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Item 7. Management’s Discussion and Analysis

2024-02-22 compared with 2023-02-21 · 116 added, 117 removed, 394 unchanged (37% of the section changed)

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The following discussion should be read in conjunction with the Consolidated Financial Statements appearing elsewhere herein and is based primarily on our Consolidated Financial Statements for the years ended December 31, 2023, 2022 and

This report including the following discussion, contains forward-looking statements, which we intend to be covered by the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities

Exchange Act of 1934, as amended.

The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements.

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“See “Forward-Looking Statements” immediately before Part I of this report.

During the twelve months ended December 31, 2022, we owned and managed properties within five segments:

(1) Philadelphia Central Business District (“Philadelphia CBD”), (2) Pennsylvania Suburbs, (3) Austin, Texas, (4) Metropolitan Washington, D.C., and (5) Other.

During the twelve months ended December 31, 2023, we owned and managed properties within four segments:

(1) Philadelphia Central Business District (“Philadelphia CBD”), (2) Pennsylvania Suburbs, (3) Austin, Texas, and (4) Other.

The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania.

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The Austin, Texas segment includes properties in the City of Austin, Texas.

The Metropolitan Washington, D.C.

segment includes properties in Northern Virginia, Washington, D.C.

and Southern Maryland.

The Other segment includes properties in Camden County, New Jersey and New Castle County, Delaware.

In addition to the five segments, our corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions.

The Other segment includes properties in Northern Virginia, Washington, D.C., Southern Maryland, Camden County, New Jersey and New Castle County, Delaware.

In addition to the four segments, our corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions.

We generate cash and revenue from leases of space at our Properties and, to a lesser extent, from the management and development of properties owned by third parties and from investments in the unconsolidated real estate ventures.

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We also generate cash through sales of assets, including assets that we do not view as core to our business plan, either because of location or expected growth potential, and assets that are commanding premium prices from third party investors.

Our financial and operating performance is dependent upon the demand for office, residential, parking, and retail space in our markets, our leasing results, our acquisition, disposition and development activity, our financing activity, our cash requirements and economic and market conditions, including prevailing interest rates.

Adverse changes in economic conditions, including the ongoing effects of the global COVID-19 pandemic, inflation, and rising interest rates, could result in a reduction of the availability of financing and higher borrowing costs.

We continue to closely monitor the impact of the COVID-19 pandemic, inflation and rising interest rates on all aspects of our business, including the impact on our tenants, employees, and business partners.

Our financial and operating performance is dependent upon the demand for office, life science, residential, parking, and retail space in our markets, our leasing results, our acquisition, disposition and development activity, our financing activity, our cash requirements and economic and market conditions, including prevailing interest rates.

Adverse changes in economic conditions, including inflation, and high interest rates, could result in a reduction of the availability of financing and higher borrowing costs.

We continue to closely monitor the impact of the inflation and high interest rates on all aspects of our business, including the impact on our tenants, employees, and business partners.

Vacancy rates may increase, and rental rates and rent collection rates may decline as the current economic climate may negatively impact tenants.

The long-term impact of the ongoing COVID-19 pandemic on the global economy and our tenants and prospective tenants remains uncertain.

In addition, the government responses to control the pandemic are creating disruption in the global economy and supply chains and have adversely impacted many industries, including owners and developers of office and mixed-use buildings.

Overall economic conditions, including but not limited to labor shortages, supply chain constraints, inflation, rising interest rates and deteriorating financial and credit markets, could have a dampening effect on the fundamentals of our business, including increases in past due accounts, tenant defaults, lower occupancy and reduced effective rents.

Overall economic conditions, including but not limited to labor shortages, supply chain constraints, inflation, high interest rates and deteriorating financial and credit markets, could have a dampening effect on the fundamentals of our business, including increases in past due accounts, tenant defaults, lower occupancy and reduced effective rents.

These adverse conditions could impact our net income and cash flows and could have a material adverse effect on our financial condition.

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Our accrued rent receivable allowance was $2.7 million or 1.4% of our accrued rent receivable balance as of December 31, 2023 compared to $3.9 million or 2.1% of our accrued rent receivable balance as of December 31, 2022.

If economic conditions deteriorate, including as a result of the ongoing COVID-19 pandemic, inflation, and rising interest rates we may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents.

This condition

would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition.

If economic conditions deteriorate, including as a result of inflation and high interest rates we may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents.

This condition would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition.

Development Risk

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Property/Portfolio Name Location Expected Completion Date Activity Type Approximate Square Footage Estimated Costs Construction Loan Financing Amount Funded

250 King of Prussia Road (a) Radnor, PA Q3 2022 Redevelopment 168,294 $ 103,680 $ — $ 73,469

2340 Dulles Corner Boulevard (b) Herndon, VA Q2 2023 Redevelopment 268,365 $ 117,974 $ — $ 72,978

155 King of Prussia Road Radnor, PA Q4 2024 Development 144,685 $ 80,000 $ 48,000 (c) $ 16,308

(a) Total project costs include $20.6 million of existing property basis.

Base building was completed in Q3 2022.

The remaining amounts unfunded relate to tenant fit-out work to be completed.

(b) Total project costs include $58.0 million of existing property basis.

In addition to the properties listed above, we have classified one parking facility in Philadelphia, Pennsylvania as redevelopment.

155 King of Prussia Road Radnor, PA Q4 2024 Development 144,685 $ 80,000 $ 50,000 $ 42,435

In addition to the property listed above, we have classified one parking facility in Philadelphia, Pennsylvania as redevelopment.

As of December 31, 2023 the following recently completed development project was not yet stabilized (dollars, in thousands):

Property/Portfolio Name Location Expected Completion Date Activity Type Approximate Square Footage Estimated Costs Amount Funded

405 Colorado Street (a) Austin, TX Q2 2021 (b) Development 205,803 $ 122,000 $ 106,964

(a) Estimated costs include $2.1 million of existing property basis through a ground lease.

The project includes 520 parking spaces.

Recently Completed not Stabilized properties are recorded on our consolidated balance sheet in land, buildings and tenant improvements and deferred leasing costs, not construction-in-progress.

Stabilization is expected during the first quarter of 2023.

(b) The parking garage and occupied portions of the office building were placed into service during 2021.

Property/Portfolio Name Location Completion Date

Activity Type Approximate Square Footage Estimated Costs Amount Funded

250 King of Prussia Road

Redevelopment

168,294 $ 103,680 (a)

(a) Total project costs include $20.6 million of existing property basis.

As of December 31, 2023 the following active unconsolidated real estate venture development projects remain under construction in progress and we were proceeding on the following activity (dollars, in thousands):

Property/Portfolio Name Location Expected Completion Date Approximate Square Footage Estimated Costs Amount Funded Construction Loan Financing Our Share Remaining to be Funded Partner's Share Remaining to be Funded

3025 JFK Boulevard (55%) Philadelphia, PA Q3 2023 (a) $ 287,272 $ 159,605 $ 186,727 $ — $ —

3151 Market Street (55%) Philadelphia, PA Q2 2024 441,000 $ 307,586 $ 63,221 $ 184,552 (b) $ 4,448 $ 55,365

One Uptown - Office (50%) Austin, TX Q3 2023 362,679 $ 191,616 $ 86,851 $ 121,650 $ — $ —

3025 JFK Boulevard (60%)

Philadelphia, PA Q4 2023

(a) $ 300,000 $ 256,608 $ 186,727 $ 5,664 $ —

3151 Market Street (65%)

Philadelphia, PA Q3 2024

441,000 $ 316,909 $ 137,094 $ 174,300 (b) $ 5,515 $ —

One Uptown - Office (56%)

Austin, TX Q4 2023

362,679 $ 201,616 $ 132,358 $ 121,650 $ — $ —

One Uptown - Multifamily (50%) Austin, TX Q3 2024 341 Units $ 144,029 $ 99,082 $ 85,000 $ — $ —

(a) Mixed used building with 428,000 rentable square feet consisting of 200,000 SF of life science/innovation office, 219,000 SF of residential (326 units), and 9,000 SF of retail.

(b) Debt financing amount represents an estimate at 60% Loan-to-Value ratio.

(a) Mixed used building with 428,000 rentable square feet consisting of 200,000 square feet of life science/innovation office, 219,000 square feet of residential (326 units), and 9,000 square feet of retail.

(b) Debt financing amount represents an estimate at 55% Loan-to-Value ratio for 3151 Market Street..

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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These judgments are similar to those outlined above in the impairment of real estate investments.

We also use judgment in making the determination as to whether

or not the impairment is temporary by considering, among other things, the length of time that the market value has been less than cost, the financial condition of the unconsolidated real estate venture and our ability and intent to retain the investment long enough for a recovery in value.

We also use judgment in making the determination as to whether or not the impairment is temporary by considering, among other things, the length of time that the market value has been less than cost, the financial condition of the unconsolidated real estate venture and our ability and intent to retain the investment long enough for a recovery in value.

Our judgments related to the determination of fair value and whether an impairment is other than temporary could result in the recognition of an impairment which could be material.

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When we are required to provide improvements under the terms of a lease, we need to determine whether the improvements constitute landlord assets or tenant assets.

If the improvements are landlord assets, we capitalize the cost of the improvements and recognize depreciation expense associated with such improvements over the shorter of the estimated useful life or the term of the lease.

improvements are landlord assets, we capitalize the cost of the improvements and recognize depreciation expense associated with such improvements over the shorter of the estimated useful life or the term of the lease.

If the improvements are tenant assets, we defer the cost of improvements funded by us as a lease incentive asset and amortize it as a reduction of rental revenue over the term of the lease.

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The following discussion is based on our Consolidated Financial Statements for the years ended December 31, 2023 and 2022.

Refer to Item 7.

Refer to Part II, Item 7.

“Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of the results of operations for the year ended December 31, 2021 which is presented therein in the form of a year-to-year comparison to the year ended December 31, 2022.

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(b) “Total Portfolio,” which represents all properties owned and consolidated by us during 2023 and 2022,

(c) “Recently Completed/Acquired Properties,” which represents two properties placed into service or acquired on or subsequent to January 1, 2021,

(d) “Development/Redevelopment Properties,” which represents four properties currently in development/redevelopment.

(c) “Recently Completed/Acquired Properties,” which represents three properties placed into service or acquired on or subsequent to January 1, 2022,

(d) “Development/Redevelopment Properties,” which represents two properties currently in development/redevelopment.

A property is excluded from our Same Store Property Portfolio and moved into Development/Redevelopment in the period that we determine to proceed with development/redevelopment for a future development strategy, and

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Net gain on real estate venture transactions 0.2 26.7 (26.5) (99.3) %

Loss on early extinguishment of debt (0.4) — (0.4) — %

Gain (loss) on early extinguishment of debt 0.2 (0.4) 0.6 (150.0) %

Income tax provision (0.1) (0.1) — — %

Net income $ 54.0 $ 12.4 $ 41.6 335.5 %

Net income attributable to Common Shareholders of Brandywine Realty Trust $ 0.31 $ 0.07 $ 0.24 342.9 %

Net income (loss) $ (197.4) $ 54.0 $ (251.4) (465.6) %

Net income (loss) attributable to Common Shareholders of Brandywine Realty Trust $ (1.15) $ 0.31 $ (1.46) (471.0) %

(a) Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation, third-party management fees, provisions for impairment, and changes in the accrued rent receivable allowance.

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Rents from the Total Portfolio increased $8.9 million primarily as a result of the following:

• $3.3 million increase related to our a redevelopment property in our Philadelphia CBD segment that was placed into service in the fourth quarter of 2022;

• $4.7 million increase at a property in our Metropolitan, Washington D.C.

segment due to an increase in occupancy;

• $3.8 million increase related to a development property in our Austin, Texas segment that was partially placed into service during the third quarter of 2021

• $3.5 million increase related to the commencement of operations of B.Labs, a life science incubator lab in our Philadelphia CBD segment, during the first quarter of 2022;

• $2.6 million increase related to the restaurant, residential and hotel components at the FMC Tower in our Philadelphia CBD segment related to higher rental rates and higher occupancy partially due to the lifting of COVID-19 pandemic restrictions.

The remaining $1.5 million increase in Rents is primarily due to increased occupancy at certain properties across our Same Store Property Portfolio, as well as increased use of our properties as more tenants return to work related to the lifting of COVID-19 pandemic restrictions,resulting in higher tenant reimbursements.

Third party management fees, labor reimbursement, and leasing income decreased primarily due to $1.6 million decrease in fees and reimbursements associated with a third party management contract that was terminated during the Fourth quarter of 2021.

Other income at our Total Portfolio increased primarily as a result of a $2.2 million of settlement proceeds received from a general contractor for liquidated damages as a result of a construction delay at a property in our Austin, Texas segment.

Property Operating Expenses

Property operating expenses increased $8.3 million primarily as a result of the following:

• $3.4 million increase related to higher energy rates in our Philadelphia CBD and Pennsylvania Suburbs segments as a result of the bankruptcy of our energy generation provider during 2022 resulting in higher rates;

• $1.5 million increase related to the commencement of operations of B.Labs, a life science incubator lab in our Philadelphia CBD segment, during the first quarter of 2022.

• $1.4 million increase related to a recently completed but not yet stabilized development property in our Austin, Texas segment that was partially placed into service during the third quarter of 2021 and entirely placed into service in third quarter 2022;

• $1.2 million increase at the restaurant, residential and hotel components of FMC Tower primarily as a result of the lifting of COVID-19 pandemic restrictions;.

The remaining increase of $0.8 million is primarily related to miscellaneous increases in property operating expenses across our Total Portfolio, primarily driven by increased usage of our properties partially due to the lifting of COVID-19 pandemic restrictions and associated repairs and maintenance.

Third party management expenses

Third party management expense s decreased primarily due to the loss of a third party management contract in the fourth quarter of 2021 and the sale of the final property in the Brandywine - AI Venture in 2021, which resulted in $1.2 million and $0.8 million decreases, respectively.

General and Administrative

General and administrative expenses increased primarily as a result of a $2.4 million recovery of previously expensed legal fees incurred in pursuit of a settlement that was received in the first quarter of 2021.

In addition, $2.4 million of the increase is related to increased non-cash compensation expense during the twelve months ended December 31, 2022 compared to the twelve months ended December 31, 2022.

• $18.0 million increase related to our Recently Completed/Acquired Properties which comprise 405 Colorado, Austin TX, 250 King of Prussia Road, Radnor, PA and 2340 Dulles Corner Boulevard, Herndon VA;

• $7.3 million decrease due to the sales of 8521 Leesburg Pike, Vienna, VA in the fourth quarter of 2023, T hree Barton Skyway, Austin, TX in the third quarter of 2023 and 200 Barr Harbor Drive in the fourth quarter of 2022;

• $3.2 million decrease due to the early termination of a single tenant occupant at a property in our Austin, Texas segment in the third quarter of 2023 and removing one building from service in our Philadelphia CBD segment in the third quarter of 2022.

The remaining $1.4 million increase in Rents is primarily due to increased rental rates across our Same Store Property Portfolio, as well as increased use of our properties as more tenants implement return to office policies resulting in higher tenant reimbursements.

Real Estate Taxes

The $3.6 million decrease is primarily due to a reduction in tax assessments in 2023 compared to 2022 on properties in our Austin Texas segment.

Depreciation and Amortization

Depreciation and amortization expense increased primarily as a result of the following:

• $7.3 million increase due to the placement into service of our Recently Completed/Acquired Properties;

• $2.6 million increase related to accelerated depreciation on the tenant improvements due to the early termination of a single tenant occupant at a property in our Austin, Texas segment;

Provision for Impairment

During 2022, we recognized a provision for impairment of $ 4.7 million on an office property located in our Metropolitan Washington, D.C.

segment that we expect to sell to a third party.

During the fourth quarter of 2023, we recognized a provision for impairment of $103.2 million on three properties in the Metropolitan Washington, D.C.

area within our Other segment.

These impairments resulted from the shortened hold period assumptions for the assets as a result of our plan to exit these markets.

Additionally, we recognized a provision for impairment of $12.3 million on an office property located within our Other segment, prior to sale.

During the third quarter of 2023, we recognized a provision for impairment of $11.7 million on office properties located in our Pennsylvania Suburbs segment.

The estimated fair value was based upon a pending purchase and sale agreement as of September 30, 2023 that was not completed as of December 31, 2023 due to the termination of the purchase and sale agreement.

During the second quarter of 2023, we recognized a provision for impairment of $4.5 million on an office property located in our Austin Texas, segment which met the held for sale criteria as of June 30, 2023 and was sold during the three months ended September 30, 2023.

During 2022, we recognized a provision for impairment of $4.7 million on an office property located in the Metropolitan Washington, D.C.

area of our Other segment that we expect to sell to a third party.

See Note 3 “Real Estate Investments,” for further information.

Net Gain on Disposition of Real Estate

The $7.7 million gain on disposition of real estate for 2023 is due to the sale of a retail building located at 200 North Radnor Chester Road, Radnor, Pennsylvania for a gross sales price of $14.2 million and net cash proceeds of $13.8 million.

The $17.7 million gain on disposition of real estate for 2022 primarily resulted from the following sales transactions:

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The gain of $1.2 million recognized during 2023 is due to the following:

• The $0.8 million gain related to the contribution of a prepaid leasehold interest to the 3151 Market Street Venture at fair value;

• The $0.4 million gain related to the sale of Dabney East, a 11.6 acre lot of land located in Richmond Virginia ("Dabney East").

The gain of $8.0 million recognized during 2022 is due to the following:

• $0.9 million related to the sale of two parcels of land in our Other Segment during the three months ended March 31, 2022;

• $4.1 million related to the sale of one parcel of land in our Metropolitan Washington, D.C.

segment and the sale of a portfolio of four parcels of land and two office buildings in our Other segment during the three months ended June 30, 2022;

• $4.1 million related to the sale of one parcel of land in our Other segment and the sale of a portfolio of four parcels of land and two office buildings in our Other segment during the three months ended June 30, 2022;

• $2.6 million gain due to formation of the 3151 Market Street Venture, which resulted in deconsolidation of the project.

The gain of $2.9 million recognized during 2021 primarily resulted from the formation of the 3025 JFK Venture, which resulted in deconsolidation of the project and recognition of our investment in the real estate venture at fair value and the sale of three parcels of land in our Other Segment.

Interest and Investment Income

Interest and investment income decreased by $6.4 million primarily as a result of a preferred equity investment we funded on December 31, 2020 and that was redeemed prior to maturity on September 3, 2021.

Of the $6.4 million decrease, $2.8 million related to our receipt of an accelerated minimum return and exit fees paid in cash on the redemption date.

Interest Expense

Interest expense increased primarily due to a higher average balance outstanding on our line of credit throughout 2022 and a higher weighted average interest rate on our line of credit and other floating rate debt during the twelve months ended December 31, 2022 compared to the twelve months ended December 31, 2021.

Interest expense increased primarily due to a full year of our interest incurred on the $350.0 million principal amount of the 2028 Notes which carry an effective interest rate of 7.98% per annum compared to the retired 3.95% Guaranteed Notes due 2023 (the “2023 Notes”), which carried an effective interest rate of 3.87% per annum.

In addition, we closed on our $245 million secured term loan which we used to pay down our line of credit and obtained another $70 million unsecured term loan in March 2023, resulting in higher leverage at higher interest rates over the prior period.

Equity in Loss of Unconsolidated Real Estate Ventures

Equity in loss of unconsolidated real estate ventures decreased primarily due to:

• $3.4 million decrease associated with our Commerce Square Venture primarily due to a decrease in the amortization of in-place lease intangibles during the December 31, 2022 compared to the twelve months ended December 31, 2021;

• $1.0 million decrease associated with our 4040 Wilson Venture.

• $1.0 million decrease associated with our 1919 Market Venture due to the sale of our equity interest during the fourth quarter 2022;

• $0.7 million decrease associated with our Brandywine - AI Venture due to the sale of the remaining property in 2021;

• $1.0 million decrease associated with our investment in Cira Square acquired in the first quarter of 2022.

The increased losses from our unconsolidated real estate ventures is due to the other-than-temporary impairment of approximately $37.2 million related to our unconsolidated joint ventures and $12.5 million due to higher interest rates on the outstanding indebtedness of the portfolio of joint ventures.

See Note 4 “Investment in Unconsolidated Real Estate Ventures” to our Consolidated Financial Statements for further information.

Net Gain on Real Estate Venture Transactions

The $26.7 million net gain on real estate venture transactions is due to the sale of our 50% ownership interest in the 1919 Market Joint Venture for a gross sales price of $38.8 million.

The $26.7 million net gain on real estate venture transactions in 2022 is due to the sale of our 50% ownership interest in the 1919 Market Joint Venture for a gross sales price of $38.8 million.

We received cash proceeds of $83.3 million, inclusive of proceeds from the repayment of the $44.3 million outstanding loan between Brandywine and the venture.

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On June 30, 2022, we executed the 2022 Credit Agreement, which, among other things, provides for the Revolving Credit Facility and Term Loan.

As of December 31, 2022, based on the Operating Partnership's unsecured senior debt rating, the applicable margin for revolving loans under the Revolving Credit Facility was 105.0 basis points (excluding the applicable facility fee of 25 basis points) and was 120.0 basis points for the Term Loan, plus, in each case, a daily SOFR adjustment of 10 basis points.

Through a series of interest rate swaps, the $250.0 million principal amount of the Term Loan had a fixed interest rate of 2.87% until October 8, 2022.

As of December 31, 2023, based on the Operating Partnership's unsecured senior debt rating, the applicable margin for revolving loans under the Revolving Credit Facility was 105.0 basis points (excluding the applicable facility fee of 25 basis points) and was 120.0 basis points for the Term Loan, plus, in each case, a daily Secured Overnight Offering Rate ("SOFR") adjustment of 10 basis points.

Through a series of interest rate swaps, the $250.0 million principal amount of the Term Loan had a fixed interest rate of 5.01% until June 30, 2027.

See Note 9 “Debt Obligations," for further information.

On December 13, 2022, the Company completed an underwriting offering of its $350.0 million 7.55% Guaranteed Notes due 2028 (the “2028 Notes”).

On December 13, 2022, we completed an underwriting offering of the 2028 Notes.

The 2028 Notes were priced at 99.06% of their face amount and they have been reflected net of a discount of $3.3 million in the consolidated balance sheet as of December 31, 2022.

The Company received approximately $344.6 million after deduction for underwriting discounts and offering expenses.

On December 20, 2022, the Company used a portion of the net proceeds from the offering of the 2028 Notes to repurchase $295.7 million aggregate principal amount of its outstanding 3.95% guaranteed notes due 2023 (the “2023 Notes”), through a tender offer, together with $4.1 million of accrued and unpaid interest thereon.

The Company recognized a $0.4 million loss on early extinguishment of debt related to the total repurchase.

On January 20, 2023, the Company completed the redemption of the remaining $54.3 million aggregate principal amount of the 2023 Notes.

See Note 21, “Subsequent Events” for further information regarding the redemption.

On January 19, 2023, the Company closed on a term loan secured by seven operating properties with an aggregate principal amount of $245.0 million (the “Secured Facility”).

The Company used the net proceeds of the loan for general corporate purposes, including to reduce outstanding borrowings under the Company’s unsecured revolving credit facility.

See Note 21, “Subsequent Events” for further information regarding the Secured Facility.

We received approximately $344.6 million after deducting for underwriting discounts and offering expenses.

On December 20, 2022, we used a portion of the net proceeds from the offering of the 2028 Notes to repurchase $295.7 million aggregate principal amount of the 2023 Notes, through a tender offer, together with $4.1 million of accrued and unpaid interest thereon.

We recognized a $0.4 million loss on early extinguishment of debt related to the total repurchase.

On January 20, 2023, we completed the redemption of the remaining $54.3 million aggregate principal amount of the 2023 Notes.

On January 19, 2023, we closed on a term loan secured by seven operating properties with an aggregate principal amount of $245.0 million (the “Secured Facility”).

The Secured Facility matures on February 6, 2028.

We used the net proceeds from the Secured Facility for general corporate purposes, including to reduce outstanding borrowings under our unsecured credit facility.

See Note 9 “Debt Obligations,” for further information.

On March 1, 2023, we closed on an unsecured term loan with a principal amount of $70.0 million (the “Unsecured Term Loan”).

The Unsecured Term Loan has a scheduled maturity date of February 28, 2024 with an option to extend for twelve months and bears interest at Daily Simple SOFR plus 1.75% with a 0.10% SOFR adjustment.

The Company exercised its option to extend the Facility for an additional twelve months on January 24, 2024.

See Note 9 “Debt Obligations,” for further information.

On August 15, 2023, we entered into a construction loan agreement secured by the development project at 155 King of Prussia Road in Radnor, Pennsylvania in the aggregate principal amount of $50.0 million (the “Construction Loan”).

The Construction Loan has a scheduled maturity date of August 16, 2026 with an option to prepay at any time without a fee, premium or penalty.

The Construction Loan bears interest at SOFR plus 2.5%.

The 2028 Notes include an interest rate adjustment provision whereby the interest rate payable on the notes is subject to a 25 basis point adjustment if either Moody's Investors Services Inc, and its successors, ("Moody's") or S&P Global Ratings, and its successors ("S&P") downgrades (or subsequently upgrades) its rating assigned to the 2028 Notes.

During the third quarter of 2023, Moody’s downgraded our senior unsecured credit rating from Baa3 to Ba1.

As a result of the downgrade, the interest rate on the 2028 Notes increased 25 basis points to 7.80% in September 2023 due to the coupon adjustment provisions within the note.

As of December 31, 2023, our senior unsecured credit ratings and outlook were as follows:

Long-term debt

Subsequent to December 31, 2023, S&P downgraded our senior unsecured credit rating from BBB- to BB+.

As a result of the downgrade, the interest rate will increase 25 basis points to 8.05% in March 2024.

If our credit ratings are lowered further, our ability to access the public debt markets, our costs of funds, and other terms for new debt issuances could be adversely impacted.

Each of the credit ratings agencies reviews its ratings periodically and there is no guarantee our current credit ratings will remain the same.

We use multiple financing sources to fund our long-term capital needs.

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Our ability to incur additional debt is dependent upon a number of factors, including our credit ratings, the value of our unencumbered assets, our degree of leverage and borrowing restrictions imposed by our lenders.

If one or more rating agencies were to downgrade our unsecured credit rating, our access to the unsecured debt market would be more limited and the interest rate under our unsecured credit facility and unsecured term loan would increase.

If one or more rating

agencies were to downgrade our unsecured credit rating, our access to the unsecured debt market would be more limited and the interest rate under our unsecured credit facility and unsecured term loan would increase.

The Parent Company unconditionally guarantees the Operating Partnership’s unsecured debt obligations, which, as of December 31, 2023, amounted to $1,888.6 million.

We did not have any secured debt obligations as of December 31, 2022.

See Note 21 “Subsequent Events,” for further information regarding the Secured Facility.

The Operating Partnership’s secured debt obligations as of December 31, 2023 amounted to $258.8 million.

Capital Markets

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The Operating Partnership also considers net sales of selected properties and recapitalization of unconsolidated real estate ventures as additional sources of managing its liquidity.

During 2022, we closed on the sale of three parcels of land for net cash proceeds of $38.8 million as well as a portfolio of three office properties and five parcels of land in Gibbsboro, New Jersey for net cash proceeds of $4.0 million.

We contributed our investment in a 99-year prepaid leasehold interest in a 0.8 acre land parcel held for development to the 3151 Market Street Venture and 4.7 acres of land held for development to the One Uptown Ventures.

We completed the sale of an office building located at 200 Barr Harbor Drive, West Conshohocken, Pennsylvania for net cash proceeds of $29.3 million.

Additionally, we completed the sale of our 50% ownership interest in the 1919 Market joint venture for a gross sales price of $83.2 million, a portion of which satisfied repayment of the $44.4 million outstanding loan between the Company and the venture.

During 2023, we contributed to the 3151 Market Street Venture 200,000 square feet of FAR, which represents buildable density, at the project site, and, upon contribution at fair market value, recognized a gain, net of transaction costs, of $0.8 million.

During the year ended December 31, 2023, we completed the sale of Three Barton Skyway, a 173,302 square foot office building located in Austin, Texas for $53.3 million, 200 N Radnor Chester Road, a 17,884 square foot retail building located in Radnor, Pennsylvania for $14.2 million and 8521 Leesburg Pike a 150,897 square foot office building located in Vienna, Virginia for $11.0 million.

We also completed the sale of our Byberry land purchase option, an option to purchase 50.0 acres of land located in Philadelphia, Pennsylvania for $9.6 million and the sale of Dabney East for $1.6 million.

The net proceeds were used for general corporate purposes.

As of December 31, 2023, we had $58.3 million of cash and cash equivalents and $560.7 million of available borrowings under our unsecured credit facility, net of $39.3 million in letters of credit outstanding.

12 unchanged sentences

Our principal source of cash flows is from the operation of our Properties.

Our Properties provide a relatively consistent stream of cash flows that provides us with the resources to fund operating expenses, debt service and quarterly dividends.

The increase in operating cash flows is primarily due to the gain on sales for the 2022 property dispositions.

Our Properties provide a relatively consistent stream of cash flows that provides us with the re/.sources to fund operating expenses, debt service and quarterly dividends.

The decrease in operating cash flows is primarily due to the decrease in average occupancy in 2023 compared to 2022.

Cash is used in investing activities to fund acquisitions, development, or redevelopment projects and recurring and nonrecurring capital expenditures.

9 unchanged sentences

Capital distributions from unconsolidated real estate ventures (43,108)

Other investing activities (1,250)

Increase in net cash used in investing activities $ (90,274)

Decrease in net cash used in investing activities $ 15,677

We generally fund our investment activity through the sale of real estate, property-level financing, credit facilities, senior unsecured notes, and construction loans.

8 unchanged sentences

Other financing activities 2,570

Decrease in net cash used in financing activities $ 80,705

Increase in net cash provided by financing activities $ 75,417

Capitalization

3 unchanged sentences

Fixed rate $ 1,985,000 $ 1,554,301

Variable rate - unhedged (b) 417,110 101,610

Variable rate - unhedged (b) (c)

162,434 417,110

Total $ 2,147,434 $ 1,971,411

14 unchanged sentences

The effective date of the swap is January 31, 2023.

(c) On January 16, 2024, the Trust Preferred I - Indenture IA was swapped to a fixed rate at 5.14% for the period from March 30, 2024 to December 30, 2026 and Trust Preferred I - Indenture IB and Trust Preferred II - Indenture II were swapped to a fixed rate at 5.24% for the period from January 30, 2024 to January 30, 2027.

Scheduled principal payments and related weighted average annual effective interest rates for our debt as of December 31, 2023 were as follows (dollars in thousands):

33 unchanged sentences

In connection with the formation of the Commerce Square Venture, we committed to investing an additional $20.0 million of preferred equity in the properties on a pari passu basis with our joint venture partner of which $9.5 million has been contributed by us as of December 31, 2023.

We have committed to contribute $15.0 million to a newly-formed venture capital fund that invests in early-stage life science companies.

As part of our September 2004 acquisition of a portfolio of properties (which the we refer to as the “TRC acquisition”), we acquired our interest in Two Logan Square, a 708,844 square foot office building in Philadelphia, Pennsylvania primarily through ownership of a second and third mortgage secured by this property.

6 unchanged sentences

As part of our acquisition of properties, from time to time in tax-deferred transactions, we have agreed to provide certain of the prior owners of the acquired properties the right to guarantee our indebtedness.

If we were to seek to repay the indebtedness guaranteed by the prior owner before the expiration of the applicable agreement, we would be required to

provide the prior owner an opportunity to guaranty qualifying replacement debt.

If we were to seek to repay the indebtedness guaranteed by the prior owner before the expiration of the applicable agreement, we would be required to provide the prior owner an opportunity to guaranty qualifying replacement debt.

These debt maintenance agreements may limit our ability to refinance indebtedness on terms favorable to us.

10 unchanged sentences

Our financial instruments consist of both fixed and variable rate debt.

As of December 31, 2022, our consolidated debt consisted of unsecured notes with an outstanding principal balance of $1,554.3 million, all of which are fixed rate borrowings.

We also have variable rate debt consisting of trust preferred securities with an outstanding principal balance of $78.6 million, a $600.0 million Credit Facility with an outstanding balance of $88.5 million and an unsecured term loan with an outstanding principal balance of $250.0 million.

As of December 31, 2023, our consolidated debt consisted of (i) unsecured notes with an outstanding principal balance of $1,490.0 million, all of which are fixed rate borrowings, (ii) variable rate debt consisting of trust preferred securities with an outstanding principal balance of $78.6 million, (iii) a $600.0 million Credit Facility with no outstanding borrowings, (iv) a secured fixed rate term loan with an outstanding principal balance of $245.0 million, (v) a construction loan for the property at 155 King of Prussia Road with an outstanding balance of $13.8 million and (v) two unsecured term loans of $250.0 million and $70.0 million.

The $250.0 million unsecured term loan has been swapped to a fixed rate.

All financial instruments were entered into for other than trading purposes and the net market value of these financial instruments is referred to as the net financial position.

12 unchanged sentences

Funds from Operations (FFO)

Pursuant to the revised definition of FFO adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), we calculate FFO by adjusting net income/(loss) attributable to common unit holders (computed in accordance with GAAP) for gains (or losses) from sales of properties, impairment losses on depreciable consolidated real estate, impairment losses on investments in unconsolidated real estate ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated real estate ventures, real estate related depreciation and amortization, and after similar adjustments for unconsolidated real estate ventures.

consolidated real estate, impairment losses on investments in unconsolidated real estate ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated real estate ventures, real estate related depreciation and amortization, and after similar adjustments for unconsolidated real estate ventures.

Our calculation of FFO includes gains from sale of undepreciated real estate and other assets, considered incidental to our main business, to third parties or unconsolidated real estate ventures.

FFO is a non-GAAP financial measure.

We believe that the use of FFO

combined with the required GAAP presentations has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REITs’ operating results more meaningful.

We believe that the use of FFO combined with the required GAAP presentations has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REITs’ operating results more meaningful.

We consider FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding property impairments, gains or losses related to sales of previously depreciated operating real estate assets and real estate depreciation and amortization, FFO can help the investing public compare the operating performance of a company’s real estate between periods or as compared to other companies.

6 unchanged sentences

(amounts in thousands, except share information)

Net income attributable to common unitholders $ 53,538 $ 11,948

Net income (loss) attributable to common unitholders $ (197,948) $ 53,538

Add (deduct):

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis