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Brandywine Realty Trust (NYSE:BDN)

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On Thursday, Shares of Brandywine Realty Trust (NYSE:BDN), lost -0.24% and closed at $16.85 in the last trading session. The last trading range of the stock ranges between $16.65 and $17.02. Brandywine Realty Trust (BDN) recently stated its financial and operating results for the three months ended March 31, 2017.

Administration Comments

“We started the year with a very solid first quarter and we are very much on track to meet our 2017 business plan objectives,” stated Gerard H. Sweeney, President and Chief Executive Officer for Brandywine Realty Trust.  “We made excellent progress and are now 90% complete on our 2017 speculative revenue target.  Our portfolio repositioning has left us with a portfolio that generated a strong 9.4% same store cash NOI growth during this quarter.  During the first quarter, we also accomplished $133 million or 66% of our $200 million disposition target.  Balance sheet metric improvement continues and we have stepped down our 6.9% perpetual preferred shares at par with cash-on-hand to improve our coverage ratios.  This redemption of the perpetual preferred shares created a one-time, non-cash $0.02 per share charge related to the write-off of original issuance costs during the second quarter and we are revising our 2017 FFO guidance to reflect that charge.  Our current 2017 FFO guidance range of $1.35 to $1.42 is now adjusted to $1.33 to $1.40.”

First Quarter Highlights

Financial Results

Net income available to common shareholders; $19.3 million, or $0.11 per diluted share.

Funds from Operations (FFO); $56.1 million, or $0.32 per diluted share.

Portfolio Results

Core portfolio was 93.2% occupied and 94.0% leased.

Signed 980,000 square feet of new and renewal leases.

Rental rate mark-to-market raised 9.1% / 1.5% on GAAP/cash basis.

Same store net operating income growth: 2.4% on a GAAP basis and 9.4% on a cash basis.

2017 Business Plan Revisions

Rental rate mark-to-market: Raised on a cash basis from 8-10% to 9-11%.

Speculative Revenue: Reduced $1.0 million from $28.7 million to $27.7 million mainly because of accelerated first quarter disposition activity and certain properties presently under contract for sale.

Recent Transaction Activity

On March 30, 2017, accomplished the sale of three properties known as Woodland Falls in Cherry Hill, New Jersey, containing 215,465 net rentable square feet, for a gross sales price of $19.0 million.

On March 15, 2017, accomplished the sale of the Marine Center Piers in Philadelphia, Pennsylvania, containing 181,900 net rentable square feet, for a gross sales price of $21.4 million, of which $12.0 million was paid at settlement. A gain on sale of $6.5 million was recorded during the first quarter of 2017. A second installment payment totaling $9.4 million is due from the buyer upon termination or expiration of the lease with an existing tenant and we will record a $9.4 million gain in the period we receive that payment.

On March 13, 2017, accomplished the sale of three office properties in Beltsville, Maryland, containing about 313,800 net rentable square feet, for a gross sales price of $9.0 million. An impairment charge totaling $1.7 million was recorded during the quarter.

On February 2, 2017, accomplished the sale of two office properties known as the Concord Airport Plaza in Concord, California, containing about 350,300 net rentable square feet, for a gross sales price of $33.1 million.

As formerly declared, on January 31, 2017, we sold our 50% ownership interest in an unmerged real estate venture known as the Parc at Plymouth for $100.5 million, receiving net cash proceeds of $27.2 million after closing costs and related debt pay-off. The gain on sale is $14.6 million and since the land contribution on September 5, 2012, the real estate venture earned an annualized IRR of 18.6%.

During the quarter, we accomplished land sales in Austin, Texas and Richmond, Virginia totaling 6.5 acres for $4.6 million.

Recent Finance / Capital Markets Activity

On April 11, 2017, accomplished the formerly declared redemption of the entire 4,000,000 preferred shares for $102 million, counting the cash redemption price of $25.00 per share plus accumulated and unpaid distributions. During the second quarter 2017, we will record a one-time, non-cash charge related to unamortized issuance costs totaling $3.2 million, or $0.02 per diluted share.

We have no outstanding balance on our $600.0 million unsecured revolving credit facility as of March 31, 2017.

We have $234.7 million of cash and cash equivalents on-hand as of March 31, 2017 of which $100 million was subsequently used to fund the redemption of our preferred shares.

Results for the Three Months Ended March 31, 2017

Net income allocated to common shares totaled $19.3 million, or $0.11 per diluted share, in the first quarter of 2017 contrast to a net income allocated to common shares totaled $44.1 million, or $0.25 per diluted shares in the first quarter of 2016.

FFO available to common shares and units in the first quarter of 2017 totaled $56.1 million, or $0.32 per diluted share, as compared to ($11.6) million or ($0.07) per diluted share in the first quarter of 2016.  FFO for the first quarter of 2016 includes a $66.6 million, or $0.38 per share, charge for the early extinguishment of debt related to our first quarter sale of Cira Square.  Our first quarter 2017 payout ratio ($0.16 common share distribution / $0.32 FFO per diluted share) was 50.0%.

Operating and Leasing Activity

In the first quarter of 2017, our Net Operating Income (NOI) apart from termination revenues and other income items raised 2.4% on a GAAP basis and raised 9.4% on a cash basis for our 97 same store properties, which were 93.2% and 94.0% occupied on March 31, 2017 and March 31, 2016, respectively.

We leased about 980,000 square feet and begind occupancy on 228,000 square feet during the first quarter of 2017.  The first quarter occupancy activity includes 84,000 square feet of renewals, 72,000 square feet of new leases and 72,000 square feet of tenant expansions.  We have an additional 120,000 square feet of executed new leasing planned to begin subsequent to March 31, 2017.

We achieved a 47% tenant retention ratio in our core portfolio with net negative absorption of (107,000) square feet during the first quarter of 2017.  First quarter rental rate growth raised 9.1% as our renewal rental rates raised 11.1% and our new lease/expansion rental rates raised 7.4%, all on a GAAP basis.

Analyst recommendation for this stock stands at 2.70.