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BRANDYWINE REALTY TRUST (BDN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 FFO was $0.17 per share and missed internal guidance by ~3% and Wall Street consensus by ~6%; GAAP loss per share was $(0.25) due to $23.8M non-cash JV impairments in D.C.
  • Liquidity strengthened: >$300M dispositions in 2024, $90.2M cash on hand, and zero draw on the $600M revolver at year-end
  • Core occupancy/leased levels improved sequentially (87.8% occupied, 89.9% leased), with Q4 leasing the highest of 2024; tenant retention was 76% in Q4
  • 2025 is a transitional year: FFO guidance $0.60–$0.72 per share amid expensing of preferred equity returns and reduced capitalized interest on recently delivered developments; management is pursuing JV recapitalizations to lower carry costs

What Went Well and What Went Wrong

What Went Well

  • “We accomplished or exceeded many of our full year 2024 business plan objectives including speculative revenue, tenant retention, same-store NOI results and rental rate mark-to-markets” (CEO)
  • Dispositions exceeded targets: ~$310M gross proceeds, fueling year-end cash of $90.2M and undrawn revolver
  • FS Investments signed a 117,000 sq ft, 16-year HQ lease at 3025 JFK; Q4 leasing totaled 783,000 sq ft including JVs, the highest in 2024

What Went Wrong

  • Q4 FFO missed guidance (~3%) and consensus (~6%); $6M expected other income shifted to Q1’25, contributing to the shortfall
  • Developments are off capitalization periods, elevating 2025 carry costs (construction interest and partner preferred returns ~$43.8M), driving a trough FFO year
  • Q4 same-store NOI declined (1.6%) on accrual basis; negative cash rent spreads are expected in 2025 driven by Austin renewals trading capital for rent

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Revenue ($USD Millions)$130.17 $131.78 $121.91
GAAP Diluted EPS ($)$(0.91) $(0.96) $(0.25)
FFO per Share - Fully Diluted ($)$0.27 $0.23 $0.17
Same-Store NOI Change (Accrual, YoY)—(2.0)% (1.6)%
Same-Store NOI Change (Cash, YoY)—+1.6% +0.5%
KPIsQ4 2023Q3 2024Q4 2024
Core Occupied (%)—87.2% 87.8%
Core Leased (%)—88.7% 89.9%
New & Renewal Leases (Wholly Owned, sq ft)—298,000 486,000
New & Renewal Leases (Incl. JVs, sq ft)—558,000 783,000
Tenant Retention (Quarter)—42% 76%
Rental Rate Mark-to-Market (Accrual)—+14.9% +5.9%
Rental Rate Mark-to-Market (Cash)—+8.9% +1.1%
FY ResultsFY 2023FY 2024
Total Revenue ($USD Millions)$514.65 $505.52
GAAP Diluted EPS ($)$(1.15) $(1.13)
FFO per Share - Fully Diluted ($)$1.15 $0.85
Same-Store NOI Change (Accrual, YoY)—(1.0)%
Same-Store NOI Change (Cash, YoY)—+1.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FFO per ShareFY 2025—$0.60–$0.72Introduced
Loss per Share (GAAP)FY 2025—$(0.60)–$(0.48)Introduced
Core Occupancy (Year-End)FY 2025—88–89%Introduced
Core Leased (Year-End)FY 2025—89–90%Introduced
Mark-to-Market (Accrual)FY 2025—+3–4%Introduced
Mark-to-Market (Cash)FY 2025—(3)–(2)%Introduced
Same-Store NOI (Accrual)FY 2025—(1)%–+1%Introduced
Same-Store NOI (Cash)FY 2025—+1%–+3%Introduced
Speculative RevenueFY 2025—$27–$28M (achieved $22.9M to date)Introduced
Property Sales (ex land)FY 2025—$40–$60MIntroduced
FinancingFY 2025—Refi $70M unsecured term loan (Feb’25) and $50M construction loan (Aug’26)Introduced
DividendFY 2025—$0.15 per quarter ($0.60 annual)Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Flight to Quality & Leasing Momentum60–68% of new leases driven by flight to quality; tours above pre-pandemic; pipeline ~2.0–2.3M sq ft Q4 tours +7% QoQ; strong pipelines in Philly and Austin; core CBD ~93% leased Improving demand for Class A; sustained pipeline
Development Lease-Up (3025 JFK, 3151 Market, Uptown ATX)3025 JFK: growing pipeline; 3151 delivery in Q4’24; Uptown pipeline >600k sq ft 3025 office 83% leased (FS Investments 117k sq ft); Avira 84% leased; 3151 delivered; Uptown office pipeline >500k sq ft; stabilization guided to 2026 Progress but elongated decision cycles; stabilization shifted
Liquidity/DispositionsRaised 2024 sales midpoint to $150M; Plymouth Meeting sale w/ seller financing ~$310M gross sales (Austin Barton Skyway, 4040 Wilson JV, Dabney portfolio); cash $90.2M; revolver undrawn Strong balance sheet progress
Austin Market DynamicsSuburban assets lag; TI pressures; competitive sublease market 2025 cash rent spreads negative driven by Austin structure; suburban absorption likely gradual Gradual recovery; near-term rent headwinds
JV Structure & RecapitalizationsJV restructuring reduced debt attribution; MAP JV plan Preferred equity yields in teens; active discussions to recap preferred and debt ahead of stabilization Targeted recaps to reduce carry costs
Dividend/CADCAD payout ~95% YTD; vigilant capital allocation CAD payout guided 120–150% in 2025 due to deferred tenant allowances; aim to normalize by 2026 without cutting dividend Temporarily elevated; plan to normalize

Management Commentary

  • “Our 2025 FFO guidance range of $0.60 to $0.72 per diluted share reflects increased expenses due to the expiration of the capitalization periods on several of our recently delivered developments including the expensing of the return on our partners’ preferred equity investments.” (CEO)
  • “Fourth quarter FFO results were 3% below our guidance and 6% below the consensus estimates, partially as a result of timing.” (CFO)
  • “We significantly exceeded our liquidity goals and completed over $300 million of dispositions… $90 million of cash on hand and no outstanding amounts on our $600 million unsecured line of credit at year-end.” (CEO)
  • “We have not lost any of our major prospects… timelines have been very protracted… tenants behaving more pragmatically and cautiously.” (CEO, on 3151/Uptown)

Q&A Highlights

  • Development leasing timelines: Management emphasized elongated decision cycles but no loss of major prospects; rents holding, with higher TI traded for longer terms
  • JV carry costs and recaps: Preferred equity yields are high; active discussions to recap preferred and debt earlier than stabilization to reduce 2025 drag
  • 2025 guidance range: Upside drivers are incremental development leasing and successful recapitalizations; operating portfolio spec revenue ~83% achieved at midpoint
  • CAD payout ratio: Elevated (120–150%) in 2025 due to ~$23–24M deferred tenant allowances with ‘use it or lose it’ provisions that mostly trigger in 2025
  • Austin rent spreads: Negative cash spreads in 2025 largely due to specific large suburban renewals trading TI for rate; absent those, portfolio spreads would be higher

Estimates Context

  • Management disclosed Q4 FFO was ~6% below consensus and ~3% below guidance; specific S&P Global consensus figures were not retrieved at time of analysis due to data access limits. Comparisons to estimates are therefore anchored on management’s disclosure rather than numerical consensus values.

Key Takeaways for Investors

  • Near-term earnings trough: 2025 FFO reset ($0.60–$0.72) reflects development carry costs; watch for JV recapitalizations to lower preferred/debt expense and lift toward the high end of guidance
  • Liquidity optionality: ~$90M cash and undrawn revolver provide flexibility to fund recaps and bridge lease-up; supports dividend stability despite elevated CAD payout in 2025
  • Leasing catalysts: Additional 3025 JFK commercial lease-up, office users at 3151 Market (life science optionality), and Uptown ATX large user wins are key stock catalysts through 2025–2026
  • Austin watchlist: Expect negative cash rent spreads and gradual suburban absorption; progress on conversions (e.g., River Place) and large CBD users could inflect sentiment
  • Portfolio resilience: Sequential occupancy/leased improvements and strong Q4 retention (76%) underscore operational stability amid market bifurcation toward Class A
  • Disposition program de-risked balance sheet: Exceeded 2024 sales target; 2025 plan includes $40–$60M of additional asset sales with minimal dilution (timing second half)
  • Estimate sensitivity: Given the Q4 miss vs consensus and broad guidance range, estimate revisions may trend lower near-term; upside hinges on leasing and recap execution