PHILADELPHIA, Oct. 17, 2019 (GLOBE NEWSWIRE) — Brandywine Realty Trust (NYSE:BDN) today reported its financial and operating results for the three and nine-month periods ended September 30, 2019, narrowed full year 2019 guidance and introduced 2020 earnings guidance.
Management Comments“We are encouraged by the continued execution of our 2019 business plan during the third quarter,” stated Gerard H. Sweeney, President and Chief Executive Officer of Brandywine Realty Trust. “We are experiencing strong market conditions and continue to achieve our operating plan metrics. In addition, we took advantage of the public debt markets to raise $214 million of unsecured bonds at a weighted average interest rate of 3.0% and weighted average maturity of 7.5 years. A majority of the proceeds were used to pay-off the outstanding balance on our line of credit. We are narrowing our 2019 FFO guidance from $1.40 to $1.44 per share to $1.41 to $1.43 per share. We are also introducing our 2020 FFO guidance range of $1.41 to $1.51 per share. Our 2020 guidance, at the midpoint, represents a comparable 3% annual FFO growth rate.”Third Quarter HighlightsFinancial ResultsNet income available to common shareholders; $6.7 million, or $0.04 per diluted share.Funds from Operations (FFO); $64.0 million, or $0.36 per diluted share.Portfolio ResultsCore Portfolio: 93.2% occupied and 95.5% leased.New and Renewal Leases Signed: 577,000 square feet.Tenant Retention Ratio: 72%.Rental Rate Mark-to-Market Increase: 9.3% on a GAAP basis and 4.2% on a cash basis.2019 Business Plan RevisionsDisposition Activity: $36.4 million.2020 Business Plan and Guidance IntroducedNet income: $0.24 to $0.34 per diluted share.FFO: $1.41 to $1.51 per diluted share, representing a 3% growth rate at guidance midpoint.Rental Rate Mark-to-Market Range: 8-10% cash and 17-19% GAAP.Transaction Activity
Wholly-owned DispositionsOn September 11, 2019, we completed the sale of a 211,000 square foot office building located at 1900 Gallows Road in Vienna, Virginia for a gross sale price of $36.4 million.Finance ActivityOn October 3, 2019, we priced a $200.0 million underwritten public offering consisting of $100.0 million of our 4.100% guaranteed notes due 2024 (the “2024 Notes”) and $100.0 million of our 4.550% guaranteed notes due 2029 (the “2029 Notes” and, together with the 2024 Notes, the “Notes”).
The 2024 Notes were offered to investors at a price of 106.315% of their principal amount, plus accrued and unpaid interest from and including October 1, 2019, with a re-offer yield of 2.669%. The 2029 Notes were offered to investors at a price of 110.058% of their principal amount, plus accrued and unpaid interest from and including October 1, 2019, with a re-offer yield of 3.331%. The 2024 Notes became part of the same series as the 4.100% guaranteed notes due 2024, $250.0 million of which were originally issued on September 16, 2014. The 2029 Notes became part of the same series as the 4.550% guaranteed notes due 2029, $250.0 million of which were originally issued on September 16, 2014.
The net proceeds of the offering, after deducting underwriting discounts and estimated transaction expenses related to this offering and excluding accrued interest paid by the purchasers of the 2024 notes and the 2029 notes, were approximately $214.3 million. We used the net proceeds of the offering to reduce outstanding borrowings under the Operating Partnership’s unsecured revolving credit facility. Any remaining net proceeds will be used for general corporate purposes, which may include the repayment, repurchase or other retirement of other indebtedness.
The $146.5 million outstanding balance on our $600.0 million unsecured revolving credit facility as of September 30, 2019 was subsequently repaid in October.We have $29.9 million of cash and cash equivalents on-hand as of September 30, 2019.Results for the Three and Nine-Month Periods Ended September 30, 2019Net income allocated to common shares totaled $6.7 million or $0.04 per diluted share in the third quarter of 2019 compared to a net loss of ($43.3) million or ($0.24) per diluted share in the third quarter of 2018. The 2018 results include an impairment charge totaling ($56.9) million, or ($0.32) per diluted share.FFO available to common shares and units in the third quarter of 2019 totaled $64.0 million or $0.36 per diluted share versus $63.2 million or $0.35 per diluted share in the third quarter of 2018. Our third quarter 2019 payout ratio ($0.19 common share distribution / $0.36 FFO per diluted share) was 52.8%. Net income allocated to common shares totaled $17.2 million or $0.10 per diluted share for the first nine months of 2019 compared to net income of $13.4 million or $0.07 per diluted share in the first nine months of 2018.Our FFO available to common shares and units for the first nine months of 2019 totaled $186.3 million, or $1.05 per diluted share compared to FFO available to common shares and units of $183.4 million, or $1.01 per diluted share, for the first nine months of 2018. Our first nine months 2019 FFO payout ratio ($0.57 common share distribution / $1.05 FFO per diluted share) was 54.3%.Operating and Leasing ActivityIn the third quarter of 2019, our Net Operating Income (NOI) excluding termination revenues and other income items decreased (1.3%) on a GAAP basis and increased 0.6% on a cash basis for our 74 same store properties, which were 93.1% occupied on September 30, 2019 and September 30, 2018.We leased approximately 577,000 square feet and commenced occupancy on 518,000 square feet during the third quarter of 2019. The third quarter occupancy activity includes 241,000 square feet of renewals, 171,000 square feet of new leases and 106,000 square feet of tenant expansions. We have an additional 383,000 square feet of executed new leasing scheduled to commence subsequent to September 30, 2019.We achieved a 72% tenant retention ratio in our core portfolio with net absorption of 33,000 square feet during the third quarter of 2019. Third quarter rental rate growth increased 9.3% as our renewal rental rates increased 6.5% and our new lease/expansion rental rates increased 13.3%, all on a GAAP basis.At September 30, 2019, our core portfolio of 91 properties comprising 16.2 million square feet was 93.2% occupied and we are now 95.5% leased (reflecting new leases commencing after September 30, 2019).DistributionsOn September 10, 2019, our Board of Trustees declared a quarterly dividend distribution of $0.19 per common share that was paid on October 17, 2019 to shareholders of record as of October 3, 2019. 2019 Earnings and FFO GuidanceBased on current plans and assumptions and subject to the risks and uncertainties more fully described in our Securities and Exchange Commission filings, we are adjusting our 2019 net income guidance of $0.17 – $0.21 to $0.14 – $0.16 per diluted share and 2019 FFO guidance of $1.40 – $1.44 to $1.41 – $1.43 per diluted share. This guidance is provided for informational purposes and is subject to change. The following is a reconciliation of the calculation of 2019 FFO and earnings per diluted share:Our 2019 key business plan assumptions include:
Core Occupancy improving to a range of 94-95% by year-end 2019 and 95-96% leased;11-12% increase in overall lease rates on a GAAP basis;4-5% increase in overall lease rates on a cash basis;0-2% increase in 2019 same store GAAP NOI;1-3% increase in 2019 same store cash NOI;Speculative Revenue Target: $32.0 million, 100% achieved;Change in Lease Accounting Treatment: $7.9 million decrease to earnings, or $0.04 per diluted share;Tenant Retention Rate: 66%;$0.19 per share quarterly dividend;Acquisition Activity: none;Disposition Activity: $36.4 million;One Development Start: 405 Colorado, Austin, Texas; andAnnual earnings and FFO per diluted share based on 178.0 million fully diluted weighted average common shares.2020 Earnings and FFO GuidanceBased on current plans and assumptions and subject to the risks and uncertainties more fully described in our Securities and Exchange Commission filings, we are introducing our 2020 net income guidance of $0.24 to $0.34 per diluted share and 2020 FFO guidance of $1.41 – $1.51 per diluted share. This guidance is provided for informational purposes and is subject to change. The following is a reconciliation of the calculation of 2020 FFO and earnings per diluted share:Our 2020 FFO key assumptions to include:
Core Occupancy improving to a range of 94-95% by year-end 2020 and 95-96% leased;17-19% GAAP increase in overall lease rates;8-10% cash increase in overall lease rates;2-4% increase in 2020 same store GAAP NOI;0-2% increase in 2020 same store cash NOIExcluding 1676 International Drive, 2.5% to 4.5% increase in cash NOI;Speculative Revenue Target: $31.0 million, 50% achieved;Acquisition Activity: $20.0 million (250 King of Prussia Road, Radnor, PA)Disposition Activity: none;Two development starts; andAnnual earnings and FFO per diluted share based on 179.0 million fully diluted weighted average common shares.About Brandywine Realty TrustBrandywine Realty Trust (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, Austin and Washington, D.C. markets. Organized as a real estate investment trust (REIT), we own, develop, lease and manage an urban, town center and transit-oriented portfolio comprising 178 properties and 24.6 million square feet as of September 30, 2019, 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. For more information, please visit www.brandywinerealty.com.Conference Call and Audio WebcastBDN management will discuss updated earnings guidance for fiscal 2019 on Friday, October 18, 2019, during the company’s earnings call. The conference call will begin at 9:00 a.m. Eastern Time and will last approximately one hour. The conference call can be accessed by dialing 1-833-818-6810 and providing conference ID: 4680129. Beginning two hours after the conference call, a taped replay of the call can be accessed through Friday, November 1, 2019, by calling 1-855-859-2056 and entering access code 4680129. The conference call can also be accessed via a webcast on our website at www.brandywinerealty.com.Looking Ahead – Fourth Quarter 2019 Conference CallWe anticipate we will release our fourth quarter 2019 earnings on Wednesday, January 29, 2020, after the market close and will host our fourth quarter 2019 conference call on Thursday, January 30, 2020 at 9:00 a.m. Eastern Time. We expect to issue a press release in advance of these events to reconfirm the dates and times and provide all related information.Forward-Looking StatementsEstimates of future earnings per share, FFO per share, common share dividend distributions and certain other statements in this release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our and our affiliates’ actual results, performance, achievements or transactions to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors relate to, among others: our ability to lease vacant space and to renew or relet space under expiring leases at expected levels; competition with other real estate companies for tenants; the potential loss or bankruptcy of major tenants; interest rate levels; the availability of debt, equity or other financing; risks of acquisitions, dispositions and developments, including the cost of construction delays and cost overruns; unanticipated operating and capital costs; our ability to obtain adequate insurance, including coverage for terrorist acts; dependence upon certain geographic markets; and general and local economic and real estate conditions, including the extent and duration of adverse changes that affect the industries in which our tenants operate. The declaration and payment of future dividends (both timing and amount) is subject to the determination of our Board of Trustees, in its sole discretion, after considering various factors, including the Company’s financial condition, historical and forecast operating results, and available cash flow, as well as any applicable laws and contractual covenants and any other relevant factors. The Company’s practice regarding payment of dividends may be modified at any time and from time to time. Additional information on factors which could impact us and the forward-looking statements contained herein are included in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2018. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events except as required by law.Non-GAAP Supplemental Financial Measures
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