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DATE
Thursday, April 23, 2026 at 9:00 a.m. ET
CALL PARTICIPANTS
- President and Chief Executive Officer — Gerard H. Sweeney
- Executive Vice President and Chief Financial Officer — Thomas E. Wirth
- Senior Vice President and Chief Accounting Officer — Dan Palazzo
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TAKEAWAYS
- FFO — $0.11 per share, totaling $20 million, in line with management guidance and consensus estimates.
- Full-Year FFO Guidance — Midpoint maintained at $0.55 per share; guidance range narrowed.
- Net Loss — $48.9 million, or $0.28 per share, including $11.9 million of non-cash property impairment charges ($0.07 per share).
- NOI — $70.2 million, $800,000 above reforecast, primarily from improved portfolio margins.
- Core Portfolio Occupancy — 88.3% occupied and 89.9% leased; forward leasing of 182,000 square feet scheduled to commence soon.
- Leasing Activity — 422,000 square feet executed, including 268,000 in wholly owned and 153,000 in joint venture properties; highest wholly owned activity since 2024.
- Speculative Revenue Target — 94% of the $400,000 target achieved; running ahead of prior year.
- Tenant Retention — 45%, as expected, due to planned known move-outs.
- GAAP Mark-to-Market — +4.1%; cash mark-to-market -2.6%, both below full-year business ranges, but maintained guidance for improvement.
- Same-Store Growth — GAAP +0.8%, cash +3.3%; both above current guidance ranges.
- Leasing Conversion Rates — 53% of tours to proposals; 37% of proposals to executed leases, on a trailing four-quarter basis.
- Philadelphia CBD and University City Portfolio — 94% occupied, 96% leased, with only 6% lease rollover through end of 2028; overall Philadelphia lease rate at 95%.
- Austin Portfolio — 70% occupied, creating a 340-basis-point drag on company-wide leasing; tour volume up 15% sequentially.
- Sales Pipeline — $305 million under agreement and in various due diligence stages, pricing in line with guidance, majority expected to close within the next quarter.
- Capital Plan (Uses and Sources) — $450 million of capital uses: $140 million allocated to debt reduction and share buybacks, $50 million for development, $42 million for dividends, with $80 million of internal cash flow, $290 million of sales proceeds, and $100 million from project financing offsetting uses.
- Debt Metrics — Net debt to EBITDA: 9.18x (combined), 8.18x (core); expected improvement as asset sales close and projects stabilize.
- Liquidity — $36 million of cash and $65 million drawn on unsecured line of credit; reiterated plan to maintain minimal balances as sales proceeds come in.
- Share Repurchase Program — $82 million available; management intends to opportunistically buy back shares using a portion of sales proceeds while prioritizing credit metric improvement.
- Major Refinancing — $100 million, seven-year, fixed-rate (mid-5% range) secured financing on the residential component of 3025 JFK to repay the construction loan and unencumber the commercial component.
- ATX Joint Venture Recapitalizations — Targeting pari passu structures or outright sales; expected $40 million–$50 million cash proceeds; not included in FFO outlook due to timing.
- One Uptown — 63% leased, up from last quarter; six proposals outstanding (almost 100,000 square feet); leasing pipeline exceeds 230,000 square feet.
- Solaris Center Residential — Renewal rent increases averaging 16% on executed renewals; lease-up accelerated by upfront concessions.
- New Portfolio Addition — 250 King of Prussia Road, 168,000-square-foot life science asset to be stabilized and added to core portfolio in June.
- Dividend Payout Ratio — First quarter CAD payout at 92.7%, projected to trend within the 70%-90% target range during the year as FFO improves.
- Critical Development Update — No lease commencements or revenue from 3151 included in the current year business plan; project pipeline now 1.2 million square feet (50% office, 50% life science).
SUMMARY
Brandywine Realty Trust (BDN 1.54%) reported first quarter financial and operational results consistent with its multi-year business plan, with asset sales, refinancing, and portfolio initiatives positioned to materially improve balance sheet and credit metrics over the remainder of 2026. Management explicitly reiterated debt reduction as its top strategic priority, while also highlighting the intention to repurchase shares opportunistically, reflecting confidence in asset sale execution. The company’s Philadelphia market presence remains differentiated, with 41% of new leases in the submarket executed by Brandywine Realty Trust. Liquidity is further supported by pending portfolio sales and a robust capital plan, with near-term refinancing and redevelopment activities underway in key projects.
- Philadelphia office supply is expected to shrink due to over 5 million square feet of office space either converted, redeveloping, or planned for residential or alternative use, equating to approximately 11% of the Central Business District inventory.
- Brandywine Realty Trust’s share of new lease signings in the Philadelphia market reached 41% for the year, continuing a five-year trend of outsized market capture.
- Management confirmed that nearly all asset sales under agreement are less-than-core rather than true core assets, providing flexibility in future portfolio repositioning cycles.
- The commercial component of 3025 JFK will soon be unencumbered, increasing Brandywine Realty Trust’s pool of unencumbered assets for secured and unsecured borrowing calculations.
- Tour activity is up 80% year over year, with 1.7 million square feet in the operating portfolio’s leasing pipeline, of which 314,000 square feet are in advanced stages of negotiation.
- Renewal rent growth at Solaris Center is driving positive future NOI inflection, with management seeing supportive institutional investor demand for recapitalization.
- Retention rates and sequential G&A cost reductions were attributed to known move-outs and timing of deferred compensation, respectively, supporting management’s ability to forecast and control expense trends.
INDUSTRY GLOSSARY
- Pari Passu: Joint venture equity structure where partners share profits, losses, and distributions equally, rather than on a preferred or mezzanine basis.
- Mark-to-Market: Comparison of current or expiring rental rates to current market rates upon lease renewal or re-leasing, shown as a percentage gain or loss.
- NOI: Net Operating Income, calculated as total property revenue less property-level operating expenses, excluding depreciation, interest, and corporate overhead.
- FFO: Funds From Operations, a key REIT performance metric equal to net income plus real estate-related depreciation and amortization, minus gains on property sales.
- CAD: Cash Available for Distribution, measuring a REIT’s ability to cover dividends from recurring cash flow after capital expenditures and tenant improvements.
Full Conference Call Transcript
Gerard H. Sweeney: Thank you very much. Good morning, everyone. Thank you for participating in our first quarter 2026 earnings call. On today’s call with me are Dan Palazzo, our Senior Vice President and Chief Accounting Officer, and Thomas E. 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 laws. Although we believe the 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 annual and quarterly reports that we file with the SEC. During our prepared comments today, Tom and I will briefly review first quarter results and frame out the key assumptions driving our 2026 guidance. After that, Dan, Tom, and I are available for any questions. From an operating, portfolio management, and liquidity standpoint, the first quarter produced results very much in line with our business plan. As such, as noted in our supplemental package, all of our full-year operating and financial metrics remain unchanged from our original 2026 business plan.
While the first quarter was relatively quiet from a transaction announcement standpoint, it was very busy from an activity perspective. Quarterly highlights include: we have achieved 94% of our speculative revenue target at the midpoint of our guidance. Our first quarter FFO was $0.11 per share, which was in line with consensus and management guidance. We have narrowed our full-year FFO guidance while maintaining our $0.55 full-year midpoint. Our portfolio recycling and debt reduction program is progressing on schedule, with approximately $305 million of potential sales under agreement and in various stages of due diligence, with pricing in line with our guidance. We expect the majority of these transactions to close in the second quarter.
Looking more closely at first quarter operations, solid operating metrics reinforced our strong market positioning, and tenants continue to like the quality of our perspective. Our wholly owned core portfolio is 88.3% occupied and 89.9% leased. Our year-end occupancy and leasing percentages will improve throughout the year as we anticipate having positive net absorption for the first time in several years, further evidence of our improving markets. Forward leasing commencing after year-end totaled 182,000 square feet, with most taking occupancy in the next couple of quarters. We have achieved 94% of our spec revenue target, which is $400,000, running ahead of last year.
Leasing activity for the quarter totaled 422,000 square feet, including 268,000 square feet in our wholly owned portfolio and 153,000 square feet in our joint venture portfolio. The wholly owned leasing activity is our highest level since 2024. Tenant retention was around 45%, very much as expected, since we know there will be a number of known move-outs throughout the course of the year. Our capital ratio is below our targeted 6.4%, driven by a low- or no-capital deal within one of our portfolios, but our capital for the year will remain within our guidance range. Our GAAP mark-to-market was 4.1%.
Cash mark-to-market decreased by 2.6%, both below our annual business ranges, but we anticipate improving results in the next three quarters and, as such, we are maintaining our full-year guidance range. Same-store results were a positive 0.8% on a GAAP basis and 3.3% on a cash basis, both above our current guidance ranges. Tours in 2026 exceeded 2025 by 80%, showing a continued uptick in overall leasing activity. We also continue to experience a good conversion rate from these tours. For the trailing four quarters, 53% of our tours converted to a proposal, and from proposal, 37% converted to an executed lease.
A few additional comments regarding market dynamics: in Philadelphia, which includes our Central Business District and University City portfolios, we are now 94% occupied and 96% leased, with only 6% rolling through year-end 2028. Our Commerce Square joint venture property is now 93% leased, bringing our overall combined Philadelphia holdings to 95% leased. Overall activity levels in our core CBD and University City markets remain very strong, and we continue to outperform our market share. As noted on the last call, we have captured more than double our market share in each of the last five years, and this trend continued in 2026, with 41% of all new leases signed in this market at a Brandywine Realty Trust property.
In the Pennsylvania suburbs, overall, we are about 90% leased and continue to see solid levels of pipeline prospects for the existing vacancies. Austin is 70% occupied; that continues to lag the rest of our portfolio and creates a 340-basis-point drop in overall company leasing levels. Tour volume, however, increased 15% over prior quarters. The operating portfolio leasing pipeline is up again this quarter by 200,000 square feet from last quarter and remains solid at 1.7 million square feet. That includes about 314,000 square feet in advanced stages of negotiations. It does not include the leasing pipelines we have at either 3151 Market Street or our project at One Uptown.
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