Brandywine Realty Trust Q4 2024 Earnings Report

Brandywine Realty Trust EPS Results

• Actual EPS: $0.17
• Consensus EPS: $0.01
• Beat/Miss: Beat by +$0.16
• One Year Ago EPS: N/A

Brandywine Realty Trust Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $122.16 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Brandywine Realty Trust Announcement Details

• Quarter: Q4 2024
• Date: 2/4/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, February 5, 2025
• Conference Call Time: 9:00AM ET

Brandywine Realty Trust (NYSE:BDN) (NYSE: BDN) is one of the largest, publicly traded, full-service, integrated real estate companies in the United States with a core focus in the Philadelphia and Austin markets. Organized as a real estate investment trust (REIT), we own, develop, lease and manage an urban, town center and transit-oriented portfolio comprising 160 properties and 22.6 million square feet as of September 30, 2023 which excludes assets held for sale. Our purpose is to shape, connect and inspire the world around us through our expertise, the relationships we foster, the communities in which we live and work, and the history we build together.

Brandywine Realty Trust Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Brandywine Realty Trust Fourth Quarter twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Session.

[Operator]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jerry Sweeney, President and CEO. Please go ahead.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Thank you very much. Good morning, everyone. Thank you for participating in our fourth quarter twenty twenty four earnings call. On today's call with me as usual are George Johnstone, our Executive Vice President of Operations Dan Palazzo, our Senior Vice President and Chief Accounting Officer and Tom Worth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed on the call today may constitute forward looking statements within the meaning of the federal securities law.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release as well as our most recent annual and quarterly reports that we filed with the SEC. Well, first and foremost, we hope that you and yours are doing well. And with 2024 now behind us, we're looking forward to continued real estate market improvements into both 2025 and 2026. During our prepared comments today, Tom and I will briefly review our 2024 results and frame out the key assumptions driving our 2024 guidance.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

After that, Anne, George, Tom and I are available for any questions. Well, from an operating and portfolio management and liquidity standpoint, 2024 was a solid year. We posted strong operating metrics again this quarter, reinforcing the high quality nature of our portfolio. Our wholly owned core portfolio is 87.8% occupied and 89.9% leased, which has improved sequentially over the last quarter. We exceeded our twenty twenty four business plan spec revenue target by 8%, generating $26,400,000 We also exceeded our tenant retention target, which ended at 63% compared to our original business plan target of 51% to 53%.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Leasing activity for the year approximated 2,300,000 square feet. During the quarter, we executed 783,000 square feet of leases, including 486,000 in our wholly owned portfolio and 297,000 square feet in our joint ventures. This quarterly activity was the highest in 2024 and forty two percent above the corresponding fourth quarter in 2023. Looking ahead, we have less than 5% annual rollover through '26, '1 of the lowest in the office sector. On an annual basis, our mark to market was 12.6 on a GAAP basis and 1.8% on a cash basis, both within our business plan expectations.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Our new leasing mark to market was strong at 184% on a GAAP and cash basis respectively. Fourth quarter physical tours exceeded third quarter by 7% with tours in 2024 exceeding 2023 by 22%. Tour activity remains well above pre pandemic levels. For the quarter on a wholly owned basis, 62% of leases were the result of Flight to Quality. During 2022 or for the full year, Flight to Quality deals represented 60% of new leasing activity.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

We also importantly note that we do not have any tenant lease expirations greater than 1% of revenues through 2026. Our operating portfolio leasing pipeline remains strong at 1,800,000 square feet, which includes about 163,000 square feet in advanced stage of negotiations. So the takeaway on operations is stable, solid operating performance with limited rollover risk for several years, good capital control, improving markets and an expanding leasing pipeline. Another key component of our business plan is continually improving liquidity. During 2024, we significantly exceeded our liquidity goals and completed over $300,000,000 of dispositions.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

This was well above our $150,000,000.20 20 for midpoint, revised midpoint and our $90,000,000 original guidance. These efforts result in our having $90,000,000 of cash on hand and no outstanding balance on our $600,000,000 unsecured line of credit at year end. We also, as Tom will get into more detail, have no unsecured bond maturities until November of 'twenty seven. And going forward, our business plan is predicated on maintaining minimal balances on our line of credit over the next several years to ensure ample liquidity. And our only real maturity in 2025 is a $70,000,000 unsecured term loan evaluating the cost of extending.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

During 2024, we also recapitalized or exited several operating joint ventures. Our '24 goal, you may recall, was to streamline these operating joint venture relationships and reduce debt attribution by $100,000,000 We achieved that goal and during 2024, we reduced debt attribution by two twenty nine million dollars Despite these strong operating metrics and significant progress on further strengthening liquidity, we did fall short of our FFO targets. FFO results were $0.17 for the fourth quarter and $0.85 for 2024. The fourth quarter annual results were negatively impacted by $0.03 a share reduced other income from a one time transaction that we did anticipate in the fourth quarter, zero point zero '1 dollars per share net dilution due to the increase in accelerated disposition activity, and from a broader several other points that Tom will walk through as well. From a broader perspective, however, the real estate markets are improving.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

We're seeing that every day. During the year, we laid a solid operating foundation and capitalizing these improving office market dynamics. In Philadelphia, there are encouraging signs of stabilization. Philadelphia's office market is today a clear shift towards high quality space with Class A properties accounting for 66% of all lease deals signed in 2024. Our overall CBD portfolio is 93% leased.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

The CBD recorded 1,000,000 square feet of transactions during '24, demonstrating the sustained demand for high quality workspace. Of that activity, Brandywine captured 49% of all office deals. In addition, the city's life science sector, while still recovering, continues to be a driver of future growth backed by strong regional healthcare ecosystem that includes 1,200 biotech and pharmaceutical firms alongside 15 major healthcare systems. Austin, which continues to be a magnet for corporate expansion, leasing momentum there remains positive with Austin recording two consecutive quarters of net absorption and over 81 tenants currently and actively seeking more than 2,500,000 square feet of space. Positive momentum during the fourth quarter was driven by revitalization of the tech sector.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

There's also finally a notable trend towards encouraging trend towards return to work on a full time basis. So we are optimistic that Boston will see increased leasing activity in 2025. With tenants having a clear preference for premium office environments, Brandywine is demonstrated by 2024 leasing results is well positioned to capture increasing demand at both Philadelphia and Austin. Well, throughout 2024, we addressed the key themes that guide our business plan liquidity, portfolio stability and our lease up development. While significant progress was made on liquidity and portfolio stability, we have remaining work to do on development leasing.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

As we'll discuss with Humomis, twenty twenty five is a transitional earnings year for us impacted by the expensing of our preferred coupon payments and the interest expense charges relating to our two residential projects and 3025 JFK and one Uptown. While lease momentum continues to accelerate, the lease update is taking longer than originally anticipated. As such, 2025 is an earnings drop due to the items I just mentioned a moment ago. Stabilizing these development projects remains a top priority for the organization. The pipeline of each property continues to build.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Tour volume and issued proposals increased during the fourth quarter. But to be conservative, we are not projecting on the commercial properties any additional incremental NOI being generated during 2025. In looking at each project, on our 3,025 office project at Schuylkill Yards, we did execute 117,000 square foot lease with FS Investments for their new expanded global headquarters. This four floor lease brings the office component to 83% leased with just over one floor remaining to lease with a very healthy pipeline behind that. We do anticipate this project component will stabilize in Q1 twenty twenty six upon that tenant's occupancy.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Looking at the residential side of Zira, which is the residential component of thirtytwenty five excuse me, continuing to perform on pro form a in terms of absorption of rents and sits at 84% leased. Since we launched that marketing campaign, we have leased three zero six leases. We're about 92% of the project. We're also seeing very good as we're into the renewal program now, very good renewal rates for some of the existing tenants or in excess of the 55% renewal rate and an average rate increase in the high double digits. We do expect this project to stabilize this component of the project to stabilize in Q2 twenty twenty five.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

'3 thousand '1 hundred and '50 '1 Market, which is our life science project in Super Yards, was substantially delivered at year end twenty twenty four with some remaining work to do and will remain in the capitalization period through 2025. The pipeline on that project has grown significantly during the last quarter and stands at about 800,000 square feet with several advanced discussions underway. We do anticipate this project will stabilize in Q3 twenty twenty six. At Uptown ATX, the pipeline for the office component now stands over 500,000 square feet with tenant size ranging between 600,002 square feet plus, including ongoing discussions with several sizable users. Given the composition of this pipeline, after accounting for tenant build out and approval periods, we expect this project to stabilize in Q2 twenty twenty six.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

At Uptown Residential, known as Solaris House, we have delivered all three forty one units. We are currently 30% occupied for 102 units and 32% leased. Our wholly owned office development in Radler is 100% leased and tenant occupancy commenced in November of twenty twenty four. As noted in the past, these development projects remain top of market. We remain confident in their success and will continue our aggressive marketing efforts on each one.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

The earnings impact, as Tom and I will walk through a few moments, of carrying these non revenue producing capital projects is a major driver impacting 2025 guidance. And along those lines, we did introduce 2025 guidance. We do view our 2025 business plan as being a transitional bridge year for us, highlighted by solid core portfolio performance with strong leasing activity, significant balance sheet liquidity with no significant debt maturities and certainly reflecting the earnings impact of our development JVs moving off their capitalization periods. We did provide in our release yesterday 2025 FFO guidance with the range of $0.6 to $0.72 per share for a midpoint of $0.66 At the midpoint, the '25 FFO guidance is $0.19 per share below our $0.24 FFO of $0.85 per share. The primary drivers for this are highlighted in the FFO reconciliation on Page one of our SIP and primarily related to the expense and interest rates and preferred charges on 3025 Uptown ATX commercial development and the continued lease up of our Solaris residential project, partially offset by the projected stabilization of our Bureau project.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Looking at other metrics, our 2025 GAAP NOI will be approximately $18,000,000 below 24 levels, primarily due to asset sales activity, partially being offset by the 155 King Of Prussia Road being fully operational in 2025. We do anticipate executing on some of the late land sales activity, which will generate some additional gains. Tom will review all these items in more detail on several of the factors. From an operating standpoint, spec revenue for $25,000,000 will be between $27,000,000 and $28,000,000 up 4% from 24 levels. We are currently at $22,900,000 or 83% achieved at the midpoint.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Our cash and GAAP mark to market range is lower than $24,000,000 primarily due to the regional composition of our leasing activity in 2025. Our GAAP mark to market ranges are also below those levels, which is mainly driven by again the regional composition of our 2025 leasing activity. And we did actually two large TI two large renewals with no capital costs that impacted the mark to market for 'twenty five. Occupancy levels will be incrementally higher between 8889%. Our lease level loss will be incrementally higher between 8990%.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

We anticipate a retention rate of 59% to 61%. Same store NOI growth will range 1% to 3% on a cash basis and negative 1% to positive 1% on a GAAP basis. Capital control will remain in very good shape or about 10% of revenues below our '24 results. Our business plan projects $50,000,000 of additional sales activity that occurs later in the fourth quarter of $25,000,000 with minimal dilution. Our dividend payout ratios for $24,000,000 were 71.4% and slightly more than 100% on cat.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

For 25%, the FFO and CAD payout ratios are above our historical averages and above our preferred levels. However, as development JVs grow occupancy and we embark on several recapitalizations, we anticipate growing our FFO and CAD results through '26 and bringing our dividend payout ratios back to historical levels without reducing the current 0.6 dividend. It's also important to note that as we highlighted on Page three of the set, our $25,000,000 capital spend is included in CAD is impacted by approximately $23,000,000 or $0.14 a share of deferred tenant allowance payments for leases that were done between 2020 and 2023. I also want to note that our 9% to 11%, twenty five % projected capital ratio range is one of the lowest we've had in the past five years. So with that, let me turn the floor over to Tom to review our financial results for 2024 and summarize our 2025 outlook.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Thank you, Jerry, and good morning. Our fourth quarter net loss stood at $43,300,000 or $0.25 per share and our fourth quarter FFO is about $29,900,000 or $0.17 per share. Our quarterly net income results were impacted by several non cash impairment charges totaling $23,800,000 or $0.14 per share related to two of our non consolidated joint ventures located in the DC area. Our fourth quarter FFO results were 3% below our guidance and 6% below the consensus estimates, partially as a result of timing and some general observations for the quarter. Our other income, we did anticipate receiving one time transactional income totaling about $6,000,000 or just over $0.03 a share.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

We now anticipate that income being received in the first quarter of twenty twenty five. Property level GAAP NOI. Our GAAP NOI was 68.5% reflects this was reflective of our higher than anticipated and earlier than anticipated asset sales activity and suddenly higher operating expenses. G and A totaled $10,100,000 1 point 1 million dollars above our third quarter re forecast. That's primarily due to some higher non cash equity amortization.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

The increase is due to higher forecast investing that will continue into 2025. Total interest expense was 1.2% below our REIT forecast, primarily due to higher cash proceeds from the asset sales, which lowered our line of credit balance and we had slightly higher capitalized interest. Looking at our debt metrics, fourth quarter debt service and interest coverage ratios were 2.1, slightly below our 2.2 projections. Our fourth quarter and annualized consolidated core net debt to EBITDA were 7.9 times and 7.2 times respectively with both metrics above our range primarily due to the lower fourth quarter income. Portfolio and joint venture changes, we did add 155 King Of Prussia Road to our core portfolio during the quarter as our tenants took occupancy and the property is 100% occupied.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Liquidity, due to the asset sales, our year end cash position increased to $90,000,000 70 5 million dollars above our third quarter projection. And as Gerry highlighted earlier, we have $1,000,000 I said $170,000,000 term loan maturing in 2025 and no unsecured bonds maturing until November 2027. Our wholly owned debt is 95.4% fixed with a weighted average maturity of three point seven years. Our full year 2024 cat rate payout ratio was 103.4. This was negatively impacted by the lower than anticipated fourth quarter income.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

And if that income did come in, we would have been below the 100%. Going into our 2025 guidance as a midpoint, our net loss will be $0.54 per share. Our 2025 midpoint guidance for FFO will be $0.66 per diluted share. With a stable wholly owned portfolio. This reset of FFO we believe is temporary impacted by our portfolio reshaping efforts to the disposition of non core assets and the development project stabilization.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

In our fourth quarter, our FFO contribution from our undefiled joint ventures developments will be a loss of $25,200,000 or $0.11 a share. As our development projects are completed but not yet stabilized, we are incurring interest expense and preferred equity costs and overall negative operating income within those joint ventures. The result is losses totaling approximately $32,600,000 or $0.18 a share during 2025 compared to a loss of $12.2 or $0.07 a share in 2024. Our 2025 construction loan interest and partner preferred equity returns totaled $43,800,000 or $0.24 a share. We expect to recapitalize these capital projects into lower debt and equity costs as the projects stabilize.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

We will also receive 7,400,000 of non recurring cash income from the development joint ventures in the first half of twenty twenty five. To offset the development joint venture losses, we do expect our operating joint venture portfolio to generate approximately $9,000,000 or $0.05 a share of FFO. As Gerry noted, we will look to recapitalize the residential developments as they approach stabilization and recapitalize the commercial developments as leases are executed and our lease percentage approaches 80% to 90%. We believe that will have minimal effect potentially in this year and have significant effect on our 2026 results. Operating portfolio, operations are expected to remain very stable with operating GAAP NOI totaling roughly $290,000,000 roughly flat on a same store basis as compared to 2024 with core occupancy increasing slightly at the midpoint.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Our 2025 fully owned core portfolio would be reduced on a comparable basis by the third quarter sale of our campus in the PA suburbs and the fourth quarter asset sales in Austin, Texas and Richmond, Virginia. The impact of those results will reduce our NOI by roughly $15,000,000 to $18,000,000 Full year impact of 155 King of Pressure will be about $6,000,000 and once the lease up of $250,000,000 half occurs, we will generate an additional $3,000,000 Recall, G and A, we expect G and A to be between $42,500,000 to $43,500,000 which approximates our full year 2024 results. Our interest expense including for financing costs and capitalized interest will approximate $135,000,000 with the midpoint representing a 14,000,000 increase. That increase represents $9,000,000 of reduced capitalized interest and from the developments becoming operational and $4,000,000 of interest, which is the full year effect of the April 2024 unsecured bond issuance. Termination of the fee income will be between $7,000,000 and $9,000,000 as compared to $13,700,000 and $24,000,000 net management fee and development fees will be between $8,000,000 and $10,000,000 5 million dollars reduction again due to lower development fees from recently delivered joint venture projects.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

And we do expect to do $50,000,000 of speculative sales Weighted towards the second half of the year, we project these sales will occur later in 2025 and have minimal dilution. We anticipate no property acquisitions. We anticipate no use of the ATM or buyback activity. So we leave our share count would be roughly 178,000,000 shares. Looking closer at the first quarter, we see property level NOI of approximately $69,000,000 Again, this will have the full quarter effect of 01/1955 King of Prussia, but also have the full quarter effect of our fourth quarter asset sales activity.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Our FFO contribution from our joint ventures will total negative $1,000,000 for the first quarter. That's primarily due to the ramp up of leasing in our multifamily, one uptown ATX coming online. However, that number is also inclusive of a $6,000,000 non recurring income. In the previous quarter, we had thought that would be a consolidated pickup. That pickup will occur in the joint ventures in the first quarter.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

G and A expense for the quarter will be about $17,000,000 That's roughly 40% of our G and A for the year and that increase is really resulting from timing of compensation expense being recognized in the company. Total interest expense will approximate $33,000,000 Capitalized interest will be about $2,500,000 Termination and other fee income will be about $2,000,000 Net management fees and development fees will total about $2,500,000 We primarily feel more positive about executing our land sales program this year and have reintroduced $4,000,000 to $6,000,000 of land sales, which were delayed from 2024. These sales will take place later in the year and there are no anticipated closings of any land sales in the first quarter of twenty twenty five. Turning to our 2025 capital plan. The plan is much simpler than in prior years as our wholly owned development and redevelopment projects are fully construction or during completion.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

As our CAD payout ratio will be 120 to 150, we recognize this is elevated compared to historical averages and our long term targets. However, as we complete our recent developments, we should see CAD levels raise, rise and increase going into 2026, based on the trajectory of the leasing and occupancy taking effect. In addition, as Gerry noted, we have over $23,000,000 of revenue maintained capital spend for leases signed between 2020 and 2023. While there is always a delay, this is an unusually high year and it was tied to a number of large renewals done in the past. Looking at larger users of our cash, $60,000,000 for development, which includes $155,000,000.02 $50,000,000 and completing zero last expansion, we have $105,000,000 of common dividends, $35,000,000 of revenue maintained capital, $30,000,000 of revenue create and $25,000,000 of equity contributions to fund recent tenant leases in our joint ventures.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Sources of this will be $130,000,000 of cash flow after interest payments, $50,000,000 of speculative asset sales and $10,000,000 of construction loan proceeds on 155 King Of Prussia. Based on that capital plan, we anticipate using approximately $60,000,000 of our $90,000,000 of cash on hand, but we do expect to end the year with full availability of our line of credit. We also project that our net debt to EBITDA range will be $62,000,000 to $84,000,000 with increase the increase is primarily due to the losses of the joint ventures and our debt to GAB will approximate 48%. Additional metric of core net debt to EBITDA should be 7.7% to 7.9%. By year end 2020, our core net debt to EBITDA should really equal our consolidated net debt to EBITDA since we will have no developments going on and it will only exclude our joint ventures.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Again, we believe those ratios are temporarily impacted by revenue coming along in our development completions, and we are confident that once those completions are stabilized, our leverage levels will decrease back towards core levels. We anticipate our fixed charge and interest card ratios to be roughly two point zero, which represent a 0.1 sequential decrease from this year, again due to joint venture losses. And we anticipate the leverage will then begin to improve as we go into next year. I will now turn the call back over to Jerry.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Tom, thank you very much.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So as we look ahead, we're confident that the strength of our operating platform and the quality of our developments will allow us to leverage improving real estate market trends and position the company for future growth. While earnings growth of our development pipeline is not yet fully visible, the groundwork has been laid and we are poised to build on our continued momentum as we drive towards long term value. The overall real estate markets continue to improve. Our operating platform remains very stable with very limited near term rollover. As Tom walked you through, our liquidity is in excellent shape and we are well positioned to take advantage of continued market improvements.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

With that, we're delighted to open up the floor for questions. As we always do, we ask that in the interest of time, you limit yourself to one question and a follow-up. Dean?

[Operator]

Thank you. And our first question comes from Michael Griffin of Citi. Your line is open. Michael, your line is open. Please unmute.

[Operator]

Our next question comes from Seif Sakhwa of Evercore ISI.

[Steve Sakwa, Senior Managing Director & Senior Equity Research Analyst at Evercore ISI]

Yes, thanks. Good morning. I guess, Gerry, going to a couple of the developments, you've talked about what I think are relatively good pipelines and they seem to be growing, but the inability to get some of these deals over the finish line. So I guess the first question is, have any of these larger tenants at 3151 or Uptown ATX, have they gone anywhere else? Have you lost them?

[Steve Sakwa, Senior Managing Director & Senior Equity Research Analyst at Evercore ISI]

Or have these tenants just not made decisions? And what do you think the biggest, I guess, hold up is from getting these companies to make decisions?

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Yes, good morning, Steve. We have not lost any of our major prospects to any other building or to them making a decision to stay put where they are. The timelines have been very protracted. The discussions are ongoing. And I think when we take a look at the one Uptown and 3151, the pipelines are very good and they are advancing through the various stages.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

It just seems that tenants are behaving a bit more pragmatically and cautiously than we would frankly like. Part of that would probably due to macro uncertainty, the elections, not sure where the economy is going, all those different things. But one of the trend lines we are seeing, Steve, which is kind of interesting is, one of the reasons why some of these decisions were delayed is because they weren't real tenants weren't really sure what their return to work policies would be and how many seats they would need. So that is really starting to look like it's in the rearview mirror for companies in general and certainly for companies looking to move up the quality curve. So we have a number of space plans underway.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

We're quantifying both construction costs and square footage. So the tone of conversations again continues to be positive. As I mentioned at the close of my comments, like we understand there's not clear visibility on the income timing from these development projects, but we remain confident that these discussions will continue to progress and that will get some of them across the finish line. But the key answer to your question is we've not lost any of these prospects to any other competitive building.

[Steve Sakwa, Senior Managing Director & Senior Equity Research Analyst at Evercore ISI]

Okay, thanks. And then maybe just as a follow-up, as you look at the cash yields and I realize you've got a lot of carry costs coming through the P and L this year and you're confident those will start to recede, I guess, in 2026 and ultimately 2027. I guess, what confidence do you have around the rents and the timing, I guess, to hit these yields? And does it seem to be a pricing issue or just more of a tenant decision making issue as you're kind of talking to them? I guess, what's the risk of these yields when you do get them leased aren't achieved?

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Yes. I think it's more of a timing issue than a pricing issue. I think the dichotomy we're seeing in the market is as evidenced by what we've seen here in a couple of the Philadelphia markets is there's a real flight to quality. So tenants are really looking at moving as far as they count quality curve. So price versus quality Workspace is a secondary consideration.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

But the reality is that the timelines have become fairly protracted. But George, maybe you can make some comments on that as well.

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

Yes. I mean, I really do, Steve, feel that it's really more of a timing issue. I think the rental the incoming initial rental rates in our pro form a don't appear to be at risk.

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

So again, I think if we can accelerate decision making, sign the lease quicker, build the space quicker and commence it even quicker than that's the solid path to the yields that we've laid out in these projects.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Yes.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Just one final point on that, Steve, just to close the loop. I mean, where there rents have not been an issue, TI costs have been a bit higher. And we're seeing where if the TI costs are higher, we're actually getting longer term leases than we originally pro form a.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So while the overall returns we're expecting based on the capital investment we need to make is staying fairly in line with what our expectations were. But the TI cost at point of sale could be higher, but we're making up for that by longer lease terms.

[Steve Sakwa, Senior Managing Director & Senior Equity Research Analyst at Evercore ISI]

Great. Thanks. That's it for me.

[Operator]

Thank

[Operator]

you. Our next question comes from Anthony Paolone of JPMorgan. Your line is open.

[Anthony Paolone, Executive Director at J.P. Morgan]

Thanks. Good morning. Maybe for Tom, you went through a bunch of details on the drag from the developments in 2025 and so forth. But I don't know if you can maybe just bottom line like upon stabilization of the development pipeline, like what would be the difference between kind of the JVFFO, I guess negative for 2025 versus what the stabilized level would be?

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Yes. I think, Tony, when we look at the income coming off the JVs this year, whether it's residential or commercial, it's give or take $10,000,000 to $12,000,000 with a ramp up. I think those numbers are going to jump to the yields you're seeing on the development page, which can go over $50,000,000 So the ramp up will be there as we go through the OpEx side. On the overall FFO side, you will also see, Tony, that we did outline the costs we're taking in terms of the construction loans and in terms of the preferred equity. So those costs will as we get them close to stabilization, it'll have to be stabilized.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

I think we will look to recap the assets to get out from under those higher costs. So those were some larger costs outlined that won't go away and potentially could increase until we recap the assets.

[Anthony Paolone, Executive Director at J.P. Morgan]

Okay. I mean, it's just I guess my follow-up and what I'm trying to just get to is, it seems like the accounting is pretty onerous here, but if I just look at your development page and just take the project costs and the equity capitalization in your share roughly, it's like a quarter of a billion dollars, I guess, for Brandywine. Like, I guess, is there just ultimately an impairment to that amount? And we should just think about that and the rest of this is just pretty tough accounting it seems like. And just trying to understand what the equity is here.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Right. No, I think when we look at some of the capitalization rates we can get on some of the projects and we think that there we don't think there's an impairment concern. If you look at the yields, we think that we can get out from our equity without a concern. Now that has to happen, we have to lease them up. So I can't say when that will happen, but right now we don't expect to have an equity impairment based on the current trajectory and the projections we're seeing.

[Anthony Paolone, Executive Director at J.P. Morgan]

Okay. Thank you.

[Operator]

Thank you. Our next question comes from Dylan Brzezinski of Green Street. Your line is open.

[Dylan Burzinski, Senior Analyst, Office at Green Street Advisors, LLC]

Hi, guys. Good morning. Thanks for taking the question. Tom, when you say recap the JV assets, can you kind of talk about what that would look like? Would that essentially be Brandywine taking a larger equity ownership interest or?

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Yes. Hey, Dylan, Jerry, Simon and I will tag you. So just to refresh everyone's memory, these development joint ventures are structured on a preferred equity basis. So the equity investment by our partners has priority over ours. And during this period when it comes out of capitalization, we need to expense those preferred payments.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

There's a set price takeout for each of those. So even though the sit may have or 64%, sixty eight % owner, Brandywine essentially owns between 8890% of the residual position in those properties. So as Tom touched on that these projects move towards stabilization, 03/2025 is pretty much moving that direction very quickly. We'll be able to take out our preferred partner and then recap that and either bring that asset on our balance sheet as a large unsecured asset, refinance existing debt or bring additional partners. So we think we have a whole range of options available for us that can be both balance sheet strengthening and accretive to our earnings path going forward.

[Dylan Burzinski, Senior Analyst, Office at Green Street Advisors, LLC]

That's helpful. Appreciate that, Jerry. And I guess just one more sort of on the development side of things. We noticed in your guys' guidance figures that you guys talked about starting one development or redevelopment. Can you kind of give us any details as to size of that?

[Dylan Burzinski, Senior Analyst, Office at Green Street Advisors, LLC]

And then maybe talk about why deciding to continue to start to develop given a public market cost of capital that is initially conducive to external growth at this time?

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Yes, it's a great question, Matthew. And look, first of all, we have leasing to do and that remains the top priority without exception. And we do anticipate as we've talked about continued momentum on the leasing front. But as we're looking at our 2025 full year plan, there are a couple of possibilities that we're evaluating. One is outlined on Page four to sit for the last few quarters.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

We are evaluating potential convergence of underperforming office hats in the multifamily. We also are exploring a fully leased or built as part of our university master planning process. And we're also evaluating the last piece of our Radnor, Arc and the Penn Medicine complex. They can do a residential or hotel project there. Those deals are all kind of in the $40,000,000 to $50,000,000 range.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

And really our desire to move forward to any of those is really going to be totally a function of how we're doing on some of the lease up and development projects. So just when we look at the full year plan with these things happening, we thought we'd highlight that there could be a potential start, but that certainly in no way was meant to convey that the eyes off the ball on leasing our existing development projects. That is the number one priority we have as a company.

[Dylan Burzinski, Senior Analyst, Office at Green Street Advisors, LLC]

Great. Thanks for that detail.

[Operator]

Thank you. Our next question comes from Tayo Okusanya of Deutsche Bank. Your line is open.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Hi, yes. Good morning, everyone. So I wanted to understand a little bit about the guidance range of 60% to 72%. Again, Tom, appreciate a lot of the exploration around the carry cost. But I guess again, the guidance, the midpoint 66% kind of came in pretty light versus where most of us were modeling to.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

So I don't know whether it's us just missing some of the carry costs. I don't know whether there's something unusual that maybe we did not anticipate in 2025. And again, also kind of curious, one, why the guidance range is so wide and what kind of moves you to the high end or low end of the guidance range?

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Hi, Tayo. Good morning. Some of you couldn't hear it too crisply. I think you're asking about some of the guidance questions going forward. I mean, on the JVs, I think the guidance in the JVs, especially on the development side, we did push back all of the leasing into next year.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

That was large. And we're going to have those projects on our books for the rest of the year. We were hoping that maybe there could be some recapitalizations done. We are not really forecasting much impact from those, which really did impact that number on the loss side. We also had an effect on the other areas, right?

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

We had less capitalization of our interest expense. So cash interest expense, a lot of that is outside of the one bond deal, but we did lose a lot of capitalization of interest on our investment in those joint ventures. And then we are losing development fees, which we also signaled as going lower. And again, as these projects come online, we're not going to have a development case. So there are a number of line items within our guidance that's being impacted by that.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

And you can see those are outlined on that Page one where we talk about some of those happenings and what takes us from the current 80 the 85 for this year down to the 66.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Okay. That's helpful. Could you just talk a little bit again about the range? Like what why is the range particularly wide and what would get you to the high end or low end of the guidance range?

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Yes, I think on the high end of the range, there could be leasing that could take place. I mean, we don't know if that will happen, but leasing that we have not programmed, especially on the developments, there could be some opportunities. The properties are done large pipeline as Gerry mentioned. There's still tenants that if they came in and really needed space that there's an opportunity to build some of that out. The second area is if we could do some recaps which we're not sure if they can get done.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

As I outlined, there's some high costs related to our preferred equity and the construction loans are above where we think we could refinance the assets. And or we could just potentially sell the assets or take a smaller position. So at that point, the development losses will also go down. So there could be an opportunity that would allow us to have losses come out there. And so those are the two main areas Tayo would be some recapitalization certainly or some additional leasing that we don't see right now and those developments.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

Yes.

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

Tayo, it's George. If I could weigh in on the operating side there of the house, I mean, look, we're 83% complete on our spec revenue for the year. Of what's remaining to be done, 90% of that is coming out of Philadelphia and the Pennsylvania suburbs. So we do think that there is some potential uplift to spec revenue that could come from our lower than we would like to see Boston portfolio.

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

So I do think there's the opportunity for

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

day

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

to day operations to contribute that could get us above that from this point.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Thank you.

[Operator]

Thank you. Our next question comes from Yupal Rana of KeyBanc Capital Markets. Your line is open.

[Upal Rana, Director - Senior Equity Research Analyst at KeyBanc Capital Markets]

Great. Thanks for taking my question. Can you guys talk about the CAD payout ratio guidance of 120% to 150% this year, the $24,000,000 deferred tenant allowance? Is the $24,000,000 going to only impact $25,000,000 or is there a chance this could lead into 2026?

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Yes, Tom, I'm sorry.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

No, I don't think there's going to be I think there are known tenant improvements that are being done. Part of that, I'll just go back and say these are allowances that for the most part are being done by our tenants, right? So they get a tenant allowance. They then are given a period of time to do that work.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

They do all the scoping. They do all the building. And at the end, we went in or along the way, we then made payments to those tenants. In the case of so they do a lot of the work and so we're not really gauging when that happens, except to know that it's occurring or not and when they may bill us. So that can occur throughout that process.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

And when people renew, they may be restocking their space. They go through what they want to do with the space plan. And some of those take longer periods of time. And so what we're looking at are we think that the items that we're bringing up are points that we do think they're going to need the money this year, should not spill over into next year. There is always delays.

[Thomas E. Wirth, Executive VP & CFO at Brandywine Realty Trust]

It's just that we're highlighting this is a delay that's much longer and much more impactful to 2025 than in other years.

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

Yes. And again, this is George Wayne. I mean, we have the vast majority of those all have sunset provisions to them in the lease document. And most of those sunset provisions trigger in 2025.

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

So the tenant is basically in a use it or lose it position. So that's why we kind of feel that it all happens this year.

[Upal Rana, Director - Senior Equity Research Analyst at KeyBanc Capital Markets]

Okay, great. That was helpful. And then you were able to achieve positive rent spreads in 2024, but you expect it to be negative in 2025 mostly due to Austin. Could you talk about what is driving the weakness for you there in Austin? Because as you said, there should be some increased activity this year.

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

Yes. Again, George, we're in here. Yes. I mean, look, the Austin metric is predominantly being driven. We had a 100,000 square foot tenant renew with us in our suburban project Riverplace.

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

And in lieu of TI, we ended up dropping the face rate to still obtain a net effective front positive outcome, but basically traded capital for rent. So that's really why we provided the additional breakdown on Page three, so you can kind of see the impact of the Austin. So absent that largely is in Austin and one other that we had done a similar structure with in Philadelphia. Take two deals out of the mix and we're rolling up the call it, a 2% cash and a 7.5% gap. So kind of more in line with how the vast majority of the portfolio performs.

[Upal Rana, Director - Senior Equity Research Analyst at KeyBanc Capital Markets]

Okay, great. Thank you.

[Operator]

Thank you. Our next question comes from Michael Lewis of Truist Securities. Your line is open.

[Michael Lewis, Cyber Security Group Manager at Truist Securities]

Thank you. So my understanding on the preferred to the JV partner is the yield is in the teens. That's frustrating when you have a cash balance and nothing drawn on your line of credit. Is there nothing that you could work out prior to stabilization with your partner to kind of get at that high cost obligation sooner? And when can you repay?

[Michael Lewis, Cyber Security Group Manager at Truist Securities]

Does the project have to stabilize? Why can't you pay it earlier?

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Yes, Michael, Jerry, very good questions. We're fortunate to have some have very good partners with a great relation with them. And some of those discussions that you're referencing are ongoing. So So we recognize that when we did these development joint ventures, our approach was to preserve the significant residual profit position for Brandywine. The cost of us doing that was to do these preferred structures.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So as I mentioned a little bit ago, there's pretty much defined takeout numbers for this. Given our strong liquidity, that's certainly one of the things we're thinking about in terms of how we can minimize the kind of I'll call it the FFO earnings impact of paying the preferred dividends on a current basis now the capitalization goes over. By recasting or recapitalizing those ventures, we do not need to wait until there's any stabilization there. So there's active discussions underway. As Tom touched on, we think some of the excuse me, some of the coupons on the construction loans are higher than we could get today.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So we're looking at both recap on the preferred equity side, but then also recap on the debt side as well. So I think one of the questions was how we kind of move the range a little bit. I think some of those things happening on more of an accelerated basis than we have in our plan right now should be very helpful.

[Michael Lewis, Cyber Security Group Manager at Truist Securities]

Okay, great. And then looking at your portfolio, right, so Philly CBD, ninety six percent leased, excellent, low rollover. Philly suburbs have been higher leased in the past, but a few spaces in contract and Plymouth meeting, but 90% over 90% leased in the suburbs. And then Austin, so you've already answered some questions about Austin, but there's a lot of conversation about this one big tenant in the market. And these numbers for Austin, I mean, is this a case where you hit one or two big leases and this 78% lease goes to 90%?

[Michael Lewis, Cyber Security Group Manager at Truist Securities]

Or do you think it's going to be kind of a longer term,

[Michael Lewis, Cyber Security Group Manager at Truist Securities]

I

[Michael Lewis, Cyber Security Group Manager at Truist Securities]

don't know what word to use, slog in Austin to kind of get that up? And is the market still soft and it's going to take a while?

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Well, I think the market is still in a recovery phase and George and I will tag team this. But look, I mean, the pipeline we have in our Austin portfolio is significantly higher than it was a couple of quarters ago. So certainly more tenants are moving in the marketplace. I think the positive absorption of leasing activity, particularly in some of the submarkets for us has been very helpful. Look, we're always tracking large and small sized tenants.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So certainly the larger sized tenants we pay a lot of attention to and they're more relevant probably to our Uptown ATX project. But as we're looking strategically at Austin over the next few years, We're certainly very fortunate for that 405 Colorado downtown. We have a wonderful mixed use development opportunity at Uptown ATX. We're hopeful of the CapMetro project moving forward to the next quarter or so. So the other suburban assets, I think, it's there's and off the furniture, but there's a range of larger tenants and smaller tenants.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So my guess would be on some of the projects, we're hoping for a quick hit for a larger user and on maybe some of the other ones, there's less visibility on large user. I will note though, Michael, to add on to it is that on that page in the SIP we have excuse me, we have identified a couple of buildings at Riverplace, which are underperforming as potential residential conversions, an excellent residential market. We're going through that zoning approval, working with the local leadership and the community groups that test the viability of that. So there could be an opportunity for us to recast the use of a couple of those buildings at River Place. But George, any other observations?

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

Yes. I think you touched on most of them, but I think Michael to kind of amplify on the suburban product, I mean, those projects are going to kind of play in that 5,000 to 20,000 square foot tenant on the larger end of the spectrum. So a lot of kind of fives and tens. And with some of these assets, we saw a lot of excess over the years post pandemic. I think as return to work now starts to rebuild, we feel pretty good about the quality of the project.

[George Johnstone, EVP, Operations at Brandywine Realty Trust]

We are still competing with some new developments and some very good sublease space, but the sublet market in Austin has started to tighten. So again, I think we're going to be still a couple of quarters away to start posting some absorption in the suburban, but it will be on the smaller side as compared to the larger prospects we're seeing in the development asset.

[Michael Lewis, Cyber Security Group Manager at Truist Securities]

Great. Thank you.

[Operator]

Thank you.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Thank you, Michael.

[Operator]

Our next question comes from Michael Griffith of Citi. Your line is open.

[Michael Griffin, Senior Equity Research Analyst at Citigroup]

Great. Thanks. And sorry for the technical difficulties earlier. Wondering if we could get some color just on the year end asset sales. Can you give us a sense of what the buyer pool was like?

[Michael Griffin, Senior Equity Research Analyst at Citigroup]

Anything on cap rates? And whether or not seller financing was potentially needed to get some of these deals over the finish line?

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Very good. Thanks. And no worries about the technical issues, we were having a few of those this morning ourselves. So understood perfectly. Yes, look, we actually went on having a very successful close with 2022 on the asset sale, certainly far beyond what we initially had in our plan.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So we wound up essentially including a parcel of land in our Daphne area, about over $300,000,000 of sales, $310,000,000 The cap rates ranged on that from low 5s on the sales up to a ten ten plus on our suburban Philadelphia asset. I guess from a buyer pool standpoint, a couple of things. One is, we're definitely seeing some owner occupants seizing the opportunity to buy assets at fairly low price. I mean actually, we were able to do that last year with one of our other assets and couple of the sales here in the Philadelphia region have gone to owner occupants. We're definitely seeing more family offices, well capitalized buyers, kind of all cash moving into the market to take advantage with, again, AC is lower pricing with significant upward bias.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Most of the institutional capital that we're seeing is really still opportunistic. We're looking for mid kind of mid to high teens total returns. We are beginning and so that includes, I would say, some of these smaller syndicators, like the buyer of our of one of our properties was a syndicator. They're raising money for some smaller family offices and aggregating capital. We are beginning to see though the emergence of some core and core plus buyers.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

What was interesting is most owners like Brandywine are reluctant to sell our really truly high quality assets today given kind of depressed valuations and also the anticipation of a much lower supply coming in over the next few years to better position those better assets both from a rental rate and a value standpoint. So some of those core buyers where we're getting tinged on different unsolicited sales etcetera are trying to get in now in anticipation of a continued recovery in the marketplace. I mean the forward supply pipeline for office, as you well know, is very, very low for the foreseeable future. We're also seeing a lot of preferred equity and mezzanine financing sources out there who are still looking to take advantage of kind of a recovering debt capital market to provide bridge financing to get certain transactions done. And then certainly one of our larger sales last year went to the City of Austin, who's going to occupy that for a public service public safety building.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So that was a very fortunate turn of events for us as well. So I think it's still being dominated, Michael, by kind of the family offices, smaller syndicators, core plus I'm sorry, optimistic groups targeting those returns I mentioned. There's an awful lot of capital sitting on the sidelines. I think as the market gets more visibility on the slight the quality, no future pipeline, demand drivers picking up. I think you'll see a big uptick in buyers coming back into the marketplace at much more realistic values that are closer to historical levels.

[Michael Griffin, Senior Equity Research Analyst at Citigroup]

Thanks, Jerry. Really appreciate the color there. And then maybe just one on kind of the development leasing pipeline as it relates to 03/1951. Obviously, you've had success at 03/2025 with the large lease signed there. The commercial component is about 80% leased, but still seems like it's lagging for the 03/1951, probably just a function of where we are in the life science cycle right now.

[Michael Griffin, Senior Equity Research Analyst at Citigroup]

Would you ever consider leasing space there to traditional office users if demand was there for it?

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Great question. A couple of things. One is that building was literally just completed. So we still have perimeter excuse me, perimeter work to do. Lobby is still being finished.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So it's not quite in pristine marketing condition. So but we are having, as I mentioned earlier, some significant increase in the pipeline. The life science market has been slow to recover. That being said, we are seeing a lot of, as we call them, green shoots out there for half floor, full floor, couple floor users. There's still some institutional demand out there that we're talking to.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

So we still feel very good about the track that we have that project on right now. Your question is an excellent one though, and we certainly have given the success we've had at 03/2025, we certainly have started thinking to show that building to other office users who are looking to get next to a mass transportation center, move into University City, looking for a very, very high quality office space that has great visibility. So I think one of the beauties of how we design that property, it can accommodate as heavy a life size user as is out there from a lab, research, mechanical system standpoint, but it also can become a recipient for office use as well. So we really weren't pushing that very hard until we achieved this lease at 03/2025. Now with that project clearly on a path to stabilization success, we've made a pin with our marketing teams to put 31.51 into that market queue as well.

[Michael Griffin, Senior Equity Research Analyst at Citigroup]

Thanks. That's it for me and good luck for the Eagles this weekend.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Thank you very much. We appreciate that.

[Operator]

Thank you. I'm not showing any further questions at this time. I'd like to turn the call back over to Jerry Sweeney for closing remarks.

[Gerard Sweeney, President, CEO & Trustee at Brandywine Realty Trust]

Great. Katie, thanks for your call today. And everyone, thank you very much for participating in this earnings call. We look forward to continued progress on our 25 business plan and updating you on that progress on our first quarter call in April. So thank you very much and have a great day.

Participants

Executives

• Gerard Sweeney, President, CEO & Trustee
• Thomas E. Wirth, Executive VP & CFO
• George Johnstone, EVP, Operations

Analysts

• Steve Sakwa, Senior Managing Director & Senior Equity Research Analyst at Evercore ISI
• Anthony Paolone, Executive Director at J.P. Morgan
• Dylan Burzinski, Senior Analyst, Office at Green Street Advisors, LLC
• Omotayo Okusanya, Managing Director at Deutsche Bank
• Upal Rana, Director - Senior Equity Research Analyst at KeyBanc Capital Markets
• Michael Lewis, Cyber Security Group Manager at Truist Securities
• Michael Griffin, Senior Equity Research Analyst at Citigroup