Vacancy Drops Across Brandywine Portfolio

At the same time, Brandywine reported an $11.6-million loss in net income, a decline of $20.5 million compared with net income of $8.9 million in the same quarter a year ago. The culprit was a one-time $44-million hit from depreciation and amortization expense related to assets from the acquisition.

Integration of the two companies is on pace and 70% complete, Gerard Sweeney, president and CEO, said during a conference call. He also noted that Brandywine moved its headquarters from Plymouth Meeting to 555 Lancaster Avenue here. "We were out of space, and prospects were clamoring for the space we were in." he said.

Rent rates at the Plymouth Meeting facility are approaching $29 per sf, while they are in the $22-per-sf range in the renovated Radnor property. Lease-up of the Radnor assets is ahead of schedule. "We anticipated they would be 60% leased by the end of this year," he said. They are 60% leased now, and he expects that figure to reach 67% by year-end.

Market conditions are improving and vacancy is down in all Brandywine markets, according to Sweeney. Occupancy in the portfolio is 91.6%, and 93.1% of the portfolio is leased. "Rate performance remains challenging," he said, but expects that to "move to positive in 2007," with the exception of the Southern New Jersey and suburban Philadelphia markets. The company's near-term top priority is to lease office space, aiming for 95% occupancy.

The disposition of former Prentiss properties in Dallas has yielded more than $200 million so far, with another $60 million expected next month. This is ahead of the initial schedule. More Dallas properties are on the market. "We'll look at the pricing structures before we determine what we'll do," Sweeney said. The anticipated prices are between $120 per sf and $130 per sf. While Dallas represents "a recycling opportunity, Austin is a growth market for us."