BRANDYWINE REALTY TRUST
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 27, 2025
BDN$3.24+2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-22.
0000790816-24-000014
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0000790816-25-000009
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 180 previous paragraphs and 181 current paragraphs.
111 unchanged; 37 reworded; 28 added; 28 removed; 4 previous and 5 current paragraphs rearranged.
Tables are not compared: 12 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
Overall macroeconomic conditions, including but not limited to inflation and high interest rates and changes in work patterns, including remote working arrangements, that have contributed to negative lease absorption within our office markets, have had a dampening effect on the fundamentals of our business, as reflected in, among other metrics, our increased borrowing costs and lower occupancy as well as downward pressures on asset valuations. These adverse conditions could continue to impact our net income, cash flows and liquidity and could have a material adverse effect on our financial condition and results of operations.
Current report
Notwithstanding the challenging macroeconomic conditions, which have contributed to recent difficulties in asset dispositions at acceptable prices, leasing of vacant space at attractive rents and sourcing of capital for development projects at acceptable costs, as well as to impairments of assets, we believe that our portfolio of Properties and investments, and liquidity profile, will allow us to maintain stable operating performance. In our ongoing assessment of our Properties as “quality” or “high quality”, we consider both their quantitative and qualitative attributes, including in relation to other properties within a given submarket or adjacent submarkets that compete with our portfolio for tenants. The attributes that we consider in our assessment include the age and condition of the property, average asking rental rates, access to mass transit and highways, floorplate efficiencies, amenities within, and nearby, the property and availability of parking as well as market demographics such that bear on demand for space at our portfolio. We also believe that our portfolio and liquidity profile will enable us to raise capital, as 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.
Current report
(2)Includes leasing at recently completed not-stabilized Properties. The statistics presented for periods ended prior to the three-month period ended December 31, 2024 have not been adjusted for properties sold subsequent to the periods presented.
Current report
(6)For comparison purposes, we exclude new leases of space when the previous lease of such space ended more than 12 months from the signing date for the new leases.
Current report
(7)Average annual rent represents total initial contractual rent under the applicable leases plus contractual fixed rent increases due under the applicable leases averaged over the total terms of the applicable leases.
Current report
Our actual leasing capital costs as a percentage of rents are largely a function of the composition of our leases to new tenants or renewals with existing tenants, in addition to size and timing of occupancy. We generally experience lower leasing costs in connection with the renewal of leases with existing tenants compared to leases with new tenants. Our properties compete for tenants with similar properties primarily on the basis of location, total occupancy costs (including base rent and operating expenses), services and amenities, and the design and condition of the properties. As leases at our properties expire, we face competition to renew or re-let space in light of the competing properties within the applicable markets. As a result, and as part of customary lease negotiations, we are often required to provide rent concessions or abatements, incur charges for tenant improvements and other inducements, including early termination rights or potential below market renewal options, all of which impact, in varying degrees, annualized rents.
Current report
The table below summarizes occupancy statistics of our Core Properties by segment for thetwelve months ended December 31, 2024 and 2023:
Current report
The table below summarizes the occupancy statistics of our Properties, broken down by property types for the twelve months ended December 31, 2024 and 2023:
Current report
(1)Represents Philadelphia portfolio assets located at 3000 Market Street and 3025 Market Street in Philadelphia, Pennsylvania, dedicated life science floors at Cira Centre in Philadelphia, Pennsylvania and 250 King of Prussia Road in Radnor, Pennsylvania.
Current report
(2)Represents our residential operation at 2929 Walnut Street in Philadelphia, Pennsylvania.
Current report
We have compared our weighted-average in-place rental rates to our leases signed in 2024 and our current market leasing assumptions, and while the actual results will be dependent on the leases expiring in any particular period, we believe the current portfolio should generate positive rental rate increases for the remainder of fiscal 2024.
Current report
Development and Redevelopment Risk
Current report
(c)Estimated costs include base building costs plus projected tenant fit out costs for remaining vacancies.
Current report
•$3.3 million decrease due to the sale of five Class B office properties in the Plymouth Meeting Executive Center in Plymouth Meeting, PA in the third quarter of 2024;
Current report
The remaining $5.5 million decrease in Rents is primarily due to increase vacancies across our Same Store Property Portfolio.
Current report
•$5.6 million decrease related to the reduction in the cost basis of assets as a result of the provision for impairment recorded ontwo properties in the Metropolitan Washington, D.C. area within our Other segment in 2023;
Current report
•$2.9 million decrease related to the sales of three properties in 2023;
Current report
•$2.0 million decrease due to the sale of five Class B office properties in the Plymouth Meeting Executive Center in Plymouth Meeting, PA in the third quarter of 2024; and
Current report
General & Administrative Expenses
Current report
General and Administrative Expenses increase is primarily as a result of increased deferred compensation expenses.
Current report
During the fourth quarter of 2024, we recognized a provision for impairment of $17.3 million on two office properties sold during the fourth quarter of 2024 located in our Austin, Texas segment. During the third quarter of 2024, we recognized a provision for impairment of $3.8 million on six properties sold during the third quarter of 2024, five of which were located in our Pennsylvania Suburbs segment and one of which was located in our Other segment. In addition, during the third quarter of 2024, werecognized aprovision for impairment of $23.5 million on one property in our Other segment. The estimated fair value for this property was based upon a purchase and sale agreement pending as of September 30, 2024. The purchase and sale agreement was terminated during the fourth quarter of 2024 and the property currently remains in our portfolio.
Current report
The $2.3 million gain on disposition of real estate for 2024 is due to the sale of a parking lot property in Richmond, VA for a gross sales price of $8.5 million and net cash proceeds of $8.3 million.
Current report
On June 28, 2024, we recapitalized our Original MAP Venture, in which we had a negative investment balance of $52.2 million as of March 31, 2024. In connection with the recapitalization, we recognized a one-time, non-cash gain of $53.8 million in connection with the derecognition of the negative investment balance in the Original MAP Venture. See Note 4 “Investment in Unconsolidated Real Estate Ventures” to our Consolidated Financial Statements for further information.
Current report
On April 15, 2024, we commenced a tender offer (the “Tender Offer”) for any and all of the outstanding $335.1 million principal amount of our 4.10% Guaranteed Notes due 2024 (the “2024 Notes”). The purchase price offered per $1,000 principal amount of 2024 Notes pursuant to the Tender Offer was determined by reference to the fixed spread for the 2024 Notes of 0 basis points plus the yield based on the bid-side price of the 4.250% U.S. Treasury due September 30, 2024. The Tender Offer expired on April 19, 2024. Upon completion of the Tender Offer, on April 23, 2024, the Company issued a redemption notice to redeem any 2024 Notes that remained outstanding after the Tender Offer. On June 7, 2024, we redeemed the remaining $113.4 million of our 2024 Bonds at the aggregate principal amount outstanding together with accrued and unpaid interest thereon to the redemption date.
Current report
Liquidity
Current report
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 year ended December 31, 2024 we completed the sales of the Plymouth Meeting Executive Center, comprised of five office properties totaling a 521,288 square feet located in Plymouth Meeting, PA for a gross sales price of $65.5 million, One and Two Barton, comprised of two office properties totaling 390,963 square feet in Austin, TX for a gross sales price of $107.6 million, 55 US Avenue, 11.0 Acres of land located in Gibbsboro, NJ for a gross sales price of $6.5 million, and Dabney Land Westwood, 11.0 Acres parking lot in Richmond VA for a gross sales price of $8.5 million.
Current report
Inflation and Lease Pass-Through Provisions
Current report
While we have experienced increased inflation, our Same Store Property Portfolio operating margins remained consistent at 63.1% for the twelve months ended December 31, 2024 and 2023, respectively, primarily due to the expense reimbursement provisions noted above. The expense reimbursement provisions in our leases resulted in Same Store Property Portfolio operating expense recovery rates of 52.7% and 52.9% for the twelve months ended December 31, 2024 and 2023, respectively.
Removed paragraphs (28)
Previous report
Adverse changes in economic conditions, including inflation, and high interest rates, could result in a reduction of the availability of financing and higher borrowing costs. We continue to closely monitor the impact of the inflation and high interest rates on all aspects of our business, including the impact on our tenants, employees, and business partners. Vacancy rates may increase, and rental rates and rent collection rates may decline as the current economic climate may negatively impact tenants.
Previous report
Overall economic conditions, including but not limited to labor shortages, supply chain constraints, inflation, high interest rates 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 could 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 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.
Previous report
(2)Includes leasing related to completed developments and redevelopments, recently completed not yet stabilized, and sold properties.
Previous report
Development Risk
Previous report
In addition to the property listed above, we have classified one parking facility in Philadelphia, Pennsylvania as redevelopment.
Previous report
The remaining $1.4 million increase in Rents is primarily due to increased rental rates across our Same Store Property Portfolio, as well as increased use of our properties as more tenants implement return to office policies resulting in higher tenant reimbursements.
Previous report
Real Estate Taxes
Previous report
The $3.6 million decrease is primarily due to a reduction in tax assessments in 2023 compared to 2022 on properties in our Austin Texas segment.
Previous report
During 2022, we recognized a provision for impairment of $4.7 million on an office property located in the Metropolitan Washington, D.C. area of our Other segment that we expect to sell to a third party. See Note 3 “Real Estate Investments,” for further information.
Previous report
The $17.7 million gain on disposition of real estate for 2022 primarily resulted from the following sales transactions:
Previous report
•$8.3 million gain due to the formation of the One Uptown Ventures, which resulted in deconsolidation of the project and recognition of our investment in the real estate venture at fair value; and
Previous report
•$8.7 million gain related to the sale of an office building located at 200 Barr Harbor Drive, West Conshohocken, Pennsylvania for a gross sales price of $30.5 million and net cash proceeds of $29.3 million.
Previous report
The gain of $1.2 million recognized during 2023 is due to the following:
Previous report
•The $0.8 million gain related to the contribution of a prepaid leasehold interest to the 3151 Market Street Venture at fair value; and
Previous report
•The $0.4 million gain related to the sale of Dabney East, a 11.6 acre lot of land located in Richmond Virginia ("Dabney East").
Previous report
The gain of $8.0 million recognized during 2022 is due to the following:
Previous report
•$0.9 million related to the sale of two parcels of land in our Other Segment during the three months ended March 31, 2022;
Previous report
•$4.1 million related to the sale of one parcel of land in our Other segment and the sale of a portfolio of four parcels of land and two office buildings in our Other segment during the three months ended June 30, 2022; and
Previous report
•$2.6 million gain due to formation of the 3151 Market Street Venture, which resulted in deconsolidation of the project.
Previous report
Interest expense increased primarily due to a full year of our interest incurred on the $350.0 million principal amount of the 2028 Notes which carry an effective interest rate of 7.98% per annum compared to the retired 3.95% Guaranteed Notes due 2023 (the “2023 Notes”), which carried an effective interest rate of 3.87% per annum. In addition, we closed on our $245 million secured term loan which we used to pay down our line of credit and obtained another $70 million unsecured term loan in March 2023, resulting in higher leverage at higher interest rates over the prior period.
Previous report
The $26.7 million net gain on real estate venture transactions in 2022 is due to the sale of our 50% ownership interest in the 1919 Market Joint Venture for a gross sales price of $38.8 million. We received cash proceeds of $83.3 million, inclusive of proceeds from the repayment of the $44.3 million outstanding loan between Brandywine and the venture. See Note 4 “Investment in Unconsolidated Real Estate Ventures” to our Consolidated Financial Statements for further information.
Previous report
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 December 31, 2023, 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 Secured Overnight Offering Rate ("SOFR") adjustment of 10 basis points. Through a series of interest rate swaps, the $250.0 million principal amount of the Term Loan had a fixed interest rate of 5.01% until June 30, 2027. See Note 9 “Debt Obligations," for further information.
Previous report
On December 20, 2022, we used a portion of the net proceeds from the offering of the 2028 Notes to repurchase $295.7 million aggregate principal amount of the 2023 Notes, through a tender offer, together with $4.1 million of accrued and unpaid interest thereon. We recognized a $0.4 million loss on early extinguishment of debt related to the total repurchase. On January 20, 2023, we completed the redemption of the remaining $54.3 million aggregate principal amount of the 2023 Notes.
Previous report
Capital Recycling
Previous report
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 2023, we contributed to the 3151 Market Street Venture 200,000 square feet of FAR, which represents buildable density, at the project site, and, upon contribution at fair market value, recognized a gain, net of transaction costs, of $0.8 million.
Previous report
During the year ended December 31, 2023, we completed the sale of Three Barton Skyway, a 173,302 square foot office building located in Austin, Texas for $53.3 million, 200 N Radnor Chester Road, a 17,884 square foot retail building located in Radnor, Pennsylvania for $14.2 million and 8521 Leesburg Pike a 150,897 square foot office building located in Vienna, Virginia for $11.0 million. We also completed the sale of our Byberry land purchase option, an option to purchase 50.0 acres of land located in Philadelphia, Pennsylvania for $9.6 million and the sale of Dabney East for $1.6 million. The net proceeds were used for general corporate purposes.
Previous report
Inflation
Previous report
In connection with the formation of the Commerce Square Venture, we committed to investing an additional $20.0 million of preferred equity in the properties on a pari passu basis with our joint venture partner of which $9.5 million has been contributed by us as of December 31, 2023.
Reworded paragraphs (37)
Previous wording
This report including the following discussion, contains forward-looking statements, which we intend to be covered by the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. 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. These forward-looking statements are inherently uncertain, and actual results may differ from expectations. “See “Forward-Looking Statements” immediately before Part I of this report.
Current wording
The following discussion should be read in conjunction with the Consolidated Financial Statements appearing elsewhere herein and is based primarily on our Consolidated Financial Statements for the years ended December 31, 2024, 2023 and 2022. This report including the following discussion, contains forward-looking statements, which we intend to be covered by the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. 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. These forward-looking statements are inherently uncertain, and actual results may differ from expectations. “See “Forward-Looking Statements” immediately before Part I of this report.
Previous wording
During the twelve months ended December 31, 2023, we owned and managed properties within four segments: (1) Philadelphia Central Business District (“Philadelphia CBD”), (2) Pennsylvania Suburbs, (3) Austin, Texas, and (4) 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 Other segment includes properties in Northern Virginia, Washington, D.C., Southern Maryland, Camden County, New Jersey and New Castle County, Delaware. In addition to the four 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.
Current wording
During the twelve months ended December 31, 2024, we owned and managed properties within four segments: (1) Philadelphia Central Business District (“Philadelphia CBD”), (2) Pennsylvania Suburbs, (3) Austin, Texas, and (4) 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 Other segment includes properties in Northern Virginia, Washington, D.C., Southern Maryland, Camden County, New Jersey and New Castle County, Delaware. In addition to the four segments, our corporate group is responsible for cash and investment management, development/redevelopment of certain properties during the construction period, and certain other general support functions.
Previous wording
Our financial and operating performance is dependent upon the demand for office, life science, 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.
Current wording
Our financial condition and operating performance are dependent upon the demand for office, residential, life science, parking and retail space in our markets, our leasing results, our acquisition, disposition and development/redevelopment activity, our financing activity, our cash requirements and economic and market conditions, including prevailing interest rates.
Previous wording
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 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.
Current wording
We generate cash and revenue from leases of space at our Properties and, to a lesser extent, from the management and development/redevelopment of properties owned by third parties (primarily unconsolidated real estate ventures) 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 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.
Previous wording
We continue to seek revenue growth throughout our portfolio by increasing occupancy and rental rates. Occupancy at our Core Properties at December 31, 2023 was 88.0% compared to 89.8% at December 31, 2022.
Current wording
We continue to seek revenue growth throughout our portfolio by increasing occupancy and rental rates. Occupancy at our Core Properties at December 31, 2024 was 87.8% compared to 88.0% at December 31, 2023.
Previous wording
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 5.5% of our aggregate final annualized base rents as of December 31, 2023 (representing approximately 6.9% of the net rentable square feet of the properties) are scheduled to expire without penalty in 2024. 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.
Current wording
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 3.9% of our aggregate final annualized base rents as of December 31, 2024 (representing approximately 4.2% of the net rentable square feet of the properties) are scheduled to expire without penalty in 2025. 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.
Previous wording
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 $2.7 million or 1.4% of our accrued rent receivable balance as of December 31, 2023 compared to $3.9 million or 2.1% of our accrued rent receivable balance as of December 31, 2022.
Current wording
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 $0.9 million or 0.5% of our accrued rent receivable balance as of December 31, 2024 compared to $2.7 million or 1.4% of our accrued rent receivable balance as of December 31, 2023.
Previous wording
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.
Current wording
Development and Redevelopment 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.
Previous wording
(a)Mixed used building with 428,000 rentable square feet consisting of 200,000 square feet of life science/innovation office, 219,000 square feet of residential (326 units), and 9,000 square feet of retail.
Current wording
(a)Mixed used building with 428,000 rentable square feet consisting of 200,000 square feet of life science, 219,000 square feet of residential (326 units), and 9,000 square feet of retail.
Previous wording
Real estate investment fair values are estimated based on contract prices, discounted cash flows, or comparable sales. Estimated future cash flows used in such analyses are based on our views of market and economic conditions. The estimation of future cash flows is subjective and is based on various assumptions, including but not limited to market rental rates, capitalization rates, and recent sales data for comparable real estate investments. Estimated future cash flows are discounted when determining fair value of an asset. Most of these assumptions are influenced by our direct experience with the real estate investments and their markets as well as market data obtained from real estate leasing and brokerage firms. Determining the appropriate capitalization or discount rate also requires significant judgment and is typically based on many factors, including the prevailing rate for the market or submarket, as well as the quality and location of the real estate investment. Changes in the estimated future cash flows due to changes in our plans for a real estate investment, views of market and economic conditions and/or our ability to obtain development rights could result in recognition of an impairment which could be material.
Current wording
Real estate investment fair values are estimated based on agreements with third parties, discounted cash flows, or comparable sales. Estimated future cash flows used in such analyses are based on our views of market and economic conditions. The estimation of future cash flows is subjective and is based on various assumptions, including but not limited to market rental rates, capitalization rates, and recent sales data for comparable real estate investments. Estimated future cash flows are discounted when determining fair value of an asset. Most of these assumptions are influenced by our direct experience with the real estate investments and their markets as well as market data obtained from real estate leasing and brokerage firms. Determining the appropriate capitalization or discount rate also requires significant judgment and is typically based on many factors, including the prevailing rate for the market or submarket, as well as the quality and location of the real estate investment. Changes in the estimated future cash flows due to changes in our plans for a real estate investment, views of market and economic conditions and/or our ability to obtain development rights could result in recognition of an impairment which could be material.
Previous wording
(a)“Same Store Property Portfolio,” which represents 67 properties containing an aggregate of approximately 12.2 million net rentable square feet that we owned and consolidated for the twelve-month periods ended December 31, 2023 and 2022. The Same Store Property Portfolio includes properties acquired or placed in service on or prior to January 1, 2022 and owned and consolidated through December 31, 2023, excluding properties classified as held for sale,
Current wording
(a)“Same Store Property Portfolio,” which represents 61 properties containing an aggregate of approximately 11.5 million net rentable square feet that we owned and consolidated for the twelve-month periods ended December 31, 2024 and 2023. The Same Store Property Portfolio includes properties acquired or placed in service on or prior to January 1, 2023 and owned and consolidated through December 31, 2024, excluding properties classified as held for sale,
Previous wording
(d)“Development/Redevelopment Properties,” which represents two 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
Current wording
(d)“Development/Redevelopment Properties,” which represents zero 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
Previous wording
Rents from the Total Portfolio increased $8.9 million primarily as a result of the following:
Current wording
Rents from the Total Portfolio decreased $(10.6) million primarily as a result of the following:
Previous wording
•$7.3 million decrease due to the sales of 8521 Leesburg Pike, Vienna, VA in the fourth quarter of 2023, Three Barton Skyway, Austin, TX in the third quarter of 2023 and 200 Barr Harbor Drive in the fourth quarter of 2022; and
Current wording
•$6.6 million decrease due to the sales of 200 North Radnor Chester Road, Radnor, PA and 8521 Leesburg Pike, Vienna, VA in the fourth quarter of 2023 and Three Barton Skyway, Austin, TX in the third quarter of 2023;
Previous wording
•$3.2 million decrease due to the early termination of a single tenant occupant at a property in our Austin, Texas segment in the third quarter of 2023 and removing one building from service in our Philadelphia CBD segment in the third quarter of 2022.
Current wording
•$2.5 million decrease due to the early termination of a single tenant occupant at a property in our Austin, Texas segment in the third quarter of 2023; and
Previous wording
•$18.0 million increase related to our Recently Completed/Acquired Properties which comprise 405 Colorado, Austin TX, 250 King of Prussia Road, Radnor, PA and 2340 Dulles Corner Boulevard, Herndon VA;
Current wording
•$7.3 million increase relate Recently Completed/Acquired Properties which comprise 250 King of Prussia Road, Radnor, PA, 155 King of Prussia Road, Radnor, PA and 2340 Dulles Corner Boulevard, Herndon VA.
Previous wording
Depreciation and amortization expense increased primarilyas a result of the following:
Current wording
Depreciation and amortization expense decreased primarilyas a result of the following:
Previous wording
•$2.6 million increase related to accelerated depreciation on the tenant improvements due to the early termination of a single tenant occupant at a property in our Austin, Texas segment;
Current wording
•$4.0 million decrease related to accelerated depreciation on tenant improvements due to the early termination of a single tenant occupant at a property in our Austin, Texas segment in 2023;
Previous wording
•$7.3 million increase due to the placement into service of our Recently Completed/Acquired Properties; and
Current wording
•$3.0 million increase due to the placement into service of our Recently Completed/Acquired Properties.
Previous wording
During the second quarter of 2023, we recognized a provision for impairment of $4.5 million on an office property located in our Austin Texas, segment which met the held for sale criteria as of June 30, 2023 and was sold during the three months ended September 30, 2023.
Current wording
During the second quarter of 2023, we recognized a provision for impairment of $4.5 million on an office property located in our Austin Texas, segment which met the held for sale criteria as of June 30, 2023 and was sold during the three months ended September 30, 2023. See Note 3 “Real Estate Investments,” for further information.
Previous wording
The $7.7 million gain on disposition of real estate for 2023 is due tothe sale of a retail building located at 200 North Radnor Chester Road, Radnor, Pennsylvania for a gross sales price of $14.2 million and net cash proceeds of $13.8 million.
Current wording
The $7.7 million gain on disposition of real estate for 2023 is due tothe sale of a retail building located at 200 North Radnor Chester Road, Radnor, PA for a gross sales price of $14.2 million and net cash proceeds of $13.8 million.
Previous wording
The increased losses from our unconsolidated real estate ventures is due to the other-than-temporary impairment of approximately $37.2 million related to our unconsolidated joint ventures and $12.5 million due to higher interest rates on the outstanding indebtedness of the portfolio of joint ventures. See Note 4 “Investment in Unconsolidated Real Estate Ventures” to our Consolidated Financial Statements for further information.
Current wording
Equity in loss of real estate ventures increased primarily due to our recognition of an impairment charge on the properties in our Commerce Square Venture and JBG Venture. Additionally, the increased losses from our unconsolidated real estate ventures are due to higher interest rates on the ventures’ outstanding indebtedness. See Note 4 “Investment in Unconsolidated Real Estate Ventures” to our Consolidated Financial Statements for further information.
Previous wording
On December 13, 2022, we completed an underwriting offering of the 2028 Notes. The 2028 Notes were priced at 99.06% of their face amount and they have been reflected net of a discount of $3.3 million in the consolidated balance sheet as of December 31, 2022. We received approximately $344.6 million after deducting for underwriting discounts and offering expenses.
Current wording
On April 12, 2024, we completed an underwritten offering of $400.0 million aggregate principal amount of our 8.875% Guaranteed Notes due 2029 (the “2029 Notes”). The 2029 Notes were priced at approximately 99.51% of their face amount. We received approximately $391.8 million of net proceeds after the deduction for underwriting discounts and offering expenses.
Previous wording
The 2028 Notes include an interest rate adjustment provision whereby the interest rate payable on the notes is subject to a 25 basis point adjustment if either Moody's Investors Services Inc, and its successors, ("Moody's") or S&P Global Ratings, and its successors ("S&P") downgrades (or subsequently upgrades) its rating assigned to the 2028 Notes. During the third quarter of 2023, Moody’s downgraded our senior unsecured credit rating from Baa3 to Ba1. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 7.80% in September 2023 due to the coupon adjustment provisions within the note.
Current wording
Our outstanding 7.55% Guaranteed Notes due 2028 (the “2028 Notes”) include an interest rate adjustment provision whereby the interest rate payable on the 2028 Notes is subject to a 25 basis point adjustment if either Moody's Investors Services Inc, and its successors ("Moody's"), or S&P Global Ratings, and its successors ("S&P") downgrades (or subsequently upgrades) its rating assigned to the 2028 Notes. During the third quarter of 2023, Moody’s downgraded our senior unsecured credit rating from Baa3 to Ba1. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 7.80% in September 2023. In January 2024, S&P downgraded our senior unsecured credit rating from BBB- to BB+. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.05% in March 2024. During the second quarter of 2024, Moody's downgraded our senior unsecured credit rating from Ba1 to Ba2. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.30% in April 2024 due to the coupon adjustment provisions within the 2028 Notes.
Previous wording
The Parent Company unconditionally guarantees the Operating Partnership’s unsecured debt obligations, which, as of December 31, 2023, amounted to $1,888.6 million. The Operating Partnership’s secured debt obligations as of December 31, 2023 amounted to $258.8 million.
Current wording
The Parent Company unconditionally guarantees the Operating Partnership’s unsecured debt obligations, which, as of December 31, 2024, amounted to $1,948.6 million. The Operating Partnership’s secured debt obligations as of December 31, 2024 amounted to $277.7 million.
Previous wording
As of December 31, 2023, we had $58.3 million of cash and cash equivalents and $560.7 million of available borrowings under our unsecured credit facility, net of $39.3 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 2024 will be to fund our current development and redevelopment projects.
Current wording
As of December 31, 2024, we had $90.2 million of cash and cash equivalents and $560.8 million of available borrowings under our unsecured credit facility, net of $39.2 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 2025 will be to fund our current development and redevelopment projects.
Previous wording
As of December 31, 2023 and 2022, we maintained cash and cash equivalents and restricted cash of $67.5 million and $17.6 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):
Current wording
As of December 31, 2024 and 2023, we maintained cash and cash equivalents and restricted cash of $96.2 million and $67.5 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):
Previous wording
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 re/.sources to fund operating expenses, debt service and quarterly dividends. The decrease in operating cash flows is primarily due to the decrease in average occupancy in 2023 compared to 2022.
Current wording
Our principal source of cash flows is from the leasing of space at 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 increase in operating cash flows is primarily due to the decrease in average occupancy in 2024 compared to 2023.
Previous wording
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 year ended December 31, 2023, when compared to the year ended December 31, 2022, the change in investing cash flows was due to the following activities (in thousands):
Current wording
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 we expect will enable us to take advantage of our development, leasing, financing, and property management skills and invest in existing buildings that meet our investment criteria for additional capital. During the year ended December 31, 2024, when compared to the year ended December 31, 2023, the change in investing cash flows was due to the following activities (in thousands):
Previous wording
(b)On November 23, 2022, our unsecured term loan of $250.0 million was swapped to a fixed rate of 5.01% and matures on June 30, 2027. The effective date of the swap is January 31, 2023.
Current wording
(b)On November 23, 2022, the unsecured term loan of $250.0 million was swapped to a fixed rate. At December 31, 2024, the fixed rate for this instrument was 5.41% and matures on June 30, 2027. The effective date of the swap was January 31, 2023.
Previous wording
Substantially all our leases are structured as base year or triple net leases which provide for reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per square-foot basis, or in some cases, annual reimbursement of 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 resulting in higher borrowing costs.
Current wording
Substantially all our leases are structured as base year or triple net leases which provide for reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per square-foot basis, or in some cases, annual reimbursement of operating expenses above certain per square-foot allowances. In addition, as of December 31, 2024, approximately 96% of our leases (as a percentage of the aggregate net rentable square feet of our wholly-owned portfolio) contain annual rent escalations that are either fixed (generally ranging from 2.0% to 3.0% per lease year) or indexed based on a consumer price index or other indices. We believe such lease provisions mitigate adverse impacts of inflation on our earnings from real estate operations. However, recent inflation and higher interest rates have caused an increase in our borrowing costs, including on our variable rate debt, and on our operating expenses that are not subject to the lease pass-through provisions.
Previous wording
In connection with the Schuylkill Yards Project, we entered into a neighborhood engagement program and, as of December 31, 2023, had $6.2 million of future contractual obligations. We are also committed to making additional contributions under the program. We estimate that, as of December 31, 2023, these additional contributions, which are not fixed under the terms of agreement, will be $2.2 million. See Note 20 “Commitments and Contingencies,” to our Consolidated Financial Statements for further information.
Current wording
In connection with the Schuylkill Yards Project, we entered into a neighborhood engagement program and, as of December 31, 2024, had $5.2 million of future contractual obligations. We are also committed to making additional contributions under the program. We estimate that, as of December 31, 2024, these additional contributions, which are not fixed under the terms of agreement, will be $2.0 million. See Note 19 “Commitments and Contingencies,” to our Consolidated Financial Statements for further information.
Previous wording
We have committed to contribute $15.0 million to a newly-formed venture capital fund that invests in early-stage life science companies.
Current wording
We have committed to contribute $15.0 million to a newly-formed venture capital fund that invests in early-stage life science companies. As of December 31, 2024 we had funded $2.7 million of the foregoing commitment.
Previous wording
As part of our September 2004 acquisition of a portfolio of properties (which the we refer to as the “TRC acquisition”), we acquired our interest in Two Logan Square, a 708,844 square foot office building in Philadelphia, Pennsylvania primarily through ownership of a second and third mortgage secured by this property. This property is consolidated, as the borrower is a VIE and we, through our ownership of the second and third mortgages, are the primary beneficiary. On October 21, 2020, we also acquired the $79.8 million first mortgage on the property from the third-party mortgage lender pursuant to an agreement with certain of the former owners. Under the agreement, we have agreed to not take title to Two Logan until the earlier of June 2026 or the occurrence of certain events related to the ownership interests of certain former owners. If we were to sell the restricted property before the expiration of the restricted period in a non-exempt transaction, we may be required to make significant payments to certain of the former owners of Two Logan Square on account of tax liabilities attributed to them. Additionally, we will be required to pay these certain former owners an amount estimated at approximately $0.6 million to redeem their residual interest in the fee owner of this property. The $0.6 million payment is included within “Other liabilities” on the consolidated balance sheets.
Current wording
As part of our September 2004 acquisition of a portfolio of properties (which we refer to as the “TRC acquisition”), we acquired our interest in Two Logan Square, a 708,844 square foot office building in Philadelphia, Pennsylvania primarily through ownership of a second and third mortgage secured by this property. This property is consolidated, as the borrower is a VIE and we, through our ownership of the second and third mortgages, are the primary beneficiary. On October 21, 2020, we also acquired the $79.8 million first mortgage on the property from the third-party mortgage lender pursuant to an agreement with certain of the former owners. Under the agreement, we have agreed to not take title to Two Logan until the earlier of June 2026 or the occurrence of certain events related to the ownership interests of certain former owners. If we were to sell the restricted property before the expiration of the restricted period in a non-exempt transaction, we may be required to make significant payments to certain of the former owners of Two Logan Square on account of tax liabilities attributed to them. Additionally, we will be required to pay these certain former owners an amount estimated at approximately
Previous wording
Our financial instruments consist of both fixed and variable rate debt. As of December 31, 2023, our consolidated debt consisted of (i) unsecured notes with an outstanding principal balance of $1,490.0 million, all of which are fixed rate borrowings, (ii) variable rate debt consisting of trust preferred securities with an outstanding principal balance of $78.6 million, (iii) a $600.0 million Credit Facility with no outstanding borrowings, (iv) a secured fixed rate term loan with an outstanding principal balance of $245.0 million, (v) a construction loan for the property at 155 King of Prussia Road with an outstanding balance of $13.8 million and (v) two unsecured term loans of $250.0 million and $70.0 million. The $250.0 million 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.
Current wording
Our financial instruments consist of both fixed and variable rate debt. As of December 31, 2024, our consolidated debt consisted of (i) unsecured notes with an outstanding principal balance of $1,550.0 million, all of which are fixed rate borrowings, (ii) variable rate debt consisting of trust preferred securities that have been swapped to fixed rates with an outstanding principal balance of $78.6 million, (iii) a $600.0 million Credit Facility with no outstanding borrowings, (iv) a secured fixed rate term loan with an outstanding principal balance of $245.0 million, (v) a construction loan for the property at 155 King of Prussia Road with an outstanding balance of $32.7 million and (v) two unsecured term loans of $250.0 million and $70.0 million. The $250.0 million 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.
Previous wording
As of December 31, 2023, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was $1,386.6 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 $13.9 million at December 31, 2023.
Current wording
As of December 31, 2024, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was $1,537.2 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 $15.4 million at December 31, 2024.
Previous wording
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 $412.4 million as of December 31, 2023. The total fair value of our variable rate debt was approximately $370.7 million at December 31, 2023. 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 $12.3 million at December 31, 2023. If market rates of interest decrease by 100 basis points, the fair value of our outstanding variable rate debt would increase by approximately $13.1 million at December 31, 2023.
Current wording
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 $431.3 million as of December 31, 2024. The total fair value of our variable rate debt was approximately $403.9 million at December 31, 2024. 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 $10.9 million at December 31, 2024. If market rates of interest decrease by 100 basis points, the fair value of our outstanding variable rate debt would increase by approximately $11.5 million at December 31, 2024.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
(3)Does not include Properties under development/redevelopment.
Current report — wording carried from elsewhere
(4)See Note 18 “Segment Information,” to our Consolidated Financial Statements for the definition of Net Operating Income.
Current report — wording carried from elsewhere
Interest expense increased primarily due to our issuance of $400 million aggregate principal amount of 2029 Notes in April 2024, partially offset by the tender offer and redemption of our $350 million 4.10% Guaranteed Notes due 2024 in June 2024. Additionally, interest expense increased during the third quarter of 2023 when Moody’s downgraded our senior unsecured credit rating from Baa3 to Ba1. As a result of the downgrade, the interest rate on our 2028 Notes increased 25 basis points in September 2023 due to the coupon adjustment provisions within the 2028 Notes. During the first quarter of 2024, S&P downgraded our senior unsecured credit rating from BBB- to BB+. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.05% in March 2024 due to the coupon adjustment provisions within the 2028 Notes. During the second quarter of 2024, Moody's downgraded our senior unsecured credit rating from Ba1 to Ba2. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.30% in April 2024 due to the coupon adjustment provisions within the 2028 Notes.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
$0.6 million to redeem their residual interest in the fee owner of this property. The $0.6 million payment is included within “Other liabilities” on the consolidated balance sheets.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
The following discussion should be read in conjunction with the Consolidated Financial Statements appearing elsewhere herein and is based primarily on our Consolidated Financial Statements for the years ended December 31, 2023, 2022 and
Previous report — wording carried elsewhere
As of December 31, 2023 the following active development and redevelopment projects remain under construction in progress and we were proceeding on the following activity (dollars, in thousands):
Previous report — wording carried elsewhere
Net Gain on Sale of Undepreciated Real Estate
Previous report — wording carried elsewhere
Subsequent to December 31, 2023, S&P downgraded our senior unsecured credit rating from BBB- to BB+. As a result of the downgrade, the interest rate will increase 25 basis points to 8.05% in March 2024.