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Brandywine in Sync with Estimates

Zacks Equity Research

Brandywine Realty Trust (BDN), a real estate investment trust (:REIT), reported third quarter 2012 FFO (funds from operations) of 39 cents per share, in line with the Zacks Consensus Estimate. However, this compares unfavorably with the FFO of 41 cents in the year-earlier quarter.

FFO stood at $57.7 million in the third quarter of 2012 compared with $60.3 million in the year-ago quarter. The company reported CAD (cash available for distribution) of $30.2 million or 21 cents per share compared with $10.1 million or 7 cents per share in the prior year.

Quarter Highlights

Total revenue during the reported quarter was $140.4 million, slightly up from $139.4 million in the year-ago quarter, but missed the Zacks Consensus Estimate of $141.0 million.

With respect to same-store properties, Brandywine’s total net operating income (:NOI) increased 2.5% to $80.0 million. NOI, excluding termination revenues and other income items, upped 0.2% to $77.3 million on a GAAP basis and 0.9% to $71.9 million on a cash basis.

Brandywine executed strong leasing activities during the third quarter. The company signed lease agreements for approximately 1,212,679 square feet of space, comprised of 399,008 square feet of new leases, 111,710 square feet of tenant expansion and 701,961 square feet of renewed lease. In addition, Brandywine signed new leases for 553,801 square feet of space, with the leasing period set to commence after the third quarter of 2012.

The company achieved a tenant retention ratio of 60.6% with a negative net absorption of 129,364 square feet in its core portfolio. As of September 30, 2012, Brandywine’s core portfolio comprising 218 properties and spanning 24.3 million square feet was 88.6% leased and 86.3% occupied, including new leases starting subsequent to the end of the quarter.

Acquisitions and Dispositions

During the reported quarter, Brandywine in collaboration with its joint venture partner closed the acquisition of Station Square, a 499,395 square feet three-property office portfolio in Maryland, for $120.6 million.

Brandywine completed the sale of Oaklands Corporate Center, a Pennsylvania-based eleven-property office portfolio spanning 466,719 square feet, for $52.7 million.

As of September 30, 2012, Brandywine had an urban town center and suburban office portfolio of 295 properties which spans 34.0 million square feet. This includes 219 properties (24.5 million square feet) owned on a consolidated basis and 57 properties (7.0 million square feet) owned through unconsolidated real estate ventures.


At the end of the quarter, the company had cash and cash equivalents of $241.6 million and net debt to gross assets ratio of 42.4%. The company had no outstanding balance on its $600.0 million unsecured revolving credit facility. Brandywine declared and paid a dividend of 15 cents per share in the reported quarter.


Brandywine slightly narrowed the 2012 FFO guidance to the range of $1.33 to $1.36 per share from the previous range of $1.32 to $1.36. However, for 2013, the company expects FFO to be in the range of $1.38 to $1.46 per share.

Our Take

Currently the Zacks Consensus Estimate for 2012 and 2013 are pegged at $1.34 and $1.40, respectively.

One of the company’s competitors, Mack-Cali Realty Corp. (CLI) reported its third quarter FFO of 65 cents per share, beating the Zacks Consensus Estimate by 3 cents.

Brandywine carries a Zacks #3 Rank, implying a short-term Hold rating. We also reiterate our long-term Neutral recommendation on the stock.

Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

CAD, a measure to ascertain the ability of a REITs to generate cash, is derived by subtracting straight-line rent and non-recurring real estate expenses from funds from operations.

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