Q1 2025 Brandywine Realty Trust Earnings Call

Thank you. Bye.

Speaker Change: Good day and welcome to the Brandywine Realty Trust's first quarter 2025 earnings call. At this time, all participants are in a listening mode. After the speaker's presentation, there will be a question and answer session.

Speaker Change: Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Jerry Sweeney, President and CEO . Please go ahead.

Michelle, thank you. Thank you very much. Good morning everyone.

Speaker Change: Thank you for participating in our first quarter, 2025 Earnings Call.

Speaker Change: On today's call with me is usual, or George Johnstone, or Executive Vice President of Operations, Dan Palazzo, or Senior Vice President, Chief Accounting Officer, and Tom Worth, or Executive Vice President, and Chief Financial Officer.

Speaker Change: Prior to beginning certain information with old discuss on the call today, may constitute forward-looking statements within the meanings of the Federal Securities Law.

Speaker Change: Although we believe the estimates reflected in these statements are based on reasonable assumptions.

Speaker Change: We cannot give assurance that the anticipated results will be achieved.

Speaker Change: for further information on the factors that could impact our anticipated results.

Speaker Change: Please reference our press release as well as our most recent annual and quarterly reports that we file with the SEC.

Speaker Change: Well, first in four months, we hope that you and yours are doing well [inaudible]

Speaker Change: To the extent that we can, we are closely monitoring the rapidly evolving macro-environment, including the impact of tariffs, interest rates, credit spreads, and other public policy issues as we move forward with executing our 2025 business plan [inaudible]

Speaker Change: So, during our prepared remarks today, we'll briefly update you on first quarter results and provide an update on our 2000 business plan After that, Dan, George, Tom and I are available to answer any questions

Speaker Change: So moving into the presentation, our first quarter FFO was 14 cents per share. You'll hear more on that from Tom in a few moments

Speaker Change: We posted solid operating metrics again this quarter, reinforcing our portfolios high quality and strong market positioning. At the midpoint, we have now executed 92% of our 25 spec revenue

Our quarterly retention rate was 55%

Speaker Change: While this quarterly activity was below our fourth quarter run rate, our operating portfolio of pipeline continues to increase.

Speaker Change: And along those lines were pleased to report that we have 306,000 square feet of forward leasing activity that will commence after the first quarter end. This is the highest level of forward leasing velocity we've had in over 11 quarters.

This forward leasing helps mitigate our first quarter negative absorption

Speaker Change: The predominance of that negative is worse than was the result of early terminations and two tenant defaults.

Speaker Change: 77% of that activity occurred in our Austin, Met DC and New Jersey Delaware markets. We have already released 55,000 square feet of those moveouts all with 2025 commencement dates.

In Philadelphia, we are 93% occupied and 96% least [inaudible]

Speaker Change: In the Pennsylvania suburbs, we are 88% occupied and 90% least And in Austin, we're a number of early terminations impacted our overall occupancy numbers that is now 75% occupied.

Speaker Change: But given the overall strong performance in the majority of our portfolio, we are maintaining our year-end occupancy and leasing guidance.

Speaker Change: Looking ahead, we have only 4.4% of annual roll-over through 2026, remaining one of the lowest in the office sector For the quarter, our market market was 8.9% on a gap basis and 2.3% on a cash basis, both are above our business plan expectations

Speaker Change: Our capital ratio was 12.2%, slightly above our 25 business plan range, but as expected for the first quarter.

Speaker Change: First quarter, physical tours were well in line with our fourth quarter, volume and exceeded first quarter, 24 by 4%. Also on a wholly owned basis, 60% of all new leasing activity was the result of the flight that clouded, I'll talk about in a few moments.

Speaker Change: Our operating portfolio leasing pipeline remained very strong and it includes about 159,000 square feet of leases and advanced stages of negotiations.

So the takeaway on operations is it remains very stable.

Speaker Change: Solid Operating Performance with very limited roll over risk for several years .

Good Capital Control [inaudible]

Speaker Change: Improving Markets and an expanding leasing pipeline, so all in all very consistent with our 25 business plan forecast.

Speaker Change: From a liquidity standpoint, we did elect a free pay our $70 million unsecured term loan and at $65 million outstanding on our $600 million unsecured line of credit. We have no unsecured bond maturities until 2027 in November of that year.

Speaker Change: Going forward, as we talk about every quarter, to ensure ample liquidity, our business plan is predicated upon maintaining minimal balances on our line of credit over the next several years.

Speaker Change: If stepping back and looking at the big picture, our real estate markets and overall sentiment continue to improve. We are seeing that every day in our tour activity.

Speaker Change: Our operating and leasing teams have established a solid operating foundation to capitalize on these improving office market dynamics. In particular, our pipeline activity continues to grow.

Speaker Change: Tour volume remains at a very healthy level. Rent levels and concession packages remain in line with our business plan, and in select submarkets and buildings, we're pushing both nominal and effective rents.

Speaker Change: Demand for high-quality, highly-manitized product, advancing the flight the quality trend remains the defining characteristic of both the overall sector and our portfolio. The market continues to see a quality bifurcation.

Speaker Change: For example, using one of the brokerage firm's numbers, Philadelphia has an 18% vacancy rate among 119 buildings

Speaker Change: 50% of that vacancy is concentrated in just 14 buildings while the 10 Ampest Buildings account for 40% of the city's vacancy.

Speaker Change: So the high-quality buildings are not only outperforming but also pushing effective rents and the competitive set continues to narrow.

Brandywine: Overall, Brandywine is 96.2% at least in our Philadelphia CBD portfolio and during the first quarter we captured 64% of all deals done in the Central Business District.

Brandywine: The city's light science sector, while certainly still in the recovery phase, continues to be a Ford growth driver backed by a strong regional healthcare ecosystem that includes almost 1200 biotech and pharmaceutical firms along with 15 major healthcare systems.

Brandywine: Austin, which is still early in the recovery cycle, continues to be a magnet for corporate expansion driven by both a friendly business environment and robust job growth.

Brandywine: Lisa Memento remains positive with Austin recording over 112 tenants actively seeking more than 3.7 million square feet of space as of April .

Brandywine: That's a 33% increase in demand over the fourth quarter of 24.

Brandywine: Positive momentum is danger in bias, what we're seeing a revitalization of the tech sector. There's also a notable trend encouraging return to work on a full-time basis. So we remain optimistic that Austin will see increased leasing activity as 2025 progresses.

Brandywine: We do anticipate tenants continue to have a clear preference for premium office environments and Brandywine, as demonstrated through our leasing results, is well positioned to continue capturing demand in both Philadelphia, Austin and our other smaller submarkets.

as we discuss during our fourth quarter call.

2025 is a transitional earnings year for us.

Brandywine: We have made significant progress on portfolio stability, however our earnings remain impacted by the expensing of our preferred non-casher curals and interest expense charges relating to our two residential projects at 30.25 JFK and one uptown.

Brandywine: Stabilizing these development projects remains the top priority for the organization and during the quarter we had great success in our residential developments and expanded the pipeline and deal status of our remaining commercial projects.

Looking at each project at Scookel Yards

Leaving us with just over one floor to lease [inaudible]

Brandywine: We have a good pipeline that advanced or in the quarter on that remaining office space and if advanced negotiations underway on the two remaining retail spaces, we do anticipate the commercial component will stabilize in the first quarter of 26.

Brandywine: A Vera, a residential tower, continues to perform on-pro-forma and is currently 96% least.

Brandywine: We are also experiencing a very healthy renewal rate at an average rent increase in the double digits.

Brandywine: We expect the viewer will stabilize in the second quarter of this year, so this quarter.

31-51, our life science project with substantially delivered this quarter.

Brandywine: Some physical work does remain particularly on the streetscape and this project will be in a capitalization phase through 2025.

Brandywine: The pipeline now stands at over 500,000 square feet with advanced discussions underway with several prospects.

Brandywine: The life science market remains in a recovery mode impacted by a challenging fundraising climate and public policy uncertainty.

Brandywine: Excuse me, an uptown ATX, the pipe line for office component now stands to shy 400,000 square feet, with ten in size as ranging between 6 and 150,000 square feet.

Brandywine: Given the status of this pipeline after counting for tenant build-out periods, we do expect this project to stabilize in Q226.

Brandywine: as we project at last quarter. Uptown Residential, known as Solaris House, opened six months ago in September . We're currently 56% least and we expect Solaris to stabilize early Q425.

Brandywine: As noted in the past, our development projects remain top of market and are attracted to a broad range of our customer targets.

Brandywine: We remain confident in their success and we continue to aggressively market each of those projects.

to the upside

Brandywine: Pine Stabilization, these projects will generate about 41 million dollars of annualized NLI increase to our first quarter income stream, so they do remain a key driver for the company. Also, as these projects stabilize, they present an excellent refinancing and recapitalization opportunity for us.

Brandywine: In looking at the dividend, you know, for as we noted on the year end call, we roll that 25 guidance.

Brandywine: For 25, the FF fell in cat payout ratios will be above our historical averages, and frankly, above our preferred levels.

Brandywine: However, as our developments grow occupancy, we anticipate bringing our FFO and Cater results through 26 and bringing that dividend pair ratios back to historical levels without reducing the current 60 cent per share dividend.

Brandywine: It's also important to note, as we highlight on page 3 of the supplemental package,

Brandywine: Our 2025 recurring capital spend is projected to be impacted by approximately $21 million or $0.12 per share of deferred tenant improvement allowances for leases that were signed prior to 2023.

Brandywine: During the first quarter, we recognize approximately 50% of those forecasted costs.

Brandywine: totaling $10.5 million or $6 cents per share that is included in our CAD ratio. In addition, the CAD ratio for the quarter includes just shy of $4 million of accrued but unpaid preferred returns to our partners were about two cents a share.

So, it's important that without those...

Brandywine: Resulting in an 88% pat ratio, much more in line with our historical standards.

Brandywine: I also would like to note on the capital side that our 9-11% 25 projected capital ratio range is where the lowest we've had in the past 5 years, so we are keeping a tight control over capital spending as we aggressively move police up our development projects.

Brandywine: So with that, let me turn the floor over to Tom to review our financial results and provide an outlook for the balance of the year.

Tom: Thank you, Jerry. Good morning. Our first quarter net loss stood at 27.4 million or 16 cents per share and our first quarter FFO totaled 24.7 million or 14 cents per diluted share.

Tom: Each quarter, we provide future quarter-guidance on a certain significant revenue expense line items and based on our fourth quarter-guidance, our results were one penny above that guidance but were two cents below first quarter consensus.

Tom: The difference is primarily due to a couple of estimates straightlining some expense line items which did not impact the full year but didn't impact the quarter.

Tom: Some general observations for the first quarter. FFO contribution from our on Consolidate joined ventures.

Tom: or $1.9 million above our $1 million reforchested loss. This is primarily due to an income received at Solaris. It's one time in nature.

Tom: Certain interest, interest expense was 1 million less than our forecast primarily due to capitalized interest, and all the other forecasted quarterly results were in line.

Tom: Looking at our debt metrics, first quarter debt service and interest coverage ratios were 2.1 unchanged from the fourth quarter and our first quarter in annualized combined core net debt to Ibidah were 7.7 and 7.9 respectively with both metrics at or below our range.

Tom: Our combined leverage was better than our core leverage, primarily due to the forecasted one-time cash income that was generated from our unconsolidated joint ventures.

Tom: There were no other changes to the portfolio or joint ventures as we finalized our partial conversion plans and is outlined on page of our supplemental. We anticipate removing 300 Delaware from our portfolio within the next two quarters and replacing it into redevelopment.

Tom: During the quarter, we repaid our 70 million on secure turmoil on the extended maturity day with proceeds from the unsecured line of credit and cash on hand.

Tom: We have, as Jerry mentioned, we have no unsecured bonds maturing until November 20, 20, 27, and our wholly owned debt is 95.4% fixed with a weighted average maturity of 3.5 years.

Looking at our second quarter-guines

Tom: Property level operating income will cost approximately $70 million and will be slightly above our first quarter based on lower seasonal operating expenses.

Tom: $5 million for the second quarter. This represents a sequential decrease of approximately $6 million, primarily due to the one-time forecasted non-recurring income that we received in the first quarter.

Tom: GNA for the second quarter will total about 9.5 million representing a sequential decrease.

Tom: totaling $8 million and consistent with prior years. The sequential decrease is primarily due to the timing of our equity compensation expense recognition.

Tom: Total interest expense will approximate $34 million and capitalized interest will be about $2.5 million. Termination and other income will total about $1.5 million and net management currency and development will be $2.5 million.

Tom: Our full year business plan does include speculative sales activity, totaling $50 million million dollars.

Tom: which is anticipated to be weighted towards the second half of the year. We project these sales to occur later in 2025 and to create minimal dilution. However, the earnings impact may be higher if timing is accelerated.

Tom: We anticipate no property acquisitions, we anticipate no use of the ATM or ATI, by-back activity and we believe our share count will be roughly 179 million shares.

Tom: As Jerry noted, we will look to recapitalize our developments as they approach stabilization and recap the commercial developments as leases are executed and are least percentages approach 80 to 90 percent.

Tom: We are reaching those levels on several projects and we will commence these recapitalization of efforts over the balance of the year.

Turning to our capital plan.

Tom: Our capital plan for the balance of this year totals 180 million and is straightforward as our wholly-owned development redevelopment projects are fully constructed with least up capital remaining to be spent on our commercial projects.

Tom: We recognize this is very elevated, and this gerry outlined our quarterly CAD was negatively impacted by older 10 allowances on our crude but unpaid preferred dividends on our unconsolidated joint ventures.

Tom: Longer term is we complete the recently the recent development cycle and experience higher net operating income. Our CAD ratio should decrease significantly throughout 2026.

Tom: Looking at the larger capital uses for the balance of the year, we have development spend totaling 35 million, which includes 155 King of Pressure Road to 50 King of Pressure Road, and we recently announced the Food Hall of One Drexel Project.

Tom: We have $80 million to common dividends, $20 million of revenue maintained capital, $20 million of revenue created capital, and $20 million of equity contributions to fund the recently signed tenant leases and our joint venture developments.

Tom: The funding sources are $95 million of cash flow after interest payments, $55 million of speculative asset and land sales, and $5 million in construction loan proceeds from 155 King of Prussia.

Tom: Based on the capital plan above, we anticipate using an incremental 25 million of net cash during the balance of the year with a $61 million outstanding balance on our $600 million line of credit.

Tom: We also projected our net debt to Ividah will range between 8-8-4

Tom: Without any recapitization of our joint ventures with the increase primarily due to the losses that were occurring on those joint ventures currently, our debt to GAV will approximately 48 percent.

Tom: By the end of the year, our core net debt to Ibadah range will be 7.7 to 7.9 and should equal our consolidated net debt to Ibadah, which does exclude joint ventures.

Tom: We anticipate fixed charge ratio and interest coverage ratios will be roughly 2.0, which will represent a one-tenth sequential decrease from this quarter. Again, primarily due to the joint venture losses.

Tom: and with incremental income from the development of projects, we anticipate the leverage will continue to improve as the year goes on. I will now turn the call back over to Gerard.

Gerard Sweeney: Thank you, Tom. So as we look ahead, the operating platform and the quality of our developments will allow us to continue capitalizing and improving real estate market conditions.

Gerard Sweeney: While earnings growth from the development pipeline is that yet fully visible, the groundwork has been laid and we are poised to continue to build on the momentum and drive long-term value out of those properties.

Speaker Change: The operating platform remains very stable, very limited in your term rollover, liquidity as time outlined is an excellent shape, and we're well positioned to take advantage of continued improvement in both the tenant and the financing markets.

Gerard Sweeney: With that, we're delighted to open the floor for questions. As we always do, we ask in the interest of time you limit yourself to one question and a follow-up.

Gerard Sweeney: Thank you. If you'd like to ask a question, please press star 11. If your question has an answer and you'd like to remove yourself from the queue, please press star 11 again.

Gerard Sweeney: Our first question comes from Anthony Paolone with JP Morgan. Your line is open.

Anthony Paylone: Thank you. Good morning. I was wondering, Jerry, if you could start with maybe the pipeline you touched on it a little bit, particularly as it relates to Austin, but maybe give us a little bit more color around where it's coming from, whether the discussions are...

for expansions, moves, et cetera.

Anthony Paylone: Yeah, Tony, thank you. Good morning. Yeah, certainly look, we've definitely seen a continuation of the trend we outlined in the last call, which is increased.

Anthony Paylone: Tour activity through the building. And we're definitely saying a more increased interest through some technology tenants.

Anthony Paylone: So we take a look at the at the existing pipeline that we have. It's a good mix of technology companies.

Financial Service Companies, actually a couple of emerging life science companies.

Anthony Paylone: that are really focused on kind of moving into new quality space that we've delivered.

Anthony Paylone: So the pipeline, as I mentioned, ranges from a low of 6,000 square feet, we're filling up the specs so we put the pull together to some of the larger tennis that we're in advance discussions with.

Ok. And then, just more broadly… [inaudible]

Speaker Change: Can you give us any just more real-time anecdotes about how decision-making is coming along as the macro backdrop unfolds here and whether or not anybody's hitting pause or if its business is usual, just anything incremental and more real-time helpful?

Yeah, I look certainly the level of macro uncertainty.

Speaker Change: is not helping the decision making process. I can't say, George, maybe you can weigh in, but I don't think we've really seen any of the larger prospects that we're talking to across the company, both in existing properties and development properties, paused because of the macro overlay. Bye.

Speaker Change: But that could certainly change. I mean, every day it seems like we're in a new cycle. But, you know, decision making from our standpoint is we've reinforced the last several quarters, does remain slower than we would like?

Speaker Change: But I can't say that the events of let's say the last quarter

Speaker Change: Have really done anything to protract what we already do as a protract decision making cycle anyway.

You know, the-

Speaker Change: The tariff situation, I think, is creating some uncertainty in the minds of our contractors and certainly as we go through the pricing process for TI work.

Speaker Change: That actually, the threat of those tariffs is actually an accelerant.

Speaker Change: to getting pricing finalized. We're in a very fortunate position where the development projects that we have underway.

Speaker Change: They were all done based on the guaranteed maximum price contract, as you can see from the supplemental package, all of our capital is spent.

Speaker Change: with the exception of TI dollars. So we're very keenly focused on having that risk behind us, but also as we go through the space planning and bidding process, making sure we continue to deal with very high quality contractors who have great supply chains.

Speaker Change: and making sure that we accelerate the planning process to the extent we can to lock into pricing before the concern about the increased tariff prices takes place. But George, any other colleagues? Yeah, I think two other things, Tony. I do think that while...

You know...

Speaker Change: The tenant is taking the amount of time the tenant's taking to make decisions but Brandywine with our internal leasing teams, our internal construction and design teams and legal teams.

Speaker Change: We're turning our side of the transaction much quicker than some of our competitors and also with an highly unencumbered pool of assets.

Speaker Change: We're not having to go back to Lenders for additional decision making and then I think you know as Jerry mentioned in his script we probably have seen a little bit of a elongated decision making timeline when it comes to some of the life science companies but not necessarily on the office companies. [inaudible]

Ok, thank you for all that.

Thanks for learning.

Steve Sakwa: Thank you. Our next question comes from Steve Sakwa with Evercore ISI. Your line is open.

Steve Sakwa: Uptown ATX, and I guess at this point, 30-25, just so we have kind of a good framework for what's going on there.

Speaker Change: Yeah, well look, I think certainly on the operating portfolio side, the pipeline remains kind of between 1.7 and 1.8 million square feet.

Speaker Change: with good tour velocity. So, look, I think it's evidence by us being 96% least in CBD filled up in us doing north of 60% of the deals. We've got a very, very good pipeline there.

We have a couple holes in our Rann report folio.

Speaker Change: that in our Radner Corporate Center that we're very keen on getting filled and we're developing a nice pipeline and that pipeline's really picked up nicely in the last quarter. Our major holes in the operating portfolio really are down in Austin, Texas.

Speaker Change: where we've had a couple of tenants that moved out during the quarter without I guess a bankruptcy in an early termination and there the pipeline is better Steve than it was last quarter but still we're working hard to continue to build that pipeline. We've redoubled our marketing efforts down there, we're doing a lot more.

Not More Prospect Outreach [inaudible]

Speaker Change: that made some improvements to the properties to really position them well, so I think on the operating front.

Speaker Change: I think the trend line is very positive, even in Austin we're saying more and more companies focused on coming back to the office with more frequency

So their space needs are being more defined

You know, here in the Phil Loss, your region, we're definitely uh...

Speaker Change: I have seen people migrate to a full four or five day work weeks, so I think we're getting clarity on that You know, in the development pipeline

Speaker Change: You know, we have the one remaining floor, you mentioned 30, 25, we have one remaining floor and two retail spaces.

Speaker Change: I touched on with Tony on Austin, definitely seen a big uptick and tour activity. We continue to talk to several technology companies about larger space requirements.

Those.

Discussions are moving [inaudible]

Speaker Change: At a pace it's slower than we would like but certainly a constructive and engaged dialogue.

Speaker Change: We've actually seen a couple financial service firms enter the fray, they're looking for, you know, 50,000 plus kind of square foot requirements and then a number of retail tenants were talking to also as far as that building goes.

Speaker Change: just around out the horn at 31-51. You know, that is a building that was a special purpose for life science.

Speaker Change: We have a pipeline there of over 500,000 square feet. The largest users about 100,000 square feet is a highly a high credit prospect.

Speaker Change: But I think as George touched on, I think the concern over NIH funding.

Speaker Change: The slowdown in venture capital investment in life sciences clearly have an impact on the timing of once some of those life science companies make decisions.

And as a result,

right at the consequence of that.

Speaker Change: As we talked last quarter, we'd begun the show 31-51 to a number of office users as well. So we'd have a few of those potential office users in our pipeline.

Speaker Change: There have been through the building for tours and we'll see how that process continues at DuffTail with what we're doing with the institutional users and the life science companies.

Speaker Change: Great, thanks for that color, Jerry. And then maybe just switching the 300 Delaware, it sounds like pulling that asset out of the pool will certainly aid kind of the year end occupancy staff. Could you maybe talk about the economics of that office to Rezi Conversion, sort of how do you think about?

Speaker Change: The incremental capital that you'll need to spend and, you know, I guess you're going to lose some ROI perhaps coming off that building. Like how do you think about the stabilize yield when that process is completed?

Speaker Change: Excuse me, and then we went through the detailed pricing conversion analysis.

That building is eligible for some federal financing.

Speaker Change: that helps augment the yield on that project so we have a lot of work underway on that property.

Speaker Change: The NOI that we're losing, Steve, is actually very minimal. I mean if the property has been under at least for a number of years.

We essentially made the fundamental decision a few years ago.

Speaker Change: that we were not going to invest additional capital in that building for leasing activity because we thought that we weren't going to get good effective rents.

Speaker Change: and our capital was better deployed elsewhere. And that was really the catalyst to start reviewing what the long-term...

Speaker Change: by Bill that project would dig. When we take a look at going through the remaining part of design development review, which will take really through the balance of this year.

Speaker Change: to get our full MEP, HBAC, all of our design development work completed.

Speaker Change: worked through the final approval processes. This would be a potential activity for us in the probably the middle to latter part of 2026.

Speaker Change: The yield right now, the yield on that assuming that we can achieve the federal subsidy would be somewhere in the 7.5% range.

Speaker Change: So our goal really on this and a couple of the other conversion opportunities that we're looking at is to get through the approval process.

Speaker Change: Doug tell that with the design development process we're going through. Develop the financial model and then decide that this is something that we want to either do ourselves or market as a turnkey development project to another firm. So

Speaker Change: But the important point I want to amplify is we made the decision.

Speaker Change: that it may not economic sense given where rent levels and capital costs are in that market for us to continue leasing that building on truly an office basis.

I hope that provides enough color for you [inaudible]

Yeah, that's great, thanks Gerard.

Welcome, Seth.

Speaker Change: Thank you. Our next question comes from Seth Bergey with City. Your line is open.

Seth Berge: Hi, it's discussed 15 million of dispositions with the possibility of more to come through the year. How has the macro environment changed what you're seeing out there in the market in terms of the buyer pool composition, pricing, and finance, finance and availability?

Speaker Change: Good morning. Look, actually I think that is an emerging bright spot. We'll sail it all about $50 million of sales this year.

We currently have put in a several of our properties.

Speaker Change: in Austin, Texas, and the suburban markets on the market for sale. We are in the process of going through that underwriting and bidding process by a number of buyers, a good pool of potential bidders on those properties.

Speaker Change: So I think we would expect that more visibility in the next quarter or so on how that process would work its way through. But I think we'd take a look at the...

at the overall investment market.

I think last year [inaudible]

Speaker Change: Going back to 23, you really had a marketplace with the dominant bite.

Speaker Change: I think we saw happen in 24 was kind of the reemergence of institutional quality buyers. So, for example, in 23 institutional buyers were less than 16%.

Speaker Change: of the office buying pool. They closed out 24 about 40% and just based upon the level of activity that we're seeing in the market generally, that institutional appetite seems the re-emerging for office space.

Speaker Change: The private firms high net worth families are still there as well, and they're all saying more and more private operators team up with private equity.

to pull together programs to-

to basically-

Speaker Change: Re-imagine properties that we want to sell, where we think the return metrics don't work for us but they may work for someone else in a more highly levered model.

Speaker Change: So we're continuing to see that as a buyer pool as well. Right now the mix of pit folks looking at the assets we have on the market is a blend of institutional operator and private equity.

Thanks.

You're welcome.

Speaker Change: Thank you. Our next question comes from Michael Lewis with Truth Securities. Your line is open.

Speaker Change: Thank you. You talked about recapitalizing the development project. The multi-family ones are pretty close to stabilization now.

Speaker Change: Could you maybe talk a little bit about the capital provider appetite and how that marries with your strategy in terms of, you know...

Speaker Change: What you might encumber, you know, amounts across the capital, anything to talk about on any of that?

Speaker Change: Yeah, good morning, Michael. I think, I think, in specific form and they're still evolving.

Speaker Change: I think the major focus right now makes everything stabilized, but certainly the buying pool in the appetite for the residential properties has a higher level of visibility and depth in the office products right now.

Speaker Change: So we're looking at everything ranging from harvesting the full value of those assets for sale.

Speaker Change: to doing another type of paraphasuit type of joint venture, will reduce our equity stake.

Speaker Change: of finalizing exactly what those algorithms will be. What we do know is that those preferred structures we have in place.

Speaker Change: We are targeting to reduce our exposure in at least one possibly two of those this year and the balance in 2026.

Speaker Change: Brandywine off in trades at a discount to NAV. Sometimes that discount is deep. That's like a lot of office

Speaker Change: Right now, I just pulled up on consensus NAV, Brandywine was 60% discounted NAV, so it almost got there in 2023. It traded at a discount this wide in 2020 at the onset of COVID. And in 2020 and in 2008, 2009, the GSC, so this is a historic

Speaker Change: Discount 1080. So my question is, you know, is there anything that you do differently or kind of creatively? You know, I was trying to think of ideas as well.

Speaker Change: Monetizing Assets, or I don't know, right? Sort of an open-ended question about, you know, at this point in time, with this deep-a-discounts NAV, does that change your thought process or give you any ideas?

Speaker Change: As we take a look at that and we think about the upcoming years.

We know some of the real key value drivers.

Are Delivering

Our Development Pipeline [inaudible]

Speaker Change: which as I mentioned will deliver 41 million dollars of additional N.O.I. [inaudible]

Speaker Change: to the company. So that is something that's within our grasp, within our target of business plan, and we feel very confident, getting it executed within the next several quarters as we outlined in the supplemental package. We think that will go a long way towards...

Speaker Change: George is generating higher FFO growth for us and returning our payout ratios to historical norms. Two, we also understand very clearly what the dynamics are in each of our markets.

Speaker Change: And when I take a look at the Ford Supply Pipeline

of Office Product.

Speaker Change: and look at the dearth of new additions coming into the office sector over the next four to five years. I think that really positions our portfolio incredibly well. I think we're saying the early signs of that, particularly here in CBD filled up in some of our core suburban markets where the our ability to move effective rents.

and our ability to control capital costs is really becoming a very key part of our business plan execution. I do believe

Speaker Change: are competitive that will continue to narrow at least in the intermediate term which provides a tremendous opportunity for us to continue driving N.O.I. And I think driving that N.O.I. will open up the door for us to evaluate more significant.

Speaker Change: Technical moves we can make in terms of different pieces of the portfolio. We have, you know, as you know, two significant development opportunities in front of us with the school yards and up 10 ATX, the market's clearly not there.

Speaker Change: for additional development, but the approvals are done, planning is done, infrastructure investments are being made, we recently received this, we outlined in the SIPA significant up-zoning potential for Optan ATX.

Speaker Change: And I certainly think as we start to take a look at what that development pipeline looks like, Michael, it's going to be much more mixed use. I think, you know, the original business plan was more off. It was originally a higher construction of office. I think we're going to follow the market demand drivers and I think our approvals.

Speaker Change: in both of those major pods give us complete flexibility in terms of project type.

Transparing density between different sites [inaudible]

Speaker Change: and those approvals are hard to achieve. Once they're achieved, they create a lot of value. So, whether we start to take a look at spinning off parcels in those properties or in those developments, doing ground-leaf structures, trying to figure out a way to more effectively finance.

Speaker Change: Those properties to deliver value to our shareholders given or high-costed equity capital in the public marketplace. I think all those things are very much on the radar screen.

Speaker Change: and are very much top of mind to management in the boards. We go through our strategic review process every quarter.

Thank you.

Speaker Change: Thank you. Our next question comes from Upal Rana with Keybank Capital Markets. Your line is open.

[inaudible]

Speaker Change: Good morning. This is Gabion for Upal. So building off a previous question on decision-making compared to the beginning of the year are potential tenants asking for more concessions or maybe looking at smaller spaces versus when they initially started looking? Thank you.

Speaker Change: Good morning. I know we're all changed since being here on New Georgia. Have you seen anything? But...

Speaker Change: New tenets that were gaining are sometimes downsizing from the space that...

Speaker Change: that they're vacating in someone else's portfolio but I think that plays into the flight to the quality theme of uh...

Speaker Change: But overall, I think, you know, concessions haven't changed dramatically capital as Jerry indicated. We're doing a good job in controlling, you know, capital ratios and et cetera.

Speaker Change: Great, thank you. And then I've a follow-up. Could you just talk about the GSA as a tenant? We see their annualized rent is primarily related to parking and op-ex. So could you provide any additional detail here given they're one of your top tenants?

Speaker Change: It's the historic renovation of the post office building that sits adjacent to the 30th Street Station in Philadelphia. That leads with the GSA at the end of 2030.

Right now it houses the Internal Revenue Service. [inaudible]

as a sole occupant.

Speaker Change: with the federal government mandate to bring workers back to the workplace.

for running at 80% occupancy there.

Speaker Change: and we remain in a very active dialogue with both the GSA.

and the client agency IRS.

about what they're going for plans are.

Speaker Change: So as part of that lease to go to your question, they do lease a number of parking spaces from us.

in a separate entity which is called Sierra Garage.

Speaker Change: and they are fully utilizing all their spaces as of this point. So, we have a number of years to work through that process with them on their renewal.

Speaker Change: It is the building's a designated federal facility. I think the service agencies are happy to be there, but of course we don't control the MAC or environment or what will happen with these different client agencies based upon administrative actions.

[inaudible]

Great, thank you. I appreciate the time.

Thank you.

Speaker Change: Thank you. Our next question comes from Dylan Burzinski with Green Street. Your line is open.

Dylan Brzezinski: Good morning guys, most of my friends asked by now, but I guess it's just one

I think it was a couple weeks ago we saw

Dylan Brzezinski: An announcement that sparked therapeutics was laying off a significant portion of its workforce. I know that you guys are the second largest tenants. Just curious that there's any sort of termination rides or ability for them to vacate that space at all.

Dylan Brzezinski: Well, they did have that answer, and Member Squark is owned by...

Dylan Brzezinski: by Roche Pharmaceuticals. So we have an extraordinary strong credit on that at least and I think

Dylan Brzezinski: This is the next phase, I'm going through the digestion of that acquisition.

Dylan Brzezinski: Rosh and Spark are still moving ahead on their cell and gene therapy research and manufacturing center.

Dylan Brzezinski: which is located adjacent to one of our property, so that investment level continues.

Dylan Brzezinski: But the average weighted average remaining lease term we have with them is 92 months. So they have no early rights to terminate.

Dylan Brzezinski: They have a lease that's coming in the couple of our buildings here in University City at the end of next year So we'll take a look at some of those

Great, appreciate that. Thanks guys.

Thank you, Dylan [inaudible]

Dylan Brzezinski: Thank you. That's all the time we have for questions. Like to turn the call back over to Jerry Sweeney for closing remarks.

Dylan Brzezinski: Great, Michelle. Thank you very much. And thank you all for participating in our first quarter 25 earnings call. We look forward to being able to provide an update on our second quarter call later in the quarter. Thank you very much.

Dylan Brzezinski: Thank you for your participation. This says include the program and you may now disconnect. Everyone, have a great day.