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Before addressing our performance for the quarter just a quick observation on the economy. Clearly, the economic environment is less bullish than it was during our first quarter call. Macro data remains mixed and the economy seems to be operating without a sense of conviction on the timing or pace of the recovery. And, while that data can certainly not be ignored, we have not yet seen either directly or indirectly any real hesitation or a lack of forward planning on the part of our tenant base.In fact, so much to the contrary, a number of our tenants are already looking forward to 2011 and 2012 on their space requirements. An increasing number of tenants are evaluating build-to-suit opportunities. And, while I believe most of those will stay on the “drawing board”, they do reflect I think a more positive bias by some major users. This impact as we talked on previous calls, however, remains somewhat mitigated by continued downsizing by some users that still need to align their office needs to their current business plans. The offsetting of those two factors will results in a market environment that will continue to favor tenants. But all in all, however, we remain optimistic with a small out on the recovery we’re seeing in our primary markets. Even when looking at our markets most impacted by weaker demand like in New Jersey, leasing activity during the quarter remained encouraging. Now in terms of looking at the second quarter, we continued solid execution of our 2010 business plan including strong leasing performance. As you look at the quarter in the remainder of the year, several overall comments. Headline leasing news for us was 1.1 million square feet of leasing activity during the quarter, a strong and steady new deal pipeline of 2.4 million square feet, 548,000 square feet of executed forward new leasing transactions, and over 0.5 million square feet of leases in negotiations. From our standpoint, all very strong metrics.
Overall leasing velocity continued to be in line with our expectations and we do expect fundamentals to continue firming. Some markets are recovering faster than others. These conditions are factored into our business plant and reflect our view on the market bottoming with rental rate stability in some markets and continued downward trends in several others.Near-term pressure on operating trends, however, will persist. Our market-to-market on rents remain negative. Same-store NOI declined both in line with our expectations. But our NOI margins remain stable and we have executed approximately 91% of our annual 2010 spec revenue target. Our tenant retention rate for the second quarter was 66%, excluding early terminations and 56.5% with early terminations included. Capital costs for the quarter were 15.4% of gross revenues for new leasing activity and 9.1% of gross revenues for renewals. Again, all in line with our expectations and a reflect of what we see as continued stability in the costs involved in leasing transactions. Traffic through our portfolio was down slightly from Q1, but up 11% year-over-year. Our strongest performing markets in terms of activity and rental rates remains Philadelphia CBD, Radnor Plymouth Meeting in Newtown Square submarkets in Suburban Philadelphia, the Toll Road Carter in DC, and Austin in Richmond. As outlined on our last call, our 2010 operating and business plan assumptions are, first, our major objective for the year is to simply lease office space. As evidenced by our strong pipeline, we have an active engaged leasing program underway for every one of our properties and are aggressively pursuing all deals. We understand the leasing realities in this type of market and have tailored marketing plans for each under leased asset to ensure that we accelerate absorption to the extent that we can. Our original business plan contemplated a 46% tenant retention rate based on results thus far. We believe our actual retention rate will approach 55%. Read the rest of this transcript for free on seekingalpha.com