Enhanced Investments - Financial Portal

Published: 2023-07-27 00:00:00 ET

bdn-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________________________________________________________________

FORM 10-Q

_____________________________________________________________________________________________

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

_____________________________________________________________________________________________

Brandywine Realty Trust

Brandywine Operating Partnership, L.P.

(Exact name of registrant as specified in its charter)

_____________________________________________________________________________________________

Registrant’s telephone number, including area code (610) 325-5600

_____________________________________________________________________________________________

Maryland

(Brandywine Realty Trust)

001-9106

23-2413352

Delaware

(Brandywine Operating Partnership, L.P.)

000-24407

23-2862640

(State or Other Jurisdiction of Incorporation
or Organization)

(Commission file number)

(I.R.S. Employer Identification Number)

2929 Arch Street
Suite 1800
Philadelphia, PA 19104
(Address of principal executive offices) (Zip Code)

(610) 325-5600
(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares of Beneficial Interest

BDN

NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Brandywine Realty Trust	Yes	☒ No ☐
Brandywine Operating Partnership, L.P.	Yes	☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Brandywine Realty Trust	Yes	☒ No ☐
Brandywine Operating Partnership, L.P.	Yes	☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Brandywine Realty Trust:


Large accelerated filer	☒	Accelerated filer ☐	Non-accelerated filer ☐
Smaller reporting company	☐	Emerging growth company	☐

Brandywine Operating Partnership, L.P.:


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer	☒
Smaller reporting company ☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Brandywine Realty Trust	Yes	☐	No ☒
Brandywine Operating Partnership, L.P.	Yes	☐	No ☒

A total of 172,097,661 Common Shares of Beneficial Interest, par value $0.01 per share of Brandywine Realty Trust, were outstanding as of July 24, 2023.

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2023 of Brandywine Realty Trust (the “Parent Company”) and Brandywine Operating Partnership L.P. (the “Operating Partnership”). The Parent Company is a Maryland real estate investment trust, or REIT, that owns its assets and conducts its operations through the Operating Partnership, a Delaware limited partnership, and subsidiaries of the Operating Partnership. The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company”. In addition, as used in this report, terms such as “we”, “us”, and “our” may refer to the Company, the Parent Company, or the Operating Partnership.

The Parent Company is the sole general partner of the Operating Partnership and, as of June 30, 2023, owned a 99.7% interest in the Operating Partnership. The remaining 0.3% interest consists of common units of limited partnership interest issued by the Operating Partnership to third parties in exchange for contributions of properties to the Operating Partnership. As the sole general partner of the Operating Partnership, the Parent Company has full and complete authority over the Operating Partnership’s day-to-day operations and management.

Management operates the Parent Company and the Operating Partnership as one enterprise. The management of the Parent Company consists of the same members as the management of the Operating Partnership.

As general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the Parent Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Parent Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company’s operations on a consolidated basis and how management operates the Company.

The Company believes that combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into a single report will:

•facilitate a better understanding by the investors of the Parent Company and the Operating Partnership by enabling them to view the business as a whole in the same manner as management views and operates the business;

•remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a substantial portion of the disclosure applies to both the Parent Company and the Operating Partnership; and

•create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

There are few differences between the Parent Company and the Operating Partnership, which are reflected in the footnote disclosures in this report. The Company believes it is important to understand the differences between the Parent Company and the Operating Partnership in the context of how these entities operate as an interrelated consolidated company. The Parent Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing equity from time to time (and contributing the net proceeds of such issuances to the Operating Partnership) and guaranteeing the debt obligations of the Operating Partnership. The Operating Partnership holds substantially all the assets of the Company, including the Company’s ownership interests in the real estate ventures described below. The Operating Partnership conducts the operations of the Company’s business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s incurrence of indebtedness (directly and through subsidiaries) and through the issuance of partnership units of the Operating Partnership or equity interests in subsidiaries of the Operating Partnership.

The equity and non-controlling interests in the Parent Company and the Operating Partnership’s equity are the main areas of difference between the consolidated financial statements of the Parent Company and the Operating Partnership. The common units of limited partnership interest in the Operating Partnership are accounted for as partners’ equity in the Operating Partnership’s financial statements while the common units of limited partnership interests held by parties other than the Parent Company are presented as non-controlling interests in the Parent Company’s financial statements. The differences between the Parent Company and the Operating Partnership’s equity relate to the differences in the equity issued at the Parent Company and Operating Partnership levels.

To help investors understand the significant differences between the Parent Company and the Operating Partnership, this report presents the following as separate notes or sections for each of the Parent Company and the Operating Partnership:

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•Consolidated Financial Statements; and

•Notes to the Parent Company’s and Operating Partnership’s Equity.

This report also includes separate Item 4. (Controls and Procedures) disclosures and separate Exhibit 31 and 32 certifications for each of the Parent Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Parent Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. § 1350.

In order to highlight the differences between the Parent Company and the Operating Partnership, the separate sections in this report for the Parent Company and the Operating Partnership specifically refer to the Parent Company and the Operating Partnership. In the sections that combine disclosures of the Parent Company and the Operating Partnership, this report refers to such disclosures as those of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and real estate ventures and holds assets and incurs debt, reference to the Company is appropriate because the business is one enterprise and the Parent Company operates the business through the Operating Partnership.

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TABLE OF CONTENTS


			Page

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Brandywine Realty Trust

Financial Statements of Brandywine Realty Trust			5

Consolidated Balance Sheets as of June 30 , 2023 and December 31, 2022			5

Consolidated Statements of Operations for the six months ended June 3 0 , 2023 and 2022			6

Consolidated Statements of Comprehensive Income for the six months ended June 30 , 2023 and 2022			7

Consolidated Statements of Beneficiaries’ Equity for the six months ended June 30 , 2023 and 2022			8

Consolidated Statements of Cash Flows for the six months ended June 30 , 2023 and 2022			10

Brandywine Operating Partnership, L.P.

Financial Statements of Brandywine Operating Partnership, L.P.			11

Consolidated Balance Sheets as of June 30 , 2023 and December 31, 2022			11

Consolidated Statements of Operations for the six months ended June 30 , 2023 and 2022			12

Consolidated Statements of Comprehensive Income for the six months ended June 30 , 2023 and 2022			13

Consolidated Statements of Partners’ Equity for the six months ended June 30 , 2023 and 2022			14

Consolidated Statements of Cash Flows for the six months ended June 30 , 2023 and 2022			16

Notes to Unaudited Consolidated Financial Statements			17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			31

Item 3. Quantitative and Qualitative Disclosures about Market Risk			46

Item 4. Controls and Procedures			47

PART II — OTHER INFORMATION			48

Item 1. Legal Proceedings			48

Item 1A. Risk Factors			48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			48

Item 3. Defaults Upon Senior Securities			48

Item 4. Mine Safety Disclosures			48

Item 5. Other Information			48

Item 6. Exhibits			49

Signatures			50

Filing Format

This combined Form 10-Q is being filed separately by Brandywine Realty Trust and Brandywine Operating Partnership, L.P.

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PART I - FINANCIAL INFORMATION

Item 1. — Financial Statements

BRANDYWINE REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share information)


	June 30, 2023		December 31, 2022
ASSETS
Real estate investments:
Operating properties	$	3,597,211	$	3,617,240
Accumulated depreciation	(1,125,145)		(1,063,060)
Right of use asset - operating leases, net	19,346		19,664
Operating real estate investments, net	2,491,412		2,573,844
Construction-in-progress	245,677		218,869
Land held for development	71,493		76,499
Prepaid leasehold interests in land held for development, net	27,762		35,576
Total real estate investments, net	2,836,344		2,904,788
Assets held for sale, net	52,664		—
Cash and cash equivalents	32,111		17,551
Restricted cash and escrows	10,876		—

Accounts receivable	11,654		11,003
Accrued rent receivable, net of allowance of $3,778 and $3,947 as of June 30, 2023 and December 31, 2022, respectively	183,191		179,771
Investment in unconsolidated real estate ventures	630,505		567,635
Deferred costs, net	95,102		96,639
Intangible assets, net	11,676		18,451
Other assets	90,362		78,667
Total assets	$	3,954,485	$	3,874,505
LIABILITIES AND BENEFICIARIES' EQUITY
Secured term loan, net	$	241,383	$	—
Unsecured credit facility	—		88,500
Unsecured term loan, net	318,065		248,168
Unsecured senior notes, net	1,574,373		1,628,370
Accounts payable and accrued expenses	116,913		132,440
Distributions payable	32,957		32,792
Deferred income, gains and rent	24,786		25,082
Intangible liabilities, net	8,811		10,322
Liabilities related to assets held for sale, net	1,041		—
Lease liability - operating leases	23,268		23,166
Other liabilities	56,228		52,331
Total liabilities	$	2,397,825	$	2,241,171
Commitments and contingencies (See Note 14)
Brandywine Realty Trust's Equity:
Common Shares of Brandywine Realty Trust's beneficial interest, $0.01 par value; shares authorized 400,000,000; 172,101,929 and 171,569,807 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	1,719		1,716
Additional paid-in-capital	3,159,276		3,153,229
Deferred compensation payable in common shares	19,965		19,601
Common shares in grantor trust, 1,207,415 and 1,179,643 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	(19,965)		(19,601)
Cumulative earnings	1,158,240		1,176,195
Accumulated other comprehensive income	5,216		3,897
Cumulative distributions	(2,775,124)		(2,709,405)
Total Brandywine Realty Trust's equity	1,549,327		1,625,632
Noncontrolling interests	7,333		7,702
Total beneficiaries' equity	$	1,556,660	$	1,633,334
Total liabilities and beneficiaries' equity	$	3,954,485	$	3,874,505

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except share and per share information)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue
Rents	$	118,133	$	116,897	$	238,981	$	232,798
Third party management fees, labor reimbursement and leasing	6,227		5,924		12,229		11,032
Other	1,522		1,221		3,899		7,717
Total revenue	125,882		124,042		255,109		251,547
Operating expenses
Property operating expenses	31,891		33,111		65,485		64,659
Real estate taxes	11,571		13,746		26,173		27,559
Third party management expenses	2,557		2,792		5,196		5,349
Depreciation and amortization	47,079		43,959		92,679		87,741
General and administrative expenses	9,360		8,328		18,842		18,328
Provision for impairment	4,468		—		4,468		—
Total operating expenses	106,926		101,936		212,843		203,636
Gain on sale of real estate
Net gain on disposition of real estate	—		144		—		144
Net gain on sale of undepreciated real estate	—		4,127		781		5,024
Total gain on sale of real estate	—		4,271		781		5,168
Operating income	18,956		26,377		43,047		53,079
Other income (expense):
Interest income	520		449		1,025		889
Interest expense	(23,669)		(16,341)		(46,322)		(32,083)
Interest expense - amortization of deferred financing costs	(1,114)		(805)		(2,141)		(1,514)

Equity in loss of unconsolidated real estate ventures	(7,598)		(4,981)		(13,765)		(9,544)

Net gain on real estate venture transactions	181		—		181		—



Net income (loss) before income taxes	(12,724)		4,699		(17,975)		10,827
Income tax provision	(13)		(48)		(38)		(75)
Net income (loss)	(12,737)		4,651		(18,013)		10,752
Net (income) loss attributable to noncontrolling interests	41		(14)		58		(22)
Net income (loss) attributable to Brandywine Realty Trust	(12,696)		4,637		(17,955)		10,730


Nonforfeitable dividends allocated to unvested restricted shareholders	(204)		(98)		(274)		(246)
Net income (loss) attributable to Common Shareholders of Brandywine Realty Trust	$	(12,900)	$	4,539	$	(18,229)	$	10,484

Basic income (loss) per Common Share	$	(0.08)	$	0.03	$	(0.11)	$	0.06

Diluted income (loss) per Common Share	$	(0.08)	$	0.03	$	(0.11)	$	0.06

Basic weighted average shares outstanding	171,962,162		171,527,031		171,818,463		171,411,631
Diluted weighted average shares outstanding	171,962,162		172,260,429		171,818,463		172,575,408

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	(12,737)	$	4,651	$	(18,013)	$	10,752
Comprehensive income:
Unrealized gain on derivative financial instruments	6,646		1,747		1,355		5,511



Amortization of interest rate contracts (1)	—		188		—		376

Total comprehensive income	6,646		1,935		1,355		5,887
Comprehensive income (loss)	(6,091)		6,586		(16,658)		16,639
Comprehensive (income) loss attributable to noncontrolling interest	21		(20)		22		(40)
Comprehensive income (loss) attributable to Brandywine Realty Trust	$	(6,070)	$	6,566	$	(16,636)	$	16,599

(1)Amounts reclassified from comprehensive income to interest expense within the Consolidated Statements of Operations.

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST

CONSOLIDATED STATEMENTS OF BENEFICIARIES’ EQUITY

(unaudited, in thousands, except number of shares)


	Number of Common Shares	Number of Rabbi Trust/Deferred Compensation Shares	Common Shares of Brandywine Realty Trust's beneficial interest		Additional Paid-in Capital		Deferred Compensation Payable in Common Shares		Common Shares in Grantor Trust		Cumulative Earnings		Accumulated Other Comprehensive Income (Loss)		Cumulative Distributions		Noncontrolling Interests		Total
BALANCE, December 31, 2022	171,569,807	1,179,643	$	1,716	$	3,153,229	$	19,601	$	(19,601)	$	1,176,195	$	3,897	$	(2,709,405)	$	7,702	$	1,633,334
Net loss											(5,259)						(17)		(5,276)
Other comprehensive income (loss)													(5,307)				16		(5,291)


Share-based compensation activity	171,318	22,449	1		3,370														3,371
Share Issuance from/(to) Deferred Compensation Plan	(13,422)	(48,733)			(88)		145		(145)										(88)
Reallocation of Noncontrolling interest					(4)												4		—
Distributions declared $0.19 per share)															(32,734)		(98)		(32,832)
BALANCE, March 31, 2023	171,727,703	1,153,359	$	1,717	$	3,156,507	$	19,746	$	(19,746)	$	1,170,936	$	(1,410)	$	(2,742,139)	$	7,607	$	1,593,218
Net income											(12,696)						(41)		(12,737)
Other comprehensive income													6,626				20		6,646

Share-based compensation activity	374,226	54,056	2		2,614														2,616
Share Issuance from/(to) Deferred Compensation Plan							219		(219)										—
Reallocation of Noncontrolling interest					155												(155)		—
Distributions declared $0.19 per share)															(32,985)		(98)		(33,083)
BALANCE, June 30, 2023	172,101,929	1,207,415	$	1,719	$	3,159,276	$	19,965	$	(19,965)	$	1,158,240	$	5,216	$	(2,775,124)	$	7,333	$	1,556,660

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST

CONSOLIDATED STATEMENT OF BENEFICIARIES’ EQUITY

(unaudited, in thousands, except number of shares)



	Number of Common Shares	Number of Rabbi Trust/Deferred Compensation Shares	Common Shares of Brandywine Realty Trust's beneficial interest		Additional Paid-in Capital		Deferred Compensation Payable in Common Shares		Common Shares in Grantor Trust		Cumulative Earnings		Accumulated Other Comprehensive Income (Loss)		Cumulative Distributions		Noncontrolling Interests		Total
BALANCE, December 31, 2021	171,126,257	1,169,703	$	1,712	$	3,146,786	$	18,491	$	(18,491)	$	1,122,372	$	(2,020)	$	(2,578,583)	$	10,952	$	1,701,219
Net income											6,093						8		6,101
Other comprehensive income													3,940				12		3,952
Redemption of LP Units																	(4,006)		(4,006)

Share-based compensation activity	277,061	68,540	2		1,653														1,655
Share Issuance from/(to) Deferred Compensation Plan	(19,406)	(52,702)			(249)		895		(895)										(249)
Reallocation of Noncontrolling interest					(959)												959		—
Distributions declared ($0.38 per share)															(32,711)		(98)		(32,809)
BALANCE, March 31, 2022	171,383,912	1,185,541	$	1,714	$	3,147,231	$	19,386	$	(19,386)	$	1,128,465	$	1,920	$	(2,611,294)	$	7,827	$	1,675,863
Net loss											4,637						14		4,651
Other comprehensive income													1,929				6		1,935


Share-based compensation activity	191,368	16,844	2		1,915														1,917
Share Issuance from/(to) Deferred Compensation Plan							215		(215)										—
Distributions declared ($0.19 per share)															(32,705)		(98)		(32,803)
BALANCE, June 30, 2022	171,575,280	1,202,385	$	1,716	$	3,149,146	$	19,601	$	(19,601)	$	1,133,102	$	3,849	$	(2,643,999)	$	7,749	$	1,651,563

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(18,013)	$	10,752
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	92,679		87,741
Amortization of deferred financing costs	2,141		1,514
Amortization of debt discount/(premium), net	(516)		(975)
Amortization of stock compensation costs	6,073		5,419
Straight-line rent income	(4,600)		(5,042)
Amortization of acquired above (below) market leases, net	(760)		(1,664)
Ground rent expense	401		408

Net gain on real estate venture transactions	(181)		—

Total gain on sale of real estate	(781)		(5,168)

Provision for impairment	4,468		—
Loss from unconsolidated real estate ventures, including income distributions	13,765		9,544
Income tax provision	38		75
Changes in assets and liabilities:
Accounts receivable	(469)		(1,254)
Other assets	(12,604)		(2,711)
Accounts payable and accrued expenses	(21,271)		(19,484)
Deferred income, gains and rent	285		(2,487)
Other liabilities	649		1,826
Net cash provided by operating activities	61,304		78,494
Cash flows from investing activities:
Acquisition of properties	—		(3,446)
Proceeds from the sale of properties	—		34,146





Capital expenditures for tenant improvements	(24,431)		(35,545)
Capital expenditures for redevelopments	(34,827)		(56,472)
Capital expenditures for developments	(18,341)		(82,252)
Advances for the purchase of tenant assets, net of repayments	(26)		(447)
Investment in unconsolidated real estate ventures	(60,290)		(27,807)
Deposits for real estate	3,500		(7,550)

Capital distributions from unconsolidated real estate ventures	2,250		5,720
Leasing costs paid	(5,697)		(15,209)
Net cash used in investing activities	(137,862)		(188,862)
Cash flows from financing activities:

Proceeds from credit facility borrowings	136,000		196,000
Repayments of credit facility borrowings	(224,500)		(5,000)
Repayments of unsecured notes	(54,301)		—
Proceeds from unsecured term loan	70,000		—
Proceeds from secured term loan	245,000		—
Debt financing costs paid	(4,455)		(6,641)


Shares used for employee taxes upon vesting of share awards	(952)		(2,935)



Redemption of limited partnership units	—		(4,006)
Distributions paid to shareholders	(65,438)		(65,315)
Distributions to noncontrolling interest	(196)		(255)
Net cash provided by financing activities	101,158		111,848
Increase in cash and cash equivalents and restricted cash	24,600		1,480
Cash and cash equivalents and restricted cash at beginning of period	18,387		28,300
Cash and cash equivalents and restricted cash at end of period	$	42,987	$	29,780


Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period	$	17,551	$	27,463
Restricted cash, beginning of period	836		837
Cash and cash equivalents and restricted cash, beginning of period	$	18,387	$	28,300
Cash and cash equivalents, end of period	$	32,111	$	28,849
Restricted cash, end of period	10,876		931
Cash and cash equivalents and restricted cash, end of period	$	42,987	$	29,780
Supplemental disclosure:
Cash paid for interest, net of capitalized interest during the six months ended June 30, 2023 and 2022 of $8,587 and $4,442, respectively	$	50,480	$	37,961
Cash paid for income taxes	550		902
Supplemental disclosure of non-cash activity:
Dividends and distributions declared but not paid	32,957		32,800










Change in investment in real estate ventures as a result of deconsolidation	8,595		—
Change in operating real estate from deconsolidation of operating properties	(7,814)		—



Change in other assets as a result of investing activities	—		13,396
Change in capital expenditures financed through accounts payable at period end	1,292		10,283
Change in capital expenditures financed through retention payable at period end	2,039		(1,097)

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except unit and per unit information)


	June 30, 2023		December 31, 2022
ASSETS
Real estate investments:
Operating properties	$	3,597,211	$	3,617,240
Accumulated depreciation	(1,125,145)		(1,063,060)
Right of use asset - operating leases, net	19,346		19,664
Operating real estate investments, net	2,491,412		2,573,844
Construction-in-progress	245,677		218,869
Land held for development	71,493		76,499
Prepaid leasehold interests in land held for development, net	27,762		35,576
Total real estate investments, net	2,836,344		2,904,788
Assets held for sale, net	52,664		—
Cash and cash equivalents	32,111		17,551
Restricted cash and escrows	10,876		—

Accounts receivable	11,654		11,003
Accrued rent receivable, net of allowance of $3,778 and $3,947 as of June 30, 2023 and December 31, 2022, respectively	183,191		179,771
Investment in unconsolidated real estate ventures	630,505		567,635
Deferred costs, net	95,102		96,639
Intangible assets, net	11,676		18,451
Other assets	90,362		78,667
Total assets	$	3,954,485	$	3,874,505
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable, net	$	241,383	$	—
Unsecured credit facility	—		88,500
Unsecured term loan, net	318,065		248,168
Unsecured senior notes, net	1,574,373		1,628,370
Accounts payable and accrued expenses	116,913		132,440
Distributions payable	32,957		32,792
Deferred income, gains and rent	24,786		25,082
Intangible liabilities, net	8,811		10,322
Liabilities related to assets held for sale, net	1,041		—
Lease liability - operating leases	23,268		23,166
Other liabilities	56,228		52,331
Total liabilities	$	2,397,825	$	2,241,171
Commitments and contingencies (See Note 14)
Redeemable limited partnership units at redemption value; 516,467 and 516,467 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	2,318		3,195
Brandywine Operating Partnership, L.P.'s equity:
General Partnership Capital; $172,101,929 and 171,569,807 units issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	1,546,587		1,623,738
Accumulated other comprehensive income	4,924		3,569
Total Brandywine Operating Partnership, L.P.'s equity	1,551,511		1,627,307
Noncontrolling interest - consolidated real estate ventures	2,831		2,832
Total partners' equity	$	1,554,342	$	1,630,139
Total liabilities and partners' equity	$	3,954,485	$	3,874,505

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except unit and per unit information)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue
Rents	$	118,133	$	116,897	$	238,981	$	232,798
Third party management fees, labor reimbursement and leasing	6,227		5,924		12,229		11,032
Other	1,522		1,221		3,899		7,717
Total revenue	125,882		124,042		255,109		251,547
Operating expenses
Property operating expenses	31,891		33,111		65,485		64,659
Real estate taxes	11,571		13,746		26,173		27,559
Third party management expenses	2,557		2,792		5,196		5,349
Depreciation and amortization	47,079		43,959		92,679		87,741
General and administrative expenses	9,360		8,328		18,842		18,328
Provision for impairment	4,468		—		4,468		—
Total operating expenses	106,926		101,936		212,843		203,636
Gain on sale of real estate
Net gain on disposition of real estate	—		144		—		144
Net gain on sale of undepreciated real estate	—		4,127		781		5,024
Total gain on sale of real estate	—		4,271		781		5,168
Operating income	18,956		26,377		43,047		53,079
Other income (expense):
Interest income	520		449		1,025		889
Interest expense	(23,669)		(16,341)		(46,322)		(32,083)
Interest expense - amortization of deferred financing costs	(1,114)		(805)		(2,141)		(1,514)

Equity in loss of unconsolidated real estate ventures	(7,598)		(4,981)		(13,765)		(9,544)

Net gain on real estate venture transactions	181		—		181		—


Net income (loss) before income taxes	(12,724)		4,699		(17,975)		10,827
Income tax provision	(13)		(48)		(38)		(75)
Net income (loss)	(12,737)		4,651		(18,013)		10,752
Net loss attributable to noncontrolling interests - consolidated real estate ventures	—		2		1		4
Net income (loss) attributable to Brandywine Operating Partnership	(12,737)		4,653		(18,012)		10,756


Nonforfeitable dividends allocated to unvested restricted unitholders	(204)		(98)		(274)		(246)
Net income (loss) attributable to Common Partnership Unitholders of Brandywine Operating Partnership, L.P.	$	(12,941)	$	4,555	$	(18,286)	$	10,510

Basic income (loss) per Common Partnership Unit	$	(0.08)	$	0.03	$	(0.11)	$	0.06

Diluted income (loss) per Common Partnership Unit	$	(0.08)	$	0.03	$	(0.11)	$	0.06

Basic weighted average common partnership units outstanding	172,478,629		172,043,498		172,334,930		171,985,863
Diluted weighted average common partnership units outstanding	172,478,629		172,776,896		172,334,930		173,149,640

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	(12,737)	$	4,651	$	(18,013)	$	10,752
Comprehensive income:
Unrealized gain on derivative financial instruments	6,646		1,747		1,355		5,511



Amortization of interest rate contracts (1)	—		188		—		376
Total comprehensive income	6,646		1,935		1,355		5,887
Comprehensive income (loss)	(6,091)		6,586		(16,658)		16,639
Comprehensive loss attributable to noncontrolling interest - consolidated real estate ventures	—		2		1		4
Comprehensive income (loss) attributable to Brandywine Operating Partnership	$	(6,091)	$	6,588	$	(16,657)	$	16,643

(1)Amounts reclassified from comprehensive income to interest expense within the Consolidated Statements of Operations.

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

(unaudited, in thousands, except number of units)


	General Partner Capital
	Units	Amount		Accumulated Other Comprehensive Income		Noncontrolling Interest - Consolidated Real Estate Ventures		Total Partners' Equity
BALANCE, December 31, 2022	171,569,807	$	1,623,738	$	3,569	$	2,832	$	1,630,139
Net loss		(5,275)				(1)		(5,276)
Other comprehensive loss				(5,291)				(5,291)
Deferred compensation obligation	(13,422)	(88)						(88)

Share-based compensation activity	171,318	3,371						3,371
Adjustment of redeemable partnership units to liquidation value at period end		779						779
Distributions declared to general partnership unitholders ($0.19 per unit)		(32,734)						(32,734)
BALANCE, March 31, 2023	171,727,703	$	1,589,791	$	(1,722)	$	2,831	$	1,590,900
Net income (loss)		(12,737)				—		(12,737)
Other comprehensive income				6,646				6,646


Share-based compensation activity	374,226	2,616						2,616
Adjustment of redeemable partnership units to liquidation value at period end		(98)						(98)
Distributions declared to general partnership unitholders ($0.19 per unit)		(32,985)						(32,985)
BALANCE, June 30, 2023	172,101,929	$	1,546,587	$	4,924	$	2,831	$	1,554,342

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENT OF PARTNERS’ EQUITY

(unaudited, in thousands, except number of units)


	General Partner Capital
	Units	Amount		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest - Consolidated Real Estate Ventures		Total Partners' Equity
BALANCE, December 31, 2021	171,126,257	$	1,689,611	$	(2,366)	$	2,834	$	1,690,079
Net income		6,103				(2)		6,101
Other comprehensive loss				3,952				3,952
Deferred compensation obligation	(19,406)	(249)						(249)
Repurchase and retirement of LP units		(4,006)						(4,006)
Share-based compensation activity	277,061	1,655						1,655
Adjustment of redeemable partnership units to liquidation value at period end		3,704						3,704
Distributions declared to general partnership unitholders ($0.19 per unit)		(32,711)						(32,711)
BALANCE, March 31, 2022	171,383,912	$	1,664,107	$	1,586	$	2,832	$	1,668,525
Net loss		4,653				(2)		4,651
Other comprehensive income				1,935				1,935


Issuance of partnership interest in consolidated real estate ventures	191,368	1,917						1,917
Share-based compensation activity		2,181						2,181
Adjustment of redeemable partnership units to liquidation value at period end		(32,705)						(32,705)
Distributions declared to general partnership unitholders ($0.19 per unit)								—
BALANCE, June 30, 2022	171,575,280	$	1,640,153	$	3,521	$	2,830	$	1,646,504

The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(18,013)	$	10,752
Adjustments to reconcile net income to net cash from operating activities: