Brandywine Realty Trust (

BDN

)

Q1 2011 Earnings Call

April 28, 2011 9:00 a.m. ET

Executives

Gerry Sweeney – President & CEO

George Johnstone – SVP, Operations & Asset Management

Howard Sipzner – EVP and CFO

Gabe Mainardi – Vice President and Chief Accounting Officer

Tom Wirth – EVP, Portfolio Management and Investments

Analysts

Jordan Sadler – KeyBanc Capital Markets

Michael Bilerman –Citigroup

Anthony Paolone – JP Morgan

Jamie Feldman – Bank of America/Merrill Lynch

Brendan Maiorana – Wells Fargo Securities

Dave Rodgers – RBC Capital Markets

Richard Anderson – BMO Capital Market

Mitchell Germain – JMP Securities

Daniel Donlan – Janney Capital Markets

David Anderson – Green Street Advisors

TheStreet Recommends

Ross Nussbaum – UBS

Presentation

Operator

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» Brandywine Realty Trust Q1 2010 Earnings Call Transcript

Good morning. My name is Latangie, and I will your conference operator today. At this time, I would like to welcome everyone to the Brandywine Realty Trust first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions).

I would now like to turn the conference over to Mr. Gerry Sweeney, President and CEO of Brandywine Realty Trust. Please go ahead, sir.

Gerry Sweeney

Latangie, thank you very much. Good morning, and thank you all for joining us for our first quarter 2011 earnings call. Participating on today's call with me are Gabe Mainardi, our Vice President and Chief Accounting Officer; George Johnstone, Senior Vice President of Operations; Tom Wirth, Executive Vice President, Portfolio Management and Investments; and Howard Sipzner, our Executive Vice President and Chief Financial Officer.

Prior to beginning, I'd like to remind everyone that certain information discussed during our call may constitute forward-looking statements within the meaning of the Federal Securities Law. Although we believe that 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 filed with the SEC.

As our first quarter results indicate, our 2011 business plan remains very much on track. Market conditions continue to improve and we are seeing increased activity levels through most of our markets. The pace of tenant contraction has slowed. This dynamic coupled with increased tenant activity levels, reflects the steady state of recovery.

While business outlook remains positive, economic uncertainty does remain an ongoing concern. Macro issues such as job creation, the federal deficient, the divide on public policy, state and municipal budgetary constraints are all keeping uncertainty at the forefront of many business leaders’ thinking.

However, bottom line consistent with our long held view, we expect a real estate recovery for suburban office space to continue to be steady but remain slow.

Looking out over the next several quarters, we anticipate the following within the Brandywine portfolio. With the market still in the recovery phase, we will generate leasing results primarily by increasing market share, rather than through our markets operating at historical absorption levels.

Leasing activity levels will remain constant and in some markets continue to increase. Most of our markets will continue to have a tenant-driven pricing dynamic but we are also seeing encouraging signs of rental rate growth in some of our core suburban markets where vacancy rates and Class A products have continued to decrease.

The flight up the quality curve by customers will continue and will directly benefit our portfolio. This benefit will be additional absorption, not necessarily across-the-board-upward-pricing pressure, as many tenants are looking to move to higher quality buildings, at lower price points because they anticipate a longer term rental-rate recovery.

In looking at our plan, we are 82% complete on our 2011 speculative revenue targets, and 46% completed on our 2011 renewals.

Pages 29 and 30 of our supplemental package summarizes our progress on these various business metrics. George will review in more detail, but all operating metric were in line with our business plan projections and we saw continued acceleration of our 2011 revenue targets.

Looking at the balance of the year, we expect stable to-improving occupancies, consistent same-store numbers, and a declining negative mark-to-market, all reflective of a continued improvement in market conditions. Our concession packages have remained fairly steady and where we are seeing capital cost increase, we’re getting more lease term.

So with those overview comments highlights for the first quarter results are, we exceeded the first quarter consensus by a penny, and posted FFO of $0.33 per-share. As such, even with our debt issuance acceleration, we raised the bottom end of our 2011 FFO guidance up a penny, for a new guidance range of 1.27 to 1.34 per share.

Howard will review our financial performance and related implications in more detail in a few moments.

We also posted other quarter of leasing activity in access of 1 million square feet. That strong performance was further reinforced by a tenant-retention rate of over 68%.

The overall tone of the market continues to be positive. Our new leasing pipeline stands at 3.2 million square feet of which 482,000 is in active negotiations. Our conversion rate also continues to improve. For the first quarter that conversion rate was 40% and we executed 37% of our first quarter leasing transactions on a direct basis.

Four out of seven of our primary market experienced positive absorption for the quarter led by Austin, Texas, Richmond, Virginia, Philadelphia CBD, and our New Jersey/Delaware region. Leasing activity levels were up in all but one of our markets for the first quarter compared to the same quarter last year.

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