• Core Portfolio Occupancy: 87.8% occupied and 89.9% leased.
• Spec Revenue: $26.4 million, exceeding the 2024 target by 8%.
• Tenant Retention Rate: 63%, above the original target of 51% to 53%.
• Leasing Activity: 2.3 million square feet for the year; 783,000 square feet in Q4.
• Liquidity: $90 million cash on hand; no outstanding amounts on a $600 million unsecured line of credit.
• Dispositions: Over $300 million, exceeding the $150 million revised midpoint guidance.
• FFO: $0.17 for Q4 and $0.85 for 2024.
• Net Loss: $43.3 million or $0.25 per share for Q4.
• 2025 FFO Guidance: $0.60 to $0.72 per share, midpoint of $0.66.
• Same-Store NOI Growth: 1% to 3% on a cash basis for 2025.
• 2025 Occupancy Levels: Expected between 88% and 89%.
• 2025 Lease Levels: Expected between 89% and 90%.
• 2025 Retention Rate: Expected between 59% and 61%.
• 2025 Capital Spend: Impacted by $23 million of deferred tenant allowance payments.
• 2025 Debt Metrics: Net debt to EBITDA expected to be 82% to 84%.

• Warning! GuruFocus has detected 8 Warning Signs with BDN.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Brandywine Realty Trust (NYSE:BDN) exceeded its 2024 business planned spec revenue target by 8%, generating $26.4 million.
• The company achieved a tenant retention rate of 63%, surpassing its original target of 51% to 53%.
• Leasing activity was robust, with approximately 2.3 million square feet leased in 2024, including 783,000 square feet in the fourth quarter alone.
• Brandywine Realty Trust (NYSE:BDN) significantly improved its liquidity, completing over $300 million in dispositions, well above its $150 million revised midpoint guidance.
• The company's wholly owned core portfolio is 87.8% occupied and 89.9% leased, showing sequential improvement over the last quarter.

Negative Points

• Brandywine Realty Trust (NYSE:BDN) fell short of its FFO targets, with FFO results at $0.17 for the fourth quarter and $0.85 for 2024.
• The company is facing a transitional earnings year in 2025, impacted by expensing preferred coupon payments and interest expenses related to residential projects.
• Development projects are taking longer to lease up than anticipated, affecting earnings visibility.
• The 2025 FFO guidance is significantly lower than 2024, with a midpoint of $0.66, reflecting a $0.19 per share decrease.
• The company anticipates a CAD payout ratio of 120% to 150% in 2025, which is elevated compared to historical averages.

Q & A Highlights

Q: Have any of the larger tenants at 3151 or Uptown ATX gone elsewhere, or are they just not making decisions? What is the biggest hold-up in getting these companies to make decisions? A: Gerard Sweeney, President and CEO, stated that they have not lost any major prospects to other buildings or decisions to stay put. The timelines have been protracted, and discussions are ongoing. Tenants are behaving more pragmatically and cautiously, likely due to macro uncertainties such as elections and economic conditions. However, there is a trend towards companies finalizing their return-to-work policies, which is encouraging for future leasing decisions.

Q: Regarding the cash yields and carry costs, what confidence do you have around the rents and timing to hit these yields? Is it a pricing issue or more of a tenant decision-making issue? A: Gerard Sweeney explained that it is more of a timing issue than a pricing issue. Tenants are moving up the quality curve, and price is a secondary consideration. George Johnstone, EVP of Operations, added that rental rates in their pro forma do not appear to be at risk, and accelerating decision-making and lease signings will help achieve the projected yields.

Q: Upon stabilization of the development pipeline, what would be the difference between the JV FFO negative for '25 versus the stabilized level? A: Thomas Wirth, CFO, stated that the income from JVs this year is around $10-$12 million, but it could exceed $50 million upon stabilization. The costs related to construction loans and preferred equity will be addressed through recapitalization as projects stabilize.

Q: Can you elaborate on what "recap the JV assets" would look like? Would Brandywine take a larger equity ownership interest? A: Gerard Sweeney explained that the JV assets are structured on a preferred equity basis, with Brandywine owning a significant residual position. As projects move towards stabilization, they plan to take out the preferred partner and recapitalize, potentially bringing assets onto their balance sheet or refinancing existing debt.

Q: Why is the guidance range for 2025 so wide, and what would move you to the high or low end of the range? A: Thomas Wirth noted that the wide range is due to potential leasing that is not currently programmed, especially on developments, and possible recapitalizations. Leasing activity and recapitalization of high-cost preferred equity and construction loans could positively impact the guidance range.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.