Brandywine Realty Trust Earnings Call Nuggets: Current Leasing Pipeline, Acquisition Pipeline

On Thursday, Brandywine Realty Trust (NYSE:BDN) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Current Leasing Pipeline

James Feldman – Bank of America Merrill Lynch: Can you talk a little bit more about the current leasing pipeline I guess in terms of what you have left to do for the rest of the year? Then also with the election coming people are concerned about the fiscal cliff, what’s your sense of it in terms of business decision-making for the rest of the year?

Gerard H. Sweeney – President and CEO: Sure. George?

George D. Johnstone – SVP, Operations and Asset Management: Jamie I think, as I mentioned earlier we’ve got $9 million of spec revenue left to achieve. That’s going to require us to do just a little bit north of 1.5 square feet. The pipeline is strong its 3.4 million square feet in total, 2.5 million square feet of that are new prospects and 900,000 of renewal prospects. We feel confident that with the pipeline that we have, the conversion rates that we’ve demonstrated, last year our conversion was 40%, it was 31% for the first quarter, but we’ve got several markets that continue to kind of outperform that 40% Company average. Just in terms of one of the things we really do to track is, is the traffic that comes through our pipeline, but that tends to be a harbinger of forward leasing activity and I think even with the overall market levels being down a bit Q1 versus Q4, we were very pleased with the increase in traffic through our portfolio. Now, it’s pretty much throughout our inventory, across all the markets. So, I think with the pipeline remaining constant, the number of deals that we have in negotiations, the percentage of deals that we have proposals issued for, I think we’re continuing to remain very confident on our ability to achieve all these targets.

James Feldman – Bank of America Merrill Lynch: I guess just bigger picture on sentiment among tenants and among decision-makers; do you sense people are getting more cautious here with the election and the economic data getting more mixed or no change?

Gerard H. Sweeney – President and CEO: It’s not a big change since the last conference call. Look, certainly, the market that we’re in that is the most sensitized to the federal government and its budgetary matters, as both in Northern Virginia and in Maryland. I think the decline in leasing activity in Q1 in that market is reflective of the fact that the number of tenants are on the sidelines or pausing before they make a lot of poor lease commitments so they get a better flavor for what the political climate will be going forward. Certainly, with some of the appeal processes recently issued by the federal government in terms of awarding contracts, that has a bit of a delay in the actual award of those contracts and creates more protracted timeline. When we look beyond that I don’t think we are really seeing the impact of the election in our other markets. I mean, the pipeline – feedback from our leasing agents, the managing directors does not seem to indicate that people are really focusing on that political climate as a key driver in their space decision.

Acquisition Pipeline

Josh Attie – Citigroup: Can you talk a little bit more about what the acquisition pipeline looks like and maybe even development. When you did the preferred offerings you chose to increase the cash balance instead of paying down debt or – and I guess that kind of implies that you’re seeing more growth opportunities. Can you talk about that a little bit?

Gerard H. Sweeney – President and CEO: Certainly, I’ll make a real quick overview and then Tom can you give you kind of around the horn what we are seeing on the investment side. Look I think the reason when we raised this capital that we didn’t pay down the debt immediately was just to preserve complete optionality and we have as you know from our bank term loan structure a pretty flexible platform to pay down that debt as we see fit with some acceleration of cost, but minimal breakage expenses. So, I think, when we analyze where we are we’ve retained the optionality to apply cash to future debt pay downs or as you know this past quarter to I think some pretty good tactical liability management, and we are seeing more things on the investment side, which Tom can certainly touch on.

Thomas E. Wirth – EVP, Portfolio Management and Investments: Sure. On the investment side, I think, if you look at the markets – I think that Philadelphia, Richmond tend to be slower not seeing much activity at this point. Continuing to see some activity in Austin that we monitor, that market continues to be well received when product is out there and we continue to look at the CBD and Southwest for opportunities and in Metro DC I think it’s a (tale) of two storylines. We have the outside the beltway, which other than our trade, there’s been very few outside the beltway trades, they’ve been taking longer to get done. So, we’re monitoring that very closely just to see if cap rates are going to go higher out there or whether we see that nothing trades. Inside the beltway, we’re still seeing a lot of good activity, and that activity in the trophy-class, there’s plenty of capital out there finding that product, as well as – but some product that isn’t trading at the expectations people are expecting, especially with – I think as you mentioned on the political side, we’ve seen rent sort of come down a little bit, we’ve seen it in our portfolio, we’re seeing it in the district also with some negative absorption, that people are pulling product, and in some cases refinancing. So, there is some haves and have-nots. With our looking in the district and in inside the beltway markets, we are targeting that with our Allstate joint venture. So, we’re certainly looking for opportunities in our targeted markets which are all inside the beltway. We’re seeing some good opportunities. We’re taking a look at them. Most of the things we’re looking out are going to be conservative, we’re not looking for a lot of leasing exposure or near-term leasing risk, and we continue to be pleased by what kind of lending you’re seeing on assets inside the beltway by various institutions.

Josh Attie – Citigroup: How should we think about the redeployment of the asset sale proceeds? You increased the asset sale guidance. Should we think of those proceeds as going towards sitting in cash until you can find acquisition opportunities, or would some of those proceeds go to pay down the term loan?

Gerard H. Sweeney – President and CEO: I think as I mentioned in the beginning, I think we’ll just keep our flexibility. We have the option of paying down certainly $100 million floating rate term loan as we choose, how it continues to track the liability market by any frictional trades we can make to look at our forward liabilities, and Tom and his team are continuing to beat the bush on investments. So, I think, those three avenues, I think, are good ones for the Company, and as situations arise that we think justified the deployment of capital will move down that path.