# Brandywine Realty Trust: Form 10-Q for the period ended Jun 30, 2024

- Company: [Brandywine Realty Trust](/companies/bdn.md) (CIK 790816)
- Form: 10-Q
- Filed: 2024-08-09
- Accepted by EDGAR: Aug 9, 2024, 11:39 ET
- Period: 2024-06-30
- Accession: 0000790816-24-000037
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/790816/000079081624000037/bdn-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/790816/000079081624000037/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $125.3m | us-gaap:Revenues |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $251.8m | us-gaap:Revenues |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $79.0m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $158.1m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $19.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $42.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $9.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $11.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $30.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $13.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.17 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.08 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.17 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.08 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 174,695,651 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 174,342,151 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $72.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-06-30 | $30.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-06-30 | $3.75bn | us-gaap:Assets |
| Total liabilities | at 2024-06-30 | $2.45bn | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $2.24bn | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-06-30 | $1.29bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 59,081 characters.

The Private Securities Litigation Reform Act of 1995 (the “1995 Act”) provides a “safe harbor” for forward-looking statements. This Quarterly Report on Form 10-Q and other materials filed by us with the SEC (as well as information included in oral or other written statements made by us) contain statements that are forward-looking, including statements relating to business and real estate development/redevelopment activities, acquisitions, dispositions, future capital expenditures, financing sources, governmental regulation (including environmental regulation) and competition. We intend such forward-looking statements to be covered by the safe-harbor provisions of the 1995 Act. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. As forward-looking statements, these statements involve important risks, uncertainties and other factors that could cause actual results to differ materially from the expected results and, accordingly, such results may differ from those expressed in any forward-looking statements made by us or on our behalf. Factors that might cause actual results to differ materially from our expectations are set forth in the “*Risk Factors”* section of our Annual Report on Form 10-K for the year ended December 31, 2023 and in Part II, Item 1A “Risk Factors” below. Accordingly, we caution readers not to place undue reliance on forward-looking statements. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events except as required by law.

The discussion that follows is based primarily on our consolidated financial statements as of June 30, 2024 and December 31, 2023 and for the three and six months ended June 30, 2024 and 2023 and should be read along with the consolidated financial statements and related notes appearing elsewhere in this report. The ability to compare one period to another may be significantly affected by acquisitions completed, development/redevelopment properties placed in service and dispositions made during those periods.

### OVERVIEW

During the six months ended June 30, 2024, we owned and managed properties within four segments: (1) Philadelphia CBD, (2) Pennsylvania Suburbs, (3) Austin, Texas, and (4) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Other segment includes properties located in the District of Columbia, Northern Virginia, Southern Maryland, Camden County, New Jersey and New Castle County, Delaware. In addition to the four segments, our corporate group is responsible for cash and investment management, development/redevelopment of certain properties during the construction period, and certain other general support functions.

Our financial condition and operating performance are dependent upon the demand for office, residential, life science, parking and retail space in our markets, our leasing results, our acquisition, disposition and development/redevelopment activity, our financing activity, our cash requirements and economic and market conditions, including prevailing interest rates.

We generate cash and revenue from leases of space at our Properties and, to a lesser extent, from the management and development/redevelopment of properties owned by third parties (primarily unconsolidated real estate ventures) and from investments in the unconsolidated real estate ventures. Factors that we evaluate when leasing space include rental rates, costs of tenant improvements, tenant creditworthiness, current and expected operating costs, the length of the lease term, vacancy levels and demand for space. We also generate cash through sales of assets, including assets that we do not view as core to our business plan, either because of location or expected growth potential, and assets that are commanding premium prices from third party investors.

Overall macroeconomic conditions, including but not limited to inflation and rising interest rates and changes in work patterns, including remote working arrangements, that have contributed to negative lease absorption within office markets, have had a dampening effect on the fundamentals of our business, as reflected in, among other metrics, our increased borrowing costs and lower occupancy as well as downward pressures on asset valuations. These adverse conditions could impact our net income, cash flows and liquidity and could have a material adverse effect on our financial condition and results of operations.

Notwithstanding the challenging macroeconomic conditions, which have led to recent difficulties in asset dispositions at acceptable prices, leasing of vacant space at attractive rents and sourcing of capital for development projects at acceptable costs, we believe that our portfolio or Properties and investments, and liquidity profile, will allow us maintain stable operating performance. In assessing our portfolio Properties as “quality” or “high quality” we consider both quantitative and qualitative attributes of our Properties in relation to other properties within a given submarket or adjacent submarkets that compete with our portfolio for tenants. The attributes we consider in our assessment include the age and condition of the property, average asking rental rates, access to mass transit and highways, floorplate efficiencies, amenities within, and nearby, the property and availability of parking as well as market demographics such that bear on demand for space at our portfolio. We also believe that our portfolio and liquidity profile will enable us to raise capital, as necessary, in various forms and from different sources, including through secured or unsecured loans from banks, pension funds and life insurance companies. However, there can be no assurance that we will be able to borrow funds on terms that are economically attractive or at all.

We continue to seek revenue growth throughout our portfolio by increasing occupancy and rental rates. Occupancy at our Core Properties at June 30, 2024 was 87.3% compared to 89.4% at June 30, 2023.

The table below summarizes selected operating and leasing statistics of our Core Properties for the three and six months ended June 30, 2024 and 2023:

| Leasing Activity Core Properties (1): | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Total net rentable square feet owned | 12,698,115 | 12,823,542 | 12,698,115 | 12,823,542 |
| Occupancy percentage (end of period) | 87.3% | 89.4% | 87.3% | 89.4% |
| Average occupancy percentage | 87.3% | 89.0% | 87.7% | 89.2% |
| Total Portfolio, less properties in development/redevelopment (2): |  |  |  |  |
| Tenant retention rate (3) | 67.1% | 70.7% | 67.2% | 55.4% |
| New leases and expansions commenced (square feet) | 125,193 | 93,215 | 254,985 | 159,466 |
| Leases renewed (square feet) | 230,383 | 113,952 | 393,978 | 222,745 |
| Net (negative) absorption (square feet) | (43,530) | 18,311 | (92,468) | (90,976) |
| Percentage change in rental rates per square foot (4): |  |  |  |  |
| New and expansion rental rates | 28.0% | 30.1% | 20.0% | 21.1% |
| Renewal rental rates | 8.7% | 13.0% | 12.3% | 14.4% |
| Combined rental rates | 10.8% | 17.6% | 13.8% | 16.0% |
| Weighted average lease term for leases commenced (years) | 5.1 | 7.0 | 6.2 | 7.2 |
| Average annual rent (per square foot) (7) (8) | $38.07 | $34.38 | $40.57 | $38.51 |
| Capital Costs Committed (5, 6, 7): |  |  |  |  |
| Leasing commissions (per square foot) | $5.40 | $7.33 | $8.24 | $9.64 |
| Tenant improvements (per square foot) | $13.44 | $23.06 | $23.94 | $16.79 |
| Total capital per square foot per lease year | $3.70 | $3.72 | $4.14 | $3.26 |
| Average annualized capital as % of average annual rent (7) (8) | 10.8% | 12.5% | 12.7% | 9.8% |

(1) Does not include Properties under development/redevelopment, or recently completed not-stabilized Properties.

(2) Includes leasing at recently completed not-stabilized Properties. The statistics presented for periods ended prior to the three-month period ended June 30, 2024 have not been adjusted for properties sold subsequent to the periods presented.

(3) Calculated as percentage of total net rentable square feet.

(4) Includes base rent plus reimbursement for operating expenses and real estate taxes.

(5) Calculated on a weighted average basis.

(6) The reduction for the three months ended June 30, 2024 is primarily due to a large tenant that renewed with a below average lease term resulting in lower lease commission and tenant improvement capital.

(7) For comparison purposes, we exclude new leases of space when the previous lease of such space ended more than 12 months from the signing date for the new leases.

(8) Average annual rent represents total initial contractual rent under the applicable leases plus contractual fixed rent increases due under the applicable leases averaged over the total terms of the applicable leases.

Our actual annualized leasing costs as a percentage of annualized rents are largely a function of the composition of our leases to new tenants or renewals with existing tenants, in addition to size and timing of occupancy. We generally experience lower leasing costs in connection with the renewal of leases with existing tenants compared to leases with new tenants. Our properties compete for tenants with similar properties primarily on the basis of location, total occupancy costs (including base rent and operating expenses), services and amenities, and the design and condition of the properties. As leases at our properties expire, we face competition to renew or re-let space in light of the competing properties within the applicable markets. As a result, and as part of customary lease negotiations, we are often required to provide rent concessions or abatements, incur charges for tenant improvements and other inducements, including early termination rights or potential below market renewal options, all of which impact, in varying degrees, annualized rents.

The table below summarizes occupancy statistics of our Core Properties by segment for the six months ended June 30, 2024 and 2023:

|  | Six Months Ended June 30, 2024 % Occupied | 2023 % Occupied |
| --- | ---: | ---: |
| Philadelphia CBD | 95.2% | 96.1% |
| Pennsylvania Suburbs | 84.9% | 91.1% |
| Austin, Texas | 79.4% | 82.9% |
| Other | 82.2% | 73.9% |
| Total - Core Properties | 87.3% | 89.4% |

The table below summarizes the occupancy statistics of our Properties, broken down by property types for the six months ended June 30, 2024 and 2023:

|  | Six Months Ended June 30, 2024 % Net Operating Income (4) | 2023 % Net Operating Income (4) | Six Months Ended June 30, 2024 % Occupied | 2023 % Occupied |
| --- | ---: | ---: | ---: | ---: |
| Office | 91.5% | 91.7% | 87.0% | 89.2% |
| Life Science (1) | 5.6% | 5.4% | 84.4% | 83.0% |
| Residential (2) | 2.9% | 2.9% | 85.0% | 87.0% |
| Total (3) | 100.0% | 100.0% | 86.9% | 88.9% |

(1) Represents Philadelphia portfolio assets located at 3000 Market Street and 3025 Market Street in Philadelphia, Pennsylvania, dedicated life science floors at Cira Centre in Philadelphia, Pennsylvania and 250 King of Prussia Road in Radnor, Pennsylvania.

(2) Represents our residential operation at 2929 Walnut Street in Philadelphia, Pennsylvania.

(3) Does not include Properties under development/redevelopment.

(4) See Note 13, “Segment Information,” to our Consolidated Financial Statements for the definition of Net Operating Income.

In seeking to increase revenue through our operating, financing and investment activities, we also seek to minimize operating risks, including (i) tenant rollover risk, (ii) tenant credit risk and (iii) development risk.

We have compared our weighted-average in-place rental rates to our leases signed in 2024 and our current market leasing assumptions, and while the actual results will be dependent on the leases expiring in any particular period, we believe the current portfolio should generate positive rental rate increases for the remainder of fiscal 2024.

#### Tenant Rollover Risk

We are subject to the risk that tenant leases, upon expiration, will not be renewed, that space may not be relet, or that the terms of renewal or reletting (including the cost of renovations) may be less favorable to us than the current lease terms. Leases that accounted for approximately 2.5% of our total square footage as of June 30, 2024 (representing approximately 3.2% of the occupied rentable square feet of the properties) are scheduled to expire without penalty during the remainder of 2024. We maintain an active dialogue with our tenants in an effort to maximize lease renewals. If we are unable to renew leases or relet space under expiring leases, at anticipated rental rates, or if our tenants terminate their leases early, our cash flow would be adversely impacted.

#### Tenant Credit Risk

In the event of a tenant default, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. Our management evaluates our accrued rent receivable reserve policy in light of our tenant base and general and local economic conditions. Our accrued rent receivable allowance was $1.3 million or 0.7% of our accrued rent receivable balance as of June 30, 2024, compared to $2.7 million or 1.4% of our accrued rent receivable balance as of December 31, 2023.

If economic conditions deteriorate, including as a result of inflation and rising interest rates, we may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents. These conditions would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition.

#### Development and Redevelopment Risk

Development and Redevelopment projects are subject to a variety of risks, including construction delays, construction cost overruns, building moratoriums, inability to obtain financing on favorable terms, inability to lease space at projected rates, inability to enter into construction, development, redevelopment and other agreements on favorable terms, and unexpected environmental and other hazards.

As of June 30, 2024, the following development project, within our consolidated portfolio, remains under construction in progress (dollars, in thousands):

| Property/Portfolio Name | Location | Expected Completion Date | Activity Type | Approximate Square Footage | Estimated Costs | Construction Loan Financing | Amount Funded (a) |
| --- | --- | --- | --- | ---: | ---: | ---: | ---: |
| 155 King of Prussia Road | Radnor, PA | Q4 2024 | Development | 144,685 | $80,000 | $50,000 | $56,515 |

(a) The Company has fully funded its $30.0 million equity commitment, and the balance of the construction costs are expected to be funded through advances under the construction loan.

In addition to the property listed above, we have classified one parking facility in Philadelphia, Pennsylvania as redevelopment.

As of June 30, 2024, the following unconsolidated real estate venture development projects remain under construction in progress (dollars, in thousands):

| Property/Portfolio Name | Location | Expected Completion Date | Approximate Square Footage | Estimated Costs | Amount Funded | Construction Loan Financing | Our Share Remaining to be Funded | Partner's Share Remaining to be Funded |
| --- | --- | --- | ---: | ---: | ---: | ---: | ---: | ---: |
| 3025 JFK Boulevard (60%) | Philadelphia, PA | Q4 2023 | (a) | $300,000 | $271,833 | $186,727 | $5,664 | $— |
| 3151 Market Street (65%) | Philadelphia, PA | Q3 2024 | 441,000 | $316,909 | $183,972 | (b) | (b) | $— |
| One Uptown - Office (56%) | Austin, TX | Q1 2024 | 362,679 | $201,616 | $146,536 | $121,650 | $— | $— |
| One Uptown - Multifamily (50%) | Austin, TX | Q3 2024 | 341 Units | $144,029 | $116,108 | $85,000 | $— | $— |

(a) Mixed used building with 428,000 rentable square feet consisting of 200,000 square feet of life science/innovation office, 219,000 square feet of residential (326 units), and 9,000 square feet of retail.

(b) The development budget contemplated receipt of a construction loan of approximately $174.3 million, reflecting a 55% loan to value ratio and, as of the date of this Form 10-Q, no construction loan has been obtained and there can be no assurance that a loan will be obtained. In the event that costs are incurred before a construction loan has been obtained, the Company expects to fund such costs through its credit facilities and cash on hand.

As of the date of this Quarterly Report on Form 10-Q, the 3151 Market Street Venture has not secured a construction loan. Under the partnership agreement with our partner in this real estate venture, after our partner has funded the remaining balance of its capital commitment, as shown in the table above, then, until a construction loan has been obtained, we will be obligated to fund the balance of construction costs incurred in the project development.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Certain accounting policies are considered to be critical accounting policies, as they require management to make assumptions about matters that are highly uncertain at the time the estimate is made and changes in accounting estimate are reasonably likely to occur from period to period. Management bases its estimates and assumptions on historical experience and current economic conditions.

Our Annual Report on Form 10-K for the year ended December 31, 2023 contains a discussion of our critical accounting policies. There have been no significant changes in our critical accounting policies since December 31, 2023.

### RESULTS OF OPERATIONS

The following discussion is based on our consolidated financial statements for the three and six months ended June 30, 2024 and 2023. We believe that presentation of our consolidated financial information, without a breakdown by segment, will effectively present important information useful to our investors.

Net operating income (“NOI”) as presented in the comparative analysis below is a non-GAAP financial measure defined as total revenue less property operating expenses, real estate taxes and third party management expenses. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance, and management fees. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards and professional fees that are incurred as part of corporate office management. NOI is a non-GAAP financial measure that we use internally to evaluate the operating performance of our real estate assets by segment, as presented in Note 13, “Segment Information,” to our consolidated financial statements, and of our business as a whole. We believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairment losses, depreciation and amortization costs, capital expenditures and leasing costs. We believe that net income, as defined by GAAP, is the most appropriate earnings measure. See Note 13, “Segment Information,” to our Consolidated Financial Statements for a reconciliation of NOI to our consolidated net income as defined by GAAP.

#### Comparison of the Three Months Ended June 30, 2024 and June 30, 2023

The following comparison of the three months ended June 30, 2024 to the three months ended June 30, 2023 makes reference to the effect of the following:

(a) “Same Store Property Portfolio,” which represents 68 properties containing an aggregate of approximately 12.4 million net rentable square feet, and represents properties that we owned and consolidated for the three-month periods ended June 30, 2024 and 2023. The Same Store Property Portfolio includes properties acquired or placed in service on or prior to April 1, 2023 and owned and consolidated through June 30, 2024, excluding properties classified as held for sale;

(b) “Total Portfolio,” which represents all properties owned and consolidated by us during the three months ended June 30, 2024 and 2023;

(c) “Recently Completed/Acquired Properties,” which represents two properties placed into service or acquired on or subsequent to April 1, 2023;

(d) “Development/Redevelopment Properties,” which represents two properties currently in development/redevelopment. A property is excluded from our Same Store Property Portfolio and moved into Development/Redevelopment Properties in the period that we determine to proceed with development/redevelopment for a future development strategy; and

(e) “Q2 2023 through Q2 2024 Dispositions,” which represents five properties disposed of from April 1, 2023 through June 30, 2024.

### Comparison of the three months ended June 30, 2024 to the three months ended June 30, 2023

*(dollars and square feet in millions except per share amounts)*

| Revenue: | Same Store Property Portfolio 2024 | 2023 | $ Change | % Change | Recently Completed/Acquired Properties 2024 | 2023 | Development/Redevelopment Properties 2024 | 2023 | Other (Eliminations) (a) (c) 2024 | 2023 | Total Portfolio 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Rents | $109.5 | $109.6 | $(0.1) | (0.1)% | $3.9 | $1.2 | $— | $— | $4.6 | $7.3 | $118.0 | $118.1 | $(0.1) | (0.1)% |
| Third party management fees, labor reimbursement and leasing | — | — | — | —% | — | — | — | — | 5.7 | 6.2 | 5.7 | 6.2 | (0.5) | (8.1)% |
| Other | 0.3 | 0.3 | — | —% | — | — | — | — | 1.3 | 1.3 | 1.6 | 1.6 | — | —% |
| Total revenue | 109.8 | 109.9 | (0.1) | (0.1)% | 3.9 | 1.2 | — | — | 11.6 | 14.8 | 125.3 | 125.9 | (0.6) | (0.5)% |
| Property operating expenses | 28.9 | 28.5 | 0.4 | 1.4% | 0.8 | 0.1 | — | — | 1.7 | 3.3 | 31.4 | 31.9 | (0.5) | (1.6)% |
| Real estate taxes | 12.0 | 10.8 | 1.2 | 11.1% | 0.3 | 0.2 | — | — | 0.2 | 0.6 | 12.5 | 11.6 | 0.9 | 7.8% |
| Third party management expenses | — | — | — | —% | — | — | — | — | 2.4 | 2.6 | 2.4 | 2.6 | (0.2) | (7.7)% |
| Net operating income | 68.9 | 70.6 | (1.7) | (2.4)% | 2.8 | 0.9 | — | — | 7.3 | 8.3 | 79.0 | 79.8 | (0.8) | (1.0)% |
| Depreciation and amortization | 37.9 | 39.9 | (2.0) | (5.0)% | 2.3 | — | — | — | 4.0 | 7.1 | 44.2 | 47.0 | (2.8) | (6.0)% |
| General & administrative expenses | — | — | — | —% | — | — | — | — | 8.9 | 9.3 | 8.9 | 9.3 | (0.4) | (4.3)% |
| Provision for impairment (c) | — | — | — | —% | — | — | — | — | 6.4 | 4.5 | 6.4 | 4.5 | 1.9 | 42.2% |
| Operating income (loss) | $31.0 | $30.7 | $0.3 | 1.0% | $0.5 | $0.9 | $— | $— | $(12.0) | $(12.6) | $19.5 | $19.0 | $0.5 | 2.6% |
| Number of properties | 68 | 68 |  |  | 2 |  | 2 |  |  |  | 72 |  |  |  |
| Square feet | 12.4 | 12.4 |  |  | 0.4 |  | 0.1 |  |  |  | 13.0 |  |  |  |
| Core Occupancy % (b) | 87.2% | 89.7% |  |  |  |  |  |  |  |  |  |  |  |  |
| Other Income (Expense): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Interest and investment income |  |  |  |  |  |  |  |  |  |  | 1.5 | 0.5 | 1.0 | 200.0% |
| Interest expense |  |  |  |  |  |  |  |  |  |  | (29.5) | (23.7) | (5.8) | 24.5% |
| Interest expense — Deferred financing costs |  |  |  |  |  |  |  |  |  |  | (1.4) | (1.1) | (0.3) | 27.3% |
| Equity in loss of unconsolidated real estate ventures |  |  |  |  |  |  |  |  |  |  | (14.5) | (7.6) | (6.9) | 90.8% |
| Net gain on real estate venture transactions |  |  |  |  |  |  |  |  |  |  | 53.8 | 0.2 | 53.6 | 26800.0% |
| Gain on early extinguishment of debt |  |  |  |  |  |  |  |  |  |  | 0.9 | — | 0.9 | —% |
| Net income (loss) |  |  |  |  |  |  |  |  |  |  | $30.3 | $(12.7) | $43.0 | (338.6)% |
| Net income (loss) attributable to Common Shareholders of Brandywine Realty Trust |  |  |  |  |  |  |  |  |  |  | $0.17 | $(0.08) | $0.25 | (312.5)% |

(a) Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation, third-party management fees, provisions for impairment, and changes in the accrued rent receivable allowance. Other(Eliminations) also includes properties sold and properties classified as held for sale.

(b) Pertains to Core Properties.

(c) Held for use impairment charges are excluded from Same Store Property Portfolio operating income and presented in Other (Eliminations).

#### Depreciation and Amortization

#### Depreciation and Amortization decreased primarily as a result of the following:

- $1.5 million decrease related to the reduction in the cost basis of assets as a result of the provision for impairment recorded on three properties in the Metropolitan Washington, D.C. area within our Other segment and six office properties located in our Pennsylvania Suburbs segment in 2023;
- $1.4 million decrease related to accelerated depreciation on tenant improvements due to the early termination of a single tenant occupant at a property in our Austin, Texas segment in 2023;
- $1.0 million decrease related to the sales of three properties in 2023; and
- Partially offset by a $1.5 million increase related to two properties which were placed in service in the second half of 2023.

#### Provision for Impairment

During the second quarter of 2024, we recognized a provision for impairment of $6.4 million on office properties located in our Austin, Texas segment. See Note 3 “Real Estate Investments,” for further information.

#### Interest Expense

Interest expense increased primarily due to the effect of the issuance of $400 million aggregate principal amount of our 8.875% Guaranteed Notes due 2029 (the “2029 Notes”) in April 2024. Additionally, interest expense increased during the third quarter of 2023 when Moody’s downgraded our senior unsecured credit rating from Baa3 to Ba1. As a result of the downgrade, the interest rate on our 7.55% Guaranteed Notes due 2028 (the “2028 Notes”) increased 25 basis points in September 2023 due to the coupon adjustment provisions within the 2028 Notes. During the first quarter of 2024, S&P downgraded our senior unsecured credit rating from BBB- to BB+. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.05% in March 2024 due to the coupon adjustment provisions within the 2028 Notes. During the second quarter of 2024, Moody's downgraded our senior unsecured credit rating from Ba1 to Ba2. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.30% in April 2024 due to the coupon adjustment provisions within the 2028 Notes.

#### Equity in Income of Real Estate Ventures

The increased losses from our unconsolidated real estate ventures are primarily due to higher interest rates on the ventures’ outstanding indebtedness and net losses from the 3025 JFK Venture being put into service in the fourth quarter of 2024.

#### Net gain on real estate venture transactions

On June 28, 2024, we recapitalized our MAP Venture, in which we had a negative investment balance of $52.2 million as of March 31, 2024. In connection with the recapitalization, we recognized a one-time, non-cash gain of $53.8 million in connection with the derecognition of the negative investment balance in the MAP Venture. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information.

#### Comparison of the Six Months Ended June 30, 2024 and June 30, 2023

The following comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023 makes reference to the effect of the following:

(a) “Same Store Property Portfolio,” which represents 68 properties containing an aggregate of approximately 12.4 million net rentable square feet, and represents properties that we owned and consolidated for the six-month periods ended June 30, 2024 and 2023. The Same Store Property Portfolio includes properties acquired or placed in service on or prior to January 1, 2023 and owned and consolidated through June 30, 2024 excluding properties classified as held for sale;

(b) “Total Portfolio,” which represents all properties owned and consolidated by us during the six months ended June 30, 2024 and 2023;

(c) "Recently Completed/Acquired Properties," which represents two properties placed into service or acquired on or subsequent to January 1, 2023;

(d) "Development/Redevelopment Properties," which represents two properties currently in development/redevelopment. A property is excluded from our Same Store Property Portfolio and moved into Development/Redevelopment in the period that we determine to proceed with development/redevelopment for a future development strategy; and

(e) "YTD 2023 and 2024 Dispositions," which represents six properties disposed of from January 1, 2023 through June 30, 2024.

### Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023

*(dollars and square feet in millions except per share amounts)*

| Revenue: | Same Store Property Portfolio 2024 | 2023 | $ Change | % Change | Recently Completed/Acquired Properties 2024 | 2023 | Development/Redevelopment Properties 2024 | 2023 | Other (Eliminations) (a) 2024 | 2023 | Total Portfolio 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Rents | $220.9 | $222.2 | $(1.3) | (0.6)% | $7.8 | $2.1 | $— | $— | $8.3 | $14.7 | $237.0 | $239.0 | $(2.0) | (0.8)% |
| Third party management fees, labor reimbursement and leasing | — | — | — | —% | — | — | — | — | 11.6 | 12.2 | 11.6 | 12.2 | (0.6) | (4.9)% |
| Other | 0.6 | 0.5 | 0.1 | 20.0% | — | — | — | — | 2.6 | 3.3 | 3.2 | 3.8 | (0.6) | (15.8)% |
| Total revenue | 221.5 | 222.7 | (1.2) | (0.5)% | 7.8 | 2.1 | — | — | 22.5 | 30.2 | 251.8 | 255.0 | (3.2) | (1.3)% |
| Property operating expenses | 58.2 | 59.0 | (0.8) | (1.4)% | 1.6 | 0.2 | — | — | 3.8 | 6.3 | 63.6 | 65.5 | (1.9) | (2.9)% |
| Real estate taxes | 24.0 | 24.2 | (0.2) | (0.8)% | 0.5 | 0.3 | (0.1) | — | 0.7 | 1.7 | 25.1 | 26.2 | (1.1) | (4.2)% |
| Third party management expenses | — | — | — | —% | — | — | — | — | 5.0 | 5.2 | 5.0 | 5.2 | (0.2) | (3.8)% |
| Net operating income | 139.3 | 139.5 | (0.2) | (0.1)% | 5.7 | 1.6 | 0.1 | — | 13.0 | 17.0 | 158.1 | 158.1 | — | —% |
| Depreciation and amortization | 76.6 | 79.3 | (2.7) | (3.4)% | 4.5 | 1.4 | — | — | 8.1 | 11.9 | 89.2 | 92.6 | (3.4) | (3.7)% |
| General & administrative expenses | — | — | — | —% | — | — | — | — | 20.1 | 18.8 | 20.1 | 18.8 | 1.3 | 6.9% |
| Provision for impairment (c) | — | — | — | —% | — | — | — | — | 6.4 | 4.5 | 6.4 | 4.5 | 1.9 | 42.2% |
| Net loss on disposition of real estate |  |  |  |  |  |  |  |  |  |  | — | — | — | —% |
| Net gain on sale of undepreciated real estate |  |  |  |  |  |  |  |  |  |  | — | (0.8) | 0.8 | (100.0)% |
| Operating income (loss) | $62.7 | $60.2 | $2.5 | 4.2% | $1.2 | $0.2 | $0.1 | $— | $(21.6) | $(18.2) | $42.4 | $43.0 | $(0.6) | (1.4)% |
| Number of properties | 68 | 68 |  |  | 2 |  | 2 |  |  |  | 72 |  |  |  |
| Square feet | 12.4 | 12.4 |  |  | 0.4 |  | 0.1 |  |  |  | 13.0 |  |  |  |
| Core Occupancy % (b) | 87.2% | 89.7% |  |  | 124.1% |  |  |  |  |  |  |  |  |  |
| Other Income (Expense): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Interest and investment income |  |  |  |  |  |  |  |  |  |  | 1.9 | 1.0 | 0.9 | 90.0% |
| Interest expense |  |  |  |  |  |  |  |  |  |  | (54.5) | (46.3) | (8.2) | 17.7% |
| Interest expense — Deferred financing costs |  |  |  |  |  |  |  |  |  |  | (2.5) | (2.1) | (0.4) | 19.0% |
| Equity in loss of unconsolidated real estate ventures |  |  |  |  |  |  |  |  |  |  | (28.1) | (13.8) | (14.3) | 103.6% |
| Net gain on real estate venture transactions |  |  |  |  |  |  |  |  |  |  | 53.7 | 0.2 | 53.5 | 26750.0% |
| Gain on early extinguishment of debt |  |  |  |  |  |  |  |  |  |  | 0.9 | — | 0.9 |  |
| Net income (loss) |  |  |  |  |  |  |  |  |  |  | $13.8 | $(18.0) | $31.8 | (176.7)% |
| Net income (loss) attributable to Common Shareholders of Brandywine Realty Trust |  |  |  |  |  |  |  |  |  |  | $0.08 | $(0.11) | $0.19 | (172.7)% |

38

(a) Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation, third-party management fees, provisions for impairment, and changes in the accrued rent receivable allowance. Other/(Eliminations) also includes properties sold and properties classified as held for sale.

(b) Pertains to Core Properties.

(c) Held for use impairment charges are excluded from Same Store Property Portfolio operating income and presented in Other (Eliminations).

#### Depreciation and Amortization

Depreciation and amortization expense decreased primarily as a result of the following:

- $3.0 million decrease related to the reduction in the cost basis of assets as a result of the provision for impairment recorded on three properties in the Metropolitan Washington, D.C. area within our Other segment and six office properties located in our Pennsylvania Suburbs segment in 2023;
- $2.3 million decrease related to the sales of three properties in 2023;
- $1.7 million decrease related to accelerated depreciation on tenant improvements due to the early termination of a single tenant occupant at a property in our Austin, Texas segment; and
- Partially offset by a $3.1 million increase related to two properties which were placed in service in the second half of 2023.

#### Provision for Impairment

During the second quarter of 2024, we recognized a provision for impairment of $6.4 million on office properties located in our Austin, Texas segment. See Note 3 “Real Estate Investments,” for further information.

#### Interest Expense

Interest expense increased primarily due to the effect of the issuance of $400 million aggregate principal amount of 2029 Notes in April 2024. Additionally, interest expense increased during the third quarter of 2023 when Moody’s downgraded our senior unsecured credit rating from Baa3 to Ba1. As a result of the downgrade, the interest rate on our 2028 Notes increased 25 basis points in September 2023 due to the coupon adjustment provisions within the 2028 Notes. During the first quarter of 2024, S&P downgraded our senior unsecured credit rating from BBB- to BB+. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.05% in March 2024 due to the coupon adjustment provisions within the 2028 Notes. During the second quarter of 2024, Moody's downgraded our senior unsecured credit rating from Ba1 to Ba2. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.30% in April 2024 due to the coupon adjustment provisions within the 2028 Notes.

#### Equity in Loss of Unconsolidated Real Estate Ventures

The increased losses from our unconsolidated real estate ventures are primarily due to higher interest rates on the ventures’ outstanding indebtedness and net losses from the 3025 JFK Venture being put into service in the fourth quarter of 2024.

#### Net gain on real estate venture transactions

On June 28, 2024, we recapitalized our MAP Venture, in which we had a negative investment balance of $52.2 million as of March 31, 2024. In connection with the recapitalization, we recognized a one-time, non-cash gain of $53.8 million in connection with the derecognition of the negative investment balance in the MAP Venture. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information.

### LIQUIDITY AND CAPITAL RESOURCES

#### General

Our principal liquidity funding needs for the next twelve months are as follows:

- normal recurring expenses;
- capital expenditures, including capital and tenant improvements and leasing costs;
- debt service and principal repayment obligations;
- current development and redevelopment costs;
- commitments to unconsolidated real estate ventures and investment vehicles;
- distributions to shareholders to maintain our REIT status;
- possible acquisitions of properties, either directly or indirectly through the acquisition of equity interest therein; and
- possible common share repurchases.

We expect to satisfy these needs using one or more of the following:

- cash flows from operations;
- distributions of cash from our unconsolidated real estate ventures;
- cash and cash equivalent balances;
- availability under our Unsecured Credit Facility;
- secured construction loans and long-term unsecured indebtedness;
- sales of real estate or contributions of interests in real estate to joint ventures; and
- issuances of Parent Company equity securities and/or units of the Operating Partnership.

As of June 30, 2024, the Parent Company owned a 99.7% interest in the Operating Partnership. The remaining interest of approximately 0.3% pertains to common limited partnership interests owned by non-affiliated investors who contributed property to the Operating Partnership in exchange for their interests. As the sole general partner of the Operating Partnership, the Parent Company has full and complete responsibility for the Operating Partnership’s day-to-day operations and management. The Parent Company’s source of funding for its dividend payments and other obligations is the distributions it receives from the Operating Partnership.

As summarized above, we believe that our liquidity needs will be satisfied through available cash balances and cash flows from operations, financing activities and real estate sales. Rental revenue and other income from operations are our principal sources of cash to pay operating expenses, debt service, recurring capital expenditures and the minimum distributions required to maintain our REIT qualification. We seek to increase cash flows from our properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our revenue also includes third-party fees generated by our property management, leasing, development/redevelopment and construction businesses. We believe that our revenue, together with proceeds from property sales and debt financings, will continue to provide funds for our short-term liquidity needs. However, material changes in our operating or financing activities may adversely affect our net cash flows. With uncertain economic conditions, vacancy rates may increase, effective rental rates on new and renewed leases may decrease and tenant installation costs, including concessions, may increase in most or all of our markets during the remainder of 2024 and possibly beyond. As a result, our revenues and cash flows could be insufficient to cover operating expenses, including increased tenant installation costs, pay debt service or make distributions to shareholders over the short-term. If this situation were to occur, we expect that we would finance cash deficits through borrowings under our unsecured credit facility and other sources of debt and equity financings. In addition, a material adverse change in cash provided by operations could adversely affect our compliance with financial performance covenants under our unsecured credit facility, including unsecured term loans and unsecured notes. As of June 30, 2024 we were in compliance with all of our debt covenants and requirement obligations.

On April 12, 2024, we completed an underwritten offering of $400.0 million aggregate principal amount of the 2029 Notes. The 2029 Notes were priced at approximately 99.51% of their face amount. We received approximately $391.8 million of net proceeds after the deduction for underwriting discounts and offering expenses.

On April 15, 2024, the Company commenced a tender offer (the “Tender Offer”) for any and all of the outstanding $335.1 million principal amount of its 4.10% Guaranteed Notes due 2024 (the “2024 Notes”). The purchase price offered per $1,000 principal amount of 2024 Notes pursuant to the Tender Offer was determined by reference to the fixed spread for the 2024 Notes of 0 basis points plus the yield based on the bid-side price of the 4.250% U.S. Treasury due September 30, 2024. The Tender Offer expired on April 19, 2024. Upon completion of the Tender Offer, on April 23, 2024, the Company issued a redemption notice to redeem any 2024 Notes that remained outstanding after the Tender Offer. On June 7, 2024, we redeemed the remaining $113.4 million of our 2024 Bonds at the aggregate principal amount outstanding together with accrued and unpaid interest thereon to the redemption date.

The 2028 Notes include an interest rate adjustment provision whereby the interest rate payable on the 2028 Notes is subject to a 25 basis point adjustment if either Moody's Investors Services Inc, and its successors ("Moody's"), or S&P Global Ratings, and its successors ("S&P") downgrades (or subsequently upgrades) its rating assigned to the 2028 Notes. During the third quarter of 2023, Moody’s downgraded our senior unsecured credit rating from Baa3 to Ba1. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 7.80% in September 2023. In January 2024, S&P downgraded our senior unsecured credit rating from BBB- to BB+. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.05% in March 2024. During the second quarter of 2024, Moody's downgraded our senior unsecured credit rating from Ba1 to Ba2. As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 8.30% in April 2024 due to the coupon adjustment provisions within the 2028 Notes.

Our ability to incur additional debt is dependent upon a number of factors, including our credit ratings, the value of our unencumbered assets, our degree of leverage and borrowing restrictions imposed by our lenders. If one or more rating agencies were to downgrade our unsecured credit rating, our access to the unsecured debt market would be more limited and the interest rate under our unsecured credit facility and unsecured term loan would increase.

As of June 30, 2024, our senior unsecured credit ratings and outlook were as follows:

|  |  |  |
| --- | --- | --- |
|  | Moody's | S&P |
| Long-term debt | Ba2 | BB+ |
| Outlook | Stable | Negative |

If our credit ratings are lowered further, our ability to access the public debt markets, our costs of funds, and other terms for new debt issuances could be adversely impacted. Each of the credit ratings agencies reviews its ratings periodically and there is no guarantee our current credit ratings will remain the same.

The Parent Company unconditionally guarantees the Operating Partnership’s unsecured debt obligations, which, as of June 30, 2024, amounted to $1,986.6 million. The Operating Partnership’s secured debt obligations as of June 30, 2024, amounted to $270.6 million

#### Capital Markets

The Parent Company issues equity from time to time, the proceeds of which it contributes to the Operating Partnership in exchange for additional interests in the Operating Partnership, and guarantees debt obligations of the Operating Partnership. The Parent Company’s ability to sell common shares and preferred shares is dependent on, among other things, general market conditions for REITs, market perceptions about the Company as a whole and the current trading price of the Parent Company’s shares. The Parent Company maintains a shelf registration statement that covers the offering and sale of common shares, preferred shares, depositary shares, warrants and unsecured debt securities. Subject to our ongoing compliance with securities laws, and if warranted by market conditions, we may offer and sell equity and debt securities from time to time under the shelf registration statement or in transactions exempt from registration.

See Note 11, “Beneficiaries’ Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our share repurchase program. We expect to fund any additional share repurchases with a combination of available cash balances and availability under our unsecured credit facility. The timing and amounts of any repurchases will depend on a variety of factors, including market conditions, regulatory requirements, share prices, capital availability and other factors as determined by our management team. The repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without notice.

#### Liquidity

As of June 30, 2024, we had $30.4 million of cash and cash equivalents and $535.7 million of available borrowings under our unsecured credit facility, net of $39.3 million in letters of credit outstanding. Based on the foregoing, as well as cash flows from operations net of dividend requirements, we believe we have sufficient capital to fund our remaining capital requirements on existing development and redevelopment projects and pursue additional attractive investment opportunities. We expect that our primary uses of capital during the remainder of 2024 will be to fund our current development and redevelopment projects.

#### Cash Flows

The following discussion of our cash flows is based on the consolidated statement of cash flows and is not meant to be a comprehensive discussion of the changes in our cash flows for the periods presented.

As of June 30, 2024 and December 31, 2023, we maintained cash and cash equivalents and restricted cash of $36.5 million and $67.5 million, respectively. We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following table summarizes changes in our cash flows (in thousands):

| Activity | Six Months Ended June 30, 2024 | 2023 | (Decrease) Increase |
| --- | ---: | ---: | ---: |
| Operating | $71,970 | $61,304 | $10,666 |
| Investing | (154,094) | (137,862) | (16,232) |
| Financing | 51,103 | 101,158 | (50,055) |
| Net cash flows | $(31,021) | $24,600 | $(55,621) |

Our principal source of cash flows is from the operation of our Properties. Our Properties provide a relatively consistent stream of cash flows that provides us with the resources to fund operating expenses, debt service and quarterly dividends.

Cash is used in investing activities to fund acquisitions, development, or redevelopment projects and recurring and nonrecurring capital expenditures. We selectively invest in new projects that enable us to take advantage of our development/redevelopment, leasing, financing, and property management skills and invest in existing buildings that meet our investment criteria. During the six months ended June 30, 2024, when compared to the six months ended June 30, 2023, the change in investing cash flows was due to the following activities (in thousands):

|  | (Decrease) Increase |
| --- | ---: |
| Capital expenditures and capitalized interest | 24,059 |
| Capital improvements/acquisition deposits/leasing costs | (4,227) |
| Joint venture investments | (37,745) |
| Capital distributions from unconsolidated real estate ventures | 1,681 |
| Increase in net cash used in investing activities | $(16,232) |

We generally fund our investment activity through the sale of real estate, property-level financing, unsecured and secured credit facilities, senior unsecured notes, and construction loans. From time to time, we may issue common or preferred shares of beneficial interest, or the Operating Partnership may issue common or preferred units of limited partnership interest. During the six months ended June 30, 2024, when compared to the six months ended June 30, 2023, the change in financing cash flows was due to the following activities (in thousands):

|  | (Decrease) Increase |
| --- | ---: |
| Proceeds from debt obligations | $35,802 |
| Repayments of debt obligations | (97,258) |
| Dividends and distributions paid | 13,356 |
| Debt financing costs paid | (1,879) |
| Other financing activities | (76) |
| Decrease in net cash provided by financing activities | $(50,055) |

42

### Capitalization

#### Indebtedness

The table below summarizes our secured and unsecured debt at June 30, 2024 and December 31, 2023:

*(dollars in thousands)*

| Balance: (a) | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Fixed rate | $2,136,610 | $1,985,000 |
| Variable rate - unhedged | 120,625 | 162,434 |
| Total | $2,257,235 | $2,147,434 |
| **Percent of Total Debt:** |  |  |
| Fixed rate | 94.7% | 92.4% |
| Variable rate - unhedged | 5.3% | 7.6% |
| Total | 100.0% | 100.0% |
| **Weighted-average interest rate at period end:** |  |  |
| Fixed rate | 6.1% | 5.1% |
| Variable rate - unhedged | 7.3% | 7.1% |
| Total | 6.2% | 5.2% |
| **Weighted-average maturity in years:** |  |  |
| Fixed rate | 4.3 | 3.8 |
| Variable rate - unhedged | 1.5 | 6.3 |
| Total | 4.2 | 4.0 |

(a) Consists of unpaid principal and does not reflect premium/discount or deferred financing costs.

Scheduled principal payments and related weighted average annual effective interest rates for our debt as of June 30, 2024, were as follows (dollars in thousands):

| Period | Principal maturities | Weighted Average Interest Rate of Maturing Debt |
| --- | ---: | ---: |
| 2024 (six months remaining) | $— | —% |
| 2025 | 70,000 | 7.3% |
| 2026 | 25,625 | 7.8% |
| 2027 | 738,000 | 4.6% |
| 2028 | 595,000 | 7.3% |
| 2029 | 750,000 | 6.8% |
| 2030 | — | —% |
| 2031 | — | —% |
| 2032 | — | —% |
| 2033 | — | —% |
| Thereafter | 78,610 | 5.2% |
| Totals | $2,257,235 | 6.2% |

#### Unsecured Debt

The Operating Partnership is the issuer of our unsecured notes which are fully and unconditionally guaranteed by the Parent Company. The indenture under which the Operating Partnership issued its unsecured notes contains financial covenants, including: (i) a leverage ratio not to exceed 60%; (ii) a secured debt leverage ratio not to exceed 40%; (iii) a debt service coverage ratio of greater than 1.5 to 1.0; and (iv) an unencumbered asset value of not less than 150% of unsecured debt. The Operating Partnership is in compliance with all covenants as of June 30, 2024.

The charter documents of the Parent Company and Operating Partnership do not limit the amount or form of indebtedness that the Operating Partnership may incur, and its policies on debt incurrence are solely within the discretion of the Parent

Company’s Board of Trustees, subject to the financial covenants in the credit agreement for our Unsecured Credit Facility, the indenture for our unsecured notes and in our other credit agreements.

#### Equity

In order to maintain its qualification as a REIT, the Parent Company is required to, among other things, pay dividends to its shareholders of at least 90% of its REIT taxable income. See Note 11, “Beneficiaries’ Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our dividends declared for the second quarter of 2024.

#### Inflation and Lease Pass-Through Provisions

Substantially all our leases are structured as base year or triple net leases which provide for reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per square-foot basis, or in some cases, annual reimbursement of operating expenses above certain per square-foot allowances. In addition, as of June 30, 2024, approximately 96% of our leases (as a percentage of the aggregate net rentable square feet of our wholly-owned portfolio) contain annual rent escalations that are either fixed (generally ranging from 2.5% to 3.0% per lease year) or indexed based on a consumer price index or other indices. We believe such lease provisions mitigate adverse impacts of inflation on our earnings from real estate operations. However, recent inflation and higher interest rates have caused an increase in our borrowing costs, including on our variable rate debt, and on our operating expenses that are not subject to the lease pass-though provisions.

While we have experienced increased inflation, our Same Store Property Portfolio operating margins improved to 63.0% and 62.6% for the six months ended June 30, 2024 and 2023, respectively, primarily due to the expense reimbursement provisions noted above. The expense reimbursement provisions in our leases resulted in Same Store Property Portfolio operating expense recovery rates of 52.7% and 52.8% for the six months ended June 30, 2024 and 2023, respectively.

### Other Contractual Obligations

We provide customary guarantees for certain development projects of our unconsolidated real estate ventures. See Note 14 “Commitments and Contingencies,” to our Consolidated Financial Statement for further details on payment guarantees provided on behalf of our real estate ventures and refer to our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our contractual obligations.

### Funds from Operations (FFO)

Pursuant to the revised definition of FFO adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), we calculate FFO by adjusting net income/(loss) attributable to common unit holders (computed in accordance with GAAP) for gains (or losses) from sales of properties, impairment losses on depreciable consolidated real estate, impairment losses on investments in unconsolidated real estate ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated real estate ventures, real estate related depreciation and amortization, and after similar adjustments for unconsolidated real estate ventures. Our calculation of FFO includes gains from sale of undepreciated real estate and other assets, considered incidental to our main business, to third parties or unconsolidated real estate ventures. FFO is a non-GAAP financial measure. We believe that the use of FFO combined with the required GAAP presentations, has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REITs’ operating results more meaningful. We consider FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding property impairments, gains or losses related to sales of previously depreciated operating real estate assets and real estate depreciation and amortization, FFO can help the investing public compare the operating performance of a company’s real estate between periods or as compared to other companies. Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently.

We consider net income, as defined by GAAP, to be the most comparable earnings measure to FFO. While FFO and FFO per unit are relevant and widely used measures of operating performance of REITs, FFO does not represent cash flow from operations or net income as defined by GAAP and should not be considered as alternatives to those measures in evaluating our liquidity or operating performance. We believe that to further understand our performance, FFO should be compared with our reported net income/(loss) attributable to common unit holders and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.

The following table presents a reconciliation of net income attributable to common unitholders to FFO for the three and six months ended June 30, 2024 and 2023:

*(amounts in thousands, except share information)*

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| **Net income (loss) attributable to common unitholders** | **$29,987** | **$(12,941)** | **$13,234** | **$(18,286)** |
| Add (deduct): |  |  |  |  |
| Amount allocated to unvested restricted unitholders | 277 | 204 | 613 | 274 |
| Net gain on real estate venture transactions | (53,762) | (181) | (53,733) | (181) |
| Net loss on disposition of real estate | — | — | — | — |
| Provision for impairment | 6,427 | 4,468 | 6,427 | 4,468 |
| Depreciation and amortization: |  |  |  |  |
| Real property | 38,368 | 39,119 | 77,485 | 77,749 |
| Leasing costs including acquired intangibles | 4,904 | 7,103 | 9,923 | 13,243 |
| Company’s share of unconsolidated real estate ventures | 12,294 | 12,145 | 26,146 | 23,709 |
| Partners’ share of consolidated real estate ventures | — | (4) | — | (8) |
| **Funds from operations** | **$38,495** | **$49,913** | **$80,095** | **$100,968** |
| Funds from operations allocable to unvested restricted shareholders | (467) | (309) | (886) | (533) |
| **Funds from operations available to common share and unit holders (FFO)** | **$38,028** | **$49,604** | **$79,209** | **$100,435** |
| **Weighted-average shares/units outstanding — basic (a)** | **173,078,731** | **172,478,629** | **172,900,681** | **172,334,930** |
| **Weighted-average shares/units outstanding — fully diluted (a)** | **175,211,246** | **172,797,873** | **174,857,745** | **172,811,483** |

(a) Includes common shares and partnership units outstanding through the three and six months ended June 30, 2024 and 2023, respectively.

## Market risk

As filed, 4,220 characters.

Market risk is the exposure to loss resulting from changes in interest rates, commodity prices and equity prices. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between our yield on invested assets and cost of funds and, in turn, our ability to make distributions or payments to our shareholders. While we have not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or continued economic slowdown, defaults could increase and result in losses to us which would adversely affect our operating results and liquidity.

#### Interest Rate Risk and Sensitivity Analysis

The analysis below presents the sensitivity of the market value of the Operating Partnership’s financial instruments to selected changes in market rates. The range of changes chosen reflects its view of changes which are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates chosen.

Our financial instruments consist of both fixed and variable rate debt. As of June 30, 2024, our consolidated debt consisted of (i) unsecured notes with an outstanding principal balance of $1,563.0 million, all of which are fixed rate borrowings, (ii) variable rate debt consisting of trust preferred securities that have been swapped to fixed rates with an outstanding principal balance of $78.6 million, (iii) a $600.0 million revolving credit facility with an outstanding principal balance of $25.0 million , (iv) a secured fixed rate term loan with an outstanding principal balance of $245.0 million and (v) two unsecured term loans of $250.0 million and $70.0 million. The $250.0 million unsecured term loan has been swapped to a fixed rate. All financial instruments were entered into for other than trading purposes and the net market value of these financial instruments is referred to as the net financial position. Changes in interest rates have different impacts on the fixed and variable rate portions of our debt portfolio. A change in interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position, but has no impact on interest incurred or cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position.

If market rates of interest increase by 100 basis points, the fair value of our outstanding secured fixed rate debt would increase by approximately $7.5 million. If market rates of interest decrease by 100 basis points, the fair value of our outstanding secured fixed rate debt would decrease by approximately $7.7 million.

As of June 30, 2024, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was $1,507.0 million. For sensitivity purposes, a 100-basis point change in the discount rate equates to a change in the total fair value of our debt of approximately $14.9 million at June 30, 2024.

From time to time or as the need arises, we use derivative instruments to manage interest rate risk exposures and not for speculative or trading purposes. The total outstanding principal balance of our variable rate debt was approximately $449.2 million as of June 30, 2024. The total fair value of our variable rate debt was approximately $410.8 million at June 30, 2024. For sensitivity purposes, if market rates of interest increase by 100 basis points the fair value of our variable rate debt would decrease by approximately $11.7 million at June 30, 2024. If market rates of interest decrease by 100 basis points the fair value of our outstanding variable rate debt would increase by approximately $12.4 million at June 30, 2024.

These amounts were determined solely by considering the impact of hypothetical interest rates on our financial instruments. Due to the uncertainty of specific actions we may undertake to minimize possible effects of market interest rate increases, this analysis assumes no changes in our financial structure.

## Controls and procedures

As filed, 2,257 characters.

### Controls and Procedures (Parent Company)

(a) *Evaluation of disclosure controls and procedures.* Under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, the Parent Company conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this quarterly report. Based on this evaluation, the Parent Company’s principal executive officer and principal financial officer have concluded that the Parent Company’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.

(b) *Changes in internal control over financial reporting.* There was no change in the Parent Company’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the Parent Company’s internal control over financial reporting.

### Controls and Procedures (Operating Partnership)

(a) *Evaluation of disclosure controls and procedures.* Under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, the Operating Partnership conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act as of the end of the period covered by this quarterly report. Based on this evaluation, the Operating Partnership’s principal executive officer and principal financial officer have concluded that the Operating Partnership’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.

*(b) Changes in internal control over financial reporting.* There was no change in the Operating Partnership’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

## Risk factors

As filed, 3,657 characters.

As of June 30, 2024, there have been no material changes to the Risk Factors disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, with the exception of the risk factor below.

**We have experienced, and may again experience a, data security breach that may cause damage to our business and reputation.**

In the ordinary course of our business, we maintain sensitive data, including our proprietary financial information, business information and the information of our tenants and business partners, in our data centers and on our networks. Security breaches or disruptions, mainly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, have generally increased in number, intensity and sophistication. Notwithstanding the security measures undertaken, our information technology has been, and may in the future be, vulnerable to attacks or breaches. One such event occurred on May 1, 2024 when we detected unauthorized occurrences by a third party on portions of our information technology systems that consisted of the third party’s unauthorized access to, and deployment of encryption to, a portion of our internal corporation information technology systems and the exfiltration of certain files, including files containing personal information. There can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Protected information, networks, systems and facilities remain vulnerable because the techniques used in such attempted security breaches evolve and may not be recognized or detected until launched against a target. Accordingly, we may be unable to anticipate these techniques or implement adequate security barriers or other preventative measures.

Data security breaches, including the one noted above, have in the past, and may in the future, result in one or more of the following harms:

- disrupt the proper functioning of our networks and systems and therefore our operations and/or those of our tenants;
- result in misstated financial reports, violations of loan covenants, missed reporting deadlines, and/or missed permitting deadlines;
- result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;
- result in the unauthorized access to, and destruction, loss, theft, misappropriation, or release of proprietary, confidential, sensitive, or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes;
- require significant management attention and resources to remedy any damages that result;
- subject us to claims and lawsuits for breach of contract, damages, credits, penalties, or other agreements; and/or
- damage our reputation among our tenants and investors generally.

While we maintain insurance coverage that may, subject to policy terms and conditions including deductibles, cover specific aspects of cyber risks, such insurance coverage may be insufficient to cover all losses.

Third parties to whom we outsource certain of our functions are also subject to the risks outlined above. We review and assess the cybersecurity controls of our third-party service providers and vendors, as appropriate, and make changes to our business processes to manage these risks. Data breaches and/or the insolvency of such third parties and vendors may result in us incurring costs and may have other negative consequences.

Filed Aug 9, 2024.
Source: SEC EDGAR, the filing index for accession 0000790816-24-000037. Last ingested by Listed: Oct 30, 2026, 13:40 ET. No prices; not investment advice.