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Press release from PR Newswire

Brandywine Realty Trust Announces FFO per Diluted Share of $0.32 for the First Quarter of 2012

Wednesday, April 25, 2012

Brandywine Realty Trust Announces FFO per Diluted Share of $0.32 for the First Quarter of 201216:15 EDT Wednesday, April 25, 2012RADNOR, Pa., April 25, 2012 /PRNewswire/ -- Brandywine Realty Trust (NYSE:BDN), a real estate investment trust focused on the ownership, management and development of Class A, urban and suburban office properties in the mid-Atlantic region and other select markets throughout the United States, today reported its financial and operating results for the three-month period ended March 31, 2012.  "We are pleased with our first quarter results and the progress to date on our 2012 business plan," stated Gerard H. Sweeney, President and Chief Executive Officer of Brandywine Realty Trust.  "Leasing activity and operational metrics were in line and we are 80% achieved on our speculative revenue target.  We completed over $94 million of dispositions during the first quarter, and subsequent to quarter end, executed a $100 million preferred share issuance and associated $50 million preferred share redemption.  With the combination of the higher level of executed and anticipated sales activity and the preferred share transactions, partially offset by strong operating performance, we are revising our previously issued 2012 FFO guidance to $1.30 to $1.35 from the prior range of $1.35 to $1.41."Financial HighlightsNet income allocated to common shares totaled $7.1 million or $0.05 per diluted share in the first quarter of 2012 compared to a net loss of ($2.6 million) or ($0.02) per diluted share in the first quarter of 2011.  Funds from operations available to common shares and units (FFO) in the first quarter of 2012 totaled $47.1 million or $0.32 per diluted share compared to $48.2 million or $0.33 per diluted share in the first quarter of 2011.  Our first quarter 2012 FFO payout ratio was 46.9% ($0.15 common share dividend paid / $0.32 FFO per share). In the first quarter of 2012, we incurred $12.3 million of revenue maintaining capital expenditures reflecting disbursements related to current and previously executed leases which along with other adjustments to FFO, resulted in $27.8 million of cash available for distribution (CAD) or $0.19 per diluted share compared to $25.4 million of CAD or $0.18 per diluted share in the first quarter of 2011 when we incurred $18.8 million of revenue maintaining capital expenditures.  Our first quarter 2012 CAD payout ratio was 78.9% ($0.15 common share dividend paid / $0.19 CAD per share).  Portfolio HighlightsIn the first quarter of 2012, our net operating income (NOI) excluding termination revenues and other income items increased 2.6% on a GAAP basis and declined 0.3% on a cash basis for our 225 same store properties which were 86.8% and 85.0% occupied on March 31, 2012 and March 31, 2011, respectively. During the first quarter of 2012, we commenced occupancy on 982,254 square feet of total leasing activity including 421,383 square feet of renewals, 441,872 square feet of new leases and 118,999 square feet of tenant expansions.  We have an additional 532,988 square feet of executed new leasing scheduled to commence subsequent to March 31, 2012. During the first quarter of 2012, we achieved a 59.7% tenant retention ratio in our core portfolio with positive net absorption of 76,547 square feet.  During the first quarter of 2012, we experienced a 5.6% decrease on our renewal rental rates and a 2.1% decrease on our new lease/expansion rental rates, both on a GAAP basis. At March 31, 2012, our core portfolio of 230 properties comprising 24.9 million square feet was 86.7% occupied and 88.8% leased (reflecting new leases commencing after March 31, 2012).Capital Markets HighlightsDuring the first quarter of 2012 as previously disclosed, we closed a new $600.0 million four-year unsecured revolving credit facility and three unsecured term loans of $150.0 million, $250.0 million and $200.0 million with terms of three, four and seven years, respectively.  The maturity of the revolving credit facility, three-year term loan and four-year term loan may each be extended for one additional year at our discretion.  We used a portion of the net proceeds from the funding of the three term loans to retire the $297.0 million outstanding balance on our prior $600.0 million unsecured revolving credit facility and the $37.5 million remaining balance on our prior $183.0 million term loan, both of which had been scheduled to mature on June 29, 2012 and are now terminated, and used the balance of the net proceeds for general corporate purposes including the establishment of interim cash balances.  We currently have no outstanding balance on our new $600.0 million unsecured revolving credit facility. During the first quarter of 2012, we repurchased $4.0 million of our 2012, 2014 and 2015 unsecured senior notes in a series of open-market transactions and incurred a ($0.2 million) loss on the early extinguishment of debt.  We funded these repurchases with available corporate funds. During the first quarter of 2012, we used available corporate funds to fund $12.0 million towards our 20% share of a $60.0 million mortgage loan repayment completed by one of our unconsolidated real estate ventures. At March 31, 2012, our net debt to gross assets measured 43.7% reflecting $284.2 million of cash and $50.2 million of securities on hand. For the quarter ended March 31, 2012, we achieved a 2.4 EBITDA to interest coverage ratio and a 7.2 ratio of net debt to annualized quarterly EBITDA based on consolidated EBITDA excluding non-recurring items, and inclusive of our pro rata share of unconsolidated EBITDA, interest and net debt. Subsequent to quarter end, we used available corporate funds to redeem the remaining $151.2 million balance of our $300.0 million 5.75% unsecured senior note issue due April 1, 2012. Subsequent to quarter end as previously disclosed, we closed a public offering of 4.0 million shares of 6.90% Series E Cumulative Redeemable Preferred Shares at $25.00 per share.  We will use a portion of the net proceeds from this offering to fund the previously announced redemption of all 2.0 million outstanding shares of our 7.50% Series C Cumulative Redeemable Preferred Shares at an aggregate cost of $50.0 million plus accumulated and unpaid dividends and used the remaining net proceeds for general corporate purposes.  We will recognize a $2.1 million preferred share redemption expense in the second quarter of 2012 related to the redemption of our 7.50% Series C Cumulative Redeemable Preferred Shares. Investment HighlightsDuring the first quarter of 2012, we completed the acquisition of 660 West Germantown Pike, a 154,392 square foot vacant office building located in Plymouth Meeting, Pennsylvania for $9.1 million and subsequently commenced a redevelopment of the entire property at a projected incremental cost of $18.8 million.  We expect to deliver the finished building by the end of this year and are already 58.2% pre-leased. We funded the acquisition and expect to fund the redevelopment costs with available corporate funds. During the first quarter of 2012, we completed the previously disclosed disposition of a fully leased, 268,240 square foot office building located in Herndon, Virginia for $91.1 million and also completed the disposition of a 90.1% leased, 32,978 square foot office building in Moorestown, New Jersey for $3.0 million.  We used the net proceeds from these sales for general corporate purposes. DistributionsOn March 20, 2012, our Board of Trustees declared a quarterly dividend distribution of $0.15 per common share that was paid on April 19, 2012 to shareholders of record as of April 5, 2012. Our Board also declared regular quarterly dividend distributions of $0.46875 per 7.50% Series C Cumulative Redeemable Preferred Share and $0.460938 per 7.375% Series D Cumulative Redeemable Preferred Share that were paid on April 16, 2012 to holders of record as of March 30, 2012 of the Series C and Series D Preferred Shares, respectively. All of our outstanding 7.50% Series C Cumulative Redeemable Preferred Shares have been called for early redemption on May 3, 2012 on which date each share will receive the $25.00 redemption price plus $0.09375 of accumulated and unpaid dividends.2012 Earnings and FFO GuidanceBased on current plans and assumptions and subject to the risks and uncertainties more fully described in our Securities and Exchange Commission filings, we are revising our previously issued guidance for 2012 FFO per diluted share to a range of $1.30 to $1.35 versus the prior range of $1.35 to $1.41.  The adjustment reflects an aggregate reduction of $0.07 per diluted share ? $0.03 per diluted share from our preferred share issuance and associated preferred share redemption and $0.04 per diluted share from the higher and earlier level of executed and anticipated sales activity versus our plan ? offset by approximately $0.02 per diluted share from better operating results. This guidance is provided for informational purposes and is subject to change.  The following is a reconciliation of the calculation of 2012 FFO per diluted share and earnings per diluted share:Guidance for 2012 Range or Value            Earnings (loss) per diluted share allocated to common shareholders $ (0.25)to    $ (0.20)            Plus:  real estate depreciation and amortization  1.551.55            FFO per diluted share $ 1.30to     $ 1.35Our 2012 FFO guidance does not include income arising from sales or the impact of future impairments, and does not include any income from the sale of undepreciated real estate.  Our 2012 earnings and FFO per diluted share each reflect $0.08 per diluted share of net non-cash income attributable to the second of five annual recognitions of 20% of the total net benefit of the previously disclosed rehabilitation tax credit financing on the 30th Street Post Office.  Other key assumptions include occupancy improving to 89.4% by year-end 2012, a (1.0%) decline ? 2.0% increase (GAAP) in overall lease rates, a resulting 0.5 ? 2.5% increase in 2012 same store NOI (GAAP), no additional capital markets activity, $175.0 million of aggregate sales activity and 147.0 million fully diluted weighted average shares.Non-GAAP Supplemental Financial MeasuresWe compute our financial results in accordance with generally accepted accounting principles (GAAP).  Although FFO, NOI and CAD are non-GAAP financial measures, we believe that FFO, NOI and CAD calculations are helpful to shareholders and potential investors and are widely recognized measures of real estate investment trust performance.  At the end of this press release, we have provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measure.Funds from Operations (FFO)  We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than us.  NAREIT defines FFO as net income (loss) before non-controlling interests and excluding gains (losses) on sales of depreciable operating property and extraordinary items (computed in accordance with GAAP); plus real estate related depreciation and amortization (excluding amortization of deferred financing costs), and after similar adjustments for unconsolidated joint ventures.  Net income, the GAAP measure that we believe to be most directly comparable to FFO, includes depreciation and amortization expenses, gains or losses on property sales, extraordinary items and non-controlling interests.  To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income (determined in accordance with GAAP) as presented in the financial statements included elsewhere in this release.  FFO does not represent cash flow from operating activities (determined in accordance with GAAP) and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders.Net Operating Income (NOI)NOI is a non-GAAP financial measure equal to net income available to common shareholders, the most directly comparable GAAP financial measure, plus corporate general and administrative expense, depreciation and amortization, interest expense, non-controlling interests and losses from early extinguishment of debt, less interest income, development and management income, gains from property dispositions, gains on sale from discontinued operations, gains on early extinguishment of debt, income from discontinued operations, income from unconsolidated joint ventures and non-controlling interests.  In some cases, we also present NOI on a cash basis, which is NOI after eliminating the effect of straight-lining of rent and deferred market intangible amortization.  NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently.  NOI should not be considered an alternative to net income as an indication of our performance, or as an alternative to cash flow from operating activities as a measure of our liquidity or ability to make cash distributions to shareholders.Cash Available for Distribution (CAD)CAD is a non-GAAP financial measure that is not intended as an alternative to cash flow from operating activities as determined under GAAP.  CAD is presented solely as a supplemental disclosure with respect to liquidity because we believe it provides useful information regarding our ability to fund our distributions.  Because other companies do not necessarily calculate CAD the same way as we do, our presentation of CAD may not be comparable to similarly titled measures provided by other companies.Revenue Maintaining Capital ExpendituresRevenue maintaining capital expenditures, a non-GAAP financial measure, are a component of our CAD calculation and represent the portion of capital expenditures required to maintain our current level of funds available for distribution.  Revenue maintaining capital expenditures include current tenant improvement and allowance expenditures for all tenant spaces that have been owned for at least one year, and that were not vacant during the twelve-month period prior to the date that the tenant improvement or allowance expenditure was incurred.  Revenue maintaining capital expenditures also include other expenditures intended to maintain our current revenue base.  Accordingly, we exclude capital expenditures related to development and redevelopment projects, as well as certain projects at our core properties that are intended to attract prospective tenants in order to increase revenues and/or occupancy rates.First Quarter Earnings Call and Supplemental Information PackageWe will host a conference call on Thursday, April 26, 2012 at 9:00 a.m. EDT.  The conference call can be accessed by calling 1-800-683-1525 and referencing conference ID #29831068.  Beginning two hours after the conference call, a taped replay of the call can be accessed 24 hours a day through Thursday, May 10, 2012 by calling 1-855-859-2056 and providing access code 29831068.  In addition, the conference call can be accessed via a webcast located on our website at www.brandywinerealty.com.We have prepared a supplemental information package that includes financial results and operational statistics related to the first quarter earnings report.  The supplemental information package is available in the "Investor Relations ? Financial Reports" section of our website at www.brandywinerealty.com.  Looking Ahead - Second Quarter 2012 Conference CallWe anticipate we will release our second quarter 2012 earnings on Wednesday, July 25, 2012, after the market close and will host our second quarter 2012 conference call on Thursday, July 26, 2012, at 9:00 a.m. EDT.  We expect to issue a press release in advance of these events to reconfirm the dates and times and provide all related information.About Brandywine Realty Trust Brandywine Realty Trust is one of the largest, publicly traded, full-service, integrated real estate companies in the United States.  Organized as a real estate investment trust and operating in select markets, Brandywine owns, leases and manages an urban, town center and suburban office portfolio comprising 306 properties and 34.6 million square feet, including 231 properties and 25.1 million square feet owned on a consolidated basis and 52 properties and 6.5 million square feet in 18 unconsolidated real estate ventures. For more information, please visit www.brandywinerealty.com. Forward-Looking StatementsEstimates of future earnings per share, FFO per share, common share dividend distributions and certain other statements in this release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our and our affiliates' actual results, performance, achievements or transactions to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements.  Such risks, uncertainties and other factors relate to, among others: our ability to lease vacant space and to renew or relet space under expiring leases at expected levels; competition with other real estate companies for tenants; the potential loss or bankruptcy of major tenants; interest rate levels; the availability of debt, equity or other financing; risks of acquisitions, dispositions and developments, including the cost of construction delays and cost overruns; unanticipated operating and capital costs; our ability to obtain adequate insurance, including coverage for terrorist acts; dependence upon certain geographic markets; and general and local economic and real estate conditions, including the extent and duration of adverse changes that affect the industries in which our tenants operate. Additional information on factors which could impact us and the forward-looking statements contained herein are included in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2011. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events except as required by law.BRANDYWINE REALTY TRUSTCONSOLIDATED BALANCE SHEETS(in thousands)March 31,December 31,20122011(unaudited)ASSETSReal estate investments:Rental properties$      4,717,124$      4,793,080Accumulated depreciation(884,026)(865,710)3,833,0983,927,370Construction-in-progress38,44225,083Land inventory109,285109,0083,980,8254,061,461Cash and cash equivalents284,236410Held to maturity securities50,164-Accounts receivable, net14,03814,718Accrued rent receivable, net110,853108,101Investment in real estate ventures127,536115,807Deferred costs, net118,685115,362Intangible assets, net63,96970,515Notes receivable17,99118,186Other assets57,04653,158Total assets$      4,825,343$      4,557,718LIABILITIES AND EQUITYMortgage notes payable, including premiums$         508,210$         511,061Unsecured credit facility-275,500Unsecured term loan600,00037,500Unsecured senior notes, net of discounts1,566,2401,569,934Accounts payable and accrued expenses72,83269,929Distributions payable23,86023,895Deferred income, gains and rent99,90599,569Acquired lease intangibles, net33,27835,106Other liabilities45,57645,528Total liabilities2,949,9012,668,022Brandywine Realty Trust's equity:Preferred shares - Series C2020Preferred shares - Series D2323Common shares1,4281,424Additional paid-in capital2,777,1482,776,197Deferred compensation payable in common stock5,4365,631Common shares held in grantor trust(5,436)(5,631)Cumulative earnings486,491477,338Accumulated other comprehensive loss(6,005)(6,079)Cumulative distributions(1,415,916)(1,392,332)Total Brandywine Realty Trust's equity1,843,1891,856,591Non-controlling interests32,25333,105Total equity1,875,4421,889,696Total liabilities and equity$      4,825,343$      4,557,718   BRANDYWINE REALTY TRUSTCONSOLIDATED STATEMENTS OF OPERATIONS(unaudited, in thousands, except share and per share data)Three Months Ended March 31,20122011RevenueRents$           116,296$         117,362Tenant reimbursements19,33222,532Termination fees1,497568Third party management fees, labor reimbursement and leasing3,1422,753Other1,5341,083Total revenue141,801144,298Operating ExpensesProperty operating expenses40,19745,002Real estate taxes14,33313,958Third party management expenses1,2501,510Depreciation and amortization50,50250,295General & administrative expenses6,0506,244Total operating expenses112,332117,009Operating income29,46927,289Other income (expense)Interest income483441Interest expense(34,144)(32,393)Deferred financing costs(1,311)(928)Interest expense - financing obligation(182)-Equity in income of real estate ventures441,233Net gain on sale of interests in real estate-2,791Loss on early extinguishment of debt(248)-Loss from continuing operations (5,889)(1,567)Discontinued operations:Income from discontinued operations5571,077Net gain on disposition of discontinued operations14,668-Total discontinued operations15,2251,077Net income (loss)9,336(490)Net (income) loss from discontinued operations attributableto non-controlling interests - LP units(279)(22)Net (income) loss from continuing operations attributable to non-controlling interests - LP units14573Net (income) loss attributable to non-controlling interests(134)51Net income (loss) attributable to Brandywine Realty Trust9,202(439)Preferred share dividends(1,998)(1,998)Amount allocated to unvested restricted shareholders(96)(142)Net income (loss) attributable to common shareholders$               7,108$           (2,579)PER SHARE DATABasic income (loss) per common share$                0.05$             (0.02)Basic weighted-average shares outstanding142,820,955134,577,421Diluted income (loss) per common share$                0.05$             (0.02)Diluted weighted-average shares outstanding142,820,955134,577,421   BRANDYWINE REALTY TRUSTFUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION(unaudited, in thousands, except share and per share data)Three Months Ended March 31,20122011Reconciliation of Net Loss to Funds from Operations:Net loss attributable to common shareholders$           7,108$          (2,579)Add (deduct):Net loss attributable to non-controlling interests - LP units(145)(73)Amount allocated to unvested restricted shareholders96142Net gain on sale of interests in real estate-(2,791)Net income from discontinued operations attributable to non-controlling interests - LP units27922Net loss on disposition of discontinued operations(14,668)-Depreciation and amortization:   Real property - continuing operations39,54038,056   Leasing costs (includes acquired intangibles) - continuing operations10,85611,935   Real property - discontinued operations8021,363   Leasing costs (includes acquired intangibles) - discontinued operations14963   Company's share of unconsolidated real estate ventures3,3902,381Funds from operations$          47,407$          48,519Funds from operations allocable to unvested restricted shareholders(318)(340)Funds from operations available to common share and unit holders (FFO)$          47,089$          48,179FFO per share - fully diluted$             0.32$             0.33Weighted-average shares/units outstanding - fully diluted145,901,718145,848,318Dividends paid per common share$             0.15$             0.15Payout ratio of FFO (Dividends paid per common share divided / FFO per diluted share)46.9%45.5%CASH AVAILABLE FOR DISTRIBUTION (CAD):Funds from operations available to common share and unit holders$          47,089$          48,179Add (deduct):Rental income from straight-line rent, including discontinued operations(6,930)(4,729)Deferred market rental income, including discontinued operations(176)-Company's share of unconsolidated real estate ventures' straight-line and deferred market rent(1,441)(1,261)Historic tax credit transaction income(323)59Straight-line and deferred market ground rent expense activity498524Stock-based compensation costs1,2901,372Fair market value amortization - mortgage notes payable91(243)Debt discount amortization - exchangeable notes-272Sub-total certain non-cash items(6,991)(4,006)Less:Revenue maintaining capital expenditures:     Building improvements(878)(1,567)     Tenant improvements(8,944)(13,169)     Lease commissions(2,476)(4,026)Total revenue maintaining capital expenditures(12,298)(18,762)Cash available for distribution$          27,800$          25,411CAD per share - fully diluted $             0.19$             0.18Weighted-average shares/units outstanding - fully diluted145,901,718145,848,318Less: certain partnership units which were not entitled to distributions until August 5, 2011-(7,111,112)Adjusted Weighted-average shares/units outstanding - fully diluted145,901,718138,737,206Dividends paid per common share$             0.15$             0.15Payout ratio of CAD (Dividends paid per common share / CAD per diluted share)78.9%83.3%   BRANDYWINE REALTY TRUSTSAME STORE OPERATIONS - 1ST QUARTER(unaudited and in thousands)Of the 231 properties owned by the Company as of March 31, 2012, a total of 225 properties ("Same Store Properties") containing an aggregate of 24.5 million net rentable square feet were owned for the entire three-month periods ended March 31, 2012 and 2011.  Average occupancy for the Same Store Properties was 86.8% during 2012 and 85.0% during 2011. The following table sets forth revenue and expense information for the Same Store Properties:Three Months Ended March 31,20122011RevenueRents$           115,381$           114,982Tenant reimbursements19,14022,400Termination fees1,497568Other1,391772137,409138,722Operating expensesProperty operating expenses41,72947,132Real estate taxes14,05913,530Net operating income$             81,621$             78,060Net operating income - percentage change over prior year4.6%Net operating income, excluding termination fees & other$             78,733$             76,720Net operating income, excluding termination fees & other - percentage change over prior year2.6%Net operating income             $             81,621$             78,060     Straight line rents(6,624)(4,517)     Above/below market rent amortization(1,321)(1,220)     Non-cash ground rent498524Cash - Net operating income$             74,174$             72,847Cash - Net operating income - percentage change over prior year1.8%Cash - Net operating income, excluding termination fees & other$             71,286$             71,507Cash - Net operating income, excluding termination fees & other - percentage change over prior year-0.3%The following table is a reconciliation of Net Income to Same Store net operating income:Three Months Ended March 31,20122011Net income (loss):$               9,336$                (490)Add/(deduct):Interest income(483)(441)Interest expense34,14432,393Deferred financing costs1,311928Interest expense - financing obligation182-Equity in income of real estate ventures(44)(1,233)Depreciation and amortization50,50250,295Net gain on sale on interests in real estate-(2,791)Loss on early extinguishment of debt248-General & administrative expenses6,0506,244Total discontinued operations(15,225)(1,077)Consolidated net operating income86,02183,828Less:  Net operating income of non same store properties(982)49Less:  Eliminations and non-property specific net operating income(3,418)(5,817)Same Store net operating income$             81,621$             78,060 SOURCE Brandywine Realty TrustFor further information: Company / Investor Contact: Marge Boccuti, Manager, Investor Relations, +1-610-832-7702, marge.boccuti@bdnreit.com