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Good day, and thank you for standing by. Welcome to the Brandywine Realty Trust fourth quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jerry Sweeney, President and CEO. Please go ahead.

Thank you very much. Good morning, everyone. Thank you for participating in our fourth quarter 2024 earnings call. On today's call with me, as usual, are George Johnstone, Executive Vice President of Operations, Dan Villanja, our Senior Vice President and Chief Accounting Officer, and Tom Wirth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed in the call today may constitute forward-looking statements within the meaning of the federal securities law. 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 filed with the SEC.

Well, first and foremost, we hope that you and yours are doing well. With 2024 now behind us, we are looking forward to continued real estate market improvements in both 2025 and 2026. During our prepared comments today, Tom and I will briefly review our 2024 results and frame out the key assumptions driving our 2025 guidance. After that, Dan, George, Tom, and I are available for any questions. From an operating, portfolio management, and liquidity standpoint, 2024 was a solid year. We posted strong operating metrics again this quarter, reinforcing the high-quality nature of our portfolio. Our wholly owned core portfolio is 87.8% occupied and 89.9% leased, which had improvement sequentially over the last quarter. We exceeded our 2024 business plan spec revenue target by 8%, generating $26.4 million. We have also exceeded our tenant retention target, which ended at 63% compared to our original business plan target of 51% to 53%. Leasing activity for the year approximated 2.3 million square feet. During the quarter, we executed 783,000 square feet of leases, including 486,000 in our wholly owned portfolio and 297,000 square feet in our joint ventures. This quarterly activity was the highest in 2024 and 42% above the corresponding fourth quarter in 2023. Looking ahead, we have less than 5% annual rollover through 2026, one of the lowest in the office sector. On an annual basis, our mark-to-market was 12.6% on a GAAP basis and 1.8% on a cash basis, both within our business plan expectations. Our new leasing mark-to-market was strong at 18% and 4% on a GAAP and cash basis, respectively. Fourth quarter physical tours exceeded third quarter by 7%, with tours in 2024 exceeding 2023 by 22%. Tour activity remains well above pre-pandemic levels. For the quarter on a wholly owned basis, 62% of leases were the result of flight to quality. During 2024, for the full year, flight to quality deals represented 8% of new leasing activity. We also importantly note that we do not have any tenant lease expirations greater than 1% of revenues through 2026. Our operating portfolio leasing pipeline remains strong at 1.8 million square feet, which includes about 163,000 square feet in advanced stages of negotiations. So the state of our operations is stable, with solid operating performance, limited rollover risk for several years, good capital control, improving markets, and an expanding leasing pipeline. Another key component of our business plan is continually improving liquidity. During 2024, we significantly exceeded our liquidity goals and completed over $300 million of dispositions. This was well above our $150 million 2024 midpoint revised midpoint and our $90 million original guidance. These average results are having $90 million of cash on hand and no outstanding balance on our $600 million unsecured line of credit at year-end. We also have a couple of different in more detail. No unsecured bond maturities until November of 2027. Going forward, our business plan is predicated on maintaining minimal balances on our line of credit over the next several years to ensure ample liquidity, and our only real maturity in 2025 is a $70 million unsecured term loan that we are evaluating the process of extending. During 2024, we also recapitalized and exited several operating joint ventures. Our 2024 goal, if you recall, was to streamline the operating joint venture relationships and reduce attribution by $100 million. We achieved that goal during 2024, reducing that attribution by $229 million. Despite these strong operating metrics and significant progress on further striking queries, we did fall short of our FFO targets. FFO results were $0.17 for the fourth quarter and $0.85 for 2024. The fourth quarter annual results were negatively impacted by $0.03 a share of reduced other income from a one-time transaction that we did not anticipate in the fourth quarter, $0.01 per share net dilution due to the increased and accelerated disposition activity, and from a broader and several other points that Tom will walk through as well. From a broader perspective, our real estate markets are improving. We are seeing that every day. During the year, we laid a solid operating foundation capitalized on these improving office market dynamics. In Philadelphia, there are encouraging signs of stabilization. Philadelphia's office market is seeing a clear shift towards high-quality space, with Class A properties accounting for 66% of all lease deals signed in 2024. Our overall CBD portfolio is 93% leased. The CBD recorded 1 million square feet of transactions during 2024, demonstrating the sustained demand for high-quality workspace. Of that activity, Brandywine captured 49% of all office deals. In addition, the city's life science sector, while still recovering, continues to be a driver of future growth backed by a strong regional healthcare ecosystem that includes 1,200 biotech and pharmaceutical firms, alongside 15 major healthcare systems. Austin, which continues to be a magnet for corporate expansion, leasing momentum there remains positive. With Austin recording two consecutive quarters of net absorption and over 81 tenants currently and actively seeking more than 2.5 million square feet of space. Positive momentum in the fourth quarter was driven by revitalization of the tech sector. There's also finally a notable trend towards encouraging trend towards return to work on a full-time basis. So we are optimistic that Austin will see increased leasing activity in 2025. With tenants having a clear preference for premium office environments, Brandywine, as demonstrated by 2024 leasing results, is well-positioned to capture increasing demand in both Philadelphia and Austin. Throughout 2024, we addressed the key themes that guide our business plan: liquidity, portfolio stability, and our lease-up development. While significant progress was made on liquidity and portfolio stability, we have remaining work to do on development leasing. As we'll discuss with you, 2025 is a transitional earnings year for us, impacted by the expensing of our preferred coupon payments and the interest expense charges relating to our two residential projects, 3025 JFK and One Uptown. While leasing momentum continues to accelerate, the lease update is taking longer than originally anticipated. As such, 2025 is an earnings trough due to the items I just mentioned. Stabilizing these development projects remains a top priority for the organization. The pipeline of each property continues to build. Tour volume and issued proposals increased during the fourth quarter. But to be conservative, we are not projecting on the commercial properties any additional incremental NOI being generated toward 2025. In looking at each project, on our 3025 office project in Schuylkill Yards, we did execute a 117,000 square foot lease with FS Investments for their new expanding global headquarters. This fourth-floor lease brings the office component to 83% leased, which is over one floor remaining to lease with a very healthy pipeline behind that. We do anticipate this project component will stabilize in Q1 2026 upon that tenant's occupancy. Looking at the residential side of

Looking at other metrics, our 2025 GAAP NOI will be approximately $18 million below 2024 levels, primarily due to the asset sales activity partially being offset by the 155 King of Prussia Road being fully operational in 2025. We do anticipate actually some delayed land sales activity will generate some additional gains. Tom will review all these items in more detail on several of the factors. From an operating standpoint, spec revenue for 2025 will be between $27 and $28 million, up 4% from 2024 levels. We are currently at $22.9 million or 83% achieved at the midpoint. Our cash and GAAP mark-to-market range is lower than 2024, primarily due to regional composition of our leasing activity in 2025. Our GAAP mark-to-market ranges are also below those levels, which is mainly driven by, again, the regional composition of our 2025 leasing activity. We did actually two large TI two large renewals with no capital cost that impacted the mark-to-market for 2025. Occupancy levels will be incrementally higher, between 88% and 89%. Our lease level will also be incrementally higher between 89% and 90%. We anticipate a retention rate of 59% to 61%. Same-store NOI growth will range 1% to 3% on a cash basis and negative 1% to positive 1% on a GAAP basis. Capital control will remain in very good shape. We are about 10% of revenues below our 2024 results. Our business plan projects $50 million of additional sales activity that occurs later in the fourth quarter of about 2025 with minimal dilution. Our dividend payout ratios for 2024 were 71.4% and slightly more than a percent on CAD. For 2025, the FFO and CAD payout ratios are above our historical averages and above our preferred levels.

However, as development JVs grow occupancy, we have worked on several recapitalizations. We anticipate growing our FFO and CAD results through 2026 and bringing our dividend payout ratios back to historical levels without reducing the current $0.60 dividend. It's also important to note that as we highlighted on page three of the SIP, our 2025 capital spend is including CAD, is impacted by approximately $23 million or $0.14 a share of deferred tenant allowance payments for leases that were done between 2020 and 2023. Also, I also wanted to add that our 9% to 11% 2025 projected capital ratio range is one of the lowest we've had in the past five years. So with that, let me turn it forward to Tom to review our financial results for 2024 and summarize our 2025 outlook.

Thank you, Jerry, and good morning. Our fourth quarter net loss stood at $43.3 million or $0.25 per share, and our fourth quarter FFO is about $29.9 million or $0.17 per share. Our quarterly net income results were impacted by several non-cash impairment charges totaling $23.8 million or $0.14 per share related to two of our non-consolidated joint ventures, located in the DC area. Our fourth quarter FFO results were 3% below our guidance and 6% below the consensus estimates, partially as a result of timing and some general observations for the quarter. Our other income did anticipate receiving one-time transactional income totaling about $6 million or just over $0.03 a share. We now anticipate that income being received in the first quarter of 2025. Property level GAAP NOI. Our GAAP NOI is $28.5 million, reflective of our higher than anticipated and earlier than anticipated asset sales activity and slightly higher operating expenses. G&A totaled $10.1 million, $1.1 million above our third quarter reforecast. That's primarily due to some higher non-cash equity amortization increases due to the higher forecast of vaccine. That will continue into 2025. Total interest expense was $1.2 million below our rate forecast primarily due to higher cash proceeds from the asset sales which lowered our line of credit balance and we had slightly higher capitalized interest. Looking at our debt metrics, fourth quarter debt service and interest coverage ratios were 2.1, slightly below our 2.2 projections. Our fourth quarter and annualized consolidated core net debt to EBITDA were 7.9 and 7.2 times respectively with both metrics above our range primarily due to the lower fourth quarter income. Portfolio and joint venture changes, we did add 155 King of Prussia Road to our core portfolio during the quarter as our tenant took occupancy and the property is 100% occupied. Liquidity, due to the asset sales our year-end cash position increased to $90 million, $75 million above our third quarter projection, and as Jerry highlighted earlier, we have a $70 million term loan maturing in 2025 and no unsecured bonds maturing until November 2027. Our wholly owned debt is 95.4% fixed with a weighted average maturity of 3.7 years. Our full year 2024 cap rate payout ratio is 103.4%. This was negatively impacted by the lower than anticipated fourth quarter income. And if that income did hit the income in, we would have been below the 100%. Going into our 2025 guidance as a midpoint, our net loss will be $0.54 per share. Our 2025 midpoint guidance for FFO will be $0.66 per diluted share with a stable wholly owned portfolio. This reset of FFO, we believe, is temporary impacted by our portfolio reshaping efforts to this disposition of non-core assets and the development project stabilization. In our fourth quarter, our FFO contract was will be a loss of $25.2 million or $0.11 a share. As our development projects are completed but not yet stabilized, we are incurring interest expense, preferred equity costs, and overall negative operating $2.6 million or $0.18 a share during 2025 compared to a loss of $12.2 million or $0.07 a share in 2024. Our 2025 construction loan interest and partner preferred equity returns totaled $43.8 million or $0.24 a share. We expect to recapitalize these capital projects at a lower debt and floating cost as the project stabilized. We will also receive $7.4 million of non-recurring cash income from the development joint ventures in the first half of 2025. To offset the development joint venture losses, we do expect our operating joint venture portfolio to generate approximately $9 million for $0.05 a share of less than that. As Jerry noted, we will look to recapitalize the divestiture developments to stay approach stabilization and recapitalize the commercial developments percentage approaches 80% to 90% as leases are executed and our lease first. We believe that will have minimal effect potentially in this year and have significant effect on our 2026 results. Operating portfolio, operations are expected to remain very stable with operating GAAP NOI totaling roughly $290 million, roughly flat on a same-store basis compared to 2024, the core occupancy increased slightly at 7 point. Our 2025 fully owned core portfolio would be reduced on a comparable basis by the third quarter sale of our campus in the PA suburbs and the fourth quarter asset sales in Austin, Texas. Texas and Rich our NOI by roughly $15 to $18 million. Full year impact of 155 King of Prussia will be about $6 million and once the lease-up of 250 half occurs, we will generate an additional $3 million. We call G&A, we expect G&A to be between $42.5 and $43.5, which approximates our full year 2024 results. Our interest expense including deferred financing cost capitalized interest will approximate $135 million with the midpoint representing a $14 million increase. That increase represents of reduced capitalized interest and $9 million and from the developments becoming operational and formally of interest which is the full year effect of the April 2024 Termination of the fee income will be between $7 and $9 million. As compared to $13.7 million in 2024 Net management fee and development fees, will be between $8 and $10 million, a $5 million reduction again, due to lower development fees from recently delivered joint venture projects. And we do expect to do $50 million of speculative sales weighted towards the second half of the year. We project these sales will occur later in 2025 and have minimal dilution. We anticipate no property acquisitions. We anticipate no use to the ATM or buyback activity, and we believe our share count would be roughly 178 million shares. More looking closer at the first quarter, we see property level NOI of approximately $69 million. Again, this will have the full quarter effect of 155 King of Prussia, also have the full quarter effect of our fourth quarter asset sales activity. Our FFO contribution from our joint ventures will total negative $1 million for the first quarter. That's primarily due to the ramp-up of leasing in our multifamily One Uptown ATS coming online. However, that number is also inclusive by a $6 million nonrecurring income. In the previous quarter, we had thought that would be, I guess, pickup. That pickup will occur in the joint ventures in the first quarter. G&A expense for the quarter will be about $17 million. That's roughly 40% of our G&A for the year, and that increase is really resulting from this timing of compensation expense being recognized. In the company. Capitalized interest Total interest expense will approximate $33 million will be about $2.5. Termination and other fee income will be about $2 million. Net management fees, and development fees will total about $2.5 million. We incrementally feel more positive about I think executing our land sales program this year and have reintroduced $4 to $6 million of land sales, which were delayed from 2024. These sales will take place later in the year, and there are no anticipated closings of any land sales in the first quarter of 2025. Turning to our 2025 capital plan. The plan is much simpler than in prior years as our wholly owned development and redevelopment projects are fully construction or during completion as our cash payout ratio will be 120% to 150%. Recognize this is elevated compared to historical averages, and our long and our long-term targets. However, as we complete our recent developments, we should see CAD levels rise and increase going into 2026. Based on the trajectory of the leasing and occupancy taking effect. In addition, as Jerry noted, have over $23 million of revenue maintained capital spend for at least this time between 2020 and 2023. While there is always a delay, this is an unusually high year. And it and it was tied to a number of large renewals done in the past. Looking at larger users of our cash, $60 million for development, which includes 155, 250, and completing Solaris expansion. We have $105 million of common dividends. $35 million of revenue maintained capital, $30 million of revenue create, and $25 million of equity contract contributions to fund recent tenant leases in our joint ventures. Sources of these it is sources of this will be $130 million cash cash flow after interest payments, and $10 million $50 million of speculative asset sales, construction loan proceeds on 155, King of Prussia. Based on that capital plan, we anticipate using the approximately $60 million of our $90 million of cash on hand but we do expect to end the year with full availability of our line of credit. Also reject that our debt debt to EBITDA range will be sec 8.2 to 8.4 with increase the increase is primarily due to the losses of joint ventures, and our debt to GAV will approximate 48%. 7.7 to 7.9. We Additional metric of core net debt to EBITDA should be By year-end 2020, our core net debt to EBITDA should really equal our consolidated net debt to EBITDA since we will have no developments going on, and it will only exclude our joint ventures. Again, we believe those ratios are temporarily impacted by revenue coming along in our developments completions, and we are confident that once those completions are stabilized, our leverage levels will decrease back towards core levels. We anticipate our fixed charge and interest card drop ratios to be roughly 2.0, which represent a 0.1 sequential decrease decrease from this year, again, due to joint venture losses, and we anticipate the leverage will then begin to improve as we go into next year. I will now turn the call back over to Sharon. So thank you very much. So as we look ahead, we're confident that the strength of our operating platform and the quality of our developments will allow us to leverage improving real estate market trends and positioning the company for future growth. While earnings growth for our development pipeline is not yet fully visible, the groundwork has been laid and we are poised to build on our continued momentum as we drive towards long-term value. The overall real estate markets continue to improve near-term rollover. Our operating platform remains very stable with earnings limited as Tom walked you through our liquidity, is in excellent shape, and we are well-positioned to take advantage of continued market improvement. With that, we'd like to open up the floor for questions. As we always do, we ask that in the interest of time, you limit yourself to one question and a follow-up. Steve? Thank you.

To withdraw your question, please press star one one again. And our first question comes from Michael Griffin of Citi. Your line is open. Michael, your line is open. Please unmute. One moment for our next question. Our next question comes from Steve Sakwa of Evercore ISI.

Yeah. Thanks. Good morning. I guess, Jerry, going to a couple of the developments, you know, you've talked about but I think are relatively good pipelines and they seem to be growing. But you know, the inability to get some of these deals over the finish line. So I guess the first question is, know, have any of these larger tenants at 3151 or Uptown ATX have they gone anywhere else? Have you lost them? Or have these tenants just not made decisions? And, you know, what do you think the biggest I guess, holdup is from getting these companies to make decisions?

Hey. Good morning, Steve. We have not lost any of our major prospects to any other buildings. Or to them making a decision to stay put where they are. The timelines have been very protracted. The discussions are ongoing. And I think people would take a look at at the one uptown and 3151. The pipelines are very good. They are advancing through the various stages. It just seems that tenants are behaving a bit more pragmatically and cautiously than we would frankly like. Part of that would probably due to, you know, macro uncertainty the elections, not sure where the economy is going, all those different things. But one of the trend lines we are seeing, Steve, is kind of interesting. It is you know, one of the reasons why some of these decisions were delayed is because they weren't real tenants weren't really sure what their return to work policies would be and how many seats they would need. So that is really starting to look like it's in the rearview mirror for companies in general. And certainly for companies looking to move up the quality curve, so we have a number of space plans underway. We're quantifying both construction costs and square footage, so the tone of conversations, again, continues to be positive. As I mentioned at the close of my comments, like, we understand there's not clear visibility that this the discussion will continue to progress.

Those will, you know, start to receive, I guess, in 2026 and ultimately 2027. I guess, what confidence do you have around the rents, you know, and the timing, I guess, to hit these deals? And, you know, does it seem to be a pricing issue or just more of a tenant decision-making issue as you're kinda talking I guess, what's the risk of these yields when you do get them leased aren't achieved?

Yeah. Well, I think it's more of a timing issue than a pricing issue. I think the other the dichotomy we're seeing in the market is that is why we've seen here in a couple of the Philadelphia markets is you know, there's a real flight to quality. So, you know, tenants are really looking at moving as far as they can up the quality curve. So price versus quality workspace is a secondary consideration. But the reality is that the timelines have become fairly protracted. But, George, maybe you can make some comments on that as well. Yeah. I mean, I really do feel that it's really more of a timing issue. I think the rental deal. Incoming initial rental rates in our pro forma don't appear to be at risk. So again, I think if we can accelerate decision-making, sign the lease quicker, build the space quicker, and commence it even quicker than, you know, that's the solid path to the yields that we've laid out for these projects.

Yeah. Just one final point on that, Steve. Just to close the loop. I mean, rents have not been an issue. TI costs have been a bit higher. And we're seeing where if the TI costs are higher, we're actually getting longer-term leases than we originally pro forma. So while the overall returns we're expecting based on the capital investment we need to make is staying fairly in line with what our expectations were. But the TI cost at point of sale could be higher, but we're making up for that longer lease terms.

Great. Thanks. That's it for me.

Thank you. Our next question comes from Anthony Paolone of JPMorgan. Your line is open.

Thanks. Good morning. Maybe for Tom, you went through a bunch of details on the drag from the developments in 2025 and so forth. But of the development pipeline, I don't know if you can maybe just bottom line, like, upon stabilization, like, what would be the difference between kind of a JV FFO just negative for 2025 versus the stabilized level would be.

Yeah. I think, Tony, when we look at the income coming off the JVs this year, whether it's residential or commercial, it's give or take $10 million to $12 million with the ramp-up. I think those numbers are gonna jump to the yields you're seeing on the development page, which can go over $50 million. So the ramp-up will be there as we go through the for the optic side. On the overall, I've got both sides, will also see, Tony, that, you know, we did outline the costs we're taking in terms of the construction loans and in terms of the preferred equity. So those costs will as we get them close to stabilization, they don't have to be stabilized, I think we will look to recap the assets to get out from one of those higher costs. So those were some larger costs I outlined that won't go away and potentially could increase until we recap the assets.

Okay. I mean, it just I guess my follow-up what I'm trying to just get to is it seems like the accounting's pretty onerous here, but if I just look at your development page, and just take the project costs and the quarter of a billion dollars, I guess, for Brandywine. Like, I guess, is there just ultimately an impairment to that amount? And we should just think about that, and this that the rest of this is just pretty tough accounting, it seems like. I mean, just like, just trying to understand what the equity is here.

Right. No. I think when we look at some of the capitalization rates, we can get on some of the projects and we think that they're we don't think there's an impairment concern. If you look at the yields, we think that we can get out from our equity without a concern. Now that has to happen. We have to lease them up. So they can't say when that'll happen. But, no, right now, we don't expect to have an equity impairment based on the current trajectory and the projections we're seeing.

Okay. Thank you.

Thank you. Our next question comes from Dylan Brzezinski of Green Street. Your line is open.

Hi, guys. Good morning. Thanks for taking the question. Tom, when you say recap the JVs can you kinda talk about what that would look like? That essentially be Brandywine taking a larger equity ownership interest or?

Yes. Hey. How you doing, Jerry? Tom and I were talking. So it's just to refresh everyone's memory, these development joint ventures are structured on a preferred equity basis. So the equity investment by our partners has priority over ours. And during this period when it comes out of capitalization, we need to expend expense those preferred payments. There's a set price takeout for each of those. So even though the sit and they have were 64% or 68% owner, Brandywine essentially owns between 88% and 90% of the residual position as properties. So as Tom touched on these projects, move towards stabilization. 3025 is pretty much moving that direction very quickly. We'll be able to take out our preferred partner. And then recap that and either bring that asset on our balance sheet as a large unsecured asset, refinance existing debt, or bring additional partners. So we think we have a whole range of options available for us. That can be both balance sheet strengthening and accretive to our earnings path going forward.

That's helpful. Appreciate that, Jerry. I guess just one more sort of on the development side of things. We noticed in your guys' guidance figures that you guys talked about starting one development or redevelopment. Can you kinda give us any details as the size of that and then maybe talk about why deciding to continue to start to develop given, you know, a public market public market cost of capital that is initially conducive to catching on earth at this time?

Yeah. And it's a great question, Matthew. And look, first of all, we have leasing to do. And that remains a top priority without exception. And we do anticipate we've talked about, you know, continued momentum on the leasing front. But as we were looking at our 2025 full-year plan, there are a couple of possibilities that we're evaluating. One is outlined on page four to set for the last few quarters. You know, we are evaluating potential convergence of underperforming office apps in the multi-family. We also are exploring a fully planning process. And we're also evaluating the last piece of our Radnor Arc in the Penn Medicine complex. $50 million range. That can do a residential or hotel project there. Those deals are all kind of in the $40 to $50 million range. And really our desire to move forward in any of those how we're doing on some of the lease of the development project. So just we look at the full-year plan with these things happening, we thought we'd highlight that there could be a potential start but that's certainly in no way was meant to convey that the eyes off the ball at least for our existing development projects. That is the number one priority asset company.

Great. Thanks for that detail.

Thank you. Our next question comes from Tayo Okusanya of Deutsche Bank. Your line is open.

Yes. Good morning, everyone. So wanted to understand a little bit about the guidance range of $0.60 to $0.72. Again, Tom appreciate a lot of the exploration around the carry cost. But I guess, again, the guidance midpoint $0.66 to kind of. So I don't know whether it's us just missing some of the carry costs. I don't know whether that's something unusual that maybe we did not anticipate in 2025. And again, also kind of curious, you know, one, why the guidance range is so wide and what kind of moves you to the high end or low end of the guidance range.

Hi, Jay. Good morning. I some of your couldn't hear it too, Chris, but I think you're asking about some of the guidance questions going forward. I mean, on the JVs, I think yeah. And we the guidance in the JV, especially on the development side, we did push back all of the leasing into next year. That was large, and we're gonna have those projects on our books for the rest of the year. We were hoping that maybe there could be some recapitalizations done. We are not really forecasting much impact from those, which really did impact that number on the loss side. Also had an effect on the other areas like we had left capitalization of our interest expense. So cash interest expense a lot of that is tied to the one bond deal, but we did lose a lot of capitalization of interest on our investment in those joint ventures. And then we are losing development fees. Which we also signaled is going lower. And again, that's at least project come online, we're not gonna have the development fees. So there are a number of line items within our guidance that's being impacted by that. And you can see those are outlined on that page one. Where we talk about some of those happening and what takes us from the current $0.80, $0.85 for this year down to the $0.66.

Okay. That's helpful. Eric, could you just talk a little bit again about the range? Like, why is the range particularly wide? And what would get you to the high end or low end of the guidance range?

Yeah. I think on the high end of the range, it could be, you know, leasing that could take place. I mean, we don't know if that will happen. But leasing that we have not programmed, especially on the take down the development there could be some opportunities. The properties are done. Large pipeline, as Jerry mentioned, there's still tenants that if they came in and really needed space, there's an opportunity to build some of that out. The second area is if we could use some recaps, which we're not sure if they can get done, you know, as I outlined, there's some high cost related to our preferred equity and the construction loans are above where we think we could refinance the assets. And or we could just or, you know, potentially sell the asset or take a smaller position. So at that point, you know, the development losses will also go down. So we you know, there could be an opportunity that would allow us to have losses come out there. And so those are the two main areas. Theo, would be some recapitalizations, really, or some additional leasing that we don't see right now in those developments. Yeah. And Tayo, it's George. If I could weigh in on the operating side of the house. I mean, look, we're 83% complete on our spec revenue for the year. Of what's remaining to be done, 90% of that is coming out of Philadelphia and the Pennsylvania suburbs. So we do think that there is some potential uplift to spec revenue. That could come from our, you know, lower than we would like to see Boston portfolio. So I do think there's, you know, the opportunity for, you know, day-to-day operations that contribute that could get us above that from this one.

Thank you.

Thank you. Our next question comes from Upal Rana of KeyBanc Capital Markets. Your line is open.

Great. Thank you for taking my question. Can you guys talk about the CAD payout ratio guidance of 120% to 150% this year for the $24 million deferred tenant allowance? Is the $24 million going to only impact 2025 or is there a chance this could bleed into 2026?

Yeah. Tom, I'm sorry. No. I don't think there's gonna be I think they're are known tenant improvements that are being done. Part of that also back and said these are allowances that for the most part are being done by our tenants. Right? So they get a tenant allowance. They then are given a period of time to do that work. They do all the scoping, they do all the building, but at the end, we win or along the way. We then make payments to those tenants. In the case of so they do a lot of the work, and so we're not really gauging when that happens. Except to know that it's occurring or not and when they may bill us stuff. So that can occur throughout that process. And when people renew, they may be restocking their space they go through what they wanna do with the space plan. And, you know, some of those take longer periods of time. And so what we're looking at are we think that these items that we're bringing up are points that we do think they're gonna meet the money this year. Should not spill over into next year. There is always delay. It's just that we're highlighting the this a delay that's much longer and much more impactful to 2025 than in other years. Yeah. And again, this is George Wayne. And I mean, we have a, you know, the vast majority of those all have sunset provisions to them in the lease document. And most of those sunset provisions trigger in 2025. So there the tenant is basically in a use it or lose it position. So that's why we kind of feel it is all happened.

Okay. Great. That was helpful. And then you know, you're able to achieve, you know, positive rent spreads in 2024 but you expect it to be negative in 2025 mostly due to Austin. Could you talk about what is driving the weakness for you there in Austin? Because you know, as you said, there should be some increased activity this year.

Yeah. Again, George Wyndham here. Yeah. I mean, look, the Austin metric is predominantly being driven. We had a 100,000 square foot tenant renew with us in our suburban project, the Riverplace. And in lieu of TI, you know, we ended up dropping the space freight to still obtain a net effective trend positive outcome. But basically traded, you know, capital for rent. So that's really why, you know, we provided the additional breakout on page three, you know, so you can kinda see the impact of Austin. So, you know, accent that largely is in Austin and one other that we have done similar structure with in Philadelphia. Yep. They do deals out of the text and work, you know, we're rolling up the you'll call it a 2% cash and a 7.5% cap. So kinda more in line with you know, how the vast majority of the portfolio performs.

Okay. Great. Thank you.

Thank you. Our next question comes from Michael Lewis of Truist Securities. Your line is open.

Thank you. So my understanding on the preferred to the JV partner is the yield is in the teens. That's frustrating when you have a cash balance and nothing drawn on your line of credit. Is there nothing that you could work out know, prior to stabilization with your partner to kinda get at that high, you know, high-cost obligation sooner and, you know, when can you repay the project have to stabilize? You know, why can't you pay it earlier?

Yeah. Michael, that's a very good question. We're fortunate to have very good partners. With a great relationship with them. And some of those discussions that you're referencing are ongoing. So you know, we recognize that, when we did these development joint ventures, our approach was to preserve residual profit position for Brandywine. The cost of us doing that was to do these preferred structures. So as I mentioned, it's a little bit ago. There's pretty much defined takeout numbers for this. Given our strong liquidity, that's certainly one of the things we're thinking about in terms of how we can minimize the kind of I call the FFO earnings impact of paying the preferred dividends on a current basis. Now the capitalization grows over by recasting or recapitalizing those ventures. Do not need to wait till there's any stabilization there. So there's active discussions underway. As Tom touched on, we think some of the Excuse me. Some of the the the coupons or the construction loans are higher than we could get today. So we're looking at both recap on the preferred equity side, but then also recap on the debt side as well. So I think one of the question was how kinda move the range. So I think some of those things happening on more of an accelerated basis than we have in our plan right now should be very helpful.

Okay. Great. And then CBD, you know, 96% leased. you know, looking at your portfolio. Right? So Philly Excellent, low rollover Philly suburbs, have been higher leased in the past, but, you know, a few space have been contract and limits meeting, but 90% over 90% leased in the suburbs. And then Austin. So You know, you've already answered some questions about Austin, but you know, there's a lot of conversation about this one big tenant in the market. And these numbers fro offset. I mean, is this is a is this a case where you hit one or two big leases and this You know, 78% lease goes to 90. Do you think it's gonna be kind of a longer-term you know, I don't know what word to use, slog in Austin to kinda to kinda get that up? And is the market still, you know, soft and it's gonna take a while?

Well, I think the market the market's still in a recovery phase, and George and I will tag team this. But look, I mean, the pipeline we have Austin in our Austin portfolio is significantly higher than it was a couple of quarters ago. So certainly more tenants are moving in the marketplace. I think the positive absorption leasing activity particularly in some of the submarkets for us has been very helpful. Look, we're always tracking large and small-sized tenants. So, certainly, the larger-sized tenants we pay a lot of attention to and they're more relevant probably to our Uptown ATX project. But, you know, as we're looking strategically at Austin, over the next few years, we're certainly very fortunate that 405 Colorado downtown. We have a wonderful mixed-use development opportunity at Uptown ATX. We're hopeful that the CapMetro project moving forward in the next quarter or so. So the other suburban assets, I think, that it's there's a there's a and I'll defer to George, but there's a range of larger tenants smaller tenants. So my guess would be on some of the projects we're hoping for a quick hit for a larger user. And on maybe some of the other ones, there's less visibility of large user. I will note the Michael, to add on to is it on on that page in the SIP, we have identified a couple of buildings at Riverplace which are underperforming as potential residential conversions options are both excellent residential market. We're going through that zoning approval working with the local leadership and the community groups that tested viability in that. So there could be an opportunity for us to recast the use of a couple of those buildings at Riverplace. But George, any other observations?

Yeah. I think you touched on most of them, but I think, Michael, to kinda answer amplify on the suburban product, I mean, no, those projects are gonna kinda play in that five to twenty thousand square foot tenant on the larger end of the spectrum. So a lot of kind of fives and tens and, you know, some of these assets you know, we saw a lot of text to this over the years post-pandemic. I think as return to work now starts to rebuild, you know, we feel pretty good about, you know, the quality of the project. We are still competing with know, some new developments and some very good sublease space. But, you know, the sublet market in Austin has started to tighten. So again, I think, you know, we're really still a couple of quarters away to start posting you know, some absorption in the suburban, but it'll be on the smaller side as compared to the larger prospects we're seeing in the development.

Great. Thank you.

Thank you. Our next question comes from Michael Griffin of Citi. Your line is open.

Great. Thanks. I'm sorry for technical difficulties earlier. Wondering if we could get some color just on the year-end asset sales. Can you give us a sense of what the buyer pool was like, anything on cap rates, and whether or not seller financing was potentially needed to get some of these deals over the finish line.

Right. That's you know, worries about the technical issues we were having a few of those morning ourselves. So understood perfectly, guys. Yeah. Look, we actually went on having a very successful close to 2024. The asset sales were certainly far beyond the issue we had in our plan. So, you know, we wind up essentially including a parcel land in our Adabnes area. About over $3 million of sales during $10 million. The cap rates range on that from, you know, low fives on the sales up to, I guess, a ten plus on our suburban Philadelphia asset. I guess from a buyer pool standpoint, a couple of things. You know? One is we're definitely seeing some owner occupants seizing the opportunity to buy assets at fairly low price. I mean, actually, we were able to do that last year with one of our other assets and a couple of the sales here in the Philadelphia region have gone to owner occupants. We're definitely seeing more family offices well-capitalized buyers, have all cash moving into the market to take advantage with, again, Macy's is lower pricing with significant upward bias. Most of the institutional capital that we're seeing is really still opportunistic. We're looking for, you know, mid kind of mid to high teens total returns. We are beginning and so that includes, I would say, some of these smaller syndicators. Like the buyer of one of our properties was a syndicated. You know, they're raising money for some smaller family offices and aggregating capital. We are beginning to see, though, the emergence of some core and core plus buyers. What was interesting is you know, most owners like Brandywine are reluctant to sell our really truly high-quality assets today given kind of depressed valuations and also the anticipation of a much lower supply coming in over the next few years to better position those better assets both from a rental rate and a value standpoint. So some of those core buyers where we're getting pinged on different unsolicited sales, etcetera, you know, or trying to get in now in anticipation of a continued recovery in the market. Plus with the forward supply pipeline for office as you all know, is very, very low for the foreseeable future. We're also seeing, you know, a lot of preferred equity and mentioning financing sources out there. Who are still looking to take advantage of kind of a recovering debt capital market to provide bridge financing to get certain transactions done. And then, certainly, one of our largest sales last year went to the city of Boston, who's gonna occupy that for a public service building. So that was a very fortunate turn of events for us as well. So I think it's still being dominated, Michael Bicon, and the family offices smaller syndicators, core plus I'm sorry, optimistic groups targeting you know, those returns I mentioned. There's an awful lot of capital sitting on the sidelines I think is as the market gets more visibility on the spike, the quality. No future pipeline. Demand drivers picking up. I think you'll see a big uptick in buyers coming back into the marketplace at much more realistic values that are closer to historical levels.

Thanks, Jerry. Really appreciate the color there. And then maybe just one on kind of the development leasing pipe with at 3025 with the large lease signed there. The, you know, commercial component is about 80% leased, but still seems like it's lagging from that 3151 project a function of where we are in the life science cycle right now, would you ever consider leasing space there to traditional office users if demand was there for it?

Great question. Couple of things. One is, you know, that building was literally just completed. So we still have perimeter, excuse me, perimeter work to do. Lobby's still being finished, so it's not quite in pristine marketing condition. So but we are having a, as I mentioned earlier, some significant increase in the pipeline. The life science market has been slow to recover. That being said, we are seeing a lot of them, as we call them, green shoots out there for, you know, the half floor, full floor couple floor users. There's still some it's institutional demand out there that we're talking to. So we still feel very good about the track that we have that project on right now. Your question is an excellent one though, and we certainly have given the success we've had at 3025, we certainly have started to show building to other office users who were looking to get next to a mass transportation center move into University City, looking for a very, very high-quality office space that has great visibility. So I think one of the beauties of how we designed that property it can accommodate its heavy and life-sized user as it's out there. From a lab research, mechanical system standpoint, but it also can become a recipient for office users as well. So you know, we really weren't pushing that very hard. Until we achieve this lease at 3025. Now with that project clearly on a path to stabilization success, we made a pin with our marketing teams to put 3151 to that market you as well.

Thanks. That's it for me, and good luck to the Eagles this weekend.

Thank you very much. We appreciate that.

Thank you. I'm not showing any further questions at this time. I'd like to turn the call back over to Jerry Sweeney for closing remarks.

Great. Judy, thanks for all today. And everyone, thank you very much for participating in this earnings call. We look forward to continued progress in our 2025 business plan and updating you on that progress on our next on our first quarter call in April. Thank you very much, and have a great day.