Q3 2023 Brandywine Realty Trust Earnings Call

Speaker 1: Good day and thank you for standing by. Welcome to the Brandywine Realty Trust third quarter 2023 earnings call. At this time, all participants.

Good day and thank you for standing by welcome to the Brandywine Realty Trust third quarter 2023 earnings call.

At this time all participants are in a listen only mode.

Speaker 1: After the speaker's presentation, there will be a question and answer session.

After the speaker's presentation, there will be a question and answer session.

Speaker 1: To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising you to press star 1 1 on your telephone.

To ask a question during the session you will need to press star one one on your telephone.

Then here an automated message advising your hand is raised.

Speaker 1: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

To withdraw your question. Please press star one one again.

Please be advised that today's conference is being recorded.

Speaker 1: I would now like to hand the conference over to your speaker today, Jerry Sweeney, President and CEO . Please go ahead.

I would now like to hand, the conference over to your Speaker today, Jerry Sweeney President and CEO. Please go ahead.

Speaker 2: Liz, thank you very much. Good morning, everyone, and thank you for participating in our third quarter, 2023 earnings call. On today's call with me today is George Johnson, our executive vice president of operations, Dan Palazzo, senior vice president, chief accounting officer.

Well. Thank you very much good morning, everyone and thank you for participating in our third quarter 2023 earnings call on today's call with me today is George Johnstone, Our executive Vice President of operations, Dan Palazzo Senior Vice President and Chief Accounting Officer.

Speaker 2: and Tom Werth, our Executive Vice President and Chief Financial Officer.

And Tom Wirth, our executive Vice President and Chief Financial Officer.

Speaker 2: Prior to beginning, certain information discussed during our call may constitute forward-looking statements within the meaning of the federal securities law. Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurances that the anticipated results will be achieved.

Prior to beginning certain information discussed during our call may constitute forward looking statements within the meaning of the federal Securities law. Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurances that the anticipated results will be achieved.

Speaker 2: Further information on factors that could impact our anticipated results. Please reference our press release as well as our most recent annual and quarterly reports that we follow with the SEC.

Further information on factors that could impact our anticipated results. Please reference our press release as well as our most recent annual and quarterly reports that we filed with the SEC.

Speaker 2: So to start off this morning during our prepared comments as we always do, we're review quarterly results and provide an update on our 2023 business.

So to start off this morning during our prepared comments as we always do we'll review quarterly results and provide an update on our 2023 business plan.

Speaker 2: Tom will then review third quarter financial results and frame that the remaining key assumptions that drive our 23 guidance.

Tom will then review third quarter financial results and frame out the remaining key assumptions that drive our 'twenty three guidance after that Tom Dan George and I are available for any questions.

Speaker 2: After that Tom Dan Georg and I are available for any questions.

Speaker 2: So the third quarter saw additional progress on our 23 business plan are combined leasing activity for the quarter total 624,000 square feet. During the quarter we executed 351,000 square feet of leases, including 118,000 square feet of new leasing within our Holy Own portfolio.

So the third quarter saw additional progress of our 23 business plan, our combined leasing activity for the quarter totaled 624000 square feet. During the quarter, we executed 351000 square feet of leases, including 118000 square feet of new leasing within our wholly owned portfolio.

Speaker 2: Our joint venture portfolio achieved 273,000 square feet of lease executions, including 108,000 square feet of new leasing activity.

Our joint venture portfolio achieved 273000 square feet of lease executions, including a 108000 square feet of new leasing activity.

Speaker 2: Also, while the third quarter mark-to-market results were below our annual targets, based on executed leases, we expect our full-year mark-to-market range to be between 11 to 13% on a gap basis, and 4 to 6% on a cash base.

Also while the third quarter Mark to market results were below our annual targets based on executed leases, we expect our full year mark to market range to be between 11% to 13% on a GAAP basis, and 46% on a cash basis.

Speaker 2: As I noted in last quarter's call, our market to market will vary by region with filled out the SCBD, University City and the Pennsylvania suburbs leading the way. We certainly continue to expect that given current market conditions, our market to market in Austin for the balance of the year will remain negative on both the cash and gap.

As I noted in last quarter's call our mark to market will vary by region with Philadelphia CBD University City in the Pennsylvania suburbs, leading the way, we certainly continue to expect that given current market conditions, our mark to market in Austin for the balance of the year will remain negative on both the cash.

GAAP basis.

Speaker 2: As we did anticipate in our business plan, we had negative absorption this quarter, primarily related to tenants moving out in our Pennsylvania climate meeting portfolio, a tenant in Austin, Texas, and a 42,000 square foot firm vacating the lower bank here at Sierra Center. And at Sierra, as I'll touch on later, this space is part of our lifestyles conversion within that lower bank and work is already underway.

As we did anticipate in our business plan, we had negative absorption this quarter, primarily related to tenants moving out in our Pennsylvania, Plymouth meeting portfolio.

Tenant in Austin, Texas, and up 42000 square foot.

Firm vacating the lower bank here at Sierra Center, and at Sierra as I'll touch on later this space as part of our life science conversion within that lower bank at work is already underway. Overall, we are 88, 3% occupied and 90, 94% leased based on 200.

Speaker 2: Overall, we are 88.3% occupied in 90.4% lease based on 256,000 square feet before lease but nothing to do.

56000 square feet or four lease commitments as a result of delayed occupancy on executed deals primarily due to slower buildout approvals and frankly, the slower pace of leasing in Austin, we are reducing our year end occupancy range from 90% to 91% down to 89 to 90.

Speaker 2: As a result of delayed occupancy on executed deals, primarily due to slower build out of approvals, and frankly, the slower pace of leasing and Austin, we are reducing our year-end occupancy range from 90 to 91% down to 89 to 90.

Speaker 2: We are, however, based on activity, maintaining our least percentage range of 91 to 92.

We are however, based on activity, maintaining our lease percentage range of 91% to 92%.

Speaker 2: Our core markets are filled up as CBD, University City, and Pennsylvania sub-Burbs and Austin, which comprise 92% of the company's NLI is 90% occupied and 90% with 92%.

Our core markets, Philadelphia, CBD University City penciled.

Pennsylvania suburbs in Austin, which comprised 92% of the company's NOI is 90% occupied and 90% with 92% leased we did add a new page in our supplemental package page four which highlights how well the the majority of our portfolio occupancy is we did.

Speaker 2: We did add a new page in our supplemental package page four, which highlights how well the majority of our portfolio occupancy is. We did highlight on that page, eight of our wholly owned properties can price 50% of the company's vacancy. Number of these properties are either being marketed for sale or undergoing an analysis for conversion opportunities, but those properties do affect our occupancy numbers by 450 basis points.

Highlight on that page eight of our wholly owned properties comprise 50% of the company's vacancy number of these properties are either being marketed for sale. We're undergoing an analysis for conversion opportunities, but those properties do affect our occupancy numbers by 450 basis points.

Speaker 2: and plans are underway to address each of these projects ranging from increased leasing outreach programs as well as well as mentioned sale and conversion operations.

And plans are underway to address each of these projects ranging from increased leasing outreach programs as well as what I just mentioned the sale and conversion opportunities.

Speaker 2: Both Gap and SameStore Alperformed are business plan ranges during the quarter, and we are increasing both ranges for the year. The Gap, SameStore range is increased from 0 to 2 to 2 to 3%, primarily due to approximately 500,000 square feet of positive blend and extend leases that were done. Notably, none of these blend and extends involved a contraction by the renewing ten.

Both GAAP and same store outperformed our business plan ranges during the quarter and we are increasing both ranges for the year. The GAAP same store GAAP same store range has increased from zero to 2% to 2% to 3% primarily due to approximately 500000 square feet.

Positive blend and extend the leases that were done notably none of these blend and extends and Bob the contraction by the renewing tenant.

Speaker 2: You'll note that this activity bought down our forward rollover exposure, which I'll touch on in a few moments. Cash change store is increasing from 2.5 to 4.5%, which was a previous range, the 5 to 6%, primarily due to proactive cost reduction issues, resulting in lower utility, genital costs, reduced real estate taxes, all net-of-pent and burst reimbursement, as well as the continued burnoff of some free rent.

Youll note that this activity brought down our forward rollover exposure, which I'll touch on a few moments.

Cash same store is increasing from two 5% to four 5%, which was a previous range to 5% to 6% primarily due to proactive cost reduction initiatives, resulting in lower utility janitorial costs reduced real estate taxes, all net of patent burst reimbursements as well as they continue.

<unk> burn off of some free rent.

Speaker 2: Third quarter capital costs were in line with our business plan range. However, based on year-to-date results in projected fourth quarter activity, we are reducing our leasing capital ratio from 11 to 13 percent down to 9 to 10 percent.

Third quarter capital costs were in line with our business plan range. However, based on year to date results and projected fourth quarter activity, we are reducing our leasing capital ratio from 11% to 13% down to 9% to 10%.

Speaker 2: So as evidenced by our positive mark to market results, this lower capital ratio, we will continue to generate positive net effect of rent in most of our markets.

As evidenced by our positive Mark to market results. This lower capital ratio, we will continue to generate positive net effective rents in most of our markets.

Speaker 2: Tenant retention for the quarter was 44% again in line with our plan, but below the bottom end of our full year forecast was driven primarily by those vacates I previously mentioned, but we are maintaining our existing range of 49 to 51% based on forecast acute poor activity.

Tenant retention for the quarter was 44% again in line with our plan, but below the bottom end of our full year forecast was driven primarily by those vacates I previously mentioned, while we are maintaining our existing range of 49% to 51% based on our forecasted Q4 activity.

Speaker 2: Our spec revenue range remains in the $17 to $19 million range, about 94% done at the midpoint. We expect to be able to reach the midpoint that range by the end of the year. Our operating portfolio is solid with a stable outlook. We have reduced our forward rollover exposure through 24 to an average of 6.3% and through 2026 to an average annual rate of 6.7%.

Our spec revenue range remains in the $17 million to $19 million range about 94% done at the midpoint and we expect to be able to reach the midpoint of that range by the end of the year.

Our operating portfolio is solid with a stable outlook, we have reduced our forward rollover exposure through 'twenty four to an average of six 3% and through 2026 to an average annual rate of six 7%.

Speaker 2: We do feel very good about our portfolio quality, our management services delivery platform, and our sub-market positioning. We do believe the quality curve thesis remains intact, as evidenced by the overall pickup and leasing activity that we continue to see. Additionally, rather, overall tour velocity, which is really a starting point for our leasing cycle, continues to improve. So just several points to amplify.

We do feel very good about our portfolio quality, our management services delivery platform and our sub market positioning we do believe the quality curve thesis remains intact as evidenced by the overall pick up in leasing activity that we continue to see.

Additional additionally, rather overall tour velocity, which is it really a starting point for our leasing cycle continues to improve so just several points to amplify.

Speaker 2: The increase in physical tour volume has been very encouraging. Our third quarter physical tours exceeded second quarter tour volume by 29 percent, but also exceeded our trailing four quarter average by 69 percent, and our tour activity level remains above pre-pandemic levels by 18 percent. So good traction through the entire portfolio.

The.

The increase in physical tour volume has been very encouraging our third quarter physical tours exceeded second quarter toward volume by 29%, but also exceeded our trailing four quarter average by 69% and our tour activity level remains above pre pandemic levels by <unk>.

18%, so good traction through the entire portfolio.

Speaker 2: On a wholly owned basis during the third quarter, 62,000 square feet of new leases, or 53% of all new leasing activity, were a result of this flight to quality thesis.

On a wholly owned basis during the third quarter 62000 square feet of new leases or 53% of all new lease activity were a result of this flight to quality thesis.

Speaker 2: Tenant expansions continued to outweigh tenant contractions during the quarter.

Tenant expansions continued to outweigh tenant contractions during the quarter.

Speaker 2: And the market recovery does continue, albeit at a slower pace than we would like, but our total leasing pipeline is up 20% for the second consecutive quarter and stands at 3.8 million square feet.

And the market recovery does continue, albeit at a slower pace than we would like but our total leasing pipeline is up 20% for the second consecutive quarter and stands at $3 8 million square feet that pipeline a pipeline is broken down between one 7 million square feet in our wholly owned portfolio.

Speaker 2: That pipeline is broken down between 1.7 million square feet in our wholly owned portfolio, which is up from last quarter, and stability within our development project portfolio.

<unk>, which is up from last quarter and stability within our development project portfolio.

Speaker 2: The 1.7 million square feet existing portfolio pipeline includes approximately 100,000 square feet in advanced stages of lease negotiations.

One 7 million square feet existing portfolio of pipeline includes approximately 100000 square feet in advanced stages of lease negotiations.

Speaker 2: Also, 46% of our operating portfolio new deal pipeline are prospects looking to move up the quality curve. That's up from 31% last quarter. Turning to the balance sheet, as expected, our second quarter net debt to EBITDA ratio decreased from the 7.4 from 7.6.

Also 46% of our operating portfolio new deal pipeline, our prospects looking to move up the quality curve, that's up from 31% last quarter.

Turning to the balance sheet.

As expected our second quarter net debt to EBITDA ratio decreased from seven four from seven six primarily from increased EBITDA offset by increased development and redevelopment costs. We anticipate this ratio to decrease to our business plan ranges with sales in the fourth quarter and achieve.

Speaker 2: primarily from increased EBITDA offset by increased development and redevelopment costs. We anticipate this ratio to decrease to our business plan ranges with sales in the fourth quarter and achieving our targeted reduction in joint venture debt.

Our targeted reduction in joint venture debt attribution.

Speaker 2: As we noted in the SIF, this ratio is higher due to development spend and debt attribution from our joint venture.

As we noted in the Sip this ratio is higher due to development spend and debt attribution from our joint ventures.

Speaker 2: If both of these items were removed from our 7.4 metric, our leverage would be a full-term lower at 6.44 times.

Both of these items were removed from our seven four metric our leverage would be a full turn lower at six.

Speaker 2: To amplify this point, our core EBITDA metric, which is our operating portfolio excluding joint venture debt attribution and development and redevelopment spend, ended the quarter within our range at 6.3 times.

Four times to amplify that at this point, our core EBITDA metric.

Which is our operating portfolio wings, excluding joint venture debt attribution and development and redevelopment spend ended the quarter within our range at six three times.

Speaker 2: On the liquidity front, we continue to make progress in our assets, sales, and financing.

On the liquidity front, we continue to make progress on our asset sales and financings. We have a short term extension with the lender on our nonrecourse leasehold mortgage in our mask joint venture.

Speaker 2: We have a short-term extension with the lender on our non-recourse leasehold mortgage in our MAP joint venture through December 23, December 1st of 23.

Through December 23 December 123.

Speaker 2: The current outstanding balance of that loan is $181 million. The extension is providing additional time to finalize a recapitalization strategy with both the leasehold lender and the fee owner. And discussions to date have been very constructive.

The carry outstanding balance of that loan is $181 million. The extension is providing additional time to finalize our recapitalization strategy with both the leasehold lender and the owner and discussions to date have been very constructive.

Speaker 2: In August , as we know, in the release, we completed a $50 million construction loan financing on our 155 King of Prussia Road property. That loan bears interest at 250 basis points over SOFR.

In August as we noted in the release, we completed a $50 million construction loan financing on our 100 on a $1 55 King of Prussia Road property.

That loan bears interest at 250 basis points over sofa.

Speaker 2: In August , we also completed the sale of our Barton, our three Barton Skyway project in Austin, Texas. That sale price was 53.3 million, or $307 per square foot, which represented a cap rate in the high 6%.

In August we also completed the sale of our Barton our three Barton Skyway project in Austin, Texas at sale price was $53 3 million or $3 or $307 per square foot, which represented a cap rate in the high 6% range.

Speaker 2: Other than the recently financed Commerce Square joint venture, on our other operating JVs, we have $68 million invested, with $624 million of non-recourse mortgages maturing in 24, before any extension.

Other than the recently financed.

<unk> square joint venture on our other operating Jv's, we have $68 million invested with $624 million of nonrecourse mortgages maturing in 2004 before any extension options of $113 million of that debt is attributed to Brandywine.

Speaker 2: 113 million of that debt is attributed to Brandywine. Our ownership stake ranges between 15 to 20%. We are working closely with all of our partners and lenders on loan extensions and recapitalization efforts and would expect to report additional progress in the coming quarters.

Our ownership stake ranges between 15% to 20% we are working closely with all of our partners and lenders on loan extensions of recapitalization efforts and would expect to report additional progress in the coming quarters.

Speaker 2: As Tom will touch on, our consolidated debt is 93% fixed at a 5.2% rate, and we have no consolidated debt maturities until our 2024 $250 million bond, which Tom will also amplify our strategy there. At quarter end, there's no outstanding balance in our $600 million unsecured line of credit, and we have approximately $48 million of unrestricted cash on hand.

As Tom will touch on our consolidated debt is 93% fixed at a five 2% rate and we of note consolidated debt maturities until 2024 $350 million bond, which Tom will also amplify our strategy there at quarter end there was no outstanding balance on our <unk>.

$200 million unsecured line of credit and we have approximately $48 million of unrestricted cash on hand.

Speaker 2: As noted on page 13 in our SIP, based on remaining asset sales, development spend projections, our business plan projects that we will have full availability on our line of credit at the year-end 2021.

As noted on page 13 in our Sip based on remaining asset sales development spend projections, our business plan projects that we will have full availability on our line of credit at year end 'twenty three.

Speaker 2: In September , our board of trustees did decrease our quarterly dividend by $4 a share from 19 cents to 15 cents a share. And while our cash flow numbers are solid and our CAD payout ratio is strong and remains well covered and we continue to forecast, as I just mentioned, full availability in our line of credit.

In September our board of Trustees did decrease our quarterly dividend by $4 a share from <unk> 19 to 15 cents a share.

And while our cash flow numbers are solid and our CAD payout ratio was strong and remains well covered and we continue to forecast as I just mentioned full availability on our line of credit the board felt we needed to reduce the dividend to account for both the challenges, but more importantly, simply the ongoing volatility.

Speaker 2: The board felt we needed to reduce the dividend to account for both the challenges, but more importantly, simply the ongoing volatility in the equity and debt market.

<unk> in the equity and debt markets. We believe this reset dividend level will serve as a solid foundation from which to grow our dividend in the future as capital market recovers and leasing continues to accelerate this level covers our taxable income and will generate approximately an additional $28 million of free.

Speaker 2: We believe this reset dividend level will serve as a solid foundation for which to grow our dividend in the future as capital market recovers and leasing continues to accelerate. This level covers our taxable income and will generate approximately an additional $28 million of free cash flow to the company.

Cash flow to the company.

Speaker 2: Based on this $0.60 per share annual dividend and the midpoint of our guidance, our CAD payout ratio for 23 is projected to be 75%, and our FFO payout ratio is projected to be 52%. Both of those payout ratios are very much in line with our historical average.

Based on the 60.

Per share annual dividend and the midpoint of our guidance our CAD payout ratio for 'twenty three is projected to be 75% and our <unk> payout ratio is projected to be 52%. Both of those payout ratios are very much in line with our historical averages.

Speaker 2: To spend just a few moments on looking at our development, we have $1.2 billion under active development.

To spend just a few moments on looking at our development, we have $1 2 billion under active development.

Speaker 2: On the wholly owned pipeline of roughly $200 million. That's 95% pre-leased. The remaining funding for these wholly owned developments is only $22 million, which is built into the capital plan that shows our line of credit being unused. And that's primarily for tenant improvement dollars related to our 2340 Dulles property in Herndon.

On the wholly owned pipeline of roughly $200 million at 95% pre leased the remaining funding for these wholly owned developments is only a $22 million, which is built into the capital plan that shows our line of credit being unused and thats, primarily for tenant improvement dollars related to.

Our 23 40, Dallas property in Herndon, Virginia.

Speaker 2: On a joint venture side, at full cost, that pipeline is 30% residential, 32% life science, and 38% office.

On a joint venture side at full cost that pipeline is 30% residential 32% life science and 38% office. The remaining funding on this pipeline is less than $10 million. As you may recall last quarter. We did increase some of the project cost to simply reflect the higher.

Speaker 2: The remaining funding on this pipeline is less than 10 million dollars. As you may recall last quarter we did increase some of the project costs to simply reflect the higher rate environment. And in some cases, a slight delay in target stabilization.

Rate environment and in some cases, a slight delay in targeted stabilization dates.

Speaker 2: Going forward, we may see some additional cost increases related to higher TI costs, but even with these increases, we are targeting and plan to maintain yield equivalency on all of our joint venture developments.

Going forward, we may see some additional cost increases related to higher ti costs, but even with these increases we talked we are targeting and plan to maintain yield equivalency on all of our joint venture developments.

Speaker 2: I guess furthermore, you know, given the volatility in the capital markets, while we'll continue planning on several projects, other than fully leased build-to-suit opportunities, future development starts are on hold pending both more leasing in our existing pipeline, but also more clarity on the cost of debt capital and work half-rate.

I guess Furthermore, given the volatility in the capital markets. While we will continue planning on several projects other than fully leased build to suit opportunities future development starts are on hold pending both more leasing in our existing pipeline, but also more clarity on the cost of debt capital and where cap rates.

Speaker 2: Looking ahead, given the mixed-use nature of our master plan, communities are expected for development pipeline is 27% life science, 42% residential, 22% office, and 9% support retail, entertainment, and hospitality.

We'll be looking.

Looking ahead, given the mixed use nature of our master planned communities are expected forward development pipeline is 27% life science, 42% residential 22% office and 9% support retail entertainment and hospitality and as we identified on page six our objective is to grow that.

Speaker 2: And as we identified on page six, our objective is to grow that life-size portfolio and platform to over 23% of our square footage as market conditions allow, and that would be built on land that we already own or control.

<unk> portfolio and platform to over 23% of our square footage as market conditions allow and that would be built on land that we already own or control. Just a quick review of specific projects $23 $40 is 92% pre leased.

Speaker 2: Just a quick review of specific projects, $23.40 is 92%.

That project is moving into full operations in the very near future 250, King of Prussia Road in our Radnor Submarket is now complete it does remain at 53% leased as it was previous quarter and previous quarter. We've had $18 million of remaining funding pipeline remains very strong that pipeline is 100 per.

<unk> life Science, and we have projected stabilization date in Q2 'twenty for the increased remaining spend on that project.

It's really the cost to do some additional tenant leasing, but as we indicated last quarter, we anticipate higher rents will leave our current yield intact as this project moves into operation.

Pipeline activity our development.

Projects continued to build we're actually pleased with the overall and continual increase in both tours and prospect activity as it shoe reinforcement of the quality thesis I mentioned earlier, we have a number of advanced discussions underway, but none quite yet across the finish line as I mentioned last quarter.

<unk> primary reasons for the delay in making in tenants, making decisions really seem to be driven at this point more by macro considerations rather than specific real estate concerns.

Speaker 2: Construction of our 3025 JFK project, our life science office and residential tower, is on time for a Q4 23 full delivery.

Construction on our of our 30 25 JFK project, our life Science office and residential tower is on time for Q4, 'twenty three full delivery.

Operator: Good day and thank you for standing by.

Speaker 2: We're currently 15% leased on the commercial portion with an active pipeline that's almost 700,000 square feet for the life science and office component. We have done over 160 tours. We did deliver the first residential units with a balanced phasing over the next quarter and a half. Activity levels are very good, and we currently have 62 leases executed. We're about 19% of the project.

Operator: Welcome to the Brandywine Realty Trust 3rd quarter 2023 earnings call. At this time, all participants are not listening only mode.

We're currently 15% leased on the commercial portion with an active pipeline, that's almost 700000 square feet for the life Science and office component. We've done over 160 tours, we did deliver the first residential units with a balanced phasing in over the next quarter and a half activity levels are very good and we.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Currently at 62 leases executed were about 19% of the project 57 of those leases have already taken occupancy and the rental rates that we're achieving are very much in line with pro forma, particularly now that the amenity for just recently opened.

Speaker 2: 57 of those leases have already taken occupancy, and the rental rates that we're achieving are very much in line with pro forma, particularly now that the amenity floor just recently opened.

Operator: Please be advised that today's conference is being recorded.

Jerry Sweeney: I would now like to hand the conference over to your speaker today, Jerry Sweeney, President and CEO. Please go ahead. Liz, thank you very much. Good morning everyone and thank you for participating in our 3rd quarter 2023 earnings call. On today's call with me today is George Johnstone, our Executive Vice President of Operations, Dan Palazzo, Senior Vice President and Chief Accounting Officer, and Tom Wirth, our Executive Vice President and Chief Financial Officer.

Speaker 2: 3151 market, our 441,000 square foot life science building at Schuylkill Yards, again, is on schedule and budget. The topping off ceremony occurred yesterday, and the project's profile in the market continues to improve. The leasing pipeline there is roughly 400,000 square feet. And tour activity, now that the steel is up, is beginning to increase as well.

$31 51 market, our 441000 square foot life Science building at Schuylkill yards again is on schedule and budget the topping off ceremony occurred yesterday and the project's profile in the market continues to improve the leasing pipeline. There is roughly 400000 square feet.

And tour activity now that the steel is up is beginning to increase as well.

Speaker 2: Uptown ATX Block A construction is also on time and on budget. Block A consists of 348,000 square feet of office, excuse me, and 341 residential units, 15,000 square feet of ground floor retail.

Jerry Sweeney: Prior to beginning certain information discussed during our call may constitute forward-looking statements within the meaning of the Federal Securities Law. Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurances that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release, as well as our most recent annual and quarterly reports that we follow with the SEC.

Uptown ACX block a construction is also on time and on budget lock, a Kansas up 348000 square feet of office.

Excuse me at 341 residential units.

15000 square feet of graph where retail.

Speaker 2: On the office component, the pipeline remains strong in advance of building delivery, which will be later this year. Pipeline includes a mix of prospects ranging from 5,000 square feet to 200,000 square feet. And the multi-

On the office component.

The pipeline remains strong in advance of building delivery, which will be later this year pipeline includes a mix of process prospects ranging from 5000 square feet at 200000 square feet and the multi family component 341 units will begin phasing in during the third quarter of NES.

Jerry Sweeney: So to start off this morning during our prepared comments, as we always do, we review quarterly results and provide an update on our 2023 business plan.

Speaker 2: Family component written 41 units will begin phasing in during the third quarter of next year.

Tom Wirth: Tom will then review 3rd quarter financial results and frame out the remaining key assumptions that drive our 23 guidance.

Last year.

Speaker 2: Moving back to University City, our next phase of D-labs on the 9th floor of Sierra Center is nearly complete at the 27,000 square foot expansion. This conversion of that office space to graduate lab space is now 81% pre-least with a lease app for the remainder of the space. That full conversion will be completed in Q-124. The total cost remain on target for $20 million with an expected yield of about 11.

Moving back to University City, our next phase of the labs on the ninth <unk> Centre is nearly complete at the 27000 square foot expansion. This conversion of that office space to graduate lab space is now 81% pre leased with a lease out for the remainder of the space that full convert.

Jerry Sweeney: After that, Tom and George and I are available for any questions. So the 3rd quarter saw additional progress on our 23 business plan, our combined leasing activity for the quarter total 624,000 square feet. During the quarter, we executed 351,000 square feet of leases, including 118,000 square feet of new leasing within our wholly owned portfolio. Our joint venture portfolio achieved 273,000 square feet of leased executions, including 108,000 square feet of new leasing activity.

Version will be completed in Q1 'twenty for the total cost remain on target for $20 million with an expected yield of about 11%.

Speaker 2: So to wrap up comments are going to develop an activity. You know the key phrase is on our forward pipeline is timing, flexibility, low basis per FAR and product diversity.

So to wrap up the commentary on the development activity. The key phrases that run our forward pipeline as timing flexibility low basis per <unk> and product diversity.

Speaker 2: Of the square feet we can build, only about 25% is office, with the ability to do between 3 and 4 million square feet of like science space and over 4,000 apartments. And the overall overlay approvals we have on our master plan developments give us the flexibility to adjust that mix further to meet market needs.

Jerry Sweeney: Also, while the 3rd quarter marked to market results were below our annual targets, based on executed leases, we expect our full year marked to market range to be between 11 to 13% on a gap basis, and 4 to 6% on a cash basis. As I noted in last quarter's call, our marked to market will vary by region, with filled out the SCBD, University City, and the Pennsylvania suburbs leading the way. We certainly continue to expect that given current market conditions, our marked to market in Austin for the balance of the year will remain negative on both the cash and gap basis.

The square feet, we can build only about 25% is office with the ability to do between three and 4 million square feet of life Science space.

<unk> 4000 apartments in the overall overlay approvals, we have on our master planned developments give us the flexibility to adjust that mix further to meet market demands.

Speaker 2: Looking at the sales activity, look, there's no question that the pricing and pace of office sales has been impacted by the challenging rate environment, and the pullback by lenders in commercial real estate, and certainly the negative macro.

Looking at the sales activity, but there is no question that the pricing and pace of office sales has been impacted by the challenging rate environment.

And that pulled back by lenders and commercial real estate.

And certainly the negative macro towns and office. Despite this as previously highlighted we did sell that $53 million in Austin and based on our existing pipeline and transactions in process, we're still maintaining our $100 million to $125 million sales target by year end, we do have about $200 million in the market for sale those.

Speaker 2: Despite this, as previously highlighted, we did sell the $53 million in Austin, and based on our existing pipeline and transactions and process, we're still maintaining our $100 to $125 million sales target by year end. We do have about $200 million in the market for sale. Those properties are in our Met DC and Pennsylvania suburban operations, and we also have several joint venture properties in the market as well.

Jerry Sweeney: As we did anticipate in our business plan, we had negative absorption this quarter, primarily related to tenants moving out in our Pennsylvania climate meeting portfolio, a tenant in Austin, Texas, and a 42,000 square foot firm vacating the lower bank here at CERA Center. And at CERA, as I'll touch on later, this space is part of our lifestyles conversion within that lower bank and work is already underway. Overall, we are 88.3% occupied in 90.4% lease based on 256,000 square feet before lease commitments.

<unk> and our met DC and Pennsylvania suburban operations and we also had several joint venture properties in the market as well.

Speaker 2: Several of those properties are moving through the contract negotiations and maintenance as they some level of short-term bridge seller finance.

All of those properties are moving through the contract negotiations and maintenance as they some level of short term bridge seller financing.

Speaker 2: In general, we continue to see a good list of bidders with the primary challenge being getting those acquisitions financed. Certainly, dollars generated from all these sales and joint venture restructurings will be used to fund our remaining development pipeline commitments, further reduce leverage, and redeploying to higher growth opportunities, including debt and stock buybacks on a leveraged new.

In general we continue to see a good list of bidders with the primary challenge being getting those acquisitions financed.

Jerry Sweeney: As a result of delayed occupancy on executed deals, primarily due to slower buildout approvals, and frankly, the slower pace of leasing in Austin, we are reducing our year end occupancy range from 90 to 91% down to 89 to 90%. We are, however, based on activity, maintaining our lease percentage range of 91 to 92%. Our core market to build up is CBD, University City, Pennsylvania, Sub-Burbs and Austin, which comprises 92% of the company's NOI is 90% occupied and 90% with 92% lease.

Certainly dollars generated from all these sales and joint venture restructurings will be used to fund our remaining development pipeline commitments further reduce leverage and.

And redeploy into higher growth opportunities, including debt and stock buybacks on a leverage neutral basis.

Speaker 2: With that, Tom will now provide an overview of our financial results.

With that Tom will now provide an overview of our financial results.

Thank you Jerry and good morning.

Speaker 2: Our third quarter net loss totaled $21.7 million, or $0.13 per share, and our results were negatively impacted by a non-cash impairment charge totaling $11.7 million, or $0.07 per share.

Third quarter net loss totaled $21 7 million or <unk> 13.

Per share and our results were negatively impacted by a noncash impairment charge totaling $11 7 million or <unk> <unk> per share third quarter, <unk> totaled $56 million or 29 per diluted share and <unk> <unk> above consensus estimates some general observations regarding the.

Speaker 2: Third quarter FFO totaled $50.6 million or $0.29 per diluted share and $0.01 above consensus estimates.

Jerry Sweeney: We did add a new page in our supplemental package page 4, which highlights how well the majority of our portfolio occupancy is. We did highlight on that page eight of our wholly owned properties can price 50% of the company's vacancy. Number of these properties are being marketed for sale or undergoing an analysis for conversion opportunities, but those properties do affect our occupancy numbers by 450 basis points and plans are underway to address each of these projects ranging from increased leasing outreach programs as well as mentioned sale and conversion opportunities.

Speaker 3: some general observations regarding the third quarter. Being above consensus, we had several moving pieces.

Third quarter being above consensus we had several moving pieces.

Speaker 3: and several variances compared to our second quarter guidance. Management leasing and development, fees were up 700,000 above our reforca, primarily due to higher leasing commission income. Interest expense was 500,000 below reforca, primarily due to higher capitalized interest and no borrowings on our line of credit.

Several variances compared to our second quarter guidance.

Management leasing and development fees were up 700000 above our rate forecast, primarily due to higher leasing Commission income.

Interest expense was 500000 below re forecast, primarily due to higher capitalized interest and no borrowings on our line of credit we forecasted two vacant land parcel sales to generate $1 billion of land gains during the quarter and they were both delayed until the fourth quarter.

Speaker 3: We forecasted two vacant land parcel sales to generate a million dollars of land gains during the quarter and they were both delayed until the fourth.

Jerry Sweeney: Both Gap and SameStore outperformed our business plan ranges during the quarter and we are increasing both ranges for the year. The Gap SameStore range is increased from 0 to 2 to 2 to 3%, primarily due to approximately 500,000 square feet of positive blend and extend leases that were done. Notably, none of these blend and extends involved a contraction by the renewing tenant. You'll note that this activity bought down our forward rollover exposure, which I'll touch on in a few moments.

Speaker 3: Our third quarter debt service and interest coverage ratios were both 2.7 and net debt to Gav was 41.6.

Our third quarter debt service and interest coverage ratios were both two seven and net debt to JV was 41 six.

Speaker 3: Our third quarter annualized core net debt to EBITDA was 6.3 and within our 2023 range, and our annualized combined net debt to EBITDA was 7.4 and 1% above the high end of our 7.0 to 7.3 guidance. Any further reduction will be based on timing, size, and pricing of our fourth quarter assets.

Our third quarter annualized core net debt to EBITDA was $6 three and within our 2023 range and our annualized combined net debt to EBITDA was seven four and 1% above the high end of our seven to 73 guidance any further reduction will be based on timing size and <unk>.

Jerry Sweeney: Cash change store is increased from 2.5 to 4.5%, which was a previous range, the 5 to 6%, primarily due to proactive cost reduction issues, resulting in lower utility, janitorial costs, reduced real estate taxes, all net effect and reimbursement as well as the continued burn off of some free rent. Third quarter capital costs were in line with our business plan range. However, based on year-to-date results and projected fourth quarter activity, we are reducing our leasing capital ratio from 11 to 13% down to 9 to 10%.

<unk> of our fourth quarter asset sales.

Speaker 3: Regarding portfolio changes during the quarter, we removed two properties located in an Austin, totaling 225,000 square feet from our court portfolio. Both properties will not be available for lease and were located in our uptown ATX developed.

Regarding portfolio changes during the quarter, we removed two properties located in Austin totaling 225 assets square feet from our core portfolio, both properties will not be.

<unk> at least and were located in our Uptown ATX development.

Speaker 3: We anticipate adding 2340 dollars quarter to our core portfolio during the fourth quarter as well.

We anticipate adding $23 40, dulles corner to our core portfolio during the fourth quarter as well.

Speaker 3: On the financing activity, as Jerry outlined, we closed on a construction loan for 155 King of Prussia Road in Radnor, Pennsylvania. The loan bears interest at 250 basis points over SOFR, and we anticipate drawing on that facility during the fourth quarter as our equity is now fully funded.

On the financing activity as Jerry outlined we closed on a construction loan for $1 55, King of Prussia Road in Radnor, Pennsylvania.

The loan bears interest at $2 50, 250 basis points over sofa, and we anticipate drawing on that facility during the fourth quarter.

Jerry Sweeney: So as evidenced by our positive market to market results, this lower capital ratio, we will continue to generate positive net effect of rents in most of our markets. Ten of retention for the quarter was 44% again in line with our plan, but below the bottom end of our full year forecast was driven primarily by those vacates I previously mentioned, but we are maintaining our existing range of 49 to 51% based on forecasted to poor activity. Our spec revenue range remains in the $17 to $19 million range, about 94% done at the midpoint, we expect to be able to reach the midpoint that range by the end of the year.

Our equity is now fully funded we remained.

Speaker 3: We remain focused on our 2024 bond maturity in October and continue to evaluate funding in both the secured and unsecured financing mark.

<unk> focused on our 2024 bond maturing in October and continue to evaluate funding in both the secured and unsecured financing markets.

Speaker 3: As you know, the traditional banks are allocating a little to none to new originations on new office loans, except for certain situations as fully leased build the suit properties. However, we will continue to explore term loans from our syndicate banks as we did earlier this year to execute on a $70 million term loan.

As you know the traditional banks are allocating a little to none to new originations on new office loans, except for certain situations as fully leased build to suit properties. However, we will continue to explore our term loans from our syndicate banks as we did earlier this year to execute on a $70 million term loan we're exploring some.

Speaker 3: We're exploring some property level secured financing options as well, including another wholly owned CMBS transit.

Jerry Sweeney: Our operating portfolio is solid with a stable outlook. We have reduced our forward rollover exposure through 24 to an average of 6.3%, and through 2026 to an average annual rate of 6.7%. We do feel very good about our portfolio quality, our management services delivery platform, and our sub-market positioning. We do believe the quality curve thesis remains intact as evidenced by the overall pickup and leasing activity that we continue to see. Additionally, overall tour velocity, which is really a starting point for our leasing cycle, continues to improve.

Property level secured financing options as well, including another wholly owned see MBS transaction, we anticipate our ongoing sales and joint venture liquidation strategy. We're also generate additional capacity.

Speaker 3: We anticipate our ongoing sales and joint venture liquidation strategy. We also generate additional capacity.

Speaker 3: As we discussed in the past, we prefer to remain an unsecured borrower and we'll continue to monitor the unsecured bond market as well. Given the above, we will seek the most efficient capital source with a bias towards the unsecured market.

As we discussed in the past we prefer to remain an unsecured borrower and we will continue to monitor the unsecured bond market as well given.

Given the above we will seek the most efficient capital source with a bias towards the unsecured market.

Speaker 3: Regarding our upcoming 2024 joint venture debt maturity, as Jerry mentioned, we are working with our partners on the 2024 maturities to potentially extend the current maturity dates with our existing lenders, commence marketing efforts for new lenders, and make certain property level sales to lower JV leverage.

Regarding our upcoming 2024 joint venture debt maturities as Jerry mentioned, we are working with our partners on the 2024 maturities to potentially extend the current maturity dates with our existing lenders commenced marketing efforts for our new lenders and make certain property level sales.

Jerry Sweeney: So just several points to amplify. The increase in physical tour volume has been very encouraging. Our third quarter physical tours exceeded second quarter tour volume by 29%, but also exceeded our trailing four-quarter average by 69%, and our tour activity level remains above pre-pandemic levels by 18%. So good traction through the entire portfolio. On a wholly owned basis during the third quarter, 62,000 square feet of new leases are 53% of all new leases activity.

Slower JV leverage.

Speaker 3: Regarding our map joint venture, we hope to agree to a recapitalization ahead of the current December 1st, 2023 extension date. We are 50% partner in a joint venture which owns leasehold positions and a portfolio of assets. And we are working with the lender potentially recap the joint venture with the ground.

Regarding our map joint venture, we hope to agree to a cap recapitalization ahead of the current December one 2023 extension date, where 50% partner in a joint venture which owns leasehold positions in our portfolio of assets and we are working with the lender potentially recap the joint venture with the ground.

Speaker 3: Looking at 2023 guidance, we narrowed the guidance by $0.02 and maintain a midpoint of $1.16. And the range is mainly attributable to the variability of our asset sales program, both in terms of volume and timing, as well as our projected land sale and related gains.

Looking at 2023 guidance, we narrowed the guidance by <unk> <unk> and maintain a midpoint of $1 16 in the range is mainly attributable to the variability of our asset sales program. Both in terms of volume and timing as well as our projected land sale and related gains.

Jerry Sweeney: We resulted in this like the quality thesis. Ten in expansions continue to outweigh ten in contractions during the quarter, and the market recovery does continue albeit at a slower pace than we would like. What our total leasing pipeline is up 20% for the second consecutive quarter and stands at 3.8 million square feet. That pipeline is broken down between 1.7 million square feet in our wholly owned portfolio, which is up from last quarter and stability within our development project portfolio.

Speaker 3: On our 2023 business plan continues, we have the following general assumptions as is property level sales with 153.3 million complete. The balance of our guidance is expected to occur in the fourth quarter, so dilution should not be very significant.

On our 2023 business plan continues we have the following general assumptions.

Yes.

Property level sales with $153 3 million and complete the balance of our guidance is expected to occur in the fourthquarter, so dilution should not be very significant.

Speaker 3: No new property acquisitions. No anticipated ATM or share buyback activity. And the share count will approximate 173.5 million.

Jerry Sweeney: The 1.7 million square feet existing portfolio pipeline includes approximately 100,000 square feet in advanced stages of lease negotiations. Also, 46% of our operating portfolio new-deal pipeline are prospects looking to move up the quality curve. That's up from 31% last quarter. Turning to the balance sheet, as expected, our second quarter net debt to EBITDA ratio decreased from the 7.4 from 7.6, primarily from increased EBITDA offset by increased development and redevelopment costs. We anticipate this ratio could decrease to our business plan ranges with sales in the fourth quarter and achieving our target of reduction in joint venture debt attribution.

No new property acquisitions, no anticipated ATM or share buyback activity and the share count will approximate 173 5 million shares.

Speaker 3: our fourth quarter guidance, looking more closely where the following general assumptions, property level operating income will total approximately $74 million, and will be about $3 million below the three-q range, primarily due to lower revenue from several known moon outs, several known moon outs we discussed.

Our fourth quarter guidance.

Looking more closely where the following general assumptions property level operating income will total approximately $74 million and will be about $3 million below the three Q.

Jerry Sweeney: As we note in the set, this ratio is higher due to development spend and debt attribution from our joint ventures. If both of these items were removed from our 7.4 metric, our leverage would be a full-term lower at 6.4 times. To amplify that at this point, our core EBITDA metric, which is our operating portfolio, including joint venture debt attribution and development and redevelopment spend, ended the quarter within our range at 6.3 times.

Range, primarily due to lower revenue from several known move out several known move outs we discussed.

Speaker 3: and incrementally higher operating expenses, primarily due to fourth quarter season at that seasonality, and higher RNF.

In ink and incrementally higher operating expenses, primarily due to fourth quarter.

Quarter season of that seasonality and higher R&M.

Speaker 3: FFL contribution from our joint ventures will break even for the fourth quarter. This sequential decrease is primarily due to the residential component of school yards where it's becoming operation.

<unk> contribution from our joint ventures will breakeven for the fourth quarter.

Sequential decrease is primarily due to the residential component of Schuylkill yards, west becoming operational and during the fourth quarter, we will recognize higher operating losses, lower capitalized increased interest and increased preferred equity costs.

Speaker 3: And during the fourth quarter, we will recognize higher operating losses, lower capitalized interest and increased preferred equity.

Speaker 3: These losses will decrease over the next four to five quarters as the residential operation police table.

These losses will decrease over the next four to five quarters as the residential operation fully stabilized.

Speaker 3: In addition, our math FFO contribution decreased about 700,000 primarily due to higher.

In addition, our.

Matt <unk> contribution decreased about 700000, primarily due to higher interest expense.

Speaker 3: Our fourth quarter GNA will remain consistent with the third quarter at 8.1 million. Our interest expense, including the first financing cost, will approximately 26.5 million and capitalized interest will approximate 3 million.

Our fourth quarter G&A will remain consistent with the third quarter at $8 1 million.

Jerry Sweeney: On the liquidity front, we continue to make progress on our asset sales and the end-financing. We have a short-term extension with the lender on our non-reports leasehold mortgage in our MAC joint venture through December 23, December 1, 23. The current standing balance of that loan is $181 million. The extension is providing additional time to finalize a recapitalization strategy with both the leasehold lender and the the owner and discussions today have been very constructive.

Our interest expense, including deferred financing costs were approximately $26 5 million and capitalized interest will approximate $3 million.

Speaker 3: Termination and other fee income. We'll total $6 million, which primarily consists of an anticipated one-time real estate transaction generating about 4.5 million of income.

Termination and other fee income.

Well totaled $6 million, which primarily consists of an anticipated one time real estate transaction.

<unk> generated about $4 $5 million of income.

Speaker 3: Net management leasing and development fees will be 3 million as we forecast Controls lower third party lease commission income after a higher third quarter level

Net management leasing and development fees will be $3 million as we forecast sequential lower third party lease Commission income after a higher third quarter level.

Jerry Sweeney: In August, as we know, in the release, we completed a $50 million construction loan financing on our 155 King of Pressure Road property. That loan bears interest at 250 basis points over so. Cooper.

Speaker 3: Land gain and tax provision will total about 1.1 million of income representing two forecasted land sales that didn't occur in the third quarter.

Land gain and tax provision will total about $1 1 million of income representing two forecasted land sales that didn't occur in the third quarter.

Jerry Sweeney: In August, we also completed the sale of our three Barton Skywave projects in Austin, Texas at sale price was $53.3 million or $3.7 per square foot, which represented a cap rate in the high 6% range. Other than the recently financed commerce square joint venture, when our other operating JVs, we have $68 million invested with $624 million of non-recourse mortgages, maturing in 24 before any extension options. $113 million of that debt is attributed to Brandywine.

Speaker 3: On the capital plan, we experience better than forecasted third-party CAD payout ratio of 76%. Primarily due to leasing capital costs being below our business plan range and improved operating.

On the capital plan.

We experienced better than forecasted third party CAD payout ratio of 76%, primarily due to leasing capital costs being below our business plan range and improved operating results.

Speaker 3: Based on a revised annual dividend, the 60 cents per chair, our Proforma 2023 coverage ratio is projected to be 75.

Just on a revised annual dividend of <unk> 60 per share our pro forma 2023 coverage ratio is projected to be 75%.

Speaker 3: As outlined on page 14 of the supplemental package, our fourth quarter capital plan is very straightforward and totals $95 million.

As outlined on page 14 of the supplemental package, our fourth quarter capital plan is very straightforward and totaled $95 million.

Speaker 3: Most importantly, we continue to prioritize liquidity and still project no borrowings on a $600 million on secured line of credit at the end of the year.

Jerry Sweeney: Our ownership stake ranges between 15 to 20%. We are working close to all of our partners and lenders on loan extensions to recapitalization efforts, and would expect report additional progress in the coming quarters. As Tom will touch on, our consolidated debt is 93% fixed at a 5.2% rate, and we have no consolidated debt matured into our 2024 during a $50 million bond, which Tom will also amplify or strategy there. At quarter end, there is no outstanding bounce in our $600 million unscured line of credit, and we have approximately 48 million dollars of unrestricted cash on hand.

Most importantly, we continue to prioritize liquidity and still project no borrowings on our $600 million unsecured line of credit at the end of the year.

Speaker 3: Use is during the fourth quarter or comprised of 36 million of development and redevelopment. 26 million of common dividend.

Uses during the fourth quarter are comprised of $36 million of development and redevelopment.

26 million of common dividends.

Speaker 3: 8 million of revenue maintained, 10 million of revenue create, and 15 million contributions to our joint venture.

$8 million of revenue maintain $10 million of revenue create.

And $15 million contribution.

Speaker 3: The primary sources are going to be capital after interest payments, totaling $50 million, $10 million of construction loan proceeds for $155 King of Prussia Road, and $50 million of net cash proceeds from property land and other sales.

To our joint ventures.

The primary sources are going to be capital.

After interest payments totaling $50 million $10 million of construction loan proceeds for $1 55, King of Prussia Road and $50 million of net cash proceeds from property land and other sales.

Jerry Sweeney: As noted on page 13 in our SIP, based on remaining asset sales, development spend projections, our business plan projects that will have full availability on our line of credit at the year end 23. In September, our board of trustees did decrease our quarterly dividend by $4 a share from 19 cents to 15 cents a share, and while our cash flow numbers are solid and our CAD payout ratio is strong and remains well covered, and we continue to forecast, as I just mentioned, full availability on our line of credit.

Speaker 3: Based on the capital plan outlined above, we project a $15 million increase in cash during the quarter. We are also maintaining our net debt to EBITDA range of seven to seven three, and we'll be partially dependent meeting that range based on the timing of the fourth quarter sales as I mentioned.

Based on the capital plan outlined above we project a $15 million increase in cash during the quarter.

We are also maintaining our net debt to EBITDA range of 7% to 73 and will be partially dependent.

Meeting that range based on the timing of the fourth quarter sales as I mentioned previously.

Speaker 3: Also, that will be impacted by any GAV recapitalization of sex or sales during the quarter as well.

Also that will be impacted by in Hav recapitalization.

<unk> have set or sales during the quarter as well.

Speaker 3: Our debt to GAV will be in the 40 to 42% range.

Our debt to JV will be in the $40 to 42% range.

Speaker 3: Our core net debt to Ividar range is 6'2-6'5. This range excludes our joint ventures and our active development projects. We continue to believe this core leverage metric better reflects the leverage of our portfolio and eliminating our more highly levered joint ventures and our unstabilized development and redevelopment projects.

Jerry Sweeney: The board felt we needed to reduce the dividend to account for both the challenges, but more importantly, simply the ongoing volatility in the equity and debt markets. We believe this reset dividend level will serve as a solid foundation from which to grow our dividend in the future, as capital market recovers, and leasing continues to accelerate. This level covers our taxable income, and will generate approximately an additional 28 million dollars of free cash flow to the company.

Our core net debt to EBITDA range is six two to six five this range excludes our joint ventures in our active development projects. We continue to believe this core leverage metric better reflects the leverage of our Corp.

Portfolio and elimination are more highly levered joint ventures, and our unstable lies development and redevelopment projects. We believe that our leverage ratios are elevated due to our development pipeline and we believe once those developments are stabilized our leverage will decrease back closer to this core leverage ratio.

Speaker 3: who believe that our leverage ratios are elevated due to our development pipeline. And we believe once those developments are stabilized, our leverage will decrease back closer to this core leverage ratio.

Jerry Sweeney: Based on this 60 cents per share annual dividend, and the midpoint of our guidance, our CAD payout ratio for 23 is projected to be 75 percent, and our FFO payout ratio is projected to be 52 percent. Both of those payout ratios are very much in line with our historical averages.

Speaker 3: We anticipate our debt service and interest coverage ratios to approximate 2.6 by year end, which represents a slight sequential decrease from the coverage ratios in the third quarter, primarily due to the additional development spend and higher interest rates. I will now turn the call back over to Chair.

We anticipate our debt service and interest coverage ratios to approximate.

Two six by year end, which represents a slight sequential decrease from the coverage ratios in the third quarter, primarily due to the additional development spend and higher interest rates.

Jerry Sweeney: The spend is a few moments on looking at our development. We have $1.2 billion under active development on the wholly owned pipeline of roughly $200 million at 95 percent pre-leased. The remaining funding for these wholly owned developments is only $22 million, which is built into the capital plan that shows our line of credit being unused, and that's primarily for tenant-improving dollars related to our $23, $40 property in Herndon, Virginia. On a joint venture side, at full cost, that pipeline is 30 percent residential, 32 percent life signs, and 38 percent off.

I will now turn the call back over to Gerry.

Great Tom Thank you very much.

Speaker 2: So the key takeaways are the portfolio is in solid shape with an increasingly think pipe.

And so the key takeaways are the portfolio is.

In solid shape with an increasing leasing pipeline.

Speaker 2: As I mentioned, we continue to be very pleased with the level of traction through every element of our portfolio. Our average annual rollover exposure through 2026.

As I mentioned, we continue to be very pleased with the level of traction through every element of our of our of our portfolio. Our average annual rollover exposure through 2026 is only six 7% we've been posting and expect to continue to post fairly strong mark to markets manageable.

Speaker 2: is only 6.7%. We've been posting and expect to continue to post fairly strong mark to markets. Manageable capital spend is evidenced by reducing our capital ratio is on our horizon as well. And we do expect to have stable and accelerating leasing velocity through our development pipeline.

Capital spend as evidenced by our reducing our capital ratios on a horizon as well and we do expect to have stable and accelerate accelerating leasing velocity through our development pipeline.

Jerry Sweeney: The remaining funding on this pipeline is less than 10 million dollars. As you may recall last quarter we did increase some of the project costs to simply reflect the higher rate environment and in some cases a slight delay in targeted stabilization dates. I guess furthermore, given the volatile in the capital markets, we'll continue planning on several projects other than fully leased build-to-suit opportunities, future development starts are on hold pending both more leasing and our existing pipeline, but also more clarity on the cost of debt capital and where cap rates will be.

Speaker 2: We have covered all of our wholly owned near-term liquidity needs or plan to keep the line of credit zero and are actually a baseline business plan that has time touched on improved liquidity. Keeps that fourth bullet on very solid footing with strong forward leasing prospects. So as usual, and where we started with that, we hope you and your families are doing well and we're delighted to open up the floor for questions Liz. We do ask that in the interest of time, you let me yourself to one question and a follow-up.

We have covered all of our wholly owned near term liquidity needs or plan to keep the line of credit zero and are executing a baseline business plan that as Tom touched on improves liquidity keeps that portfolio on very solid footing with strong forward leasing prospects.

As usual and where we started with that.

We hope you and your families are doing well and we're delighted to open up the floor for questions. Liz we do ask that in the interest of time, you limit yourself to one question and a follow up.

Speaker 1: As a reminder, if you'd like to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced.

List.

As a reminder, if you'd like to ask a question at this time. Please press star one one on your telephone and wait for your name to be announced.

Speaker 1: To withdraw your question, please press star 11 again. Please stand by.

Withdraw your question. Please press star one again.

Jerry Sweeney: Looking ahead, given the mix use nature of our master plan communities are expected for development pipeline is 27% life science, 42% residential, 22% office, and 9% support retail entertainment and hospitality. And as we identified on page 6, our objective is to grow that life science portfolio and platform to over 23% of our square footage as market conditions allow and that would be built on land that we already own or control. Just a quick review of specific projects, 2340 dollars is 92% pre leased that project is moving into full operations in the very near future.

Please standby, while we compile the Q&A roster.

Speaker 1: Our first question comes from a line of Steve Sakewa with Evercore ISI.

Our first question comes from the line of Steve Sochua with Evercore ISI.

Speaker 4: Thanks. Good morning. I guess first question, Jerry, I just want to go back on sort of the JVs and the debt that you were sort of talking about. Just make sure I'm understanding. Are you potentially in a process of maybe trying to hand keys back or is this just a situation where you and your partners are trying to just get to the finish line on, I guess, loan extensions? I just couldn't tell from the commentary kind of where you were heading with some of those assets.

Thanks, Good morning.

I guess first question Jerry I, just wanted to go back on sort of the Jv's and the debt that you were sort of talking about it just to make sure I'm understanding are you potentially in a process of maybe trying to hand keys back or is this just a situation where you and your partners are trying to just get to the finish line on.

I guess.

Loan extensions.

Jerry Sweeney: 250 can't approach a road in our raditor sub market is now complete. It does remain at 53% leased as it was previous quarter, we've had 18 million dollars of remaining funding. Pipeline remains very strong that pipeline is 100% life science, and we have projected a stabilization data in Q224. The increased remaining spend on that project is really the cost to do some additional tenant leasing, but as we indicated last quarter we anticipate higher rents will leave our current yield intact as this project moves in operation.

Couldn't tell from the commentary kind of where you are heading with some of those assets.

Speaker 2: Yeah, it's a great question. Thanks for the inquiry on the clarity. I mean, our intention is to work with our partners.

Yes, Steve Great question and thanks for the for the <unk>.

On the clarity.

Our intention is to work with our partners too.

Speaker 2: to extend these loans out on terms that are acceptable both the lender and the partnership as we wait for the market conditions to improve. I think from brand new wine sample, we think we have a very high quality partners, very seasoned, very experienced.

To extend these loans outs on on.

Terms that are acceptable both the lender and the partnership.

As we wait for the market conditions to improve.

I think from.

From Brandywine standpoint, we think we have a <unk>.

Cadre of very high quality partners.

Very season.

Jerry Sweeney: Pipeline active in our development projects continue to build, we're actually pleased with the overall and continual increase in both tours and prospect activity as a true reinforcement of the quality of these as I mentioned earlier. We have a number of advanced discussions underway, but none quite yet across the finish line. As I mentioned last quarter, primary reasons for the delay in making intense making decisions really seem to be driven at this point more by macro considerations rather than specific real estate concerns.

Speaker 2: The loans themselves are all structured on a non-requored basis.

Our experienced.

The loans themselves are all structured on a nonrecourse basis. So we do have the opportunity that if things do not work out we'll certainly take a look at what's the best answer for Brandywine.

Speaker 2: So we do have the opportunity that if things do not work out, we'll certainly take a look at what's the best answer for Brandywine. But our plan going into each of these discussions.

But our plan going into each of these discussions is to make sure that we accommodate both the both the partnership's objectives and the lenders objectives to the extent, we can to facilitate a bridge solution that will keep these partnerships intact.

Speaker 2: is to make sure that we accommodate both the partnerships objective and the lenders objectives to the extent we can to facilitate a bridge solution.

Speaker 2: that will keep these partnerships intact as the marketplace continues to recover from a leasing standpoint, but also hopefully the capital markets provide more stability. So there's more opportunities to refinance. I think one of the points I was trying to amplify is that if you look at the balance sheet and the supplemental package, those JDs have $624 million of non-reports debt on them.

Jerry Sweeney: Construction on our of our 3025 JFK project or life science office and residential tower is on time for a Q423 full delivery. We're currently 15% lease on the commercial portion with an active pipeline that's almost 700,000 square feet for the life science and office component. We have done over 160 tours. We did deliver the first residential units with a balanced space in over the next quarter and a half. Activity levels are very good, and we currently have 62 leases executed.

As the marketplace continues to recover from a leasing standpoint, but also hopefully the capital markets.

Provide more stability, so there's more opportunities to refinance.

I think one of the points I was trying to amplify is that if you look at the balance sheet in the supplemental package those jv's have $624 million of nonrecourse debt on them $113 million of that is attributable to brandywine and our investment base in those ventures.

Speaker 2: 113 million of that is a trivial to brandy one and our investment base in those ventures Excluding math, which has a negative basis is $68 million. So I think we're in a good position as a sponsor with our partners To go into the discussion with every single lender with the hopes of structuring a program that's mutually satisfactory to both parties

Excluding map, which has a negative basis is $68 million. So I think we're in a good position as a sponsor with our partners to go into the discussion with every single lender.

Jerry Sweeney: We're about 19% of the project. 57 of those leases have already taken occupancy, and the rental rates that we're achieving are very much in line with pro forma, particularly now that the amenity for just recently. 31-51 market, our 441,000 square foot lifestyle, building a super yard, again, is on scheduling budget. The topping off ceremony occurred yesterday, and the project's profile on the market continues to improve. The leasing pipeline there is roughly 400,000 square feet, and tour activity now that the steel is up is beginning to increase as well.

With the hopes of structuring a program that's mutually satisfactory to both parties.

Speaker 4: Okay, and just as a quick follow up, when you kind of look at your explorations for next year, it's about 880,000 feet. I know you'll provide more details on exact guidance, but are there any, I guess, large known move outs at this point in 24 that you could sort of highlight or share with us that might more negatively impact the retention rate next year?

Okay, and just as a quick follow up when you kind of look at your explorations for next year.

It's about 880000 feet I know youll provide more details on exact guidance, but are there any I guess large known move outs at this point in 24 that you could sort of highlight or share with us that might more negatively impact the retention rate next year.

Jerry Sweeney: Uptown ATX Block A construction is also on time and on budget. Block A consists of 348,000 square feet of office, excuse me, 341 residential units, 15,000 square feet of ground floor retail. On the office component, the pipeline remains strong in advance of building delivery, which will be later this year. Pipeline includes a mix of prospects ranging from 5,000 square feet to 200,000 square feet, and the multi-family component, 341 units, will begin phasing in during the third quarter of next year.

Speaker 2: Yes, Steve, good morning. It's a discharge. We've got, for 24, we've only got two leases over 50,000 square feet. One of those is potentially a move out, and we've already got quite a bit of increased. the

Yeah, Steve Good morning, it's George.

We've got for 24, we've only got two leases over.

Over 50000 square feet.

One of them one of those is potentially a move out and we've already got quite a bit of increased.

Speaker 2: activity looking at that space over at our Logan Square project.

Activity looking at that space over at our Logan Square project and then the other one we've actually got an amendment out some of the square footage in that 50 will be.

Speaker 2: And then the other one, we've actually got an amendment out. Some of the square footage in that 50 will...

Speaker 3: converted the swing space so it will bridge 24 into 25 and a portion of it will be extended on a long-term basis. So it's really only kind of two at the present

Converted the swing space.

Jerry Sweeney: Moving back to University City, our next phase of D-labs on the 9th floor of CIRCenter is nearly complete at the 27,000 square foot expansion. This conversion of that office space to graduate lab space is now 81% pre-leafed with a lease app for the remainder of the space. That full conversion will be completed in Q124. The total costs remain on target for $20 million, with an expected yield of about 11%.

So it will bridge.

Four into 'twenty fives, and a portion of it will be extended on a long term basis. So.

So really only kind of two <unk> at the present time.

And that higher higher range.

Great. Thanks.

Thank you Steve.

Speaker 1: Our next question comes from a line of Camille Bunnell with Bank of America.

Our next question comes from the line of <unk> with Bank of America.

Okay.

Hello.

Jerry Sweeney: So to wrap up comments are going to development activity. You know the key phrase is on our forward pipeline is timing flexibility, low basis per FAR and product diversity. Of the square feet we can build only about 25% is office, with the ability to do between 3 and 4 million square feet of like sign space and over 4,000 apartments. And the overall overlay approvals we have on our master plan developments give us the flexibility to adjust that next further to meet market demands.

Speaker 5: Yes, good morning, Camille. Good morning. Following up on the balance sheet with further occupancy pressures and slower development leasing, so what extent are you factoring these risks when thinking about deliveraging? And what other potential avenues could you consider to drive further progress on this front?

Can you hear me.

Yes, good morning, good morning.

Following up on the balance sheet with further occupancy pressures and slower development leasing to what extent are you factoring these risks when thinking about.

Deleveraging and what other potential avenues could you consider to drive.

Further progress on this front.

Speaker 2: I guess Tom and I can tag him. I think from our perspective, the portfolio while we're, the occupancy range has been reduced.

I guess, Tom and I can tag team I think from our perspective.

Portfolio, while we're the occupancy range has been reduced.

Jerry Sweeney: Looking at the sales activity, there's no question that the pricing and pace of office sales has been impacted by the challenging rate environment and the pullback by lenders in commercial real estate. And certainly the negative macro tones on office. Despite this previously highlighted, we did sell the $53 million in Austin and based on our existing pipeline and transactions and process, we're still maintaining our 125 million dollar sales target by year end.

Speaker 2: by 100 basis points in a range for 23. As I mentioned, that was really due to some slower delays and get our lead thing percentage where it was. So we certainly think the portfolio has a good degree of stability to it. And while the elements of the development pipeline are progressing slower than we would like, the pipeline continues to get very strong. So we do have an expectation.

By 100 basis points on a range for 'twenty three as I mentioned that was really due to some slower delays in occupancy to get our leasing percentage.

Where it was so we certainly think the portfolio has a good degree of stability to it and wild.

Elements of the development pipeline are progressing slower than we would like the pipeline continues to get very strong. So we do have an expectation.

Speaker 2: That as we've even seen on the residential component of 3025 where we're running, you know, ahead of pro forma on the residential leasing side that we will be in a good position on those development projects. So that's more of a backdrop to frame out where we are in terms of looking at liquidity. Look, that remains a key objective for the company.

Jerry Sweeney: We do have about 200 million dollars in the market for sale. Those properties are in our METTC and Pennsylvania suburban operations. And we also have several joint venture properties in the market as well. Several of those properties are moving through the contract negotiations and maintenance that they some level of short term bridge seller financing. In general, we continue to see a good list of bidders with the primary challenge being getting that those acquisitions financed.

That as we've even seen on the residential component 30, 25, where we're running.

Ahead of pro forma on the residential leasing side that we will be in a good position on those development projects.

So that's more of a backdrop the frame out where we are in terms of looking at liquidity look that remains a key objective for the company. So as we take a look at.

Speaker 2: So as we take a look at the deleveraging components, one is clearly land sales. And as we mentioned, we still remain focused on selling non-core land parcels. Some of those are going through rezoning efforts to other uses in office to kind of optimize the value of those land.

The deleveraging components, one is clearly land sales and as we mentioned we still remain focused on selling non non core land parcels. Some of those are going through rezoning efforts.

Jerry Sweeney: Certainly, dollars generated from all these sales and joint venture restructuring will be used to fund our remaining development pipeline commitments further reduce leverage and redeploying the higher growth opportunities, including debt and stock buybacks on a leverage due to, on a legal basis.

Other uses that office to kind of optimize the value of those land holdings.

Speaker 2: two, we will continue to push our sales program. And frankly, Camille said that we need to facilitate good sales in this kind of challenge market. You know, we are prepared to take back some creative short-term bridge financing.

Two we will continue to.

Push our sales program and frankly, Camille today said that we need to to facilitate good sales in this kind of challenged market.

Tom Wirth: With that, Tom will now provide an overview of our financial results. Thank you, Jerry.

Tom Wirth: Good morning. Our third quarter net loss total 21.7 million or 13 cents per share and our results were narrowly impacted by a non-cash impairment charge totaling 11.7 million per 7 cents per share. Third quarter FFO total 50.6 million or 29 cents per diluted share and one cent above consensus estimates. Some general observations regarding the third quarter. Being above consensus, we have several moving pieces and several variances compared to our second quarter guidance.

We are prepared to take back some accretive short term bridge financing to generate some near term liquidity for the company Delever the balance sheet and create an AA.

Speaker 2: to generate some near-term liquidity for the company, to deliver the balance sheet and create an interest rate bridge on those purchase money mortgages for the next couple years. Three, we do plan to...

Interest rate bridge on those purchase money mortgages for the next couple of years.

Three we do plan to.

Speaker 2: reduce our interest and or liquidate.

<unk> reduced our interest and or liquidate.

Speaker 2: Some of our positions in these joint ventures, particularly some of the operating ones that are kind of reaching the end of their life cycle. Again, while we don't have a lot of dollars invested in some of them, we do pick up a fair amount of debt attribution. And to the extent that we're in a position to reduce that debt attribution, that in and of itself creates some great capital to pass.

Some of our positions in these joint ventures, particularly some of the operating ones that are kind of reaching the end of their lifecycle again, while we don't have a lot of dollars invested in some of them. We do pick up a fair amount of debt attribution and to the extent that we're in a position to reduce that debt that debt attribution that in and of itself creates some.

Tom Wirth: Management leasing and development fees were up 700,000. Above our reforecast, primarily due to higher leasing commission income, interest expense was 500,000 below reforecast, primarily due to higher capitalized interest and no borrowings on our line of credit. We forecasted two vacant land parcel sales to generate a million dollars of land gains during the quarter and they were both delayed until the fourth quarter. Our third quarter debt service and interest coverage ratios were both 2.7 and net debt to GAV was 41.6.

Speaker 2: And in terms of, you know, there's other opportunities we were exploring in terms of looking at private equity investments in some portions of our portfolio that could provide not just the near-term liquidity but also the leveraging. And I think Tom did a great job of outlining some of our other tactics in terms of resolving our 2024. And I think Tom did a great job of outlining some of our other tactics in terms of resolving our portfolio.

Capital capacity.

And in terms of.

There's other opportunities we are exploring in terms of looking at it.

Private equity investments and some portions of our portfolio that could provide not just the near term liquidity, but also deleveraging and I think Tom did a great job of outlining some of our other tactics in terms of.

<unk>, our 2024 bond maturity.

Speaker 3: Yeah, Camille is just to add to that. You know, we do have, you know, most of our debt is fixed at 93%. And to the extent we can keep the line of credit on use that certainly, you know, limits even more our exposure to the floating rate debt. And really, it's, as you already mentioned on the JVs, if you look at sort of our wholly owned net debt divina, which we, you know, outlined.

Tom Wirth: Our third quarter annualized four net debt to IVIDA was 6.3 and within our 2023 range and our annualized combined net debt to IVIDA was 7.4 and 1 percent above the high end of our 7.0 to 7.3 guidance. Any further reduction will be based on timing, size and pricing of our fourth quarter asset sales. Regarding portfolio changes, during the quarter we removed two properties located in an Austin totaling 225,000 square feet from our court portfolio.

Yes.

Tom to add to that we do have most of our debt is fixed at 93% and to the extent, we can keep the line of credit.

Use that certainly.

Limits, even more our exposure to floating rate debt and really it's as Jerry mentioned on the JV is if you look at sort of our wholly owned net debt to EBITDA, which we.

Speaker 3: page 32. Holy on that, even with the developments we are doing, holy oned, we're at 6.7. So I do think being able to manage our joint venture leverage will help as well in bringing that down. Certainly, the bond in 2024 will be dilutive and depending on how we finance that, will be a measure of what that does to sort of our fixed charge and leverage.

Outline.

On page 32 wholly owned net debt even with the developments we are doing wholly owned where.

We were at $6 seven so I do think being able to manage our joint venture leverage will help as.

Tom Wirth: Both properties will not be available for lease and were located in our uptown ATX development. We anticipate adding 2340 dollars quarter to our court portfolio during the fourth quarter as well. On the financing activity as Jerry outlined, we closed on a construction loan for 155 King of Prussia Road and Radden, Pennsylvania. The loan bear is interested 250 basis points over sofa and we anticipate drawing on that facility during the fourth quarter as our equity is now fully funded.

As well and bringing that down certainly that the bond in 2024 will.

We will be dilutive and depending on how we finance that will be a measure of what that does to sort of our fixed charge and leverage ratios.

Speaker 3: But we're looking at several different ways of doing that whether it be in the unsecured market or secured or the additional asset sales as Jerry

But we're looking at several different ways of doing that whether it be in the unsecured market or secured or the additional asset sales as Gerry outlined.

Speaker 5: Appreciate the details. As my follow-up, could we focus a bit on Plymouth meeting, given the current occupancy levels and nearly 14% of your leases are expiring through 2024? How is the leasing pipeline generally trending in that?

I appreciate the details.

My follow up could we focus a bit on <unk>.

Tom Wirth: We remain focused on our 2024 bond maturity in October and continue to evaluate funding in both the secured and unsecured financing markets. As you know, the traditional banks are allocating a little to none to new originations on new office loans except for certain situations as fully leased build the suit properties. However, we will continue to explore term loans from our syndicate banks as we did earlier this year to execute on a $70 million term loan.

This meeting given the current occupancy levels in nearly 14% of your leases are expiring through 2024.

Is the leasing pipeline generally trending in that.

Speaker 3: I'm sorry Camille, you did cut out. Did you mention Plymouth Meeting? Yes, Plymouth Meeting. Okay, so look for some detail in the Plymouth Meeting. Yes, we had, you know, we had a 55,000 square foot tenant move out during the third quarter that's on two contiguous floors at 401 Plymouth Road, which is, which is a great project for us right at the interchange of the Turnpike and the North

I'm sorry.

<unk> you mentioned Plymouth meeting, yes, Plymouth meeting okay.

So.

Look for some detail on the Plymouth meeting one yes, we had.

We had 55000 square foot tenant move out during the third quarter. That's on two contiguous floors that at 401, Plymouth Road, which is which is a great project for US right at the interchange of the Turnpike in the northeast extension.

Tom Wirth: We are exploring some property level secured financing options as well, including another wholly owned CNBS transaction. We anticipate our ongoing sales and joint venture liquidation strategy will also generate additional capacity. As we discussed in the past, we prefer to remain an unsecured borrow and will continue to monitor the unsecured bond market as well. Given the above, we will seek the most efficient capital source with a bias towards the unsecured market. Regarding our upcoming 2024 joint venture debt maturities, as Jerry mentioned, we are working with our partners on the 2024 maturities to potentially extend the current maturity dates with our existing lenders, commence marketing efforts for new lenders and make certain property level sales to lower JV leverage.

Speaker 3: Activity levels have been good. We've had several tours within the space knowing that it was coming back. We've got one proposal outstanding right now that we're still kind of back and forth with the prospect.

Activity levels have been good we've had.

Several several tours within the space knowing that it was coming back.

We've got one proposal outstanding right now that we're still kind of back and forth with the prospect but.

Speaker 2: You know, we feel good about it. The space is in relatively good condition. So I'm not sure it'll be, you know, a heavy capital requirement, but.

We feel good about it the spaces in relatively good condition.

So I'm not sure it will be.

Our heavy capital requirement, but.

Speaker 6: We feel good about that project at location and the underlying.

We feel good about that project its location in the underlying pipeline.

Speaker 2: And I think it's that on George Comments, Camille. You know, 401 is the top project in the market.

And I think just to add on George comments.

<unk> hundred one is.

As the top project in the market.

Speaker 2: But we need not that strong, not that large of a market it combines with Bluebell, which is another joining sub-market. But the 401, as George mentioned, very high profile products, that the interchange of a really three interstates. And the pipeline, the visibility there will be good. So if there was a building we had to get space back on our own time, we want space back. That was probably the one that would be the highest probability of near-term reletting.

Tom Wirth: Regarding our map joint venture, we hope to agree to a recapitalization ahead of the current December 1st, 2023 extension date. We are 50% partner in a joint venture which owns leasehold positions and a portfolio of assets. And we are working with the lender potentially recap the joint venture with the ground over. Looking at 2023 guidance, we narrow the guidance by two cents and maintain a midpoint of 116 and the range is mainly attributable to the variability of our asset sales program, both in terms of volume and timing, as well as our projected land sale and related gains.

It's not that strong, but not that large of a market and combined with blue belt, which others joining submarket, but.

401, as George mentioned very high profile projects at the interchange of.

Really three interstates and.

The pipeline the visibility there will be good. So if there was a building we had to get space back on onsite, we want space back that was probably the one that would be to have the highest probability of near term re letting.

Thank you for taking my questions.

Thank you.

Speaker 1: Our next question comes from a line of Anthony Palo with JP Morgan.

Our next question comes from the line of Anthony Powell long with J P. Morgan.

Speaker 7: Thanks. Good morning. I guess first question if I look at the development pipeline and you know, call it yields around seven and think about current debt costs. If these if this rate environment persists, do you think?

Tom Wirth: On our 2023 business plan continues, we have the following general assumptions as property level sales with 153.3 million complete, the balance of our guidance is expected to occur in the fourth quarter, so delusion should not be very significant. No new property acquisitions, no anticipated ATM or share buyback activity and the share count will approximate 173.5 million shares. Our fourth quarter guidance, looking more closely where the following general assumptions, property level operating income will total approximately $74 million and will be about $3 million below the 3Q range, primarily due to lower revenue from several known moon outs we discussed and incrementally higher operating expenses, primarily due to fourth quarter season at seasonality and higher R&M.

Hi, Thanks, good morning.

I guess first question if I look at the development pipeline.

Call it yields around seven and think about current debt cost. If these if this rate environment persist do you think.

Speaker 7: As the stuff gets delivered, it could be an actual earnings drag. Or how do you think about the levers you might have to kind of protect earnings for the company if that's kind of a situation?

Just as the stuff gets delivered it could be an actual like earnings drag or how do you think about the levers you might have to kind of protect earnings for the company, if thats kind of a situation.

Speaker 2: Yeah, Tony, good question. Look, I think certainly with that was an increase rate of debt, it squeezes the return margins on those properties. You know, we typically have done, it's will build in three plus percent rental rate increase.

Yes, Tony Good question look I think certainly with that was the increase.

<unk> of that.

Squeezes the return margins on those properties.

We typically have done is we will build in.

<unk> three plus percent rental rate increases.

Speaker 2: into all of those leases. So the idea from our perspective is to get those projects to a stabilization point.

And to all of those leases. So the idea from our perspective is to get those projects to a stabilization point.

Speaker 2: yet we're you know the least terms were doing there typically tend to be between 10 to 15 years they tend to be with good credit tenants with good collateral support. So the game plan would be as at least as the interest rate market still remains higher than any of us would like.

Yes.

The lease terms were doing theyre typically tend to be between 10 to 15 years, they tend to be with good credit tenants with good collateral support so the game plan would be as this lease as the interest rate market still remains.

Tom Wirth: FFL contribution from our joint ventures will break even for the fourth quarter. The sequential decrease is primarily due to the residential component of school yards where it's becoming operational. During the fourth quarter, we will recognize higher operating losses, lower capitalized interest and increased preferred equity costs. These losses will decrease over the next four to five quarters as the residential operation fully stabilizes. In addition, our math FFL contribution decrease about 700,000, primarily due to higher interest expense.

Speaker 2: execute the business plan for each of those assets, maintain yield equivalency or potentially higher yield equivalency than we have in the projections right now, and then learn or get those projects stabilized and then really focus on kind of the refinancing or sale option.

With like execute the business plan for each of those assets maintained yield equivalency or potentially higher yields equivalents than we have in the projections right now and then learn or lift get those projects stabilize and then really focus on kind of a refinancing or sale option.

Speaker 2: as the market conditions cloud.

<unk>.

As the market conditions as market conditions clarify.

Speaker 2: But certainly with debt costs going up to the extent that they have during the development cycle, the margin of contribution is lower than we were initially targeting when we started these projects.

But certainly with that cost going up to the extent that they have during the development cycle. The margin of contribution is lower than we were initially targeting when we started these projects.

Tom Wirth: Our fourth quarter GNA will remain consistent with the third quarter at 8.1 million. Our interest expense, including deferred financing costs, will approximately $26.5 million and capitalized interest will approximate $3 million. Termination and other fee income will total $6 million, which primarily consists of an anticipated one-time real estate transaction generating about 4.5 million of income. Net management leasing and development fees will be $3 million as we forecast quentials, lower third-party lease commission income after a higher third quarter level.

Speaker 2: And we recognize that, which is why one of the reasons we're focused on driving the net effect of rents we can achieve, not just on those projects, but across the entire portfolio.

And we recognize that which is why one of the reasons we're focused on.

Driving the net effective rents we can achieve not just on those on those projects, but across the entire portfolio.

Speaker 7: Okay, thanks. And then just follow up, if you go out to maybe 24 or even perhaps 25, you noted the limited exposure on leasing, but can you maybe address just where you think marked to markets maybe right now and or perhaps if there's any appreciable change in the capital that might be needed for that leasing?

Okay. Thanks, and then just follow up if you go down to maybe 24 or even perhaps 25.

The limited exposure on leasing, but can you maybe address just where you think mark to markets may be right, now and or perhaps if theres any appreciable change in the capital that might be needed for that leasing.

Tom Wirth: Land gain and tax provision will total about 1.1 million of income representing two forecasted land sales that didn't occur in the third quarter. On the capital plan, we experienced better than forecasted third-party CAD payout ratio of 76%. Primarily due to leasing capital costs being below our business plan range and improved operating results. Based on a revised annual dividend, the 60 cents per share, our pro forma 2023 coverage ratio is projected to be 75%.

Speaker 2: Look, I think from a market, a market to market right now, the best evidence we give is what we've been posting thus far. So we do expect, again, to continue to see very good market to markets in our CBD, University City and particularly our Ragnar Submarket in Pennsylvania. I do think, though, Tony, in all Canada will continue to have negative market to markets coming out of Austin.

Look I think from a market mark to market right now the best evidence. We gave you is what we've been posting thus far so we do.

Do expect to continue to see very good mark to markets.

In our CBD University city and <unk>.

Typically our Radnor Submarket in Pennsylvania I.

I do think though Tony and all Canada will continue to have negative mark to markets come out of Boston markets.

Speaker 2: I know that marks in a suit that certainly a state of dis-equilibrium.

Mark.

<unk>.

Certainly a state of equilibrium and as you noticed from that new page, we put into the supplemental some of our bigger vacancy exposures are in three.

Speaker 2: And as you notice from that new page, we put into the supplemental, you know, some of our bigger vacancy exposures are in three of our Austin complexes. So I think there the watchword will be, you know, accelerate activity, meet the market in terms of pricing, try and keep good annual rent bumps in and control capital to the extent that we can.

Tom Wirth: As outlined on page 14 of the supplemental package, our fourth quarter capital plan is very straightforward and total is 95 million dollars. Most importantly, we continue to prioritize liquidity and still project no borrowings on a $600 million on secured line of credit at the end of the year. Uses during the fourth quarter are comprised of 36 million of development and redevelopment, 26 million of common dividends, 8 million of revenue maintained, 10 million of revenue create, and 15 million contributions to our joint ventures.

<unk> and complex itself.

I think there.

Watch word will be accelerated activity meet the market in terms of pricing try and keep good annual rent bumps and control capital to the extent that we can.

Speaker 2: But look, one of the interesting things that we are saying is, you know, the competitive set is actually shrinking a little bit in some of these markets. Not every land...

But look one of the interesting things that we are seeing is.

The competitive set is actually shrinking a little bit and some of these markets not every landlord as the quality product, we have nor the financial resources to attract tenancy. So.

Speaker 2: As the quality product, we have your financial resource.

Speaker 2: to attract tenancy. So our focus remains only seeing every square put through the fourth folio, driving net effective rents at highs we possum.

Our our focus remains on leasing every square foot through the portfolio.

Tom Wirth: The primary sources are going to be capital after interest payments totaling $50 million, 10 million of construction loan proceeds for 155 King of Prussia Road, and 50 million of net cash proceeds from property land and other sales. Based on the capital plan outlined above, we project a $15 million increase in cash during the quarter. We are also maintaining our net debt to Ibadah range of 7-7-3 and will be partially dependent meeting that range based on the timing of the fourth quarter sales that I mentioned previously.

Yes.

Driving net effective rents.

As high as we possibly can and really taken advantage of this continuing window, we see.

Speaker 2: and really take an advantage of this continuing window we see but tenants really wanted to move into higher quality project with landlord's stability. You know, brokers wanted to show space and buildings where they can get their leasing commissions. tenants want to move into buildings.

Tenants really wanted to move into higher quality project with landlords stability brokers wanted to show space in buildings, where they can get their leasing commissions tenants want to move into buildings, where they know their certainty of getting their tenant improvement dollars funded brandywine resonates on both of those fronts incredibly well so.

Speaker 2: where they know that there's certainty of getting their tenant improvement dollars funded. BrainyWine resonates on both of those fronts incredibly well. So, we've increased our leasing teams and our talent at the ground level to make sure that we're really focused on turning over every possible stonewall.

<unk>.

We've increased our leasing teams and our talent on the ground level to make sure that we're really focused on.

Tom Wirth: Also, that will be impacted by any GAV recapitalization of sales during the quarter as well. Our debt to GAV will be in the 40 to 42 percent range. Our core net debt to Ibadah range is 6-2-6-5. This range excludes our joint ventures and our active development projects. We continue to believe this core leverage metric better reflects the leverage of our portfolio and eliminate our more highly levered joint ventures and our unstabilized development and redevelopment projects.

Turning over every possible stone, we think theres a leasing prospects.

Okay. Thank you.

Thank you Tim.

Speaker 1: Our next question comes from a line of Michael Griffin with City.

Our next question comes from the line of Michael Griffin with Citi.

Speaker 3: Great thanks. From the Scarletway assets sale, do you have a sense what the cap rate or buyer interest was on that property? And then from a half-sets your currently marketing, you know, similar question, you know, where do you think you could sell to that or what's the potential buyer?

Great. Thanks.

Scott wanted to asset sale do you have a sense.

What the cap rate or a buyer interest lies on that property and then.

Assets Youre currently marketing similar question, where do you think you could tell me that and what's the potential buyer pool.

Tom Wirth: We believe that our leverage ratios are elevated due to our development pipeline and we believe once those developments are stabilized, our leverage will decrease back closer to this core leverage ratio. We anticipate our debt service and interest coverage ratios to approximate 2.6 by year end which represents a slight sequential decrease from the coverage ratios in the third quarter, primarily due to the additional development spend and higher interest rates.

Speaker 2: Yeah, a great question, Michael, the the cap rate on the on the on the Barton sale was it was in the high sex.

Yeah, Great question Michael.

The.

The cap rate on the on the on the Barton sale as it was in the high sixes and came in at about 300 Bucks a foot a little bit of a 300 Bucks a foot.

Speaker 2: and came in about 300 bucks a foot, little more 300 bucks a foot. Look, I mean, the buyer pool is actually interesting right now. We have an upper property to the marketplace. We have one or two properties, a way to go under firm agreement. And on the standard office product, we're typically saying, this small institution.

Look I mean, the buyer pool is actually interesting right now we have a number of properties in the marketplace we have.

One or two properties.

Waiting to go under firm agreements.

And.

<unk>.

On the standard office product.

Jerry Sweeney: I will now turn the call back over to Chair. Great. Tom, thank you very much.

Typically seeing.

The small institutions the syndicators.

Jerry Sweeney: So the key takeaways are the portfolio is in solid shape with an increasing leasing pipeline. As I mentioned, we continue to be very pleased with the level of traction through every element of our portfolio. Our average annual roll over exposure through 2026 is only 6.7 percent. We've been posting and expecting to continue to post fairly strong market to markets. Manageable capital spend is evidence by reducing our capital ratio is on our horizon as well and we do expect to have stable and accelerating leasing velocity through our development pipeline.

Speaker 2: syndicators, the well-capitalized private development, redevelopment companies in the marketplace.

<unk> capitalized private development redevelopment companies in the marketplace.

Speaker 2: So, you know, cap rates are kind of in the, uh, I'll call it in the 8 to 10% range for some of those, uh, more, more, uh, workmen-like products. The biggest challenge really is getting the financing in place. So, we haven't really seen as much pricing pressures you would expect.

So cap rates are kind of in the.

Caught in the 8% to 10% range for some of those.

More and more.

Workman like products. The biggest challenge really is getting the financing in place. So we haven't really seen as much pricing pressure as you would expect.

Speaker 2: unless it's really driven by, hey, I need to get financing. So I think Brandywine being in a position where we can provide some bridge financing for several years and take that refinancing risk off the table, I think puts us in a pretty good position. But, you know, for example, we have a couple of props we have on the market in.

Unless it's really driven by had immediate financing so I think brandywine being in a position where we can provide some bridge financing for several years and take that refinancing risk off the table I think puts us in a pretty good position.

Jerry Sweeney: We have covered all of our wholly-owned near-term liquidity needs are planning to keep the line of credit zero and are executing a baseline business plan that is time-pouched on improved liquidity. Keeps that portfolio in very solid footing with strong forward leasing prospects.

For example, we have a.

A couple of crops, we have on the market in <unk>.

Speaker 2: northern Virginia. You know, we've had in one case, our reporting investors signed the NDA with about 10 different tours. We have another project where we had 75 CA's, nine with tours occurring on almost a daily basis. So there seems to be still a fair amount of interest.

Northern Virginia, we've had.

In one case over 40 investors signed the NDA with about 10 different tours, we have another project, where we had 75 CA signed.

Operator: As usual, anywhere we started with that we hope you and your families are doing well and we're delighted to open up the floor for questions Liz. We do ask in the interest of time you let me yourself to one question and a follow-up. Liz? As a reminder, if you'd like to ask a question at this time, please press star-1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again. Please stand by when we compile the Q&A roster.

With towards occurring on almost a daily basis.

So there seems to be still a fair amount of interest in buying properties. The major gating issue that I think we're all facing.

Speaker 2: in buying properties, the major gating issue that I think we're all facing is just how we can facilitate the debt side of their equity.

How we can we can facilitate the debt side of their equity investment.

Speaker 2: And I think really depending upon how the interest rate climate goes and the commercial banks and life insurance companies, that'll dictate whether to get some of these sales done, we need to do some bridge funding.

And I think really depending upon how the interest rate climate goes in the commercial banks and life insurance companies that will dictate whether.

To get some of these sales done we need to.

Do some bridge financing.

Steve Sakwa: Our first question comes from a line of Steve Sakwa with Evercore ISI. Thanks, good morning. I guess first question, Jerry. I just want to go back on sort of the JVs and the debt that you were sort of talking about. Just to make sure I'm understanding, are you potentially in a process of maybe trying to hand keys back? Or is this just a situation where you and your partners are trying to just get to the finish line on, I guess, loan extensions? I just couldn't tell from the commentary kind of where you were heading with some of those assets.

Speaker 8: Great, thanks. Then maybe one on the leasing side. Can you maybe comment on sort of how concessions have been trending in your markets and kind of a sense of what tenants are out in the market right now and sort of what they're looking for in terms of space requirements?

Great. Thanks, and then maybe one on the leasing side can you maybe comment on sort of how concessions have been trending in your markets and kind of a sense of what tenants are out in the market right now and sort of what they are looking for in terms of space requirements.

Speaker 6: Yeah, sure, Michael. This is George. I'd be happy to take that one. I mean, you know, TI's have remained relatively constant. You know, we've seen a little bit of pressure on unit costing, but the overall package, and again, we look at the concession, you know, as a combination of both abatement and TI. So we have seen a little bit of a shift more towards abatement, and we obviously try and limit that to just a fixed rent as opposed to the operating expense pass-throughs.

Yeah sure. Michael This is George I'll be happy to take that one.

<unk> have remained relatively constant.

We've seen a little bit of pressure on unit costing but.

But the overall package and again, we look at the concession.

Combination of both abatement and Ti so we have seen a little bit of a shift more towards abatement.

Jerry Sweeney: Yeah, Steve, great question. Thanks for the inquiry on the clarity. Our intention is to work with our partners to extend these loans out on terms that are acceptable to both the lender and the partnership as we wait for the market conditions to improve. I think, you know, from Brandywine's standpoint, we think we have a cadre of very high-quality partners, very seasoned, very experienced. The loans themselves are all structured on a non-recourse basis.

And we obviously try and limit that to just a fixed rent as opposed to the operating expense pass throughs.

Commissions have remained unchanged.

Speaker 6: So overall, Med Effective Rents, we've continued to see growth, especially in Philadelphia, University City, and in RADNER, more challenging given the dynamic in Austin on Med Effective Rents growth. So overall, Med Effective Rents, we've continued to see growth, especially in RADNER, more challenging given the dynamic in Austin on Med Effective Rents growth.

So overall net effective rents we've continued to see growth.

Especially in Philadelphia University City and in Radnor.

More challenging given the dynamic in Austin on net effective rent growth.

Great that's it for me thanks.

Right.

Youre welcome. Thank you.

Speaker 1: Our next question comes from a line of Michael Lewis with truest security.

Our next question comes from the line of Michael Lewis with <unk> Securities.

Jerry Sweeney: So we do have the opportunity that if things do not work out, we'll certainly take a look at what's the best answer for Brandywine. But our plan going into each of these discussions is to make sure that we accommodate both the partnerships objectives and the lender's objectives. To the extent we can, to facilitate a bridge solution that will keep these partners intact as the marketplace continues to recover from a leasing standpoint, but also hopefully the capital markets provide more stability.

Speaker 3: Great, thank you. My first question is about, Jerry, talk about the dividend cut.

Great. Thank you.

My first question's about Terry talked about the dividend cut.

Speaker 3: or maybe the question's really about cash flow, right? The new dividend payment looks to me it's about 60% of your third quarter CAD.

Maybe the question is really about cash flow rate the new dividend payment. It looks to me, it's about 60% of your third quarter CAD, even at the old payment. It only would have been 76%. So your stock's trading at a 15% yield with 60% coverage just spot at <unk>.

Speaker 3: Even at the old payment, it only would have been 76%. So your stocks traded at a 15% yield with 60% coverage, just spot at 3Q.

Speaker 9: So the question is, you know, the markets, you know, with a yield that high and coverage that appears comfortable, you know, the market's not really buying this. And so.

The question is the markets with a yield that high and coverage that appears comfortable the market is not really buying this and so is the dividend cut is it as simple as you say $28 million and you have good uses for that and develop it.

Speaker 9: Is the dividend cut, is it as simple as you say $28 million and you have good uses for that undeveloped and delivering?

Jerry Sweeney: So there's more opportunities to refinance. You know, I think one of the points I was trying to amplify is that, you know, if you look at the balance sheet, the supplemental package, you know, those JDs have $624 million of non-recourse debt on them. 113 million of that is attributable to Brandywine, and our investment base in those ventures excluding MAP, which has a negative basis, is $68 million. So I think we're in a good position as a sponsor with our partners to go into the discussion with every single lender with the hopes of structuring a program that's mutually satisfactory to both parties.

Speaker 9: Or is this an expectation that cash flow still going down and you've got ahead of this coverage getting...

Delevering.

Or is this an expectation that cash flow is still going down.

And you've got ahead of this coverage getting getting really tight.

Speaker 2: Hey, Michael. Now, let me be real clear. Our cash flow is strong. The coverages that we've talked about are in very good shape. This was a deliberate review that the board and management went through in taking a look at really the, as I touched on in my comments, really the volatility and unpredictability of the capital markets.

Hey, Michael now, let me be real clear.

Our cash flow is strong.

The coverage is as we've talked about are in very good shape.

This was a deliberate.

Review that the board and management went through a taking a look at really the.

I touched on in my comments really the volatility and unpredictability of the capital markets.

Speaker 2: The fundamental reality is there's a lot of economic uncertainty out there. There's a lot of geopolitical risk. No one's sure where interest rates are going to go. No one's sure what the state of the labor market is. So I think the board took a hard look at our board projections. And in thinking about a reset dividend.

George Johnstone: Okay, and just as a quick follow up, when you kind of look at your explorations for next year, it's about 880,000 feet. I know you'll provide more details on exact guidance, but are there any, I guess, large known moveouts at this point in 24 that you could sort of highlight or share with us that might more negatively impact the retention rate next year? Yes, good morning, it's George. We've got, for 24, we've only got two leases over 50,000 square feet.

The the <unk>.

Fundamental reality is there's a lot of economic uncertainty out there.

There is a lot of geopolitical risk.

No ensure where interest rates are going to go now and sort of what the state of the labor market is so I think that the board took a hard look at our forward projections and thinking about a.

Excuse me a reset dividend.

Speaker 2: wanted to set it at a level that provided bulletproof coverages for us.

Wanted to set it at a level that provided bulletproof coverages for us <unk>.

George Johnstone: One of those is potentially a moveout, and we've already got quite a bit of increased activity looking at that space over at our Logan Square project. And then the other one, we've actually got an amendment out. Some of the square footage in that 50 will be converted to swing space so it will bridge 24 into 25 in a portion of it will be extended on a long term basis. So it's really only kind of two at the present time that in that higher range. Great, thanks.

Speaker 2: sent a strong signal that we recognize the volatility, the uncontrollability in those capital markets, but also set a firm foundation point where that revised dividend covered our taxable income distribution requirements, and really set a firm foundation point for that dividend to hopefully grow as the capital markets showed more sign of stability or predictability and our cash flows continued to increase.

A strong signal that we were that we recognize the volatility of the uncontrolled ability in those capital markets.

But also set a firm foundation point, where that revised dividend covered our taxable income distribution requirements and really set a firm foundation point for that dividend to hopefully grow.

As the capital markets showed more signs of stability or predictability in our cash flows continued to increase.

Speaker 2: So, if anything, it was a signal that recognized the realities of the current capital markets, not a harbinger that it was concerned about where our cash flows were going. So, I want to be very clear on that.

So it was if anything it was a signal that recognize the realities of the current capital markets not a harbinger that it was concerned about where our cash flows for gallons. So I'd be very clear on that.

Speaker 9: Okay, great. And then 2nd, for me, these 8 properties with high vacancy on page 4, your supplemental, you know, 300 Delaware stands out. But, you know, is there any detail specific detail on the plan for that asset? Or for anything else? You know, on that list that you think might be helpful to know, you know, in terms of addressing these properties, which are driving a large part of the of the vacancy in the portfolio.

Okay, Great and then.

Second for me these eight properties with high vacancy on page four of your supplemental.

Camille Bunnell: Our next question comes from a line of Camille Bunnell with Bank of America. Hello, can you hear me? Yes, good morning, Camille. Good morning, following up on the balance sheet with further occupancy pressures and slower development leasing. So what extent are you factoring these risks when thinking about the leveraging and what other potential avenues could you consider to drive further progress on this front? I guess, Tom and I contact him. I think from our perspective, you know, the portfolio while we're, the occupancy range has been reduced by 100 basis points on a range for 23.

300, Delaware stands out but is there any detail.

Specific detail on the plan for that asset or for anything else on that list that you think might be helpful to know in terms of addressing these properties, which are driving a large part of the of the vacancy in the portfolio.

Speaker 2: Yeah, a great question. Thanks, Michael. Look at the we laid out those eight properties. And as you know, you know, three of them, actually for them, really, because it's too light, you know, is really kind of properties in Austin.

Yes.

Great question. Thanks, Michael.

We laid out those eight properties and as you know.

Three of them.

Actually for them really because of two <unk> is really kind of our properties in Austin. So I think in Austin, the real focus for US is accelerating leasing so we have a number of <unk>.

Speaker 2: So I think in Austin, the real focus for us is accelerating leasing. So we have a number of really talented leasing folks down there, great top executives.

Really talented leasing folks down there great top executives they've all got involved very very even more so than the past and really sourcing deals.

Speaker 2: They've all gotten involved, even more so than the past, in really sourcing deals. We've reached out to brokers for incentive programs.

Camille Bunnell: As I mentioned, that was really due to some slower delays and actually get our leasing percentage where it was. So we certainly think the portfolio has a good degree of stability to it. And while the elements of the development pipeline are progressing slower than we would like, the pipeline continues to get very strong. So we do have an expectation that as we've even seen on the residential component of 30, 25 where we're running ahead of pro form on the residential leasing side that we will be in a good position on those development projects.

We've reached out to brokers for incentive programs.

Speaker 2: And in one of those properties, frankly, that's very, very well located, you know, we are taking a look at whether there's a residential conversion opportunity on a couple of those, a couple of the buildings in that complex.

And in one of those properties frankly, it's very very well located we are taking a look at whether there is a residential conversion opportunity.

On a couple of those a couple of buildings in that complex, but Austin is primarily pedal to the metal let's get through this moment of this equal live in the marketplace as tenants tenants.

Speaker 2: But awesome is primarily pedal to the metal.

Speaker 2: Let's get through this moment of disequilibrium in the marketplace. As tenants return to the marketplace for space, let's make sure these buildings look great, they're positioned well, they're well-staffed, great talent at the ground level, and let's get them leased up. So that's really the focus there. You know, we take a look at a 1676 International. As you know, that building has been a great redevelopment for us. The market has not performed as well as we hoped it would.

Tenants return to the marketplace for space, Let's make sure. These buildings look right theyre positioned well, they're well staffed great talent at the ground level and let's get them leased up so that's really the focus there.

Camille Bunnell: So that's more of a backdrop to frame out where we are in terms of looking at liquidity. Look, that remains a key objective for the company. So as we take a look at the deleverging components, one is clearly land sales. And as we mentioned, we're still remain focused on selling non core land parcels. Some of those are going through rezoning efforts to other uses in office to kind of optimize the value of those land holdings.

When we take a look at $16 76 International as you know that building has been a great redevelopment for us the market has not performed as well as we hoped it would.

Speaker 2: and that property along with some of our other assets in the northern mission market, we do as sale candidates in the near term.

That property along with some of our other assets in the northern Michigan market, we view as sale candidates in the near term.

Speaker 2: 401 Plymouth, George touched on it in one of the other questions, which is, you know, we just had a tenant give give us space back there. That's top of the market. The game plan there is to release that space. Sierra center, you know, that's on there because they give back this quarter, but that space is all part of our.

401 plan that George touched on it in one of the other questions, which is we just had a tenant give us space back there that's top of the market.

Camille Bunnell: Two, we will continue to push our sales program. And frankly, Camille said that we need to facilitate good sales in this kind of challenge market. You know, we are prepared to take back some creative short term bridge financing to generate some near term liquidity for the company, deliver the balance sheet and create an interest rate bridge on those purchase money mortgages. For the next couple years, three, we do plan to reduce our interest and or liquidate some of our positions in these joint ventures, particularly some of the operating ones that are kind of reaching the end of their life cycle.

The game plan there is to re lease that space.

<unk> Center Thats on there because to give back this quarter, but that space is all part of our converting this building from purely office to the lower ninth towards being life science. So as you can see there we've been pre leased.

Speaker 2: Converting this building from purely office to the lower nine floors being life science. So as you can see there, we've even pre leased, you know, 22,000 square feet of that space. Three in Delaware is an interesting dilemma for us. It's a property in downtown Wilmington. We really have at least any space in that building for a number of years because at least terms just aren't economic.

22000 square feet of that space.

Three of the Delaware is an interesting dilemma for us it's a property in downtown Wilmington, we really haven't leased.

Any space in that building for a number of years because the lease terms just on economic.

Speaker 2: The floor plate sizes are around 15,000 square feet, plus or minus. The existing zoning provides for residential and office use. So that is a building we're looking at a potential residential conversion and a tenant move out plan over the next several years. That would be a project either Brandywine could undertake or simply sell it based upon the conversion plan that we put in.

The floor plate sizes are around 15000 square feet plus or minus.

Camille Bunnell: Again, while we don't have a lot of dollars invested in some of them, we do pick up a fair amount of debt attribution. And to the extent that we're in a position to reduce that debt attribution, that in and of itself creates some great capital capacity. And in terms of, you know, there's other opportunities we're exploring in terms of looking at private equity investments in some portions of our portfolio that could provide not just the near term liquidity, but also the leveraging.

The existing zoning provides for residential and off issues. So that is a build and we're looking at.

A potential residential conversion and a tenant move out plan over the next several years that would be a project either brandywine could undertake or simply sell it based upon the conversion plan that we put in place, but thats a project, we do not anticipate investing any significant additional capital into.

Speaker 3: But that's a project we do not anticipate investing any significant additional capital into. Was that helpful? Did that answer your question?

Camille Bunnell: And I think time did a great job of outlining some of our other tactics in terms of resolving our 2024, of Omotayo. Camille, we do have, most of our debt is fixed at 93%, and to the extent we can keep the line of credit on use that certainly limits even more our exposure to the floating rig debt. And really, as you already mentioned on the JV's, if you look at our wholly owned net debt divide, which we outlined on page 32, wholly owned net debt, even with the developments we are doing wholly owned, we're at 67, so I do think being able to manage our joint venture leverage will help as well in bringing that down.

Yes.

Was that helpful does that answer your question.

Yes, no that's helpful. I appreciate it.

Thank you.

Okay.

Speaker 1: Our next question comes from the line of Dylan Brzezinski with Green Street Advisory.

Yes.

Our next question comes from the line of Dylan Brzezinski with Green Street Advisors.

Speaker 10: Morning, guys. Thanks for taking the question. I'm just curious. You mentioned several times, you know, bridge financing or seller financing or whatever you want to call it. But just curious, you know, what would be the LTV that you guys would be willing to offer in this sort of structure?

Good morning, guys. Thanks for taking the question.

Just curious.

<unk> several times bridge financing or seller financing or whatever you want to call. It.

I'm just curious what would be the LTV that you guys would be willing to offer and this sort of structure.

Speaker 2: Yeah, I think in that framework, anywhere kind of between 50 and 75%, depending upon the project, the quality of the buyer, and our convertibility capacity to the extent that the loan does a perform. So, but that seems to be the pretty safe range still in somewhere in that 50 to 75.

Yes, I think in that framework anywhere between 50 and 75% depending upon the.

The project.

The quality of the buyer and our convert ability capacity to the extent alone doesn't perform.

Camille Bunnell: Certainly, the bond in 2024 will be dilutive and depending on how we finance that will be a measure of what that does to sort of our fixed charge and leverage ratios. But we're looking at several different ways of doing that, whether it be in the unsecured market or secured, or the additional asset sales is Jerry. I appreciate the details. As my follow-up, could we focus a bit on climate meeting given the current occupancy levels and nearly 14% of your leases are expiring through 2024?

So.

But that seems to be the a pretty safe range somewhere in that 50% to 75% range.

Speaker 10: Okay, that's helpful. And then I guess just touching on the expense that are things, you know, you mentioned lower expenses in the quarter, I guess, just how should we be thinking about that looking in the 2024? Should we expect to continue to receive relief on this run or should there be return to a more normalized environment added in the 2024?

Okay. That's helpful. And then I guess just touching on the expense side of things you mentioned lower expenses in the quarter I guess, just how should we be thinking about that looking into 2024. So we expect to continue to see relief on this front or should we return to a more normalized environment heading into 2024.

Speaker 6: Yeah, Dylan and George, I mean, I think, you know, probably a little bit of a continuation. You know, we continue to aggressively...

Sure.

Yes, Don its George I mean I.

Think.

Probably a little bit of a continuation we continue to aggressively.

Camille Bunnell: How is the leasing pipeline generally trending in that specific submerge? I'm sorry. Can you dig it after? Did you mention climate meeting? Yes, climate meeting. Okay, look for some details on the climate meeting. Yes, we had a 55,000 square foot tenant move out during the third quarter. That's on two contiguous floors at 401, which is a great project for us right at the interchange of the term pipe and the northeast extension.

Speaker 6: know, appeal and challenge real estate tax assessments. I do think we maybe have some opportunities still there. You know, utilities, our teams have just done a good job at kind of managing that consumption load and some of our negotiated contracts on forward purchase.

Yes.

And in challenged real estate tax assessments I do think we maybe have some opportunity is still there.

Utilities.

Our teams have just done a good job of kind of kind of managing that.

That consumption load in some of our negotiated contracts on forward purchase agreements.

Speaker 6: have benefited the portfolio. We've got a little bit of seasonality coming up for the fourth quarter, so we'll start to get into the potential for snow removal that hasn't existed thus far. But year over year, I would think there's certainly a lot of focus on our property management team.

<unk> benefited the portfolio.

We've got a little bit of seasonality coming up for the fourth quarter. So it will start to get into.

The potential for snow removal that hasnt existed, thus far, but but year over year I would think.

Camille Bunnell: Activity levels have been good. We've had several tours within the space knowing that it was coming back. We've got one proposal outstanding right now that we're still kind of back and forth with the prospect, but we feel good about it. The space is in relatively good condition, so I'm not sure it'll be a heavy capital requirement, but we feel good about that project its location and the underlying pipeline. And I think it's that on George comments, you know, 401 is the top project in the market.

Theres certainly a lot of focus on our property management teams to maintain if not reduce expenses across the board.

Speaker 2: Yeah, I don't understand. I mean, we're doing the same thing on the construction side. I mean, the reality is, you know, if you think about it, overall, leasing velocity is down, not just in Brandywine, but in the markets. You know, a lot of general contractors are looking for work. So we're able to kind of get

Yes.

I'll just add on to it I mean, we're doing the same thing on the construction side I mean, the reality is.

If you think about it overall leasing velocity is down not just in branding one but in the markets.

A lot of general contractors are looking for work, so we're able to kind of get.

Speaker 2: better buying power given the size of our asset base here, particularly in Philadelphia.

Better buying power given the size of our asset base here, particularly in Philadelphia to drive better better Gcc's better general conditions.

Speaker 2: drive better GCCs, better general conditions.

Speaker 2: do some forward procurement programs. So really one of the

Camille Bunnell: That's not that strong, but not that large of a market it combines with Blue Bell, which is not a joining sub market, but the 401, as George mentioned, very high profile projects at the interchange of a really three interstates and the pipeline that visibility there will be good. So if there was a building, we had to get space back on on some one space back. That was probably the one that would be had the highest probability of near term reletting. Thank you for taking my questions. Thank you.

Do some forward procurement programs, so really one of the one of the real Green shoots this year has been our ability to.

Speaker 2: One of the real green shoots this year has been our ability to really maintain very strong control over our capitals.

Really maintained very strong control over our capital spend.

Speaker 2: which I think really helps drive those net effective rents. I think combination of the really great work or operating teams do every day to make sure that we ever improve our margins in a challenging environment that we expect to be a continual trend line. And certainly as the pace of overall construction slows.

Which I think really helps drive those net effective rents up so I think combination of really great work. Our operating teams do every day to make sure that we ever improve our margins in a challenging environment that we expect to be a continual trend line and certainly as the pace of overall construction.

Speaker 2: we think we'll be in even a stronger position to leverage our buying power in our core markets.

Slows, we think we'll be in even a stronger position to leverage our buying power and our core markets to drive even better better cost modules from our outside general contracting firms.

Camille Bunnell: Our next question comes from a line of Anthony Palo with JP Morgan. Thanks.

Speaker 2: driving better cost modules from our outside general contracting firms.

Tom Wirth: Good morning. I guess first question, if I look at the development pipeline and you know, call it yields around seven and think about current debt costs. If this rate environment persists, do you think? Just as this stuff gets delivered, it could be an actual earnings drag, or how do you think about the levers you might have to kind of protect earnings for the company if that's kind of a situation? There are three plus percent rental rate increases into all of those leases, so the idea from our perspective is to get those projects to a stabilization point.

That's helpful color really appreciate it thanks guys.

Thank you.

Speaker 1: Our next question comes from a line of Upal Rana with KiDang.

Our next question comes from the line of Paul <unk> with Keybanc.

Speaker 11: Hey, good morning. Thanks for staying with my question. Tom, your prepared remarks on the Schuylkill Yards lease up was helpful, but could you expand further on that project? You know, any LOIs on the office portion you hope to get to the finish line in the near term? And any timing on the residential lease up? And if you can provide any numbers on the impact on the capitalized interest burn off, that'd be helpful.

Hey, good morning.

For taking my question.

Tom.

Our prepared remarks on the Schuylkill yards lease up was helpful. But could you expand further on that project any LOI on the office portion you hope to get to the finish line in the near term.

And any timing on the residential lease up and.

And if you can provide any numbers.

On the impact from the capitalized interest burn off that available.

Speaker 3: You know, I'll touch based on just what I talked about with Tom. I stand pretty much like that. Yeah, I guess I'll touch on what I said in the remarks. Yeah, we, you know, as we bring the developments online, we're going to be...

Yeah, well I'll touch base on just what I talked about with Tom nicely I'm sorry.

I guess I'll touch on what I said in the remarks, yes, we yes.

Yes.

As we bring the developments online.

Tom Wirth: The least terms we're doing there typically tend to be between 10 to 15 years. They tend to be with good credit, tenants with good collateral support. The game plan would be as the interest rate market still remains higher than any of us would like. Execute the business plan for each of those assets, maintain yield equivalency or potentially higher yield equivalency than we have in the projections right now. And then get those projects stabilized and then really focus on kind of the reef financing or sale options as the market conditions, as market conditions clarify.

We're going to be experiencing a lease up phase and with with the multifamily that's going to be brought in over time.

Speaker 3: experiencing a lease-up phase, and with the multifamily that's going to be brought in over time.

Speaker 3: But, you know, for the first year, we expect to slowly bring up the operating results for the residential. That'll be both here and when we eventually have uptown ATX residential started. When that happens, you know, we're gonna have some operating losses as we bring those properties on. So that's gonna be one phase of it. To, you know, you begin to reduce interest capitalization as more and more of the units become available for lease.

But for the first year, we expect to slowly bring up the operating results for the residential that'll be both here and when we eventually have uptown ATX residential started when that happens we're going to have some operating losses as we bring those properties on so thats going to be one phase of it to begin.

To reduce interest capitalization as more and more of the units become available for lease and then number three we have our.

Speaker 3: And then number three, we have our preferred equity partner cost. It's also our phase in on a similar manner. So.

Tom Wirth: But certainly with debt costs going up to the extent that they have during the development cycle, the margin of contribution is lower than we were initially targeting when we started these projects. And we recognize that which is why one of the reasons we're focused on, you know, driving the net effect of rents we can achieve, not just on those projects, but across the entire portfolio.

Preferred equity partner costs. It also are faced in on a similar manner. So.

Speaker 3: Those costs over the first, you know, two, three, four quarters are going to be a level that will hold hopefully decrease as we get the closer to stable.

Those costs over the first 234 quarters are going to be.

A level that will help us hopefully.

Decrease as we get closer to stabilization. So that's how I think we look at the the rollout of some of the JV, especially on the on the multifamily side as you look at the office side until we can lease the square feet. It's a little more it's a little simpler we have.

Speaker 3: So that's how I think we look at the rollout of some of the JVs, especially on the multifamily side. As you look at the office side, you know, until we can lease the square feet, it's a little more, it's a little simpler. We have a, you know, we basically have one year from substantial completion to lease up that.

Jerry Sweeney: Okay, thanks. And then just follow up. If you go out to maybe 24 or even perhaps 25, you noted the limited exposure on leasing, but can you maybe address just where you think mark to markets maybe right now and or perhaps, you know, if there's any appreciable change in the capital that might be needed for that leasing. Look, I think from a mark to market right now, the best evidence we give is what we've been posting thus far.

We have one year from substantial completion to lease up that space. So again, that's more of a future thing and Jerry can touch more on the pipeline and what he's seeing there, but after the one year then it does become an operational asset regardless of lease up so.

Speaker 3: So again, that's more of a future thing. And Jerry can touch more on the pipeline and what he's seeing there. But after the one year, then it does become an operational asset regardless of lease up. So our goal, as we've said, is to get the leasing completed. So as we roll into that one year window and we start to look at that operational.

Noel as we've said is to get the leasing completed so as we roll into that one year window and we start to look at that operational.

Speaker 3: Property come online that we've you know that we've done our best to get the revenue

Property come online that we've that we've done our best to get the revenue.

Jerry Sweeney: So we do expect to continue to see very good market market in our CBD university city and particularly our radon or some market in Pennsylvania. I do think though, Tony, in all kind of will continue to have negative mark to markets coming out of Austin, that marks in a certainly a state of disequilibrium. And as you notice from that new page, we put into the supplemental, you know, some of our bigger vacancy exposures are in through everlasting complexes.

Speaker 3: But that'll occur again, we have a year to do that from an office standpoint. And as Lisa's come on, we just turn on that portion of the building from...

Start, but that will occur again, we have a year to do that from an office standpoint, and as leases come on we just turn on that portion of the of the building from a from an operation point of view.

Speaker 2: Yeah, and I'll just add on to Tom's good comments. You know, I think on the pipeline, you know, the really near term focuses on 30, 25. That's pretty much delivered at this point. We have a number of residential, and that won't really deliver for the next couple months. But the activity levels are very good. I mean, I think we've been very pleased with the progress on the residential.

Yes.

Let me just add on to Tom's good comments.

I think on the pipeline.

Near term focus is on 32, 5%.

Pretty much delivered at this point, we have a number of residential units that won't really deliver for the next couple of months, but.

Jerry Sweeney: So I think there the watch word will be, you know, accelerate activity, meet the market in terms of pricing, try and keep good manual brand bumps in and control capital, the extent that we can. But look, one of the interesting things that we are saying is, you know, the competitive set is actually shrinking a little bit in some of these markets. It's not every landlord has the quality product. We have nor the financial resources to attract tenancy.

The activity levels are very good I mean, I think we've been very pleased with the with the progress on the residential.

Speaker 2: Uh, yeah, we've had, uh, there's tours taking place every day, including the weekends, the, uh, the leasing team.

We've had towards taking place every day, including weekends. The leasing team. There is doing just a rock star job of.

Speaker 2: a rock star job of getting tenants qualified and leases executed. So to mention we're in the low 60s.

Of getting tenants qualify them leases executed so dementia were in the low <unk>.

Speaker 2: in terms of Lisa's sign, which is right in line with the hoping for and rates you're holding. And there we had to do some.

In terms of leases signed which is.

Right in line with what we are hoping for and rates are holding in there we had to do some pre construction opening rent concessions are pretty much all burning off so we're very much in line with our pro forma there.

Speaker 2: pre-construction opening, rent concessions, they're pretty much all burning off.

Jerry Sweeney: So our focus remains on leasing every square put through the portfolio, driving net effective rents at highs we possibly can. And really take an advantage of this continuing window we see of tenants really wanted to move into higher quality project with landlord stability. You know, brokers wanted to show space and buildings where they can get their leasing commissions. Tenants want to move into buildings where they know that they're sure they're getting their tenant improvement dollars funded.

Speaker 2: So we're very much in line with our pro-former there. On the commercial side, we did sign the One Lees with Gowin Proctor. We have picked up a whole new listing of prospects in the last quarter. Those tenants range everywhere.

I will tell you on the commercial side, we did sign the one lease with Goodwin Procter.

We have picked up a whole new listing of prospects in the last quarter.

Tenants range everywhere from 10000 square feet up through over 100000 square feet. So very pleased with the pipeline Theyre naphtha building is done the lobby is done furniture is in park has completed the amenity floor is done the building really does present a very.

Speaker 2: you know, 10,000 square feet up through over 100,000 square feet. So, very pleased with the pipeline there. Now the building is done, the lobby's done, furniture's in, park is completed, amenity floor is done. The building really does present a very attractive showcase. So, the leasing team is doing more and more tours every day. So, while we don't have anything under LOI or in lease negotiation, we have a number of proposals being exchanged. And a number of substantive.

Jerry Sweeney: Brandy wine resonates on both of those funds incredibly well. So we've increased our leasing teams and our talent at the ground level to make sure that we're really focused on turning over every possible stone. I think there's a leasing prospect.

Anthony Paolone: Okay, thank you.

Very attractive showcase so.

The leasing team is doing more and more towards everyday so while we don't have anything under LOI or in lease negotiation, we have a number of proposals being exchanged and a number of substantive discussion same thing on $31 51, which is again not going to be delivered till later in 'twenty four and we're just <unk>.

Anthony Paolone: Thank you, Tony.

Michael Griffin: Our next question comes from the line of Michael Griffin with City. Great, thanks.

Speaker 2: And we just top the steel off the other day, so it's a really hard tack towards up to just the first few.

The steel off the other day, so it's really hard hat tours up to just a few first few levels.

Michael Griffin: For the driveway assets sale, do you have a sense what the cap rate or buyer interest was on that property and then from assets you're currently marketing, you know, similar question, you know, where do you think you can tell me that what's the potential buyer for? Yeah, great question, Michael. The cap rate on the on the on the Barton sale was within the high taxes and came in about 300 bucks, a little bit more 300 bucks.

But the activity level, there has picked up as well the life science market is showing some signs of recovery there is more tenants in the marketplace.

Speaker 2: signs of recovery, there's more tenants in the marketplace.

Speaker 2: The rate environment has created a dynamic where there's not as many new projects on the horizon as there was feared to be a couple of years ago. And those tenants that we're talking to at 3151 range in the 50 to 125,000 square foot range. So good sized tenants again.

Rate environment has.

Created a dynamic where there's not as many new projects on the horizon as there was geared to be a couple of years ago.

And those tenants that we're talking to a $31 51.

Michael Griffin: Look, I mean, the the buyer pulls actually interesting right now, you know, we have a number of properties of the marketplace, we have a, you know, one or two properties, a way to go under firm agreement. And the on the standard office product, we're typically saying, you know, the small institutions, the syndicators, the well capitalized private development, redevelopment companies in the marketplace. So, you know, cap rates are kind of in the call in the 8 to 10% range for some of those more more workmen like products.

The range in the.

50 to 125000 square foot range. So good sized tenants again proposals being exchanged nothing signed at this point.

Speaker 2: proposals being exchanged, nothing's fine at this point. Uptown A-Tech, the residential won't really deliver till the latter half of next year, so it's still a bit too early to tell the business plan there looks good, market dynamics seems solid. And on the commercial side, that market is, I touched on, remains slow, but we do have a number of prospects that we are doing tours and having.

Uptown a tech the residential won't really deliver till the latter half of next year. So it's a bit too early to tell the business plan, there looks good market dynamics and solid.

And on the commercial side that market as I touched on remains slow, but we do have a.

A number of prospects that we are doing tours and having discussions with so hopefully that provides you a little more color than the prepared comments.

Speaker 2: So hopefully that provides you a little more color than the prepared comments.

Speaker 11: Great, that was very helpful. And just one quick last one for me. What was the $11 million impairment related to?

Great. That's very helpful and just one quick last one for me.

Michael Griffin: The biggest challenge really is getting a financing in place. So, we haven't really seen as much pricing pressures you would expect unless it's really driven by, hey, need to get financing. So, I think brandy wine being in a position where we can provide some bridge financing for several years and take that financing risk off the table, I think puts in a pretty good position. But you know, for example, we have a couple of props we have on the market in northern Virginia, you know, we've had in one case over 40 investors signed the NDA with about 10 different tours.

What was the 11.

<unk> million dollars impairment related to.

Speaker 3: We looked at one of our assets, some of them are in use in paramins that we take at a couple of property levels as we start to assess whether we're gonna sell those assets or not. So that is not related to three-parten. Last quarter we did take an impairment on three-borten, ahead of that sale. This is impairment on assets that we are taking and look at as possible.

We looked at it or.

Our assets some of them are.

And use impairments that we've taken a couple of property levels as we start to assess.

Whether we're going to sell those assets or not so that is not related to.

<unk> partners last quarter, we did take an impairment on three important ahead of that sale. This is impairment on assets that we are taking a look at it as possible sale candidates.

Michael Griffin: We have another project where we had 75 C89 with the, with the, with tours occurring on almost a daily basis. So, there seems to be a still a fair amount of interest in buying properties. The major gating issue that I think we're all facing is just how we can, we can facilitate the debt side of their equity investment. And I think really depending upon how the interest rate climate goes and the commercial banks and life insurance companies, that'll dictate whether, you know, if you get some of these sales done, we need to do some bridge financing. Very thanks.

Okay, great. Thank you.

Michael Griffin: Maybe one on the leasing side.

Thank you.

Speaker 1: That concludes today's question and answer session. I'd like to turn my call back to Jerry Sweeney for closing your mark.

That concludes today's question and answer session I would like to turn the call back to Jerry Sweeney for closing remarks.

Speaker 2: Great Liz, thank you for your help today. And thanks to all of you for participating on our third quarter earnings conference call. And we look forward to updating on our business plan progress after the first of the year. So thank you very much.

Great. Thank you for your help today and thanks to all of you for participating on our third quarter earnings Conference call and we look forward to updating you on our business plan progress after.

After the first of the year. So thank you very much.

Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect. Yeah.

This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker 12: Thanks for watching!

George Johnstone: Can you maybe comment on sort of how concessions have been trending in your markets and kind of a sense of what tenants are out of the market right now and sort of what they're looking for in terms of space requirements. Yeah, sure, Michael, this is George. The appetite to take that one. I mean, you know, TIs have remained relatively constant. You know, we've seen a little bit of pressure on unit costing, but the overall package.

Yeah.

Yes.

Sure.

George Johnstone: And again, we look at the concession, you know, as a combination of both abatement and TI. So we have seen a little bit of a shift more towards abatement. And we obviously try and limit that to just a fixed rent, as opposed to the operating expense pass through. Commissions have remained unchanged. So overall, net effective rents, we've continued to see growth, especially in Philadelphia, University City, and in Radner, more challenging, given the dynamic in Austin on net effective rent growth.

Michael Lewis: Great. That's just for me. Thanks for the time. Welcome, thanks.

Michael Lewis: Our next question comes from a line of Michael Lewis with Truist Securities. Please. Great. Thank you.

Michael Lewis: My first question is about, you know, Jerry, talk about the dividend cut, or maybe the question is really about cash flow, right? The new dividend payment looks to me it's about 60% of your third quarter CAD. Even at the old payment, it only would have been 76%. So your stocks trade at a 15% yield with 60% coverage just spot, you know, at 3Q. So the question is, you know, the markets, you know, with a yield that high and coverage that appears comfortable, you know, the market's not really buying this.

Michael Lewis: And so is the dividend cut? Is it as simple as, you know, you save $28 million and you have good uses for that on development and delivering? Or is this an expectation that cash flow still going down? And you've got ahead of this, you know, coverage getting getting really tight.

Jerry Sweeney: Hey, Michael, now let me be real clear. Our cash flow is strong. The coverage is that we've talked about are in very good shape. This was a deliberate review that the board and management went through and taking a look at really the, as I touched on in my comments, really the volatility and unpredictability of the capital markets. The fundamental reality is there's a lot of economic uncertainty out there. There's a lot of geopolitical risk.

Jerry Sweeney: No one's sure where interest rates are going to go. No one's sure what the state of the labor market is. So I think that the board took a hard look at our board projections. And in thinking about a, excuse me, a reset dividend, one of the set it at a level that provided bulletproof coverage is for us, send a strong signal that we were that we recognize the volatility, the uncontrollability in those capital markets.

Jerry Sweeney: But also set a firm foundation point where that revised dividend covered our taxable income distribution requirements. And really set a firm foundation point for that dividend to hopefully grow as the capital markets showed more sinus stability or predictability and our cash flows continue to increase. So if anything, it was a signal that recognized the realities of the current capital markets, not a harbinger that it was concerned about where our cash flows were going. So I want to be very clear on that. Okay, great.

Michael Griffin: And then second for me, these eight properties with high vacancy on page four, your supplemental 300 Delaware stands out. But, you know, is there any detail, you know, specific detail on the plan for that asset or for anything else, you know, on that list that you think might be helpful to know, you know, in terms of addressing, you know, these properties, which are driving, you know, a large part of the vacancy in the portfolio.

Michael Griffin: Great question, thanks Michael. We laid out those eight properties and as you know, it's three of them, actually four of them really because it's really kind of properties in Austin. So I think in Austin, the real focus for us is accelerating leasing. So we have a number of really talented leasing folks down there, great top executives. They've all gotten involved very, very even more so than the past in really sourcing deals.

Michael Griffin: We've reached out to brokers for incentive programs. And in one of those properties, frankly, it's very, very well located. You know, we are taking a look at whether there's a residential conversion opportunity on a couple of those, a couple of buildings in that complex. But Austin is primarily pedal to the metal. Let's get through this moment of this equal of in the marketplace. As tenants return to the marketplace for space, let's make sure these buildings look great. They're positioned well, they're well-stamped, great town at the ground level. And let's get them leased up.

Jerry Sweeney: So that's really the focus there. You know, we take a look at a 1676 international. As you know, that building has been a great redevelopment for us. The market has not performed as well as we hoped it would. And that property, along with some of our other assets in the northern mission markets, you know, we do as sale candidates in the near term. For a one, climate george touched on in one of the other questions, which is, you know, we just had a tenant give a space back there.

Jerry Sweeney: That's top of the market, the game plan there is to release that space. Sear a center, you know, that's on there because the give back this quarter, but that space is all part of our converting this building from purely office to the lower nine floors thing like science. So as you can see there, we've been pre-leased, you know, 22,000 square feet of that space. Three of Delaware's an interesting dilemma for us.

Jerry Sweeney: It's a property in downtown Wilmington. We really have at least any space in that building for a number of years because the least terms just aren't economic. The floor plate sizes are around 15,000 square feet plus or minus. The existing zoning provides for residential and office use. So that is a building we're looking at a potential residential conversion and a tenant move out plan over the next several years. That would be a progy the brandy wine could undertake or simply sell it based upon the conversion plan that we put in place. But that's a progy we do not anticipate investing any significant additional capital. So, was that helpful? Did that answer your question? Yeah, yeah, no, that's helpful. I appreciate it. Thank you.

Dylan Burzinski: Our next question comes from the line of Bill and Brzezinski with green street advisors. Good morning, guys. Thanks for taking the question. Just curious, you know, you mentioned several times, you know, bridge financing or cellar financing or whatever you want to call it. But just curious, you know, what would be the LTV that you guys would be willing to offer in this sort of structure? Yeah, I think in that framework, anywhere kind of between 50% and 75%, depending upon the project, the quality of the buyer and our convertibility capacity to the extent that Alon does a perform.

Dylan Burzinski: But that seems to be the pretty safe range, Dylan, somewhere in that 50% to 75% range. Okay, that's helpful. And then I guess just touching on the expense side of things, you know, you mentioned lower expenses in the quarter. I guess just how should we be thinking about that looking into 2024? Should we expect to continue to receive relief on this run, or should we return to a more normalized environment added in the 2024?

George Johnstone: Yeah, Dylan, it's George. I mean, I think, you know, probably a little bit of a continuation. You know, we continue to aggressively appeal and challenge real estate tax assessments. I do think we maybe have some opportunity still there. You know, utilities, our teams have just done a good job at kind of managing that consumption load and some of our negotiated contracts on forward purchase agreements have benefited the portfolio. You know, we've got a little bit of seasonality coming up for the fourth quarter, so we'll start to get into the potential for snow removal that hasn't existed thus far.

George Johnstone: But year over year, I would think, you know, there's certainly a lot of focus on our property management teams to maintain, if not reduced expenses across the board. Yeah, I don't understand. I mean, we're doing the same thing on the construction side. I mean, the reality is, you know, if you think about it, overall leasing velocity is down much than brandy one, but in the markets. You know, a lot of general contractors are looking for works, so we're able to kind of get better buying power given the size of our asset base here, particularly in Philadelphia, to drive better, better GC fees, better general conditions.

George Johnstone: Do some forward procurement programs. So really one of the one of the real green shoots this year has been our ability to, you know, really maintain very strong control over our capital spend. Which I think really helps drive those net effective rents. I think combination of the really great work are operating teams do every day to make sure that we ever improve our margins in a challenging environment that we expect to be a continual trend line.

George Johnstone: And certainly as the pace of overall construction slows, we think we'll be in even a stronger position to leverage our buying power in our core markets to drive even better, better cost modules from our outside general contracting firms. That's helpful color. Really appreciate it. Thanks, guys. Thank you.

Upal Rana: Our next question comes from a line of upalrana with key bank.

Tom Wirth: Hey, good morning. Thanks for staying with my question. Tom, you're preparing remarks on the scoop of yards, Lisa was helpful, but could you spend further on that project, you know, any allies on the office portion you hope to get to the finish line in the near term. And any timing on the residential Lisa and if you can provide any numbers on the impact on the capitalized interest burn off that, you know, that be able to.

Tom Wirth: Paul, thanks. Yeah, well, I'll touch based on just what I talked about with Tom Mice, very much. I guess I'll touch on what I said in the remarks. Yeah, we, you know, as we bring the developments online, we're going to be experiencing a leaps-up phase and with the multi-family, that's going to be brought in over time. But, you know, for the first year we expect to slowly bring up the operating results for the residential, that'll be both here and when we eventually have uptown ATX residential started.

Tom Wirth: When that happens, you know, we're going to have some operating losses as we bring those properties on, so that's going to be one phase of it. Two, you know, you begin to reduce interest capitalization as more and more of the units become available for lease. And then number three, we have our preferred equity partner costs that also are phased in on a similar manner. So, those costs over the first, you know, two, three, four quarters are going to be a level that will halt hopefully decrease as we get the closest stabilization.

Tom Wirth: So, that's how I think we look at the rollout of some of the JVs especially on the multi-family side. As you look at the office side, you know, until we can lease the square fee, it's a little simpler. We have, you know, we basically have one year from substantial completion to lease up that space. So, again, that's more of a future thing and Jerry could touch more on the pipeline and what he's seeing there.

Tom Wirth: But after the one year, then it does become an operational asset, regardless of lease up. So, you know, our goal as we've said is to get the leasing completed. So as we roll into that one year window and we start to look at that operational property come online that we've, you know, that we've done our best to get the revenue start. But that'll occur. Again, we have a year to do that from an office standpoint.

Tom Wirth: And as leases come on, we just turn on that portion of the building from an operation point of view. And I'll just add on to Tom's good comments. You know, I think on the pipeline, you know, the really near term focuses on 30, 25. That's pretty much delivered at this point. We have a number of residential that won't really deliver for the next couple months. But the activity levels are very good.

Tom Wirth: I mean, I think we've been very pleased with the progress on the residential. You know, we've had, there's tours taking place every day, including the weekends, the leasing team there's doing just a rock star job of getting tenants qualified and leases executed. So the mention were in the low 60s in terms of leases sign, which is right in line with what we're hoping for and rates are holding in there. We had to do some pre-construction opening rent concessions.

Tom Wirth: They're pretty much all burning off. So we're very much in line with our pro former there. On the, I will tell you on the commercial side, we did sign the one lease with Gilwin Proctor. We have picked up a whole new listing of prospects in the last quarter, those tenants range everywhere from, you know, 10,000 square feet up through over 100,000 square feet. So very pleased with the pipeline. They're now the building is done.

Tom Wirth: The lobby's done furnitures and park is completed. The amenity floor is done. The building really does present a very, a very attractive showcase. So we're the leasing team is doing more and more tours every day. So while we don't have anything under L.O.I.R, in lease negotiation, we have a number of proposals being exchanged and a number of substantive discussions. Same thing on 31, 51, which is, again, not going to be delivered till later in 24.

Tom Wirth: And we just top the steel off the other day. So it's a really heart attack tours up to just the first few levels. But the activity level there is picked up as well. The life science market is showing some signs of recovery. There's more tenants in the marketplace. The rate environment has created dynamic where there's not as many new projects on the horizons as there was feared to be a couple years ago.

Tom Wirth: And those tenants that were talking to a 31-51 range in the 50 to 125,000 square foot range. So, good sites, tenants, again, proposals being exchanged, nothing's not at this point. Uptown HX, the residential won't really deliver till the latter half of next year. So, a bit too early to tell the business plan there looks good. Market dynamics seems solid. And on the commercial side, that market is touched on remains slow. But we do have a number of prospects that we are doing tours and having discussions with. So, hopefully that provides you a little more color than the preparation. So, thank you very much for your hard comments.

Jerry Sweeney: Great, that was very helpful. And just one quick last one for me. What was the 11 million dollar impairment related to? We looked at one of our assets. Some of them are in use in impairments that we take at a couple of property levels as we start to assess whether we're going to sell those assets or not. So, that is not related to three Barton last quarter. We did take an impairment on three Barton ahead of that sale. Well, this is impairment on assets that we are taking a look at as possible sale candidates. Okay, great. Thank you.

Jerry Sweeney: That concludes today's question and answer session. I'd like to turn the call back to Jerry Sweeney for closing remarks. Great, Liz. Thank you for your help today. And thanks to all of you for participating in our third quarter earnings conference call. And we look forward to updating on our business plan progress after the first of the year. So, thank you very much.

Operator: This concludes today's conference call. Thank you for participating.

Operator: You may now disconnect.