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BRANDYWINE REALTY TRUST - Quarter Report: 2021 September (Form 10-Q)

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________________________________________________________
FORM 10-Q
_____________________________________________________________________________________________
(Mark One)
☒
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2021
or
☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
_____________________________________________________________________________________________
Brandywine Realty Trust
Brandywine Operating Partnership, L.P.
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________
Registrant’s telephone number, including area code (610) 325-5600
_____________________________________________________________________________________________
Maryland
(Brandywine Realty Trust)
001-9106
23-2413352
Delaware
(Brandywine Operating Partnership, L.P.)
000-24407
23-2862640
(State or Other Jurisdiction of Incorporation
or Organization)
(Commission file number)
(I.R.S. Employer Identification Number)
2929 Arch Street
Suite 1800
Philadelphia, PA 19104
(Address of principal executive offices) (Zip Code)
(610) 325-5600
(Registrant’s telephone number, including area code)
2929 Walnut Street
Suite 1700
Philadelphia, PA 19104
(Former address)
Securities registered pursuant to section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares of Beneficial InterestBDNNYSE
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 TrustYes
☒  No ☐
Brandywine Operating Partnership, L.P.Yes
☒  No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Brandywine Realty TrustYes
☒  No ☐
Brandywine Operating Partnership, L.P.Yes
☒  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Brandywine Realty Trust:
Large accelerated filer☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company☐Emerging growth company ☐
Brandywine Operating Partnership, L.P.:
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer
 ☒
Smaller reporting company ☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Brandywine Realty TrustYes   ☐
 No ☒
Brandywine Operating Partnership, L.P.Yes   ☐
 No ☒
A total of 171,126,257 Common Shares of Beneficial Interest, par value $0.01 per share of Brandywine Realty Trust, were outstanding as of October 25, 2021.

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EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2021 of Brandywine Realty Trust (the “Parent Company”) and Brandywine Operating Partnership L.P. (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, as used in this report, terms such as “we”, “us”, and “our” 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 September 30, 2021, owned a 99.5% interest in the Operating Partnership. The remaining 0.5% interest consists of common units of limited partnership interest issued by the Operating Partnership to third parties 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.
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.
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's operations on a consolidated basis and how management operates the Company.
The Company believes that combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into a single report will:
•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.
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 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 equity from time to time (and contributing the net proceeds of such issuances to the Operating Partnership) and guaranteeing the debt obligations of the Operating Partnership. The Operating Partnership holds substantially all the assets of the Company, including the Company's ownership interests in the real estate ventures described below. 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 incurrence of indebtedness (directly and through subsidiaries) and 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:
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•Consolidated Financial Statements; and
•Notes to the Parent Company’s and Operating Partnership’s Equity.
This report also includes separate Item 4. (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 incurs debt, reference to the Company is appropriate because the business is one enterprise and the Parent Company operates the business through the Operating Partnership.
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TABLE OF CONTENTS
Page
Filing Format
This combined Form 10-Q is being filed separately by Brandywine Realty Trust and Brandywine Operating Partnership, L.P.
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PART I - FINANCIAL INFORMATION
Item 1. — Financial Statements


BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share information)
September 30,
2021		December 31,
2020
ASSETS
Real estate investments:
Operating properties$3,437,074 $3,474,109 
Accumulated depreciation(957,793)(896,561)
Right of use asset - operating leases, net20,478 20,977 
Operating real estate investments, net2,499,759 2,598,525 
Construction-in-progress266,263 210,311 
Land held for development118,684 117,984 
Prepaid leasehold interests in land held for development, net27,762 39,185 
Total real estate investments, net2,912,468 2,966,005 
Assets held for sale, net562 7,349 
Cash and cash equivalents42,484 46,344 
Accounts receivable11,645 13,536 
Accrued rent receivable, net of allowance of $4,133 and $5,086 as of September 30, 2021 and December 31, 2020, respectively
165,564 155,372 
Investment in unconsolidated real estate ventures449,658 401,327 
Deferred costs, net81,632 84,856 
Intangible assets, net34,514 48,570 
Other assets131,230 176,747 
Total assets$3,829,757 $3,900,106 
LIABILITIES AND BENEFICIARIES' EQUITY
Unsecured term loan, net$249,477 $249,084 
Unsecured senior notes, net1,581,112 1,581,511 
Accounts payable and accrued expenses133,615 121,982 
Distributions payable32,763 32,706 
Deferred income, gains and rent21,861 21,396 
Intangible liabilities, net14,451 18,448 
Lease liability - operating leases22,911 22,758 
Other liabilities48,090 47,573 
Total liabilities$2,104,280 $2,095,458 
Commitments and contingencies (See Note 15)
Brandywine Realty Trust's Equity:
Common Shares of Brandywine Realty Trust's beneficial interest, $0.01 par value; shares authorized 400,000,000; 171,126,257 and 170,572,964 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively1,712 1,707 
Additional paid-in-capital3,145,209 3,138,152 
Deferred compensation payable in common shares18,491 17,516 
Common shares in grantor trust, 1,169,703 and 1,160,494 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively(18,491)(17,516)
Cumulative earnings1,117,804 1,110,083 
Accumulated other comprehensive loss(4,333)(7,561)
Cumulative distributions(2,545,979)(2,448,238)
Total Brandywine Realty Trust's equity1,714,413 1,794,143 
Noncontrolling interests11,064 10,505 
Total beneficiaries' equity$1,725,477 $1,804,648 
Total liabilities and beneficiaries' equity$3,829,757 $3,900,106 
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share information)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenue
Rents$112,159 $121,277 $336,878 $392,661 
Third party management fees, labor reimbursement and leasing6,500 4,324 19,778 13,339 
Other1,759 505 4,633 2,031 
Total revenue120,418 126,106 361,289 408,031 
Operating expenses
Property operating expenses30,304 31,567 88,503 102,320 
Real estate taxes13,421 14,923 42,784 48,525 
Third party management expenses3,327 2,509 9,866 7,546 
Depreciation and amortization48,175 43,533 131,303 145,314 
General and administrative expenses7,076 7,069 22,016 23,973 
Total operating expenses102,303 99,601 294,472 327,678 
Gain on sale of real estate
Net gain on disposition of real estate— 271,901 142 274,487 
Net gain on sale of undepreciated real estate910 — 2,903 201 
Total gain on sale of real estate910 271,901 3,045 274,688 
Operating income19,025 298,406 69,862 355,041 
Other income (expense):
Interest and investment income4,494 467 7,845 1,487 
Interest expense(15,190)(16,310)(46,973)(56,510)
Interest expense - amortization of deferred financing costs(709)(715)(2,127)(2,195)
Equity in loss of unconsolidated real estate ventures(6,634)(5,788)(20,798)(9,882)
Net gain on real estate venture transactions— 75 — 75 
Net income before income taxes986 276,135 7,809 288,016 
Income tax (provision) benefit(12)(2)(46)224 
Net income974 276,133 7,763 288,240 
Net income attributable to noncontrolling interests(7)(1,612)(42)(1,701)
Net income attributable to Brandywine Realty Trust967 274,521 7,721 286,539 
Nonforfeitable dividends allocated to unvested restricted shareholders(91)(93)(331)(317)
Net income attributable to Common Shareholders of Brandywine Realty Trust$876 $274,428 $7,390 $286,222 
Basic income per Common Share$0.01 $1.61 $0.04 $1.66 
Diluted income per Common Share$0.01 $1.60 $0.04 $1.66 
Basic weighted average shares outstanding170,907,018 170,573,028 170,794,585 172,380,410 
Diluted weighted average shares outstanding172,237,194 171,026,492 172,077,950 172,735,436 
 
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income$974 $276,133 $7,763 $288,240 
Comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments911 1,040 2,681 (6,979)
Amortization of interest rate contracts (1)188 188 564 564 
Total comprehensive income (loss)1,099 1,228 3,245 (6,415)
Comprehensive income2,073 277,361 11,008 281,825 
Comprehensive income attributable to noncontrolling interest(12)(1,619)(59)(1,665)
Comprehensive income attributable to Brandywine Realty Trust$2,061 $275,742 $10,949 $280,160 
(1)Amounts reclassified from comprehensive income to interest expense within the Consolidated Statements of Operations.
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF BENEFICIARIES’ EQUITY
(unaudited, in thousands, except number of shares)
Number of Common SharesNumber of Rabbi
Trust/Deferred
Compensation Shares		Common Shares of
Brandywine Realty
Trust's beneficial
interest		Additional Paid-in
Capital		Deferred Compensation
 Payable
in Common
 Shares		Common Shares in
 Grantor Trust		Cumulative EarningsAccumulated Other
Comprehensive Income (Loss)		Cumulative DistributionsNoncontrolling InterestsTotal
BALANCE, beginning of period170,572,964 1,160,494 $1,707 $3,138,152 $17,516 $(17,516)$1,110,083 $(7,561)$(2,448,238)$10,505 $1,804,648 
Net income6,921 43 6,964 
Other comprehensive income1,092 6 1,098 
Share-based compensation activity108,345 12,719 2,502 2,502 
Share Issuance from/(to) Deferred Compensation Plan(18,058)(61,436)(198)142 (142)(198)
Distributions declared ($0.19 per share)
(32,573)(187)(32,760)
BALANCE, March 31, 2021170,663,251 1,111,777 $1,707 $3,140,456 $17,658 $(17,658)$1,117,004 $(6,469)$(2,480,811)$10,367 $1,782,254 
Net loss(167)(8)(175)
Other comprehensive income1,042 6 1,048 
Issuance of partnership interest in consolidated real estate ventures2,289 2,289 
Redemption of LP Units(2,334)(2,334)
Share-based compensation activity237,240 63,566 2 688 690 
Share Issuance from/(to) Deferred Compensation Plan833 (833)— 
Reallocation of Noncontrolling interest(569)569 — 
Distributions declared ($0.19 per share)
(32,562)(157)(32,719)
BALANCE, June 30, 2021170,900,491 1,175,343 $1,709 $3,140,575 $18,491 $(18,491)$1,116,837 $(5,427)$(2,513,373)$10,732 $1,751,053 
Net income967 7 974 
Other comprehensive income1,094 5 1,099 
Issuance of Common Shares of Beneficial Interest226,695 3 3,049 3,052 
Issuance of partnership interest in consolidated real estate ventures476 476 
Share-based compensation activity(929)(5,640)1,585 1,585 
Distributions declared $0.19 per share)
(32,606)(156)(32,762)
BALANCE, September 30, 2021171,126,257 1,169,703 $1,712 $3,145,209 $18,491 $(18,491)$1,117,804 $(4,333)$(2,545,979)$11,064 $1,725,477 
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENT OF BENEFICIARIES’ EQUITY
(unaudited, in thousands, except number of shares)
Number of Common SharesNumber of Rabbi
Trust/Deferred
 Compensation Shares		Common Shares of
 Brandywine Realty
Trust's beneficial interest		Additional Paid-in
Capital		Deferred Compensation
 Payable in Common
 Shares		Common Shares in
 Grantor Trust		Cumulative EarningsAccumulated Other
Comprehensive Income (Loss)		Cumulative DistributionsNoncontrolling InterestsTotal
BALANCE, beginning of period176,480,095 1,105,542 $1,766 $3,192,158 $16,216 $(16,216)$804,556 $(2,370)$(2,318,233)$10,426 $1,688,303 
Net income8,022 65 8,087 
Other comprehensive loss(7,825)(44)(7,869)
Repurchase and retirement of Common Shares of Beneficial Interest(5,644,200)(57)(53,801)(53,858)
Share-based compensation activity142,468 50,967 1 2,030 2,031 
Share Issuance from/(to) Deferred Compensation Plan(12,376)(38,726)(193)796 (796)(193)
Distributions declared $0.19 per share)
(32,500)(187)(32,687)
BALANCE, March 31, 2020170,965,987 1,117,783 $1,710 $3,140,194 $17,012 $(17,012)$812,578 $(10,195)$(2,350,733)$10,260 $1,603,814 
Net income3,996 24 4,020 
Other comprehensive income225 1 226 
Repurchase and retirement of Common Shares of Beneficial Interest(604,283)(5)(6,136)(6,141)
Share-based compensation activity166,628 2 1,666 1,668 
Share Issuance from/(to) Deferred Compensation Plan44,827 42,906 (11)504 (504)(11)
Reallocation of Noncontrolling interest(123)123 — 
Distributions declared ($0.19 per share)
(32,540)(187)(32,727)
BALANCE, June 30, 2020170,573,159 1,160,689 $1,707 $3,135,590 $17,516 $(17,516)$816,574 $(9,970)$(2,383,273)$10,221 $1,570,849 
Net income274,521 1,612 276,133 
Other comprehensive income1,221 7 1,228 
Impact of deconsolidation of real estate venture(1,017)(1,017)
Distributions from consolidated real estate ventures(22)(22)
Share-based compensation activity1,263 1,263 
Share Issuance from/(to) Deferred Compensation Plan(195)(195)(2)(2)
Distributions declared $0.19 per share)
(32,463)(187)(32,650)
BALANCE, September 30, 2020170,572,964 1,160,494 $1,707 $3,136,851 $17,516 $(17,516)$1,091,095 $(8,749)$(2,415,736)$10,614 $1,815,782 
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands) 
Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net income$7,763 $288,240 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization131,303 145,314 
Amortization of deferred financing costs2,127 2,195 
Amortization of debt discount/(premium), net(1,463)(55)
Amortization of stock compensation costs5,732 5,544 
Straight-line rent income(10,641)(8,903)
Amortization of acquired above (below) market leases, net(3,929)(3,657)
Ground rent expense712 1,092 
Provision for doubtful accounts940 1,041 
Net gain on sale of interests in real estate(3,045)(274,688)
Loss from unconsolidated real estate ventures, net of distributions20,798 9,880 
Income tax provision (benefit)46 (224)
Changes in assets and liabilities:
Accounts receivable672 (6,263)
Other assets(8,562)(7,527)
Accounts payable and accrued expenses3,650 10,782 
Deferred income, gains and rent914 (8,856)
Other liabilities(6,298)8,549 
Net cash provided by operating activities140,719 162,464 
Cash flows from investing activities:
Acquisition of properties— (11,432)
Proceeds from the sale of properties10,303 122,055 
Proceeds from insurance1,250 — 
Proceeds from note receivable50,000 — 
Capital expenditures for tenant improvements(30,168)(55,262)
Capital expenditures for redevelopments(18,705)(18,664)
Capital expenditures for developments(26,694)(51,435)
Advances for the purchase of tenant assets, net of repayments279 1,265 
Investment in unconsolidated real estate ventures(27,210)(719)
Capital distributions from unconsolidated real estate ventures7,499 6,916 
Leasing costs paid(11,475)(16,747)
Net cash used in investing activities(44,921)(24,023)
Cash flows from financing activities:
Repayments of mortgage notes payable— (6,105)
Proceeds from credit facility borrowings116,000 170,500 
Repayments of credit facility borrowings(116,000)(170,500)
Exercise of stock options, net(63)47 
Shares used for employee taxes upon vesting of share awards(1,762)(1,346)
Partner contributions to consolidated real estate venture2,765 — 
Repurchase and retirement of common shares— (60,000)
Redemption of limited partnership units(2,334)— 
Distributions paid to shareholders(97,637)(98,651)
Distributions to noncontrolling interest(547)(561)
Net cash used in financing activities(99,578)(166,616)
Decrease in cash and cash equivalents and restricted cash(3,780)(28,175)
Cash and cash equivalents and restricted cash at beginning of period47,077 91,170 
Cash and cash equivalents and restricted cash at end of period$43,297 $62,995 
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period$46,344 $90,499 
Restricted cash, beginning of period733 671 
Cash and cash equivalents and restricted cash, beginning of period$47,077 $91,170 
Cash and cash equivalents, end of period$42,484 $62,256 
Restricted cash, end of period813 739 
Cash and cash equivalents and restricted cash, end of period$43,297 $62,995 
Supplemental disclosure:
Cash paid for interest, net of capitalized interest during the nine months ended September 30, 2021 and 2020 of $6,348 and $3,462, respectively
$45,786 $51,733 
Cash paid for income taxes23 719 
Supplemental disclosure of non-cash activity:
Dividends and distributions declared but not paid32,763 32,705 
Change in investment in real estate ventures as a result of dispositions32,761 — 
Change in operating real estate from deconsolidation of operating properties(30,073)269,268 
Change in investment in real estate ventures from deconsolidation of operating properties— (263,358)
Change in mortgage notes payable from deconsolidation of operating properties— (220,271)
Change in other assets as a result of deconsolidation of operating properties(2,688)— 
Change in capital expenditures financed through accounts payable at period end6,653 (8,244)
Change in capital expenditures financed through retention payable at period end(1,473)754 
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except unit and per unit information)
September 30,
2021		December 31,
2020
ASSETS
Real estate investments:
Operating properties$3,437,074 $3,474,109 
Accumulated depreciation(957,793)(896,561)
Right of use asset - operating leases, net20,478 20,977 
Operating real estate investments, net2,499,759 2,598,525 
Construction-in-progress266,263 210,311 
Land held for development118,684 117,984 
Prepaid leasehold interests in land held for development, net27,762 39,185 
Total real estate investments, net2,912,468 2,966,005 
Assets held for sale, net562 7,349 
Cash and cash equivalents42,484 46,344 
Accounts receivable11,645 13,536 
Accrued rent receivable, net of allowance of $4,133 and $5,086 as of September 30, 2021 and December 31, 2020, respectively
165,564 155,372 
Investment in unconsolidated real estate ventures449,658 401,327 
Deferred costs, net81,632 84,856 
Intangible assets, net34,514 48,570 
Other assets131,230 176,747 
Total assets$3,829,757 $3,900,106 
LIABILITIES AND PARTNERS' EQUITY
Unsecured term loan, net$249,477 $249,084 
Unsecured senior notes, net1,581,112 1,581,511 
Accounts payable and accrued expenses133,615 121,982 
Distributions payable32,763 32,706 
Deferred income, gains and rent21,861 21,396 
Intangible liabilities, net14,451 18,448 
Lease liability - operating leases22,911 22,758 
Other liabilities48,090 47,573 
Total liabilities$2,104,280 $2,095,458 
Commitments and contingencies (See Note 15)
Redeemable limited partnership units at redemption value; 823,983 and 981,634 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively11,170 11,566 
Brandywine Operating Partnership, L.P.'s equity:
General Partnership Capital; 171,126,257 and 170,572,964 units issued and outstanding as of September 30, 2021 and December 31, 2020, respectively1,718,929 1,800,945 
Accumulated other comprehensive loss(4,690)(7,935)
Total Brandywine Operating Partnership, L.P.'s equity1,714,239 1,793,010 
Noncontrolling interest - consolidated real estate ventures68 72 
Total partners' equity$1,714,307 $1,793,082 
Total liabilities and partners' equity$3,829,757 $3,900,106 
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except unit and per unit information)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenue
Rents$112,159 $121,277 $336,878 $392,661 
Third party management fees, labor reimbursement and leasing6,500 4,324 19,778 13,339 
Other1,759 505 4,633 2,031 
Total revenue120,418 126,106 361,289 408,031 
Operating expenses
Property operating expenses30,304 31,567 88,503 102,320 
Real estate taxes13,421 14,923 42,784 48,525 
Third party management expenses3,327 2,509 9,866 7,546 
Depreciation and amortization48,175 43,533 131,303 145,314 
General and administrative expenses7,076 7,069 22,016 23,973 
Total operating expenses102,303 99,601 294,472 327,678 
Gain on sale of real estate
Net gain on disposition of real estate— 271,901 142 274,487 
Net gain on sale of undepreciated real estate910 — 2,903 201 
Total gain on sale of real estate910 271,901 3,045 274,688 
Operating income19,025 298,406 69,862 355,041 
Other income (expense):
Interest and investment income4,494 467 7,845 1,487 
Interest expense(15,190)(16,310)(46,973)(56,510)
Interest expense - amortization of deferred financing costs(709)(715)(2,127)(2,195)
Equity in loss of unconsolidated real estate ventures(6,634)(5,788)(20,798)(9,882)
Net gain on real estate venture transactions— 75 — 75 
Net income before income taxes986 276,135 7,809 288,016 
Income tax (provision) benefit(12)(2)(46)224 
Net income974 276,133 7,763 288,240 
Net (income) loss attributable to noncontrolling interests - consolidated real estate ventures2 2 4 (20)
Net income attributable to Brandywine Operating Partnership976 276,135 7,767 288,220 
Nonforfeitable dividends allocated to unvested restricted unitholders(91)(93)(331)(317)
Net income attributable to Common Partnership Unitholders of Brandywine Operating Partnership, L.P.$885 $276,042 $7,436 $287,903 
Basic income per Common Partnership Unit$0.01 $1.61 $0.04 $1.66 
Diluted income per Common Partnership Unit$0.01 $1.60 $0.04 $1.66 
Basic weighted average common partnership units outstanding171,731,001 171,554,662 171,710,387 173,362,044 
Diluted weighted average common partnership units outstanding173,061,177 172,008,126 172,993,752 173,717,070 
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income$974 $276,133 $7,763 $288,240 
Comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments911 1,040 2,681 (6,979)
Amortization of interest rate contracts (1)188 188 564 564 
Total comprehensive income (loss)1,099 1,228 3,245 (6,415)
Comprehensive income2,073 277,361 11,008 281,825 
Comprehensive (income) loss attributable to noncontrolling interest - consolidated real estate ventures2 2 4 (20)
Comprehensive income attributable to Brandywine Operating Partnership$2,075 $277,363 $11,012 $281,805 
(1)Amounts reclassified from comprehensive income to interest expense within the Consolidated Statements of Operations.
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
(unaudited, in thousands, except number of units)
General Partner Capital
UnitsAmountAccumulated Other Comprehensive Income (Loss)Noncontrolling Interest - Consolidated Real Estate VenturesTotal Partners' Equity
BALANCE, beginning of period170,572,964 $1,800,945 $(7,935)$72 $1,793,082 
Net income6,965 (1)6,964 
Other comprehensive income1,098 1,098 
Deferred compensation obligation(18,058)(198)(198)
Share-based compensation activity108,345 2,502 2,502 
Adjustment of redeemable partnership units to liquidation value at period end(1,294)(1,294)
Distributions declared to general partnership unitholders ($0.19 per unit)
(32,573)(32,573)
BALANCE, March 31, 2021170,663,251 $1,776,347 $(6,837)$71 $1,769,581 
Net loss(174)(1)(175)
Other comprehensive income1,048 1,048 
Repurchase and retirement of LP units(2,334)(2,334)
Issuance of partnership interest in consolidated real estate ventures2,289 2,289 
Share-based compensation activity237,240 690 690 
Adjustment of redeemable partnership units to liquidation value at period end1,066 1,066 
Distributions declared to general partnership unitholders ($0.19 per unit)
(32,562)(32,562)
BALANCE, June 30, 2021170,900,491 $1,745,322 $(5,789)$70 $1,739,603 
Net income976 (2)974 
Other comprehensive income1,099 1,099 
Issuance of LP Units226,695 3,052 3,052 
Issuance of partnership interest in consolidated real estate ventures476476 
Share-based compensation activity(929)1,585 1,585 
Adjustment of redeemable partnership units to liquidation value at period end124 124 
Distributions declared to general partnership unitholders ($0.19 per unit)
(32,606)(32,606)
BALANCE, September 30, 2021171,126,257 $1,718,929 $(4,690)$68 $1,714,307 
The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENT OF PARTNERS’ EQUITY
(unaudited, in thousands, except number of units)
General Partner Capital
UnitsAmountAccumulated Other Comprehensive IncomeNoncontrolling Interest - Consolidated Real Estate VenturesTotal Partners' Equity
BALANCE, beginning of period176,480,095 $1,674,539 $(2,715)$1,091 $1,672,915 
Net income8,075 12 8,087 
Other comprehensive loss(7,869)(7,869)
Deferred compensation obligation(12,376)(193)(193)
Repurchase and retirement of LP units(5,644,200)(53,858)(53,858)
Share-based compensation activity142,468 2,031 2,031 
Adjustment of redeemable partnership units to liquidation value at period end5,220 5,220 
Distributions declared to general partnership unitholders ($0.19 per unit)
(32,500)(32,500)
BALANCE, March 31, 2020170,965,987 $1,603,314 $(10,584)$1,103 $1,593,833 
Net income4,010 10 4,020 
Other comprehensive income226 226 
Deferred compensation obligation44,827 (11)(11)
Repurchase and retirement of LP units(604,283)(6,141)(6,141)
Share-based compensation activity166,628 1,668 1,668 
Adjustment of redeemable partnership units to liquidation value at period end(743)(743)
Distributions declared to general partnership unitholders ($0.19 per unit)
(32,540)(32,540)
BALANCE, June 30, 2020170,573,159 $1,569,557 $(10,358)$1,113 $1,560,312 
Net income276,135 (2)276,133 
Other comprehensive income1,228 1,228 
Deferred compensation obligation(195)(2)(2)
Distributions from consolidated real estate ventures(22)(22)
Share-based compensation activity1,263 1,263 
Impact of deconsolidation of real estate venture(1,017)(1,017)
Adjustment of redeemable partnership units to liquidation value at period end400 400 
Distributions declared to general partnership unitholders ($0.19 per unit)
(32,463)(32,463)
BALANCE, September 30, 2020170,572,964 $1,814,890 $(9,130)$72 $1,805,832 


The accompanying notes are an integral part of these consolidated financial statements.
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BRANDYWINE OPERATING PARTNERSHIP L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands) 
Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net income$7,763 $288,240 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization131,303 145,314 
Amortization of deferred financing costs2,127 2,195 
Amortization of debt discount/(premium), net(1,463)(55)
Amortization of stock compensation costs5,732 5,544 
Straight-line rent income(10,641)(8,903)
Amortization of acquired above (below) market leases, net(3,929)(3,657)
Ground rent expense712 1,092 
Provision for doubtful accounts940 1,041 
Net gain on sale of interests in real estate(3,045)(274,688)
Loss from unconsolidated real estate ventures, net of distributions20,798 9,880 
Income tax provision (benefit)46 (224)
Changes in assets and liabilities:
Accounts receivable672 (6,263)
Other assets(8,562)(7,527)
Accounts payable and accrued expenses3,650 10,782 
Deferred income, gains and rent914 (8,856)
Other liabilities(6,298)8,549 
Net cash provided by operating activities140,719 162,464 
Cash flows from investing activities:
Acquisition of properties— (11,432)
Proceeds from the sale of properties10,303 122,055 
Proceeds from insurance1,250 — 
Proceeds from note receivable50,000 — 
Capital expenditures for tenant improvements(30,168)(55,262)
Capital expenditures for redevelopments(18,705)(18,664)
Capital expenditures for developments(26,694)(51,435)
Advances for the purchase of tenant assets, net of repayments279 1,265 
Investment in unconsolidated real estate ventures(27,210)(719)
Capital distributions from unconsolidated real estate ventures7,499 6,916 
Leasing costs paid(11,475)(16,747)
Net cash used in investing activities(44,921)(24,023)
Cash flows from financing activities:
Repayments of mortgage notes payable— (6,105)
Proceeds from credit facility borrowings116,000 170,500 
Repayments of credit facility borrowings(116,000)(170,500)
Exercise of stock options, net(63)47 
Shares used for employee taxes upon vesting of share awards(1,762)(1,346)
Partner contributions to consolidated real estate venture2,765 — 
Repurchase and retirement of common shares— (60,000)
Redemption of limited partnership units(2,334)— 
Distributions paid to preferred and common partnership units(98,184)(99,212)
Net cash used in financing activities(99,578)(166,616)
Decrease in cash and cash equivalents and restricted cash(3,780)(28,175)
Cash and cash equivalents and restricted cash at beginning of period47,077 91,170 
Cash and cash equivalents and restricted cash at end of period$43,297 $62,995 
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period$46,344 $90,499 
Restricted cash, beginning of period733 671 
Cash and cash equivalents and restricted cash, beginning of period$47,077 $91,170 
Cash and cash equivalents, end of period$42,484 $62,256 
Restricted cash, end of period813 739 
Cash and cash equivalents and restricted cash, end of period$43,297 $62,995 
Supplemental disclosure:
Cash paid for interest, net of capitalized interest during the nine months ended September 30, 2021 and 2020 of $6,348 and $3,462, respectively
$45,786 $51,733 
Cash paid for income taxes23 719 
Supplemental disclosure of non-cash activity:
Dividends and distributions declared but not paid32,763 32,705 
Change in investment in real estate ventures as a result of dispositions32,761 — 
Change in operating real estate from deconsolidation of operating properties(30,073)269,268 
Change in investment in real estate ventures from deconsolidation of operating properties— (263,358)
Change in mortgage notes payable from deconsolidation of operating properties— (220,271)
Change in other assets as a result of deconsolidation of operating properties(2,688)— 
Change in capital expenditures financed through accounts payable at period end6,653 (8,244)
Change in capital expenditures financed through retention payable at period end(1,473)754 
The accompanying notes are an integral part of these consolidated financial statements.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION OF THE PARENT COMPANY AND THE OPERATING PARTNERSHIP
Brandywine Realty Trust (the "Parent Company") is a self-administered and self-managed real estate investment trust (“REIT”) engaged in the acquisition, development, redevelopment, ownership, management, and operation of a portfolio of office and mixed-use properties. The Parent Company owns its assets and conducts its operations through Brandywine Operating Partnership, L.P. (the "Operating Partnership") and subsidiaries of the Operating Partnership. The Parent Company is the sole general partner of the Operating Partnership and, as of September 30, 2021, owned a 99.5% interest in the Operating Partnership. The Parent Company’s common shares of beneficial interest are publicly traded on the New York Stock Exchange under the ticker symbol “BDN”. The Parent Company, the Operating Partnership, and their consolidated subsidiaries are collectively referred to as the "Company".
As of September 30, 2021, the Company owned 81 properties that contained an aggregate of approximately 13.7 million net rentable square feet (collectively, the “Properties”). The Company’s core portfolio of operating properties (the “Core Properties”) excludes development properties, redevelopment properties, and properties held for sale. The Properties were comprised of the following as of September 30, 2021:
Number of PropertiesRentable Square Feet
Office properties71 12,006,744 
Mixed-use properties5 942,334 
Core Properties76 12,949,078 
Development property1 205,803 
Redevelopment properties4 496,769 
The Properties81 13,651,650 
In addition to the Properties, as of September 30, 2021, the Company owned 176.1 acres of land held for development, of which 10.0 acres were held for sale. The Company also held a leasehold interest in one land parcel totaling 0.8 acres, acquired through a prepaid 99-year ground lease, and held options to purchase approximately 55.5 additional acres of undeveloped land.  As of September 30, 2021, the total potential development that this inventory of land could support under current zoning and entitlements, including the parcels under option, amounted to an estimated 13.4 million square feet of which 0.1 million square feet relates to 10.0 acres held for sale.
As of September 30, 2021, the Company also owned economic interests in ten unconsolidated real estate ventures (see Note 4, ''Investment in Unconsolidated Real Estate Ventures” for further information). The Properties and the properties owned by the unconsolidated real estate ventures are primarily located in or near Philadelphia, Pennsylvania; Austin, Texas; Metropolitan Washington, D.C.; Southern New Jersey; and Wilmington, Delaware.
The Company conducts its third-party real estate management services business primarily through wholly-owned management company subsidiaries. As of September 30, 2021, the management company subsidiaries were managing properties containing an aggregate of approximately 24.4 million net rentable square feet, of which approximately 13.7 million net rentable square feet related to Properties owned by the Company and approximately 10.7 million net rentable square feet related to properties owned by third parties and unconsolidated real estate ventures.
Unless otherwise indicated, all references in this Form 10-Q to square feet represent net rentable area.
2. BASIS OF PRESENTATION
Basis of Presentation
The consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments consist solely of normal recurring matters, and result in a fair statement of the financial position of the Company as of September 30, 2021, the results of its operations for the three and nine months ended September 30, 2021 and 2020 and its cash flows for the nine months ended September 30, 2021 and 2020. The results of operations for such interim periods are not necessarily indicative of the results for a full year. These consolidated financial statements should be read in conjunction with the Parent Company’s and the Operating Partnership’s consolidated financial statements and footnotes included in their combined Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 24, 2021.
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The consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements as of that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
The Company's Annual Report on Form 10-K for the year ended December 31, 2020 contains a discussion of its significant accounting policies under Note 2, "Summary of Significant Accounting Policies". There have been no significant changes in the Company's significant accounting policies since December 31, 2020.
Change in Depreciable Lives of Real Estate Investments
In accordance with its policy, the Company reviews the estimated useful lives of its real estate investments on an ongoing basis. Pursuant to our Broadmoor master development plans, the estimated useful lives of seven properties in Austin, Texas were modified to reflect the estimated periods during which these assets will remain in service. The estimated useful lives of the properties that were approximately 35 years were decreased to approximately 12 years. The effect of this change in estimate was a $3.3 million and $6.5 million increase in depreciation expense during the three and nine months ended September 30, 2021, respectively.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and is effective between March 12, 2020 and December 31, 2022. The guidance may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply elections as applicable as additional changes in the market occur.
3. REAL ESTATE INVESTMENTS
As of September 30, 2021 and December 31, 2020, the gross carrying value of the operating properties was as follows (in thousands):
September 30, 2021December 31, 2020
Land$391,261 $407,514 
Building and improvements2,640,229 2,665,232 
Tenant improvements405,584 401,363 
Total$3,437,074 $3,474,109 
Dispositions
The following table summarizes the property dispositions during the nine months ended September 30, 2021 (dollars in thousands):
Property/Portfolio NameDisposition DateLocationProperty TypeRentable Square Feet/AcresSales PriceGain/(Loss) on Sale (a)
2100-2200 Lenox DriveJuly 6, 2021Lawrenceville, NJLand35.2 acres$8,900 $842 
1100 Lenox DriveSeptember 8, 2021Lawrenceville, NJLand5.0 acres$2,575 $68 
(a)Gain/(Loss) on Sale is net of closing and other transaction related costs.
In addition, on February 2, 2021, the Company contributed its investment in a 99-year prepaid leasehold interest in a one-acre land parcel held for development at 3025 JFK Boulevard in Philadelphia, Pennsylvania to a newly formed joint venture with an unaffiliated third party. The project is part of the Schuylkill Yards master development. The transaction valued the Company's investment in the project at $34.8 million and resulted in deconsolidation of the property and conversion of Brandywine Opportunity Fund, L.P. to a real estate venture ("3025 JFK Venture"). The Company recorded its investment at fair value and recognized a gain of $2.0 million in "Net gain on sale of undepreciated real estate" on the consolidated statements of operations. See Note 4, "Investment in Unconsolidated Real Estate Ventures," for further information.
Held for Sale
As of September 30, 2021, the Company determined that the sale of two adjacent parcels of land within the Other segment totaling 10.0 acres was probable and classified these properties as held for sale. As such, $0.6 million was classified as “Assets held for sale, net” on the consolidated balance sheets.
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4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
As of September 30, 2021, the Company held ownership interests in ten unconsolidated real estate ventures for a net aggregate investment balance of $427.4 million, which includes a negative investment balance in one unconsolidated real estate venture of $22.2 million, reflected within "Other liabilities" on the consolidated balance sheets. As of September 30, 2021, five of the real estate ventures owned properties that contained an aggregate of approximately 8.4 million net rentable square feet of office space; two real estate ventures owned 1.4 acres of land held for development; one real estate venture owned 1.0 acres of land in active development; one real estate venture owned a mixed used tower comprised of 250 apartment units and 0.2 million net rentable square feet of office/retail space; and one real estate venture owned a residential tower that contained 321 apartment units.
The Company accounts for its interests in the unconsolidated real estate ventures, which range from 15% to 70%, using the equity method. Certain of the unconsolidated real estate ventures are subject to specified priority allocations of distributable cash.
The Company earned management fees from the unconsolidated real estate ventures of $2.1 million and $1.3 million for the three months ended September 30, 2021 and 2020, respectively, and $6.2 million and $3.2 million for the nine months ended September 30, 2021 and 2020, respectively.
The Company earned leasing commissions from the unconsolidated real estate ventures of $0.7 million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively, and $2.6 million and $0.9 million for the nine months ended September 30, 2021 and 2020, respectively.
The Company had outstanding accounts receivable balances from the unconsolidated real estate ventures of $2.0 million and $1.2 million as of September 30, 2021 and December 31, 2020, respectively.
The amounts reflected in the following tables (except for the Company’s share of equity in income) are based on the financial information of the individual unconsolidated real estate ventures.
The following is a summary of the financial position of the unconsolidated real estate ventures in which the Company held interests as of September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021December 31, 2020
Net property$1,573,569 $1,520,804 
Other assets443,610 488,805 
Other liabilities328,446 333,049 
Debt, net954,213 956,688 
Equity (a)734,520 719,872 
(a)This amount does not include the effect of the basis difference between the Company's historical cost basis and the basis recorded at the real estate venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials occur from the impairment of investments, purchases of third party interests in existing real estate ventures and upon the transfer of assets that were previously owned by the Company into a real estate venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the real estate venture level.
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The following is a summary of results of operations of the unconsolidated real estate ventures in which the Company held interests during the three and nine month periods ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenue$53,991 $43,109 $160,576 $105,554 
Operating expenses(29,650)(23,870)(87,266)(59,838)
Interest expense, net(8,024)(6,175)(23,414)(16,320)
Depreciation and amortization(23,038)(22,345)(73,431)(47,493)
Provision for impairment(1,125)— (1,125)— 
Net loss$(7,846)$(9,281)$(24,660)$(18,097)
Ownership interest %VariousVariousVariousVarious
Company's share of net loss$(6,572)$(5,812)$(20,394)$(9,892)
Basis adjustments and other(62)24 (404)10 
Equity in loss of unconsolidated real estate ventures$(6,634)$(5,788)$(20,798)$(9,882)
Brandywine - AI Venture
During the three months ended September 30, 2021, Brandywine - AI Venture, in which the Company owns a 50% interest, recorded a $1.1 million held for sale impairment charge related to 3141 Fairview Park Drive. The Company’s share of the impairment charge was $0.6 million, which is reflected in “Equity in loss of Real Estate Ventures” in the consolidated statements of operations for the three months ended September 30, 2021. The impairment was measured based on an executed sale agreement with a third-party. The Company determined that its investment in the real estate venture is not impaired as the Company's share of the distributable cash is in excess of the Company's basis in the real estate venture.
3025 JFK Venture
On February 2, 2021, the Company contributed its investment in a 99-year prepaid leasehold interest in a one-acre land parcel held for development at 3025 JFK Boulevard in Philadelphia, Pennsylvania to the 3025 JFK Venture. The Company's initial investment in this real estate venture at February 2, 2021 was $34.8 million. The real estate venture was formed to develop a 570,000 square foot mixed-use building at property under the long-term ground lease. The estimated project cost is approximately $287.3 million, and the joint venture partner has agreed, subject to customary funding conditions, to fund up to approximately $45.2 million of the project costs in exchange for a 45% preferred equity interest in the venture and the Company will retain a 55% preferred equity interest. In addition to its $34.8 million credit for contribution of the leasehold interest at 3025 JFK Venture, the Company has funded $20.5 million of project costs as of September 30, 2021. On July 23, 2021, the 3025 JFK Venture closed on a $186.7 million construction loan, which will bear interest at 3.50% plus LIBOR (subject to a LIBOR floor of 0.25%) per annum and matures in July 2025. The Company has determined that the 3025 JFK Venture is a variable interest entity ("VIE"). As a result, the Company used the VIE model under the accounting standard for consolidation in order to determine whether to consolidate the 3025 JFK Venture. Based upon each member’s shared power over the activities of 3025 JFK Venture under the operating and related agreements, and the Company’s lack of control over the development and construction phases of the project, 3025 JFK Venture is accounted for under the equity method of accounting.

5. DEBT AND PREFERRED EQUITY INVESTMENTS
Austin Preferred Equity Investment
On December 31, 2020, the Company invested $50.0 million in exchange for a preferred equity interest in a single-purpose entity that owned two stabilized office buildings located in Austin, Texas. The Company accounted for this mandatorily redeemable investment as a note receivable, which was included within “Other assets” on the consolidated balance sheets. The preferred equity interest accrued a 9.0% annual return, compounded and paid monthly. The investment was required to be redeemed no later than December 31, 2023 (subject to a one-year extension option). On September 3, 2021, the $50.0 million investment was redeemed prior to maturity. As a result, the Company recognized an incremental $2.8 million of income on early redemption related to its accelerated minimum return and exit fees paid in cash on the redemption date during the three months ended September 30, 2021, which is included in "Interest and investment income" on the consolidated statements of operations.
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1919 Venture Note Receivable
During 2018, each of the Company and the other equity partner in 1919 Venture, an unconsolidated real estate venture, provided a $44.4 million mortgage loan to 1919 Venture and, as a result, the Company recorded a $44.4 million related-party note receivable from 1919 Venture. The loan bears interest at a fixed 4.0% per annum interest rate with a scheduled maturity on June 25, 2023. 1919 Venture used the proceeds from the loans to repay its then outstanding $88.8 million construction loan. As of September 30, 2021, the debt investment was performing in accordance with its terms and remains on accrual status.
6. LEASES
Lessor Accounting
The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the three and nine months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
Lease Revenue2021202020212020
Fixed contractual payments$87,498 $95,751 $259,995 $302,146 
Variable lease payments21,265 22,716 67,473 80,824 
Total$108,763 $118,467 $327,468 $382,970 

7. INTANGIBLE ASSETS AND LIABILITIES
As of September 30, 2021 and December 31, 2020, the Company’s intangible assets/liabilities were comprised of the following (in thousands):
September 30, 2021
Total CostAccumulated AmortizationIntangible Assets, net
Intangible assets, net:
In-place lease value$80,630 $(46,386)$34,244 
Tenant relationship value167 (95)72 
Above market leases acquired486 (288)198 
Total intangible assets, net$81,283 $(46,769)$34,514 
Total CostAccumulated AmortizationIntangible Liabilities, net
Intangible liabilities, net:
Below market leases acquired$28,881 $(14,430)$14,451 
December 31, 2020
Total CostAccumulated AmortizationIntangible Assets, net
Intangible assets, net:
In-place lease value$91,552 $(43,400)$48,152 
Tenant relationship value2,091 (1,938)153 
Above market leases acquired530 (265)265 
Total intangible assets, net$94,173 $(45,603)$48,570 
Total CostAccumulated AmortizationIntangible Liabilities, net
Intangible liabilities, net:
Below market leases acquired$31,263 $(12,815)$18,448 
As of September 30, 2021, the Company’s annual amortization for its intangible assets/liabilities, assuming no prospective early lease terminations, was as follows (dollars in thousands):
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AssetsLiabilities
2021 (three months remaining)$3,711 $1,129 
20229,807 2,645 
20237,218 1,609 
20244,993 1,392 
20253,805 1,115 
Thereafter4,980 6,561 
Total$34,514 $14,451 

8. DEBT OBLIGATIONS
The following table sets forth information regarding the Company’s consolidated debt obligations outstanding as of September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021December 31, 2020Effective
Interest Rate		Maturity
Date
UNSECURED DEBT
$600 million Unsecured Credit Facility
$— $— 
LIBOR + 1.10%
July 2022(a)
Seven-Year Term Loan - Swapped to fixed
250,000 250,000 2.87%October 2022
$350.0M 3.95% Guaranteed Notes due 2023
350,000 350,000 3.87%February 2023
$350.0M 4.10% Guaranteed Notes due 2024
350,000 350,000 3.78%October 2024
$450.0M 3.95% Guaranteed Notes due 2027
450,000 450,000 4.03%November 2027
$350.0M 4.55% Guaranteed Notes due 2029
350,000 350,000 4.30%October 2029
Indenture IA (Preferred Trust I)27,062 27,062 
LIBOR + 1.25%
March 2035
Indenture IB (Preferred Trust I)25,774 25,774 
LIBOR + 1.25%
April 2035
Indenture II (Preferred Trust II)25,774 25,774 
LIBOR + 1.25%
July 2035
Principal balance outstanding1,828,610 1,828,610 
Plus: original issue premium (discount), net8,675 10,137 
Less: deferred financing costs(6,696)(8,152)
Total unsecured indebtedness$1,830,589 $1,830,595 
(a)The Company has the ability to extend the term of the Unsecured Credit Facility until July 2023 through two successive six-month extension options.
The Company utilizes borrowings under its unsecured revolving credit facility (the “Unsecured Credit Facility”) for general business purposes, including to fund costs of acquisitions, developments and redevelopments of properties, fund share repurchases and repay other debt. The Unsecured Credit Facility provides for borrowings of up to $600.0 million and the per annum variable interest rate on borrowings is LIBOR plus 1.10%. The interest rate and facility fee are subject to adjustment upon a change in the Company’s unsecured debt ratings. During the nine months ended September 30, 2021, the weighted-average interest rate on Unsecured Credit Facility borrowings was 1.21% resulting in $0.3 million of interest expense.
The Parent Company unconditionally guarantees the unsecured debt obligations of the Operating Partnership (or is a co-borrower with the Operating Partnership) but does not by itself incur unsecured indebtedness. The Parent Company has no material assets other than its investment in the Operating Partnership.
The Company was in compliance with all financial covenants as of September 30, 2021. Certain of the covenants restrict the Company’s ability to obtain alternative sources of capital.
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As of September 30, 2021, the aggregate scheduled principal payments on the Company's debt obligations were as follows (in thousands):
2021 (three months remaining)$— 
2022250,000 
2023350,000 
2024350,000 
2025— 
Thereafter878,610 
Total principal payments 1,828,610 
Net unamortized premiums/(discounts)8,675 
Net deferred financing costs(6,696)
Outstanding indebtedness $1,830,589 
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
•Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access;
•Level 2 inputs are inputs, other than quoted prices included in Level 1, which are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals; and
•Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity or information.
The Company determined the fair values disclosed below using available market information and discounted cash flow analyses as of September 30, 2021 and December 31, 2020, respectively. The discount rate used in calculating fair value is the sum of the current risk free rate and the risk premium on the date of measurement of the instruments or obligations. Considerable judgment is necessary to interpret market data and to develop the related estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize upon disposition. The use of different estimates and valuation methodologies may have a material effect on the fair value amounts shown. The Company believes that the carrying amounts reflected in the consolidated balance sheets at September 30, 2021 and December 31, 2020 approximate the fair values for cash and cash equivalents, accounts receivable, other assets and liabilities, accounts payable and accrued expenses because they are short-term in duration. The following are financial instruments for which the Company’s estimates of fair value differ from the carrying amounts (in thousands):
September 30, 2021December 31, 2020
Carrying Amount (a)Fair ValueCarrying Amount (a)Fair Value
Unsecured notes payable$1,502,502 $1,623,840 $1,502,901 $1,607,310 
Variable rate debt$328,087 $309,523 $327,694 $308,838 
Notes receivable (b)$44,430 $46,266 $94,430 $97,372 
(a)Net of deferred financing costs of $6.2 million and $7.2 million for unsecured notes payable and $0.5 million and $0.9 million for variable rate debt as of September 30, 2021 and December 31, 2020.
(b)For further detail, refer to Note 5, ''Debt and Preferred Equity Investments."
The Company used quoted market prices as of September 30, 2021 and December 31, 2020 to value the unsecured notes payable and, as such, categorized them as Level 2.
The inputs utilized to determine the fair value of the Company’s variable rate debt are categorized as Level 3. The fair value of the variable rate debt was determined using a discounted cash flow model that considered borrowing rates available to the Company for loans with similar terms and characteristics.
The inputs utilized to determine fair value of the Company's notes receivable are unobservable and, as such, were categorized as Level 3. Fair value was determined using a discounted cash flow model that considered the contractual interest and principal payments discounted at a blended interest rate of the notes receivable.
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For the Company’s level 3 financial instruments for which fair value is disclosed, an increase in the discount rate used to determine fair value would result in a decrease to the fair value. Conversely, a decrease in the discount rate would result in an increase to the fair value.
Disclosure about the fair value of financial instruments is based upon pertinent information available to management as of September 30, 2021 and December 31, 2020. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts were not comprehensively revalued for purposes of these financial statements since September 30, 2021. Current estimates of fair value may differ from the amounts presented herein.
10. DERIVATIVE FINANCIAL INSTRUMENTS
The following table summarizes the terms and fair values of the Company’s derivative financial instruments as of September 30, 2021 and December 31, 2020. The notional amounts provide an indication of the extent of the Company’s involvement in these instruments at that time, but do not represent exposure to credit, interest rate or market risks (amounts presented in thousands).
Hedge ProductHedge TypeDesignationNotional AmountStrikeTrade DateMaturity DateFair value
9/30/202112/31/20209/30/202112/31/2020
Liabilities
SwapInterest RateCash Flow(a)$250,000 $250,000 2.868 %October 8, 2015October 8, 2022$(3,872)$(6,627)
SwapInterest RateCash Flow(b)— 25,774 3.300 %December 22, 2011January 30, 2021— (120)
$250,000 $275,774 
(a)Hedging unsecured variable rate debt.
(b)On January 30, 2021, the interest rate hedge contract for this swap expired.
The Company measures its derivative instruments at fair value and records them in “Other assets” and (“Other liabilities”) on the Company’s consolidated balance sheets.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that the inputs utilized to determine the fair value of derivative instruments are classified in Level 2 of the fair value hierarchy.
Disclosure about the fair value of derivative instruments is based upon pertinent information available to management as of September 30, 2021 and December 31, 2020. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since September 30, 2021. Current estimates of fair value may differ from the amounts presented herein.
11. LIMITED PARTNERS' NONCONTROLLING INTERESTS IN THE PARENT COMPANY
Noncontrolling interests in the Parent Company’s financial statements relate to redeemable common limited partnership interests in the Operating Partnership held by parties other than the Parent Company and properties which are consolidated but not wholly owned by the Operating Partnership.
Operating Partnership
The aggregate book value of the noncontrolling interests associated with the redeemable common limited partnership interests in the accompanying consolidated balance sheet of the Parent Company was $8.3 million and $10.5 million as of September 30, 2021 and December 31, 2020, respectively. Under the applicable accounting guidance, the redemption value of limited partnership units are carried at fair value. The Parent Company believes that the aggregate settlement value of these interests (based on the number of units outstanding and the average closing price of the common shares during the last five business days of the quarter) was approximately $11.2 million and $11.7 million as of September 30, 2021 and December 31, 2020, respectively.
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12. BENEFICIARIES' EQUITY OF THE PARENT COMPANY
Earnings per Share (EPS)
The following table details the number of shares and net income used to calculate basic and diluted earnings per share (in thousands, except share and per share amounts; results may not add due to rounding):
Three Months Ended September 30,
20212020
BasicDilutedBasicDiluted
Numerator
Net income$974 $974 $276,133 $276,133 
Net income attributable to noncontrolling interests(7)(7)(1,612)(1,612)
Nonforfeitable dividends allocated to unvested restricted shareholders(91)(91)(93)(93)
Net income attributable to common shareholders$876 $876 $274,428 $274,428 
Denominator
Weighted-average shares outstanding170,907,018 170,907,018 170,573,028 170,573,028 
Contingent securities/Share based compensation— 1,330,176 — 453,464 
Weighted-average shares outstanding170,907,018 172,237,194 170,573,028 171,026,492 
Earnings per Common Share:
Net income attributable to common shareholders$0.01 $0.01 $1.61 $1.60 
Nine Months Ended September 30,
20212020
BasicDilutedBasicDiluted
Numerator
Net income$7,763 $7,763 $288,240 $288,240 
Net income attributable to noncontrolling interests(42)(42)(1,701)(1,701)
Nonforfeitable dividends allocated to unvested restricted shareholders(331)(331)(317)(317)
Net income attributable to common shareholders$7,390 $7,390 $286,222 $286,222 
Denominator
Weighted-average shares outstanding170,794,585 170,794,585 172,380,410 172,380,410 
Contingent securities/Share based compensation— 1,283,365 — 355,026 
Weighted-average shares outstanding170,794,585 172,077,950 172,380,410 172,735,436 
Earnings per Common Share:
Net income attributable to common shareholders$0.04 $0.04 $1.66 $1.66 
Redeemable common limited partnership units totaling 823,983 at September 30, 2021 and 981,634 at September 30, 2020, were excluded from the diluted earnings per share computations because they are not dilutive.
Unvested restricted shares are considered participating securities which require the use of the two-class method for the computation of basic and diluted earnings per share. For the three and nine months ended September 30, 2021 and 2020, earnings representing nonforfeitable dividends as noted in the table above were allocated to the unvested restricted shares issued to the Company’s executives and other employees under the Company's shareholder-approved long-term incentive plan.
Common Shares
On September 14, 2021, the Parent Company declared a distribution of $0.19 per common share, totaling $32.8 million, which was paid on October 20, 2021 to shareholders of record as of October 6, 2021.
The Parent Company maintains a common share repurchase program under which the Board of Trustees has authorized the Parent Company to repurchase common shares. On January 3, 2019, the Board of Trustees authorized the repurchase of up to $150.0 million common shares from and after January 3, 2019. During the nine months ended September 30, 2021, the Company did not repurchase any common shares. During the nine months ended September 30, 2020, the Company repurchased and retired 6,248,483 common shares at an average price of $9.60 per share, totaling $60.0 million.
During the nine months ended September 30, 2021, the Company issued 226,695 common shares of beneficial interest in a private placement to an unaffiliated third party in exchange for a third party's 1% residual ownership interest in One and Two Commerce Square, an unconsolidated joint venture.
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13. PARTNERS' EQUITY OF THE PARENT COMPANY
Earnings per Common Partnership Unit
The following table details the number of units and net income used to calculate basic and diluted earnings per common partnership unit (in thousands, except unit and per unit amounts; results may not add due to rounding):
Three Months Ended September 30,
20212020
BasicDilutedBasicDiluted
Numerator
Net income$974 $974 $276,133 $276,133 
Net loss attributable to noncontrolling interests2 2 2 2 
Nonforfeitable dividends allocated to unvested restricted unitholders(91)(91)(93)(93)
Net income attributable to common unitholders$885 $885 $276,042 $276,042 
Denominator
Weighted-average units outstanding171,731,001 171,731,001 171,554,662 171,554,662 
Contingent securities/Share based compensation— 1,330,176 — 453,464 
Total weighted-average units outstanding171,731,001 173,061,177 171,554,662 172,008,126 
Earnings per Common Partnership Unit:
Net income attributable to common unitholders$0.01 $0.01 $1.61 $1.60 
Nine Months Ended September 30,
20212020
BasicDilutedBasicDiluted
Numerator
Net income$7,763 $7,763 $288,240 $288,240 
Net (income) loss attributable to noncontrolling interests4 4 (20)(20)
Nonforfeitable dividends allocated to unvested restricted unitholders(331)(331)(317)(317)
Net income attributable to common unitholders$7,436 $7,436 $287,903 $287,903 
Denominator
Weighted-average units outstanding171,710,387 171,710,387 173,362,044 173,362,044 
Contingent securities/Share based compensation— 1,283,365 — 355,026 
Total weighted-average units outstanding171,710,387 172,993,752 173,362,044 173,717,070 
Earnings per Common Partnership Unit:
Net income attributable to common unitholders$0.04 $0.04 $1.66 $1.66 
Unvested restricted units are considered participating securities which require the use of the two-class method for the computation of basic and diluted earnings per share. For the three and nine months ended September 30, 2021 and 2020, earnings representing nonforfeitable dividends were allocated to the unvested restricted units issued to the Parent Company's executives and other employees under the Parent Company's shareholder-approved long-term incentive plan.
Common Partnership Units
On September 14, 2021, the Operating Partnership declared a distribution of $0.19 per common partnership unit, totaling $32.8 million, which was paid on October 20, 2021 to unitholders of record as of October 6, 2021.
In connection with the Parent Company’s common share repurchase program, one common unit of the Operating Partnership is retired for each common share repurchased. During the nine months ended September 30, 2021, the Company did not repurchase any units. During the nine months ended September 30, 2020, the Company retired 6,248,483 common partnership units at an average price of $9.60 per unit, totaling $60.0 million, in connection with an equal number of share repurchases.
During the nine months ended September 30, 2021, the Operating Partnership issued 226,695 common partnership units to the Parent Company in connection with the Company's acquisition of a third party's 1% residual interest in One and Two Commerce Square, as described in Note 12, ''Beneficiaries' Equity of the Parent Company."
14. SEGMENT INFORMATION
As of September 30, 2021, the Company owns and manages properties within five segments: (1) Philadelphia Central Business District ("Philadelphia CBD"), (2) Pennsylvania Suburbs, (3) Austin, Texas (4) Metropolitan Washington, D.C. and (5) Other.
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The Philadelphia CBD segment includes properties located in the City of Philadelphia, Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Metropolitan Washington, D.C. segment includes properties in the District of Columbia, Northern Virginia and Southern Maryland. The Other segment includes properties located in Camden County, New Jersey and New Castle County, Delaware. In addition to the five segments, the 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. Land held for development and construction in progress is transferred to operating properties by region upon completion of the associated construction or project.
The following tables provide selected asset information and results of operations of the Company's reportable segments (in thousands):
Real estate investments, at cost:
September 30, 2021December 31, 2020
Philadelphia CBD$1,430,724 $1,433,927 
Pennsylvania Suburbs875,586 871,530 
Austin, Texas771,977 728,741 
Metropolitan Washington, D.C.271,929 352,794 
Other86,858 87,117 
Operating Properties$3,437,074 $3,474,109 
Corporate
Right of use asset - operating leases, net$20,478 $20,977 
Construction-in-progress$266,263 $210,311 
Land held for development$118,684 $117,984 
Prepaid leasehold interests in land held for development, net$27,762 $39,185 
Net operating income:
Three Months Ended September 30,
20212020
Total revenueOperating expenses (a)Net operating incomeTotal revenueOperating expenses (a)Net operating income (loss)
Philadelphia CBD$51,587 $(18,823)$32,764 $52,640 $(18,522)$34,118 
Pennsylvania Suburbs31,327 (10,154)21,173 34,649 (11,141)23,508 
Austin, Texas24,813 (9,580)15,233 25,328 (9,944)15,384 
Metropolitan Washington, D.C.5,224 (3,806)1,418 9,675 (5,236)4,439 
Other3,638 (2,534)1,104 3,188 (2,374)814 
Corporate3,829 (2,155)1,674 626 (1,782)(1,156)
Operating properties$120,418 $(47,052)$73,366 $126,106 $(48,999)$77,107 
Nine Months Ended September 30,
20212020
Total revenueOperating expenses (a)Net operating incomeTotal revenueOperating expenses (a)Net operating income (loss)
Philadelphia CBD$154,259 $(54,493)$99,766 $181,203 $(65,615)115,588 
Pennsylvania Suburbs93,361 (30,625)62,736 106,569 (34,980)71,589 
Austin, Texas76,501 (29,262)47,239 76,921 (30,032)46,889 
Metropolitan Washington, D.C.14,711 (11,907)2,804 30,520 (15,678)14,842 
Other10,513 (7,344)3,169 10,221 (7,434)2,787 
Corporate11,944 (7,522)4,422 2,597 (4,652)(2,055)
Operating properties$361,289 $(141,153)$220,136 $408,031 $(158,391)$249,640 
(a)Includes property operating expenses, real estate taxes and third party management expense.

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Unconsolidated real estate ventures:
Investment in real estate venturesEquity in income (loss) of real estate venture
As ofThree Months Ended September 30,Nine Months Ended September 30,
September 30, 2021December 31, 20202021202020212020
Philadelphia CBD$319,645 $268,562 $(3,602)$(2,737)$(12,542)$(2,576)
Metropolitan Washington, D.C.97,972 99,769 (1,173)(1,367)(2,368)(2,463)
Mid-Atlantic Office JV32,041 32,996 310 — 634 — 
MAP Venture(22,247)(11,516)(2,169)(1,684)(6,522)(4,843)
Total$427,411 $389,811 $(6,634)$(5,788)$(20,798)$(9,882)
Net operating income (“NOI”) is a non-GAAP financial measure, which we define as total revenue less property operating expenses, real estate taxes and third party management expenses. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance and management fees. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards and professional fees that are incurred as part of corporate office management. NOI presented by the Company may not be comparable to NOI reported by other companies that define NOI differently. NOI is the primary measure that is used by the Company’s management to evaluate the operating performance of the Company’s real estate assets by segment. The Company believes NOI provides useful information to investors regarding the financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairment losses, depreciation and amortization costs, capital expenditures and leasing costs. The Company believes that net income (loss), as defined by GAAP, is the most appropriate earnings measure. The following is a reconciliation of consolidated net income, as defined by GAAP, to consolidated NOI, (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income$974 $276,133 $7,763 $288,240 
Plus:
Interest expense15,190 16,310 46,973 56,510 
Interest expense - amortization of deferred financing costs709 715 2,127 2,195 
Depreciation and amortization48,175 43,533 131,303 145,314 
General and administrative expenses7,076 7,069 22,016 23,973 
Equity in loss of unconsolidated real estate ventures6,634 5,788 20,798 9,882 
Less:
Interest and investment income4,494 467 7,845 1,487 
Income tax (provision) benefit(12)(2)(46)224 
Net gain on disposition of real estate— 271,901 142 274,487 
Net gain on sale of undepreciated real estate910 — 2,903 201 
Net gain on real estate venture transactions— 75 — 75 
Consolidated net operating income$73,366 $77,107 $220,136 $249,640 
15. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is involved from time to time in litigation on various matters, including disputes with tenants, vendors and disputes arising out of agreements to purchase or sell properties. Given the nature of the Company’s business activities, these lawsuits are considered routine to the conduct of its business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. The Company will establish reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is probable and when the amount of loss is reasonably estimable. The Company does not expect that the liabilities, if any, that may ultimately result from such legal actions will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.
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Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state, and local governments. The Company’s compliance with existing laws has not had a material adverse effect on its financial condition and results of operations, and the Company does not believe it will have a material adverse effect in the future. However, the Company cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on its current Properties or on properties that the Company may acquire.
Debt Guarantees
As of September 30, 2021, the Company’s unconsolidated real estate ventures had aggregate indebtedness of $958.8 million. These loans are generally mortgage or construction loans, most of which are nonrecourse to the Company, except for customary recourse carve-outs. As of September 30, 2021, the $150.0 million construction loan obtained by 4040 Wilson, located in Arlington, Virginia, for which the Company has a payment guarantee up to $41.3 million, is recourse to the Company. In addition, during construction undertaken by the unconsolidated real estate ventures, including 4040 Wilson and 3025 JFK, the Company has provided, and expects to continue to provide, cost overrun and completion guarantees, as well as customary environmental indemnities and guarantees of customary exceptions to nonrecourse provisions in loan agreements. In the agreement with its partner in the 3025 JFK Venture, the Company agreed to provide cost overrun and completion guaranties for the project under development. With respect to the construction loan obtained by 3025 JFK Venture on July 23, 2021, the Company has also provided a carry guarantee and limited payment guarantee up to 25% of the principal balance.
Impact of Natural Disasters and Casualty
The Company carries liability insurance to mitigate its exposure to certain losses, including those relating to property damage. The Company records the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the amount of the losses is considered a gain contingency and is not recorded until the proceeds are received.

In February 2021, one of the Company's properties in Austin, Texas sustained damage from the winter storms and resulting power grid failures. As a result of the damage, during the nine months ended September 30, 2021, the Company recorded a fixed asset write-off totaling $1.2 million. During the nine months ended September 30, 2021, the Company has recorded an estimated $7.2 million of restoration costs, of which $2.0 million is included in Accounts payable and accrued expenses on the consolidated balance sheets as of September 30, 2021. The Company has also sustained business interruption loss of $3.9 million related to unpaid rent, which is also fully covered under the insurance policy. During the nine months ended September 30, 2021, the Company has received $13.0 million of insurance proceeds, resulting in full recovery of the costs incurred to date. The $0.7 million of insurance proceeds received in excess of the fixed asset write-off, total business interruption, and total estimated restoration cost during the nine months ended September 30, 2021 is included in Other income on the consolidated statement of operations.
Other Commitments or Contingencies
In connection with the Schuylkill Yards Project, the Company entered into a neighborhood engagement program and, as of September 30, 2021, had $7.6 million of future fixed contractual obligations. The Company also committed to fund additional contributions under the program. As of September 30, 2021, the Company estimates that these additional contributions, which are not fixed under the terms of agreement, will be $2.4 million.
In connection with the formation of the Commerce Square Venture, the Company has committed to investing an additional $20.0 million of preferred equity in the properties on a pari passu basis with its joint venture partner of which $2.1 million has been contributed by the Company as of September 30, 2021.
The Company invests in its properties and regularly incurs capital expenditures in the ordinary course of business to maintain the properties. The Company believes that such expenditures enhance its competitiveness. The Company also enters into construction, utility and service contracts in the ordinary course of business which may extend beyond one year. These contracts typically provide for cancellation with insignificant or no cancellation penalties.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Private Securities Litigation Reform Act of 1995 (the “1995 Act”) provides a “safe harbor” for forward-looking statements. This Quarterly Report on Form 10-Q 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 might cause actual results to differ materially from our expectations, many of which may be more likely to impact us as a result of the ongoing COVID-19 pandemic, are set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020. Accordingly, 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.
The discussion that follows is based primarily on our consolidated financial statements as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020 and should be read along with the consolidated financial statements and related notes appearing elsewhere in this report. The ability to compare one period to another may be significantly affected by acquisitions completed, development properties placed in service and dispositions made during those periods.
OVERVIEW
During the nine months ended September 30, 2021, we owned and managed properties within five segments: (1) Philadelphia Central Business District (“Philadelphia CBD”), (2) Pennsylvania Suburbs, (3) Austin, Texas, (4) Metropolitan Washington, D.C., and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Metropolitan Washington, D.C. segment includes properties in Northern Virginia, Washington, D.C. and Southern Maryland. The Other segment includes properties in Camden County, New Jersey and New Castle County, Delaware. In addition to the five segments, our corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions.
We generate cash and revenue from leases of space at our Properties and, to a lesser extent, from the management and development of properties owned by third parties and from investments in the unconsolidated real estate ventures. Factors that we evaluate when leasing space include rental rates, costs of tenant improvements, tenant creditworthiness, current and expected operating costs, the length of the lease term, vacancy levels and demand for space. We also generate cash through sales of assets, including assets that we do not view as core to our business plan, either because of location or expected growth potential, and assets that are commanding premium prices from third party investors.
Our financial and operating performance is dependent upon the demand for office, residential, parking, and retail space in our markets, our leasing results, our acquisition, disposition and development activity, our financing activity, our cash requirements and economic and market conditions, including prevailing interest rates.
We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it is impacting our tenants, employees, and business partners. Adverse changes in economic conditions, including the ongoing effects of the global COVID-19 pandemic, could result in a reduction of the availability of financing and potentially in higher borrowing costs. Vacancy rates may increase, and rental rates and rent collection rates may decline, during the remainder of 2021 and possibly beyond as the current economic climate may negatively impact tenants.
Overall economic conditions, including but not limited to higher unemployment and deteriorating financial and credit markets, could have a dampening effect on the fundamentals of our business, including increases in past due accounts, tenant defaults, lower occupancy and reduced effective rents. The ongoing COVID-19 pandemic has significantly slowed global economic activity, caused significant volatility in financial markets, and resulted in unprecedented job losses. In addition, the government responses to control the pandemic are creating disruption in the global economy and supply chains and adversely impacting many industries, including owners and developers of office and mixed-use buildings. These adverse conditions have impacted our net income and cash flows and could have a material adverse effect on our financial condition. We believe that the quality of our assets and the strength of our balance sheet will enable us to raise debt capital, if necessary, in various forms and from
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different sources, including through secured or unsecured loans from banks, pension funds and life insurance companies. However, there can be no assurance that we will be able to borrow funds on terms that are economically attractive or at all.
We continue to seek revenue growth throughout our portfolio by increasing occupancy and rental rates. Occupancy at our Core Properties at September 30, 2021 was 90.3% compared to 91.0% at September 30, 2020.
The table below summarizes selected operating and leasing statistics of our wholly owned properties for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Leasing Activity
Core Properties (1):
Total net rentable square feet owned12,949,078 14,421,473 12,949,078 14,421,473 
Occupancy percentage (end of period)90.3 %91.0 %90.3 %91.0 %
Average occupancy percentage90.2 %90.7 %90.0 %90.0 %
Total Portfolio, less properties in development (2):
Tenant retention rate (3)57.2 %59.6 %55.3 %53.4 %
New leases and expansions commenced (square feet)214,687 370,123 400,162 636,800 
Leases renewed (square feet)140,091 280,678 402,768 562,632 
Net absorption (square feet)(20,560)101,562 (165,888)(150,576)
Percentage change in rental rates per square feet (4):
New and expansion rental rates15.3 %22.8 %24.6 %22.5 %
Renewal rental rates15.7 %10.6 %13.1 %12.8 %
Combined rental rates15.5 %17.1 %17.6 %17.2 %
Capital Costs Committed (5):
Leasing commissions (per square feet)$7.94 $12.07 $9.33 $9.41 
Tenant Improvements (per square feet)$6.95 $27.24 $20.10 $21.68 
Weighted average lease term (years)6.5 7.2 6.8 6.3 
Total capital per square foot per lease year$2.63 $4.48 $3.39 $4.00 
(1)Does not include properties under development, redevelopment, held for sale, or sold.
(2)Includes leasing related to completed developments and redevelopments, as well as sold properties.
(3)Calculated as percentage of total square feet.
(4)Includes base rent plus reimbursement for operating expenses and real estate taxes.
(5)Calculated on a weighted average basis.
In seeking to increase revenue through our operating, financing and investment activities, we also seek to minimize operating risks, including (i) tenant rollover risk, (ii) tenant credit risk and (iii) development risk.
Tenant Rollover Risk
We are subject to the risk that tenant leases, upon expiration, will not be renewed, that space may not be relet, or that the terms of renewal or reletting (including the cost of renovations) may be less favorable to us than the current lease terms. Leases that accounted for approximately 0.9% of our aggregate final annualized base rents as of September 30, 2021 (representing approximately 1.2% of the net rentable square feet of the properties) are scheduled to expire without penalty in the remainder of 2021. Leases that accounted for approximately 9.2% of our aggregate final annualized base rents as of September 30, 2021 (representing approximately 9.6% of the net rentable square feet of the properties) are scheduled to expire without penalty in 2022. We maintain an active dialogue with our tenants in an effort to maximize lease renewals. If we are unable to renew leases or relet space under expiring leases, at anticipated rental rates, or if tenants terminate their leases early, our cash flow would be adversely impacted.
Tenant Credit Risk
In the event of a tenant default, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. Our management evaluates our accrued rent receivable reserve policy in light of our tenant base and general and local economic conditions. Our accrued rent receivable allowance was $4.1 million or 2.4% of our accrued rent
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receivable balance as of September 30, 2021 compared to $5.1 million or 3.2% of our accrued rent receivable balance as of December 31, 2020.
If economic conditions deteriorate, including as a result of the ongoing COVID-19 pandemic, we may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents. This condition would negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition.
Development Risk
Development projects are subject to a variety of risks, including construction delays, construction cost overruns, building moratoriums, inability to obtain financing on favorable terms, inability to lease space at projected rates, inability to enter into construction, development and other agreements on favorable terms, and unexpected environmental and other hazards.
As of September 30, 2021 the following active development and redevelopment projects remain under construction in progress and we were proceeding on the following activity (dollars, in thousands):
Property/Portfolio NameLocationCompletion DateActivity TypeApproximate Square FootageEstimated CostsAmount Funded
405 Colorado Street (a)Austin, TXQ2 2021Development205,803 $122,000 $82,818 
3000 Market Street (b)Philadelphia, PAQ3 2021Redevelopment64,070 $35,000 $24,620 
250 King of Prussia Road (c)Radnor, PAQ2 2022Redevelopment168,294 $82,854 $23,857 
(a)Estimated costs include $2.1 million of existing property basis through a ground lease. Project includes 520 parking spaces.
(b)Estimated costs include $12.8 million of existing property basis.
(c)Total project costs includes $20.6 million of existing property basis.
In addition to the properties listed above, we have classified one office building in Herndon, Virginia that has yet to incur significant redevelopment costs, and one parking facility in Philadelphia, Pennsylvania as redevelopment.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Certain accounting policies are considered to be critical accounting policies, as they require management to make assumptions about matters that are highly uncertain at the time the estimate is made and changes in accounting estimate are reasonably likely to occur from period to period. Management bases its estimates and assumptions on historical experience and current economic conditions.
Our Annual Report on Form 10-K for the year ended December 31, 2020 contains a discussion of our critical accounting policies. There have been no significant changes in our critical accounting policies since December 31, 2020.
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RESULTS OF OPERATIONS
The following discussion is based on our consolidated financial statements for the three and nine months ended September 30, 2021 and 2020. We believe that presentation of our consolidated financial information, without a breakdown by segment, will effectively present important information useful to our investors.
Net operating income (“NOI”) as presented in the comparative analysis below is a non-GAAP financial measure defined as total revenue less property operating expenses, real estate taxes and third party management expenses. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance, and management fees. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards and professional fees that are incurred as part of corporate office management. NOI is a non-GAAP financial measure that we use internally to evaluate the operating performance of our real estate assets by segment, as presented in Note 14, ''Segment Information," to our consolidated financial statements, and of our business as a whole. We believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairment losses, depreciation and amortization costs, capital expenditures and leasing costs. We believe that net income, as defined by GAAP, is the most appropriate earnings measure. See Note 14, ''Segment Information” to our Consolidated Financial Statements for a reconciliation of NOI to our consolidated net income as defined by GAAP.
Comparison of the Three Months Ended September 30, 2021 and September 30, 2020
The following comparison for the three months ended September 30, 2021 to the three months ended September 30, 2020, makes reference to the effect of the following:
(a)“Same Store Property Portfolio,” which represents 74 properties containing an aggregate of approximately 12.8 million net rentable square feet, and represents properties that we owned and consolidated for the three-month periods ended September 30, 2021 and 2020. The Same Store Property Portfolio includes properties acquired or placed in service on or prior to July 1, 2020 and owned and consolidated through September 30, 2021, excluding properties classified as held for sale,
(b)“Total Portfolio,” which represents all properties owned and consolidated by us during the three months ended September 30, 2021 and 2020,
(c)"Recently Completed/Acquired Properties," which represents two properties placed into service or acquired on or subsequent to July 1, 2020,
(d)"Development/Redevelopment Properties," which represents five properties currently in development/redevelopment. A property is excluded from our Same Store Property Portfolio and moved into Development/Redevelopment in the period that we determine to proceed with development/redevelopment for a future development strategy, and
(e)"Q3 2020 through Q3 2021 Dispositions," which represents 14 properties disposed of from July 1, 2020 through September 30, 2021.
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Comparison of three months ended September 30, 2021 to the three months ended September 30, 2020
Same Store Property PortfolioRecently Completed/Acquired PropertiesDevelopment/Redevelopment PropertiesOther (Eliminations) (a)Total Portfolio
(dollars and square feet in millions except per share amounts)20212020$ Change% Change20212020202120202021202020212020$ Change% Change
Revenue:
Rents$107.1 $105.5 $1.6 1.5 %$1.2$0.3 $0.5 $2.5 $3.4 $13.0 $112.2 $121.3 $(9.1)(7.5)%
Third party management fees, labor reimbursement and leasing— — — — %—— — — 6.5 4.3 6.5 4.3 2.2 51.2 %
Other0.3 0.2 0.1 50.0 %—— — — 1.5 0.3 1.8 0.5 1.3 260.0 %
Total revenue107.4 105.7 1.7 1.6 %1.20.3 0.5 2.5 11.4 17.6 120.5 126.1 (5.6)(4.4)%
Property operating expenses27.9 26.9 1.0 3.7 %0.2— 0.1 0.2 2.1 4.5 30.3 31.6 (1.3)(4.1)%
Real estate taxes12.9 12.8 0.1 0.8 %0.1— 0.1 0.4 0.3 1.7 13.4 14.9 (1.5)(10.1)%
Third party management expenses— — — — %—— — — 3.3 2.5 3.3 2.5 0.8 32.0 %
Net operating income66.6 66.0 0.6 0.9 %0.90.3 0.3 1.9 5.7 8.9 73.5 77.1 (3.6)(4.7)%
Depreciation and amortization44.4 37.5 6.9 18.4 %0.70.3 0.2 0.4 3.0 5.4 48.3 43.6 4.7 10.8 %
General & administrative expenses— — — — %—— — — 7.1 7.1 7.1 7.1 — — %
Provision for impairment— — — — %—— — — — — — — — — %
Net gain on disposition of real estate— (271.9)271.9 (100.0)%
Net gain on sale of undepreciated real estate(0.9)— (0.9)— %
Operating income (loss)$22.2 $28.5 $(6.3)(22.1)%$0.2$— $0.1 $1.5 $(4.4)$(3.6)$19.0 $298.3 $(279.3)(93.6)%
Number of properties74 74 2 5 81 
Square feet12.8 12.8 0.2 0.7 13.9 
Core Occupancy % (b)90.2 %91.0 %100.0 %
Other Income (Expense):
Interest and investment income4.5 0.5 4.0 800.0 %
Interest expense(15.2)(16.3)1.1 (6.7)%
Interest expense — Deferred financing costs(0.7)(0.7)— — %
Equity in loss of unconsolidated real estate ventures(6.6)(5.8)(0.8)13.8 %
Net gain on real estate venture transactions— 0.1 (0.1)(100.0)%
Net income$1.0 $276.1 $(275.1)(99.6)%
Net income attributable to Common Shareholders of Brandywine Realty Trust$0.01 $1.60 $(1.59)(99.4)%

(a)Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation, third-party management fees, provisions for impairment, and changes in the accrued rent receivable allowance. Other/(Eliminations) also includes properties sold and properties classified as held for sale.
(b)Pertains to Core Properties.
Total Revenue
Rents from the Total Portfolio decreased primarily as a result of the following:
•$10.5 million decrease related to the Q3 2020 through Q3 2021 Dispositions;
•$2.5 million decrease related to a property that has been vacated and placed into redevelopment in our Metropolitan Washington D.C. segment;
•$1.2 million decrease related to a property that has been vacated and taken out of service for future demolition in our Austin, Texas segment;
•$1.0 million increase related to the residential and hotel components at the FMC Tower in our Philadelphia CBD segment related to higher occupancy partially due to the lifting of COVID-19 pandemic restrictions; and
•$0.9 million increase related to the Recently Completed/Acquired Properties.
The remaining $3.2 million increase in Rents is primarily due to increased occupancy at certain properties across our Same Store Property Portfolio, as well as increased use of our properties by the tenants related to the lifting of COVID-19 pandemic restrictions.

Third party management fees, labor reimbursement, and leasing income increased primarily due to $1.1 million of fees earned from the Mid-Atlantic Office Venture formed in the fourth quarter of 2020, $0.3 million of fees earned from the Commerce Square Venture formed in the third quarter of 2020, and a $0.2 million increase in fees earned from our MAP Venture primarily related to increases in leasing commissions and construction management fees. The remaining increase is primarily related to miscellaneous increases in leasing commissions, labor reimbursement, and management fees earned from our other unconsolidated real estate ventures.
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Other income increased primarily due to excess insurance proceeds of $0.8 million related to properties in our Pennsylvania Suburbs segment as well as an increase of $0.3 million in income from the restaurant component of FMC Tower as a result of the lifting of COVID-19 pandemic restrictions.
Property Operating Expenses
Property operating expenses across our Total Portfolio decreased primarily as a result of the following:
•$3.4 million decrease related to the Q3 2020 through Q3 2021 Dispositions;
•$1.0 million increase across our Same Store Property Portfolio primarily due to increased use of our properties by the tenants as a result of the lifting of COVID-19 pandemic restrictions; and
•$0.2 million increase at the hotel and restaurant components of FMC Tower primarily as a result of the lifting of COVID-19 pandemic restrictions.
The remaining offsetting increase of $0.9 million is primarily related to miscellaneous increases in property operating expenses across our Total Portfolio, primarily driven by increases in property-related employee compensation expenses, marketing expenses, and repairs and maintenance.
Real Estate Taxes
Real estate taxes decreased primarily as a result of a $1.1 million decrease related to the Q3 2020 through Q3 2021 Dispositions as well as a $0.6 million decrease in tax assessments across our Austin, Texas segment.
Depreciation and Amortization
Depreciation and amortization expense increased primarily as a result of the following:
•$3.1 million decrease related to the Q3 2020 through Q3 2021 Dispositions;
•$4.5 million increase primarily related to accelerated depreciation as a result of early lease terminations at certain properties in our Same Store Portfolio during the third quarter of 2021; and
•$3.3 million increase due to the reassessment of the estimated useful life of seven properties in our Austin, Texas segment pursuant to future demolition plans as part of our Broadmoor master development plan beginning in the second quarter of 2021.
Net Gain on Disposition of Real Estate
The Net Gain on Disposition of Real Estate of $271.9 million recognized during the three months ended September 30, 2020 is related to the sale of a 30% preferred equity interest in One Commerce Square and Two Commerce Square, which resulted in deconsolidation of the properties and recognition of our investment in the properties at fair value.
Interest and Investment Income
Interest and investment income increased by $4.0 million as a result of our Austin Preferred Equity Investment, which closed on December 31, 2020 and was redeemed prior to maturity on September 3, 2021. Of the $4.0 million increase, $2.8 million was related to receiving our accelerated minimum return and exit fees paid in cash on the redemption date.
Interest Expense
Interest expense decreased primarily due to the following:
•$1.5 million decrease due to an increase in capitalized interest on our various development projects, as well as capitalized interest on our investment in 3025 JFK Venture;
•$0.4 million decrease due to deconsolidation of One Commerce Square and Two Commerce Square and the associated mortgage loans on July 21, 2020;
•$1.1 million decrease due to the purchase of the Two Logan Square mortgage in the fourth quarter of 2020; and
•$2.0 million increase due to a reduction of interest expense recognized during the three months ended September 30, 2020 on account of a contingent payment to an unaffiliated third party. The amount had previously accreted through interest expense and a portion of the contingent payment ceased to be probable in the third quarter of 2020 due to the anticipated purchase of the Two Logan Square mortgage in the fourth quarter of 2020.
The remaining decrease is primarily related to lower interest rates during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.
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Equity in loss of unconsolidated real estate ventures
Equity in loss of unconsolidated real estate ventures increased primarily due to the following:
•$1.0 million increase associated with our Commerce Square Venture formed on July 21, 2020;
•$0.6 million increase associated with our BDN AI Venture primarily due to our share of held for sale impairment in the remaining property held by the venture. See Note 4, ''Investment in Unconsolidated Real Estate Ventures" to our Consolidated Financial Statements for further information;
•$0.5 million increase related to our MAP Venture due to lower revenues driven by lower occupancy during the three months ended September 30, 2021 than the three months ended September 30, 2020;
•$0.9 million decrease associated with our 4040 Wilson Venture completed during the first quarter of 2021; and
•$0.3 million decrease associated with our Mid-Atlantic Office Venture formed on December 21, 2020.
Comparison of the Nine Months Ended September 30, 2021 and September 30, 2020
The following comparison for the nine months ended September 30, 2021 to the nine months ended September 30, 2020, makes reference to the effect of the following:
(a)“Same Store Property Portfolio,” which represents 73 properties containing an aggregate of approximately 12.5 million net rentable square feet, and represents properties that we owned and consolidated for the nine-month periods ended September 30, 2021 and 2020. The Same Store Property Portfolio includes properties acquired or placed in service on or prior to January 1, 2020 and owned and consolidated through September 30, 2021 excluding properties classified as held for sale,
(b)“Total Portfolio,” which represents all properties owned and consolidated by us during the nine months ended September 30, 2021 and 2020,
(c)"Recently Completed/Acquired Properties," which represents three properties placed into service or acquired on or subsequent to January 1, 2020,
(d)"Development/Redevelopment Properties," which represents five properties currently in development/redevelopment. A property is excluded from our Same Store Property Portfolio and moved into Development/Redevelopment in the period that we determine to proceed with development/redevelopment for a future development strategy, and
(e)"YTD 2020 and 2021 Dispositions," which represents 15 properties disposed of from January 1, 2020 through September 30, 2021.
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Comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2020
Same Store Property PortfolioRecently Completed/Acquired PropertiesDevelopment/Redevelopment PropertiesOther (Eliminations) (a)Total Portfolio
(dollars and square feet in millions except per share amounts)20212020$ Change% Change20212020202120202021202020212020$ Change% Change
Revenue:
Rents$315.9 $312.8 $3.1 1.0 %$12.4 $6.0 $0.7 $7.8 $7.9 $66.1 $336.9 $392.7 $(55.8)(14.2)%
Third party management fees, labor reimbursement and leasing— — — — %— — — — 19.8 13.3 19.8 13.3 6.5 48.9 %
Other0.7 0.7 — — %— — — — 3.9 1.3 4.6 2.0 2.6 130.0 %
Total revenue316.6 313.5 3.1 1.0 %12.4 6.0 0.7 7.8 31.6 80.7 361.3 408.0 (46.7)(11.4)%
Property operating expenses80.6 80.1 0.5 0.6 %3.2 2.1 (1.1)0.6 5.8 19.5 88.5 102.3 (13.8)(13.5)%
Real estate taxes38.8 37.9 0.9 2.4 %0.6 0.5 1.9 1.3 1.5 8.8 42.8 48.5 (5.7)(11.8)%
Third party management expenses— — — — %— — — — 9.9 7.5 9.9 7.5 2.4 32.0 %
Net operating income197.2 195.5 1.7 0.9 %8.6 3.4 (0.1)5.9 14.4 44.9 220.1 249.7 (29.6)(11.9)%
Depreciation and amortization117.3 112.2 5.1 4.5 %5.5 3.1 0.7 2.9 7.7 27.2 131.2 145.4 (14.2)(9.8)%
General & administrative expenses— — — — %— — — — 22.0 24.0 22.0 24.0 (2.0)(8.3)%
Net gain on disposition of real estate(0.1)(274.5)274.4 (100.0)%
Net gain on sale of undepreciated real estate(2.9)(0.2)(2.7)1350.0 %
Operating income (loss)$79.9 $83.3 $(3.4)(4.1)%$3.1 $0.3 $(0.8)$3.0 $(15.3)$(6.3)$69.9 $355.0 $(285.1)(80.3)%
Number of properties73 73 3 5 81 
Square feet12.5 12.5 0.5 0.7 13.9 
Core Occupancy % (b)90.1 %91.0 %94.6 %
Other Income (Expense):
Interest and investment income7.8 1.5 6.3 420.0 %
Interest expense(47.0)(56.5)9.5 (16.8)%
Interest expense — Deferred financing costs(2.1)(2.2)0.1 (4.5)%
Equity in loss of unconsolidated real estate ventures(20.8)(9.9)(10.9)110.1 %
Net gain on real estate venture transactions— 0.1 (0.1)(100.0)%
Income tax benefit— 0.2 (0.2)(100.0)%
Net income$7.8 $288.2 $(280.4)(97.3)%
Net income attributable to Common Shareholders of Brandywine Realty Trust$0.04 $1.66 $(1.62)(97.6)%
(a)Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation, third-party management fees, provisions for impairment, and changes in the accrued rent receivable allowance. Other/ (Eliminations) also includes properties sold and properties classified as held for sale.
(b)Pertains to Core Properties.
Total Revenue
Rents from the Total Portfolio decreased primarily as a result of the following:
•$57.5 million decrease related to the YTD 2020 and 2021 Dispositions;
•$7.4 million decrease related to a property that has been vacated and placed into redevelopment in our Metropolitan Washington D.C. segment;
•$2.5 million decrease related to a property that has been vacated and taken out of service for future demolition in our Austin, Texas segment;
•$6.4 million increase related to the Recently Completed/Acquired Properties;
•$1.2 million increase related to the residential and hotel components at the FMC Tower in our Philadelphia CBD segment related to higher occupancy partially due to the lifting of COVID-19 pandemic restrictions; and
The remaining $4.0 million increase in Rents is primarily due to increased occupancy at certain properties across our Same Store Property Portfolio, as well as increased use of our properties by the tenants related to the lifting of COVID-19 pandemic restrictions.
Third party management fees, labor reimbursement, and leasing income increased primarily due to $3.1 million of fees earned from the Mid-Atlantic Office Venture formed in the fourth quarter of 2020, $1.9 million of fees earned from the Commerce Square Venture formed in the third quarter of 2020, and a $1.3 million increase in fees earned from our MAP Venture primarily related to increases in leasing commissions and construction management fees.
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Other income increased primarily due to $1.6 million in excess insurance proceeds related to properties in our Pennsylvania Suburbs segment and Austin, Texas segment, $0.4 million in proceeds related to a legal settlement during the second quarter of 2021, and an increase of $0.4 million in income from the restaurant component of FMC Tower as a result of the lifting of COVID-19 pandemic restrictions.
Property Operating Expenses
Property operating expenses across our Total Portfolio decreased primarily as a result of the following:
•$17.9 million decrease related to the YTD 2020 and 2021 Dispositions;
•$1.7 million decrease related to the Development/Redevelopment properties primarily related to a property in our Metropolitan Washington D.C. segment that was taken out of service for redevelopment; and
•$1.1 million increase related to the Recently Completed/Acquired Properties.
The remaining offsetting increase of $4.7 million is related to miscellaneous increases in property operating expenses across our Total Portfolio, primarily driven by increased use of our properties by the tenants as a result of lifting of COVID-19 pandemic restrictions and increases in property-related employee compensation expenses, marketing expenses, and repairs and maintenance.
Real Estate Taxes
Real estate taxes decreased primarily due to a $6.5 million decrease related to the YTD 2020 and 2021 Dispositions. The offsetting $0.8 million increase is primarily the result of acquisition of 250 King of Prussia Road in our Pennsylvania Suburbs Segment and miscellaneous increases in tax assessments across our Total Portfolio.
Depreciation and Amortization
Depreciation and amortization expense decreased primarily as a result of the following:
•$20.5 million decrease due to the YTD 2020 and 2021 Dispositions; and
•$6.5 million increase due to the reassessment of the estimated useful life of seven properties in our Austin, Texas segment pursuant to future demolition plans as part of our Broadmoor master development plan beginning in the second quarter of 2021.
General and Administrative
General and administrative expenses decreased primarily as a result of a $2.4 million recovery of previously expensed legal fees incurred in pursuit of a settlement that was received in the first quarter of 2021. The offsetting $0.4 million is primarily related to increased employee medical benefit costs.
Net Gain on disposition of Real Estate
The gain of $274.5 million recognized during the nine months ended September 30, 2020 is primarily related to the following:
•$271.9 million related to the sale of a 30% preferred equity interest in One Commerce Square and Two Commerce Square, which resulted in deconsolidation of the properties and recognition of our investment in the properties at fair value; and
•$2.3 million related to the disposition of 52 East Swedesford Road, an office property in our Pennsylvania Suburbs Segment.

Net Gain on Sale of Undepreciated Real Estate
The gain of $2.9 million recognized during the nine months ended September 30, 2021 is due to the following:
•$2.0 million related to the formation of the 3025 JFK Venture, which resulted in deconsolidation of the project and recognition of our investment in the real estate venture at fair value; and
•$0.9 million related to the sale of three parcels of land in our Other Segment.
The gain of $0.2 million recognized during the nine months ended September 30, 2020 resulted from the sale of Keith Valley, a land parcel in our Pennsylvania Suburbs Segment.
Interest and Investment Income
Interest and investment income increased by $6.5 million primarily as a result of our Austin Preferred Equity Investment, which closed on December 31, 2020 and was redeemed prior to maturity on September 3, 2021. Of the $6.5 million increase, $2.8 million was related to receiving our accelerated minimum return and exit fees paid in cash on the redemption date.
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Interest Expense
Interest expense decreased primarily due to the following:
•$4.8 million decrease due to deconsolidation of One Commerce Square and Two Commerce Square and the associated mortgage loans on July 21, 2020;
•$2.9 million decrease due to an increase in capitalized interest on our various development projects as well as capitalized interest on our investment in 3025 JFK Venture;
•$2.6 million decrease due to the purchase of the Two Logan Square mortgage in the fourth quarter of 2020; and
•$2.0 million increase due to a reduction of interest expense recognized during the three months ended September 30, 2020 on account of a contingent payment to an unaffiliated third party. The amount had previously accreted through interest expense and a portion of the contingent payment ceased to be probable in the third quarter of 2020 due to the anticipated purchase of the Two Logan Square mortgage in the fourth quarter of 2020.
The remaining decrease is primarily related to lower interest rates during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.
Equity in Loss of unconsolidated real estate ventures
Equity in loss of unconsolidated real estate ventures increased primarily due to the following:
•$9.9 million increase associated with our Commerce Square Venture formed on July 21, 2020;
•$1.7 million increase related to our MAP Venture due to lower revenues driven by lower occupancy during the nine months ended September 30, 2021 than the nine months ended September 30, 2020;
•$0.9 million increase associated with our BDN AI Venture, which is primarily driven by to our $0.6 million share of the held for sale impairment on the remaining property held by the venture. See Note 4, ''Investment in Unconsolidated Real Estate Ventures" to our Consolidated Financial Statements for further information;
•$0.7 million decrease associated with our 4040 Wilson Venture completed during the first quarter of 2021; and
•$0.6 million decrease associated with our Mid-Atlantic Office Venture formed on December 21, 2020.

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LIQUIDITY AND CAPITAL RESOURCES
General
Our principal liquidity funding needs for the next twelve months are as follows:
•normal recurring expenses;
•capital expenditures, including capital and tenant improvements and leasing costs;
•debt service and principal repayment obligations;
•current development and redevelopment costs;
•commitments to unconsolidated real estate ventures;
•distributions to shareholders to maintain our REIT status;
•possible acquisitions of properties, either directly or indirectly through the acquisition of equity interest therein; and
•possible common share repurchases.
We expect to satisfy these needs using one or more of the following:
•cash flows from operations;
•distributions of cash from our unconsolidated real estate ventures;
•cash and cash equivalent balances;
•availability under our unsecured Credit Facility;
•secured construction loans and long-term unsecured indebtedness;
•sales of real estate or contributions of interests in real estate to joint ventures; and
•issuances of Parent Company equity securities and/or units of the Operating Partnership.
As of September 30, 2021, the Parent Company owned a 99.5% interest in the Operating Partnership. The remaining interest of approximately 0.5% pertains to common limited partnership interests owned by non-affiliated investors who contributed property to the Operating Partnership in exchange for their interests. As the sole general partner of the Operating Partnership, the Parent Company has full and complete responsibility for the Operating Partnership’s day-to-day operations and management. The Parent Company’s source of funding for its dividend payments and other obligations is the distributions it receives from the Operating Partnership.
As summarized above, we believe that our liquidity needs will be satisfied through available cash balances and cash flows from operations, financing activities and real estate sales. Rental revenue and other income from operations are our principal sources of cash to pay operating expenses, debt service, recurring capital expenditures and the minimum distributions required to maintain our REIT qualification. We seek to increase cash flows from our properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our revenue also includes third-party fees generated by our property management, leasing, development and construction businesses. We believe that our revenue, together with proceeds from property sales and debt financings, will continue to provide funds for our short-term liquidity needs. However, material changes in our operating or financing activities may adversely affect our net cash flows. With uncertain economic conditions, vacancy rates may increase, effective rental rates on new and renewed leases may decrease and tenant installation costs, including concessions, may increase in most or all of our markets during 2021 and possibly beyond. As a result, our revenues and cash flows could be insufficient to cover operating expenses, including increased tenant installation costs, pay debt service or make distributions to shareholders over the short-term. If this situation were to occur, we expect that we would finance cash deficits through borrowings under our unsecured revolving credit facility and other sources of debt and equity financings. In addition, a material adverse change in cash provided by operations could adversely affect our compliance with financial performance covenants under our unsecured revolving credit facility, including unsecured term loans and unsecured notes. As of September 30, 2021 we were in compliance with all of our debt covenants and requirement obligations.
In addition, we are continuing to monitor the ongoing COVID-19 pandemic and the related economic impacts, market volatility, and business disruption, and its impact on our tenants. The severity and duration of the pandemic and its impact on our operations and liquidity is uncertain and continues to evolve globally. However, if the pandemic continues, there will likely be continued negative economic impacts, market volatility, and business disruption which could negatively impact our tenants’ ability to pay rent, our ability to lease vacant space, and our ability to complete development and redevelopment projects, and these consequences, in turn, could materially impact our results of operations. We collected 99.5% of total cash-based rent due from tenants during the third quarter of 2021, which reflects a 99.6% collection rate from our office tenants.
We have granted rent relief requests primarily to our co-working and retail tenants. The relief requests have substantially all been in the form of rent deferral for varying lengths of time, but were/are primarily being repaid in 2020 and 2021. For those tenants we believe require rent relief, we have granted deferrals and, in some instances, rent abatements while receiving extended lease terms through favorable lease extensions. As of September 30, 2021, we have provided $4.8 million of rent relief to 65 tenants approximating 0.9 million square feet. We continue to assess the merits of rent deferral requests and can
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give no assurances on the outcomes of these ongoing negotiations, the amount and nature of the rent relief packages and ultimate recovery of the amounts deferred.
We use multiple financing sources to fund our long-term capital needs. When needed, we use borrowings under our unsecured revolving credit facility for general business purposes, including to meet debt maturities and to fund distributions to shareholders as well as development and acquisition costs and other expenses. In light of the volatility in financial markets and economic uncertainties, it is possible, that one or more lenders under our unsecured revolving credit facility could fail to fund a borrowing request. Such an event could adversely affect our ability to access funds under our unsecured credit facility when needed to fund distributions or pay expenses.
Our ability to incur additional debt is dependent upon a number of factors, including our credit ratings, the value of our unencumbered assets, our degree of leverage and borrowing restrictions imposed by our lenders. If one or more rating agencies were to downgrade our unsecured credit rating, our access to the unsecured debt market would be more limited and the interest rate under our unsecured credit facility and unsecured term loan would increase.
The Parent Company unconditionally guarantees the Operating Partnership’s unsecured debt obligations, which, as of September 30, 2021, amounted to $1,828.6 million. We did not have any secured debt obligations as of September 30, 2021.
Capital Markets
The Parent Company issues equity from time to time, the proceeds of which it contributes to the Operating Partnership in exchange for additional interests in the Operating Partnership, and guarantees debt obligations of the Operating Partnership. The Parent Company’s ability to sell common shares and preferred shares is dependent on, among other things, general market conditions for REITs, market perceptions about the Company as a whole and the current trading price of the Parent Company’s shares. The Parent Company maintains a shelf registration statement that covers the offering and sale of common shares, preferred shares, depositary shares, warrants and unsecured debt securities. Subject to our ongoing compliance with securities laws, and if warranted by market conditions, we may offer and sell equity and debt securities from time to time under the shelf registration statement or in transactions exempt from registration.
See Note 12, ''Beneficiaries' Equity of the Parent Company” to our Consolidated Financial Statements for further information related to our share repurchase program. We expect to fund any additional share repurchases with a combination of available cash balances and availability under our unsecured revolving credit facility. The timing and amounts of any repurchases will depend on a variety of factors, including market conditions, regulatory requirements, share prices, capital availability and other factors as determined by our management team. The repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without notice.
Capital Recycling
The Operating Partnership also considers net sales of selected properties and recapitalization of unconsolidated real estate ventures as additional sources of managing its liquidity. During the nine months ended September 30, 2021, we closed on the sale of three parcels of land for net cash proceeds of $10.2 million. In addition, we contributed our investment in a 99-year prepaid leasehold interest in a one-acre land parcel held for development to 3025 JFK Venture.
As of September 30, 2021, we had $42.5 million of cash and cash equivalents and $598.2 million of available borrowings under our unsecured revolving credit facility, net of $1.8 million in letters of credit outstanding. Based on the foregoing, as well as cash flows from operations net of dividend requirements, we believe we have sufficient capital to fund our remaining capital requirements on existing development and redevelopment projects and pursue additional attractive investment opportunities. We expect that our primary uses of capital during the remainder of 2021 will be to fund our current development and redevelopment projects.
Cash Flows
The following discussion of our cash flows is based on the consolidated statement of cash flows and is not meant to be a comprehensive discussion of the changes in our cash flows for the periods presented.
As of September 30, 2021 and December 31, 2020, we maintained cash and cash equivalents and restricted cash of $43.3 million and $47.1 million, respectively. We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following table summarizes changes in our cash flows (in thousands):
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Nine Months Ended September 30,
Activity20212020(Decrease) Increase
Operating$140,719 $162,464 $(21,745)
Investing(44,921)(24,023)(20,898)
Financing(99,578)(166,616)67,038 
Net cash flows$(3,780)$(28,175)$24,395 
Our principal source of cash flows is from the operation of our Properties. Our Properties provide a relatively consistent stream of cash flows that provides us with the resources to fund operating expenses, debt service and quarterly dividends. The decrease in operating cash flows is primarily due to the 15 properties disposed of or contributed to an unconsolidated real estate venture from January 1, 2020 through September 30, 2021. Cash is used in investing activities to fund acquisitions, development, or redevelopment projects and recurring and nonrecurring capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing, and property management skills and invest in existing buildings that meet our investment criteria. During the nine months ended September 30, 2021, when compared to the nine months ended September 30, 2020, the change in investing cash flows was due to the following activities (in thousands):
(Decrease) Increase
Acquisitions of real estate$11,432 
Capital expenditures and capitalized interest49,794 
Capital improvements/acquisition deposits/leasing costs4,286 
Joint venture investments(26,491)
Proceeds from the sale of properties(111,752)
Proceeds from notes receivable50,000 
Other investing activities1,833 
Increase in net cash used in investing activities$(20,898)
We generally fund our investment activity through the sale of real estate, property-level financing, credit facilities, senior unsecured notes, and construction loans. From time to time, we may issue common or preferred shares of beneficial interest, or the Operating Partnership may issue common or preferred units of limited partnership interest. During the nine months ended September 30, 2021, when compared to the nine months ended September 30, 2020, the change in financing cash flows was due to the following activities (in thousands):
(Decrease) Increase
Proceeds from debt obligations$(54,500)
Repayments of debt obligations60,605 
Redemption of limited partnership units(2,334)
Repurchase and retirement of common shares60,000 
Other financing activities2,239 
Dividends and distributions paid1,028 
Decrease in net cash used in financing activities$67,038 
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Capitalization
Indebtedness
The table below summarizes indebtedness under our unsecured debt at September 30, 2021 and December 31, 2020:  
September 30, 2021December 31, 2020
(dollars in thousands)
Balance: (a)
Fixed rate$1,750,000 $1,775,774 
Variable rate - unhedged78,610 52,836 
Total$1,828,610 $1,828,610 
Percent of Total Debt:
Fixed rate95.7 %97.1 %
Variable rate - unhedged4.3 %2.9 %
Total100.0 %100.0 %
Weighted-average interest rate at period end:
Fixed rate3.8 %3.8 %
Variable rate - unhedged1.4 %1.5 %
Total3.7 %3.8 %
Weighted-average maturity in years:
Fixed rate4.25.2
Variable rate - unhedged13.814.6
Total4.75.4
(a)Consists of unpaid principal and does not reflect premium/discount or deferred financing costs.
Scheduled principal payments and related weighted average annual effective interest rates for our debt as of September 30, 2021 were as follows (dollars in thousands):
PeriodPrincipal maturitiesWeighted Average Interest Rate of Maturing Debt
2021 (three months remaining)$— — %
2022250,000 2.87 %
2023350,000 3.87 %
2024350,000 3.78 %
2025— — %
2026— — %
2027450,000 4.03 %
2028— — %
2029350,000 4.30 %
2030— — %
Thereafter78,610 1.39 %
Totals$1,828,610 3.73 %
The indenture under which the Operating Partnership issued its unsecured notes contains financial covenants, including: (i) a leverage ratio not to exceed 60%; (ii) a secured debt leverage ratio not to exceed 40%; (iii) a debt service coverage ratio of greater than 1.5 to 1.0; and (iv) an unencumbered asset value of not less than 150% of unsecured debt. The Operating Partnership is in compliance with all covenants as of September 30, 2021.
Equity
In order to maintain its qualification as a REIT, the Parent Company is required to, among other things, pay dividends to its shareholders of at least 90% of its REIT taxable income. See Note 12, ''Beneficiaries' Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our dividends declared for the third quarter of 2021.
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Contractual Obligations
Refer to our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of our contractual obligations.
There have been no material changes, outside the ordinary course of business, to these contractual obligations during the three months ended September 30, 2021.
Funds from Operations (FFO)
Pursuant to the revised definition of FFO adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), we calculate FFO by adjusting net income/(loss) attributable to common unit holders (computed in accordance with GAAP) for gains (or losses) from sales of properties, impairment losses on depreciable consolidated real estate, impairment losses on investments in unconsolidated real estate ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated real estate ventures, real estate related depreciation and amortization, and after similar adjustments for unconsolidated real estate ventures. FFO is a non-GAAP financial measure. We believe that the use of FFO combined with the required GAAP presentations, has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REITs’ operating results more meaningful. We consider FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding gains or losses related to sales of previously depreciated operating real estate assets and real estate depreciation and amortization, FFO can help the investing public compare the operating performance of a company’s real estate between periods or as compared to other companies. Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently.
We consider net income, as defined by GAAP, to be the most comparable earnings measure to FFO. While FFO and FFO per unit are relevant and widely used measures of operating performance of REITs, FFO does not represent cash flow from operations or net income as defined by GAAP and should not be considered as alternatives to those measures in evaluating our liquidity or operating performance. We believe that to further understand our performance, FFO should be compared with our reported net income/(loss) attributable to common unit holders and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.
The following table presents a reconciliation of net income attributable to common unit holders to FFO for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(amounts in thousands, except share information)
Net income attributable to common unitholders$885 $276,042 $7,436 $287,903 
Add (deduct):
Amount allocated to unvested restricted unitholders91 93 331 317 
Net gain on real estate venture transactions— (75)— (75)
Net gain on disposition of real estate— (271,901)(142)(274,487)
Company's share of impairment of an unconsolidated real estate venture562 — 562 — 
Depreciation and amortization:
Real property39,824 34,479 105,652 110,026 
Leasing costs including acquired intangibles7,801 8,542 24,035 33,786 
Company’s share of unconsolidated real estate ventures12,078 13,014 39,869 22,243 
Partners’ share of consolidated real estate ventures(5)(5)(15)(124)
Funds from operations$61,236 $60,189 $177,728 $179,589 
Funds from operations allocable to unvested restricted shareholders(175)(172)(538)(529)
Funds from operations available to common share and unit holders (FFO)$61,061 $60,017 $177,190 $179,060 
Weighted-average shares/units outstanding — basic (a)171,731,001 171,554,662 171,710,387 173,362,044 
Weighted-average shares/units outstanding — fully diluted (a)173,061,177 172,008,126 172,993,752 173,717,070 
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(a)Includes common share and partnership units outstanding through the three and nine months ended September 30, 2021 and 2020, respectively.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the exposure to loss resulting from changes in interest rates, commodity prices and equity prices. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between our yield on invested assets and cost of funds and, in turn, our ability to make distributions or payments to our shareholders. While we have not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or continued economic slowdown, defaults could increase and result in losses to us which would adversely affect our operating results and liquidity.
Interest Rate Risk and Sensitivity Analysis
The analysis below presents the sensitivity of the market value of the Operating Partnership’s financial instruments to selected changes in market rates. The range of changes chosen reflects its view of changes which are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates chosen.
Our financial instruments consist of both fixed and variable rate debt. As of September 30, 2021, our consolidated debt consisted of unsecured notes with an outstanding principal balance of $1,500.0 million, all of which are fixed rate borrowings. We also have variable rate debt consisting of trust preferred securities with an outstanding principal balance of $78.6 million, a $600.0 million Credit Facility with no amounts borrowed and an unsecured term loan with an outstanding principal balance of $250.0 million. The unsecured term loan has been swapped to a fixed rate. All financial instruments were entered into for other than trading purposes and the net market value of these financial instruments is referred to as the net financial position. Changes in interest rates have different impacts on the fixed and variable rate portions of our debt portfolio. A change in interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position, but has no impact on interest incurred or cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position.
As of September 30, 2021, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was $1,624.0 million. For sensitivity purposes, a 100-basis point change in the discount rate equates to a change in the total fair value of our debt of approximately $16.3 million at September 30, 2021.
From time to time or as the need arises, we use derivative instruments to manage interest rate risk exposures and not for speculative or trading purposes. The total outstanding principal balance of our variable rate debt was approximately $328.6 million as of September 30, 2021. The total fair value of our variable rate debt was approximately $309.5 million at September 30, 2021. For sensitivity purposes, if market rates of interest increase by 100 basis points the fair value of our variable rate debt would decrease by approximately $9.3 million at September 30, 2021. If market rates of interest decrease by 100 basis points the fair value of our outstanding variable rate debt would increase by approximately $10.3 million at September 30, 2021.
These amounts were determined solely by considering the impact of hypothetical interest rates on our financial instruments. Due to the uncertainty of specific actions we may undertake to minimize possible effects of market interest rate increases, this analysis assumes no changes in our financial structure.
Item 4. Controls and Procedures
Controls and Procedures (Parent Company)
(a)Evaluation of disclosure controls and procedures. Under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, the Parent Company conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this quarterly report. Based on this evaluation, the Parent Company’s principal executive officer and principal financial officer have concluded that the Parent Company’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.
(b)Changes in internal control over financial reporting. There was no change in the Parent Company’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the Parent Company’s internal control over financial reporting.
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Controls and Procedures (Operating Partnership)
(a)Evaluation of disclosure controls and procedures. Under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, the Operating Partnership conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act as of the end of the period covered by this quarterly report. Based on this evaluation, the Operating Partnership’s principal executive officer and principal financial officer have concluded that the Operating Partnership’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.
(b)Changes in internal control over financial reporting. There was no change in the Operating Partnership’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of September 30, 2021 there have been no material changes to the Risk Factors disclosed in "Part I. Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)On September 28, 2021, the Parent Company issued 226,695 common shares to an unaffiliated third party in payment of two promissory notes in the aggregate amount of $3,853,850 issued by the Operating Partnership in exchange for a third party’s 1% residual limited partnership interest in One Commerce Square and Two Commerce Square, an unconsolidated real estate venture. The common shares were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended; and in connection with such issuance, the Operating Partnership issued to the Parent Company an equal number of common partnership units.
(b)Not applicable.
(c)There were no common share repurchases under the Parent Company’s share repurchase program during the fiscal quarter ended September 30, 2021. As of September 30, 2021, $82.9 million remained available for repurchases under our share repurchase program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.

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Item 6. Exhibits
(a)
Exhibits
Exhibits No.Description
31.1 
31.2 
31.3 
31.4 
32.1 
32.2 
32.3 
32.4 
99.1 
101.1 
The following materials from the Quarterly Reports on Form 10-Q of Brandywine Realty Trust and Brandywine Operating Partnership, L.P. for the quarter ended September 30, 2021 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, detailed tagged and filed herewith.
104 Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
** Management contract or compensatory plan or arrangement.
Exhibits 32.1, 32.2, 32.3 and 32.4 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that section, nor shall any of such exhibits be deemed to be incorporated by reference in any filing of Brandywine Realty Trust or Brandywine Operating Partnership, L.P. under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise stated in such filing.
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SIGNATURES OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BRANDYWINE REALTY TRUST
(Registrant)
Date:October 29, 2021By:/s/ Gerard H. Sweeney
Gerard H. Sweeney, President and
Chief Executive Officer
(Principal Executive Officer)
Date:October 29, 2021By:/s/ Thomas E. Wirth
Thomas E. Wirth, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date:October 29, 2021By:/s/ Daniel Palazzo
Daniel Palazzo, Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
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SIGNATURES OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BRANDYWINE OPERATING PARTNERSHIP, L.P.
(Registrant)
BRANDYWINE REALTY TRUST,
as general partner
Date:October 29, 2021By:/s/ Gerard H. Sweeney
Gerard H. Sweeney, President and
Chief Executive Officer
(Principal Executive Officer)
Date:October 29, 2021By:/s/ Thomas E. Wirth
Thomas E. Wirth, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date:October 29, 2021By:/s/ Daniel Palazzo
Daniel Palazzo, Vice President and
Chief Accounting Officer
(Principal Accounting Officer)

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