REAL ESTATE INVESTMENTS

9 Months Ended

Sep. 30, 2022

3. REAL ESTATE INVESTMENTS

As of September 30, 2022 and December 31, 2021, the gross carrying value of the operating properties was as follows (in thousands):


	September 30, 2022		December 31, 2021
Land	$	404,849	$	410,144
Building and improvements	2,743,280		2,653,492
Tenant improvements	438,954		408,966
Operating properties	$	3,587,083	$	3,472,602
Assets held for sale - real estate investments	21,050		—
Total	$	3,608,133	$	3,472,602

Acquisitions

The following table summarizes the property acquisitions during the nine months ended September 30, 2022 (dollars in thousands):

Property/Portfolio Name

Acquisition Date

Location

Property Type

Rentable Square Feet/Acres

Purchase Price

631 Park Avenue

January 21, 2022

King of Prussia, PA

Land

3.3 acres

3,650

3151 Market Street (a)

April 29, 2022

Philadelphia, PA

Leasehold Interest

0.8 acres

27,349

(a)On April 29, 2022, the Company acquired, through a 99-year ground lease, the leasehold interest in a 0.8-acre land parcel, located at 3151 Market Street, in Philadelphia, Pennsylvania. The Company prepaid $19.5 million of the ground lease, representing 500,000 square feet of buildable floor to area ratio ("FAR") to be used for the development of 3151 Market Street, and paid $7.8 million for 200,000 square feet of FAR density usable pursuant to the Schuylkill Yards Project master development agreement. The additional density is included in prepaid leasehold interests in land held for development in the consolidated balance sheets. See below regarding disposition of 500,000 square feet of FAR.

Dispositions

The following table summarizes the property dispositions during the nine months ended September 30, 2022 (dollars in thousands):

Property/Portfolio Name

Disposition Date

Location

Property Type

Rentable Square Feet/Acres

Sales Price

Gain/(Loss) on Sale (a)

Gateway G & H

January 20, 2022

Richmond, VA

Land

10.0 acres

1,600

897

25 M Street

April 14, 2022

Washington, D.C.

Land

0.8 acres

29,675

3,836

(b)

Gibbsboro Portfolio

June 28, 2022

Gibbsboro, NJ

Office/Land

42,809/4.0 acres

4,100

831

(c)

3151 Market Street

July 14, 2022

Philadelphia, PA

Leasehold Interest

0.8 acres

30,394

2,583

(d)

11501 Burnet Road

July 29, 2022

Austin, TX

Land

4.7 acres

32,513

8,312

(e)

(a)Gain/(Loss) on Sale is net of closing and other transaction related costs.

(b)On September 30, 2022, the Company recognized $0.4 million of additional gain on disposition of real estate.

(c)Includes $0.7 million of gain on sale of undepreciated real estate and $0.1 million of gain on disposition of real estate included within the consolidated statements of operations for the nine months ended September 30, 2022.

(d)On July 14, 2022, the Company contributed 500,000 square feet of FAR relating to its 99-year prepaid leasehold interest at 3151 Market Street in Philadelphia, Pennsylvania, acquired on April 29, 2022, to a newly formed joint venture with an unaffiliated third party. The Company's initial deemed contribution in the project was $30.4 million and the transaction resulted in deconsolidation of the property and conversion of Brandywine 3151 Market, LP, (formerly a wholly-owned subsidiary of the Operating Partnership) to a real estate venture ("3151 Market Street Venture"). The Company recorded its investment at fair value and recognized a gain, net of transaction costs, of $2.6 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.

(e)On July 29, 2022, the Company contributed a 4.7 acre parcel of land held for development at 11501 Burnet Road in Austin, Texas to a newly formed joint venture with an unaffiliated third party. The project is part of the Uptown ATX master development. The Company's combined contributed initial land investment in the project was $32.5 million and the transaction resulted in the deconsolidation of the property and formation of Brandywine Uptown Office LLC and Brandywine One Uptown Multifamily LLC, (together, "One Uptown Ventures)"). The Company recorded its investment at fair value and recognized a gain of $8.3 million in "Net gain on disposition of real estate" on the consolidated statements of operations. Gain on sale of $8.3 million is calculated as the difference between the estimated relative sales value of the contributed land and the estimated total cost allocations per block. See Note 4, "Investment in Unconsolidated Real Estate Ventures," for further information.

The following is a summary of properties classified as held for sale at September 30, 2022 (in thousands):


	Held for Sale Properties (a)
	September 30, 2022
ASSETS HELD FOR SALE
Real estate investments:
Operating properties	$	21,050
Accumulated depreciation	(1,840)
Operating real estate investments, net	19,210


Total real estate investments, net	19,210
Deferred costs, net	236
Intangible assets, net	88

Total assets held for sale, net	$	19,534

LIABILITIES HELD FOR SALE

Deferred income, gains and rent	20
Intangible liabilities, net	16

Total liabilities held for sale, net	$	36

(a)As of September 30, 2022, the Company determined that the sale of an office property in the Pennsylvania Suburbs segment was probable and classified the property as held for sale. The fair value less the anticipated costs of sale of the property exceeded the carrying value. The fair value of the property is based on the pricing in the agreement of sale.