Release Date: February 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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.
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