Q2 2026 Brandywine Realty Trust Earnings Call

July 23, 2026

Speaker #1: To ask a question during this session, you'll need to press *11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press *11 again.

Operator: Thank you for standing by, welcome to the Brandywine Realty Trust Q2 2026 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Gerry Sweeney, President and CEO. Please go ahead, sir.

Operator: Thank you for standing by, welcome to the Brandywine Realty Trust Q2 2026 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one, one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one, one again.

Speaker #1: today's program is being recorded. And now I'd like to introduce your host for today's program, Jerry Sweeney, President and CEO. Please go ahead, sir.

Speaker #1: 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 *11 on your telephone.

Speaker #2: Jonathan, thank you very much. Good morning, everyone. Thank you for participating in our second quarter 26 earnings call. On today's call with me are Dan Palazzo, our Senior Vice President and Chief Accounting Officer; and Tom Wirth, our Executive Vice President and Chief Financial Officer.

Speaker #1: If your question has been answered and you'd like to remove yourself from the queue, simply press *11 again. As a reminder, today's program is being recorded.

Operator: As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Gerry Sweeney, President and CEO. Please go ahead, sir.

Speaker #1: And now I'd like to introduce your host for today's program, Gerard Sweeney, president and CEO. Please go ahead, sir.

Speaker #2: Prior to beginning, certain information discussed on the call today 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 assurance that the anticipated results will be achieved.

Gerard H. Sweeney: Jonathan, thank you very much. Good morning, everyone. Thank you for participating in our Q2 2026 earnings call. On today's call with me are Dan Palazzo, our Senior Vice President and Chief Accounting Officer, and Tom Wirth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed on the call today 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 assurance 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 and annual and quarterly reports that we file with the SEC.

Speaker #2: Johnathan, thank you very much. Good morning, everyone. Thank you for participating in our second quarter 2026 earnings call. On today's call with me are Dan Palazzo, our senior vice president and chief accounting officer; and Tom Wirth, our executive vice president and chief financial officer.

Speaker #2: 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 file with the SEC.

Speaker #2: During our prepared comments today, Tom and I will briefly review second quarter results, and frame out the key assumptions driving our guidance for the second half of the year.

Gerard H. Sweeney: Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance 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 and annual and quarterly reports that we file with the SEC.

Speaker #2: After that, Dan, Tom, and I are available to answer any questions. To start, from an operating portfolio management and liquidity standpoint, the second quarter produced results that exceeded or were in line with our business plan.

Speaker #2: During our prepared comments today, Tom and I will briefly review second quarter results and frame out the key assumptions driving our guidance for the second half of the year.

Gerard H. Sweeney: During our prepared comments today, Tom and I will briefly review Q2 results and frame out the key assumptions driving our guidance for the H2 of the year. After that, Dan, Tom, and I are available to answer any questions. To start from an operating portfolio management and liquidity standpoint, the Q2 produced results that exceeded or were in line with our business plan. This is highlighted by our speculative revenue increasing by $1 million of our guidance midpoint. Also, due to better than expected tenant renewals and expansions, we increased our full-year range for tenant retention. All of our other full-year operating and financial metrics remain unchanged from our original 2026 business plan. Since our last call, significant progress has been made on our capital markets activity, including asset sales and our 3025 refinancing that we'll review in a few moments.

Gerard H. Sweeney: During our prepared comments today, Tom and I will briefly review Q2 results and frame out the key assumptions driving our guidance for the H2 of the year. After that, Dan, Tom, and I are available to answer any questions. To start from an operating portfolio management and liquidity standpoint, the Q2 produced results that exceeded or were in line with our business plan. This is highlighted by our speculative revenue increasing by $1 million of our guidance midpoint. Also, due to better-than-expected tenant renewals and expansions, we increased our full-year range for tenant retention. All of our other full-year operating and financial metrics remain unchanged from our original 2026 business plan. Since our last call, significant progress has been made on our capital markets activity, including asset sales and our 3025 refinancing that we'll review in a few moments.

Speaker #2: This is highlighted by our speculative revenue increasing by $1 million in our guidance midpoint. Also, due to better-than-expected tenant renewals and expansions, we increased our full-year range for tenant retention.

Speaker #2: All of our other full-year operating and financial metrics remain unchanged from our original 2026 business plan. Since our last call, significant progress has been made on our capital markets activity, including asset sales in our 30/25 refinancing that we'll review in a few moments.

Speaker #2: Quarterly highlights include achieving 99% of our speculative revenue at the revised guidance midpoint, our second quarter FFO of 13 cents per share, that was ahead of the management guidance we provided in our first quarter call, and 1 cent below consensus.

Speaker #2: All of our other full-year operating and financial metrics remain unchanged from our original 2026 business plan. Since our last call, significant progress has been made on our capital markets activity, including asset sales and our 30-25 refinancing, which we'll review in a few moments.

Speaker #2: We are maintaining our 55-cent full-year midpoint and have narrowed our full-year FFO guidance range accordingly. Our balance sheet strengthening programs progressing very much on target, with approximately $208 million of asset sales now complete and the remaining under agreement with hard money deposits and quarter.

Speaker #2: Quarterly highlights include achieving 99% of our speculative revenue at the revised guidance midpoint. Our second quarter FFO was $0.13 per share, which was ahead of the management guidance we provided in our first quarter call and $0.01 below consensus.

Gerard H. Sweeney: Quarterly highlights include achieving 99% of our speculative revenue at the revised guidance midpoint. Our Q2 FFO of $0.13 per share, that was ahead of the management guidance we provided on our Q1 call and $0.01 below consensus. We are maintaining our $0.55 full year midpoint and have narrowed our full year FFO guidance range accordingly. Our balance sheet strengthening program's progressing very much on target with approximately $208 million of asset sales now complete and the remaining under agreement with hard money deposits and scheduled to close in Q3. We raised our sale guidance to $305 million, which is up $15 million from our business plan. For all sales, we have achieved pricing in line with our original guidance.

Speaker #2: We raised our sale guidance to $305 million or sub $15 million from our business plan, and for all sales, we have achieved pricing in line with our original guidance.

Speaker #2: We are maintaining our $0.55 full-year midpoint and have narrowed our full-year FFO guidance range accordingly. Our balance sheet strengthening program is progressing very much on target, with approximately $208 million of asset sales now complete and the remainder under agreement with hard money deposits, scheduled to close in the third quarter.

Speaker #2: Looking more closely at second quarter operations, solid operating metrics reinforced our strong market positioning, and tenants continued preference for high-quality space. Our wholly-owned portfolio is 90.6% leased, and 89.1% occupied.

Speaker #2: We raised our sale guidance to $305 million which is up $15 million from our business plan. And for all sales, we have achieved pricing in line with our original guidance.

Speaker #2: We had 88,000 square feet of positive net absorption during the quarter, our year-end occupancy and lease percentage will improve throughout the year, as we will have positive full-year net absorption for the first time in several years, as additional evidence of the ever-improving market in which we're operating.

Speaker #2: Looking more closely at second quarter operations, solid operating metrics reinforced our strong market positioning. And tenants continued preference for high-quality space. Our wholly-owned portfolio is 90.6% leased, and 89.1% occupied.

Gerard H. Sweeney: Looking more closely at Q2 operations, solid operating metrics reinforced our strong market positioning and tenants' continued preference for high quality space. Our wholly owned portfolio is 90.6% leased and 89.1% occupied. We had 88,000 square feet of positive net absorption during the quarter. Our year-end occupancy and lease percentage will improve throughout the year as we will have positive full year net absorption for the first time in several years as additional evidence of the ever-improving market in which we are operating. Leasing activity for the quarter totaled 353,000 square feet, including 254,000 square feet in our wholly owned portfolio and 98,000 square feet in our joint ventures. Forward leasing commencing after quarter-end totaled 166,000 square feet, with most taking occupancy this year. We have also achieved $18.3 million of spec revenue.

Gerard H. Sweeney: Looking more closely at Q2 operations, solid operating metrics reinforced our strong market positioning and tenants' continued preference for high-quality space. Our wholly owned portfolio is 90.6% leased and 89.1% occupied. We had 88,000 square feet of positive net absorption during the quarter. Our year-end occupancy and lease percentage will improve throughout the year as we will have positive full year net absorption for the first time in several years as additional evidence of the ever-improving market in which we are operating. Leasing activity for the quarter totaled 353,000 square feet, including 254,000 square feet in our wholly owned portfolio and 98,000 square feet in our joint ventures. Forward leasing commencing after quarter-end totaled 166,000 square feet, with most taking occupancy this year. We have also achieved $18.3 million of spec revenue.

Speaker #2: Leasing activity for the quarter totaled 353,000 square feet, including 254,000 square feet in our wholly-owned portfolio and 98,000 square feet in our joint ventures.

Speaker #2: We had 88,000 square feet of positive net absorption during the quarter. Our year-end occupancy and lease percentage will improve throughout the year, as we will have positive full-year net absorption for the first time in several years, as additional evidence of the ever-improving market in which we're operating.

Speaker #2: Forward leasing commencing after quarter end totaled $166,000 square feet, with most taking occupancy this year. We have also achieved 18.3 million of spec revenue.

Speaker #2: Leasing activity for the quarter totaled 353,000 square feet, including 254,000 square feet in our wholly-owned portfolio and 98,000 square feet in our joint ventures.

Speaker #2: That outperformance versus our original plan was primarily driven by Philadelphia CBD and our university city operations. Tenant retention for the quarter was 85%, resulting in us raising our full-year midpoint retention to 51 to 53 percent.

Speaker #2: Forward leasing commencing after quarter end totaled $166,000 square feet, with most taking occupancy this year. We have also achieved 18.3 million of spec revenue.

Speaker #2: This raise is due to unbudgeted renewals and expansions, again, in Philadelphia CBD and the Pennsylvania suburbs. Our capital ratio for the quarter was 12.9%, within our 26 business plan range, and our year-to-date capital ratio remains below our 26 range, but will remain within the overall guidance that we've provided.

Gerard H. Sweeney: That outperformance versus our original plan was primarily driven by Philadelphia CBD and our University City operations. Tenant retention for the quarter was 85%, resulting in us raising our full year midpoint retention to 51% to 53%. This raise is due to unbudgeted renewals and expansions again in Philadelphia CBD and the Pennsylvania suburbs. Our capital ratio for the quarter was 12.9%, within our 2026 business plan range. Our year-to-date capital ratio remains below our 2026 range, but will remain within the overall guidance that we've provided. Our GAAP mark-to-market was 1.5%. Cash market mark-to-market declined during the quarter, but we do anticipate improving results in the next two quarters and are maintaining our full year guidance. Our same-store results were a +0.5% on a GAAP basis and 1.9% on a cash basis, both within our current guidance ranges.

Speaker #2: Our gap mark-to-market was 1.5%, cash-to-market mark-to-market declined during the quarter, but we do anticipate improving results in the next two quarters and are maintaining our full-year guidance.

Speaker #2: This raise is due to unbudgeted renewals and expansions again in Philadelphia CBD and the Pennsylvania suburbs. Our capital ratio for the quarter was 12.9%, within our 2026 business plan range.

Speaker #2: Our same-store results were a positive 0.5% on a gap basis, and 1.9% on a cash basis, both within our current guidance ranges. Tour volume in the second quarter remains on pace with the high volume we saw in the first quarter.

Speaker #2: And our year-to-date capital ratio remains below our 2026 range, but will remain within the overall guidance that we've provided. Our gap mark to market was 1.5%.

Speaker #2: Cash market mark to market declined during the quarter, but we do anticipate improving results in the next two quarters and are maintaining our full-year guidance.

Speaker #2: We also continue to experience good tour conversion rates. For the trailing four quarters, 53% of our tours convert to a lease proposal, and from proposal, 41% converted to executed leases, which is above our historical average.

Speaker #2: Our same-store results were a positive 0.5% on a gap basis. And 1.9% on a cash basis, both within our current guidance ranges. Tour volume in the second quarter remained on pace with the high volume we saw in the first quarter.

Gerard H. Sweeney: Tour volume in Q2 remains on pace with the high volume we saw in Q1. We also continue to experience good tour conversion rates. For the trailing four quarters, 53% of our tours convert to a lease proposal, and from proposal, 41% converted to executed leases, which is above our historical average. A few additional comments regarding market dynamics. In Philadelphia, which includes our CBD and University City portfolios, we are now 95% occupied and 97% leased, with only 7% rolling annually through 2028, and overall activity levels remain very strong. During the quarter, we continued our CBD outperformance trend for the entire H1 2026, with 54% of all new leases signed in our CBD and University City submarkets being at a Brandywine property, significantly exceeding our market share.

Speaker #2: A few additional comments regarding market dynamics. In Philadelphia, which includes our CBD and university city portfolios, we are now 95% occupied and 97% leased, with only 7% rolling annually through 2028, and overall activity levels remain very strong.

Speaker #2: We also continue to experience good tour conversion rates. For the trailing four quarters, 53% of our tours convert to a lease proposal, and from proposal, 41% convert to executed leases, which is above our historical average.

Speaker #2: During the quarter, we continued our CBD outperformance trend for the entire first half of '26, with 54% of all new leases signed in our CBD and university city submarkets being at a Brandywine property significantly exceeding our market share.

Speaker #2: In addition to that, as noted on page 4 of the SIP, we are monitoring conversion projects aggregating more than 5.1 million square feet, representing approximately 11% of Philadelphia's total office inventory.

Speaker #2: And overall activity levels remain very strong. During the quarter, we continued our CBD outperformance trend for the entire first half of '26, with 54% of all new leases signed in our CBD and university city submarkets being at a Brandywine property significantly exceeding our market share.

Speaker #2: Our marketing position in Philadelphia will continue to improve, as these conversion projects get executed. In the Pennsylvania suburbs, we're 91% leased with the Radnor or submarket being 93% leased.

Gerard H. Sweeney: In addition to that, as noted on page four of the CIP, we are monitoring conversion projects aggregating more than 5.1 million square feet, representing approximately 11% of Philadelphia's total office inventory. Our marketing position in Philadelphia will continue to improve as these conversion projects get executed. In the Pennsylvania suburbs, we are 91% leased, with the Radnor submarket being 93% leased. We continue to see solid levels of pipeline prospects for all of our existing vacancies. On the other hand, Austin, at 67% occupied, continues to lag the rest of the portfolio and creates a more than 400 basis point drop in our overall company occupancy. Our Austin quarter end occupancy was negatively impacted by 3.7% due to 405 Colorado, which is 100% leased, being held for sale at the end of the quarter and subsequently closed.

Speaker #2: We continue to see solid levels of pipeline prospects for all of our existing vacancies. On the other hand, Austin, at 67% occupied, continues to lag the rest of the portfolio, and creates a more than 400 basis point drop in our overall company occupancy.

Speaker #2: Our marketing position in Philadelphia will continue to improve as these conversion projects get executed. In the Pennsylvania suburbs, we're 91% leased with the Radnor submarket being 93% leased.

Speaker #2: Our Austin quarter-end occupancy was negatively impacted by 3.7% due to 405 Colorado, which is 100% leased being held for sale at the end of the quarter and subsequently closed.

Speaker #2: We continue to see solid levels of pipeline prospects for all of our existing vacancies. On the other hand, Austin, at 67% occupied, continues to lag the rest of the portfolio and creates a more than 400 basis point drop in our overall company occupancy.

Speaker #2: The operating portfolio leasing pipeline is up 13%, or 220,000 square feet from the first quarter, and remains a solid level, just shy of 2 million square feet.

Speaker #2: Our Austin quarter-end occupancy was negatively impacted by 3.7% due to 405 Colorado, which is 100% leased, being held for sale at the end of the quarter and subsequently closed.

Speaker #2: This pipeline includes about 456,000 square feet, of deals in advanced stages of negotiation. Turning to our balance sheet, we remain in solid shape from a liquidity standpoint.

Speaker #2: The operating portfolio leasing pipeline is up 13%, or 220,000 square feet from the first quarter, and remains a solid level just shy of 2 million square feet.

Gerard H. Sweeney: The operating portfolio leasing pipeline is up 13%, or 220,000 square feet from the Q1 and remains a solid level just shy of 2 million square feet. This pipeline includes about 456,000 square feet of deals in advanced stages of negotiation. Turning to our balance sheet, we remain in solid shape from a liquidity standpoint. While we had a balance outstanding on our line of credit at quarter end, upon receipt of $192 million of sale proceeds, we paid off that balance. As such, there is no outstanding balance on our line of credit, and we have $35 million of cash on hand. Our paramount objective is to use the vast majority of sale proceeds to reduce company leverage and to further improve credit metrics.

Speaker #2: While we had a balance outstanding on our line of credit at quarter end, upon receipt of $192, million of sale proceeds, we paid off that balance.

Speaker #2: This pipeline includes about 456,000 square feet of deals in advanced stages of negotiation. Turning to our balance sheet, we remain in solid shape from a liquidity standpoint.

Speaker #2: As such, there is no outstanding balance on our line of credit, and we have $35 million of cash on hand. Our paramount objective is to use the vast majority of sale proceeds to reduce company leverage and to further improve credit metrics.

Speaker #2: While we had a balance outstanding on our line of credit a quarter end, upon receipt of $192, million of sale proceeds, we paid off that balance.

Speaker #2: As such, we intend to use our cash balances and sale proceeds to further reduce debt, including repurchasing bonds starting as early as this quarter, and to a much lesser extent repurchasing shares.

Speaker #2: As such, regarding our planned share buyback program, until we make significant progress on achieving all of our leverage targets and credit metrics, we anticipate using only about 5 to 10 percent of our net proceeds to repurchase shares.

Gerard H. Sweeney: As such, we intend to use our cash balances and sale proceeds to further reduce debt, including repurchasing bonds starting as early as this quarter, and to a much lesser extent, repurchasing shares. As such, regarding our planned share buyback program, until we make significant progress on achieving all of our leverage targets and credit metrics, we anticipate using only about 5% to 10% of our net proceeds to repurchase shares. Consistent with this approach, as noted previously, our multiple year plan is designed to return to investment grade metrics. As such, we plan to maintain minimal balances on our line of credit and continue improving all credit metrics. The execution of our sales program is an excellent catalyst to reduce overall leverage levels and further improve all credit metrics.

Speaker #2: Consistent with this approach and, as noted previously, our multiple-year plan is designed to return to investment-grade metrics. As such, we plan to maintain minimal balances on our line of credit, and continue improving all credit metrics.

Speaker #2: The execution of our sales program is an excellent catalyst to reduce overall leverage levels, and further improve all credit metrics. As a point of note, almost 50% of our outstanding bonds have coupons north of 8.8%, providing an excellent refinancing opportunity over the next several years, assuming capital markets remain constructive.

Speaker #2: Consistent with this approach and as noted previously, our multiple-year plan is designed to return to investment-grade metrics. As such, we plan to maintain minimal balances on our line of credit and continue improving all credit metrics.

Speaker #2: Regarding other elements of our capital plan, during the quarter, we repaid 3025 JFK's construction loan with a $90 million seven-year secured financing on our residential component of Vera, and payments from our unsecured line of credit.

Speaker #2: The execution of our sales program is an excellent catalyst to reduce overall leverage levels and further improve all credit metrics. As a point of note, almost 50% of our outstanding bonds have coupons north of 8.8%, providing an excellent refinancing opportunity over the next several years, assuming capital markets remain constructive.

Gerard H. Sweeney: As a point of note, almost 50% of our outstanding bonds have coupons north of 8.8%, providing an excellent refinancing opportunity over the next several years, assuming capital markets remain constructive. Regarding other elements of our capital plan, during the quarter, we repaid 3025 JFK's construction loan with a $90 million 7-year secured financing on our residential component of Vera and payments from our unsecured line of credit. This transaction unencumbered the office component of the property for inclusion in our unencumbered asset pool, bringing over $13 million of GAAP income onto our balance sheet. During the quarter, we also exercised our first 6-month extension right under our existing credit facility, moving the maturity date to year-end 2026. As we complete our 2026 capital recycling program and other capital market activity, we will continue our productive work with our bank group to recast the facility during this extension period.

Speaker #2: This transaction unencumbered the office component of the property, for inclusion in our unencumbered asset pool, bringing over $13 million of gap income onto our balance sheet.

Speaker #2: Regarding other elements of our capital plan, during the quarter we repaid $30 million loan with a $90 million seven-year secured financing on our residential component of Vera, and payments from our unsecured line of credit.

Speaker #2: During the quarter, we also exercised our first six-month extension right under our existing credit facility, moving the maturity date to year-end '26, and as we complete our 26 capital recycling program, and other capital market activity, we'll continue our productive work with our bank group to recast the facility during this extension period.

Speaker #2: This transaction unencumbered the office component of the property for inclusion in our unencumbered asset pool, bringing over $13 million of gap income onto our balance sheet.

Speaker #2: With the asset sale activity and the financings, we do project our year-end core net debt to EBITDA to be as we outlined in the SIP and arrange it 8 to 8.4 times.

Speaker #2: During the quarter, we also exercised our first six-month extension right under our existing credit facility, moving the maturity date to year-end '26. And as we complete our 2026 capital recycling program, and other capital market activity, we'll continue our productive work with our bank group to recast the facility during this extension period.

Speaker #2: Looking at our two remaining development projects, one uptown in 3151, while we have minimal definitive results to report this quarter, activity levels have been quite significant.

Speaker #2: With the asset sale activity and the financings, we do project our year-end core net debt to EBITDA to be as we outlined in the SIP and a range of 8 to 8.4 times.

Gerard H. Sweeney: With the asset sale activity and the financings, we do project our year-end core net debt to EBITDA to be, as we outlined in the CIP, in a range of 8 to 8.4 times. Looking at our two remaining development projects, One Uptown and 3151. While we have minimal definitive results to report this quarter, activity levels have been quite significant. Our overall pipeline for these projects is up over 10% from our last quarter. More importantly, at One Uptown, we have three leases being finalized and five proposals advancing towards lease negotiations that total over 100,000 sq ft. At 3151, in addition to the pipeline continuing to build, we have a multi-floor client in advanced lease negotiations, our overall pipeline remains around 46% office and 54% life science. We also have several other prospects in active discussions and several other key proposals outstanding.

Speaker #2: Our overall pipeline for these projects is up over 10% from our last quarter, more importantly, at one uptown, we have three leases being finalized, and five proposed advancing towards lease negotiations that total over 100,000 square feet.

Speaker #2: Looking at our two remaining development projects, one uptown in 3151, while we have minimal definitive results to report this quarter, activity levels have been quite significant.

Speaker #2: At 3151, in addition to the pipeline continuing to build, we have a multi-floor client and advanced lease negotiations, and our overall pipeline remains around 46% office, and 54% life science.

Speaker #2: Our overall pipeline for these projects is up over 10% from our last quarter. More importantly, at one uptown, we have three leases being finalized, and five proposed advancing towards lease negotiations that total over 100,000 square feet.

Speaker #2: We also have several other prospects and active discussions and several other key proposals outstanding. Additionally, in anticipation of the 2027 IBM expiration at uptown ATX, we do plan to commence redevelopment at least one of the existing buildings.

Speaker #2: At 3151, in addition to the pipeline continuing to build, we have a multi-floor client and advanced lease negotiations and our overall pipeline remains around 46% office, and 54% life science.

Speaker #2: Since announcing this initiative, we've built a pipeline of over 1.1 million square feet, with that pipeline having lease commencement dates ranging from 2027 to 2028.

Speaker #2: So the market response has been exceptional, the first building consists of 157,000 square feet, and we expect to deliver that renovated building in the fourth quarter of next year.

Gerard H. Sweeney: Additionally, in anticipation of the 2027 IBM expiration at Uptown ATX, we do plan to commence redeveloping at least one of the existing buildings. Since announcing this initiative, we've built a pipeline of over 1.1 million sq ft, with that pipeline having lease commencement dates ranging from 2027 to 2028. The market response has been exceptional. The first building consists of 157,000 sq ft, we expect to deliver that renovated building in Q4 of next year. We do expect rent levels to be 15% to 20% below rents required at One Uptown and for brand-new development, we're targeting a cash yield north of 8%. Also, as prospective tenant requirements advance, we also have planning underway to do similar renovations to several other buildings within the complex. Our Radnor Hotel development opened on schedule in May 2026.

Speaker #2: Since announcing this initiative, we've built a pipeline of over 1.1 million square feet, with that pipeline having lease commencement dates ranging from 2027 to 2028.

Speaker #2: We do expect rent levels to be 15 to 20 percent below rents required at one uptown, and for brand-new development, and we're targeting a cash yield north of 8%.

Speaker #2: Also, as prospective tenant requirements advance, we also have planning underway to do similar renovations to several other buildings within the complex. Our Radnor Hotel development opened on schedule in May of 2026.

Speaker #2: So the market response has been exceptional, the first building consists of 157,000 square feet, and we expect to deliver that renovated building in the fourth quarter of next year.

Speaker #2: We do expect rent levels to be 15 to 20 percent below rents required at one uptown and for brand-new development, and we're targeting a cash yield north of 8%.

Speaker #2: This 121-room hotel is situated adjacent to our 2.1 million square foot Radnor life science portfolio office portfolio and Penn Medicine's campus. The hotel is already serving as an excellent amenity for the BRANDYWINE tenant base.

Speaker #2: Also, as prospective tenant requirements advance, we have planning underway to do similar renovations to several other buildings within the complex. Our Radnor Hotel development opened on schedule in May 2026.

Speaker #2: The eight universities and colleges within a five-mile radius, and the adjoining Penn Medicine complex. For the partial year eight-month operating period from May when we opened the doors through December of '26, our pro forma projected a total of $8,500 room nights sold at a target ADR in the low $300s.

Speaker #2: This 121-room hotel is situated adjacent to our 2.1 million square foot Radnor Life Science portfolio and Penn Medicine's campus. The hotel is already serving as an excellent amenity for the Brandywine tenant base.

Gerard H. Sweeney: This 121-room hotel is situated adjacent to our 2.1 million sq ft Radnor life science portfolio, office portfolio in Penn Medicine's campus. The hotel is already serving as an excellent amenity for the Brandywine tenant base, the eight universities and colleges within a five-mile radius, and the adjoining Penn Medicine complex. For the partial year, eight-month operating period from May, when we opened the doors, through December 2026, our pro forma projected a total of 8,500 room nights sold at a target ADR in the low 300s. To date, with less than three months of operations, we have already booked over 8,400 hotel room nights, achieving almost 99% of our 2026 occupancy projections while maintaining our ADR target. These initial results are very encouraging. We'll be fully opening our two food and beverage offerings by Labor Day, we expect to stabilize the project in mid-2027.

Speaker #2: To date, with less than three months of operations, we have already booked over 8,400 hotel room nights, achieving almost 99% of our 2026 occupancy projections, while maintaining our ADR target.

Speaker #2: So these initial results are very encouraging, we'll be fully opening our two food and beverage offerings by Labor Day and we expect to stabilize the project in mid-2027, and as we've noted previously, once this project is stabilized, we will aggressively seek alternative capital structures for this operation.

Speaker #2: To date, with less than three months of operations, we have already booked over 8,400 hotel room nights achieving almost 99% of our 2026 occupancy projections while maintaining our ADR target.

Speaker #2: Looking at capital markets, as we've already highlighted, we've exceeded our initial 2026 business plan target of $280 to $300 million of sales, we expect to close all 305 million dollars of sales by the end of the third quarter.

Speaker #2: So these initial results are very encouraging, we'll be fully opening our two food and beverage offerings by Labor Day and we expect to stabilize the project in mid-2027.

Speaker #2: And as we've noted previously, once this project is stabilized, we will aggressively seek alternative capital structures for this operation. Looking at capital markets, as we've already highlighted, we've exceeded our initial 2026 business plan target of $280 to $300 million of sales.

Gerard H. Sweeney: As we've noted previously, once this project is stabilized, we will aggressively seek alternative capital structures for this operation. Looking at capital markets, as we've already highlighted, we've exceeded our initial 2026 business plan target of $280 to $300 million of sales. We expect to close all $305 million of sales by the end of Q3. We do have several other properties in the market for sale as we look at our disposition pipeline moving into 2027. In general, the response from the market on assets listed for sale was very strong. There was considerable interest, with the typical marketing process producing seven to 10 qualified bids. All buyer types were engaged, including institutional investment managers, private REITs, and significant interest from private capital and family offices.

Speaker #2: We do have several other properties in the market for sale, as we look at our disposition pipeline moving into 2027. In general, the response from the market on assets listed for sale was very strong.

Speaker #2: There was considerable interest with typical marketing process producing 7 to 10 qualified bids, all buyer types were engaged, including institutional investment managers, private REITs, and significant interest from private capital and family offices.

Speaker #2: We expect to close all 305 million dollars of sales by the end of the third quarter. We do have several other properties in the market for sale, as we look at our disposition pipeline moving into 2027.

Speaker #2: In general, the response from the market on assets listed for sale was very strong. There was considerable interest, with a typical marketing process producing 7 to 10 qualified bids. All buyer types were engaged, including institutional investment managers, private REITs, and there was significant interest from private capital and family offices.

Speaker #2: Looking at our further elements of our capital plan, we do plan to recapitalize both one uptown and Solaris, our residential project at uptown ATX during the second half of 2026.

Speaker #2: We anticipate a full sale on Solaris, and a parry pursuit joint venture on one uptown. These initiatives will recover significant capital, lower debt attribution, while increasing liquidity.

Speaker #2: Looking at our further elements of our capital plan, we do plan to recapitalize both one uptown and Solaris, our residential project at uptown ATX during the second half of 2026.

Gerard H. Sweeney: Looking at our further elements of our capital plan, we do plan to recapitalize both One Uptown and Solaris, our residential project at Uptown ATX, during H2 2026. We anticipate a full sale on Solaris and a pari passu joint venture on One Uptown. These initiatives will recover significant capital, lower debt attribution while increasing liquidity. With that overview, Tom will now review our financial results for Q2 and outlook for the balance of the year. Tom?

Speaker #2: So with that overview, Tom will now review our financial results for the second quarter, and outlook for the balance of the year. Tom?

Speaker #3: Thank you, Jerry, and good morning. Our second quarter net loss was $31.7 million, or 18 cents per share, our second quarter FFO totaled $23.6 million, or 13 cents per diluted share, and above our first quarter guidance and 1 cent below consent estimates.

Speaker #2: We anticipate a full sale on Solaris and a Parry Pursuit joint venture on One Uptown. These initiatives will recover significant capital, lower debt attribution, and increase liquidity.

Speaker #2: So with that overview, Tom will now review our financial results for the second quarter, and outlook for the balance of the year. Tom?

Speaker #3: So in general observations for the second quarter, FFO contribution from our joint ventures was 0.3 million, or 1.2 million above our forecast due to termination fee income and improving leasing.

Thomas E. Wirth: Thank you, Gerry, and good morning. Our Q2 net loss was $31.7 million, or $0.18 per share. Our Q2 FFO totaled $23.6 million, or $0.13 per diluted share and above our Q1 guidance and $0.01 below consensus estimates. The general observations for Q2, FFO contribution from our joint ventures was $0.3 million or $1.2 million above our forecast due to termination fee income and improving leasing. G&A expense was below our forecast by $0.2 million, primarily due to timing. Other income and term fees were $2.2 million or $0.3 million below reforecast due to lower termination fee income. Third-party fees were $1.8 million, $0.3 million above forecast due to higher third-party leasing fees. Property level NOI, interest expense and other forecasts according to results were generally in line.

Speaker #3: G&A expense was below our forecast by 0.2 million, primarily due to timing. Other income and term fees were 2.2 million, or 3 0.3 million below re-forecast due to lower termination fee income, and third-party fees were 1.8 million, 0.3 million above forecast due to higher third-party leasing fees.

Speaker #3: Property level NOI, interest expense, and other forecasted quarterly results were generally in line. Looking at our debt metrics second quarter, debt service and interest coverage ratios were 1.7, both equal to our first quarter results.

Speaker #3: And third-party fees were 1.8 million, 0.3 million above forecast due to higher third-party leasing fees. Property level NOI, interest expense, and other forecast according to results were generally in line.

Speaker #3: Our second quarter annualized combined and core net debt EBITDA were 9.0 and 8.1, respectively, since most of our sales and debt reduction will occur during the third quarter, our leverage metrics are similar to the first quarter.

Speaker #3: Looking at our debt metrics second quarter, debt service and interest coverage ratios were 1.7, both equal to our first quarter results. Our second quarter annualized combined and core net debt EBITDA were 9.0 and 8.1 respectively, since most of our sales and debt reduction will occur during the third quarter, our leverage metrics are similar to the first quarter.

Speaker #3: During the second half of the year, we expect these leverage levels to decrease. Portfolio composition during the second quarter, we removed four properties from our core portfolio that are being held for sale, totaling approximately $775,000 square feet, and they are roughly 91, a little over 91 and a half percent occupied.

Thomas E. Wirth: Looking at our debt metrics, Q2 debt service and interest coverage ratios were 1.7, both equal to our Q1 results. Our Q2 annualized combined and core net debt EBITDA were 9.0x and 8.1x respectively. Since most of our sales and debt reduction will occur during Q3, our leverage metrics are similar to Q1. During H2, we expect these leverage levels to decrease. Portfolio composition. During Q2, we removed four properties from our core portfolio that are being held for sale, totaling approximately 775,000 sq ft, and they are roughly a little over 91.5% occupied. To confirm, properties that are classified as held for sale are removed from our core and operating statistics. Based on the asset sold and the assets held for sale, the impact to our 2026 portfolio statistics will be immaterial.

Speaker #3: To confirm, properties that are classified as held for sale are removed from our core and operating statistics. Based on the asset sold and the assets held for sale, the impact to our 2026 portfolio statistics will be immaterial.

Speaker #3: And they are roughly 91, a little over 91 and a half percent occupied. To confirm, properties that are classified as held for sale are removed from our core and operating statistics.

Speaker #3: During the second quarter, we added 250 King of Prussia Road, our 168,000 square foot life science property located in the Radnor submarket. So the core portfolio, as property as the property stabilized in June.

Speaker #3: Based on the asset sold and the assets held for sale, the impact to our 2026 portfolio statistics will be immaterial. During the second quarter, we added 250 King of Prussia Road, our 168,000 square foot life science property located in the Radnor submarket.

Speaker #3: From liquidity and financing, we continue to maintain solid liquidity with 35 million current cash on hand and no outstanding balance on our unsecured line of credit, after taking into account the announced July sales activity.

Thomas E. Wirth: During Q2, we added 250 King of Prussia Road, our 168,000 sq ft life science property located in the Radnor sub-market. The core portfolio, as the property stabilized in June. From liquidity and financing, we continue to maintain solid liquidity with $35 million current cash on hand and no outstanding balance on our unsecured line of credit after taking into account the announced July sales activity. Related to sales activity, we adjusted our business plan for an increase to the wholly owned disposition activity. As Gerry touched on, we have increased our sales target to $305 million, with $208 million already closed and two properties expected to close during Q3. Majority of these proceeds will be used to reduce debt and continue our path back to investment grade.

Speaker #3: Related to sales activity, we adjusted our business plan for an increase to the wholly owned disposition activity. As Jerry touched on, we have increased our sales target to $305 million, with $208 million already closed, and two properties expected to close during the third quarter, majority of these proceeds will be used to reduce debt and continue our path back to investment grade.

Speaker #3: So the core portfolio, as property as the property stabilized in June. From liquidity and financing, we continue to maintain solid liquidity with 35 million current cash on hand and no outstanding balance on our unsecured line of credit after taking into account the announced July sales activity.

Speaker #3: Related to sales activity, we adjusted our business plan for an increase to the wholly owned disposition activity. As Jerry touched on, we have increased our sales target to 305 million, with 208 million already closed, and two properties expected to close during the third quarter, majority of these proceeds will be used to reduce debt and continue our path back to investment grade.

Speaker #3: With respect to our planned buyback activity, on the unsecured notes, we will be focused on notes with higher coupons as that will be more have more of an immediate impact to reduce our coverage ratios.

Speaker #3: To improve our coverage ratios, I'm sorry. Since these bonds trade at a premium, we will incur one-time debt extinguishment costs. However, we have not included these in our estimates of current FFO guidance.

Thomas E. Wirth: With respect to our planned buyback activity on the unsecured notes, we will be focused on those with higher coupons as that will have more of an immediate impact to improve our coverage ratios. Since these bonds trade at a premium, we will incur one-time debt extinguishment costs. However, we have not included these in our estimates of current FFO guidance. We also intend to use a portion of these proceeds, as Gerry mentioned, for sales proceeds to have an opportunistically buyback some shares. From a financings activity, the $178 million consolidated construction loan that was scheduled to mature in July 2026 was repaid in June. We have funded the repayment with a secured loan on the residential portion of the property totaling $90 million and our unsecured line of credit to unencumber the property. The $90 million seven-year secured financing was swapped to a fixed all-in rate of 5.8%.

Thomas E. Wirth: With respect to our planned buyback activity on the unsecured notes, we will be focused on those with higher coupons as that will have more of an immediate impact to improve our coverage ratios. Since these bonds trade at a premium, we will incur one-time debt extinguishment costs. However, we have not included these in our estimates of current FFO guidance. We also intend to use a portion of these proceeds, as Gerry mentioned, for sales proceeds to have an opportunistically buyback some shares. From a financing's activity, the $178 million consolidated construction loan that was scheduled to mature in July 2026 was repaid in June. We have funded the repayment with a secured loan on the residential portion of the property totaling $90 million and our unsecured line of credit to unencumber the property. The $90 million seven-year secured financing was swapped to a fixed all-in rate of 5.8%.

Speaker #3: We also intend to use a portion of these proceeds, as Jerry mentioned, for sales, proceeds to have an opportunistically buyback some shares. From a financing activity, the $178 million consolidated construction loan that was scheduled to mature in July 2026 was repayed in June.

Speaker #3: We have funded the repayment with the secure a secured loan on the residential portion of the property totaling $90 million, and our unsecured line of credit to uncover the property the $90 million seven-year secure financing was swapped to a fixed all-in rate of 5.8%.

Speaker #3: We also intend to use a portion of these proceeds, as Jerry mentioned, for sales, proceeds to have an opportunistically buyback some shares. From a financing activity, the 178 million consolidated construction loan that was scheduled to mature in July 2026 was repaid in June.

Speaker #3: Regarding the credit facility, our unsecured line of credit had an initial maturity date of June 2026, with 26-month extensions through June of 2027. While we complete our sales and debt reduction program, we continue to work with our bank group and anticipate completing a longer-term amendment during the initial six-month extension period.

Speaker #3: We have funded the repayment with the secure a secured loan on the residential portion of the property totaling 90 million dollars, and our unsecured line of credit to uncover the property the 90 million dollars seven-year secure financing was swapped to a fixed all-in rate of 5.8%.

Speaker #3: Looking at the recapitalizations, as our joint ventures continue to lease up and cash flows improve, we anticipate recapitalizing the final two preferred equity development projects into parry pursuit common equity joint venture structures during the second half of the year, with our ownership decreasing to a minority stake or an outright sale.

Speaker #3: Regarding the credit facility, our unsecured line of credit had an initial maturity date of June 2026 with 26-month extensions through June of 27. While we complete our sales and debt reduction program, we continue to work with our bank group and anticipate completing a longer-term amendment during the initial six-month extension period.

Thomas E. Wirth: Regarding the credit facility, our unsecured line of credit had an initial maturity date of June 2026, with two six-month extensions through June 2027. While we complete our sales and debt reduction program, we continue to work with our bank group and anticipate completing a longer term amendment during the initial six-month extension period. Looking at the recapitalizations. As our joint ventures continue to lease up and cash flows improve, we anticipate recapitalizing the final two preferred equity development projects and to pursue common equity joint venture structures during the H2 of the year with our ownership decreasing to a minority stake or an outright sale. We extended two existing loans on our ATX projects. While we still anticipate closing those transactions in the H2 of the year, we felt extending the loans will allow us time to run the recapitalization process without concerns about the maturities.

Speaker #3: We extended two existing loans on our ATX projects, while we still anticipate closing those transactions in the second half of the year, we felt extending the loans will allow us time to run the recapitalization process without concerns about the maturities.

Speaker #3: The recapitalization of both these projects will generate cash proceeds between 40 and 50 million, that will be used to further reduce our wholly owned leverage, and will slightly be slightly accretive to earnings and improve leverage.

Speaker #3: We extended two existing loans on our ATX projects while we still anticipate closing those transactions in the second half of the year. We felt extending the loans will allow us time to run the recapitalization process without concerns about the maturities.

Speaker #3: We continue to feel incrementally more positive about executing our land sales program this year, but we have not included any land proceeds gains or losses in our results.

Speaker #3: The recapitalization of both these projects will generate cash proceeds between 40 and 50 million. That will be used to further reduce our wholly owned leverage and will slightly be slightly accretive to earnings continue to feel incrementally more positive about executing our land sales program this year, but we have not included any land proceeds gains or losses in our results.

Thomas E. Wirth: The recapitalization of both these projects will generate cash proceeds between $40 million and $50 million that will be used to further reduce our wholly owned leverage and will be slightly accretive to earnings and improve leverage. We have not included any land proceeds, gains, or losses in our results or forecasted results. Focusing on the Q3 guidance, property level operating income will approximate $69.5 million and will be $3 million below the Q2. The incremental decrease is primarily due to the assets that are held for sale that did close in July. That will generate a $5 million reduction in NOI for the Q3 versus the Q2.

Speaker #3: Our forecasted results. Focusing on the third quarter guidance, property level operating income will approximate $69.5 million, and will be $3 million below the second quarter.

Speaker #3: The incremental decrease is primarily due to the assets that are held for sale that did close in July, and that will generate a $5 million reduction in NOI for the third quarter versus the second quarter.

Speaker #3: Our forecasted results. Focusing on the third quarter guidance, property level operating income will approximate 69.5 million, and we'll be 3 million below the second quarter.

Speaker #3: The lower NOI is partially offset, but the full-year impact by the full quarter impact of the Radnor Hotel, which commenced operations in May, and will generate a 1.2 million quarter over quarter increase.

Speaker #3: The incremental decrease is primarily due to the assets that are held for sale that did close in July, and that will generate a 5 million dollar reduction in NOI for the third quarter versus the second quarter.

Speaker #3: We also have the stabilization of 250 King of Prussia Road, which stabilized in June and will have that full quarter effect in the second in the third quarter as well.

Speaker #3: FFO contribution from our joint ventures will be break even, for the third quarter, G&A expense for the third quarter will total $7.5 million, the sequential decrease is consistent with prior quarters, and is primarily due to the timing of deferred compensation expense recognition.

Thomas E. Wirth: The lower NOI is partially offset by the full quarter impact of The Brandywine, which commenced operations in May and will generate a $1.2 million quarter-over-quarter increase. We also have the stabilization of 250 King of Prussia Road, which stabilized in June and will have that full quarter effect in the Q3 as well. FFO contribution from our joint ventures will be break even for the Q3. G&A expense for the Q3 will total $7.5 million. The sequential decrease is consistent with prior quarters and is primarily due to the timing of deferred compensation expense recognition. Our full year range is maintained at $36 million to $37 million. Total interest expense, including deferred financing costs, will approximate $40 million, which includes $400,000 of capitalized interest.

Speaker #3: We also have the stabilization of 250 King of Prussia Road, which stabilized in June and will have that full quarter effect in the second in the third quarter as well.

Speaker #3: Our full-year range is maintained at $36 to $37 million. Total interest expense including deferred financing costs will approximate $40 million, which includes $400,000 of capitalized interest, we have lowered our full-year interest expense range by 6.5 million at the midpoint to account for the anticipated lower debt balances.

Speaker #3: FFO contribution from our joint ventures will be break even. For the third quarter, G&A expense for the third quarter will total 7.5 million. The sequential decrease is consistent with prior quarters, and is primarily due to the timing of deferred compensation expense recognition.

Speaker #3: As previously mentioned, in connection with potentially buying back our unsecured bonds, we may incur one-time extinguishment charges that are not currently included in our guidance.

Speaker #3: Our full-year range is maintained at 36 to 37 million. Total interest expense including deferred financing costs will approximate 40 million. Which includes 400,000 of capitalized interest, we have lowered our full-year interest expense range by 6.5 million at the midpoint to account for the anticipated lower debt balances.

Speaker #3: Termination fee and other income will total $2.8 million. Net third-party fees will approximate $1.5 million, interest income $500,000, and our fully diluted share count will be 180 million.

Thomas E. Wirth: We have lowered our full year interest expense range by $6.5 million at the midpoint to account for the anticipated lower debt balances. As previously mentioned, in connection with potentially buying back our unsecured bonds, we may incur one-time extinguishment charges that are not currently included in our guidance. Termination fee and other income will total $2.8 million. Net third-party fees will approximate $1.5 million. Interest income $500,000. Our fully diluted share count will be 180 million. For clarity, the above forecasted results On our core FFO range will be $0.13 to $0.15 for the current Q3. Turning to our capital plan, H2 of the year remains active with a total of $250 million of activity. Our Q2 CAD payout ratio was 103%.

Speaker #3: As previously mentioned, in connection with potentially buying back our unsecured bonds, we may incur one-time extinguishment charges that are not currently included in our guidance.

Speaker #3: For clarity, the above forecasted results on our core FFO range will be 13 to 15 cents for the current third quarter. According to our capital plan, the second half of the year, remains active with a total of $250 million of activity.

Speaker #3: Termination fee and other income will total $2.8 million. Net third-party fees will approximate $1.5 million. Interest income will be $500,000, and our fully diluted share count will be 180 million.

Speaker #3: Our second quarter CAD payout ratio was 103%. However, payout will remain within our business plan range for the balance of the year at 70 to 90 percent.

Speaker #3: As we expect incremental improvement in the payout ratio as FFO improves to the balance of the year. Looking at the larger uses, we have development spend of $40 million, we also have $28 million of common dividends, $17 million of revenue maintained capital, $25 million of revenue-free capital, and $10 million of equity contributions to our joint ventures.

Speaker #3: Our second quarter can payout ratio was 103%. However, payout will remain within our business plan range for the balance of the year at 70 to 90 percent.

Thomas E. Wirth: However, payout will remain within our business plan range for the balance of the year at 70% to 90%, which we expect incremental improvement in the payout ratio as FFO improves for the balance of the year. Looking at the larger uses, we have development spend of $40 million. We also have $28 million of common dividends, $17 million of revenue-maintaining capital, $25 million of revenue-creating capital, and $10 million of equity contributions to our joint ventures. The sources are going to be $55 million of cash flow from after interest, and asset sales totaling $290 million. Based on the capital plan, we anticipate having a small balance outstanding on our unsecured line of credit. We anticipate our net debt to EBITDA to still be in the range of 8.4 to 8.8. Our fixed charge ratio will be between 1.8 and 2.0.

Speaker #3: As we expect incremental improvement in the payout ratio as FFO improves in the balance of the year. Looking at the larger uses, we have development spend of 40 million dollars.

Speaker #3: The sources are going to be $55 million of cash flow from after-interest and asset sales totaling $290 million. Based on the capital plan, we anticipated having small balance outstanding on our unsecured line of credit.

Speaker #3: We also have $28 million of common dividends, $17 million of revenue-maintained capital, $25 million of revenue-free capital, and $10 million of equity contributions to our joint ventures.

Speaker #3: We anticipate our net debt to EBITDA to still be in the range of $84 to $88, and our fixed charge ratio will be between 18 and 20.

Speaker #3: Implicit in these ratios is the execution of our asset sales program and the recapitalization of the ATX developments. Until revenue becomes comes online, from our remaining development projects, particularly 3151 Market, our leverage ratios will remain elevated.

Speaker #3: The sources are going to be 55 million dollars of cash flow from after-interest and asset sales totaling 290 million. Based on the capital plan, we anticipated having small balance outstanding on our unsecured line of credit.

Speaker #3: We anticipate our net debt to EBITDA to still be in the range of 84 to 88, and our fixed charge ratio will be between 18 and 20.

Speaker #3: However, our asset sales recycling program is generating proceeds that will lower debt levels and improve our leverage metrics for both bonds and the credit facility.

Thomas E. Wirth: Implicit in these ratios is the execution of our asset sales program and the recapitalization of the ATX developments. Until revenue comes online from our remaining development projects, particularly 3151 Market, our leverage ratios will remain elevated. However, our asset sales recycling program is generating proceeds that will lower debt levels and improve our leverage metrics for both bonds and the credit facility. The benefit of this will be reported in the future quarters as we continue to execute on this program. I will now turn the call back over to Jerry.

Speaker #3: The benefit of this will be reported in the future quarters as we continue to execute on this program. I will now turn the call back over to Jerry.

Speaker #4: Great. Thank you, Tom. As we wrap up and look ahead, market conditions continue to firm. We're seeing, as I mentioned, a monthly increase or overall pipeline.

Speaker #3: However, our asset sales recycling program is generating proceeds that will lower debt levels and improve our leverage metrics for both bonds and the credit facility.

Speaker #4: Across the board in all of our core markets, our leasing team are doing a great job in terms of making sure that we capture more than our more than our market share of lease deals across our portfolio.

Speaker #3: The benefit of this will be reported in the future quarters as we continue to execute on this program. I will now turn the call back over to Jerry.

Speaker #1: Great. Thank you, Tom. As we wrap up and look ahead, market conditions continue to firm. We're seeing, as I mentioned, a monthly increase or overall pipeline.

Gerard H. Sweeney: Great. Thank you, Tom. As we wrap up and look ahead, market conditions continue to firm. We're seeing, as I mentioned, a monthly increase to our overall pipeline across the board in all of our core markets. Our leasing team are doing a great job in terms of making sure we capture more than our market share of lease deals across our portfolio. As we've outlined, 2026 is going to show earnings growth and lower leverage over 2025, and we certainly expect further improvement and growth into 2026. As Tom touched on, as we continue to stabilize and recapitalize these projects, we do believe they'll be generating significant incremental NOI in 2026, 2027, and 2028. The groundwork's been laid, and we'll continue building on the momentum that our teams have created to drive long-term value. With that, Jonathan, we're delighted to open up the floor for questions.

Speaker #4: And as we've outlined 2026 is going to show earnings growth and lower leverage over 2025. And we certainly expect further improvement in growth in the 2026.

Speaker #1: Across the board in all of our core markets, our leasing team are doing a great job in terms of making sure we capture more than our more than our market share of lease deals across our portfolio.

Speaker #4: As Tom touched on, as we continue to stabilize and recapitalize these projects, we do believe there'll be generating significant incremental NOI. In '26, '27, and '28.

Speaker #1: And as we've outlined 2026 is going to show earnings growth and lower leverage over 2025. And we certainly expect further improvement in growth in the 2026.

Speaker #4: So the groundwork's been laid, and we'll continue building on the momentum that our teams have created to drive long-term value. So with that, Jonathan, we're delighted to open up the floor for questions.

Speaker #4: As we always do, we ask that in the interest of timing courtesy, you limit yourself to one question and follow-up.

Speaker #1: As Tom touched on, as we continue to stabilize and recapitalize these projects, we do believe they'll be generating significant incremental NOI in '26, '27, and '28.

Speaker #2: Certainly. Thank you. And our first question for today comes from the line of Steve Sakwa from Evercore ISI. Your question, please.

Speaker #1: So the groundwork's been laid, and we'll continue building on the momentum that our teams have created to drive long-term value. So with that, Jonathan, we're delighted to open up the do, we ask that in the interest of timing courtesy, you limit yourself to one question and follow-up.

Speaker #5: Yeah. Thanks. Good morning, Jerry and Tom. Could you maybe just provide a little bit more color on the 3151? I think you said you had multiple floor users looking at the building.

Gerard H. Sweeney: As we always do, we ask that in the interest of time and courtesy, you limit yourself to one question and follow-up.

Speaker #5: Maybe just talk maybe about the nature of the tendency life science versus traditional office and have you seen any meaningful improvement on the life sciences front as capital markets activity on that front?

Operator: Certainly. Thank you. Our first question for today comes from the line of Stephen Sakwa from Evercore ISI. Your question please.

Speaker #2: Certainly. Thank you. And our first question for today comes from the line of Steve Sakwa from Evercore ISI. Your question, please.

Speaker #4: Yeah. Thanks. Good morning, Jerry and Tom. Could you maybe just provide a little bit more color on the 3151? I think you said you had multiple floor users looking at the building.

Stephen Sakwa: Yeah, thanks. Good morning, Jerry and Tom. Could you maybe just provide a little bit more color on the 3151? I think you said you had multiple floor users looking at the building. Maybe just talk about the nature of the tenancy, life science versus traditional office, and have you seen any meaningful improvement on the life sciences front as capital markets activity on that front has gotten better over the last six to nine months?

Speaker #5: Has gotten better over the last 6 to 9 months?

Speaker #4: Yeah. You certainly, Stephen. How are you this morning? Yeah. 3151, we actually have a multi-floor client in advanced stage of lease negotiations right now.

Speaker #4: Maybe just talk maybe about the nature of the tendency life science versus traditional office and have you seen any meaningful improvement on the life sciences front as capital markets activity on that front has gotten better over the last 6 to 9 months?

Speaker #4: So we think that's moving very positively. And we think that will also generate some additional momentum. As I mentioned, the portfolios the pipeline is up about 10% from last quarter.

Speaker #4: I know pipeline has been getting a deal done, but it's a Harbinger of good things to come. So we're happy that the tour velocity remains very active.

Speaker #3: Yeah. You certainly,

Gerard H. Sweeney: Yeah. Certainly, Steven. How are you this morning? Yeah, 3151, we actually have a multi-floor client in advanced stages of lease negotiations right now. We think that's moving very positively. We think that will also generate some additional momentum. As I mentioned, the pipeline is up about 10% from last quarter. I know pipeline isn't getting a deal done, but it's a harbinger of good things to come. We're happy that the tour velocity remains very active. A lot of ongoing discussions proposed.

Speaker #1: Stephen, how are you this morning? Yeah, 3151—we actually have a multi-floor client in advanced stage of lease negotiations right now, so we think that's moving very positively.

Speaker #4: A lot of ongoing discussions, proposals, or advancing. In terms of the life science market, we are seeing a bit of a rebound. In fact, we were fortunate enough here at Sierra Center to host an event the other day with the governor of the Commonwealth of Pennsylvania, Josh Shapiro, a number of other political notaries, state senators, etc.

Speaker #1: And we think that will also generate some additional momentum. As I mentioned, the portfolios the pipeline is up about 10% from last quarter. I know pipeline isn't getting a deal done, but it's a harbinger of good things to come.

Speaker #1: So we're happy that the tour velocity remains very active. A lot of ongoing discussions, proposals, or advancing. In terms of the life science market, we are seeing a bit of a rebound.

Speaker #4: to announce the Commonwealth is part of the budget this year. Adopted 125 million dollar Innovate 2.0 Pennsylvania, which is geared towards providing attractive financing to help life science companies grow.

Speaker #1: In fact, we were fortunate enough here at Sierra Center to host an event the other day with the governor of the Commonwealth of Pennsylvania, Josh Shapiro, along with a number of other political notables, state senators, etc.

Speaker #4: We think that will accelerate the growth rate and the capital structures of a number of the life science companies that are being curated both at B-Labs, other incubators in the city, and certainly start to create a little more momentum for those incubator-level tenants to move to graduate spaces.

Speaker #1: to announce the Commonwealth is part of the budget this year. Adopted 125 million dollar Innovate 2.0 Pennsylvania, which is geared towards providing attractive financing to help life science companies grow.

Speaker #4: And we are talking a couple of tenants in our graduate-level space that are taking more space than 3151. So the trend line is acceleration has not occurring, certainly at the pace any of us would like, but the trend line is positive.

Speaker #1: We think that will accelerate the growth rate and the capital structures of a number of the life science companies that are being curated both at B-Labs, other incubators in the city, and certainly start to create a little more momentum for those incubator level tenants to move to graduate spaces.

Speaker #4: It seems to be durable. And we're certainly looking forward to getting a couple of leases across the finish line on this building.

Speaker #5: Okay. Thanks. And then just as a follow-up, I think you said that you were Solaris and One Uptown were basically JV/asset sale kind of in the back half of the year.

Speaker #1: And we are talking a couple of tenants in our graduate level space that are taking more space than 3151. So the trend line is acceleration has not occurring, certainly at the pace any of us would like, but the trend line is positive.

Speaker #5: Maybe just talk about the demand for Austin assets in general, particularly on the apartment side, just given that that market's been oversupplied and what kind of, I guess, demand did you see when you went to sell 405 Colorado?

Speaker #1: It seems to be durable, and we're certainly looking forward to getting a couple of leases across the finish line on this building.

Speaker #4: Okay. Thanks. And then just as a follow-up, I think you said that you were Solaris and One Uptown were basically JV/asset sale kind of in the back half of the year.

Speaker #4: Yeah. Well, in terms of 405 Colorado, we saw great activity. And I guess stepping back for just a second, if you look at the activities that we have at taking place in Austin, our primary focus, as I've talked on the calls before, is to take real advantage of the long-term value opportunity we have at Uptown.

Speaker #4: Maybe just talk about the demand for Austin assets in general, particularly on the apartment side, just given that that market's been oversupplied and what kind of, I guess, demand did you see when you went to sell 405 Colorado?

Speaker #1: Yeah. Well, in terms of 405 Colorado, we saw great activity. And I guess, stepping back for just a second, if you look at the activities that we have taking place in Austin, our primary focus, as I've talked about on the calls before, is to take real advantage of the long-term value opportunity we have at Uptown.

Speaker #4: And as noted in the SIPA, we achieved some excellent zoning changes in the last year or so that moved our FAR from 12 from 3 to 1 to 12 per 1, moved up our height limit, so certainly a big focus of our talent and capital base is going to be directed to harvesting the value we can create at One Uptown.

Speaker #4: Based on that, with our sale program really focused on reducing leverage, we took a look at a lot of properties in our portfolio. 405 came up as a property that obviously very high quality, fully leased.

Speaker #1: And as noted in the SIPA, we achieved some excellent zoning changes in the last year or so that moved our FAR from 12 from 3 to 1 to 12 per 1, moved up our height limit, so certainly a big focus of our talent and capital base is going to be directed to harvesting the value we can create at One Uptown.

Speaker #4: We thought it was a good time to optimize some value there. We saw a very active bid list. From a number of very high-quality institutions, we closed that transaction a few weeks ago.

Speaker #1: Based on that, with our sale program really focused on reducing leverage, we took a look at a lot of properties in our portfolio. 405 came up as a property that is obviously very high quality and fully leased.

Speaker #4: The pricing of that project at North is $700 a square foot came right in line with our assumed guidance. So even with that, the CBD market, having more than 5 million square feet of current vacancy, including space coming online, and projected absorption levels between 500,000 and a million square feet, even with that overhang of a 5 to 6-year stabilization period, I think the leasing profile and the wall that we had weighted average lease term that we had on 405 was very attractive to a lot of investors.

Speaker #1: We thought it was a good time to optimize some value there. We saw a very active bid list. From a number of very high quality institutions, we closed that transaction a few weeks ago.

Speaker #1: The pricing of that project at North is $700 a square foot came right in line with our assumed guidance. So even with that, the CBD market, having more than 5 million square feet of current vacancy, including space coming online, and projected absorption levels between 500,000 and a million square feet, even with that overhang of 5 to 6 year stabilization period, I think the leasing profile and the wall that we had weighted average lease term that we had on 405 was very attractive to a lot of investors.

Speaker #4: So very pleased to get that across the table. Again, it helps us focus back on One Uptown. And Uptown ATX in general, as well as generated a lot of great liquidity for us.

Speaker #4: Looking at Solaris, look, we had great success in absorbing space at Solaris. And we've been testing the waters with a number of investors. We think that there's a high probability we get a very good cap rate transaction on that project done within the next 60 to 90 days.

Speaker #1: So very pleased to get that across the table. Again, it helps us focus back on One Uptown. And Uptown ATX in general, as well as generated a lot of great liquidity for us.

Speaker #4: The migration is still very good. The job growth is still very good. So even though there's a temporary overbuilding of apartments, the absorption pace has been pretty significant throughout the city of Austin.

Speaker #1: Looking at Solaris, look, we had great success in absorbing space at Solaris. And we've been testing the waters with a number of investors. We think that there's a high probability we get a very good cap rate transaction on that project done within the next 60 to 90 days.

Speaker #5: Great. That's it for me. Thanks.

Speaker #4: Thank you, Steve.

Speaker #1: Thank you. And our next question comes from the line of Seth Bergey from Citi. Your question, please.

Speaker #1: The migration is still very good. The job growth is still very good. So even though there's a temporary overbuilding of apartments, the absorption pace has been pretty significant throughout the city of Austin.

Speaker #2: Thanks. It's Nick Joseph here with Seth. Something that's more commentary on the thought process behind the split between the debt repayments and the stock buybacks.

Speaker #2: Obviously, that's accretion from the buyback side, but recognize the desire to return to investment-grade metrics. So just wondering how you came up with that 5 to 10 percent proceeds for the buybacks.

Speaker #4: Great. That's it for me. Thanks.

Speaker #1: Thank you, Steve.

Speaker #2: Thank you. And our next question comes from the line of Seth Bergi from Citi. Your question, please.

Speaker #5: Thanks. It's Nick Joseph here. Seth, could you give us some more commentary on the thought process behind the split between the debt repayments and the stock buybacks?

Speaker #4: Yeah. And hey, Nick, and Tom and I will tag team this. But look, again, as I mentioned, the paramount objective is to move to investment grade.

Speaker #5: Obviously, that's accretion from the buyback side, but recognize the desire to return to investment-grade metrics. So just wondering how you came up with that 5 to 10 percent proceeds for the buybacks.

Speaker #4: Improve all of our credit metrics. The opportunity we have is that we have about 900 million dollars of outstanding bonds. That have a coupon rate in the high eights, high percentage rate.

Speaker #1: Yeah. And hey, Nick, and Tom and I will tag in this. But look, again, as I mentioned, the paramount objective is to move to investment grade.

Speaker #4: So being able to minimize those interest payments by buying back a lot of bonds is a real accelerant to improving all of our credit metrics.

Speaker #1: Improve all of our credit metrics. The opportunity we have is that we have about $900 million of outstanding bonds that have a coupon rate in the high eights, a high percentage rate.

Speaker #4: When we take a look at the share of buyback, it's really deemed to be an adjunct to maintain earnings neutrality through the impact of our sales program.

Speaker #4: So right now, we're targeting that somewhere between 5 and 10 percent of overall proceeds. I did mention that we have some other projects in the market for sale.

Speaker #1: So being able to minimize those interest payments by buying back a lot of bonds is a real accelerant to improving all of our credit metrics.

Speaker #4: Tom alluded to some of the land sale activity we're having. So we're on a clear path to generate surplus liquidity. And use that liquidity to improve our over balance sheet metrics.

Speaker #1: When we take a look at the share buyback, it's really considered to be an adjunct to maintain earnings neutrality through the impact of our sales program.

Speaker #4: With a piece of that being allocated to recognize the big dislocation between what we view as asset value and where the stock price is trading.

Speaker #1: So right now, we're targeting that somewhere between 5 and 10 percent of overall proceeds. I did mention that we have some other projects in the market for sale.

Speaker #4: I mean, certainly, trading a range of assets at 300 million dollars this year, thus far, at our targeted cap rate in the high sevens to low eights, versus where the stock is trading, say, on a cap rate basis, is a clear indication that the stock price, as it sits today, is currently undervalued.

Speaker #1: Tom alluded to some of the land sale activity we're having. So we're on a clear path to generate surplus liquidity, and use that liquidity to improve our overall balance sheet metrics.

Speaker #1: With a portion of that being allocated to recognize the significant dislocation between what we view as asset value and where the stock price is trading.

Speaker #4: That being said, major focus is to improve all the credit metrics. I have Tom, do you have anything else to add to that?

Speaker #1: I mean, certainly, trading a range of assets at $300 million this year, thus far, at our targeted cap rate in the high sevens to low eights, versus where the stock is trading, say, on a cap rate basis, is a clear indication that the stock price, as it sits today, is currently undervalued.

Speaker #3: Yeah. I just add to that. Seth, at those levels of buyback, if in fact we do them, and it's all dependent on where markets are, is that it doesn't really impact our leverage levels significantly at all to buy back some shares.

Speaker #1: That being said, major focus is to improve all the credit metrics. I have Tom, do you have anything else to add to that?

Speaker #3: Relative to the leverage levels. Again, every dollar we go into debt is important. But we do think that it's not going to impact our leverage levels dramatically at all to have some level of buybacks that's in that single-digit area especially when we're trying to buy back bonds that are north of eight and a half percent coupon.

Speaker #3: Yield to maturity probably somewhere in the mid-sixes. But still allows us to delever and keep earnings kind of in a neutral place.

Speaker #5: And this is Seth here, just as a follow-up. Can you just provide us some color on kind of what the demand is for kind of the IBM space that they're going to vacate?

Speaker #3: Especially when we're trying to buy back bonds that have a coupon north of 8.5%. Yield to maturity is probably somewhere in the mid-sixes.

Speaker #5: And you have plans to renovate and what kind of pre-leasing would you kind of look for to start on 904 and 906?

Speaker #3: But still allows us to delever and keep earnings kind of in a neutral place.

Speaker #4: And this is Seth here, just as a follow-up. Can you just provide us some color on kind of what the demand is for kind of the IBM space that they're going to vacate?

Speaker #4: Yeah. Well, good morning, Seth. Certainly, look, as I mentioned, the pipeline since we announced this initiative has been very, very encouraging. I think part of that is the fact that people, I think, see the value in our Uptown development.

Speaker #4: And you have plans to renovate and what kind of pre-leasing would you kind of look for to start on 904 and 906?

Speaker #4: Again, the train station coming online, early next year. It really does achieve that ultimate goal we had of it becoming the first mass transit serve mixed-use development in Austin.

Speaker #1: Yeah. Well, good morning, Seth. Certainly, look, as I mentioned, the pipeline since we announced this initiative has been very, very encouraging. I think part of that is the fact that people, I think, see the value in our Uptown development.

Speaker #4: And Cap Metro does project that to be the second busiest train station on that line. So we think that's been a real draw in bringing companies to look at Uptown ATX.

Speaker #4: Then the ability to deliver these buildings at a pricing discount to new construction costs. With floor to ceiling glass completely renovated HVA system and mechanical systems with a really first quality presentation has been attractive to everyone.

Speaker #1: Again, the train station coming online early next year really does achieve that ultimate goal we had of it becoming the first mass-transit-served mixed-use development in Austin.

Speaker #1: And Cap Metro does project that to be the second-busiest train station on that line. So we think that's been a real draw in bringing companies to look at Uptown ATX.

Speaker #4: And then, of course, that overall submarket, even when you factor in sublease space, is less than 8% vacant. We felt there was a real window of opportunity.

Speaker #1: Then the ability to deliver these buildings at a pricing discount the new construction costs. With floor to ceiling glass completely renovated HVA system and mechanical systems with a really first quality presentation has been attractive to everyone.

Speaker #4: So the first building we plan to start is about 150 7,000 square feet. We're hoping to get some leases done as we move through that construction process.

Speaker #1: And then, of course, that overall submarket, even when you factor in sublease space, is less than 8% vacant. We felt there was a real window of opportunity.

Speaker #4: But certainly, moving towards other buildings would be a function of getting leases signed. We think we have some good discussions underway that will validate that thesis.

Speaker #4: And we'll see what the market presents. But the game plan is we see it as there's a window of opportunity here to deliver within a mixed-use community very good quality renovated office space that hits the price point that a lot of people are looking for.

Speaker #1: So, the first building we plan to start is about 157,000 square feet. We're hoping to get some leases done as we move through that construction process.

Speaker #1: But certainly, moving forth other buildings are going to be a function of getting leases signed. We think we have some good discussions underway that will validate that thesis.

Speaker #4: And given the amenity base we're building at Uptown, as well as the mass transit accessibility, we think that's a pretty good prescription for success.

Speaker #1: And we'll see what the market presents. But the game plan, as we see it, is there's a window of opportunity here to deliver, within a mixed-use community, very good quality, renovated office space that hits the price point that a lot of people are looking for.

Speaker #5: Great. Thanks.

Speaker #4: Thank you.

Speaker #1: Thank you. And our next question comes from the line of Upal Rana from Qbank. Your question, please.

Speaker #2: Great. Thank you. Jerry, just on the 405 Colorado Tower disposition, yeah, what was the cap rate on that? And then also, once the 300 million dollars of dispositions are completed this year, where would you stand on doing further dispositions from here?

Speaker #1: And And given the amenity base we're building at Uptown, as well as the mass transit accessibility, we think that's a pretty good prescription for success.

Speaker #4: Great. Thanks.

Speaker #1: Thank you.

Speaker #2: Just trying to get a sense of how much more there's left to do.

Speaker #2: Thank you. And our next question comes from the line of Upaal Rana from KeyBank. Your question, please.

Speaker #4: Yeah. I think from our perspective, we're looking to do more asset sales. I think I mentioned that in our in our commentary. We have a number of assets in the market for sale.

Speaker #1: Great. Thank you.

Speaker #5: Jerry, just on the 405 Colorado Tower disposition, yeah, what was the cap rate on that? And then also, once the 300 million dollars of dispositions are completed this year, where would you stand on doing further dispositions from here?

Speaker #4: We haven't put a revised target in place for 2026. And we haven't put any guidance for '27. But certainly, as we take a look at each asset that we have within our portfolio, as we mentioned in the last call, we're analyzing each asset.

Speaker #5: Just trying to get a sense of how much more there's left to do.

Speaker #1: Yeah. I think from our perspective, we're looking to do more asset sales. I think I mentioned that in our commentary. We have a number of assets in the market for sale.

Speaker #4: It's relative growth profile. What level of investment is required to bring those properties to stabilization and to deliver growth to the company? So we would certainly expect sales somewhere in the couple hundred million dollar range over the next four to six quarters as we move forward with this balance sheet enhancing program.

Speaker #1: We haven't put a revised target in place for 2026, and we haven't put any guidance for '27. But certainly, as we take a look at each asset that we have within our portfolio—as we mentioned in the last call—we're analyzing each asset.

Speaker #1: It's relative growth profile. What level of investment is required to bring those properties to stabilization and to deliver growth to the company? So we would certainly expect sales somewhere in the couple hundred million dollar range over the next four to six quarters as we move forward with this balance sheet enhancing program.

Speaker #3: And Upal on 405, we did have a filing that kind of put the cap rate right around eight, maybe a little just slightly above that.

Speaker #3: Cash would be a little lower than that, but that's basically the cap rate we got on that asset.

Speaker #4: Cap basis, right.

Speaker #2: Okay. Great. That was helpful. And then just on the occupancy, it improved 80 base points to 89.1%. And the lease percentage also increased. So you mentioned this year will be your first positive net absorption year in a while.

Speaker #3: And Upaal on 405, we did have a filing that kind of put the cap rate right around eight, maybe a little just slightly above that.

Speaker #2: So I'm just trying to get a sense of timing on occupancy of the back half. You've got 166,000 still to commence. And you sold several assets that were which two of them are fully leased.

Speaker #3: Cash would be a little lower than that, but that's basically the cap rate we got on that asset.

Speaker #1: Cap basis, right?

Speaker #5: Okay, great. That was helpful. And then just on the occupancy, it improved 80 basis points to 89.1%. And the lease percentage also increased. So, you mentioned this year will be your first positive net absorption year in a while.

Speaker #2: So I just want to get your thoughts there and as your guidance still suggests further improvement in the back half.

Speaker #4: Yeah. I think as we're taking we will have positive absorption for the full year. As we outlined in the original business plan call, we'll have it dip in the third quarter.

Speaker #5: So I'm just trying to get a sense of timing on occupancy in the back half. You've got 166,000 still to commence and you sold several assets that were which two of them are fully leased.

Speaker #4: From an absorption sample, then we'll pick up strong in the fourth quarter. So we're holding our year-end occupancy and lease targets. I think generally, though, to answer your question, I mean, I think we're very encouraged with the number of tenants coming back into the marketplace.

Speaker #5: So I just want to get your thoughts there, and as your guidance still suggests further improvement in the back half.

Speaker #1: Yeah, I think as we're talking, we will have positive absorption for the full year. As we outlined in the original business plan call, we'll have it dip in the third quarter.

Speaker #4: We do think that the bias towards quality buildings, quality operators, efficient operations, remains very much intact. And we think with our on-the-ground leasing and property management team, I think that's honestly one of the reasons why we're capturing so much activity versus our market share.

Speaker #1: From an absorption standpoint, then we'll take up strong in the fourth quarter. So we're holding our year-end occupancy and lease targets. I think generally, though, to answer your question, I mean, I think we're very encouraged with the number of tenants coming back into the marketplace.

Speaker #4: So we think there's a real window to amplify the quality bias of our portfolio and team. And I think that's one of the reasons why that pipeline continues to build.

Speaker #1: We do think that the bias towards quality buildings, quality operators, efficient operations, remains very much on-the-ground leasing and property management team, I think that's honestly one of the reasons why we're capturing so much activity versus our market share.

Speaker #4: I mean, to have our pipeline up quarter over quarter has actually been very good reinforcement of our leasing and marketing strategies. And we're not going to really rest till we get that occupancy level well above 90%.

Speaker #1: So we think there's a real window to amplify the quality bias of our portfolio and team. And I think that's one of the reasons why that pipeline continues to build.

Speaker #4: Again, if you take a look at our Pennsylvania-based assets, CBD Philadelphia, University City, and the couple of submarkets we're in in the suburbs, we're doing really well.

Speaker #1: I mean, to have our pipeline up quarter over quarter has actually been very good reinforcement of our leasing and marketing strategies. And we're not going to really rest till we get that occupancy level well above 90%.

Speaker #4: We have a challenge in Austin. And we've got some programs in place to address that over the next several quarters. We're hopefully going to pick up some absorption there as well to bring those that drag on our overall occupancy and leasing stats to minimize that in future quarters.

Speaker #1: Again, if you take a look at our Pennsylvania-based assets, CBD Philadelphia, University City, and the couple of submarkets we're in in the suburbs, we're doing really well.

Speaker #2: Okay. Great. That was helpful. Thank you.

Speaker #1: We have a challenge in Austin. And we've got some programs in place to address that over the next several quarters. We're hopefully going to pick up some absorption there as well to bring those that drag on our overall occupancy and leasing stats to minimize that in future quarters.

Speaker #1: Thank you. And our next question comes from the line. Of Dylan Brzinski from Green Street. Your question, please.

Speaker #5: Hi, guys. Most of my questions have been answered, but I guess as you think about any sort of remaining asset sales, is that likely to be more so stabilized core-like assets or more assets with maybe some either current vacancy or looming vacancy as we look out over the next few years?

Speaker #5: Okay. Great. That was helpful. Thank you.

Speaker #2: Thank you. And our next question comes from the line of Dylan Brzezinski from Green Street. Your question, please.

Speaker #5: Can you kind of just maybe talk about how you think about the portfolio today?

Speaker #6: Hey, guys. Most of my questions have been answered, but I guess as you think about any sort of remaining asset sales, is that likely to be more so stabilized core-like assets or more assets with maybe some either current vacancy or looming vacancy as we look out over the next few years?

Speaker #4: Yeah. Yeah. Great question. Good morning. It's going to be without being too vague, it's going to be a mix. I think we're again, we have to take a hard discipline look at every single asset.

Speaker #4: And go through that net present value calculation. We're constantly testing where we think values are. So for us, it's really about what at what point each asset is at its optimal value point given current market conditions.

Speaker #6: Can you kind of just maybe talk about how you think about the portfolio today?

Speaker #1: Yeah. Yeah. Great question. Good morning. It's going to be with that being too vague, it's going to be a mix. I think we're re again, we have take a hard discipline look at every single asset.

Speaker #4: So even when you take a look at what we sold this year, we sold one significantly under lease property. Because the reality from our perspective was that the amount of capital required to bring that project to stabilization and the projected absorption timeline delivered a very low return on invested capital.

Speaker #1: And go through that net present value calculation. We're constantly testing where we think values are. So for us, it's really about what at what point each asset is at its optimal value point given current market conditions.

Speaker #4: So from a net present value standpoint, we're able to actually, from the sales standpoint today, exceed that net present value. So we're going through the exercise, Dylan, across the entire company.

Speaker #1: So, even when you take a look at what we sold this year, we sold one significantly under-leased property. Because the reality from our perspective was that the amount of capital required to bring that project to stabilization, and the projected absorption timeline, delivered a very low return on invested capital.

Speaker #4: We took a look at a 405 or 500 North Gulf Road. They're the weighted average lease terms in today's market. We're very attractive to whole series of investors.

Speaker #4: So we felt that was a good optimal price point for us to generate the liquidity to execute the balance sheet strategy we have underway.

Speaker #1: So from a net present value standpoint, we're able to actually, from the sales standpoint today, exceed that net present value. So we're going through the exercise, Dylan, across the entire company.

Speaker #4: So I think you should be looking out for a mix of asset sales going forward. As Tom alluded, we're also taking a look at a lot of our land inventory.

Speaker #1: We took a look at 405 or 500 North Gulf Road. Their weighted average lease terms in today's market are very attractive to a whole series of investors.

Speaker #4: And have a certain number of those parcels going through the sale process. And that, again, is it's a non-earning asset. Our major quest right now is to generate liquidity to improve the balance sheet and to improve our growth profile going forward.

Speaker #1: So we felt that was a good optimal price point for us to generate the liquidity to execute the balance sheet strategy we have underway.

Speaker #1: So, I think you should be looking out for a mix of asset sales going forward. As Tom alluded, we're also taking a look at a lot of our land inventory.

Speaker #5: And would you say for the assets you've brought to market, that exercise of comparing sort of the capital markets bids versus where your guys' internal assessment of value is, is closer when you look at stabilized core assets?

Speaker #1: And have a certain number of those parcels going through the sale process. And that, again, is it's a non-earning asset. Our major quest right now is to generate liquidity to improve the balance sheet and to improve our growth profile going forward.

Speaker #5: Can you kind of just give us I'm just trying to get a sense for as buyers get back into the market, is there a stronger depth of appetite for maybe more value-add-oriented assets versus the core product?

Speaker #6: And would you say for the assets you've brought to market, that exercise of comparing sort of the capital markets bids versus where your guys' internal assessment of value is, is closer when you look at stabilized core assets?

Speaker #5: Just curious your thoughts there.

Speaker #4: No. Hey, great. It's a great question. We actually debate that internally. I think the market has moving is still core money there. And I think the core money is really focused on stability, weighted average lease term.

Speaker #6: Can you kind of just give us I'm just trying to get a sense for as buyers get back into the market, is there a stronger depth of appetite for maybe more value-add-oriented assets versus the core product?

Speaker #4: Asset quality and submarket positioning and submarket dynamics key issues. But we're also seeing a an interesting return of a lot of value-add capital that is basically taking a look at the supply pipeline coming on board in the office sector, which is de minimis.

Speaker #6: Just curious your thoughts there.

Speaker #1: No. Hey, great, it's a great question. We actually debate that internally. I think the market is moving; there is still core money there. And I think the core money is really focused on stability, weighted average lease term.

Speaker #1: Asset quality and submarket positioning and submarket dynamics, key issues. But we're also seeing a an interesting return of a lot of value-add capital that is basically taking a look at the supply pipeline coming on board in the office sector, which is de minimis.

Speaker #4: As all the forecasts show. In the case of Philadelphia, just to use that as an example, 11% plus of the inventory being converted to residential.

Speaker #4: Public policy moving to amplify more office to residential conversions. You can actually make a pretty good quantitative case that the office market fundamentals will improve dramatically in the next several years.

Speaker #1: As all the forecasts show, in the case of Philadelphia—just to use that as an example—over 11% of the inventory is being converted to residential.

Speaker #4: So we're seeing a number of value-add buyers come in who are willing to take vacancy risk. And not overpay for that today, but be much more aggressive in pricing that today than they were a year or two ago.

Speaker #1: Public policy is moving to amplify more office-to-residential conversions. You can actually make a pretty good quantitative case that the office market fundamentals will improve dramatically in the next several years.

Speaker #4: And with the debt markets being very fluid, that's also amplifying, I think, the pace of their execution. So I think it's a good time for us to be taking a look at our overall portfolio.

Speaker #1: So, we're seeing a number of value-add buyers come in who are willing to take vacancy risk, and not overpay for that today, but be much more aggressive in pricing than they were a year or two ago.

Speaker #4: Identifying which assets will deliver great growth for us from a quality and financial standpoint. And then use what we're hearing from the market dynamics as we're talking different investors to dovetail in where we want to sell assets and at what price points acceptable.

Speaker #1: And with the debt markets being very fluid, that’s also amplifying, I think, the pace of their execution. So I think it’s a good time for us to be taking a look at our overall portfolio.

Speaker #5: Great, Jerry. Thanks for that thoughtful explanation. Appreciate it. Have a good one.

Speaker #4: Thanks, Dylan.

Speaker #1: Identifying which assets will deliver great growth for us from a quality and financial standpoint, and then use what we're hearing from the market dynamics as we're talking to different investors to dovetail in where we want to sell assets and at what price points are acceptable.

Speaker #1: Thank you. And as a reminder, if you have a question at this time, please press star 11 on your telephone. Our next question comes from the line of Anthony Paolone from JPMorgan.

Speaker #1: Your question, please.

Speaker #5: Yeah. Thanks. Just two quicker ones. I think one, is on the IBM buildings. What do you think your all-in spend will need to be to get those repositioned and backfilled?

Speaker #6: Great, Jerry. Thanks for that thoughtful explanation. Appreciate it. Have a good one.

Speaker #1: Thanks, Tom.

Speaker #2: Thank you. And as a reminder, if you have a question at this time, please press *11 on your telephone. Our next question comes from the line of Anthony Palloni from JPMorgan.

Speaker #4: Yeah. I think on the first building, which is what we kind of have fully priced out, I think the idea there is we'll be somewhere in the $60 million range.

Speaker #4: That includes the related infrastructure work, all the TI cost, and getting all the base building improvements done.

Speaker #2: Your question, please.

Speaker #6: Yeah, thanks. Just two quick ones. I think one is on the IBM buildings. What do you think your all-in spend will need to be to get those repositioned and backfilled?

Speaker #5: Okay. And would that be a similar type number for the other if you kind of move it in that same direction?

Speaker #4: Yeah. I think so. I think so. I hesitate to give you a definitive answer because we're really we're pricing through all that right now.

Speaker #1: Yeah. I think on the first building, which is what we kind of have fully priced out, I think the idea there is we'll be somewhere in the $60 million range.

Speaker #4: But that's a good order of magnitude pricing. I think the key issue for us is in addition to the cost number is where the rents will be versus new development rents.

Speaker #1: That includes the related infrastructure work, all the TI costs, and getting all the base building improvements done.

Speaker #6: Okay. And would that be a similar type number for the other if you kind of move it in that same direction?

Speaker #4: And our targeted returns being north of 8%. So we're kind of looking at that those metrics to really drive the cost equation as well.

Speaker #1: Yeah. I think so. I think so. I hesitate to give you a definitive answer because we're really we're pricing through all that right now.

Speaker #5: Got it. And then just second one, with the JV recap, anticipating you mentioned ownership stake going down, what do you think you order magnitude you're ending ownership stake is going to be?

Speaker #1: But that's a good order of magnitude pricing. I think the key issue for us is in addition to the cost number is where the rents will be versus new development rents.

Speaker #4: Yeah. I think our ideal structure both from a liquidity harvesting profit-taking balance sheet improvement is to probably be a holder between 10 and 20 percent.

Speaker #1: And our targeted returns being north of 8%. So we're kind of looking at that those metrics to really drive the cost equation as well.

Speaker #6: Got it. And then just, second one—with the JV recap, anticipating, you mentioned ownership stake going down—what do you think your order-of-magnitude ending ownership stake is going to be?

Speaker #4: The buy is more towards 10%. As I mentioned right now, the current thought process is while we're talking a couple of partners on the residential project in Austin, I think the buy is right now is to sell that.

Speaker #1: Yeah. I think our ideal structure both from a liquidity harvesting profit-taking balance sheet improvement is to probably be a holder between 10 and 20 percent.

Speaker #4: Give more pricing us.

Speaker #5: Got it. Thank you.

Speaker #4: Thank you.

Speaker #1: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Jerry Sweeney for any further remarks.

Speaker #1: The buy is more towards 10%. As I mentioned, right now the current thought process is, while we're talking to a couple of partners on the residential project in Austin, I think the buy right now is to sell that.

Speaker #4: Jonathan, thank you. And just thank all of you for participating in our second quarter earnings call. We look forward to updating our business plan progress in October.

Speaker #1: Get more pricing us.

Speaker #6: Got it. Thank you.

Speaker #4: For our third quarter call. And in the meantime, have a wonderful summer. Thank you very much.

Speaker #1: Thank you.

Speaker #2: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Jerry Sweeney for any further remarks.

Speaker #1: Jonathan, thank you. And thank you to all of you for participating in our second quarter earnings call. We look forward to updating you on our business plan progress in October.

Speaker #1: For our third quarter call. In the meantime, have a wonderful summer. Thank you very much.

Q2 2026 Brandywine Realty Trust Earnings Call

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