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What changed in BRANDYWINE REALTY TRUST's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BRANDYWINE REALTY TRUST's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+184 added−184 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-21)

Top changes in BRANDYWINE REALTY TRUST's 2023 10-K

184 paragraphs added · 184 removed · 150 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe continued to maintain an A rating from MSCI ESG Research and received our seventh annual Global Real Estate Sustainability Benchmark (“GRESB”) Green Star ranking, as well as our first 5-Star ranking. We achieved 2022 Green Lease Leaders Platinum recognition in the category’s inaugural year, recognizing our collaboration with tenants to equitably align financial and environmental benefits.
Biggest changeWe achieved 2022 Green Lease Leaders Platinum recognition in the category’s inaugural year, recognizing our collaboration with tenants to equitably align financial and environmental benefits. We were also recognized for our commitment to the Philadelphia 2030 District initiative to achieve substantial reduction in energy use by the year 2030.
Regulation General Properties in our markets are subject to various laws, ordinances, and regulations, including regulations relating to common areas. We believe we have the necessary permits and approvals to operate each of our properties. 9 Environmental Matters Our business operations are subject to various federal, state, and local environmental laws and regulations governing land, water, and wetlands resources.
Regulation General Properties in our markets are subject to various laws, ordinances, and regulations, including regulations relating to common areas. We believe we have the necessary permits and approvals to operate each of our properties. 8 Environmental Matters Our business operations are subject to various federal, state, and local environmental laws and regulations governing land, water, and wetlands resources.
For information regarding our joint ventures, see Note 4 “Investment in Unconsolidated Real Estate Ventures,” to our Consolidated Financial Statements. 7 Developments/Redevelopments Our regular interaction with tenants and other market participants keep us current on innovations in workplace layout and smart living.
For information regarding our joint ventures, see Note 4 “Investment in Unconsolidated Real Estate Ventures,” to our Consolidated Financial Statements. 6 Developments/Redevelopments Our regular interaction with tenants and other market participants keep us current on innovations in workplace layout and smart living.
We also intend to 8 selectively dispose of properties and redeploy capital if we determine a property cannot meet our long-term earnings growth expectations. We believe that recycling capital is an important aspect of maintaining the overall quality of our portfolio.
We also intend to 7 selectively dispose of properties and redeploy capital if we determine a property cannot meet our long-term earnings growth expectations. We believe that recycling capital is an important aspect of maintaining the overall quality of our portfolio.
Business Segments See Note 19 “Segment Information , ” to our Consolidated Financial Statements for information on results of operations of our reportable segments for the years ended December 31, 2022, 2021, and 2020 and balance sheet amounts as of December 31, 2022 and 2021.
Business Segments See Note 19 “Segment Information , ” to our Consolidated Financial Statements for information on results of operations of our reportable segments for the years ended December 31, 2023, 2022, and 2021 and balance sheet amounts as of December 31, 2023 and 2022.
The Audit Committee of our Board (the “Audit Committee”) and senior management receive and review quarterly reports on cybersecurity matters from our Chief Technology and Innovation Officer, including reports on documented incidents or violations of our IT and security policies.
The Audit Committee of our Board (the “Audit Committee”) and senior management receive and review periodic reports on cybersecurity matters from our Chief Technology and Innovation Officer, including reports on documented incidents or violations of our IT and security policies.
During the twelve months ended December 31, 2022, we owned and managed properties within five markets: (1) Philadelphia Central Business District (“Philadelphia CBD”), (2) Pennsylvania Suburbs, (3) Austin, Texas (4) Metropolitan Washington, D.C., and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania.
During the twelve months ended December 31, 2023, we owned and managed properties within four markets: (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.
We maintain policies and programs that we believe reflect our continued commitment to our employees, including: • a competitive compensation program and benefits package. • operational protocols which prioritize employee health, safety and well-being. • promotion of diversity and inclusion in our hiring practices. ◦ In 2022, approximately 50% of all new hires were females and approximately 38% of all new hires were ethnic minorities. • training and career development opportunities and a tuition reimbursement program. • regular assessment of the engagement, satisfaction and retention of our employees. • programs such as internally organized affinity groups which are intended to foster an atmosphere of collaboration and inclusion. 10 Environmental, Social, and Corporate Governance Brandywine is committed to implementing and maintaining environmental, social, and governance (“ESG”) standards while driving value through continual improvement of our operations, portfolio performance, and community impact.
We maintain policies and programs that we believe reflect our continued commitment to our employees, including: • a competitive compensation program and benefits package; • operational protocols which prioritize employee health, safety and well-being; • promotion of diversity and inclusion in our hiring practices; ◦ In 2023, approximately 43% of all new hires were females and approximately 30% of all new hires were ethnic minorities. • training and career development opportunities and a tuition reimbursement program; and • regular assessment of the engagement, satisfaction and retention of our employees. 9 Environmental, Social, and Corporate Governance Brandywine is committed to implementing and maintaining environmental, social, and governance (“ESG”) standards while driving value through continual improvement of our operations, portfolio performance, and community impact.
We have implemented a training program for employees that includes both proactive education modules, as well as reactive anti-phishing and testing modules designed to test the end-user’s ability to put what they have learned into practice. Human Capital Resources As of December 31, 2022, we had approximately 328 full-time employees and six part-time employees, one intern and one temporary employee.
We have implemented a training program for employees that includes both proactive education modules, as well as reactive anti-phishing and testing modules designed to test the end-user’s ability to put what they have learned into practice. Human Capital Resources As of December 31, 2023, we had approximately 323 full-time employees and eight part-time employees and two interns.
The Pennsylvania Suburbs segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs. 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 Pennsylvania Suburbs segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Other segment includes properties in Washington, D.C., Northern Virginia, Southern Maryland, Camden County, New Jersey and New Castle County, Delaware.
We’ve achieved one or more green building certifications across 62% of our portfolio and participate in the UL Verified Healthy Buildings Program. Over 700 energy, water, and waste efficiency projects were implemented in our portfolio, and we continue to generate and procure renewable energy for our properties. Brandywine remains committed to supporting our employees and the communities we operate in.
We’ve achieved Energy Star certification across the majority of our portfolio and participate in the UL Verified Healthy Buildings Program. Over 650 energy, water, and waste efficiency projects were implemented in our portfolio, and we continue to generate and procure renewable energy for our properties. Brandywine remains committed to supporting our employees and the communities where we operate .
See Note 1 “Organization of the Parent Company and the Operating Partnership,” to our Consolidated Financial Statements for the Parent Company's ownership interest in the Operating Partnership. The ownership interests in the Operating Partnership not owned by the Company consist of common units of limited partnership issued to the holders in exchange for contributions of properties to the Operating Partnership.
The ownership interests in the Operating Partnership not owned by the Company consist of common units of limited partnership issued to the holders in exchange for contributions of properties to the Operating Partnership.
See Note 1 “Organization of the Parent Company and the Operating Partnership,” to our Consolidated Financial Statements for our property portfolio, management services and land holdings. Unless otherwise indicated, all references in this Form 10-K to “square feet” represent the net rentable area. The Parent Company was organized and commenced its operations in 1986 as a Maryland REIT.
Unless otherwise indicated, all references in this Form 10-K to “square feet” represent the net rentable area. The Parent Company was organized and commenced its operations in 1986 as a Maryland REIT. The Parent Company owns its assets and conducts its operations through the Operating Partnership and subsidiaries of the Operating Partnership.
We promote diversity, equity, and inclusion through internal affinity teams, board diversity, and employee engagement. Employees are given access to mentorship and tuition reimbursement opportunities as well as numerous programs to promote health and wellness. Brandywine maintains and encourages the use of over 74 acres of public green space for community engagement.
We promote diversity, equity, and inclusion through board diversity and employee engagement. Employees are given access to mentorship and tuition reimbursement opportunities as well as numerous programs to promote health and wellness.
For further information regarding our environmental, social, and governance strategies and policies, please visit the “Responsibility” section of our website. The information contained on our website is not incorporated by reference into this Annual Report.
The information contained on our website is not incorporated by reference into this Annual Report.
The Other segment includes properties in Camden County in New Jersey and properties in New Castle County in Delaware. In addition to the five markets, 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.
In addition to our four geographic markets, 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. See Note 1 “Organization of the Parent Company and the Operating Partnership,” to our Consolidated Financial Statements for our property portfolio, management services and land holdings.
The Parent Company owns its assets and conducts its operations through the Operating Partnership and subsidiaries of the Operating Partnership. The Operating Partnership was formed in 1996 as a Delaware limited partnership. The Parent Company controls the Operating Partnership as its sole general partner.
The Operating Partnership was formed in 1996 as a Delaware limited partnership. The Parent Company controls the Operating Partnership as its sole general partner. See Note 1 “Organization of the Parent Company and the Operating Partnership,” to our Consolidated Financial Statements for the Parent Company's ownership interest in the Operating Partnership.
We were also recognized for our commitment to the Philadelphia 2030 District initiative to achieve substantial reduction in energy use by the year 2030. We have further completed 13.5 million square feet of green building certifications, encompassing approximately 62% of our portfolio. We remain committed to energy efficiency in our buildings.
We have further completed an additional 1.8 million square feet of green certifications for our buildings raising the total to 15.3 million square feet of green building certifications, encompassing approximately 54% of our portfolio. We remain committed to energy efficiency in our buildings.
We continue to foster long-standing, ethical partnerships with local suppliers and drive economic resilience through the Schuylkill Yards projects and community totaling $16.4 million to date. We’ve spearheaded new, equitable transit-oriented development in Austin and Philadelphia and continue to assess what investments will impact our employees and communities the most.
Brandywine maintains and encourages the use of over 74 acres of public green space for community engagement including a focus on biodiversity through our onsite, honey generating, beekeeping habitats. We continue to foster long-standing, ethical partnerships with local suppliers and drive economic resilience through the Schuylkill Yards projects and community totaling $16.4 million to date.
Our reduction targets for energy, greenhouse gas emissions and water are focused to reduce consumption 15% by 2025 over our 2018 baseline. In 2022, we extended our industry-leading ISS Governance Quality Score of 1, representing the highest possible score and indicating the lowest shareholder risk.
Our reduction targets for energy, greenhouse gas emissions and water are focused to reduce consumption 15% compared to our 2018 baseline by 2025. We have reached a 25% like-for-like intensity use reduction from baseline for water and energy, as well as a 23.9% like-for-like intensity use reduction from baseline for greenhouse gas emissions.
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In 2023, we extended our industry-leading ISS Governance Quality Score of 1, representing the highest possible score and indicating the lowest shareholder risk and received our eighth annual Global Real Estate Sustainability Benchmark (“GRESB”) Green Star ranking, and our second 5-Star ranking.
Added
We’ve spearheaded new, equitable transit-oriented development in Austin and Philadelphia and continue to assess what investments will impact our employees and communities in the most impactful ways. For further information regarding our environmental, social, and governance strategies and policies, please visit the “Responsibility” section of our website.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

45 edited+7 added−10 removed163 unchanged
Biggest changeIt is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable. It is also possible that we are unable to identify and complete the acquisition of suitable replacement property to effect a Section 1031 Exchange.
Biggest changeIt is also possible that we are unable to identify and complete the acquisition of suitable replacement property to effect a Section 1031 Exchange. In any such case, our taxable income and earnings and profits would increase. This could increase the dividend income to our shareholders by reducing any return of capital they received.
Our financial performance and the value of our real estate assets, and consequently the value of our securities, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow, results of operations, financial condition and ability to make distributions to our security holders will be adversely affected. 11 The following factors, among others, may materially and adversely affect the income generated by our properties and our performance generally: • adverse changes in international, national or local economic and demographic conditions; • increased vacancies or our inability to rent space on favorable terms, including market pressures to offer tenants rent abatements, increased tenant improvement packages, early termination rights, below market rental rates or below-market renewal options; • significant job losses in the financial and professional services industries may occur, which may decrease demand for office space, causing market rental rates and property values to be negatively impacted; • changes in space utilization by our tenants due to technology, economic conditions, impact of pandemics, and business culture may decrease demand for office space, causing market rental rates and property values to be negatively impacted; • deterioration in the financial condition of our tenants may result in tenant defaults under leases, including due to bankruptcy, and adversely impact our ability to collect rents from our tenants; • competition from other office and mixed-use properties, and increased supply of such properties; • increases in non-discretionary operating costs, including insurance expense, utilities, real estate taxes, state and local taxes, labor shortages and heightened security costs may not be offset by increased market rental rates; • increases in operating costs due to inflation may not be offset by increased market rental rates; • reduced values of our properties would limit our ability to dispose of assets at attractive prices, limit our access to debt financing secured by our properties and reduce the availability of unsecured loans; • increases in interest rates, reduced availability of financing and reduced liquidity in the capital markets may adversely affect our ability or the ability of potential buyers of properties and tenants of properties to obtain financing on favorable terms, or at all; • one or more lenders under our unsecured credit facility could refuse or be unable to fund their financing commitment to us and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all; and • civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war may result in uninsured or underinsured losses.
Our financial performance and the value of our real estate assets, and consequently the value of our securities, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow, results of operations, financial condition and ability to make distributions to our security holders will be adversely affected. 10 The following factors, among others, may materially and adversely affect the income generated by our properties and our performance generally: • adverse changes in international, national or local economic and demographic conditions; • increased vacancies or our inability to rent space on favorable terms, including market pressures to offer tenants rent abatements, increased tenant improvement packages, early termination rights, below market rental rates or below-market renewal options; • significant job losses in the financial and professional services industries may occur, which may decrease demand for office space, causing market rental rates and property values to be negatively impacted; • changes in space utilization by our tenants due to technology, economic conditions, impact of pandemics, and business culture may decrease demand for office space, causing market rental rates and property values to be negatively impacted; • deterioration in the financial condition of our tenants may result in tenant defaults under leases, including due to bankruptcy, and adversely impact our ability to collect rents from our tenants; • competition from other office and mixed-use properties, and increased supply of such properties; • increases in non-discretionary operating costs, including insurance expense, utilities, real estate taxes, state and local taxes, labor shortages and heightened security costs may not be offset by increased market rental rates; • increases in operating costs due to inflation may not be offset by increased market rental rates; • reduced values of our properties would limit our ability to dispose of assets at attractive prices, limit our access to debt financing secured by our properties and reduce the availability of unsecured loans; • increases in interest rates, reduced availability of financing and reduced liquidity in the capital markets may adversely affect our ability or the ability of potential buyers of properties and tenants of properties to obtain financing on favorable terms, or at all; • one or more lenders under our unsecured credit facility could refuse or be unable to fund their financing commitment to us and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all; and • civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war may result in uninsured or underinsured losses.
Risks associated with our development and construction activities include: • unavailability of favorable financing alternatives in the private and public debt markets; • insufficient capital to pay development costs; • dependence on the financial, technology and professional services sector as part of our tenant base; • construction costs exceeding original estimates due to rising interest rates, inflation, diminished availability of materials and labor, and increases in the costs of materials and labor; • construction and lease-up delays resulting in increased debt service, fixed expenses and construction or renovation costs; • expenditure of funds and devotion of management’s time to projects that we do not complete; • occupancy rates and rents at newly completed properties may fluctuate depending on a number of factors, including market and economic conditions, resulting in lower than projected rental rates and a corresponding lower return on our investment; • complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other governmental permits; • increased use restrictions by local zoning or planning authorities limiting our ability to develop and impacting the size of developments; and • limited experience in developing or redeveloping properties in certain of our geographic markets may lead us to incorrectly project development costs and returns on our investments.
Risks associated with our development and construction activities include: • unavailability of favorable financing alternatives in the private and public debt markets; • insufficient capital to pay development costs; • dependence on the financial, technology and professional services sector as part of our tenant base; • construction costs exceeding original estimates due to high interest rates, inflation, diminished availability of materials and labor, and increases in the costs of materials and labor; • construction and lease-up delays resulting in increased debt service, fixed expenses and construction or renovation costs; • expenditure of funds and devotion of management’s time to projects that we do not complete; • occupancy rates and rents at newly completed properties may fluctuate depending on a number of factors, including market and economic conditions, resulting in lower than projected rental rates and a corresponding lower return on our investment; • complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other governmental permits; • increased use restrictions by local zoning or planning authorities limiting our ability to develop and impacting the size of developments; and • limited experience in developing or redeveloping properties in certain of our geographic markets may lead us to incorrectly project development costs and returns on our investments.
In addition, changes to existing requirements or enactments of new requirements could require significant expenditures. Such costs may adversely affect our cash flow and ability to make distributions to shareholders. REIT Risk Factors Failure to qualify as a REIT would subject us to U.S. federal income tax which would reduce the cash available for distribution to our shareholders.
In addition, changes to existing requirements or enactments of new requirements could require significant expenditures. Such costs may adversely affect our cash flow and ability to make distributions to shareholders. 16 REIT Risk Factors Failure to qualify as a REIT would subject us to U.S. federal income tax which would reduce the cash available for distribution to our shareholders.
Significant losses related to such investments or loans could adversely affect our results of operations and financial condition. 15 Because real estate is illiquid, we may be unable to sell properties when in our best interest. Real estate investments generally, and in particular large office and mixed use properties like those that we own, often cannot be sold quickly.
Significant losses related to such investments or loans could adversely affect our results of operations and financial condition. Because real estate is illiquid, we may be unable to sell properties when in our best interest. Real estate investments generally, and in particular large office and mixed use properties like those that we own, often cannot be sold quickly.
Certain of these contracts may be structured such that we are the principal rather than the agent. As a result, we may assume liabilities in the course of the project and be subjected to, or become liable for, claims for construction defects, negligent performance of work or other similar actions by third parties we have engaged.
Certain of these contracts may be structured 12 such that we are the principal rather than the agent. As a result, we may assume liabilities in the course of the project and be subjected to, or become liable for, claims for construction defects, negligent performance of work or other similar actions by third parties we have engaged.
In that case, it is possible that we would fail certain of the asset tests applicable to REITs, in which event we would fail to qualify as a REIT unless we could avail ourselves of certain relief provisions. To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions.
In that case, it is possible that we would fail certain of the asset tests applicable to REITs, in which event we would fail to qualify as a REIT unless we could avail ourselves of certain relief provisions. 17 To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions.
These agreements may hinder actions that we may otherwise desire to take to repay or refinance guaranteed indebtedness because we would be required to make payments to the beneficiaries of such agreements if we violate these agreements. Our property taxes could increase due to property tax rate changes or reassessment, which would adversely impact our cash flows.
These agreements may hinder actions that we may otherwise desire to take to repay or refinance guaranteed indebtedness because we would be required to make payments to the beneficiaries of such agreements if we violate these agreements. 15 Our property taxes could increase due to property tax rate changes or reassessment, which would adversely impact our cash flows.
There can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Protected information, networks, systems and facilities remain vulnerable because the techniques used in such attempted security breaches evolve and may not be recognized or detected until launched against a target.
There can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Protected information, networks, systems and facilities 22 remain vulnerable because the techniques used in such attempted security breaches evolve and may not be recognized or detected until launched against a target.
Such events could adversely affect our cash flow and ability to make distributions to shareholders. If one or more of our insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such claims could have an adverse effect on our financial condition and results of operations.
Such events could adversely affect our cash flow and ability to make distributions to shareholders. If one or more of our 23 insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such claims could have an adverse effect on our financial condition and results of operations.
If any subsidiary REIT failed to qualify as a REIT, we could be directly or indirectly subject to higher taxes and could fail to remain qualified as a REIT. We directly or indirectly (through disregarded subsidiaries or pass-through entities) own shares of certain subsidiaries that have elected to be taxed as a REIT for U.S. federal income tax purposes.
If any subsidiary REIT failed to qualify as a REIT, we could be directly or indirectly subject to higher taxes and could fail to remain qualified as a REIT. We directly or indirectly (through disregarded subsidiaries or pass-through entities) own shares of certain subsidiaries that have elected to be taxed as REITs for U.S. federal income tax purposes.
There are, however, types of losses, such as lease and other contract claims, biological, radiological and nuclear hazards and acts of war that generally are 24 not insured. We cannot assure you that we will be able to renew insurance coverage in an adequate amount or at reasonable prices.
There are, however, types of losses, such as lease and other contract claims, biological, radiological and nuclear hazards and acts of war that generally are not insured. We cannot assure you that we will be able to renew insurance coverage in an adequate amount or at reasonable prices.
Moreover, our venture partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives, including objectives that relate to the appropriate timing and terms of any sale or refinancing of a property. In some instances, our venture partners may have competing interests in our markets that could create conflicts of interest.
Moreover, our venture partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives, including objectives that relate to the appropriate timing and terms of any sale or refinancing of a property. In some instances, our venture partners may have competing interests in our markets that could create conflicts of 14 interest.
The determination as to whether a particular sale or series of sales is/are a prohibited transaction depends on the facts and circumstances related to 18 that sale. We cannot guarantee that sales of our properties would not be prohibited transactions unless we comply with certain statutory safe-harbor provisions.
The determination as to whether a particular sale or series of sales is/are a prohibited transaction depends on the facts and circumstances related to that sale. We cannot guarantee that sales of our properties would not be prohibited transactions unless we comply with certain statutory safe-harbor provisions.
Our failure to comply with these requirements could result in the imposition of fines and damage awards and could result in a default under some of our tenant 16 leases. Moreover, the costs to comply with any new or different regulations could adversely affect our cash flow and our ability to make distributions to shareholders.
Our failure to comply with these requirements could result in the imposition of fines and damage awards and could result in a default under some of our tenant leases. Moreover, the costs to comply with any new or different regulations could adversely affect our cash flow and our ability to make distributions to shareholders.
Certain of these matters are beyond our control and any adverse changes could have a material adverse effect on our cash flow and our ability to make distributions to shareholders. We face possible federal, state and local tax audits.
Certain of these matters are beyond our control and any adverse changes could have a material adverse effect on our cash flow and our ability to make distributions to shareholders. 20 We face possible federal, state and local tax audits.
In the event that one or more 13 of the contractors involved does not, or cannot, perform as a result of bankruptcy or for another reason, we may be responsible for cost overruns, as well as the consequences of late delivery.
In the event that one or more of the contractors involved does not, or cannot, perform as a result of bankruptcy or for another reason, we may be responsible for cost overruns, as well as the consequences of late delivery.
Congress and the IRS might make changes to the tax laws and regulations, and the courts might issue new rulings or interpretations of tax law, that make it more difficult, or impossible, for us to remain 17 qualified as a REIT.
Congress and the IRS might make changes to the tax laws and regulations, and the courts might issue new rulings or interpretations of tax law, that make it more difficult, or impossible, for us to remain qualified as a REIT.
Higher market interest rates would not, however, result in more funds for us to distribute and, to the contrary, would likely increase our borrowing costs and 21 potentially decrease funds available for distribution.
Higher market interest rates would not, however, result in more funds for us to distribute and, to the contrary, would likely increase our borrowing costs and potentially decrease funds available for distribution.
The success of such transactions is subject to a number of factors, including the risks that: • we may not be able to obtain financing for such acquisitions on favorable terms; • acquired properties may fail to perform as expected; • even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition after making a non-refundable deposit and incurring certain other acquisition-related costs; • the actual costs of repositioning, redeveloping or maintaining acquired properties may be higher than our estimates; • the acquired properties may be located in new markets where we may have limited knowledge and understanding of the local economy, an absence of business relationships in the area or unfamiliarity with local governmental and permitting procedures; and • we may not be able to efficiently integrate acquired properties, particularly portfolios of properties, into our organization and manage new properties in a way that allows us to realize anticipated cost savings and synergies. 14 Acquired properties may subject us to known and unknown liabilities.
The success of such transactions is subject to a number of factors, including the risks that: • we may not be able to obtain financing for such acquisitions on favorable terms; • acquired properties may fail to perform as expected; • even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition after making a non-refundable deposit and incurring certain other acquisition-related costs; • the actual costs of repositioning, redeveloping or maintaining acquired properties may be higher than our estimates; • the acquired properties may be located in new markets where we may have limited knowledge and understanding of the local economy, an absence of business relationships in the area or unfamiliarity with local governmental and permitting procedures; and • we may not be able to efficiently integrate acquired properties, particularly portfolios of properties, into our organization and manage new properties in a way that allows us to realize anticipated cost savings and synergies.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Influence Future Results of Operations - Development Risk.” Our development projects and third party property management business may subject us to certain liabilities.
See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Influence Future Results of Operations - Development Risk.” Our development projects and third party property management business may subject us to certain liabilities.
Properties that we acquire may be subject to known and unknown liabilities for which we would have no recourse, or only limited recourse, to the former owners of such properties or otherwise.
Acquired properties may subject us to known and unknown liabilities. Properties that we acquire may be subject to known and unknown liabilities for which we would have no recourse, or only limited recourse, to the former owners of such properties or otherwise.
See Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Influence Future Results of Operations - Tenant Credit Risk.” 12 Real Estate Industry Risk Factors We may experience increased operating costs, which might reduce our profitability.
See Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Influence Future Results of Operations - Tenant Credit Risk.” Real Estate Industry Risk Factors We may experience increased operating costs, which might reduce our profitability.
In addition, the Internal Revenue Code limits our ability, as a REIT, to sell properties that we have held for fewer than two years without potential adverse consequences to us.
In addition, the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), limits our ability, as a REIT, to sell properties that we have held for fewer than two years without potential adverse consequences to us.
If we decide not to sell or participate in a real estate venture and instead hire a third party manager, we would be dependent on their key personnel to provide services on our behalf and we may not find a suitable replacement if the management agreement is terminated, or if key personnel leave or otherwise become unavailable to us.
If we decide not to sell or participate in a real estate venture and instead hire a third party manager, we would be dependent on their key personnel to provide services on our behalf and we may not find a suitable replacement if the management agreement is terminated, or if key personnel leave or otherwise become unavailable to us. 13 We face risks associated with property acquisitions.
The physical effects of climate change could have a material adverse effect on our properties, operations and business. For example, many of our properties are located along the East Coast, particularly those in the central business districts of Philadelphia, Pennsylvania and Washington, D.C.
We face possible risks associated with the physical effects of climate change. The physical effects of climate change could have a material adverse effect on our properties, operations and business. For example, many of our properties are located along the East Coast, particularly those in the central business districts of Philadelphia, Pennsylvania and Washington, D.C.
Our performance is dependent upon the economic conditions of the markets in which our properties are located. Our results of operations will be significantly influenced by the economies and other conditions of the real estate markets in which we operate, particularly in Philadelphia, Pennsylvania, the suburbs of Philadelphia, Pennsylvania, Austin, Texas, Washington, D.C., Northern Virginia and Southern Maryland.
Our performance is dependent upon the economic conditions of the markets in which our properties are located. Our results of operations will be significantly influenced by the economies and other conditions of the real estate markets in which we operate, particularly in Philadelphia, Pennsylvania, the suburbs of Philadelphia, Pennsylvania, and Austin, Texas.
We face risks associated with property acquisitions. We have acquired in the past and intend to continue to pursue the acquisition of properties, including large portfolios that would increase our size and potentially alter our capital structure.
We have acquired in the past and intend to continue to pursue the acquisition of properties, including large portfolios that would increase our size and potentially alter our capital structure.
In the event that our unsecured debt is downgraded by Moody’s Investor Services or Standard & Poor’s from the current ratings, we would likely incur higher borrowing costs and the market prices of our common shares and debt securities might decline.
In the event that our unsecured debt is downgraded by Moody’s Investor Services or Standard & Poor’s from the current ratings, we would likely incur higher borrowing costs and the market prices of our common shares and debt securities might decline. Data security breaches may cause damage to our business and reputation.
The impact of the COVID-19 pandemic could negatively impact our business in a number of ways, including: (i) deterioration in the financial condition of our tenants and in their ability to pay rents; (ii) reduction in demand for space in our portfolio; (iii) costs associated with construction delays and cost overruns at our development and redevelopment projects; (iv) costs associated with higher inflation rates; (v) reduction in availability of, and increased costs of, capital; and (vi) failure of our contract counterparties, including partners in unconsolidated real estate ventures, to meet their obligations. 20 We face possible risks associated with the physical effects of climate change.
The impact of pandemics, epidemics and other public health crises could negatively impact our business in a number of ways, including: (i) deterioration in the financial condition of our tenants and in their ability to pay rents; (ii) reduction in demand for space in our portfolio; (iii) costs associated with construction delays and cost overruns at our development and redevelopment projects; (iv) costs associated with higher inflation rates; (v) reduction in availability of, and increased costs of, capital; and (vi) failure of our contract counterparties, including partners in unconsolidated real estate ventures, to meet their obligations.
Moreover, it is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties on a tax deferred basis. 19 Failure to obtain the tax benefits and remain compliant within Qualified Opportunity Zones and Keystone Opportunity Zones may have adverse consequences.
Moreover, it is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties on a tax deferred basis.
We may suffer adverse consequences due to the financial difficulties, bankruptcy or insolvency of our tenants. Periodically, our tenants experience financial difficulties, including bankruptcy, insolvency or a general downturn in their business, and these difficulties may have an adverse effect on our cash flow, results of operations, financial condition and ability to make distributions to our shareholders.
Periodically, our tenants experience financial difficulties, including bankruptcy, insolvency or a general downturn in their business, and these difficulties may have an adverse effect on our cash flow, results of operations, financial condition and 11 ability to make distributions to our shareholders. We cannot assure you that any tenant that files for bankruptcy protection will continue to pay us rent.
From time to time we seek to dispose of properties in transactions that are intended to qualify as tax-deferred “like kind exchanges” under Section 1031 of the Internal Revenue Code of 1986, as amended (a “Section 1031 Exchange”).
From time to time we seek to dispose of properties in transactions that are intended to qualify as tax-deferred “like kind exchanges” under Section 1031 of the Internal Revenue Code (a “Section 1031 Exchange”). It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable.
If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable, or if we are unable to identify and complete the acquisition of suitable replacement property to effect a Section 1031 Exchange, we may face adverse consequences.
We and our shareholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation. 18 If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable, or if we are unable to identify and complete the acquisition of suitable replacement property to effect a Section 1031 Exchange, we may face adverse consequences.
In addition, an increase in interest rates could decrease the amounts third parties are willing or able to pay for our assets, thereby limiting our ability to recycle capital and change our portfolio promptly in response to changes in economic or other conditions. 22 Our degree of leverage could limit our ability to obtain additional financing or affect the market price of our equity shares or debt securities.
In addition, an increase in interest rates could decrease 21 the amounts third parties are willing or able to pay for our assets, thereby limiting our ability to recycle capital and change our portfolio promptly in response to changes in economic or other conditions. For more information about our interest costs on variable rate debt see Part II, Item 7.
If we are required to take additional impairment charges, our results of operations could be adversely impacted. An increase in interest rates would increase our interest costs on variable rate debt and could adversely impact our ability to refinance existing debt or sell assets on favorable terms or at all.
An increase in interest rates would increase our interest costs on variable rate debt and could adversely impact our ability to refinance existing debt or sell assets on favorable terms or at all. Rising interest rates could limit our ability to refinance existing debt when it matures or significantly increase our future interest expense.
Our bylaws require advance notice for shareholders to nominate persons for election as trustees at, or to bring other business before, any meeting of our shareholders. This bylaw provision limits the ability of shareholders to make nominations of persons for election as trustees or to introduce other proposals unless we are notified in a timely manner prior to the meeting.
This bylaw provision limits the ability of shareholders to make nominations of persons for election as trustees or to introduce other proposals unless we are notified in a timely manner prior to the meeting. 19 Disaster Risk Factors A pandemic, epidemic or outbreak of a contagious disease could adversely affect us.
Our organizational documents do not contain any limitation on the amount of indebtedness we may incur. We are subject to risks associated with debt financing, such as the insufficiency of cash flow to meet required debt service payment obligations and the inability to refinance existing indebtedness.
We are subject to risks associated with debt financing, such as the insufficiency of cash flow to meet required debt service payment obligations and the inability to refinance existing indebtedness. If our debt cannot be paid, refinanced or extended at maturity, we may not be able to make distributions to shareholders at expected levels or at all.
In any such case, our taxable income and earnings and profits would increase. This could increase the dividend income to our shareholders by reducing any return of capital they received. In some circumstances, we may be required to pay additional dividends or, in lieu of that, corporate income tax, possibly including interest and penalties.
In some circumstances, we may be required to pay additional dividends or, in lieu of that, corporate income tax, possibly including interest and penalties.
We invest and plan to continue to heavily invest in Qualified Opportunity Zones as part of the federal program and Keystone Opportunity Zones in Pennsylvania due to the related tax benefits.
These incentives typically have specific sunset provisions and may be subject to governmental discretion in the eligibility or award of the applicable incentives. We have invested and may continue to invest in Qualified Opportunity Zones as part of the federal program and Keystone Opportunity Zones in Pennsylvania due to the related tax benefits.
If our debt cannot be paid, refinanced or extended at maturity, we may not be able to make distributions to shareholders at expected levels or at all. Furthermore, an increase in our interest expense could adversely affect our cash flow and ability to make distributions to shareholders.
Furthermore, an increase in our interest expense could adversely affect our cash flow and ability to make distributions to shareholders.
Demand for space at our properties is dependent on a variety of macroeconomic factors, such as employment levels, inflation, interest rates, changes in stock market valuations, rent levels and availability of competing space. These factors can be significantly adversely affected by a variety of factors beyond our control.
Pandemics, epidemics, and other public health crises have impacted, and could continue to impact many countries around the globe, including the U.S. Demand for space at our properties is dependent on a variety of macroeconomic factors, such as employment levels, inflation, interest rates, changes in stock market valuations, rent levels and availability of competing space.
Certain of our properties have the benefit of governmental tax incentives for development in areas and neighborhoods which have not historically seen robust commercial development. These incentives typically have specific sunset provisions and may be subject to governmental discretion in the eligibility or award of the applicable incentives.
Failure to obtain the tax benefits and remain compliant within Qualified Opportunity Zones and Keystone Opportunity Zones may have adverse consequences. Certain of our properties have the benefit of governmental tax incentives for development in areas and neighborhoods which have not historically seen robust commercial development.
If we breach covenants in our secured debt agreements, the lenders can declare a default and take possession of the property securing the defaulted loan. Certain of our mortgages include restrictive covenants and default provisions, which could limit our flexibility, limit our ability to sell the encumbered properties and require us to repay the indebtedness prior to its maturity.
"Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources." Certain of our mortgages include restrictive covenants and default provisions, which could limit our flexibility, limit our ability to sell the encumbered properties and require us to repay the indebtedness prior to its maturity.
Rising interest rates could limit our ability to refinance existing debt when it matures or significantly increase our future interest expense. From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts.
From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts.
Removed
We cannot assure you that any tenant that files for bankruptcy protection will continue to pay us rent.
Added
During the year ended December 31, 2023, we recognized aggregate impairment charges of $168.8 million, with $131.6 million related to our Real Estate Investments and $37.2 million related to our Investment in Unconsolidated Real Estate Ventures. If we are required to take additional impairment charges, our results of operations could be adversely impacted.
Removed
We and our shareholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation.
Added
See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Impairment.” See also Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Comparison of Year Ended December 31, 2023 to the Year Ended December 31, 2022 – Provision for Impairment.” We may suffer adverse consequences due to the financial difficulties, bankruptcy or insolvency of our tenants.
Removed
Disaster Risk Factors A pandemic, epidemic or outbreak of a contagious disease, such as the ongoing COVID-19 pandemic, could adversely affect us. Pandemics, epidemics, and other public health crises, including the ongoing COVID-19 pandemic, have impacted, and could continue to impact many countries around the globe, including the U.S.
Added
In addition, for tax years beginning after December 31, 2022, we would possibly also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, such as the nondeductible one percent excise tax on certain stock repurchases.
Removed
The COVID-19 pandemic’s long-term impact on global economies, financial markets, and the job market remain uncertain and could result in prolonged economic downturns and recessions that adversely impact us and our tenants. The global impact of the outbreak has been rapidly evolving and there is significant uncertainty regarding its continued impact on the U.S. economy and consumer confidence.
Added
Our bylaws require advance notice for shareholders to nominate persons for election as trustees at, or to bring other business before, any meeting of our shareholders.
Removed
The extent to which the COVID-19 pandemic continues to impact our results will depend on future developments, many of which are highly uncertain and cannot be predicted.
Added
These factors can be significantly adversely affected by a variety of factors beyond our control.
Removed
Discontinuation of the London interbank offered rate and transition to an alternative benchmark could adversely affect our operating results In March 2021, the Chief Executive of the U.K.
Added
"Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources." Our degree of leverage could limit our ability to obtain additional financing or affect the market price of our equity shares or debt securities. Our organizational documents do not contain any limitation on the amount of indebtedness we may incur.
Removed
Financial Conduct Authority (the “FCA”), which regulates the London interbank offered rate (“LIBOR”), announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after June 30, 2023.
Added
If we breach covenants in our secured debt agreements, the lenders can declare a default and take possession of the property securing the defaulted loan. For more information about the terms and covenants relating to our indebtedness see Part II, Item 7.
Removed
Due to the cessation of LIBOR, we have entered into financial transactions, including the 2022 Credit Agreement, that use the Secured Overnight Financing Rate (“SOFR”) as an interest rate benchmark. SOFT is calculated differently from LIBOR and has inherent differences, which could give rise to uncertainties, including the limited historical data and volatility in the benchmark rate.
Removed
The full effects of the transition to SOFR, or any other benchmark rate, remains uncertain.
Removed
Any other unforeseen impacts of the discontinuation of LIBOR and subsequent transition to SOFR, or any other benchmark rate, could have a negative impact on our results of operations and our variable rate debt. 23 Data security breaches may cause damage to our business and reputation.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFor more information about our geographic locations, see Note 19 “Segment Information” to our Consolidated Financial Statements: Location Number of Properties Net Rentable Square Feet (in thousands) Percentage Leased as of December 31, 2022 Leased Square Feet (in thousands) Total Base Rent (a) (in thousands) Percentage of Base Rent Philadelphia 11 4,726 97.2 % 4,592 $ 142,389 41.5 % Pennsylvania Suburbs 33 3,949 93.4 % 3,687 113,740 33.2 % Austin 20 2,768 84.3 % 2,333 60,953 17.8 % Metropolitan Washington, D.C. 4 770 75.7 % 583 16,932 4.9 % Other 4 578 73.7 % 426 9,046 2.6 % 72 12,791 90.9 % 11,621 $ 343,060 100.0 % (a) Represents base rents earned during the year, including tenant reimbursements, and excludes parking income, tenant inducements, and deferred market rent adjustments. 26 The following table shows the major tenants of the Core Properties as of December 31, 2022 and assumes that none of the tenants exercise renewal options or termination rights, if any, at or prior to scheduled expirations: Tenant Name Annualized Base Rents (a) (in thousands) Percentage of Aggregate Annualized Base Rents IBM, Inc. $ 21,140 4.8 % Spark Therapeutics, Inc. 17,210 3.9 % Comcast Corporation 12,106 2.8 % FMC Corporation 11,711 2.7 % CSL Behring, LLC 10,966 2.5 % Troutman Pepper Hamilton Sanders LLP 9,912 2.3 % Lincoln National Management Corporation 9,861 2.3 % Independence Blue Cross, LLC 8,241 1.9 % The Trustees of the University of Pennsylvania 7,358 1.7 % SailPoint Technologies, Inc. 7,283 1.7 % Other 321,022 73.4 % $ 436,810 100.0 % (a) Represents the annualized base rent, including tenant reimbursements, for each lease in effect at December 31, 2022.
Biggest changeFor more information about our geographic locations, see Note 19 “Segment Information” to our Consolidated Financial Statements: Location Number of Properties Net Rentable Square Feet (in thousands) Percentage Leased as of December 31, 2023 Leased Square Feet (in thousands) Total Base Rent (a) (in thousands) Percentage of Base Rent Philadelphia 11 4,726 96.9 % 4,579 $ 145,752 41.5 % Pennsylvania Suburbs 32 3,932 88.6 % 3,482 113,778 32.3 % Austin 18 2,576 82.6 % 2,128 60,260 17.1 % Other 8 1,464 81.1 % 1,187 31,941 9.1 % 69 12,698 89.6 % 11,376 $ 351,731 100.0 % (a) Represents base rents earned during the year, including tenant reimbursements, and excludes parking income, tenant inducements, and deferred market rent adjustments. 26 The following table shows the major tenants of the Core Properties as of December 31, 2023 and assumes that none of the tenants exercise renewal options or termination rights, if any, at or prior to scheduled expirations: Tenant Name Annualized Base Rents (a) (in thousands) Percentage of Aggregate Annualized Base Rents IBM, Inc. $ 20,849 4.7 % Spark Therapeutics, Inc. 18,527 4.2 % Comcast Corporation 12,309 2.8 % FMC Corporation 11,830 2.7 % Troutman Pepper Hamilton Sanders LLP 10,308 2.3 % Lincoln National Management Co. 9,935 2.2 % Independence Blue Cross, LLC 8,255 1.9 % The Trustees of the University of Pennsylvania 7,670 1.7 % CSL Behring, LLC 7,280 1.6 % SailPoint Technologies, Inc. 7,336 1.7 % Other 329,005 74.2 % $ 443,304 100.0 % (a) Represents the annualized base rent, including tenant reimbursements, for each lease in effect at December 31, 2023.
See Note 4 “Investment in Unconsolidated Real Estate Ventures,” to our Consolidated Financial Statements for further information. 25 Property Statistics The following table shows lease expirations for the Core Properties as of December 31, 2022, during each of the next 10 years and thereafter.
See Note 4 “Investment in Unconsolidated Real Estate Ventures,” to our Consolidated Financial Statements for further information. 25 Property Statistics The following table shows lease expirations for the Core Properties as of December 31, 2023, during each of the next 10 years and thereafter.
Tenant reimbursements generally include payment of a portion of real estate taxes, operating expenses, and common area maintenance and utility charges. The following table shows the geographic locations for the Core Properties as of December 31, 2022.
Tenant reimbursements generally include payment of a portion of real estate taxes, operating expenses, and common area maintenance and utility charges. The following table shows the geographic locations for the Core Properties as of December 31, 2023.
The properties are located in or near Philadelphia, Pennsylvania; Austin, Texas; Metropolitan Washington, D.C.; Southern New Jersey; and Wilmington, Delaware. As of December 31, 2022, the properties, excluding properties under development and redevelopment, were approximately 89.8% occupied. As of December 31, 2022, we also owned economic interests in twelve unconsolidated real estate ventures.
The properties are located in or near Philadelphia, Pennsylvania; Austin, Texas; Washington, D.C.; Southern New Jersey; and Wilmington, Delaware. As of December 31, 2023, the properties, excluding properties under development and redevelopment, were approximately 88.0% occupied. As of December 31, 2023, we also owned economic interests in twelve unconsolidated real estate ventures.
Item 2. Properties Overview As of December 31, 2022, we owned 72 properties that contain an aggregate of approximately 12.8 million net rentable square feet and consist of 67 office properties and five mixed-use properties (collectively, the “Core Properties”), one development property and three redevelopment properties (collectively, the “Properties”).
Item 2. Properties Overview As of December 31, 2023, we owned 69 properties that contain an aggregate of approximately 12.7 million net rentable square feet and consist of 65 office properties and four mixed-use properties (collectively, the “Core Properties”). We also own one development property, one redevelopment property and one recently completed not yet stabilized property (collectively, the “Properties”).
This table assumes no exercise of renewal options or termination rights: Year of Lease Expiration December 31, Rentable Square Feet (in thousands) Final Annualized Base Rent Under Expiring Leases (a) (in thousands) Percentage of Total Final Annualized Base Rent Under Expiring Leases 2023 828 $ 29,572 6.0 % 2024 980 39,451 8.0 % 2025 1,238 51,369 10.5 % 2026 807 32,019 6.5 % 2027 1,542 63,091 12.8 % 2028 907 35,937 7.3 % 2029 1,358 62,482 12.7 % 2030 821 39,383 8.0 % 2031 482 23,299 4.8 % 2032 464 23,726 4.8 % 2033 and thereafter 2,065 91,243 18.6 % 11,492 $ 491,572 100 % (a) Represents the annualized cash rental rate of base rents, including tenant reimbursements, in the final month prior to expiration.
This table assumes no exercise of renewal options or termination rights: Year of Lease Expiration December 31, Rentable Square Feet (in thousands) Final Annualized Base Rent Under Expiring Leases (a) (in thousands) Percentage of Total Final Annualized Base Rent Under Expiring Leases 2024 769 $ 27,410 5.5 % 2025 898 35,558 7.1 % 2026 744 32,086 6.4 % 2027 1,436 58,968 11.8 % 2028 1,090 44,730 8.9 % 2029 1,747 79,364 15.9 % 2030 817 39,512 7.9 % 2031 487 25,195 5.0 % 2032 495 25,723 5.1 % 2033 477 28,805 5.8 % 2034 and thereafter 2,221 102,622 20.5 % 11,181 $ 499,973 100 % (a) Represents the annualized cash rental rate of base rents, including tenant reimbursements, in the final month prior to expiration.
Tenant reimbursements generally include payment of a portion of real estate taxes, operating expenses, and common area maintenance and utility charges.
Tenant reimbursements generally include payment of a portion of real estate taxes, operating expenses, and common area maintenance and utility charges. Developments/Redevelopments As of December 31, 2023, we were developing/redeveloping 0.1 million rentable square feet of office/life science properties and one parking facility.
Removed
Developments/Redevelopments As of December 31, 2022, we were developing/redeveloping 0.6 million rentable square feet of office/life science properties and one parking facility and have recently completed but have yet to stabilize an office property comprising 0.2 million rentable square feet.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSee Note 13 “Beneficiaries' Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our share repurchase program during the year ended December 31, 2022. In 2021, we redeemed 157,651 Class A units of limited partnership interest held by unaffiliated third parties for total cash payments of $2.3 million.
Biggest changeIn 2021, we redeemed 157,651 Class A units of limited partnership interest held by unaffiliated third parties for total cash payments of $2.3 million. During 2022, we redeemed 307,516 Class A units of limited partnership interest held by unaffiliated third parties for total cash payments of $4.0 million.
We expect to make future quarterly distributions to shareholders; however, the timing and amount of future distributions will be at the discretion of our Board and will depend on our actual funds from operations, financial condition and capital requirements and the annual distribution requirements under the REIT provisions of the Code.
We expect to make future quarterly distributions to shareholders; however, the timing and amount of future distributions will be at the discretion of our Board and will depend on our actual funds from operations, financial condition and capital requirements and the annual distribution requirements under the REIT provisions of the Internal Revenue Code.
For each quarter in 2022 and 2021, the Operating Partnership paid a cash distribution per Class A unit in an amount equal to the dividend paid on a common share for each such quarter.
For each quarter in 2023 and 2022, the Operating Partnership paid a cash distribution per Class A unit in an amount equal to the dividend paid on a common share for each such quarter.
The following chart compares the cumulative total shareholder return for the common shares with the cumulative shareholder return of companies on (i) the S&P 500 Index, (ii) the FTSE NAREIT All Equity REITs Index, (iii) the Russell 2000 Index and (iv) the FTSE NAREIT Equity Office Index for the period beginning December 31, 2017 and ending December 31, 2022 and assumes an investment of $100, with reinvestment of all dividends, has been made in the common shares and in each index on December 31, 2017.
The following chart compares the cumulative total shareholder return for the common shares with the cumulative shareholder return of companies on (i) the S&P 500 Index, (ii) the FTSE NAREIT All Equity REITs Index, (iii) the Russell 2000 Index and (iv) the FTSE NAREIT Equity Office Index for the period beginning December 31, 2018 and ending December 31, 2023 and assumes an investment of $100, with reinvestment of all dividends, has been made in the common shares and in each index on December 31, 2018.
During 2022, we redeemed 307,516 Class A units of limited partnership interest held by unaffiliated third parties for total cash payments of $4.0 million. 28 SHARE PERFORMANCE GRAPH The SEC requires us to present a chart comparing the cumulative total shareholder return on the common shares with the cumulative total shareholder return of (i) a broad equity index and (ii) a published industry or peer group index.
During 2023, we redeemed 872 Class A units of limited partnership interest held by unaffiliated third parties for total cash payments of $5,000. 28 SHARE PERFORMANCE GRAPH The SEC requires us to present a chart comparing the cumulative total shareholder return on the common shares with the cumulative total shareholder return of (i) a broad equity index and (ii) a published industry or peer group index.
On February 14, 2023, there were 539 holders of record of our common shares and 20 holders of record (in addition to Brandywine Realty Trust) of Class A units of limited partnership interest in the Operating Partnership. On February 14, 2023, the last reported sales price of the common shares on the NYSE was $6.63.
On February 20, 2024, there were 541 holders of record of our common shares and 20 holders of record (in addition to Brandywine Realty Trust) of Class A units of limited partnership interest in the Operating Partnership. On February 20, 2024, the last reported sales price of the common shares on the NYSE was $4.15.
See Note 15 “Share Based Compensation, 401(k) Plan and Deferred Compensation,” to our Consolidated Financial Statements for information related to compensation plans under which our common shares are authorized for issuance.
See Note 15 “Share-Based Compensation, 401(k) Plan and Deferred Compensation,” to our Consolidated Financial Statements for information related to compensation plans under which our common shares are authorized for issuance. See Note 13 “Beneficiaries' Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our share repurchase program during the year ended December 31, 2023.
Period Ending Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 FTSE NAREIT All Equity REITs Index 100.00 95.96 123.46 117.14 165.51 124.22 Russell 2000 Index 100.00 88.99 111.70 134.00 153.85 122.41 FTSE NAREIT Equity Office Index 100.00 85.50 112.36 91.65 111.81 69.75 Brandywine Realty Trust 100.00 73.96 95.37 77.20 92.25 45.52 Item 6. [Reserved]
Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 FTSE NAREIT All Equity REITs Index 100.00 125.53 150.58 172.90 137.56 160.85 Russell 2000 Index 100.00 128.66 122.07 172.49 129.45 144.16 FTSE NAREIT Equity Office Index 100.00 131.42 107.19 130.77 81.58 83.23 Brandywine Realty Trust 100.00 128.95 104.38 124.73 61.55 62.61 Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeA 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 (e) “2021 and 2022 Dispositions,” which represents four properties disposed of during 2021 and 2022. 35 Comparison of Year Ended December 31, 2022 to the Year Ended December 31, 2021 Same Store Property Portfolio Recently Completed/Acquired Properties Development/Redevelopment Properties Other (Eliminations) (a) Total Portfolio (dollars and square feet in millions except per share amounts) 2022 2021 $ Change % Change 2022 2021 2022 2021 2022 2021 2022 2021 $ Change % Change Revenue: Rents $ 440.8 $ 432.1 $ 8.7 2.0 % $ 10.0 $ 2.2 $ 1.1 $ 0.4 $ 19.0 $ 16.8 $ 470.9 $ 451.5 $ 19.4 4.3 % Third party management fees, labor reimbursement and leasing — — — — % — — — — 24.1 26.4 24.1 26.4 (2.3) (8.7) % Other 1.0 1.0 — — % 0.1 — — — 10.0 7.9 11.1 8.9 2.2 24.7 % Total revenue 441.8 433.1 8.7 2.0 % 10.1 2.2 1.1 0.4 53.1 51.1 506.1 486.8 19.3 4.0 % Property operating expenses 117.9 111.3 6.6 5.9 % 2.2 0.5 — 0.4 10.1 9.7 130.2 121.9 8.3 6.8 % Real estate taxes 49.8 50.8 (1.0) (2.0) % 2.0 0.1 0.4 0.4 1.4 2.3 53.6 53.6 — — % Third party management expenses — — — — % — — — — 10.5 12.8 10.5 12.8 (2.3) (18.0) % Net operating income 274.1 271.0 3.1 1.1 % 5.9 1.6 0.7 (0.4) 31.1 26.3 311.8 298.5 13.3 4.5 % Depreciation and amortization 158.2 163.2 (5.0) (3.1) % 4.7 1.2 0.7 0.4 14.4 13.3 178.0 178.1 (0.1) (0.1) % General & administrative expenses 35.0 30.2 35.0 30.2 4.8 15.9 % Provision for impairment 4.7 — 4.7 — 4.7 — % Net gain on disposition of real estate (17.7) (0.1) (17.6) 17,600.0 % Net gain on sale of undepreciated real estate (8.0) (2.9) (5.1) 175.9 % Operating income (loss) $ 115.9 $ 107.8 $ 8.1 7.5 % $ 1.2 $ 0.4 $ — $ (0.8) $ (23.0) $ (17.2) $ 119.8 $ 93.2 $ 26.6 28.5 % Number of properties 71 71 2 4 77 Square feet 12.7 12.7 0.3 0.6 13.9 Core Occupancy % (b) 89.8 % 91.1 % 100.0 % Other Income (Expense): Interest and investment income 1.9 8.3 (6.4) (77.1) % Interest expense (68.8) (62.6) (6.2) 9.9 % Interest expense — Deferred financing costs (3.1) (2.8) (0.3) 10.7 % Equity in loss of unconsolidated real estate ventures (22.0) (26.7) 4.7 (17.6) % Net gain on real estate venture transactions 26.7 3.0 23.7 790.0 % Loss on early extinguishment of debt (0.4) — (0.4) — % 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 % (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.
Biggest changeA 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 (e) “2022 and 2023 Dispositions,” which represents four properties disposed of during 2022 and 2023. 35 Comparison of Year Ended December 31, 2023 to the Year Ended December 31, 2022 Same Store Property Portfolio Recently Completed/Acquired Properties Development/Redevelopment Properties Other (Eliminations) (a) Total Portfolio (dollars and square feet in millions except per share amounts) 2023 2022 $ Change % Change 2023 2022 2023 2022 2023 2022 2023 2022 $ Change % Change Revenue: Rents $ 428.9 $ 429.6 $ (0.7) (0.2) % $ 24.6 $ 6.6 $ — $ — $ 26.3 $ 34.7 $ 479.8 $ 470.9 $ 8.9 1.9 % Third party management fees, labor reimbursement and leasing — — — — % — — — — 24.4 24.1 24.4 24.1 0.3 1.2 % Other 1.1 1.0 0.1 10.0 % — 0.1 — — 9.4 10.0 10.5 11.1 (0.6) (5.4) % Total revenue 430.0 430.6 (0.6) (0.1) % 24.6 6.7 — — 60.1 68.8 514.7 506.1 8.6 1.7 % Property operating expenses 114.7 114.8 (0.1) (0.1) % 5.3 1.9 — — 9.9 13.5 129.9 130.2 (0.3) (0.2) % Real estate taxes 44.6 47.1 (2.5) (5.3) % 2.9 2.2 — — 2.5 4.3 50.0 53.6 (3.6) (6.7) % Third party management expenses — — — — % — — — — 10.1 10.5 10.1 10.5 (0.4) (3.8) % Net operating income 270.7 268.7 2.0 0.7 % 16.4 2.6 — — 37.6 40.5 324.7 311.8 12.9 4.1 % Depreciation and amortization 155.6 152.0 3.6 2.4 % 10.4 3.1 — — 22.8 22.9 188.8 178.0 10.8 6.1 % General & administrative expenses 34.8 35.0 34.8 35.0 (0.2) (0.6) % Provision for impairment 131.6 4.7 131.6 4.7 126.9 2,700.0 % Net gain on disposition of real estate (7.7) (17.7) 10.0 (56.5) % Net gain on sale of undepreciated real estate (1.2) (8.0) 6.8 (85.0) % Operating income (loss) $ 115.1 $ 116.7 $ (1.6) (1.4) % $ 6.0 $ (0.5) $ — $ — $ (151.6) $ (22.1) $ (21.6) $ 119.8 $ (141.4) (118.0) % Number of properties 67 67 3 2 72 Square feet 12.2 12.2 0.6 0.1 13.0 Core Occupancy % (b) 87.8 % 90.8 % 84.3 % Other Income (Expense): Interest and investment income 1.7 1.9 (0.2) (10.5) % Interest expense (95.5) (68.8) (26.7) 38.8 % Interest expense — Deferred financing costs (4.4) (3.1) (1.3) 41.9 % Equity in loss of unconsolidated real estate ventures (77.9) (22.0) (55.9) 254.1 % Net gain on real estate venture transactions 0.2 26.7 (26.5) (99.3) % Gain (loss) on early extinguishment of debt 0.2 (0.4) 0.6 (150.0) % Income tax provision (0.1) (0.1) — — % 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.
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.
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 45 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.
We also use judgment in making the determination as to whether 33 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.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Impairment We assess each of our real estate investments for indicators of impairment quarterly or when circumstances indicate that a real estate investment may be impaired.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. 32 Impairment We assess each of our real estate investments for indicators of impairment quarterly or when circumstances indicate that a real estate investment may be impaired.
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 44 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.
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.
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 29 Exchange Act of 1934, as amended.
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.
We believe that the use of FFO 45 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.
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.
If the 33 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.
Changes in the assumptions used to estimate future common development costs could result in a significant impact on the amounts recorded as net gain on disposition of real estate or net gain on sale of undepreciated real estate. 34 RESULTS OF OPERATIONS The following discussion is based on our Consolidated Financial Statements for the years ended December 31, 2022 and 2021.
Changes in the assumptions used to estimate future common development costs could result in a significant impact on the amounts recorded as net gain on disposition of real estate or net gain on sale of undepreciated real estate. 34 RESULTS OF OPERATIONS The following discussion is based on our Consolidated Financial Statements for the years ended December 31, 2023 and 2022.
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.
Based on the foregoing, as well as cash flows from operations net of dividend requirements, we believe we have sufficient capital to fund our remaining capital requirements on existing development and redevelopment projects and pursue additional attractive investment opportunities. We expect that our primary uses of capital during 2023 will be to fund our current development and redevelopment projects.
Based on the foregoing, as well as cash flows from operations net of dividend requirements, we believe we have sufficient capital to fund our remaining capital requirements on existing development and redevelopment projects and pursue additional attractive investment opportunities. We expect that our primary uses of capital during 2024 will be to fund our current development and redevelopment projects.
In addition, a material adverse change in cash provided by operations could adversely affect our compliance with financial performance covenants under our unsecured credit facility, including unsecured term loans and unsecured notes. As of December 31, 2022 we were in compliance with all of our debt covenants and requirement obligations.
In addition, a material adverse change in cash provided by operations could adversely affect our compliance with financial performance covenants under our unsecured credit facility, including unsecured term loans and unsecured notes. As of December 31, 2023 we were in compliance with all of our debt covenants and requirement obligations.
We estimate that, as of December 31, 2022, these additional contributions, which are not fixed under the terms of agreement, will be $2.2 million. See Note 20 “Commitments and Contingencies,” to our Consolidated Financial Statements for further information.
We estimate that, as of December 31, 2023, these additional contributions, which are not fixed under the terms of agreement, will be $2.2 million. See Note 20 “Commitments and Contingencies,” to our Consolidated Financial Statements for further information.
Equity In order to maintain its qualification as a REIT, the Parent Company is required to, among other things, pay dividends to its shareholders of at least 90% of its REIT taxable income. During the year ended December 31, 2022, the Parent Company paid dividends in excess of the 90% criterion.
Equity In order to maintain its qualification as a REIT, the Parent Company is required to, among other things, pay dividends to its shareholders of at least 90% of its REIT taxable income. During the year ended December 31, 2023, the Parent Company paid dividends in excess of the 90% criterion.
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.
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.
As of December 31, 2022, the Parent Company owned a 99.7% interest in the Operating Partnership. The remaining interest of approximately 0.3% pertains to common limited partnership interests owned by non-affiliated investors who contributed property to the Operating Partnership in exchange for their interests.
As of December 31, 2023, the Parent Company owned a 99.7% interest in the Operating Partnership. The remaining interest of approximately 0.3% pertains to common limited partnership interests owned by non-affiliated investors who contributed property to the Operating Partnership in exchange for their interests.
With uncertain economic conditions, vacancy rates may increase, effective rental rates on new and renewed leases may decrease and tenant installation costs, including concessions, may increase in most or all of our markets during 2023 and possibly beyond.
With uncertain economic conditions, vacancy rates may increase, effective rental rates on new and renewed leases may decrease and tenant installation costs, including concessions, may increase in most or all of our markets during 2024 and possibly beyond.
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. See Note 3 “Real Estate Investments,” for further information.
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.
The Same Store Property Portfolio includes properties acquired or placed in service on or prior to January 1, 2021 and owned and consolidated through December 31, 2022, excluding properties classified as held for sale, (b) “Total Portfolio,” which represents all properties owned and consolidated by us during 2022 and 2021, (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.
The Same Store Property Portfolio includes properties acquired or placed in service on or prior to January 1, 2022 and owned and consolidated through December 31, 2023, excluding properties classified as held for sale, (b) “Total Portfolio,” which represents all properties owned and consolidated by us during 2023 and 2022, (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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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, 2022, 2021 and 2020.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 29 2021.
See Note 13 “Beneficiaries' Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our dividends declared for the fourth quarter of 2022.
See Note 13 “Beneficiaries' Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our dividends declared for the fourth quarter of 2023.
In connection with the Schuylkill Yards Project, we entered into a neighborhood engagement program and, as of December 31, 2022, had $6.6 million of future contractual obligations. We are also committed to making additional contributions under the program.
In connection with the Schuylkill Yards Project, we entered into a neighborhood engagement program and, as of December 31, 2023, had $6.2 million of future contractual obligations. We are also committed to making additional contributions under the program.
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.
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. We received approximately $344.6 million after deducting for underwriting discounts and offering expenses.
Refer to Item 7. “Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of the results of operations for the year ended December 31, 2020 which is presented therein in the form of a year-to-year comparison to the year ended December 31, 2021.
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.
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.
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.
Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 The following comparison for the year ended December 31, 2022 to the year ended December 31, 2021, makes reference to the effect of the following: (a) “Same Store Property Portfolio,” which represents 71 properties containing an aggregate of approximately 12.7 million net rentable square feet that we owned and consolidated for the twelve-month periods ended December 31, 2022 and 2021.
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 The following comparison for the year ended December 31, 2023 to the year ended December 31, 2022, makes reference to the effect of the following: (a) “Same Store Property Portfolio,” which represents 67 properties containing an aggregate of approximately 12.2 million net rentable square feet that we owned and consolidated for the twelve-month periods ended December 31, 2023 and 2022.
The Operating Partnership is in compliance with all covenants as of December 31, 2022.
The Operating Partnership is in compliance with all covenants as of December 31, 2023.
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 $7.2 million has been contributed by us as of December 31, 2022.
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.
(b) Debt financing amount represents an estimate at 60% Loan-to-Value ratio. 32 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
(b) Debt financing amount represents an estimate at 55% Loan-to-Value ratio for 3151 Market Street.. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
Leases that accounted for approximately 6.0% of our aggregate final annualized base rents as of December 31, 2022 (representing approximately 7.2% of the net rentable square feet of the properties) are scheduled to expire without penalty in 2023. We maintain an active dialogue with our tenants in an effort to maximize lease renewals.
Leases that accounted for approximately 5.5% of our aggregate final annualized base rents as of December 31, 2023 (representing approximately 6.9% of the net rentable square feet of the properties) are scheduled to expire without penalty in 2024. We maintain an active dialogue with our tenants in an effort to maximize lease renewals.
From time to time or as the need arises, we use derivative instruments to manage interest rate risk exposures and not for speculative or trading purposes. The total outstanding principal balance of our variable rate debt was approximately $417.1 million as of December 31, 2022.
From time to time or as the need arises, we use derivative instruments to manage interest rate risk exposures and not for speculative or trading purposes. The total outstanding principal balance of our variable rate debt was approximately $412.4 million as of December 31, 2023.
If market rates of interest decrease by 100 basis points, the fair value of our outstanding variable rate debt would increase by approximately $18.5 million at December 31, 2022. These amounts were determined solely by considering the impact of hypothetical interest rates on our financial instruments.
If market rates of interest decrease by 100 basis points, the fair value of our outstanding variable rate debt would increase by approximately $13.1 million at December 31, 2023. These amounts were determined solely by considering the impact of hypothetical interest rates on our financial instruments.
These forward-looking statements are inherently uncertain, and actual results may differ from expectations. “See “Forward-Looking Statements” immediately before Part I of this report. OVERVIEW 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.
These forward-looking statements are inherently uncertain, and actual results may differ from expectations. “See “Forward-Looking Statements” immediately before Part I of this report. OVERVIEW 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.
As of December 31, 2022, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was $1,411.4 million. For sensitivity purposes, a 100 basis point change in the discount rate equates to a change in the total fair value of our debt of approximately $14.1 million at December 31, 2022.
As of December 31, 2023, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was $1,386.6 million. For sensitivity purposes, a 100 basis point change in the discount rate equates to a change in the total fair value of our debt of approximately $13.9 million at December 31, 2023.
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.
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. Changes in interest rates have different impacts on the fixed and variable rate portions of our debt portfolio.
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. Changes in interest rates have different impacts on the fixed and variable rate portions of our debt portfolio.
Occupancy at our Core Properties at December 31, 2022 was 89.8% compared to 91.3% at December 31, 2021. 30 The table below summarizes selected operating and leasing statistics of our wholly owned properties for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Leasing Activity Core Properties (1): Total net rentable square feet owned 12,791,041 13,039,634 Occupancy percentage (end of period) 89.8 % 91.3 % Average occupancy percentage 89.8 % 89.6 % Total Portfolio, less properties in development/redevelopment (2): Tenant retention rate (3) 64.1 % 52.8 % New leases and expansions commenced (square feet) 811,316 661,826 Leases renewed (square feet) 847,454 484,574 Net absorption (square feet) (171,208) (49,724) Percentage change in rental rates per square foot (4): New and expansion rental rates 24.9 % 23.1 % Renewal rental rates 15.5 % 12.4 % Combined rental rates 18.7 % 16.2 % Weighted average lease term for leases commenced (years) 6.8 7.0 Capital Costs Committed (5): Leasing commissions (per square foot) $ 9.69 $ 8.54 Tenant Improvements (per square foot) $ 30.77 $ 18.38 Total capital per square foot per lease year $ 4.26 $ 3.23 (1) Does not include properties under development, redevelopment, held for sale, or sold.
Occupancy at our Core Properties at December 31, 2023 was 88.0% compared to 89.8% at December 31, 2022. 30 The table below summarizes selected operating and leasing statistics of our wholly owned properties for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Leasing Activity Core Properties (1): Total net rentable square feet owned 12,698,115 12,791,041 Occupancy percentage (end of period) 88.0 % 89.8 % Average occupancy percentage 88.9 % 89.8 % Total Portfolio, less properties in development/redevelopment (2): Tenant retention rate (3) 49.3 % 64.1 % New leases and expansions commenced (square feet) 342,731 811,316 Leases renewed (square feet) 423,998 847,454 Net absorption (square feet) (298,896) (171,208) Percentage change in rental rates per square foot (4): New and expansion rental rates 22.2 % 24.9 % Renewal rental rates 10.9 % 15.5 % Combined rental rates 13.5 % 18.7 % Weighted average lease term for leases commenced (years) 6.2 6.8 Capital Costs Committed (5): Leasing commissions (per square foot) $ 7.65 $ 9.69 Tenant Improvements (per square foot) $ 14.11 $ 30.77 Total capital per square foot per lease year $ 3.23 $ 4.26 (1) Does not include properties under development, redevelopment, held for sale, or sold.
The total fair value of our variable rate debt was approximately $387.0 million at December 31, 2022. For sensitivity purposes, if market rates of interest increase by 100 basis points the fair value of our variable rate debt would decrease by approximately $17.3 million at December 31, 2022.
The total fair value of our variable rate debt was approximately $370.7 million at December 31, 2023. For sensitivity purposes, if market rates of interest increase by 100 basis points the fair value of our variable rate debt would decrease by approximately $12.3 million at December 31, 2023.
See Note 21, “Subsequent Events” for further information regarding the Secured Facility. We use multiple financing sources to fund our long-term capital needs. When needed, we use borrowings under our unsecured credit facility for general business purposes, including to meet debt maturities and to fund distributions to shareholders as well as development and acquisition costs and other expenses.
We use multiple financing sources to fund our long-term capital needs. When needed, we use borrowings under our unsecured credit facility for general business purposes, including to meet debt maturities and to fund distributions to shareholders as well as development and acquisition costs and other expenses.
Additionally, we will be required to pay these certain former owners an amount estimated at approximately $0.6 million to redeem their residual interest in the fee owner of this property. The $0.6 million payment is included within “Other liabilities” on the consolidated balance sheets.
Additionally, we will be required to pay these certain former owners an amount estimated at approximately $0.6 million to redeem their residual interest in the fee owner of this property.
During the year ended December 31, 2022, when compared to the year ended December 31, 2021, the change in financing cash flows was due to the following activities (in thousands): (Decrease) Increase Proceeds from debt obligations $ 674,000 Repayments of debt obligations (577,634) Redemption of limited partnership units (1,672) Debt financing costs paid (9,875) Dividends and distributions paid (233) Other financing activities (3,881) Decrease in net cash used in financing activities $ 80,705 42 Capitalization Indebtedness The table below summarizes indebtedness under our unsecured debt at December 31, 2022 and December 31, 2021: December 31, 2022 December 31, 2021 (dollars in thousands) Balance: (a) Fixed rate $ 1,554,301 $ 1,750,000 Variable rate - unhedged (b) 417,110 101,610 Total $ 1,971,411 $ 1,851,610 Percent of Total Debt: Fixed rate 78.8 % 94.5 % Variable rate - unhedged 21.2 % 5.5 % Total 100.0 % 100.0 % Weighted-average interest rate at period end: Fixed rate 4.9 % 3.8 % Variable rate - unhedged 5.6 % 1.3 % Total 5.0 % 3.7 % Weighted-average maturity in years: Fixed rate 4.6 4.0 Variable rate - unhedged 5.9 10.6 Total 4.8 4.4 (a) Consists of unpaid principal and does not reflect premium/discount or deferred financing costs.
During the year ended December 31, 2023, when compared to the year ended December 31, 2022, the change in financing cash flows was due to the following activities (in thousands): (Decrease) Increase Proceeds from debt obligations $ (284,176) Repayments of debt obligations 340,970 Redemption of limited partnership units 4,001 Debt financing costs paid 5,504 Dividends and distributions paid 6,548 Other financing activities 2,570 Increase in net cash provided by financing activities $ 75,417 42 Capitalization Indebtedness The table below summarizes indebtedness under our unsecured debt at December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 (dollars in thousands) Balance: (a) Fixed rate $ 1,985,000 $ 1,554,301 Variable rate - unhedged (b) (c) 162,434 417,110 Total $ 2,147,434 $ 1,971,411 Percent of Total Debt: Fixed rate 92.4 % 78.8 % Variable rate - unhedged 7.6 % 21.2 % Total 100.0 % 100.0 % Weighted-average interest rate at period end: Fixed rate 5.1 % 4.9 % Variable rate - unhedged 7.1 % 5.6 % Total 5.2 % 5.0 % Weighted-average maturity in years: Fixed rate 3.8 4.6 Variable rate - unhedged 6.3 5.9 Total 4.0 4.8 (a) Consists of unpaid principal and does not reflect premium/discount or deferred financing costs.
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.
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 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.
Scheduled principal payments and related weighted average annual effective interest rates for our debt as of December 31, 2022 were as follows (dollars in thousands): Period Principal maturities Weighted Average Interest Rate of Maturing Debt 2023 $ 54,301 3.87 % 2024 350,000 3.78 % 2025 — — % 2026 88,500 5.45 % 2027 700,000 4.59 % 2028 350,000 7.73 % 2029 350,000 4.30 % 2030 — — % 2031 — — % 2032 — — % Thereafter 78,610 5.41 % Totals $ 1,971,411 5.00 % Unsecured Debt The Operating Partnership is the issuer of our unsecured notes which are fully and unconditionally guaranteed by the Parent Company.
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): Period Principal maturities Weighted Average Interest Rate of Maturing Debt 2024 $ 340,000 3.8 % 2025 70,000 7.2 % 2026 13,824 7.8 % 2027 700,000 4.4 % 2028 595,000 7.1 % 2029 350,000 4.3 % 2030 — — % 2031 — — % 2032 — — % 2033 — — % Thereafter 78,610 6.9 % Totals $ 2,147,434 5.2 % Unsecured Debt The Operating Partnership is the issuer of our unsecured notes which are fully and unconditionally guaranteed by the Parent Company.
The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs. 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 Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas.
The following table presents a reconciliation of net income attributable to common unitholders to FFO for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 (amounts in thousands, except share information) Net income attributable to common unitholders $ 53,538 $ 11,948 Add (deduct): Amount allocated to unvested restricted unitholders 456 421 Net gain on real estate venture transactions (26,718) (2,973) Net gain on disposition of real estate (17,677) (142) Provision for impairment 4,663 — Company's share of impairment of an unconsolidated real estate venture — 696 Depreciation and amortization: Real property 149,026 144,261 Leasing costs including acquired intangibles 25,989 31,698 Company’s share of unconsolidated real estate ventures 49,743 52,455 Partners’ share of consolidated real estate ventures (18) (20) Funds from operations $ 239,002 $ 238,344 Funds from operations allocable to unvested restricted shareholders (770) (705) Funds from operations available to common share and unit holders (FFO) $ 238,232 $ 237,639 Weighted-average shares/units outstanding — basic (a) 172,036,481 171,770,843 Weighted-average shares/units outstanding — fully diluted (a) 172,870,758 173,165,898 (a) Includes common shares and partnership units outstanding through the years ended December 31, 2022 and December 31, 2021, respectively.
The following table presents a reconciliation of net income attributable to common unitholders to FFO for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 (amounts in thousands, except share information) Net income (loss) attributable to common unitholders $ (197,948) $ 53,538 Add (deduct): Amount allocated to unvested restricted unitholders 567 456 Net gain on real estate venture transactions (181) (26,718) Net gain on disposition of real estate (7,736) (17,677) Provision for impairment 131,573 4,663 Company's share of impairment of an unconsolidated real estate venture 37,175 — Depreciation and amortization: Real property 159,213 149,026 Leasing costs including acquired intangibles 26,131 25,989 Company’s share of unconsolidated real estate ventures 50,565 49,743 Partners’ share of consolidated real estate ventures (20) (18) Funds from operations $ 199,339 $ 239,002 Funds from operations allocable to unvested restricted shareholders (1,043) (770) Funds from operations available to common share and unit holders (FFO) $ 198,296 $ 238,232 Weighted-average shares/units outstanding — basic (a) 172,475,645 172,036,481 Weighted-average shares/units outstanding — fully diluted (a) 173,046,299 172,870,758 (a) Includes common shares and partnership units outstanding through the years ended December 31, 2023 and December 31, 2022, respectively.
As of December 31, 2022 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 $ — $ — One Uptown - Multifamily (50%) Austin, TX Q3 2024 341 Units $ 144,029 $ 46,308 $ 85,000 $ — $ 12,721 (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.
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 (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 square feet of life science/innovation office, 219,000 square feet of residential (326 units), and 9,000 square feet of retail.
As of December 31, 2022, we had $17.6 million of cash and cash equivalents and $505.2 million of available borrowings under our unsecured credit facility, net of $6.3 million in letters of credit outstanding.
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.
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.
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.
We selectively invest in new projects that enable us to take advantage of our development, leasing, financing, and property management skills and invest in existing buildings that meet our investment criteria.
Cash is used in investing activities to fund acquisitions, development, or redevelopment projects and recurring and nonrecurring capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing, and property management skills and invest in existing buildings that meet our investment criteria.
During the year ended December 31, 2022, when compared to the year ended December 31, 2021, the change in investing cash flows was due to the following activities (in thousands): (Decrease) Increase Acquisitions of real estate $ (3,446) Capital expenditures and capitalized interest (127,893) Capital improvements/acquisition deposits/leasing costs (9,977) Joint venture investments (15,785) Proceeds from the sale of properties 53,907 Proceeds from note receivable (5,700) Capital distributions from unconsolidated real estate ventures 19,870 Other investing activities (1,250) Increase in net cash used in investing activities $ (90,274) We generally fund our investment activity through the sale of real estate, property-level financing, credit facilities, senior unsecured notes, and construction loans.
During the year ended December 31, 2023, when compared to the year ended December 31, 2022, the change in investing cash flows was due to the following activities (in thousands): (Decrease) Increase Acquisitions of real estate $ (4,301) Capital expenditures and capitalized interest 106,554 Capital improvements/acquisition deposits/leasing costs 26,732 Joint venture investments (38,494) Proceeds from the sale of properties 12,594 Proceeds from note receivable (44,300) Capital distributions from unconsolidated real estate ventures (43,108) 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.
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. See Note 9, “Debt Obligations,” for further information. 39 On December 13, 2022, the Company completed an underwriting offering of its $350.0 million 7.55% Guaranteed Notes due 2028 (the “2028 Notes”).
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. 39 On December 13, 2022, we completed an underwriting offering of the 2028 Notes.
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.
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.
Net Gain on Disposition of Real Estate The $17.6 million gain on disposition of real estate for 2022 primarily resulted from the following sales transactions: • $8. 3 million gain due to the formation of the One Uptown Ventures, which resulted in deconsolidation of the project and recognition of our investment in the real estate venture at fair value; and • $8.7 million gain related to the sale of an office building located at 200 Barr Harbor Drive, West Conshohocken, Pennsylvania for a gross sales price of $30.5 million and net cash proceeds of $29.3 million. 37 Net Gain on Sale of Undepreciated Real Estate The gain of $8 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; and • $2.6 million gain due to formation of the 3151 Market Street Venture, which resulted in deconsolidation of the project.
The $17.7 million gain on disposition of real estate for 2022 primarily resulted from the following sales transactions: • $8. 3 million gain due to the formation of the One Uptown Ventures, which resulted in deconsolidation of the project and recognition of our investment in the real estate venture at fair value; and • $8.7 million gain related to the sale of an office building located at 200 Barr Harbor Drive, West Conshohocken, Pennsylvania for a gross sales price of $30.5 million and net cash proceeds of $29.3 million.
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.
The $0.6 million payment is included within “Other liabilities” on the consolidated balance sheets. 44 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.
The timing and amounts of any repurchases will depend on a variety of factors, including market conditions, regulatory requirements, share prices, capital availability and other factors as determined by our management team.
The timing and amounts of any repurchases will depend on a variety of factors, including market conditions, regulatory requirements, share prices, capital availability and other factors as determined by our management team. The repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without notice.
Cash Flows The following discussion of our cash flows is based on the consolidated statement of cash flows and is not meant to be a comprehensive discussion of the changes in our cash flows for the years presented.
Cash Flows The following discussion of our cash flows is based on the consolidated statement of cash flows and is not meant to be a comprehensive discussion of the changes in our cash flows for the years presented. 41 As of December 31, 2023 and 2022, we maintained cash and cash equivalents and restricted cash of $67.5 million and $17.6 million, respectively.
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, 2022, amounted to $1,971.4 million.
If one or more rating 40 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 repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without notice. 40 Capital Recycling The Operating Partnership also considers net sales of selected properties and recapitalization of unconsolidated real estate ventures as additional sources of managing its liquidity.
Capital Recycling The Operating Partnership also considers net sales of selected properties and recapitalization of unconsolidated real estate ventures as additional sources of managing its liquidity.
The following table summarizes changes in our cash flows (in thousands): Year Ended December 31, Activity 2022 2021 (Decrease) Increase Operating $ 209,307 $ 190,874 $ 18,433 Investing (190,589) (100,315) (90,274) Financing (28,631) (109,336) 80,705 Net cash flows $ (9,913) $ (18,777) $ 8,864 Our principal source of cash flows is from the operation of our Properties.
The following table summarizes changes in our cash flows (in thousands): Year Ended December 31, Activity 2023 2022 (Decrease) Increase Operating $ 177,273 $ 209,307 $ (32,034) Investing (174,912) (190,589) 15,677 Financing 46,786 (28,631) 75,417 Net cash flows $ 49,147 $ (9,913) $ 59,060 Our principal source of cash flows is from the operation of our Properties.
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.
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”).
As of December 31, 2022 the following active development and redevelopment projects remain under construction in progress and we were proceeding on the following activity (dollars, in thousands): 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.
As of December 31, 2023 the following active development and redevelopment projects remain under construction in progress and we were proceeding on the following activity (dollars, in thousands): Property/Portfolio Name Location Expected Completion Date Activity Type Approximate Square Footage Estimated Costs Construction Loan Financing Amount Funded 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, 2022 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.
As of December 31, 2023 the following recently completed development project was not yet stabilized (dollars, in thousands): Property/Portfolio Name Location Completion Date Activity Type Approximate Square Footage Estimated Costs Amount Funded 250 King of Prussia Road Radnor, PA Q3 2022 Redevelopment 168,294 $ 103,680 (a) $ 88,244 (a) Total project costs include $20.6 million of existing property basis.
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.
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.
As of December 31, 2022 and 2021, we maintained cash and cash equivalents and restricted cash of $18.4 million and $28.3 million, respectively. We report and analyze our cash flows based on operating activities, investing activities, and financing activities.
We report and analyze our cash flows based on operating activities, investing activities, and financing activities.
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. Vacancy rates may increase, and rental rates and rent collection rates may decline as the current economic climate may negatively impact tenants.
Vacancy rates may increase, and rental rates and rent collection rates may decline as the current economic climate may negatively impact tenants.
Our accrued rent receivable allowance was $3.9 million or 2.1% of our accrued rent receivable balance as of December 31, 2022 compared to $4.1 million or 2.4% of our accrued rent receivable balance as of December 31, 2021.
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. 31 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.
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 31 would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition.
This condition would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition.
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.
Total Revenue Rents from the Total Portfolio increased $19.4 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; and • $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. 36 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.
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. 36 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.
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.
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; 37 • $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; and • $2.6 million gain due to formation of the 3151 Market Street Venture, which resulted in deconsolidation of the project.
Removed
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.
Added
Total Revenue Rents from the Total Portfolio increased $8.9 million primarily as a result of the following: • $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; and • $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.
Removed
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. (c) Debt financing amount represents an estimate at 60% Loan-to-Value ratio. In addition to the properties listed above, we have classified one parking facility in Philadelphia, Pennsylvania as redevelopment.
Added
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; and • $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 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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.

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