BRANDYWINE REALTY TRUST - Annual Report: 2010 (Form 10-K)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

Commission file number 001-9106 (Brandywine Realty Trust)
000-24407 (Brandywine Operating Partnership, L.P.)

Brandywine Realty Trust

Brandywine Operating Partnership, L.P.

(Exact name of registrant as specified in its charter)

MARYLAND (Brandywine Realty Trust)		23-2413352
DELAWARE (Brandywine Operating Partnership L.P.)		23-2862640
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation or organization)
555 East Lancaster Avenue
Radnor, Pennsylvania		19087
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (610) 325-5600

Securities registered pursuant to Section 12(b) of the Act:

		Name of each exchange
Title of each class		on which registered
Common Shares of Beneficial Interest,		New York Stock Exchange
par value $0.01 per share
(Brandywine Realty Trust)
7.50% Series C Cumulative Redeemable Preferred		New York Stock Exchange
Shares of Beneficial Interest
par value $0.01 per share
(Brandywine Realty Trust)
7.375% Series D Cumulative Redeemable Preferred		New York Stock Exchange
Shares of Beneficial Interest
par value $0.01 per share
(Brandywine Realty Trust)

Securities registered pursuant to Section 12(g) of the Act:
Units of General Partnership Interest (Brandywine Operating Partnership, L.P.)

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Brandywine Realty Trust		Yes þ No o
Brandywine Operating Partnership, L.P.		Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Brandywine Realty Trust		Yes o No þ
Brandywine Operating Partnership, L.P.		Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Brandywine Realty Trust		Yes þ No o
Brandywine Operating Partnership, L.P.		Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Brandywine Realty Trust		Yes þ No o
Brandywine Operating Partnership, L.P.		Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Brandywine Realty Trust:
Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o

Brandywine Operating Partnership, L.P.:
Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Brandywine Realty Trust		Yes o No þ
Brandywine Operating Partnership, L.P.		Yes o No þ

As of June 30, 2010, the aggregate market value of the Common Shares of Beneficial Interest held by non-affiliates of Brandywine Realty Trust was $1,394,281,711 based upon the last reported sale price of $10.75 per share on the New York Stock Exchange on June 30, 2010. An aggregate of 134,520,391 Common Shares of Beneficial Interest were outstanding as of February 23, 2011.

As of June 30, 2010, the aggregate market value of the 1,896,552 common units of limited partnership (“Units”) held by non-affiliates of Brandywine Operating Partnership, L.P. was $20,387,934 million based upon the last reported sale price of $10.75 per share on the New York Stock Exchange on June 30, 2010 of the Common Shares of Beneficial Interest of Brandywine Realty Trust, the sole general partner of Brandywine Operating Partnership, L.P. (For this computation, the Registrant has excluded the market value of all Units beneficially owned by Brandywine Realty Trust.)

Documents Incorporated By Reference

Portions of the proxy statement for the 2011 Annual Meeting of Shareholders of Brandywine Realty Trust are incorporated by reference into Part III of this Form 10-K.

The exhibit index as required by Item 601(a) of Regulation S-K is included in Item 15 of Part IV of this report.

 

 

EXPLANATORY NOTE

This report combines the annual reports on Form 10-K for the year ended December 31, 2010 of Brandywine Realty Trust (the “Parent Company”) and Brandywine Operating Partnership (the “Operating Partnership”). The Parent Company is a Maryland real estate investment trust, or REIT that owns its assets and conducts its operations through the Operating Partnership, a Delaware limited partnership, and subsidiaries of the Operating Partnership. The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company”. In addition, terms such as “we”, “us”, or “our” used in this report may refer to the Company, the Parent Company, or the Operating Partnership.

The Parent Company is the sole general partner of the Operating Partnership and as of December 31, 2010, owned a 93.1% interest in the Operating Partnership. The remaining 6.9% interest consists of common units of limited partnership interest issued by the Operating Partnership in exchange for contributions of properties to the Operating Partnership. As the sole general partner of the Operating Partnership, the Parent Company has full and complete authority over the Operating Partnership’s day-to-day operations and management.

The Company believes that combining the annual reports on Form 10-K of the Parent Company and the Operating Partnership into a single report will result in the following benefits:

•

facilitate a better understanding by the investors of the Parent Company and the Operating Partnership by enabling them to view the business as a whole in the same manner as management views and operates the business;

•

remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a substantial portion of the disclosure applies to both the Parent Company and the Operating Partnership; and

•

create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

Management operates the Parent Company and the Operating Partnership as one enterprise. The management of the Parent Company consists of the same members as the management of the Operating Partnership. These members are officers of both the Parent Company and of the Operating Partnership.

There are few differences between the Parent Company and the Operating Partnership, which are reflected in the footnote disclosures in this report. The Company believes it is important to understand the differences between the Parent Company and the Operating Partnership in the context of how these entities operate as an interrelated consolidated company. The Parent Company is a REIT, whose only material asset is its ownership of the partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing the debt obligations of the Operating Partnership. The Operating Partnership holds substantially all the assets of the Company and directly or indirectly holds the ownership interests in the Company’s real estate ventures. The Operating Partnership conducts the operations of the Company’s business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of partnership units of the Operating Partnership or equity interests in subsidiaries of the Operating Partnership.

The equity and non-controlling interests in the Parent Company and the Operating Partnership’s equity are the main areas of difference between the consolidated financial statements of the Parent Company and the Operating Partnership. The common units of limited partnership interest in the Operating Partnership are accounted for as partners’ equity in the Operating Partnership’s financial statements while the common units of limited partnership interests held by parties other than the Parent Company are presented as non-controlling interests in the Parent Company’s financial statements. The differences between the Parent Company and the Operating Partnership’s equity relate to the differences in the equity issued at the Parent Company and Operating Partnership levels.

To help investors understand the significant differences between the Parent Company and the Operating Partnership, this report presents the following as separate notes or sections for each of the Parent Company and the Operating Partnership:

•

consolidated financial statements;

•

the following notes to the consolidated financial statements:

•

Noncontrolling Interests; and

•

Parent Company’s and Operating Partnership’s Equity

•

Liquidity and Capital Resources in the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This report also includes separate Item 9A. (Controls and Procedures) disclosures and separate Exhibit 31 and 32 certifications for each of the Parent Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Parent Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.

In order to highlight the differences between the Parent Company and the Operating Partnership, the separate sections in this report for the Parent Company and the Operating Partnership specifically refer to the Parent Company and the Operating Partnership. In the sections that combine disclosures of the Parent Company and the Operating Partnership, this report refers to such disclosures as those of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and real estate ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Parent Company operates the business through the Operating Partnership.

As general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the Parent Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Parent Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company operations on a consolidated basis and how management operates the Company.

TABLE OF CONTENTS

FORM 10-K

		Page
PART I
Item 1. Business			8
Item 1A. Risk Factors			16
Item 1B. Unresolved Staff Comments			27
Item 2. Properties			27
Item 3. Legal Proceedings			36
Item 4. Removed and Reserved			36
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities			37
Item 6. Selected Financial Data			40
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			42
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			70
Item 8. Financial Statements and Supplementary Data			70
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			70
Item 9A. Controls and Procedures			70
Item 9B. Other Information			71
PART III
Item 10. Directors, Executive Officers and Corporate Governance			72
Item 11. Executive Compensation			72
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters			72
Item 13. Certain Relationships and Related Transactions, and Director Independence			72
Item 14. Principal Accounting Fees and Services			72
PART IV
Item 15. Exhibits and Financial Statement Schedules			73
SIGNATURES			81
Exhibit 3.1.27
Exhibit 12.1
Exhibit 12.2
Exhibit 21
Exhibit 23.1
Exhibit 23.2
Exhibit 31.1
Exhibit 31.2
Exhibit 31.3
Exhibit 31.4
Exhibit 32.1
Exhibit 32.2
Exhibit 32.3
Exhibit 32.4
Exhibit 99.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Filing Format

This combined Form 10-K is being filed separately by Brandywine Realty Trust (the “Parent Company”) and Brandywine Operating Partnership, L.P. (the “Operating Partnership”).

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This Annual Report on Form 10-K and other materials filed by us with the SEC (as well as information included in oral or other written statements made by us) contain statements that are forward-looking, including statements relating to business and real estate development activities, acquisitions, dispositions, future capital expenditures, financing sources, governmental regulation (including environmental regulation) and competition. We intend such forward-looking statements to be covered by the safe-harbor provisions of the 1995 Act. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. As forward-looking statements, these statements involve important risks, uncertainties and other factors that could cause actual results to differ materially from the expected results and, accordingly, such results may differ from those expressed in any forward-looking statements made by us or on our behalf. Factors that could cause actual results to differ materially from our expectations include, but are not limited to:

•

the continuing impact of the recent credit crisis and global economic slowdown, which is having and may continue to have negative effect on the following, among other things:

•

the fundamentals of our business, including overall market occupancy, demand for office space and rental rates;

•

the financial condition of our tenants, many of which are financial, legal and other professional firms, our lenders, counterparties to our derivative financial instruments and institutions that hold our cash balances and short-term investments, which may expose us to increased risks of default by these parties;

•

availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue acquisition and development opportunities and refinance existing debt; and

•

a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis.

•

changes in local real estate conditions (including changes in rental rates and the number of properties that compete with our properties);

•

changes in the economic conditions affecting industries in which our principal tenants compete;

•

the unavailability of equity and debt financing;

•

our failure to lease unoccupied space in accordance with our projections;

•

our failure to re-lease occupied space upon expiration of leases;

•

tenant defaults and the bankruptcy of major tenants;

•

increases in interest rates;

•

failure of interest rate hedging contracts to perform as expected and the effectiveness of such arrangements;

•

failure of acquisitions to perform as expected;

•

unanticipated costs associated with the acquisition, integration and operation of, our acquisitions;

•

unanticipated costs to complete, lease-up and operate our developments and redevelopments;

•

unanticipated costs associated with land development, including building moratoriums and inability to obtain necessary zoning, land-use, building, occupancy and other required governmental approvals, construction cost increases or overruns and construction delays;

•

impairment charges;

•

increased costs for, or lack of availability of, adequate insurance, including for terrorist acts;

•

actual or threatened terrorist attacks;

•

demand for tenant services beyond those traditionally provided by landlords;

•

liability under environmental or other laws;

•

failure or bankruptcy of real estate venture partners;

•

inability of real estate venture partners to fund venture obligations;

•

failure of dispositions to close in a timely manner;

•

failure of buyers of our properties to comply with terms of their financing agreements to us;

•

earthquakes and other natural disasters;

•

the unforeseen impact of climate change and compliance costs relating to laws and regulations governing climate change;

•

risks associated with federal, state and local tax audits;

•

complex regulations relating to our status as a REIT and the adverse consequences of our failure to qualify as a REIT; and

•

the impact of newly adopted accounting principles on our accounting policies and on period-to-period comparisons of financial results.

Given these uncertainties, and the other risks identified in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, we caution readers not to place undue reliance on forward-looking statements. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

PART I

Item 1.		Business

Introduction

We are a self-administered and self-managed REIT that provides leasing, property management, development, redevelopment, acquisition and other tenant-related services for a portfolio of office, mixed-use and industrial properties. As of December 31, 2010, we owned and consolidated 233 properties (collectively, the “Properties”) containing an aggregate of approximately 25.6 million net rentable square feet. The Properties include 208 office properties, 20 industrial properties, four mixed-use properties and a garage property under redevelopment. As of December 31, 2010, we also owned interests in 17 unconsolidated real estate ventures (collectively, the “Real Estate Ventures”) that own properties that contain approximately 6.5 million net rentable square feet. In addition, as of December 31, 2010, we owned approximately 509 acres of undeveloped land. The Properties and the properties owned by the Real Estate Ventures are located in or near Philadelphia, Pennsylvania; Metropolitan Washington, D.C.; Southern and Central New Jersey; Richmond, Virginia; Wilmington, Delaware; Austin, Texas and Oakland, Concord, Carlsbad and Rancho Bernardo, California. In addition to managing properties that we own, as of December 31, 2010, we were managing approximately 7.8 million square feet of office and industrial properties for third parties and Real Estate Ventures. Unless otherwise indicated, all references to square feet represent net rentable area.

Organization

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. The Operating Partnership was formed in 1996 as a Delaware limited partnership. The Parent Company controls the Operating Partnership as its sole general partner. As of December 31, 2010, the Parent Company owned a 93.1% interest in the Operating Partnership. The remaining 6.9% interest in the Operating Partnership consists of common units of limited partnership interest issued to the holders in exchange for contributions of properties to the Operating Partnership. Our structure as an “UPREIT” is designed, in part, to permit persons contributing properties to us to defer some or all of the tax liability they might otherwise incur in a sale of properties.

The common units in the Operating Partnership consist of two classes: Class A units and Class F (2010) units. Holders of Class A units have the right to require redemption of their units at any time. At our option, we may satisfy the redemption of a Class A unit either for a common share of the Parent Company or for an amount of cash equal to the market price of one common share of the Parent Company (based on the average closing prices of the common shares on the New York Stock Exchange for the five-trading days ending on the redemption date). Class F (2010) units rank on a parity with Class A units as to distributions but do not begin to accrue distributions and are not entitled to allocations of income or loss prior to August 5, 2011. Thereafter, Class F (2010) units will be entitled to receive the same distributions that the Parent Company pays on its common shares, and the holder of the units will have the right to exchange the units for an equal number of common shares (or, at the Parent Company’s option, a cash payment equal to the number of units tendered for exchange multiplied by the average closing price of the common shares on the New York Stock Exchange for the five trading days ending on the date of the exchange).

Our executive offices are located at 555 East Lancaster Avenue, Suite 100, Radnor, Pennsylvania 19087 and our telephone number is (610) 325-5600. We have offices in Philadelphia, Pennsylvania; Falls Church, Virginia; Mount Laurel, New Jersey; Richmond, Virginia; Austin, Texas; Oakland, California; and Carlsbad, California. We have an internet website at www.brandywinerealty.com. We are not incorporating by reference into this Annual Report on Form 10-K any material from our website. The reference to our website is an inactive textual reference to the uniform resource locator (URL) and is for your reference only.

2010 Transactions

Real Estate Acquisitions/Dispositions

As of December 31, 2010, two of our building properties located in King of Prussia, Pennsylvania were undergoing demolition and the remaining land balances have been presented as land inventory in our consolidated balance sheets. We have determined that there was a change in the estimated useful lives of the properties resulting from the ongoing demolition causing an acceleration of depreciation expense. During the year ended December 31, 2010, we recognized the remaining net book value of the two buildings aggregating to $2.7 million as depreciation, with the land amounts of $1.1 million being reclassified to land inventory for potential future development. All related demolition costs are charged to earnings.

On December 29, 2010, we acquired a 12 acre parcel of land in Gibbsboro, New Jersey through the foreclosure of a note receivable amounting to $2.8 million which was secured by this land and payment of transaction related costs of $0.3 million. This parcel of land is held for future development.

On August 5, 2010, we acquired Three Logan Square in Philadelphia, together with related ground tenancy rights under a long-term ground lease, from BAT Partners, L.P., a third party unaffiliated with us. Three Logan Square contains approximately 1.0 million of net rentable square feet and is currently 67.2% leased. We acquired Three Logan Square for approximately $129.0 million funded through a combination of $51.2 million in cash and 7,111,112 Class F (2010) Units. As indicated above under “Organization”, the Class F (2010) Units do not begin to accrue distributions and are not entitled to income or loss allocations prior to August 5, 2011. We funded the cash portion of the acquisition price through an advance under our revolving credit facility and with available corporate funds.

On December 23, 2010, we sold four office properties (One and Two Greentree Centre, 8000 Lincoln Drive and Lake Center IV) containing a total of 243,195 net rentable square feet located in Marlton, New Jersey for an aggregate sales price of $20.9 million. The properties were 76.1% occupied at the date of sale.

On November 22, 2010, we sold Spyglass Point, a 58,576 net rentable square feet office property located in Austin, Texas for a sales price of $13.5 million. The property was fully occupied at the date of sale.

On September 20, 2010, we sold 630 Clark Avenue, a 50,000 net rentable square feet office property located in King of Prussia, Pennsylvania for a sales price of $3.6 million. The property was fully occupied at the date of sale.

On August 18, 2010, we sold 479 Thomas Jones Way, a 49,264 net rentable square feet office property located in Exton, Pennsylvania, for a sales price of $3.8 million. The property was 63.0% occupied at the date of sale.

On January 14, 2010, we sold 1957 Westmoreland Street, a 121,815 net rentable square feet property located in Richmond, Virginia, for a sales price of $10.8 million. The property was vacant at the date of sale.

Developments and Redevelopments

During 2010, we placed in service three office properties and one-mixed use property that we developed or redeveloped and that contain an aggregate of 1.9 million net rentable square feet. We place a property in service at the date the property reaches at least 95% occupancy. At December 31, 2010, we were proceeding on one garage redevelopment with total projected costs of $14.8 million of which $0.8 million remained to be funded. We expect to place this project in service in or around the fourth quarter of 2011.

Unsecured Debt Activity

During the year ended December 31, 2010, we repurchased $82.7 million of our unsecured Notes as summarized in the table below:

		Repurchase												Deferred Financing
Notes		Amount				Principal				Loss				Amortization
2010 5.625% Notes		$	2,002			$	1,942			$	37			$	3
2011 3.875% Notes (a)			68,741				68,125				1,762				281
2012 5.750% Notes			13,333				12,625				431				32
		$	84,076			$	82,692			$	2,230			$	316

We funded these repurchases from a combination of proceeds from asset sales, cash flow from operations and borrowings under our unsecured revolving credit facility (the “Credit Facility”). We use borrowings under the Credit Facility for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. The maturity date of the Credit Facility is June 29, 2011 (subject to an extension of one year, at our option, upon our payment of an extension fee equal to 15 basis points of the committed amount under the Credit Facility). The per annum variable interest rate on the outstanding balances is LIBOR plus 0.725%. The interest rate and facility fee are subject to adjustment upon a change in our unsecured debt ratings. In addition, the capitalization rate used in the calculation of several of the financial covenants in the Credit Facility is 7.50% and our swing loan availability under the Credit Facility is at $60.0 million. We are allowed four competitive bid loan requests in any 30 day period. Borrowings are available to the extent of borrowing capacity at the stated rates; however, the competitive bid feature allows banks that are part of the lender consortium under the Credit Facility to bid to make loans to us at a reduced LIBOR rate. We have the option to increase the Credit Facility to $800.0 million provided that we have not committed any defaults under the Credit Facility and we are able to acquire additional commitments from its existing lenders or new lenders.

The Credit Facility contains financial and non-financial covenants, including covenants that relate to our incurrence of additional debt; the granting of liens; consummation of mergers and consolidations; the disposition of assets and interests in subsidiaries; the making of loans and investments; and the payment of dividends. The restriction on dividends permits us to pay dividends to the greater of (i) an amount required for us to retain our qualification as a REIT and (ii) 95% of our funds from operations. The Credit Facility includes financial covenants that require us to maintain an interest coverage ratio, a fixed charge coverage ratio, an unsecured debt ratio and an unencumbered cash flow ratio above specified levels; to maintain net worth above an amount determined on a specified formula; and to maintain a leverage ratio and a secured debt ratio below certain maximum levels. Another financial covenant limits the ratio of unsecured debt to unencumbered properties. We were in compliance with all financial and non-financial covenants as of December 31, 2010. We continuously monitor our compliance with all covenants. Certain covenants restrict our ability to obtain alternative sources of capital. While we believe that we will remain in compliance with our covenants, a continued slow-down in the economy and continued decrease in availability of debt financing could result in non-compliance with covenants.

Secured Debt Activity

On August 26, 2010, the Operating Partnership received $254.0 million of gross proceeds from a $256.5 million forward financing commitment that the Operating Partnership obtained on June 29, 2009. The Operating Partnership paid a $17.7 million commitment fee in connection with this commitment. The loan proceeds, together with the commitment fee had been escrowed with an institutional trustee pending the completion of the IRS Philadelphia Campus and the Cira South Garage as well as the commencement of the leases at these facilities. The financing consists of two separate loans: $209.7 million secured by the IRS Philadelphia Campus and $46.8 million secured by the Cira South Garage. The lender held back $2.5 million of the loan proceeds pending completion of certain conditions related to the IRS Philadelphia Campus and the Cira South Garage. As of December 31, 2010, the Operating Partnership received $2.1 million of the amounts held back. The loans are non-recourse and are secured by the IRS Philadelphia Campus and the Cira South Garage, respectively. The loans bear interest at 5.93% with interest only through September 10, 2010 and thereafter require principal and interest monthly payments through its maturity in September 2030. The Operating Partnership used the loan proceeds to reduce borrowings under its Credit Facility and for general corporate purposes.

Additional Financing Activity

On August 5, 2010, the Operating Partnership issued 7,111,112 of Class F (2010) units in connection with the acquisition of Three Logan Square, an office property in Philadelphia, Pennsylvania. The Class F (2010) units do not accrue a dividend and are not entitled to income or loss allocations prior to August 5, 2011. They are also not exchangeable for Parent Company’s common shares for that period. For purposes of computing the total purchase price of Three Logan Square, the Class F (2010) units were valued based on the closing market price of the Parent Company’s common shares on the acquisition date of $11.54 less $0.60 to reflect that these units do not begin to accrue a dividend prior to August 5, 2011.

In June 2010, the Operating Partnership through one of its wholly owned taxable REIT subsidiaries (a“TRS”) received a $27.4 million contribution under the historic tax credit transaction that we entered into in 2008 with US Bancorp bringing the total contributions received to date to $61.4 million.

In March 2010, the Parent Company commenced a continuous equity offering program (the “Offering Program”), under which the Parent Company may sell up to an aggregate amount of 15,000,000 common shares until March 10, 2013. Through December 31, 2010, the Parent Company sold 5,742,268 shares under the Offering Program at an average sales price of $12.54 per share resulting in net proceeds of $70.8 million. The Parent Company contributed the net proceeds from the sale of its shares under the Offering Program to the Operating Partnership in exchange for the issuance of 5,742,268 common partnership units to the Parent Company. The Operating Partnership used the net proceeds from the sales contributed by the Parent Company to reduce borrowings under the Credit Facility and for general corporate purposes.

Business Objective and Strategies for Growth

Our business objective is to deploy capital effectively to maximize our return on investment and thereby maximize our total return to shareholders. To accomplish this objective we seek to:

•

maximize cash flow through leasing strategies designed to capture rental growth as rental rates increase and as above and below-market leases are renewed;

•

attain a high tenant retention rate by providing a full array of property management and maintenance services and tenant service programs responsive to the varying needs of our diverse tenant base;

•

form joint venture opportunities with high-quality partners having attractive real estate holdings or significant financial resources;

•

utilize our reputation as a full-service real estate development and management organization to identify opportunities that will expand our business and create long-term value; and

•

increase the economic diversification of our tenant base while maximizing economies of scale.

We also consider the following to be important objectives:

•

to acquire and develop high-quality office and industrial properties at attractive yields in markets that we expect will experience economic growth and where we can achieve operating efficiencies;

•

to deploy our land inventory for development of high-quality office and industrial properties; and

•

to capitalize on our redevelopment expertise to selectively develop, redevelop and reposition properties in desirable locations.

We expect to concentrate our real estate activities in markets where we believe that:

•

current and projected market rents and absorption statistics justify construction activity;

•

we can maximize market penetration by accumulating a critical mass of properties and thereby enhance operating efficiencies;

•

barriers to entry (such as zoning restrictions, utility availability, infrastructure limitations, development moratoriums and limited developable land) will create supply constraints on office and industrial space; and

•

there is potential for economic growth, particularly job growth and industry diversification.

Operating Strategy

In this current economic environment, we expect to continue to operate in markets where we have a concentration advantage due to economies of scale. We believe that where possible, it is best to operate with a strong base of properties in order to benefit from the personnel allocation and the market strength associated with managing several properties in the same market. However, we intend to selectively dispose of properties and redeploy capital if we determine a property cannot meet long term earnings growth expectations. We believe that recycling capital is an important aspect of maintaining the overall quality of our portfolio.

Our broader strategy remains focused on continuing to enhance liquidity and strengthen our balance sheet through capital retention, targeted sales activity and management of our existing and prospective liabilities.

In the long term, we believe that we are well positioned in our current markets and have the expertise to take advantage of both development and acquisition opportunities, as warranted by market and economic conditions, in new markets that have healthy long-term fundamentals and strong growth projections. This capability, combined with what we believe is a conservative financial structure, should allow us to achieve disciplined growth. These abilities are integral to our strategy of having a geographically and physically diverse portfolio of assets, which will meet the needs of our tenants.

We use experienced on site construction superintendents, operating under the supervision of project managers and senior management, to control the construction process and mitigate the various risks associated with real estate development.

In order to fund developments, redevelopments and acquisitions, as well as refurbish and improve existing Properties, we must use excess cash from operations after satisfying our dividend and other requirements. The availability of funds for new investments and maintenance of existing Properties depends in large measure on capital markets and liquidity factors over which we can exert little control. Past events, including failures and near failures of a number of large financial service companies, have made the capital markets increasingly volatile. As a result, many property owners are finding financing to be increasingly expensive and difficult to obtain. In addition, downgrades of our public debt ratings by Standard & Poor’s and Moody’s Investor Service could increase our cost of capital.

Policies With Respect To Certain Activities

The following is a discussion of our investment, financing and other policies. These policies have been determined by our Board of Trustees and our Board may revise these policies without a vote of shareholders.

Investments in Real Estate or Interests in Real Estate

We may develop, purchase or lease income-producing properties for long-term investment, expand and improve the properties presently owned or other properties purchased, or sell such properties, in whole or in part, as circumstances warrant. Although there is no limitation on the types of development activities that we may undertake, we expect that our development activities will meet current market demand and will generally be on a build-to-suit basis for particular tenants where a significant portion of the building is pre-leased before construction begins. We continue to participate with other entities in property ownership through existing joint ventures or other types of co-ownership. Our equity investments may be subject to existing or future mortgage financing and other indebtedness that will have priority over our equity investments.

Securities of or Interests in Entities Primarily Engaged in Real Estate Activities and Other Issuers

Subject to the percentage of ownership limitations and gross income tests necessary for REIT qualification, we may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers. We may enter into joint ventures or partnerships for the purpose of obtaining an equity interest in a particular property. We do not currently intend to invest in the securities of other issuers except in connection with joint ventures or acquisitions of indirect interests in properties.

Investments in Real Estate Mortgages

While our current portfolio consists of, and our business objectives emphasize, equity investments in commercial real estate, we may, at the discretion of management or our Board of Trustees, invest in other types of equity real estate investments, mortgages and other real estate interests. We do not presently intend to invest to a significant extent in mortgages or deeds of trust, but may invest in participating mortgages if we conclude that we may benefit from the cash flow or any appreciation in the value of the property securing a mortgage. From time to time, we provide seller financing to buyers of our properties. We do this when the buyer requires additional funds for the purchase and provision of seller financing will be beneficial to us and the buyer compared to a mortgage loan from a third party lender.

Dispositions

Our disposition of properties is based upon management’s periodic review of our portfolio and the determination by management or our Board of Trustees that a disposition would be in our best interests. We intend to use selective dispositions to fund our capital and refinancing needs.

Financing Policies

A primary objective of our financing policy has been to manage our financial position to allow us to raise capital from a variety of sources at competitive rates. Our mortgages, credit facilities and unsecured debt securities contain restrictions on our ability to incur indebtedness. Our charter documents do not limit the indebtedness that we may incur. Our financing strategy is to maintain a strong and flexible financial position by limiting our debt to a prudent level and minimizing our variable interest rate exposure. We intend to finance future growth and future maturing debt with the most advantageous source of capital then available to us. These sources may include selling common or preferred equity and debt securities sold through public offerings or private placements, utilizing availability under the Credit Facility or incurring additional indebtedness through secured or unsecured borrowings. To qualify as a REIT, we must distribute to our shareholders each year at least ninety percent of our net taxable income, excluding any net capital gain. This distribution requirement limits our ability to fund future capital needs, including for acquisitions and developments, from income from operations. Therefore, we expect to continue to rely on third party sources of capital to fund future capital needs.

Working Capital Reserves

We maintain working capital reserves and access to borrowings in amounts that our management determines to be adequate to meet our normal contingencies.

Policies with Respect to Other Activities

We expect to issue additional common and preferred equity in the future and may authorize our Operating Partnership to issue additional common and preferred units of limited partnership interest, including to persons who contribute their interests in properties to us in exchange for such units. We have not engaged in trading, underwriting or agency distribution or sale of securities of unaffiliated issuers and we do not intend to do so. We intend to make investments consistent with our qualification as a REIT, unless because of circumstances or changes in the Internal Revenue Code of 1986, as amended (or the Treasury Regulations), our Board of Trustees determines that it is no longer in our best interests to qualify as a REIT. We may make loans to third parties, including to joint ventures in which we participate and to buyers of our real estate. We intend to make investments in such a way that we will not be treated as an investment company under the Investment Company Act of 1940.

Management Activities

We provide third-party real estate management services primarily through wholly-owned subsidiaries (collectively, the “Management Companies”). As of December 31, 2010, the Management Companies were managing properties containing an aggregate of approximately 33.4 million net rentable square feet, of which approximately 25.6 million net rentable square feet related to Properties owned by us and approximately 7.8 million net rentable square feet related to properties owned by third parties and unconsolidated Real Estate Ventures.

Geographic Segments

As of December 31, 2010, we were managing our portfolio within seven segments: (1) Pennsylvania Suburbs, (2) Philadelphia Central Business District (“CBD”), (3) Metropolitan Washington D.C, (4) New Jersey/Delaware, (5) Richmond, Virginia, (6) Austin, Texas and (7) California. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Metropolitan Washington, D.C. segment includes properties in Northern Virginia and suburban Maryland. The New Jersey/Delaware segment includes properties in Burlington, Camden and Mercer counties and in New Castle county in the state of Delaware. The Richmond, Virginia segment includes properties primarily in Albemarle, Chesterfield, Goochland and Henrico counties and Durham, North Carolina. The Austin, Texas segment includes properties in Austin. The California segment includes properties in Oakland, Concord, Carlsbad and Rancho Bernardo. 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.

Competition

The real estate business is highly competitive. Our Properties compete for tenants with similar properties primarily on the basis of location, total occupancy costs (including base rent and operating expenses), services provided, and the design and condition of the improvements. We also face competition when attempting to acquire or develop real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension funds, partnerships and individual investors. Additionally, our ability to compete depends upon trends in the economies of our markets, investment alternatives, financial condition and operating results of current and prospective tenants, availability and cost of capital, construction and renovation costs, land availability, our ability to obtain necessary construction approvals, taxes, governmental regulations, legislation and population trends.

Insurance

We maintain commercial general liability and “all risk” property insurance on our properties. We intend to obtain similar coverage for properties we acquire in the future. There are types of losses, generally of a catastrophic nature, such as losses from war, terrorism, environmental issues, floods, hurricanes and earthquakes that are subject to limitations in certain areas or which may be uninsurable risks. We exercise our discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to maintaining appropriate insurance on our investments at a reasonable cost and on suitable terms. If we suffer a substantial loss, our insurance coverage may not be sufficient to pay the full current market value or current replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it impractical to use insurance proceeds to fully replace or restore a property after it has been damaged or destroyed.

Employees

As of December 31, 2010, we had 439 full-time employees, including 30 union employees.

Government Regulations Relating to the Environment

Many laws and governmental regulations relating to the environment apply to us and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently and may adversely affect us.

Existing conditions at some of our Properties. Independent environmental consultants have conducted Phase I or similar environmental site assessments on our Properties. We generally obtain these assessments prior to the acquisition of a Property and may later update them as required for subsequent financing of the property or as requested by a tenant. Site assessments are generally performed to ASTM standards then existing for Phase I site assessments, and typically include a historical review, a public records review, a visual inspection of the surveyed site, and the issuance of a written report. These assessments do not generally include any soil samplings or subsurface investigations. Depending on the age of the property, the Phase I may have included an assessment of asbestos-containing materials. For properties where asbestos-containing materials were identified or suspected, an operations and maintenance plan was generally prepared and implemented. See Note 2 to our consolidated financial statements for our evaluation in accordance with the accounting standard governing asset retirement obligations.

Historical operations at or near some of our properties, including the operation of underground storage tanks, may have caused soil or groundwater contamination. We are not aware of any such condition, liability or concern by any other means that would give rise to material, uninsured environmental liability. However, the assessments may have failed to reveal all environmental conditions, liabilities or compliance concerns; there may be material environmental conditions, liabilities or compliance concerns that a review failed to detect or which arose at a property after the review was completed; future laws, ordinances or regulations may impose material additional environmental liability; and current environmental conditions at our Properties may be affected in the future by tenants, third parties or the condition of land or operations near our Properties, such as the presence of underground storage tanks. We cannot be certain that costs of future environmental compliance will not affect our ability to make distributions to our shareholders.

Use of hazardous materials by some of our tenants. Some of our tenants handle hazardous substances and wastes on our properties as part of their routine operations. Environmental laws and regulations may subject these tenants, and potentially us, to liability resulting from such activities. We generally require our tenants, in their leases, to comply with these environmental laws and regulations and to indemnify us for any related liabilities. These tenants are primarily involved in the life sciences and the light industrial and warehouse businesses. We are not aware of any material noncompliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with any of our Properties, and we do not believe that on-going activities by our tenants will have a material adverse effect on our operations.

Costs related to government regulation and private litigation over environmental matters. Under environmental laws and regulations, we may be liable for the costs of removal, remediation or disposal of hazardous or toxic substances present or released on our Properties. These laws could impose liability without regard to whether we are responsible for, or knew of, the presence or release of the hazardous materials. Government investigations and remediation actions may entail substantial costs and the presence or release of hazardous substances on a property could result in governmental cleanup actions or personal injury or similar claims by private plaintiffs.

Potential environmental liabilities may exceed our environmental insurance coverage limits. We carry what we believe to be sufficient environmental insurance to cover potential liability for soil and groundwater contamination, mold impact, and the presence of asbestos-containing materials at the affected sites identified in our environmental site assessments. Our insurance policies are subject to conditions, qualifications and limitations. Therefore, we cannot provide any assurance that our insurance coverage will be sufficient to cover all liabilities for losses.

Potential environmental liabilities may adversely impact our ability to use or sell assets. The presence of contamination or the failure to remediate contamination may impair our ability to sell or lease real estate or to borrow using the real estate as collateral.

Other

We do not have any foreign operations and our business is not seasonal. Our operations are not dependent on a single tenant or a few tenants and no single tenant accounted for more than 10.0% of our total 2010 revenue.

Code of Conduct

We maintain a Code of Business Conduct and Ethics applicable to our Board and all of our officers and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions. A copy of our Code of Business Conduct and Ethics is available on our website, www.brandywinerealty.com. In addition to being accessible through our website, copies of our Code of Business Conduct and Ethics can be obtained, free of charge, upon written request to Investor Relations, 555 East Lancaster Avenue, Suite 100, Radnor, PA 19087. Any amendments to or waivers of our Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions and that relate to any matter enumerated in Item 406(b) of Regulation S-K promulgated by the SEC will be disclosed on our website.

Corporate Governance Principles and Board Committee Charters

Our Corporate Governance Principles and the charters of the Executive Committee, Audit Committee, Compensation Committee and Corporate Governance Committee of the Board of Trustees of Brandywine Realty Trust and additional information regarding our corporate governance are available on our website, www.brandywinerealty.com. In addition to being accessible through our website, copies of our Corporate Governance Principles and charters of our Board Committees can be obtained, free of charge, upon written request to Investor Relations, 555 Lancaster Avenue, Suite 100, Radnor, PA 19087.

Availability of SEC Reports

We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information with the SEC. Members of the public may read and copy materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Members of the public may also obtain information on the Public Reference Room by calling the SEC at 1-800-732-0330. The SEC also maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. The address of that site is http://www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information filed by us with the SEC are available, without charge, on our Internet web site, http://www.brandywinerealty.com as soon as reasonably practicable after they are filed electronically with the SEC. Copies are also available, free of charge, upon written request to Investor Relations, Brandywine Realty Trust, 555 East Lancaster Avenue, Suite 100, Radnor, PA 19087.

Item 1A.		Risk Factors

Our results from operations and ability to make distributions on our equity and to pay debt service on our indebtedness may be affected by the risk factors set forth below. All investors should consider the following risk factors before deciding to purchase our securities.

Adverse economic and geopolitical conditions could have a material adverse effect on our results of operations, financial condition and our ability to pay distributions to you.

Our business is affected by the continued uncertainty in the financial and credit markets, the sluggish recovery in the global economy from the recent recession, and other market or economic challenges experienced by the U.S. economy or the real estate industry as a whole. While there are signs of recovery in the U.S. economy, the recovery rate has been much slower than anticipated. Our portfolio consists primarily of office buildings (as compared to a more diversified real estate portfolio); if economic conditions persist or again deteriorate, then our results of operations, financial condition, financial results and ability to service current debt and to pay distributions to our shareholders may be adversely affected by the following, among other potential conditions:

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significant job losses in the financial and professional services industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;

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our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to complete development opportunities and refinance existing debt;

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reduce our returns from both our existing operations and our development activities and increase our future interest expense;

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reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;

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the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, the dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors;

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reduced liquidity in debt markets and increased credit risk premiums for certain market participants may impair our ability to access capital; and

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one or more lenders under our line of credit 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.

These conditions, which could have a material adverse effect on our results of operations, financial condition and ability to pay distributions, may continue or worsen in the future.

Our performance is subject to risks associated with our properties and with the real estate industry.

Our economic 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 and ability to pay distributions to our shareholders will be adversely affected. Events or conditions beyond our control that may adversely affect our operations or the value of our properties include:

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downturns in the national, regional and local economic climate including increases in the unemployment rate and inflation;

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competition from other office, mixed use, industrial and commercial buildings;

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local real estate market conditions, such as oversupply or reduction in demand for office, industrial or commercial space;

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changes in interest rates and availability of financing;

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vacancies, changes in market rental rates and the need to periodically repair, renovate and re-lease space;

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increased operating costs, including insurance expense, utilities, real estate taxes, janitorial costs, state and local taxes, labor shortages and heightened security costs;

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civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war which may result in uninsured or underinsured losses;

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significant expenditures associated with each investment, such as debt service payments, real estate taxes, insurance and maintenance costs which are generally not reduced when circumstances cause a reduction in revenues from a property; and

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declines in the financial condition of our tenants and our ability to collect rents from our tenants.

The disruption in the debt capital markets could adversely affect us.

Notwithstanding the recent improvement in capital and credit markets, these markets are still considered volatile and disruptions in these markets are still possible. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength. These events have an adverse effect on the availability of credit, the terms on which credit can be sourced and the overall cost of debt capital. This could negatively affect us by:

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increasing our costs to finance our ongoing operations and fund our development and redevelopment activities;

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reducing the availability of potential bidders for, and the amounts offered for, any properties we may wish to sell; and

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preventing us from accessing necessary debt capital on a timely basis leading us to consider potentially more dilutive capital transactions such as undesirable sales of properties or equity securities.

We may suffer adverse consequences due to the financial difficulties, bankruptcy or insolvency of our tenants.

The current economic conditions have caused some of our tenants to experience financial difficulties. If more of our tenants were to continue to experience financial difficulties, including bankruptcy, insolvency or a general downturn in their business, there could be an adverse effect on our financial performance and distributions to shareholders. We cannot assure you that any tenant that files for bankruptcy protection will continue to pay us rent. A bankruptcy filing by or relating to one of our tenants or a lease guarantor would bar efforts by us to collect pre-bankruptcy debts from that tenant or lease guarantor, or its property, unless we receive an order permitting us to do so from the bankruptcy court. In addition, we cannot evict a tenant solely because of bankruptcy. The bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. If, however, a lease is rejected by a tenant in bankruptcy, we would have only a general, unsecured claim for damages. Any such unsecured claim would only be paid to the extent that funds are available and only in the same percentage as is paid to all other holders of general, unsecured claims. Restrictions under the bankruptcy laws further limit the amount of any other claims that we can make if a lease is rejected. As a result, it is likely that we would recover substantially less than the full value of the remaining rent during the term.

The terms and covenants relating to our indebtedness could adversely impact our economic performance.

Like other real estate companies which incur debt, 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. Furthermore, an increase in our interest expense could adversely affect our cash flow and ability to make distributions to shareholders. If we do not meet our debt service obligations, any properties securing such indebtedness could be foreclosed on, which would have a material adverse effect on our cash flow and ability to make distributions and, depending on the number of properties foreclosed on, could threaten our continued viability.

Our Credit Facility, term loan and the indenture governing our unsecured public debt securities contain (and any new or amended facility will contain) restrictions, requirements and other limitations on our ability to incur indebtedness, including total debt to asset ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt which we must maintain. Our ability to borrow under our credit facilities is subject to compliance with such financial and other covenants. In the event that we fail to satisfy these covenants, we would be in default under the credit facilities, the term loan and the indenture and may be required to repay such debt with capital from other sources. Under such circumstances, other sources of capital may not be available to us, or may be available only on unattractive terms. In addition, the mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. 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.

Increases in interest rates on variable rate indebtedness will increase our interest expense, which could adversely affect our cash flow and ability to make distributions to shareholders. Rising interest rates could also restrict our ability to refinance existing debt when it matures. In addition, an increase in interest rates could decrease the amounts that third parties are willing to pay for our assets, thereby limiting our ability to alter our portfolio promptly in relation to economic or other conditions. We entered into and may, from time to time, enter into agreements such as interest rate hedges, swaps, floors, caps and other interest rate hedging contracts with respect to a portion of our variable rate debt. Although these agreements may lessen the impact of rising interest rates on us, they also expose us to the risk that other parties to the agreements will not perform or that we cannot enforce the agreements.

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 degree of leverage could affect our ability to obtain additional financing for working capital expenditures, development, acquisitions or other general corporate purposes 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. Our degree of leverage could also make us more vulnerable to a downturn in business or the economy in general.

We may experience increased operating costs, which might reduce our profitability.

Our properties are subject to increases in operating expenses such as for cleaning, electricity, heating, ventilation and air conditioning, administrative costs and other costs associated with security, landscaping and repairs and maintenance of our properties. In general, under our leases with tenants, we pass through all or a portion of these costs to them. We cannot assure you, however, that tenants will actually bear the full burden of these higher costs, or that such increased costs will not lead them, or other prospective tenants, to seek office space elsewhere. If operating expenses increase, the availability of other comparable office space in our core geographic markets might limit our ability to increase rents; if operating expenses increase without a corresponding increase in revenues, our profitability could diminish and limit our ability to make distributions to shareholders.

Our investment in property development or redevelopment may be more costly or difficult to complete than we anticipate.

We intend to continue to develop properties where market conditions warrant such investment. Once made, these investments may not produce results in accordance with our expectations. Risks associated with our development and construction activities include:

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the unavailability of favorable financing alternatives in the private and public debt markets;

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having sufficient capital to pay development costs;

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unprecedented market volatility in the share price of REITs;

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dependence on the financial services sector as part of our tenant base;

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construction costs exceeding original estimates due to rising interest rates, diminished availability of materials and labor, and increases in the costs of materials and labor;

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construction and lease-up delays resulting in increased debt service, fixed expenses and construction or renovation costs;

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expenditure of funds and devotion of management’s time to projects that we do not complete;

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the unavailability or scarcity of utilities;

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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;

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complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other governmental permits; and

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increased use restrictions by local zoning or planning authorities limiting our ability to develop and impacting the size of developments.

We face risks associated with property acquisitions.

We have recently acquired properties, and may in the future continue to acquire, properties and portfolios of properties, including large portfolios that would increase our size and potentially alter our capital structure. Although we believe that the acquisitions that we have completed and that we expect to undertake in the future have, and will, enhance our future financial performance, the success of such transactions is subject to a number of factors, including the risks that:

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we may not be able to obtain financing for acquisitions on favorable terms;

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acquired properties may fail to perform as expected;

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the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates;

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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

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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 cost savings and synergies.

We acquired in the past and in the future may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership interests in our Operating Partnership. This acquisition structure has the effect, among other factors, of reducing the amount of tax depreciation we can deduct over the tax life of the acquired properties, and typically requires that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their tax bases. These restrictions on dispositions could limit our ability to sell an asset or pay down partnership debt during a specified time, or on terms, that would be favorable absent such restrictions.

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. As a result, if a liability were asserted against us based upon ownership of an acquired property, we might be required to pay significant sums to settle it, which could adversely affect our financial results and cash flow. Unknown liabilities relating to acquired properties could include:

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liabilities for clean-up of pre-existing disclosed or undisclosed environmental contamination;

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claims by tenants, vendors or other persons arising on account of actions or omissions of the former owners of the properties; and

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liabilities incurred in the ordinary course of business.

We have agreed not to sell certain of our properties and to maintain indebtedness subject to guarantees.

We agreed not to sell some of our properties for varying periods of time, in transactions that would trigger taxable income to the former owners, and we may enter into similar arrangements as a part of future property acquisitions. These agreements generally provide that we may dispose of the subject properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax deferred transactions. Such transactions can be difficult to complete and can result in the property acquired in exchange for the disposed of property inheriting the tax attributes (including tax protection covenants) of the sold property. Violation of these tax protection agreements would impose significant costs on us. As a result, we are restricted with respect to decisions related to financing, encumbering, expanding or selling these properties.

We have also entered into agreements that provide prior owners of properties with the right to guarantee specific amounts of indebtedness and, in the event that the specific indebtedness that they guarantee is repaid or reduced, we would be required to provide substitute indebtedness for them to guarantee. 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.

We may be unable to renew leases or re-lease space as leases expire; certain leases may expire early.

If tenants do not renew their leases upon expiration, we may be unable to re-lease the space. Even if the tenants do renew their leases or if we can re-lease the space, the terms of renewal or re-leasing (including the cost of required renovations) may be less favorable than the current lease terms. Certain leases grant the tenants an early termination right upon payment of a termination penalty or if we fail to comply with certain material lease terms. Our inability to renew or release spaces and the early termination of certain leases could affect our ability to make distributions to shareholders.

We face significant competition from other real estate developers.

We compete with real estate developers, operators and institutions for tenants and acquisition and development opportunities. Some of these competitors may have significantly greater financial resources than we have. Such competition may reduce the number of suitable investment opportunities available to us, may interfere with our ability to attract and retain tenants and may increase vacancies, which could result in increased supply and lower market rental rates, reducing our bargaining leverage and adversely affect our ability to improve our operating leverage. In addition, some of our competitors may be willing (e.g., because their properties may have vacancy rates higher than those for our properties) to make space available at lower rental rates or with higher tenant concession percentages than available space in our properties. We cannot assure you that this competition will not adversely affect our cash flow and our ability to make distributions to shareholders.

Property ownership through joint ventures may limit our ability to act exclusively in our interest.

We develop and acquire properties in joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. As of December 31, 2010, we had investments in 17 unconsolidated real estate ventures. Our net investments in the 17 unconsolidated real estate ventures aggregated approximately $84.4 million as of December 31, 2010. We could become engaged in a dispute with one or more of our joint venture partners that might affect our ability to operate a jointly-owned property. Moreover, our joint 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 joint venture partners may have competing interests in our markets that could create conflicts of interest. If the objectives of our joint venture partners or the lenders to our joint ventures are inconsistent with our own objectives, we may not be able to act exclusively in our interests. Furthermore, if the current constrained credit conditions in the capital markets persist or deteriorate further, the value of our investments could deteriorate and we could be required to reduce the carrying value of our equity method investments if a loss in the carrying value of the investment is other than a temporary decline pursuant to the accounting standard governing the equity method of accounting for investments in common stock.

Because real estate is illiquid, we may not be able to sell properties when appropriate.

Real estate investments generally, and in particular large office and industrial/flex properties like those that we own, often cannot be sold quickly. The capitalization rates at which properties may be sold are generally higher than historic rates, thereby reducing our potential proceeds from sale. Consequently, we may not be able to alter our portfolio promptly in response to changes in economic or other conditions. In addition, the Internal Revenue Code limits our ability to sell properties that we have held for fewer than four years without potential adverse consequences to our shareholders. Furthermore, properties that we have developed and have owned for a significant period of time or that we acquired in exchange for partnership interests in our operating partnership often have a low tax basis. If we were to dispose of any of these properties in a taxable transaction, we may be required under provisions of the Internal Revenue Code applicable to REITs to distribute a significant amount of the taxable gain to our shareholders and this could, in turn, impact our cash flow. In some cases, tax protection agreements with third parties will prevent us from selling certain properties in a taxable transaction without incurring substantial costs. In addition, purchase options and rights of first refusal held by tenants or partners in joint ventures may also limit our ability to sell certain properties. All of these factors reduce our ability to respond to changes in the performance of our investments and could adversely affect our cash flow and ability to make distributions to shareholders as well as the ability of someone to purchase us, even if a purchase were in our shareholders’ best interests.

Some potential losses are not covered by insurance.

We currently carry comprehensive “all-risk” property, and rental loss insurance and commercial general liability coverage on all of our properties. We believe the policy specifications and insured limits of these policies are adequate and appropriate. 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. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to earthquake, terrorist acts and mold, or, if offered, these types of insurance may be prohibitively expensive. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. We cannot assure you that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. 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. In addition, if one or more of our insurance providers were to become subject to insolvency, bankruptcy or other proceedings and our insurance policies with the provider were terminated or cancelled as a result of those proceedings, we cannot guarantee that we would be able to find alternative coverage in adequate amounts or at reasonable prices. In such case, we could experience a lapse in any or adequate insurance coverage with respect to one or more properties and be exposed to potential losses relating to any claims that may arise during such period of lapsed or inadequate coverage.

Terrorist attacks and other acts of violence or war may adversely impact our performance and may affect the markets on which our securities are traded.

Terrorist attacks against our properties, or against the United States or our interests, may negatively impact our operations and the value of our securities. Attacks or armed conflicts could result in increased operating costs; for example, it might cost more in the future for building security, property and casualty insurance, and property maintenance. As a result of terrorist activities and other market conditions, the cost of insurance coverage for our properties could also increase. We might not be able to pass through the increased costs associated with such increased security measures and insurance to our tenants, which could reduce our profitability and cash flow. Furthermore, any terrorist attacks or armed conflicts could result in increased volatility in or damage to the United States and worldwide financial markets and economy. Such adverse economic conditions could affect the ability of our tenants to pay rent and our cost of capital, which could have a negative impact on our results.

Our ability to make distributions is subject to various risks.

Historically, we have paid quarterly distributions to our shareholders. Our ability to make distributions in the future will depend upon:

•

the operational and financial performance of our properties;

•

capital expenditures with respect to existing, developed and newly acquired properties;

•

general and administrative costs associated with our operation as a publicly-held REIT;

•

the amount of, and the interest rates on, our debt; and

•

the absence of significant expenditures relating to environmental and other regulatory matters.

Certain of these matters are beyond our control and any significant difference between our expectations and actual results could have a material adverse effect on our cash flow and our ability to make distributions to shareholders.

Changes in the law may adversely affect our cash flow.

Because increases in income and service taxes are generally not passed through to tenants under leases, such increases may adversely affect our cash flow and ability to make expected distributions to shareholders. Our properties are also subject to various regulatory requirements, such as those relating to the environment, fire and safety. 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. Although we believe that our properties are in material compliance with all such requirements, we cannot assure you that these requirements will not change or that newly imposed requirements will not require significant expenditures in order to be compliant.

Potential liability for environmental contamination could result in substantial costs.

Under various federal, state and local laws, ordinances and regulations, we may be liable for the costs to investigate and remove or remediate hazardous or toxic substances on or in our properties, often regardless of whether we know of or are responsible for the presence of these substances. These costs may be substantial. While we do maintain environmental insurance, we can not be assured that our insurance coverage will be sufficient to protect us from all of the aforesaid remediation costs. Also, if hazardous or toxic substances are present on a property, or if we fail to properly remediate such substances, our ability to sell or rent the property or to borrow using that property as collateral may be adversely affected.

Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and also govern emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) and underground storage tanks are also regulated by federal and state laws. We are also subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals. We could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or tanks or related claims arising out of environmental contamination or human exposure to contamination at or from our properties.

Additionally, we develop, manage, lease and/or operate various properties for third parties. Consequently, we may be considered to have been or to be an operator of these properties and, therefore, potentially liable for removal or remediation costs or other potential costs that could relate to hazardous or toxic substances.

An earthquake or other natural disasters could adversely affect our business.

Some of our properties are located in California which is a high risk geographical area for earthquakes or other natural disasters. Depending upon its magnitude, an earthquake could severely damage our properties which would adversely affect our business. We maintain earthquake insurance for our California properties and the resulting business interruption. We cannot assure you that our insurance will be sufficient if there is a major earthquake.

Americans with Disabilities Act compliance could be costly.

The Americans with Disabilities Act of 1990, as amended (“ADA”) requires that all public accommodations and commercial facilities, including office buildings, meet certain federal requirements related to access and use by disabled persons. Compliance with ADA requirements could involve the removal of structural barriers from certain disabled persons’ entrances which could adversely affect our financial condition and results of operations. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses. Although we believe that our properties are in material compliance with present requirements, noncompliance with the ADA or similar or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us. 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.

Our status as a REIT (or any of our REIT subsidiaries) is dependent on compliance with federal income tax requirements.

If we (or any of our REIT subsidiaries) fail to qualify as a REIT, we or the affected REIT subsidiaries would be subject to federal income tax at regular corporate rates. Also, unless the IRS granted us or our affected REIT subsidiaries, as the case may be, relief under certain statutory provisions, we or it would remain disqualified as a REIT for four years following the year it first failed to qualify. If we or any of our REIT subsidiaries fails to qualify as a REIT, we or they would be required to pay significant income taxes and would, therefore, have less money available for investments or for distributions to shareholders. This would likely have a material adverse effect on the value of the combined company’s securities. In addition, we or our affected REIT subsidiaries would no longer be required to make any distributions to shareholders.

Failure of the Operating Partnership (or a subsidiary partnership) to be treated as a partnership would have serious adverse consequences to our shareholders. If the IRS were to successfully challenge the tax status of the Operating Partnership or any of its subsidiary partnerships for federal income tax purposes, the Operating Partnership or the affected subsidiary partnership would be taxable as a corporation. In such event we would cease to qualify as a REIT and the imposition of a corporate tax on the Operating Partnership or a subsidiary partnership would reduce the amount of cash available for distribution from the Operating Partnership to us and ultimately to our shareholders.

Even if we qualify as a REIT, we will be required to pay certain federal, state and local taxes on our income and properties. In addition, our taxable REIT subsidiaries will be subject to federal, state and local income tax at regular corporate rates on their net taxable income derived from management, leasing and related service business. If we have net income from a prohibited transaction, such income will be subject to a 100% tax.

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.

We operate our business to qualify to be taxed as a REIT for federal income tax purposes. We have not requested and do not plan to request a ruling from the IRS that we qualify as a REIT, and the statements in this Annual Report on Form 10-K are not binding on the IRS or any court. As a REIT, we generally will not be subject to federal income tax on the income that we distribute currently to our shareholders. Many of the REIT requirements, however, are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances that may not be totally within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from specific passive sources, such as rent, that are itemized in the REIT tax laws. In addition, to qualify as a REIT, we cannot own specified amounts of debt and equity securities of some issuers. We also are required to distribute to our shareholders with respect to each year at least 90% of our REIT taxable income (excluding net capital gains). The fact that we hold substantially all of our assets through the Operating Partnership and its subsidiaries further complicates the application of the REIT requirements for us. Even a technical or inadvertent mistake could jeopardize our REIT status and, given the highly complex nature of the rules governing REITs and the ongoing importance of factual determinations, we cannot provide any assurance that we will continue to qualify as a REIT. Furthermore, Congress and the IRS might make changes to the tax laws and regulations, and the courts might issue new rulings, that make it more difficult, or impossible, for us to remain qualified as a REIT. If we fail to qualify as a REIT for federal income tax purposes and are able to avail ourselves of one or more of the statutory savings provisions in order to maintain our REIT status, we would nevertheless be required to pay penalty taxes of $50,000 or more for each such failure.

If we fail to qualify as a REIT for federal income tax purposes, and are unable to avail ourselves of certain savings provisions set forth in the Internal Revenue Code, we would be subject to federal income tax at regular corporate rates on all of our income. As a taxable corporation, we would not be allowed to take a deduction for distributions to shareholders in computing our taxable income or pass through long term capital gains to individual shareholders at favorable rates. We also could be subject to the federal alternative minimum tax and possibly increased state and local taxes. We would not be able to elect to be taxed as a REIT for four years following the year we first failed to qualify unless the IRS were to grant us relief under certain statutory provisions. If we failed to qualify as a REIT, we would have to pay significant income taxes, which would reduce our net earnings available for investment or distribution to our shareholders. This likely would have a significant adverse effect on our earnings and likely would adversely affect the value of our securities. In addition, we would no longer be required to pay any distributions to shareholders.

Failure of the Operating Partnership (or a subsidiary partnership) to be treated as a partnership would have serious adverse consequences to our shareholders. If the IRS were to successfully challenge the tax status of the Operating Partnership or any of its subsidiary partnerships for federal income tax purposes, the Operating Partnership or the affected subsidiary partnership would be taxable as a corporation. In such event we would cease to qualify as a REIT and the imposition of a corporate tax on the Operating Partnership or a subsidiary partnership would reduce the amount of cash available for distribution from the Operating Partnership to us and ultimately to our shareholders.

To maintain our REIT status, we may be forced to borrow funds on a short term basis during unfavorable market conditions.

As a REIT, we are subject to certain distribution requirements, including the requirement to distribute 90% of our REIT taxable income, that may result in our having to make distributions at disadvantageous time or to borrow funds at unfavorable rates. Compliance with this requirement may hinder our ability to operate solely on the basis of maximizing profits.

We will pay some taxes even if we qualify as a REIT, which will reduce the cash available for distribution to our shareholders.

Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains. Additionally, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is 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.

In addition, any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded for federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to federal and possibly state corporate income tax. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the economic arrangements between the REIT, the REIT’s customers, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities follow the federal income tax treatment of REITs. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to our shareholders.

We face possible federal, state and local tax audits.

Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes, but are subject to certain state and local taxes. Certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits. Although we believe that we have substantial arguments in favor of our positions in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. There can be no assurance that these or future audits will not have a material adverse effect on our results of operations. The Operating Partnership has been audited by the Internal Revenue Service for its 2004 tax year. The audit concerns the tax treatment of a transaction in September 2004 in which we acquired a portfolio of properties through the acquisition of a limited partnership. On December 17, 2010, the IRS proposed an adjustment to the allocation of recourse liabilities allocated to the contributor of the properties. The Operating Partnership intends to appeal the proposed adjustment. The proposed adjustment, if upheld, would not result in a material tax liability for us. However, an adjustment could raise a question as to whether a contributor of partnership interests in the 2004 transaction could assert a claim against us under the tax protection agreement entered into as part of the transaction.

Competition for skilled personnel could increase labor costs.

We compete with various other companies in attracting and retaining qualified and skilled personnel. We depend on our ability to attract and retain skilled management personnel who are responsible for the day-to-day operations of our company. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel. We may not be able to offset such added costs by increasing the rates we charge our tenants. If there is an increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.

We are dependent upon our key personnel.

We are dependent upon our key personnel whose continued service is not guaranteed. We are dependent on our executive officers for strategic business direction and real estate experience. Loss of their services could adversely affect our operations.

Although we have an employment agreement with Gerard H. Sweeney, our President and Chief Executive Officer, this agreement does not restrict his ability to become employed by a competitor following the termination of his employment. We do not have key man life insurance coverage on our executive officers.

Certain limitations will exist with respect to a third party’s ability to acquire us or effectuate a change in control.

Limitations imposed to protect our REIT status. In order to protect us against the loss of our REIT status, our Declaration of Trust limits any shareholder from owning more than 9.8% in value of our outstanding shares, subject to certain exceptions. The ownership limit may have the effect of precluding acquisition of control of us. If anyone acquires shares in excess of the ownership limit, we may:

•

consider the transfer to be null and void;

•

not reflect the transaction on our books;

•

institute legal action to stop the transaction;

•

not pay dividends or other distributions with respect to those shares;

•

not recognize any voting rights for those shares; and

•

consider the shares held in trust for the benefit of a person to whom such shares may be transferred.

Limitation due to our ability to issue preferred shares. Our Declaration of Trust authorizes our Board of Trustees to cause us to issue preferred shares, without limitation as to amount and without shareholder consent. Our Board of Trustees is able to establish the preferences and rights of any preferred shares issued and these shares could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our shareholders’ best interests.

Limitation imposed by the Maryland Business Combination Law. The Maryland General Corporation Law, as applicable to Maryland REITs, establishes special restrictions against “business combinations” between a Maryland REIT and “interested shareholders” or their affiliates unless an exemption is applicable. An interested shareholder includes a person, who beneficially owns, and an affiliate or associate of the trust who, at any time within the two-year period prior to the date in question, was the beneficial owner of, ten percent or more of the voting power of our then-outstanding voting shares. Among other things, Maryland law prohibits (for a period of five years) a merger and certain other transactions between a Maryland REIT and an interested shareholder unless the board of trustees had approved the transaction before the party became an interested shareholder. The five-year period runs from the most recent date on which the interested shareholder became an interested shareholder. Thereafter, any such business combination must be recommended by the board of trustees and approved by two super-majority shareholder votes unless, among other conditions, the common shareholders receive a minimum price for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for our shares or unless the board of trustees approved the transaction before the party in question became an interested shareholder. The business combination statute could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offers, even if the acquisition would be in our shareholders’ best interests.

Maryland Control Share Acquisition Act. Maryland law provides that “control shares” of a REIT acquired in a “control share acquisition” shall have no voting rights except to the extent approved by a vote of two-thirds of the vote eligible to be cast on the matter under the Maryland Control Share Acquisition Act. “Control Shares” means shares that, if aggregated with all other shares previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing trustees within one of the following ranges of voting power: one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions. If voting rights or control shares acquired in a control share acquisition are not approved at a shareholder’s meeting, then subject to certain conditions and limitations the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a shareholder’s meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other shareholders may exercise appraisal rights. Any control shares acquired in a control share acquisition which are not exempt under our Bylaws are subject to the Maryland Control Share Acquisition Act. Our Bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our shares. We cannot assure you that this provision will not be amended or eliminated at any time in the future.

Advance Notice Provisions for Shareholder Nominations and Proposals. 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.

Many factors can have an adverse effect on the market value of our securities.

A number of factors might adversely affect the price of our securities, many of which are beyond our control. These factors include:

•

increases in market interest rates, relative to the dividend yield on our shares. If market interest rates go up, prospective purchasers of our securities may require a higher yield. 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. Thus, higher market interest rates could cause the market price of our common shares to go down;

•

anticipated benefit of an investment in our securities as compared to investment in securities of companies in other industries (including benefits associated with tax treatment of dividends and distributions);

•

perception by market professionals of REITs generally and REITs comparable to us in particular;

•

level of institutional investor interest in our securities;

•

relatively low trading volumes in securities of REITs;

•

our results of operations and financial condition; and

•

investor confidence in the stock market generally.

The market value of our common shares is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash distributions. Consequently, our common shares may trade at prices that are higher or lower than our net asset value per common share. If our future earnings or cash distributions are less than expected, it is likely that the market price of our common shares will diminish.

Additional issuances of equity securities may be dilutive to shareholders.

The interests of our shareholders could be diluted if we issue additional equity securities to finance future developments or acquisitions or to repay indebtedness. Our Board of Trustees may authorize the issuance of additional equity securities without shareholder approval. Our ability to execute our business strategy depends upon our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including the issuance of common and preferred equity.

The issuance of preferred securities may adversely affect the rights of holders of our common shares.

Because our Board of Trustees has the power to establish the preferences and rights of each class or series of preferred shares, we may afford the holders in any series or class of preferred shares preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders of common shares. Our Board of Trustees also has the power to establish the preferences and rights of each class or series of units in Brandywine Operating Partnership, and may afford the holders in any series or class of preferred units preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders of common units.

The acquisition of new properties or the development of new properties which lack operating history with us may give rise to difficulties in predicting revenue potential.

We may continue to acquire additional properties and may seek to develop our existing land holdings strategically as warranted by market conditions. These acquisitions and developments could fail to perform in accordance with expectations. If we fail to accurately estimate occupancy levels, operating costs or costs of improvements to bring an acquired property or a development property up to the standards established for our intended market position, the performance of the property may be below expectations. Acquired properties may have characteristics or deficiencies affecting their valuation or revenue potential that we have not yet discovered. We cannot assure you that the performance of properties acquired or developed by us will increase or be maintained under our management.

Our performance is dependent upon the economic conditions of the markets in which our properties are located.

Our properties are located in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Texas, and California. Like other real estate markets, these commercial real estate markets have been impacted by the sluggish economic recovery from the recent recession, and any adverse changes in economic conditions in the future in any of these economies or real estate markets could negatively affect cash available for distribution. Our financial performance and ability to make distributions to our shareholders will be particularly sensitive to the economic conditions in these markets. The local economic climate, which may be adversely impacted by business layoffs or downsizing, industry slowdowns, changing demographics and other factors, and local real estate conditions, such as oversupply of or reduced demand for office, industrial and other competing commercial properties, may affect revenues and the value of properties, including properties to be acquired or developed. We cannot assure you that these local economies will grow in the future.

Item 1B.		Unresolved Staff Comments

None.

Item 2.		Properties

Property Acquisitions

On December 29, 2010, we acquired a 12-acre parcel of land in Gibbsboro, New Jersey through the foreclosure of a note receivable amounting to $2.8 million under which the said property was encumbered and payment of transaction related costs of $0.3 million. The parcel of land is held for future development.

On August 5, 2010, we acquired Three Logan Square in Philadelphia, together with related ground tenancy rights under a long-term ground lease, from BAT Partners, L.P, a third party unaffiliated with us. Three Logan Square contains approximately 1.0 million of net rentable square feet and is currently 67.2% leased. We acquired Three Logan Square for approximately $129.0 million funded through a combination of $51.2 million in cash and 7,111,112 Class F (2010) units. The Class F (2010) units do not accrue a dividend and are not entitled to income or loss allocations prior to August 5, 2011. We funded the cash portion of the acquisition price through an advance under the Credit Facility and with available corporate funds.

Development and Redevelopment Properties Placed in Service

We placed in service the following office properties during the year ended December 31, 2010:

Month Placed

# of

Rentable

in Service

Property/Portfolio Name

Location

Buildings

Square Feet

Aug-10

IRS Philadelphia Campus

Philadelphia, PA

1

862,692

Aug-10

Cira South Garage

Philadelphia, PA

1

553,421

Apr-10

Radnor Corporate Center I

Radnor, PA

1

201,980

Jan-10

300 Delaware Avenue

Wilmington, DE

1

298,071

Total Properties Placed in Service

4

1,916,164

As of December 31, 2010, two of our properties located in King of Prussia, Pennsylvania were undergoing demolition and the remaining land balances have been presented as land inventory in our consolidated balance sheets. We have determined that there was a change in the estimated useful lives of the buildings resulting from the ongoing demolition causing an acceleration of depreciation expense. During year ended December 31, 2010, we recognized the remaining net book value of the two buildings aggregating to $2.7 million as depreciation, with the land amounts of $1.1 million being reclassified to land inventory for potential future development. All related demolition costs are charged to earnings.

Property Sales

We sold the following office properties during the year ended December 31, 2010:

Month of										# of				Rentable Square				Occupancy %				Sales
Sale				Property/Portfolio Name		Location				Bldgs.				Feet/ Acres				at Date of Sale				Price
																						(in 000’s)
Dec-10				One and Two Greentree Centre, 8000 Lincoln Drive and Lake Center IV		Marlton, NJ					4				243,195				76.1	%		$	20,915
Nov-10				Spyglass Point		Austin, TX					1				58,576				100.0	%			13,472
Sep-10				630 Clark Avenue		King of Prussia, PA					1				50,000				100.0	%			3,610
Aug-10				479 Thomas Jones Way		Exton, PA					1				49,264				63.0	%			3,780
Jan-10				1957 Westmoreland Plaza		Richmond, VA					1				121,815				0.0	%			10,780
				Total Office Properties Sold							8				522,850							$	52,557

Properties

As of December 31, 2010, we owned 208 office properties, 20 industrial facilities and four mixed-use properties that contain an aggregate of approximately 25.6 million net rentable square feet. The properties are located in or near Philadelphia, Pennsylvania, Metropolitan Washington, D.C., Southern and Central New Jersey, Richmond, Virginia, Wilmington, Delaware, Austin, Texas, and Oakland, Concord, Carlsbad and Rancho Bernardo, California. As of December 31, 2010, the Properties were approximately 85.6% occupied by 1,368 tenants and had an average age of approximately 18.2 years. The office properties are primarily suburban office buildings containing an average of approximately 0.1 million net rentable square feet. The industrial and mixed-use properties accommodate a variety of tenant uses, including light manufacturing, assembly, distribution and warehousing. We carry comprehensive liability, fire, extended coverage and rental loss insurance covering all of the properties, with policy specifications and insured limits which we believe are adequate.

As of December 31, 2010, we were proceeding on one garage redevelopment with total projected costs of $14.8 million, of which $0.8 million remained to be funded. The garage redevelopment project is expected to be completed in or around the fourth quarter of 2011.

The following table sets forth information with respect to our core properties at December 31, 2010:

																											Average
																							Total Base Rent				Annualized
															Net				Percentage				for the Twelve				Rental Rate
											Year				Rentable				Leased as of				Months Ended				as of
											Built/				Square				December 31,				December 31,				December 31,
Property Name			Location				State				Renovated				Feet				2010 (a)				2010 (b) (000’s)				2010 (c)
PENNSYLVANIA SUBURBS SEGMENT
150 Radnor Chester Road			Radnor				PA					1983				340,262				99.2	%			9,575				29.41
201 King of Prussia Road			Radnor				PA					2001				251,434				100.0	%			6,045				28.97
555 Lancaster Avenue			Radnor				PA					1973				241,778				99.0	%			5,890				25.89
One Radnor Corporate Center			Radnor				PA					1998				201,980				90.8	%			2,054				1.89
401 Plymouth Road			Plymouth Meeting				PA					2001				201,883				79.5	%			5,087				33.36
101 West Elm Street			W. Conshohocken				PA					1999				175,009				95.1	%			3,546				20.61
Four Radnor Corporate Center			Radnor				PA					1995				164,723				90.7	%			3,507				25.60
Five Radnor Corporate Center			Radnor				PA					1998				164,655				100.0	%			4,636				30.45
751-761 Fifth Avenue			King Of Prussia				PA					1967				158,000				100.0	%			574				3.64
630 Allendale Road			King of Prussia				PA					2000				150,000				76.0	%			3,198				23.30
640 Freedom Business Center		(d)	King Of Prussia				PA					1991				132,000				87.8	%			2,209				24.23
52 Swedesford Square			East Whiteland Twp.				PA					1988				131,017				0.0	%			1,913				—
400 Berwyn Park			Berwyn				PA					1999				124,182				100.0	%			3,049				29.61
4000 Chemical Road			Plymouth Meeting				PA					2007				120,877				100.0	%			2,424				17.47
Three Radnor Corporate Center			Radnor				PA					1998				119,107				82.3	%			2,504				29.12
101 Lindenwood Drive			Malvern				PA					1988				118,121				63.5	%			1,186				19.14
300 Berwyn Park			Berwyn				PA					1989				106,038				87.8	%			1,385				12.91
442 Creamery Way		(f)	Exton				PA					1991				104,500				100.0	%			598				5.71
Two Radnor Corporate Center			Radnor				PA					1998				97,936				58.9	%			1,272				24.15
301 Lindenwood Drive			Malvern				PA					1984				97,813				87.3	%			1,692				21.07
1 West Elm Street			W. Conshohocken				PA					1999				97,737				100.0	%			2,176				27.15
555 Croton Road			King of Prussia				PA					1999				96,909				90.3	%			2,324				30.54
500 North Gulph Road			King Of Prussia			PA						1979				93,082				84.3	%			1,496				18.70
620 West Germantown Pike			Plymouth Meeting				PA					1990				90,183				86.6	%			1,454				24.35
610 West Germantown Pike			Plymouth Meeting				PA					1987				90,152				79.6	%			1,438				29.17
630 West Germantown Pike			Plymouth Meeting				PA					1988				89,925				97.1	%			2,040				27.91
600 West Germantown Pike			Plymouth Meeting				PA					1986				89,681				83.3	%			1,421				24.71
630 Freedom Business Center		(d)	King Of Prussia				PA					1989				86,683				76.8	%			1,232				21.43
1200 Swedesford Road			Berwyn				PA					1994				86,622				87.0	%			1,366				29.41
620 Freedom Business Center		(d)	King Of Prussia				PA					1986				86,570				89.4	%			1,766				20.53
595 East Swedesford Road			Wayne				PA					1998				81,890				100.0	%			1,750				23.66
1050 Westlakes Drive			Berwyn				PA					1984				80,000				100.0	%			1,984				25.50
One Progress Drive			Horsham				PA					1986				79,204				100.0	%			841				13.42
1060 First Avenue		(e)	King Of Prussia				PA					1987				77,718				100.0	%			1,378				21.41
741 First Avenue			King Of Prussia				PA					1966				77,184				100.0	%			193				—
1040 First Avenue		(e)	King Of Prussia				PA					1985				75,488				78.6	%			1,267				23.65
200 Berwyn Park			Berwyn				PA					1987				75,025				100.0	%			1,505				22.77
1020 First Avenue		(e)	King Of Prussia				PA					1984				74,556				100.0	%			1,608				21.00
1000 First Avenue		(e)	King Of Prussia				PA					1980				74,139				88.9	%			1,386				22.86
436 Creamery Way			Exton				PA					1991				72,300				100.0	%			731				14.43
130 Radnor Chester Road			Radnor				PA					1983				71,349				100.0	%			2,150				32.48

																											Average
																							Total Base Rent				Annualized
															Net				Percentage				for the Twelve				Rental Rate
											Year				Rentable				Leased as of				Months Ended				as of
											Built/				Square				December 31,				December 31,				December 31,
Property Name			Location				State				Renovated				Feet				2010 (a)				2010 (b) (000’s)				2010 (c)
PENNSYLVANIA SUBURBS SEGMENT
14 Campus Boulevard			Newtown Square				PA					1998				69,542				100.0	%			1,815				25.86
170 Radnor Chester Road			Radnor				PA					1983				68,143				100.0	%			1,670				26.85
500 Enterprise Road			Horsham				PA					1990				66,751				100.0	%			412				9.76
575 East Swedesford Road			Wayne				PA					1985				66,265				100.0	%			1,230				28.65
429 Creamery Way			Exton				PA					1996				63,420				83.9	%			569				14.47
610 Freedom Business Center		(d)	King Of Prussia				PA					1985				62,991				52.7	%			827				6.89
925 Harvest Drive			Blue Bell				PA					1990				62,957				93.3	%			913				19.08
980 Harvest Drive			Blue Bell				PA					1988				62,379				71.4	%			966				20.15
426 Lancaster Avenue			Devon				PA					1990				61,102				100.0	%			1,213				20.29
1180 Swedesford Road			Berwyn				PA					1987				60,371				100.0	%			1,880				33.65
1160 Swedesford Road			Berwyn				PA					1986				60,099				97.4	%			1,385				26.68
100 Berwyn Park			Berwyn				PA					1986				57,731				91.7	%			512				20.90
440 Creamery Way			Exton				PA					1991				57,218				100.0	%			813				16.38
640 Allendale Road		(f)	King of Prussia				PA					2000				56,034				100.0	%			323				8.86
565 East Swedesford Road			Wayne				PA					1984				55,456				88.5	%			911				19.85
650 Park Avenue			King Of Prussia				PA					1968				54,338				87.8	%			727				17.33
910 Harvest Drive			Blue Bell				PA					1990				52,611				100.0	%			1,040				20.71
2240/50 Butler Pike			Plymouth Meeting				PA					1984				52,229				100.0	%			1,014				21.94
920 Harvest Drive			Blue Bell				PA					1990				51,875				74.6	%			822				21.54
486 Thomas Jones Way			Exton				PA					1990				51,372				70.9	%			620				18.30
875 First Avenue			King Of Prussia				PA					1966				50,000				100.0	%			1,038				22.64
620 Allendale Road			King Of Prussia				PA					1961				50,000				67.0	%			536				16.05
15 Campus Boulevard			Newtown Square				PA					2002				49,621				100.0	%			1,063				25.77
17 Campus Boulevard			Newtown Square				PA					2001				48,565				100.0	%			841				19.07
11 Campus Boulevard			Newtown Square				PA					1998				47,699				100.0	%			1,256				25.90
456 Creamery Way			Exton				PA					1987				47,604				100.0	%			371				9.31
585 East Swedesford Road			Wayne				PA					1998				43,683				100.0	%			771				28.04
1100 Cassett Road			Berwyn				PA					1997				43,480				100.0	%			1,106				31.95
467 Creamery Way			Exton				PA					1988				42,000				100.0	%			603				19.08
1336 Enterprise Drive			West Goshen				PA					1989				39,330				0.0	%			518				—
600 Park Avenue			King Of Prussia				PA					1964				39,000				100.0	%			545				16.75
412 Creamery Way			Exton				PA					1999				38,098				86.0	%			671				26.54
18 Campus Boulevard			Newtown Square				PA					1990				37,374				100.0	%			790				23.90
457 Creamery Way			Exton				PA					1990				36,019				100.0	%			401				15.29
100 Arrandale Boulevard			Exton				PA					1997				34,931				100.0	%			456				17.75
300 Lindenwood Drive			Malvern				PA					1991				33,000				100.0	%			794				23.81
2260 Butler Pike			Plymouth Meeting				PA					1984				31,892				100.0	%			658				22.54
120 West Germantown Pike			Plymouth Meeting				PA					1984				30,574				100.0	%			505				21.10
468 Thomas Jones Way			Exton				PA					1990				28,934				100.0	%			550				20.00
1700 Paoli Pike			Malvern				PA					2000				28,000				0.0	%			—				—
140 West Germantown Pike			Plymouth Meeting				PA					1984				25,357				76.0	%			406				25.22
481 John Young Way			Exton				PA					1997				19,275				100.0	%			483				26.59
100 Lindenwood Drive			Malvern				PA					1985				18,400				100.0	%			363				21.51
200 Lindenwood Drive			Malvern				PA					1984				12,600				40.2	%			36				6.45
111 Arrandale Road			Exton				PA					1996				10,479				100.0	%			198				19.49
SUBTOTAL/WEIGHTED AVG — PENNSYLVANIA SUBURBS SEGMENT																7,026,511				89.3	%			128,471				21.34

																											Average
																							Total Base Rent				Annualized
															Net				Percentage				for the Twelve				Rental Rate
											Year				Rentable				Leased as of				Months Ended				as of
											Built/				Square				December 31,				December 31,				December 31,
Property Name			Location				State				Renovated				Feet				2010 (a)				2010 (b) (000’s)				2010 (c)
METROPOLITAN WASHINGTON D.C. SEGMENT
1676 International Drive			McLean				VA					1999				299,387				93.8	%			8,712				34.06
13820 Sunrise Valley Drive			Herndon				VA					2007				268,240				100.0	%			9,085				31.76
2340 Dulles Corner Boulevard			Herndon				VA					1987				264,405				100.0	%			8,024				31.19
2291 Wood Oak Drive			Herndon				VA					1999				230,389				98.8	%			5,326				30.89
7101 Wisconsin Avenue			Bethesda				MD					1975				223,054				96.8	%			6,864				32.60
1900 Gallows Road			Vienna				VA					1989				210,632				52.1	%			3,283				28.27
3130 Fairview Park Drive			Falls Church				VA					1999				180,645				79.7	%			5,014				33.66
3141 Fairview Park Drive			Falls Church				VA					1988				180,611				86.6	%			4,401				28.24
2411 Dulles Corner Park			Herndon				VA					1990				180,510				98.7	%			5,530				31.23
2355 Dulles Corner Boulevard			Herndon				VA					1988				179,176				83.6	%			4,873				33.43
1880 Campus Commons Drive			Reston				VA					1985				173,026				100.0	%			3,069				10.47
2121 Cooperative Way			Herndon				VA					2000				161,275				83.5	%			3,961				32.14
6600 Rockledge Drive		(d)	Bethesda				MD					1981				160,173				71.0	%			3,165				28.97
8260 Greensboro Drive			McLean				VA					1980				158,961				77.5	%			3,099				26.36
2251 Corporate Park Drive			Herndon				VA					2000				158,016				100.0	%			5,073				34.39
12015 Lee Jackson Memorial Highway			Fairfax				VA					1985				153,255				96.5	%			3,971				26.85
13880 Dulles Corner Lane			Herndon				VA					1997				151,747				100.0	%			4,678				36.45
8521 Leesburg Pike			Vienna				VA					1984				150,897				69.1	%			2,751				27.48
2273 Research Boulevard			Rockville				MD					1999				147,689				98.4	%			4,295				30.69
2275 Research Boulevard			Rockville				MD					1990				147,650				100.0	%			4,127				29.95
2201 Cooperative Way			Herndon				VA					1990				138,806				85.7	%			3,685				32.60
2277 Research Boulevard			Rockville				MD					1986				137,045				100.0	%			3,360				29.24
11781 Lee Jackson Memorial Highway			Fairfax				VA					1982				130,935				93.3	%			3,137				26.76
11720 Beltsville Drive			Beltsville				MD					1987				128,903				57.4	%			1,776				23.73
13825 Sunrise Valley Drive			Herndon				VA					1989				104,150				12.4	%			331				25.61
198 Van Buren Street			Herndon				VA					1996				98,934				100.0	%			2,886				32.24
196 Van Buren Street			Herndon				VA					1991				97,781				78.9	%			1,673				32.63
11700 Beltsville Drive			Beltsville				MD					1981				96,843				96.3	%			2,150				22.90
11710 Beltsville Drive			Beltsville				MD					1987				81,281				89.2	%			1,699				17.27
4401 Fair Lakes Court			Fairfax				VA					1988				55,972				95.6	%			1,438				28.43
11740 Beltsville Drive			Beltsville				MD					1987				6,783				100.0	%			140				27.60
SUBTOTAL/WEIGHTED AVG — METROPOLITAN WASHINGTON D.C. SEGMENT																4,857,171				87.7	%			121,576				29.58
PHILADELPHIA CBD
1717 Arch Street		(d)	Philadelphia				PA					1990				1,029,413				67.2	%			4,855				20.91
2970 Market Street			Philadelphia				PA					2010				862,692				100.0	%			6,658				31.03
2929 Arch Street		(d)	Philadelphia				PA					2005				729,897				100.0	%			24,406				35.41
100 North 18th Street		(e)	Philadelphia				PA					1988				706,288				93.7	%			20,102				32.82
130 North 18th Street			Philadelphia				PA					1989				595,041				100.0	%			12,800				28.95
2930 Chestnut Street		(d), (g)	Philadelphia				PA					2010				553,421				93.2	%			—				11.84
Philadelphia Marine Center		(d), (g)	Philadelphia				PA				Various					181,900				100.0	%			1,311				3.99
SUBTOTAL/WEIGHTED AVG — PHILADELPHIA CBD SEGMENT																4,658,652				91.0	%			70,132				26.15

																											Average
																							Total Base Rent				Annualized
															Net				Percentage				for the Twelve				Rental Rate
											Year				Rentable				Leased as of				Months Ended				as of
											Built/				Square				December 31,				December 31,				December 31,
Property Name			Location				State				Renovated				Feet				2010 (a)				2010 (b) (000’s)				2010 (c)
NEW JERSEY/DELAWARE SEGMENT
300 Delaware Avenue			Wilmington				DE					1989				298,071				74.7	%			2,576				16.81
920 North King Street			Wilmington				DE					1989				203,328				96.7	%			4,576				26.90
10000 Midlantic Drive			Mt. Laurel				NJ					1990				183,147				46.5	%			2,056				25.27
1009 Lenox Drive			Lawrenceville				NJ					1989				180,734				88.5	%			4,579				26.96
525 Lincoln Drive West			Marlton				NJ					1986				165,956				94.2	%			2,829				24.68
Main Street — Plaza 1000			Voorhees				NJ					1988				162,364				33.0	%			1,559				22.16
400 Commerce Drive			Newark				DE					1997				154,086				100.0	%			2,321				16.64
2000 Lenox Drive			Lawrenceville				NJ					2000				122,169				81.8	%			2,560				27.12
457 Haddonfield Road			Cherry Hill				NJ					1990				121,737				91.2	%			2,125				24.87
2000 Midlantic Drive			Mt. Laurel				NJ					1989				121,658				61.3	%			1,041				23.20
700 East Gate Drive			Mt. Laurel				NJ					1984				119,272				88.8	%			1,834				24.98
989 Lenox Drive			Lawrenceville				NJ					1984				112,055				67.8	%			1,806				26.77
993 Lenox Drive			Lawrenceville				NJ					1985				111,124				100.0	%			2,552				28.75
1000 Howard Boulevard			Mt. Laurel				NJ					1988				105,312				44.7	%			1,723				22.09
One Righter Parkway		(d)	Wilmington				DE					1989				104,761				82.3	%			1,965				22.82
1000 Atrium Way			Mt. Laurel				NJ					1989				99,668				76.4	%			1,430				22.58
997 Lenox Drive			Lawrenceville				NJ					1987				97,277				80.4	%			2,144				26.66
Two Righter Parkway		(d)	Wilmington				DE					1987				95,514				60.7	%			986				14.31
1120 Executive Boulevard			Mt. Laurel				NJ					1987				95,278				50.9	%			1,031				25.17
15000 Midlantic Drive			Mt. Laurel				NJ					1991				84,056				77.8	%			966				25.26
220 Lake Drive East			Cherry Hill				NJ					1988				78,509				77.2	%			954				24.67
1200 Lenox Drive			Lawrenceville				NJ					2007				76,419				92.5	%			1,327				29.30
200 Lake Drive East			Cherry Hill				NJ					1989				76,352				91.1	%			1,161				22.67
Three Greentree Centre			Marlton				NJ					1984				69,300				87.1	%			1,250				24.50
200 Commerce Drive			Newark				DE					1998				68,034				100.0	%			1,327				20.32
9000 Midlantic Drive			Mt. Laurel				NJ					1989				67,299				74.2	%			558				—
6 East Clementon Road			Gibbsboro				NJ					1980				66,236				28.6	%			707				19.72
100 Commerce Drive			Newark				DE					1989				62,787				81.4	%			846				19.02
701 East Gate Drive			Mt. Laurel				NJ					1986				61,794				66.1	%			761				23.24
210 Lake Drive East			Cherry Hill				NJ					1986				60,604				89.2	%			831				23.41
308 Harper Drive			Moorestown				NJ					1976				59,500				88.6	%			367				13.94
305 Fellowship Drive			Mt. Laurel				NJ					1980				56,824				83.5	%			873				21.10
309 Fellowship Drive			Mt. Laurel				NJ					1982				55,911				77.2	%			729				24.23
307 Fellowship Drive			Mt. Laurel				NJ					1981				54,485				75.5	%			549				17.38
303 Fellowship Drive			Mt. Laurel				NJ					1979				53,768				63.7	%			517				23.00
1000 Bishops Gate			Mt. Laurel				NJ					2005				53,281				95.3	%			990				24.41
1000 Lenox Drive			Lawrenceville				NJ					1982				52,264				100.0	%			1,329				30.34
100 Lenox Drive			Lawrenceville				NJ					1991				50,942				100.0	%			972				23.45
2 Foster Avenue		(f)	Gibbsboro				NJ					1974				50,761				94.6	%			220				4.62
4000 Midlantic Drive			Mt. Laurel				NJ					1998				46,945				100.0	%			602				21.39
Five Eves Drive			Marlton				NJ					1986				45,564				100.0	%			726				22.48
161 Gaither Drive			Mount Laurel				NJ					1987				44,739				100.0	%			643				23.82
Main Street — Piazza			Voorhees				NJ					1990				44,708				65.4	%			521				21.05
30 Lake Center Drive			Marlton				NJ					1986				40,287				54.0	%			377				20.60