Brandywine Realty Trust Announces Fourth Quarter, Full Year 2023 Results and Initiates 2024 Guidance
- Company achieved or exceeded many 2023 business plan objectives
- Strong liquidity position with no borrowings on the $600 million unsecured line of credit
- 96% of wholly-owned debt is fixed
- 2024 FFO guidance range of $0.90 to $1.00 per diluted share introduced
- Net loss available to common shareholders of $(157.4) million
- Higher anticipated refinancing interest costs impacting 2024 FFO guidance
Insights
The reported net loss of $(157.4) million by Brandywine Realty Trust is a significant figure, particularly when contrasted with the net income of $29.5 million from the previous year. This drastic change is largely attributable to a non-cash impairment charge of $(152.6) million, indicating a devaluation of certain assets. While non-cash charges do not affect cash flow, they are indicative of a decrease in the value of the company's assets and can affect investor perception and stock price.
The Funds from Operations (FFO), a key metric in the real estate industry as it excludes the effects of depreciation and provides a clearer picture of operating performance, was $47.2 million for the quarter. This is down from $55.7 million in the same quarter of the previous year. The decline in FFO, coupled with the net loss, may raise concerns about the company's operational efficiency and profitability, potentially impacting investor confidence.
Brandywine's liquidity position appears robust with no borrowings against their $600 million credit line and a significant portion of their debt being fixed. This is a positive sign for investors, indicating a lower risk of liquidity issues in the short term. However, the anticipated higher refinancing interest costs could increase financial expenses in the future and should be closely monitored.
The occupancy and leasing figures provide insight into the company's market position. An 88.0% occupancy rate and 89.6% leased status suggest a stable demand for Brandywine's properties, though there is room for improvement to reach full occupancy. The reported 13.4% rental rate growth on an accrual basis is impressive, signaling the company's ability to increase rents upon lease renewals or new leases, which is a positive indicator for revenue growth.
The tenant retention rate of 45% in the fourth quarter, although below 50%, could be seen as an area for potential improvement. Retaining tenants is often more cost-effective than acquiring new ones and a low retention rate could lead to increased vacancy rates and higher costs associated with re-leasing space. The negative absorption of (63,000) square feet indicates that more space was vacated than leased, which could pressure future occupancy rates and rental income.
Brandywine's disposition activity, including the sale of properties and an option to purchase land, resulted in gains and cash proceeds, which can be seen as a strategic move to streamline the portfolio and improve the balance sheet. However, the sale of an office property at a loss suggests potential difficulties in certain markets or property types.
Brandywine Realty Trust's 2024 FFO guidance range of $0.90 to $1.00 per diluted share reflects management's expectations for the coming year. This guidance is crucial for investors as it offers a forecast of the company's operational performance. The projected increase in refinancing costs and development project expenses are important considerations for long-term investors, as they could dampen earnings in the near term but may be part of a strategy for growth.
The FFO payout ratio of 62.6% for the year is within a reasonable range, suggesting that the company has a sustainable dividend policy relative to its operational cash flow. This is a key metric for income-focused investors. However, given the reported net losses and impairment charges, investors should consider the sustainability of dividends in the context of overall financial health.
Finally, the absence of planned property acquisition or development starts for 2024 could indicate a conservative approach in the face of market uncertainty or a focus on consolidating existing operations. The lack of share buyback activity also suggests that the company is prioritizing maintaining liquidity and financial flexibility over returning capital to shareholders in the short term.
PHILADELPHIA, Jan. 31, 2024 (GLOBE NEWSWIRE) -- Brandywine Realty Trust (NYSE:BDN) today reported its financial and operating results for the three and twelve-month periods ended December 31, 2023.
Management Comments
“We accomplished or exceeded many of our 2023 business plan objectives including our same store results and rental rate mark-to-markets,” stated Jerry Sweeney, President and Chief Executive Officer of Brandywine Realty Trust. “In addition to our operating metrics, we were able to contain our capital costs resulting in lower capital costs as a percentage of new lease revenue and better than forecasted cash flow. Our liquidity position is in excellent shape with no borrowings on our
Fourth Quarter Highlights
Financial Results
- Net loss available to common shareholders:
$(157.4) million , or$(0.91) per share. These results include a$(152.6) million , or$(0.89) per share, non-cash impairment charge related to four wholly-owned operating properties located in the metropolitan D.C. area and our unconsolidated joint ventures. - Funds from Operations (FFO) available to common shareholders:
$47.2 million , or$0.27 per diluted share.
Portfolio Results
- Operating Portfolio:
88.0% occupied and89.6% leased. - New and Renewal Leases Signed: 240,000 square feet in the fourth quarter and 1,517,000 square feet for the full year 2023 in our wholly-owned portfolio and including our joint ventures totaled 552,000 square feet in the fourth quarter and 2,746,000 square feet for the full year 2023.
- Rental Rate Growth:
13.4% on an accrual basis and7.5% on a cash basis. - Tenant Retention Ratio:
45% in fourth quarter and49% for 2023. - Same Store Results: Increased
1.2% on an accrual basis and8.3% on a cash basis.
Transaction Activity
Disposition Activity
- On October 31, 2023, we sold a retail property, located at 200 North Radnor Chester Road in Radnor, Pennsylvania for a gross sales price of
$14.2 million or$794 per square foot. We received net cash proceeds of$13.8 million and recorded a gain of$7.7 million during the fourth quarter of 2023.
- On December 1, 2023, we sold an office property, located at 8521 Leesburg Pike in Vienna, Virginia for a gross sales price of
$11.0 million or$73 per square foot. We received net cash proceeds of$10.2 million . Prior to the sale, we recognized an impairment loss of$12.3 million on the property based upon the executed purchase and sale agreement during the fourth quarter of 2023. - We owned an option to purchase 50 acres of land located at 15000 Roosevelt Blvd in Philadelphia, Pennsylvania. During December 2023, we sold that option for a gross sales price of
$9.6 million and received net cash proceeds of$8.7 million and recorded income of$4.0 million during the fourth quarter of 2023.
Finance Activity
- During December 2023, we repurchased
$10.0 million of our outstanding unsecured notes due 2024 at a price of$98.6 and paid accrued interest of$0.1 million . As a result of the repurchase, we recorded a gain from the early extinguishment of debt of$0.1 million . - We had no outstanding balance on our
$600.0 million unsecured revolving credit facility as of December 31, 2023. - We had
$58.3 million of cash and cash equivalents on-hand as of December 31, 2023.
Results for the Three and Twelve-Month Periods Ended December 31, 2023
Net loss available to common shareholders totaled
FFO available to common shareholders and units in the fourth quarter of 2023 totaled
Net loss totaled
FFO available to common shareholders and units for the year ended 2023 totaled
Operating and Leasing Activity
In the fourth quarter of 2023, our Net Operating Income (NOI), excluding termination fees, bad debt expense and other income items increased
We leased approximately 240,000 square feet and we commenced occupancy on 209,000 square feet during the fourth quarter of 2023. The fourth quarter occupancy activity includes 86,000 square feet of renewals, 88,000 square feet of new leases and 35,000 square feet of tenant expansions. We have an additional 195,000 square feet of executed new leases scheduled to commence subsequent to December 31, 2023.
We experienced
For the year, our 2023 leasing activity totaled approximately 1,517,000 square feet and commenced occupancy on 767,000 square feet. Our 2023 occupancy activity includes 424,000 of renewals, 242,000 of new leases and 101,000 square feet of tenant expansions.
At December 31, 2023, our operating portfolio of 69 properties comprising 12.7 million square feet was
Distributions
On December 5, 2023, our Board of Trustees declared a quarterly dividend distribution of
2024 Earnings and FFO Guidance
Based on current plans and assumptions and subject to the risks and uncertainties more fully described in our Securities and Exchange Commission filings, we are providing our 2024 loss per share guidance of
| Guidance for 2024 | Range | ||
| Loss per diluted share allocated to common shareholders | to | ||
| Plus: real estate depreciation, amortization | 1.26 | 1.26 | |
| FFO per diluted share | to | ||
Our 2024 FFO key assumptions include:
- Year-end Core Occupancy Range: 87
-88% ; - Year-end Core Leased Range: 88
-89% ; - Rental Rate Growth (accrual): 11
-13% ; - Rental Rate Growth (cash): 0
-2% ; - Same Store (accrual) NOI Growth Range: (1)-
1% ; - Same Store (cash) NOI Growth Range: 1
-3% ; - Speculative Revenue Target:
$24.0 -$25.0 million ,$19.3 million achieved; - Tenant Retention Rate Range: 51
-53% ; - Property Acquisition Activity: None;
- Property Sales Activity (excluding land):
$80 -$100 million ; - Joint Venture Activity: None;
- Development Starts: None;
- Financing Activity: Refinance our unsecured bonds due October 2024 (
$340 million outstanding); - Share Buyback Activity: None; and
- Annual earnings and FFO per diluted share based on 174.0 million fully diluted weighted average common shares.
About Brandywine Realty Trust
Brandywine 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 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 158 properties and 22.4 million square feet as of December 31, 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. For more information, please visit www.brandywinerealty.com.
Conference Call and Audio Webcast
We will release our fourth quarter earnings after the market close on Wednesday January 31, 2024, and will hold our fourth quarter conference call on Thursday February 1, 2024 at 9:00 a.m. Eastern Time. To access the conference call by phone, please visit this link here, and you will be provided with dial in details. A live webcast of the conference call will also be available on the Investor Relations page of our website at www.brandywinerealty.com.
Looking Ahead – First Quarter 2024 Conference Call
We anticipate we will release our first quarter 2024 earnings on Wednesday, April 17, 2024, after the market close and will host our first quarter 2024 conference call on Thursday, April 18, 2024 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.
Press Release
Our Complete press release and related financial statements and schedules are available on the Investor Relations page of our website at www.brandywinerealty.com
Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “will,” “strategy,” “expects,” “seeks,” “believes,” “potential,” or other similar words. Because such statements involve known and unknown risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These forward-looking statements, including our 2024 guidance and the progress of our projects under development, are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and not within our control. Such risks, uncertainties and contingencies include, among others: risks related to the impact of COVID-19 and other potential future outbreaks of infectious diseases on our financial condition, results of operations and cash flows and those of our tenants as well as on the economy and real estate and financial markets; reduced demand for office space and pricing pressures, including from competitors, that could limit our ability to lease space or set rents at expected levels or that could lead to declines in rent; uncertainty and volatility in capital and credit markets, including changes that reduce availability, and increase costs, of capital or that delay receipt of our planned debt financings and refinancings; the effect of inflation and interest rate fluctuations, including on the costs of our planned debt financings and refinancings; the potential loss or bankruptcy of tenants or the inability of tenants to meet their rent and other lease obligations; risks of acquisitions and dispositions, including unexpected liabilities and integration costs; delays in completing, and cost overruns incurred in connection with, our developments and redevelopments; disagreements with joint venture partners; unanticipated operating and capital costs; uninsured casualty losses and our ability to obtain adequate insurance, including coverage for terrorist acts; additional asset impairments; our dependence upon certain geographic markets; changes in governmental regulations, tax laws and rates and similar matters; unexpected costs of REIT qualification compliance; and costs and disruptions as the result of a cybersecurity incident or other technology disruption. 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 our 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. Our Board’s practice regarding declaration 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, 2022. 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
We compute our financial results in accordance with generally accepted accounting principles (GAAP). Although FFO and NOI are non-GAAP financial measures, we believe that FFO and NOI calculations are helpful to shareholders and potential investors and are widely recognized measures of real estate investment trust performance. At the end of this press release, we have provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measure.
Funds from Operations (FFO)
We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than us. NAREIT defines FFO as net income (loss) before non-controlling interests and excluding gains (losses) on sales of depreciable operating property, impairment losses on depreciable consolidated real estate, impairment losses on investments in unconsolidated real estate ventures and extraordinary items (computed in accordance with GAAP); plus real estate related depreciation and amortization (excluding amortization of deferred financing costs), and after similar adjustments for unconsolidated joint ventures. Net income, the GAAP measure that we believe to be most directly comparable to FFO, includes depreciation and amortization expenses, gains or losses on property sales, extraordinary items and non-controlling interests. To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income (determined in accordance with GAAP) as presented in the financial statements included elsewhere in this release. FFO does not represent cash flow from operating activities (determined in accordance with GAAP) and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders. We generally consider FFO and FFO per share to be useful measures for understanding and comparing our operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO per share can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies.
Net Operating Income (NOI)
NOI (accrual basis) is a financial measure equal to net income available to common shareholders, the most directly comparable GAAP financial measure, plus corporate general and administrative expense, depreciation and amortization, interest expense, non-controlling interest in the Operating Partnership and losses from early extinguishment of debt, less interest income, development and management income, gains from property dispositions, gains on sale from discontinued operations, gains on early extinguishment of debt, income from discontinued operations, income from unconsolidated joint ventures and non-controlling interest in property partnerships. In some cases we also present NOI on a cash basis, which is NOI after eliminating the effects of straight-lining of rent and deferred market intangible amortization. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered an alternative to net income as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions. We believe NOI is a useful measure for evaluating the operating performance of our properties, as it excludes certain components from net income available to common shareholders in order to provide results that are more closely related to a property's results of operations. We use NOI internally to evaluate the performance of our operating segments and to make decisions about resource allocations. We concluded that NOI provides useful information to investors regarding our financial condition and results of operations, as it reflects only the income and expense items incurred at the property level, as well as the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unlevered basis.
Same Store Properties
In our analysis of NOI, particularly to make comparisons of NOI between periods meaningful, it is important to provide information for properties that were in-service and owned by us throughout each period presented. We refer to properties acquired or placed in-service prior to the beginning of the earliest period presented and owned by us through the end of the latest period presented as Same Store Properties. Same Store Properties exclude properties placed in-service, acquired, repositioned, held for sale or in development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented. Accordingly, it takes at least one year and one quarter after a property is acquired for that property to be included in Same Store Properties.
Core Portfolio
Our core portfolio is comprised of our wholly-owned properties, excluding any properties currently in development, re-development, re-entitlement or recently completed and not stabilized.
Company / Investor Contact:
Tom Wirth
EVP & CFO
610-832-7434
tom.wirth@bdnreit.com
FAQ
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