PHILADELPHIA, PA — Brandywine Realty Trust (NYSE: BDN) reduced its debt by $390 million and completed $681 million in property sales as of its October 21 earnings report, accelerating efforts to strengthen its balance sheet even as third-quarter operating earnings declined and the company widened its projected annual loss.
The Philadelphia-based real estate investment trust reported a net loss of $22.3 million, or 13 cents per share, for the quarter ended September 30, compared with a loss of $26.2 million, or 15 cents per share, a year earlier.
Core funds from operations, a measure of real estate operating performance that excludes certain charges, fell to $24.5 million, or 14 cents per diluted share, from $28 million, or 16 cents per share, in the prior-year quarter.
The results reflect Brandywine’s efforts to reduce leverage through asset dispositions while managing leasing conditions across its office portfolio.
The company reported a net debt-to-earnings before interest, taxes, depreciation and amortization ratio of 7.6 times, down from 9.0 times in the previous quarter.
“Our capital markets plan is completed and we have executed $681 million of sales versus our $305 million business plan target,” Chief Executive Officer Gerard H. Sweeney said.
The transactions included a $240 million sale of a Philadelphia office property on September 30. The building was only 3.9% occupied at the time of sale, and Brandywine received $233.7 million in net cash proceeds.
The company also sold a fully occupied King of Prussia office property for $41.5 million on July 1, generating $37.8 million in net proceeds.
Other third-quarter dispositions included a fully occupied Austin, Texas, office property sold for $151 million and two McLean, Virginia, office properties sold together for $97.1 million.
Brandywine separately completed the $136 million sale of Solaris, a 341-unit apartment property in Austin, on September 30. The company held a 57% interest in the joint venture and received $16.3 million after repayment of a $76.5 million construction loan and obligations to its preferred partner.
The residential property was 90.3% occupied at closing.
Brandywine used proceeds from its capital markets activity to retire debt, including $50 million of guaranteed notes due in 2028 and $90 million of notes due in 2029.
Those repurchases generated a $9.2 million debt-extinguishment loss. The company also repaid a $57.3 million Commercial Property Assessed Clean Energy loan associated with the Philadelphia disposition, recording an additional $6.3 million loss.
Combined, the transactions produced $15.4 million in early debt-extinguishment charges during the quarter.
Brandywine also repurchased approximately 4.7 million common shares for $14.9 million, paying an average of $3.19 per share. The company estimates the repurchases will reduce annual dividend payments by approximately $1.5 million.
As of September 30, Brandywine reported $313 million in cash and cash equivalents and $137 million outstanding on its $600 million unsecured revolving credit facility.
Sweeney said subsequent closings left the company with $176 million in cash and no outstanding balance on the credit line.
Despite the balance-sheet improvement, Brandywine lowered its full-year earnings outlook.
The company now expects a 2026 net loss of 62 cents to 64 cents per share, compared with its previous forecast of 41 cents to 45 cents.
Management attributed the revision primarily to the loss associated with the $240 million Philadelphia property sale and the costs of retiring debt early.
Brandywine also replaced its previous funds-from-operations guidance of 53 cents to 57 cents per diluted share with a core FFO forecast of 54 cents to 56 cents, excluding the debt-extinguishment charges.
The distinction is significant because core FFO removes the $15.4 million charge, making the new measure different from the company’s previous FFO guidance.
Operating results remained mixed.
Brandywine’s core portfolio of 58 properties, totaling 10.8 million square feet, was 89% occupied and 90.5% leased at quarter-end.
The company signed approximately 372,000 square feet of new and renewal leases in its wholly owned portfolio, increasing to 558,000 square feet when joint ventures are included.
Tenant retention was 50%, and the core portfolio recorded negative net absorption of 7,000 square feet.
Rental rates on new and renewal leases increased 10.8% on an accrual basis and 5.7% on a cash basis.
Same-store net operating income declined 0.6% on an accrual basis but increased 1.7% on a cash basis across 55 comparable properties.
Occupancy at those properties fell to 88.8% from 89.8% a year earlier.
Brandywine commenced occupancy on approximately 192,000 square feet during the quarter, including 93,000 square feet of new leases, 73,000 square feet of renewals and 26,000 square feet of expansions.
An additional 163,000 square feet of executed new leasing was scheduled to commence after September 30.
For the first nine months of 2026, Brandywine reported a net loss of $102.8 million, or 59 cents per share, compared with a loss of $142.6 million, or 82 cents per share, a year earlier.
Core FFO declined to $68.2 million, or 38 cents per diluted share, from $78.8 million, or 44 cents per share.
The company recorded $41 million in noncash impairment charges during the first nine months, compared with $63.4 million in the corresponding 2025 period.
Brandywine raised its speculative revenue target for the second time this year to $19.5 million, an 11.4% increase from its original business plan. Management said the revised target had already been achieved.
The company’s One Uptown office venture in Austin was 97% leased as of October 21.
For year-end, Brandywine expects core portfolio occupancy of 89% to 90%, with leased space reaching 90% to 91%.
The company also anticipates full-year same-store net operating income ranging from a 1% decline to a 1% increase on an accrual basis and growth of up to 2% on a cash basis.
Brandywine declared a quarterly dividend of 8 cents per common share, payable October 22 to shareholders of record as of October 8.
The company’s latest results underscore the trade-off in its restructuring strategy: asset sales and debt repayment have reduced leverage, while lower core operating earnings and transaction-related charges continue to weigh on financial performance.
Support the local news that supports Chester County. MyChesCo delivers reliable, fact-based reporting and essential community resources—free for everyone. If you value that, click here to become a patron today.