damage from the winter storms and resulting power grid failures. As a result of the damage, during the nine monthsyear ended September 30,December 31, 2021, the Company recorded a fixed asset write-off totaling $1.2 million. During the nine months ended September 30, 2021, the Company hasmillion and recorded an estimated $7.2 million of restoration costs, of which $2.0$1.9 million is included in Accountsaccounts payable and accrued expenses on the consolidated balance sheets as of September 30,December 31, 2021. The Company has also sustained business interruption loss of $3.9 million related to unpaid rent, which is also fully covered under the insurance policy. During the nine monthsyear ended September 30,December 31, 2021, the Company has received $13.0$15.3 million of insurance proceeds, resulting in full recovery of the costs incurred to date. The $0.7$3.0 million of insurance proceeds received in excess of the fixed asset write-off, total business interruption, and total estimated restoration cost during the nine monthsyear ended September 30,December 31, 2021 is included in Otherother income on the consolidated statement of operations. During the six months ended June 30, 2022, the Company recognized a $0.8 million reduction of the previously estimated restoration costs and also received $2.4 million of additional insurance proceeds. The reduction of the restoration costs and additional insurance proceeds are included in other income on the consolidated statement of operations.
Other Commitments or Contingencies
Under the terms of each of the One Uptown joint venture agreements, the joint venture partner is not required to fund project costs until the closing of the applicable construction loans. In the event that the Company does not close on the applicable construction loan for each of the joint ventures by July 30, 2022, the joint venture partner could elect to assign its interest in the project to the Company and have no obligation to fund the project costs. In addition, the Company has provided cost overrun and completion guarantees, as well as customary environmental indemnities, in favor of the joint venture partner, for each of the One Uptown joint ventures. On July 29, 2022, the One Uptown joint ventures closed on 2 construction loans. See Note 3, ''Real Estate Investments,” to our Consolidated Financial Statements for further information.
In connection with the Schuylkill Yards Project, the Company entered into a neighborhood engagement program and, as of SeptemberJune 30, 2021,2022, had $7.6$7.2 million of future fixed contractual obligations. The Company also committed to fund additional contributions under the program. As of SeptemberJune 30, 2021,2022, the Company estimates that these additional contributions, which are not fixed under the terms of agreement, will be $2.4$2.3 million.
In connection with the formation of the Commerce Square Venture, the Company has committed to investing an additional $20.0 million of preferred equity in the properties on a pari passu basis with its joint venture partner of which $2.1$5.9 million has been contributed by the Company as of SeptemberJune 30, 2021.2022.
The Company invests in its properties and regularly incurs capital expenditures in the ordinary course of business to maintain the properties. The Company believes that such expenditures enhance its competitiveness. The Company also enters into
construction, utility and service contracts in the ordinary course of business which may extend beyond one year. These contracts typically provide for cancellation with insignificant or no cancellation penalties.
15. SUBSEQUENT EVENTS
On July 14, 2022, the Company formed a joint venture, with an unaffiliated third party, to develop an approximately 417,000 square foot life science/office building under a long-term ground lease located at 3151 Market Street in Philadelphia, Pennsylvania. The estimated project cost is approximately $307 million, and the joint venture partner has agreed, subject to customary funding conditions, to fund up to approximately $55 million of the project costs in exchange for a 45% preferred equity interest in the venture. We have agreed to provide a completion guaranty in connection with the development of the project.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Private Securities Litigation Reform Act of 1995 (the “1995 Act”) provides a “safe harbor” for forward-looking statements. This Quarterly Report on Form 10-Q and other materials filed by us with the SEC (as well as information included in oral or other written statements made by us) contain statements that are forward-looking, including statements relating to business and real estate development activities, acquisitions, dispositions, future capital expenditures, financing sources, governmental regulation (including environmental regulation) and competition. We intend such forward-looking statements to be covered by the safe-harbor provisions of the 1995 Act. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. As forward-looking statements, these statements involve important risks, uncertainties and other factors that could cause actual results to differ materially from the expected results and, accordingly, such results may differ from those expressed in any forward-looking statements made by us or on our behalf. Factors that might cause actual results to differ materially from our expectations, many of which may be more likely to impact us as a result of the ongoing COVID-19 pandemic, are set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020.2021. Accordingly, we caution readers not to place undue reliance on forward-looking statements. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
The discussion that follows is based primarily on our consolidated financial statements as of SeptemberJune 30, 20212022 and December 31, 20202021 and for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 and should be read along with the consolidated financial statements and related notes appearing elsewhere in this report. The ability to compare one period to another may be significantly affected by acquisitions completed, development properties placed in service and dispositions made during those periods.
OVERVIEW
During the ninesix months ended SeptemberJune 30, 2021,2022, we owned and managed properties within five segments: (1) Philadelphia Central Business District (“Philadelphia CBD”),CBD, (2) Pennsylvania Suburbs, (3) Austin, Texas, (4) Metropolitan Washington, D.C., and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Metropolitan Washington, D.C. segment includes properties in Northern Virginia, Washington, D.C. and Southern Maryland. The Other segment includes properties in Camden County, New Jersey and New Castle County, Delaware. In addition to the five segments, our corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions.
We generate cash and revenue from leases of space at our Properties and, to a lesser extent, from the management and development of properties owned by third parties and from investments in the unconsolidated real estate ventures. Factors that we evaluate when leasing space include rental rates, costs of tenant improvements, tenant creditworthiness, current and expected operating costs, the length of the lease term, vacancy levels and demand for space. We continue to seek revenue growth throughout our portfolio by increasing occupancy and rental rates. We also generate cash through sales of assets, including assets that we do not view as core to our business plan, either because of location or expected growth potential, and assets that are commanding premium prices from third party investors.
Our financial and operating performance is dependent upon the demand for office, residential, parking, and retail space in our markets, our leasing results, our acquisition, disposition and development activity, our financing activity, our cash requirements and economic and market conditions, including prevailing interest rates.
Adverse changes in economic conditions, including the ongoing effects of the global COVID-19 pandemic and the current inflationary environment, could result in a reduction of the availability of financing and higher borrowing costs. We continue to closely monitor the impact of the COVID-19 pandemic and inflation on all aspects of our business, including how it is impacting our tenants, employees, and business partners. Adverse changes in economic conditions, including the ongoing effects of the global COVID-19 pandemic, could result in a reduction of the availability of financing and potentially in higher borrowing costs. Vacancy rates may increase, and rental rates and rent collection rates may decline during the remainder of 2021 and possibly beyond as the current economic climate may negatively impact tenants.
Overall economic conditions, including but not limited to higher unemployment and deteriorating financial and credit markets, could have a dampening effect on The long-term impact of the fundamentals of our business, including increases in past due accounts, tenant defaults, lower occupancy and reduced effective rents. The ongoing COVID-19 pandemic has significantly slowedon the global economic activity, caused significant volatility in financial markets,economy and resulted in unprecedented job losses.our tenants and prospective tenants remains uncertain and will depend on new information which may emerge concerning the severity of COVID-19, new variants of COVID-19 and the actions taken to contain it or treat its impact. In addition, the government responses to control the pandemic are creating disruption in the global economy and supply chains and adversely impacting many industries, including owners and developers of office and mixed-use buildings.
Overall economic conditions, including but not limited to labor shortages, supply chain constraints, inflation, and deteriorating financial and credit markets, could have a dampening effect on the fundamentals of our business, including increases in past due accounts, tenant defaults, lower occupancy and reduced effective rents. These adverse conditions have impactedcould impact our net
income and cash flows and could have a material adverse effect on our financial condition. We believe that the quality of our assets and the strength of our balance sheet will enable us to raise debt capital, if necessary, in various forms and from
different sources, including through secured or unsecured loans from banks, pension funds and life insurance companies. However, there can be no assurance that we will be able to borrow funds on terms that are economically attractive or at all.
We continue to seek revenue growth throughout our portfolio by increasing occupancy and rental rates. Occupancy at our Core Properties at September 30, 2021 was 90.3% compared to 91.0% at September 30, 2020.
The table below summarizes selected operating and leasing statistics of our wholly owned properties for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| Leasing Activity | Leasing Activity | | | | | | | | Leasing Activity | | | | | | | |
| Core Properties (1): | Core Properties (1): | | Core Properties (1): | |
| Total net rentable square feet owned | Total net rentable square feet owned | 12,949,078 | | | 14,421,473 | | | 12,949,078 | | | 14,421,473 | | Total net rentable square feet owned | 12,996,825 | | | 12,949,078 | | | 12,996,825 | | | 12,949,078 | |
| Occupancy percentage (end of period) | Occupancy percentage (end of period) | 90.3 | % | | 91.0 | % | | 90.3 | % | | 91.0 | % | Occupancy percentage (end of period) | 89.6 | % | | 90.5 | % | | 89.6 | % | | 90.5 | % |
| Average occupancy percentage | Average occupancy percentage | 90.2 | % | | 90.7 | % | | 90.0 | % | | 90.0 | % | Average occupancy percentage | 88.9 | % | | 90.4 | % | | 89.4 | % | | 89.9 | % |
| Total Portfolio, less properties in development (2): | | |
| Total Portfolio, less properties in development/redevelopment (2): | | Total Portfolio, less properties in development/redevelopment (2): | |
| Tenant retention rate (3) | Tenant retention rate (3) | 57.2 | % | | 59.6 | % | | 55.3 | % | | 53.4 | % | Tenant retention rate (3) | 70.3 | % | | 57.5 | % | | 60.6 | % | | 54.1 | % |
| New leases and expansions commenced (square feet) | New leases and expansions commenced (square feet) | 214,687 | | | 370,123 | | | 400,162 | | | 636,800 | | New leases and expansions commenced (square feet) | 247,597 | | | 156,372 | | | 359,694 | | | 185,475 | |
| Leases renewed (square feet) | Leases renewed (square feet) | 140,091 | | | 280,678 | | | 402,768 | | | 562,632 | | Leases renewed (square feet) | 137,103 | | | 95,853 | | | 519,458 | | | 262,677 | |
| Net absorption (square feet) | Net absorption (square feet) | (20,560) | | | 101,562 | | | (165,888) | | | (150,576) | | Net absorption (square feet) | 27,391 | | | 19,798 | | | (224,973) | | | (145,328) | |
| Percentage change in rental rates per square feet (4): | | |
| Percentage change in rental rates per square foot (4): | | Percentage change in rental rates per square foot (4): | |
| New and expansion rental rates | New and expansion rental rates | 15.3 | % | | 22.8 | % | | 24.6 | % | | 22.5 | % | New and expansion rental rates | 26.2 | % | | 32.7 | % | | 23.9 | % | | 29.8 | % |
| Renewal rental rates | Renewal rental rates | 15.7 | % | | 10.6 | % | | 13.1 | % | | 12.8 | % | Renewal rental rates | 8.3 | % | | 13.3 | % | | 17.9 | % | | 11.6 | % |
| Combined rental rates | Combined rental rates | 15.5 | % | | 17.1 | % | | 17.6 | % | | 17.2 | % | Combined rental rates | 18.4 | % | | 22.2 | % | | 19.6 | % | | 18.7 | % |
| Weighted average lease term for leases commenced (years) | | Weighted average lease term for leases commenced (years) | 8.0 | | | 8.5 | | | 8.3 | | | 7.1 | |
| Capital Costs Committed (5): | Capital Costs Committed (5): | | Capital Costs Committed (5): | |
| Leasing commissions (per square feet) | $ | 7.94 | | | $ | 12.07 | | | $ | 9.33 | | | $ | 9.41 | | |
| Tenant Improvements (per square feet) | $ | 6.95 | | | $ | 27.24 | | | $ | 20.10 | | | $ | 21.68 | | |
| Weighted average lease term (years) | 6.5 | | | 7.2 | | | 6.8 | | | 6.3 | | |
| Leasing commissions (per square foot) | | Leasing commissions (per square foot) | $ | 10.45 | | | $ | 12.61 | | | $ | 11.95 | | | $ | 10.15 | |
| Tenant Improvements (per square foot) | | Tenant Improvements (per square foot) | $ | 39.59 | | | $ | 35.01 | | | $ | 35.81 | | | $ | 27.87 | |
| Total capital per square foot per lease year | Total capital per square foot per lease year | $ | 2.63 | | | $ | 4.48 | | | $ | 3.39 | | | $ | 4.00 | | Total capital per square foot per lease year | $ | 4.85 | | | $ | 4.29 | | | $ | 4.44 | | | $ | 3.83 | |
(1)Does not include properties under development, redevelopment, held for sale, or sold.
(2)Includes leasing related to completed developments and redevelopments, as well as sold properties.
(3)Calculated as percentage of total square feet.
(4)Includes base rent plus reimbursement for operating expenses and real estate taxes.
(5)Calculated on a weighted average basis.basis for leases commenced during the quarter. Does not include properties under development/redevelopment.
In seeking to increase revenue through our operating, financing and investment activities, we also seek to minimize operating risks, including (i) tenant rollover risk, (ii) tenant credit risk and (iii) development risk.
Tenant Rollover Risk
We are subject to the risk that tenant leases, upon expiration, will not be renewed, that space may not be relet, or that the terms of renewal or reletting (including the cost of renovations) may be less favorable to us than the current lease terms. Leases that accounted for approximately 0.9%3.3% of our aggregate final annualized base rents as of SeptemberJune 30, 20212022 (representing approximately 1.2%4.8% of the net rentable square feet of the properties) are scheduled to expire without penalty in the remainder of 2021. Leases that accounted for approximately 9.2% of our aggregate final annualized base rents as of September 30, 2021 (representing approximately 9.6% of the net rentable square feet of the properties) are scheduled to expire without penalty in 2022. We maintain an active dialogue with our tenants in an effort to maximize lease renewals. If we are unable to renew leases or relet space under expiring leases, at anticipated rental rates, or if tenants terminate their leases early, our cash flow would be adversely impacted.
Tenant Credit Risk
In the event of a tenant default, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. Our management evaluates our accrued rent receivable reserve policy in light of our tenant base and general and local economic conditions. Our accrued rent receivable allowance was $4.1$4.0 million or 2.4%2.1% of our accrued rent
receivable balance as of SeptemberJune 30, 20212022 compared to $5.1$4.1 million or 3.2%2.4% of our accrued rent receivable balance as of December 31, 2020.2021.
If economic conditions deteriorate, including as a result of the ongoing COVID-19 pandemic and the current inflationary environment, we may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents. This conditionThese conditions would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition.
Development Risk
Development projects are subject to a variety of risks, including construction delays, construction cost overruns, building moratoriums, inability to obtain financing on favorable terms, inability to lease space at projected rates, inability to enter into construction, development and other agreements on favorable terms, and unexpected environmental and other hazards.
As of SeptemberJune 30, 20212022 the following active development and redevelopment projects remain under construction in progress and we were proceeding on the following activity (dollars, in thousands):
| | Property/Portfolio Name | Property/Portfolio Name | | Location | | Completion Date | | Activity Type | | Approximate Square Footage | | Estimated Costs | | Amount Funded | Property/Portfolio Name | | Location | | Expected Completion Date | | Activity Type | | Approximate Square Footage | | Estimated Costs | | Amount Funded |
| 405 Colorado Street (a) | 405 Colorado Street (a) | | Austin, TX | | Q2 2021 | | Development | | 205,803 | | | $ | 122,000 | | | $ | 82,818 | | 405 Colorado Street (a) | | Austin, TX | | Q2 2021 (c) | | Development | | 205,803 | | | $ | 121,987 | | | $ | 103,312 | |
| 3000 Market Street (b) | | Philadelphia, PA | | Q3 2021 | | Redevelopment | | 64,070 | | | $ | 35,000 | | | $ | 24,620 | | |
| | 250 King of Prussia Road (c) | | Radnor, PA | | Q2 2022 | | Redevelopment | | 168,294 | | | $ | 82,854 | | | $ | 23,857 | | |
| 250 King of Prussia Road (b) | | 250 King of Prussia Road (b) | | Radnor, PA | | Q3 2022 | | Redevelopment | | 168,294 | | | $ | 82,854 | | | $ | 52,134 | |
| 2340 Dulles Corner Boulevard (d) | | 2340 Dulles Corner Boulevard (d) | | Herndon, VA | | Q2 2023 | | Redevelopment | | 268,365 | | | $ | 117,974 | | | $ | 68,266 | |
(a)Estimated costs include $2.1 million of existing property basis through a ground lease. Project includes 520 parking spaces.
(b)EstimatedTotal project costs include $12.8includes $20.6 million of existing property basis.
(c)The parking garage and occupied portions of the office building were placed into service during 2021.
(d)Total project costs includes $20.6include $58.0 million of existing property basis.
In addition to the properties listed above, we have classified one office building in Herndon, Virginia that has yet to incur significant redevelopment costs, and one parking facility in Philadelphia, Pennsylvania as redevelopment.
On December 1, 2021, we entered into two joint venture agreements to develop One Uptown, a $328.4 million mixed-used project in Austin, Texas. Construction of the project commenced during the fourth quarter of 2021 and we have funded $75.9 million of the total estimated project costs as of June 30, 2022. Under the joint venture agreement, we are required to fund an additional $7.4 million of the project costs. The remaining $245.1 million of the estimated total project costs is expected to be funded by our joint venture partner and proceeds from $206.7 million in construction loans that closed on July 29, 2022. See Note 3, ''Real Estate Investments,” to our Consolidated Financial Statements for additional information regarding the project.
On July 14, 2022, we entered into a joint venture agreement to develop 3151 Market Street, a $307 million life science project in Philadelphia, Pennsylvania. Construction of the project commenced during the second quarter of 2022 and we have funded $43.0 million of the total estimated project costs as of June 30, 2022. Under the joint venture agreement, we are required to fund an additional $24.6 million of the project costs. The remaining $239.4 million of the estimated total project costs is expected to be funded by our joint venture partner and proceeds of an expected $185 million in construction loans. See Note 3, ''Real Estate Investments,” to our Consolidated Financial Statements for additional information regarding the project.
As of June 30, 2022 the following active unconsolidated real estate venture development projects remain under construction in progress and we were proceeding on the following activity (dollars, in thousands):
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| Property/Portfolio Name | | Location | | Expected Completion Date | | | | Approximate Square Footage | | Estimated Costs | | Amount Funded | | Construction Loan Financing | | Our Share Remaining to be Funded | |
| 3025 JFK Boulevard (55%) | | Philadelphia, PA | | Q3 2023 | | | | (a) | | $ | 287,272 | | | $ | 99,371 | | | $ | 186,727 | | | $ | — | | (b) |
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(a)Mixed used building with 428,000 rentable square feet consisting of 200,000 SF of life science/innovation office, 219,000 SF of residential (326 units), and 9,000 SF of retail.
(b)We have fully funded our equity commitment of $55.3 million. The remaining amount of the estimated costs to be funded of $187.9 million will be funded by our joint venture partner and the available borrowings under the $186.7 million construction loan.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).GAAP. The preparation of these financial statements in conformity with GAAP 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. Certain accounting policies are considered to be critical accounting policies, as they require management to make assumptions about matters that are highly uncertain at the time the estimate is made and changes in accounting estimate are reasonably likely to occur from period to period. Management bases its estimates and assumptions on historical experience and current economic conditions.
Our Annual Report on Form 10-K for the year ended December 31, 20202021 contains a discussion of our critical accounting policies. There have been no significant changes in our critical accounting policies since December 31, 2020.2021.
RESULTS OF OPERATIONS
The following discussion is based on our consolidated financial statements for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021. We believe that presentation of our consolidated financial information, without a breakdown by segment, will effectively present important information useful to our investors.
Net operating income (“NOI”) as presented in the comparative analysis below is a non-GAAP financial measure defined as total revenue less property operating expenses, real estate taxes and third party management expenses. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance, and management fees. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards and professional fees that are incurred as part of corporate office management. NOI is a non-GAAP financial measure that we use internally to evaluate the operating performance of our real estate assets by segment, as presented in Note 14,13, ''Segment Information," to our consolidated financial statements, and of our business as a whole. We believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairment losses, depreciation and amortization costs, capital expenditures and leasing costs. We believe that net income, as defined by GAAP, is the most appropriate earnings measure. See Note 14,13, ''Segment Information”Information,” to our Consolidated Financial Statements for a reconciliation of NOI to our consolidated net income as defined by GAAP.
Comparison of the Three Months Ended SeptemberJune 30, 20212022 and SeptemberJune 30, 20202021
The following comparison for the three months ended SeptemberJune 30, 20212022 to the three months ended SeptemberJune 30, 2020,2021, makes reference to the effect of the following:
(a)“Same Store Property Portfolio,” which represents 7473 properties containing an aggregate of approximately 12.812.9 million net rentable square feet, and represents properties that we owned and consolidated for the three-month periods ended SeptemberJune 30, 20212022 and 2020.2021. The Same Store Property Portfolio includes properties acquired or placed in service on or prior to JulyApril 1, 20202021 and owned and consolidated through SeptemberJune 30, 2021,2022, excluding properties classified as held for sale,
(b)“Total Portfolio,” which represents all properties owned and consolidated by us during the three months ended SeptemberJune 30, 20212022 and 2020,2021,
(c)"Recently Completed/Acquired Properties,Property," which represents two propertiesone property placed into service or acquired on or subsequent to JulyApril 1, 2020,2021,
(d)"Development/Redevelopment Properties," which represents fivefour properties currently in development/redevelopment. A property is excluded from our Same Store Property Portfolio and moved into Development/Redevelopment in the period that we determine to proceed with development/redevelopment for a future development strategy, and
(e)"Q3 2020Q2 2021 through Q3 2021Q2 2022 Dispositions," which represents 14three properties disposed of from JulyApril 1, 20202021 through SeptemberJune 30, 2021.2022.
Comparison of three months ended SeptemberJune 30, 20212022 to the three months ended SeptemberJune 30, 20202021 | | | Same Store Property Portfolio | | Recently Completed/Acquired Properties | | Development/Redevelopment Properties | | Other (Eliminations) (a) | | Total Portfolio | | Same Store Property Portfolio | | Recently Completed/Acquired Properties | | Development/Redevelopment Properties | | Other (Eliminations) (a) | | Total Portfolio |
| (dollars and square feet in millions except per share amounts) | (dollars and square feet in millions except per share amounts) | | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | $ Change | | % Change | (dollars and square feet in millions except per share amounts) | | 2022 | | 2021 | | $ Change | | % Change | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | $ Change | | % Change |
| Revenue: | Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Rents | Rents | | $ | 107.1 | | | $ | 105.5 | | | $ | 1.6 | | | 1.5 | % | | $1.2 | | $ | 0.3 | | | $ | 0.5 | | | $ | 2.5 | | | $ | 3.4 | | | $ | 13.0 | | | $ | 112.2 | | | $ | 121.3 | | | $ | (9.1) | | | (7.5) | % | Rents | | $ | 110.1 | | | $ | 109.0 | | | $ | 1.1 | | | 1.0 | % | | $1.2 | | $ | 0.1 | | | $ | 1.5 | | | $ | 0.1 | | | $ | 4.1 | | | $ | 2.0 | | | $ | 116.9 | | | $ | 111.2 | | | $ | 5.7 | | | 5.1 | % |
| Third party management fees, labor reimbursement and leasing | Third party management fees, labor reimbursement and leasing | | — | | | — | | | — | | | — | % | | — | | — | | | — | | | — | | | 6.5 | | | 4.3 | | | 6.5 | | | 4.3 | | | 2.2 | | | 51.2 | % | Third party management fees, labor reimbursement and leasing | | — | | | — | | | — | | | — | % | | — | | — | | | — | | | — | | | 5.9 | | | 6.6 | | | 5.9 | | | 6.6 | | | (0.7) | | | (10.6) | % |
| Other | Other | | 0.3 | | | 0.2 | | | 0.1 | | | 50.0 | % | | — | | — | | | — | | | — | | | 1.5 | | | 0.3 | | | 1.8 | | | 0.5 | | | 1.3 | | | 260.0 | % | Other | | 0.3 | | | 0.3 | | | — | | | — | % | | — | | — | | | — | | | — | | | 0.9 | | | 1.9 | | | 1.2 | | | 2.2 | | | (1.0) | | | (45.5) | % |
| Total revenue | Total revenue | | 107.4 | | | 105.7 | | | 1.7 | | | 1.6 | % | | 1.2 | | 0.3 | | | 0.5 | | | 2.5 | | | 11.4 | | | 17.6 | | | 120.5 | | | 126.1 | | | (5.6) | | | (4.4) | % | Total revenue | | 110.4 | | | 109.3 | | | 1.1 | | | 1.0 | % | | 1.2 | | 0.1 | | | 1.5 | | | 0.1 | | | 10.9 | | | 10.5 | | | 124.0 | | | 120.0 | | | 4.0 | | | 3.3 | % |
| Property operating expenses | Property operating expenses | | 27.9 | | | 26.9 | | | 1.0 | | | 3.7 | % | | 0.2 | | — | | | 0.1 | | | 0.2 | | | 2.1 | | | 4.5 | | | 30.3 | | | 31.6 | | | (1.3) | | | (4.1) | % | Property operating expenses | | 29.3 | | | 27.5 | | | 1.8 | | | 6.5 | % | | 0.1 | | — | | | 0.3 | | | (0.7) | | | 3.4 | | | 2.5 | | | 33.1 | | | 29.3 | | | 3.8 | | | 13.0 | % |
| Real estate taxes | Real estate taxes | | 12.9 | | | 12.8 | | | 0.1 | | | 0.8 | % | | 0.1 | | — | | | 0.1 | | | 0.4 | | | 0.3 | | | 1.7 | | | 13.4 | | | 14.9 | | | (1.5) | | | (10.1) | % | Real estate taxes | | 13.1 | | | 13.3 | | | (0.2) | | | (1.5) | % | | 0.1 | | 0.1 | | | 0.3 | | | 0.8 | | | 0.2 | | | 0.4 | | | 13.7 | | | 14.6 | | | (0.9) | | | (6.2) | % |
| Third party management expenses | Third party management expenses | | — | | | — | | | — | | | — | % | | — | | — | | | — | | | — | | | 3.3 | | | 2.5 | | | 3.3 | | | 2.5 | | | 0.8 | | | 32.0 | % | Third party management expenses | | — | | | — | | | — | | | — | % | | — | | — | | | — | | | — | | | 2.8 | | | 3.6 | | | 2.8 | | | 3.6 | | | (0.8) | | | (22.2) | % |
| Net operating income | Net operating income | | 66.6 | | | 66.0 | | | 0.6 | | | 0.9 | % | | 0.9 | | 0.3 | | | 0.3 | | | 1.9 | | | 5.7 | | | 8.9 | | | 73.5 | | | 77.1 | | | (3.6) | | | (4.7) | % | Net operating income | | 68.0 | | | 68.5 | | | (0.5) | | | (0.7) | % | | 1.0 | | — | | | 0.9 | | | — | | | 4.5 | | | 4.0 | | | 74.4 | | | 72.5 | | | 1.9 | | | 2.6 | % |
| Depreciation and amortization | Depreciation and amortization | | 44.4 | | | 37.5 | | | 6.9 | | | 18.4 | % | | 0.7 | | 0.3 | | | 0.2 | | | 0.4 | | | 3.0 | | | 5.4 | | | 48.3 | | | 43.6 | | | 4.7 | | | 10.8 | % | Depreciation and amortization | | 39.6 | | | 40.0 | | | (0.4) | | | (1.0) | % | | 0.6 | | — | | | 0.6 | | | — | | | 3.1 | | | 2.7 | | | 43.9 | | | 42.7 | | | 1.2 | | | 2.8 | % |
| General & administrative expenses | General & administrative expenses | | — | | | — | | | — | | | — | % | | — | | — | | | — | | | — | | | 7.1 | | | 7.1 | | | 7.1 | | | 7.1 | | | — | | | — | % | General & administrative expenses | | — | | | — | | | — | | | — | % | | — | | — | | | — | | | — | | | 8.3 | | | 8.4 | | | 8.3 | | | 8.4 | | | (0.1) | | | (1.2) | % |
| Provision for impairment | | — | | | — | | | — | | | — | % | | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | % | |
| | Net gain on disposition of real estate | Net gain on disposition of real estate | | — | | | (271.9) | | | 271.9 | | | (100.0) | % | Net gain on disposition of real estate | | (0.1) | | | (0.1) | | | — | | | — | % |
| Net gain on sale of undepreciated real estate | Net gain on sale of undepreciated real estate | | (0.9) | | | — | | | (0.9) | | | — | % | Net gain on sale of undepreciated real estate | | (4.1) | | | — | | | (4.1) | | | — | % |
| Operating income (loss) | Operating income (loss) | | $ | 22.2 | | | $ | 28.5 | | | $ | (6.3) | | | (22.1) | % | | $0.2 | | $ | — | | | $ | 0.1 | | | $ | 1.5 | | | $ | (4.4) | | | $ | (3.6) | | | $ | 19.0 | | | $ | 298.3 | | | $ | (279.3) | | | (93.6) | % | Operating income (loss) | | $ | 28.4 | | | $ | 28.5 | | | $ | (0.1) | | | (0.4) | % | | $0.4 | | $ | — | | | $ | 0.3 | | | $ | — | | | $ | (6.9) | | | $ | (7.1) | | | $ | 26.4 | | | $ | 21.5 | | | $ | 4.9 | | | 22.8 | % |
| Number of properties | Number of properties | | 74 | | | 74 | | | 2 | | | 5 | | | 81 | | | Number of properties | | 73 | | | 73 | | | 1 | | | 4 | | | 78 | | |
| Square feet | Square feet | | 12.8 | | | 12.8 | | | 0.2 | | | 0.7 | | | 13.9 | | | Square feet | | 12.9 | | | 12.9 | | | 0.1 | | | 0.6 | | | 13.8 | | |
| Core Occupancy % (b) | Core Occupancy % (b) | | 90.2 | % | | 91.0 | % | | 100.0 | % | | Core Occupancy % (b) | | 89.5 | % | | 90.5 | % | | 100.0 | % | |
| Other Income (Expense): | Other Income (Expense): | | Other Income (Expense): | |
| Interest and investment income | Interest and investment income | | 4.5 | | | 0.5 | | | 4.0 | | | 800.0 | % | Interest and investment income | | 0.4 | | | 1.7 | | | (1.3) | | | (76.5) | % |
| Interest expense | Interest expense | | (15.2) | | | (16.3) | | | 1.1 | | | (6.7) | % | Interest expense | | (16.3) | | | (15.5) | | | (0.8) | | | 5.2 | % |
| Interest expense — Deferred financing costs | Interest expense — Deferred financing costs | | (0.7) | | | (0.7) | | | — | | | — | % | Interest expense — Deferred financing costs | | (0.8) | | | (0.7) | | | (0.1) | | | 14.3 | % |
| | Equity in loss of unconsolidated real estate ventures | Equity in loss of unconsolidated real estate ventures | | (6.6) | | | (5.8) | | | (0.8) | | | 13.8 | % | Equity in loss of unconsolidated real estate ventures | | (5.0) | | | (7.2) | | | 2.2 | | | (30.6) | % |
| Net gain on real estate venture transactions | | — | | | 0.1 | | | (0.1) | | | (100.0) | % | |
| | Net income | | $ | 1.0 | | | $ | 276.1 | | | $ | (275.1) | | | (99.6) | % | |
| | Net income (loss) | | Net income (loss) | | $ | 4.7 | | | $ | (0.2) | | | $ | 4.9 | | | (2450.0) | % |
| Net income attributable to Common Shareholders of Brandywine Realty Trust | Net income attributable to Common Shareholders of Brandywine Realty Trust | | $ | 0.01 | | | $ | 1.60 | | | $ | (1.59) | | | (99.4) | % | Net income attributable to Common Shareholders of Brandywine Realty Trust | | $ | 0.03 | | | $ | — | | | $ | 0.03 | | | — | % |
(a)Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation, third-party management fees, provisions for impairment, and changes in the accrued rent receivable allowance. Other/(Eliminations) also includes properties sold and properties classified as held for sale.
(b)Pertains to Core Properties.
Total Revenue
Rents from the Total Portfolio decreasedincreased primarily as a result of the following:
•$10.51.2 million decreaseincrease related to the Q3 2020 through Q3 2021 Dispositions;commencement of operations of B.Labs, a life science incubator lab in our Philadelphia CBD segment, during the first quarter of 2022;
•$2.51.1 million decreaseincrease related to a property that has been vacated and placed into redevelopment in our Metropolitan Washington D.C. segment;Recently Completed/Acquired Property;
•$1.2 million decreaseincrease related to a development property that has been vacated and taken out of service for future demolition in our Austin, Texas segment;segment that was partially placed into service during the third quarter of 2021; and
•$1.00.8 million increase related to the residential and hotel components at the FMC Tower in our Philadelphia CBD segment related to higher occupancy partially due to the lifting of COVID-19 pandemic restrictions; andrestrictions.
•$0.9 million increase related to the Recently Completed/Acquired Properties.
The remaining $3.2 million increase in Rents is primarily due to increased occupancy at certain properties across our Same Store Property Portfolio, as well as increased use of our properties by the tenants related to the lifting of COVID-19 pandemic restrictions.
Third party management fees, labor reimbursement, and leasing income increaseddecreased primarily due to $1.1a $0.5 million of fees earned from the Mid-Atlantic Office Venture formeddecrease related to a third party management contract terminated in the fourth quarter of 2020,2021 and a $0.3 million of fees earned from the Commerce Square Venture formed in the third quarter of 2020, and a $0.2 million increasedecrease in fees earned from our MAP Venture primarily related to increasesdecreases in leasing commissions and construction management fees. The remaining increase is primarily related to miscellaneous increases in leasing commissions, labor reimbursement, and management fees earned from our other unconsolidated real estate ventures.
Other income increaseddecreased primarily due to $0.7 million in excess insurance proceeds of $0.8 million related to propertiesa property in our Pennsylvania SuburbsAustin, Texas segment as well as an increase of $0.3$0.4 million in income fromproceeds related to a legal settlement during the restaurant componentsecond quarter of FMC Tower as a result of the lifting of COVID-19 pandemic restrictions.2021.
Property Operating Expenses
Property operating expenses across our Total Portfolio decreasedincreased primarily as a result of the following:
•$3.40.7 million decreaseincrease related to a development property in our Austin, Texas segment that was partially placed into service during the Q3 2020 through Q3 2021 Dispositions;third quarter of 2021;
•$1.00.6 million increase acrossrelated to the commencement of operations of B.Labs, a life science incubator lab in our Same Store Property Portfolio primarily due to increased usePhiladelphia CBD segment, during the first quarter of our properties by the tenants as a result of the lifting of COVID-19 pandemic restrictions;2022; and
•$0.20.5 million increase at the hotel and restaurant componentscomponent of FMC Tower primarily as a result of the lifting of COVID-19 pandemic restrictions.
The remaining offsetting increase of $0.9$2.0 million is primarily related to miscellaneous increases in property operating expenses across our Total Portfolio, primarily driven by increases in property-related employee compensation expenses, marketing expenses, and repairs and maintenance.
Real Estate Taxes
Real estate taxes decreased primarily as a result of a $1.1 million decrease related to the Q3 2020 through Q3 2021 Dispositions as well as a $0.6 million decrease in tax assessments across our Austin, Texas segment.
Depreciation and Amortization
Depreciation and amortization expense increased primarily as a result of the following:
•$3.10.6 million decrease increase related to the Q3 2020 through Q3 2021 Dispositions;
•$4.5 million increase primarily related to accelerated depreciation ascommencement of operations of B.Labs, a result of early lease terminations at certain propertieslife science incubator lab in our Same Store PortfolioPhiladelphia CBD segment, during the thirdfirst quarter of 2021;2022; and
•$3.30.6 million increase duerelated to the reassessment of the estimated useful life of seven properties in our Austin, Texas segment pursuant to future demolition plans as part of our Broadmoor master development plan beginning in the second quarter of 2021.Recently Completed/Acquired Property.
Net Gain on DispositionSale of Undepreciated Real Estate
The Net Gain on Dispositiongain of Real Estate of $271.9$4.1 million recognized during the three months ended SeptemberJune 30, 20202022 is related to the sale of one parcel of land in our Metropolitan Washington, D.C. segment and the sale of a 30% preferred equity interestportfolio of four parcels of land and two office buildings in One Commerce Square and Two Commerce Square, which resulted in deconsolidation of the properties and recognition of our investment in the properties at fair value.Other segment.
Interest and Investment Income
Interest and investment income increased by $4.0 milliondecreased primarily as a result of a $1.2 million decrease related to our preferred equity investment in a single-purpose entity that owned two stabilized office buildings located in Austin, Preferred Equity Investment,Texas, which closed on December 31, 2020 and was redeemed prior to maturity on September 3, 2021. Of the $4.0 million increase, $2.8 million was related to receiving our accelerated minimum return and exit fees paid in cash on the redemption date.
Interest Expense
Interest expense decreased primarily due to the following:
•$1.5 million decrease due to an increase in capitalized interest on our various development projects, as well as capitalized interest on our investment in 3025 JFK Venture;
•$0.4 million decrease due to deconsolidation of One Commerce Square and Two Commerce Square and the associated mortgage loans on July 21, 2020;
•$1.1 million decrease due to the purchase of the Two Logan Square mortgage in the fourth quarter of 2020; and
•$2.0 million increase due to a reduction of interest expense recognized during the three months ended September 30, 2020 on account of a contingent payment to an unaffiliated third party. The amount had previously accreted through interest expense and a portion of the contingent payment ceased to be probable in the third quarter of 2020 due to the anticipated purchase of the Two Logan Square mortgage in the fourth quarter of 2020.
The remaining decrease is primarily related to lower interest rates during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.
Equity in loss of unconsolidated real estate ventures
Equity in loss of unconsolidated real estate ventures increaseddecreased primarily due to the following:
•$1.01.9 million increasedecrease associated with our Commerce Square Venture formed on July 21, 2020;
•$0.6 million increase associated with our BDN AI Venture primarily due to our share of held for sale impairmenta decrease in the remaining property held by the venture. See Note 4, ''Investment in Unconsolidated Real Estate Ventures" to our Consolidated Financial Statements for further information;
•$0.5 million increase related to our MAP Venture due to lower revenues driven by lower occupancyamortization of in-place lease intangibles during the three months ended SeptemberJune 30, 2021 than2022 compared to the three months ended SeptemberJune 30, 2020;2021;
•$0.90.4 million decrease associated withrelated to our 4040 Wilson Venture completed during the first quarter of 2021;primarily; and
•$0.3 million decrease associated with our Mid-Atlantic Office Venture formed on December 21, 2020.1919 Market Venture.
Comparison of the NineSix Months Ended SeptemberJune 30, 20212022 and SeptemberJune 30, 20202021
The following comparison for the ninesix months ended SeptemberJune 30, 20212022 to the ninesix months ended SeptemberJune 30, 2020,2021, makes reference to the effect of the following:
(a)“Same Store Property Portfolio,” which represents 73 properties containing an aggregate of approximately 12.512.9 million net rentable square feet, and represents properties that we owned and consolidated for the nine-monthsix-month periods ended SeptemberJune 30, 20212022 and 2020.2021. The Same Store Property Portfolio includes properties acquired or placed in service on or prior to January 1, 20202021 and owned and consolidated through SeptemberJune 30, 20212022 excluding properties classified as held for sale,
(b)“Total Portfolio,” which represents all properties owned and consolidated by us during the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021,
(c)"Recently Completed/Acquired Properties,Property," which represents three propertiesone property placed into service or acquired on or subsequent to January 1, 2020,2021,
(d)"Development/Redevelopment Properties," which represents fivefour properties currently in development/redevelopment. A property is excluded from our Same Store Property Portfolio and moved into Development/Redevelopment in the period that we determine to proceed with development/redevelopment for a future development strategy, and
(e)"YTD 20202021 and 20212022 Dispositions," which represents 15three properties disposed of from January 1, 20202021 through SeptemberJune 30, 2021.2022.
Comparison of the ninesix months ended SeptemberJune 30, 20212022 to the ninesix months ended SeptemberJune 30, 20202021
| | | Same Store Property Portfolio | | Recently Completed/Acquired Properties | | Development/Redevelopment Properties | | Other (Eliminations) (a) | | Total Portfolio | | Same Store Property Portfolio | | Recently Completed/Acquired Properties | | Development/Redevelopment Properties | | Other (Eliminations) (a) | | Total Portfolio |
| (dollars and square feet in millions except per share amounts) | (dollars and square feet in millions except per share amounts) | | 2021 | | 2020 | | $ Change | | % Change | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | $ Change | | % Change | (dollars and square feet in millions except per share amounts) | | 2022 | | 2021 | | $ Change | | % Change | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | $ Change | | % Change |
| Revenue: | Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Rents | Rents | | $ | 315.9 | | | $ | 312.8 | | | $ | 3.1 | | | 1.0 | % | | $ | 12.4 | | | $ | 6.0 | | | $ | 0.7 | | | $ | 7.8 | | | $ | 7.9 | | | $ | 66.1 | | | $ | 336.9 | | | $ | 392.7 | | | $ | (55.8) | | | (14.2) | % | Rents | | $ | 220.8 | | | $ | 219.9 | | | $ | 0.9 | | | 0.4 | % | | $ | 2.3 | | | $ | 0.1 | | | $ | 2.6 | | | $ | 0.2 | | | $ | 7.1 | | | $ | 4.5 | | | $ | 232.8 | | | $ | 224.7 | | | $ | 8.1 | | | 3.6 | % |
| Third party management fees, labor reimbursement and leasing | Third party management fees, labor reimbursement and leasing | | — | | | — | | | — | | | — | % | | — | | | — | | | — | | | — | | | 19.8 | | | 13.3 | | | 19.8 | | | 13.3 | | | 6.5 | | | 48.9 | % | Third party management fees, labor reimbursement and leasing | | — | | | — | | | — | | | — | % | | — | | | — | | | — | | | — | | | 11.0 | | | 13.3 | | | 11.0 | | | 13.3 | | | (2.3) | | | (17.3) | % |
| Other | Other | | 0.7 | | | 0.7 | | | — | | | — | % | | — | | | — | | | — | | | — | | | 3.9 | | | 1.3 | | | 4.6 | | | 2.0 | | | 2.6 | | | 130.0 | % | Other | | 0.6 | | | 0.5 | | | 0.1 | | | 20.0 | % | | — | | | — | | | 0.1 | | | — | | | 7.0 | | | 2.4 | | | 7.7 | | | 2.9 | | | 4.8 | | | 165.5 | % |
| Total revenue | Total revenue | | 316.6 | | | 313.5 | | | 3.1 | | | 1.0 | % | | 12.4 | | | 6.0 | | | 0.7 | | | 7.8 | | | 31.6 | | | 80.7 | | | 361.3 | | | 408.0 | | | (46.7) | | | (11.4) | % | Total revenue | | 221.4 | | | 220.4 | | | 1.0 | | | 0.5 | % | | 2.3 | | | 0.1 | | | 2.7 | | | 0.2 | | | 25.1 | | | 20.2 | | | 251.5 | | | 240.9 | | | 10.6 | | | 4.4 | % |
| Property operating expenses | Property operating expenses | | 80.6 | | | 80.1 | | | 0.5 | | | 0.6 | % | | 3.2 | | | 2.1 | | | (1.1) | | | 0.6 | | | 5.8 | | | 19.5 | | | 88.5 | | | 102.3 | | | (13.8) | | | (13.5) | % | Property operating expenses | | 58.0 | | | 55.5 | | | 2.5 | | | 4.5 | % | | 0.3 | | | (0.1) | | | 0.6 | | | (1.1) | | | 5.8 | | | 3.9 | | | 64.7 | | | 58.2 | | | 6.5 | | | 11.2 | % |
| Real estate taxes | Real estate taxes | | 38.8 | | | 37.9 | | | 0.9 | | | 2.4 | % | | 0.6 | | | 0.5 | | | 1.9 | | | 1.3 | | | 1.5 | | | 8.8 | | | 42.8 | | | 48.5 | | | (5.7) | | | (11.8) | % | Real estate taxes | | 26.2 | | | 26.4 | | | (0.2) | | | (0.8) | % | | 0.1 | | | 0.1 | | | 0.5 | | | 1.6 | | | 0.8 | | | 1.3 | | | 27.6 | | | 29.4 | | | (1.8) | | | (6.1) | % |
| Third party management expenses | Third party management expenses | | — | | | — | | | — | | | — | % | | — | | | — | | | — | | | — | | | 9.9 | | | 7.5 | | | 9.9 | | | 7.5 | | | 2.4 | | | 32.0 | % | Third party management expenses | | — | | | — | | | — | | | — | % | | — | | | — | | | — | | | — | | | 5.3 | | | 6.5 | | | 5.3 | | | 6.5 | | | (1.2) | | | (18.5) | % |
| Net operating income | Net operating income | | 197.2 | | | 195.5 | | | 1.7 | | | 0.9 | % | | 8.6 | | | 3.4 | | | (0.1) | | | 5.9 | | | 14.4 | | | 44.9 | | | 220.1 | | | 249.7 | | | (29.6) | | | (11.9) | % | Net operating income | | 137.2 | | | 138.5 | | | (1.3) | | | (0.9) | % | | 1.9 | | | 0.1 | | | 1.6 | | | (0.3) | | | 13.2 | | | 8.5 | | | 153.9 | | | 146.8 | | | 7.1 | | | 4.8 | % |
| Depreciation and amortization | Depreciation and amortization | | 117.3 | | | 112.2 | | | 5.1 | | | 4.5 | % | | 5.5 | | | 3.1 | | | 0.7 | | | 2.9 | | | 7.7 | | | 27.2 | | | 131.2 | | | 145.4 | | | (14.2) | | | (9.8) | % | Depreciation and amortization | | 79.5 | | | 77.6 | | | 1.9 | | | 2.4 | % | | 1.1 | | | — | | | 1.0 | | | 0.4 | | | 6.0 | | | 5.2 | | | 87.6 | | | 83.2 | | | 4.4 | | | 5.3 | % |
| General & administrative expenses | General & administrative expenses | | — | | | — | | | — | | | — | % | | — | | | — | | | — | | | — | | | 22.0 | | | 24.0 | | | 22.0 | | | 24.0 | | | (2.0) | | | (8.3) | % | General & administrative expenses | | — | | | — | | | — | | | — | % | | — | | | — | | | — | | | — | | | 18.3 | | | 14.9 | | | 18.3 | | | 14.9 | | | 3.4 | | | 22.8 | % |
| | Net gain on disposition of real estate | Net gain on disposition of real estate | | (0.1) | | | (274.5) | | | 274.4 | | | (100.0) | % | Net gain on disposition of real estate | | (0.1) | | | (0.1) | | | — | | | — | % |
| Net gain on sale of undepreciated real estate | Net gain on sale of undepreciated real estate | | (2.9) | | | (0.2) | | | (2.7) | | | 1350.0 | % | Net gain on sale of undepreciated real estate | | (5.0) | | | (2.0) | | | (3.0) | | | 150.0 | % |
| Operating income (loss) | Operating income (loss) | | $ | 79.9 | | | $ | 83.3 | | | $ | (3.4) | | | (4.1) | % | | $ | 3.1 | | | $ | 0.3 | | | $ | (0.8) | | | $ | 3.0 | | | $ | (15.3) | | | $ | (6.3) | | | $ | 69.9 | | | $ | 355.0 | | | $ | (285.1) | | | (80.3) | % | Operating income (loss) | | $ | 57.7 | | | $ | 60.9 | | | $ | (3.2) | | | (5.3) | % | | $ | 0.8 | | | $ | 0.1 | | | $ | 0.6 | | | $ | (0.7) | | | $ | (11.1) | | | $ | (11.6) | | | $ | 53.1 | | | $ | 50.8 | | | $ | 2.3 | | | 4.5 | % |
| Number of properties | Number of properties | | 73 | | | 73 | | | 3 | | | 5 | | | 81 | | | Number of properties | | 73 | | | 73 | | | 1 | | | 4 | | | 78 | | |
| Square feet | Square feet | | 12.5 | | | 12.5 | | | 0.5 | | | 0.7 | | | 13.9 | | | Square feet | | 12.9 | | | 12.9 | | | 0.1 | | | 0.6 | | | 13.8 | | |
| Core Occupancy % (b) | Core Occupancy % (b) | | 90.1 | % | | 91.0 | % | | 94.6 | % | | Core Occupancy % (b) | | 89.5 | % | | 90.5 | % | | 100.0 | % | |
| Other Income (Expense): | Other Income (Expense): | | Other Income (Expense): | |
| Interest and investment income | Interest and investment income | | 7.8 | | | 1.5 | | | 6.3 | | | 420.0 | % | Interest and investment income | | 0.9 | | | 3.4 | | | (2.5) | | | (73.5) | % |
| Interest expense | Interest expense | | (47.0) | | | (56.5) | | | 9.5 | | | (16.8) | % | Interest expense | | (32.1) | | | (31.8) | | | (0.3) | | | 0.9 | % |
| Interest expense — Deferred financing costs | Interest expense — Deferred financing costs | | (2.1) | | | (2.2) | | | 0.1 | | | (4.5) | % | Interest expense — Deferred financing costs | | (1.5) | | | (1.4) | | | (0.1) | | | 7.1 | % |
| | Equity in loss of unconsolidated real estate ventures | Equity in loss of unconsolidated real estate ventures | | (20.8) | | | (9.9) | | | (10.9) | | | 110.1 | % | Equity in loss of unconsolidated real estate ventures | | (9.5) | | | (14.2) | | | 4.7 | | | (33.1) | % |
| Net gain on real estate venture transactions | | — | | | 0.1 | | | (0.1) | | | (100.0) | % | |
| | Income tax benefit | | — | | | 0.2 | | | (0.2) | | | (100.0) | % | |
| | Income tax provision | | Income tax provision | | (0.1) | | | — | | | (0.1) | | | — | % |
| Net income | Net income | | $ | 7.8 | | | $ | 288.2 | | | $ | (280.4) | | | (97.3) | % | Net income | | $ | 10.8 | | | $ | 6.8 | | | $ | 4.0 | | | 58.8 | % |
| Net income attributable to Common Shareholders of Brandywine Realty Trust | Net income attributable to Common Shareholders of Brandywine Realty Trust | | $ | 0.04 | | | $ | 1.66 | | | $ | (1.62) | | | (97.6) | % | Net income attributable to Common Shareholders of Brandywine Realty Trust | | $ | 0.06 | | | $ | 0.04 | | | $ | 0.02 | | | 50.0 | % |
(a)Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation, third-party management fees, provisions for impairment, and changes in the accrued rent receivable allowance. Other/(Eliminations) also includes properties sold and properties classified as held for sale.
(b)Pertains to Core Properties.
Total Revenue
Rents from the Total Portfolio decreasedincreased primarily as a result of the following:
•$57.52.3 million decreaseincrease related to a development property in our Austin, Texas segment that was partially placed into service during the YTD 2020 and 2021 Dispositions;third quarter of 2021;
•$7.42.2 million decreaseincrease related to a property that has been vacated and placed into redevelopment in our Metropolitan Washington D.C. segment;Recently Completed/Acquired Property;
•$2.5 million decrease related to a property that has been vacated and taken out of service for future demolition in our Austin, Texas segment;
•$6.4 million increase related to the Recently Completed/Acquired Properties;
•$1.22.0 million increase related to the residential and hotel components at the FMC Tower in our Philadelphia CBD segment related to higher occupancy partially due to the lifting of COVID-19 pandemic restrictions; and
The remaining $4.0•$1.4 million increase in Rents is primarily due to increased occupancy at certain properties across our Same Store Property Portfolio, as well as increased use of our properties by the tenants related to the liftingcommencement of COVID-19 pandemic restrictions.operations of B.Labs, a life science incubator lab in our Philadelphia CBD segment, during the first quarter of 2022.
Third party management fees, labor reimbursement, and leasing income increaseddecreased primarily due to $3.1a $1.1 million of fees earned from the Mid-Atlantic Office Venture formed in the fourth quarter of 2020, $1.9 million of fees earned from the Commerce Square Venture formed in the third quarter of 2020, and a $1.3 million increasedecrease in fees earned from our MAP Venture primarily related to increasesdecreases in leasing commissions and construction management fees.fees, $1.0 million decrease related to a third party management contract terminated in the fourth quarter of 2021, and $0.3 million decrease as a result of the sale of the final property at our Allstate Venture during the fourth quarter of 2021.
Other income increased primarily due to $1.6as a result of the following:
•$3.4 million in excess insurance proceeds related to properties in our Pennsylvania Suburbs segment and Austin, Texas segment, $0.4received during the six months ended June 30, 2022 offset by $0.7 million in proceedsreceived during the six months ended June 30, 2021 related to a legalproperty in our Austin, Texas segment; and
•$2.2 million of settlement during the second quarter of 2021, and an increase of $0.4 million in incomeproceeds received from the restaurant component of FMC Towera general contractor for liquidated damages as a result of the lifting of COVID-19 pandemic restrictions.a construction delay at a property in our Austin, Texas segment.
Property Operating Expenses
Property operating expenses across our Total Portfolio decreasedincreased primarily as a result of the following:
•$17.91.4 million decreaseincrease related to the YTD 2020 and 2021 Dispositions;commencement of operations of B.Labs, a life science incubator lab in our Philadelphia CBD segment, during the first quarter of 2022;
•$1.71.4 million decrease related to the Development/Redevelopment properties primarilyincrease related to a development property in our Metropolitan Washington D.C.Austin, Texas segment that was taken outpartially placed into service during the third quarter of service for redevelopment;2021;
•$0.8 million increase at the restaurant component of FMC Tower primarily as a result of the lifting of COVID-19 pandemic restrictions; and
•$1.10.3 million increase related to the Recently Completed/Acquired Properties.Property.
The remaining offsetting increase of $4.7$2.6 million is related to miscellaneous increases in property operating expenses across our Total Portfolio, primarily driven by increased use of our properties by the tenants as a result of lifting of COVID-19 pandemic restrictions and increases in property-related employee compensation expenses, marketing expenses, and repairs and maintenance.
Real Estate Taxes
Real estate taxes decreased primarily due to a $6.5$1.1 million decrease related to the YTD 2020 and 2021 Dispositions. The offsetting $0.8 million increase is primarily the result of acquisition of 250 King of Prussia Roadacross properties in our Pennsylvania Suburbs Segment and miscellaneous increases insegment as a result of tax assessments across our Total Portfolio.reassessments.
Depreciation and Amortization
Depreciation and amortization expense decreasedincreased primarily as a result of the following:
•$20.53.3 million decrease due to the YTD 2020 and 2021 Dispositions; and
•$6.5 million increase in depreciation expense due to the reassessment of the estimated useful life of seven properties in our Austin, Texas segment pursuant to future demolition plans as part of our Broadmoor master development plan beginning in the second quarter of 2021.2021; and
•$1.2 million increase related to the commencement of operations of B.Labs, a life science incubator lab in our Philadelphia CBD segment, during the first quarter of 2022.
General and Administrative
General and administrative expenses decreasedincreased primarily as a result of a $2.4 million recovery of previously expensed legal fees incurred in pursuit of a settlement that was received in the first quarter of 2021. The offsetting $0.4In addition, $1.4 million of the increase is primarily related to increased employee medical benefit costs.
Net Gain on disposition of Real Estate
The gain of $274.5 million recognizednon-cash compensation expense during the ninesix months ended SeptemberJune 30, 2020 is primarily related2022 compared to the following:
•$271.9 million related to the sale of a 30% preferred equity interest in One Commerce Square and Two Commerce Square, which resulted in deconsolidation of the properties and recognition of our investment in the properties at fair value; and
•$2.3 million related to the disposition of 52 East Swedesford Road, an office property in our Pennsylvania Suburbs Segment.
Net Gain on Sale of Undepreciated Real Estate
The gain of $2.9$5.0 million recognized during the ninesix months ended SeptemberJune 30, 20212022 is due to the following:
•$2.03.4 million related to the sale of a parcel of land in our Metropolitan Washington, D.C. segment; and
•$0.6 million related to the sale of a portfolio of five parcels of land and three operating properties in our Other segment.
The gain of $2.0 million recognized during the six months ended June 30, 2021 is related to the formation of the 3025 JFK Venture, which resulted in deconsolidation of the project and recognition of our investment in the real estate venture at fair value; and
•$0.9 million related to the sale of three parcels of land in our Other Segment.
The gain of $0.2 million recognized during the nine months ended September 30, 2020 resulted from the sale of Keith Valley, a land parcel in our Pennsylvania Suburbs Segment.value.
Interest and Investment Income
Interest and investment income increaseddecreased by $6.5$2.5 million primarily as a result of our preferred equity investment in a single-purpose entity that owned two stabilized office buildings located in Austin, Preferred Equity Investment,Texas, which closed on December 31, 2020 and was redeemed prior to maturity on September 3, 2021. Of the $6.5 million increase, $2.8 million was related to receiving our accelerated minimum return and exit fees paid in cash on the redemption date.
Interest Expense
Interest expense decreased primarily due to the following:
•$4.8 million decrease due to deconsolidation of One Commerce Square and Two Commerce Square and the associated mortgage loans on July 21, 2020;
•$2.9 million decrease due to an increase in capitalized interest on our various development projects as well as capitalized interest on our investment in 3025 JFK Venture;
•$2.6 million decrease due to the purchase of the Two Logan Square mortgage in the fourth quarter of 2020; and
•$2.0 million increase due to a reduction of interest expense recognized during the three months ended September 30, 2020 on account of a contingent payment to an unaffiliated third party. The amount had previously accreted through interest expense and a portion of the contingent payment ceased to be probable in the third quarter of 2020 due to the anticipated purchase of the Two Logan Square mortgage in the fourth quarter of 2020.
The remaining decrease is primarily related to lower interest rates during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.
Equity in Loss of unconsolidated real estate venturesUnconsolidated Real Estate Ventures
Equity in loss of unconsolidated real estate ventures increased primarily due to the following:
•$9.93.1 million increasedecrease associated with our Commerce Square Venture formed on July 21, 2020;
•$1.7 million increase related to our MAP Ventureprimarily due to lower revenues driven by lower occupancya decrease in the amortization of in-place lease intangibles during the ninesix months ended SeptemberJune 30, 2021 than2022 compared to the ninesix months ended SeptemberJune 30, 2020;
•$0.9 million increase associated with our BDN AI Venture, which is primarily driven by to our $0.6 million share of the held for sale impairment on the remaining property held by the venture. See Note 4, ''Investment in Unconsolidated Real Estate Ventures" to our Consolidated Financial Statements for further information;
•$0.7 million decrease associated with our 4040 Wilson Venture completed during the first quarter of 2021; and
•$0.6 million decrease associated with our Mid-Atlantic Office Venture formed on December 21, 2020.1919 Market Venture;
•$0.4 million decrease associated with MAP Venture.
LIQUIDITY AND CAPITAL RESOURCES
General
Our principal liquidity funding needs for the next twelve months are as follows:
•normal recurring expenses;
•capital expenditures, including capital and tenant improvements and leasing costs;
•debt service and principal repayment obligations;
•current development and redevelopment costs;
•commitments to unconsolidated real estate ventures;
•distributions to shareholders to maintain our REIT status;
•possible acquisitions of properties, either directly or indirectly through the acquisition of equity interest therein; and
•possible common share repurchases.
We expect to satisfy these needs using one or more of the following:
•cash flows from operations;
•distributions of cash from our unconsolidated real estate ventures;
•cash and cash equivalent balances;
•availability under our unsecured Credit Facility;credit facility;
•secured construction loans and long-term unsecured indebtedness;
•sales of real estate or contributions of interests in real estate to joint ventures; and
•issuances of Parent Company equity securities and/or units of the Operating Partnership.
As of SeptemberJune 30, 2021,2022, the Parent Company owned a 99.5%99.7% interest in the Operating Partnership. The remaining interest of approximately 0.5%0.3% pertains to common limited partnership interests owned by non-affiliated investors who contributed property to the Operating Partnership in exchange for their interests. As the sole general partner of the Operating Partnership, the Parent Company has full and complete responsibility for the Operating Partnership’s day-to-day operations and management. The Parent Company’s source of funding for its dividend payments and other obligations is the distributions it receives from the Operating Partnership.
As summarized above, we believe that our liquidity needs will be satisfied through available cash balances and cash flows from operations, financing activities and real estate sales. Rental revenue and other income from operations are our principal sources of cash to pay operating expenses, debt service, recurring capital expenditures and the minimum distributions required to maintain our REIT qualification. We seek to increase cash flows from our properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our revenue also includes third-party fees generated by our property management, leasing, development and construction businesses. We believe that our revenue, together with proceeds from property sales and debt financings, will continue to provide funds for our short-term liquidity needs. However, material changes in our operating or financing activities may adversely affect our net cash flows. With uncertain economic conditions, vacancy rates may increase, effective rental rates on new and renewed leases may decrease and tenant installation costs, including concessions, may increase in most or all of our markets during 20212022 and possibly beyond. As a result, our revenues and cash flows could be insufficient to cover operating expenses, including increased tenant installation costs, pay debt service or make distributions to shareholders over the short-term. If this situation were to occur, we expect that we would finance cash deficits through borrowings under our unsecured revolving credit facility and other sources of debt and equity financings. In addition, a material adverse change in cash provided by operations could adversely affect our compliance with financial performance covenants under our unsecured revolving credit facility, including unsecured term loans and unsecured notes. As of SeptemberJune 30, 20212022 we were in compliance with all of our debt covenants and requirement obligations.
On June 30, 2022, we executed the 2022 Credit Agreement, which, among other things, provides for the Revolving Credit Facility and Term Loan. As of June 30, 2022, based on the Operating Partnership's unsecured senior debt rating, the applicable margin for revolving loans under the Revolving Credit Facility was 105.0 basis points (excluding the applicable facility fee of 25 basis points) and was 120.0 basis points for the Term Loan, plus, in each case, a daily SOFR adjustment of 10 basis points. Through a series of interest rate swaps, the $250.0 million principal amount of the Term Loan has a fixed interest rate of 2.87% until October 8, 2022. See Note 7, ''Debt Obligations," for further information.
In addition, we are continuing to monitor the ongoing COVID-19 pandemic and the related economic impacts, inflation, market volatility, and business disruption, and its impact on our tenants. The severity and duration of the pandemic and its impact on our operations and liquidity is uncertain and continues to evolve globally. However, if the pandemic continues, there will likely be continued negative economic impacts, market volatility, and business disruption which could negatively impact our tenants’
ability to pay rent, our ability to lease vacant space, and our ability to complete development and redevelopment projects, and these consequences, in turn, could materially impact our results of operations. We collected 99.5% of total cash-based rent due from tenants during the third quarter of 2021, which reflects a 99.6% collection rate from our office tenants.
We have granted rent relief requests primarily to our co-working and retail tenants. The relief requests have substantially all been in the form of rent deferral for varying lengths of time, but were/arewere primarily being repaid in 2020 and 2021. For those tenants we believe require rent relief, we have granted deferrals and, in some instances, rent abatements while receiving extended lease terms through favorable lease extensions. As of September 30, 2021, we have provided $4.8 million of rent relief to 65 tenants approximating 0.9 million square feet. We continue to assess the merits of rent deferral requests and can
give no assurances on the outcomes of these ongoing negotiations, the amount and nature of the rent relief packages and ultimate recovery of the amounts deferred.
We use multiple financing sources to fund our long-term capital needs. When needed, we use borrowings under our unsecured revolving credit facility for general business purposes, including to meet debt maturities and to fund distributions to shareholders as well as development and acquisition costs and other expenses. In light of the volatility in financial markets and economic uncertainties, it is possible, that one or more lenders under our unsecured revolving credit facility could fail to fund a borrowing request. Such an event could adversely affect our ability to access funds under our unsecured credit facility when needed to fund distributions or pay expenses.
Our ability to incur additional debt is dependent upon a number of factors, including our credit ratings, the value of our unencumbered assets, our degree of leverage and borrowing restrictions imposed by our lenders. If one or more rating agencies were to downgrade our unsecured credit rating, our access to the unsecured debt market would be more limited and the interest rate under our unsecured credit facility and unsecured term loan would increase.
The Parent Company unconditionally guarantees the Operating Partnership’s unsecured debt obligations, which, as of SeptemberJune 30, 2021,2022, amounted to $1,828.6$2,042.6 million. We did not have any secured debt obligations on our wholly-owned portfolio as of SeptemberJune 30, 2021.2022.
Capital Markets
The Parent Company issues equity from time to time, the proceeds of which it contributes to the Operating Partnership in exchange for additional interests in the Operating Partnership, and guarantees debt obligations of the Operating Partnership. The Parent Company’s ability to sell common shares and preferred shares is dependent on, among other things, general market conditions for REITs, market perceptions about the Company as a whole and the current trading price of the Parent Company’s shares. The Parent Company maintains a shelf registration statement that covers the offering and sale of common shares, preferred shares, depositary shares, warrants and unsecured debt securities. Subject to our ongoing compliance with securities laws, and if warranted by market conditions, we may offer and sell equity and debt securities from time to time under the shelf registration statement or in transactions exempt from registration.
See Note 12,11, ''Beneficiaries' Equity of the Parent Company”Company,” to our Consolidated Financial Statements for further information related to our share repurchase program. We expect to fund any additional share repurchases with a combination of available cash balances and availability under our unsecured revolving credit facility. The timing and amounts of any repurchases will depend on a variety of factors, including market conditions, regulatory requirements, share prices, capital availability and other factors as determined by our management team. The repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without notice.
Capital Recycling
The Operating Partnership also considers net sales of selected properties and recapitalization of unconsolidated real estate ventures as additional sources of managing its liquidity. During the ninesix months ended SeptemberJune 30, 2021,2022, we closed on the sale of three parcels of land for net cash proceeds of $10.2$38.8 million as well as a portfolio of 3 office properties and 5 parcels of land in Gibbsboro, New Jersey for net cash proceeds of $4.0 million. In addition, we contributed our investment in a 99-year prepaid leasehold interest in a one-acre land parcel held for development to 3025 JFK Venture.
As of SeptemberJune 30, 2021,2022, we had $42.5$28.8 million of cash and cash equivalents and $598.2$381.7 million of available borrowings under our unsecured revolving credit facility, net of $1.8$4.3 million in letters of credit outstanding. Based on the foregoing, as well as cash flows from operations net of dividend requirements, we believe we have sufficient capital to fund our remaining capital requirements on existing development and redevelopment projects and pursue additional attractive investment opportunities. We expect that our primary uses of capital during the remainder of 20212022 will be to fund our current development and redevelopment projects.
Cash Flows
The following discussion of our cash flows is based on the consolidated statement of cash flows and is not meant to be a comprehensive discussion of the changes in our cash flows for the periods presented.
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, we maintained cash and cash equivalents and restricted cash of $43.3$29.8 million and $47.1$28.3 million, respectively. We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following table summarizes changes in our cash flows (in thousands):
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| Activity | Activity | | 2021 | | 2020 | | (Decrease) Increase | Activity | | 2022 | | 2021 | | (Decrease) Increase |
| Operating | Operating | | $ | 140,719 | | | $ | 162,464 | | | $ | (21,745) | | Operating | | $ | 78,494 | | | $ | 79,126 | | | $ | (632) | |
| Investing | Investing | | (44,921) | | | (24,023) | | | (20,898) | | Investing | | (188,862) | | | (68,403) | | | (120,459) | |
| Financing | Financing | | (99,578) | | | (166,616) | | | 67,038 | | Financing | | 111,848 | | | (9,288) | | | 121,136 | |
| Net cash flows | Net cash flows | | $ | (3,780) | | | $ | (28,175) | | | $ | 24,395 | | Net cash flows | | $ | 1,480 | | | $ | 1,435 | | | $ | 45 | |
Our principal source of cash flows is from the operation of our Properties. Our Properties provide a relatively consistent stream of cash flows that provides us with the resources to fund operating expenses, debt service and quarterly dividends. The decrease in operating cash flows is primarily due to the 15 properties disposedtiming of or contributed to an unconsolidated real estate venture from January 1, 2020 through September 30, 2021. operating expense payments.
Cash is used in investing activities to fund acquisitions, development, or redevelopment projects and recurring and nonrecurring capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing, and property management skills and invest in existing buildings that meet our investment criteria. During the ninesix months ended SeptemberJune 30, 2021,2022, when compared to the ninesix months ended SeptemberJune 30, 2020,2021, the change in investing cash flows was due to the following activities (in thousands):
| | | | | | | | |
| | (Decrease) Increase |
| Acquisitions of real estate | | $ | 11,432 (3,446) | |
| Capital expenditures and capitalized interest | | 49,794 (124,945) | |
| Capital improvements/acquisition deposits/leasing costs | | 4,286 (14,309) | |
| Joint venture investments | | (26,491)(11,145) | |
| Proceeds from the sale of properties | | (111,752)34,067 | |
ProceedsCapital distributions from notes receivableunconsolidated real estate ventures | | 50,000569 | |
| Other investing activities | | 1,833 (1,250) | |
| | |
| Increase in net cash used in investing activities | | $ | (20,898)(120,459) | |
We generally fund our investment activity through the sale of real estate, property-level financing, credit facilities, senior unsecured notes, and construction loans. From time to time, we may issue common or preferred shares of beneficial interest, or the Operating Partnership may issue common or preferred units of limited partnership interest. During the ninesix months ended SeptemberJune 30, 2021,2022, when compared to the ninesix months ended SeptemberJune 30, 2020,2021, the change in financing cash flows was due to the following activities (in thousands):
| | | | | | | | |
| | (Decrease) Increase |
| Proceeds from debt obligations | | $ | (54,500)100,000 | |
| Repayments of debt obligations | | 60,60533,000 | |
| Redemption of limited partnership units | | (2,334)(1,772) | |
Repurchase and retirement of common shares | | 60,000 | |
Other financing activities | | 2,239 | |
| Dividends and distributions paid | | 1,028 (113) | |
DecreaseDebt financing costs paid | | (6,641) | |
| Other financing activities | | (3,338) | |
Increase in net cash used inprovided by financing activities | | $ | 67,038121,136 | |
Capitalization
Indebtedness
The table below summarizes indebtedness under our unsecured debt at SeptemberJune 30, 20212022 and December 31, 2020:2021:
| | | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| | (dollars in thousands) | | (dollars in thousands) |
Balance: (a) | Balance: (a) | | Balance: (a) | |
| Fixed rate | Fixed rate | $ | 1,750,000 | | | $ | 1,775,774 | | Fixed rate | $ | 1,750,000 | | | $ | 1,750,000 | |
| Variable rate - unhedged | Variable rate - unhedged | 78,610 | | | 52,836 | | Variable rate - unhedged | 292,610 | | | 101,610 | |
| Total | Total | $ | 1,828,610 | | | $ | 1,828,610 | | Total | $ | 2,042,610 | | | $ | 1,851,610 | |
| Percent of Total Debt: | Percent of Total Debt: | | | | Percent of Total Debt: | | | |
| Fixed rate | Fixed rate | 95.7 | % | | 97.1 | % | Fixed rate | 85.7 | % | | 94.5 | % |
| Variable rate - unhedged | Variable rate - unhedged | 4.3 | % | | 2.9 | % | Variable rate - unhedged | 14.3 | % | | 5.5 | % |
| Total | Total | 100.0 | % | | 100.0 | % | Total | 100.0 | % | | 100.0 | % |
| Weighted-average interest rate at period end: | Weighted-average interest rate at period end: | | | | Weighted-average interest rate at period end: | | | |
| Fixed rate | Fixed rate | 3.8 | % | | 3.8 | % | Fixed rate | 3.8 | % | | 3.8 | % |
| Variable rate - unhedged | Variable rate - unhedged | 1.4 | % | | 1.5 | % | Variable rate - unhedged | 2.5 | % | | 1.3 | % |
| Total | Total | 3.7 | % | | 3.8 | % | Total | 3.7 | % | | 3.7 | % |
| Weighted-average maturity in years: | Weighted-average maturity in years: | | Weighted-average maturity in years: | |
| Fixed rate | Fixed rate | 4.2 | | 5.2 | Fixed rate | 4.2 | | 4.0 | |
| Variable rate - unhedged | Variable rate - unhedged | 13.8 | | 14.6 | Variable rate - unhedged | 6.5 | | 10.6 | |
| Total | Total | 4.7 | | 5.4 | Total | 4.5 | | 4.4 | |
(a)Consists of unpaid principal and does not reflect premium/discount or deferred financing costs.
Scheduled principal payments and related weighted average annual effective interest rates for our debt as of SeptemberJune 30, 20212022 were as follows (dollars in thousands):
| | Period | Period | | | Principal maturities | | | Weighted Average Interest Rate of Maturing Debt | Period | | | Principal maturities | | | Weighted Average Interest Rate of Maturing Debt |
| 2021 (three months remaining) | | | $ | — | | | | — | % | |
| 2022 | | | 250,000 | | | | 2.87 | % | |
| 2022 (six months remaining) | | 2022 (six months remaining) | | | $ | — | | | | — | % |
| 2023 | 2023 | | | 350,000 | | | | 3.87 | % | 2023 | | | 350,000 | | | | 3.87 | % |
| 2024 | 2024 | | | 350,000 | | | | 3.78 | % | 2024 | | | 350,000 | | | | 3.78 | % |
| 2025 | 2025 | | | — | | | | — | % | 2025 | | | — | | | | — | % |
| 2026 | 2026 | | | — | | | | — | % | 2026 | | | 214,000 | | | | 2.59 | % |
| 2027 | 2027 | | | 450,000 | | | | 4.03 | % | 2027 | | | 700,000 | | | | 3.61 | % |
| 2028 | 2028 | | | — | | | | — | % | 2028 | | | — | | | | — | % |
| 2029 | 2029 | | | 350,000 | | | | 4.30 | % | 2029 | | | 350,000 | | | | 4.30 | % |
| 2030 | 2030 | | | — | | | | — | % | 2030 | | | — | | | | — | % |
| 2031 | | 2031 | | | — | | | | — | % |
| Thereafter | Thereafter | | | 78,610 | | | | 1.39 | % | Thereafter | | | 78,610 | | | | 2.44 | % |
| Totals | Totals | | | $ | 1,828,610 | | | | 3.73 | % | Totals | | | $ | 2,042,610 | | | | 3.65 | % |
We anticipate refinancing our $350 million 3.95% Guaranteed Notes prior to the February 2023 maturity with similar guaranteed notes that will likely have a term between five and ten years. In the current interest rate environment, we anticipate the new guaranteed notes will have an effective interest rate that is above the current effective interest rate.
Unsecured Debt
The Operating Partnership is the issuer of our unsecured notes which are fully and unconditionally guaranteed by the Parent Company. The indenture under which the Operating Partnership issued its unsecured notes contains financial covenants, including: (i) a leverage ratio not to exceed 60%; (ii) a secured debt leverage ratio not to exceed 40%; (iii) a debt service coverage ratio of greater than 1.5 to 1.0; and (iv) an unencumbered asset value of not less than 150% of unsecured debt. The Operating Partnership is in compliance with all covenants as of SeptemberJune 30, 2021.2022.
The charter documents of the Parent Company and Operating Partnership do not limit the amount or form of indebtedness that the Operating Partnership may incur, and its policies on debt incurrence are solely within the discretion of the Parent Company’s Board of Trustees, subject to the financial covenants in the 2022 Credit Agreement, the indenture and other credit agreements.
Equity
In order to maintain its qualification as a REIT, the Parent Company is required to, among other things, pay dividends to its shareholders of at least 90% of its REIT taxable income. See Note 12,11, ''Beneficiaries' Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our dividends declared for the thirdsecond quarter of 2021.2022.
Inflation
operating expenses above certain per square-foot allowances. In addition, approximately 96% of our leases (as a proportion of our wholly-owned portfolio square feet) contain effective annual rent escalations that are either fixed (generally ranging from 2.5% to 3.0%) or indexed based on a consumer price index or other indices. Accordingly, we do not believe that our cash flows or earnings from real estate operations are subject to significant risks from inflation. However, a period of high inflation would cause an increase in the borrowing cost on our variable rate debt and would have an impact on our ability to refinance existing debt or obtain new debt at favorable terms. Contractual Obligations
Refer to our Annual Report on Form 10-K for the year ended December 31, 20202021 for a discussion of our contractual obligations.
There have been no material changes, outside the ordinary course of business, to these contractual obligations during the three months ended SeptemberJune 30, 2021.2022.
Funds from Operations (FFO)
Pursuant to the revised definition of FFO adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), we calculate FFO by adjusting net income/(loss) attributable to common unit holders (computed in accordance with GAAP) for gains (or losses) from sales of properties, impairment losses on depreciable consolidated real estate, impairment losses on investments in unconsolidated real estate ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated real estate ventures, real estate related depreciation and amortization, and after similar adjustments for unconsolidated real estate ventures. Our calculation of FFO includes gains from sale of undepreciated real estate and other assets, considered incidental to our main business, to third parties or unconsolidated real estate ventures. FFO is a non-GAAP financial measure. We believe that the use of FFO combined with the required GAAP presentations, has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REITs’ operating results more meaningful. We consider FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding property impairments, gains or losses related to sales of previously depreciated operating real estate assets and real estate depreciation and amortization, FFO can help the investing public compare the operating performance of a company’s real estate between periods or as compared to other companies. Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently.
We consider net income, as defined by GAAP, to be the most comparable earnings measure to FFO. While FFO and FFO per unit are relevant and widely used measures of operating performance of REITs, FFO does not represent cash flow from operations or net income as defined by GAAP and should not be considered as alternatives to those measures in evaluating our liquidity or operating performance. We believe that to further understand our performance, FFO should be compared with our reported net income/(loss) attributable to common unit holders and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.
The following table presents a reconciliation of net income attributable to common unit holdersunitholders to FFO for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (amounts in thousands, except share information) |
| Net income attributable to common unitholders | $ | 885 | | | $ | 276,042 | | | $ | 7,436 | | | $ | 287,903 | |
| Add (deduct): | | | | | | | |
| Amount allocated to unvested restricted unitholders | 91 | | | 93 | | | 331 | | | 317 | |
| Net gain on real estate venture transactions | — | | | (75) | | | — | | | (75) | |
| Net gain on disposition of real estate | — | | | (271,901) | | | (142) | | | (274,487) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Company's share of impairment of an unconsolidated real estate venture | 562 | | | — | | | 562 | | | — | |
| Depreciation and amortization: | | | | | | | |
| Real property | 39,824 | | | 34,479 | | | 105,652 | | | 110,026 | |
| Leasing costs including acquired intangibles | 7,801 | | | 8,542 | | | 24,035 | | | 33,786 | |
| Company’s share of unconsolidated real estate ventures | 12,078 | | | 13,014 | | | 39,869 | | | 22,243 | |
| Partners’ share of consolidated real estate ventures | (5) | | | (5) | | | (15) | | | (124) | |
| Funds from operations | $ | 61,236 | | | $ | 60,189 | | | $ | 177,728 | | | $ | 179,589 | |
| Funds from operations allocable to unvested restricted shareholders | (175) | | | (172) | | | (538) | | | (529) | |
| Funds from operations available to common share and unit holders (FFO) | $ | 61,061 | | | $ | 60,017 | | | $ | 177,190 | | | $ | 179,060 | |
| Weighted-average shares/units outstanding — basic (a) | 171,731,001 | | | 171,554,662 | | | 171,710,387 | | | 173,362,044 | |
| Weighted-average shares/units outstanding — fully diluted (a) | 173,061,177 | | | 172,008,126 | | | 172,993,752 | | | 173,717,070 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (amounts in thousands, except share information) |
| Net income (loss) attributable to common unitholders | $ | 4,555 | | | $ | (268) | | | $ | 10,510 | | | $ | 6,551 | |
| Add (deduct): | | | | | | | |
| Amount allocated to unvested restricted unitholders | 98 | | | 94 | | | 246 | | | 240 | |
| | | | | | | |
| Net gain on disposition of real estate | (144) | | | (68) | | | (144) | | | (142) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Depreciation and amortization: | | | | | | | |
| Real property | 36,631 | | | 34,294 | | | 72,793 | | | 65,828 | |
| Leasing costs including acquired intangibles | 6,597 | | | 7,954 | | | 13,591 | | | 16,234 | |
| Company’s share of unconsolidated real estate ventures | 12,903 | | | 14,060 | | | 24,198 | | | 27,791 | |
| Partners’ share of consolidated real estate ventures | (5) | | | (5) | | | (10) | | | (10) | |
| Funds from operations | $ | 60,635 | | | $ | 56,061 | | | $ | 121,184 | | | $ | 116,492 | |
| Funds from operations allocable to unvested restricted shareholders | (154) | | | (150) | | | (392) | | | (363) | |
| Funds from operations available to common share and unit holders (FFO) | $ | 60,481 | | | $ | 55,911 | | | $ | 120,792 | | | $ | 116,129 | |
| Weighted-average shares/units outstanding — basic (a) | 172,043,498 | | | 171,792,415 | | | 171,985,863 | | | 171,699,909 | |
| Weighted-average shares/units outstanding — fully diluted (a) | 172,776,896 | | | 173,289,294 | | | 173,149,640 | | | 172,958,591 | |
(a)Includes common shareshares and partnership units outstanding through the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.
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 our business plan, the primary market risk to which we are exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between our yield on invested assets and cost of funds and, in turn, our ability to make distributions or payments to our shareholders. While we have not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or continued economic slowdown, defaults could increase and result in losses to us which would adversely affect our operating results and liquidity.
Interest Rate Risk and Sensitivity Analysis
The analysis below presents the sensitivity of the market value of the Operating Partnership’s financial instruments to selected changes in market rates. The range of changes chosen reflects its view of changes which are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates chosen.
Our financial instruments consist of both fixed and variable rate debt. As of SeptemberJune 30, 2021,2022, our consolidated debt consisted of (i) unsecured notes with an outstanding principal balance of $1,500.0 million, all of which are fixed rate borrowings. We also haveborrowings, (ii) variable rate debt consisting of trust preferred securities with an outstanding principal balance of $78.6 million, (iii) a $600.0 million Credit Facilityrevolving credit facility with no amounts borrowedan outstanding balance of $214.0 million and (iv) an unsecured term loan with an outstanding principal balance of $250.0 million. The unsecured term loan has been swapped to a fixed rate. 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 instrument position, but has no impact on interest incurred or cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position.
As of SeptemberJune 30, 2021,2022, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was $1,624.0$1,462.0 million. For sensitivity purposes, a 100-basis point change in the discount rate equates to a change in the total fair value of our debt of approximately $16.3$14.6 million at SeptemberJune 30, 2021.2022.
From time to time or as the need arises, we use derivative instruments to manage interest rate risk exposures and not for speculative or trading purposes. The total outstanding principal balance of our variable rate debt was approximately $328.6
$542.6 million as of SeptemberJune 30, 2021.2022. The total fair value of our variable rate debt was approximately $309.5$542.6 million at SeptemberJune 30, 2021.2022. For sensitivity purposes, if market rates of interest increase by 100 basis points the fair value of our variable rate debt would decrease by approximately $9.3$27.4 million at SeptemberJune 30, 2021.2022. If market rates of interest decrease by 100 basis points the fair value of our outstanding variable rate debt would increase by approximately $10.3$29.3 million at SeptemberJune 30, 2021.2022.
These amounts were determined solely by considering the impact of hypothetical interest rates on our financial instruments. Due to the uncertainty of specific actions we may undertake to minimize possible effects of market interest rate increases, this analysis assumes no changes in our financial structure.
Item 4. Controls and Procedures
Controls and Procedures (Parent Company)
(a)Evaluation of disclosure controls and procedures. Under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, the Parent Company conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this quarterly report. Based on this evaluation, the Parent Company’s principal executive officer and principal financial officer have concluded that the Parent Company’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.
(b)Changes in internal control over financial reporting. There was no change in the Parent 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 Parent Company’s internal control over financial reporting.
Controls and Procedures (Operating Partnership)
(a)Evaluation of disclosure controls and procedures. Under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, the Operating Partnership conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act as of the end of the period covered by this quarterly report. Based on this evaluation, the Operating Partnership’s principal executive officer and principal financial officer have concluded that the Operating Partnership’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.
(b)Changes in internal control over financial reporting. There was no change in the Operating Partnership’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 Operating Partnership’s internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of SeptemberJune 30, 20212022 there have been no material changes to the Risk Factors disclosed in "Part I. Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)On September 28, 2021, the Parent Company issued 226,695 common shares to an unaffiliated third party in payment of two promissory notes in the aggregate amount of $3,853,850 issued by the Operating Partnership in exchange for a third party’s 1% residual limited partnership interest in One Commerce Square and Two Commerce Square, an unconsolidated real estate venture. The common shares were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended; and in connection with such issuance, the Operating Partnership issued to the Parent Company an equal number of common partnership units.None.
(b)Not applicable.
(c)There were no common share repurchases under the Parent Company’s share repurchase program during the fiscal quarter ended SeptemberJune 30, 2021.2022. As of SeptemberJune 30, 2021,2022, $82.9 million remained available for repurchases under our share repurchase program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| | | | | | | | | | | |
| (a) | Exhibits | | |
| Exhibits No. | | Description |
| 10.1 | | | Second Amended and Restated Credit Agreement, dated as of June 30, 2022, by and among Brandywine Realty Trust and Brandywine Operating Partnership, L.P., as Borrowers, and Bank of America, N.A., as Administrative Agent and Issuing Lender, and Citibank, N.A., as Co-Syndication Agent and Issuing Lender, and PNC Capital Markets LLC and Truist Securities, Inc., as Co-Syndication Agents, and Citizens Bank, N.A., M&T Bank, TD Bank, N.A., U.S. Bank National Association, The Bank of New York Mellon and Wells Fargo Bank, National Association, as Co-Documentation Agents, and BofA Securities, Inc., Citibank N.A., PNC Capital Markets LLC and Truist Securities, Inc., as Joint Lead Arrangers and BofA Securities, Inc. and Citibank N.A., as Joint Bookrunners (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on June 30, 2022 and incorporated herein by reference) |
| 31.1 | | | |
| 31.2 | | | |
| 31.3 | | | |
| 31.4 | | | |
| 32.1 | | | |
| 32.2 | | | |
| 32.3 | | | |
| 32.4 | | | |
| 99.1 | | | |
| 101.1 | | | The following materials from the Quarterly Reports on Form 10-Q of Brandywine Realty Trust and Brandywine Operating Partnership, L.P. for the quarter ended SeptemberJune 30, 20212022 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, detailed tagged and filed herewith. |
| 104 | | | Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
** Management contract or compensatory plan or arrangement.
Exhibits 32.1, 32.2, 32.3 and 32.4 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that section, nor shall any of such exhibits be deemed to be incorporated by reference in any filing of Brandywine Realty Trust or Brandywine Operating Partnership, L.P. under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise stated in such filing.
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: | OctoberJuly 29, 20212022 | | By: | /s/ Gerard H. Sweeney |
| | | | Gerard H. Sweeney, President and
Chief Executive Officer |
| | | | (Principal Executive Officer) |
| | | | |
| Date: | OctoberJuly 29, 20212022 | | By: | /s/ Thomas E. Wirth |
| | | | Thomas E. Wirth, Executive Vice President
and Chief Financial Officer |
| | | | (Principal Financial Officer) |
| | | | |
| Date: | OctoberJuly 29, 20212022 | | By: | /s/ Daniel Palazzo |
| | | | Daniel Palazzo, Vice President and
Chief Accounting Officer |
| | | | (Principal Accounting Officer) |
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 OPERATING PARTNERSHIP, L.P.
(Registrant)
BRANDYWINE REALTY TRUST,
as general partner |
| | | | |
| Date: | OctoberJuly 29, 20212022 | | By: | /s/ Gerard H. Sweeney |
| | | | Gerard H. Sweeney, President and
Chief Executive Officer |
| | | | (Principal Executive Officer) |
| | | |
| Date: | OctoberJuly 29, 20212022 | | By: | /s/ Thomas E. Wirth |
| | | | Thomas E. Wirth, Executive Vice President
and Chief Financial Officer |
| | | | (Principal Financial Officer) |
| | | |
| Date: | OctoberJuly 29, 20212022 | | By: | /s/ Daniel Palazzo |
| | | | Daniel Palazzo, Vice President and
Chief Accounting Officer |
| | | | (Principal Accounting Officer) |