Brandywine Realty Trust Announces Second Quarter Results

Brandywine Realty Trust

PHILADELPHIA, PA — Brandywine Realty Trust (NYSE: BDN) has reported its financial and operating results for the three and six-month periods ended June 30, 2021.

Management Comments

“We are excited to see an increasing number of our tenants returning to the workplace. As physical building occupancy increases, we will continue to prioritize the safety of our employees, tenants and stakeholders,” stated Gerard H. Sweeney, President and Chief Executive Officer for Brandywine Realty Trust. “We are making excellent progress on our 2021 business plan. We have narrowed our speculative revenue guidance range while increasing the midpoint by $0.5 million and we are now 98% complete at the revised midpoint. During the quarter, we continued to experience positive mark-to-market rents increasing 22% and 14% on an accrual and cash basis. Based on signed leases, we anticipate that during the second half of 2021, we will experience increased occupancy and higher same-store cash NOI growth. Our balance sheet and liquidity remained strong during the quarter and we continue to make excellent progress on our life science and other development initiatives. Based on our first quarter progress, we are narrowing our 2021 FFO guidance of $1.33 to $1.41 per share to $1.34 to $1.40 per share.”

Second Quarter Highlights
Financial Results

  • Net loss to common shareholders: ($0.3) million, or less than ($0.01) per share.
  • Funds from Operations (FFO): $55.9 million, or $0.32 per share.

Portfolio Results

  • Core Portfolio: 90.5% occupied and 92.5% leased.
  • New and Renewal Leases Signed: 435,000 square feet
  • Rental Rate Mark-to-Market: Increased 22.2% / 13.7% on accrual / cash basis
  • Same Store Net Operating Income: 0.5% on an accrual basis and 1.8% on a cash basis
  • Tenant Retention Ratio: 58%

2021 Business Plan Revisions

  • Speculative Revenue Range: Narrowed from $18.0-$22.0 million to $20.0-$21.0 million increasing the midpoint guidance by $0.5 million; 98% achieved.

COVID-19 Update

The Company states it continues to monitor events related to COVID-19 and take steps to reduce risks to Brandywine and their tenants. While the duration and economic impact of the COVID-19 pandemic remains unknown, the Company believes that as of the date of this press release, their 2021 business plan and earnings estimates account for the impact of COVID-19. The Company states it is continually assessing the ongoing effects of the pandemic to their business plan, their tenants and their earnings estimates.

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The following is a summary of their second quarter consolidated cash base rent collections as of July 23, 2021:

  • 99.3% of total cash-based rent due has been received from their tenants during the second quarter 2021, which represents a 99.8% collection rate from their office tenants.
  • A majority of the rental revenue that has been in the form of rent deferrals is scheduled to be repaid by year-end 2021.
  • The Company has collected 58% of the rent deferrals not provided as free rent with an associated lease extension.

Recent Transaction Activity

Financing Activity

  • On July 23, 2021, in connection with their development project at 3025 JFK Boulevard, also known as Schuylkill Yards West, they closed on a $186.7 million construction loan. The construction loan represents approximately 65% of total project costs and initially bears interest at 3.75% per annum and matures in July 2025.

2021 Finance / Capital Markets Activity

  • The Company has $58.0 million outstanding on their $600.0 million unsecured revolving credit facility as of June 30, 2021.
  • The Company has $47.7 million of cash and cash equivalents on-hand as of June 30, 2021.

Results for the Three and Six Month Periods Ended June 30, 2021

Net loss allocated to common shares totaled ($0.3) million or less than ($0.01) per diluted share in the second quarter of 2021 compared to net income of $3.9 million or $0.02 per diluted share in the second quarter of 2020.

FFO available to common shares and units totaled $55.9 million or $0.32 per diluted share in the second quarter of 2021 as compared to $57.7 million, or $0.34 per diluted share for the second quarter of 2020. The Company’s second quarter 2021 payout ratio ($0.19 common share distribution / $0.32 FFO per diluted share) was 59.4%.

Net income allocated to common shares totaled $6.5 million or $0.04 per diluted share in the first six months of 2021 compared to net income of $11.8 million or $0.07 per diluted share in the first six months of 2020.

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Their FFO available to common shares and units for the first six months of 2021 totaled $116.1 million or $0.67 per diluted share versus $119.0 million, or $0.68 per diluted share in the first six months of 2020. The Company’s payout ratio for the first half 2021 ($0.38 common share distribution / $0.67 FFO per diluted share) was 56.7%.

Operating and Leasing Activity

In the second quarter of 2021, their Net Operating Income (NOI) excluding termination revenues and other income items increased 0.5% on an accrual basis and increased 1.8% on a cash basis for their 73 same store properties, which were 90.3% and 90.7% occupied on June 30, 2021 and 2020, respectively.

The Company leased approximately 435,000 square feet and commenced occupancy on 252,000 square feet during the second quarter of 2021. The second quarter occupancy activity includes 96,000 square feet of renewals, 118,000 square feet of new leases and 38,000 square feet of tenant expansions. The Company has an additional 258,000 square feet of executed new leasing scheduled to commence subsequent to June 30, 2021.

The Company’s second quarter tenant retention ratio was 58% in their core portfolio with net absorption of 20,000 square feet during the second quarter of 2021. Second quarter rental rate growth increased 22.2% as their renewal rental rates increased 13.3% and their new lease/expansion rental rates increased 32.7%, all on an accrual basis.

As of June 30, 2021, The Company’s core portfolio properties comprise 12.9 million square feet. As of June 30, 2021, their core portfolio was 90.5% occupied and tey are currently 92.5% leased (reflecting new leases commencing after June 30, 2021).

Distributions

On May 18, 2021, the Company’s Board of Trustees declared a quarterly dividend distribution of $0.19 per common share that is payable on July 21, 2021 to shareholders of record as of July 7, 2021.

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2021 Earnings and FFO Guidance

Based on current plans and assumptions and subject to the risks and uncertainties more fully described in their Securities and Exchange Commission filings, The Company states it is adjusting their 2021 earnings per share guidance of $0.28 – $0.36 to $0.25 – $0.31 per diluted share and 2021 FFO guidance of $1.33 – $1.41 to $1.34 – $1.40 per diluted share. This guidance is provided for informational purposes and is subject to change. The following is a reconciliation of the calculation of 2021 FFO and earnings per diluted share:

Guidance for 2021 Range
Earnings per diluted share allocated to common shareholders $0.25 to $0.31
Plus: real estate depreciation, amortization 1.09 1.09
FFO per diluted share $1.34 to $1.4
The Company’s 2021 FFO key assumptions include:

  • Year-end Core Occupancy Range: 91-93%;
  • Year-end Core Leased Range: 92-94%;
  • Rental Rate Mark-to-Market (accrual): 14-16%;
  • Rental Rate Mark-to-Market (cash): 8-10%;
  • Same Store (accrual) NOI Range: 0-2%;
  • Same Store (cash) NOI Range: 3-5%;
  • Speculative Revenue Range: Narrowed from $18.0 – $22.0 million to $20.0 – $21.0 million, 98% achieved;
  • Tenant Retention Rate Range: 51-53%;
  • Property Acquisition Activity: None;
  • Property Sales Activity: None;
  • Development/Redevelopment Starts: Two starts; one start commenced, Schuylkill Yards West;
  • Core and Same Store Portfolio Adjustments: Effective January 1, 2021, the Company states it removed 2340 Dulles (placed into redevelopment) and effective January 1, 2021, 905 Broadmoor was removed from their first quarter same store portfolio and was subsequently taken out of service, as part of their Broadmoor Master Plan;
  • Financing Activity: None;
  • Share Buyback Activity: None;
  • Annual earnings and FFO per diluted share based on 173.0 million fully diluted weighted average common shares.

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