10-K 1 w29720e10vk.htm FORM 10-K e10vk
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number
  001-9106 (Brandywine Realty Trust)
000-24407 (Brandywine Operating Partnership, L.P.)
Brandywine Realty Trust
Brandywine Operating Partnership, L.P.
(Exact name of registrant as specified in its charter)
     
MARYLAND (Brandywine Realty Trust)   23-2413352
DELAWARE (Brandywine Operating Partnership L.P.   23-2862640
     
(State or other jurisdiction of   (I.R.S. Employer Identification No.)
Incorporation or organization)    
     
555 East Lancaster Avenue    
Radnor, Pennsylvania   19087
     
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code       (610) 325-5600
Securities registered pursuant to Section 12(b) of the Act:
     
    Name of each exchange
Title of each class   on which registered
     
Common Shares of Beneficial Interest,    
par value $0.01 per share    
(Brandywine Realty Trust)   New York Stock Exchange
     
7.50% Series C Cumulative Redeemable    
Preferred Shares of Beneficial Interest   New York Stock Exchange
par value $0.01 per share    
(Brandywine Realty Trust)    
     
7.375% Series D Cumulative Redeemable    
Preferred Shares of Beneficial Interest   New York Stock Exchange
par value $0.01 per share    
(Brandywine Realty Trust)    
Securities registered pursuant to Section 12(g) of the Act:
Units of General Partnership Interest (Brandywine Operating Partnership, L.P.)
 
(Title of class)
          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Brandywine Realty Trust   Yes þ No o
Brandywine Operating Partnership, L.P.   Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
 
Brandywine Realty Trust   Yes o No þ
Brandywine Operating Partnership, L.P.   Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Brandywine Realty Trust   Yes þ No o
Brandywine Operating Partnership, L.P.   Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
 
Brandywine Realty Trust   Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Brandywine Operating Partnership, L.P.   Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Brandywine Realty Trust   Yes o No þ
Brandywine Operating Partnership, L.P.   Yes o No þ
The aggregate market value of the Common Shares of Beneficial Interest held by non-affiliates of Brandywine Realty Trust as of the last day of the registrant’s most recently completed second fiscal quarter was $2.9 billion. The aggregate market value has been computed by reference to the closing price of the Common Shares of Beneficial Interest on the New York Stock Exchange on such date. An aggregate of 88,599,963 Common Shares of Beneficial Interest were outstanding as of February 22, 2007.
As of June 30, 2006, the aggregate market value of the 2,309,051 common units of limited partnership (“Units”) held by non-affiliates of Brandywine Operating Partnership, L.P. was $74.3 million based upon the last report sale price of $32.17 per share on the New York Stock Exchange on June 30, 2006 of the Common Shares of Beneficial Interest of Brandywine Realty Trust, the sole general partner of Brandywine Operating Partnership, L.P. (For this computation, the Registrant has excluded the market value of all Units beneficially owned by Brandywine Realty Trust.)
Documents Incorporated By Reference
Portions of the proxy statement for the Annual Meeting of Shareholders of Brandywine Realty Trust to be held on May 9, 2007 are incorporated by reference into Part III of this Form 10-K.
The exhibit index as required by Item 601(a) of Regulation S-K is included in Item 15 of Part IV of this report.
 
 

 


 

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 Statement re Computation of Ratios of Brandywine Realty Trust
 Statement re Computation of Ratios of Brandywine Operating Partnership, L.P.
 List of Subsidiaries
 Consent of Independent Registered Public Accounting Firm
 Consent of Independent Registered Public Accounting Firm
 Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
 Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
 Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
 Certification Pursuant to Rules 13a-14(a) and 15d-14(a)
 Rule 13(a)-14(b) Certification
 Rule 13(a)-14(b) Certification
 Rule 13(a)-14(b) Certification
 Rule 13(a)-14(b) Certification

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Filing Format
This combined Form 10-K is being filed separately by Brandywine Realty Trust and Brandywine Operating Partnership, L.P.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This Annual Report on Form 10-K and other materials filed by us with the SEC (as well as information included in oral or other written statements made by us) contain statements that are forward-looking, including statements relating to business and real estate development activities, acquisitions, dispositions, future capital expenditures, financing sources, governmental regulation (including environmental regulation) and competition. We intend such forward-looking statements to be covered by the safe-harbor provisions of the 1995 Act. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. As forward-looking statements, these statements involve important risks, uncertainties and other factors that could cause actual results to differ materially from the expected results and, accordingly, such results may differ from those expressed in any forward-looking statements made by us or on our behalf. Factors that could cause actual results to differ materially from our expectations include, but are not limited to:
    changes in general economic conditions;
 
    changes in local real estate conditions (including changes in rental rates and the number of properties that compete with our properties);
 
    changes in the economic conditions affecting industries in which our principal tenants compete;
 
    our failure to lease unoccupied space in accordance with our projections;
 
    our failure to re-lease occupied space upon expiration of leases;
 
    the bankruptcy of major tenants;
 
    changes in prevailing interest rates;
 
    the unavailability of equity and debt financing;
 
    failure of acquisitions to perform as expected;
 
    unanticipated costs associated with, and integration of, our acquisitions;
 
    unanticipated costs to complete and lease-up pending developments;
 
    impairment charges;
 
    increased costs for, or lack of availability of, adequate insurance, including for terrorist acts;
 
    demand for tenant services beyond those traditionally provided by landlords;
 
    potential liability under environmental or other laws;
 
    earthquakes and other natural disasters;
 
    complex regulations relating to our status as a REIT and to our acquisition, disposition and development activities;

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    the adverse consequences of our failure to qualify as a REIT; and
 
    the impact of newly adopted accounting principles on our accounting policies and on period-to-period comparisons of financial results.
Given these uncertainties, and the other risks identified in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, we caution readers not to place undue reliance on forward-looking statements. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

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PART I
Item 1. Business
Introduction
The terms “we,” “us,” “our” or the “Company” refer to Brandywine Realty Trust, a Maryland real estate investment trust, individually or together with its consolidated subsidiaries, including Brandywine Operating Partnership, L.P. (the “Operating Partnership”), a Delaware limited partnership.
We are a self-administered and self-managed real estate investment trust, or REIT, active in acquiring, developing, redeveloping, leasing and managing office and industrial properties. As of December 31, 2006, we owned 261 office properties, 23 industrial facilities and one mixed-use property (which we refer to collectively, the “Properties”) containing an aggregate of approximately 28.2 million net rentable square feet. We also have six properties under development, three properties under redevelopment and four lease-up properties containing an aggregate of 2.1 million net rentable square feet. As of December 31, 2006, we owned economic interests in 11 unconsolidated real estate ventures that contain approximately 2.7 million net rentable square feet and in four consolidated real estate ventures that own 15 office properties containing approximately 1.5 million net rentable square feet (which we refer to collectively as the “Real Estate Ventures”). In addition, as of December 31, 2006, we owned approximately 490 acres of undeveloped land. The Properties are located in and surrounding Philadelphia, Wilmington, Southern and Central New Jersey, Richmond, Metropolitan Washington, D.C., Dallas/Fort Worth, Austin, Oakland, San Diego and Los Angeles. In addition to managing properties that we own, as of December 31, 2006, we were managing approximately 13.0 million square feet of office and industrial properties for third parties and Real Estate Ventures. Unless otherwise indicated, all references to square feet represent net rentable area.
Organization
Brandywine Realty Trust was organized and commenced its operations in 1986 as a Maryland REIT. Brandywine Realty Trust owns its assets and conducts its operations through the Operating Partnership and subsidiaries of the Operating Partnership. Brandywine Realty Trust controls the Operating Partnership as its sole general partner and as of December 31, 2006 owned a 95.7% interest in the Operating Partnership. The holders of the remaining interests in the Operating Partnership, consisting of Class A units of limited partnership interest, have the right to require redemption of their units at any time. At our option, we may satisfy the redemption either for an amount, per unit, of cash equal to the then market price of one Brandywine common share (based on the prior ten-day trading average) or for one Brandywine common share. Our structure as an “UPREIT” is designed, in part, to permit persons contributing properties to us to defer some or all of the tax liability they might otherwise incur in a sale of properties.
Our executive offices are located at 555 East Lancaster Avenue, Radnor, Pennsylvania 19087 and our telephone number is (610) 325-5600. We have regional offices in Mount Laurel, New Jersey; Philadelphia, Pennsylvania; Richmond, Virginia; Falls Church, Virginia; Austin, Texas; Dallas, Texas; Oakland, California; and Carlsbad, California. We have an internet website at www.brandywinerealty.com. We are not incorporating by reference into this Annual Report on Form 10-K any material from our website. The reference to our website is an inactive textual reference to the uniform resource locator (URL) and is for your reference only.
Acquisition of Prentiss Properties Trust in January 2006
On January 5, 2006, we acquired Prentiss Properties Trust (“Prentiss”) under an agreement and plan of merger that we entered into with Prentiss on October 3, 2005. In conjunction with our acquisition of Prentiss, designees of The Prudential Insurance Company of America (“Prudential”) acquired Prentiss properties that contain an aggregate of approximately 4.32 million net rentable square feet for total consideration of approximately $747.7 million. Through our acquisition of Prentiss (and after giving effect to the Prudential acquisition of Prentiss properties), we acquired a portfolio of 79 office properties (including 13 properties that are owned by consolidated Real Estate Ventures and seven properties that are owned by unconsolidated Real Estate Ventures) that contain an aggregate of 14.0 million net rentable square feet. In addition, through our acquisition of Prentiss we entered into new geographic markets, primarily Southern and Northern California, Dallas/Fort Worth and Austin, Texas and

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Metropolitan Washington, D.C. and decreased our relative concentration in Philadelphia and the Mid-Atlantic region.
In our acquisition of Prentiss, each then outstanding Prentiss common share was converted into the right to receive 0.69 of a Brandywine common share and $21.50 in cash (the “Per Share Merger Consideration”) except that 497,884 Prentiss common shares held in the Prentiss deferred compensation plan converted solely into 720,737 Brandywine common shares. In addition, each then outstanding unit (each, a “Prentiss OP Unit”) of limited partnership interest in Prentiss’s operating partnership subsidiary was, at the option of the holder, converted into Prentiss Common Shares with the right to receive the Per Share Merger Consideration or 1.3799 Class A units of our Operating Partnership. Accordingly, based on 49,375,723 Prentiss common shares outstanding at closing of the acquisition, we issued 34,446,446 Brandywine common shares and paid an aggregate of approximately $1.05 billion in cash for the accounts of the former Prentiss shareholders. Based on 1,572,612 Prentiss OP Units outstanding at closing of the acquisition, we issued 2,170,047 Class A units. In addition, options issued by Prentiss that were exercisable for an aggregate of 342,662 Prentiss common shares were converted into options exercisable for an aggregate of 496,037 Brandywine common shares at a weighted average exercise price of $22.00 per share. Through our acquisition of Prentiss we also assumed approximately $647.3 million in aggregate principal amount of Prentiss debt.
We funded the approximately $1.05 billion cash portion of the merger consideration, related transaction costs and prepayments of approximately $543.3 million in Prentiss mortgage debt at the closing of the acquisition through (i) a $750 million unsecured term loan that we repaid in full on March 28, 2006; (ii) approximately $676.5 million of cash received from Prudential’s acquisition of the Prentiss properties; and (iii) approximately $195.0 million through borrowing under our revolving credit facility.
2006 Transactions
Real Estate Acquisitions/Dispositions
In addition to our January 2006 acquisition of properties through our merger with Prentiss, and the concurrent disposition of properties to Prudential, in 2006 we acquired five office properties that contain an aggregate of 839,704 net rentable square feet and 93.4 acres of land, and we sold 23 office properties that contain an aggregate of 3,364,215 net rentable square feet and 76.7 acres of land, as indicated below:
  §   In January 2006, we sold 850/950 Warrenville Road, two properties totaling 99,470 square feet in Chicago, Illinois for a sales price of $15.3 million.
 
  §   In February 2006, we acquired 100 Lenox Drive, a property totaling 92,980 square feet in Lawrenceville, New Jersey for a purchase price of $10.2 million.
 
  §   In February 2006, we sold 550/650 Warrenville Road, 1050 Warrenville Road, 701 Warrenville Road and 801 Cherry Street, five properties totaling 1,316,744 square feet in Chicago, Illinois and Fort Worth, Texas for an aggregate sales price of $207.3 million.
 
  §   In March 2006, we sold 8755 W. Higgins Road, a property totaling 237,320 square feet in Chicago, Illinois for a sales price of $30.0 million.
 
  §   In April 2006, we acquired One Paragon, a property totaling 145,127 square feet in Richmond, Virginia for a purchase price of $24.0 million. We also acquired a 47.9 acre land parcel in Mt. Laurel, New Jersey and a 5.5 acre land parcel in Newtown (Delaware County), Pennsylvania for a total purchase price of $8.6 million.
 
  §   In April 2006, we sold 1.3 acres of land in Radnor, Pennsylvania for a sales price of $4.5 million.
 
  §   In June 2006, we acquired a 23.2 acre land parcel in Goochland County, Virginia for a purchase price of $4.6 million.
 
  §   In June 2006, we sold 505 Millenium Drive, a property totaling 98,586 square feet in Allen, Texas and 5.5 acres of land in Westampton, New Jersey for a an aggregate sales price of $6.4 million.

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  §   In July 2006, we sold 110 Summit Drive, a property totaling 43,660 square feet in Exton, Pennsylvania for a sales price of $3.7 million.
 
  §   In August 2006, we acquired 2340 Dulles Corner Boulevard, a property totaling 264,405 square feet in Herndon, Virginia, for a purchase price of $79.0 million and 2355 Dulles Corner Boulevard, a property totaling 179,176 square feet in Herndon, Virginia for a purchase price of $55.0 million.
 
  §   In August 2006, we sold 8144 Walnut Hill Lane, property totaling 464,470 square feet in Dallas, Texas, 111 Presidential Boulevard, a property totaling 172,894 square feet in Bala Cynwyd, Pennsylvania, 220 Cabot Drive, a property totaling 124,327 square feet in Lisle, Texas and 10.9 acres of land in Sacramento, California for an aggregate sales price of $127.6 million.
 
  §   In October 2006, we acquired a 16.8 acre land parcel in Austin, Texas for a purchase price of $2.5 million.
 
  §   In November 2006, we sold King & Harvard Drive and One South Union Avenue, two properties totaling 167,017 square feet in Cherry Hill, New Jersey and 1255 Corporate Drive, a property totaling 150,019 square feet in Irving, Texas for an aggregate sales price of $37.8 million.
 
  §   In November 2006, we acquired 2251 Corporate Park Drive, a property totaling 158,016 square feet in Herndon, Virginia for a purchase price of $59.0 million.
 
  §   In December 2006, we sold 2110 Walnut Hill Lane, three properties totaling 164,782 square feet in Irving, Texas, 105/140 Terry Drive, two properties totaling 128,666 square feet in Newtown, Pennsylvania and 3890/3860 West Northwest Highway, two properties totaling 196,260 square feet in Dallas, Texas for an aggregate sales price of $45.0 million. We also sold 59.0 acres of land in Newtown, Pennsylvania for a sales price of $19.0 million.
Developments
In 2006 we placed in service two office properties that we developed and that contain an aggregate of 782,595 net rentable square feet. We place a property in services at the earlier of (i) the date at which we estimate the property to be 95% occupied and (ii) one year from the project completion date. At December 31, 2006 we had nine properties under development or redevelopment that contain an aggregate of 1.4 million net rentable square feet at an estimated total development cost of $304.3 million. We expect to place these projects in service at dates between between the second quarter of 2007 and the fourth quarter of 2008.
Unsecured Debt Financings
On March 28, 2006, we completed an underwritten public offering of (1) $300,000,000 aggregate principal amount of floating rate guaranteed notes due 2009, (2) $300,000,000 aggregate principal amount of 5.75% guaranteed notes due 2012 and (3) $250,000,000 aggregate principal amount of 6.00% guaranteed notes due 2016. We used proceeds from these notes to repay a term loan that we obtained to finance a portion of the consideration that we paid in the Prentiss merger and to reduce borrowings under our revolving credit facility.
On October 4, 2006, we completed an offering of $300.0 million aggregate principal amount of 3.875% senior convertible notes due 2026 in an offering made in reliance upon an exemption from registration rights under Rule 144A under the Securities Act of 1933 and issued an additional $45 million of exchangeable notes on October 16, 2006 to cover over-allotments. At certain times and upon the occurrence of certain events, the notes are exchangable into cash up to their principal amount and, with respect to the remainder, if any, of the exchange value in excess of such principal amount, cash or shares of the Company’s common shares. The initial exchange rate is 25.4065 shares per $1,000 principal amount of notes (which is equivalent to an initial conversion price of $39.36 per share). The notes may not be redeemed by us prior to October 20, 2011 (except to preserve the Company’s status as a REIT), but are redeemable anytime thereafter, in whole or in part, at a redemption price equal to the principal amount of the notes plus any accrued and unpaid interest (including additional interest), if any. In addition, on October 20, 2011, October 15, 2016, and October 15, 2021, or upon the occurrence of certain change in control transactions prior to October 20, 2011, note holders may require us to repurchase all or a portion of the notes at a purchase price equal to the principal amount plus any accrued and unpaid interest on the notes. Net

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proceeds from the October 2006 note offering were used to repurchase approximately $60.0 million of common shares at an average price of $32.80 per share and for general corporate purposes, including the repayment of outstanding borrowings under our unsecured revolving credit facility.
Business Objective and Strategies for Growth
Our business objective is to deploy capital effectively to maximize our return on investment and thereby maximize our total return to shareholders. To accomplish this objective we seek to:
    maximize cash flow through leasing strategies designed to capture rental growth as rental rates increase and as below-market leases are renewed;
 
    attain a high tenant retention rate by providing a full array of property management and maintenance services and tenant service programs responsive to the varying needs of our diverse tenant base;
 
    increase the economic diversification of our tenant base while maximizing economies of scale;
 
    as warranted by market conditions, deploy our land inventory and seek new land parcels on which to develop high-quality office and industrial properties to service our tenant base;
 
    capitalize on our redevelopment expertise to selectively acquire, redevelop and reposition properties in desirable locations;
 
    acquire high-quality office and industrial properties and portfolios of such properties at attractive yields in markets that we expect will experience economic growth;
 
    form joint venture opportunities with high-quality partners having attractive real estate holdings or significant financial resources; and
 
    utilize our reputation as a full-service real estate development and management organization to identify opportunities that will expand our business and create long-term value.
We expect to concentrate our real estate activities in markets where we believe that:
    current and projected market rents and absorption statistics justify construction activity;
 
    we can maximize market penetration by accumulating a critical mass of properties and thereby enhance operating efficiencies;
 
    barriers to entry (such as zoning restrictions, utility availability, infrastructure limitations, development moratoriums and limited developable land) will create supply constraints on office and industrial space; and
 
    there is potential for economic growth, particularly job growth and industry diversification.

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Operating Strategy
We believe that we are well positioned in our current markets and have the expertise to take advantage of both development and acquisition opportunities in new markets that have healthy long-term fundamentals and strong growth projections. This capability, combined with what we believe is a conservative financial structure, allows us to concentrate our growth efforts towards selective development alternatives and acquisition opportunities. These abilities are integral to our strategy of having a geographically and physically diverse portfolio of assets, which will meet the needs of our tenants. Through our merger with Prentiss and our 2006 development and disposition activities, we commenced operations in Southern and Northern California, Austin and Dallas, TX and Metropolitan Washington D.C. metropolitan region and have decreased our relative concentrations in Philadelphia and the Mid-Atlantic region. We have also expanded our overall development pipeline and are pursuing acquisitions of sites on which we can capitalize on our own development and market expertise.
We expect that selective development of new office properties will continue to be important to the growth of our portfolio over the next several years. We use experienced on site construction superintendents, operating under the supervision of project managers and senior management, to control the construction process and mitigate the various risks associated with real estate development. We believe we understand and effectively manage the risks associated with development and construction, and these risks are justified by higher potential yields.
We expect to continue to operate in markets where we have a concentration advantage due to economies of scale. We believe that where possible, it is best to operate with a strong base of properties in order to benefit from the personnel allocation and the market strength associated with managing several properties in the same market. However, we intend to selectively dispose of properties and redeploy capital if we determine a property cannot meet long term earnings growth expectations. We believe that recycling capital is an important aspect of maintaining the overall quality of our portfolio.
Policies With Respect To Certain Activities
The following is a discussion of our investment, financing and other policies. These policies have been determined by our Board of Trustees and our Board may revise these policies without a vote of shareholders.
Investments in Real Estate or Interests in Real Estate
We may develop, purchase or lease income-producing properties for long-term investment, expand and improve the properties presently owned or other properties purchased, or sell such properties, in whole or in part, as circumstances warrant. Although there is no limitation on the types of development activities that we may undertake, we expect that our development activities will meet current market demand and will generally be on a build-to-suit basis for particular tenants, or where a significant portion of the building is pre-leased before construction begins. We may also participate with other entities in property ownership through joint ventures or other types of co-ownership. Our equity investments may be subject to existing or future mortgage financing and other indebtedness that will have priority over our equity investments.
Securities of or Interests in Entities Primarily Engaged in Real Estate Activities and Other Issuers
Subject to the percentage of ownership limitations and gross income tests necessary for REIT qualification, we may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers. We may enter into joint ventures or partnerships for the purpose of obtaining an equity interest in a particular property. We do not currently intend to invest in the securities of other issuers except in connection with joint ventures or acquisitions of indirect interests in properties.
Investments in Real Estate Mortgages
While our current portfolio consists of, and our business objectives emphasize, equity investments in commercial real estate, we may, at the discretion of management or our Board of Trustees, invest in other types of equity real estate investments, mortgages and other real estate interests. We do not presently intend to invest to a significant extent in mortgages or deeds of trust, but may invest in participating mortgages if we conclude that we may benefit from the cash flow or any appreciation in the value of the property securing a mortgage.

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Dispositions
Our disposition of properties is based upon management’s periodic review of our portfolio and the determination by management or our Board of Trustees that a disposition would be in our best interests.
Financing Policies
A primary objective of our financing policy has been to manage our financial position to allow us to raise capital from a variety of sources at competitive rates. Our mortgages, credit facilities and unsecured debt securities contain customary restrictions and limitations on our ability to incur indebtedness. Our charter documents do not limit the indebtedness that we may incur. Our financing strategy is to maintain a strong and flexible financial position by limiting our debt to a prudent level and minimizing our variable interest rate exposure. We intend to finance future growth with the most advantageous source of capital available to us at the time of an acquisition. These sources may include selling common stock, preferred stock, debt securities, depository shares or warrants through public offerings or private placements, utilizing availability under our unsecured revolving credit facilities or incurring additional indebtedness through secured or unsecured borrowings either or through mortgages with recourse limited to specific properties. To qualify as a REIT, we must distribute to our shareholders each year at least ninety percent of our net taxable income, excluding any net capital gain. This distribution requirement makes it unlikely that we will be able to fund future capital needs, including for acquisitions and developments, substantially from income from operations. Therefore, we expect to continue to rely on third party sources of capital to fund future capital needs.
Working Capital Reserves
We maintain working capital reserves and access to borrowings in amounts that our management determines to be adequate to meet our normal contingencies.
Policies with Respect to Other Activities
We expect to issue additional common and preferred shares of beneficial interest in the future and may authorize our Operating Partnership to issue additional common and preferred units of limited partnership interest, including to persons who contribute their interests in properties to us in exchange for such units. We have not engaged in trading, underwriting or agency distribution or sale of securities of unaffiliated issuers and we do not intend to do so. At all times, we intend to make investments consistent with our qualification as a REIT, unless because of circumstances or changes in the Internal Revenue Code of 1986, as amended (or the Treasury Regulations), our Board of Trustees determines that it is no longer in our best interests to qualify as a REIT. We may make loans to third parties, including to joint ventures in which we participate. We intend to make investments in such a way that we will not be treated as an investment company under the Investment Company Act of 1940.
Management Activities
We provide third-party real estate management services primarily through four subsidiaries (collectively, the “Management Companies”): Brandywine Realty Services Corporation (“BRSCO”), BTRS, Inc. (“BTRS”), Brandywine Properties I Limited, Inc. (“BPI”) and Brandywine Properties Management, L.P. (“BPM”). BRSCO, BTRS and BPI are taxable REIT subsidiaries. The Operating Partnership owns a 95% interest in BRSCO and the remaining 5% interest is owned by a partnership comprised of a current executive and former executive of the Company, each of whom is a member of our Board of Trustees. The Operating Partnership owns, directly and indirectly, 100% of each of BTRS, BPI and BPM.
As of December 31, 2006, the Management Companies were managing properties containing an aggregate of approximately 42.3 million net rentable square feet, of which approximately 28.2 million net rentable square feet related to Properties owned by us and approximately 13.0 million net rentable square feet related to properties owned by third parties and unconsolidated Real Estate Ventures.
Geographic Segments
As of December 31, 2006 we were managing our portfolio within nine segments: (1) Pennsylvania—West, (2) Pennsylvania—North, (3) New Jersey, (4) Urban, (5) Richmond, Virginia, (6) California—North, (7) California—South, (8) Mid-Atlantic and (9) Southwest. The Pennsylvania—West segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs of Pennsylvania. The Pennsylvania—North segment includes properties north of Philadelphia in Berks, Bucks, Cumberland, Dauphin, Lehigh and Montgomery

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counties. The New Jersey segment includes properties in counties in the southern and central part of New Jersey including Burlington, Camden and Mercer counties and in Bucks County, Pennsylvania. The Urban segment includes properties in the City of Philadelphia, Pennsylvania and the state of Delaware. The Richmond, Virginia segment includes properties primarily in Albemarle, Chesterfield and Henrico counties, the City of Richmond and Durham, North Carolina. The California—North segment includes properties in the City of Oakland and Concord. The California—South segment includes properties in the City of Carlsbad and San Diego. The Mid-Atlantic segment includes properties in Northern Virginia and the suburban Maryland. The Southwest segment includes properties in Dallas and Travis counties of Texas. Our corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period and general support functions.
Competition
The real estate business is highly competitive. Our properties compete for tenants with similar properties primarily on the basis of location, total occupancy costs (including base rent and operating expenses), services provided, and the design and condition of the improvements. We also face competition when attempting to acquire or develop real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension funds, partnerships and individual investors. Additionally, our ability to compete depends upon trends in the economies of our markets, investment alternatives, financial condition and operating results of current and prospective tenants, availability and cost of capital, construction and renovation costs, land availability, completion of construction approvals, taxes, governmental regulations, legislation and population trends.
Insurance
We maintain comprehensive liability and property insurance on our properties, including for liability, fire and flood. We intend to obtain similar coverage for properties we acquire in the future. There are types of losses, generally of a catastrophic nature, such as losses from terrorism, environmental issues, floods, hurricanes or earthquakes that may be subject to limitations in certain areas. We exercise our discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to maintaining appropriate insurance on our investments at a reasonable cost and on suitable terms. If we suffer a substantial loss, our insurance coverage may not be sufficient to pay the full current market value or current replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it impractical to use insurance proceeds to fully replace or restore a property after it has been damaged or destroyed.
Employees
As of December 31, 2006, we had 599 full-time employees, including 40 union employees.
Government Regulations Relating to the Environment
Many laws and governmental regulations relating to the environment apply to us and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently and may adversely affect us.
Existing conditions at some of our Properties. Independent environmental consultants have conducted Phase I or similar environmental site assessments on all of our properties. We generally obtain these assessments prior to the acquisition of a property and may later update them as required for subsequent financing of the property or as requested by a tenant. Site assessments are generally performed to ASTM standards then existing for Phase I site assessments, and typically include a historical review, a public records review, a visual inspection of the surveyed site, and the issuance of a written report. These assessments do not generally include any soil samplings or subsurface investigations. Depending on the age of the property, the Phase I may have included an assessment of asbestos-containing materials. For properties where asbestos-containing materials were identified or suspected, an operations and maintenance plan was generally prepared and implemented. See Note 2 to our consolidated financial statements for our evaluation in accordance with FIN 47, Accounting for Conditional Asset Retirement Obligations.
Historical operations at or near some of our properties, including the operation of underground storage tanks, may have caused soil or groundwater contamination. We are not aware of any such condition, liability or concern by any other means that would give rise to material environmental liability. However, the assessments may have failed to reveal all environmental conditions, liabilities or compliance concerns; there may be material environmental

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conditions, liabilities or compliance concerns that arose at a property after the review was completed; future laws, ordinances or regulations may impose material additional environmental liability; and current environmental conditions at our Properties may be affected in the future by tenants, third parties or the condition of land or operations near our Properties, such as the presence of underground storage tanks. We cannot be certain that costs of future environmental compliance will not affect our ability to make distributions to our shareholders.
Use of hazardous materials by some of our tenants. Some of our tenants handle hazardous substances and wastes on our properties as part of their routine operations. Environmental laws and regulations may subject these tenants, and potentially us, to liability resulting from such activities. We generally require our tenants, in their leases, to comply with these environmental laws and regulations and to indemnify us for any related liabilities. These tenants are primarily involved in the life sciences and the light industrial and warehouse business. We are not aware of any material noncompliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with any of our Properties, and we do not believe that on-going activities by our tenants will have a material adverse effect on our operations.
Costs related to government regulation and private litigation over environmental matters. Under environmental laws and regulations, we may be liable for the costs of removal, remediation or disposal of hazardous or toxic substances present or released on our Properties. These laws could impose liability without regard to whether we are responsible for, or knew of, the presence or release of the hazardous materials. Government investigations and remediation actions may entail substantial costs and the presence or release of hazardous substances on a property could result in governmental cleanup actions or personal injury or similar claims by private plaintiffs.
Potential environmental liabilities may exceed our environmental insurance coverage limits. We carry what we believe to be sufficient environmental insurance to cover potential liability for soil and groundwater contamination and the presence of asbestos-containing materials at the affected sites identified in our environmental site assessments. Our insurance policies are subject to conditions, qualifications and limitations. Therefore, we cannot provide any assurance that our insurance coverage will be sufficient to cover all liabilities for losses.
Other
We do not have any foreign operations and our business is not seasonal. Our operations are not dependent on a single tenant or a few tenants and no single tenant accounted for more than 10% of our total 2006 revenue.
Code of Conduct
We maintain a Code of Business Conduct and Ethics applicable to our Board and all of our officers and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions. A copy of our Code of Business Conduct and Ethics is available on our website, www.brandywinerealty.com. In addition to being accessible through our website, copies of our Code of Business Conduct and Ethics can be obtained, free of charge, upon written request to Investor Relations, 555 East Lancaster Avenue, Suite 100, Radnor, PA 19087. Any amendments to or waivers of our Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions and that relate to any matter enumerated in Item 406(b) of Regulation S-K promulgated by the SEC will be disclosed on our website.
Corporate Governance Principles and Board Committee Charters
Our Corporate Governance Principles and the charters of the Audit Committee, Compensation Committee and Corporate Governance Committee of the Board of Trustees of Brandywine Realty Trust and additional information regarding our corporate governance are available on our website, www.brandywinerealty.com. In addition to being accessible through our website, copies of our Corporate Governance Principles and charters of our Board Committees can be obtained, free of charge, upon written request to Investor Relations, 555 Lancaster Avenue, Radnor, PA 19087.
Availability of SEC Reports
We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information with the SEC. Members of the public may read and copy materials that we file with the SEC at the

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SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Members of the public may also obtain information on the Public Reference Room by calling the SEC at 1-800-732-0330. The SEC also maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. The address of that site is http://www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information filed by us with the SEC are available, without charge, on our Internet web site, http://www.brandywinerealty.com, as soon as reasonably practicable after they are filed electronically with the SEC. Copies are also available, without charge, from Secretary, Brandywine Realty Trust, 555 East Lancaster Avenue, Suite 100, Radnor, PA 19087.
Item 1A. Risk Factors
Our performance is subject to risks associated with our properties and with the real estate industry.
Our economic performance and the value of our real estate assets, and consequently the value of our securities, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected. Events or conditions beyond our control that may adversely affect our operations or the value of our properties include:
    downturns in the national, regional and local economic climate;
 
    competition from other office, industrial and commercial buildings;
 
    local real estate market conditions, such as oversupply or reduction in demand for office, or other commercial or industrial space;
 
    changes in interest rates and availability of financing;
 
    vacancies, changes in market rental rates and the need to periodically repair, renovate and re-lease space;
 
    increased operating costs, including insurance expense, utilities, real estate taxes, state and local taxes and heightened security costs;
 
    civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war which may result in uninsured or underinsured losses;
 
    significant expenditures associated with each investment, such as debt service payments, real estate taxes, insurance and maintenance costs which are generally not reduced when circumstances cause a reduction in revenues from a property; and
 
    declines in the financial condition of our tenants and our ability to collect rents from our tenants.
We may experience increased operating costs, which might reduce our profitability.
Our properties are subject to increases in operating expenses such as for cleaning, electricity, heating, ventilation and air conditioning, administrative costs and other costs associated with security, landscaping and repairs and maintenance of our properties. In general, under our leases with tenants, we pass on all or a portion of these costs to them. We cannot assure you, however, that tenants will actually bear the full burden of these higher costs, or that such increased costs will not lead them, or other prospective tenants, to seek office space elsewhere. If operating expenses increase, the availability of other comparable office space in our core geographic markets might limit our ability to increase rents; if operating expenses increase without a corresponding increase in revenues, our profitability could diminish and limit our ability to make distributions to shareholders.
Our investment in property development or redevelopment may be more costly than we anticipate.
We intend to continue to develop properties where market conditions warrant such investment. Once made, these investments may not produce results in accordance with our expectations. Risks associated with our development and construction activities include:

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    the unavailability of favorable financing alternatives in the private and public debt markets;
 
    construction costs exceeding original estimates due to rising interest rates and increases in the costs of materials and labor;
 
    construction and lease-up delays resulting in increased debt service, fixed expenses and construction or renovation costs;
 
    expenditure of funds and devotion of management’s time to projects that we do not complete;
 
    the unavailability utilities;
 
    occupancy rates and rents at newly completed properties may fluctuate depending on a number of factors, including market and economic conditions, resulting in lower than projected rental rates and a corresponding lower return on our investment; and
 
    complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other governmental permits.
We may not successfully integrate our historic operations with those of Prentiss and the intended benefits of our acquisition of Prentiss may not be realized.
Our January 2006 acquisition of Prentiss presents challenges to management, including the integration of our historic operations, properties and personnel with those of Prentiss. The acquisition also poses other risks commonly associated with similar transactions, including unanticipated liabilities, unexpected costs and the diversion of management’s attention to the integration of the operations of the combined companies. Any difficulties that our combined company encounters in the transition and integration processes, and any level of integration that is not successfully achieved, could have an adverse effect on our revenue, level of expenses and operating results. We may also experience operational interruptions or the loss of key employees, tenants and customers. As a result, notwithstanding our expectations, we may not realize any of the anticipated benefits or cost savings of the Prentiss acquisition.
We face risks associated with property acquisitions.
We have in the past acquired, and intend in the future to acquire, properties and portfolios of properties, including large portfolios, such as our acquisition of Prentiss, that would increase our size and potentially alter our capital structure. Although we believe that the acquisitions that we have completed in the past and that we expect to undertake in the future have, and will, enhance our future financial performance, the success of such transactions is subject to a number of factors, including the risk that:
    we may not be able to obtain financing for acquisitions on favorable terms;
 
    acquired properties may fail to perform as expected;
 
    the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates;
 
    acquired properties may be located in new markets where we may have limited knowledge and understanding of the local economy, an absence of business relationships in the area or unfamiliarity with local governmental and permitting procedures; and
 
    we may not be able to efficiently integrate acquired properties, particularly portfolios of properties, into our organization and to manage new properties in a way that allows us to realize cost savings and synergies.
We have acquired in the past and in the future may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership interests in our Operating Partnership. This acquisition structure has the effect, among others, of reducing the amount of tax depreciation we can deduct over

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the tax life of the acquired properties, and typically requires that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their tax bases. These restrictions on dispositions could limit our ability to sell an asset at a time, or on terms, that would be favorable absent such restrictions.
Acquired properties may subject us to unknown liabilities.
Properties that we acquire may be subject to unknown liabilities for which we would have no recourse, or only limited recourse, to the former owners of such properties. As a result, if a liability were asserted against us based upon ownership of an acquired property, we might be required to pay significant sums to settle it, which could adversely affect our financial results and cash flow. Unknown liabilities relating to acquired properties could include:
    liabilities for clean-up of undisclosed environmental contamination;
 
    claims by tenants, vendors or other persons arising on account of actions or omissions of the former owners of the properties; and
 
    liabilities incurred in the ordinary course of business.
We have agreed not to sell certain of our properties and to maintain indebtedness subject to guarantees.
We have agreed not to sell some of our properties for varying periods of time, in transactions that would trigger taxable income to the former owners, and we may enter into similar arrangements as a part of future property acquisitions. One of these tax protection agreements is with one of our current trustees. These agreements generally provide that we may dispose of the subject properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax deferred transactions. Such transactions can be difficult to complete and can result in the property acquired in exchange for the disposed of property inheriting the tax attributes (including tax protection covenants) of the disposed of property. Violation of these tax protection agreements would impose significant costs on us. As a result, we are restricted with respect to decisions related to financing, encumbering, expanding or selling of these properties.
We have also entered into agreements that provide prior owners of properties with the right to guarantee specific amounts of indebtedness and, in the event that the specific indebtedness that they guarantee is repaid or reduced, we would be required to provide substitute indebtedness for them to guarantee. These agreements may hinder actions that we may otherwise desire to take to repay or refinance guaranteed indebtedness because we would be required to make payments to the beneficiaries of such agreements if we violate these agreements.
We may be unable to renew leases or re-lease space as leases expire.
If tenants do not renew their leases upon expiration, we may be unable to re-lease the space. Even if the tenants do renew their leases or if we can re-lease the space, the terms of renewal or re-leasing (including the cost of required renovations) may be less favorable than current lease terms. Certain leases grant the tenants an early termination right upon payment of a termination penalty.
We face significant competition from other real estate developers.
We compete with real estate developers, operators and institutions for tenants and acquisition and development opportunities. Some of these competitors have significantly greater financial resources than we have. Such competition may reduce the number of suitable investment opportunities available to us, may interfere with our ability to attract and retain tenants and may increase vacancies, which could result in increased supply and lower market rental rates, reducing our bargaining leverage and adversely affect our ability to improve our operating leverage. In addition, some of our competitors may be willing (because their properties may have vacancy rates higher than those for our properties) to make space available at lower prices than available space in our properties or for other reasons. We cannot assure you that this competition will not adversely affect our cash flow and our ability to make distributions to shareholders.

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Changes in market conditions including capitalization rates applied in real estate acquisitions could impact our ability to grow through acquisitions.
We selectively pursue acquisitions in our core markets when long-term yields make acquisitions attractive. We compete with numerous property owners for the acquisition of real estate properties. Some of these competitors may be willing to accept lower yields on their investments impacting our ability to acquire real estate assets and thus limit our external growth. We cannot assure you that this competition will not adversely affect our cash flow and our ability to make distributions to shareholders.
Property ownership through joint ventures may limit our ability to act exclusively in our interest.
We develop and acquire properties in joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. As of December 31, 2006, we had investments in eleven unconsolidated real estate ventures and four additional real estate ventures that are consolidated in our financial statements. Our investments in the eleven unconsolidated real estate ventures aggregated approximately $74.6 million (net of returns of investment amounts) as of December 31, 2006. We could become engaged in a dispute with one or more of our joint venture partners that might affect our ability to operate a jointly-owned property. Moreover, our joint venture partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives, including objectives that relate to the appropriate timing and terms of any sale or refinancing of a property. In some instances, our joint venture partners may have competing interests in our markets that could create conflicts of interest. If the objectives of our joint venture partners are inconsistent with our own objectives, we will not be able to act exclusively in our interests.
Because real estate is illiquid, we may not be able to sell properties when appropriate.
Real estate investments generally, and in particular large office and industrial properties like those that we own, often cannot be sold quickly. Consequently, we may not be able to alter our portfolio promptly in response to changes in economic or other conditions. In addition, the Internal Revenue Code limits our ability to sell properties that we have held for fewer than four years without resulting in adverse consequences to our shareholders. Furthermore, properties that we have developed and have owned for a significant period of time or that we acquired in exchange for partnership interests in our operating partnership often have a low tax basis. If we were to dispose of any of these properties in a taxable transaction, we may be required under provisions of the Internal Revenue Code applicable to REITs to distribute a significant amount of the taxable gain to our shareholders and this could, in turn, impact our cash flow. In some cases, tax protection agreements with third parties will prevent us from selling certain properties in a taxable transaction without incurring substantial costs. In addition, purchase options and rights of first refusal held by tenants or partners in joint ventures may also limit our ability to sell certain properties. All of these factors reduce our ability to respond to changes in the performance of our investments and could adversely affect our cash flow and ability to make distributions to shareholders as well as the ability of someone to purchase us, even if a purchase were in our shareholders’ best interests.
We may suffer adverse consequences due to the financial difficulties, bankruptcy or insolvency of our tenants.
If one or more of our tenants were to experience financial difficulties, including bankruptcy, insolvency or a general downturn of business, there could be an adverse effect on our financial performance and distributions to shareholders. We cannot assure you that any tenant that files for bankruptcy protection will continue to pay us rent. A bankruptcy filing by or relating to one of our tenants or a lease guarantor would bar efforts by us to collect pre-bankruptcy debts from that tenant or lease guarantor, or its property, unless we receive an order permitting us to do so from the bankruptcy court. In addition, we cannot evict a tenant solely because of bankruptcy. The bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. If, however, a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any such unsecured claim would only be paid to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. Restrictions under the bankruptcy laws further limit the amount of any other claims that we can make if a lease is rejected. As a result, it is likely that we would recover substantially less than the full value of any such unsecured claims that we might hold.

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Some potential losses are not covered by insurance.
We currently carry comprehensive liability, fire, extended coverage and rental loss insurance on all of our properties. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, types of losses, such as lease and other contract claims and terrorism and acts of war that generally are not insured. We cannot assure you that we will be able to renew insurance coverage in an adequate amount or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and mold, or, if offered, these types of insurance may be prohibitively expensive. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. We cannot assure you that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our cash flow and ability to make distributions to shareholders.
Terrorist attacks and other acts of violence or war may adversely impact our performance and may affect the markets on which our securities are traded.
Terrorist attacks against our properties, or against the United States or our interests, may negatively impact our operations and the value of our securities. Attacks or armed conflicts could result in increased operating costs; for example, it might cost more in the future for building security, property/casualty and liability insurance, and property maintenance. As a result of terrorist activities and other market conditions, the cost of insurance coverage for our properties could also increase. We might not be able to pass along the increased costs associated with such increased security measures and insurance to our tenants, which could reduce our profitability and cash flow. Furthermore, any terrorist attacks or armed conflicts could result in increased volatility in or damage to the United States and worldwide financial markets and economy. Such adverse economic conditions could affect the ability of our tenants to pay rent and our costs of capitals, which could have a negative impact on our results.
Our ability to make distributions is subject to various risks.
Historically, we have paid quarterly distributions to our shareholders. Our ability to make distributions in the future will depend upon:
    the operational and financial performance of our properties;
 
    capital expenditures with respect to existing and newly acquired properties;
 
    general and administrative costs associated with our operation as a publicly-held REIT;
 
    the amount of, and the interest rates on, our debt; and
 
    the absence of significant expenditures relating to environmental and other regulatory matters.
Certain of these matters are beyond our control and any significant difference between our expectations and actual results could have a material adverse effect on our cash flow and our ability to make distributions to shareholders.
Changes in the law may adversely affect our cash flow.
Because increases in income and service taxes are generally not passed through to tenants under leases, such increases may adversely affect our cash flow and ability to make expected distributions to shareholders. Our properties are also subject to various regulatory requirements, such as those relating to the environment, fire and safety. Our failure to comply with these requirements could result in the imposition of fines and damage awards and default under some of our tenant leases. Moreover, the costs to comply with any new or different regulations could adversely affect our cash flow and our ability to make distributions. Although we believe that our properties are in material compliance with all such requirements, we cannot assure you that these requirements will not change or that newly imposed requirements will not require significant expenditures.

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The terms and covenants relating to our indebtedness could adversely impact our economic performance.
Like other real estate companies which incur debt, we are subject to risks associated with debt financing, such as the insufficiency of cash flow to meet required debt service payment obligations and the inability to refinance existing indebtedness. If our debt cannot be paid, refinanced or extended at maturity, in addition to our failure to repay our debt, we may not be able to make distributions to shareholders at expected levels or at all. Furthermore, an increase in our interest expense could adversely affect our cash flow and ability to make distributions to shareholders. If we do not meet our debt service obligations, any properties securing such indebtedness could be foreclosed on, which would have a material adverse effect on our cash flow and ability to make distributions and, depending on the number of properties foreclosed on, could threaten our continued viability.
Our credit facilities and the indenture governing our unsecured public debt securities contain (and any new or amended facility will contain) customary restrictions, requirements and other limitations on our ability to incur indebtedness, including total debt to asset ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt which we must maintain. Our ability to borrow under our credit facilities is (and any new or amended facility will be) subject to compliance with such financial and other covenants. In the event that we fail to satisfy these covenants, we would be in default under the credit facilities and indenture and may be required to repay such debt with capital from other sources. Under such circumstances, other sources of capital may not be available to us, or may be available only on unattractive terms.
Increases in interest rates on variable rate indebtedness would increase our interest expense, which could adversely affect our cash flow and ability to make distributions to shareholders. Rising interest rates could also restrict our ability to refinance existing debt when it matures. In addition, an increase in interest rates could decrease the amounts that third parties are willing to pay for our assets, thereby limiting our ability to alter our portfolio promptly in relation to economic or other conditions. We have entered into and may, from time to time, enter into agreements such as interest rate hedges, swaps, floors, caps and other interest rate hedging contracts with respect to a portion of our variable rate debt. Although these agreements may lessen the impact of rising interest rates on us, they also expose us to the risk that other parties to the agreements will not perform or that we cannot enforce the agreements.
Our degree of leverage could limit our ability to obtain additional financing or affect the market price of our equity shares or debt securities.
Our degree of leverage could affect our ability to obtain additional financing for working capital expenditures, development, acquisitions or other general corporate purposes. Our senior unsecured debt is currently rated investment grade by the three major rating agencies. We cannot, however, assure you that we will be able to maintain this rating. In the event that our unsecured debt is downgraded from the current rating, we would likely incur higher borrowing costs and the market prices of our common shares and debt securities might decline. Our degree of leverage could also make us more vulnerable to a downturn in business or the economy generally.
Potential liability for environmental contamination could result in substantial costs.
Under various federal, state and local laws, ordinances and regulations, we may be liable for the costs to investigate and remove or remediate hazardous or toxic substances on or in our properties, often regardless of whether we know of or are responsible for the presence of these substances. These costs may be substantial. Also, if hazardous or toxic substances are present on a property, or if we fail to properly remediate such substances, our ability to sell or rent the property or to borrow using that property as collateral may be adversely affected.
Additionally, we develop, manage, lease and/or operate various properties for third parties. Consequently, we may be considered to have been or to be an operator of these properties and, therefore, potentially liable for removal or remediation costs or other potential costs that could relate to hazardous or toxic substances.
An earthquake or other natural disasters could adversely affect our business.
Some of our properties are located in California which is a high risk geographical area for earthquakes or other natural disasters. Depending upon its magnitude, an earthquake could severely damage our properties which would adversely affect our business. We maintain earthquake insurance for our California properties and the resulting business interruption. We cannot assure you that our insurance will be sufficient if there is a major earthquake.

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Americans with Disabilities Act compliance could be costly.
The Americans with Disabilities Act of 1990 (“ADA”) requires that all public accommodations and commercial facilities, including office buildings, meet certain federal requirements related to access and use by disabled persons. Compliance with ADA requirements could involve the removal of structural barriers from certain disabled persons’ entrances which could adversely affect our financial condition and results of operations. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses. Although we believe that our properties are in material compliance with present requirements, noncompliance with the ADA or similar or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us. In addition, changes to existing requirements or enactments of new requirements could require significant expenditures. Such costs may adversely affect our cash flow and ability to make distributions to shareholders.
Our status as a REIT (or any of our REIT subsidiaries) is dependent on compliance with federal income tax requirements.
If we (or any of our REIT subsidiaries) fail to qualify as a REIT, we or the affected REIT subsidiary would be subject to federal income tax at regular corporate rates. Also, unless the IRS granted us or our affected REIT subsidiary, as the case may be, relief under certain statutory provisions, we or it would remain disqualified as a REIT for four years following the year it first failed to qualify. If we or any of our REIT subsidiaries fails to qualify as a REIT, we or they would be required to pay significant income taxes and would, therefore, have less money available for investments or for distributions to shareholders. This would likely have a material adverse effect on the value of the combined company’s securities. In addition, we or our affected REIT subsidiaries would no longer be required to make any distributions to shareholders.
Failure of the Operating Partnership (or a subsidiary partnership) to be treated as a partnership would have serious adverse consequences to our shareholders. If the IRS were to successfully challenge the tax status of the Operating Partnership or any of its subsidiary partnerships for federal income tax purposes, the Operating Partnership or the affected subsidiary partnership would be taxable as a corporation. In such event we would cease to qualify as a REIT and the imposition of a corporate tax on the Operating Partnership or a subsidiary partnership would reduce the amount of cash available for distribution from the Operating Partnership to us and ultimately to our shareholders.
Even if we qualify as a REIT, we will be required to pay certain federal, state and local taxes on our income and properties. In addition, our taxable REIT subsidiaries will be subject to federal, state and local income tax at regular corporate rates on their net taxable income derived from management, leasing and related service business. If we have net income from a prohibited transaction, such income will be subject to a 100% tax.
We face possible state and local tax audits.
Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes, but are subject to certain state and local taxes. In the normal course of business, certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits. Although we believe that we have substantial arguments in favor of our positions in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. Collectively, tax deficiency notices received to date from the jurisdictions conducting the ongoing audits have not been material. However, there can be no assurance that future audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
Competition for skilled personnel could increase labor costs.
We compete with various other companies in attracting and retaining qualified and skilled personnel. We depend on our ability to attract and retain skilled management personnel who are responsible for the day-to-day operations of our company. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel. We may not be able to offset such added costs by increasing the rates we charge tenants. If there is an increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.

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We are dependent upon our key personnel.
We are dependent upon our key personnel whose continued service is not guaranteed. We are dependent on our executive officers for strategic business direction and real estate experience. In connection with the acquisition of Prentiss, we entered into employment agreements with several former officers of Prentiss. Although we believe that we could find replacements for these key personnel (including the former Prentiss officers), loss of their services could adversely affect our operations.
Although we have an employment agreement with Gerard H. Sweeney, our President and Chief Executive Officer, for a term extending to February 9, 2010, this agreement does not restrict his ability to become employed by a competitor following the termination of his employment. We do not have key man life insurance coverage on our executive officers.
Certain limitations will exist with respect to a third party’s ability to acquire us or effectuate a change in control.
Limitations imposed to protect our REIT status. In order to protect us against the loss of our REIT status, our Declaration of Trust limits any shareholder from owning more than 9.8% in value of our outstanding shares, subject to certain exceptions. The ownership limit may have the effect of precluding acquisition of control of us. If anyone acquires shares in excess of the ownership limit, we may:
    consider the transfer to be null and void;
 
    not reflect the transaction on our books;
 
    institute legal action to stop the transaction;
 
    not pay dividends or other distributions with respect to those shares;
 
    not recognize any voting rights for those shares; and
 
    consider the shares held in trust for the benefit of a person to whom such shares may be transferred.
Limitation due to our ability to issue preferred shares. Our Declaration of Trust authorizes our Board of Trustees to cause us to issue preferred shares, without limitation as to amount and without shareholder consent. Our Board of Trustees is able to establish the preferences and rights of any preferred shares issued and these shares could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our shareholders’ best interests.
Limitation imposed by the Maryland Business Combination Law. The Maryland General Corporation Law, as applicable to Maryland REITs, establishes special restrictions against “business combinations” between a Maryland REIT and “interested shareholders” or their affiliates unless an exemption is applicable. An interested shareholder includes a person who beneficially owns, and an affiliate or associate of the trust who, at any time within the two-year period prior to the date in question, was the beneficial owner of, ten percent or more of the voting power of our then-outstanding voting shares. Among other things, Maryland law prohibits (for a period of five years) a merger and certain other transactions between a Maryland REIT and an interested shareholder unless the board of trustees had approved the transaction before the party became an interested shareholder. The five-year period runs from the most recent date on which the interested shareholder became an interested shareholder. Thereafter, any such business combination must be recommended by the board of trustees and approved by two super-majority shareholder votes unless, among other conditions, the common shareholders receive a minimum price for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for our shares or unless the board of trustees approved the transaction before the party in question became an interested shareholder. The business combination statute could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offers, even if the acquisition would be in our shareholders’ best interests.
Maryland Control Share Acquisition Act. Maryland law provides that “control shares” of a REIT acquired in a “control share acquisition” shall have no voting rights except to the extent approved by a vote of two-thirds of the vote eligible to be cast on the matter under the Maryland Control Share Acquisition Act. “Control Shares” means

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shares that, if aggregated with all other shares previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing trustees within one of the following ranges of voting power: one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions. If voting rights or control shares acquired in a control share acquisition are not approved at a shareholder’s meeting, then subject to certain conditions and limitations the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a shareholder’s meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other shareholders may exercise appraisal rights. Any control shares acquired in a control share acquisition which are not exempt under our Bylaws are subject to the Maryland Control Share Acquisition Act. Our Bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our shares. We cannot assure you that this provision will not be amended or eliminated at any time in the future.
Advance Notice Provisions for Shareholder Nominations and Proposals. Our bylaws require advance notice for shareholders to nominate persons for election as trustees at, or to bring other business before, any meeting of our shareholders. This bylaw provision limits the ability of shareholders to make nominations of persons for election as trustees or to introduce other proposals unless we are notified in a timely manner prior to the meeting.
Many factors can have an adverse effect on the market value of our securities.
A number of factors might adversely affect the price of our securities, many of which are beyond our control. These factors include:
    increases in market interest rates, relative to the dividend yield on our shares. If market interest rates go up, prospective purchasers of our securities may require a higher yield. Higher market interest rates would not, however, result in more funds for us to distribute and, to the contrary, would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of our common shares to go down;
 
    anticipated benefit of an investment in our securities as compared to investment in securities of companies in other industries (including benefits associated with tax treatment of dividends and distributions);
 
    perception by market professionals of REITs generally and REITs comparable to us in particular;
 
    level of institutional investor interest in our securities;
 
    relatively low trading volumes in securities of REITs;
 
    our results of operations and financial condition; and
 
    investor confidence in the stock market generally.
The market value of our common shares is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash distributions. Consequently, our common shares may trade at prices that are higher or lower than our net asset value per common share. If our future earnings or cash distributions are less than expected, it is likely that the market price of our common shares will diminish.
Additional issuances of equity securities may be dilutive to shareholders.
The interests of our shareholders could be diluted if we issue additional equity securities to finance future developments or acquisitions or to repay indebtedness. Our Board of Trustees may authorize the issuance of additional equity securities without shareholder approval. Our ability to execute our business strategy depends upon our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including the issuance of common and preferred equity.

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The issuance of preferred securities may adversely affect the rights of holders of our common shares.
Because our Board of Trustees has the power to establish the preferences and rights of each class or series of preferred shares, we may afford the holders in any series or class of preferred shares preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders of common shares. Our Board of Trustees also has the power to establish the preferences and rights of each class or series of units in Brandywine Operating Partnership, and may afford the holders in any series or class of preferred units preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders of common units.
The acquisition of new properties which lack operating history with us may give rise to difficulties in predicting revenue potential.
We will continue to acquire additional properties. These acquisitions could fail to perform in accordance with expectations. If we fail to accurately estimate occupancy levels, operating costs or costs of improvements to bring an acquired property up to the standards established for our intended market position, the performance of the property may be below expectations. Acquired properties may have characteristics or deficiencies affecting their valuation or revenue potential that we have not yet discovered. We cannot assure you that the performance of properties acquired by us will increase or be maintained under our management.
Our performance is dependent upon the economic conditions of the markets in which our properties are located.
Our properties are located in the Mid-Atlantic, Southwest, Northern California and Southern California markets. Like other real estate markets, these commercial real estate markets have experienced economic downturns in the past, and future declines in any of these economies or real estate markets could adversely affect cash available for distribution. Our financial performance and ability to make distributions to our shareholders will be particularly sensitive to the economic conditions in these markets. The local economic climate, which may be adversely impacted by business layoffs or downsizing, industry slowdowns, changing demographics and other factors, and local real estate conditions, such as oversupply of or reduced demand for office, industrial and other competing commercial properties, may affect revenues and the value of properties, including properties to be acquired or developed. We cannot assure you that these local economies will grow in the future.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
Property Acquisitions
We acquired the following properties during the year ended December 31, 2006:
                                 
Month of           # of     Rentable Square     Purchase  
Acquisition   Property/Portfolio Name   Location   Buildings     Feet/ Acres     Price  
                            (in 000’s)  
Office:
                               
Jan-06
  Prentiss Properties   Various     79       14,043,326     $ 2,701,652  
Feb-06
  100 Lenox Drive   Lawrenceville, NJ     1       92,980       10,150  
Apr-06
  One Paragon Place   Richmond, VA     1       145,127       24,000  
Aug-06
  2340 Dulles Corner Boulevard   Herndon, VA     1       264,405       79,000  
Aug-06
  2355 Dulles Corner Boulevard   Herndon, VA     1       179,176       55,000  
Nov-06
  2251 Corporate Park Drive   Herndon, VA     1       158,016       59,000  
 
                         
 
  Total Office Properties Acquired         84       14,883,030     $ 2,928,802  
 
                         
 
                               
Land Parcels:
                               
Mar-06
  101-103 Juniper Street (parking garage)   Philadelphia, PA                 $ 2,250  
Apr-06
  Bishops Gate South   Mount Laurel, NJ             47.9       6,700  
Apr-06
  Gradyville Road   Newtown (Delaware County), PA             5.5       1,900  
Jun-06
  West Creek Land   Goochland County, VA             23.2       4,636  
Oct-06
  Rob Roy Land   Austin, TX             16.8       2,475  
 
                           
 
  Total Land Acquired                 93.4     $ 17,961  
 
                           

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The purchase prices above do not include transaction costs, excluding the Prentiss properties.
Development Properties Placed in Service
We placed in service the following properties during the year ended December 31, 2006:
                         
Month Placed           # of   Rentable
in Service   Property/Portfolio Name   Location   Buildings   Square Feet
Office:
                       
Nov-06
  Cira Centre   Philadelphia, PA     1       731,852  
Dec-06
  855 Springdale Drive   West Whiteland, PA     1       52,500  
 
                       
 
  Total Properties Placed in Service         2       784,352  
 
                       
We place a property under development in service once a property reaches 95% occupancy or one year after the completion of shell construction, whichever is earlier.

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Property Sales
We sold the following properties during the year ended December 31, 2006:
                                 
Month of           # of     Rentable Square     Sales  
Sale   Property/Portfolio Name   Location   Bldgs.     Feet/ Acres     Price  
                            (in 000’s)  
Office:
                               
Jan-06
  850/950 Warrenville Road   Chicago, IL     2       99,470     $ 15,250  
Feb-06
  550/650 Warrenville Road   Chicago, IL     2       169,115       22,250  
Feb-06
  1050 Warrenville Road   Chicago, IL     1       53,982       3,500  
Feb-06
  701 Warrenville Road   Chicago, IL     1       68,046       9,500  
Feb-06
  801 Cherry Street   Fort Worth, TX     1       1,025,601       172,000  
Mar-06
  8755 W. Higgins Road   Chicago, IL     1       237,320       30,000  
Jun-06
  505 Millenium Drive   Allen, TX     1       98,586       5,943  
Jul-06
  110 Summit Drive   Exton, PA     1       43,660       3,690  
Aug-06
  8144 Walnut Hill Lane   Dallas, TX     1       464,470       63,300  
Aug-06
  111 Presidential Boulevard   Bala Cynwyd, PA     1       172,894       34,868  
Aug-06
  2200 Cabot Drive   Lisle, IL     1       124,327       24,250  
Nov-06
  King & Harvard Drive   Cherry Hill, NJ     1       67,444       6,600  
Nov-06
  One South Union Avenue   Cherry Hill, NJ     1       99,573       11,000  
Nov-06
  1255 Corporate Drive   Irving, TX     1       150,019       20,200  
Dec-06
  2110 Walnut Hill Lane   Irving, TX     3       164,782       11,825  
Dec-06
  105/140 Terry Drive   Newtown (Bucks County), PA     2       128,666       16,150  
Dec-06
  3890 West Northwest Highway   Dallas, TX     1       126,132       11,000  
Dec-06
  3860 West Northwest Highway   Dallas, TX     1       70,128       6,000  
 
                         
 
  Total Office Properties Sold         23       3,364,215     $ 467,326  
 
                         
 
                               
Land Parcels:
                               
Apr-06
  Radnor Chester Road   Radnor, PA             1.3     $ 4,500  
Jun-06
  Highland Drive   Westampton, NJ             5.5       427  
Aug-06
  Natomas Land   Sacramento, CA             10.9       5,223  
Dec-06
  Newtown Land   Newtown (Bucks County), PA             59.0       19,000  
 
                           
 
  Total Land Sold                 76.7     $ 29,150  
 
                           
Properties
As of December 31, 2006, we owned 261 office properties, 23 industrial facilities and one mixed-use property that contain an aggregate of approximately 28.2 million net rentable square feet. We also have 6 properties under development, 3 properties under redevelopment and 4 lease-up properties containing an aggregate 2.1 million net rentable square feet. The properties are located in and surrounding Philadelphia, Wilmington, Southern and Central New Jersey, Richmond, Metropolitan Washington, D.C., Dallas/Fort Worth, Austin, Oakland, San Diego and Los Angeles. As of December 31, 2006, the Properties were approximately 91.5% occupied by 1,623 tenants and had an average age of approximately 17.8 years. The office properties are primarily two to three story suburban office buildings containing an average of approximately 108,019 net rentable square feet. The industrial properties accommodate a variety of tenant uses, including light manufacturing, assembly, distribution and warehousing. We carry comprehensive liability, fire, extended coverage and rental loss insurance covering all of the Properties, with policy specifications and insured limits which we believe are adequate.

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We had the following projects in development or redevelopment as of December 31, 2006:
                             
                %    
                Leased   Projected
        Rentable   as of   In-Service
Project Name   Location   Square Feet   12/31/06   Date (a)
Under Development:
                           
Three Paragon
  Richmond, VA     72,561       71 %   Jun-07
Metroplex
  Plymouth Meeting, PA     120,877       0 %   Apr-08
1200 Lenox Drive
  Lawrenceville, NJ     71,250       0 %   Apr-08
Park on Barton Creek
  Austin, TX     213,255       0 %   Jun-08
2150 Franklin
  Oakland, CA     215,000       0 %   Oct-08
South Lake at Dulles
  Herndon, VA     267,350       0 %   Aug-08
 
                           
 
        960,293                  
 
                           
 
                           
Under Redevelopment:
                           
555 East Lancaster Avenue
  Radnor, PA     242,032       92 %(b)   May-07
500 Office Center Drive
  Fort Washington, PA     104,303       36 %   Oct-07
100 Lenox Drive
  Lawrenceville, NJ     92,980       0 %   May-08
 
                           
 
        439,315                  
 
                           
 
        1,399,608                  
 
                           
 
(a)   Projected in-service date represents the earlier of (i) the date at which the property is estimated to be 95% occupied or (ii) one year from the project completion date.
 
(b)   Includes the portion of the building we occupied in the second quarter of 2006.
As of December 31, 2006, the above nine projects accounted for $141.2 million of the $217.9 million of construction in process on our consolidated balance sheet.
As of December 31, 2006, we expect our total investment in these nine projects, including an estimate of the tenant improvement costs, to be approximately $304.3 million.
The following table sets forth information with respect to our operating properties at December 31, 2006:

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                                            Average
                                    Total Base Rent   Annualized
                    Net   Percentage   for the Twelve   Rental Rate
                Year   Rentable   Leased as of   Months Ended   as of
                Built/   Square   December 31,   December 31,   December 31,
Property Name       Location   State   Renovated   Feet   2006 (a)   2006 (b) (000’s)   2006 (c)
CALIFORNIA NORTH SEGMENT
                                               
1 Kaiser Plaza
      Oakland   CA   1970     530,887       98.1 %   $ 16,028     $ 34.34  
2101 Webster Street
      Oakland   CA   1985     464,424       93.2 %     11,538       29.01  
1901 Harrison Street
      Oakland   CA   1985     272,100       95.3 %     7,565       32.05  
1220 Concord Avenue
      Concord   CA   1984     175,153       100.0 %     2,944       22.06  
1200 Concord Avenue
      Concord   CA   1984     175,103       100.0 %     4,161       24.47  
 
                                               
MID-ATLANTIC REGION SEGMENT
                                               
7101 Wisconsin Avenue
      Bethesda   MD   1975     223,054       76.1 %     4,640       21.88  
6600 Rockledge Drive
  (d)   Bethesda   MD   1981     156,325       100.0 %     4,993       36.27  
2273 Research Boulevard
      Rockville   MD   1999     147,689       85.0 %     2,751       24.53  
2275 Research Boulevard
      Rockville   MD   1990     147,267       91.2 %     2,993       23.17  
2277 Research Boulevard
      Rockville   MD   1986     137,045       100.0 %     3,012       24.29  
11720 Beltsville Drive
      Beltsville   MD   1987     132,252       58.8 %     875       17.72  
7735 Old Georgetown Road
      Bethesda   MD   1964/1997     124,480       98.4 %     3,233       30.38  
11700 Beltsville Drive
      Beltsville   MD   1981     95,983       71.1 %     1,517       21.75  
11710 Beltsville Drive
      Beltsville   MD   1987     77,869       80.0 %     1,586       25.05  
11740 Beltsville Drive
      Beltsville   MD   1987     6,783       100.0 %     160       26.41  
1676 International Drive
      McLean   VA   1999     299,413       100.0 %     9,152       31.59  
2340 Dulles Corner Boulevard
      Herndon   VA   1987     264,405       96.8 %     2,443       26.04  
1900 Gallows Road
      Vienna   VA   1989     202,684       100.0 %     4,244       23.65  
3130 Fairview Park Drive
      Falls Church   VA   1999     183,111       72.4 %     5,213       30.96  
3141 Fairview Park Drive
      Falls Church   VA   1988     180,041       92.9 %     3,886       24.36  
2355 Dulles Corner Boulevard
      Herndon   VA   1988     179,074       98.7 %     1,311       15.63  
2411 Dulles Corner Park
      Herndon   VA   1990     177,072       95.4 %     5,078       30.10  
1880 Campus Commons Drive
      Reston   VA   1985     172,448       100.0 %     3,110       19.78  
2121 Cooperative Way
      Herndon   VA   2000     161,274       100.0 %     4,435       27.74  
8260 Greensboro Drive
      McLean   VA   1980     161,229       93.3 %     3,667       25.03  
2251 Corporate Park Drive
      Herndon   VA   2000     158,016       100.0 %     664       32.93  
13880 Dulles Corner Lane
      Herndon   VA   1997     151,747       100.0 %     4,686       30.83  
8521 Leesburg Pike
      Vienna   VA   1984     150,919       92.2 %     3,161       24.54  
12015 Lee Jackson Memorial Highway
      Fairfax   VA   1985     150,432       92.7 %     3,335       24.52  
2201 Cooperative Way
      Herndon   VA   1990     138,545       100.0 %     3,829       28.41  
11781 Lee Jackson Memorial Highway
      Fairfax   VA   1982     127,227       96.8 %     3,048       24.26  
13825 Sunrise Valley Drive
      Herndon   VA   1989     104,466       100.0 %     2,484       24.67  
4401 Fair Lakes Court
      Fairfax   VA   1988     55,972       98.7 %     1,573       24.13  
 
                                               
PENNSYLVANIA NORTH SEGMENT
                                               
100-300 Gundy Drive
      Reading   PA   1970     452,902       100.0 %     7,222       15.64  
401 Plymouth Road
      Plymouth Meeting   PA   2001     201,528       100.0 %     5,880       27.08  
300 Corporate Center Drive
      Camp Hill   PA   1989     175,280       91.3 %     1,920       10.23  
7535 Windsor Drive
      Allentown   PA   1988/2004     132,375       76.0 %     1,372       16.01  
100 Kachel Blvd
      Reading   PA   1970     131,082       100.0 %     2,960       21.45  
501 Office Center Drive
      Fort Washington   PA   1974/2005     114,795       98.0 %     2,340       20.83  
7130 Ambassador Drive
  (f)   Allentown   PA   1991     114,049       100.0 %     430       3.76  
7350 Tilghman Street
      Allentown   PA   1987     111,500       100.0 %     1,983       20.11  
7450 Tilghman Street
      Allentown   PA   1986     100,000       100.0 %     1,545       18.02  

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                                            Average
                                    Total Base Rent   Annualized
                    Net   Percentage   for the Twelve   Rental Rate
                Year   Rentable   Leased as of   Months Ended   as of
                Built/   Square   December 31,   December 31,   December 31,
Property Name       Location   State   Renovated   Feet   2006 (a)   2006 (b) (000’s)   2006 (c)
620 West Germantown Pike
      Plymouth Meeting   PA   1990     90,175       89.3 %     1,772       27.91  
610 West Germantown Pike
      Plymouth Meeting   PA   1987     90,152       100.0 %     2,406       30.12  
630 West Germantown Pike
      Plymouth Meeting   PA   1988     89,925       88.8 %     1,768       24.05  
600 West Germantown Pike
      Plymouth Meeting   PA   1986     89,681       97.4 %     2,237       20.77  
3331 Street Road -Greenwood Square
      Bensalem   PA   1986     81,575       98.8 %     1,447       20.45  
One Progress Drive
      Horsham   PA   1986     79,204       100.0 %     848       13.40  
323 Norristown Road
      Lower Gwyned   PA   1988     76,287       100.0 %     1,447       19.16  
160 - 180 West Germantown Pike
      East Norriton   PA   1982     73,394       69.4 %     902       17.15  
500 Enterprise Road
      Horsham   PA   1990     66,751       100.0 %     506       13.53  
925 Harvest Drive
      Blue Bell   PA   1990     62,957       100.0 %     1,060       19.22  
980 Harvest Drive
      Blue Bell   PA   1988     62,379       100.0 %     1,317       21.32  
3329 Street Road -Greenwood Square
      Bensalem   PA   1985     60,705       100.0 %     1,146       21.02  
200 Corporate Center Drive
      Camp Hill   PA   1989     60,000       100.0 %     1,051       17.23  
321 Norristown Road
      Lower Gwyned   PA   1971     59,994       95.0 %     1,056       19.22  
520 Virginia Drive
      Fort Washington   PA   1987     56,454       100.0 %            
910 Harvest Drive
      Blue Bell   PA   1990     52,611       100.0 %     704       13.72  
2240/50 Butler Pike
      Plymouth Meeting   PA   1984     52,229       100.0 %     1,119       20.96  
920 Harvest Drive
      Blue Bell   PA   1990     51,894       77.8 %     554       17.71  
1155 Business Center Drive
      Horsham   PA   1990     51,388       94.2 %     803       18.55  
800 Business Center Drive
      Horsham   PA   1986     51,236       100.0 %     598       15.71  
7150 Windsor Drive
      Allentown   PA   1988     49,420       100.0 %     542       14.41  
6575 Snowdrift Road
      Allentown   PA   1988     47,091       100.0 %     396       13.31  
220 Commerce Drive
      Fort Washington   PA   1985     46,080       94.5 %     794       21.39  
6990 Snowdrift Road (A)
      Allentown   PA   2003     44,200       100.0 %     763       18.30  
7248 Tilghman Street
      Allentown   PA   1987     43,782       73.2 %     535       17.56  
7360 Windsor Drive
      Allentown   PA   2001     43,600       100.0 %     935       24.41  
300 Welsh Road — Building I
      Horsham   PA   1980     40,042       100.0 %     679       18.65  
7310 Tilghman Street
      Allentown   PA   1985     40,000       83.5 %     472       17.73  
150 Corporate Center Drive
      Camp Hill   PA   1987     39,401       94.1 %     703       18.84  
755 Business Center Drive
      Horsham   PA   1998     38,050       100.0 %     576       24.98  
7010 Snowdrift Road
      Allentown   PA   1991     33,029       60.5 %     145       15.67  
2260 Butler Pike
      Plymouth Meeting   PA   1984     31,892       100.0 %     654       14.59  
700 Business Center Drive
      Horsham   PA   1986     30,773       100.0 %     434       14.78  
120 West Germantown Pike
      Plymouth Meeting   PA   1984     30,574       100.0 %     562       20.10  
650 Dresher Road
      Horsham   PA   1984     30,071       100.0 %     684       23.71  
655 Business Center Drive
      Horsham   PA   1997     29,849       94.3 %     399       19.70  
630 Dresher Road
      Horsham   PA   1987     28,894       100.0 %     717       25.95  
6990 Snowdrift Road (B)
      Allentown   PA   2004     27,900       100.0 %     401       17.71  
140 West Germantown Pike
      Plymouth Meeting   PA   1984     25,357       100.0 %     488       23.09  
3333 Street Road -Greenwood Square
      Bensalem   PA   1988     25,000       100.0 %     539       23.89  
800 Corporate Circle Drive
      Harrisburg   PA   1979     24,862       49.7 %     197       17.80  
500 Nationwide Drive
      Harrisburg   PA   1977     18,027       75.5 %     211       18.85  
600 Corporate Circle Drive
      Harrisburg   PA   1978     17,858       100.0 %     287       18.41  
300 Welsh Road — Building II
      Horsham   PA   1980     17,750       100.0 %     333       17.29  
2404 Park Drive
      Harrisburg   PA   1983     11,000       100.0 %     215       19.00  
2401 Park Drive
      Harrisburg   PA   1984     10,074       100.0 %     183       18.74  

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Table of Contents

                                                 
                                            Average
                                    Total Base Rent   Annualized
                    Net   Percentage   for the Twelve   Rental Rate
                Year   Rentable   Leased as of   Months Ended   as of
                Built/   Square   December 31,   December 31,   December 31,
Property Name       Location   State   Renovated   Feet   2006 (a)   2006 (b) (000’s)   2006 (c)
George Kachel Farmhouse
      Reading   PA   2000     1,664       0.0 %            
 
PENNSYLVANIA WEST SEGMENT
                                               
101 West Elm Street
      W. Conshohocken   PA   1999     185,774       77.2 %     3,371       25.18  
One Radnor Corporate Center
      Radnor   PA   1998     185,166       65.9 %     4,743       31.86  
Four Radnor Corporate Center
      Radnor   PA   1995     165,138       78.5 %     2,988       21.02  
Five Radnor Corporate Center
      Radnor   PA   1998     164,577       91.9 %     4,755       32.70  
751-761 Fifth Avenue
      King Of Prussia   PA   1967     158,000       100.0 %     532       3.39  
630 Allendale Road
      King of Prussia   PA   2000     150,000       100.0 %     3,722       25.40  
640 Freedom Business Center
  (d)   King Of Prussia   PA   1991     132,000       84.1 %     2,796       25.65  
52 Swedesford Square
      East Whiteland Twp.   PA   1988     131,017       100.0 %     2,677       21.18  
400 Berwyn Park
      Berwyn   PA   1999     124,182       100.0 %     3,256       26.72  
Three Radnor Corporate Center
      Radnor   PA   1998     119,194       80.0 %     2,635       28.38  
101 Lindenwood Drive
      Malvern   PA   1988     118,121       100.0 %     2,114       19.36  
300 Berwyn Park
      Berwyn   PA   1989     109,919       98.8 %     2,180       24.12  
442 Creamery Way
  (f)   Exton   PA   1991     104,500       100.0 %     598       6.28  
Two Radnor Corporate Center
      Radnor   PA   1998     100,973       69.0 %     2,156       30.10  
301 Lindenwood Drive
      Malvern   PA   1984     97,813       99.3 %     1,766       18.63  
1 West Elm Street
      W. Conshohocken   PA   1999     97,737       100.0 %     2,744       28.44  
555 Croton Road
      King of Prussia   PA   1999     96,909       100.0 %     2,696       29.74  
500 North Gulph Road
      King Of Prussia   PA   1979     93,082       80.8 %     2,184       19.09  
630 Freedom Business Center
  (d)   King Of Prussia   PA   1989     86,683       97.0 %     1,986       25.71  
620 Freedom Business Center
  (d)   King Of Prussia   PA   1986     86,570       100.0 %     1,569       16.93  
1200 Swedsford Road
      Berwyn   PA   1994     86,000       100.0 %     2,111       26.99  
595 East Swedesford Road
      Wayne   PA   1998     81,890       100.0 %     1,573       21.35  
1050 Westlakes Drive
      Berwyn   PA   1984     80,000       100.0 %     719        
1060 First Avenue
      King Of Prussia   PA   1987     77,718       90.6 %     1,380       22.03  
741 First Avenue
      King Of Prussia   PA   1966     77,184       100.0 %     580       8.85  
1040 First Avenue
      King Of Prussia   PA   1985     75,488       93.6 %     1,321       21.97  
200 Berwyn Park
      Berwyn   PA   1987     75,025       100.0 %     1,574       23.40  
1020 First Avenue
      King Of Prussia   PA   1984     74,556       100.0 %     1,639       23.37  
1000 First Avenue
      King Of Prussia   PA   1980     74,139       56.8 %     921       23.38  
436 Creamery Way
      Exton   PA   1991     72,300       87.8 %     616       13.53  
14 Campus Boulevard
      Newtown Square   PA   1998     69,542       100.0 %     1,466       25.83  
575 East Swedesford Road
      Wayne   PA   1985     66,265       100.0 %     1,251       21.43  
429 Creamery Way
      Exton   PA   1996     63,420       100.0 %     777       14.94  
610 Freedom Business Center
  (d)   King Of Prussia   PA   1985     62,991       100.0 %     1,420       26.90  
426 Lancaster Avenue
      Devon   PA   1990     61,102       100.0 %     1,213       17.63  
1180 Swedesford Road
      Berwyn   PA   1987     60,371       100.0 %     1,847       32.05  
1160 Swedesford Road
      Berwyn   PA   1986     60,099       100.0 %     1,413       24.49  
100 Berwyn Park
      Berwyn   PA   1986     57,731       98.0 %     1,087       22.66  
440 Creamery Way
      Exton   PA   1991     57,218       100.0 %     446       7.78  
640 Allendale Road
  (f)   King of Prussia   PA   2000     56,034       100.0 %     350       7.83  
565 East Swedesford Road
      Wayne   PA   1984     55,979       100.0 %     1,010       19.95  
650 Park Avenue
      King Of Prussia   PA   1968     54,338       97.1 %     796       15.36  
855 Springdale Drive
      Exton   PA   1986     53,500       33.3 %     44        

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Table of Contents

                                                 
                                            Average
                                    Total Base Rent   Annualized
                    Net   Percentage   for the Twelve   Rental Rate
                Year   Rentable   Leased as of   Months Ended   as of
                Built/   Square   December 31,   December 31,   December 31,
Property Name       Location   State   Renovated   Feet   2006 (a)   2006 (b) (000’s)   2006 (c)
680 Allendale Road
      King Of Prussia   PA   1962     52,528       100.0 %     544       13.34  
486 Thomas Jones Way
      Exton   PA   1990     51,372       81.6 %     677       19.83  
660 Allendale Road
  (f)   King of Prussia   PA   1962     50,635       100.0 %     365       9.17  
875 First Avenue
      King of Prussia   PA   1966     50,000       100.0 %     1,038       21.15  
630 Clark Avenue
      King of Prussia   PA   1960     50,000       100.0 %     301       7.36  
620 Allendale Road
      King of Prussia   PA   1961     50,000       100.0 %     978       21.38  
15 Campus Boulevard
      Newtown Square   PA   2002     49,621       100.0 %     991       21.56  
479 Thomas Jones Way
      Exton   PA   1988     49,264       100.0 %     765       17.30  
17 Campus Boulevard
      Newtown Square   PA   2001     48,565       100.0 %     1,224       28.52  
11 Campus Boulevard
      Newtown Square   PA   1998     47,700       100.0 %     1,064       18.64  
456 Creamery Way
      Exton   PA   1987     47,604       100.0 %     364       7.89  
585 East Swedesford Road
      Wayne   PA   1998     43,683       100.0 %     1,018       24.76  
1100 Cassett Road
      Berwyn   PA   1997     43,480       100.0 %     1,106       29.65  
467 Creamery Way
      Exton   PA   1988     42,000       100.0 %     554       18.20  
1336 Enterprise Drive
      West Goshen   PA   1989     39,330       100.0 %     796       22.43  
600 Park Avenue
      King of Prussia   PA   1964     39,000       100.0 %     536       15.02  
412 Creamery Way
      Exton   PA   1999     38,098       77.3 %     677       23.33  
18 Campus Boulevard
      Newtown Square   PA   1990     37,374       52.6 %     740       21.94  
457 Creamery Way
      Exton   PA   1990     36,019       100.0 %     386       14.70  
100 Arrandale Boulevard
      Exton   PA   1997     34,931       100.0 %     550       20.01  
300 Lindenwood Drive
      Malvern   PA   1991     33,000       0.0 %     376        
468 Thomas Jones Way
      Exton   PA   1990     28,934       100.0 %     483       18.00  
1700 Paoli Pike
      Malvern   PA   2000     28,000       100.0 %     504       20.65  
2490 Boulevard of the Generals
      King of Prussia   PA   1975     20,600       100.0 %     434       20.77  
481 John Young Way
      Exton   PA   1997     19,275       100.0 %     405       22.50  
100 Lindenwood Drive
      Malvern   PA   1985     18,400       100.0 %     319       19.79  
748 Springdale Drive
      Exton   PA   1986     13,950       77.7 %     209       18.62  
200 Lindenwood Drive
      Malvern   PA   1984     12,600       65.3 %     148       18.39  
111 Arrandale Road
      Exton   PA   1996     10,479       100.0 %     196       17.76  
 
                                               
NEW JERSEY SEGMENT
                                               
50 East State Street
      Trenton   NJ   1989     305,884       91.3 %     5,278       29.88  
1009 Lenox Drive
      Lawrenceville   NJ   1989     180,460       89.8 %     3,777       28.42  
10000 Midlantic Drive
      Mt. Laurel   NJ   1990     179,098       90.0 %     2,727       22.82  
33 West State Street
      Trenton   NJ   1988     167,774       99.6 %     2,987       31.17  
525 Lincoln Drive West
      Marlton   NJ   1986     165,956       96.7 %     2,562       20.28  
Main Street — Plaza 1000
      Voorhees   NJ   1988     162,364       94.6 %     3,247       24.44  
457 Haddonfield Road
      Cherry Hill   NJ   1990     121,737       100.0 %     2,689       24.13  
2000 Midlantic Drive
      Mt. Laurel   NJ   1989     121,658       100.0 %     2,022       24.06  
700 East Gate Drive
      Mt. Laurel   NJ   1984     119,272       79.2 %     2,061       24.45  
2000 Lenox Drive
      Lawrenceville   NJ   2000     119,114       100.0 %     3,208       30.57  
989 Lenox Drive
      Lawrenceville   NJ   1984     112,055       91.3 %     2,734       30.46  
993 Lenox Drive
      Lawrenceville   NJ   1985     111,124       100.0 %     2,882       29.00  
1000 Howard Boulevard
      Mt. Laurel   NJ   1988     105,312       100.0 %     1,934       22.85  
100 Brandywine Boulevard
      Newtown   PA   2002     102,000       100.0 %     2,681       25.73  
997 Lenox Drive
      Lawrenceville   NJ   1987     97,277       100.0 %     2,387       27.27  
1000 Atrium Way
      Mt. Laurel   NJ   1989     97,158       47.7 %     1,020       21.48  

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Table of Contents

                                                 
                                            Average
                                    Total Base Rent   Annualized
                    Net   Percentage   for the Twelve   Rental Rate
                Year   Rentable   Leased as of   Months Ended   as of
                Built/   Square   December 31,   December 31,   December 31,
Property Name       Location   State   Renovated   Feet   2006 (a)   2006 (b) (000’s)   2006 (c)
1120 Executive Boulevard
      Mt. Laurel   NJ   1987     95,278       98.8 %     1,503       17.14  
15000 Midlantic Drive
      Mt. Laurel   NJ   1991     84,056       100.0 %     1,355       19.75  
220 Lake Drive East
      Cherry Hill   NJ   1988     78,509       76.1 %     1,198       22.95  
1007 Laurel Oak Road
      Voorhees   NJ   1996     78,205       100.0 %     621       7.94  
10 Lake Center Drive
      Marlton   NJ   1989     76,359       95.2 %     1,117       20.10  
200 Lake Drive East
      Cherry Hill   NJ   1989     76,352       96.0 %     1,609       22.92  
1400 Howard Boulevard
      Mt. Laurel   NJ   1995/2005     75,590       100.0 %     1,431       23.20  
Three Greentree Centre
      Marlton   NJ   1984     69,300       96.1 %     1,313       22.66  
9000 Midlantic Drive
      Mt. Laurel   NJ   1989     67,299       100.0 %     836       22.86  
6 East Clementon Road
      Gibbsboro   NJ   1980     66,236       87.1 %     981       18.75  
701 East Gate Drive
      Mt. Laurel   NJ   1986     61,794       100.0 %     1,280       22.55  
210 Lake Drive East
      Cherry Hill   NJ   1986     60,604       94.2 %     1,214       22.25  
308 Harper Drive
      Moorestown   NJ   1976     59,500       79.5 %     1,001       22.57  
305 Fellowship Drive
      Mt. Laurel   NJ   1980     56,824       100.0 %     1,068       22.14  
Two Greentree Centre
      Marlton   NJ   1983     56,075       69.6 %     836       22.86  
309 Fellowship Drive
      Mt. Laurel   NJ   1982     55,911       100.0 %     1,217       26.19  
One Greentree Centre
      Marlton   NJ   1982     55,838       95.1 %     1,072       20.96  
8000 Lincoln Drive
      Marlton   NJ   1997     54,923       100.0 %     1,003       18.47  
307 Fellowship Drive
      Mt. Laurel   NJ   1981     54,485       93.6 %     1,047       24.71  
303 Fellowship Drive
      Mt. Laurel   NJ   1979     53,768       100.0 %     1,037       22.43  
1000 Bishops Gate
      Mt. Laurel   NJ   2005     53,281       100.0 %     1,167       22.53  
1000 Lenox Drive
      Lawrenceville   NJ   1982     52,264       100.0 %     1,329       28.83  
2 Foster Avenue
  (f)   Gibbsboro   NJ   1974     50,761       100.0 %     165       5.11  
4000 Midlantic Drive
      Mt. Laurel   NJ   1998     46,945       100.0 %     657       22.34  
Five Eves Drive
      Marlton   NJ   1986     45,564       100.0 %     815       19.68  
161 Gaither Drive
      Mount Laurel   NJ   1987     44,739       96.0 %     647       16.64  
Main Street — Piazza
      Voorhees   NJ   1990     44,708       97.3 %     725       17.92  
30 Lake Center Drive
      Marlton   NJ   1986     40,287       48.1 %     750       22.14  
20 East Clementon Road
      Gibbsboro   NJ   1986     38,260       100.0 %     549       17.77  
Two Eves Drive
      Marlton   NJ   1987     37,532       82.9 %     564       17.98  
304 Harper Drive
      Moorestown   NJ   1975     32,978       97.5 %     655       23.39  
Main Street — Promenade
      Voorhees   NJ   1988     31,445       96.5 %     502       17.58  
Four B Eves Drive
      Marlton   NJ   1987     27,011       82.8 %     376       16.59  
815 East Gate Drive
      Mt. Laurel   NJ   1986     25,500       100.0 %     246       11.72  
817 East Gate Drive
      Mt. Laurel   NJ   1986     25,351       38.5 %     142       16.16  
Four A Eves Drive
      Marlton   NJ   1987     24,687       100.0 %     327       15.49  
1 Foster Avenue
  (f)   Gibbsboro   NJ   1972     24,255       100.0 %     62       4.45  
4 Foster Avenue
  (f)   Gibbsboro   NJ   1974     23,372       100.0 %     150       8.65  
7 Foster Avenue
      Gibbsboro   NJ   1983     22,158       100.0 %     367       21.19  
10 Foster Avenue
      Gibbsboro   NJ   1983     18,651       100.0 %     259       17.26  
305 Harper Drive
      Moorestown   NJ   1979     14,980       100.0 %     127       9.61  
5 U.S. Avenue
  (f)   Gibbsboro   NJ   1987     5,000       100.0 %     23       4.40  
50 East Clementon Road
      Gibbsboro   NJ   1986     3,080       100.0 %     145       47.01  
5 Foster Avenue
      Gibbsboro   NJ   1968     2,000       100.0 %     7        
 
                                               
SOUTHWEST SEGMENT
                                               
2711 North Haskell Avenue
      Dallas   TX   1988     1,303,161       90.4 %     19,900       18.65  

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Table of Contents

                                                 
                                            Average
                                    Total Base Rent   Annualized
                    Net   Percentage   for the Twelve   Rental Rate
                Year   Rentable   Leased as of   Months Ended   as of
                Built/   Square   December 31,   December 31,   December 31,
Property Name       Location   State   Renovated   Feet   2006 (a)   2006 (b) (000’s)   2006 (c)
1501/1503 LBJ Freeway
      Dallas   TX   1985     355,895       72.1 %     4,891       19.60  
1505/1507 LBJ Freeway
      Dallas   TX   1989     352,177       94.1 %     7,414       24.23  
1250 Capital of Texas Highway South
      Austin   TX   1984     269,321       90.1 %     3,232       22.62  
1301 Mopac Expressway
      Austin   TX   2001     222,581       99.1 %     4,441       29.60  
1603 LBJ Freeway
      Dallas   TX   1985     200,375       69.4 %     2,049       12.22  
1601 Mopac Expressway
      Austin   TX   2000     195,639       100.0 %     2,562       25.20  
1501 South Mopac Expressway
      Austin   TX   1999     195,164       100.0 %     3,026       25.76  
1601 LBJ Freeway
      Dallas   TX   1982     182,739       100.0 %     3,085       15.60  
1221 Mopac Expressway
      Austin   TX   2001     173,302       96.0 %     3,541       30.62  
1801 Mopac Expressway
      Austin   TX   1999     58,576       100.0 %     974       29.13  
 
                                               
URBAN SEGMENT
                                               
2929 Arch Street
      Philadelphia   PA   2006     729,723       99.4 %     16,653       22.61  
100 North 18th Street
  (e)   Philadelphia   PA   1988     701,645       99.1 %     20,235       31.52  
130 North 18th Street
      Philadelphia   PA   1998     594,361       100.0 %     12,852       29.54  
Philadelphia Marine Center
  (d)   Philadelphia   PA   Various     181,900       100.0 %     1,491       5.45  
300 Delaware Avenue
      Wilmington   DE   1989     310,929       79.5 %     3,613       15.08  
920 North King Street
      Wilmington   DE   1989     203,328       100.0 %     4,604       24.61  
400 Commerce Drive
      Newark   DE   1997     154,086       100.0 %     2,229       15.82  
One Righter Parkway
  (d)   Wilmington   DE   1989     105,237       93.1 %     1,719       18.40  
Two Righter Parkway
  (d)   Wilmington   DE   1987     95,514       0.0 %     1,759        
200 Commerce Drive
      Newark   DE   1998     68,034       100.0 %     1,327       18.51  
100 Commerce Drive
      Newark   DE   1989     62,787       99.8 %     1,106       15.35  
111/113 Pencader Drive
      Newark   DE   1990     52,665       100.0 %     505       12.73  
 
                                               
VIRGINIA SEGMENT
                                               
600 East Main Street
      Richmond   VA   1986     420,575       93.8 %     6,957       19.14  
300 Arboretum Place
      Richmond   VA   1988     212,647       100.0 %     3,822       18.97  
6800 Paragon Place
      Richmond   VA   1986     145,127       98.9 %     2,075       19.22  
6802 Paragon Place
      Richmond   VA   1989     143,585       87.4 %     2,311       18.07  
2511 Brittons Hill Road
  (f)   Richmond   VA   1987     132,548       100.0 %     673       6.20  
2100-2116 West Laburnam Avenue
      Richmond   VA   1976     127,287       95.6 %     1,929       16.01  
1957 Westmoreland Street
  (f)   Richmond   VA   1975     121,815       100.0 %     656       8.25  
2201-2245 Tomlynn Street
  (f)   Richmond   VA   1989     85,860       100.0 %     543       5.30  
100 Gateway Centre Parkway
      Richmond   VA   2001     74,585       0.0 %     1,348        
9011 Arboretum Parkway
      Richmond   VA   1991     72,949       98.0 %     1,225       17.52  
4805 Lake Brooke Drive
      Glen Allen   VA   1996     61,347       94.8 %     878       15.50  
9100 Arboretum Parkway
      Richmond   VA   1988     57,838       100.0 %     1,005       19.02  
2812 Emerywood Parkway
      Henrico   VA   1980     56,984       100.0 %     841       15.49  
2277 Dabney Road
  (f)   Richmond   VA   1986     50,400       100.0 %     267       7.28  
9200 Arboretum Parkway
      Richmond   VA   1988     49,542       71.4 %     523       14.06  
9210 Arboretum Parkway
      Richmond   VA   1988     48,012       100.0 %     670       13.85  
2212-2224 Tomlynn Street
  (f)   Richmond   VA   1985     45,353       100.0 %     215       6.91  
2221-2245 Dabney Road
  (f)   Richmond   VA   1994     45,250       100.0 %     274       8.28  
2251 Dabney Road
  (f)   Richmond   VA   1983     42,000       100.0 %     183       5.85  
2161-2179 Tomlynn Street
  (f)   Richmond   VA   1985     41,550       100.0 %     245       7.95  
2256 Dabney Road
  (f)   Richmond   VA   1982     33,600       86.0 %     185       7.85  

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                                            Average
                                    Total Base Rent   Annualized
                    Net   Percentage   for the Twelve   Rental Rate
                Year   Rentable   Leased as of   Months Ended   as of
                Built/   Square   December 31,   December 31,   December 31,
Property Name       Location   State   Renovated   Feet   2006 (a)   2006 (b) (000’s)   2006 (c)
2246 Dabney Road
  (f)   Richmond   VA   1987     33,271       100.0 %     280       10.29  
2244 Dabney Road
  (f)   Richmond   VA   1993     33,050       100.0 %     297       10.53  
9211 Arboretum Parkway
      Richmond   VA   1991     30,791       100.0 %     438       14.23  
2248 Dabney Road
  (f)   Richmond   VA   1989     30,184       100.0 %     207       8.23  
2130-2146 Tomlynn Street
  (f)   Richmond   VA   1988     29,700       100.0 %     249       10.66  
2120 Tomlyn Street
  (f)   Richmond   VA   1986     23,850       100.0 %     142       8.07  
2240 Dabney Road
  (f)   Richmond   VA   1984     15,389       100.0 %     139       10.88  
4364 South Alston Avenue
      Durham   NC   1985     56,601       100.0 %     1,132       20.14  
 
                                               
 
                                               
SUBTOTAL FULLY OWNED PROPERTIES / WEIGHTED AVG.
                    28,180,705       93.2 %                
 
                                               
1333 Broadway
      Oakland   CA   1972     238,392       93.7 %     5,822       25.94  
5780 & 5790 Feet Street
      Carlsbad   CA   1999     121,381       97.3 %     3,406       32.02  
5900 & 5950 La Place Court
      Carlsbad   CA   1988     80,506       98.4 %     1,675       24.08  
16870 West Bernardo Drive
      San Diego   CA   2002     68,708       100.0 %     2,175       34.68  
5963 La Place Court
      Carlsbad   CA   1987     61,587       87.4 %     1,321       26.02  
2035 Corte Del Nogal
      Carlsbad   CA   1991     53,982       88.5 %     1,040       21.23  
5973 Avendia Encinas
      Carlsbad   CA   1986     51,695       100.0 %     1,325       26.88  
2291 Wood Oak Drive
      Herndon   VA   1999     227,574       100.0 %     5,152       27.70  
198 Van Buren Street
      Herndon   VA   1996     99,214       80.2 %     2,119       29.92  
196 Van Buren Street
      Herndon   VA   1991     97,781       87.2 %     2,081       26.78  
1177 East Belt Line Road
      Coppell   TX   1998     150,000       100.0 %     1,728       12.87  
200 Barr Harbour Drive
      Conshohocken   PA   1998     85,867       77.7 %     2,251       31.90  
181 Washington Street
      Conshohocken   PA   1999     115,122       100.0 %     3,078       28.51  
 
                                               
SUBTOTAL CONSOLIDATED JOINT VENTURES / WEIGHTED AVG.
                    1,451,809       94.2 %                
 
                                               
500 Office Center Drive
      Fort Washington   PA   1974     104,303       35.7 %     357       21.50  
555 Lancaster Avenue
      Radnor   PA   1973     242,099       92.5 %     2,700       17.89  
100 Lenox Drive
      Lawrenceville   NJ   1991     92,980       0.0 %     225        
 
                                               
SUBTOTAL REDEVELOPMENT PROPERTIES / WEIGHTED AVG.
                    439,382       59.4 %                
 
                                               
150 Radnor Chester Road
      Radnor   PA   1983     335,458       78.5 %     5,419       23.20  
201 King of Prussia Road
      Radnor   PA   2001     251,372       57.1 %     3,352       33.71  
170 Radnor Chester Road
      Radnor   PA   1983     72,962       88.6 %     115       5.34  
130 Radnor Chester Road
      Radnor   PA   1983     71,349       32.2 %     270       11.75  
 
                                               
SUBTOTAL LEASE-UP PROPERTIES / WEIGHTED AVG.
                    395,683       59.4 %                
 
                                               

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(a)   Calculated by dividing net rentable square feet included in leases signed on or before December 31, 2006 at the property by the aggregate net rentable square feet of the property.
 
(b)   “Total Base Rent” for the twelve months ended December 31, 2006 represents base rents received during such period, excluding tenant reimbursements, calculated in accordance with generally accepted accounting principles (GAAP) determined on a straight-line basis.
 
(c)   “Average Annualized Rental Rate” is calculated as follows: (i) for office leases written on a triple net basis, the sum of the annualized contracted base rental rates payable for all space leased as of December 31, 2006 (without giving effect to free rent or scheduled rent increases that would be taken into account under GAAP) plus the 2006 budgeted operating expenses excluding tenant electricity; and (ii) for office leases written on a full service basis, the annualized contracted base rent payable for all space leased as of December 31, 2006. In both cases, the annualized rental rate is divided by the total square footage leased as of December 31, 2006 without giving effect to free rent or scheduled rent increases that would be taken into account under GAAP.
 
(d)   These properties are subject to a ground lease with a third party.
 
(e)   We hold our interest in Two Logan Square (100 North 18th Street) primarily through our ownership of second and third mortgages that are secured by this property and that are junior to a first mortgage. Our ownership of these two mortgages currently provides us with all of the cash flows from Two Logan Square after the payment of operating expenses and debt service on the first mortgage.
 
(f)   These properties are industrial facilities.
The following table shows information regarding rental rates and lease expirations for the Properties at December 31, 2006 and assumes that none of the tenants exercises renewal options or termination rights, if any, at or prior to scheduled expirations:
                                                 
                            Final     Percentage        
            Rentable     Final     Annualized     of Total Final        
    Number of     Square     Annualized     Base Rent     Annualized        
Year of   Leases     Footage     Base Rent     Per Square     Base Rent        
Lease   Expiring     Subject to     Under     Foot Under     Under        
Expiration   Within the     Expiring     Expiring     Expiring     Expiring     Cumulative  
December 31,   Year     Leases     Leases (a)     Leases     Leases     Total  
2007
    405       3,093,670     $ 65,018,414     $ 21.02       11.2 %     11.2 %
2008
    319       3,224,632       68,055,879       21.11       11.8 %     23.0 %
2009
    340       3,651,654       79,335,298       21.73       13.7 %     36.7 %
2010
    274       3,669,111       80,071,219       21.82       13.9 %     50.6 %
2011
    248       3,377,304       73,218,213       21.68       12.7 %     63.3 %
2012
    99       1,620,205       39,995,511       24.69       6.9 %     70.2 %
2013
    49       1,109,288       24,415,811       22.01       4.2 %     74.4 %
2014
    43       1,463,277       31,220,832       21.34       5.4 %     79.8 %
2015
    31       1,346,511       33,219,278       24.67       5.7 %     85.5 %
2016
    35       630,168       15,738,836       24.98       2.7 %     88.2 %
2017 and thereafter
    51       2,608,623       67,760,193       25.98       11.8 %     100.0 %
 
                                     
 
    1,894       25,794,443     $ 578,049,484     $ 22.41       100.0 %        
 
                                     
 
(a)   “Final Annualized Base Rent” for each lease scheduled to expire represents the cash rental rate of base rents, excluding tenant reimbursements, in the final month prior to expiration multiplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

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At December 31, 2006, the Properties were leased to 1,623 tenants that are engaged in a variety of businesses. The following table sets forth information regarding leases at the Properties with the 20 tenants with the largest amounts leased based upon Annualized Escalated Rent as of December 31, 2006:
                                                 
            Weighted                             Percentage of  
            Average     Aggregate     Percentage     Annualized     Aggregate  
    Number     Remaining     Square     of Aggregate     Escalated     Annualized  
    of     Lease Term     Feet     Leased     Rent (in     Escalated  
Tenant Name (a)   Leases     in Months     Leased     Square Feet     000) (b)     Rent  
Kaiser Foundation Health Plan
    2       47       483,693       1.8 %   $ 17,682       2.9 %
Northrop Grumman Corporation
    5       63       519,493       2.0 %     15,379       2.5 %
State of New Jersey
    7       33       441,488       1.7 %     13,323       2.2 %
7-Eleven, Inc.
    1       4       504,351       1.9 %     12,222       2.0 %
Pepper Hamilton LLP
    2       94       295,873       1.1 %     11,101       1.8 %
Lockheed Martin
    9       48       548,579       2.1 %     10,385       1.7 %
Wells Fargo Bank, N.A.
    6       43       368,879       1.4 %     9,379       1.5 %
Verizon
    6       46       409,574       1.6 %     8,990       1.5 %
Dechert LP
    2       139       242,288       0.9 %     8,086       1.3 %
IBM
    5       43       284,940       1.1 %     7,811       1.3 %
Bearingpoint, Inc.
    2       95       243,122       0.9 %     7,655       1.2 %
AT&T
    8       25       335,223       1.3 %     7,397       1.2 %
General Services Administration — U.S. Govt.
    17       40       330,242       1.3 %     7,374       1.2 %
Drinker Biddle & Reath
    2       87       218,743       0.8 %     6,476       1.0 %
Blank Rome LLP
    1       181       223,886       0.8 %     6,419       1.0 %
Penske Truck Leasing
    1       198       352,641       1.3 %     6,006       1.0 %
Marsh USA, Inc.
    3       30       154,797       0.6 %     5,344       0.9 %
World Savings & Loan Corporation
    1       132       148,175       0.6 %     5,265       0.9 %
Computer Sciences
    5       71       252,765       1.0 %     5,130       0.8 %
Vignette Corporation
    2       49       142,745       0.5 %     4,927       0.8 %
 
                                   
Consolidated Total/Weighted Average
    87       66       6,501,497       24.7 %   $ 176,351       28.7 %
 
                                   
 
(a)   The identified tenant includes affiliates in certain circumstances.
 
(b)   Annualized Escalated Rent represents the monthly Escalated Rent for each lease in effect at December 31, 2006 multiplied by 12. Escalated Rent represents fixed base rental amounts plus tenant reimbursements which include payment of real estate taxes, operating expenses and common area maintenance and utility charges. We estimate operating expense reimbursements based on historical amounts and comparable market data.
Real Estate Ventures
As of December 31, 2006, we had an aggregate investment of approximately $74.6 million in eleven unconsolidated Real Estate Ventures (net of returns of investment). We formed these ventures with unaffiliated third parties to develop office properties or to acquire land in anticipation of possible development of office properties. Nine of the Real Estate Ventures own fifteen office buildings that contain an aggregate of approximately 2.7 million net rentable square feet, one Real Estate Venture developed a hotel property that contains 137 rooms and one Real Estate Venture is developing an office property located in Charlottesville, Virginia.
As of December 31, 2006, we also had investments in three Real Estate Ventures that are considered to be variable interest entities under FIN 46R and of which we are the primary beneficiary. We also have an investment in one Real Estate Venture where we serve as the general partner and are deemed to control the entity based on the fact that the limited partner does not have substantive participating rights in accordance with EITF 04-05. The financial information for two of these four Real Estate Ventures (Four and Six Tower Bridge) was consolidated into our consolidated financial statements effective March 31, 2004. Prior to March 31, 2004, we accounted for our investment in these two Real Estate Ventures under the equity method.
We account for our remaining non-controlling interests in the Real Estate Ventures using the equity method. Our non-controlling ownership interests range from 6% to 50%, subject to specified priority allocations in certain of the Real Estate Ventures. Our investments, initially recorded at cost, are subsequently adjusted for our share of the Real Estate Ventures’ income or loss and contributions to capital and distributions.

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As of December 31, 2006, we had guaranteed repayment of approximately $0.6 million of loans for the Real Estate Ventures. We also provide customary environmental indemnities and completion guarantees in connection with construction and permanent financing both for our own account and on behalf of the Real Estate Ventures.
Item 3. Legal Proceedings
We are involved from time to time in litigation, including in disputes with tenants and arising out of agreements to purchase or sell properties. Given the nature of our business activities, we generally consider these lawsuits to be routine to the conduct of our business. Because of the very nature of litigation, including its adversarial nature and the jury system, we cannot predict the result of any lawsuit.
Lawsuits have been brought against owners and managers of multifamily and office properties that assert claims of personal injury and property damage caused by the presence of mold in the properties. We have been named as a defendant in two lawsuits in the State of New Jersey that allege personal injury as a result of the presence of mold. In 2005, one of these lawsuits was dismissed by way of summary judgment with prejudice. The plaintiffs seek unspecified damages in the remaining lawsuit. We referred this lawsuit to our environmental insurance carrier and, as of the date of this Form 10-K, the insurance carrier is defending this claim.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our shareholders during the fourth quarter of the year ended December 31, 2006.
PART II
Item 5. Market for Registrant’s Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities
Our common shares are traded on the New York Stock Exchange (“NYSE”) under the symbol “BDN.” There is no established trading market for the Class A units of the Operating Partnership. On February 22, 2007, there were 720 holders of record of our common shares and 51 holders of record of the Class A units (in addition to Brandywine Realty Trust). On February 22, 2007, the last reported sales price of the common shares on the NYSE was $35.18. The following table sets forth the quarterly high and low closing sales price per common share reported on the NYSE for the indicated periods and the distributions paid by us with respect to each such period.
                         
    Share Price   Share Price   Distributions
    High   Low   Declared For Quarter
First Quarter 2005
  $ 30.06     $ 27.61     $ 0.44  
Second Quarter 2005
  $ 30.90     $ 27.49     $ 0.44  
Third Quarter 2005
  $ 32.71     $ 29.56     $ 0.44  
Fourth Quarter 2005
  $ 29.69     $ 26.30     $ 0.44  
First Quarter 2006
  $ 31.90     $ 28.94     $ 0.44  
Second Quarter 2006
  $ 32.17     $ 27.65     $ 0.44  
Third Quarter 2006
  $ 33.83     $ 30.98     $ 0.44  
Fourth Quarter 2006
  $ 35.37     $ 31.55     $ 0.44  
In connection with our merger with Prentess, we declared a dividend of $0.02 per common share on December 21, 2005, paid on January 17, 2006 to shareholders of record on January 4, 2006.
For each quarter during 2006 and 2005, the Operating Partnership paid a cash distribution to holders of its Class A units equal in amount to the dividends paid on the Company’s common shares for such quarter.

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In order to maintain the status of Brandywine Realty Trust as a REIT, we must make annual distributions to shareholders of at least 90% of its taxable income (not including net capital gains). Future distributions will be declared at the discretion of our Board of Trustees and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986 and such other factors as our Board deems relevant.
The following table provides information as of December 31, 2006 with respect to compensation plans under which our equity securities are authorized for issuance:
                         
    (a)     (b)     (c)  
Plan category   Number of securities to be     Weighted-average exercise     Number of securities  
    issued upon exercise of     price of outstanding     remaining available for  
    outstanding options,     options, warrants and     future issuance under  
    warrants and rights     rights     equity compensation plans  
                    (excluding securities  
                reflected in column (a))  
Equity compensation plans approved by security holders (1)
  1,286,075     $ 26.45(2)   4,129,630
 
                       
Equity compensation plans not approved by security holders
           
 
                       
Total
  1,286,075     $ 26.45(2)   4,129,630
 
(1)   Relates to our Amended and Restated 1997 Long-Term Incentive Plan and the Prentiss Properties Trust 2005 Share Incentive Plan that we assumed in our January 2006 merger with Prentiss Properties Trust. Under each of these two plans, the Compensation Committee of our Board of Trustees may award restricted or unrestricted common shares, options to acquire common shares and performance shares or units or other instruments that have a value tied to our common shares. In May 2005, our shareholders authorized an increase to the number of common shares that may be issued or subject to award under the 1997 Long-Term Incentive Plan, from 5,000,000 to 6,600,000. The May 2005 amendment provides that 500,000 of the shares under the 1997 Plan are available solely for awards under options and share appreciation rights that have an exercise or strike price not less than the market price of our common shares on the date of award, and the remaining 6,100,000 shares are available for any type of award under the Plan.
 
(2)   Weighted-average exercise price of outstanding options; excludes restricted common shares.
The following table presents information related to our share repurchases:

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                    Purchased as Part of     Shares that May Yet Be  
    Total Number of     Average Price Paid     Publicly Announced     Purchased Under the  
Period   Shares Purchased     per Share     Plans or Programs     Plans or Programs (a)  
                            (in thousands)  
 
October 2006
    1,829,000     $ 32.80             2,319,800  
November 2006
                      2,319,800  
December 2006
                      2,319,800  
 
                           
Total
    1,829,000                        
 
                           
 
(a)   On May 2, 2006, our Board of Trustees authorized an increase in the number of common shares that we may repurchase, whether in open-market or privately negotiated transactions. The Board authorized us to purchase up to an aggregate of 3,500,000 common shares (inclusive of remaining share repurchase availability under the Board’s prior authorization from September 2001). There is no expiration date on the share repurchase program. The 1,829,000 shares shown above were purchased with proceeds of our 3.875% exchangeable notes and did not reduce capacity under the share repurchase plan.

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SHARE PERFORMANCE GRAPH
The Securities and Exchange Commission requires us to present a chart comparing the cumulative total shareholder return on the common shares with the cumulative total shareholder return of (i) a broad equity index and (ii) a published industry or peer group index. The following chart compares the cumulative total shareholder return for the common shares with the cumulative shareholder return of companies on (i) the S&P 500 Index (ii) the Russell 2000 and (iii) the NAREIT ALL-REIT Total Return Index as provided by NAREIT for the period beginning December 31, 2001 and ending December 31, 2006.
(Performance Graph)
                                                 
    Period Ending  
Index   12/31/01     12/31/02     12/31/03     12/31/04     12/31/05     12/31/06  
         
Brandywine Realty Trust
    100.00       111.81       147.33       171.86       173.68       215.51  
S&P 500
    100.00       77.90       100.24       111.14       116.59       135.00  
Russell 2000
    100.00       79.52       117.09       138.55       144.86       171.47  
NAREIT All Equity REIT Index
    100.00       103.82       142.37       187.33       210.12       283.78  

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Item 6. Selected Financial Data
The following table sets forth selected financial and operating data and should be read in conjunction with the financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K. The selected data have been revised to reflect the reclassification of losses from early extinguishments of debt, in accordance with SFAS No. 145, and the disposition of all properties since January 1, 2002, which have been reclassified as discontinued operations for all periods presented in accordance with SFAS No. 144.
Brandywine Realty Trust
(in thousands, except per common share data and number of properties)
                                         
Year Ended December 31,   2006     2005     2004     2003     2002  
     
Operating Results
                                       
Total revenue
  $ 662,801     $ 380,624     $ 316,557     $ 293,108     $ 277,553  
Income (loss) from continuing operations
    (14,031 )     38,179       56,483       72,774       43,445  
Net income
    10,482       42,766       60,301       86,678       62,984  
Income allocated to Common Shares
    2,490       34,774       55,081       54,174       51,078  
Income from continuing operations per Common Share
                                       
Basic
  $ (0.25 )   $ 0.54     $ 1.07     $ 1.05     $ 0.85  
Diluted
  $ (0.24 )   $ 0.54     $ 1.07     $ 1.05     $ 0.84  
Earnings per Common Share
                                       
Basic
  $ 0.03     $ 0.62     $ 1.15     $ 1.43     $ 1.40  
Diluted
  $ 0.03     $ 0.62     $ 1.15     $ 1.43     $ 1.39  
Cash distributions declared per Common Share
  $ 1.76     $ 1.78  (a)   $ 1.76     $ 1.76     $ 1.76  
 
                                       
Balance Sheet Data
                                       
Real estate investments, net of accumulated depreciation
  $ 4,739,726     $ 2,541,486     $ 2,363,865     $ 1,695,355     $ 1,745,981  
Total assets
    5,508,263       2,805,745       2,633,984       1,855,776       1,919,288  
Total indebtedness
    3,152,230       1,521,384       1,306,669       867,659       1,004,729  
Total liabilities
    3,486,346       1,663,022       1,444,116       950,431       1,097,793  
Minority interest
    123,991       37,859       42,866       133,488       135,052  
Convertible preferred shares
                      37,500       132,300  
Beneficiaries’ equity
    1,897,926       1,104,864       1,147,002       771,857       686,443  
 
                                       
Other Data
                                       
Cash flows from:
                                       
Operating activities
    241,566       125,147       152,890       118,793       128,836  
Investing activities
    (915,794 )     (252,417 )     (682,652 )     (34,068 )     5,038  
Financing activities
    692,433       119,098       536,556       (102,974 )     (120,532 )
 
                                       
Property Data
                                       
Number of properties owned at year end
    313       251       246       234       238  
Net rentable square feet owned at year end
    31,764       19,600       19,150       15,733       16,052  
 
(a)   Includes $0.02 special distribution declared in December 2005 for shareholders of record for the period January 1, 2006 through January 4, 2006 (pre-Prentiss merger period).

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Brandywine Operating Partnership, L.P.
(in thousands, except per unit data and number of properties)
                                         
Year Ended December 31,   2006     2005     2004     2003     2002  
     
Operating Results
                                       
Total revenue
  $ 662,801     $ 380,624     $ 316,557     $ 293,108     $ 277,553  
Income (loss) from continuing operations
    (15,059 )     39,262       59,118       82,068       52,820  
Net income
    10,626       44,013       63,081       96,467       73,136  
Income from continuing operations per Common Partnership Unit
                                       
Basic
  $ (0.25 )   $ 0.54     $ 1.07     $ 1.06     $ 0.86  
Diluted
  $ (0.24 )   $ 0.54     $ 1.07     $ 1.06     $ 0.86  
Earnings per Common Partnership Units
                                       
Basic
  $ 0.03     $ 0.62     $ 1.15     $ 1.43     $ 1.41  
Diluted
  $ 0.03     $ 0.62     $ 1.14     $ 1.43     $ 1.40  
Cash distributions declared per Common Partnership Unit
  $ 1.76     $ 1.78  (a)   $ 1.76     $ 1.76     $ 1.76  
 
                                       
Balance Sheet Data
                                       
Real estate investments, net of accumulated depreciation
  $ 4,739,726     $ 2,541,486     $ 2,363,865     $ 1,695,355     $ 1,745,981  
Total assets
    5,508,263       2,805,745       2,633,984       1,855,776       1,919,288  
Total indebtedness
    3,152,230       1,521,384       1,306,669       867,659       1,004,729  
Total liabilities
    3,486,346       1,662,967       1,443,934       951,484       1,098,846  
Series B Preferred Units
                      97,500       97,500  
Redeemable limited partnership units
    131,711       54,300       60,586       46,505       38,984  
Partners’ equity
    1,855,770       1,088,478       1,129,464       760,287       683,958  
 
                                       
Other Data
                                       
Cash flows from:
                                       
Operating activities
    241,566       125,147       152,890       118,793       128,836  
Investing activities
    (915,794 )     (252,417 )     (682,652 )     (34,068 )     5,038  
Financing activities
    692,433       119,098       536,556       (102,974 )     (120,532 )
 
                                       
Property Data
                                       
Number of properties owned at year end
    313       251       246       234       238  
Net rentable square feet owned at year end
    31,764       19,600       19,150       15,733       16,052  
 
(a)   Includes $0.02 special distribution declared in December 2005 for unitholders of record for the period January 1, 2006 through January 4, 2006 (pre-Prentiss merger period).

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere herein and is based primarily on our consolidated financial statements for the years ended December 31, 2006, 2005 and 2004.
OVERVIEW
As of December 31, 2006 we managed our portfolio within nine geographic segments: (1) Pennsylvania—West, (2) Pennsylvania—North, (3) New Jersey, (4) Urban, (5) Richmond, Virginia, (6) California—North, (7) California—South, (8) Mid-Atlantic and (9) Southwest. The Pennsylvania—West segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs of Pennsylvania. The Pennsylvania—North segment includes properties north of Philadelphia in Berks, Bucks, Cumberland, Dauphin, Lehigh and Montgomery counties. The New Jersey segment includes properties in counties in the southern and central parts of New Jersey including Burlington, Camden and Mercer counties and in Bucks County, Pennsylvania. The Urban segment includes properties in the City of Philadelphia, Pennsylvania and the state of Delaware. The Richmond, Virginia segment includes properties primarily in Albemarle, Chesterfield and Henrico counties, the Cities of Richmond and Durham, North Carolina. The California—North segment includes properties in the Cities of Oakland and Concord. The California—South segment includes properties in the Cities of Carlsbad and San Diego. The Mid-Atlantic segment includes properties in Northern Virginia and the Cities of Bethesda and Rockville, Maryland. The Southwest segment includes properties in Dallas and Travis counties of Texas.
We receive income primarily from rental revenue (including tenant reimbursements) from our properties and, to a lesser extent, from the management of properties owned by third parties and from investments in the Real Estate Ventures.
Our financial performance is dependent upon the demand for office, industrial and other commercial space in our markets and prevailing interest rates.
Through our January 2006 acquisition of Prentiss, we acquired interests in properties that contain an aggregate of 14.0 million net rentable square feet. Through this acquisition, we also entered into new markets, including markets in California, Metropolitan Washington, D.C., and Texas. Accordingly, the reported historical financial information for periods prior to this transaction is not believed to be fully indicative of our future operating results or financial condition.
As we seek to increase revenue through our operating activities, our management also seeks 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, are not 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 accounting for approximately 11.2% of our aggregate annualized base rents as of December 31, 2006 (representing approximately 11.0% of the net rentable square feet of the Properties) expire without penalty in 2007. We maintain an active dialogue with our tenants in an effort to maximize lease renewals. Our retention rate for leases that were scheduled to expire in 2006 was 78.7%. If we are unable to renew leases or relet space under expiring leases, at anticipated rental rates, 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 regularly evaluates our accounts receivable reserve policy in light of our tenant base and general and local economic conditions. Our accounts receivable allowance was $9.3 million or 9.0% of total receivables (including accrued rent

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receivable) as of December 31, 2006 compared to $4.9 million or 7.6% of total receivables (including accrued rent receivable) as of December 31, 2005.
Development Risk:
As of December 31, 2006, we had in development or redevelopment nine sites aggregating approximately 1.4 million square feet. We estimate the total cost of these projects to be $304.4 million and we had incurred $141.2 million of these costs as of December 31, 2006. We are actively marketing space at these projects to prospective tenants but can provide no assurance as to the timing or terms of any leases of space at these projects. As of December 31, 2006, we owned approximately 490 acres of undeveloped land. Risks associated with development of this land include construction cost increases or overruns and construction delays, insufficient occupancy rates, building moratoriums and inability to obtain necessary zoning, land-use, building, occupancy and other required governmental approvals.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting periods. 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 the accounting estimate are reasonably likely to occur from period to period. Management believes the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For a summary of all of our significant accounting policies, see Note 2 to our consolidated financial statements included elsewhere in this report.
Revenue Recognition
We recognize rental revenue on the straight-line basis from the later of the date of the commencement of the lease or the date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. Certain lease agreements contain provisions that require tenants to reimburse a pro rata share of real estate taxes and common area maintenance costs.
Real Estate Investments
Real estate investments are carried at cost. We record acquisition of real estate investments under the purchase method of accounting and allocate the purchase price to land, buildings and intangible assets on a relative fair value basis. Depreciation is computed using the straight-line method over the useful lives of buildings and capital improvements (5 to 55 years) and over the shorter of the lease term or the life of the asset for tenant improvements. Direct construction costs related to the development of Properties and land holdings are capitalized as incurred. We expense routine repair and maintenance expenditures and capitalize those items that extend the useful lives of the underlying assets.
Real Estate Ventures
When we obtain an economic interest in an entity, we evaluate the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if we are deemed to be the primary beneficiary, in accordance with FASB Interpretation No.46 R, “Consolidation of Variable Interest Entities” (“FIN 46R”). If the entity is not deemed to be a VIE, and we serve as the general partner within the entity, we evaluate to determine if our presumed control as the general partner is overcome by the “kick out” rights and other substantive participating rights of the limited partners in accordance with EITF 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-05”).

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We consolidate (i) entities that are VIEs and of which we are deemed to be the primary beneficiary and (ii) entities that are non-VIEs which we control. Entities that we account for under the equity method (i.e. at cost, increased or decreased by our share of earnings or losses, less distributions) include (i) entities that are VIEs and of which we are not deemed the primary beneficiary and (ii) entities that are non-VIEs which we do not control, but over which we have the ability to exercise significant influence. We will reconsider our determination of whether an entity is a VIE and who the primary beneficiary is if events occur that are likely to cause a change in the original determinations.
Impairment of Long-Lived Assets
Our management reviews investments in real estate and real estate ventures for impairment if facts and circumstances indicate that the carrying value of such assets may not be recoverable. Measurement of any impairment loss is based on the fair value of the asset, determined using customary valuation techniques, such as the present value of expected future cash flows.
In accordance with SFAS No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as real estate investments and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities relating to assets classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the balance sheet.
Income Taxes
The Company has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, we have several subsidiary REITs. In order to maintain their qualification as a REIT, the Company and its REIT subsidiaries are required to, among other things, distribute at least 90% of its REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets. As REITs, the Company and its REIT subsidiaries are not subject to federal income tax with respect to the portion of its income that meets certain criteria and is distributed annually to the stockholders. Accordingly, no provision for federal income taxes is included in the accompanying consolidated financial statements with respect to the operations of these operations. The Company and its REIT subsidiaries intend to continue to operate in a manner that allows them to continue to meet the requirements for taxation as REITs. Many of these requirements, however, are highly technical and complex. If the Company or one of its REIT subsidiaries were to fail to meet these requirements, the Company would be subject to federal income tax. The Company is subject to certain state and local taxes. Provision for such taxes has been included in general and administrative expenses in the Company’s Consolidated Statements of Operations and Comprehensive Income.
We may elect to treat one or more of our subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS of the Company may perform additional services for our tenants and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the provision to any person, under a franchise, license or otherwise, of rights to any brand name under which any lodging facility or health care facility is operated). A TRS is subject to corporate federal income tax. We have elected to treat certain of our corporate subsidiaries as TRSs, these entities provide third party property management services and certain services to tenants that could not otherwise be provided. At December 31, 2006, our TRSs had tax net operating loss (“NOL”) carryforward of approximately $3.0 million, expiring from 2013 to 2020. We have ascribed a full valuation allowance to our net deferred tax assets.

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Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts that represents an estimate of losses that may be incurred from the inability of tenants to make required payments. The allowance is an estimate based on two calculations that are combined to determine the total amount reserved. First, we evaluate specific accounts where we have determined that a tenant may have an inability to meet its financial obligations. In these situations, we use our judgment, based on the facts and circumstances, and records a specific reserve for that tenant against amounts due to reduce the receivable to the amount that we expect to collect. These reserves are re-evaluated and adjusted as additional information becomes available. Second, a reserve is established for all tenants based on a range of percentages applied to receivable aging categories. If the financial condition of our tenants were to deteriorate, additional allowances may be required.
Deferred Costs
We incur direct costs related to the financing, development and leasing of our properties. Management exercises judgment in determining whether such costs meet the criteria for capitalization or must be expensed. Capitalized financing fees are amortized over the related loan term and capitalized leasing costs are amortized over the related lease term. Management re-evaluates the remaining useful lives of leasing costs as the creditworthiness of our tenants and economic and market conditions change.
Purchase Price Allocation
We allocate the purchase price of properties to net tangible and identified intangible assets acquired based on fair values. Above-market and below-market in-place lease values for acquired properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) our estimate of the fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancellable term of the lease. Capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancellable terms of the respective leases. Capitalized below-market lease values are amortized as an increase of rental income over the remaining non-cancellable terms of the respective leases, including any fixed-rate renewal periods.
Other intangible assets also include amounts representing the value of tenant relationships and in-place leases based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with the respective tenant. We estimate the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, include leasing commissions, legal and other related expenses. This intangible asset is amortized to expense over the remaining term of the respective leases. We estimate fair value through methods similar to those used by independent appraisers or by using independent appraisals. Factors that we consider in our analysis include an estimate of the carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. We also consider information obtained about each property as a result of our pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from three to twelve months.
Characteristics that we consider in allocating value to our tenant relationships include the nature and extent of our business relationship with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The value of tenant relationship intangibles is amortized over the remaining initial lease term and expected renewals, but in no event longer than the remaining depreciable life of the building. The value of in-place leases is amortized over the remaining non-cancellable term of the respective leases and any fixed-rate renewal periods.
In the event that a tenant terminates its lease, the unamortized portion of each intangible, including market rate adjustments, in-place lease values and tenant relationship values, would be charged to expense.

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RESULTS OF OPERATIONS
Comparison of the Year Ended December 31, 2006 to the Year Ended December 31, 2005
The table below shows selected operating information for the Same Store Properties and the Total Portfolio. The Same Store Properties consists of 234 properties containing an aggregate of approximately 17.5 million net rentable square feet that we owned for the entire twelve-month periods ended December 31, 2006 and 2005. This table also includes a reconciliation from the Same Store Properties to the Total Portfolio (i.e., all properties owned by us as of December 31, 2006 and 2005) by providing information for the properties which were acquired, sold, or placed into service and administrative/elimination information for the years ended December 31, 2006 and 2005.

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                                    Acquired     Development     Other/        
    Same Store Properties     Properties     Properties (a)     Eliminations (b)     All Properties  
                    Increase/     %                                                                     Increase/     %  
(dollars in thousands)   2006     2005     (Decrease)     Change     2006     2005     2006     2005     2006     2005     2006     2005     (Decrease)     Change  
Revenue:
                                                                                                               
Cash rents
  $ 296,811     $ 292,439     $ 4,372       1.5 %   $ 200,753     $ 1,342     $ 24,163     $ 8,400     $ (912 )   $ 297     $ 520,815     $ 302,478     $ 218,337       72.2 %
Straight-line rents
    8,636       11,141       (2,505 )     -22.5 %     9,111       165       11,504       2,984                   29,251       14,290       14,961       104.7 %
Rents — FAS 141
    2,713       1,546       1,167       75.5 %     7,405       (33 )     (249 )     (243 )     1       180       9,870       1,450       8,420       580.7 %
 
                                                                                   
Total rents
    308,160       305,126       3,034       1.0 %     217,269       1,474       35,418       11,141       (911 )     477       559,936       318,218       241,718       76.0 %
Tenant reimbursements
    48,086       46,705       1,381       3.0 %     28,698       98       3,007       1,130       679       629       80,470       48,562       31,908       65.7 %
Other (c)
    9,499       8,153       1,346       16.5 %     2,195             108       613       10,593       5,078       22,395       13,844       8,551       61.8 %
 
                                                                                   
 
                                                                                                             
Total revenue
    365,745       359,984       5,761       1.6 %     248,162       1,572       38,533       12,884       10,361       6,184       662,801       380,624       282,177       74.1 %
 
                                                                                                               
Operating Expenses:
                                                                                                               
Property operating expenses
    114,455       112,656       1,799       1.6 %     72,798       552       14,454       7,614       (13,706 )     (9,630 )     188,001       111,192       76,809       69.1 %
Real estate taxes
    36,682       34,387       2,295       6.7 %     24,422       190       4,124       3,320       356       283       65,584       38,180       27,404       71.8 %
 
                                                                                   
Subtotal
    151,137       147,043       4,094       2.8 %     97,220       742       18,578       10,934       (13,350 )     (9,347 )     253,585       149,372       104,213       69.8 %
 
                                                                                                               
Net operating income
    214,608       212,941       1,667       0.8 %     150,942       830       19,955       1,950       23,711       15,531       409,216       231,252       177,964       77.0 %
 
Administrative expenses
                      0.0 %                             29,647       17,982       29,647       17,982       11,665       64.9 %
Depreciation and amortization
    113,247       101,074       12,173       12.0 %     117,175       461       15,313       5,326       2,394       2,257       248,129       109,118       139,011       127.4 %
 
                                                                                   
Operating Income (loss)
  $ 101,361     $ 111,867     $ (10,506 )     -9.4 %   $ 33,767     $ 369     $ 4,642     $ (3,376 )   $ (8,330 )   $ (4,708 )   $ 131,440     $ 104,152     $ 27,288       26.2 %
 
                                                                                                               
Number of properties
    234                               62               17                               313                          
Square feet (in thousands)
    17,533                               11,261               2,970                               31,764                          
 
                                                                                                               
Other Income (Expense):
                                                                                                               
Interest income
                                                                                    9,513       1,370       8,143       594 %
Interest expense
                                                                                    (171,177 )     (70,152 )     (101,025 )     144 %
Interest expense — Deferred Financing Costs
                                                                                    (4,607 )     (3,766 )     (841 )     22 %
Equity in income of real estate ventures
                                                                                    2,165       3,172       (1,007 )     -32 %
Net gain on sales of interests in real estate
                                                                                    14,190       4,640       9,550       206 %
Gain on termination of purchase contract
                                                                                    3,147             3,147       100 %
 
                                                                                                       
Income (loss) before minority interest
                                                                                    (15,329 )     39,416       (54,745 )     -139 %
Minority interest — partners’ share of consolidated real estate ventures
                                                                                    270             270       100 %
Minority interest attributable to continuing operations — LP units
                                                                                    1,028       (1,237 )     2,265       183 %
 
                                                                                                       
Income (loss) from continuing operations
                                                                                    (14,031 )     38,179       (52,210 )     -137 %
Income (loss) from discontinued operations
                                                                                    24,513       4,588       19,925       434 %
 
                                                                                                       
Net Income (loss)
                                                                                  $ 10,482     $ 42,767     $ (32,285 )     -75 %
 
                                                                                                       
Earnings per common share
                                                                                  $ 0.03     $ 0.62     $ (0.59 )     -95 %
 
                                                                                                       
EXPLANATORY NOTES
 
(a) - Results include: nine developments/redevelopments, four lease-up assets and three properties placed in service
 
(b) - Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation and third-party management fees
 
(c) - Includes net termination fee income of $6,133 for 2006 and $5,583 for 2005 for the same store property portfolio and $948 for 2006 for the acquired properties

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Total Revenue
Revenue increased by $282.2 million primarily due to the acquired properties (primarily Prentiss), which represents $246.6 million of this increase. The increase is also the result of 4 properties placed in service, including Cira Centre, which contributed $25.7 million to this increase.
The increase in total revenue from our same store properties of $5.8 million is primarily attributable to increased occupancy as well as increased tenant reimbursements resulting from higher property operating expenses.
Operating Expenses and Real Estate Taxes
Property operating expenses increased by $76.3 million primarily due to the acquisition of Prentiss and other properties, which represents $72.2 million of this increase. Property operating expenses attributable to the increased occupancy of Cira Centre and other completed developments resulted in an additional $6.8 million of property operating expense.
Real estate taxes increased by $27.4 million primarily due to the acquisition of Prentiss and other properties, which represents $24.2 million of this increase. The remainder of the increase primarily is the result of increased real estate tax assessments in our same store portfolio and properties placed in service.
Depreciation and Amortization Expense
Depreciation and amortization increased by $139.0 million primarily due to the acquisition of Prentiss and other properties, which increased total portfolio depreciation expense by $116.7 million. A significant portion of the increase, $11.9 million, is also due to accelerated depreciation expense associated with the demolition of one of our properties as part of an office park development in suburban Philadelphia. This property was part of our same store portfolio; therefore the remaining increase in depreciation and amortization for our same store portfolio is $0.3 million. This increase resulted from the timing of assets being placed in service upon completion of tenant improvement and capital improvement projects subsequent to the end of the nine month period ending September 30, 2005. The depreciation and amortization for our development properties increased by $10.0 million as a result of timing of the properties being completed and placed into service.
Administrative Expenses
Administrative expenses increased by approximately $11.9 million primarily due to the acquisition of Prentiss. Of this increase, $3.6 million was primarily attributable to increased payroll and related costs associated with employees that we hired as part of the acquisition of Prentiss. We also incurred an additional $4.1 million in professional fees in connection with our merger integration activities. The remainder of the increase reflects other increased costs of the combined companies which includes an increase in deferred compensation expense of $2.2 million.
Interest Income/ Expense
Interest expense and deferred financing costs increased by approximately $101.9 million primarily as a result of 14 fixed rate mortgages, three unsecured notes, and one note secured by U.S. treasury notes (“PPREFI debt”) that we assumed or entered into to finance the Prentiss merger. The mortgages assumed have maturity dates ranging from 2009 through 2016 and the unsecured notes have maturities ranging from 2008 through 2035.
The PPREFI debt had a maturity of February 2007, but we elected to prepay this debt in November 2006. The PPREFI debt was defeased by Prentiss in the fourth quarter of 2005 and was secured by an investment in U.S. treasury notes. The interest earned on the treasury notes is included in interest income and

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substantially offsets the amount of interest expense incurred on the PPREFI debt, resulting in an immaterial amount of net interest expense incurred. The increase of $8.1 million in interest income is primarily attributable to the interest income earned on these treasury notes.
See the Notes to Consolidated Financial in Part IV, Item 15 for details of our mortgage indebtedness and unsecured notes outstanding.
Gain on termination of purchase contract
We held a fifty percent economic interest in an approximately 141,724 square foot office building located at 101 Paragon Drive, Montvale, New Jersey. The remaining fifty percent interest was held by Donald E. Axinn, one of the Company’s Trustees. Although we and Mr. Axinn had each committed to provide one half of the $11 million necessary to repay the mortgage loan secured by this property at the maturity of the loan, in February 2006 an unaffiliated third party entered into an agreement to purchase this property for $18.3 million. As a result of the purchase by an unaffiliated third party during August 2006, we recognized a $3.1 million gain on termination of its rights under a 1998 contribution agreement, modified in 2005, that entitled the Partnership to the 50% interest in the joint venture to operate the property.
Minority Interest-partners’ share of consolidated real estate ventures
Minority interest-partners’ share of consolidated real estate ventures represents the portion of income from our consolidated joint ventures that is allocated to our minority interest partners.
As of December 31, 2006 we held an ownership interest in 15 properties through consolidated Real Estate Ventures, compared to two properties owned by consolidated Real Estate Ventures at December 31, 2005.
Minority Interest attributable to continuing operations – LP units
Minority interest attributable to continuing operations – LP units represents the equity in loss (income) attributable to the portion of the Operating Partnership not owned by us. The increase from the prior year is primarily the result of the fact that at December 31, 2006 the LP units share in our net loss from continuing operations compared to their share of net income from continuing operations in the prior year. Minority interests owned 4.6% and 3.4% of the Operating Partnership as of December 31, 2006 and 2005, respectively. The change in minority interest ownership is primarily the result of the Class A units that we issued in the Prentiss acquisition.
Discontinued Operations
Income from discontinued operations increased by $19.9 million from the prior year as a result of the sale of eight properties in Chicago, IL, five in Dallas, TX, and one in Allen, TX that we acquired in the Prentiss acquisition. We also sold five properties that were previously included in our same store portfolio. These 19 properties combined had net income of $7.7 million and gain on sale of $20.2 million during the year ended December 31, 2006 before minority interest. Included in the gain on sale amount was $1.8 million attributable to minority interest in the Chicago property that was sold by one of our consolidated Real Estate Ventures.
Net Income
Net income declined by $32.3 million in the year ended December 31, 2006, compared to the same period in 2005 as increased revenues in 2006 were offset by increases in operating expenses (primarily depreciation and amortization) and financing costs. All major financial statement captions increased as a result of our acquisition of Prentiss and the related financing required to complete the transaction. A significant element of these increases relate to additional depreciation and amortization charges from the significant property additions (including both the TRC acquisition in 2004 and the Prentiss acquisition) and

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the values ascribed to related acquired intangibles (e.g., in-place leases). These charges do not affect our ability to pay dividends and may not be comparable to those of other real estate companies that have not made such acquisitions. Such charges can be expected to continue until the values ascribed to the lease intangibles are fully amortized. These intangibles are amortizing over the related lease terms or estimated tenant relationship. In addition, a significant portion of the decrease in net income is attributable to the $11.9 million in depreciation expense described in the Depreciation and Amortization Expense section above.
Earnings per Common Share
Earnings per common share of $0.03 for the year ended December 31, 2006 as compared to earnings per common share of $0.62 in 2005 declined as a result of the factors described in “Net Income” above and an increase in the average number of common shares outstanding. We issued 34.6 million common shares in our acquisition of Prentiss.
Comparison of the Year Ended December 31, 2005 to the Year Ended December 31, 2004
The table below shows selected operating information for the Same Store Property Portfolio and the Total Portfolio. The Same Store Property Portfolio consists of 226 Properties containing an aggregate of approximately 15.0 million net rentable square feet that we owned for the entire twelve-month periods ended December 31, 2005 and 2004. This table also includes a reconciliation from the Same Store Property Portfolio to the Total Portfolio (i.e., all properties owned by us as of December 31, 2005 and 2004) by providing information for the properties which were acquired, sold, or placed into service and administrative/elimination information for the years ended December 31, 2005 and 2004.

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                                    Acquired     Development     Other/        
    Same Store Properties     Properties (a)     Properties     Eliminations (b)     All Properties  
                    Increase/     %                                                                     Increase/     %  
(dollars in thousands)   2005     2004     (Decrease)     Change     2005     2004     2005     2004     2005     2004     2005     2004     (Decrease)     Change  
Revenue:
                                                                                                               
Rents
  $ 245,234     $ 248,725       (3,491 )     -1.4 %   $ 75,500     $ 22,177     $ 7,338     $ 4,729     $ 0     $ 0     $ 328,072     $ 275,631     $ 52,441       19.0 %
Tenant reimbursements
    37,071       34,037       3,034       8.9 %     11,460       3,040       753       549       225       (54 )     49,509       37,572       11,937       31.8 %
Other
    7,329       3,967       3,362       84.7 %     907       326       594       60       5,049       7,665       13,879       12,018       1,861       15.5 %
 
                                                                                   
Total revenue
    289,634       286,729       2,905       1.0 %     87,867       25,543       8,685       5,338       5,274       7,611       391,460       325,221       66,239       20.4 %
 
                                                                                                               
Operating Expenses:
                                                                                                               
Property operating expenses
    91,423       88,266       3,157       3.6 %     30,079       7,883       3,615       2,218       (10,241 )     (8,510 )     114,876       89,857       25,019       27.8 %
Real estate taxes
    28,814       27,399       1,415       5.2 %     9,402       2,563       1,164       1,069       31       31       39,411       31,062       8,349       26.9 %
 
                                                                                   
Subtotal
    120,237       115,665       4,572       4.0 %     39,481       10,446       4,779       3,287       (10,210 )     (8,479 )     154,287       120,919       33,368       27.6 %
 
                                                                                                               
Net Operating Income
    169,397       171,064       (1,667 )     -1.0 %     48,386       15,097       3,906       2,051       15,484       16,090       237,173       204,302       32,871       16.1 %
 
                                                                                                               
Administrative expenses
                      0.0 %                             17,982       15,100       17,982       15,100       2,882       19.1 %
Depreciation and amortization
    68,744       63,968       4,776       7.5 %     38,776       13,221       3,313       1,669       1,053       1,046       111,886       79,904       31,982       40.0 %
 
                                                                                   
 
Operating Income
    100,653       107,096       (6,443 )     -6.0 %     9,610       1,876       593       382       (3,551 )     (56 )     107,305       109,298       (1,993 )     -1.8 %
 
Other Income (Expense):
                                                                                                               
Interest income
                                                                                    1,376       840       536       63.8 %
Interest expense
                                                                                    (74,363 )     (55,061 )     (19,302 )     35.1 %
Equity in income of real estate ventures
                                                                                    3,172       2,024       1,148       56.7 %
Net gain on sales of interest in real estate
                                                                                    4,640       2,975       1,665       56.0 %
 
                                                                                                       
Income before minority interest
                                                                                    42,130       60,076       (17,946 )     -29.9 %
Minority interest attributable to continuing operations
                                                                                    (1,331 )     (2,472 )     1,141       -46.2 %
 
                                                                                                       
Income from continuing operations
                                                                                    40,799       57,604       (16,805 )     -29.2 %
Income from discontinued operations
                                                                                    1,968       2,699       (731 )     -27.1 %
 
                                                                                                       
Net income
                                                                                    42,767       60,303       (17,536 )     -29.1 %
 
                                                                                                       
Earnings per common share
                                                                                  $ 0.62     $ 1.15     $ (0.53 )     -46.1 %
 
                                                                                                       
EXPLANATORY NOTES
 
(a) - Represents the operations of properties acquired that are not included in the definition of the Same Store Property Portfolio, primarily the TRC properties acquired on September 21, 2004.
 
(b) - Represents certain revenue and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation.

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Revenue
Revenue increased by $66.2 million primarily due to properties that were acquired in 2005 and a full year of operations of those properties acquired in 2004, primarily the TRC Properties acquired in September 2004. Revenue for Same Store Properties increased by $2.9 million due to increased tenant reimbursement revenue resulting from increased property operating expenses in 2005 as compared to 2004. Other revenue represents lease termination fees, bankruptcy settlement proceeds, leasing commissions and third-party management fees. Total Portfolio other revenue increased by $1.9 million in 2005 primarily due to an increase in net termination fees associated with tenant terminations in 2005 offset by the settlement of a previously disclosed litigation in 2004 ($1.0 million plus accrued interest on our security deposit that was released).
Operating Expenses and Real Estate Taxes
Property operating expenses increased by $25.0 million in 2005 primarily due to properties acquired in 2005 and a full year of operations of properties acquired in 2004 as well as increased repairs and maintenance costs, snow removal costs, electric expense, security expense, janitorial costs and HVAC maintenance expense at existing properties in our same store property portfolio and our development properties.
Real estate taxes increased by $8.3 million primarily due to properties acquired in 2005 and a full year of real estate taxes for our properties acquired in 2004 as well as increased real estate tax assessments in 2005 at existing properties in our same store property portfolio and our development properties as a result of higher tax rates and property assessments.
Interest Expense
Interest expense increased by $19.3 million in 2005 primarily due to: (i) an increase in average debt as a result of debt incurred to finance our acquisitions in 2005/2004 and our increased development activity and (ii) an increase in average rates on debt outstanding as a result of the increase in LIBOR rates on our credit facilities. These increases were partially offset by an increase in the amount of interest capitalized which is primarily attributable to our development of Cira Centre.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by $32.0 million in 2005 primarily due to properties acquired in 2005, a full year of depreciation and amortization of properties acquired during 2004 and additional amortization from tenant improvements and leasing commissions paid during 2005. Depreciation and amortization expense for the same store properties increased by $4.8 million primarily as a result of the write-off of tenant improvements and intangibles for spaces that were vacated during 2005.
Administrative Expenses
Administrative expenses increased by $2.9 million in 2005 primarily due to increased payroll and related costs associated with employees that we hired as part of our TRC acquisition in September 2004, higher compensation and benefits costs for employees and increased spending on process and technology improvements.
Equity in Income of Real Estate Ventures
Equity in income of Real Estate Ventures increased by $1.1 million in 2005 as a result of increased net income from the Real Estate Ventures. The increased net income resulted from the sale of condominium units by one of the Real Estate Venture in 2005.

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Net Gains on Sales of Interests in Real Estate
During 2005, we sold three parcels of land, realizing net gains totaling $4.6 million. The increase from the prior year of $1.6 million is a result of the value of the land parcels sold in each year compared to their carrying values at the time of sale.
Minority Interest
Minority interest from continuing operations represents the equity in income attributable to the portion of the Operating Partnership and the consolidated Real Estate Ventures not owned by us. Minority interest from continuing operations decreased by $1.1 million in 2005 primarily due to decreased net income from our Operating Partnership and a decrease in the minority interest ownership percentage.
Discontinued Operations
Discontinued operations decreased by $0.7 million in 2005 primarily due to the timing of property sales for assets included in discontinued operations in 2005 as compared to 2004.
Net Income
Net income declined in 2005 by $17.5 million as increased revenues were not sufficient to offset increases in operating and financing costs. All major financial statement captions increased as a result of the Company’s significant property acquisitions in fiscal 2004 and 2005 and the related financing required to complete those transactions. It should be noted that a significant element of these costs relate to additional depreciation and amortization charges relating to the significant property additions and the values ascribed to related acquired intangibles (e.g., in-place leases). These charges do not affect the Company’s ability to pay dividends and may not be comparable to those of other real estate companies that have not made such acquisitions. Such charges can be expected to continue until the values ascribed to the lease intangibles are fully amortized. These intangibles are amortizing over the related lease terms or estimated tenant relationship. The size of these non-cash charges are expected to increase in the future as a result of the Prentiss transaction.
Earnings per Common Share
Earnings per common share of $0.62 in 2005 as compared to earnings per common share of $1.15 in 2004 as a result of the factors described in net income above and an increase in the average number of shares outstanding as a result of offerings completed in 2004.
LIQUIDITY AND CAPITAL RESOURCES
General
Our principal liquidity needs for the next twelve months are as follows:
    fund normal recurring expenses,
 
    meet debt service requirements,
 
    fund capital expenditures, including capital and tenant improvements and leasing costs,
 
    fund current development and redevelopment costs, and
 
    fund distributions declared by our Board of Trustees.
We believe that our liquidity needs will be satisfied through cash flows generated by operations and financing activities. Rental revenue, expense recoveries from tenants, and other income from operations are our principal sources of cash that we use to pay operating expenses, debt service, recurring capital expenditures and the minimum distributions required to maintain our REIT qualification. Our revenue also

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includes third-party fees generated by our property management, leasing, development and construction businesses. We believe our revenue, together with proceeds from equity 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. Such changes, in turn, would adversely affect our ability to fund distributions, debt service payments and tenant improvements. In addition, a material adverse change in our cash provided by operations would affect our compliance with covenants under our unsecured credit facility and unsecured notes.
Our principal liquidity needs for periods beyond twelve months are for costs of developments, redevelopments, property acquisitions, scheduled debt maturities, major renovations, expansions and other non-recurring capital improvements. We draw on multiple financing sources to fund our long-term capital needs. We use our credit facility for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt.
As a result of our acquisition of Prentiss, we have additional short and long-term liquidity requirements. Historically, we have satisfied these requirements principally through the most advantageous source of capital at that time, including public offerings of unsecured debt and private placements of secured and unsecured debt, sales of common and preferred equity, capital raised through the disposition of assets, and joint venture transactions. We believe these sources of capital will continue to be available to fund our capital needs.
We funded the approximately $1.05 billion cash portion of the Prentiss merger consideration, related transaction costs and prepayments of approximately $543.3 million in Prentiss mortgage debt at the closing of the merger through (i) a $750 million unsecured term loan that we repaid in March 2006; (ii) approximately $676.5 million of cash from Prudential’s acquisition of Prentiss properties; and (iii) approximately $195.0 million through our revolving credit facility.
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 current lenders. We currently have investment grade ratings for prospective unsecured debt offerings from three major rating agencies. If a rating agency were to downgrade our credit rating, our access to capital in the unsecured debt market would be more limited and the interest rate under our existing credit facility would increase.
Our ability to sell common and preferred shares is dependent on, among other things, general market conditions for REITs, market perceptions about us and the current trading price of our shares. We regularly analyze which source of capital is most advantageous to us at any particular point in time. The equity markets may not be consistently available on terms that we consider attractive.
Cash Flows
The following summary discussion of our cash flows is based on the consolidated statement of cash flows included in our consolidated financial statements and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented.
As of December 31, 2006 and 2005, we maintained cash and cash equivalents of $25.4 million and $7.2 million, respectively. This $18.2 million increase was the result of the following changes in cash flow from our various activities:

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        Activity   2006     2005     2004  
Operating
  $ 241,566     $ 125,147     $ 152,890  
Investing
    (915,794 )     (252,417 )     (682,652 )
Financing
    692,433       119,098       536,556  
 
                 
Net cash flows
  $ 18,205     $ (8,172 )   $ 6,794  
 
                 
Our principal source of cash flows is from the operation of our properties. Our increased cash flow from operating activities is primarily attributable our acquisition of Prentiss.
The increase in our investing activities in 2006 over 2005 is primarily attributable to our acquisition of Prentiss in January 2006 and other property and land acquisitions totaling $1,167.1 million. In addition, we incurred approximately $242.5 million of capital expenditures for the properties that we own. These increases in investing activities are offset by the net proceeds of $257.6 million received from the sale of eight properties in Chicago and seven properties in Texas that we acquired in our acquisition of Prentiss and subsequently sold. We received net proceeds of $92.0 million from sales of properties and land in our same store portfolio. We redeemed marketable securities of $181.6 million that had been escrowed to secure a secured notes payable.
The increase in our financing activities in 2006 as compared to 2005 is primarily attributable to the issuance in 2006 of $1,195.0 million of unsecured notes resulting in net proceeds of $1,186.0 million. The proceeds were used to repay the $750.0 million term loan that we obtained in connection with our acquisition of Prentiss, as well as to repay a portion of the outstanding borrowings on our credit facility. This cash inflow is offset by our repurchase of common shares totaling $94.5 million and our four distribution payments totaling $151.1 million.
Capitalization
Indebtedness
As of December 31, 2006, we had approximately $3.16 billion of outstanding indebtedness. The table below summarizes our mortgage notes payable, our unsecured notes, and our revolving credit facility at December 31, 2006 and 2005:
                 
    December 31  
    2006     2005  
    (dollars in thousands)  
Balance:
               
Fixed rate
  $ 2,718,171     $ 1,417,611  
Variable rate
    439,162       103,773  
 
           
Total
  $ 3,157,333     $ 1,521,384  
 
           
 
               
Percent of Total Debt:
               
Fixed rate
    86.1 %     93.2 %
Variable rate
    13.9 %     6.8 %
 
           
Total
    100 %     100 %
 
           
 
               
Weighted-average interest rate at period end:
               
Fixed rate
    5.6 %     5.9 %
Variable rate
    6.0 %     5.3 %
The variable rate debt shown above generally bears interest based on various spreads over LIBOR (the term of which we select). The December 31, 2006 fixed rate balance includes $90.0 million of variable rate debt that is effectively fixed at 6% via an interest rate hedge.

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Unsecured Credit Facility
We use credit facility borrowings for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. In December 2005,we replaced our then existing unsecured credit facility with a $600 million unsecured credit facility (the “Credit Facility”) that matures in December 2009, subject to a one year extension option upon payment of a fee and the absence of any defaults. Borrowings under the new Credit Facility generally bear interest at LIBOR (LIBOR was 5.33% as of December 31, 2006) plus a spread over LIBOR ranging from 0.55% to 1.10% based on our unsecured senior debt rating. We have an option to increase the maximum borrowings under the Credit Facility to $800 million subject to the absence of any defaults and our ability to obtain additional commitments from our existing or new lenders.
As of December 31, 2006, we had $60 million of borrowings and $24 million of letters of credit outstanding under the Credit Facility, leaving $516 million of unused availability. On January 2, 2007, we used $300 million of borrowings under the Credit Facility to payoff the $300 million unsecured floating rate notes due 2009; notice of this payoff was given in November 2006. For the years ended December 31, 2006 and 2005, our weighted average interest rates, including the effects of interest rate hedges discussed in Note 12 to the consolidated financial statements included herein, and including both the new Credit Facility and prior credit facility, were 5.93% and 4.58 % per annum, respectively.
The Credit Facility contains financial and non-financial covenants, including covenants that relate to our incurrence of additional debt; the granting of liens; consummation of mergers and consolidations; the disposition of assets and interests in subsidiaries; the making of loans and investments; and the payment of dividends. The restriction on dividends permits us to pay dividends in the amount required for us to retain our qualification as a REIT and otherwise limits dividends to 90% of our funds from operations. The Credit Facility also contains financial covenants that require us to maintain an interest coverage ratio, a fixed charge coverage ratio, an unsecured debt ratio and an unencumbered cash flow ratio above certain specified minimum levels; to maintain net worth above an amount determined on a specified formula; and to maintain a leverage ratio and a secured debt ratio below certain maximum levels. Another financial covenant limits the ratio of unsecured debt to unencumbered properties. We were in compliance with all financial covenants as of December 31, 2006.
Unsecured Notes
On March 28, 2006, the Operating Partnership consummated the public offering of (1) $300,000,000 aggregate principal amount of its unsecured floating rate notes due 2009, (2) $300,000,000 aggregate principal amount of its 5.75% notes due 2012 and (3) $250,000,000 aggregate principal amount of its 6.00% notes due 2016. The Company guaranteed the payment of principal and interest on these notes.
On October 4, 2006, we completed an offering of $300.0 million aggregate principal amount of 3.875% senior convertible notes due 2026 in an offering made in reliance upon an exemption from registration rights under Rule 144A under the Securities Act of 1933 and issued an additional $45 million of exchangeable notes on October 16, 2006 to cover over-allotments. At certain times and upon the occurrence of certain events, the notes are convertible into cash up to their principal amount and, with respect to the remainder, if any, of the conversion value in excess of such principal amount, cash or shares of the Company’s common stock. The initial conversion rate will be 25.4065 shares per $1,000 principal amount of notes (which is equivalent to an initial conversion price of $39.36 per share). The notes may not be redeemed by us prior to October 20, 2011 (except to preserve the Company’s status as a REIT for U.S, federal income tax purposes), but are redeemable anytime thereafter, in whole or in part, at a redemption price equal to the principal amount of the notes plus any accrued and unpaid interest (including additional interest), if any. In addition, on October 20, 2011, October 15, 2016, and October 15, 2021, or upon the occurrence of certain change in control transactions prior to October 20, 2011, note holders may require us to repurchase all or a portion of the notes at a purchase price equal to the principal amount plus any accrued and unpaid interest on the notes. Net proceeds from the October 2006 Debt Offering were used to repurchase approximately $60.0 million of the Company’s common stock at a price of $32.80 per share and for general corporate purposes, including the repayment of outstanding borrowings under our unsecured revolving credit facility.

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On November 29, 2006, we gave notice of redemption of the $300 million floating rate guaranteed notes due 2009 issued by the Operating Partnership and repaid these notes on March 28, 2006. The Operating Partnership repaid the 2009 Notes on January 2, 2007 and incurred accelerated amortization of the associated deferred financing costs of $1.4 million in the fourth quarter 2006 after giving prepayment notice in November 2006.
The indenture relating to our unsecured notes contains various financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40%, (3) a debt service coverage ratio of greater than 1.5 to 1.0, and (4) an unencumbered asset value of not less than 150% of unsecured debt. In addition, the note purchase agreement relating to our $113 million unsecured notes that mature in 2008 contains covenants that are similar to the above covenants.
Unsecured Term Loans
On March 28, 2006, we terminated and repaid all amounts outstanding under the $750 million term loan agreement that we had entered into on January 5, 2006 in connection with our acquisition of Prentiss.

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Mortgage Indebtedness
The following table sets forth information regarding our mortgage indebtedness outstanding at December 31, 2006 and 2005:
                                 
                    Effective        
    December 31,     December 31,     Interest Rate     Maturity  
Property / Location   2006     2005     @ 12/31/06     Date  
111 Arrandale Blvd
  $     $ 1,043           Aug-06
429 Creamery Way
          2,927           Sep-06
Interstate Center
    552       766       6.19 %(b)   Mar-07
440 & 442 Creamery Way
    5,421       5,581       8.55 %   Jul-07
Norriton Office Center
          5,191       8.50 %   Oct-07
481 John Young Way
    2,294       2,360       8.40 %   Nov-07
400 Commerce Drive
    11,797       11,989       7.12 %   Jun-08
Two Logan Square
    71,348       72,468       5.78 %(a)   Jul-09
The Bluffs
    10,700             6.00 %(a)   Jul-09
Pacific Ridge
    14,500             6.00 %(a)   Aug-09
Pacific View/Camino
    26,000             6.00 %(a)   Aug-09
Computer Associates Building
    31,000             6.00 %(a)   Aug-09
200 Commerce Drive
    5,841       5,911       7.12 %(a)   Jan-10
Presidents Plaza
    30,900             6.00 %(a)   May-10
1333 Broadway
    24,418             5.18 %(a)   May-10
The Ordway
    46,199             7.95 %(a)   Aug-10
World Savings Center
    27,524             7.91 %(a)   Nov-10
Plymouth Meeting Exec.
    44,103       44,687       7.00 %(a)   Dec-10
Four Tower Bridge
    10,626       10,763       6.62 %   Feb-11
Arboretum I, II, III & V
    22,750       23,238       7.59 %   Jul-11
Midlantic Drive/Lenox Drive/DCC I
    62,678       63,803       8.05 %   Oct-11
Research Office Center
    42,205             7.64 %(a)   Oct-11
Concord Airport Plaza
    38,461             7.20 %(a)   Jan-12
Six Tower Bridge
    14,744       15,083       7.79 %   Aug-12
Newtown Square/Berwyn Park/Libertyview
    63,231       64,429       7.25 %   May-13
Coppell Associates
    3,737             6.89 %   Dec-13
Southpoint III
    4,949       5,431       7.75 %   Apr-14
Tysons Corner
    100,000             4.84 %(a)   Aug-15
Coppell Associates
    16,600             5.75 %   Mar-16
Grande A
    59,513       61,092       7.48 %   Jul-27
Grande A
          11,456           Jul-27
Grande A
          1,551           Jul-27
Grande B
    77,535       79,036       7.48 %   Jul-27
 
                           
Principal balance outstanding
    869,626       488,805                  
Plus: unamortized fixed-rate debt premiums
    14,294       5,972                  
 
                           
Total mortgage indebtedness
  $ 883,920     $ 494,777                  
 
                           
 
(a)   Loans were assumed upon acquisition of the related property. Interest rates presented above reflect the market rate at the time of acquisition.
 
(b)   For loans that bear interest at a variable rate, the rates in effect at December 31, 2006 have been presented.
The mortgage note payable balance of $5.1 million for Norriton Office Center as of December 31, 2006, not included in the table above, is included in Mortgage notes payable and other liabilities held for sale on the balance sheet.
Guaranties. As of December 31, 2006, we had guaranteed repayment of approximately $0.6 million of loans on behalf of certain Real Estate Ventures. See Item 2. Properties – Real Estate Ventures. We also provide customary environmental indemnities and completion guarantees in connection with construction and permanent financing both for our own account and on behalf of Real Estate Ventures.

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Share Repurchases
We maintain a share repurchase program under which our Board has authorized us to repurchase our common shares from time to time. Our Board initially authorized this program in 1998 and has periodically replenished capacity under the program, including, most recently, on May 2, 2006 when our Board restored capacity to 3.5 million common shares. During the year ended December 31, 2006, we repurchased approximately 1.2 million common shares under this program at an average price of $29.22 per share, leaving approximately 2.3 million in remaining capacity. Our Board has not limited the duration of the program.
On October 4, 2006 we repurchased 1,829,000 common shares with a portion of the proceeds of our 3.875% Exchangeable Guaranteed Notes at an average purchase price of $32.80 per share (approximately $60.0 million in aggregate). We repurchased these shares under a separate Board authorization that provided that the shares repurchased did not reduce capacity under the share repurchase program.
Off-Balance Sheet Arrangements
We are not dependent on any off-balance sheet financing arrangements for liquidity. Our off-balance sheet arrangements are discussed in Note 4 to the financial statements, “Investment in Unconsolidated Real Estate Ventures”. Additional information about the debt of our unconsolidated Real Estate Ventures is included in “Item 2 – Properties”.
Our interest rate incurred under our revolving credit facility is subject to modification depending on our rating status with qualified agencies.
Shelf Registration Statement
We maintain a shelf registration statement for the issuance of common shares, preferred shares, depositary shares and 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 registration statement.
Short- and Long-Term Liquidity
We believe that our cash flow from operations is adequate to fund our short-term liquidity requirements. Cash flow from operations is generated primarily from rental revenues and operating expense reimbursements from tenants and management services income from providing services to third parties. We intends to use these funds to meet short-term liquidity needs, which are to fund operating expenses, debt service requirements, recurring capital expenditures, tenant allowances, leasing commissions and the minimum distributions required to maintain the Company’s REIT qualification under the Internal Revenue Code.
We expect to meet our long-term liquidity requirements, such as for property acquisitions, development, investments in real estate ventures, scheduled debt maturities, major renovations, expansions and other significant capital improvements, through cash from operations, borrowings under our Credit Facility, other long-term secured and unsecured indebtedness, the issuance of equity securities and the proceeds from the disposition of selected assets.
Inflation
A majority of our leases provide for reimbursement of real estate taxes and operating expenses either on a triple net basis or over a base amount. In addition, many of our office leases provide for fixed base rent increases. We believe that inflationary increases in expenses will be partially offset by expense reimbursement and contractual rent increases.

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Commitments
The following table outlines the timing of payment requirements related to our contractual commitments as of December 31, 2006.
                                         
    Payments by Period (in thousands)  
            Less than                     More than  
    Total     1 Year     1-3 Years     3-5 Years     5 Years  
Mortgage notes payable (a)
  $ 869,626     $ 20,232     $ 190,733     $ 320,864     $ 337,797  
Mortgage notes payable on asset classified as held for sale (a)
    5,105       5,105                    
Revolving credit facility (b)
    60,000             60,000              
Unsecured debt (a), (b)
    2,211,610             688,000       945,000       578,610  
Ground leases (c)
    280,185       1,736       3,472       3,637       271,340  
Other liabilities
    2,495             1,807             688  
 
                             
 
  $ 3,429,021     $ 27,073     $ 944,012     $ 1,269,501     $ 1,188,435  
 
                             
 
(a)   Amounts do not include unamortized discounts and/or premiums.
 
(b)   Our revolving credit facility was used to repay the $300 million floating rate notes due 2009 on January 2, 2007. Accordingly, these amounts are shown as payable in 2009, which is the maturity of the credit facility.
 
(c)   Future minimum rental payments under the terms of all non-cancelable ground leases under which we are the lessee are expensed on a straight-line basis regardless of when payments are due.
As part of our acquisition of the TRC Properties in September 2004, we agreed to issue to the sellers up to a maximum of $9.7 million of Class A Units of the Operating Partnership if certain of the acquired properties achieve at least 95% occupancy prior to September 21, 2007. The maximum number of Units that we are obligated to issue declines monthly and, as of December 31, 2006, the maximum balance payable under this arrangement was $1.8 million, with no amount currently due.
As part of the TRC acquisition, we acquired our interest in Two Logan Square, a 696,477 square foot office building in Philadelphia, primarily through a second and third mortgage secured by this property. We currently do not expect to take title to Two Logan Square until, at the earliest, September 2019. In the event that we take title to Two Logan Square upon a foreclosure of our mortgage, we have agreed to make a payment to an unaffiliated third party with a residual interest in the fee owner of this property. The amount of the payment would be $0.6 million if we must pay a state and local transfer tax upon taking title, and $2.9 million if no transfer tax is payable upon the transfer.
As part of the TRC acquisition and several of our other acquisitions, we agreed not to sell the acquired properties. In the case of the TRC Properties, we agreed not to sell the acquired properties for periods ranging from three to 15 years from the acquisition date as follows: 201 King of Prussia Road, 555 East Lancaster Avenue and 300 Delaware Avenue (three years); One Rodney Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square and Radnor Corporate Center (15 years). At December 31, 2006, we had agreed not to sell 14 properties that aggregate 1.0 million square feet for periods that expire through 2008. Our agreements generally provide that we may dispose of the subject properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax deferred transactions. In the event that we sell any of the properties within the applicable restricted period in non-exempt transactions, we would be required to pay significant tax liabilities that would be incurred by the parties who sold us the applicable property.
We invest in our properties and regularly incur capital expenditures in the ordinary course to maintain the properties. We believe that such expenditures enhance our competitiveness. We also enter 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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Interest Rate Risk and Sensitivity Analysis
The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates. The range of changes chosen reflects our 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 December 31, 2006, our consolidated debt consisted of $889.0 million (including $90.0 million of variable interest rate debt that is fixed through interest rate swaps) in fixed rate mortgages and $0.6 million in variable rate mortgage notes, $60.0 million borrowings under our Credit Facility and $2.3 billion in unsecured notes (net of discounts) of which $1.8 billion are fixed rate borrowings and $439.0 million are variable rate borrowings. 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.
If market rates of interest on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $4.4 million. If market rates of interest on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $4.4 million.
If market rates of interest increase by 1%, the fair value of our outstanding fixed-rate debt would decrease by approximately $102.8 million. If market rates of interest decrease by 1%, the fair value of our outstanding fixed-rate mortgage debt would increase by approximately $109.9 million.
As of December 31, 2006, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was $1.83 billion.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
See discussion in Management’s Discussion and Analysis included in Item 7 herein.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary financial data of Brandywine Realty Trust and Brandywine Operating Partnership, L.P. and the reports thereon of PricewaterhouseCoopers LLP with respect thereto are listed under Item 15(a) and filed as part of this Annual Report on Form 10-K. See Item 15.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of each registrant’s management, including its principal executive officer and principal financial officer, each registrant’s management conducted an evaluation of the registrant’s 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). Based on this evaluation, the principal executive officer and the principal financial officer of each registrant concluded

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that each registrant’s disclosure controls and procedures were effective as of the end of the period covered by this annual report. There were no changes in the internal control over financial reporting of each registrant that occurred during the three-month period ended December 31, 2006 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
The management of each registrant is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).
Under the supervision and with the participation of each registrant’s management, including its principal executive officer and principal financial officer, each registrant’s management conducted an evaluation of the effectiveness of the registrant’s internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the framework in Internal Control — Integrated Framework, each registrant’s management concluded that the registrant’s internal control over financial reporting was effective as of December 31, 2006.
Management of each registrant has excluded our investments in Four and Six Tower Bridge Associates from its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2006 because we do not have the right or authority to assess the internal controls of the individual entities and we also lack the ability, in practice, to make the assessment. Four and Six Tower Bridge Associates are two real estate partnerships, created prior to December 15, 2003, which we consolidate under Financial Accounting Standards Board Interpretation (FIN) 46R, “Consolidation of Variable Interest Entities.” We started consolidating Four and Six Tower Bridge Associates on March 31, 2004. The total assets and total revenue of Four and Six Tower Bridge Associates represent, in the aggregate, less than 1% of our consolidated total assets and consolidated total revenue as of and for the year ended December 31, 2006.
The management assessment of the effectiveness of each registrant’s internal control over financial reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their reports which are included herein.
Changes in Internal Control over Financial Reporting.
There have not been any changes in either registrant’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, either registrant’s internal control over financial reporting.
Item 9B. Other Information
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
Item 11. Executive Compensation

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Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
Item 14. Principal Accountant Fees and Services
Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders expected to be held on May 9, 2007.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
          (a) 1. and 2. Financial Statements and Schedules
The financial statements and schedules of Brandywine Realty Trust and Brandywine Operating Partnership listed below are filed as part of this annual report on the pages indicated.

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Index to Financial Statements and Schedules
         
    Page
BRANDYWINE REALTY TRUST
       
 
    F-1  
 
       
    F-3  
 
       
    F-4  
 
       
    F-5  
 
       
    F-6  
 
       
    F-7  
 
       
    F-8  
 
       
    F-40  
 
       
    F-41  
BRANDYWINE OPERATING PARTNERSHIP, L.P.
         
     
    F-47  
 
       
    F-49  
 
       
    F-50  
 
       
    F-51  
 
       
    F-52  
 
       
    F-53  
 
       
    F-54  
 
       
    F-86  
 
       
    F-87  

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Table of Contents

3. Exhibits
     
Exhibits No.   Description
 
   
2
  Agreement and Plan of Merger dated as of October 3, 2005 by and among Brandywine Realty Trust, Brandywine Operating Partnership, L.P., Brandywine Cognac I, LLC, Brandywine Cognac II, LLC, Prentiss Properties Trust and Prentiss Properties Acquisition Partners, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 4, 2005 and incorporated herein by reference)
 
   
3.1.1
  Amended and Restated Declaration of Trust of Brandywine Realty Trust (amended and restated as of May 12, 1997) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated June 9, 1997 and incorporated herein by reference)
 
   
3.1.2
  Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (September 4, 1997) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated September 10, 1997 and incorporated herein by reference)
 
   
3.1.3
  Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated June 3, 1998 and incorporated herein by reference)
 
   
3.1.4
  Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (September 28, 1998) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 13, 1998 and incorporated herein by reference)
 
   
3.1.5
  Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (March 19, 1999) (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference)
 
   
3.1.6
  Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (April 19, 1999) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 26, 1999 and incorporated herein by reference)
 
   
3.1.7
  Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (December 30, 2003) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-A dated December 29, 2003 and incorporated herein by reference)
 
   
3.1.8
  Articles Supplementary to Declaration of Trust of Brandywine Realty Trust (February 5, 2004) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-A dated February 5, 2004 and incorporated herein by reference)
 
   
3.1.9
  Articles of Amendment to Declaration of Trust of Brandywine Realty Trust (October 3, 2005) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 4, 2005 and incorporated herein by reference)
 
   
3.1.10
  Second Amended and Restated Partnership Agreement of Brandywine Realty Services Partnership (previously filed as an exhibit to Brandywine Realty Trust’s Registration statement of Form S-11 (File No. 33-4175) and incorporated herein by reference)
 
   
3.1.11
  Amended and Restated Articles of Incorporation of Brandywine Realty Services Corporation (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference)
 
   
3.1.12
  Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (the “Operating Partnership”) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 17, 1997 and incorporated herein by reference)
 
   
3.1.13
  First Amendment to Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 17, 1997 and incorporated herein by reference)
 
   
3.1.14
  Second Amendment to the Amended and Restated Agreement of Limited Partnership Agreement of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 13, 1998 and incorporated herein by reference)
 
   
3.1.15
  Third Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated May 14, 1998 and incorporated herein by reference)
 
   
3.1.16
  Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 13, 1998 and incorporated herein by reference)
 
   
3.1.17
  Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 13, 1998 and incorporated herein by reference)
 
   
3.1.18
  Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 13, 1998 and incorporated herein by reference)
 
   
3.1.19
  Seventh Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)
 
   
3.1.20
  Eighth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)

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Table of Contents

     
Exhibits No.   Description
 
   
3.1.21
  Ninth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)
 
   
3.1.22
  Tenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)
 
   
3.1.23
  Eleventh Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)
 
   
3.1.24
  Twelfth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference)
 
   
3.1.25
  Thirteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated September 21, 2004 and incorporated herein by reference)
 
   
3.1.26
  Fourteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
3.1.27
  Fifteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated August 18, 2006 and incorporated herein by reference)
 
   
3.1.28
  List of partners of Brandywine Operating Partnership, L.P.
 
   
3.2
  Amended and Restated Bylaws of Brandywine Realty Trust (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 14, 2003 and incorporated herein by reference)
 
   
4.1
  Form of 7.50% Series C Cumulative Redeemable Preferred Share Certificate (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-A dated December 29, 2003 and incorporated herein by reference)
 
   
4.2
  Form of 7.375% Series D Cumulative Redeemable Preferred Share Certificate (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-A dated February 5, 2004 and incorporated herein by reference)
 
   
4.3.1
  Indenture dated October 22, 2004 by and among Brandywine Operating Partnership, L.P., Brandywine Realty Trust, certain subsidiaries of Brandywine Operating Partnership, L.P. named therein and The Bank of New York, as Trustee (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 22, 2004 and incorporated herein by reference)
 
   
4.3.2
  First Supplemental Indenture dated as of May 25, 2005 by and among Brandywine Operating Partnership, L.P., Brandywine Realty Trust, certain subsidiaries of Brandywine Operating Partnership, L.P. named therein and The Bank of New York, as Trustee (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated May 26, 2005 and incorporated herein by reference)
 
   
4.3.3
  Second Supplemental Indenture dated as of October 4, 2006 by and among Brandywine Operating Partnership, L.P., Brandywine Realty Trust and the Bank of New York, as Trustee (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 4, 2006 and incorporated herein by reference)
 
   
4.4
  Form of $275,000,000 4.50% Guaranteed Note due 2009 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 22, 2004 and incorporated herein by reference)
 
   
4.5
  Form of $250,000,000 5.40% Guaranteed Note due 2014 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 22, 2004 and incorporated herein by reference)
 
   
4.6
  Form of $300,000,000 5.625% Guaranteed Note due 2010 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 20, 2005 and incorporated herein by reference)
 
   
4.7
  Form of $300,000,000 aggregate principal amount of Floating Rate Guaranteed Note due 2009 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated March 28, 2006 and incorporated herein by reference).
 
   
4.8
  Form of $300,000,000 aggregate principal amount of 5.75% Guaranteed Note due 2012 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated March 28, 2006 and incorporated herein by reference).
 
   
4.9
  Form of $250,000,000 aggregate principal amount of 6.00% Guaranteed Note due 2016 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated March 28, 2006 and incorporated herein by reference).
 
   
4.10
  Form of 3.875% Exchangeable Guaranteed Notes due 2026 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 4, 2006 and incorporated herein by reference)
 
   
10.1
  Amended and Restated Revolving Credit Agreement dated as of December 22, 2005 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 23, 2005 and incorporated herein by reference)
 
   
10.2
  Term Loan Agreement dated as of January 5, 2006 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.3
  Note Purchase Agreement dated as of November 15, 2004 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated November 15, 2004 and incorporated herein by reference)
 
   
10.4
  Tax Indemnification Agreement dated May 8, 1998, by and between Brandywine Operating Partnership, L.P. and the parties identified on the signature page (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated May 14, 1998 and incorporated herein by reference)
 
   
10.5
  Contribution Agreement dated as of July 10, 1998 (with Donald E. Axinn) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated July 30, 1998 and incorporated herein by reference)

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Table of Contents

     
Exhibits No.   Description
 
   
10.6
  First Amendment to Contribution Agreement (with Donald E. Axinn) (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 13, 1998 and incorporated herein by reference)
 
   
10.7
  Form of Donald E. Axinn Options** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated July 30, 1998 and incorporated herein by reference)
 
   
10.8
  Modification Agreement dated as of June 20, 2005 between Brandywine Operating Partnership, L.P. and Donald E. Axinn (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated June 21, 2005 and incorporated herein by reference)
 
   
10.9
  Consent and Confirmation Agreement with Donald E. Axinn (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 15, 2006 and incorporated herein by reference)
 
   
10.10
  Contribution Agreement dated August 18, 2004 with TRC Realty, Inc.-GP, TRC-LB LLC and TRC Associates Limited Partnership (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated August 19, 2004 and incorporated herein by reference)
 
   
10.11
  Registration Rights Agreement (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated September 21, 2004 and incorporated herein by reference)
 
   
10.12
  Tax Protection Agreement (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated September 21, 2004 and incorporated herein by reference)
 
   
10.13
  Alternative Asset Purchase Agreement (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.14
  Registration Rights Agreement dated as of October 3, 2005 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 4, 2005 and incorporated herein by reference)
 
   
10.15
  Letter to Cohen & Steers Capital Management, Inc. (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended June 30, 2003 and incorporated herein by reference)
 
   
10.16
  Sales Agreement with Brinson Patrick Securities Corporation (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated November 29, 2004 and incorporated herein by reference)
 
   
10.17
  Registration Rights Agreement dated as of October 4, 2006 relating to 3.875% Exchangeable Guaranteed Notes due 2026 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 4, 2006 and incorporated herein by reference)
 
   
10.18
  Common Share Delivery Agreement (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated October 4, 2006 and incorporated herein by reference)
 
   
10.19
  2006 Amended and Restated Agreement dated as of January 5, 2006 with Anthony A. Nichols, Sr.** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.20
  Amended and Restated Employment Agreement dated as of February 9, 2007 of Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 14, 2007 and incorporated herein by reference)
 
   
10.21
  Employment Agreement with Robert K. Wiberg (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated as of November 2, 2005 and incorporated herein by reference)
 
   
10.22
  Employment Agreement with Daniel K. Cushing (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated as of November 2, 2005 and incorporated herein by reference)
 
   
10.23
  Employment Agreement with Christopher M. Hipps (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated as of November 2, 2005 and incorporated herein by reference)
 
   
10.24
  Employment Agreement with Michael J. Cooper (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated as of November 2, 2005 and incorporated herein by reference)
 
   
10.25
  Employment Agreement with Gregory S. Imhoff** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.26
  Employment Agreement with Howard M. Sipzner** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 12, 2006 and incorporated herein by reference)
 
   
10.27
  Employment Agreement with Darryl M. Dunn** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2007 and incorporated herein by reference)
 
   
10.28
  Consulting Agreement with Michael V. Prentiss** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.29
  Consulting Agreement with Thomas F. August** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.30
  Third Amended and Restated Employment Agreement with Michael V. Prentiss**(previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.31
  First Amendment to the Third Amended and Restated Employment Agreement with Michael V. Prentiss** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.32
  Second Amendment to the Third Amended and Restated Employment Agreement with Michael V. Prentiss** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.33
  Amended and Restated Employment Agreement with Thomas F. August** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.34
  First Amendment to the Amended and Restated Employment Agreement with Thomas F. August** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)

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Table of Contents

     
Exhibits No.   Description
 
   
10.35
  Second Amendment to the Amended and Restated Employment Agreement with Thomas F. August** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.36
  Form of Acknowledgment and Waiver Agreement** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.37
  1997 Long-Term Incentive Plan (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2005 and incorporated herein by reference)
 
   
10.38
  Amended and Restated Executive Deferred Compensation Plan effective March 25, 2004** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference)
 
   
10.39
  Amended and Restated Executive Deferred Compensation Plan effective January 1, 2006** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 26, 2006 and incorporated herein by reference)
 
   
10.40
  Amended and Restated Non-Qualified Stock Option Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference)
 
   
10.41
  2002 Restricted Share Award for Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended June 30, 2002 and incorporated herein by reference)
 
   
10.42
  2002 Form of Restricted Share Award for Executive Officers (other than the President and Chief Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended June 30, 2002 and incorporated herein by reference)
 
   
10.43
  2002 Restricted Share Award to Christopher P. Marr** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated August 27, 2002 and incorporated herein by reference)
 
   
10.44
  2002 Non-Qualified Option to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended September 30, 2002 and incorporated herein by reference)
 
   
10.45
  2003 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference)
 
   
10.46
  2003 Restricted Share Award to Anthony S. Rimikis** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference)
 
   
10.47
  2003 Restricted Share Award to H. Jeffrey De Vuono** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference)
 
   
10.48
  2003 Restricted Share Award to George D. Sowa** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference)
 
   
10.49
  2003 Restricted Share Award to Brad A. Molotsky** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference)
 
   
10.50
  2003 Restricted Share Award to Christopher P. Marr** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference)
 
   
10.51
  2004 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference)
 
   
10.52
  Form of 2004 Restricted Share Award to executive officers (other than the President and Chief Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference)
 
   
10.53
  Form of 2004 Restricted Share Award to non-executive trustees** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended June 30, 2004 and incorporated herein by reference)
 
   
10.54
  Form of 2004 Restricted Share Award to non-executive trustee (Wyche Fowler)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 22, 2004 and incorporated herein by reference)
 
   
10.55
  2005 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 15, 2005 and incorporated herein by reference)
 
   
10.56
  Form of 2005 Restricted Share Award to executive officers (other than the President and Chief Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 15, 2005 and incorporated herein by reference)
 
   
10.57
  Form of 2005 Restricted Share Award to non-executive trustees** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated May 26, 2005 and incorporated herein by reference)
 
   
10.58
  2006 Restricted Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 15, 2006 and incorporated herein by reference)
 
   
10.59
  Form of 2006 Restricted Share Award to executive officers (other than the President and Chief Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 15, 2006 and incorporated herein by reference)
 
   
10.60
  Form of 2006 Restricted Share Award to non-executive trustees** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2006 and incorporated herein by reference)
 
   
10.61
  Performance Share Award to Howard M. Sipzner ** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 12, 2006 and incorporated herein by reference)
 
   
10.62
  2007 Performance Share Award to Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 14, 2007 and incorporated herein by reference)

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Table of Contents

     
Exhibits No.   Description
 
   
10.63
  Form of 2007 Performance Share Award to executive officers (other than the President and Chief Executive Officer)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 14, 2007 and incorporated herein by reference)
 
   
10.64
  Form of Severance Agreement for executive officers** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 15, 2005 and incorporated herein by reference)
 
   
10.65
  Change of Control Agreement with Howard M. Sipzner** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 12, 2006 and incorporated herein by reference)
 
   
10.66
  Summary of Trustee Compensation** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated March 17, 2006 and incorporated herein by reference)
 
   
10.67
  Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.68
  First Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan**(previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.69
  Second Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan**(previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.70
  Amendment No. 3 to the Prentiss Properties Trust 1996 Share Incentive Plan**(previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.71
  Fourth Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.72
  Amendment No. 5 to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.73
  Sixth Amendment to the Prentiss Properties Trust 1996 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.74
  Prentiss Properties Trust 2005 Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.75
  Amended and Restated Prentiss Properties Trust Trustees’ Share Incentive Plan**(previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.76
  Amendment No. 1 to the Amended and Restated Prentiss Properties Trust Trustees’ Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.77
  Second Amendment to the Amended and Restated Prentiss Properties Trust Trustees’ Share Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.78
  Form of Restricted Share Award** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated January 10, 2006 and incorporated herein by reference)
 
   
10.79
  2006 Long-Term Outperformance Compensation Program (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated September 1, 2006 and incorporated herein by reference)
 
   
12.1
  Statement re Computation of Ratios of Brandywine Realty Trust
 
   
12.2
  Statement re Computation of Ratios of Brandywine Operating Partnership, L.P.
 
   
14.1
  Code of Business Conduct and Ethics (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 22, 2004 and incorporated herein by reference)
 
   
21
  List of subsidiaries
 
   
23.1
  Consent of PricewaterhouseCoopers LLP relating to financial statements of Brandywine Realty Trust
 
   
23.2
  Consent of PricewaterhouseCoopers LLP relating to financial statements of Brandywine Operating Partnership, L.P.
 
   
31.1
  Certifications of the Chief Executive Officer of Brandywine Realty Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
 
   
31.2
  Certifications of the Chief Financial Officer of Brandywine Realty Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
 
   
31.3
  Certifications of the Chief Executive Officer of Brandywine Realty Trust in its capacity as the general partner of Brandywine Operating Partnership, L.P., required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
 
   
31.4
  Certifications of the Chief Financial Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
 
   
32.1
  Certifications of the Chief Executive Officer of Brandywine Realty Trust required under Rule 13a-14(b) of the Securities Exchange Act of 1934.
 
   
32.2
  Certifications of the Chief Financial Officer of Brandywine Realty Trust required by Rule 13a-14(b) under the Securities Exchange Act of 1934.
 
   
32.3
  Certifications of the Chief Executive Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., required by Rule 13a-14(b) under the Securities Exchange Act of 1934.
 
   
32.4
  Certifications of the Chief Financial Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., required by Rule 13a-14(b) under the Securities Exchange Act of 1934.
 
**   Management contract or compensatory plan or arrangement.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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    
 
           
 
  By:   /s/ Gerard H. Sweeney    
 
           
    Gerard H. Sweeney
President and Chief Executive Officer
   
Date: February 28, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
         
Signature   Title   Date
 
       
/s/ Walter D’Alessio
 
Walter D’Alessio
  Chairman of the Board and Trustee   February 28, 2007
 
       
/s/ Gerard H. Sweeney
 
Gerard H. Sweeney
  President, Chief Executive Officer and Trustee (Principal Executive Officer)   February 28, 2007
 
       
/s/ Howard M. Sipzner
 
Howard M. Sipzner
  Executive Vice President and Chief Financial Officer (Principal Financial Officer)   February 28, 2007
 
       
/s/ Darryl M. Dunn
 
Darryl M. Dunn
  Vice President, Chief Accounting Officer & Treasurer
(Principal Accounting Officer)
  February 28, 2007
 
       
/s/ D. Pike Aloian
 
D. Pike Aloian
  Trustee   February 28, 2007
 
       
/s/ Thomas F. August
 
Thomas F. August
  Trustee   February 28, 2007
 
       
/s/ Donald E. Axinn
 
Donald E. Axinn
  Trustee   February 28, 2007
 
       
/s/ Wyche Fowler
 
Wyche Fowler
  Trustee   February 28, 2007
 
       
/s/ Michael J. Joyce
 
Michael J. Joyce
  Trustee   February 28, 2007
 
       
/s/ Anthony A. Nichols, Sr.
 
Anthony A. Nichols, Sr.
  Trustee   February 28, 2007
 
       
/s/ Charles P. Pizzi
 
Charles P. Pizzi
  Trustee   February 28, 2007
 
       
/s/ Michael V. Prentiss
 
Michael V. Prentiss
  Trustee   February 28, 2007

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.    
 
           
    By: Brandywine Realty Trust, its General Partner    
 
           
 
  By:   /s/ Gerard H. Sweeney    
 
           
    Gerard H. Sweeney
President and Chief Executive Officer
   
Date: February 28, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
         
Signature   Title   Date
 
       
/s/ Walter D’Alessio
 
Walter D’Alessio
  Chairman of the Board and Trustee   February 28, 2007
 
       
/s/ Gerard H. Sweeney
 
Gerard H. Sweeney
  President, Chief Executive Officer and Trustee (Principal Executive Officer)   February 28, 2007
 
       
/s/ Howard M. Sipzner
 
Howard M. Sipzner
  Executive Vice President and Chief Financial Officer (Principal Financial Officer)   February 28, 2007
 
       
/s/ Darryl M. Dunn
 
Darryl M. Dunn
  Vice President, Chief Accounting Officer & Treasurer
(Principal Accounting Officer)
  February 28, 2007
 
       
/s/ D. Pike Aloian
 
D. Pike Aloian
  Trustee   February 28, 2007
 
       
/s/ Thomas F. August
 
Thomas F. August
  Trustee   February 28, 2007
 
       
/s/ Donald E. Axinn
 
Donald E. Axinn
  Trustee   February 28, 2007
 
       
/s/ Wyche Fowler
 
Wyche Fowler
  Trustee   February 28, 2007
 
       
/s/ Michael J. Joyce
 
Michael J. Joyce
  Trustee   February 28, 2007
 
       
/s/ Anthony A. Nichols, Sr.
 
Anthony A. Nichols, Sr.
  Trustee   February 28, 2007
 
       
/s/ Charles P. Pizzi
 
Charles P. Pizzi
  Trustee   February 28, 2007
 
       
/s/ Michael V. Prentiss
 
Michael V. Prentiss
  Trustee   February 28, 2007

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Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Brandywine Realty Trust:
We have completed integrated audits of Brandywine Realty Trust’s and its subsidiaries (collectively the “Company”) consolidated financial statements and of its internal control over financial reporting as of December 31, 2006, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement schedules
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(2)  present fairly, in all material respects, the financial position of Brandywine Realty Trust and its subsidiaries (collectively the “Company”) at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in the accompanying Form 10-K appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the

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company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded the Company’s investments in Four and Six Tower Bridge Associates from its assessment of internal control over financial reporting as of December 31, 2006 because the Company does not have the right and authority to assess the internal control over financial reporting of the individual entities and it lacks the ability to influence or modify the internal control over financial reporting of the individual entities. Four and Six Tower Bridge are two real estate partnerships, created prior to December 13, 2003, which the Company started consolidating under Financial Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable Interest Entities” on March 31, 2004. We have also excluded Four and Six Tower Bridge Associates from our audit of internal control over financial reporting. Four and Six Tower Bridge are two consolidated real estate partnerships whose total assets and total revenues represent less than 1% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2006.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 28, 2007

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BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
                 
    December 31,  
    2006     2005  
ASSETS
               
Real estate investments:
               
Operating properties
  $ 4,927,305     $ 2,560,061  
Accumulated depreciation
    (515,698 )     (390,333 )
 
           
Operating real estate investments, net
    4,411,607       2,169,728  
Construction-in-progress
    217,886       273,240  
Land held for development
    110,233       98,518  
 
           
Total real estate investments, net
    4,739,726       2,541,486  
 
               
Cash and cash equivalents
    25,379       7,174  
Restricted cash
    22,557       18,498  
Accounts receivable, net
    19,957       12,874  
Accrued rent receivable, net
    71,589       47,034  
Asset held for sale
    126,016        
Investment in real estate ventures, at equity
    74,574       13,331  
Deferred costs, net
    73,708       37,602  
Intangible assets, net
    281,251       78,097  
Other assets
    73,506       49,649  
 
           
 
               
Total assets
  $ 5,508,263     $ 2,805,745  
 
           
 
               
LIABILITIES AND BENEFICIARIES’ EQUITY
               
Mortgage notes payable
  $ 883,920     $ 494,777  
Unsecured notes
    2,208,310       936,607  
Unsecured credit facility
    60,000       90,000  
Accounts payable and accrued expenses
    108,400       52,635  
Distributions payable
    42,760       28,880  
Tenant security deposits and deferred rents
    55,697       20,953  
Acquired below market leases, net of accumulated amortization of $26,009 and $6,931
    92,527       34,704  
Other liabilities
    13,906       4,466  
Mortgage notes payable and other liabilities held for sale
    20,826        
 
           
Total liabilities
    3,486,346       1,663,022  
Minority interest — partners’ share of consolidated real estate ventures
    34,428        
Minority interest attributable to continuing operations — LP units
    89,563       37,859  
 
               
Commitments and contingencies (Note 22)
               
 
               
Beneficiaries’ equity:
               
Preferred Shares (shares authorized-20,000,000):
               
7.50% Series C Preferred Shares, $0.01 par value; issued and outstanding–2,000,000 in 2006 and 2005
    20       20  
7.375% Series D Preferred Shares, $0.01 par value; issued and outstanding–2,300,000 in 2006 and 2005
    23       23  
Common Shares of beneficial interest, $0.01 par value; shares authorized 200,000,000; issued and outstanding–88,327,041 in 2006 and 56,179,075 in 2005
    883       562  
Additional paid-in capital
    2,311,541       1,369,913  
Cumulative earnings
    423,764       413,282  
Accumulated other comprehensive income (loss)
    1,576       (3,169 )
Cumulative distributions
    (839,881 )     (675,767 )
 
           
Total beneficiaries’ equity
    1,897,926       1,104,864  
 
           
Total liabilities, minority interest and beneficiaries’ equity
  $ 5,508,263     $ 2,805,745  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share information)
                         
    Years ended December 31,  
    2006     2005     2004  
Revenue:
                       
Rents
  $ 559,936     $ 318,218     $ 267,710  
Tenant reimbursements
    80,470       48,562       36,849  
Other
    22,395       13,844       11,998  
 
                 
Total revenue
    662,801       380,624       316,557  
 
                       
Operating Expenses:
                       
Property operating expenses
    188,001       111,192       86,358  
Real estate taxes
    65,584       38,180       29,895  
Depreciation and amortization
    248,132       109,118       77,521  
Administrative expenses
    29,644       17,982       15,100  
 
                 
Total operating expenses
    531,361       276,472       208,874  
 
                 
Operating income
    131,440       104,152       107,683  
Other Income (Expense):
                       
Interest income
    9,513       1,370       841  
Interest expense
    (171,177 )     (70,152 )     (52,642 )
Interest expense — Deferred financing costs
    (4,607 )     (3,766 )     (1,968 )
Equity in income of real estate ventures
    2,165       3,172       2,023  
Net gain on sale of interests in real estate
    14,190       4,640       2,975  
Gain on termination of purchase contract
    3,147              
 
                 
Income (loss) before minority interest
    (15,329 )     39,416       58,912  
Minority interest — partners’ share of consolidated real estate ventures
    270              
Minority interest attributable to continuing operations — LP units
    1,028       (1,237 )     (2,429 )
 
                 
Income (loss) from continuing operations
    (14,031 )     38,179       56,483  
 
                       
Discontinued operations:
                       
Income from discontinued operations
    7,681       2,555       827  
Net gain on disposition of discontinued operations
    20,243       2,196       3,137  
Minority interest — partners’ share of consolidated real estate ventures
    (2,239 )            
Minority interest attributable to discontinued operations — LP units
    (1,172 )     (163 )     (144 )
 
                 
Income from discontinued operations
    24,513       4,588       3,820  
 
                 
Net income
    10,482       42,767       60,303  
Income allocated to Preferred Shares
    (7,992 )     (7,992 )     (9,720 )
Preferred Share redemption gain
                4,500  
 
                 
Income allocated to Common Shares
  $ 2,490     $ 34,775     $ 55,083  
 
                 
 
                       
Basic earnings per Common Share:
                       
Continuing operations
  $ (0.25 )   $ 0.54     $ 1.07  
Discontinued operations
    0.27       0.08       0.08  
 
                 
 
  $ 0.03     $ 0.62     $ 1.15  
 
                 
 
                       
Diluted earnings per Common Share:
                       
Continuing operations
  $ (0.24 )   $ 0.54     $ 1.07  
Discontinued operations
    0.27       0.08       0.08  
 
                 
 
  $ 0.03     $ 0.62     $ 1.15  
 
                 
 
                       
Dividends declared per common share
  $ 1.76     $ 1.78     $ 1.76  
 
                       
Basic weighted average shares outstanding
    89,552,301       55,846,268       47,781,789  
 
                       
Diluted weighted average shares outstanding
    90,070,825       56,104,588       48,018,704  
The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE (LOSS) INCOME
(in thousands)
                         
    Years ended December 31,  
    2006     2005     2004  
Net income
  $ 10,482     $ 42,767     $ 60,303  
Other comprehensive income:
                       
Unrealized gain (loss) on derivative financial instruments
    1,330       (713 )     309  
Less: minority interest — consolidated real estate venture partner’s share of unrealized gain (loss) on derivative financial instruments
    (302 )            
Settlement of treasury locks
                (3,238 )
Settlement of forward starting swaps
    3,266       240        
Realized gain on derivative financial instruments
            450       2,809  
Reclassification of realized (gains)/losses on derivative financial instruments to operations, net
    122              
Unrealized gain (loss) on available-for-sale securities
    328       (16 )     (852 )
 
                 
Total other comprehensive income (loss)
    4,744       (39 )     (972 )
 
                 
Comprehensive income
  $ 15,226     $ 42,728     $ 59,331  
 
                 
The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF BENEFICIARIES’ EQUITY
For the years ended December 31, 2006, 2005 and 2004  
(in thousands, except number of shares)
                                                                                                                         
                                                                                                    Accumulated              
    Number of     Par Value of     Number of     Par Value of     Number of     Par Value of             Par Value of                                     Other              
    Preferred A     Preferred A     Preferred C     Preferred C     Preferred D     Preferred D     Number of     Common     Additional Paid-in     Employee     Share     Cumulative     Comprehensive     Cumulative        
    Shares     Shares     Shares     Shares     Shares     Shares     Common Shares     Shares     Capital     Stock Loans     Warrants     Earnings     Income (Loss)     Distributions     Total  
BALANCE, December 31, 2003
    750,000     $ 8       2,000,000     $ 20           $       41,040,710     $ 411     $ 938,262     $ (1,533 )   $ 401     $ 310,212     $ (2,158 )   $ (473,766 )   $ 771,857  
 
Net income
                                                                                            60,303                       60,303  
Other comprehensive income
                                                                                                    (972 )             (972 )
Vesting of Restricted Stock
                                                    88,406       1       1,642                                               1,643  
Issuance of Preferred Shares
                                    2,300,000       23                       55,515                                               55,538  
Conversion of Preferred Series A Shares
    (750,000 )     (8 )                                     1,339,286       13       (6 )                                             (1 )
Redemption of Preferred Shares
                                                                                                            4,500       4,500  
Issuance of Common Shares
                                                    12,235,000       122       336,562                                               336,684  
Issuance of trustee/bonus shares
                                                    2,191             55                                               55  
Payment of employee stock loans
                                                                            1,112                                       1,112  
Exercise of warrants/options
                                                    587,159       6       14,940               (401 )                             14,545  
Amortization of stock options
                                                                    102                                               102  
Preferred Share distributions
                                                                                                            (9,720 )     (9,720 )
Distributions ($1.76 per share)
                                                                                                            (88,644 )     (88,644 )
 
                                                                                         
 
                                                                                                                       
BALANCE, December 31, 2004
        $       2,000,000     $ 20       2,300,000     $ 23       55,292,752     $ 553     $ 1,347,072     $ (421 )   $     $ 370,515     $ (3,130 )   $ (567,630 )   $ 1,147,002  
 
                                                                                                                       
Net income
                                                                                            42,767                       42,767  
Other comprehensive income
                                                                                                    (39 )             (39 )
Vesting of Restricted Stock
                                                    69,746       1       1,539                                               1,540  
Conversion of LP units to common shares
                                                    107,692       1       2,584                                               2,585  
Issuance of trustee/bonus shares
                                                    3,204             90                                               90  
Payment of employee stock loans
                                                                            50                                       50  
Exercise of warrants/options
                                                    705,681       7       18,999                                               19,006  
Preferred Share distributions
                                                                                                            (7,992 )     (7,992 )
Distributions ($1.78 per share)
                                                                                                            (100,145 )     (100,145 )
 
                                                                                         
 
                                                                                                                       
BALANCE, December 31, 2005
        $       2,000,000     $ 20       2,300,000     $ 23       56,179,075     $ 562     $ 1,370,284     $ (371 )   $     $ 413,282     $ (3,169 )   $ (675,767 )   $ 1,104,864  
 
                                                                                                                       
Net income
                                                                                            10,482                       10,482  
Other comprehensive income
                                                                                                    4,745               4,745  
Vesting of Restricted Stock
                                                    81,142       1       1,886                                               1,887  
Conversion of LP units to common shares
                                                    14,700             488                                               488  
Issuance of Common Shares
                                                    34,542,151       345       1,021,828                                               1,022,173  
Repurchase of Common Shares
                                                    (3,009,200 )     (30 )     (94,443 )                                             (94,473 )
Issuance of trustee/bonus shares
                                                    3,257             90                                               90  
Payment of employee stock loans
                                                                            371                                       371  
Exercise of warrants/options
                                                    515,916       5       11,408                                               11,413  
Preferred Share distributions
                                                                                                            (7,992 )     (7,992 )
Distributions ($1.76 per share)
                                                                                                            (156,122 )     (156,122 )
 
                                                                                         
 
                                                                                                                       
BALANCE, December 31, 2006
        $       2,000,000     $ 20       2,300,000     $ 23       88,327,041     $ 883     $ 2,311,541     $     $     $ 423,764     $ 1,576     $ (839,881 )   $ 1,897,926  
 
                                                                                         
The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                         
    Years ended December 31,  
    2006     2005     2004  
Cash flows from operating activities:
                       
Net income (loss)
  $ 10,482     $ 42,767     $ 60,303  
Adjustments to reconcile net income (loss) to net cash from operating activities:
                       
Depreciation
    186,454       84,561       64,175  
Amortization:
                       
Deferred financing costs
    4,607       3,721       5,088  
Deferred leasing costs
    12,258       8,895       7,841  
Acquired above (below) market leases, net
    (9,034 )     (1,542 )     (406 )
Acquired lease intangibles
    66,317       18,573       8,112  
Deferred compensation costs
    3,447       2,764       2,114  
Straight-line rent
    (31,326 )     (14,952 )     (6,023 )
Provision for doubtful accounts
    3,510       792       467  
Real estate venture income in excess of distributions
    (15 )     (769 )     (293 )
Net gain on sale of interests in real estate
    (34,433 )     (6,820 )     (6,111 )
Gain on termination of purchase contract
    (3,147 )            
Minority interest
    2,113       1,400       2,573  
Changes in assets and liabilities:
                       
Accounts receivable
    1,365       (598 )     (1,769 )
Other assets
    (4,855 )     (11,810 )     9,840  
Accounts payable and accrued expenses
    (1,154 )     (2,407 )     3,199  
Tenant security deposits and deferred rents
    29,209       (40 )     3,750  
Other liabilities
    5,768       612       30  
 
                 
Net cash from operating activities
    241,566       125,147       152,890  
Cash flows from investing activities:
                       
Acquisition of Prentiss
    (935,856 )            
Acquisition of properties
    (231,244 )     (92,674 )     (569,343 )
Sales of properties, net
    347,652       29,428       22,283  
Proceeds from termination of purchase contract
    3,147              
Capital expenditures
    (242,516 )     (177,035 )     (131,998 )
Investment in marketable securities
    181,556       423        
Investment in unconsolidated Real Estate Ventures
    (753 )     (269 )     (233 )
Restricted cash
    (2,981 )     (518 )     (1,320 )
Cash distributions from unconsolidated Real Estate Ventures in excess of equity in income
    3,762       462       1,402  
Increase in cash due to consolidation of variable interest entities
                426  
Proceeds from repayment of mortgage notes receivable
                6,470  
Leasing costs
    (38,561 )     (12,234 )     (10,339 )
 
                 
Net cash from investing activities
    (915,794 )     (252,417 )     (682,652 )
Cash flows from financing activities:
                       
Proceeds from Credit Facility borrowings
    726,000       372,142       570,000  
Repayments of Credit Facility borrowings
    (756,000 )     (434,142 )     (723,000 )
Proceeds from mortgage notes payable
    20,520              
Repayments of secured debt
    (213,338 )     (23,457 )     (50,165 )
Proceeds from term loan
    750,000             433,000  
Repayments of term loan
    (750,000 )           (533,000 )
Proceeds from unsecured notes
    1,193,217       299,976       636,398  
Proceeds from forward starting swap termination
    3,266              
Repayments on employee stock loans
    371       50       1,112  
Proceeds from issuance of shares, net
                406,767  
Debt financing costs
    (14,319 )     (4,026 )     (13,580 )
Exercise of stock options
    11,414       18,999        
Repurchases of Common Shares and minority interest units
    (94,472 )     (239 )     (95,436 )
Distributions paid to shareholders
    (151,102 )     (106,608 )     (90,457 )
Distributions to minority interest holders
    (33,124 )     (3,597 )     (5,083 )
 
                 
Net cash from financing activities
    692,433       119,098       536,556  
 
                 
Increase (decrease) in cash and cash equivalents
    18,205       (8,172 )     6,794  
Cash and cash equivalents at beginning of period
    7,174       15,346       8,552  
 
                 
Cash and cash equivalents at end of period
  $ 25,379     $ 7,174     $ 15,346  
 
                 
Supplemental disclosure:
                       
Cash paid for interest, net of capitalized interest
  $ 154,258     $ 53,450     $ 43,281  
Supplemental disclosure of non-cash activity:
                       
Common shares issued in the Prentiss acquisition
    1,022,173              
Operating Partnership units issued in Prentiss acquisitions
    64,103              
Operating Partnership units issued in property acquisitions
    13,819             10,000  
Debt assumed in property acquisitions
                79,330  
Debt, minority interest and other liabilities, net, assumed in the Prentiss acquisition
    679,520              
The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006, 2005 AND 2004
1. ORGANIZATION AND NATURE OF OPERATIONS
Brandywine Realty Trust, a Maryland real estate investment trust, or REIT, is a self-administered and self-managed real estate investment trust, or REIT, active in acquiring, developing, redeveloping, leasing and managing office and industrial properties. Brandywine Realty Trust owns its assets and conducts its operations through Brandywine Operating Partnership, L.P. a Delaware limited partnership (the “Operating Partnership”) and subsidiaries of the Operating Partnership. Brandywine Realty Trust, the Operating Partnership and their consolidated subsidiaries are collectively referred to below as the “Company.”
As of December 31, 2006, the Company owned 261 office properties, 23 industrial facilities and one mixed-use property (collectively, the “Properties”) containing an aggregate of approximately 28.2 million net rentable square feet. The Company also has six properties under development, three properties under redevelopment and four lease-up properties containing an aggregate 2.1 million net rentable square feet. As of December 31, 2006, the Company owned economic interests in 11 unconsolidated real estate ventures that contain approximately 2.7 million net rentable square feet and in four consolidated real estate ventures that own 15 office properties containing approximately 1.5 million net rentable square feet (collectively, the “Real Estate Ventures”). In addition, as of December 31, 2006, the Company owned approximately 490 acres of undeveloped land. The Properties and the properties owned by the Real Estate Ventures are located in and surrounding Philadelphia, Wilmington, Southern and Central New Jersey, Richmond, Metropolitan Washington, D.C., Dallas/Fort Worth, Austin, Oakland, San Diego and Los Angeles. In addition to managing properties that the Company owns, as of December 31, 2006, the Company was managing approximately 11.0 million net rentable square feet of office and industrial properties for third parties.
All references to building square footage, acres, occupancy percentage and the number of buildings are unaudited.
As more fully described in Note 3, on January 5, 2006, the Company acquired Prentiss Properties Trust (“Prentiss”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) that the Company entered into with Prentiss on October 3, 2005.
Brandywine Realty Trust is the sole general partner of the Operating Partnership and, as of December 31, 2006, owned a 95.7% interest in the Operating Partnership. The Company conducts its third-party real estate management services business primarily through four management companies (collectively, the “Management Companies”): Brandywine Realty Services Corporation (“BRSCO”), BTRS, Inc., (“BTRS”) Brandywine Properties I Limited, Inc. (“BPI”) and Brandywine Properties Management, L.P. (“BPM”). Each of BRSCO, BTRS and BPI is a taxable REIT subsidiaries. The Operating Partnership owns a 95% interest in BRSCO and the remaining 5% interest is owned by a partnership comprised of a current executive and former executive of the Company, each of whom is a member of the Company’s Board of Trustees. The Operating Partnership owns, directly and indirectly, 100% of each of BTRS, BPI and BPM.
As of December 31, 2006, the Management Companies were managing properties containing an aggregate of approximately 42.3 million net rentable square feet, of which approximately 28.2 million net rentable square feet related to Properties owned by the Company and approximately 13.0 million net rentable square feet related to properties owned by third parties and Real Estate Ventures.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). When an entity is not deemed to be a VIE, the Company considers the provisions of EITF 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”). The Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company controls and the limited partners do not have the ability to dissolve the entity or remove the Company without cause nor substantive participating rights. Entities that the Company accounts for under the equity method (i.e. at cost, increased or decreased by the Company’s share of earnings or losses, less distributions) include (i) entities that are VIEs and of which the Company is not deemed to be the primary beneficiary (ii) entities that are non-VIEs which the Company does not control, but over which the Company has the ability to exercise significant influence and (iii) entities that are non-VIE’s that the Company controls through its general partner status, but the limited partners in the entity have the substantive ability to dissolve the entity or remove the Company without cause or have substantive participating rights. The Company will reconsider its determination of whether an entity is a VIE and who the primary beneficiary is, and whether or not the limited partners in an entity have substantive rights, if certain events occur that are likely to cause a change in the original determinations. The portion of these entities not owned by the Company is presented as minority interest as of and during the periods consolidated. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue, impairment of long-lived assets, allowance for doubtful accounts and deferred costs.
Operating Properties
Operating properties are carried at historical cost less accumulated depreciation and impairment losses. The cost of operating properties reflects their purchase price or development cost. Costs incurred for the acquisition and renovation of an operating property are capitalized to the Company’s investment in that property. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.
Purchase Price Allocation
The Company allocates the purchase price of properties to net tangible and identified intangible assets acquired based on fair values. Above-market and below-market in-place lease values for acquired properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) the Company’s estimate of the fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. Capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining non-cancelable terms of the respective leases, including any fixed-rate renewal periods.
Other intangible assets also include amounts representing the value of tenant relationships and in-place leases based on the Company’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant. The Company estimates the cost to execute

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leases with terms similar to the remaining lease terms of the in-place leases, including leasing commissions, legal and other related expenses. This intangible asset is amortized to expense over the remaining term of the respective leases. Company estimates of value are made using methods similar to those used by independent appraisers or by using independent appraisals. Factors considered by the Company in this analysis include an estimate of the carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from three to twelve months. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. The Company also uses the information obtained as a result of its pre-acquisition due diligence as part of its consideration of FIN 47, and when necessary, will record a conditional asset retirement obligation as part of its purchase price.
Characteristics considered by the Company in allocating value to its tenant relationships include the nature and extent of the Company’s business relationship with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The value of tenant relationship intangibles is amortized over the remaining initial lease term and expected renewals, but in no event longer than the remaining depreciable life of the building. The value of in-place leases is amortized over the remaining non-cancelable term of the respective leases and any fixed-rate renewal periods.
In the event that a tenant terminates its lease, the unamortized portion of each intangible, including market rate adjustments, in-place lease values and tenant relationship values, would be charged to expense.
Depreciation and Amortization
The costs of buildings and improvements are depreciated using the straight-line method based on the following useful lives: buildings and improvements (five to 55 years) and tenant improvements (the shorter of the lease term or the life of the asset).
Construction in Progress
Project costs directly associated with the development and construction of a real estate project are capitalized as construction in progress. In addition, interest, real estate taxes and general and administrative expenses that are directly associated with the Company’s development activities are capitalized until the property is placed in service. Internal direct construction costs totaling $4.9 million in 2006, $3.4 million in 2005 and $3.0 million in 2004 and interest totaling $9.5 million in 2006, $9.6 million in 2005 and $3.0 million in 2004 were capitalized related to development of certain Properties and land holdings.
Impairment of Long-Lived Assets
Statement of Financial Accounting Standard No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long-Lived Assets, provides a single accounting model for long-lived assets as held-for-sale, broadens the scope of businesses to be disposed of that qualify for reporting as discontinued operations and changes the timing of recognizing losses on such operations.
In accordance with SFAS 144, long-lived assets, such as real estate investments and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The other assets and liabilities related to assets classified as held-for-sale are presented separately in the consolidated balance sheet. As of December 31, 2006, Company had two property classified as held for sale. The Company had no properties classified as held for sale at December 31, 2005.

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Cash and Cash Equivalents
Cash and cash equivalents are highly-liquid investments with original maturities of three months or less. The Company maintains cash equivalents in financial institutions in excess of insured limits, but believes this risk is mitigated by only investing in or through major financial institutions.
Restricted Cash
Restricted cash consists of cash held as collateral to provide credit enhancement for the Company’s mortgage debt, cash for property taxes, capital expenditures and tenant improvements.
Accounts Receivable
Leases with tenants are accounted for as operating leases. Minimum annual rentals under tenant leases are recognized on a straight-line basis over the term of the related lease. The cumulative difference between lease revenue recognized under the straight-line method and contractual lease payment terms is recorded as “accrued rent receivable, net” on the accompanying balance sheets. Included in current tenant receivables are tenant reimbursements which are comprised of amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses that are recognized as revenue in the period in which the related expenses are incurred. As of December 31, 2006 one tenant represented approximately 17% of accounts receivable, a significant portion of which is for reimbursements in connection with a tenant improvement project. As of December 31, 2005, no tenant represented more than 10% of accounts receivable.
Tenant receivables and accrued rent receivables are carried net of the allowances for doubtful accounts of $4.5 million and $4.8 million in 2006, respectively and $1.9 million and $3.0 million in 2005, respectively. The allowance is an estimate based on two calculations that are combined to determine the total amount reserved. First, the Company evaluates specific accounts where it has determined that a tenant may have an inability to meet its financial obligations. In these situations, the Company uses its judgment, based on the facts and circumstances, and records a specific reserve for that tenant against amounts due to reduce the receivable to the amount that the Company expects to collect. These reserves are reevaluated and adjusted as additional information becomes available. Second, a reserve is established for all tenants based on a range of percentages applied to receivable aging categories. These percentages are based on historical collection and write-off experience. If the financial condition of the Company’s tenants were to deteriorate, additional allowances may be required.
Investments in Unconsolidated Real Estate Ventures
The Company accounts for its investments in unconsolidated Real Estate Ventures under the equity method of accounting as it is not the primary beneficiary (for VIE’s) and the Company exercises significant influence, but does not control these entities under the provisions of the entities’ governing agreements pursuant to EITF 04-05. These investments are recorded initially at cost, as Investments in Real Estate Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions.
On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated Real Estate Ventures may be other than temporarily impaired. An investment is impaired only if the value of the investment, as estimated by management, is less than the carrying value of the investment. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment, as estimated by management.
To the extent that the Company acquires an interest in or contributes assets to a Real Estate Venture project, the difference between the Company’s cost basis in the investment in venture and in the assets, intangibles and liabilities of the Real Estate Venture is amortized over the life of the related assets, intangibles and liabilities and such adjustment is included in the Company’s share of equity in income of unconsolidated ventures.
Deferred Costs
Costs incurred in connection with property leasing are capitalized as deferred leasing costs. Deferred leasing costs consist primarily of leasing commissions that are amortized on the straight-line method over

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the life of the respective lease which generally ranges from one to 15 years. Management re-evaluates the remaining useful lives of leasing costs as economic and market conditions change.
Costs incurred in connection with debt financing are capitalized as deferred financing costs and charged to interest expense over the terms of the related debt agreements. Deferred financing costs consist primarily of loan fees which are amortized over the related loan term. Management re-evaluates the remaining useful lives of financing costs as economic and market conditions change.
Other Assets
As of December 31, 2006, other assets included a direct financing lease of $14.6 million, prepaid real estate taxes of $9.7 million, prepaid insurance of $4.4 million, marketable securities of $6.8 million, deposits on properties expected to be purchased in 2007 totaling $2.2 million, cash surrender value of life insurance of $11.6 million, furniture, fixtures and equipment of $5.8 million and $6 million of other assets. Also included in this balance are a $4.3 million note receivable with a 20 year amortization period for principal and interest (balloon payment in December 2007) that bears interest at 7.5% and an $8.0 million note receivable with a 20 year amortization period for principal and interest (balloon payment in December 2007) that bears interest at 7.5%.
As of December 31, 2005, other assets included a direct financing lease of $15.2 million, prepaid real estate taxes of $8.1 million, deposits on properties to be purchased in 2006 totaling $6.9 million, cash surrender value of life insurance of $8.2 million, furniture, fixtures and equipment of $2.6 million and $4.3 million of other assets. Also included in this balance is a $4.3 million note receivable with a 20 year amortization period for principal and interest (balloon payment in December 2007) that bears interest at 7.5%.
Revenue Recognition
Rental revenue is recognized on the straight-line basis from the later of the date of the commencement of the lease or the date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. The cumulative difference between lease revenue recognized under this method and contractual lease payment terms is recorded as “accrued rent receivable” on the accompanying balance sheets. The straight-line rent adjustment increased revenue by approximately $31.3 million in 2006, $15.0 million in 2005 and $6.0 million in 2004. The leases also typically provide for tenant reimbursement of a portion of common area maintenance and other operating expenses. Other income is recorded when earned and is primarily comprised of termination fees received from tenants, bankruptcy settlement fees, third party leasing commissions, and third party management fees. During 2006, 2005, and 2004, the Company earned $7.8 million, $6.1 million, and $1.5 million in termination fees. In 2004, the Company recorded approximately $1.0 million plus accrued interest as other income relating to the settlement of litigation. Additionally, during 2004, the Company recorded approximately $0.9 million in other income from the favorable settlement of an accrued liability. Deferred rents represent rental revenue received from tenants prior to their due dates.
No tenant represented greater than 10% of the Company’s rental revenue in 2006, 2005 or 2004.
Income Taxes
The Company has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, the Company has several subsidiary REITs. In order to maintain their qualification as a REIT, the Company and its REIT subsidiaries are required to, among other things, distribute at least 90% of its REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets. As REITs, the Company and its REIT subsidiaries are not subject to federal income tax with respect to the portion of its income that meets certain criteria and is distributed annually to the stockholders. Accordingly, no provision for federal income taxes is included in the accompanying consolidated financial statements with respect to the operations of these operations. The Company and its REIT subsidiaries intend to continue to operate in a manner that allows them to continue to meet the requirements for taxation as REITs. Many of these requirements, however, are highly technical and complex. If the Company or one of its REIT subsidiaries were to fail to meet these requirements, the Company would be subject to federal income tax. The Company is subject to certain state and local taxes. Provision for such taxes has been included in general and administrative expenses in the Company’s Consolidated Statements of Operations and Comprehensive Income.

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The tax basis in the Company’s assets was $4.2 billion as of December 31, 2006 and $1.9 billion as of December 31, 2005.
The Company is subject to a 4% federal excise tax if sufficient taxable income is not distributed within prescribed time limits. The excise tax equals 4% of the annual amount, if any, by which the sum of (a) 85% of the Company’s ordinary income and (b) 95% of the Company’s net capital gain exceeds cash distributions and certain taxes paid by the Company. No excise tax was incurred in 2006, 2005, or 2004.
The Company may elect to treat one or more of its subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS of the Company may perform additional services for tenants of the Company and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the provision to any person, under a franchise, license or otherwise, of rights to any brand name under which any lodging facility or health care facility is operated). A TRS is subject to corporate federal income tax. The Company has elected to treat certain of its corporate subsidiaries as TRSs, these entities provide third party property management services and certain services to tenants that could not otherwise be provided. At December 31, 2006, the Company’s TRSs had tax net operating loss (“NOL”) carryforward of approximately $3.0 million, expiring from 2013 to 2020. The Company has ascribed a full valuation allowance to its net deferred tax assets.
Earnings Per Share
Basic earnings per share is calculated by dividing income allocated to Common Shares by the weighted-average number of shares outstanding during the period. Diluted earnings per share includes the effect of common share equivalents outstanding during the period.
Stock-Based Compensation Plans
The Company maintains shareholder-approved equity incentive plans. The Compensation Committee of the Company’s Board of Trustees authorizes awards under these plans. In May 2005, the Company’s shareholders approved an amendment to the Amended and Restated 1997 Long-Term Incentive Plan (the “1997 Plan”) that increased the number of common shares that may be issued or subject to award under the 1997 Plan from 5,000,000 to 6,600,000. The May 2005 amendment provided that 500,000 of the shares under the 1997 Plan are available solely for awards under options and share appreciation rights that have an exercise or strike price not less than the market price of the common shares on the date of award, and the remaining 6,100,000 shares are available for any type of award under the 1997 Plan. Incentive stock options may not be granted at exercise prices less than fair value of the shares at the time of grant. All options awarded by the Company to date are non-qualified stock options that generally vested over two to five years. As of December 31, 2006, 2.6 million shares remained available for future award under the 1997 Plan. As part of the Company’s January 2006 acquisition of Prentiss, the Company assumed Prentiss’ three share incentive plans. As of December 31, 2006, approximately 1,700,000 common shares remain available for issuance or subject to award under the assumed Prentiss share incentive plans; however, any such issuances or awards under the assumed Prentiss plan may be made only to those Company employees who had been employed by Prentiss immediately prior to the Company’s acquisition of Prentiss or to those Company employees hired after the Prentiss acquisition.
On January 1, 2002, the Company began to expense the fair value of stock-based compensation awards granted subsequent to January 1, 2002, over the applicable vesting period as a component of general and administrative expenses in the Company’s consolidated Statements of Operations. The Company recognized stock-based compensation expense of $3,447,000 in 2006, $2,764,000 in 2005 and $2,114,000 in 2004.
For stock-based compensation awards granted prior to 2002, the Company accounted for stock options issued under the recognition and measurement provisions of APB No. 25, Accounting for Stock Issued to Employees and Related Interpretations. Under this method, no stock-based compensation expense was recognized. Because stock options granted prior to 2002 vested over a three-year term, the resulting compensation cost based on the fair value of the awards on the date of grant, on a pro forma basis, would have been expensed in 2004, 2005, and 2006. Accordingly, had the Company applied the fair value recognition provisions of SFAS 123, the net income applicable to common shares would remain the same

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on a pro forma basis for in 2006 and would have been reduced by $511,000 and $556,000 in 2005 and 2004, respectively, with no change in basic or diluted net income per share.
Comprehensive Income
Comprehensive income or loss is recorded in accordance with the provisions of SFAS 130 (“SFAS 130”), Reporting Comprehensive Income. SFAS 130 establishes standards for reporting comprehensive income and its components in financial statements. Comprehensive income includes unrealized gains and losses on available-for-sale securities and the effective portions of changes in the fair value of derivatives.
Accounting for Derivative Instruments and Hedging Activities
The Company accounts for its derivative instruments and hedging activities under SFAS No. 133 (“SFAS 133”), Accounting for Derivative Instruments and Hedging Activities, and its corresponding amendments under SFAS No. 138, Accounting for Certain Derivative Instruments and Hedging Activities – An Amendment of SFAS 133. SFAS 133 requires the Company to measure every derivative instrument (including certain derivative instruments embedded in other contracts) at fair value and record them in the balance sheet as either an asset or liability. For derivatives designated as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in the fair value of the derivative are reported in other comprehensive income. Changes in fair value of derivative instruments and ineffective portions of hedges are recognized in earnings in the current period. For the three years ended December 31, 2005, 2004 and 2003, the Company was not party to any derivative contract designated as a fair value hedge and there are no ineffective portions of our cash flow hedges. See Note 12.
The Company actively manages its ratio of fixed-to-floating rate debt. To manage its fixed and floating rate debt in a cost-effective manner, the Company, from time to time, enters into interest rate swap agreements as cash flow hedges, under which it agrees to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts. See Note 12.
Reclassifications
Certain amounts have been reclassified in prior years to conform to the current year presentation. The reclassifications are primarily due to the treatment of sold properties as discontinued operations on the statement of operations for all periods presented.
New Pronouncements
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS No. 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact and believes that the adoption of this standard on January 1, 2008 will not have a material effect on our consolidated financial statements.
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on description, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 became effective on January 1, 2007. The Company is currently evaluating the impact of adopting FIN 48.
In October 2005, the FASB issued Staff Position No. 13-1 “Accounting for Rental Costs Incurred during a Construction Period” (“FSP FAS 13-1”). FSP FAS 13-1 addresses the accounting for rental costs associated with operating leases that are incurred during the construction period. FSP FAS 13-1 makes no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period. Therefore, rental costs associated with ground or building operating

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leases that are incurred during a construction period shall be recognized as rental expense, allocated over the lease term in accordance with SFAS No. 13 and Technical Bulletin 85-3. The terms of FSP FAS 13-1 are not applicable to lessees that account for the sale or rental of real estate projects in accordance with SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects.” FSP FAS 13-1 was effective for the first reporting period beginning after December 15, 2005. Retrospective application in accordance with SFAS 154 is permitted but not required. The adoption of FSP FAS 13-1 did not have a material effect on the consolidated financial statements of the Company.
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”). SFAS 154 replaces APB No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements” and establishes retrospective application as the required method for reporting a change in accounting principle. SFAS 154 provides guidance for determining whether a retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company adopted SFAS 154 on January 1, 2006 and this adoption had no effect on the Company’s financial position and results of operations.
In March 2005, the FASB issued FIN 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143, Asset Retirement Obligations. FIN 47 provides clarification of the term “conditional asset retirement obligation” as used in SFAS 143, defined as a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the company. Under this standard, a company must record a liability for a conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. FIN 47 became effective in the Company’s fiscal quarter ended December 31, 2005. The Company adopted FIN 47 as required effective December 31, 2005 and the initial application of FIN 47 did not have a material effect on the consolidated financial statements of the Company.
3. REAL ESTATE INVESTMENTS
As of December 31, 2006 and 2005, the gross carrying value of the Company’s Properties was as follows:
                 
    December 31,  
    2006     2005  
    (amounts in thousands)  
Land
  $ 756,400     $ 456,736  
Building and improvements
    3,807,040       1,951,252  
Tenant improvements
    363,865       152,073  
 
           
 
  $ 4,927,305     $ 2,560,061  
 
           
Acquisitions and Dispositions
The Company’s acquisitions were accounted for by the purchase method. The results of each acquired property are included in the Company’s results of operations from their respective purchase dates.
2006
Prentiss Acquisition
On January 5, 2006, the Company acquired Prentiss pursuant to the Merger Agreement that the Company entered into with Prentiss on October 3, 2005. In conjunction with the Company’s acquisition of Prentiss, designees of The Prudential Insurance Company of America (“Prudential”) acquired certain of Prentiss’ properties that contain an aggregate of approximately 4.32 million net rentable square feet for a total consideration of approximately $747.7 million. Through its acquisition of Prentiss (and after giving effect to the Prudential acquisition of certain of Prentiss’ properties), the Company acquired a portfolio of 79 office properties (including 13 properties that are owned by consolidated Real Estate Ventures and 7 properties that are owned by an unconsolidated Real Estate Venture) that contain an aggregate of 14.0

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million net rentable square feet. The results of the operations of Prentiss have been included in the Company’s condensed consolidated financial statements since January 5, 2006.
The Company funded the approximately $1.05 billion cash portion of the merger consideration, related transaction costs and prepayments of approximately $543.3 million in Prentiss mortgage debt at the closing of the merger through (i) a $750 million unsecured term loan that matures on January 4, 2007; (ii) approximately $676.5 million of cash from Prudential’s acquisition of certain of the Prentiss properties; and (iii) approximately $195.0 million through borrowing under a revolving credit facility.
The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
         
    At January 5, 2006  
Real estate investments        
Land — operating
  $ 282,584  
Building and improvements
    1,942,728  
Tenant improvements
    120,610  
Construction in progress and land inventory
    57,329  
 
     
Total real estate investments acquired
    2,403,251  
 
       
Rent receivables
    6,031  
 
       
Other assets acquired:
       
Intangible assets:
       
In-place leases
    187,907  
Relationship values
    98,382  
Above-market leases
    26,352  
 
     
Total intangible assets acquired
    312,641  
Investment in real estate ventures
    66,921  
Investment in marketable securities
    193,089  
Other assets
    8,868  
 
     
Total other assets
    581,519  
 
     
Total assets acquired
    2,990,801  
 
       
Liabilities assumed:
       
Mortgage notes payable
    532,607  
Unsecured notes
    78,610  
Secured note payable
    186,116  
Security deposits and deferred rent
    6,475  
Other liabilities:
       
Below-market leases
    78,911  
Other liabilities
    43,995  
 
     
Total other liabilities assumed
    122,906  
Total liabilities assumed
    926,714  
Minority interest
    104,658  
 
     
Net assets acquired
  $ 1,959,429  
 
     
In the acquisition of Prentiss, each then outstanding Prentiss common share was converted into the right to receive 0.69 of a Brandywine common share and $21.50 in cash (the “Per Share Merger Consideration”) except that 497,884 Prentiss common shares held in the Prentiss Deferred Compensation Plan converted solely into 720,737 Brandywine common shares. In addition, each then outstanding unit (each, a “Prentiss OP Unit”) of limited partnership interest in the Prentiss operating partnership subsidiary was, at the option of the holder, converted into Prentiss Common Shares with the right to receive the Per Share Merger Consideration or 1.3799 Class A Units of the Operating Partnership (“Brandywine Class A Units”). Accordingly, based on 49,375,723 Prentiss common shares outstanding and 139,000 Prentiss OP Units electing to receive merger consideration at closing of the acquisition, the Company issued 34,541,946 Brandywine common shares and paid an aggregate of approximately $1.05 billion in cash to the accounts

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of the former Prentiss shareholders. Based on 1,572,612 Prentiss OP Units outstanding at closing of the acquisition that did not elect to receive merger consideration, the Operating Partnership issued 2,170,047 Brandywine Class A Units. In addition, options issued by Prentiss that were exercisable for an aggregate of 342,662 Prentiss common shares were converted into options exercisable for an aggregate of 496,037 Brandywine common shares at a weighted average exercise price of $22.00 per share. Through its acquisition of Prentiss the Company also assumed approximately $611.2 million in aggregate principal amount of Prentiss debt.
Each Brandywine Class A Unit that was issued in the merger is subject to redemption at the option of the holder. The Operating Partnership may, at its option, satisfy the redemption either for an amount, per unit, of cash equal to the then market price of one Brandywine common share (based on the prior ten-day trading average) or for one Brandywine common share.
For purposes of computing the total purchase price reflected in the financial statements, the common shares, operating units, restricted shares and options that were issued in the Prentiss transaction were valued based on the average trading price per Brandywine common share of $29.54. The average trading price was based on the average of the high and low trading prices for each of the two trading days before, the day of and the two trading days after the merger was announced (i.e., September 29, September 30, October 3, October 4 and October 5).
The Company considered the provisions of FIN 47 for these acquisitions and, where necessary, recorded a conditional asset retirement obligation as part of the purchase price. The aggregate asset retirement recorded in connection with the Prentiss acquisition was approximately $2.7 million.
Pro forma information relating to the acquisition of Prentiss is presented below as if Prentiss was acquired and the related financing transactions occurred on January 1, 2005. These pro forma results are not necessarily indicative of the results which actually would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods (in thousands, except per share amounts):
                 
    December 31,  
    2006     2005  
    (unaudited)  
Pro forma revenue
  $ 665,205     $ 644,273  
 
               
Pro forma loss from continuing operations
    (13,682 )     (19,637 )
 
               
Pro forma income (loss) allocated to common shares
    2,839       (23,041 )
 
               
Earnings per common share from continuing operations
               
Basic — as reported
  $ (0.25 )   $ 0.54  
 
           
Basic — as pro forma
  $ (0.24 )   $ (0.31 )
 
           
 
Diluted — as reported
  $ (0.24 )   $ 0.54  
     
Diluted — as pro forma
  $ (0.24 )   $ (0.31 )
 
           
 
               
Earnings per common share
               
Basic — as reported
  $ 0.03     $ 0.62  
 
           
Basic — as pro forma
  $ 0.03     $ (0.26 )
 
           
 
Diluted — as reported
  $ 0.03     $ 0.62  
 
           
Diluted — as pro forma
  $ 0.03     $ (0.26 )
 
           
Subsequent to its acquisition of Prentiss and the related sale of certain properties to Prudential, the Company sold seventeen of the acquired properties that contain an aggregate of 2.9 million net rentable square feet and one parcel of land containing 10.9 acres.

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Other Acquisitions and Dispositions
In addition to the acquisition activity related to Prentiss, during 2006, the Company also acquired five office properties containing 839,704 net rentable square feet and 93.4 acres of developable land for an aggregate purchase price of $245.1 million. In addition to sales of assets acquired in the Prentiss merger, the Company sold six office properties containing 512,237 net rentable square feet and three parcels of land containing 65.8 acres for an aggregate $96.2 million, realizing net gains totaling $31.5 million.
2005
During 2005, the Company acquired one industrial property containing 385,884 net rentable square feet, two office properties containing 283,511 net rentable square feet and 36.4 acres of developable land for an aggregate purchase price of $94.5 million. The Company sold the industrial property containing 385,884 net rentable square feet and three parcels of land containing 18.0 acres for an aggregate $30.2 million, realizing net gains totaling $6.8 million.
2004
During 2004, the Company acquired one office property in Marlton, New Jersey, totaling 170,000 square feet, and one land parcel totaling 58.4 acres for aggregate consideration of $22.9 million.
On September 21, 2004, the Operating Partnership completed the acquisition of 100% of the partnership interests in The Rubenstein Company, L.P. (“TRC”). Through the acquisition, the Operating Partnership acquired 14 office properties (the “TRC Properties”) located in Pennsylvania and Delaware that contain approximately 3.5 million net rentable square feet. The results of TRC’s operations have been included in the condensed consolidated financial statements since that date.
The aggregate consideration for the TRC Properties was $631.3 million including $29.3 million of closing costs, debt prepayment penalties and debt premiums that are included in the basis of the assets acquired. The consideration was paid with $540.4 million of cash, $79.3 million of debt assumed, $1.6 million of other liabilities assumed, and 343,006 Class A Units valued at $10.0 million. The value of the debt assumed was based on prevailing market rates at the time of acquisition. The value of the Class A Units was based on the average trading price of the Company’s common shares.

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The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
         
    At September 21,  
    2004  
Real estate investments
       
Land
  $ 105,302  
Building and improvements
    434,795  
Tenant improvements
    20,322  
 
     
Total real estate investments acquired
    560,419  
 
       
Rent receivables
    5,537  
Other assets acquired:
       
Intangible assets:
       
In-Place leases
    49,455  
Relationship values
    35,548  
Above-market leases
    13,240  
 
     
Total intangible assets acquired
    98,243  
Other assets
    6,292  
 
     
Total Other assets
    104,535  
 
     
Total assets acquired
    670,491  
 
       
Liabilities assumed:
       
Mortgage notes payable
    79,330  
Security deposits and deferred rent
    618  
Other liabilities:
       
Below-market leases
    39,204  
Other liabilities
    943  
 
     
Total other liabilities assumed
    40,147  
 
     
Total liabilities assumed
    120,095  
 
     
Net assets acquired
  $ 550,396  
 
     
The net assets acquired above do not include any amounts potentially due to the sellers as contingent consideration as part of the transaction. The Operating Partnership has agreed to issue the sellers up to a maximum of $9.7 million of additional Class A Units if certain of the TRC Properties achieve at least 95% occupancy prior to September 21, 2007. The maximum number of Units that we are obligated to issue declines monthly and, as of December 31, 2006, the maximum balance payable under this arrangement was $1.8 million, with no amount currently due.
At the closing of this transaction, the Operating Partnership agreed not to sell the TRC Properties in a transaction that would trigger taxable income to the contributors (i.e., sellers) for periods ranging from three to 15 years. In the event that the Operating Partnership sells any of the properties in such a transaction within the applicable restricted period, the Operating Partnership will be required to pay significant tax liabilities that would be incurred by the contributors.
The Operating Partnership financed the TRC acquisition using the net proceeds from its September 2004 Common Share offering, after repayment of the Operating Partnership’s $100.0 million unsecured term loan facility, and the net proceeds received from two unsecured term loans.
During 2004, the Company sold two office properties containing 141,000 net rentable square feet, two industrial properties containing 184,000 net rentable square feet and three land parcels containing 29.3 acres for an aggregate of $31.4 million, realizing a net gain of $2.1 million. As part of the sale of one property, the Company provided the buyer with $4.4 million in mortgage financing.
Additionally, the Company purchased and sold a land parcel containing 93 acres in two separate transactions with unrelated third parties. The purchase and sale resulted in a net gain of approximately $1.5 million. As part of the sale, the Company provided the buyer with $4.0 million in mortgage financing. Subsequent to the sale and prior to December 31, 2004, the mortgage financing was repaid in full.
During 2004, the Company recognized a $2.5 million deferred gain from the sale of a property in 2002 that did not previously qualify for gain recognition under the full-accrual method. During 2004, the buyer of the property repaid the seller provided financing and the criteria for gain recognition under the full-accrual

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method were met. The deferred gain recognized was presented within discontinued operations consistent with the historical operating results from the property.
4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
As of December 31, 2006, the Company had an aggregate investment of approximately $74.6 million in 11 unconsolidated Real Estate Ventures (net of returns of investment). The Company or Prentiss formed these ventures with unaffiliated third parties to develop office properties or to acquire land in anticipation of possible development of office properties. Nine of the Real Estate Ventures own 15 office buildings that contain an aggregate of approximately 2.7 million net rentable square feet, one Real Estate Venture developed a hotel property that contains 137 rooms and one Real Estate Venture is developing an office property located in Albemarle County, VA.
The Company also has investments in three Real Estate Ventures that are variable interest entities under FIN 46R and of which the Company is the primary beneficiary, and one investment in a Real Estate Venture for which the Company serves as the general partner and the limited partner does not have substantive participating rights.
The Company accounts for its unconsolidated interests in its Real Estate Ventures using the equity method. Unconsolidated interests range from 6% to 50%, subject to specified priority allocations in certain of the Real Estate Ventures.
The amounts reflected below (except for Company’s share of equity and income) are based on the historical financial information of the individual Real Estate Ventures. One of the Real Estate Ventures, acquired in connection with the Prentiss acquisition, had a negative equity balance on a historical cost basis as a result of historical depreciation and distribution of excess financing proceeds. The Company reflected its acquisition of this Real Estate Venture interest at its relative fair value as of the date of the purchase of Prentiss. The difference between allocated cost and the underlying equity in the net assets of the investee is accounted for as if the entity were consolidated (i.e., allocated to the Company’s relative share of assets and liabilities with an adjustment to recognize equity in earnings for the appropriate additional depreciation/amortization).
The Company’s investment in Real Estate Ventures as of December 31, 2006 and the Company’s share of the Real Estate Ventures’ income (loss) for the year ended December 31, 2006 was as follows (in thousands):
                                                 
    Percentage (1)   Amount   Income (Loss)   Debt at 100%   Rate   Maturity
     
Two Tower Bridge Associates
    35 %   $ 2,290     $ (102 )   $ 11,430       6.82 %   May-08
Five Tower Bridge Associates
    15 %     162       57       29,927       6.77 %   Feb-09
Eight Tower Bridge Associates
    5.5 %     1,184       (175 )     41,830       7.68 %   Feb-12
1000 Chesterbrook Boulevard
    50 %     2,608       660       26,791       6.88 %   Nov-11
PJP Building Two, LC
    30 %     143       107       5,282       6.12 %   Nov-23
PJP Building Three, LC
    25 %     30       76             N/A       N/A  
PJP Building Five, LC
    25 %     169       59       6,503       6.47 %   Aug-19
PJP Building Six, LC
    25 %     75             4,597       7.08 %     (3 )
Macquarie BDN Christina LLC
    20 %     3,351       927       74,500       4.62 %   Jan-09
Broadmoor Austin Associates
    50 %     63,793       446       117,249       5.79 %   Apr-11
Residence Inn Tower Bridge
    50 %     769       110       14,480       5.63 %   Jan-16
Invesco, L.P. (2)
    35 %                       N/A       N/A  
                             
 
          $ 74,574     $ 2,165     $ 332,589                  
                             
 
(1)   Ownership percentage represents the Company’s entitlement to residual distributions after payments of priority returns, where applicable.
 
(2)   The Company’s interest consists solely of a residual profits interest.
 
(3)   Property is under development as of December 31, 2006, with an expected completion date in the first quarter of 2007, at which time the outstanding balance is expected to be converted to permanent financing.
The following is a summary of the financial position of the unconsolidated Real Estate Ventures in which the Company had investment interests as of December 31, 2006 and 2005 (in thousands):

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    December 31,
    2006   2005
Net property
  $ 365,168     $ 286,601  
Other assets
    52,935       32,291  
Other Liabilities
    28,764       24,855  
Debt
    332,589       205,018  
Equity
    56,888       88,995  
Company’s share of equity (Company basis)
    74,574       13,331  
The following is a summary of results of operations of the unconsolidated Real Estate Ventures in which the Company had interests as of December 31, 2006, 2005 and 2004 (in thousands):
                         
    Year ended December 31,
    2006   2005   2004
Revenue
  $ 70,381     $ 59,346     $ 46,906  
Operating expenses
    26,878       29,387       19,395  
Interest expense, net
    21,711       12,324       11,843  
Depreciation and amortization
    10,808       9,359       9,514  
Net income
    12,711       8,276       6,154  
Company’s share of income (Company basis)
    2,165       3,172       2,023  
As of December 31, 2006, the aggregate principal payments of non-recourse debt payable to third-parties is as follows (in thousands):
         
2007
  $ 28,166  
2008
    20,592  
2009
    38,109  
2010
    9,336  
2011
    110,440  
2012 and thereafter
    125,946  
 
     
 
  $ 332,589  
 
     
As of December 31, 2006, the Company had guaranteed repayment of approximately $0.6 million of loans on behalf of certain Real Estate Ventures. The Company also provides customary environmental indemnities in connection with construction and permanent financing both for its own account and on behalf of its Real Estate Ventures.
5. DEFERRED COSTS
As of December 31, 2006 and 2005, the Company’s deferred costs were comprised of the following (in thousands):
                         
    December 31, 2005  
            Accumulated     Deferred Costs,  
    Total Cost     Amortization     net  
Leasing Costs
  $ 83,629     $ (28,278 )   $ 55,351  
Financing Costs
    24,648       (6,291 )     18,357  
 
                 
Total
  $ 108,277     $ (34,569 )   $ 73,708  
 
                 
                         
    December 31, 2005  
            Accumulated     Deferred Costs,  
    Total Cost     Amortization     net  
Leasing Costs
  $ 52,476     $ (23,116 )   $ 29,360  
Financing Costs
    9,793       (1,551 )     8,242  
 
                 
Total
  $ 62,269     $ (24,667 )   $ 37,602  
 
                 

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During 2006, 2005 and 2004, the Company capitalized internal direct leasing costs of $8.3 million, $4.7 million and $4.0 million, respectively, in accordance with SFAS No. 91 and related guidance.
6. INTANGIBLE ASSETS/LIABILITIES
As of December 31, 2006 and 2005, the Company’s intangible assets/liabilities were comprised of the following (in thousands):
                         
            Accumulated     Deferred Costs,  
    Total Cost     Amortization     net  
In-place lease value
  $ 207,513     $ (52,293 )   $ 155,220  
Tenant relationship value
    124,605       (19,572 )     105,033  
Above market leases acquired
    32,667       (11,669 )     20,998  
 
                 
Total
  $ 364,785     $ (83,534 )   $ 281,251  
 
                 
 
                       
Below market leases acquired
  $ 118,536     $ (26,009 )   $ 92,527  
 
                 
                         
    December 31, 2005  
          Accumulated        
    Total Cost     Amortization     Deferred Costs, net  
 
                     
In-place lease value
  $ 47,965     $ (12,575 )   $ 35,390  
Tenant relationship value
    37,845       (5,606 )     32,239  
Above market leases acquired
    14,404       (3,936 )     10,468  
 
                 
Total
  $ 100,214     $ (22,117 )   $ 78,097  
 
                 
 
                       
Below market leases acquired
  $ 41,635     $ (6,931 )   $ 34,704  
 
                 
For the year ended December 31, 2006, 2005, and 2004 the Company wrote-off $1.2 million, $1.1 million, and $0.2 million, respectively of intangible assets as a result of tenant move-outs prior to the end of the associated lease terms. The Company wrote off approximately $0.1 million of intangible liabilities as a result of tenant move-outs in each of the years ending December 31, 2006, 2005, and 2004.
As of December 31, 2006, the Company’s annual amortization for its intangible assets/liabilities are as follows (in thousands, assumes no early terminations):
                 
    Assets     Liabilities  
2007
  $ 56,795     $ 19,735  
2008
    46,827       15,039  
2009
    41,312       13,013  
2010
    34,470       10,513  
2011
    27,584       8,725  
Thereafter
    74,263       25,502  
 
           
Total
  $ 281,251     $ 92,527  
 
           

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7. MORTGAGE NOTES PAYABLE
The following table sets forth information regarding the Company’s mortgage indebtedness outstanding at December 31, 2006 and 2005 (in thousands):
                                 
                    Effective        
    December 31,     December 31,     Interest Rate     Maturity  
Property / Location   2006     2005     @ 12/31/06     Date  
111 Arrandale Blvd
  $     $ 1,043           Aug-06
429 Creamery Way
          2,927           Sep-06
Interstate Center
    552       766       6.19% (b)   Mar-07
440 & 442 Creamery Way
    5,421       5,581       8.55 %   Jul-07
Norriton Office Center
          5,191       8.50 %   Oct-07
481 John Young Way
    2,294       2,360       8.40 %   Nov-07
400 Commerce Drive
    11,797       11,989       7.12 %   Jun-08
Two Logan Square
    71,348       72,468       5.78 %(a)   Jul-09
The Bluffs
    10,700             6.00 %(a)   Jul-09
Pacific Ridge
    14,500             6.00 %(a)   Aug-09
Pacific View/Camino
    26,000             6.00 %(a)   Aug-09
Computer Associates Building
    31,000             6.00 %(a)   Aug-09
200 Commerce Drive
    5,841       5,911       7.12 %(a)   Jan-10
Presidents Plaza
    30,900             6.00 %(a)   May-10
1333 Broadway
    24,418             5.18 %(a)   May-10
The Ordway
    46,199             7.95 %(a)   Aug-10
World Savings Center
    27,524             7.91 %(a)   Nov-10
Plymouth Meeting Exec.
    44,103       44,687       7.00 %(a)   Dec-10
Four Tower Bridge
    10,626       10,763       6.62 %   Feb-11
Arboretum I, II, III & V
    22,750       23,238       7.59 %   Jul-11
Midlantic Drive/Lenox Drive/DCC I
    62,678       63,803       8.05 %   Oct-11
Research Office Center
    42,205             7.64 %(a)   Oct-11
Concord Airport Plaza
    38,461             7.20 %(a)   Jan-12
Six Tower Bridge
    14,744       15,083       7.79 %   Aug-12
Newtown Square/Berwyn Park/Libertyview
    63,231       64,429       7.25 %   May-13
Coppell Associates
    3,737             6.89 %   Dec-13
Southpoint III
    4,949       5,431       7.75 %   Apr-14
Tysons Corner
    100,000             4.84 %(a)   Aug-15
Coppell Associates
    16,600             5.75 %   Mar-16
Grande A
    59,513       61,092       7.48 %   Jul-27
Grande A
          11,456           Jul-27
Grande A
          1,551           Jul-27
Grande B
    77,535       79,036       7.48 %   Jul-27
 
                           
Principal balance outstanding
    869,626       488,805                  
Plus: unamortized fixed-rate debt premiums
    14,294       5,972                  
 
                           
Total mortgage indebtedness
  $ 883,920     $ 494,777                  
 
                           
 
(a)   Loans were assumed upon acquisition of the related property. Interest rates presented above reflect the market rate at the time of acquisition.
 
(b)   For loans that bear interest at a variable rate, the rates in effect at December 31, 2006 have been presented.
The mortgage note payable balance of $5.1 million for Norriton Office Center as of December 31, 2006, not included in the table above, is included in Mortgage notes payable and other liabilities held for sale on the balance sheet.
During 2006, 2005 and 2004, the Company’s weighted-average interest rate on its mortgage notes payable was 6.57%, 7.17% and 6.80%, respectively. As of December 31, 2006 and 2005, the net carrying value of the Company’s Properties that are encumbered by mortgage indebtedness was $1,498.9 million and $779.2 million, respectively.

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As of December 31, 2006, the Company’s aggregate principal payments, excluding payments on one mortgage note held for sale at December 31, 2006, are as follows (in thousands):
         
2007
  $ 20,643  
2008
    25,228  
2009
    168,237  
2010
    192,601  
2011
    140,128  
Thereafter
    337,083  
 
     
Total mortgage indebtedness
  $ 883,920  
 
     
8.   UNSECURED NOTES
The following table sets forth information regarding the Company’s unsecured notes outstanding at December 31, 2006 and December 31, 2005 (in thousands):
                                 
    December 31,     December 31,     Stated     Effective  
Year of Maturity   2006     2005     Interest Rate     Interest Rate  
2008
    113,000       113,000       4.34 %     4.34 %(a)
2009
    300,000           Libor + 0.45 %     5.78 %(a)
2009
    275,000       275,000       4.50 %     4.62 %(a)
2010
    300,000       300,000       5.63 %     5.61 %(a)
2011
    345,000             3.88 %     3.88 %
2012
    300,000             5.75 %     5.77 %(a)
2014
    250,000       250,000       5.40 %     5.53 %(a)
2016
    250,000             6.00 %     5.95 %(a)
2035
    27,062           Libor + 1.25 %     6.58 %
2035
    25,774           Libor + 1.25 %     6.58 %
2035
    25,774           Libor + 1.25 %     6.58 %
 
                           
Total face amount
  $ 2,211,610     $ 938,000                  
Less: unamortized discounts
    (3,300 )     (1,393 )                
 
                           
Total unsecured notes
  $ 2,208,310     $ 936,607                  
 
                           
 
(a)   Rates include the effect of amortization of discounts and costs related to settlement of treasury lock agreements.
On March 28, 2006, the Operating Partnership completed an underwritten public offering of (1) $300,000,000 aggregate principal amount of unsecured floating rate notes due 2009 (the “2009 Notes”), (2) $300,000,000 aggregate principal amount of 5.75% unsecured notes due 2012 (the “2012 Notes”) and (3) $250,000,000 aggregate principal amount of 6.00% unsecured notes due 2016 (the “2016 Notes”). Brandywine Realty Trust guaranteed the payment of principal and interest on the 2009 Notes, the 2012 Notes and the 2016 Notes. The Company used proceeds from these notes to repay a term loan obtained to finance a portion of the consideration paid in the Prentiss merger and to reduce borrowings under the Company’s revolving credit facility.
In March 2006, in anticipation of the offering of the 2009 Notes, the 2012 Notes and the 2016 Notes, the Company entered into forward starting swaps. The forward starting swaps were designated as cash flow hedges of interest rate risk and qualified for hedge accounting. The forward starting swaps were for notional amounts totaling $200.0 million at an all-in-rate of 5.2%. Two of the forward starting swaps had a six year maturity date and one had a ten year maturity date. The forward starting swaps were settled in March 2006 upon the completion of the offering of the 2009, 2012, and 2016 Notes at a total benefit of approximately $3.3 million. The benefit was recorded as a component of accumulated other comprehensive income in the accompanying consolidated balance sheet and is being amortized to interest expense over the term of the unsecured notes.
On October 4, 2006, the Company completed an offering of $300.0 million aggregate principal amount of 3.875% senior convertible notes due 2026 in an offering made in reliance upon an exemption from registration rights under Rule 144A under the Securities Act of 1933 and issued an additional $45 million of exchangeable notes on October 16, 2006 to cover over-allotments. At certain times and upon the occurrence of certain events, the notes are convertible into cash up to their principal amount and, with respect to the remainder, if any, of the exchange value in excess of such principal amount, cash or shares of the Company’s common shares. The initial exchange rate is 25.4065 shares per $1,000 principal amount of notes (which is equivalent to an initial exchange price of $39.36 per share). The notes may not be redeemed by the Company prior to October 20, 2011 (except to preserve the Company’s status as a REIT for U.S, federal income tax purposes), but are redeemable anytime thereafter, in whole or in part, at a

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redemption price equal to the principal amount of the notes plus any accrued and unpaid interest (including additional interest), if any. In addition, on October 20, 2011, October 15, 2016, and October 15, 2021, or upon the occurrence of certain change in control transactions prior to October 20, 2011, note holders may require the Company to repurchase all or a portion of the notes at a purchase price equal to the principal amount plus any accrued and unpaid interest on the notes. Net proceeds from the October 2006 Debt Offering were used to repurchase approximately $60.0 million of the Company’s common stock at a price of $32.80 per share and for general corporate purposes, including the repayment of outstanding borrowings under the Company’s unsecured revolving credit facility.
On November 24, 2006, the Company prepaid a secured note (the “Defeased Note”) having an outstanding balance of $180.1 million. The Defeased Note had a maturity date of February 2007 and related to a voluntary defeasance of secured debt by Prentiss in the fourth quarter of 2005 in which Prentiss exercised the right to complete a voluntary defeasance of a $180.1 million secured loan. Pursuant to the defeasance, Prentiss assigned its obligations under the Defeased Note to an unrelated successor entity together with funds to acquire U.S. Treasury Securities sufficient to provide for the payment in full of debt service (including interest and principal) on the Defeased Note from the defeasance date through the loan maturity date.
On November 29, 2006, the Company gave notice of redemption of the 2009 Notes and redeemed the 2009 Notes on January 2, 2007.
The Company’s indenture relating to unsecured notes contains financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40%, (3) a debt service coverage ratio of greater than 1.5 to 1.0, and (4) an unencumbered asset value of not less than 150% of unsecured debt. In addition, the note purchase agreement relating to the Operating Partnership’s $113 million principal amount of unsecured notes due 2008 contains covenants that are similar to the covenants in the indenture.
In October 2005, in anticipation of the offering of the 2010 Notes, the Operating Partnership entered into forward starting swaps. The forward starting swaps were designated as cash flow hedges of interest rate risk and qualified for hedge accounting. The forward starting swaps were for notional amounts totaling $125.0 million for an expiration of five years at an all-in-rate of 4.9%. The forward starting swaps were settled in December 2005 upon the completion of the offering of the 2010 Notes at a total benefit of approximately $0.2 million. The benefit was recorded as a component of accumulated other comprehensive income in the accompanying consolidated balance sheet and is being amortized to interest expense over the term of the unsecured notes.
On December 20, 2005, the Operating Partnership completed an underwritten public offering of $300 million aggregate principal amount of 5.625% unsecured notes due December 15, 2010 (the “2010 Notes”). Brandywine Realty Trust guaranteed the payment of principal and interest on the 2010 Notes
9. UNSECURED CREDIT FACILITY
The Company utilizes credit facility borrowings for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. In December 2005, the Company replaced its then existing credit facility with a $600.0 million unsecured credit facility (the “Credit Facility”) that matures in December 2009, subject to a one-year extension option. Borrowings under the Credit Facility generally bear interest at LIBOR plus a spread over LIBOR ranging from 0.55% to 1.10% based on the Company’s unsecured senior debt rating. The Company has the option to increase the Credit Facility to $800.0 million subject to the absence of any defaults and the Company’s ability to acquire additional commitments from its existing lenders or new lenders. As of December 31, 2006, the Company had $60.0 million of borrowings and $24.2 million of letters of credit outstanding under the Credit Facility, leaving $516.0 million of unused availability. The weighted-average interest rate on the Company’s unsecured credit facilities, including the effect of interest rate hedges, was 5.93% in 2006, 4.58% in 2005 and 3.79% in 2004.

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The Credit Facility requires the maintenance of ratios related to minimum net worth, debt-to-total capitalization and fixed charge coverage and includes non-financial covenants.
10. UNSECURED TERM LOANS
On March 28, 2006, the Company terminated, and repaid all amounts outstanding under, the $750 million Term Loan Agreement that it entered into on January 5, 2006 with JPMorgan Chase Bank, N.A., as Administrative Agent and Syndication Agent, J.P. Morgan Securities Inc., as Lead Arranger and Sole Bookrunner, and the lenders identified therein. The Company entered into the Term Loan Agreement in connection with its acquisition through the merger of Prentiss on January 5, 2006.
During 2004, the Company repaid all amounts outstanding under its $100 million unsecured term loan facility. The $100.0 million unsecured term loan bore interest at LIBOR plus a spread ranging from 1.05% to 1.9% per annum based on the Company’s leverage.
In connection with the TRC acquisition in September 2004, the Company obtained two term loans: a $320 million unsecured term loan due in 2007 (the “2007 Term Loan”) and a $113 million term loan due in 2008 (the “2008 Term Loan”). In October 2004, the Company repaid all amounts outstanding under its 2007 Term Loan with proceeds of the 2009 and 2014 unsecured notes issued on October 22, 2004. In December 2004, the Company repaid the 2008 Term Loan with the proceeds of the 2008 unsecured notes, which were issued by the Operating Partnership. Brandywine Realty Trust has guaranteed the payment of the principal of and interest on the 2008 unsecured notes. A former partner in TRC has also provided a guaranty of the 2008 unsecured notes (although this guaranty does not in any way limit or diminish the obligations of the Operating Partnership or obligations arising under the guarantee that Brandywine Realty Trust provided). As a result of the repayments of the 2007 and 2008 Term Loans, the Company wrote-off approximately $3.0 million of unamortized deferred financing costs in 2004. These write-offs are presented as deferred financing costs within interest expense in the consolidated statement of operations. While outstanding, the 2007 and 2008 Term Loans bore interest at LIBOR plus spreads of 1.1% and 1.35%, respectively.
As of December 31, 2006 and 2005, the Company had no unsecured term loans outstanding.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following fair value disclosure was determined by the Company using available market information and discounted cash flow analyses as of December 31, 2006 and 2005, 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 acquiring or assuming 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 estimation methodologies may have a material effect on the estimated fair value amounts. The Company believes that the carrying amounts reflected in the Consolidated Balance Sheets at December 31, 2006 and 2005 approximate the fair values for cash and cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and borrowings under variable rate debt instruments.
The following are financial instruments for which the Company estimates of fair value differ from the carrying amounts (in thousands):
                                 
    December 31, 2006   December 31, 2005
    Carrying   Fair   Carrying   Fair
    Amount   Value   Amount   Value
Mortgage payable
  $ 888,470     $ 859,490     $ 481,006     $ 521,607  
Unsecured Notes payable
  $ 1,829,701     $ 1,826,357     $ 936,607     $ 920,470  

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12. RISK MANAGEMENT AND USE OF FINANCIAL INSTRUMENTS
Risk Management
In the normal course of its on-going business operations, the Company encounters economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk on its interest-bearing liabilities. Credit risk is the risk of inability or unwillingness of tenants to make contractually required payments. Market risk is the risk of declines in the value of properties due to changes in rental rates, interest rates or other market factors affecting the valuation of properties held by the Company.
Use of Derivative Financial Instruments
The Company’s use of derivative instruments is limited to the utilization of interest rate agreements or other instruments to manage interest rate risk exposures and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure, as well as to hedge specific transactions. The counterparties to these arrangements are major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company is potentially exposed to credit loss in the event of non-performance by these counterparties. However, because of the high credit ratings of the counterparties, the Company does not anticipate that any of the counterparties will fail to meet these obligations as they come due. The Company does not hedge credit or property value market risks.
The Company entered into two interest rate swaps in January 2006 aggregating $90 million in notional amount as part of its acquisition of Prentiss. The instruments are used to hedge the risk of interest cash outflows on secured variable rate debt on properties that are owned by one of our consolidated Real Estate Ventures. One of the swaps with a notional amount of $20 million has a maturity date of February 1, 2010 and the other with a notional amount of $70 million has a maturity date of August 1, 2008.
The Company also entered into forward starting swaps in March 2006 as more fully described in Note 8.
The Company formally assesses, both at inception of the hedge and on an on-going basis, whether each derivative is highly-effective in offsetting changes in cash flows of the hedged item. If management determines that a derivative is not highly-effective as a hedge or if a derivative ceases to be a highly-effective hedge, the Company will discontinue hedge accounting prospectively.
Concentration of Credit Risk
Concentrations of credit risk arise when a number of tenants related to the Company’s investments or rental operations are engaged in similar business activities, or are located in the same geographic region, or have similar economic features that would cause their inability to meet contractual obligations, including those to the Company, to be similarly affected. The Company regularly monitors its tenant base to assess potential concentrations of credit risk. Management believes the current credit risk portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk. No tenant accounted for 10% or more of the Company’s rents during 2006, 2005 and 2004. See Note 19 for geographic segment information.

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13. DISCONTINUED OPERATIONS
For the years ended December 31, 2006, 2005 and 2004, income from discontinued operations relates to 28 properties containing approximately 4,074,649 million net rentable square feet that the Company has sold since January 1, 2004 and two properties containing 8 buildings and one land parcel designated as held-for-sale as of December 31, 2006. The following table summarizes the balance sheet information for the two properties containing 8 buildings and one land parcel identified as held for sale at December 31, 2006 (in thousands):
         
Real Estate Investments:
       
Operating Properties
  $ 110,709  
Accumulated depreciation
    (6,050 )
 
     
 
    104,659  
 
       
Other assets
    21,357  
Total Assets Held for Sale
  $ 126,016  
 
     
 
       
Mortgage note payable and other liabilities
  $ 20,826  
 
     
The following table summarizes revenue and expense information for the 28 properties sold since January 1, 2004 and the two properties containing 8 buildings designated as held-for-sale as of December 31, 2006 (in thousands):
                         
    Years Ended December 31,  
    2006     2005     2004  
Revenue:
                       
Rents
  $ 43,410     $ 10,060     $ 8,336  
Tenant reimbursements
    5,314       1,010       1,120  
Other
    982       41       36  
 
                 
Total revenue
    49,706       11,111       9,492  
 
                       
Expenses:
                       
Property operating expenses
    17,769       3,862       4,166  
Real estate taxes
    6,145       1,316       1,441  
Depreciation & amortization
    17,284       2,939       2,607  
 
                 
Total operating expenses
    41,198       8,117       8,214  
 
                       
Operating income
    8,508       2,994       1,278  
Interest income
    14       6        
Interest expense
    (841 )     (445 )     (451 )
 
                 
 
                       
Income from discontinued operations before gain on sale of interests in real estate and minority interest
    7,681       2,555       827  
 
Net gain on sale of interests in real estate
    18,486       2,196       3,136  
Minority interest — partners’ share of net gain on sale
    1,757              
Minority interest — partners’ share of consolidated real estate venture
    (2,239 )            
Minority interest attributable to discontinued operations — LP units
    (1,172 )     (163 )     (144 )
 
                 
Income from discontinued operations
  $ 24,513     $ 4,588     $ 3,819  
 
                 
Discontinued operations have not been segregated in the consolidated statements of cash flows. Therefore, amounts for certain captions will not agree with respective data in the consolidated statements of operations.
14.   MINORITY INTEREST IN OPERATING PARTNERSHIP AND REAL ESTATE VENTURES
Minority interest in Operating Partnership is comprised of Class A Units of limited partnership interest (“Class A Units”) and, until their redemption in February 2004, Series B Preferred Units of limited partnership interest (“Series B Preferred Units”) of the Operating Partnership. The Operating Partnership issued these interests to persons that contributed assets to the Operating Partnership. The Operating Partnership is obligated to redeem, at the request of a holder, each Class A Unit for cash or one Common Share, at the option of the Company. Each Series B Preferred Unit had a stated value of $50.00 and was convertible, at the option of the holder, into Class A Units at a conversion price of $28.00. Income allocated to minority interest includes the amount of the Series B Preferred Unit distribution and the pro

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rata share of net income of the Operating Partnership allocated to the Class A Units. In February 2004, the Operating Partnership redeemed the Series B Preferred Units for an aggregate price of $93.0 million together with accrued but unpaid distributions from January 1, 2004. The Series B Preferred Units had an aggregate stated value of $97.5 million and accrued distributions at 7.25. The Company recorded a $4.5 million gain related to the redemption. The Company declared distributions of $0.8 million in 2004 to the holders of Series B Preferred Units and $2.0 million in 2006, $3.6 million in 2005 and $3.3 million in 2004 to holders of Class A Units. As of December 31, 2006 and 2005, the Company had outstanding 3,961,235 Class A Units and 1,945,267 Class A Units, respectively, held by third party investors. No Series B Preferred Units were outstanding as of December 31, 2006 and 2005.
During the year ended December 31, 2006, 424,608 Class A units were issued in connection with the acquisition of a property. These Class A units were subsequently redeemed for $13.5 million and this amount is included in distributions to minority interest holders on the consolidated statement of cash flows.
As of December 31, 2006 and 2005, the aggregate book value of the minority interest associated with these units in the accompanying consolidated balance sheet was $89.6 million and $37.9 million, respectively and the Company believes that the aggregate settlement value of these interests was approximately $131.7 million and $54.3 million, respectively. This amount is based on the number of units outstanding and the closing share price on the balance sheet date.
As of December 31, 2006, the Company owned interests in four consolidated real estate ventures that own 15 office properties containing approximately 1.5 million net rentable square feet. Minority interest in Real Estate Ventures represents the portion of these consolidated real estate ventures not owned by the Company.
The minority interests associated with certain of the Real Estate Ventures, that have finite lives under the terms of the partnership agreements represent mandatorily redeemable interests as defined in SFAS 150. As of December 31, 2006 and 2005, the aggregate book value of these minority interests in the accompanying consolidated balance sheet was $0, and the Company believes that the aggregate settlement value of these interests was approximately $8.1 million. This amount is based on the estimated liquidation values of the assets and liabilities and the resulting proceeds that the Company would distribute to its Real Estate Venture partners upon dissolution, as required under the terms of the respective partnership agreements. Subsequent changes to the estimated fair values of the assets and liabilities of the consolidated Real Estate Ventures will affect the Company’s estimate of the aggregate settlement value. The partnership agreements do not limit the amount that the minority partners would be entitled to in the event of liquidation of the assets and liabilities and dissolution of the respective partnerships.
15. BENEFICIARIES’ EQUITY
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):

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    For the years ended December 31,  
    2006     2005     2004  
    Basic     Diluted     Basic     Diluted     Basic     Diluted  
Income (loss) from continuing operations
  $ (14,031 )   $ (14,031 )   $ 38,179     $ 38,179     $ 56,483     $ 56,483  
Income from discontinued operations
    24,513       24,513       4,588       4,588       3,819       3,819  
Income allocated to Preferred Shares
    (7,992 )     (7,992 )     (7,992 )     (7,992 )     (9,720 )     (9,720 )
Preferred Share redemption/conversion benefit (charge)
                            4,500       4,500  
 
                                   
 
  $ 2,490     $ 2,490     $ 34,775     $ 34,775     $ 55,082     $ 55,082  
 
                                   
 
Weighted-average shares outstanding
    89,552,301       89,552,301       55,846,268       55,846,268       47,781,789       47,781,789  
Options, warrants and unvested restricted stock
          518,524             258,320             236,915  
 
                                   
Total weighted-average shares outstanding
    89,552,301       90,070,825       55,846,268       56,104,588       47,781,789       48,018,704  
 
                                   
Earnings per Common Share:
                                               
Continuing operations
  $ (0.25 )   $ (0.24 )   $ 0.54     $ 0.54     $ 1.07     $ 1.07  
Discontinued operations
    0.27       0.27       0.08       0.08       0.08       0.08  
 
                                   
Total
  $ 0.03     $ 0.03     $ 0.62     $ 0.62     $ 1.15     $ 1.15  
 
                                   
Securities (including Series A Preferred Shares of the Company and Class A Units of the Operating Partnership) totaling 3,961,235 in 2006, 1,945,267 in 2005 and 2,061,459 in 2004 were excluded from the earnings per share computations because their effect would have been antidilutive. The Series A Preferred Shares were converted to Common Shares in November 2004.
Common and Preferred Shares
On December 19, 2006, the Company declared a distribution of $0.44 per Common Share, totaling $39.0 million, which was paid on January 15, 2007 to shareholders of record as of January 5, 2007. On December 19, 2006, the Company declared distributions on its Series C Preferred Shares and Series D Preferred Shares to holders of record as of December 30, 2006. These shares are entitled to a preferential return of 7.50% and 7.375%, respectively. Distributions paid on January 15, 2007 to holders of Series C Preferred Shares and Series D Preferred Shares totaled $0.9 million and $1.1 million, respectively.
Common Share Repurchases
We maintain a share repurchase program under which our Board has authorized us to repurchase our common shares from time to time. Our Board initially authorized this program in 1998 and has periodically replenished capacity under the program, including, most recently, on May 2, 2006 when our Board restored capacity to 3.5 million common shares. During the year ended December 31, 2006, we repurchased approximately 1.2 million common shares under this program at an average price of $29.22 per share, leaving approximately 2.3 million in remaining capacity. Our Board has not limited the duration of the program.
On October 4, 2006 we repurchased 1,829,000 common shares with a portion of the proceeds of our 3.875% Exchangeable Guaranteed Notes at an average purchase price of $32.80 per share (approximately $60.0 million in aggregate). We repurchased these shares under a separate Board authorization that provided that the shares repurchased did not reduce capacity under the share repurchase program.
Share Based Compensation
In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) is an amendment of SFAS 123 and requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is required to be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) also contains additional minimum disclosures requirements including, but not limited to, the valuation method and assumptions

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used, amounts of compensation capitalized and modifications made. The effective date of SFAS 123(R) was subsequently amended by the SEC to be as of the beginning of the first interim or annual reporting period of the first fiscal year that begins on or after December 15, 2005, and allows several different methods of transition. The Company adopted SFAS 123(R) using the prospective method on January 1, 2006. This adoption did not have a material effect on our consolidated financial statements.
Stock Options
At December 31, 2006, the Company had 1,286,075 options outstanding under its shareholder approved equity incentive plan. No options were unvested as of December 31, 2006 and therefore there is no remaining unrecognized compensation expense associated with these options. Option activity as of December 31, 2006 and changes during the twelve months ended December 31, 2006 were as follows:
                                 
            Weighted     Weighted Average        
            Average     Remaining Contractual     Aggregate Intrinsic  
    Shares     Exercise Price     Term (in years)     Value (in 000’s)  
Outstanding at January 1, 2006
    1,276,722       26.82       2.15       1,888  
Prentiss options converted to Company options as part of the Prentiss acquisition (see Note 3)
    496,037       22.00       1.14       5,580  
Exercised
    (486,684 )     22.88       0.55       5,048  
Forfeited
                       
 
 
                       
Outstanding at December 31, 2006
    1,286,075     $ 26.45       1.50       8,739  
 
                       
 
Vested at December 31, 2006
    1,286,075     $ 26.45       1.50       8,739  
Exercisable at December 31, 2006
    1,286,075     $ 26.45       1.50       8,739  
There were no option awards granted to employees during the years ended December 31, 2006, 2005, and 2004.
                                                 
    Years ended December 31,
 
  2005   2004
 
                  Weighted                   Weighted
 
                  Average                   Average
 
          Weighted   Remaining           Weighted   Remaining
 
          Average   Contractual           Average   Contractual
 
          Exercise   Term           Exercise   Term
 
  Shares   Price   (in Years)   Shares   Price   (in Years)
 
                                   
Outstanding at beginning of year
    2,008,022       26.89               2,372,627       26.70          
 
Granted
                                       
Exercised
    (705,678 )     26.94               (337,161 )     25.39          
Forfeite/Expired
    (25,622 )     28.80               (27,444 )     28.93          
 
                                       
 
Outstanding at end of year
    1,276,722       26.82       1.97       2,008,022       26.89       2.88  
 
                                   
 
Exercisable at end of year
    1,276,722       26.82               2,008,022       26.89          
 
                                       
The Company has the ability and intent to issue shares upon stock option exercises. Historically, the Company has issued new common shares to satisfy such exercises.
401(k) Plan
The Company sponsors a 401(k) defined contribution plan for its employees. Each employee may contribute up to 100% of annual compensation, subject to specific limitations under the Internal Revenue Code. At its discretion, the Company can make matching contributions equal to a percentage of the employee’s elective contribution and profit sharing contributions. Employees vest in employer

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contributions over a three-year service period. The Company contributions were $1.1 million in 2006, $1.0 million in 2005 and $0.9 million in 2004.
Restricted Stock Awards
The Company’s primary form of share-based compensation has been restricted shares issued under a shareholder approved equity incentive plan that authorizes various equity-based awards. As of December 31, 2006, 338,860 restricted shares were outstanding and vest over five years from the initial grant date. The remaining compensation expense to be recognized for the 338,860 restricted shares outstanding at December 31, 2006 was approximately $9.8 million. That expense is expected to be recognized over a weighted average remaining vesting period of 2.4 years. For the year ended December 31, 2006, the Company recognized $2.9 million of compensation expense related to outstanding restricted shares which is included in administrative expenses. The following table summarizes the Company’s restricted share activity for the twelve-months ended December 31, 2006:
                 
            Weighted  
            Average Grant  
    Shares     Date Fair value  
Non-vested at January 1, 2006
    316,134     $ 25.76  
Granted
    240,136       30.72  
Vested
    (160,972 )     26.28  
Forfeited
    (56,438 )     28.24  
 
           
Non-vested at December 31, 2006
    338,860     $ 28.23  
 
           
Outperformance Program
On August 28, 2006, the Compensation Committee of the Company’s Board of Trustees adopted a long-term incentive compensation program (the “outperformance program” ). The Company will make payments (in the form of common shares) to executive-participants under the outperformance program only if total shareholder return exceeds percentage hurdles established under the outperformance program. The dollar value of any payments will depend on the extent to which our performance exceeds the hurdles. The Company established the outperformance program under the 1997 Plan.
If the total shareholder return (share price appreciation plus cash dividends) during a three-year measurement period exceeds either of two hurdles (with one hurdle keyed to the greater of a fixed percentage and an industry-based index, and the other hurdle keyed to a fixed percentage), then the Company will fund an incentive compensation pool in accordance with a formula and make pay-outs from the compensation pool in the form of vested and restricted common shares. The awards issued are accounted for in accordance with FASB No. 123R. The fair value of the awards on the date of grant, as adjusted for estimated forfeitures, was approximately $5.6 million and will be amortized into expense over the five-year period beginning on the date of grant using a graded vesting attribution model. The fair value of $5.6 million on the date of grant represents approximately 89.9% of the total that may be awarded, including the effects of a 3.4% forfeiture; the remaining amount available will be valued when the awards are granted to individuals. For the year ended December 31, 2006, the Company recognized $0.5 million of compensation expenses related to the outperformance program.
16. PREFERRED SHARES
In 1998, the Company issued $37.5 million of convertible preferred shares with a 7.25% coupon rate (the Series A Preferred Shares). Each Series A Preferred Share had a stated value of $50.00 and was convertible into Common Shares, at the option of the holder, at a conversion price of $28.00. The Series A Preferred Shares distribution was subject to an increase, if quarterly distributions paid to Common Share holders exceeded $0.51 per share. In November 2004, the holders of the Series A Preferred Shares converted the shares into 1.3 million Common Shares at a price of $24.00.

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In 2003, the Company issued 2,000,000 7.50% Series C Cumulative Redeemable Preferred Shares (the “Series C Preferred Shares”) for net proceeds of $48.1 million. The Series C Preferred Shares are perpetual. The Company may not redeem Series C Preferred Shares before December 30, 2008 except to preserve its REIT status. On or after December 30, 2008, the Company, at its option, may redeem the Series C Preferred Shares, in whole or in part, by paying $25.00 per share plus accrued but unpaid dividends.
In 2004, the Company issued 2,300,000 7.375% Series D Cumulative Redeemable Preferred Shares (the “Series D Preferred Shares”) for net proceeds of $55.5 million. The Series D Preferred Shares are perpetual. The Company may not redeem Series D Preferred Shares before February 27, 2009 except to preserve its REIT status. On or after February 27, 2009, the Company, at its option, may redeem the Series D Preferred Shares, in whole or in part, by paying $25.00 per share plus accrued but unpaid dividends.
17. DISTRIBUTIONS
                         
    Years ended December 31,  
    2006     2005     2004  
Common Share Distributions:
                       
Ordinary income
  $ 1.33     $ 1.37     $ 1.48  
Capital gain
    0.30       0.08       0.28  
Split year dividend (a)
    0.13       0.31        
 
                 
Distributions per share (b)
  $ 1.76     $ 1.76     $ 1.76  
 
                 
Percentage classified as ordinary income
    75.6 %     77.8 %     84.1 %
Percentage classified as capital gain
    17.0 %     4.6 %     15.9 %
Percentage classified as split year dividend
    7.4 %     17.6 %     0.0 %
 
                       
Preferred Share Distributions:
                       
 
                 
Total distributions declared
  $ 7,992,000     $ 7,992,000     $ 9,720,000  
 
(a)   Split year dividend amount shown for 2006 was taxable in 2005 and paid in 2006.
(b)   The Company also declared a special distribution of $0.02, in addition to the $1.76, in December 2005 for shareholders of record for the period January 1, 2006 through January 4, 2006.
18. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table details the components of accumulated other comprehensive income (loss) as of and for the three years ended December 31, 2006 (in thousands):

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    Unrealized Gains     Cash Flow     Accumulated Other  
    (Losses) on Securities     Hedges     Comprehensive Loss  
Balance at January 1, 2004
  $ 868     $ (3,026 )   $ (2,158 )
 
                       
Change during year
    (696 )     309       (387 )
Settlement of treasury locks
          (3,238 )     (3,238 )
Reclassification adjustments for losses reclassified into operations
    (156 )     2,809       2,653  
 
                 
 
                       
Balance at December 31, 2004
    16       (3,146 )     (3,130 )
 
                       
Change during year
    241       (713 )     (472 )
Settlement of forward starting swaps
          240       240  
Reclassification adjustments for losses reclassified into operations
    (257 )     450       193  
 
                 
 
                       
Balance at December 31, 2005
          (3,169 )     (3,169 )
 
                       
Change during year
          1,330       1,330  
Minority interest — consolidated real estate venture partner’s share of unrealized (gains)/losses on derivative financial instruments
          (302 )     (302 )
Settlement of forward starting swaps
            3,266          
Reclassification adjustments for (gains) losses reclassified into operations
    328       122       3,716  
 
                 
 
                       
Balance at December 31, 2006
  $ 328     $ 1,247     $ 1,575  
 
                 
Over time, the unrealized gains and losses held in Accumulated Other Comprehensive Income (“AOCI”) will be reclassified to earnings in the same period(s) in which hedged items are recognized in earnings. The current balance held in AOCI is expected to be reclassified to earnings over the lives of the current hedging instruments, or for realized losses on forecasted debt transactions, over the related term of the debt obligation, as applicable.
During the years ending December 31, 2006 and 2005, the Company reclassified approximately $0.1 million and $0.5 million, respectively, to interest expense associated with treasury lock agreements and forward starting swaps previously settled (see Note 12).
19. SEGMENT INFORMATION
As of December 31, 2006, the Company currently manages its portfolio within nine segments: (1) Pennsylvania—West, (2) Pennsylvania—North, (3) New Jersey, (4) Urban, (5) Richmond, Virginia, (6) California—North, (7) California—South, (8) Mid-Atlantic and (9) Southwest. The Pennsylvania—West segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs of Pennsylvania. The Pennsylvania—North segment includes properties north of Philadelphia in Berks, Bucks, Cumberland, Dauphin, Lehigh and Montgomery counties. The New Jersey segment includes properties in counties in the southern and central parts of New Jersey including Burlington, Camden and Mercer counties and in Bucks County, Pennsylvania. The Urban segment includes properties in the City of Philadelphia, Pennsylvania and the state of Delaware. The Richmond, Virginia segment includes properties primarily in Albemarle, Chesterfield and Henrico counties, the City of Richmond and Durham, North Carolina. The California—North segment includes properties in the City of Oakland and Concord. The California—South segment includes properties in the City of Carlsbad and San Diego. The Mid-Atlantic segment includes properties in Northern Virginia and the Maryland suburbs. The Southwest segment includes properties in Dallas and Travis counties of Texas. 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 are transferred to operating properties by region upon completion of the associated construction or project.

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Segment information for the three years ended December 31, 2006, 2005 and 2004 is as follows (in thousands):
                                                                                         
    Pennsylvania -     Pennsylvania                     Richmond,     California -     California -                          
    West     North     New Jersey     Urban     Virginia     North     South     Mid-Atlantic     Southwest     Corporate     Total  
2006:
                                                                                       
Real estate investments, at cost:
                                                                                       
Operating properties
  $ 922,347     $ 530,436     $ 570,009     $ 568,008     $ 244,519     $ 396,927     $ 95,942     $ 1,255,940     $ 343,177     $     $ 4,927,305  
Construction-in-progress
                                                          217,886       217,886  
Land held for development
                                                          110,233       110,233  
 
                                                                                       
Total revenue
  $ 124,301     $ 74,391     $ 96,926     $ 85,995     $ 32,526     $ 58,203     $ 11,564     $ 112,344     $ 57,734     $ 8,817     $ 662,801  
Property operating expenses and real estate taxes
    39,163       38,124       41,334       34,362       11,876       23,016       4,039       33,897       23,872       3,902       253,585  
 
                                                                 
Net operating income
  $ 85,138     $ 36,267     $ 55,592     $ 51,633     $ 20,650     $ 35,187     $ 7,525     $ 78,447     $ 33,862     $ 4,915     $ 409,216  
 
                                                                 
 
                                                                                       
2005:
                                                                                       
Real estate investments, at cost:
                                                                                       
Operating properties
  $ 867,089     $ 558,803     $ 562,832     $ 351,407     $ 219,930     $     $     $     $     $     $ 2,560,061  
Construction-in-progress
                                                          273,240       273,240  
Land held for development
                                                          98,518       98,518  
 
                                                                                       
Total revenue
  $ 111,911     $ 72,154     $ 96,683     $ 65,643     $ 28,758     $     $     $     $     $ 5,475     $ 380,624  
Property operating expenses and real estate taxes
    39,116       32,517       39,152       27,183       11,612                               (208 )     149,372  
 
                                                                 
Net operating income
  $ 72,795     $ 39,637     $ 57,531     $ 38,460     $ 17,146     $     $     $     $     $ 5,683     $ 231,252  
 
                                                                 
 
                                                                                       
2004:
                                                                                       
Total revenue
  $ 87,535     $ 73,882     $ 94,096     $ 26,319     $ 27,099     $     $     $     $     $ 7,626     $ 316,557  
Property operating expenses and real estate taxes
    25,677       31,079       35,599       12,126       11,772                                     116,253  
 
                                                                 
Net operating income
  $ 61,858     $ 42,803     $ 58,497     $ 14,193     $ 15,327     $     $     $     $     $ 7,626     $ 200,304  
 
                                                                 

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Net operating income is defined as total revenue less property operating expenses and real estate taxes. Below is reconciliation of consolidated net operating income to consolidated income from continuing operations:
                         
    Year Ended December 31,  
    2006     2005     2004  
    (amounts in thousands)  
Consolidated net operating income (loss)
  $ 409,216     $ 231,252     $ 200,304  
Less:
                       
Interest income
    9,513       1,370       841  
Interest expense
    (171,177 )     (70,152 )     (52,642 )
Deferred financing costs
    (4,607 )     (3,766 )     (1,968 )
Depreciation and amortization
    (248,132 )     (109,118 )     (77,521 )
Administrative expenses
    (29,644 )     (17,982 )     (15,100 )
Minority interest — partners’ share of consolidated real estate ventures
    270              
Minority interest attributable to continuing operations — LP units
    1,028       (1,237 )     (2,429 )
Plus:
                       
Equity in income of real estate ventures
    2,165       3,172       2,023  
Net gain on sales of interests in real estate
    14,190       4,640       2,975  
Gain on termination of purchase contract
    3,147              
 
                 
Income (loss) from continuing operations
    (14,031 )     38,179       56,483  
Income (loss) from discontinued operations
    24,513       4,588       3,819  
 
                 
Net income (loss)
  $ 10,482     $ 42,767     $ 60,302  
 
                 
20. RELATED-PARTY TRANSACTIONS
In 1998, the Board authorized the Company to make loans totaling up to $5.0 million to enable employees of the Company to purchase Common Shares at fair market value. The loans have five-year terms, are full recourse, and are secured by the Common Shares purchased. The Company made loans under this program in 1998, 1999 and 2001. Interest, payable quarterly, accrues on the loans at the lower of the interest rate borne on borrowings under the Company’s Credit Facility or a rate based on the dividend payments on the Common Shares. As of December 31, 2005, the interest rate was 4.18% per annum. The loans are payable at the earlier of the stated maturity date or 90 days following the employee’s termination. As of December 31, 2005, the outstanding balance of the loan totaled $0.3 million and was secured by an aggregate of 18,803 Common Shares. These loans were repaid in full by December 31, 2006.
The Company held a fifty percent economic interest in an approximately 141,724 square foot office building located at 101 Paragon Drive, Montvale, New Jersey. The remaining fifty percent interest was held by Donald E. Axinn, one of the Company’s Trustees. Although the Company and Mr. Axinn had each committed to provide one half of the $11 million necessary to repay the mortgage loan secured by this property at the maturity of the loan, in February 2006 an unaffiliated third party entered into an agreement to purchase this property for $18.3 million. As a result of the purchase by an unaffiliated third party during August 2006, the Company recognized a $3.1 million gain on termination of its rights under a 1998 contribution agreement, modified in 2005, that entitled the Company to the 50% interest in the joint venture to operate the property. This gain is shown separately on the Company’s income statement as a gain on termination of purchase contract.
The Company owned 384,615 shares of Cypress Communications, Inc. (“Cypress”) Common Stock. These shares were redeemed in July 2005 for $0.3 million. The redemption was the result of Cypress’s merger with another company. Prior to this merger, an officer of the Company held a position on Cypress’s Board of Directors.

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21. OPERATING LEASES
The Company leases properties to tenants under operating leases with various expiration dates extending to 2023. Minimum future rentals on non-cancelable leases at December 31, 2006 are as follows (in thousands):
         
Year   Minimum Rent  
2007
  $ 526,755  
2008
    488,853  
2009
    426,608  
2010
    349,210  
2011
    264,411  
 
     
Thereafter
    879,490  
 
     
Total minimum future rentals presented above do not include amounts to be received as tenant reimbursements for operating costs.
22. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is involved from time to time in litigation on various matters, including disputes with tenants 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 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.
There have been recent reports of lawsuits against owners and managers of multifamily and office properties asserting claims of personal injury and property damage caused by the presence of mold in residential units or office space. The Company has been named as a defendant in two lawsuits in the State of New Jersey that allege personal injury as a result of the presence of mold. In 2005, one lawsuit was dismissed by way of summary judgment with prejudice. Unspecified damages are sought on the remaining lawsuit. The Company has referred this lawsuits to its environmental insurance carrier and, as of the date of this Form 10-K, the insurance carrier is tendering a defense to this claim.
Letters-of-Credit
Under certain mortgages, the Company has funded required leasing and capital reserve accounts for the benefit of the mortgage lenders with letters-of-credit which totaled $24.2 million at December 31, 2006. The Company is also required to maintain escrow accounts for taxes, insurance and tenant security deposits and these accounts aggregated $22.6 million at December 31, 2006. Tenant rents at properties that secure these mortgage loans are deposited into the loan servicer’s depository accounts, which are used to fund debt service, operating expenses, capital expenditures and the escrow and reserve accounts, as necessary. Any excess cash is included in cash and cash equivalents.
Ground Rent
Future minimum rental payments under the terms of all non-cancelable ground leases under which the Company is the lessee are expensed on a straight-line basis regardless of when payments are due. Minimum future rentals payments on non-cancelable leases at December 31, 2006 are as follows (in thousands):

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2007
  $ 1,736  
2008
    1,736  
2009
    1,736  
2010
    1,818  
2011
    1,818  
2012 and there after
    271,340  
Other Commitments or Contingencies
As of December 31, 2006, the Company owned 490 acres of land for future development.
As part of the Company’s acquisition of the TRC Properties in September 2004, the Company agreed to issue to the sellers up to a maximum of $9.7 million of Class A Units of the Operating Partnership if certain of the acquired properties achieve at least 95% occupancy prior to September 21, 2007. The maximum number of Units that the Company is obligated to issue declines monthly and, as of December 31, 2006, the maximum amount payable under this arrangement was $1.8 million, with no amount currently due.
As part of the TRC acquisition, the Company acquired its interest in Two Logan Square, a 696,477 square foot office building in Philadelphia, primarily through a second and third mortgage secured by this property. The Company currently does not expect to take title to Two Logan Square until, at the earliest, September 2019. In the event that the Company takes title to Two Logan Square upon a foreclosure of its mortgage, we have agreed to make a payment to an unaffiliated third party with a residual interest in the fee owner of this property. The amount of the payment would be $0.6 million if the Company must pay a state and local transfer upon taking title, and $2.9 million if no transfer tax is payable upon the transfer.
As part of its acquisition of TRC Properties and several of other acquisitions, the Company agreed not to sell the acquired properties. In the case of the TRC Properties, the Company agreed not to sell the acquired properties for periods ranging from three to 15 years from the acquisition date as follows: 201 Radnor Financial Center, 555 Radnor Financial Center and 300 Delaware Avenue (three years); One Rodney Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square and Radnor Corporate Center (15 years). At December 31, 2006, the Company had agreed not to sell 14 properties that aggregate 1.0 million square feet for periods that expire through 2008. The Company’s agreements generally provide that the Company may dispose of the subject properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax deferred transactions. In the event that the Company sells any of the properties within the applicable restricted period in non-exempt transactions, the Company would be required to pay significant tax liabilities that would be incurred by the parties who sold the Company the applicable property.
The Company invests in its properties and regularly incurs capital expenditures in the ordinary course to maintain the properties. 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.
23. SUBSEQUENT EVENT
During January 2007, the Company sold two properties containing eight buildings, classified as held for sale as of December 31, 2006, totaling 26.8 million square feet and one land parcel consisting of 4.7 acres for an aggregate sales price of $114.9 million.
The Company paid off its $300.0 million 2009 three year notes in January 2007, notice of which was given in November 2006 using proceeds borrowed from the Company’s unsecured credit facility.

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24. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
The following is a summary of quarterly financial information as of and for the years ended December 31, 2006 and 2005 (in thousands, except per share data):
                                 
    1st   2nd   3rd   4th
    Quarter   Quarter   Quarter   Quarter
2006:
                               
Total revenue
  $ 153,582     $ 161,523     $ 172,962     $ 174,734  
Net income (loss)
    (2,642 )     (11,556 )     564       24,116  
Income (loss) allocated to Common Shares
    (4,640 )     (13,554 )     (1,434 )     22,118  
                                 
Basic earnings (loss) per Common Share
  $ (0.05 )   $ (0.15 )   $ (0.02 )   $ 0.25  
Diluted earnings (loss) per Common Share
  $ (0.05 )   $ (0.15 )   $ (0.02 )   $ 0.25  
 
                               
2005:
                               
Total revenue
  $ 96,690     $ 92,843     $ 93,431     $ 97,660  
Net income
    9,415       8,930       15,794       8,626  
Income allocated to Common Shares
    7,417       6,932       13,796       6,628  
                                 
Basic earnings per Common Share
  $ 0.13     $ 0.12     $ 0.25     $ 0.12  
Diluted earnings per Common Share
  $ 0.13     $ 0.12     $ 0.24     $ 0.12  
The summation of quarterly earnings per share amounts do not necessarily equal the full year amounts.

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Brandywine Realty Trust
Schedule II
Valuation and Qualifying Accounts
(in thousands)
                                 
    Balance at                     Balance  
    Beginning                     at End  
Description   of Period     Additions (1)     Deductions     of Period  
Allowance for doubtful accounts:
                               
Year ended December 31, 2006
  $ 4,877     $ 4,434     $     $ 9,311  
 
                       
Year ended December 31, 2005
  $ 4,085     $ 792     $     $ 4,877  
 
                       
Year ended December 31, 2004
  $ 4,031     $ 467     $ 413     $ 4,085  
 
                       
 
(1)   The 2006 additions includes $3.5 million of current year expense and $0.9 million of allowances against receivables assumed in the Prentiss acquisition.

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BRANDYWINE REALTY TRUST
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried            
                            Initial Cost   December 31, 2006            
                                            Net                                        
                                            Improvements                           Accumulated            
                                            (Retirements)                           Depreciation at            
                    Encumberances at           Building and   Since           Building and           December 31,   Year of   Year   Depreciable
    City   State   December 31, 2006   Land   Improvements   Acquisition   Land   Improvements   Total (a)   2006 (b)   Construction   Acquired   Life
One Greentree Centre
  Marlton   NJ           345       4,440       804       345       5,244       5,589       3,031       1982       1986       40  
Three Greentree Centre
  Marlton   NJ           323       6,024       590       324       6,614       6,937       4,289       1984       1986       40  
Two Greentree Centre
  Marlton   NJ           264       4,693       312       264       5,005       5,269       3,311       1983       1986       40  
1155 Business Center Drive
  Horsham   PA     2,407       1,029       4,124       783       1,029       4,906       5,936       1,436       1990       1996       40  
120 West Germantown Pike
  Plymouth Meeting   PA           685       2,773       1,092       685       3,865       4,550       1,525       1984       1996       40  
140 West Germantown Pike
  Plymouth Meeting   PA           481       1,976       554       482       2,530       3,011       929       1984       1996       40  
18 Campus Boulevard
  Newtown Square   PA     3,227       787       3,312       5       787       3,317       4,104       1,156       1990       1996       40  
2240/2250 Butler Pike
  Plymouth Meeting   PA           1,104       4,627       331       1,104       4,959       6,062       1,939       1984       1996       40  
2260 Butler Pike
  Plymouth Meeting   PA           661       2,727       315       662       3,042       3,703       1,000       1984       1996       40  
3329 Street Road -Greenwood Square
  Bensalem   PA           350       1,401       590       350       1,991       2,341       896       1985       1996       40  
3331 Street Road -Greenwood Square
  Bensalem   PA           1,126       4,511       1,295       1,126       5,806       6,932       2,002       1986       1996       40  
3333 Street Road -Greenwood Square
  Bensalem   PA           851       3,407       966       851       4,374       5,224       1,654       1988       1996       40  
456 Creamery Way
  Exton   PA           635       2,548       (47 )     635       2,500       3,136       824       1987       1996       40  
457 Haddonfield Road
  Cherry Hill   NJ     10,689       2,142       9,120       490       2,142       9,610       11,752       3,340       1990       1996       40  
468 Thomas Jones Way
  Exton   PA           526       2,112       163       527       2,275       2,801       747       1990       1996       40  
486 Thomas Jones Way
  Exton   PA           806       3,256       159       806       3,415       4,221       1,206       1990       1996       40  
500 Enterprise Drive
  Horsham   PA           1,303       5,188       (253 )     1,303       4,935       6,238       1,778       1990       1996       40  
500 North Gulph Road
  King Of Prussia   PA           1,303       5,201       1,255       1,303       6,456       7,759       2,246       1979       1996       40  
650 Dresher Road
  Horsham   PA     1,609       636       2,501       404       636       2,905       3,541       1,108       1984       1996       40  
6575 Snowdrift Road
  Allentown   PA           601       2,411       437       601       2,848       3,449       822       1988       1996       40  
700 Business Center Drive
  Horsham   PA     1,625       550       2,201       848       550       3,049       3,599       1,248       1986       1996       40  
7248 Tilghman Street
  Allentown   PA           731       2,969       (32 )     731       2,937       3,668       980       1987       1996       40  
7310 Tilghman Street
  Allentown   PA           553       2,246       510       553       2,755       3,309       1,178       1985       1996       40  
800 Business Center Drive
  Horsham   PA     2,098       896       3,585       18       896       3,603       4,499       1,150       1986       1996       40  
8000 Lincoln Drive
  Marlton   NJ           606       2,887       688       606       3,575       4,181       1,184       1997       1996       40  
One Progress Drive
  Horsham   PA           1,399       5,629       232       1,399       5,861       7,260       1,936       1986       1996       40  
One Righter Parkway
  Wilmington   DE     10,076       2,545       10,195       563       2,545       10,757       13,303       3,440       1989       1996       40  
1 Foster Avenue
  Gibbsboro   NJ           93       364       42       93       406       499       116       1972       1997       40  
10 Foster Avenue
  Gibbsboro   NJ           244       971       233       244       1,203       1,448       356       1983       1997       40  
100 Berwyn Park
  Berwyn   PA     6,884       1,180       7,290       1,560       1,180       8,850       10,030       2,685       1986       1997       40  
100 Commerce Drive
  Newark   DE           1,160       4,633       1,134       1,160       5,768       6,927       1,808       1989       1997       40  
100 Katchel Blvd
  Reading   PA           1,881       7,423       158       1,881       7,582       9,462       2,183       1970       1997       40  
1000 Atrium Way
  Mt. Laurel   NJ           2,061       8,180       1,065       2,061       9,245       11,306       2,599       1989       1997       40  
1000 Howard Boulevard
  Mt. Laurel   NJ           2,297       9,288       1,328       2,297       10,616       12,913       3,402       1988       1997       40  
10000 Midlantic Drive
  Mt. Laurel   NJ           3,206       12,857       1,100       3,206       13,957       17,163       4,347       1990       1997       40  
100-300 Gundy Drive
  Reading   PA           6,495       25,180       7,583       6,495       32,763       39,258       9,563       1970       1997       40  
1007 Laurel Oak Road
  Voorhees   NJ           1,563       6,241       16       1,564       6,256       7,820       1,754       1996       1997       40  
1120 Executive Boulevard
  Marlton   NJ           2,074       8,415       541       2,074       8,956       11,030       2,864       1987       1997       40  
1336 Enterprise Drive
  West Goshen   PA           731       2,946       52       731       2,998       3,729       926       1989       1997       40  
15000 Midlantic Drive
  Mt. Laurel   NJ           3,061       12,254       165       3,061       12,419       15,480       3,710       1991       1997       40  
17 Campus Boulevard
  Newtown Square   PA     5,002       1,108       5,155       48       1,108       5,203       6,311       1,357       2001       1997       40  
2 Foster Avenue
  Gibbsboro   NJ           185       730       42       185       772       957       225       1974       1997       40  
20 East Clementon Road
  Gibbsboro   NJ           769       3,055       496       769       3,552       4,320       1,072       1986       1997       40  
200 Berwyn Park
  Berwyn   PA     9,415       1,533       9,460       2,071       1,533       11,531       13,064       3,386       1987       1997       40  
2000 Midlantic Drive
  Mt. Laurel   NJ     9,160       2,202       8,823       780       2,203       9,602       11,805       3,083       1989       1997       40  
220 Commerce Drive
  Fort Washington   PA           1,086       4,338       945       1,010       5,359       6,369       1,537       1985       1997       40  
300 Berwyn Park
  Berwyn   PA     12,594       2,206       13,422       2,618       2,206       16,041       18,246       4,878       1989       1997       40  
300 Welsh Road — Building I
  Horsham   PA     2,370       894       3,572       978       894       4,550       5,444       1,352       1980       1997       40  
321 Norristown Road
  Lower Gwyned   PA           1,290       5,176       1,580       1,221       6,825       8,046       2,268       1988       1997       40  
323 Norristown Road
  Lower Gwyned   PA           1,685       6,751       4,263       1,601       11,098       12,699       3,471       1988       1997       40  
4 Foster Avenue
  Gibbsboro   NJ           183       726       93       183       820       1,002       255       1974       1997       40  
4000 Midlantic Drive
  Mt. Laurel   NJ     2,980       714       5,085       (1,939 )     714       3,146       3,860       951       1998       1997       40  
5 Foster Avenue
  Gibbsboro   NJ           9       32       26       9       58       67       14       1968       1997       40  
5 U.S. Avenue
  Gibbsboro   NJ           21       81       3       21       84       105       23       1987       1997       40  
50 East Clementon Road
  Gibbsboro   NJ           114       964       3       114       967       1,081       271       1986       1997       40  
500 Office Center Drive
  Fort Washington   PA           1,617       6,480       1,517       1,617       7,997       9,614       2,141       1974       1997       40  
501 Office Center Drive
  Fort Washington   PA           1,796       7,192       13,223       1,796       20,415       22,211       4,538       1974       1997       40  
6 East Clementon Road
  Gibbsboro   NJ           1,345       5,366       664       1,345       6,030       7,375       1,813       1980       1997       40  
655 Business Center Drive
  Horsham   PA     1,698       544       2,529       696       544       3,225       3,769       1,282       1997       1997       40  
7 Foster Avenue
  Gibbsboro   NJ           231       921       140       231       1,061       1,292       321       1983       1997       40  
748 Springdale Drive
  Exton   PA           236       931       216       236       1,146       1,383       327       1986       1997       40  
855 Springdale Drive
  Exton   PA           838       3,370       2,679       838       6,049       6,887       1,117       1986       1997       40  
9000 Midlantic Drive
  Mt. Laurel   NJ     5,789       1,472       5,895       111       1,472       6,007       7,478       1,809       1989       1997       40  
Five Eves Drive
  Marlton   NJ           703       2,819       772       703       3,592       4,294       1,090       1986       1997       40  
Four A Eves Drive
  Marlton   NJ           539       2,168       243       539       2,411       2,950       764       1987       1997       40  

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BRANDYWINE REALTY TRUST
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried            
                            Initial Cost   December 31, 2006            
                                            Net                                        
                                            Improvements                           Accumulated            
                                            (Retirements)                           Depreciation at            
                    Encumberances at           Building and   Since           Building and           December 31,   Year of   Year   Depreciable
    City   State   December 31, 2006   Land   Improvements   Acquisition   Land   Improvements   Total (a)   2006 (b)   Construction   Acquired   Life
Four B Eves Drive
  Marlton   NJ           588       2,369       327       588       2,696       3,284       814       1987       1997       40  
Main Street — Piazza
  Voorhees   NJ           696       2,802       262       696       3,064       3,760       1,007       1990       1997       40  
Main Street — Plaza 1000
  Voorhees   NJ           2,732       10,942       3,627       2,732       14,569       17,301       4,886       1988       1997       40  
Main Street — Promenade
  Voorhees   NJ           531       2,052       191       532       2,242       2,774       745       1988       1997       40  
Two Eves Drive
  Marlton   NJ           818       3,461       (31 )     818       3,429       4,248       1,087       1987       1997       40  
100 Gateway Centre Parkway
  Richmond   VA           391       5,410       125       391       5,535       5,926       674       2001       1998       40  
1000 First Avenue
  King Of Prussia   PA     3,054       2,772       10,936       703       2,772       11,639       14,411       2,869       1980       1998       40  
1009 Lenox Drive
  Lawrenceville   NJ           4,876       19,284       3,139       4,876       22,422       27,299       7,008       1989       1998       40  
1020 First Avenue
  King Of Prussia   PA     2,441       2,168       8,576       433       2,168       9,008       11,177       2,287       1984       1998       40  
1040 First Avenue
  King Of Prussia   PA     3,277       2,860       11,282       1,036       2,860       12,318       15,178       3,084       1985       1998       40  
1060 First Avenue
  King Of Prussia   PA     2,985       2,712       10,953       1,883       2,712       12,836       15,548       2,913       1987       1998       40  
14 Campus Boulevard
  Newtown Square   PA     5,117       2,244       4,217       (22 )     2,244       4,196       6,439       1,659       1998       1998       40  
150 Corporate Center Drive
  Camp Hill   PA           964       3,871       239       964       4,109       5,074       1,146       1987       1998       40  
1957 Westmoreland Street
  Richmond   VA     2,604       1,061       4,241       235       1,061       4,476       5,537       1,158       1975       1998       40  
200 Corporate Center Drive
  Camp Hill   PA           1,647       6,606       164       1,647       6,771       8,417       1,817       1989       1998       40  
2100-2116 West Laburnam Avenue
  Richmond   VA     552       2,482       8,846       2,300       2,482       11,146       13,628       2,847       1976       1998       40  
2130-2146 Tomlynn Street
  Richmond   VA     985       353       1,416       289       353       1,705       2,058       499       1988       1998       40  
2161-2179 Tomlynn Street
  Richmond   VA     1,040       423       1,695       222       423       1,917       2,340       497       1985       1998       40  
2201-2245 Tomlynn Street
  Richmond   VA     2,576       1,020       4,067       283       1,020       4,351       5,370       1,172       1989       1998       40  
2212-2224 Tomlynn Street
  Richmond   VA     1,211       502       2,014       72       502       2,085       2,588       536       1985       1998       40  
2221-2245 Dabney Road
  Richmond   VA     1,250       530       2,123       203       530       2,326       2,856       595       1994       1998       40  
2240 Dabney Road
  Richmond   VA     617       264       1,059       10       264       1,069       1,333       267       1984       1998       40  
2244 Dabney Road
  Richmond   VA     1,291       550       2,203       38       550       2,241       2,791       563       1993       1998       40  
2246 Dabney Road
  Richmond   VA     1,062       455       1,822       32       455       1,855       2,309       473       1987       1998       40  
2248 Dabney Road
  Richmond   VA     1,337       512       2,049       200       512       2,249       2,761       601       1989       1998       40  
2251 Dabney Road
  Richmond   VA     972       387       1,552       111       387       1,663       2,050       449       1983       1998       40  
2256 Dabney Road
  Richmond   VA     847       356       1,427       275       356       1,702       2,058       409       1982       1998       40  
2277 Dabney Road
  Richmond   VA     1,185       507       2,034       16       507       2,050       2,557       514       1986       1998       40  
2401 Park Drive
  Harrisburg   PA           182       728       187       182       916       1,097       293       1984       1998       40  
2404 Park Drive
  Harrisburg   PA           167       668       249       167       918       1,084       269       1983       1998       40  
2490 Boulevard of the Generals
  King Of Prussia   PA           348       1,394       53       348       1,447       1,795       409       1975       1998       40  
2511 Brittons Hill Road
  Richmond   VA     2,820       1,202       4,820       1,849       1,202       6,669       7,871       1,482       1987       1998       40  
2812 Emerywood Parkway
  Henrico   VA     3,156       1,069       4,281       1,783       1,069       6,064       7,133       1,934       1980       1998       40  
300 Arboretum Place
  Richmond   VA     13,832       5,450       21,892       1,827       5,450       23,719       29,169       6,429       1988       1998       40  
300 Corporate Center Drive
  Camp Hill   PA           4,823       19,301       1,145       4,823       20,446       25,269       5,437       1989       1998       40  
303 Fellowship Drive
  Mt. Laurel   NJ     1,789       1,493       6,055       584       1,494       6,638       8,132       1,696       1979       1998       40  
304 Harper Drive
  Moorestown   NJ     777       657       2,674       379       657       3,052       3,710       769       1975       1998       40  
305 Fellowship Drive
  Mt. Laurel   NJ     1,617       1,421       5,768       1,146       1,421       6,913       8,335       1,618       1980       1998       40  
305 Harper Drive
  Moorestown   NJ     248       223       913       0       223       914       1,136       227       1979       1998       40  
307 Fellowship Drive
  Mt. Laurel   NJ     1,761       1,565       6,342       382       1,565       6,725       8,289       1,660       1981       1998       40  
308 Harper Drive
  Moorestown   NJ           1,643       6,663       499       1,644       7,161       8,805       1,991       1976       1998       40  
309 Fellowship Drive
  Mt. Laurel   NJ     1,878       1,518       6,154       1,205       1,518       7,359       8,877       2,260       1982       1998       40  
33 West State Street
  Trenton   NJ           6,016       24,091       (21 )     6,016       24,070       30,086       6,451       1988       1998       40  
426 Lancaster Avenue
  Devon   PA           1,689       6,756       361       1,689       7,118       8,806       1,922       1990       1998       40  
4364 South Alston Avenue
  Durham   NC     1,915       1,622       6,419       728       1,581       7,188       8,769       1,952       1985       1998       40  
4805 Lake Brooke Drive
  Glen Allen   VA     3,960       1,640       6,567       266       1,640       6,832       8,473       1,764       1996       1998       40  
50 East State Street
  Trenton   NJ           8,926       35,735       773       8,926       36,508       45,434       9,946       1989       1998       40  
50 Swedesford Square
  East Whiteland Twp.   PA     4,263       3,902       15,254       (15,254 )     3,902             3,902             1986       1998       40  
500 Nationwide Drive
  Harrisburg   PA           173       850       790       173       1,640       1,813       550       1977       1998       40  
52 Swedesford Square
  East Whiteland Twp.   PA     4,661       4,241       16,579       878       4,241       17,457       21,698       4,540       1988       1998       40  
520 Virginia Drive
  Fort Washington   PA           845       3,455       39       845       3,494       4,339       1,016       1987       1998       40  
600 Corporate Circle Drive
  Harrisburg   PA           363       1,452       107       363       1,559       1,922       426       1978       1998       40  
600 East Main Street
  Richmond   VA     11,206       9,808       38,255       5,668       9,808       43,923       53,731       11,744       1986       1998       40  
600 Park Avenue
  King Of Prussia   PA           1,012       4,048       2       1,012       4,050       5,062       1,097       1964       1998       40  
610 Freedom Business Center
  King Of Prussia   PA     5,014       2,017       8,070       674       2,017       8,745       10,761       2,702       1985       1998       40  
620 Allendale Road
  King Of Prussia   PA           1,020       3,839       998       1,020       4,837       5,857       1,774       1961       1998       40  
620 Freedom Business Center
  King Of Prussia   PA     6,750       2,770       11,014       3,193       2,770       14,207       16,977       3,577       1986       1998       40  
630 Clark Avenue
  King Of Prussia   PA           547       2,190       1       547       2,191       2,738       593       1960       1998       40  
630 Freedom Business Center
  King Of Prussia   PA     6,655       2,773       11,144       668       2,773       11,812       14,585       3,337       1989       1998       40  
640 Freedom Business Center
  King Of Prussia   PA     10,539       4,222       16,891       1,318       4,222       18,209       22,431       5,412       1991       1998       40  
650 Park Avenue
  King Of Prussia   PA           1,916       4,378       2,491       1,916       6,869       8,785       1,845       1968       1998       40  
660 Allendale Road
  King of Prussia   PA           396       3,343       (1,636 )     396       1,706       2,103       708       1962       1998       40  
680 Allendale Road
  King Of Prussia   PA           689       2,756       679       689       3,435       4,124       1,149       1962       1998       40  
6990 Snowdrift Road
  Allentown   PA                 1,962       3,696             5,658       5,658       764       2003       1998       40  
6990 Snowdrift Road Bldg B
  Allentown   PA                 2,581       958             3,539       3,539       272       2004       1998       40  

F - 42


Table of Contents

BRANDYWINE REALTY TRUST
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried            
                            Initial Cost   December 31, 2006            
                                            Net                                        
                                            Improvements                           Accumulated            
                                            (Retirements)                           Depreciation at            
                    Encumberances at           Building and   Since           Building and           December 31,   Year of   Year   Depreciable
    City   State   December 31, 2006   Land   Improvements   Acquisition   Land   Improvements   Total (a)   2006 (b)   Construction   Acquired   Life
700 East Gate Drive
  Mt. Laurel   NJ     4,102       3,569       14,436       1,540       3,569       15,977       19,545       4,064       1984       1998       40  
701 East Gate Drive
  Mt. Laurel   NJ     2,048       1,736       6,877       842       1,736       7,719       9,455       2,186       1986       1998       40  
7010 Snowdrift Road
  Allentown   PA     919       818       3,324       464       818       3,789       4,606       886       1991       1998       40  
7150 Windsor Drive
  Allentown   PA     1,188       1,035       4,219       147       1,035       4,366       5,401       1,100       1988       1998       40  
7350 Tilghman Street
  Allentown   PA           3,414       13,716       1,273       3,414       14,988       18,403       4,433       1987       1998       40  
741 First Avenue
  King Of Prussia   PA           1,287       5,151       221       1,287       5,371       6,659       1,517       1966       1998       40  
7450 Tilghman Street
  Allentown   PA     3,482       2,867       11,631       1,574       2,867       13,205       16,072       3,737       1986       1998       40  
751-761 Fifth Avenue
  King Of Prussia   PA           1,097       4,391       32       1,097       4,423       5,520       1,197       1967       1998       40  
7535 Windsor Drive
  Allentown   PA     4,514       3,376       13,400       5,528       3,376       18,928       22,304       4,808       1988       1998       40  
755 Business Center Drive
  Horsham   PA     2,024       1,362       2,334       2,940       1,362       5,274       6,636       1,581       1998       1998       40  
800 Corporate Circle Drive
  Harrisburg   PA           414       1,653       105       414       1,758       2,172       492       1979       1998       40  
815 East Gate Drive
  Mt. Laurel   NJ     703       636       2,584       375       636       2,959       3,595       709       1986       1998       40  
817 East Gate Drive
  Mt. Laurel   NJ     697       611       2,426       153       611       2,579       3,190       633       1986       1998       40  
875 First Avenue
  King Of Prussia   PA           618       2,473       3,258       618       5,731       6,349       1,455       1966       1998       40  
9011 Arboretum Parkway
  Richmond   VA     4,622       1,857       7,702       528       1,857       8,231       10,087       2,063       1991       1998       40  
9100 Arboretum Parkway
  Richmond   VA     3,506       1,362       5,489       556       1,362       6,045       7,407       1,726       1988       1998       40  
920 Harvest Drive
  Blue Bell   PA           2,433       9,738       649       2,433       10,387       12,820       2,708       1990       1998       40  
9200 Arboretum Parkway
  Richmond   VA     2,506       985       3,973       133       985       4,107       5,091       1,040       1988       1998       40  
9210 Arboretum Parkway
  Richmond   VA     2,906       1,110       4,474       583       1,110       5,057       6,167       1,363       1988       1998       40  
9211 Arboretum Parkway
  Richmond   VA     1,458       582       2,433       286       582       2,719       3,301       704       1991       1998       40  
925 Harvest Drive
  Blue Bell   PA           1,671       6,606       807       1,671       7,413       9,084       1,905       1990       1998       40  
993 Lenox Drive
  Lawrenceville   NJ     11,638       2,811       17,996       (5,342 )     2,811       12,654       15,465       3,670       1985       1998       40  
997 Lenox Drive
  Lawrenceville   NJ     9,496       2,410       9,700       161       2,410       9,861       12,271       2,635       1987       1998       40  
Dabney III
  Richmond   VA     777       281       1,125       309       281       1,435       1,715       416       1986       1998       40  
Philadelphia Marine Center
  Philadelphia   PA           532       2,196       2,285       628       4,385       5,013       1,035     Various     1998       40  
1050 Westlakes Drive
  Berwyn   PA           2,611       10,445       75             13,131       13,131       2,137       1984       1999       40  
11 Campus Boulevard
  Newtown Square   PA     4,581       1,112       4,067       438       1,112       4,505       5,617       951       1998       1999       40  
400 Berwyn Park
  Berwyn   PA           2,657       4,462       15,897       2,657       20,359       23,016       3,493       1999       1999       40  
630 Dresher Road
  Horsham   PA           771       3,083       1,750       771       4,833       5,604       1,077       1987       1999       40  
7130 Ambassador Drive
  Allentown   PA           761       3,046       161       761       3,207       3,968       693       1991       1999       40  
100 Brandywine Boulevard
  Newtown   PA           1,784       9,811       2,987       1,784       12,798       14,582       2,102       2002       2000       40  
1400 Howard Boulevard
  Mt. Laurel   NJ           443             13,238       1,447       12,233       13,681       77       2005       2000       40  
15 Campus Boulevard
  Newtown Square   PA     5,723       1,164       3,896       673       1,164       4,570       5,733       594       2002       2000       40  
1700 Paoli Pike
  Malvern   PA           458       559       3,582       488       4,111       4,599       861       2000       2000       40  
2000 Lenox Drive
  Lawrenceville   NJ     13,538       2,291       12,221       2,803       2,291       15,024       17,315       4,450       2000       2000       40  
300 Welsh Road — Building II
  Horsham   PA     977       396       1,585       129       396       1,714       2,110       505       1980       2000       40  
401 Plymouth Road
  Plymouth Meeting   PA           6,198       16,131       17,430       6,199       33,560       39,759       6,347       2001       2000       40  
630 Allendale Road
  King of Prussia   PA           2,836       4,028       15,955       2,836       19,983       22,819       5,150       2000       2000       40  
640 Allendale Road
  King of Prussia   PA           439       432       1,480       439       1,913       2,351       269       2000       2000       40  
Bishops Gate Corporate Center
  Mt. Laurel   NJ           934       6,287             934       6,799       7,733       588       2005       2000       40  
Macaroni Grill
  Plymouth Meeting   PA           1,043       555             1,043       555       1,598       24       N/A       2000       40  
10 Lake Center Drive
  Marlton   NJ           1,880       7,521       1,232       1,880       8,753       10,633       1,375       1989       2001       40  
100 Arrandale Boulevard
  Exton   PA           970       3,878       1       970       3,880       4,849       559       1997       2001       40  
100 Lindenwood Drive
  Malvern   PA           473       1,892       377       473       2,269       2,742       507       1985       2001       40  
101 Lindenwood Drive
  Malvern   PA           4,152       16,606       1,575       4,152       18,182       22,333       2,916       1988       2001       40  
1100 Cassett Road
  Berwyn   PA           1,695       6,779       2       1,695       6,781       8,476       976       1997       2001       40  
111 Arrandale Road
  Exton   PA           262       1,048       69       262       1,117       1,379       156       1996       2001       40  
111/113 Pencader Drive
  Newark   DE           1,092       4,366       68       1,092       4,434       5,526       641       1990       2001       40  
1160 Swedesford Road
  Berwyn   PA           1,781       7,124       1,171       1,781       8,295       10,076       1,276       1986       2001       40  
1180 Swedesford Road
  Berwyn   PA           2,086       8,342       1,065       2,086       9,407       11,493       1,465       1987       2001       40  
161 Gaither Drive
  Mount Laurel   NJ           1,016       4,064       434       1,016       4,498       5,514       844       1987       2001       40  
200 Lake Drive East
  Cherry Hill   NJ           2,069       8,275       748       2,069       9,023       11,092       1,434       1989       2001       40  
200 Lindenwood Drive
  Malvern   PA           324       1,295       242       324       1,537       1,861       304       1984       2001       40  
210 Lake Drive East
  Cherry Hill   NJ           1,645       6,579       546       1,645       7,125       8,770       1,136       1986       2001       40  
220 Lake Drive East
  Cherry Hill   NJ           2,144       8,798       738       2,144       9,537       11,680       1,487       1988       2001       40  
30 Lake Center Drive
  Marlton   NJ           1,043       4,171       130       1,043       4,301       5,344       686       1986       2001       40  
300 Lindenwood Drive
  Malvern   PA           848       3,394       104       849       3,498       4,346       510       1991       2001       40  
301 Lindenwood Drive
  Malvern   PA           2,729       10,915       1,868       2,729       12,783       15,512       2,076       1984       2001       40  
412 Creamery Way
  Exton   PA           1,195       4,779       722       1,195       5,502       6,696       1,050       1999       2001       40  
429 Creamery Way
  Exton   PA           1,368       5,471       2       1,368       5,473       6,841       788       1996       2001       40  
436 Creamery Way
  Exton   PA           994       3,978       459       994       4,436       5,431       622       1991       2001       40  
440 Creamery Way
  Exton   PA     2,905       982       3,927       1,004       982       4,931       5,913       707       1991       2001       40  
442 Creamery Way
  Exton   PA     2,516       894       3,576       392       894       3,968       4,862       708       1991       2001       40  
457 Creamery Way
  Exton   PA           777       3,107       272       777       3,379       4,156       537       1990       2001       40  
467 Creamery Way
  Exton   PA           906       3,623       444       906       4,067       4,973       626       1988       2001       40  

F - 43


Table of Contents

BRANDYWINE REALTY TRUST
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried            
                            Initial Cost   December 31, 2006            
                                            Net                                        
                                            Improvements                           Accumulated            
                                            (Retirements)                           Depreciation at            
                    Encumberances at           Building and   Since           Building and           December 31,   Year of   Year   Depreciable
    City   State   December 31, 2006   Land   Improvements   Acquisition   Land   Improvements   Total (a)   2006 (b)   Construction   Acquired   Life
479 Thomas Jones Way
  Exton   PA           1,075       4,299       681       1,075       4,980       6,055       882       1988       2001       40  
481 John Young Way
  Exton   PA     2,294       496       1,983       1       496       1,984       2,480       286       1997       2001       40  
555 Croton Road
  King of Prussia   PA           4,486       17,943       503       4,486       18,446       22,932       2,887       1999       2001       40  
7360 Windsor Drive
  Allentown   PA           1,451       3,618       2,038       1,451       5,655       7,107       1,594       2001       2001       40  
Two Righter Parkway
  Wilmington   DE           2,802       11,217       5       2,802       11,221       14,024       1,833       1987       2001       40  
1000 Lenox Drive
  Lawrenceville   NJ           1,174       4,696       2,107       1,174       6,803       7,977       1,070       1982       2002       40  
200 Commerce Drive
  Newark   DE     5,841       911       4,414       1,020       911       5,434       6,345       838       1998       2002       40  
400 Commerce Drive
  Newark   DE     11,797       2,528       9,220       4,483       2,528       13,703       16,231       5,593       1997       2002       40  
600 West Germantown Pike
  Plymouth Meeting   PA     11,687       3,652       15,288       649       3,652       15,937       19,589       2,079       1986       2002       40  
610 West Germantown Pike
  Plymouth Meeting   PA     11,315       3,651       14,514       1,331       3,651       15,844       19,496       2,303       1987       2002       40  
620 West Germantown Pike
  Plymouth Meeting   PA     11,453       3,572       14,435       1,641       3,572       16,076       19,648       2,401       1990       2002       40  
630 West Germantown Pike
  Plymouth Meeting   PA     11,297       3,558       14,743       1,269       3,558       16,012       19,570       2,361       1988       2002       40  
6802 Paragon Place
  Richmond   VA           2,917       11,454       2,082       2,917       13,536       16,453       2,061       1989       2002       40  
980 Harvest Drive
  Blue Bell   PA           2,079       7,821       1,215       2,079       9,036       11,115       1,292       1988       2002       40  
565 East Swedesford Road
  Wayne   PA           1,872       7,489       890       1,872       8,379       10,251       785       1984       2003       40  
575 East Swedesford Road
  Wayne   PA           2,178       8,712       459       2,178       9,171       11,349       783       1985       2003       40  
585 East Swedesford Road
  Wayne   PA           1,350       5,401       34       1,350       5,435       6,785       432       1998       2003       40  
595 East Swedesford Road
  Wayne   PA           2,729       10,917       374       2,729       11,291       14,020       891       1998       2003       40  
989 Lenox Drive
  Lawrenceville   NJ           3,701       14,802       860       3,700       15,662       19,363       1,196       1984       2003       40  
100 North 18th Street
  Philadelphia   PA     74,079       16,066       100,255       1,416       16,066       101,671       117,737       8,913       1988       2004       33  
130 North 18th Street
  Philadelphia   PA           14,496       107,736       728       14,473       108,487       122,960       9,514       1998       2004       23  
130 Radnor Chester Road
  Radnor   PA           2,573       8,338       (23 )     2,567       8,320       10,888       582       1983       2004       25  
150 Radnor Chester Road
  Radnor   PA           11,925       36,986       8,223       11,897       45,237       57,134       4,146       1983       2004       29  
170 Radnor Chester Road
  Radnor   PA           2,514       8,147       30       2,509       8,182       10,691       569       1983       2004       25  
201 King of Prussia Road
  Radnor   PA           8,956       29,811       1,192       8,949       31,009       39,959       3,147       2001       2004       25  
300 Delaware Avenue
  Wilmington   DE           6,368       13,739       1,089       6,369       14,827       21,196       1,721       1989       2004       23  
525 Lincoln Drive West
  Marlton   NJ           3,727       17,620       1,770       3,727       19,390       23,117       2,267       1986       2004       40  
555 Lancaster Avenue
  Radnor   PA           8,014       16,508       16,468       7,991       32,999       40,990       832       1973       2004       24  
920 North King Street
  Wilmington   DE           6,141       21,140       528       6,141       21,668       27,809       2,016       1989       2004       30  
Five Radnor Corporate Center
  Radnor   PA           6,506       25,525       1,977       6,578       27,430       34,008       2,162       1998       2004       38  
Four Radnor Corporate Center
  Radnor   PA           5,406       21,390       7,648       5,705       28,739       34,444       2,609       1995       2004       30  
Four Tower Bridge
  Conshohocken   PA     10,626       2,672       14,221       (112 )     2,672       14,109       16,781       5,192       1998       2004       40  
One Radnor Corporate Center
  Radnor   PA           7,323       28,613       (34 )     7,323       28,579       35,902       2,683       1998       2004       29  
Six Tower Bridge
  Conshohocken   PA     14,744       2,827       15,525       20       2,827       15,545       18,372       4,731       1999       2004       40  
Three Radnor Corporate Center
  Radnor   PA           4,773       17,961       (100 )     4,791       17,843       22,634       1,654       1998       2004       29  
Two Radnor Corporate Center
  Radnor   PA           3,937       15,484       82       3,942       15,560       19,503       1,501       1998       2004       29  
1 West Elm Street
  W. Conshohocken   PA           3,557       14,249             3,557       14,254       17,811       446       1999       2005       40  
101 West Elm Street
  W. Conshohocken   PA           6,251       25,209       647       6,251       25,856       32,107       942       1999       2005       40  
Arcadia Land
  Upper Macungie   PA           5             0       5             5             N/A       2005       40  
1 Kaiser Plaza
  Oakland   CA     50,088       15,034       107,422       1,130       15,291       108,294       123,585       3,653       1978       2006       46  
100 Lenox Drive
  Lawrenceville   NJ           2,035       8,158       36       2,035       8,194       10,229       188       1991       2006       40  
101-103 Juniper Street
  Philadelphia   VA           464       1,843       1       464       1,844       2,308       35       N/A       2006       40  
11700 Beltsville Drive
  Beltsville   MD           2,808       12,081       46       2,858       12,077       14,935       313       1981       2006       46  
11710 Beltsville Drive
  Beltsville   MD           2,278       11,100       (944 )     2,317       10,117       12,434       324       1987       2006       46  
11720 Beltsville Drive
  Beltsville   MD           3,831       16,661       414       3,897       17,009       20,906       536       1987       2006       46  
11740 Beltsville Drive
  Bethesda   MD           198       870       9       202       875       1,077       36       1987       2006       46  
1177 East Beltline Road
  Coppell   TX     20,337       1,516       14,895       13       1,517       14,908       16,425       597       1998       2006       42  
11781 Lee Jackson Memorial Highway
  Fairfax   VA           3,246       19,836       167       3,302       19,948       23,250       999       1982       2006       40  
1200 Concord Avenue
  Concord   CA     20,519       6,395       24,664       551       6,504       25,106       31,610       1,673       1984       2006       34  
12015 Lee Jackson Memorial Highway
  Fairfax   VA           3,770       22,895       184       3,835       23,014       26,849       1,011       1985       2006       42  
1220 Concord Avenue
  Concord   CA     20,528       6,476       24,966       9       6,476       24,975       31,451       1,673       1984       2006       34  
1221 Mopac Expressway
  Austin   TX           3,290       31,548       459       3,361       31,935       35,296       1,045       2001       2006       55  
1250 Capital of Texas Hwy South
  Austin   TX           5,152       37,928       (51 )     5,241       37,788       43,029       1,367       1984       2006       52  
1301 Mopac Expressway
  Austin   TX           4,188       41,229       262       4,245       41,434       45,679       1,113       2001       2006       55  
1333 Broadway
  Oakland   CA     24,318       4,519       35,235       159       4,519       35,394       39,913       1,946       1972       2006       40  
13825 Sunrise Valley Drive
  Herndon   VA           3,794       19,365       173       3,859       19,473       23,332       1,083       1989       2006       46  
13880 Dulles Corner Lane
  Herndon   VA           7,236       39,213       344       7,360       39,433       46,793       1,159       1997       2006       55  
1501 South Mopac Expressway
  Austin   TX           3,698       34,912       984       3,761       35,832       39,594       1,656       1999       2006       53  
1601 Mopac Expressway
  Austin   TX           3,538       34,346       692       3,599       34,978       38,577       1,063       2000       2006       54  
1676 International Drive
  Mclean   VA     63,064       18,437       97,538       882       18,753       98,105       116,858       2,275       1999       2006       55  
16870 W Bernardo Drive
  San Diego   CA     10,700       2,979       15,896       6       2,979       15,902       18,881       953       2002       2006       56  
1801 Mopac Expressway
  Austin   TX           1,227       10,959       42       1,248       10,980       12,228       287       1999       2006       53  
1880 Campus Commons Drive
  Reston   VA           6,164       28,114       46       6,270       28,054       34,324       598       1985       2006       52  
1900 Gallows Road
  Vienna   VA           7,797       47,817       556       7,930       48,239       56,170       1,591       1989       2006       52  
1901 Harrison Street
  Oakland   CA     30,056       5,442       59,920       727       5,535       60,554       66,089       1,716       1985       2006       48  

F - 44


Table of Contents

BRANDYWINE REALTY TRUST
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried            
                            Initial Cost   December 31, 2006            
                                            Net                                        
                                            Improvements                           Accumulated            
                                            (Retirements)                           Depreciation at            
                    Encumberances at           Building and   Since           Building and           December 31,   Year of   Year   Depreciable
    City   State   December 31, 2006   Land   Improvements   Acquisition   Land   Improvements   Total (a)   2006 (b)   Construction   Acquired   Life
196 Van Buren Street
  Herndon   VA     15,338       6,023       31,780       12       6,023       31,792       37,815       1,985       1991       2006       53  
198 Van Buren Street
  Herndon   VA     15,562       1,908       12,032       5       1,908       12,037       13,945       385       1996       2006       53  
2035 Corte Del Nogal
  Carlsbad   CA     5,728       3,261       6,077       2       3,261       6,079       9,340       472       1991       2006       39  
2101 Webster Street
  Oakland   CA           13,051       89,728       1,664       13,275       91,169       104,444       3,323       1985       2006       44  
2121 Cooperative Way
  Herndon   VA           5,598       38,639       538       5,777       38,999       44,775       1,150       2000       2006       54  
2201 Cooperative Way
  Herndon   VA           4,809       34,093       121       4,809       34,215       39,024       1,476       1990       2006       54  
2251 Corporate Park Drive
  Herndon   VA           11,472       45,893       17       11,472       45,910       57,382       96       2000       2006       40  
2273 Research Boulevard
  Rockville   MD     15,787       5,167       31,110       1,326       5,231       32,372       37,602       998       1999       2006       45  
2275 Research Boulevard
  Rockville   MD     15,741       5,059       29,668       805       5,145       30,386       35,532       1,309       1990       2006       45  
2277 Research Boulevard
  Rockville   MD     14,647       4,649       26,952       266       4,726       27,142       31,867       947       1986       2006       45  
2291 Wood Oak Drive
  Herndon   VA     31,000       8,243       52,413       20       8,243       52,433       60,676       5,034       1999       2006       55  
2340 Dulles Corner Boulevard
  Herndon   VA           16,345       65,379       185       16,345       65,565       81,909       547       1987       2006       40  
2355 Dulles Corner Boulevard
  Herndon   VA           10,365       43,876       17       10,365       43,893       54,258       599       1988       2006       40  
2411 Dulles Corner Park
  Herndon   VA           7,279       46,340       406       7,404       46,621       54,026       1,674       1990       2006       50  
2711 N Haskell Avenue
  Dallas   TX           8,597       97,681       647       8,753       98,171       106,924       5,858       1998       2006       37  
3130 Fairview Park Drive
  Falls Church   VA           6,576       51,605       247       6,688       51,740       58,428       1,275       1999       2006       53  
3141 Fairview Park Drive
  Falls Church   VA           5,918       40,981       295       6,038       41,157       47,195       1,340       1988       2006       51  
3141 Fairview Park Drive
  Falls Church   VA           733       4,939       (4 )     733       4,935       5,668       134       1988       2006       51  
3141 Fairview Park Drive
  Falls Church   VA           297       1,964       1       297       1,965       2,262       40       1988       2006       51  
4401 Fair Lakes Court
  Fairfax   VA           1,569       11,982       (47 )     1,596       11,908       13,504       375       1988       2006       52  
5780 & 5790 Fleet Street
  Carlsbad   CA     14,500       7,073       22,907       8       7,072       22,916       29,988       1,836       1999       2006       55  
5900 & 5950 La Place Court
  Carlsbad   CA     8,252       3,706       11,185       4       3,706       11,189       14,895       691       1988       2006       48  
5963 La Place Court
  Carlsbad   CA     6,534       2,824       9,413       4       2,824       9,417       12,241       560       1987       2006       55  
5973 Avenida Encinas
  Carlsbad   CA     5,486       2,121       8,361       3       2,121       8,364       10,485       618       1986       2006       45  
6600 Rockledge Drive
  Bethesda   MD                 37,421       36             37,457       37,457       733       1981       2006       50  
6800 Paragon Place
  Richmond   VA           4,552       18,414       24       4,552       18,438       22,990       120       1986       2006       40  
7101 Wisconsin Avenue
  Bethesda   MD           9,634       48,402       2,215       9,799       50,452       60,251       1,626       1975       2006       45  
7735 Old Georgetown Road
  Bethesda   MD           4,370       23,192       261       4,445       23,379       27,824       903       1997       2006       45  
8260 Greensboro Drive
  Mclean   VA     33,958       7,952       33,964       (50 )     8,088       33,777       41,866       1,179       1980       2006       52  
8521 Leesburg Pike
  Vienna   VA           4,316       30,885       549       4,390       31,360       35,749       1,166       1984       2006       51  
Cityplace Conference Center
  Dallas   TX           505       5,071       2       505       5,073       5,578       137       1998       2006       37  
2929 Arch Street
  Philadelphia   PA                 208,570       79             208,649       208,649       5,659       2005       N/A       40  
922 Swedesford Road
  Berwyn   PA           218                   218             218             N/A       N/A       40  
 
                                                                                                       
 
  Subtotal:           $ 878,969     $ 754,373     $ 3,887,653     $ 284,763     $ 756,383     $ 4,170,923     $ 4,927,305     $ 515,698                          
 
                                                                                                       
 
                                                                                                       
Real Estate Classified as Held for Sale @ 12/31/06:                                                                                                
 
                                                                                                       
160 - 180 West Germantown Pike
  East Norriton   PA     5,105       1,603       6,418       1,587       1,603       8,005       9,608       2,260       1982       1998       40  
1505/1507 LBJ Freeway
  Farmers Branch   TX           4,393       27,825       (603 )     4,165       27,450       31,614       1,263       1989       2006       41  
1501/1503 LBJ Freeway
  Farmers Branch   TX           3,727       28,099       (4,142 )     3,210       24,474       27,683       1,217       1985       2006       37  
1601 LBJ Freeway
  Dallas   TX           3,122       16,194       (65 )     3,099       16,152       19,250       681       1982       2006       34  
1603 LBJ Freeway
  Dallas   TX           1,170       18,045       40       1,149       18,106       19,255       629       1985       2006       34  
 
                                                                                                       
 
  Subtotal:           $ 5,105     $ 14,015     $ 96,580     $ (3,183 )   $ 13,225     $ 94,186     $ 107,411     $ 6,050                          
 
                                                                                                       
 
  Total:           $ 884,074     $ 768,388     $ 3,984,233     $ 281,579     $ 769,608     $ 4,265,108     $ 5,034,716     $ 521,748                          
 
                                                                                                       

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(a)   Reconciliation of Real Estate:
 
    The following table reconciles the real estate investments from January 1, 2004 to December 31, 2006 (in thousands):
                         
    2006     2005     2004  
Balance at beginning of year
  $ 2,560,061     $ 2,483,134     $ 1,869,744  
Additions:
                       
Acquisitions
    2,370,241       71,783       578,197  
Consolidation of VIE’s (1)
                35,245  
Capital expenditures
    334,238       47,732       30,953  
Less:
                       
Dispositions
    (229,824 )     (42,588 )     (31,005 )
Assets transferred to held-for-sale
    (107,411 )            
 
                 
Balance at end of year
  $ 4,927,305     $ 2,560,061     $ 2,483,134  
 
                 
(b)   Reconciliation of Accumulated Depreciation:
 
    The following table reconciles the accumulated depreciation on real estate investments from January 1, 2004 to December 31, 2006 (in thousands):
                         
    2006     2005     2004  
Balance at beginning of year
  $ 390,333     $ 325,802     $ 268,091  
Additions:
                       
Depreciation expense — continued operations
    162,503       78,465       60,179  
Depreciation expense — discontinued operations
    12,305       171       224  
Consolidation of VIE’s (1)
                7,741  
Acquisitions
    1,037              
Less:
                       
Dispositions
    (44,430 )     (14,105 )     (10,433 )
Assets transferred to held-for-sale
    (6,050 )            
 
                 
Balance at end of year
  $ 515,698     $ 390,333     $ 325,802  
 
                 
 
(1)   - Joint ventures which were consolidated at March 31, 2004 under Financial Interpretation 46-R (“FIN-46-R”), “Consolidation of Variable Interest Entities.”
 
(2)   - Schedule III excludes an asset owned that is subject to a deferred financing lease.

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Report of Independent Registered Public Accounting Firm
To the Partners of Brandywine Operating Partnership, L.P.:
We have completed an integrated audit of Brandywine Operating Partnership, L.P’s and its subsidiaries (collectively the “Partnership”) December 31, 2006 consolidated financial statements and of its internal control over financial reporting as of December 31, 2006 and audits of its December 31, 2005 and 2004 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement schedules
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the financial position of Brandywine Operating Partnership, L.P. and its subsidiaries (collectively the “Partnership”) at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in the accompanying Form 10-K appearing under Item 9A, that the Partnership maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Partnership’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external

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purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the partnership; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded the Partnership’s investments in Four and Six Tower Bridge Associates from its assessment of internal control over financial reporting as of December 31, 2006 because the Partnership does not have the right and authority to assess the internal control over financial reporting of the individual entities and it lacks the ability to influence or modify the internal control over financial reporting of the individual entities. Four and Six Tower Bridge are two real estate partnerships, created prior to December 13, 2003, which the Partnership started consolidating under Financial Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable Interest Entities” on March 31, 2004. We have also excluded Four and Six Tower Bridge Associates from our audit of internal control over financial reporting. Four and Six Tower Bridge are two consolidated real estate partnerships whose total assets and total revenues represent less than 1% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2006.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 28, 2007

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BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
                 
    December 31,  
    2006     2005  
ASSETS
               
Real estate investments:
               
Operating properties
  $ 4,927,305     $ 2,560,061  
Accumulated depreciation
    (515,698 )     (390,333 )
 
           
Operating real estate investments, net
    4,411,607       2,169,728  
Construction-in-progress
    217,886       273,240  
Land held for development
    110,233       98,518  
 
           
Total real estate investments, net
    4,739,726       2,541,486  
 
               
Cash and cash equivalents
    25,379       7,174  
Restricted cash
    22,557       18,498  
Accounts receivable, net
    19,957       12,874  
Accrued rent receivable, net
    71,589       47,034  
Asset held for sale
    126,016        
Investment in unconsolidated ventures
    74,574       13,331  
Deferred costs, net
    73,708       37,602  
Intangible assets, net
    281,251       78,097  
Other assets
    73,506       49,649  
 
           
Total assets
  $ 5,508,263     $ 2,805,745  
 
           
LIABILITIES AND PARTNERS’ EQUITY
               
Mortgage notes payable
  $ 883,920     $ 494,777  
Unsecured notes
    2,208,310       936,607  
Unsecured credit facility
    60,000       90,000  
Accounts payable and accrued expenses
    108,400       52,635  
Distributions payable
    42,760       28,880  
Tenant security deposits and deferred rents
    55,697       20,953  
Acquired below market leases, net of accumulated amortization of $26,009 and $6,931
    92,527       34,704  
Other liabilities
    13,906       4,411  
Mortgage notes payable and other liabilities held for sale
    20,826        
 
           
Total liabilities
    3,486,346       1,662,967  
Minority interest — partners’ share of consolidated real estate ventures
    34,436        
Commitments and contingencies (Note 21)
               
Redeemable limited partnership units at redemption value; 3,961,235 and 1,945,267 issued and outstanding in 2006 and 2005, respectively
    131,711       54,300  
Partners’ equity:
               
7.50% Series D Preferred Mirror Units; 2,000,000 issued and outstanding in 2006 and 2005
    47,912       47,912  
7.375% Series E Preferred Mirror Units; 2,300,000 issued and outstanding in 2006 and 2005
    55,538       55,538  
General Partnership Capital, 88,327,041 and 56,179,075 units issued and outstanding in 2006 and 2005, respectively
    1,750,745       988,197  
Accumulated other comprehensive loss
    1,575       (3,169 )
 
           
Total partners’ equity
    1,855,770       1,088,478  
 
           
Total liabilities, minority interest, and partners’ equity
  $ 5,508,263     $ 2,805,745  
 
           
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
(in thousands, except unit and per unit information)
                         
    Years ended December 31,  
    2006     2005     2004  
Revenue:
                       
Rents
  $ 559,936     $ 318,218     $ 267,710  
Tenant reimbursements
    80,470       48,562       36,849  
Other
    22,395       13,844       11,998  
 
                 
Total revenue
    662,801       380,624       316,557  
 
Operating Expenses:
                       
Property operating expenses
    188,001       111,192       86,358  
Real estate taxes
    65,584       38,180       29,895  
Depreciation and amortization
    248,132       109,118       77,521  
Administrative expenses
    29,644       17,982       15,100  
 
                 
Total operating expenses
    531,361       276,472       208,874  
 
                 
Operating income
    131,440       104,152       107,683  
Other Income (Expense):
                       
Interest income
    9,513       1,370       841  
Interest expense
    (171,177 )     (70,152 )     (52,642 )
Interest expense — Deferred financing costs
    (4,607 )     (3,766 )     (1,968 )
Equity in income of real estate ventures
    2,165       3,172       2,023  
Net gain on sale of interests in real estate
    14,190       4,640       2,975  
Gain on termination of purchase contract
    3,147              
 
                 
Income (loss) before minority interest
    (15,329 )     39,416       58,912  
Minority interest — partners’ share of consolidated real estate ventures
    270       (154 )     206  
 
                 
Income (loss) from continuing operations
    (15,059 )     39,262       59,118  
Discontinued operations:
                       
Income from discontinued operations
    7,681       2,555       827  
Net gain on disposition of discontinued operations
    20,243       2,196       3,136  
Minority interest — partners’ share of consolidated real estate ventures
    (2,239 )            
 
                 
Income from discontinued operations
    25,685       4,751       3,963  
 
                 
Net income
    10,626       44,013       63,081  
Income allocated to Preferred Units
    (7,992 )     (7,992 )     (10,555 )
Preferred Unit redemption gain
                4,500  
 
                 
Income allocated to Common Partnership Units
  $ 2,634     $ 36,021     $ 57,026  
 
                 
 
                       
Basic earnings per Common Partnership Unit:
                       
Continuing operations
  $ (0.25 )   $ 0.54     $ 1.07  
Discontinued operations
    0.27       0.08       0.08  
 
                 
 
  $ 0.03     $ 0.62     $ 1.15  
 
                 
 
                       
Diluted earnings per Common Partnership Unit:
                       
Continuing operations
  $ (0.24 )   $ 0.54     $ 1.07  
Discontinued operations
    0.27       0.08       0.08  
 
                 
 
  $ 0.03     $ 0.62     $ 1.14  
 
                 
 
                       
Basic weighted average common partnership unit
    93,703,601       57,852,842       49,600,634  
 
                       
Diluted weighted average common partnership unit
    94,222,125       58,111,162       49,837,549  
The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE (LOSS) INCOME
(in thousands)
                         
    Years ended December 31,  
    2006     2005     2004  
Net income
  $ 10,626     $ 44,013     $ 63,081  
Unrealized gain (loss) on derivative financial instruments
    1,330       (713 )     309  
Less: minority interest — consolidated real estate venture partner’s share of unrealized gain (loss) on derivative financial instruments
    (302 )            
Settlement of treasury locks
                (3,238 )
Settlement of forward starting swaps
    3,266       240        
Realized gain on derivative financial instruments
          450       2,809  
Reclassification of realized (gains)/losses on derivative financial instruments to operations, net
    122              
Unrealized gain (loss) on available-for-sale securities
    328       (16 )     (852 )
 
                 
Total other comprehensive income (loss)
    4,744       (39 )     (972 )
 
                 
Comprehensive income
  $ 15,370     $ 43,974     $ 62,109  
 
                 
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
(in thousands, except Units)
                                                                                 
    Series A Preferred Mirror     Series D Preferred Mirror     Series E Preferred Mirror                     Accumulated Other     Total  
    Units     Units     Units     General Partner Capital     Comprehensive     Partner’s  
    Units     Amount     Units     Amount     Units     Amount     Units     Amount     Income     Equity  
Balance, December 31, 2003
    750,000       37,500       2,000,000       47,912                   41,040,710       677,033       (2,158 )     760,287  
Net income
                                              63,081             63,081  
Net income allocable to redeemable partnership units
                                              (1,943 )           (1,943 )
Other comprehensive income:
                                                    (972 )     (972 )
Vesting of restricted units
                                        90,597       1,697             1,697  
Issuance of preferred mirror units
                            2,300,000       55,538                         55,538  
Conversion of preferred mirror units
    (750,000 )     (37,500 )                             1,339,286       37,500              
Redemption of preferred units
                                              4,500             4,500  
Issuance of general partnership units
                                        12,235,000       336,683             336,683  
Exercise of warrants/options to purchase general partnership units
                                        587,159       14,545             14,545  
Repayment of employee stock loans
                                              1,112             1,112  
Amortization of stock options
                                              102             102  
Adjustment of redeemable partnership units to liquidation value at period end
                                              (5,967 )           (5,967 )
Distributions to Preferred Mirror Units
                                              (9,720 )           (9,720 )
Distributions to Preferred Units
                                              (835 )           (835 )
Distributions to general partnership unit holder
                                              (88,644 )           (88,644 )
 
                                                           
 
                                                                               
Balance, December 31, 2004
                2,000,000       47,912       2,300,000       55,538       55,292,752       1,029,144       (3,130 )     1,129,464  
Net income
                                              44,013             44,013  
Net income allocable to redeemable partnership units
                                              (276 )           (276 )
Other comprehensive income:
                                                    (39 )     (39 )
Conversion of LP units to common shares
                                        107,692       2,584             2,584  
Vesting of restricted units
                                        72,950       1,630             1,630  
Exercise of warrants/options to purchase general partnership units
                                        705,681       18,999             18,999  
Repayment of employee stock loans
                                              50             50  
Adjustment of redeemable partnership units to liquidation value at period end
                                              190             190  
Distributions to Preferred Mirror Units
                                              (7,992 )           (7,992 )
Distributions to general partnership unit holder
                                              (100,145 )           (100,145 )
 
                                                           
 
                                                                               
Balance, December 31, 2005
                2,000,000       47,912       2,300,000       55,538       56,179,075       988,197       (3,169 )     1,088,478  
Net income
                                              10,626             10,626  
Repurchase of common partnership units
                                        (3,009,200 )     (94,473 )           (94,473 )
Other comprehensive income:
                                                    4,744       4,744  
Conversion of LP units to common shares
                                        14,700       488             488  
Issuance of common partnership units
                                        34,542,151       1,022,173             1,022,173  
Vesting of restricted units
                                        81,142       1,887             1,887  
Issuance of trustee/bonus shares
                                        3,257       90             90  
Exercise of warrants/options to purchase general partnership units
                                        515,916       11,413             11,413  
Repayment of employee stock loans
                                              371             371  
Adjustment of redeemable partnership units to liquidation value at period end
                                              (25,913 )           (25,913 )
Distributions to Preferred Mirror Units
                                              (7,992 )           (7,992 )
Distributions to general partnership unit holder
                                              (156,122 )           (156,122 )
 
                                                           
 
                                                                               
Balance, December 31, 2006
        $       2,000,000     $ 47,912       2,300,000     $ 55,538       88,327,041     $ 1,750,745     $ 1,575     $ 1,855,770  
 
                                                           
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
(in thousands)
                         
    Years ended December 31,  
    2006     2005     2004  
Cash flows from operating activities:
                       
Net income (loss)
  $ 10,626     $ 44,013     $ 63,081  
Adjustments to reconcile net income (loss) to net cash from operating activities:
                       
Depreciation
    186,454       84,561       64,175  
Amortization:
                       
Deferred financing costs
    4,607       3,721       5,088  
Deferred leasing costs
    12,258       8,895       7,841  
Acquired above (below) market leases, net
    (9,034 )     (1,542 )     (406 )
Acquired lease intangibles
    66,317       18,573       8,112  
Deferred compensation costs
    3,447       2,764       2,114  
Straight-line rent
    (31,326 )     (14,952 )     (6,023 )
Provision for doubtful accounts
    3,510       792       467  
Real estate venture income in excess of distributions
    (15 )     (769 )     (293 )
Net gain on sale of interests in real estate
    (34,433 )     (6,820 )     (6,111 )
Gain on termination of purchase contract
    (3,147 )            
Minority interest
    1,969       154       (205 )
Changes in assets and liabilities:
                       
Accounts receivable
    1,365       (598 )     (1,769 )
Other assets
    (4,855 )     (11,810 )     9,840  
Accounts payable and accrued expenses
    (1,154 )     (2,407 )     3,199  
Tenant security deposits and deferred rents
    29,209       (40 )     3,750  
Other liabilities
    5,768       612       30  
 
                 
Net cash from operating activities
    241,566       125,147       152,890  
Cash flows from investing activities:
                       
Acquisition of Prentiss
    (935,856 )            
Acquisition of properties
    (231,244 )     (92,674 )     (569,343 )
Sales of properties, net
    347,652       29,428       22,283  
Proceeds from termination of purchase contract
    3,147              
Capital expenditures
    (242,516 )     (177,035 )     (131,998 )
Investment in marketable securities
    181,556       423        
Investment in unconsolidated Real Estate Ventures
    (753 )     (269 )     (233 )
Restrcited cash
    (2,981 )     (518 )     (1,320 )
Cash distributions from unconsolidated Real Estate Ventures in excess of equity in income
    3,762       462       1,402  
Increase in cash due to consolidation of variable interest entities
                426  
Proceeds from repayment of mortgage note receivable
                6,470  
Leasing costs
    (38,561 )     (12,234 )     (10,339 )
 
                 
Net cash from investing activities
    (915,794 )     (252,417 )     (682,652 )
Cash flows from financing activities:
                       
Proceeds from Credit Facility borrowings
    726,000       372,142       570,000  
Repayments of Credit Facility borrowings
    (756,000 )     (434,142 )     (723,000 )
Proceeds from mortgage notes payable
    20,520              
Repayments of secured debt
    (213,338 )     (23,457 )     (50,165 )
Proceeds from term loan
    750,000             433,000  
Repayments of term loan
    (750,000 )           (533,000 )
Proceeds from unsecured notes
    1,193,217       299,976       636,398  
Proceeds from forward starting swap termination
    3,266              
Repayments on employee stock loans
    371       50       1,112  
Proceeds from issuance of units, net
                406,767  
Debt financing costs
    (14,319 )     (4,026 )     (13,580 )
Exercise of stock options
    11,414       18,999        
Repurchases of common partnership and minority interest units
    (94,472 )     (239 )     (95,436 )
Distributions paid to preferred and common partnership unitholders
    (175,947 )     (106,608 )     (90,457 )
Distributions to minority interest holders — consolidated real estate ventures
    (8,279 )     (3,597 )     (5,083 )
 
                 
Net cash from financing activities
    692,433       119,098       536,556  
 
                 
Increase (decrease) in cash and cash equivalents
    18,205       (8,172 )     6,794  
Cash and cash equivalents at beginning of period
    7,174       15,346       8,552  
 
                 
Cash and cash equivalents at end of period
  $ 25,379     $ 7,174     $ 15,346  
 
                 
Supplemental disclosure:
                       
Cash paid for interest, net of capitalized interest
  $ 154,258     $ 53,450     $ 43,281  
Supplemental disclosure of non-cash activity:
                       
Common shares issued in the Prentiss acquisition
    1,022,173              
Operating Partnership units issued in Prentiss acquisitions
    64,103              
Operating Partnership units issued in property acquisitions
    13,819             10,000          
Debt assumed in property acquisitions
    532,607               79,330        
Debt, minority interest and other liabilities, net assumed in the Prentiss acquisition
    679,520              
The accompanying notes are an integral part of these consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006, 2005 AND 2004
1. ORGANIZATION AND NATURE OF OPERATIONS
Brandywine Operating Partnership, L.P. (referred to herein as “we”, “us” or the “Partnership’) is the entity through which Brandywine Realty Trust, a Maryland real estate investment trust (the “Company”), a self-administered and self-managed real estate investment trust, conducts its business and own its assets. The Partnership’s activities include acquiring, developing, redeveloping, leasing and managing office and industrial properties. The Company’s common shares of beneficial interest are publicly traded on the New York Stock Exchange under the ticker symbol “BDN”.
As of December 31, 2006, the Partnership owned 261 office properties, 23 industrial facilities and one mixed-use property (collectively, the “Properties”) containing an aggregate of approximately 28.2 million net rentable square feet. The Partnership also has six properties under development, three properties under redevelopment and four lease-up properties containing an aggregate 2.1 million net rentable square feet. As of December 31, 2006, the Partnership owned economic interests in 11 unconsolidated real estate ventures that contain approximately 2.7 million net rentable square feet and in four consolidated real estate ventures that own 15 office properties containing approximately 1.5 million net rentable square feet (collectively, the “Real Estate Ventures”). In addition, as of December 31, 2006, the Partnership owned approximately 490 acres of undeveloped land. The Properties and the properties owned by the Real Estate Ventures are located in and surrounding Philadelphia, Wilmington, Southern and Central New Jersey, Richmond, Metropolitan Washington, D.C., Dallas/Fort Worth, Austin, Oakland, San Diego and Los Angeles. In addition to managing properties that the Partnership owns, as of December 31, 2006, the Partnership was managing approximately 11.0 million net rentable square feet of office and industrial properties for third parties.
All references to building square footage, acres, occupancy percentage and the number of buildings are unaudited.
As more fully described in Note 3, on January 5, 2006, the Company acquired Prentiss Properties Trust (“Prentiss”) pursuant to an agreement and plan of merger that the Company entered into with Prentiss on October 3, 2005.
The Company is the sole general partner of the Partnership and, as of December 31, 2006, owned a 95.7% interest in the Operating Partnership. The Partnership conducts its third-party real estate management services business primarily through four management companies (collectively, the “Management Companies”): Brandywine Realty Services Corporation (“BRSCO”), BTRS, Inc., (“BTRS”) Brandywine Properties I Limited, Inc. (“BPI”) and Brandywine Properties Management, L.P. (“BPM”). Each of BRSCO, BTRS and BPI is a taxable REIT subsidiaries. The Partnership owns a 95% interest in BRSCO and the remaining 5% interest is owned by a partnership comprised of a current executive and former executive of the Company, each of whom is a member of the Company’s Board of Trustees. The Partnership owns, directly and indirectly, 100% of each of BTRS, BPI and BPM.
As of December 31, 2006, the Management Companies were managing properties containing an aggregate of approximately 42.3 million net rentable square feet, of which approximately 28.2 million net rentable square feet related to Properties owned by the Partnership and approximately 13.0 million net rentable square feet related to properties owned by third parties and Real Estate Ventures.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
When the Partnership obtains an economic interest in an entity, the Partnership evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if the Partnership is deemed to be

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the primary beneficiary, in accordance with FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). When an entity is not deemed to be a VIE, the Partnership considers the provisions of EITF 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”). The Partnership consolidates (i) entities that are VIEs and of which the Partnership is deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Partnership controls and the limited partners do not have either the ability to dissolve the entity or remove the Partnership without cause or substantive participating rights. Entities that the Partnership accounts for under the equity method (i.e. at cost, increased or decreased by the Partnership’s share of earnings or losses, less distributions) include (i) entities that are VIEs and of which the Partnership is not deemed to be the primary beneficiary (ii) entities that are non-VIEs which the Partnership does not control, but over which the Partnership has the ability to exercise significant influence and (iii) entities that are non-VIE’s that the Partnership controls through its general partner status, but the limited partners in the entity have the substantive ability to dissolve the entity or remove the Partnership without cause or have substantive participating rights. The Partnership will reconsider its determination of whether an entity is a VIE and who the primary beneficiary is, and whether or not the limited partners in an entity have substantive rights, if events occur that are likely to cause a change in the original determinations. The portion of these entities not owned by the Partnership is presented as minority interest as of and during the periods consolidated. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue, impairment of long-lived assets, allowance for doubtful accounts and deferred costs.
Operating Properties
Operating properties are carried at historical cost less accumulated depreciation and impairment losses. The cost of operating properties reflects their purchase price or development cost. Costs incurred for the acquisition and renovation of an operating property are capitalized to the Partnership’s investment in that property. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.
Purchase Price Allocation
The Partnership allocates the purchase price of properties to net tangible and identified intangible assets acquired based on fair values. Above-market and below-market in-place lease values for acquired properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) the Partnership’s estimate of the fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. Capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining non-cancelable terms of the respective leases, including any fixed-rate renewal periods.
Other intangible assets also include amounts representing the value of tenant relationships and in-place leases based on the Partnership’s evaluation of the specific characteristics of each tenant’s lease and the Partnership’s overall relationship with the respective tenant. The Partnership estimates the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, including leasing commissions, legal and other related expenses. This intangible asset is amortized to expense over the remaining term of the respective leases. Partnership estimates of value are made using methods similar to those used by independent appraisers or by using independent appraisals. Factors considered by the Partnership in this analysis include an estimate of the carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Partnership includes

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real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from three to twelve months. The Partnership also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. The Partnership also uses the information obtained as a result of its pre-acquisition due diligence as part of its consideration of FIN 47, and when necessary, will record a conditional asset retirement obligation as part of its purchase price.
Characteristics considered by the Partnership in allocating value to its tenant relationships include the nature and extent of the Partnership’s business relationship with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The value of tenant relationship intangibles is amortized over the remaining initial lease term and expected renewals, but in no event longer than the remaining depreciable life of the building. The value of in-place leases is amortized over the remaining non-cancelable term of the respective leases and any fixed-rate renewal periods.
In the event that a tenant terminates its lease, the unamortized portion of each intangible, including market rate adjustments, in-place lease values and tenant relationship values, would be charged to expense.
Depreciation and Amortization
The costs of buildings and improvements are depreciated using the straight-line method based on the following useful lives: buildings and improvements (five to 55 years) and tenant improvements (the shorter of the lease term or the life of the asset).
Construction in Progress
Project costs directly associated with the development and construction of a real estate project are capitalized as construction in progress. In addition, interest, real estate taxes and general and administrative expenses that are directly associated with the Partnership’s development activities are capitalized until the property is placed in service. Internal direct construction costs totaling $4.9 million in 2006, $3.4 million in 2005 and $3.0 million in 2004 and interest totaling $9.5 million in 2006, $9.6 million in 2005 and $3.0 million in 2004 were capitalized related to development of certain Properties and land holdings.
Impairment of Long-Lived Assets
Statement of Financial Accounting Standard No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long-Lived Assets, provides a single accounting model for long-lived assets as held-for-sale, broadens the scope of businesses to be disposed of that qualify for reporting as discontinued operations and changes the timing of recognizing losses on such operations.
In accordance with SFAS 144, long-lived assets, such as real estate investments and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The other assets and liabilities related to assets classified as held-for-sale are presented separately in the consolidated balance sheet. As of December 31, 2006, the Partnership had two properties classified as held for sale. The Partnership had no properties classified as held for sale at December 31, 2005.
Cash and Cash Equivalents
Cash and cash equivalents are highly-liquid investments with original maturities of three months or less. The Partnership maintains cash equivalents in financial institutions in excess of insured limits, but believes this risk is mitigated by only investing in or through major financial institutions.

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Restricted Cash
Restricted cash consists of cash held as collateral to provide credit enhancement for the Partnership’s mortgage debt, cash for property taxes, capital expenditures and tenant improvements.
Accounts Receivable
Leases with tenants are accounted for as operating leases. Minimum annual rentals under tenant leases are recognized on a straight-line basis over the term of the related lease. The cumulative difference between lease revenue recognized under the straight-line method and contractual lease payment terms is recorded as “accrued rent receivable, net” on the accompanying balance sheets. Included in current tenant receivables are tenant reimbursements which are comprised of amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses that are recognized as revenue in the period in which the related expenses are incurred. As of December 31, 2006 one tenant represented approximately 17% of accounts receivable, a significant portion of which is for reimbursements in connection with a tenant improvement project. As of December 31, 2005, no tenant represented more than 10% of accounts receivable.
Tenant receivables and accrued rent receivables are carried net of the allowances for doubtful accounts of $4.5 million and $4.8 million in 2006, respectively and $1.9 million and $3.0 million in 2005, respectively. The allowance is an estimate based on two calculations that are combined to determine the total amount reserved. First, the Partnership evaluates specific accounts where it has determined that a tenant may have an inability to meet its financial obligations. In these situations, the Partnership uses its judgment, based on the facts and circumstances, and records a specific reserve for that tenant against amounts due to reduce the receivable to the amount that the Partnership expects to collect. These reserves are reevaluated and adjusted as additional information becomes available. Second, a reserve is established for all tenants based on a range of percentages applied to receivable aging categories. These percentages are based on historical collection and write-off experience. If the financial condition of the Partnership’s tenants were to deteriorate, additional allowances may be required.
Investments in Unconsolidated Real Estate Ventures
The Partnership accounts for its investments in unconsolidated Real Estate Ventures under the equity method of accounting as it is not the primary beneficiary (for VIEs) and the Partnership exercises significant influence, but does not control these entities under the provisions of the entities’ governing agreements. These investments are recorded initially at cost, as Investments in Real Estate Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions.
On a periodic basis, management assesses whether there are any indicators that the value of the Partnership’s investments in unconsolidated Real Estate Ventures may be other than temporarily impaired. An investment is impaired only if the value of the investment, as estimated by management, is less than the carrying value of the investment. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over the value of the investment, as estimated by management.
To the extent that the Partnership acquires an interest in or contributes assets to a Real Estate Venture project, the difference between the Partnership’s cost basis in the investment in venture and in the assets, intangibles and liabilities of the Real Estate Venture is amortized over the life of the related assets, intangibles and liabilities and such adjustment is included in the Partnership’s share of equity in income of unconsolidated ventures.
Deferred Costs
Costs incurred in connection with property leasing are capitalized as deferred leasing costs. Deferred leasing costs consist primarily of leasing commissions that are amortized on the straight-line method over the life of the respective lease which generally ranges from one to 15 years. Management re-evaluates the remaining useful lives of leasing costs as economic and market conditions change.
Costs incurred in connection with debt financing are capitalized as deferred financing costs and charged to interest expense over the terms of the related debt agreements. Deferred financing costs consist primarily of loan fees which are amortized over the related loan term. Management re-evaluates the remaining useful lives of financing costs as economic and market conditions change.

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Other Assets
As of December 31, 2006, other assets included a direct financing lease of $14.6 million, prepaid real estate taxes of $9.7 million, prepaid insurance of $4.4 million, marketable securities of $6.8 million, deposits on properties expected to be purchased in 2007 totaling $2.2 million, cash surrender value of life insurance of $11.6 million, furniture, fixtures and equipment of $5.8 million and $6 million of other assets. Also included in this balance are a $4.3 million note receivable with a 20 year amortization period for principal and interest (balloon payment in December 2007) that bears interest at 7.5% and an $8.0 million note receivable with a 20 year amortization period for principal and interest (balloon payment in December 2007) that bears interest at 7.5%.
As of December 31, 2005, other assets included a direct financing lease of $15.2 million, prepaid real estate taxes of $8.1 million, deposits on properties to be purchased in 2006 totaling $6.9 million, cash surrender value of life insurance of $8.2 million, furniture, fixtures and equipment of $2.6 million and $4.3 million of other assets. Also included in this balance is a $4.3 million note receivable with a 20 year amortization period for principal and interest (balloon payment in December 2007) that bears interest at 7.5%.
Revenue Recognition
Rental revenue is recognized on the straight-line basis from the later of the date of the commencement of the lease or the date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. The cumulative difference between lease revenue recognized under this method and contractual lease payment terms is recorded as “accrued rent receivable” on the accompanying balance sheets. The straight-line rent adjustment increased revenue by approximately $31.3 million in 2006, $15.0 million in 2005 and $6.0 million in 2004. The leases also typically provide for tenant reimbursement of a portion of common area maintenance and other operating expenses. Other income is recorded when earned and is primarily comprised of termination fees received from tenants, bankruptcy settlement fees, third party leasing commissions, and third party management fees. During 2006, 2005, and 2004, the Partnership earned $7.8 million, $6.1 million, and $1.5 million in termination fees. In 2004, the Partnership recorded approximately $1.0 million plus accrued interest as other income relating to the settlement of litigation. Additionally, during 2004, the Partnership recorded approximately $0.9 million in other income from the favorable settlement of an accrued liability. Deferred rents represent rental revenue received from tenants prior to their due dates.
No tenant represented greater than 10% of the Partnership’s rental revenue in 2006, 2005 or 2004.
Income Taxes
No federal or state income taxes are payable by the Partnership, and accordingly, no provision for taxes has been made in the accompanying consolidated financial statements. The partners are to include their respective share of the Partnership’s profits or losses in their individual tax returns. The Partnership’s tax returns and the amount of allocable Partnership profits and losses are subject to examination by federal and state taxing authorities. If such examination results in changes to Partnership profits or losses, then the tax liability of the partners would be changed accordingly.
The Partnership has several subsidiary real estate investment trusts (“REITs”) that have elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to maintain their qualification as a REIT, the REIT subsidiaries are required to, among other things, distribute at least 90% of its REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets. The REIT subsidiaries are not subject to federal income tax with respect to the portion of its income that meets certain criteria and is distributed annually to the stockholders. Accordingly, no provision for federal income taxes is included in the accompanying consolidated financial statements with respect to the operations of these operations. The REIT subsidiaries intend to continue to operate in a manner that allows them to continue to meet the requirements for taxation as REITs. Many of these requirements, however, are highly technical and complex. If one of the REIT subsidiaries were to fail to meet these requirements, the REIT subsidiaries would be subject to federal income tax. The Partnership is subject to certain state and local taxes. Provision for such taxes has been included in general and administrative expenses in the Partner’s Consolidated Statements of Operations and Comprehensive Income.
The tax basis in the Partnership’s assets was $4.2 billion as of December 31, 2006 and $1.9 billion as of December 31, 2005.
The Company is subject to a 4% federal excise tax if sufficient taxable income is not distributed within prescribed time limits. The excise tax equals 4% of the annual amount, if any, by which the sum of (a) 85% of the Company’s ordinary income and (b) 95% of the Company’s net capital gain exceeds cash distributions and certain taxes paid by the Company. No excise tax was incurred in 2006, 2005, or 2004.
The Partnership may elect to treat one or more of its subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS of the Partnership may perform additional services for tenants of the Partnership and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the provision to any person, under a franchise, license or otherwise, of rights to any brand name under which any lodging facility or health care facility is operated). A TRS is subject to corporate federal income tax. The Partnership has elected to treat certain of its corporate subsidiaries as TRSs, these entities provide third party property management services and certain services to tenants that could not otherwise be provided. At December 31, 2006, the Partnership’s TRSs had tax net operating loss (“NOL”) carryforward of approximately $3.0 million, expiring from 2013 to 2020. The Partnership has ascribed a full valuation allowance to its net deferred tax assets.

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Earnings Per Common Partnership Unit
Basic earnings per Common Partnership Unit is calculated by dividing income allocated to Common Partnership Units by the weighted-average number of units outstanding during the period. Diluted earnings per Common Partnership Unit includes the effect of common partnership unit equivalents outstanding during the period.
Stock-Based Compensation Plans
The Partnership Agreement provides for the issuance by the Partnership to its general partner, the Company, of a number of Common Partnership Units equal to the number of common shares issued by the Company, the net proceeds of which are contributed to the Partnership. When the Company issues common shares under its equity-based compensation plan, the Partnership issues to the Company an equal number of Common Partnership Units. The Company maintains shareholder-approved equity incentive plans. The Compensation Committee of the Company’s Board of Trustees authorizes awards under these plans. In May 2005, the Company’s shareholders approved an amendment to the Amended and Restated 1997 Long-Term Incentive Plan (the “1997 Plan”) that increased the number of common shares that may be issued or subject to award under the 1997 Plan from 5,000,000 to 6,600,000. The May 2005 amendment provided that 500,000 of the shares under the 1997 Plan are available solely for awards under options and share appreciation rights that have an exercise or strike price not less than the market price of the common shares on the date of award, and the remaining 6,100,000 shares are available for any type of award under the 1997 Plan. Incentive stock options may not be granted at exercise prices less than fair value of the shares at the time of grant. All options awarded by the Company to date are non-qualified stock options that generally vested over two to five years. As of December 31, 2006, 2.6 million common shares remained available for future award under the 1997 Plan. As part of the Company’s January 2006 acquisition of Prentiss, the Company assumed Prentiss’ three share incentive plans. As of December 31, 2006, approximately 1,700,000 common shares remained available for issuance or subject to award under the assumed Prentiss share incentive plans; however, any such issuances or awards under the assumed Prentiss plan may be made only to those Company employees who had been employed by Prentiss immediately prior to the Company’s acquisition of Prentiss or to those Company employees hired after the Prentiss acquisition.
On January 1, 2002, the Partnership began to expense the fair value of stock-based compensation awards granted subsequent to January 1, 2002, over the applicable vesting period as a component of general and administrative expenses in the Partnership’s consolidated Statements of Operations. The Partnership recognized stock-based compensation expense of $3,447,000 in 2006, $2,764,000 in 2005 and $2,114,000 in 2004.
For stock-based compensation awards granted prior to 2002, the Partnership accounted for stock options issued under the recognition and measurement provisions of APB No. 25, Accounting for Stock Issued to Employees and Related Interpretations. Under this method, no stock-based compensation expense was recognized. Because stock options granted prior to 2002 vested over a three-year term, the resulting compensation cost based on the fair value of the awards on the date of grant, on a pro forma basis, would have been expensed in 2003, 2004, and 2005. Accordingly, had the Partnership applied the fair value recognition provisions of SFAS 123, the net income applicable to common partnership units would remain the same on a pro forma basis in 2006, and would have been reduced by $511,000 and $556,000 in 2005 and 2004, respectively, with no change in basic or diluted net income per share.
Comprehensive Income
Comprehensive income or loss is recorded in accordance with the provisions of SFAS 130 (“SFAS 130”), Reporting Comprehensive Income. SFAS 130 establishes standards for reporting comprehensive income and its components in financial statements. Comprehensive income includes unrealized gains and losses on available-for-sale securities and the effective portions of changes in the fair value of derivatives.
Accounting for Derivative Instruments and Hedging Activities
The Partnership accounts for its derivative instruments and hedging activities under SFAS No. 133 (“SFAS 133”), Accounting for Derivative Instruments and Hedging Activities, and its corresponding amendments under SFAS No. 138, Accounting for Certain Derivative Instruments and Hedging Activities – An Amendment of SFAS 133. SFAS 133 requires the Partnership to measure every derivative instrument

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(including certain derivative instruments embedded in other contracts) at fair value and record them in the balance sheet as either an asset or liability. For derivatives designated as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in the fair value of the derivative are reported in other comprehensive income. Changes in fair value of derivative instruments and ineffective portions of hedges are recognized in earnings in the current period. For the year-ended 2006 and 2005, the Partnership was not party to any derivative contract designated as a fair value hedge.
The Partnership actively manages its ratio of fixed-to-floating rate debt. To manage its fixed and floating rate debt in a cost-effective manner, the Partnership, from time to time, enters into interest rate swap agreements as cash flow hedges, under which it agrees to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts. See Note 12.
Reclassifications
Certain amounts have been reclassified in prior years to conform to the current year presentation. The reclassifications are primarily due to the treatment of sold properties as discontinued operations on the statement of operations for all periods presented.
New Pronouncements
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS No. 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007. The Partnership is currently evaluating the impact and believes that the adoption of this standard on January 1, 2008 will not have a material effect on our consolidated financial statements.
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a Partnership’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on description, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 became effective on January 1, 2007. The Partnership is currently evaluating the impact of adopting FIN 48.
In October 2005, the FASB issued Staff Position No. 13-1 “Accounting for Rental Costs Incurred during a Construction Period” (“FSP FAS 13-1”). FSP FAS 13-1 addresses the accounting for rental costs associated with operating leases that are incurred during the construction period. FSP FAS 13-1 makes no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period. Therefore, rental costs associated with ground or building operating leases that are incurred during a construction period shall be recognized as rental expense, allocated over the lease term in accordance with SFAS No. 13 and Technical Bulletin 85-3. The terms of FSP FAS 13-1 are not applicable to lessees that account for the sale or rental of real estate projects in accordance with SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects.” FSP FAS 13-1 was effective for the first reporting period beginning after December 15, 2005. Retrospective application in accordance with SFAS 154 is permitted but not required. The adoption of FSP FAS 13-1 did not have a material effect on the consolidated financial statements of the Partnership.
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”). SFAS 154 replaces APB No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements” and establishes retrospective application as the required method for reporting a change in accounting principle. SFAS 154 provides guidance for determining whether a retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Partnership adopted SFAS 154 on January 1, 2006 and this adoption had no effect on the Partnership’s financial position and results of operations.

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In March 2005, the FASB issued FIN 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143, Asset Retirement Obligations. FIN 47 provides clarification of the term “conditional asset retirement obligation” as used in SFAS 143, defined as a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Partnership. Under this standard, the Partnership must record a liability for a conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. The Partnership adopted FIN 47 as required effective December 31, 2005 and the initial application of FIN 47 did not have a material effect on the consolidated financial statements of the Partnership.
3. REAL ESTATE INVESTMENTS
As of December 31, 2006 and 2005, the gross carrying value of the Partnership’s properties was as follows:
                         
    December 31,  
    2006             2005  
    (amounts in thousands)  
Land
  $ 756,400             $ 456,736  
Building and improvements
    3,807,040               1,951,252  
Tenant improvements
    363,865               152,073  
 
                   
 
  $ 4,927,305             $ 2,560,061  
 
                   
Acquisitions and Dispositions
The Partnership’s acquisitions were accounted for by the purchase method. The results of each acquired property are included in the Partnership’s results of operations from their respective purchase dates.
2006
Prentiss Acquisition
On January 5, 2006, the Partnership acquired Prentiss pursuant to a merger agreement that the Company and the Partnership entered into with Prentiss on October 3, 2005. In conjunction with the Partnership’s acquisition of Prentiss, designees of The Prudential Insurance Partnership of America (“Prudential”) acquired Prentiss properties that contain an aggregate of approximately 4.32 million net rentable square feet for a total consideration of approximately $747.7 million. Through its acquisition of Prentiss (and after giving effect to the Prudential acquisition of certain of Prentiss’ properties), the Partnership acquired a portfolio of 79 office properties (including 13 properties that are owned by consolidated Real Estate Ventures and 7 properties that are owned by an unconsolidated Real Estate Venture) that contain an aggregate of 14.0 million net rentable square feet. The results of the operations of Prentiss have been included in the Partnership’s consolidated financial statements since January 5, 2006.
The Partnership funded the approximately $1.05 billion cash portion of the merger consideration, related transaction costs and prepayments of approximately $543.3 million in Prentiss mortgage debt at the closing of the merger through (i) a $750 million unsecured term loan that matured on January 4, 2007 and was repaid in March 2006; (ii) approximately $676.5 million of cash from Prudential’s acquisition of certain of the Prentiss properties; and (iii) approximately $195.0 million through borrowing under a revolving credit facility.
The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

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    At January 5, 2006  
Real estate investments
       
Land — operating
  $ 282,584  
Building and improvements
    1,942,728  
Tenant improvements
    120,610  
Construction in progress and land inventory
    57,329  
 
     
Total real estate investments acquired
    2,403,251  
 
       
Rent receivables
    6,031  
Other assets acquired:
       
Intangible assets:
       
In-place leases
    187,907  
Relationship values
    98,382  
Above-market leases
    26,352  
 
     
Total intangible assets acquired
    312,641  
Investment in real estate ventures
    66,921  
Investment in marketable securities
    193,089  
Other assets
    8,868  
 
     
Total other assets
    581,519  
 
     
Total assets acquired
    2,990,801  
 
       
Liabilities assumed:
       
Mortgage notes payable
    532,607  
Unsecured notes
    78,610  
Secured note payable
    186,116  
Security deposits and deferred rent
    6,475  
Other liabilities:
       
Below-market leases
    78,911  
Other liabilities
    43,995  
 
     
Total other liabilities assumed
    122,906  
Total liabilities assumed
    926,714  
Minority interest
    104,658  
 
     
Net assets acquired
  $ 1,959,429  
 
     
In the acquisition of Prentiss, each then outstanding Prentiss common share was converted into the right to receive 0.69 of a Brandywine common share and $21.50 in cash (the “Per Share Merger Consideration”) except that 497,884 Prentiss common shares held in the Prentiss Deferred Compensation Plan converted solely into 720,737 Brandywine common shares. In addition, each then outstanding unit (each, a “Prentiss OP Unit”) of limited partnership interest in the Prentiss operating partnership subsidiary was, at the option of the holder, converted into Prentiss Common Shares with the right to receive the Per Share Merger Consideration or 1.3799 Class A units of the Partnership (“Class A units”). Accordingly, based on 49,375,723 Prentiss common shares outstanding and 139,000 Prentiss OP Units electing to receive merger consideration at closing of the acquisition, the Company issued 34,541,946 common shares and paid an aggregate of approximately $1.05 billion in cash to the accounts of the former Prentiss shareholders. Based on 1,572,612 Prentiss OP Units outstanding at closing of the acquisition that did not elect to receive merger consideration, the Operating Partnership issued 2,170,047 Class A units. In addition, options issued by Prentiss that were exercisable for an aggregate of 342,662 Prentiss common shares were converted into options exercisable for an aggregate of 496,037 Brandywine common shares at a weighted average exercise price of $22.00 per share. Through its acquisition of Prentiss the Partnership also assumed approximately $611.2 million in aggregate principal amount of Prentiss debt.
Each Class A unit that was issued in the merger is subject to redemption at the option of the holder. The Company may, at its option, satisfy the redemption either for an amount, per unit, of cash equal to the then market price of one Brandywine common share (based on the prior ten-day trading average) or for one Brandywine common share.

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For purposes of computing the total purchase price reflected in the financial statements, the common shares, Class A units, restricted shares and options that were issued in the Prentiss transaction were valued based on the average trading price per Brandywine common share of $29.54. The average trading price was based on the average of the high and low trading prices for each of the two trading days before, the day of and the two trading days after the merger was announced (i.e., September 29, September 30, October 3, October 4 and October 5).
The Partnership considered the provisions of FIN 47 for these acquisitions and, where necessary, recorded a conditional asset retirement obligation as part of the purchase price. The aggregate asset retirement recorded in connection with the Prentiss acquisition was approximately $2.7 million.
Pro forma information relating to the acquisition of Prentiss is presented below as if Prentiss was acquired and the related financing transactions occurred on January 1, 2005. These pro forma results are not necessarily indicative of the results which actually would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods (in thousands, except per share amounts):
                 
    December 31,  
    2006     2005  
    (unaudited)  
Pro forma revenue
  $ 666,205     $ 644,273  
 
               
Pro forma loss from continuing operations
    (14,694 )     (19,163 )
 
               
Pro forma income (loss) allocated to common partnership units
    2,999       (22,404 )
 
               
Earnings per common partnership units from continuing operations
               
Basic — as reported
  $ (0.25 )   $ 0.54  
 
           
Basic — as pro forma
  $ (0.24 )   $ (0.30 )
 
           
 
               
Diluted — as reported
  $ (0.24 )   $ 0.54  
 
           
Diluted — as pro forma
  $ (0.24 )   $ (0.29 )
 
           
 
               
Earnings per common partnership units
               
Basic — as reported
  $ 0.03     $ 0.63  
 
           
Basic — as pro forma
  $ 0.03     $ (0.24 )
 
           
 
               
Diluted — as reported
  $ 0.03     $ 0.62  
 
           
Diluted — as pro forma
  $ 0.03     $ (0.24 )
 
           
Subsequent to its acquisition of Prentiss and the related sale of certain properties to Prudential, the Partnership sold seventeen of the acquired properties that contain an aggregate of 2.9 million net rentable square feet and one parcel of land containing 10.9 acres.
Other Acquisitions and Dispositions
In addition to the acquisition activity related to Prentiss, during 2006, the Partnership also acquired five office properties containing 839,704 net rentable square feet and 93.4 acres of developable land for an aggregate purchase price of $245.1 million. In addition to sales of assets acquired in the Prentiss merger, the Partnership sold six office properties containing 512,237 net rentable square feet and two parcels of land containing 65.8 acres for an aggregate $96.2 million, realizing net gains totaling $31.5 million.
2005
During 2005, the Partnership acquired one industrial property containing 385,884 net rentable square feet, two office properties containing 283,511 net rentable square feet and 36.4 acres of developable land for an aggregate purchase price of $94.5 million. The Partnership sold the industrial property containing 385,884

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net rentable square feet and three parcels of land containing 18.0 acres for an aggregate $30.2 million, realizing net gains totaling $6.8 million.
2004
During 2004, the Partnership acquired one office property in Marlton, New Jersey, totaling 170,000 square feet, and one land parcel totaling 58.4 acres for aggregate consideration of $22.9 million.
On September 21, 2004, the Partnership completed the acquisition of 100% of the partnership interests in The Rubenstein Company, L.P. (“TRC”). Through the acquisition, the Partnership acquired 14 office properties (the “TRC Properties”) located in Pennsylvania and Delaware that contain approximately 3.5 million net rentable square feet. The results of TRC’s operations have been included in the consolidated financial statements since that date.
The aggregate consideration for the TRC Properties was $631.3 million including $29.3 million of closing costs, debt prepayment penalties and debt premiums that are included in the basis of the assets acquired. The consideration was paid with $540.4 million of cash, $79.3 million of debt assumed, $1.6 million of other liabilities assumed, and 343,006 Class A units valued at $10.0 million. The value of the debt assumed was based on prevailing market rates at the time of acquisition. The value of the Class A units was based on the average trading price of the Company’s common shares.
The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
         
    At September 21, 2004  
Real estate investments
       
Land
  $ 105,302  
Building and improvements
    434,795  
Tenant improvements
    20,322  
 
     
Total real estate investments acquired
    560,419  
 
       
Rent receivables
    5,537  
Other assets acquired:
       
Intangible assets:
       
In-Place leases
    49,455  
Relationship values
    35,548  
Above-market leases
    13,240  
 
     
Total intangible assets acquired
    98,243  
Other assets
    6,292  
 
     
Total Other assets
    104,535  
 
     
Total assets acquired
    670,491  
 
       
Liabilities assumed:
       
Mortgage notes payable
    79,330  
Security deposits and deferred rent
    618  
Other liabilities:
       
Below-market leases
    39,204  
Other liabilities
    943  
 
     
Total other liabilities assumed
    40,147  
 
     
Total liabilities assumed
    120,095  
 
     
Net assets acquired
  $ 550,396  
 
     
The net assets acquired above do not include any amounts potentially due to the sellers as contingent consideration as part of the transaction. The Partnership agreed to issue the sellers up to a maximum of $9.7 million of additional Class A units if certain of the TRC Properties achieve at least 95% occupancy prior to September 21, 2007. The maximum number of Class A units that the Partnership is obligated to issue declines monthly and, as of December 31, 2006, the maximum balance payable under this arrangement was $1.8 million, with no amount currently due.

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At the closing of this transaction, the Partnership agreed not to sell the TRC Properties in a transaction that would trigger taxable income to the contributors (i.e., sellers) for periods ranging from three to 15 years. In the event that the Partnership sells any of the properties in such a transaction within the applicable restricted period, the Partnership will be required to pay significant tax liabilities that would be incurred by the contributors.
The Partnership financed the TRC acquisition using the net proceeds from the Company’s September 2004 common share offering, after repayment of the Partnership’s $100.0 million unsecured term loan facility, and the net proceeds received from two unsecured term loans.
During 2004, the Partnership sold two office properties containing 141,000 net rentable square feet, two industrial properties containing 184,000 net rentable square feet and three land parcels containing 29.3 acres for an aggregate of $31.4 million, realizing a net gain of $2.1 million. As part of the sale of one property, the Partnership provided the buyer with $4.4 million in mortgage financing.
Additionally, the Partnership purchased and sold a land parcel containing 93 acres in two separate transactions with unrelated third parties. The purchase and sale resulted in a net gain of approximately $1.5 million. As part of the sale, the Partnership provided the buyer with $4.0 million in mortgage financing. Subsequent to the sale and prior to December 31, 2004, the mortgage financing was repaid in full.
During 2004, the Partnership recognized a $2.5 million deferred gain from the sale of a property in 2002 that did not previously qualify for gain recognition under the full-accrual method. During 2004, the buyer of the property repaid the seller provided financing and the criteria for gain recognition under the full-accrual method were met. The deferred gain recognized was presented within discontinued operations consistent with the historical operating results from the property.
4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
As of December 31, 2006, the Partnership had an aggregate investment of approximately $74.6 million in 11 unconsolidated Real Estate Ventures (net of returns of investment). The Partnership or Prentiss formed these ventures with unaffiliated third parties to develop office properties or to acquire land in anticipation of possible development of office properties. Nine of the Real Estate Ventures own 15 office buildings that contain an aggregate of approximately 2.7 million net rentable square feet, one Real Estate Venture developed a hotel property that contains 137 rooms and one Real Estate Venture is developing an office property located in Albemarle County, VA.
The Partnership also has investments in four real estate ventures that are variable interest entities under FIN No. 46R and of which the Partnership is the primary beneficiary.
The Partnership accounts for its unconsolidated interests in its Real Estate Ventures using the equity method. Unconsolidated ownership interests range from 6% to 50%, subject to specified priority allocations in certain of the Real Estate Ventures.
The amounts reflected below (except for Partnership’s share of equity and income) are based on the historical financial information of the individual Real Estate Ventures. One of the Real Estate Ventures, acquired in connection with the Prentiss acquisition, had a negative equity balance on a historical cost basis as a result of historical depreciation and distribution of excess financing proceeds. The Partnership reflected its acquisition of this Real Estate Venture interest at its relative fair value as of the date of the purchase of Prentiss. The difference between allocated cost and the underlying equity in the net assets of the investee is accounted for as if the entity were consolidated (i.e., allocated to the Partnership’s relative share of assets and liabilities with an adjustment to recognize equity in earnings for the appropriate additional depreciation/amortization).
The Partnership’s investment in Real Estate Ventures as of December 31, 2006 and the Partnership’s share of the Real Estate Ventures’ income (loss) for the year ended December 31, 2006 was as follows (in thousands):

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                    Company’s Share                    
                    of Real Estate     Real Estate     Current        
    Ownership     Carrying     Venture     Venture     Interest     Debt  
    Percentage (1)     Amount     Income (Loss)     Debt at 100%     Rate     Maturity  
     
Two Tower Bridge Associates
    35 %   $ 2,290     $ (102 )   $ 11,430       6.82 %   May-08
Five Tower Bridge Associates
    15 %     162       57       29,927       6.77 %   Feb-09
Eight Tower Bridge Associates
    5.5 %     1,184       (175 )     41,830       7.68 %   Feb-12
1000 Chesterbrook Boulevard
    50 %     2,608       660       26,791       6.88 %   Nov-11
PJP Building Two, LC
    30 %     143       107       5,282       6.12 %   Nov-23
PJP Building Three, LC
    25 %     30       76             N/A       N/A  
PJP Building Five, LC
    25 %     169       59       6,503       6.47 %   Aug-19
PJP Building Six, LC
    25 %     75             4,597       7.08 %     (3 )
Macquarie BDN Christina LLC
    20 %     3,351       927       74,500       4.62 %   Jan-09
Broadmoor Austin Associates
    50 %     63,793       446       117,249       5.79 %   Apr-11
Residence Inn Tower Bridge
    50 %     769       110       14,480       5.63 %   Jan-16
Invesco, L.P. (2)
    35 %                       N/A       N/A  
                             
 
          $ 74,574     $ 2,165     $ 332,589                  
                             
 
(1)   Ownership percentage represents the Partnership’s entitlement to residual distributions after payments of priority returns, where applicable.
 
(2)   The Partnership’s interest consists solely of a residual profits interest.
 
(3)   Property is under development as of December 31, 2006, with an expected completion date in the first quarter of 2007, at which time the outstanding balance is expected to be converted to permanent financing.
     The following is a summary of the financial position of the unconsolidated Real Estate Ventures in which the Partnership had investment interests as of December 31, 2006 and 2005 (in thousands):
                 
    December 31,  
    2006     2005  
Net property
  $ 365,168     $ 286,601  
Other assets
    52,935       32,291  
Other Liabilities
    28,764       24,855  
Debt
    332,589       205,018  
Equity
    56,888       88,995  
Partnership’s share of equity (Partnership basis)
    74,574       13,331  
     The following is a summary of results of operations of the unconsolidated Real Estate Ventures in which the Partnership had interests as of December 31, 2006, 2005 and 2004 (in thousands):
                         
    2006     2005     2004  
Revenue
  $ 70,381     $ 59,346     $ 46,906  
Operating expenses
    26,878       29,387       19,395  
Interest expense, net
    21,711       12,324       11,843  
Depreciation and amortization
    10,808       9,359       9,514  
Net income
    12,711       8,276       6,154  
Partnership’s share of income (Partnership basis)
    2,165       3,172       2,023  
     As of December 31, 2006, the aggregate principal payments of non-recourse debt payable to third-parties is as follows (in thousands):
         
2007
  $ 28,166  
2008
    20,592  
2009
    38,109  
2010
    9,336  
2011
    110,440  
Thereafter
    125,946  
 
     
 
  $ 332,589  
 
     

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As of December 31, 2006, the Partnership had guaranteed repayment of approximately $0.6 million of loans on behalf of certain Real Estate Ventures. The Partnership also provides customary environmental indemnities and completion guarantees in connection with construction and permanent financing both for its own account and on behalf of its Real Estate Ventures.
5. DEFERRED COSTS
     As of December 31, 2006 and 2005, the Partnership’s deferred costs were comprised of the following (in thousands):
                         
    December 31, 2006  
            Accumulated     Deferred Costs,  
    Total Cost     Amortization     net  
Leasing Costs
  $ 83,629     $ (28,278 )   $ 55,351  
Financing Costs
    24,648       (6,291 )     18,357  
 
                 
Total
  $ 108,277     $ (34,569 )   $ 73,708  
 
                 
                         
    December 31, 2005  
            Accumulated     Deferred Costs,  
    Total Cost     Amortization     net  
Leasing Costs
  $ 52,476     $ (23,116 )   $ 29,360  
Financing Costs
    9,793       (1,551 )     8,242  
 
                 
Total
  $ 62,269     $ (24,667 )   $ 37,602  
 
                 
During 2006, 2005 and 2004, the Partnership capitalized internal direct leasing costs of $8.3 million, $4.7 million and $4.0 million, respectively, in accordance with SFAS No. 91 and related guidance.

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6. INTANGIBLE ASSETS/LIABILITIES
As of December 31, 2006 and 2005, the Partnership’s intangible assets/liabilities were comprised of the following (in thousands):
                         
            Accumulated     Deferred Costs,  
    Total Cost     Amortization     net  
In-place lease value
  $ 207,513     $ (52,293 )   $ 155,220  
Tenant relationship value
    124,605       (19,572 )     105,033  
Above market leases acquired
    32,667       (11,669 )     20,998  
 
                 
Total
  $ 364,785     $ (83,534 )   $ 281,251  
 
                 
 
                       
Below market leases acquired
  $ 118,536     $ (26,009 )   $ 92,527  
 
                 
                         
    December 31, 2005  
            Accumulated     Deferred Costs,  
    Total Cost     Amortization     net  
In-place lease value
  $ 47,965     $ (12,575 )   $ 35,390  
Tenant relationship value
    37,845       (5,606 )     32,239  
Above market leases acquired
    14,404       (3,936 )     10,468  
 
                 
Total
  $ 100,214     $ (22,117 )   $ 78,097  
 
                 
 
                       
Below market leases acquired
  $ 41,635     $ (6,931 )   $ 34,704  
 
                 
For the year ended December 31, 2006, 2005, and 2004 the Partnership wrote-off $1.2 million, $1.1 million, and $0.2 million, respectively of intangible assets as a result of tenant move-outs prior to the end of the associated lease terms. The Partnership wrote off approximately $0.1 million of intangible liabilities as a result of tenant move-outs in each of the years ending December 31, 2006, 2005, and 2004.
As of December 31, 2006, the Partnership’s annual amortization for its intangible assets/liabilities are as follows (in thousands, assumes no early terminations):
                 
    Assets     Liabilities  
2007
  $ 56,795     $ 19,735  
2008
    46,827       15,039  
2009
    41,312       13,013  
2010
    34,470       10,513  
2011
    27,584       8,725  
Thereafter
    74,263       25,502  
 
           
Total
  $ 281,251     $ 92,527  
 
           

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7. MORTGAGE NOTES PAYABLE
The following table sets forth information regarding the Partnership’s mortgage indebtedness outstanding at December 31, 2006 and 2005 (in thousands):
                                         
                    Effective                
    December 31,     December 31,     Interest Rate             Maturity  
Property / Location   2006     2005     @ 12/31/06             Date  
111 Arrandale Blvd
  $     $ 1,043                   Aug-06
429 Creamery Way
          2,927                   Sep-06
Interstate Center
    552       766       6.19 %     (b )   Mar-07
440 & 442 Creamery Way
    5,421       5,581       8.55 %           Jul-07
Norriton Office Center
          5,191       8.50 %           Oct-07
481 John Young Way
    2,294       2,360       8.40 %           Nov-07
400 Commerce Drive
    11,797       11,989       7.12 %           Jun-08
Two Logan Square
    71,348       72,468       5.78 %     (a )   Jul-09
The Bluffs
    10,700             6.00 %     (a )   Jul-09
Pacific Ridge
    14,500             6.00 %     (a )   Aug-09
Pacific View/Camino
    26,000             6.00 %     (a )   Aug-09
Computer Associates Building
    31,000             6.00 %     (a )   Aug-09
200 Commerce Drive
    5,841       5,911       7.12 %     (a )   Jan-10
Presidents Plaza
    30,900             6.00 %     (a )   May-10
1333 Broadway
    24,418             5.18 %     (a )   May-10
The Ordway
    46,199             7.95 %     (a )   Aug-10
World Savings Center
    27,524             7.91 %     (a )   Nov-10
Plymouth Meeting Exec.
    44,103       44,687       7.00 %     (a )   Dec-10
Four Tower Bridge
    10,626       10,763       6.62 %           Feb-11
Arboretum I, II, III & V
    22,750       23,238       7.59 %           Jul-11
Midlantic Drive/Lenox Drive/DCC I
    62,678       63,803       8.05 %           Oct-11
Research Office Center
    42,205             7.64 %     (a )   Oct-11
Concord Airport Plaza
    38,461             7.20 %     (a )   Jan-12
Six Tower Bridge
    14,744       15,083       7.79 %           Aug-12
Newtown Square/Berwyn Park/Libertyview
    63,231       64,429       7.25 %           May-13
Coppell Associates
    3,737             6.89 %           Dec-13
Southpoint III
    4,948       5,431       7.75 %           Apr-14
Tysons Corner
    100,000             4.84 %     (a )   Aug-15
Coppell Associates
    16,600             5.75 %           Mar-16
Grande A
    59,512       61,092       7.48 %           Jul-27
Grande A
          11,456                   Jul-27
Grande A
          1,551                   Jul-27
Grande B
    77,534       79,036       7.48 %           Jul-27
 
                                   
Principal balance outstanding
    869,623       488,805                          
Plus: unamortized fixed-rate debt premiums
    14,294       5,972                          
 
                                   
Total mortgage indebtedness
  $ 883,917     $ 494,777                          
 
                                   
 
(c)   Loans were assumed upon acquisition of the related property. Interest rates presented above reflect the market rate at the time of acquisition.
 
(d)   For loans that bear interest at a variable rate, the rates in effect at December 31, 2006 have been presented.
The mortgage note payable balance of $5.1 million for Norriton Office Center as of December 31, 2006, not included in the table above, is included in Mortgage notes payable and other liabilities held for sale on the balance sheet.
During 2006, 2005 and 2004, the Partnership’s weighted-average interest rate on its mortgage notes payable was 6.57%, 7.17% and 6.80%, respectively. As of December 31, 2006 and 2005, the net carrying value of the Partnership’s Properties that are encumbered by mortgage indebtedness was $1,498.9 million and $779.2 million, respectively.

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As of December 31, 2006, the Partnership’s aggregate principal payments, excluding payments on one mortgage note held for sale at December 31, 2006, were as follows (in thousands):
         
2007
  $ 20,643  
2008
    25,228  
2009
    168,237  
2010
    192,601  
2011
    140,128  
Thereafter
    337,083  
 
     
Total mortgage indebtedness
  $ 883,920  
 
     
8. UNSECURED NOTES
The following table sets forth information regarding the Partnership’s unsecured notes outstanding at December 31, 2006 and 2005 (in thousands):
                                 
    December 31,     December 31,     Stated     Effective  
      Year of Maturity   2006     2005     Interest Rate     Interest Rate  
2008
    113,000       113,000       4.34 %     4.34 %(a)
2009
    300,000           Libor + 0.45%     5.78 %(a)
2009
    275,000       275,000       4.50 %     4.62 %(a)
2010
    300,000       300,000       5.63 %     5.61 %(a)
2011
    345,000             3.88 %     3.88 %
2012
    300,000             5.75 %     5.77 %(a)
2014
    250,000       250,000       5.40 %     5.53 %(a)
2016
    250,000             6.00 %     5.95 %(a)
2035
    27,062           Libor + 1.25%     6.58 %
2035
    25,774           Libor + 1.25%     6.58 %
2035
    25,774           Libor + 1.25%     6.58 %
 
                           
Total face amount
  $ 2,211,610     $ 938,000                  
Less: unamortized discounts
    (3,300 )     (1,393 )                
 
                           
Total unsecured notes
  $ 2,208,310     $ 936,607                  
 
                           
 
(a)   Rates include the effect of amortization of discounts and costs related to settlement of treasury lock agreements.
On March 28, 2006, the Partnership completed an underwritten public offering of (1) $300,000,000 aggregate principal amount of unsecured floating rate notes due 2009 (the “2009 Notes”), (2) $300,000,000 aggregate principal amount of 5.75% unsecured notes due 2012 (the “2012 Notes”) and (3) $250,000,000 aggregate principal amount of 6.00% unsecured notes due 2016 (the “2016 Notes”). The Company guaranteed the payment of principal and interest on the 2009 Notes, the 2012 Notes and the 2016 Notes. The Partnership used proceeds from these notes to repay a term loan obtained to finance a portion of the consideration paid in the Prentiss merger and to reduce borrowings under its revolving credit facility.
In March 2006, in anticipation of the offering of the 2009 Notes, the 2012 Notes and the 2016 Notes, the Partnership entered into forward starting swaps. The forward starting swaps were designated as cash flow hedges of interest rate risk and qualified for hedge accounting. The forward starting swaps were for notional amounts totaling $200.0 million at an all-in-rate of 5.2%. Two of the forward starting swaps had a six year maturity date and one had a ten year maturity date. The forward starting swaps were settled in March 2006 upon the completion of the offering of the 2009, 2012, and 2016 Notes at a total benefit of approximately $3.3 million. The benefit was recorded as a component of accumulated other comprehensive income in the accompanying consolidated balance sheet and is being amortized to interest expense over the term of the unsecured notes.
On October 4, 2006, the Partnership completed an offering of $300.0 million aggregate principal amount of 3.875% senior convertible notes due 2026 in an offering made in reliance upon an exemption from registration rights under Rule 144A under the Securities Act of 1933 and issued an additional $45 million of exchangeable notes on October 16, 2006 to cover over-allotments. At certain times and upon the occurrence of certain events, the notes are convertible into cash up to their principal amount and, with respect to the remainder, if any, of the exchange value in excess of such principal amount, cash or shares of the Company’s common shares. The initial exchange rate will be 25.4065 shares per $1,000 principal amount of notes (which is equivalent to an initial exchange price of $39.36 per share). The notes may not be redeemed by the Company prior to October 20, 2011 (except to preserve the Company’s status as a REIT), but are redeemable anytime thereafter, in whole or in part, at a redemption price equal to the principal amount of the notes plus any accrued and unpaid interest (including additional interest), if any. In addition, on October 20, 2011, October 15, 2016, and October 15, 2021, or upon the occurrence of certain change in control transactions prior to October 20, 2011, note holders may require the Company to repurchase all or a portion of the notes at a purchase price equal to the principal amount plus any accrued and unpaid interest on the notes. Net proceeds from the October 2006 Debt Offering were used to repurchase approximately $60.0 million of the Company’s common stock at a price of $32.80 per share and for general corporate purposes, including the repayment of outstanding borrowings under the Company’s unsecured revolving credit facility.

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On November 24, 2006, the Partnership prepaid a secured note (the “Defeased Note”) having an outstanding balance of $180.1 million. The Defeased Note had a maturity date of February 2007 and related to a voluntary defeasance of secured debt by Prentiss in the fourth quarter of 2005 in which Prentiss exercised the right to complete a voluntary defeasance of a $180.1 million secured loan. Pursuant to the defeasance, Prentiss assigned its obligations under the Defeased Note to an unrelated successor entity together with funds to acquire U.S. Treasury Securities sufficient to provide for the payment in full of debt service (including interest and principal) on the Defeased Note from the defeasance date through the loan maturity date.
The indenture relating to the unsecured notes, contains financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40%, (3) a debt service coverage ratio of greater than 1.5 to 1.0, and (4) an unencumbered asset value of not less than 150% of unsecured debt. In addition, the note purchase agreement relating to the Partnership’s $113 million principal amount of unsecured notes due 2008 contains covenants that are similar to the covenants in the indenture.
In October 2005, in anticipation of the offering of the 2010 Notes, the Partnership entered into forward starting swaps. The forward starting swaps were designated as cash flow hedges of interest rate risk and qualified for hedge accounting. The forward starting swaps were for notional amounts totaling $125.0 million for an expiration of five years at an all-in-rate of 4.9%. The forward starting swaps were settled in December 2005 upon the completion of the offering of the 2010 Notes at a total benefit of approximately $0.2 million. The benefit was recorded as a component of accumulated other comprehensive income in the accompanying consolidated balance sheet and is being amortized to interest expense over the term of the unsecured notes.
On December 20, 2005, the Partnership completed an underwritten public offering of $300 million aggregate principal amount of 5.625% unsecured notes due December 15, 2010 (the “2010 Notes”). The Company guaranteed the payment of principal and interest on the 2010 Notes.
9. UNSECURED CREDIT FACILITY
The Partnership utilizes credit facility borrowings for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. In December 2005, the Partnership replaced its then existing credit facility with a $600.0 million unsecured credit facility (the “Credit Facility”) that matures in December 2009, subject to a one-year extension option. Borrowings under the Credit Facility generally bear interest at LIBOR plus a spread over LIBOR ranging from 0.55% to 1.10% based on the Company’s unsecured senior debt rating. The Partnership has the option to increase the Credit Facility to $800.0 million subject to the absence of any defaults and the Partnership’s ability to acquire additional commitments from its existing lenders or new lenders. As of December 31, 2006, the Partnership had $60.0 million of borrowings and $24.2 million of letters of credit outstanding under the Credit Facility, leaving $516.0 million of unused availability. The weighted-average interest rate on the Partnership’s unsecured credit facilities, including the effect of interest rate hedges, was 5.93% in 2006, 4.58% in 2005 and 3.79% in 2004.
The Credit Facility requires the maintenance of ratios related to minimum net worth, debt-to-total capitalization and fixed charge coverage and includes non-financial covenants.
10. UNSECURED TERM LOANS
On March 28, 2006, the Partnership terminated, and repaid all amounts outstanding under, the $750 million Term Loan Agreement that it entered into on January 5, 2006 with JPMorgan Chase Bank, N.A., as Administrative Agent and Syndication Agent, J.P. Morgan Securities Inc., as Lead Arranger and Sole

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Bookrunner, and the lenders identified therein. The Partnership entered into the Term Loan Agreement in connection with its acquisition through the merger of Prentiss on January 5, 2006.
During 2004, the Partnership repaid all amounts outstanding under its $100 million unsecured term loan facility. The $100.0 million unsecured term loan bore interest at LIBOR plus a spread ranging from 1.05% to 1.9% per annum based on the Partnership’s leverage.
In connection with the TRC acquisition in September 2004, the Partnership obtained two term loans: a $320 million unsecured term loan due in 2007 (the “2007 Term Loan”) and a $113 million term loan due in 2008 (the “2008 Term Loan”). In October 2004, the Partnership repaid all amounts outstanding under its 2007 Term Loan with proceeds of the 2009 and 2014 unsecured notes issued on October 22, 2004. In December 2004, the Partnership repaid the 2008 Term Loan with the proceeds of the 2008 unsecured notes, which were issued by the Partnership. The Company has guaranteed the payment of the principal of and interest on the 2008 unsecured notes. A former partner in TRC has also provided a guaranty of the 2008 unsecured notes (although this guaranty does not in any way limit or diminish the obligations of the Partnership or obligations arising under the guarantee that the Company provided). As a result of the repayments of the 2007 and 2008 Term Loans, the Partnership wrote-off approximately $3.0 million of unamortized deferred financing costs in 2004. These write-offs are presented as deferred financing costs within interest expense in the consolidated statement of operations. While outstanding, the 2007 and 2008 Term Loans bore interest at LIBOR plus spreads of 1.1% and 1.35%, respectively.
As of December 31, 2006 and 2005, the Partnership had no unsecured term loans outstanding.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following fair value disclosure was determined by the Partnership using available market information and discounted cash flow analyses as of December 31, 2006 and 2005, 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 acquiring or assuming 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 Partnership could realize upon disposition. The use of different estimation methodologies may have a material effect on the estimated fair value amounts. The Partnership believes that the carrying amounts reflected in the Consolidated Balance Sheets at December 31, 2006 and 2005 approximate the fair values for cash and cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and borrowings under variable rate debt instruments.
The following are financial instruments for which the Partnership estimates of fair value differ from the carrying amounts (in thousands):
                                 
    December 31, 2006     December 31, 2005  
    Carrying     Fair     Carrying     Fair  
    Amount     Value     Amount     Value  
Mortgage payable
  $ 88,470     $ 859,490     $ 481,006     $ 521,607  
Unsecured Notes payable
  $ 1,829,701     $ 1,826,357     $ 936,607     $ 920,470  
12. RISK MANAGEMENT AND USE OF FINANCIAL INSTRUMENTS
Risk Management
In the normal course of its on-going business operations, the Partnership encounters economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Partnership is subject to interest rate risk on its interest-bearing liabilities. Credit risk is the risk of inability or unwillingness of tenants to make contractually required payments. Market risk is the risk of declines in the value of properties due to changes in rental rates, interest rates or other market factors affecting the valuation of properties held by the Partnership.

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Use of Derivative Financial Instruments
The Partnership’s use of derivative instruments is limited to the utilization of interest rate agreements or other instruments to manage interest rate risk exposures and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Partnership’s operating and financial structure, as well as to hedge specific transactions. The counterparties to these arrangements are major financial institutions with which the Partnership and its affiliates may also have other financial relationships. The Partnership is potentially exposed to credit loss in the event of non-performance by these counterparties. However, because of the high credit ratings of the counterparties, the Partnership does not anticipate that any of the counterparties will fail to meet these obligations as they come due. The Partnership does not hedge credit or property value market risks.
The Partnership entered into two interest rate swaps in January 2006 aggregating $90 million in notional amount as part of its acquisition of Prentiss. The instruments are used to hedge the risk of interest cash outflows on secured variable rate debt on properties that are owned by one of our consolidated Real Estate Ventures. One of the swaps with a notional amount of $20 million has a maturity date of February 1, 2010 and the other with a notional amount of $70 million has a maturity date of August 1, 2008.
The Partnership also entered into forward starting swaps in March 2006 as more fully described in Note 8.
The Partnership formally assesses, both at inception of the hedge and on an on-going basis, whether each derivative is highly-effective in offsetting changes in cash flows of the hedged item. If management determines that a derivative is not highly-effective as a hedge or if a derivative ceases to be a highly-effective hedge, the Partnership will discontinue hedge accounting prospectively.
Concentration of Credit Risk
Concentrations of credit risk arise when a number of tenants related to the Partnership’s investments or rental operations are engaged in similar business activities, or are located in the same geographic region, or have similar economic features that would cause their inability to meet contractual obligations, including those to the Partnership, to be similarly affected. The Partnership regularly monitors its tenant base to assess potential concentrations of credit risk. Management believes the current credit risk portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk. No tenant accounted for 10% or more of the Partnership’s rents during 2006, 2005 and 2004. See Note 18 for geographic segment information.
13. DISCONTINUED OPERATIONS
For the years ended December 31, 2006, 2005 and 2004, income from discontinued operations relates to 28 properties containing approximately 4,074,649 million net rentable square feet that the Partnership has sold since January 1, 2004 and two properties containing 8 buildings and one land parcel designated as held-for-sale as of December 31, 2006. The following table summarizes the balance sheet information for the two properties containing 8 buildings identified as held for sale at December 31, 2006 (in thousands):
         
Real Estate Investments:
       
Operating Properties
  $ 110,709  
Accumulated depreciation
    (6,050 )
 
     
 
    104,659  
 
       
Other assets
    21,357  
 
     
Total Assets Held for Sale
  $ 126,016  
 
     
 
       
Mortgage note payable and other liabilities
  $ 20,826  
 
     
The following table summarizes revenue and expense information for the 28 properties sold since January 1, 2004 and the eight properties designated as held-for-sale as of December 31, 2006 (in thousands):

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    Years Ended December 31,  
    2006     2005     2004  
Revenue:
                       
Rents
  $ 43,410     $ 10,060     $ 8,336  
Tenant reimbursements
    5,314       1,010       1,120  
Other
    982       41       36  
 
                 
Total revenue
    49,706       11,111       9,492  
 
                       
Expenses:
                       
Property operating expenses
    17,769       3,862       4,166  
Real estate taxes
    6,145       1,316       1,441  
Depreciation & amortization
    17,284       2,939       2,607  
 
                 
Total operating expenses
    41,198       8,117       8,214  
 
                       
Operating income
    8,508       2,994       1,278  
Interest income
    14       6        
Interest expense
    (841 )     (445 )     (451 )
 
                 
 
                       
Income from discontinued operations before gain on sale of interests in real estate and minority interest
    7,681       2,555       827  
 
                       
Net gain on sale of interests in real estate
    18,486       2,196       3,136  
Minority interest — partners’ share of net gain on sale
    1,757              
Minority interest — partners’ share of consolidated real estate venture
    (2,239 )            
Minority interest attributable to discontinued operations — common partnership units
    (1,172 )     (163 )     (144 )
 
                 
Income from discontinued operations
  $ 24,513     $ 4,588     $ 3,819  
 
                 
Discontinued operations have not been segregated in the consolidated statements of cash flows. Therefore, amounts for certain captions will not agree with respective data in the consolidated statements of operations.
14. MINORITY INTEREST IN REAL ESTATE VENTURES
As of December 31, 2006, the Partnership owned interests in four consolidated real estate ventures that own 15 office properties containing approximately 1.5 million net rentable square feet. Minority interest in Real Estate Ventures represents the portion of these consolidated real estate ventures not owned by the Partnership.
The minority interests associated with certain of the Real Estate Ventures, that have finite lives under the terms of the partnership agreements represent mandatorily redeemable interests as defined in SFAS 150. As of December 31, 2006 and 2005, the aggregate book value of these minority interests in the accompanying consolidated balance sheet was $0, and the Partnership believes that the aggregate settlement value of these interests was approximately $8.1 million. This amount is based on the estimated liquidation values of the assets and liabilities and the resulting proceeds that the Partnership would distribute to its Real Estate Venture partners upon dissolution, as required under the terms of the respective partnership agreements. Subsequent changes to the estimated fair values of the assets and liabilities of the consolidated Real Estate Ventures will affect the Partnership’s estimate of the aggregate settlement value. The partnership agreements do not limit the amount that the minority partners would be entitled to in the event of liquidation of the assets and liabilities and dissolution of the respective partnerships.
15. PARTNERS’ EQUITY
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):

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    For the years ended December 31,  
    2006     2005     2004  
    Basic     Diluted     Basic     Diluted     Basic     Diluted  
Income from continuing operations
  $ (15,059 )   $ (15,059 )   $ 39,262     $ 39,262     $ 59,118     $ 59,118  
Income from discontinued operations
    25,685       25,685       4,751       4,751       3,963       3,963  
Income allocated to Preferred Units
    (7,992 )     (7,992 )     (7,992 )     (7,992 )     (10,555 )     (10,555 )
Preferred Unit redemption/conversion benefit (charge)
                            4,500       4,500  
 
                                   
 
  $ 2,634     $ 2,634     $ 36,021     $ 36,021     $ 57,026     $ 57,026  
 
                                   
 
                                               
Weighted-average common partnership units outstanding
    93,703,601       93,703,601       57,852,842       57,852,842       49,600,634       49,600,634  
Options, warrants and unvested restricted stock
          518,524             258,320             236,915  
 
                                   
Total weighted-average units outstanding
    93,703,601       94,222,125       57,852,842       58,111,162       49,600,634       49,837,549  
 
                                   
 
                                               
Earnings per Common Partnership Unit
                                               
Continuing operations
  $ (0.25 )   $ (0.24 )   $ 0.54     $ 0.54     $ 1.07     $ 1.07  
Discontinued operations
    0.27       0.27       0.08       0.08       0.08       0.08  
 
                                   
Total
  $ 0.03     $ 0.03     $ 0.62     $ 0.62     $ 1.15     $ 1.15  
 
                                   
Common Partnership Unit and Preferred Mirror Units
The Company is the sole general partner of the Partnership and conducts substantially all its business and owns its assets through the Partnership and as a result does not have any significant assets, liabilities or operations, other than its investment in the Partnership’s Units, nor does it have any employees of its own. Pursuant to the Partnership Agreement, the Partnership reimburses the Company for all expenses incurred on behalf of its operations.
The Partnership issues partnership units to the Company in exchange for the contribution of the net proceeds of any equity security issuance by the Company. The number and terms of such partnership units correspond in number and terms of the related equity securities issued by the Company. In addition, the Partnership may also issue separate classes of partnership units. Historically, the Partnership has had the following types of partnership units outstanding (i) Preferred Partnership Units which have been issued to parties other than the Company (ii) Preferred Mirror Partnership Units which have been issued to the Company and (iii) Common Partnership Units which include both interests held by the Company and those held by other limited partners. Each of these interests are described in more detail below.
Preferred Partnership Units
The Partnership issued 1,950,000 Series B Preferred Units for $97.5 million in 1998. The Preferred Units bore a preferred distribution of 7.25% per annum and had a stated value of $50.00 per share. The Preferred Units were convertible into Class A Limited Partnership Units at a conversion price of $28.00. As more fully discussed in the Common Partnership Unit section, the Class A Limited Partnership units are subject to certain redemption rights. Due to these redemption rights, the Series B Preferred Partnership Units limited partnership units have been excluded from partners’ capital and reflected at the greater of their liquidation preference or the Class A Limited Partnership redemption value as of the end of the periods presented based on the closing market price of Company’s common stock at December 31, 2006, 2005 and 2004, which was $33.25, $27.91 and $29.39 respectively. In February 2004, the Partnership redeemed all of its outstanding Series B Preferred Units for an aggregate price of $93.0 million, together with accrued but unpaid distributions from January 1, 2004. The Series B Preferred Units had an aggregate stated value of $97.5 million and accrued distributions at 7.25% per annum. The Partnership recorded a gain of $4.5 million related to the redemption as an adjustment to net income available to common partnership unitholders.
Preferred Mirror Partnership Units
In exchange for the proceeds received in corresponding offerings by the Company of preferred shares of beneficial interest, the Partnership has issued to the Company a corresponding amount of Preferred Mirror Partnership Units with terms consistent with that of the preferred securities issued by the Company.

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On September 28, 1998, the Partnership issued 750,000 Series A Preferred Mirror Units to the Company in exchange for its contribution of the net proceeds of its Series A Preferred Shares. The 750,000 Series A Preferred Mirror Units had an aggregate liquidation preference of $37.5 million, or $50.00 per unit. Cumulative distributions on the Series A Preferred Mirror Units were payable quarterly at an annualized rate of 7.25% of the liquidation preference. In November 2004, the holders of the Series A Preferred Shares converted the shares into 1.3 million common shares of the Company at a price of $24.00 and the Partnership converted the Company’s Series A Preferred Mirror Units to 1.3 million Class A Units.
On December 30, 2003, the Partnership issued 2,000,000 Series D Preferred Mirror Units to Brandywine Realty Trust in exchange for its contribution of the proceeds of its Series C Preferred Shares. The 2,000,000 Series D Preferred Mirror Units outstanding have an aggregate liquidation preference of $50 million, or $25.00 per unit. Cumulative distributions on the Series D Preferred Mirror Units are payable quarterly at an annualized rate of 7.50% of the liquidation preference. In the event that any of the Series C Preferred Shares of Brandywine Realty Trust are redeemed, which may occur at the option of Brandywine Realty Trust at any time on or after December 30, 2008, then an equivalent number of Series D Preferred Mirror Units will be redeemed.
On February 27, 2004, the Partnership issued 2,300,000 Series E Preferred Mirror Units to Brandywine Realty Trust in exchange for its contribution of the net proceeds of its Series D Preferred Shares. The 2,300,000 Series E Preferred Mirror Units outstanding have an aggregate liquidation preference of $57.5 million, or $25.00 per unit. Cumulative distributions on the Series E Preferred Mirror Units are payable quarterly at an annualized rate of 7.375% of the liquidation preference. In the event that any of the Series D Preferred Shares of Brandywine Realty Trust are redeemed, which may occur at the option of Brandywine Realty Trust at any time on or after February 27, 2009, then an equivalent number of Series E Preferred Mirror Units will be redeemed.
Common Partnership Units (Redeemable and General)
The Partnership has two classes of Common Partnership Units: (i) Class A Limited Partnership Interest which are held by both the Company and outside third parties and (ii) General Partnership Interests which are held by the Company. (Collectively, the Class A Limited Partnership Interest and General Partnership Interests are referred to as “Common Partnership Units”). The holders of the Common Partnership Units are entitled to share in cash distributions from, and in profits and losses of, the Partnership, in proportion to their respective percentage interests, subject to preferential distributions on the preferred mirror units and the preferred units.
The Common Partnership Units held by the Company (comprised of both General Partnership Units and Class A Limited Partnership Units) are presented as partner’s equity in the consolidated financial statements. Class A Limited Partnership Interest held by parties other than the Company are redeemable at the option of the holder for a like number of common shares of the Company, or cash, or a combination thereof, at the election of the Company. Because the form of settlement of these redemption rights are not within the control of the Partnership, these Common Partnership Units have been excluded from partner’s equity and are presented as redeemable limited partnership units measured at the potential cash redemption value as of the end of the periods presented based on the closing market price of the Company’s common shares at December 31, 2006, 2005 and 2004, which was $33.25, $27.91 and $29.39 respectively. As of December 31, 2006 and 2005 3,961,235 and 1,945,267 Class A Units were outstanding and owned by outside limited partners of the Partnership (See Note 18).

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On August 15, 2006, the Partnership acquired two office properties in Northern Virginia. In connection with these acquisitions, the Partnership issued 424,608 Class A Units valued at $32.546 per unit totaling $13.8 million.
On December 19, 2006, the Partnership declared a distribution of $0.44 per common partnership unit, totaling $39.0 million, which was paid on January 15, 2007 to unitholders of record as of January 5, 2007. On December 19, 2006, the Partnership declared distributions on its Series C Preferred Shares and Series D Preferred Shares to holders of record as of December 30, 2006. These shares are entitled to a preferential return of 7.50% and 7.375%, respectively. Distributions paid on January 15, 2007 to holders of Series C Preferred Shares and Series D Preferred Shares totaled $0.9 million and $1.1 million, respectively.
Common Share Repurchases
We maintain a share repurchase program under which our Board has authorized us to repurchase our common shares from time to time. Our Board initially authorized this program in 1998 and has periodically replenished capacity under the program, including, most recently, on May 2, 2006 when our Board restored capacity to 3.5 million common shares. During the year ended December 31, 2006, we repurchased approximately 1.2 million common shares under this program at an average price of $29.22 per share, leaving approximately 2.3 million in remaining capacity. Our Board has not limited the duration of the program.
On October 4, 2006 we repurchased 1,829,000 common shares with a portion of the proceeds of our 3.875% Exchangeable Guaranteed Notes at an average purchase price of $32.80 per share (approximately $60.0 million in aggregate). We repurchased these shares under a separate Board authorization that provided that the shares repurchased did not reduce capacity under the share repurchase program.
Share Based Compensation
In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) is an amendment of SFAS 123 and requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is required to be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) also contains additional minimum disclosures requirements including, but not limited to, the valuation method and assumptions used, amounts of compensation capitalized and modifications made. The effective date of SFAS 123(R) was subsequently amended by the SEC to be as of the beginning of the first interim or annual reporting period of the first fiscal year that begins on or after December 15, 2005, and allows several different methods of transition. The Partnership adopted SFAS 123(R) using the prospective method on January 1, 2006. This adoption did not have a material effect on our consolidated financial statements.
Stock Options
At December 31, 2006, the Company had 1,286,075 options outstanding under its shareholder approved equity incentive plan. No options were unvested as of December 31, 2006 and therefore there is no remaining unrecognized compensation expense associated with these options. Option activity as of December 31, 2006 and changes during the twelve months ended December 31, 2006 were as follows:

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            Weighted     Weighted Average        
            Average     Remaining Contractual     Aggregate Intrinsic  
    Shares     Exercise Price     Term (in years)     Value (in 000’s)  
Outstanding at January 1, 2006
    1,276,722       26.82       2.15       1,888  
Prentiss options converted to Company options as part of the Prentiss acquisition (see Note 3)
    496,037       22.00       1.14       5,580  
Exercised
    (486,684 )     22.88       0.55       5,048  
Forfeited
                       
 
 
                       
Outstanding at December 31, 2006
    1,286,075     $ 26.45       1.50       8,739  
 
                       
 
Vested at December 31, 2006
    1,286,075     $ 26.45       1.50       8,739  
Exercisable at December 31, 2006
    1,286,075     $ 26.45       1.50       8,739  
There were no option awards granted to employees during the years ended December 31, 2006, 2005, and 2004.
                                                 
    Years ended December 31,
 
  2005   2004
 
                  Weighted                   Weighted
 
                  Average                   Average
 
          Weighted   Remaining           Weighted   Remaining
 
          Average   Contractual           Average   Contractual
 
          Exercise   Term           Exercise   Term
 
  Shares   Price   (in Years)   Shares   Price   (in Years)
 
                                   
Outstanding at beginning of year
    2,008,022       26.89               2,372,627       26.70          
 
Granted
                                       
Exercised
    (705,678 )     26.94               (337,161 )     25.39          
Forfeite/Expired
    (25,622 )     28.80               (27,444 )     28.93          
 
                                       
 
Outstanding at end of year
    1,276,722       26.82       1.97       2,008,022       26.89       2.88  
 
                                   
 
Exercisable at end of year
    1,276,722       26.82               2,008,022       26.89          
 
                                       
The Company has the ability and intent to issue shares upon stock option exercises. Historically, the Company has issued new common shares to satisfy such exercises.
401(k) Plan
The Partnership sponsors a 401(k) defined contribution plan for its employees. Each employee may contribute up to 100% of annual compensation, subject to specific limitations under the Internal Revenue Code. At its discretion, the Partnership can make matching contributions equal to a percentage of the employee’s elective contribution and profit sharing contributions. Employees vest in employer contributions over a three-year service period. The Partnership contributions were $1.1 million in 2006, $1.0 million in 2005 and $0.9 million in 2004.
Restricted Share Awards
The Company’s primary form of share-based compensation has been restricted common shares issued under a shareholder approved equity incentive plan that authorizes various equity-based awards. As of December 31, 2006, 338,860 restricted shares were outstanding and vest over five years from the initial grant date. The remaining compensation expense to be recognized for the 338,860 restricted shares outstanding at December 31, 2006 was approximately $9.8 million. That expense is expected to be recognized over a weighted average remaining vesting period of 2.4 years. For the year ended December 31, 2006, the Company recognized $2.9 million of compensation expense related to outstanding restricted shares which is included in administrative expenses. The following table summarizes the Company’s restricted share activity for the twelve-months ended December 31, 2006:

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            Weighted  
            Average Grant  
    Shares     Date Fair value  
Non-vested at January 1, 2006
    316,134     $ 25.76  
Granted
    240,136       30.72  
Vested
    (160,972 )     26.28  
Forfeited
    (56,438 )     28.24  
 
           
Non-vested at December 31, 2006
    338,860     $ 28.23  
 
           
Outperformance Program
On August 28, 2006, the Compensation Committee of the Company’s Board of Trustees adopted a long-term incentive compensation program (the “outperformance program” ). The Company will make payments (in the form of common shares) to executive-participants under the outperformance program only if total shareholder return exceeds percentage hurdles established under the outperformance program. The dollar value of any payments will depend on the extent to which our performance exceeds the hurdles. The Company established the outperformance program under the 1997 Plan.
If the total shareholder return (share price appreciation plus cash dividends) during a three-year measurement period exceeds either of two hurdles (with one hurdle keyed to the greater of a fixed percentage and an industry-based index, and the other hurdle keyed to a fixed percentage), then the Company will fund an incentive compensation pool in accordance with a formula and make pay-outs from the compensation pool in the form of vested and restricted common shares. The awards issued are accounted for in accordance with FASB No. 123R. The fair value of the awards on the date of grant, as adjusted for estimated forfeitures, was approximately $5.6 million and will be amortized into expense over the five-year period beginning on the date of grant using a graded vesting attribution model. The fair value of $5.6 million on the date of grant represents approximately 89.9% of the total that may be awarded including the effects of a 3.4% forfeiture; the remaining amount available will be valued when the awards are granted to individuals. For the year ended December 31, 2006, the Partnership recognized $0.5 million of compensation expenses related to the outperformance program.
16. DISTRIBUTIONS
                         
    Years ended December 31,
    2006   2005 (a)   2004
Common Partnership Unit Distributions:
                       
Total distributions per unit
  $ 1.76     $ 1.78     $ 1.76  
 
                       
Preferred Unit Distributions:
                       
Total distributions declared
  $ 7,992,000     $ 7,992,000     $ 10,555,000  
 
(a)   Includes a $0.02 special distribution declared in December 2005 for unitholders of record for the period January 1, 2006 through January 4, 2006 (pre-Prentiss merger period).
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table details the components of accumulated other comprehensive income (loss) as of and for the three years ended December 31, 2006 (in thousands):

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    Unrealized Gains     Cash Flow     Accumulated Other  
    (Losses) on Securities     Hedges     Comprehensive Loss  
Balance at January 1, 2004
  $ 868     $ (3,026 )   $ (2,158 )
 
                       
Change during year
    (696 )     309       (387 )
Settlement of treasury locks
          (3,238 )     (3,238 )
Reclassification adjustments for losses reclassified into operations
    (156 )     2,809       2,653  
 
                 
 
                       
Balance at December 31, 2004
  $ 16     $ (3,146 )     (3,130 )
 
Change during year
    241       (713 )     (472 )
Settlement of forward starting swaps
          240       240  
Reclassification adjustments for losses reclassified into operations
    (257 )     450       193  
 
                 
 
                       
Balance at December 31, 2005
  $     $ (3,169 )   $ (3,169 )
 
Change during year
          1,330       1,330  
Minority interest — consolidated real estate venture partner’s share of unrealized (gains)/losses on derivative financial instruments
          (302 )     (302 )
Settlement of forward starting swaps
          3,266        
Reclassification adjustments for (gains) losses reclassified into operations
    328       122       3,716  
 
                 
 
                       
Balance at December 31, 2006
  $ 328     $ 1,247     $ 1,575  
 
                 
Over time, the unrealized gains and losses held in Accumulated Other Comprehensive Income (“AOCI”) will be reclassified to earnings in the same period(s) in which hedged items are recognized in earnings. The current balance held in AOCI is expected to be reclassified to earnings over the lives of the current hedging instruments, or for realized losses on forecasted debt transactions, over the related term of the debt obligation, as applicable.
During the years ending December 31, 2006 and 2005, the Partnership reclassified approximately $0.1 million and $0.5 million, respectively, to interest expense associated with treasury lock agreements and forward starting swaps previously settled (see Note 12).
18. SEGMENT INFORMATION
The Partnership currently manages its portfolio within nine segments: (1) Pennsylvania—West, (2) Pennsylvania—North, (3) New Jersey, (4) Urban, (5) Richmond, Virginia, (6) California—North, (7) California—South, (8) Mid-Atlantic and (9) Southwest. The Pennsylvania—West segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs of Pennsylvania. The Pennsylvania—North segment includes properties north of Philadelphia in Berks, Bucks, Cumberland, Dauphin, Lehigh and Montgomery counties. The New Jersey segment includes properties in counties in the southern and central parts of New Jersey including Burlington, Camden and Mercer counties and in Bucks County, Pennsylvania. The Urban segment includes properties in the City of Philadelphia, Pennsylvania and the state of Delaware. The Richmond, Virginia segment includes properties primarily in Albemarle, Chesterfield and Henrico counties, the City of Richmond and Durham, North Carolina. The California—North segment includes properties in the City of Oakland and Concord. The California—South segment includes properties in the City of Carlsbad and San Diego. The Mid-Atlantic segment includes properties in Northern Virginia and the Maryland suburbs. The Southwest segment includes properties in Dallas and Travis counties of Texas. Corporate 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 are transferred to operating properties by region upon completion of the associated construction or project.

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Segment information for the three years ended December 31, 2006, 2005 and 2004 is as follows (in thousands):
                                                                         
    Pennsylvania –     Pennsylvania –                     Richmond,     California -     California -              
    West     North     New Jersey     Urban     Virginia     North     South     Mid-Atlantic     Southwest  
2006:
                                                                       
Real estate investments, at cost:
                                                                       
Operating properties
  $ 922,347     $ 530,436     $ 570,009     $ 568,008     $ 244,519     $ 396,927     $ 95,942     $ 1,255,940     $ 343,177  
Construction-in-progress
                                                     
Land held for development
                                                     
 
                                                                       
Total revenue
  $ 124,301     $ 74,391     $ 96,926     $ 85,995     $ 32,526     $ 58,203     $ 11,564     $ 112,344     $ 57,734  
Property operating expenses and real estate taxes
    39,163       38,124       41,334       34,362       11,876       23,016       4,039       33,897       23,872  
 
                                                     
Net operating income
  $ 85,138     $ 36,267     $ 55,592     $ 51,633     $ 20,650     $ 35,187     $ 7,525     $ 78,447     $ 33,862  
 
                                                     
 
                                                                       
2005:
                                                                       
Real estate investments, at cost:
                                                                       
Operating properties
  $ 867,089     $ 558,803     $ 562,832     $ 351,407     $ 219,930     $     $     $     $  
Construction-in-progress
                                                     
Land held for development
                                                     
 
                                                                       
Total revenue
  $ 111,911     $ 72,154     $ 96,683     $ 65,643     $ 28,758     $     $     $     $  
Property operating expenses and real estate taxes
    39,116       32,517       39,152       27,183       11,612                          
 
                                                     
Net operating income
  $ 72,795     $ 39,637     $ 57,531     $ 38,460     $ 17,146     $     $     $     $  
 
                                                     
 
                                                                       
2004:
                                                                       
Total revenue
  $ 87,535     $ 73,882     $ 94,096     $ 26,319     $ 27,099     $     $     $     $  
Property operating expenses and real estate taxes
    25,677       31,079       35,599       12,126       11,772                          
 
                                                     
Net operating income
  $ 61,858     $ 42,803     $ 58,497     $ 14,193     $ 15,327     $     $     $     $  
 
                                                     

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Net operating income is defined as total revenue less property operating expenses and real estate taxes. Below is reconciliation of consolidated net operating income to consolidated income from continuing operations:
                         
    Year Ended December 31,  
    2006     2005     2004  
    (amounts in thousands)  
Consolidated net operating income (loss)
  $ 409,216     $ 231,252     $ 200,304  
Less:
                       
Interest income
    9,513       1,370       841  
Interest expense
    (171,177 )     (70,152 )     (52,642 )
Deferred financing costs
    (4,607 )     (3,766 )     (1,968 )
Depreciation and amortization
    (248,132 )     (109,118 )     (77,521 )
Administrative expenses
    (29,644 )     (17,982 )     (15,100 )
Minority interest — partners’ share of consolidated real estate ventures
    270       (154 )     206  
Plus:
                       
Equity in income of real estate ventures
    2,165       3,172       2,023  
Net gain on sales of interests in real estate
    14,190       4,640       2,975  
Gain on termination of purchase contract
    3,147              
 
                 
Income (loss) from continuing operations
    (15,059 )     39,262       59,118  
Income (loss) from discontinued operations
    25,685       4,751       3,963  
 
                 
Net income (loss)
  $ 10,626     $ 44,013     $ 63,081  
 
                 
19. RELATED-PARTY TRANSACTIONS
In 1998, the Board authorized the Company to make loans totaling up to $5.0 million to enable employees of the Partnership to purchase Common Shares at fair market value. The loans have five-year terms, are full recourse, and are secured by the Common Shares purchased. The Company made loans under this program in 1998, 1999 and 2001. Interest, payable quarterly, accrued on the loans at the lower of the interest rate borne on borrowings under the Partnership’s Credit Facility or a rate based on the dividend payments on the Common Shares. As of December 31, 2005, the interest rate was 4.18% per annum. The loans were payable at the earlier of the stated maturity date or 90 days following the employee’s termination. As of December 31, 2005, the outstanding balance of the loan totaled $0.3 million and was secured by of 18,803 common shares. These loans were repaid in full by December 31, 2006.
The Partnership held a fifty percent economic interest in an approximately 141,724 square foot office building located at 101 Paragon Drive, Montvale, New Jersey. The remaining fifty percent interest was held by Donald E. Axinn, one of the Company’s Trustees. Although the Partnership and Mr. Axinn had each committed to provide one half of the $11 million necessary to repay the mortgage loan secured by this property at the maturity of the loan, in February 2006 an unaffiliated third party entered into an agreement to purchase this property for $18.3 million. As a result of the purchase by an unaffiliated third party during August 2006, the Partnership recognized a $3.1 million gain on termination of its rights under a 1998 contribution agreement, modified in 2005, that entitled the Partnership to the 50% interest in the joint venture to operate the property. This gain is shown separately on the Partnership’s income statement as a gain on termination of purchase contract.
The Partnership owned 384,615 shares of Cypress Communications, Inc. (“Cypress”) common stock. These shares were redeemed in July 2005 for $0.3 million. The redemption was the result of Cypress’s merger with another company. Prior to this merger, an officer of the Company held a position on Cypress’s Board of Directors.
20. OPERATING LEASES
The Partnership leases properties to tenants under operating leases with various expiration dates extending to 2023. Minimum future rentals on non-cancelable leases at December 31, 2006 are as follows (in thousands):

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      Year   Minimum Rent
2007
  $ 526,755  
2008
    488,853  
2009
    426,608  
2010
    49,210  
2011
    264,411  
Thereafter
    879,490  
Total minimum future rentals presented above do not include amounts to be received as tenant reimbursements for operating costs.
21. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Partnership is involved from time to time in litigation on various matters, including disputes with tenants and disputes arising out of agreements to purchase or sell properties. Given the nature of the Partnership’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 Partnership 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 Partnership.
There have been lawsuits against owners and managers of multifamily and office properties asserting claims of personal injury and property damage caused by the presence of mold in residential units or office space. The Partnership has been named as a defendant in two lawsuits in the State of New Jersey that allege personal injury as a result of the presence of mold. In 2005, one lawsuit was dismissed by way of summary judgment with prejudice. Unspecified damages are sought on the remaining lawsuit. The Partnership has referred this lawsuit to its environmental insurance carrier and, as of the date of this Form 10-Q, the insurance carrier is tendering a defense to this claim.
Letters-of-Credit
Under certain mortgages, the Partnership has funded required leasing and capital reserve accounts for the benefit of the mortgage lenders with letters-of-credit which totaled $24.2 million at December 31, 2006. The Partnership is also required to maintain escrow accounts for taxes, insurance and tenant security deposits and these accounts aggregated $22.6 million at December 31, 2006. Tenant rents at properties that secure these mortgage loans are deposited into the loan servicer’s depository accounts, which are used to fund debt service, operating expenses, capital expenditures and the escrow and reserve accounts, as necessary. Any excess cash is included in cash and cash equivalents.
Ground Rent
Future minimum rental payments under the terms of all non-cancelable ground leases under which the Partnership is the lessee are expensed on a straight-line basis regardless of when payments are due. Minimum future rentals payments on non-cancelable leases at December 31, 2006 are as follows (in thousands):
         
2007
  $ 1,736  
2008
    1,736  
2009
    1,736  
2010
    1,818  
2011
    1,818  
Thereafter
    271,340  
Other Commitments or Contingencies
As of December 31, 2006, the Partnership owned 490 acres of land for future development.

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As part of the Partnership’s acquisition of the TRC Properties in September 2004, the Partnership agreed to issue to the sellers up to a maximum of $9.7 million of Class A Units of the Operating Partnership if certain of the acquired properties achieve at least 95% occupancy prior to September 21, 2007. The maximum number of Units that the Partnership is obligated to issue declines monthly and, as of December 31, 2006, the maximum amount payable under this arrangement was $1.8 million, with no amount currently due.
As part of the TRC acquisition, the Partnership acquired its interest in Two Logan Square, a 696,477 square foot office building in Philadelphia, primarily through a second and third mortgage secured by this property. The Partnership currently does not expect to take title to Two Logan Square until, at the earliest, September 2019. In the event that the Partnership takes title to Two Logan Square upon a foreclosure of its mortgage, the Partnership has agreed to make a payment to an unaffiliated third party with a residual interest in the fee owner of this property. The amount of the payment would be $0.6 million if the Partnership must pay a state and local transfer upon taking title, and $2.9 million if no transfer tax is payable upon the transfer.
As part of its acquisition of TRC Properties and several of other acquisitions, the Partnership agreed not to sell the acquired properties. In the case of the TRC Properties, the Partnership agreed not to sell the acquired properties for periods ranging from three to 15 years from the acquisition date as follows: 201 Radnor Financial Center, 555 Radnor Financial Center and 300 Delaware Avenue (three years); One Rodney Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square and Radnor Corporate Center (15 years). At December 31, 2006, the Partnership had agreed not to sell 14 properties that aggregate 1.0 million square feet for periods that expire through 2008. The Partnership’s agreements generally provide that the Partnership may dispose of the subject properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax deferred transactions. In the event that the Partnership sells any of the properties within the applicable restricted period in non-exempt transactions, the Partnership would be required to pay significant tax liabilities that would be incurred by the parties who sold the Partnership the applicable property.
The Partnership invests in its properties and regularly incurs capital expenditures in the ordinary course to maintain the properties. The Partnership 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.
22. SUBSEQUENT EVENT
During January 2007, the Partnership sold two properties containing eight buildings, classified as held for sale as of December, 31, 2006, totaling 26.8 million square feet and one land parcel consisting of 4.7 acres for an aggregate sales price of $114.9 million.
The Partnership paid off its $300.0 million 2009 three year notes in January 2007, notice of which was given in November 2006 using proceeds borrowed from the Company’s unsecured credit facility.

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23. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
The following is a summary of quarterly financial information as of and for the years ended December 31, 2006 and 2005 (in thousands, except per share data):
                                 
    1st   2nd   3rd   4th
    Quarter   Quarter   Quarter   Quarter
2006:
                               
Total revenue
  $ 153,582     $ 161,523     $ 172,962     $ 174,734  
Net income (loss)
    (2,850 )     (12,171 )     496       25,151  
Income (loss) allocated to Common Partnership Units
    (4,848 )     (14,169 )     (1,502 )     23,153  
 
                               
Basic earnings per Common Partnership Units
  $ (0.05 )   $ (0.15 )   $ (0.02 )   $ 0.25  
Diluted earnings per Common Partnership Units
  $ (0.05 )   $ (0.15 )   $ (0.02 )   $ 0.25  
 
                               
2005:
                               
Total revenue
  $ 96,690     $ 92,843     $ 93,431     $ 97,660  
Net income
    9,691       9,185       16,280       8,856  
Income allocated to Common Partnership Units
    7,693       7,187       14,282       6,858  
 
                               
Basic earnings per Common Partnership Units
  $ 0.13     $ 0.12     $ 0.25     $ 0.12  
Diluted earnings per Common Partnership Units
  $ 0.13     $ 0.12     $ 0.25     $ 0.12  
The summation of quarterly earnings per share amounts do not necessarily equal the full year amounts.

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Brandywine Operating Partnership, L.P.
Schedule II
Valuation and Qualifying Accounts
(in thousands)
                                 
    Balance at                     Balance  
    Beginning                     at End  
                   Description   of Period     Additions (1)     Deductions     of Period  
Allowance for doubtful accounts:
                               
Year ended December 31, 2006
  $ 4,877     $ 4,434     $     $ 9,311  
 
                       
Year ended December 31, 2005
  $ 4,085     $ 792     $     $ 4,877  
 
                       
Year ended December 31, 2004
  $ 4,031     $ 467     $ 413     $ 4,085  
 
                       
 
(1)   The 2006 additions includes $3.5 million of current year expense and $0.9 million of allowances against receivables assumed in the Prentiss acquisition.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried            
                            Initial Cost   December 31, 2006            
                                            Net                                        
                                            Improvements                           Accumulated            
                                            (Retirements)                           Depreciation at            
                    Encumberances at           Building and   Since           Building and           December 31,   Year of   Year   Depreciable
    City   State   December 31, 2006   Land   Improvements   Acquisition   Land   Improvements   Total (a)   2006 (b)   Construction   Acquired   Life
One Greentree Centre
  Marlton   NJ           345       4,440       804       345       5,244       5,589       3,031       1982       1986       40  
Three Greentree Centre
  Marlton   NJ           323       6,024       590       324       6,614       6,937       4,289       1984       1986       40  
Two Greentree Centre
  Marlton   NJ           264       4,693       312       264       5,005       5,269       3,311       1983       1986       40  
1155 Business Center Drive
  Horsham   PA     2,407       1,029       4,124       783       1,029       4,906       5,936       1,436       1990       1996       40  
120 West Germantown Pike
  Plymouth Meeting   PA           685       2,773       1,092       685       3,865       4,550       1,525       1984       1996       40  
140 West Germantown Pike
  Plymouth Meeting   PA           481       1,976       554       482       2,530       3,011       929       1984       1996       40  
18 Campus Boulevard
  Newtown Square   PA     3,227       787       3,312       5       787       3,317       4,104       1,156       1990       1996       40  
2240/2250 Butler Pike
  Plymouth Meeting   PA           1,104       4,627       331       1,104       4,959       6,062       1,939       1984       1996       40  
2260 Butler Pike
  Plymouth Meeting   PA           661       2,727       315       662       3,042       3,703       1,000       1984       1996       40  
3329 Street Road -Greenwood Square
  Bensalem   PA           350       1,401       590       350       1,991       2,341       896       1985       1996       40  
3331 Street Road -Greenwood Square
  Bensalem   PA           1,126       4,511       1,295       1,126       5,806       6,932       2,002       1986       1996       40  
3333 Street Road -Greenwood Square
  Bensalem   PA           851       3,407       966       851       4,374       5,224       1,654       1988       1996       40  
456 Creamery Way
  Exton   PA           635       2,548       (47 )     635       2,500       3,136       824       1987       1996       40  
457 Haddonfield Road
  Cherry Hill   NJ     10,689       2,142       9,120       490       2,142       9,610       11,752       3,340       1990       1996       40  
468 Thomas Jones Way
  Exton   PA           526       2,112       163       527       2,275       2,801       747       1990       1996       40  
486 Thomas Jones Way
  Exton   PA           806       3,256       159       806       3,415       4,221       1,206       1990       1996       40  
500 Enterprise Drive
  Horsham   PA           1,303       5,188       (253 )     1,303       4,935       6,238       1,778       1990       1996       40  
500 North Gulph Road
  King Of Prussia   PA           1,303       5,201       1,255       1,303       6,456       7,759       2,246       1979       1996       40  
650 Dresher Road
  Horsham   PA     1,609       636       2,501       404       636       2,905       3,541       1,108       1984       1996       40  
6575 Snowdrift Road
  Allentown   PA           601       2,411       437       601       2,848       3,449       822       1988       1996       40  
700 Business Center Drive
  Horsham   PA     1,625       550       2,201       848       550       3,049       3,599       1,248       1986       1996       40  
7248 Tilghman Street
  Allentown   PA           731       2,969       (32 )     731       2,937       3,668       980       1987       1996       40  
7310 Tilghman Street
  Allentown   PA           553       2,246       510       553       2,755       3,309       1,178       1985       1996       40  
800 Business Center Drive
  Horsham   PA     2,098       896       3,585       18       896       3,603       4,499       1,150       1986       1996       40  
8000 Lincoln Drive
  Marlton   NJ           606       2,887       688       606       3,575       4,181       1,184       1997       1996       40  
One Progress Drive
  Horsham   PA           1,399       5,629       232       1,399       5,861       7,260       1,936       1986       1996       40  
One Righter Parkway
  Wilmington   DE     10,076       2,545       10,195       563       2,545       10,757       13,303       3,440       1989       1996       40  
1 Foster Avenue
  Gibbsboro   NJ           93       364       42       93       406       499       116       1972       1997       40  
10 Foster Avenue
  Gibbsboro   NJ           244       971       233       244       1,203       1,448       356       1983       1997       40  
100 Berwyn Park
  Berwyn   PA     6,884       1,180       7,290       1,560       1,180       8,850       10,030       2,685       1986       1997       40  
100 Commerce Drive
  Newark   DE           1,160       4,633       1,134       1,160       5,768       6,927       1,808       1989       1997       40  
100 Katchel Blvd
  Reading   PA           1,881       7,423       158       1,881       7,582       9,462       2,183       1970       1997       40  
1000 Atrium Way
  Mt. Laurel   NJ           2,061       8,180       1,065       2,061       9,245       11,306       2,599       1989       1997       40  
1000 Howard Boulevard
  Mt. Laurel   NJ           2,297       9,288       1,328       2,297       10,616       12,913       3,402       1988       1997       40  
10000 Midlantic Drive
  Mt. Laurel   NJ           3,206       12,857       1,100       3,206       13,957       17,163       4,347       1990       1997       40  
100-300 Gundy Drive
  Reading   PA           6,495       25,180       7,583       6,495       32,763       39,258       9,563       1970       1997       40  
1007 Laurel Oak Road
  Voorhees   NJ           1,563       6,241       16       1,564       6,256       7,820       1,754       1996       1997       40  
1120 Executive Boulevard
  Marlton   NJ           2,074       8,415       541       2,074       8,956       11,030       2,864       1987       1997       40  
1336 Enterprise Drive
  West Goshen   PA           731       2,946       52       731       2,998       3,729       926       1989       1997       40  
15000 Midlantic Drive
  Mt. Laurel   NJ           3,061       12,254       165       3,061       12,419       15,480       3,710       1991       1997       40  
17 Campus Boulevard
  Newtown Square   PA     5,002       1,108       5,155       48       1,108       5,203       6,311       1,357       2001       1997       40  
2 Foster Avenue
  Gibbsboro   NJ           185       730       42       185       772       957       225       1974       1997       40  
20 East Clementon Road
  Gibbsboro   NJ           769       3,055       496       769       3,552       4,320       1,072       1986       1997       40  
200 Berwyn Park
  Berwyn   PA     9,415       1,533       9,460       2,071       1,533       11,531       13,064       3,386       1987       1997       40  
2000 Midlantic Drive
  Mt. Laurel   NJ     9,160       2,202       8,823       780       2,203       9,602       11,805       3,083       1989       1997       40  
220 Commerce Drive
  Fort Washington   PA           1,086       4,338       945       1,010       5,359       6,369       1,537       1985       1997       40  
300 Berwyn Park
  Berwyn   PA     12,594       2,206       13,422       2,618       2,206       16,041       18,246       4,878       1989       1997       40  
300 Welsh Road — Building I
  Horsham   PA     2,370       894       3,572       978       894       4,550       5,444       1,352       1980       1997       40  
321 Norristown Road
  Lower Gwyned   PA           1,290       5,176       1,580       1,221       6,825       8,046       2,268       1988       1997       40  
323 Norristown Road
  Lower Gwyned   PA           1,685       6,751       4,263       1,601       11,098       12,699       3,471       1988       1997       40  
4 Foster Avenue
  Gibbsboro   NJ           183       726       93       183       820       1,002       255       1974       1997       40  
4000 Midlantic Drive
  Mt. Laurel   NJ     2,980       714       5,085       (1,939 )     714       3,146       3,860       951       1998       1997       40  
5 Foster Avenue
  Gibbsboro   NJ           9       32       26       9       58       67       14       1968       1997       40  
5 U.S. Avenue
  Gibbsboro   NJ           21       81       3       21       84       105       23       1987       1997       40  
50 East Clementon Road
  Gibbsboro   NJ           114       964       3       114       967       1,081       271       1986       1997       40  
500 Office Center Drive
  Fort Washington   PA           1,617       6,480       1,517       1,617       7,997       9,614       2,141       1974       1997       40  
501 Office Center Drive
  Fort Washington   PA           1,796       7,192       13,223       1,796       20,415       22,211       4,538       1974       1997       40  
6 East Clementon Road
  Gibbsboro   NJ           1,345       5,366       664       1,345       6,030       7,375       1,813       1980       1997       40  
655 Business Center Drive
  Horsham   PA     1,698       544       2,529       696       544       3,225       3,769       1,282       1997       1997       40  
7 Foster Avenue
  Gibbsboro   NJ           231       921       140       231       1,061       1,292       321       1983       1997       40  
748 Springdale Drive
  Exton   PA           236       931       216       236       1,146       1,383       327       1986       1997       40  
855 Springdale Drive
  Exton   PA           838       3,370       2,679       838       6,049       6,887       1,117       1986       1997       40  
9000 Midlantic Drive
  Mt. Laurel   NJ     5,789       1,472       5,895       111       1,472       6,007       7,478       1,809       1989       1997       40  
Five Eves Drive
  Marlton   NJ           703       2,819       772       703       3,592       4,294       1,090       1986       1997       40  
Four A Eves Drive
  Marlton   NJ           539       2,168       243       539       2,411       2,950       764       1987       1997       40  

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BRANDYWINE OPERATING PARTNERSHIP, L.P.
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried            
                            Initial Cost   December 31, 2006            
                                            Net                                        
                                            Improvements                           Accumulated            
                                            (Retirements)                           Depreciation at            
                    Encumberances at           Building and   Since           Building and           December 31,   Year of   Year   Depreciable
    City   State   December 31, 2006   Land   Improvements   Acquisition   Land   Improvements   Total (a)   2006 (b)   Construction   Acquired   Life
Four B Eves Drive
  Marlton   NJ           588       2,369       327       588       2,696       3,284       814       1987       1997       40  
Main Street — Piazza
  Voorhees   NJ           696       2,802       262       696       3,064       3,760       1,007       1990       1997       40  
Main Street — Plaza 1000
  Voorhees   NJ           2,732       10,942       3,627       2,732       14,569       17,301       4,886       1988       1997       40  
Main Street — Promenade
  Voorhees   NJ           531       2,052       191       532       2,242       2,774       745       1988       1997       40  
Two Eves Drive
  Marlton   NJ           818       3,461       (31 )     818       3,429       4,248       1,087       1987       1997       40  
100 Gateway Centre Parkway
  Richmond   VA           391       5,410       125       391       5,535       5,926       674       2001       1998       40  
1000 First Avenue
  King Of Prussia   PA     3,054       2,772       10,936       703       2,772       11,639       14,411       2,869       1980       1998       40  
1009 Lenox Drive
  Lawrenceville   NJ           4,876       19,284       3,139       4,876       22,422       27,299       7,008       1989       1998       40  
1020 First Avenue
  King Of Prussia   PA     2,441       2,168       8,576       433       2,168       9,008       11,177       2,287       1984       1998       40  
1040 First Avenue
  King Of Prussia   PA     3,277       2,860       11,282       1,036       2,860       12,318       15,178       3,084       1985       1998       40  
1060 First Avenue
  King Of Prussia   PA     2,985       2,712       10,953       1,883       2,712       12,836       15,548       2,913       1987       1998       40  
14 Campus Boulevard
  Newtown Square   PA     5,117       2,244       4,217       (22 )     2,244       4,196       6,439       1,659       1998       1998       40  
150 Corporate Center Drive
  Camp Hill   PA           964       3,871       239       964       4,109       5,074       1,146       1987       1998       40  
1957 Westmoreland Street
  Richmond   VA     2,604       1,061       4,241       235       1,061       4,476       5,537       1,158       1975       1998       40  
200 Corporate Center Drive
  Camp Hill   PA           1,647       6,606       164       1,647       6,771       8,417       1,817       1989       1998       40  
2100-2116 West Laburnam Avenue
  Richmond   VA     552       2,482       8,846       2,300       2,482       11,146       13,628       2,847       1976       1998       40  
2130-2146 Tomlynn Street
  Richmond   VA     985       353       1,416       289       353       1,705       2,058       499       1988       1998       40  
2161-2179 Tomlynn Street
  Richmond   VA     1,040       423       1,695       222       423       1,917       2,340       497       1985       1998       40  
2201-2245 Tomlynn Street
  Richmond   VA     2,576       1,020       4,067       283       1,020       4,351       5,370       1,172       1989       1998       40  
2212-2224 Tomlynn Street
  Richmond   VA     1,211       502       2,014       72       502       2,085       2,588       536       1985       1998       40  
2221-2245 Dabney Road
  Richmond   VA     1,250       530       2,123       203       530       2,326       2,856       595       1994       1998       40  
2240 Dabney Road
  Richmond   VA     617       264       1,059       10       264       1,069       1,333       267       1984       1998       40  
2244 Dabney Road
  Richmond   VA     1,291       550       2,203       38       550       2,241       2,791       563       1993       1998       40  
2246 Dabney Road
  Richmond   VA     1,062       455       1,822       32       455       1,855       2,309       473       1987       1998       40  
2248 Dabney Road
  Richmond   VA     1,337       512       2,049       200       512       2,249       2,761       601       1989       1998       40  
2251 Dabney Road
  Richmond   VA     972       387       1,552       111       387       1,663       2,050       449       1983       1998       40  
2256 Dabney Road
  Richmond   VA     847       356       1,427       275       356       1,702       2,058       409       1982       1998       40  
2277 Dabney Road
  Richmond   VA     1,185       507       2,034       16       507       2,050       2,557       514       1986       1998       40  
2401 Park Drive
  Harrisburg   PA           182       728       187       182       916       1,097       293       1984       1998       40  
2404 Park Drive
  Harrisburg   PA           167       668       249       167       918       1,084       269       1983       1998       40  
2490 Boulevard of the Generals
  King Of Prussia   PA           348       1,394       53       348       1,447       1,795       409       1975       1998       40  
2511 Brittons Hill Road
  Richmond   VA     2,820       1,202       4,820       1,849       1,202       6,669       7,871       1,482       1987       1998       40  
2812 Emerywood Parkway
  Henrico   VA     3,156       1,069       4,281       1,783       1,069       6,064       7,133       1,934       1980       1998       40  
300 Arboretum Place
  Richmond   VA     13,832       5,450       21,892       1,827       5,450       23,719       29,169       6,429       1988       1998       40  
300 Corporate Center Drive
  Camp Hill   PA           4,823       19,301       1,145       4,823       20,446       25,269       5,437       1989       1998       40  
303 Fellowship Drive
  Mt. Laurel   NJ     1,789       1,493       6,055       584       1,494       6,638       8,132       1,696       1979       1998       40  
304 Harper Drive
  Moorestown   NJ     777       657       2,674       379       657       3,052       3,710       769       1975       1998       40  
305 Fellowship Drive
  Mt. Laurel   NJ     1,617       1,421       5,768       1,146       1,421       6,913       8,335       1,618       1980       1998       40  
305 Harper Drive
  Moorestown   NJ     248       223       913       0       223       914       1,136       227       1979       1998       40  
307 Fellowship Drive
  Mt. Laurel   NJ     1,761       1,565       6,342       382       1,565       6,725       8,289       1,660       1981       1998       40  
308 Harper Drive
  Moorestown   NJ           1,643       6,663       499       1,644       7,161       8,805       1,991       1976       1998       40  
309 Fellowship Drive
  Mt. Laurel   NJ     1,878       1,518       6,154       1,205       1,518       7,359       8,877       2,260       1982       1998       40  
33 West State Street
  Trenton   NJ           6,016       24,091       (21 )     6,016       24,070       30,086       6,451       1988       1998       40  
426 Lancaster Avenue
  Devon   PA           1,689       6,756       361       1,689       7,118       8,806       1,922       1990       1998       40  
4364 South Alston Avenue
  Durham   NC     1,915       1,622       6,419       728       1,581       7,188       8,769       1,952       1985       1998       40  
4805 Lake Brooke Drive
  Glen Allen   VA     3,960       1,640       6,567       266       1,640       6,832       8,473       1,764       1996       1998       40  
50 East State Street
  Trenton   NJ           8,926       35,735       773       8,926       36,508       45,434       9,946       1989       1998       40  
50 Swedesford Square
  East Whiteland Twp.   PA     4,263       3,902       15,254       (15,254 )     3,902             3,902             1986       1998       40  
500 Nationwide Drive
  Harrisburg   PA           173       850       790       173       1,640       1,813       550       1977       1998       40  
52 Swedesford Square
  East Whiteland Twp.   PA     4,661       4,241       16,579       878       4,241       17,457       21,698       4,540       1988       1998       40  
520 Virginia Drive
  Fort Washington   PA           845       3,455       39       845       3,494       4,339       1,016       1987       1998       40  
600 Corporate Circle Drive
  Harrisburg   PA           363       1,452       107       363       1,559       1,922       426       1978       1998       40  
600 East Main Street
  Richmond   VA     11,206       9,808       38,255       5,668       9,808       43,923       53,731       11,744       1986       1998       40  
600 Park Avenue
  King Of Prussia   PA           1,012       4,048       2       1,012       4,050       5,062       1,097       1964       1998       40  
610 Freedom Business Center
  King Of Prussia   PA     5,014       2,017       8,070       674       2,017       8,745       10,761       2,702       1985       1998       40  
620 Allendale Road
  King Of Prussia   PA           1,020       3,839       998       1,020       4,837       5,857       1,774       1961       1998       40  
620 Freedom Business Center
  King Of Prussia   PA     6,750       2,770       11,014       3,193       2,770       14,207       16,977       3,577       1986       1998       40  
630 Clark Avenue
  King Of Prussia   PA           547       2,190       1       547       2,191       2,738       593       1960       1998       40  
630 Freedom Business Center
  King Of Prussia   PA     6,655       2,773       11,144       668       2,773       11,812       14,585       3,337       1989       1998       40  
640 Freedom Business Center
  King Of Prussia   PA     10,539       4,222       16,891       1,318       4,222       18,209       22,431       5,412       1991       1998       40  
650 Park Avenue
  King Of Prussia   PA           1,916       4,378       2,491       1,916       6,869       8,785       1,845       1968       1998       40  
660 Allendale Road
  King of Prussia   PA           396       3,343       (1,636 )     396       1,706       2,103       708       1962       1998       40  
680 Allendale Road
  King Of Prussia   PA           689       2,756       679       689       3,435       4,124       1,149       1962       1998       40  
6990 Snowdrift Road
  Allentown   PA                 1,962       3,696             5,658       5,658       764       2003       1998       40  
6990 Snowdrift Road Bldg B
  Allentown   PA                 2,581       958             3,539       3,539       272       2004       1998       40  

F - 88


Table of Contents

BRANDYWINE OPERATING PARTNERSHIP, L.P.
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried            
                            Initial Cost   December 31, 2006            
                                            Net                                        
                                            Improvements                           Accumulated            
                                            (Retirements)                           Depreciation at            
                    Encumberances at           Building and   Since           Building and           December 31,   Year of   Year   Depreciable
    City   State   December 31, 2006   Land   Improvements   Acquisition   Land   Improvements   Total (a)   2006 (b)   Construction   Acquired   Life
700 East Gate Drive
  Mt. Laurel   NJ     4,102       3,569       14,436       1,540       3,569       15,977       19,545       4,064       1984       1998       40  
701 East Gate Drive
  Mt. Laurel   NJ     2,048       1,736       6,877       842       1,736       7,719       9,455       2,186       1986       1998       40  
7010 Snowdrift Road
  Allentown   PA     919       818       3,324       464       818       3,789       4,606       886       1991       1998       40  
7150 Windsor Drive
  Allentown   PA     1,188       1,035       4,219       147       1,035       4,366       5,401       1,100       1988       1998       40  
7350 Tilghman Street
  Allentown   PA           3,414       13,716       1,273       3,414       14,988       18,403       4,433       1987       1998       40  
741 First Avenue
  King Of Prussia   PA           1,287       5,151       221       1,287       5,371       6,659       1,517       1966       1998       40  
7450 Tilghman Street
  Allentown   PA     3,482       2,867       11,631       1,574       2,867       13,205       16,072       3,737       1986       1998       40  
751-761 Fifth Avenue
  King Of Prussia   PA           1,097       4,391       32       1,097       4,423       5,520       1,197       1967       1998       40  
7535 Windsor Drive
  Allentown   PA     4,514       3,376       13,400       5,528       3,376       18,928       22,304       4,808       1988       1998       40  
755 Business Center Drive
  Horsham   PA     2,024       1,362       2,334       2,940       1,362       5,274       6,636       1,581       1998       1998       40  
800 Corporate Circle Drive
  Harrisburg   PA           414       1,653       105       414       1,758       2,172       492       1979       1998       40  
815 East Gate Drive
  Mt. Laurel   NJ     703       636       2,584       375       636       2,959       3,595       709       1986       1998       40  
817 East Gate Drive
  Mt. Laurel   NJ     697       611       2,426       153       611       2,579       3,190       633       1986       1998       40  
875 First Avenue
  King Of Prussia   PA           618       2,473       3,258       618       5,731       6,349       1,455       1966       1998       40  
9011 Arboretum Parkway
  Richmond   VA     4,622       1,857       7,702       528       1,857       8,231       10,087       2,063       1991       1998       40  
9100 Arboretum Parkway
  Richmond   VA     3,506       1,362       5,489       556       1,362       6,045       7,407       1,726       1988       1998       40  
920 Harvest Drive
  Blue Bell   PA           2,433       9,738       649       2,433       10,387       12,820       2,708       1990       1998       40  
9200 Arboretum Parkway
  Richmond   VA     2,506       985       3,973       133       985       4,107       5,091       1,040       1988       1998       40  
9210 Arboretum Parkway
  Richmond   VA     2,906       1,110       4,474       583       1,110       5,057       6,167       1,363       1988       1998       40  
9211 Arboretum Parkway
  Richmond   VA     1,458       582       2,433       286       582       2,719       3,301       704       1991       1998       40  
925 Harvest Drive
  Blue Bell   PA           1,671       6,606       807       1,671       7,413       9,084       1,905       1990       1998       40  
993 Lenox Drive
  Lawrenceville   NJ     11,638       2,811       17,996       (5,342 )     2,811       12,654       15,465       3,670       1985       1998       40  
997 Lenox Drive
  Lawrenceville   NJ     9,496       2,410       9,700       161       2,410       9,861       12,271       2,635       1987       1998       40  
Dabney III
  Richmond   VA     777       281       1,125       309       281       1,435       1,715       416       1986       1998       40  
Philadelphia Marine Center
  Philadelphia   PA           532       2,196       2,285       628       4,385       5,013       1,035     Various     1998       40  
1050 Westlakes Drive
  Berwyn   PA           2,611       10,445       75             13,131       13,131       2,137       1984       1999       40  
11 Campus Boulevard
  Newtown Square   PA     4,581       1,112       4,067       438       1,112       4,505       5,617       951       1998       1999       40  
400 Berwyn Park
  Berwyn   PA           2,657       4,462       15,897       2,657       20,359       23,016       3,493       1999       1999       40  
630 Dresher Road
  Horsham   PA           771       3,083       1,750       771       4,833       5,604       1,077       1987       1999       40  
7130 Ambassador Drive
  Allentown   PA           761       3,046       161       761       3,207       3,968       693       1991       1999       40  
100 Brandywine Boulevard
  Newtown   PA           1,784       9,811       2,987       1,784       12,798       14,582       2,102       2002       2000       40  
1400 Howard Boulevard
  Mt. Laurel   NJ           443             13,238       1,447       12,233       13,681       77       2005       2000       40  
15 Campus Boulevard
  Newtown Square   PA     5,723       1,164       3,896       673       1,164       4,570       5,733       594       2002       2000       40  
1700 Paoli Pike
  Malvern   PA           458       559       3,582       488       4,111       4,599       861       2000       2000       40  
2000 Lenox Drive
  Lawrenceville   NJ     13,538       2,291       12,221       2,803       2,291       15,024       17,315       4,450       2000       2000       40  
300 Welsh Road — Building II
  Horsham   PA     977       396       1,585       129       396       1,714       2,110       505       1980       2000       40  
401 Plymouth Road
  Plymouth Meeting   PA           6,198       16,131       17,430       6,199       33,560       39,759       6,347       2001       2000       40  
630 Allendale Road
  King of Prussia   PA           2,836       4,028       15,955       2,836       19,983       22,819       5,150       2000       2000       40  
640 Allendale Road
  King of Prussia   PA           439       432       1,480       439       1,913       2,351       269       2000       2000       40  
Bishops Gate Corporate Center
  Mt. Laurel   NJ           934       6,287             934       6,799       7,733       588       2005       2000       40  
Macaroni Grill
  Plymouth Meeting   PA           1,043       555             1,043       555       1,598       24       N/A       2000       40  
10 Lake Center Drive
  Marlton   NJ           1,880       7,521       1,232       1,880       8,753       10,633       1,375       1989       2001       40  
100 Arrandale Boulevard
  Exton   PA           970       3,878       1       970       3,880       4,849       559       1997       2001       40  
100 Lindenwood Drive
  Malvern   PA           473       1,892       377       473       2,269       2,742       507       1985       2001       40  
101 Lindenwood Drive
  Malvern   PA           4,152       16,606       1,575       4,152       18,182       22,333       2,916       1988       2001       40  
1100 Cassett Road
  Berwyn   PA           1,695       6,779       2       1,695       6,781       8,476       976       1997       2001       40  
111 Arrandale Road
  Exton   PA           262       1,048       69       262       1,117       1,379       156       1996       2001       40  
111/113 Pencader Drive
  Newark   DE           1,092       4,366       68       1,092       4,434       5,526       641       1990       2001       40  
1160 Swedesford Road
  Berwyn   PA           1,781       7,124       1,171       1,781       8,295       10,076       1,276       1986       2001       40  
1180 Swedesford Road
  Berwyn   PA           2,086       8,342       1,065       2,086       9,407       11,493       1,465       1987       2001       40  
161 Gaither Drive
  Mount Laurel   NJ           1,016       4,064       434       1,016       4,498       5,514       844       1987       2001       40  
200 Lake Drive East
  Cherry Hill   NJ           2,069       8,275       748       2,069       9,023       11,092       1,434       1989       2001       40  
200 Lindenwood Drive
  Malvern   PA           324       1,295       242       324       1,537       1,861       304       1984       2001       40  
210 Lake Drive East
  Cherry Hill   NJ           1,645       6,579       546       1,645       7,125       8,770       1,136       1986       2001       40  
220 Lake Drive East
  Cherry Hill   NJ           2,144       8,798       738       2,144       9,537       11,680       1,487       1988       2001       40  
30 Lake Center Drive
  Marlton   NJ           1,043       4,171       130       1,043       4,301       5,344       686       1986       2001       40  
300 Lindenwood Drive
  Malvern   PA           848       3,394       104       849       3,498       4,346       510       1991       2001       40  
301 Lindenwood Drive
  Malvern   PA           2,729       10,915       1,868       2,729       12,783       15,512       2,076       1984       2001       40  
412 Creamery Way
  Exton   PA           1,195       4,779       722       1,195       5,502       6,696       1,050       1999       2001       40  
429 Creamery Way
  Exton   PA           1,368       5,471       2       1,368       5,473       6,841       788       1996       2001       40  
436 Creamery Way
  Exton   PA           994       3,978       459       994       4,436       5,431       622       1991       2001       40  
440 Creamery Way
  Exton   PA     2,905       982       3,927       1,004       982       4,931       5,913       707       1991       2001       40  
442 Creamery Way
  Exton   PA     2,516       894       3,576       392       894       3,968       4,862       708       1991       2001       40  
457 Creamery Way
  Exton   PA           777       3,107       272       777       3,379       4,156       537       1990       2001       40  
467 Creamery Way
  Exton   PA           906       3,623       444       906       4,067       4,973       626       1988       2001       40  

F - 89


Table of Contents

BRANDYWINE OPERATING PARTNERSHIP, L.P.
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried            
                            Initial Cost   December 31, 2006            
                                            Net                                        
                                            Improvements                           Accumulated            
                                            (Retirements)                           Depreciation at            
                    Encumberances at           Building and   Since           Building and           December 31,   Year of   Year   Depreciable
    City   State   December 31, 2006   Land   Improvements   Acquisition   Land   Improvements   Total (a)   2006 (b)   Construction   Acquired   Life
479 Thomas Jones Way
  Exton   PA           1,075       4,299       681       1,075       4,980       6,055       882       1988       2001       40  
481 John Young Way
  Exton   PA     2,294       496       1,983       1       496       1,984       2,480       286       1997       2001       40  
555 Croton Road
  King of Prussia   PA           4,486       17,943       503       4,486       18,446       22,932       2,887       1999       2001       40  
7360 Windsor Drive
  Allentown   PA           1,451       3,618       2,038       1,451       5,655       7,107       1,594       2001       2001       40  
Two Righter Parkway
  Wilmington   DE           2,802       11,217       5       2,802       11,221       14,024       1,833       1987       2001       40  
1000 Lenox Drive
  Lawrenceville   NJ           1,174       4,696       2,107       1,174       6,803       7,977       1,070       1982       2002       40  
200 Commerce Drive
  Newark   DE     5,841       911       4,414       1,020       911       5,434       6,345       838       1998       2002       40  
400 Commerce Drive
  Newark   DE     11,797       2,528       9,220       4,483       2,528       13,703       16,231       5,593       1997       2002       40  
600 West Germantown Pike
  Plymouth Meeting   PA     11,687       3,652       15,288       649       3,652       15,937       19,589       2,079       1986       2002       40  
610 West Germantown Pike
  Plymouth Meeting   PA     11,315       3,651       14,514       1,331       3,651       15,844       19,496       2,303       1987       2002       40  
620 West Germantown Pike
  Plymouth Meeting   PA     11,453       3,572       14,435       1,641       3,572       16,076       19,648       2,401       1990       2002       40  
630 West Germantown Pike
  Plymouth Meeting   PA     11,297       3,558       14,743       1,269       3,558       16,012       19,570       2,361       1988       2002       40  
6802 Paragon Place
  Richmond   VA           2,917       11,454       2,082       2,917       13,536       16,453       2,061       1989       2002       40  
980 Harvest Drive
  Blue Bell   PA           2,079       7,821       1,215       2,079       9,036       11,115       1,292       1988       2002       40  
565 East Swedesford Road
  Wayne   PA           1,872       7,489       890       1,872       8,379       10,251       785       1984       2003       40  
575 East Swedesford Road
  Wayne   PA           2,178       8,712       459       2,178       9,171       11,349       783       1985       2003       40  
585 East Swedesford Road
  Wayne   PA           1,350       5,401       34       1,350       5,435       6,785       432       1998       2003       40  
595 East Swedesford Road
  Wayne   PA           2,729       10,917       374       2,729       11,291       14,020       891       1998       2003       40  
989 Lenox Drive
  Lawrenceville   NJ           3,701       14,802       860       3,700       15,662       19,363       1,196       1984       2003       40  
100 North 18th Street
  Philadelphia   PA     74,079       16,066       100,255       1,416       16,066       101,671       117,737       8,913       1988       2004       33  
130 North 18th Street
  Philadelphia   PA           14,496       107,736       728       14,473       108,487       122,960       9,514       1998       2004       23  
130 Radnor Chester Road
  Radnor   PA           2,573       8,338       (23 )     2,567       8,320       10,888       582       1983       2004       25  
150 Radnor Chester Road
  Radnor   PA           11,925       36,986       8,223       11,897       45,237       57,134       4,146       1983       2004       29  
170 Radnor Chester Road
  Radnor   PA           2,514       8,147       30       2,509       8,182       10,691       569       1983       2004       25  
201 King of Prussia Road
  Radnor   PA           8,956       29,811       1,192       8,949       31,009       39,959       3,147       2001       2004       25  
300 Delaware Avenue
  Wilmington   DE           6,368       13,739       1,089       6,369       14,827       21,196       1,721       1989       2004       23  
525 Lincoln Drive West
  Marlton   NJ           3,727       17,620       1,770       3,727       19,390       23,117       2,267       1986       2004       40  
555 Lancaster Avenue
  Radnor   PA           8,014       16,508       16,468       7,991       32,999       40,990       832       1973       2004       24  
920 North King Street
  Wilmington   DE           6,141       21,140       528       6,141       21,668       27,809       2,016       1989       2004       30  
Five Radnor Corporate Center
  Radnor   PA           6,506       25,525       1,977       6,578       27,430       34,008       2,162       1998       2004       38  
Four Radnor Corporate Center
  Radnor   PA           5,406       21,390       7,648       5,705       28,739       34,444       2,609       1995       2004       30  
Four Tower Bridge
  Conshohocken   PA     10,626       2,672       14,221       (112 )     2,672       14,109       16,781       5,192       1998       2004       40  
One Radnor Corporate Center
  Radnor   PA           7,323       28,613       (34 )     7,323       28,579       35,902       2,683       1998       2004       29  
Six Tower Bridge
  Conshohocken   PA     14,744       2,827       15,525       20       2,827       15,545       18,372       4,731       1999       2004       40  
Three Radnor Corporate Center
  Radnor   PA           4,773       17,961       (100 )     4,791       17,843       22,634       1,654       1998       2004       29  
Two Radnor Corporate Center
  Radnor   PA           3,937       15,484       82       3,942       15,560       19,503       1,501       1998       2004       29  
1 West Elm Street
  W. Conshohocken   PA           3,557       14,249             3,557       14,254       17,811       446       1999       2005       40  
101 West Elm Street
  W. Conshohocken   PA           6,251       25,209       647       6,251       25,856       32,107       942       1999       2005       40  
Arcadia Land
  Upper Macungie   PA           5             0       5             5             N/A       2005       40  
1 Kaiser Plaza
  Oakland   CA     50,088       15,034       107,422       1,130       15,291       108,294       123,585       3,653       1978       2006       46  
100 Lenox Drive
  Lawrenceville   NJ           2,035       8,158       36       2,035       8,194       10,229       188       1991       2006       40  
101-103 Juniper Street
  Philadelphia   VA           464       1,843       1       464       1,844       2,308       35       N/A       2006       40  
11700 Beltsville Drive
  Beltsville   MD           2,808       12,081       46       2,858       12,077       14,935       313       1981       2006       46  
11710 Beltsville Drive
  Beltsville   MD           2,278       11,100       (944 )     2,317       10,117       12,434       324       1987       2006       46  
11720 Beltsville Drive
  Beltsville   MD           3,831       16,661       414       3,897       17,009       20,906       536       1987       2006       46  
11740 Beltsville Drive
  Bethesda   MD           198       870       9       202       875       1,077       36       1987       2006       46  
1177 East Beltline Road
  Coppell   TX     20,337       1,516       14,895       13       1,517       14,908       16,425       597       1998       2006       42  
11781 Lee Jackson Memorial Highway
  Fairfax   VA           3,246       19,836       167       3,302       19,948       23,250       999       1982       2006       40  
1200 Concord Avenue
  Concord   CA     20,519       6,395       24,664       551       6,504       25,106       31,610       1,673       1984       2006       34  
12015 Lee Jackson Memorial Highway
  Fairfax   VA           3,770       22,895       184       3,835       23,014       26,849       1,011       1985       2006       42  
1220 Concord Avenue
  Concord   CA     20,528       6,476       24,966       9       6,476       24,975       31,451       1,673       1984       2006       34  
1221 Mopac Expressway
  Austin   TX           3,290       31,548       459       3,361       31,935       35,296       1,045       2001       2006       55  
1250 Capital of Texas Hwy South
  Austin   TX           5,152       37,928       (51 )     5,241       37,788       43,029       1,367       1984       2006       52  
1301 Mopac Expressway
  Austin   TX           4,188       41,229       262       4,245       41,434       45,679       1,113       2001       2006       55  
1333 Broadway
  Oakland   CA     24,318       4,519       35,235       159       4,519       35,394       39,913       1,946       1972       2006       40  
13825 Sunrise Valley Drive
  Herndon   VA           3,794       19,365       173       3,859       19,473       23,332       1,083       1989       2006       46  
13880 Dulles Corner Lane
  Herndon   VA           7,236       39,213       344       7,360       39,433       46,793       1,159       1997       2006       55  
1501 South Mopac Expressway
  Austin   TX           3,698       34,912       984       3,761       35,832       39,594       1,656       1999       2006       53  
1601 Mopac Expressway
  Austin   TX           3,538       34,346       692       3,599       34,978       38,577       1,063       2000       2006       54  
1676 International Drive
  Mclean   VA     63,064       18,437       97,538       882       18,753       98,105       116,858       2,275       1999       2006       55  
16870 W Bernardo Drive
  San Diego   CA     10,700       2,979       15,896       6       2,979       15,902       18,881       953       2002       2006       56  
1801 Mopac Expressway
  Austin   TX           1,227       10,959       42       1,248       10,980       12,228       287       1999       2006       53  
1880 Campus Commons Drive
  Reston   VA           6,164       28,114       46       6,270       28,054       34,324       598       1985       2006       52  
1900 Gallows Road
  Vienna   VA           7,797       47,817       556       7,930       48,239       56,170       1,591       1989       2006       52  
1901 Harrison Street
  Oakland   CA     30,056       5,442       59,920       727       5,535       60,554       66,089       1,716       1985       2006       48  

F - 90


Table of Contents

BRANDYWINE OPERATING PARTNERSHIP, L.P.
Real Estate and Accumulated Depreciation — December 31, 2006
(in thousands)
                                                                                                         
                                                    Gross Amount at Which Carried                    
                            Initial Cost     December 31, 2006                    
                                            Net                                                  
                                            Improvements                             Accumulated                    
                                            (Retirements)                             Depreciation at                    
                    Encumberances at             Building and     Since             Building and             December 31,     Year of     Year     Depreciable  
    City     State     December 31, 2006     Land     Improvements     Acquisition     Land     Improvements     Total (a)     2006 (b)     Construction     Acquired     Life  
196 Van Buren Street
  Herndon   VA     15,338       6,023       31,780       12       6,023       31,792       37,815       1,985       1991       2006       53  
198 Van Buren Street
  Herndon   VA     15,562       1,908       12,032       5       1,908       12,037       13,945       385       1996       2006       53  
2035 Corte Del Nogal
  Carlsbad   CA     5,728       3,261       6,077       2       3,261       6,079       9,340       472       1991       2006       39  
2101 Webster Street
  Oakland   CA           13,051       89,728       1,664       13,275       91,169       104,444       3,323       1985       2006       44  
2121 Cooperative Way
  Herndon   VA           5,598       38,639       538       5,777       38,999       44,775       1,150       2000       2006       54  
2201 Cooperative Way
  Herndon   VA           4,809       34,093       121       4,809       34,215       39,024       1,476       1990       2006       54  
2251 Corporate Park Drive
  Herndon   VA           11,472       45,893       17       11,472       45,910       57,382       96       2000       2006       40  
2273 Research Boulevard
  Rockville   MD     15,787       5,167       31,110       1,326       5,231       32,372       37,602       998       1999       2006       45  
2275 Research Boulevard
  Rockville   MD     15,741       5,059       29,668       805       5,145       30,386       35,532       1,309       1990       2006       45  
2277 Research Boulevard
  Rockville   MD     14,647       4,649       26,952       266       4,726       27,142       31,867       947       1986       2006       45  
2291 Wood Oak Drive
  Herndon   VA     31,000       8,243       52,413       20       8,243       52,433       60,676       5,034       1999       2006       55  
2340 Dulles Corner Boulevard
  Herndon   VA           16,345       65,379       185       16,345       65,565       81,909       547       1987       2006       40  
2355 Dulles Corner Boulevard
  Herndon   VA           10,365       43,876       17       10,365       43,893       54,258       599       1988       2006       40  
2411 Dulles Corner Park
  Herndon   VA           7,279       46,340       406       7,404       46,621       54,026       1,674       1990       2006       50  
2711 N Haskell Avenue
  Dallas   TX           8,597       97,681       647       8,753       98,171       106,924       5,858       1998       2006       37  
3130 Fairview Park Drive
  Falls Church   VA           6,576       51,605       247       6,688       51,740       58,428       1,275       1999       2006       53  
3141 Fairview Park Drive
  Falls Church   VA           5,918       40,981       295       6,038       41,157       47,195       1,340       1988       2006       51  
3141 Fairview Park Drive
  Falls Church   VA           733       4,939       (4 )     733       4,935       5,668       134       1988       2006       51  
3141 Fairview Park Drive
  Falls Church   VA           297       1,964       1       297       1,965       2,262       40       1988       2006       51  
4401 Fair Lakes Court
  Fairfax   VA           1,569       11,982       (47 )     1,596       11,908       13,504       375       1988       2006       52  
5780 & 5790 Fleet Street
  Carlsbad   CA     14,500       7,073       22,907       8       7,072       22,916       29,988       1,836       1999       2006       55  
5900 & 5950 La Place Court
  Carlsbad   CA     8,252       3,706       11,185       4       3,706       11,189       14,895       691       1988       2006       48  
5963 La Place Court
  Carlsbad   CA     6,534       2,824       9,413       4       2,824       9,417       12,241       560       1987       2006       55  
5973 Avenida Encinas
  Carlsbad   CA     5,486       2,121       8,361       3       2,121       8,364       10,485       618       1986       2006       45  
6600 Rockledge Drive
  Bethesda   MD                 37,421       36             37,457       37,457       733       1981       2006       50  
6800 Paragon Place
  Richmond   VA           4,552       18,414       24       4,552       18,438       22,990       120       1986       2006       40  
7101 Wisconsin Avenue
  Bethesda   MD           9,634       48,402       2,215       9,799       50,452       60,251       1,626       1975       2006       45  
7735 Old Georgetown Road
  Bethesda   MD           4,370       23,192       261       4,445       23,379       27,824       903       1997       2006       45  
8260 Greensboro Drive
  Mclean   VA     33,958       7,952       33,964       (50 )     8,088       33,777       41,866       1,179       1980       2006       52  
8521 Leesburg Pike
  Vienna   VA           4,316       30,885       549       4,390       31,360       35,749       1,166       1984       2006       51  
Cityplace Conference Center
  Dallas   TX           505       5,071       2       505       5,073       5,578       137       1998       2006       37  
2929 Arch Street
  Philadelphia   PA                 208,570       79             208,649       208,649       5,659       2005       N/A       40  
922 Swedesford Road
  Berwyn   PA           218                   218             218             N/A       N/A       40  
 
                                                                                       
 
                                                                                                       
 
  Subtotal:           $ 878,969     $ 754,373     $ 3,887,653     $ 284,763     $ 756,383     $ 4,170,923     $ 4,927,305     $ 515,698                          
 
                                                                                       
 
                                                                                                       
Real Estate Classified as Held for Sale @ 12/31/06:                                                                                        
 
                                                                                                       
160 - 180 West Germantown Pike
  East Norriton   PA     5,105       1,603       6,418       1,587       1,603       8,005       9,608       2,260       1982       1998       40  
1505/1507 LBJ Freeway
  Farmers Branch   TX           4,393       27,825       (603 )     4,165       27,450       31,614       1,263       1989       2006       41  
1501/1503 LBJ Freeway
  Farmers Branch   TX           3,727       28,099       (4,142 )     3,210       24,474       27,683       1,217       1985       2006       37  
1601 LBJ Freeway
  Dallas   TX           3,122       16,194       (65 )     3,099       16,152       19,250       681       1982       2006       34  
1603 LBJ Freeway
  Dallas   TX           1,170       18,045       40       1,149       18,106       19,255       629       1985       2006       34  
 
                                                                                       
 
                                                                                                       
 
  Subtotal:           $ 5,105     $ 14,015     $ 96,580     $ (3,183 )   $ 13,225     $ 94,186     $ 107,411     $ 6,050                          
 
                                                                                       
 
                                                                                                       
 
  Total:           $ 884,074     $ 768,388     $ 3,984,233     $ 281,579     $ 769,608     $ 4,265,108     $ 5,034,716     $ 521,748                          
 
                                                                                       

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Table of Contents

(a)   Reconciliation of Real Estate:
 
    The following table reconciles the real estate investments from January 1, 2004 to December 31, 2006 (in thousands):
                         
    2006     2005     2004  
Balance at beginning of year
  $ 2,560,061     $ 2,483,134     $ 1,869,744  
Additions:
                       
Acquisitions
    2,370,241       71,783       578,197  
Consolidation of VIE’s (1)
                35,245  
Capital expenditures
    334,238       47,732       30,953  
Less:
                       
Dispositions
    (229,824 )     (42,588 )     (31,005 )
Assets transferred to held-for-sale
    (107,411 )            
 
                 
Balance at end of year
  $ 4,927,305     $ 2,560,061     $ 2,483,134  
 
                 
(b)   Reconciliation of Accumulated Depreciation:
 
    The following table reconciles the accumulated depreciation on real estate investments from January 1, 2004 to December 31, 2006 (in thousands):
                         
    2006     2005     2004  
Balance at beginning of year
  $ 390,333     $ 325,802     $ 268,091  
Additions:
                       
Depreciation expense — continued operations
    162,503       78,465       60,179  
Depreciation expense — discontinued operations
    12,305       171       224  
Consolidation of VIE’s (1)
                7,741  
Acquisitions
    1,037              
Less:
                       
Dispositions
    (44,430 )     (14,105 )     (10,433 )
Assets transferred to held-for-sale
    (6,050 )            
 
                 
Balance at end of year
  $ 515,698     $ 390,333     $ 325,802  
 
                 
 
(1)   - Joint ventures which were consolidated at March 31, 2004 under Financial Interpretation 46-R (“FIN-46-R”), “Consolidation of Variable Interest Entities.”
 
(2)   - Schedule III excludes an asset owned that is subject to a deferred financing lease.

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