10-K405 1 0001.txt 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 ------------------------------------------------------ OR ( ) 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 1-9106 ------ Brandywine Realty Trust -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 23-2413352 ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 14 Campus Boulevard, Newtown Square, Pennsylvania 19073 ------------------------------------------------- ---------- (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) New York Stock Exchange ------------------------------------- ----------------------- Securities registered pursuant to Section 12(g) of the Act: none -------------------------------------------------------------------------------- (Title of class) -------------------------------------------------------------------------------- (Title of class) 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. Yes [X] No [ ] 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. [X] The aggregate market value of the Common Shares of Beneficial Interest held by non-affiliates of the registrant was approximately $652.5 million as of March 15, 2001. 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 36,090,761 Common Shares of Beneficial Interest were outstanding as of March 15, 2001. Documents Incorporated By Reference Portions of the proxy statement for the Annual Meeting of Shareholders of Brandywine Realty Trust to be held in 2001 are incorporated by reference into Part III of this Form 10-K. -2- TABLE OF CONTENTS FORM 10-K Page ---- PART I........................................................................ 4 Item 1. Business............................................................ 4 Item 2. Properties..........................................................14 Item 3. Legal Proceedings...................................................25 Item 4. Submission of Matters to a Vote of Security Holders.................26 PART II.......................................................................26 Item 5. Market for Registrant's Common Equity and Related Shareholder Matters........................................26 Item 6. Selected Financial Data.............................................27 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................................28 Item 7A. Quantitative and Qualitative Disclosure About Market Risk...........32 Item 8. Financial Statements and Supplementary Data.........................32 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........................................33 PART III......................................................................33 Item 10. Trustees and Executive Officers of the Registrant...................33 Item 11. Executive Compensation..............................................33 Item 12. Security Ownership of Certain Beneficial Owners and Management......33 Item 13. Certain Relationships and Related Transactions......................33 PART IV.......................................................................34 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....34 -3- PART I Item 1. Business General Brandywine Realty Trust (collectively with its subsidiaries, the "Company") is a self-administered and self-managed real estate investment trust ("REIT") active in acquiring, developing, redeveloping, leasing and managing office and industrial properties. As of December 31, 2000, the Company owned 197 office properties, 52 industrial facilities and one mixed-use property (the "Properties") containing an aggregate of approximately 16.5 million net rentable square feet and managed an additional 47 properties containing 4.0 million net rentable square feet. As of December 31, 2000, the Company also owned approximately 477 acres of undeveloped land and held options to purchase approximately 89 additional acres. The properties, owned and managed by the Company, are located in the office and industrial markets surrounding Philadelphia, Pennsylvania, New Jersey, Long Island, New York and Richmond, Virginia. As of December 31, 2000, the Company also owned economic interests in thirteen real estate ventures (the "Real Estate Ventures") with an aggregate investment of $33.6 million (net of returns). Nine of the Real Estate Ventures own ten office buildings that contain an aggregate of approximately 1.3 million net rentable square feet; two Real Estate Ventures are developing two office buildings that will contain, upon completion, an aggregate of approximately 316,000 net rentable square feet; one Real Estate Venture is developing a hotel property that will contain, upon completion, approximately 137 rooms; and one Real Estate Venture holds approximately six acres of land for future development. Subsequent Event On March 14, 2001, the Company announced an exchange of properties with Prentiss Properties Acquisition Partners, L.P. ("Prentiss") whereby the Company agreed to acquire from Prentiss 30 properties containing approximately 1.6 million net rentable square feet, a four-story 103,000 square foot office building currently under construction and approximately 12.9 acres of developable land. These properties are located in Pennsylvania, New Jersey and Delaware. As of March 14, 2001, the 30 properties were approximately 90% leased to 119 tenants. As part of its agreement to acquire these properties, the Company has agreed to convey four office properties located in Northern Virginia that contain an aggregate of approximately 657,000 net rentable square feet, to assume approximately $79.8 million of mortgage debt secured by certain of the Prentiss properties, to pay approximately $19.6 million at closing and to pay an additional amount of approximately $15.4 million over a three year period subsequent to closing. The Company has separately agreed to contribute to Prentiss its interest in a joint venture that owns two additional office properties that contain an aggregate of approximately 451,650 net rentable square feet in exchange for a combination of preferred and common units of limited partnership interest in Prentiss having an approximate value of $10.65 million. A more complete summary of the pending transaction with Prentiss is contained in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 23, 2001. As indicated in the Form 8-K, consummation of the transaction with Prentiss is subject to customary closing conditions and no assurance can be given that all or part of the transaction will be cosumated. Business Objectives The Company's business objectives are to: o maximize cash flow through leasing strategies designed to capture potential rental growth as rental rates increase and as below-market leases are renewed; -4- o ensure a high tenant retention rate through aggressive tenant service programs responsive to the varying needs of the Company's diverse tenant base; o increase economic diversification while maximizing economies of scale; o develop high-quality office and industrial properties on the Company's existing inventory of land, as warranted by market conditions; o capitalize on management's redevelopment expertise to selectively acquire, redevelop and reposition underperforming properties in desirable locations; o acquire high-quality office and industrial properties and portfolios of such properties at attractive yields in selected submarkets within the Mid-Atlantic region (including Delaware, New Jersey, New York, Pennsylvania and Virginia) that management expects will experience economic growth and that provide barriers to entry; o enhance the Company's investment strategy through the pursuit of joint venture opportunities with high-quality partners having attractive real estate holdings or significant financial resources; and o execute an investment strategy that effectively balances creating long-term growth opportunities with the Company's public market valuation. The Company expects to continue to concentrate its real estate activities in submarkets within the Mid-Atlantic region where it believes that: (i) 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; (ii) current market rents and absorption statistics justify limited new construction activity; (iii) it can maximize market penetration by accumulating a critical mass of properties and thereby enhance operating efficiencies; and (iv) there is potential for economic growth. The Company's executive offices are located at 14 Campus Boulevard, Suite 100, Newtown Square, Pennsylvania 19073 and its telephone number is (610) 325-5600. Organization The Company was organized and commenced its operations in 1986 as a Maryland real estate investment trust. The Company 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. As of December 31, 2000, the Company's ownership interest in the Operating Partnership entitled it to approximately 94.3% of the Operating Partnership's distributions after distributions by the Operating Partnership to holders of its preferred units. The structure of the Company as an "UPREIT" is designed, in part, to permit persons contributing properties (or interests in properties) to the Company to defer some or all of the tax liability they might otherwise incur in a sale of properties. The Company conducts its real estate management services through Brandywine Realty Services Corporation (the "Management Company"), a wholly-owned subsidiary of the Operating Partnership. See "Management Company." Credit Facility The Company maintains an unsecured credit facility (the "Credit Facility") that bears interest at LIBOR plus 1.5%, with the spread over LIBOR subject to reductions by .125% to .35% based on the Company's leverage. The maximum amount available under the Credit Facility is $450 million. As of December 31, 2000, the Company had unused availability under the Credit Facility of $96.6 million. The Credit Facility matures in September 2001, subject to the Company's right upon payment of a fee to extend the maturity to September 2002. -5- Additional Debt Mortgage Indebtedness. The following table sets forth information regarding the Company's mortgage indebtedness outstanding at December 31, 2000:
Annual Debt Principal Interest Service Balance Rate (in 000's) Maturity Property / Location (in 000's) (a) (a)(b) Date -------------------------------------- ---------- -------- ---------- -------- One & Three Christina, Park 80 1 & 11, and 10000 & 15000 Midlantic Drive $116,190 7.18% 9,975 2/04 Grande B (29 properties) 85,044 7.48% 7,459 7/27 100, 200 and 300 Berwyn Park, 50 East State Street, and 33 West State Street 73,000 8.75% 7,873 4/02 Grande A (24 properties) 68,613 7.48% 7,419 7/27 993, 997 and 2000 Lenox Drive, 2000, 4000, 9000 Midlantic Drive and I Righter Parkway 68,000 8.05% 1,548 10/11 Arboretum 1, 11, 111 & V 25,800 8.00% 2,064 7/01 Grande A (24 properties) 20,000 7.47% 1,543 7/27 630 Alledale Road 18,095 8.12% 128 2/03 1009 Lenox Drive 14,573 8.25% 1,654 7/03 457 Haddonfield Road 8,725 8.96% 849 3/01 One - Three Greentree Centre 6,575 7.56% 697 1/02 Norriton Office Center 5,521 8.50% 528 10/07 1120 Executive Plaza 5,064 9.88% 828 3/02 Grande A (24 properties) 5,035 7.64% 388 7/27 1000 Howard Boulevard 4,862 9.25% 799 11/04 I nterstate Center 1,529 8.75% 233 3/07 Corporate Center Drive 1,251 8.00% 83 6/01 -------- ------- Total mortgage indebtedness $527,877 $44,068 ======== =======
(a) For loans that bear interest at a variable rate, the rates in effect at December 31, 2000 have been assumed to remain constant. (b) "Annual Debt Service" is calculated by annualizing the regularly scheduled principal and interest amortization. Guaranties. As of December 31, 2000, the Company had guaranteed repayment of approximately $16.5 million of loans for the Real Estate Ventures. The Company selectively provides completion guaranties on behalf of Real Estate Ventures as part of their development activities. As of December 31, 2000, the Company had provided completion guaranties relating to the construction of three development projects, two of which were substantially completed during the first quarter of 2001, the other expected to be completed during the fourth quarter of 2001. Management Activities The Company conducts its real estate management services business through the Management Company. As of December 31, 2000, the Management Company was managing properties containing an aggregate of approximately 20.3 million net rentable square feet, of which approximately 16.3 million net rentable square feet related to Properties owned by the Company or subject to purchase options held by the Company, and approximately 4.0 million net rentable square feet related to properties owned by unaffiliated third parties. Geographic Segments The Company currently manages its portfolio within three segments: (1) Pennsylvania, (2) New Jersey/New York and (3) Virginia. (See Note 10 to the Financial Statements.) The Company does not have any foreign operations and its business is not seasonal. -6- Competition The leasing of real estate is highly competitive. The Properties compete for tenants with similar properties located in its markets 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. The Company also faces competition when attempting to acquire real estate, including competition from domestic and foreign financial institutions, other REIT's, life insurance companies, pension funds, partnerships and individual investors. Employees As of December 31, 2000, the Company employed 262 persons. Regulations Many laws and governmental regulations are applicable to the Properties and changes in these laws and regulations or their interpretation by agencies and the courts occur frequently. See "Risk Factors - Environmental problems are possible and may be costly." Risk Factors The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Annual Report on Form 10-K and other materials filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company) contain statements that are or will be forward-looking, such as statements relating to business development and real estate development activities, acquisitions, dispositions, future capital expenditures, financing sources and availability, and the effects of regulation (including environmental regulation) and competition. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. As forward-looking statements, these statements involve 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, or on behalf of, the Company. These risks, uncertainties and other factors include, without limitation, uncertainties affecting real estate businesses generally (such as entry into new leases, renewals of leases and dependence on tenants' business operations), risks relating to the Company's ability to maintain and increase property occupancy and rental rates, risks relating to construction and development activities, acquisitions, dispositions, possible environmental liabilities, risks relating to leverage and debt service (including availability of financing terms acceptable to the Company and sensitivity of the Company's operations and financing arrangements to fluctuations in interest rates), dependence on the primary markets in which the Company's properties are located, the existence of complex regulations relating to status as a REIT and the adverse consequences of the failure to qualify as a REIT, and the potential adverse impact of market interest rates on the market price for the Company's securities. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Prospective investors should carefully consider the following risk factors together with the other reports and documents the Company files with the Securities and Exchange Commission, which may include additional or more current relevant information. o We depend on the performance of our primary markets, and changes in such markets may adversely affect our financial condition. Our Properties are located in suburban markets in Pennsylvania, New Jersey, New York, Virginia and Delaware. Like other real estate markets, these markets have experienced economic downturns in the past, and future declines in any of these real estate markets could adversely affect our operations or cash flow and ability to make distributions to shareholders. Our financial performance will be particularly sensitive to the economic -7- conditions in these markets. Our revenues and the value of our Properties may be adversely affected by a number of factors, including the economic climate in these markets (which may be adversely impacted by business layoffs, industry slowdowns, changing demographics and other factors) and real estate conditions in these markets (such as oversupply of or reduced demand for office and industrial properties). These factors, when and if they occur in the area in which our Properties are located, would adversely affect our cash flow and ability to make distributions to shareholders. Our ability to make distributions is subject to various risks. We pay quarterly distributions to our shareholders. Our ability to make distributions in the future will depend upon: o the performance of our Properties; o capital expenditures with respect to existing and newly acquired properties; o the amount of, and the interest rates on, our debt; and o 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. o We may be unable to renew leases or relet space as leases expire. If tenants fail to renew their leases upon expiration, we may be unable to relet the subject space. Even if the tenants do renew their leases or we can relet the space, the terms of renewal or reletting (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. While we have estimated our expenditures for new and renewal leases for 2001 and 2002, no assurances can be given as to the accuracy of such estimates. o Financially distressed tenants may limit our ability to realize the value of our investments. Following a tenant's lease default, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. In addition, a tenant may seek bankruptcy law protection which could relieve the tenant from its obligation to make lease payments. o 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 do. No assurances can be given that this competition will not adversely affect our cash flow and ability to make distributions to shareholders. -8- o Because real estate is illiquid, we may not be able to sell properties when appropriate. Real estate investments generally cannot be sold quickly. We may not be able to vary our portfolio promptly in response to economic or other conditions. In addition, the Internal Revenue Code of 1986 (the "Code") limits our ability to sell properties held for fewer than four years. Purchase options and rights of first refusal held by certain tenants may also limit our ability to sell certain properties. Any of these factors 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. o We have agreed not to sell certain of our properties. We have agreed with the former owners of 77 of our properties aggregating approximately 4.4 million net rentable square feet not to sell these properties for varying periods of time in transactions that would trigger taxable income to the former owners, subject to certain exceptions. Some of these agreements are with affiliates of current trustees of our company. In addition, we may enter into similar agreements with future sellers of properties. These agreements generally provide that we may dispose of the applicable properties in transactions that qualify as tax-free exchanges under Section 1031 of the Code or in other tax deferred transactions. Therefore, without suffering adverse financial consequences, we may be precluded from selling certain properties other than in transactions that would qualify as tax-free exchanges for federal income tax purposes. o 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. The Properties are also subject to various regulatory requirements, such as those relating to fire and safety. Our failure to comply with these requirements could result in the imposition of fines and damage awards. While we believe that the Properties are currently in material compliance with all such requirements, there can be no assurance that these requirements will not change or that newly imposed requirements will not require significant unanticipated expenditures. o By holding properties through the Operating Partnership and various joint ventures, we are exposed to additional risks. We own the Properties and interests in Real Estate Ventures through the Operating Partnership. In the future, we expect to continue to participate with other entities in property ownership through joint ventures or partnerships. Partnership or joint venture investments may involve risks not otherwise present in direct investments. Such risks include: o the potential bankruptcy of our partners or co-venturers; o a conflict between our business goals and those of our partners or co-venturers; and o actions taken by our partners or co-venturers contrary to our instructions or objectives. There is no limitation under our organizational documents as to the amount of funds which we may invest in partnerships or joint ventures. -9- o New development and acquisitions may fail to perform in accordance with our expectations and may require development and renovation costs exceeding our estimates. Changing market conditions and the higher yielding allocation of capital to our development program, have reduced our acquisitions. Once made, our investments may fail to perform in accordance with our expectations. Our actual renovation and improvement costs in bringing an acquired property up to market standards may exceed our estimates. In addition, we are active in developing and redeveloping office properties. Risks associated with these activities include: o the unavailability of favorable financing, including permanent financing to repay construction financing; o construction costs exceeding original estimates; o construction and lease-up delays resulting in increased debt service and construction costs; and o insufficient occupancy levels and rental rates at a newly completed property causing a property to be unprofitable. o Our indebtedness subjects us to additional risks. Debt Financing and Existing Debt Maturities. We are subject to risks normally associated with debt financing, such as the insufficiency of cash flow to meet required 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 mortgage financing 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. Risk of Rising Interest Rates and Variable Rate Debt. 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. No Limitation on Debt. Our organizational documents do not contain any limitation on our ability to incur additional debt. Accordingly, we could increase our outstanding debt without restriction. The increased debt service could adversely affect our cash flow and ability to make distributions and could increase the risk of default on our indebtedness. -10- o Our status as a REIT is dependent on compliance with federal income tax requirements. Our failure to qualify as a REIT would have serious adverse consequences to our shareholders. We believe that since 1986, we have qualified for taxation as a REIT for federal income tax purposes. We plan to continue to meet the requirements for taxation as a REIT. Many of these requirements are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances that may not be totally within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from certain sources that are itemized in the REIT tax laws. We are also required to distribute to shareholders at least 95% of our REIT taxable income (excluding capital gains). The fact that we hold our assets through the Operating Partnership and its subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, Congress and the IRS might change the tax laws and regulations, and the courts might issue new rulings that make it more difficult, or impossible, for us to remain qualified as a REIT. We do not believe, however, that any pending or proposed tax law changes would jeopardize our REIT status. To maintain REIT status, a REIT may not own more than 10% of the voting stock of any corporation, except for a qualified REIT subsidiary (which must be wholly-owned by the REIT) or another REIT. Arthur Andersen LLP, our tax advisor, has given us an opinion to the effect that, beginning with our taxable year ended December 31, 1986, we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code (the "Code") and that our current organization and method of operation will enable us to continue to so qualify. The opinion of Arthur Andersen LLP is based on assumptions and factual representations made by us regarding our ability to meet the requirements for qualification as a REIT. Such opinion is not binding on the IRS or any court. Moreover, Arthur Andersen LLP does not review or monitor our compliance with the requirements for REIT qualification on an ongoing basis. We cannot guarantee that we will be qualified and taxed as a REIT, because our qualification and taxation as a REIT will depend upon our ability to meet, on an ongoing basis, the requirements imposed under the Code. If we fail to qualify as a REIT, we would be subject to federal income tax at regular corporate rates. Also, unless the IRS granted us relief under certain statutory provisions, we would remain disqualified as a REIT for four years following the year we first failed to qualify. If we failed to qualify as a REIT, we 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 of the value of our securities. In addition, we would no longer be required to make any distributions to shareholders. In order to make the distributions required to maintain our REIT status, we may need to borrow funds. To obtain the favorable tax treatment associated with REIT qualification, we generally will be required to distribute to shareholders at least 95% of our annual REIT taxable income (excluding net capital gains). In addition, we will be subject to tax on our undistributed net taxable income and net capital gain and a 4% nondeductible excise tax on the amount, if any, by which certain distributions paid by us with respect to any calendar year are less than the sum of 85% of ordinary income plus 95% of capital gain net income for the calendar year, plus certain undistributed amounts from prior years. We intend to make distributions to shareholders to comply with the distribution provisions of the Code and to avoid income and other taxes. Our income will consist primarily of our share of the income of the Operating Partnership and our cash flow will consist primarily of our share of distributions from the Operating Partnership. Differences in timing between the receipt of income and the payment of expenses in arriving at taxable income (of the Company or the Operating Partnership) and the effect of required debt amortization payments could require us to borrow funds on a short-term basis or to liquidate funds on adverse terms to meet the REIT qualification distribution requirements. -11- 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 such partnership to us and our shareholders. We do pay some taxes. Even if we qualify as a REIT, we are required to pay certain federal, state and local taxes on our income and property. In addition, the Management Company is subject to federal, state and local income tax at regular corporate rates on its net taxable income derived from its 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 own a subsidiary REIT. One of our subsidiaries, Atlantic American Properties Trust ("AAPT"), that indirectly holds approximately 24 of the Properties, elected to be taxed as a REIT for the year ended December 31, 1997. So long as we seek to maintain AAPT's REIT status, AAPT will be subject to all the requirements and risks associated with maintaining REIT status summarized above, including the limitation on the ownership of more than 10% of the voting securities of any corporation (other than a qualified REIT subsidiary or another REIT). AAPT indirectly owns non-voting common stock issued by a corporation which is neither a qualified REIT subsidiary nor a REIT. o Environmental problems at the Properties are possible and may be costly. Federal, state and local laws, ordinances and regulations may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or releases at such property. The owner or operator may be forced to pay for property damage and for investigation and clean-up costs incurred by others in connection with environmental contamination. Such laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site. These costs may be substantial and the presence of such substances may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. Independent environmental consultants have conducted a standard Phase I or similar general environmental site assessment ("ESA") of each of our Properties to identify potential sources of environmental contamination and assess environmental regulatory compliance. For a number of the Properties, the Phase I ESA either referenced a prior Phase II ESA obtained on such Property or prompted us to have a Phase II ESA of such Property conducted. A Phase II ESA generally involves invasive procedures, such as soil sampling and testing or the installation and monitoring of groundwater wells. While the ESAs conducted have identified environmental contamination on a few of the Properties, they have not revealed any environmental contamination, liability or compliance concern that we believe would have a material adverse effect on our cash flow or ability to make distributions to shareholders. It is possible that the existing ESAs relating to the Properties do not reveal all environmental contaminations, liabilities or compliance concerns which currently exist, and it is also possible that the cost of remediating identified contamination may exceed current estimates. In addition, future properties which we acquire may be subject to environmental conditions. -12- o Some potential losses are not covered by insurance. We 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 that generally are not insured. 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. o We are dependent upon our key personnel. We are dependent upon the efforts of our executive officers, particularly Anthony A. Nichols, Sr. and Gerard H. Sweeney. The loss of their services could have an adverse affect on our operations. Although we have employment agreements with Messrs. Nichols and Sweeney for terms extending to December 31, 2003, such agreements do not restrict their ability to become employed by a competitor following the termination of their employment with us. o Certain limitations 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 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 the Company. If anyone acquires shares in excess of the ownership limit, we may: o consider the transfer to be null and void; o not reflect the transaction on our books; o institute legal action to stop the transaction; o not pay dividends or other distributions with respect to those shares; o not recognize any voting rights for those shares; and o 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 the Board of Trustees to issue preferred shares. The Board of Trustees may establish the preferences and rights of any preferred shares issued which 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. Limitations imposed by the Business Combination Law. The Maryland General Corporation Law, as applicable to Maryland real estate investment trusts, establishes special restrictions against "business combinations" between a Maryland real estate investment trust 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, the law prohibits (for a period of five years) a merger and certain other transactions between the trust and an interested shareholder unless the Board of Trustees approved the transaction before the party became an interested shareholder. The five-year period runs from the most recent date -13- 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 trust's 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 its 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 our acquisition would be in our shareholders' best interests. We have exempted any business combination involving Safeguard Scientifics, Inc., the Commonwealth of Pennsylvania State Employees' Retirement System and a voting trust established for its benefit, Morgan Stanley Asset Management Inc. and two funds managed by it, Lazard Freres Real Estate Investors, L.L.C., Five Arrows Realty Securities III L.L.C., Gerard H. Sweeney (the Company's President and Chief Executive Officer) and any of their respective affiliates or associates. o The issuance of Preferred Shares may adversely affect the rights of holders of Common Shares. Because the Board of Trustees has the power to establish the preferences and rights of each class or series of Preferred Shares, it 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. Item 2. Properties Properties As of December 31, 2000, the Company owned 197 office properties, 52 industrial facilities and one mixed-use property that contained an aggregate of approximately 16.5 million net rentable square feet. The properties are located in the office and industrial markets surrounding Philadelphia, Pennsylvania, New Jersey, Long Island, New York and Richmond, Virginia. As of December 31, 2000, the Properties (excluding two Properties under redevelopment) were approximately 95.6 % leased to 1,246 tenants and had an average age of approximately 16.6 years. The office Properties are primarily one to three story suburban office buildings containing an average of approximately 66,000 net rentable square feet. The industrial Properties accommodate a variety of tenant uses, including light manufacturing, assembly, distribution and warehousing. The Company carries comprehensive liability, fire, extended coverage and rental loss insurance covering all of the Properties, with policy specifications and insured limits which the Company believes are adequate. If the transaction with Prentiss is consummated on the terms summarized in Item 1. Business, the Company's portfolio will consist of 221 office properties containing an aggregate of approximately 14.5 million net rentable square feet, 55 industrial properties containing an aggregate of approximately 2.8 million net rentable square feet and one mixed use property containing approximately 185,000 net rentable square feet. In addition, the Company's land holdings will consist of approximately 582 acres, which management estimates can accommodate approximately 4.9 million net rentable square feet of office and industrial development. -14- The following table sets forth certain information with respect to the Properties at December 31, 2000:
Total Base Rent Net Percentage for the Twelve Rentable Leased as of Months Ended Year Square December December 31, Property Name Location State Built Feet 31, 2000 (a) 2000 (b) (000's) ------------- -------- ----- ----- -------- ------------- ----------------- PENNSYLVANIA SEGMENT 100-300 Gundy Drive Reading PA 1970 417,301 100.0% $ 6,843 Philadelphia Marine Center (f) Philadelphia PA Various 181,900 100.0% 1,279 300 Corporate Center Drive Camp Hill PA 1989 175,280 100.0% 3,388 111 Presidential Boulevard Bala Cynwyd PA 1997 172,798 100.0% 4,458 751-761 Fifth Avenue King Of Prussia PA 1967 158,000 100.0% 490 630 Allendale Road King of Prussia PA 2000 150,000 100.0% 1,685 100 Katchel Blvd Reading PA 1970 133,424 100.0% 2,759 640 Freedom Business Center (f) King Of Prussia PA 1991 132,000 100.0% 2,145 52 Swedesford Square East Whiteland Twp. PA 1988 131,017 100.0% 2,830 105 / 140 Terry Drive Newtown PA 1982 128,666 77.6% 1,522 7535 Windsor Drive Allentown PA 1988 128,114 96.8% 1,940 4667 Somerton Road (d) Trevose PA 1974 118,000 100.0% 2,277 7130 Ambassador Drive Allentown PA 1991 114,049 100.0% 513 501 Office Center Drive Fort Washington PA 1974 113,536 97.2% 1,551 7350 Tilghman Street Allentown PA 1987 111,500 100.0% 1,976 50 Swedesford Square East Whiteland Twp. PA 1986 109,800 100.0% 1,928 300 Berwyn Park Berwyn PA 1989 107,919 100.0% 2,096 920 Harvest Drive Blue Bell PA 1990 104,505 100.0% 1,672 500 Office Center Drive Fort Washington PA 1974 101,303 94.9% 1,760 7450 Tilghman Street Allentown PA 1986 100,000 94.5% 1,560 500 North Gulph Road King Of Prussia PA 1979 93,082 100.0% 1,598 630 Freedom Business Center (f) King Of Prussia PA 1989 86,683 87.5% 1,694 620 Freedom Business Center (f) King Of Prussia PA 1986 86,559 100.0% 1,827 3331 Street Road -Greenwood Square Bensalem PA 1986 83,097 97.6% 1,537 1050 Westlakes Drive Berwyn PA 1984 81,500 100.0% 1,486 2595 Metropolitan Drive (d) Trevose PA 1981 80,000 100.0% - One Progress Avenue Horsham PA 1986 79,204 100.0% 841 323 Norristown Road Lower Gwyned PA 1988 79,083 100.0% 1,292 180 Wheeler Court Langhorne PA 1975 78,213 100.0% 230 1060 First Avenue (f) King Of Prussia PA 1987 77,718 100.0% 1,663 741 First Avenue King Of Prussia PA 1966 77,184 100.0% 540 1040 First Avenue (f) King Of Prussia PA 1985 75,488 100.0% 1,930 200 Berwyn Park Berwyn PA 1987 75,025 100.0% 1,639
Average Tenants Leasing 10% Annualized or More of Rentable Rental Rate Square Footage per as of Property as of December December 31, 2000 and 31, 2000 (c) Lease Expiration Date ------------ ---------------------- PENNSYLVANIA SEGMENT 100-300 Gundy Drive $ 15.59 Parsons Corporation (42%) - 3/05 Penske Truck Leasing (36%) - 12/05 Philadelphia Marine Center 3.56 Dave & Busters of Pennsylvania, Inc. (81%) - 2/14 Meiji-En Restaurant (101%) - 6/03 300 Corporate Center Drive 18.87 Keystone Health Plan Center (70%) - 8/04 Highmark Incorporated (30%) - 8/04 111 Presidential Boulevard 27.54 American Business Financial (55%) - 7/03 751-761 Fifth Avenue 3.10 Lockheed Martin Corp. (100%) - 9/02 630 Allendale Road 22.25 Omnicare Clinical Research (100%) -7/10 100 Katchel Blvd 20.39 Penske Truck Leasing (64%) - 12/05 UGI Utilities, Inc. (34%) - 3/03 640 Freedom Business Center 18.74 General Electric Company (100%) - 9/01 52 Swedesford Square 20.88 Verizon (65%) - 8/04 The Vanguard Group (35%) - 7/06 105 / 140 Terry Drive 14.13 Magellan Behavioral Health (12%) - 12/04 Department of General Services (11%) - 12/05 Husky Injection Molding System (10%) - 3/05 Media Management Services, Inc. (10%) - 8/04 7535 Windsor Drive 15.23 Air Products (47%) - 11/01 Rosenbluth International (14%) - 4/04 Cadence Design Systems, Inc. (12%) - 12/03 4667 Somerton Road 6.21 BVI Industries, Inc. (34%) - 12/03 American Home Patient, Inc. (17%) - 10/02 Brownell Electro, Inc. (14%) - 5/02 Town & Country Van Lines, Inc. (14%) - 1/02 A.P. Green Refractories Co. (13%) - 12/01 7130 Ambassador Drive 5.46 Dispensing Containers Corporation (100%) - 9/04 501 Office Center Drive 19.47 Drug Information Resources (12%) - 8/01, 3/02 & 6/05 7350 Tilghman Street 17.45 The Hartford Group (100%) - 12/04 & 12/07 50 Swedesford Square 18.63 Decision One Corporation (100%) - 12/05 300 Berwyn Park 22.80 Delaware Valley Financial (69%) - 3/04 920 Harvest Drive 16.00 Aetna Life Insurance (100%) - 6/02 500 Office Center Drive 20.84 Information Resources, Inc. (32%) - 1/06 Gateway Funding, Inc. (12%) - 12/03 Access Services, Inc. (10%) - 8/03 7450 Tilghman Street 17.16 The Hartford Group (71%) - 12/07 Optronx, Inc. (12%) - 7/03 Paychex, Inc. (10%) - 9/06 500 North Gulph Road 20.04 Ajunto, Inc. (16%) - 8/02 Nason Cullen Group (14%) - 8/01 Ford Motor Credit Corp. (10%) - 10/04 630 Freedom Business Center 24.03 AT & T / TCG Delaware (24%) - 12/09 HQ King of Prussia, Inc. (17%) - 7/04 Robert Half International, Inc. (12%) - 10/06 620 Freedom Business Center 26.30 Reliance Insurance Company (80%) - 10/02 Home Health Corporation (18%) - 9/05 3331 Street Road -Greenwood Square 19.20 Stelex, Inc. (14%) - 5/04 Capsule Communications (13%) - 8/01 Arlington Capital Mortgage Corp. (10%) - 6/04 1050 Westlakes Drive 26.40 Dermik Laboratories (80%) - 8/10 Mediconsult.Com, Inc. (20%) - 4/03 2595 Metropolitan Drive 7.40 Northtec LLC (100 %) - 10/06 One Progress Avenue 9.89 Reed Technology (100%) - 6/11 323 Norristown Road 17.24 Bisys Plan Services (70%) - 7/02 180 Wheeler Court 5.96 Lainiere De Picardie, Inc. (59%) - 12/01 Eckerd Corporation (41%) - 8/05 1060 First Avenue 22.22 Finova Capital (30%) - 1/04 Integra, Inc. (33%) - 4/01 Aventis Behring (27%) - 10/02 Artemis Management (11%) - 5/01 741 First Avenue 8.27 Tozour - Trane, Incorporated (100%) - 4/05 1040 First Avenue 24.68 Cortech Consulting (46%) - 6/04 First USA, Inc. (26%) - 6/05 Aventis Behring (15%) - 1/03 200 Berwyn Park 26.08 Devon Direct Marketing & Advertising (53%) - 4/02 VHA East Corporation (12%) - 11/04 Bucks Consultants (12%) - 8/01
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Total Base Rent Net Percentage for the Twelve Rentable Leased as of Months Ended Year Square December December 31, Property Name Location State Built Feet 31, 2000 (a) 2000 (b) (000's) ------------- -------- ----- ----- -------- ------------- ----------------- 1020 First Avenue (f) King Of Prussia PA 1984 74,556 100.0% 1,300 1000 First Avenue (f) King Of Prussia PA 1980 74,139 100.0% 1,789 160 - 180 West Germantown Pike East Norriton PA 1982 73,242 89.8% 1,160 2560 Metropolitan Drive Trevose PA 1983 70,000 99.9% - 14 Campus Boulevard Newtown Square PA 1998 69,400 100.0% 1,193 1105 Berkshire Boulevard Reading PA 1987 68,985 100.0% 936 500 Enterprise Road Horsham PA 1990 66,751 80.8% 697 16 Campus Boulevard Newtown Square PA 1990 65,463 100.0% 705 925 Harvest Drive Blue Bell PA 1990 63,663 100.0% 1,278 610 Freedom Business Center (f) King Of Prussia PA 1985 62,991 87.4% 1,179 1974 Sproul Road Broomall PA 1995 62,669 100.0% 876 2200 Cabot Boulevard Langhorne PA 1979 61,543 100.0% 316 426 Lancaster Avenue Devon PA 1990 61,102 100.0% 1,126 3329 Street Road -Greenwood Square Bensalem PA 1985 60,642 85.5% 975 200 Corporate Center Drive Camp Hill PA 1989 60,000 100.0% 1,113 321 Norristown Road Lower Gwyned PA 1988 59,994 100.0% 987 2575 Metropolitan Drive Trevose PA 1981 60,000 100.0% - 100 Berwyn Park Berwyn PA 1986 57,731 100.0% 1,209 640 Allendale Road King of Prussia PA 2000 56,034 100.0% 103 2010 Cabot Boulevard Langhorne PA 1985 52,831 100.0% 405 680 Allendale Road King Of Prussia PA 1962 52,528 100.0% 544 2240/50 Butler Pike Plymouth Meeting PA 1984 52,229 100.0% 792 650 Park Avenue King Of Prussia PA 1968 51,711 97.0% 692 1155 Business Center Drive Horsham PA 1990 51,388 98.0% 723 486 Thomas Jones Way Exton PA 1990 51,072 92.9% 666 855 Springdale Drive Exton PA 1986 50,750 100.0% 773 660 Allendale Road King of Prussia PA 1962 50,635 100.0% 386 800 Business Center Drive Horsham PA 1986 50,609 100.0% 676 875 First Avenue King Of Prussia PA 1966 50,000 100.0% 263 630 Clark Avenue King Of Prussia PA 1960 50,000 100.0% 311 620 Allendale Road King Of Prussia PA 1961 50,000 80.0% 417
Average Tenants Leasing 10% Annualized or More of Rentable Rental Rate Square Footage per as of Property as of December December 31, 2000 and 31, 2000 (c) Lease Expiration Date ------------ ---------------------- 1020 First Avenue 18.58 Aventis Behring (100%) - 10/02 1000 First Avenue 24.98 First USA, Inc. (27%) - 4/05 Elf Atochem (22%) - 3/06 Aventis Behring (21%) - 1/03 Finova Capital (16%) - 1/04 160 - 180 West Germantown Pike 18.29 Icon Clinical Research (40%) - 8/02 Philanthropic Mutual Life Insurance (10%) - 12/01 2560 Metropolitan Drive 7.86 Marconi Medical Systems (48%) - 9/02 Delta Lighting Products, Inc. (19%) - 5/01 Nextel Communications (18%) - 5/03 Rentacom, Inc (15%) - 10/04 14 Campus Boulevard 21.97 Catholic Health East (37%) - 9/08 Naviant Technology Solutions, Inc. (35%) - 9/08 Brandywine Realty Trust (29%) - 12/03 1105 Berkshire Boulevard 14.88 The Travelers Indemnity Company (74%) - 2/02 Spicer Systems (14%) - 11/01 500 Enterprise Road 15.55 Conti Mortgage (81%) - 4/01 16 Campus Boulevard 16.22 New England Life Insurance (61%) - 5/06 Atlantic Credit Union (35%) - 1/06 925 Harvest Drive 17.76 Elliott, Reihner, Siedzikowski & Egan (35%) - 6/08 Flamm, Boroff & Bacine, P.C. (21%) - 7/05 610 Freedom Business Center 23.57 Sun Microsystems, Inc. (38%) - 8/07 UNUM Life Insurance Company (24%) - 7/02 Newbridge Networks, Incorporated (11%) - 12/01 Home Properties of New York (10%) - 8/05 1974 Sproul Road 18.61 Franklin Mint Credit Union (30%) - 5/02 Chelsea Home Publishers (21%) - 3/03 Allan Coullautt Associates (17%) - 3/03 TMR, Incorporated (11%) - 10/02 Longview of America, Inc. (11%) - 6/05 2200 Cabot Boulevard 6.82 McCaffrey Management (56%) - 8/05 Akzo Nobel Inks Corporation (44%) - 8/05 426 Lancaster Avenue 18.43 GE Transport International Pool (100%) - 9/03 3329 Street Road -Greenwood Square 17.86 FPA Corporation (30%) - 12/01 Orbital Engineering (12%) - 2/01 Model Consulting, Inc. (11%) - 7/03 Prudential Insurance Company (11%) - 6/02 200 Corporate Center Drive 19.10 Highmark, Incorporated (100%) - 5/01 321 Norristown Road 19.21 Navisys (29%) - 12/02 Bisys Plan Services (28%) - 7/02 Rohm and Haas Company (17%) - 11/3 & 4/05 2575 Metropolitan Drive 5.70 Northtec LLC (100%) - 10/06 100 Berwyn Park 27.19 Siemans Medical Solutions (49%) - 3/02 & 3/04 PFPC,Inc. (30%) - 10/02 LCOR, Inc. (13%) - 3/04 640 Allendale Road 7.27 Sharp Corporation (100%) - 10/03 2010 Cabot Boulevard 10.57 Computer Hardware Maintenance (56%) - 1/03 DiMark, Inc. (33%) - 9/02 Four Seasons Mechanical, Inc. (11%) - 9/05 680 Allendale Road 10.96 Immunization Products, Ltd. (100%) - 10/11 2240/50 Butler Pike 19.39 First Union National Bank (58%) - 4/06 Johnson Controls, Inc. (33%) - 4/06 650 Park Avenue 21.39 GE Transport International Pool (64%) - 9/03 Sunguard Recovery Services, Inc. (20%) - 10/05 1155 Business Center Drive 18.84 IMS (84%) - 3/06 Quest Diagnostics, Inc. (14%) - 8/01 486 Thomas Jones Way 19.10 First American Real Estate Tax Service (24%) - 1/04 Toshiba American Medical Systems (13%) - 6/02 Cape Environmental (12%) - 7/02 ICI America's, Inc. (12%) - 11/05 J. Reckner Associates, Inc. (10%) - 9/03 855 Springdale Drive 15.50 Environmental Resources (100%) - 7/01 660 Allendale Road 7.28 The Immune Response Corporation (100%) - 10/11 800 Business Center Drive 15.56 Quest Diagnostics Inc. (72%) - 1/12 KWS & P (27%) - 4/02 875 First Avenue 17.22 Comdisco, Inc. (100%) - 8/10 630 Clark Avenue 5.92 Metro Fiber Systems of Philadelphia (100%) - 9/12 620 Allendale Road 14.38 Executone Information Systems, Inc. ( 50 %) - 9/01 U.S.Interactive, Inc. (30%) - 9/01
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Total Base Rent Net Percentage for the Twelve Rentable Leased as of Months Ended Year Square December December 31, Property Name Location State Built Feet 31, 2000 (a) 2000 (b) (000's) ------------- -------- ----- ----- -------- ------------- ----------------- 7150 Windsor Drive Allentown PA 1988 49,420 100.0% 441 520 Virginia Drive Fort Washington PA 1987 48,122 100.0% 734 11 Campus Boulevard Newtown Square PA 1998 47,700 100.0% 1,073 456 Creamery Way Exton PA 1987 47,604 100.0% 354 6575 Snowdrift Road Allentown PA 1988 46,858 98.6% 345 220 Commerce Drive Fort Washington PA 1985 46,094 89.1% 756 7248 Tilghman Street Allentown PA 1987 43,782 96.0% 459 110 Summit Drive Exton PA 1985 43,660 100.0% 273 2535 Metropolitan Drive (d) Trevose PA 1974 42,000 100.0% - 300 Welsh Road - Building I Horsham PA 1980 40,042 100.0% 635 7310 Tilghman Street Allentown PA 1985 40,000 93.0% 459 2510 Metropolitan Drive (d) Trevose PA 1981 40,000 100.0% - 2000 Cabot Boulevard Langhorne PA 1985 39,969 100.0% 389 150 Corporate Center Drive Camp Hill PA 1987 39,401 73.6% 531 1336 Enterprise Drive West Goshen PA 1989 39,330 100.0% 481 600 Park Avenue King Of Prussia PA 1964 39,000 100.0% 470 755 Business Center Drive Horsham PA 1998 38,050 100.0% 576 18 Campus Boulevard Newtown Square PA 1990 37,374 100.0% 626 2512 Metropolitan Drive (d) Trevose PA 1981 37,000 100.0% - 3000 Cabot Boulevard Langhorne PA 1986 34,693 100.0% 568 7010 Snowdrift Way Allentown PA 1991 33,029 100.0% 401 2260 Butler Pike Plymouth Meeting PA 1984 31,892 100.0% 462 700 Business Center Drive Horsham PA 1986 30,773 100.0% 485 120 West Germantown Pike Plymouth Meeting PA 1984 30,546 100.0% 539 650 Dresher Road Horsham PA 1984 30,138 100.0% 370 655 Business Center Drive Horsham PA 1997 29,849 100.0% 464 2260/70 Cabot Boulevard Langhorne PA 1984 29,638 83.8% 307 468 Thomas Jones Way Exton PA 1990 28,934 18.5% 405
Average Tenants Leasing 10% Annualized or More of Rentable Rental Rate Square Footage per as of Property as of December December 31, 2000 and 31, 2000 (c) Lease Expiration Date ------------ ---------------------- 7150 Windsor Drive 13.31 Verizon (35%) - 10/04 ICT Group (20%) - 2/01 Choice One Commumications (12%) - 11/04 Linden Optical (11%) - 3/01 520 Virginia Drive 16.75 TVG, Inc. (100%) - 8/05 11 Campus Boulevard 21.82 Department of Forestry (70%) - 10/09 Jobson Publishing (18%) - 10/06 Dilworth Paxson (12%) - 12/06 456 Creamery Way 8.42 Neutronics (100%) - 1/03 6575 Snowdrift Road 13.24 Liberty Mutual Insurance (50%) - 3/05 Covance Pharmaceutical (25%) - 11/04 Cenix, Inc. (24%) - 6/01 220 Commerce Drive 18.48 Temple University (25%) - 4/01 Ram Technologies (13%) - 3/04 Brandywine Realty Services (11%) - 6/02 7248 Tilghman Street 15.53 Ohio Casualty (31%) - 7/01 American Express, IDS (28%) - 7/01 Saqqara Systems (15%) - 11/05 110 Summit Drive 9.18 Laser Technologies and Service (49%) - 10/06 Pall Trincor (30%) - 3/02 DGH Technology (12%) - 9/04 2535 Metropolitan Drive 6.87 Larson - Juhl (100%) - 10/03 300 Welsh Road - Building I 19.23 Music Choice (45%) - 9/03 American Meter Company - (43%) - 7/04 7310 Tilghman Street 14.83 H. Wilden & Associates (21%) - 5/09 Rosemont College (16%) - 12/05 Avaya, Inc. (15%) - 7/03 PECO Communications (14%) - 12/03 The Donnelley Directory (10%) - 6/02 SKF USA, Inc. (10%) - 6/03 2510 Metropolitan Drive 6.47 Philadelphia Choice Television (100%) - 6/01 2000 Cabot Boulevard 12.20 Ecogen, Inc. (37%) - 3/05 Rom - Tec, Inc. (28%) - 9/02 CSX Transportation (23%) - 5/04 AGIE, Ltd. (13%) - 1/01 150 Corporate Center Drive 18.56 Highmark, Incorporated (37%) - 12/03 The Prudential Insurance Company (15%) - 3/01 1336 Enterprise Drive 18.84 VWR Scientific Products (66%) - 12/02 Craftopia.com, Inc. (34%) - 11/02 600 Park Avenue 14.01 Quest Diagnostics, Inc. (100%) - 5/02 755 Business Center Drive 20.19 Scirex Corporation (100%) - 12/08 18 Campus Boulevard 20.99 Emax Solution Partners (59%) - 6/03 Marshall Dennehey (21%) - 9/06 LR, Inc. (20%) - 8/03 2512 Metropolitan Drive 7.23 Bucks County Midweek, Inc. (40%) - 6/03 American Bank Note Company (30%) - 12/04 Philadelphia Newspapers, Inc. (17%) - 10/03 Stolarik Donohue Associates, Inc. (14%) - 3/01 3000 Cabot Boulevard 18.63 Geraghty & Miller (27%) - 4/03 Integrated Data Solutions (15%) - 9/04 Luigi Bormioli Corporation (15%) - 7/04 7010 Snowdrift Way 15.61 Neighbor Care (61%) - 11/02 Anderson BDG Corporation (39%) - 6/03 2260 Butler Pike 20.25 Wilmington National Finance (36%) - 2/05 Ostroff, Fair & Company P.C. (34%) - 7/04 Thoroughbred Direct International (28%) - 5/01 700 Business Center Drive 18.97 Macro (50%) - 4/01 Arrow Electronics (34%) - 8/01 KWS & P (16%) - 4/02 120 West Germantown Pike 18.76 Clair Odell Insurance Agency (82%) - 7/01 Kleinert's, Inc. (13%) - 10/01 650 Dresher Road 16.51 GMAC (100%) - 5/03 655 Business Center Drive 20.74 Diccicco Battista Communications (54%) - 9/07 Paccar Financial Corporation (22%) - 9/02 Legg Mason Wood Walker (14%) - 5/04 2260/70 Cabot Boulevard 14.63 Sager Electrical Supply Co. (14%) - 10/02 Manufacturers Survey (13%) - 12/01 Terminix International (13%) - 11/02 Pronet Incorporated (10%) - 3/02 468 Thomas Jones Way 21.00 Main Line Affiliates (18%) - 8/05
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Total Base Rent Net Percentage for the Twelve Rentable Leased as of Months Ended Year Square December December 31, Property Name Location State Built Feet 31, 2000 (a) 2000 (b) (000's) ------------- -------- ----- ----- -------- ------------- ----------------- 630 Dresher Road (e) Horsham PA 1987 28,894 0.0% 100 2407 Park Drive Harrisburg PA 1985 28,285 47.0% 383 1700 Paoli Pike Malvern PA 2000 28,000 55.6% 127 1150 Berkshire Boulevard Reading PA 1979 26,781 100.0% 418 2405 Park Drive Harrisburg PA 1985 25,495 92.3% 358 140 West Germantown Pike Plymouth Meeting PA 1984 25,357 100.0% 504 3333 Street Road -Greenwood Square Bensalem PA 1988 25,000 100.0% 362 800 Corporate Circle Drive Harrisburg PA 1979 24,779 67.7% 263 155 Rittenhouse Circle Bristol PA 1985 22,500 100.0% 259 2005 Cabot Boulevard Langhorne PA 1985 22,000 100.0% 215 2490 Boulevard of the Generals King Of Prussia PA 1975 20,600 100.0% 299 500 Nationwide Drive Harrisburg PA 1977 18,029 50.7% 45 600 Corporate Circle Drive Harrisburg PA 1978 17,858 100.0% 267 300 Welsh Road - Building II Horsham PA 1980 17,750 100.0% 346 748 Springdale Drive Exton PA 1986 13,844 78.3% 185 2404 Park Drive Harrisburg PA 1983 11,000 100.0% 147 2401 Park Drive Harrisburg PA 1984 10,074 100.0% 135 200 Nationwide Drive Harrisburg PA 1978 2,500 100.0% 60 George Kachel Farmhouse Reading PA 2000 1,664 100.0% - 301 North Walnut Street Wilmington DE 1989 321,511 100.0% 5,730 201 North Walnut Street Wilmington DE 1988 311,286 100.0% 5,431 4550 New Linden Hill Road Wilmington DE 1974 105,067 96.6% 1,351 One Righter Parkway (f) Talleyville DE 1989 104,828 100.0% 2,294 100 Commerce Drive Newark DE 1989 63,378 81.1% 855 258 Chapman Road Newark DE 1983 40,667 80.7% 478 256 Chapman Road Newark DE 1983 33,747 100.0% 487 262 Chapman Road Newark DE 1983 30,620 80.6% 416 260 Chapman Road Newark DE 1983 29,343 83.3% 327 263 Chapman Road Newark DE 1983 24,773 91.8% 332 261 Chapman Road Newark DE 1983 23,700 100.0% 318 NEW JERSEY / NEW YORK SEGMENT 50 East State Street Trenton NJ 1989 305,884 90.6% 5,017 Park 80 West Plaza II Saddlebrook NJ 1988 264,074 96.8% 5,762 Park 80 West Plaza I Saddlebrook NJ 1970 223,327 97.5% 4,771 1009 Lenox Drive Lawrenceville NJ 1989 180,460 93.8% 4,040 10000 Midlantic Drive Mt. Laurel NJ 1990 178,605 100.0% 2,755 33 West State Street Trenton NJ 1988 167,774 100.0% 2,969
Average Tenants Leasing 10% Annualized or More of Rentable Rental Rate Square Footage per as of Property as of December December 31, 2000 and 31, 2000 (c) Lease Expiration Date ------------ ---------------------- 630 Dresher Road - 2407 Park Drive 16.00 AEGIS Security Insurance Company (47%) - 10/02 1700 Paoli Pike 22.50 Akcelerant Space Partnership (45%) - 6/03 1150 Berkshire Boulevard 16.67 Berks Cardiology (24%) - 12/01 Ervin Levin, D.D.S. (12%) - 3/08 CMA Evaluations Consultants (10%) - 9/07 Jessee L. Pleet, Esq. (10%) - 6/05 2405 Park Drive 16.56 FDIC (24%) - 4/05 DMG-Maximus (13%) - 1/05 R.H. Holsberg & Company (11%) - 8/02 United of Omaha Life Insurance Co. (10%) - 10/02 140 West Germantown Pike 22.11 Healthcare, Inc. (47%) - 9/04 Career Concepts (29%) - 2/04 PA Liquor Control Board (18%) - 6/09 3333 Street Road -Greenwood Square 18.20 Nextell Communications (100%) - 7/02 800 Corporate Circle Drive 14.04 Sacunas & Saline, Inc. (22%) - 7/05 Leukemia Society of America (13%) - 9/01 The Harrisburg Symphony (11%) - 6/03 155 Rittenhouse Circle 11.50 Osiris Investment, LP (100%) - 2/02 2005 Cabot Boulevard 16.67 Ensr Corporation (54%) - 6/05 Ecom Xml, Inc. (46%) - 10/05 2490 Boulevard of the Generals 15.17 Commonwealth of Pennsylvania (100%) - 6/01 500 Nationwide Drive 17.00 Paychex, Inc. (51%) - 9/07 600 Corporate Circle Drive 14.94 Clear Channel, Incorporated (100%) - 7/02 300 Welsh Road - Building II 21.05 AG Edwards & Sons (45%) - 12/03 Abington Memorial Hospital (37%) - 10/01 SRS Marketing Company (18%) - 9/05 748 Springdale Drive 17.64 Great American Insurance (46%) - 1/05 Chester County District Court - (32%) - 1/04 2404 Park Drive 14.66 Tracking Systems Corporation (65%) - 3/04 Albright College (35%) - 7/03 2401 Park Drive 15.70 Med Media, Inc. (46%) - 8/03 Moore Business Forms, Inc. (44%) - 6/02 Judy Carhart, MD (10%) - 10/01 200 Nationwide Drive 24.00 Fulton Bank (100 %) - 8/03 George Kachel Farmhouse 20.03 Salient 3 Communications (100%) - 12/03 301 North Walnut Street 18.44 First USA Bank (93%) - 12/15 201 North Walnut Street 19.56 First USA Bank (91%) - 1/17 4550 New Linden Hill Road 16.09 American International Insurance (53%) - 6/05 The Whitaker Corporation (23%) - 8/02 One Righter Parkway 20.91 Kimberly Clark (89 %) - 12/05 Zeneca, Inc. (11%) -12/05 100 Commerce Drive 14.36 The Travelers Bank (76%) - 12/01 258 Chapman Road 15.38 Conectiv Solutions (30%) - 4/01 Mia Shoes, Inc. (23%) - 6/04 Phillips & Cohen Associates (14%) - 7/05 256 Chapman Road 15.66 Chesapeake Decision (27%) - 2/01,8/04 & 11/05 Delaware Department of Admin. Services (20%) - 10/04 Key Enterprises (16%) - 3/05 262 Chapman Road 16.66 On-Board Chemical (41%) - 3/001 260 Chapman Road 14.41 Conectiv Communications (10%) - 7/01 & 7/04 Health Insurance Associates (10%) - 7/05 & 7/06 263 Chapman Road 14.84 Delaware Department of Admin. Services (92%) - 7/01 & 9/06 261 Chapman Road 14.04 Delaware Department of Admin. Services (100%) - 10/01 & 5/02 NEW JERSEY / NEW YORK SEGMENT 50 East State Street 24.60 State of N.J. Dept. of Human Services (73%) - 9/09 Park 80 West Plaza II 25.36 Vornado Realty Trust (10%) - 4/02 Lexington Management Corp. (10%) - 8/03 Park 80 West Plaza I 24.42 New York Life Insurance Co. (12%) - 10/04 1009 Lenox Drive 25.98 Uniform Code Council, Inc. (21%) - 11/08 N.J. State Medical Underwriters (16%) - 5/01 10000 Midlantic Drive 21.50 QAD, Inc. (37%) - 8/01 Automotive Rentals (13%) - 8/02 33 West State Street 23.73 The State of New Jersey (96%) - 7/05 & 8/08
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Total Base Rent Net Percentage for the Twelve Rentable Leased as of Months Ended Year Square December December 31, Property Name Location State Built Feet 31, 2000 (a) 2000 (b) (000's) ------------- -------- ----- ----- -------- ------------- ----------------- Main Street - Plaza 1000 Voorhees NJ 1988 162,364 100.0% 2,847 55 U.S. Avenue Gibbsboro NJ 1982 138,982 100.0% 657 457 Haddonfield Road Cherry Hill NJ 1990 121,737 91.5% 1,896 2000 Midlantic Drive Mt. Laurel NJ 1989 121,658 100.0% 1,670 2000 Lenox Drive Lawrenceville NJ 2000 119,114 100.0% 1,839 700 East Gate Drive Mt. Laurel NJ 1984 118,899 77.7% 1,994 993 Lenox Drive Lawrenceville NJ 1985 111,137 100.0% 2,294 1000 Howard Boulevard Mt. Laurel NJ 1988 105,312 100.0% 2,150 One South Union Place Cherry Hill NJ 1982 99,573 100.0% 1,237 997 Lenox Drive Lawrenceville NJ 1987 97,277 100.0% 1,869 1000 Atrium Way Mt. Laurel NJ 1989 97,158 91.6% 1,626 1120 Executive Boulevard Marlton NJ 1987 95,122 99.4% 1,793 15000 Midlantic Drive Mt. Laurel NJ 1991 84,056 100.0% 1,164 1007 Laurel Oak Road Voorhees NJ 1996 78,205 100.0% 621 Three Greentree Centre Marlton NJ 1984 69,300 100.0% 1,187 King & Harvard Cherry Hill NJ 1974 67,397 85.8% 943 9000 Midlantic Drive Mt. Laurel NJ 1989 67,299 100.0% 768 6 East Clementon Road Gibbsboro NJ 1980 66,236 87.8% 1,025 104 Windsor Center Drive East Windsor NJ 1987 65,980 100.0% 1,118 701 East Gate Drive Mt. Laurel NJ 1986 60,711 97.4% 1,152 4000/5000 West Lincoln Drive Marlton NJ 1982 59,891 98.0% 798 308 Harper Drive Mt. Laurel NJ 1976 59,500 100.0% 1,197 835 New Durham Road Edison NJ 1974 58,095 100.0% 323 305 Fellowship Drive Mt. Laurel NJ 1980 56,824 100.0% 972 Two Greentree Centre Marlton NJ 1983 56,075 100.0% 1,005 309 Fellowship Drive Mt. Laurel NJ 1982 55,911 67.3% 1,038 One Greentree Centre Marlton NJ 1982 55,838 94.2% 941 8000 Lincoln Drive Marlton NJ 1997 54,923 100.0% 964 307 Fellowship Drive Mt. Laurel NJ 1981 54,485 87.0% 1,026 303 Fellowship Drive Mt. Laurel NJ 1979 53,848 88.9% 915
Average Tenants Leasing 10% Annualized or More of Rentable Rental Rate Square Footage per as of Property as of December December 31, 2000 and 31, 2000 (c) Lease Expiration Date ------------ ---------------------- Main Street - Plaza 1000 21.21 Morgan Stanley Dean Witter (14%) - 9/04 Credit Lenders (13%) - 12/01 Ballard, Spahr, Andrews & Ingersoll (11%) - 8/10 55 U.S. Avenue 6.63 Micro Warehouse, Inc. (100%) - 8/02 457 Haddonfield Road 21.99 Montgomery McCracken (12%) - 2/05 Cozen & O'Conner (12%) - 5/05 Pepper Hamilton (12%) - 9/06 Dilworth, Paxson (10%) - 5/04 2000 Midlantic Drive 19.32 Lockheed Martin Corporation (59%) - 5/02, 6/02, 10/04, 7/05 Computer Associates International (26%) - 12/02 Telesciences, Inc. (13%) - 4/08 2000 Lenox Drive 26.58 International Thomson Publishing (55%) - 9/10 Nelson Communications, Inc. (17%) - 7/10 Ken Clark International, Inc. (14%) - 9/10 700 East Gate Drive 19.74 Citicorp Vendor Finance (50%) - 3/05 HBO & Company (13%) - 1/05 993 Lenox Drive 22.39 Stark & Stark, Inc. (57%) - 8/04 Office Concierge, Inc. (18%) - 4/04 Navigant Consulting (12%) - 6/03 1000 Howard Boulevard 20.80 Conrail (45%) - 6/05 State of New Jersey (26%) - 12/02 Lincoln Technical Institute (25%) - 11/09 One South Union Place 15.22 Vlasic Foods International, Inc. (100%) - 10/08 997 Lenox Drive 21.65 Fox,Rothschild,O'Brien & Frankel (34%) - 6/03 Dechert Price & Rhoads (25%) - 11/03 Smith Barney, Inc. (13%) - 9/05 1000 Atrium Way 19.53 Navistar Financial (18%) - 12/04 IBM (18%) - 3/01 Summit Insurance Advisors (17%) - 2/04 Janney, Montgomery, Scott (14%) - 6/05 1120 Executive Boulevard 23.29 Computer Sciences Corporation (63%) - 5/02 Fleer Skybox International (19%) - 4/03 15000 Midlantic Drive 18.07 New Jersey Bell Telephone (89%) - 7/06 Gallagher Bassett Services, Inc. (11%) - 11/02 1007 Laurel Oak Road 7.94 R.F. Power Products, Inc. (100%) - 10/06 Three Greentree Centre 19.18 Parker McCay (49%) - 7/10 Surety Title Company (19%) - 12/03 National City Mortgage Company (12%) - 7/03 H&R Block Financial Advisors (12%) - 3/05 King & Harvard 20.45 U.S. Government - Social Security (33%) - 5/10 UFCW Local 56, AFL-CIO (25%) - 3/10 N.J. Department of Law and Public Safety (23%) - 10/09 9000 Midlantic Drive 21.14 Automotive Rentals (100%) - 8/02 6 East Clementon Road 16.65 West Jersey Health Systems (30%) - 3/01 Malvern Marketing (17%) - 12/04 Equifax Credit Information Services (15%) - 12/02 104 Windsor Center Drive 18.63 I-STAT Corporation (57%) - 9/03 Evans East (22%) - 12/05 Green Tree Learning Centers, Inc. (21%) - 9/02 701 East Gate Drive 19.91 Lockheed Martin Corporation (57%) - 4/02 Compaq Computer (16%) - 6/05 American International Recovery, Inc. (11%) - 1/03 4000/5000 West Lincoln Drive 14.92 Bae Systems (18%) - 5/01 308 Harper Drive 20.62 Harleysville Insurance Company (70%) - 4/03 Cisco Systems (31%) - 7/03 835 New Durham Road 5.35 Western Union International, Inc. (100%) - 2/05 305 Fellowship Drive 19.92 Industri-Matematik American Operations, Inc. (68%) - 1/05 Dun & Bradstreet, Inc. (15%) - 9/05 Two Greentree Centre 20.03 Merrill, Lynch, Pierce, Fenner (32%) - 11/05 & 11/08 IBS Interactive (16%) - 12/03 South Jersey Radiology (10%) - 5/01 309 Fellowship Drive 20.79 Morgan Stanley Dean Witter (21%) - 12/09 HQ Mount Laurel, Inc. (20%) - 4/08 Merchants Mutual Insurance (13%) - 6/01 One Greentree Centre 18.72 American Executive Services (30%) - 1/06 Temple University (18%) - 12/02 8000 Lincoln Drive 19.70 Computer Sciences Corporation (67%) - 11/01 Blue Cross (33%) - 5/07 307 Fellowship Drive 20.19 PRC, Incorporated (10%) - 1/01 303 Fellowship Drive 19.43 Larami / Hasbro (22%) - 12/01 Equiva Services (17%) - 12/01 Metro Commercial (15%) - 2/05 The Prudential Insurance Company (14%) - 5/04
-19-
Total Base Rent Net Percentage for the Twelve Rentable Leased as of Months Ended Year Square December December 31, Property Name Location State Built Feet 31, 2000 (a) 2000 (b) (000's) ------------- -------- ----- ----- -------- ------------- ----------------- 2 Foster Avenue Gibbsboro NJ 1974 50,761 100.0% 230 44 National Road Edison NJ 1967 50,000 0.0% 107 1000/2000 West Lincoln Drive Marlton NJ 1982 49,191 95.0% 698 837 New Durham Road Edison NJ 1977 48,200 100.0% 168 4000 Midlantic Drive Mt. Laurel NJ 1998 46,945 100.0% 765 Five Eves Drive Marlton NJ 1986 45,564 95.2% 650 9000 West Lincoln Drive Marlton NJ 1983 43,719 83.8% 543 Main Street - Piazza Voorhees NJ 1990 41,408 100.0% 537 1000 East Lincoln Drive Marlton NJ 1981 40,600 100.0% 162 20 East Clementon Road Gibbsboro NJ 1986 38,260 99.7% 639 Two Eves Drive Marlton NJ 1987 37,532 95.6% 563 1255 Broad Street Bloomfield NJ 1981 37,478 100.0% 589 3000 West Lincoln Drive Marlton NJ 1982 36,070 100.0% 474 304 Harper Drive Mt. Laurel NJ 1975 32,978 100.0% 528 Main Street - Promenade Voorhees NJ 1988 31,445 87.7% 342 168 Franklin Corner Drive Lawrenceville NJ 1976 30,426 80.9% 294 Four B Eves Drive Marlton NJ 1987 27,011 100.0% 340 815 East Gate Drive Mt. Laurel NJ 1986 25,500 100.0% 293 817 East Gate Drive Mt. Laurel NJ 1986 25,351 100.0% 308 Four A Eves Drive Marlton NJ 1987 24,687 100.0% 316 1 Foster Avenue (e) Gibbsboro NJ 1972 24,255 0.0% - 4 Foster Avenue Gibbsboro NJ 1974 23,372 100.0% 171 7 Foster Avenue Gibbsboro NJ 1983 21,843 40.2% 129 10 Foster Avenue Gibbsboro NJ 1983 18,651 100.0% 285 305 Harper Drive Mt. Laurel NJ 1979 14,980 100.0% 109 5 U.S. Avenue Gibbsboro NJ 1987 5,000 100.0% 18 50 East Clementon Road Gibbsboro NJ 1986 3,080 100.0% 121 5 Foster Avenue Gibbsboro NJ 1968 2,000 100.0% - 55 Ames Court Plainview NY 1961 90,000 100.0% 1,191 245 Old Country Road Melville NY 1978 82,308 100.0% 573 125 Jericho Turnpike Jericho NY 1969 75,308 84.3% 1,270 91 North Industry Court Deer Park NY 1965 71,000 100.0% 300 263 Old Country Road Mellevile NY 1999 62,500 100.0% 803 1000 Axinn Avenue Garden City NY 1965 59,000 100.0% 287 336 South Service Road Melville NY 1965 43,600 100.0% 376 645 Stewart Avenue Garden City NY 1962 35,552 100.0% 228
Average Tenants Leasing 10% Annualized or More of Rentable Rental Rate Square Footage per as of Property as of December December 31, 2000 and 31, 2000 (c) Lease Expiration Date ------------ ---------------------- 2 Foster Avenue 5.06 Harbor Laundry, Inc. (95%) - 8/03 44 National Road - 1000/2000 West Lincoln Drive 15.04 Occupational Training Center (12%) - 7/02 837 New Durham Road 4.27 TLC Warehouse Corporation (50%) -11/01 Lex Associates, Inc. (50%) - 12/02 4000 Midlantic Drive 18.75 Lockheed Martin Corporation (100%) - 4/05 Five Eves Drive 16.17 Virtua Health (36%) - 11/06 Samaritan Hospice (25%) - 2/04 Residential Healthcare, Inc. (18%) - 3/06 9000 West Lincoln Drive 15.95 No Tenants Leasing 10% or More Square Feet Main Street - Piazza 14.28 Cooper Hospital (40%) - 2/01 & 7/01 Lincoln Investments (20%) - 8/03 Chamber of Commerce (12%) - 8/06 1000 East Lincoln Drive 3.62 Burrups Packard (100%) - 2/06 20 East Clementon Road 18.50 Medaquist Receivables Mgmt Co. (20%) - 4/03 R.Randle Scarborough, Inc. (16%) - 10/02 Serco, Inc. (16%) - 12/05 Feinberg and Associates (16%) - 1/05 The State of New Jersey (14%) - 9/07 Two Eves Drive 18.42 Resolution Management Consultants (14%) - 6/05 1255 Broad Street 20.18 Charles M. Cummins & Elliot Shack (75%) - 2/06 Menno Travel Services (14%) - 10/03 3000 West Lincoln Drive 15.36 Abo, Uris & Allenburger (20%) - 1/02 304 Harper Drive 18.39 Legg Mason Wood Walker (18%) - 6/02 Basic Commerce Industries, Inc. (14%) - 8/05 Panzano & Partners (14%) - 12/04 Tab Products (10%) - 6/02 Redwood Capital, Inc. (10%) - 8/01 & 11/02 Main Street - Promenade 15.35 Morgenstern & Associates (14%) - 5/04 IT Resources (10%) - 4/05 168 Franklin Corner Drive 17.51 Metropolitan Life Insurance (18%) - 10/04 Benecard Services, Inc. (17%) - 12/05 Voxware, Inc. (13%) - 6/03 Four B Eves Drive 16.29 ISO Commercial Risk (67%) - 6/05 Global Industries, Inc. (17%) - 12/00 Broadwing/Eclipse Communications (16%) - 1/05 815 East Gate Drive 13.27 Advanced Communication Systems (67%) - 4/04 Wyle Laboratories (33%) - 11/01 817 East Gate Drive 13.91 Landress Co. - Emtec (62%) - 3/01 Concentra (38%) - 9/04 Four A Eves Drive 15.90 Groundwater Technology (39%) - 5/04 Advanced Systems (33%) - 4/04 Anthony Scialabba, Esq. (18%) - 3/03 Inphoto Surveillance (10%) - 6/03 1 Foster Avenue - 4 Foster Avenue 8.96 Harbor Laundry, Inc. (62%) - 8/03 Medical Data Exchange, Inc. (38%) - 10/02 7 Foster Avenue 14.97 Choice Point Services (35%) - 4/01 10 Foster Avenue 15.73 Dolphin, Inc. (40%) - 5/03 Rottland Homes of New Jersey (29%) - 5/04 305 Harper Drive 8.23 The Jerome Group (100%) - 9/02 5 U.S. Avenue 0.36 Mcfadden Catering, Inc. (100%) - 12/03 50 East Clementon Road 39.17 Corestates Financial Corporation (100%) - 10/02 5 Foster Avenue - Borough of Gibbsboro - Police Station (50%) - 11/02 55 Ames Court 14.21 Cardholder Management Services (100%) - 1/03 245 Old Country Road 7.05 Citicorp Custom Credit, Inc. (100%) - 1/06 125 Jericho Turnpike 20.88 Getty Petroleum Corporation (42%) - 1/02 91 North Industry Court 5.56 Windowrama Warehousing, Inc. (100%) - 6/01 263 Old Country Road 11.67 Ademco Distributing, Inc. (100%) - 2/09 1000 Axinn Avenue 4.86 Fortunoff Fine Jewelry & Silverware, Inc. (100%) - 1/02 336 South Service Road 9.17 Nikon, Inc. (100%) - 4/01 645 Stewart Avenue 9.99 Hearst Business Communications (100%) - 12/03
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Total Base Rent Net Percentage for the Twelve Rentable Leased as of Months Ended Year Square December December 31, Property Name Location State Built Feet 31, 2000 (a) 2000 (b) (000's) ------------- -------- ----- ----- -------- ------------- ----------------- 80 Skyline Drive Plainview NY 1961 29,521 100.0% 182 131 Jericho Turnpike Jericho NY 1967 27,783 91.7% 551 120 Express Street Plainview NY 1962 27,729 100.0% 245 110 Voice Road Carle Place NY 1963 25,920 100.0% 145 100 Voice Road Carle Place NY 1963 25,000 100.0% 211 10 Skyline Drive Plainview NY 1960 22,562 100.0% 163 180 Central Ave. / 2 Engineers Ln. Farmingdale NY 1960 21,700 100.0% 134 111 Ames Court Plainview NY 1959 18,000 100.0% 136 11 Commercial Street Plainview NY 1961 17,548 100.0% 138 8 Engineers Lane Farmingdale NY 1963 15,000 100.0% 80 19 Engineers Lane Farmingdale NY 1962 10,000 100.0% 70 VIRGINIA SEGMENT 600 East Main Street Richmond VA 1986 422,789 68.5% 7,167 300 Arboretum Place Richmond VA 1988 209,576 96.3% 3,390 1900 Gallows Road (g) Vienna VA 1982 205,627 100.0% 4,295 1880 Campus Commons Drive (g) Reston VA 1985 172,448 100.0% 2,285 12015 Lee Jackson Memo(g)l Highway Fairfax VA 1985 150,046 100.0% 3,562 2511 Brittons Hill Road Richmond VA 1987 132,103 100.0% 574 11781 Lee Jackson Memo(g)l Highway Fairfax VA 1985 127,568 96.8% 2,638 2100-2116 West Laburnam Avenue Richmond VA 1976 127,239 91.4% 1,819 1957 Westmoreland Street Richmond VA 1975 121,815 100.0% 529 2201-2245 Tomlynn Street Richmond VA 1989 85,860 96.9% 661 9011 Arboretum Parkway Richmond VA 1991 72,817 96.3% 1,210 4805 Lake Brooke Drive Glen Allen VA 1996 61,632 100.0% 1,159 9100 Arboretum Parkway Richmond VA 1988 57,481 94.2% 948 2812 Emerywood Parkway Henrico VA 1980 56,076 100.0% 552 2277 Dabney Road Richmond VA 1986 50,400 100.0% 244 9200 Arboretum Parkway Richmond VA 1988 49,542 77.0% 533 9210 Arboretum Parkway Richmond VA 1988 47,943 100.0% 547 2212-2224 Tomlynn Street Richmond VA 1985 45,353 100.0% 282
Average Tenants Leasing 10% Annualized or More of Rentable Rental Rate Square Footage per as of Property as of December December 31, 2000 and 31, 2000 (c) Lease Expiration Date ------------ ---------------------- 80 Skyline Drive 9.46 Scientific Cell Company, Inc. (29%) - 8/10 Aviarms Support Corporation (27%) - 2/05 Gentiva Health Services (27%) - 2/03 Marketing Congress, Inc. (10%) - 6/02 Blaise Advertising, Inc. (10%) - 5/03 131 Jericho Turnpike 23.82 Katzman Weinstein Company (23%) - 11/04 120 Express Street 10.06 Tyz - All Plastics, Inc. (55%) - 11/08 Henderson & Bodwell (45%) - 9/02 110 Voice Road 8.65 Scales Air Compressor Corp. (100%) - 12/01 100 Voice Road 11.35 Nuclear Associates (100%) - 12/00 10 Skyline Drive 9.02 Shore Pharmaceutical (39%) - 6/05 Cold Spring Harbor Laboratories (29%) - 5/01 Tomra Metro, LLC (25%) - 4/05 180 Central Ave. / 2 Engineers Ln. 6.15 Yaleet, Inc. (100%) - 5/05 111 Ames Court 8.23 Centroid, Inc. (45%) - 4/05 Alarmguard, Inc. (41%) - 12/00 International Bonded Courier (13%) - 11/01 11 Commercial Street 10.36 Shore Pharmeceutical Providers, Inc. (100%) - 6/05 8 Engineers Lane 6.48 The Furniture Outlet (100%) - 9/04 19 Engineers Lane 7.00 First Commercial Asset Management (100%) - 1/03 VIRGINIA SEGMENT 600 East Main Street 21.09 GSA Department of Taxation (23%) - 11/01 Verizon (18%) - 11/03 300 Arboretum Place 16.22 The Travelers (40%) - 1/04 Trailblazer Health Enterprises (16%) - 12/08 1900 Gallows Road 22.35 GRC International (81%) - 5/09 National Captioning (18%) - 12/04 1880 Campus Commons Drive 16.08 Verizon Video Systems (100%) - 4/01 12015 Lee Jackson Memo(g)l Highway 23.76 Mantech (35%) - 5/07 Logicon Geodynamic (13%) - 8/07 Aerotek (13%) - 9/03 Walcoff & Associates (13%) - 5/05 Greenpoint Mortgage Funding, Inc. (10%) - 1/05 2511 Brittons Hill Road 5.44 Colortree, Inc. (56%) - 7/07 Circuit City Stores, Inc. (44%) - 6/01 11781 Lee Jackson Memo(g)l Highway 21.42 Logicon Geodynamic (32%) - 8/07 & 6/07 Oracle (30%) - 12/04 2100-2116 West Laburnam Avenue 15.71 Chesapeake Packaging Corp. (15%) - 12/02 Commercial Union Insurance (10%) - 9/01 1957 Westmoreland Street 4.61 Capital One Bank (100%) - 2/06 2201-2245 Tomlynn Street 7.66 Information Integration (27%) - 11/06 Halifax Corporation (24%) - 1/04 Micro View (13%) -3/01 Leonard Fishman & Son, Inc. (13%) - 4/04 9011 Arboretum Parkway 17.38 Elliptus Software (30%) - 8/03 Primeco Personal Communications (24%) - 7/05 4805 Lake Brooke Drive 18.27 Kemper Insurance (51%) - 10/10 Target (34%) - 2/03 J. Sargeant Reynolds (11%) - 9/01 9100 Arboretum Parkway 17.64 New York Life Insurance Co. (15%) - 3/04 Columbia HCA (13%) - 6/01 2812 Emerywood Parkway 11.14 Charter One (100%) - 1/03 2277 Dabney Road 5.12 West Home Health (48%) - 10/10 KAP, Inc. (33%) - 2/01 Goodall Rubber Company (17%) - 5/01 9200 Arboretum Parkway 13.40 Columbia Propane (29%) - 6/05 General Dynamics Govt. Systems Corp. (11%) - 11/03 Crown Castle USA, Inc. (10%) - 5/05 DR2DR.Com, Inc. (10%) - 3/03 9210 Arboretum Parkway 14.35 Triton PCS Property (25%) - 11/01 U.S. Marine Corps (17%) - 6/01 Land America Financial Group (17%) - 1/01 West End Orthopedic Clinic, Inc. (15%) - 7/04 Whiting Turner Contracting Co. (11%) - 12/05 2212-2224 Tomlynn Street 6.32 Carriage House (40%) - 7/01 Office Masters (12%) - 4/02 Alkat Electric, Inc. (11%) - 7/01
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Total Base Rent Net Percentage for the Twelve Rentable Leased as of Months Ended Year Square December December 31, Property Name Location State Built Feet 31, 2000 (a) 2000 (b) (000's) ------------- -------- ----- ----- -------- ------------- ----------------- 2221-2245 Dabney Road Richmond VA 1994 45,250 100.0% 270 2201 Dabney Street Richmond VA 1962 45,000 100.0% - 2251 Dabney Road Richmond VA 1983 42,000 100.0% 166 2161-2179 Tomlynn Street Richmond VA 1985 41,550 100.0% 222 2256 Dabney Road Richmond VA 1982 33,560 72.6% 151 2246 Dabney Road Richmond VA 1987 33,271 85.6% 226 2244 Dabney Road Richmond VA 1993 33,050 100.0% 298 9211 Arboretum Parkway Richmond VA 1991 30,791 100.0% 413 2248 Dabney Road Richmond VA 1989 30,184 72.0% 186 2130-2146 Tomlynn Street Richmond VA 1988 29,700 100.0% 197 2120 Tomlyn Street Richmond VA 1986 23,850 100.0% 134 2110 Tomlynn Street Richmond VA 1965 15,910 0.0% 31 2240 Dabney Road Richmond VA 1984 15,389 100.0% 146 4364 South Alston Avenue Durham NC 1985 56,601 100.0% 1,048 ----------- --------- TOTAL ALL PROPERTIES / WEIGHTED AVG. 16,414,023 95.6% $ 235,274 =========== =========
Average Tenants Leasing 10% Annualized or More of Rentable Rental Rate Square Footage per as of Property as of December December 31, 2000 and 31, 2000 (c) Lease Expiration Date ------------ ---------------------- 2221-2245 Dabney Road 6.85 Ademco Distribution (30%) - 7/04 Hearth Services, Inc. (24%) - 6/02 Dal - Tile Corporation (16%) - 9/04 United Power Corporation (16%) - 4/02 DHL Airways (14%) - 8/03 2201 Dabney Street - Smith Turf & Irrigation, Co. (100%) 2/01-1/06 2251 Dabney Road 5.36 Wynne Guild (30%) - 1/01 Ultrabronz (30%) - 10/05 Cavalier Flooring Systems, Inc. (20%) - 4/03 Dominion Restoration (10%) - 7/05 Unit Instruments (10%) - 7/02 2161-2179 Tomlynn Street 5.98 United Power Corporation (40%) - 4/02 Kathleen's Bake Shop (29%) - 4/04 Dillard Paper Company (20%) - 11/01 KCI USA, Inc. (10%) - 6/02 2256 Dabney Road 5.72 Daycon Products (25%) - 5/04 Visual Aids (25%) - 5/01 Stanley Stephens Co. (23%) - 2/07 2246 Dabney Road 7.55 McKinney & Company (20%) - 12/00 Xerox Corporation (15%) - 6/02 Suitable for Framing (14%) - 8/01 Canning Corporation (14%) - 3/02 2244 Dabney Road 9.41 Pharmaco LSR International, Inc. (100%) - 8/04 9211 Arboretum Parkway 13.59 Bell Industries (50 %) - 12/02 Triton Property Management (30%) - 2/01 Jess Duboy Advertising (10%) - 2/02 KCI Technologies (10%) - 8/03 2248 Dabney Road 8.75 A&J Telephone Systems (21%) - 1/03 Pharmaco, Inc. (14%) - 8/04 2130-2146 Tomlynn Street 6.86 United Power Corporation (100%) - 4/02 2120 Tomlyn Street 6.21 United Power Corporation (42%) - 8/01 Unijax (30%) - 11/00 Fred & Gladys Connaster (15%) - 6/03 West End Signs (14%) - 11/01 2110 Tomlynn Street - 2240 Dabney Road 9.33 PDD Development, Inc. (100%) - 8/04 4364 South Alston Avenue 19.97 Cato Research (70%) - 7/01 Sandler & Recht (25%) - 2/01 TOTAL ALL PROPERTIES / WEIGHTED AVG. $ 16.77
-22- (a) Calculated by dividing net rentable square feet included in leases signed on or before December 31, 2000 at the property by the aggregate net rentable square feet of the Property. (b) "Total Base Rent" for the twelve months ended December 31, 2000 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. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges. (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, 2000 (without giving effect to free rent or scheduled rent increases that would be taken into account under GAAP) plus the 2000 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, 2000. In both cases the annualized rental rate is divided by the total square footage leased as of December 31, 2000 without giving effect to free rent or scheduled rent increases that would be taken into account under GAAP. (d) "Total Base Rent" reflected for these properties is presented on a consolidated basis. (e) These properties are under redevelopment and are excluded from the percentages for Weighted Average Percentage Leased and Average Annualized Rental Rate information. (f) This property is subject to a ground lease. (g) The Company has agreed to convey these properties to Prentiss as part of the transaction referred to in Item 1. Business - Subsequent Event. The following table shows certain information regarding rental rates and lease expirations for the Properties at December 31, 2000, assuming 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 ------------ ----------- ---------- ----------- ---------- -------------- ---------- 2001 415 2,790,586 39,154,183 14.03 15.2% 15.2% 2002 309 2,488,509 36,167,158 14.53 14.0% 29.2% 2003 324 2,121,839 35,567,001 16.76 13.8% 43.0% 2004 232 1,760,012 30,620,998 17.40 11.9% 54.9% 2005 246 2,251,900 41,943,323 18.63 16.3% 71.2% 2006 54 1,077,608 12,755,729 11.84 4.9% 76.1% 2007 30 469,367 10,507,868 22.39 4.1% 80.2% 2008 20 463,492 8,697,723 18.77 3.4% 83.6% 2009 66 664,130 13,776,972 20.74 5.3% 88.9% 2010 40 652,112 16,497,439 25.30 6.4% 95.3% 2011 and thereafter 73 957,607 12,134,186 12.67 4.7% 100.0% ----- ---------- ----------- ----- ----- 1,809 15,697,162 257,822,580 16.42 100.0% ===== ========== =========== ===== =====
(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. -23- At December 31, 2000, the Properties were leased to 1,246 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 from the Properties as of December 31, 2000:
Percentage of Remaining Aggregate Percentage Annualized Aggregate Number Lease Square of Aggregate Escalated Annualized of Term in Feet Leased Rent (in Escalated Tenant Name (a) Leases Months Leased Square Feet 000) (b) Rent --------------- ------ --------- --------- ------------ ---------- ------------- First USA Bank 8 (c) 619,370 3.9% $13,014 4.4% State of New Jersey 5 (d) 415,945 2.6% 11,133 3.8% Verizon 6 (e) 429,916 2.7% 8,976 3.0% General Electric 3 (f) 226,102 1.4% 4,762 1.6% Penske Truck Leasing 1 60 233,824 1.5% 4,499 1.5% Lockheed Martin 7 (g) 311,722 2.0% 4,094 1.4% GRC International 1 101 166,597 1.1% 4,033 1.4% Omnicare Clinical Research 1 115 150,000 1.0% 3,638 1.2% The Hartford 4 (h) 182,481 1.2% 3,599 1.2% Parsons Corporation 3 (i) 174,689 1.1% 3,387 1.1% Tiavelets 3 (j) 182,717 1.2% 3,254 1.1% A, entis Behring 4 (k) 122,013 0.8% 2,781 0.9% Highinark Corporation 3 (1) 127,679 0.8% 2,672 0.9% Keystone Health Plan Central 1 44 122,101 0.8% 2,522 0.9% American Business Financial Services 1 31 89,799 0.6% 2,499 0.8% Decision One 1 60 109,800 0.7% 2,326 0.8% Computer Sciences Corporation 3 (m) 96,733 0.6% 2,305 0.8% Kimberly Clark Corporation (Scott Paper) 1 60 93,014 0.6% 2,282 0.8% Reliance Insurance Company 5 (n) 83,979 0.5% 2,161 0.7% Virginia Department ofTaxation 1 11 91,945 0.6% 2,044 0.7% -- --- --------- ---- ------- ---- Consolidated Total/Weighted Average 62 71 4,030,426 25.7% $85,981 29.0% == === ========= ==== ======= ====
(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, 2000 multiplied by 12. Escalated Rent represents fixed base rental amounts plus pass-throughs of operating expenses, including electricity costs. The Company estimates operating expense pass-throughs based on historical amounts and comparable market data. (c) Consists of eight leases: a lease representing 274,531 net rentable square feet that expires in January 2017, a lease representing 244,080 net rentable square feet that expires in December 2015, two leases representing 53,894 net rentable square feet that expire in June 2010, a lease representing 7,088 net rentable square feet that expires in December 2010, a lease representing 19,708 net rentable square feet that expires in April 2005, a lease representing 19,666 net rentable square feet that expires in June 2005 and a lease representing 403 net rentable square feet that the tenant occupies on a month-to-month basis. (d) Consists of five leases: a lease representing 222,987 net rentable square feet that expires in September 2009, a lease representing 117,428 net rentable square feet that expires in August 2008, a lease representing 5,280 net rentable square feet that expires in September 2007, a lease representing 43,201 square feet that expires in July 2005 and a lease representing 27,049 net rentable square feet that expires in December 2002. (e) Consists of six leases: a lease representing 74,728 net rentable square feet that expires in July 2006, a lease representing 17,179 net rentable square feet that expires in October 2004, a lease representing 85,561 net rentable square feet that expires in August 2004, a lease representing 80,000 net rentable square feet that expires in November 2003, a lease representing 172,448 net rentable square feet that expires in April 2001and a rooftop lease that expired in February 2001. (f) Consists of three leases: two leases representing 94,102 net rentable square feet that expire in September 2003 and a lease representing 132,000 net rentable square feet that expires in September 2001. (g) Consists of seven leases: a lease representing 15,237 net rentable square feet that expires in July 2007, a lease representing 46,945 net rentable square feet that expires in April 2005, a lease representing 13,956 net rentable square feet that expires in October 2004, a lease representing 158,000 net rentable square feet that expires in September 2002, a lease representing 12,498 net rentable square feet that expires in June 2002, a lease representing 30,280 net rentable square feet that expires in May 2002 and a lease representing 34,806 net rentable square feet that expires in April 2002 . (h) Consists of four leases: three leases representing 147,461 net rentable square feet that expire in December 2007 and a lease representing 35,020 net rentable square feet that expires in December 2004. (i) Consists of three leases: a lease representing 169,013 net rentable square feet that expires in March 2010, a lease representing 4,474 net rentable square feet that expires in March 2005 and a license agreement representing 1,202 net rentable square feet that the tenant occupies on a month-to-month basis. -24- (j) Consists of three leases: a lease representing 82,875 net rentable square feet that expires in January 2004, a lease representing 51,314 net rentable square feet that expires in February 2002 and a lease representing 47,988 net rentable square feet that expires in December 2001. (k) Consists of four leases: two leases that represent 26,652 net rentable square feet that expire in January 2003 and two leases that represent 95,361 net rentable square feet that expire in October 2002. (l) Consists of three leases: a lease representing 53,179 net rentable square feet that expires in August 2004, a lease representing 14,500 net rentable square feet that expires in December 2003 and a lease representing 60,000 net rentable square feet that expires in May 2001. (m) Consists of three leases: two leases representing 59,903 net rentable square feet that expire in May 2002 and a lease representing 36,830 net rentable square feet that expires in November 2001. (n) Consists of five leases: two leases representing 4,907 net rentable square feet that expire in January 2003, a lease representing 68,841 net rentable square feet that expires in October 2002, a lease representing 3,848 net rentable square feet that expires in June 2002 and a lease representing 6,383 net rentable square feet that expired in February 2001. Real Estate Ventures Through December 31, 2000, the Company had invested approximately $33.6 million in thirteen Real Estate Ventures (net of returns of investment received by the Company). The Company, through subsidiaries, 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 ten office buildings that contain an aggregate of approximately 1.3 million net rentable square feet; two Real Estate Ventures are developing two office buildings that will contain, upon completion, an aggregate of approximately 316,000 net rentable square feet; one Real Estate Venture is developing a hotel property that will contain, upon completion, approximately 137 rooms; and one Real Estate Venture holds approximately six acres of land for future development. At December 31, 2000, the operating properties owned by the Real Estate Ventures were approximately 98% leased to 58 tenants. Item 3. Legal Proceedings The Company is involved from time to time in litigation on various matters, which include 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. Reference is made to the litigation disclosed in Part II, Item 1 of the Company's Form 10-Q for the quarter ended September 30, 2000. On July 9, 1999, the Superior Court of New Jersey, Camden County, dismissed the complaint against the Company with prejudice. The plaintiffs subsequently filed a motion for reconsideration, which motion the Superior Court denied. Plaintiffs then appealed to the Appellate Division, which is the intermediate appellate level court in New Jersey. In December 2000, the Appellate Division affirmed in part and reversed in part the Chancery Division's earlier dismissal of the entire action. The Appellate Division affirmed the dismissal of the fraud and other non-contractual counts in the Complaint, but reversed the contract and reformation counts and remanded these to the lower court for further proceedings. The Company sought review of this decision by the Supreme Court of New Jersey, but in March 2001, that Court declined to consider the appeal. The case will therefore return to the Chancery Division, where it is expected to proceed through the discovery process. In November 1999, a third-party complaint was filed in the Superior Court of New Jersey, Burlington County, by BRI OP Limited Partnership ("BRI OP") against the Company and several other persons and entities, including several former affiliates of the Company, relative to Greentree Shopping Center located in -25- Marlton, New Jersey ("Subject Property"). The Subject Property was owned and managed by a subsidiary of the Company between 1986 and 1988. BRI OP, also a former owner of the Subject Property, has been sued by the present owner and manager of the Subject Property, seeking indemnification and contribution for costs related to the remediation of environmental contamination allegedly caused by a dry cleaning business, which was a tenant of the Subject Property. BRI OP, in turn, brought a third-party action against the Company and others seeking indemnification for environmental remediation and clean up costs for which it may be held liable. This legal proceeding remains in the early stages of discovery, as the plaintiff has yet to complete testing that would document its alleged damages. However, the Company believes, based on its assessment of the potential cost of any required remediation, the availability of other parties that are potentially responsible for all or a portion of such cost, and defenses that may be available to the Company, that this proceeding will not have a material adverse effect on the Company's financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders The Company did not submit any matters to a vote of security holders in the fourth quarter of the fiscal year ended December 31, 2000. PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters The Common Shares are traded on the New York Stock Exchange ("NYSE") under the symbol "BDN." On March 27, 2001, there were approximately 305 holders of record of the Common Shares. On March 27, 2001, the last reported sales price of the Common Shares on the NYSE was $19.55. The following table sets forth the quarterly high and low closing sales price per share reported on the NYSE for the indicated periods and the distributions paid by the Company with respect to each such period. Share Price Share Price Distributions High Low Declared For Quarter ----------- ----------- -------------------- First Quarter 1999 $18 2/16 $16 3/16 $0.39 Second Quarter 1999 $20 7/16 $16 $0.39 Third Quarter 1999 $20 1/8 $16 1/4 $0.39 Fourth Quarter 1999 $17 1/2 $15 1/8 $0.40 First Quarter 2000 $17 1/8 $15 6/16 $0.40 Second Quarter 2000 $19 6/16 $16 13/16 $0.40 Third Quarter 2000 $21 5/8 $19 1/2 $0.41 Fourth Quarter 2000 $21 3/8 $18 3/8 $0.41 Future distributions by the Company will be declared at the discretion of the Board of Trustees and will depend on the actual cash flow of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986 and such other factors as the Board of Trustees deems relevant. During 2000 and through the date of this Annual Report on Form 10-K, the Company did not issue any securities, and equity awards to Company employees were funded through open market acquisitions of Common Shares. -26- Item 6. Selected Financial Data (in thousands, except per Common Share data and number of properties)
Year Ended December 31, 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------- Operating Results Total revenue $ 287,084 $ 283,220 192,861 $ 61,060 $ 10,030 Net income (loss) 52,158 34,606 33,025 15,001 (162) Income (loss) allocated to Common Shares 40,252 29,816 32,323 14,502 (563) Earnings per Common Share Basic $ 1.12 $ 0.80 $ 0.90 $ 0.96 $ (0.44) Diluted $ 1.12 $ 0.80 $ 0.89 $ 0.95 $ (0.44) Cash distributions declared per Common Share $ 1.62 $ 1.57 $ 1.52 $ 1.44 $ 0.82 Balance Sheet Data Real estate investments, net of accumulated depreciation $ 1,674,341 $ 1,702,353 $ 1,840,618 $ 563,557 $ 151,901 Total assets 1,825,440 1,829,916 1,911,680 621,481 178,326 Total indebtedness 866,202 839,634 1,000,560 163,964 36,644 Total liabilities 923,961 895,083 1,040,828 181,576 43,558 Minority interest 144,974 145,941 127,198 14,377 6,398 Beneficiaries' equity 756,505 788,892 706,154 425,528 101,926 Other Data Funds from operations $ 120,505 $ 110,042 $ 84,569 $ 30,035 $ 2,589 Cash flows from: Operating activities 102,243 80,400 73,116 33,124 2,559 Investing activities (32,372) 69,195 (903,193) (418,256) (35,401) Financing activities (59,523) (156,978) 813,710 396,295 50,281 Property Data Number of properties owned at year end 250 251 272 117 37 Net rentable square feet owned at year end 16,471 16,607 18,834 7,131 1,994
-27- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the financial statements appearing elsewhere herein. The results of operations, liquidity and capital resources and cash flows of the Company include the historical results of operations of the Properties held by the Company during the years ended December 31, 2000, 1999 and 1998. This Annual Report on Form 10-K contains forward-looking statements for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934 and as such may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that these expectations will be realized. See Item 1. Business - Risk Factors. OVERVIEW The Company currently manages its portfolio within three geographic segments: (1) Pennsylvania, (2) New Jersey/New York and (3) Virginia. The Company believes it has established an effective platform in these office and industrial markets that provides a foundation for achieving its goals of maximizing market penetration and optimizing operating economies of scale. During 2000, the Company sold seven office properties, containing 630,000 net rentable square feet, and two parcels of land, containing 5.0 acres, for $101.1 million. In addition, the Company acquired two parcels of land, containing 36.0 acres, for $7.0 million. The Company receives income primarily from rental revenue (including tenant reimbursements) from the Properties and, to a lesser extent, from the management of certain properties owned by third parties and from investments in the Real Estate Ventures. The Company expects that revenue growth in the next two years will result primarily from rent increases in its current portfolio, the development or redevelopment of office properties and, if consummated, the pending transaction with Prentiss. As of December 31, 2000, the Company had seven buildings in development or redevelopment aggregating 577,000 square feet. RESULTS OF OPERATIONS Comparison of the Year Ended December 31, 2000 to the Year Ended December 31, 1999 Revenue (which includes rental income, recoveries from tenants, and other income) increased to $287.1 million for 2000 as compared to $283.2 million for 1999, primarily due to increased rental rates and occupancy, partially offset by property dispositions in 2000. The straight-line rent adjustment increased revenues by $6.4 million in 2000 and $8.1 million in 1999. Average occupancy increased to 95.0% in 2000 as compared to 93.6% for 1999. Property operating expenses increased to $65.6 million in 2000 as compared to $64.6 million in 1999, primarily due to increased repair and maintenance expenses and the start-up of e-Tenants.com in 2000. e-Tenants is a web-based service that provides tenants with comprehensive business-to-business, business-to-consumer and on-line work order placement capabilities. Real estate taxes increased to $26.2 million in 2000 as compared to $25.5 million in 1999, primarily due to increased real estate tax assessments in 2000, partially offset by property dispositions in 2000. Interest expense decreased to $64.7 million in 2000 as compared to $69.8 million in 1999, primarily due to decreased average borrowings resulting from property dispositions in 2000, partially offset by increased interest rates. Average outstanding debt balances for 2000 were $871.3 million as compared to $927.3 million for 1999. The Company's weighted-average interest rate on unsecured credit facilities increased to 7.84% in 2000 from 6.95% in 1999 and on mortgage notes payable increased to 7.92% in 2000 from 7.1% in 1999. -28- Depreciation decreased to $64.0 million in 2000 as compared to $66.5 million in 1999 primarily due to property dispositions in 2000. Amortization, related to deferred leasing costs, increased to $3.0 million in 2000 as compared to $2.8 million in 1999, primarily due to increased leasing activity. Management fees increased slightly to $12.1 million in 2000 as compared to $12.0 million in 1999, primarily due to increased revenue on which management fees are calculated, partially offset by property dispositions in 2000. Administrative expenses increased to $4.2 million in 2000 as compared to $3.6 million in 1999, primarily due to amortization of deferred compensation costs related to additional restricted Common Shares awarded in 2000 and a compensation accrual for loans made to executives to purchase Common Shares which will be forgiven over a three year period. Equity in income of Real Estate Ventures increased to $2.8 million in 2000 as compared to $1.0 million in 1999, primarily due to an increase in the number of ventures commencing operations. During 2000, the Company sold seven office properties and two land parcels for $101.1 million, realizing a net gain of $11.6 million. During 1999, the Company sold seven office properties and 20 industrial facilities, realizing a net gain of $3.1 million. Minority interest represents the equity in income attributable to the portion of the Operating Partnership not owned by the Company. Minority interest increased to $9.6 million in 2000 as compared to $8.0 million in 1999, primarily due to the allocation of the net gain from sales of property in 2000. Comparison of the Year Ended December 31, 1999 to the Year Ended December 31, 1998 Revenue increased to $283.2 million for 1999 as compared to $192.9 million for 1998, primarily due to property acquisitions made during the latter part of 1998 and, to a lesser extent, increased rental rates. The straight-line rent adjustment increased revenues by $8.1 million in 1999 and $6.3 million in 1998. Property operating expenses increased to $64.6 million in 1999 as compared to $44.5 million in 1998, primarily due to property acquisitions during the latter part of 1998. Real estate taxes increased to $25.5 million in 1999 as compared to $16.4 million in 1998, primarily due to property acquisitions during the latter part of 1998. Interest expense increased to $69.8 million in 1999 as compared to $36.9 million in 1998, primarily due to increased borrowings incurred in connection with property acquisitions made during the latter part of 1998, partially offset by reduced interest rates. Average outstanding debt balances for 1999 were $927.3 million as compared to $575.6 million for 1998. The Company's weighted-average interest rate on unsecured credit facilities decreased to 6.95% in 1999 from 7.05% in 1998 and on mortgage notes payable to 7.1% in 1999 from 7.6% in 1998. Depreciation decreased to $66.5 million in 1999 as compared to $45.3 million in 1998, primarily due to property acquisitions made during the latter part of 1998. Amortization, related to deferred leasing costs, increased to $2.8 million in 1999 as compared to $2.7 million in 1998, primarily due to increased leasing activity. Management fees increased to $12.0 million in 1999 as compared to $6.9 million in 1998, primarily due to property acquisitions made during the latter part of 1998. -29- Administrative expenses increased to $3.6 million in 1999 as compared to $3.2 million in 1998, primarily due to the amortization of deferred compensation costs related to additional restricted stock awarded in 1999. Equity in income of Real Estate Ventures increased to $1.0 million in 1999 as compared to $.1 million in 1998, primarily due to an increase in the number of ventures commencing operations. During 1999, the Company sold seven office properties and 20 industrial facilities, realizing a net gain of $3.1 million. During 1998, the Company sold one office property for $14.7 million, realizing a net gain of $.2 million. Minority interest income increased to $8.0 million in 1999 as compared to $2.4 million in 1998, primarily due to the property acquisitions made during the latter part of 1998. LIQUIDITY AND CAPITAL RESOURCES Cash Flows During 2000, the Company generated $102.2 million in cash flow from operating activities. Other sources of cash in-flows consisted of: (i) $107.4 million of additional mortgage notes payable, (ii) $101.1 million of net proceeds from property sales and (iii) $71.0 million of proceeds from draws on the Credit Facility. During 2000, cash out-flows consisted of: (i) $113.1 million to fund capital expenditures, (ii) $109.5 million to repay borrowings under the Credit Facility, (iii) $69.0 million of distributions to shareholders, (iv) $42.4 million of mortgage note repayments, (v) $15.3 million to repurchase Common Shares, (vi) $7.0 million for property acquisitions, (vii) $6.6 million of leasing costs, (viii) $4.0 million of escrowed cash, (ix) $2.7 million of additional investment in Real Estate Ventures and (x) $1.7 million of debt costs. Capitalization At December 31, 2000, the Company maintained a $450.0 million Credit Facility. (See Item 1. Business-Credit Facility) As of December 31, 2000, the Company had approximately $866.2 million of debt outstanding, consisting of $338.3 million of borrowings under the Credit Facility and $527.9 million of mortgage notes payable. The mortgage notes payable consists of $401.5 million of fixed rate loans and $126.4 million of variable rate loans. Additionally, the Company has entered into interest rate swap and cap agreements to fix the interest rate on $253.0 million of the Credit Facility and variable rate loans. The mortgage loans mature or matured between January 2001 and July 2027. As of December 31, 2000, the Company also had $15.1 million of letters-of-credit outstanding and $96.6 million of unused availability under the Credit Facility. For the year ended December 31, 2000, the weighted-average interest rate under the Company's Credit Facility was 7.84%, and the weighted-average interest rate for borrowings under mortgage notes payable was 7.92%. As of December 31, 2000, the Company's debt-to-market capitalization ratio was 46.9%. As a general policy, the Company intends, but is not obligated, to adhere to a policy of maintaining a long-term average debt-to-market capitalization ratio of no more than 50%. The Company's Board of Trustees approved a share repurchase program authorizing the Company to repurchase up to 3,000,000 of its outstanding Common Shares. No time limit has been placed on the duration of the share repurchase program. During 2000, the Company repurchased 957,729 Common Shares for an aggregate of $15.3 million (an average price of $15.95 per share). The Company may purchase an additional 611,232 Common Shares under this program. -30- Short- and Long-Term Liquidity The Company believes that cash flow from operations and current financing alternatives are adequate to fund its short-term liquidity requirements for 2001. Cash flow from operations is generated primarily from rental revenues, operating expense reimbursements from tenants, and provision of management services to third parties. The Company intends to use these funds to meet its principal 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 qualifications under the Internal Revenue Code. On December 8, 2000, the Board of Trustees declared a quarterly dividend distribution of $0.41 per share, paid on January 15, 2001 to shareholders of record as of December 31, 2000. Distributions declared in 2000 totaled $1.62 per share as compared to $1.57 per share in 1999, representing an increase of approximately 3.2%. The Company expects to meet its 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 borrowings under its Credit Facility, long-term secured and unsecured indebtedness, the issuance of equity securities and the disposition of certain properties. Funds from Operations Management considers Funds from Operations ("FFO") as one measure of REIT performance. FFO is calculated as net income (loss) adjusted for depreciation expense attributable to real property, amortization expense attributable to capitalized leasing costs, gains on sales of land interests, and extraordinary items and comparable adjustments for real estate ventures accounted for using the equity method. Management believes that FFO is a useful disclosure in the real estate industry; however, the Company's disclosure may not be comparable to other REITs'. FFO should not be considered an alternative to net income as an indication of the Company's operating performance or to operating cash flows as a measure of liquidity. The following table summarizes FFO for the years ended December 31, 2000 and 1999 (in thousands, except share data):
2000 1999 ----------- ----------- Income before gains on sale, minority interest and extraordinary item 50,118 $ 39,487 Add (deduct): Depreciation: Attributable to real property 64,041 66,493 Attributable to real estate ventures 2,513 1,242 Amortization attributable to leasing costs 2,971 2,820 Gain on sale of land interests 862 - Funds from operations before minority interest $ 120,505 $ 110,042 =========== =========== We ighted -average Common Shares (including Common Share equivalents) and Operating Partnership units 47,449,673 45,190,881 =========== ===========
Inflation A majority of the Company's leases provide for escalations of real estate taxes and operating expenses either on a triple net basis or over a base amount. In addition, many of the office leases provide for fixed base rent increases or indexed escalations (based on the CPI or other measure). The Company believes that inflationary increases in expenses will be significantly offset by expense reimbursement and contractual rent increases. -31- Interest Rate Risk and Sensitivity Analysis The analysis below presents the sensitivity of the market value of the Company's financial instruments to selected changes in market rates. The range of changes chosen reflects the Company's 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. The Company's financial instruments consist of both fixed and variable rate debt. As of December 31, 2000, the Company's consolidated debt consisted of $401.5 million in fixed rate mortgages and $126.4 million in variable rate mortgage notes, and $338.3 million borrowed under its Credit Facility. 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 the Company's 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. The Company has entered into interest rate swap and rate cap agreements designed to reduce the impact of interest rate changes on its variable rate debt. At December 31, 2000, the Company had two interest rate swap agreements for notional principal amounts aggregating $150 million. The swap agreements effectively fix the interest rate on $50 million of Credit Facility borrowings at 6.08% and on $100 million of Credit Facility borrowings at 6.383% until September 2002. The interest rate caps effectively fix the interest rate on two variable rate mortgages. One rate cap fixes the interest rate on a mortgage with a notional value of $75 million at 6.25% until April 2001 and then at 7% until maturity in April 2002. The second interest rate cap fixes the interest rate on a mortgage with a notional value of $28 million at 8.7% until July 2004. The sensitivity analysis related to the fixed portion of the Company's debt portfolio assumes an instantaneous 1% move in interest rates from their actual levels at December 31, 2000 with all other variables held constant. As of December 31, 2000, a 1% increase in actual interest rates would result in a decrease in beneficiaries' equity of $21.3 million and a 1% decrease in actual interest rates would result in an increase in beneficiaries' equity of $23.9 million. Based on the Company's variable rate debt as of December 31, 2000, a 1% increase in interest rates would result in an additional $2.2 million in interest expense per year and a 1% decrease would reduce interest expense by $4.6 million per year. 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 are listed under Item 14(a) and filed as part of this Annual Report on Form 10-K. See Item 14. -32- Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Trustees and Executive Officers of the Company 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 7, 2001. Item 11. Executive Compensation 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 7, 2001. Item 12. Security Ownership of Certain Beneficial Owners and Management 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 7, 2001. 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 7, 2001. -33- PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) 1. and 2. Financial Statements and Schedules The financial statements and schedules listed below are filed as part of this annual report on the pages indicated. Index to Financial Statements and Schedules Page ---- Report of Independent Public Accountants....................................F-1 Consolidated Balance Sheets as of December 31, 2000 and December 31, 1999...F-2 Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998....................................F-3 Consolidated Statements of Beneficiaries' Equity for the Years Ended December 31, 2000, 1999 and 1998....................................F-4 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998....................................F-5 Notes to Consolidated Financial Statements..................................F-6 Schedule II - Valuation and Qualifying Accounts.............................F-19 Schedule III - Real Estate and Accumulated Depreciation.....................F-20 3. Exhibits
Exhibits No. Description ------------ ----------- (1) 3.1.1 Amended and Restated Declaration of Trust of the Company (amended and restated as of May 12, 1997). (2) 3.1.2 Articles of Amendment to Declaration of Trust of the Company (September 4, 1997). (3) 3.1.3 Articles of Amendment to Declaration of Trust of the Company (No. 2). (4) 3.1.4 Articles Supplementary to Declaration of Trust of the Company (September 28, 1998) (5) 3.1.5 Articles of Amendment to Declaration of Trust of the Company (March 19, 1999) 3.2 Amended and Restated Bylaws of the Company. (6) 10.01 Brandywine Realty Partners General Partnership Agreement. (6) 10.02 Second Amended and Restated Partnership Agreement of Brandywine Realty Services Partnership. (7) 10.03 Amendment to Brandywine Realty Partners General Partnership Agreement. (8) 10.04 Third Amendment to Brandywine Realty Partners General Partnership Agreement. (8) 10.05 Form of Warrant issued to Executive Officers. ** (8) 10.06 Environmental Indemnity Agreement between the Company and SSI. (8) 10.07 Articles of Incorporation of Brandywine Realty Services Corporation, as amended. (9) 10.08 Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (the "Operating Partnership").
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(9) 10.09 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of the Operating Partnership. (9) 10.10 First Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (9) 10.11 Tax Indemnification Agreement - PWCC (9) 10.12 Tax Indemnification Agreement - Laurel Oak (9) 10.13 Tax Indemnification Agreement - English Creek (10) 10.14 Second Amendment, dated March 31, 1998, to the Amended and Restated Agreement of Limited Partnership Agreement of Brandywine Operating Partnership, L.P. (10) 10.15 Tax Indemnification Agreement, dated March 31, 1998, by and between Brandywine Operating Partnership, L.P. and Brookstone Investors, L.L.C. (10) 10.16 Tax Indemnification Agreement, dated March 31, 1998, by and between Brandywine Operating Partnership, L.P. and Brookstone Holdings of Del. -4, L.L.C. (10) 10.17 Tax Indemnification Agreement, dated March 31, 1998, by and between Brandywine Operating Partnership, L.P. and Brookstone Holdings of Del. -5, L.L.C. (10) 10.18 Tax Indemnification Agreement, dated March 31, 1998, by and between Brandywine Operating Partnership, L.P. and Brookstone Holdings of Del. -6, L.L.C. (11) 10.19 Contribution Agreement, dated April 7, 1998, by and between the entities listed on Schedule thereto and Brandywine Operating Partnership, L.P. (11) 10.20 First Amendment to Contribution Agreement dated May 8, 1998. (11) 10.21 Third Amendment, dated May 8, 1998, to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L. P. (11) 10.22 Tax Indemnification Agreement dated May 8, 1998, by and between Brandywine Operating Partnership, L.P. and the parties identified on the signature page. (12) 10.23 Contribution Agreement (Axinn) (12) 10.24 Form of Axinn Options ** (12) 10.26 Form of Hamer Options ** (4) 10.27 Second Amended and Restated Credit Agreement (4) 10.28 Pledge Agreement (4) 10.29 Credit Agreement (4) 10.30 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership creating the Series A Preferred Mirror Units. (4) 10.31 Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership creating the Series B Preferred Units. (4) 10.32 Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (4) 10.33 First Amendment to Contribution Agreement (Axinn) (13) 10.34 Contribution and Purchase Agreement (Lazard) (13) 10.35 Form of Board of Trustees Designation Letter 10.36 Amended and Restated Employment Agreement dated as of December 8, 2000 of Anthony A. Nichols, Sr.** 10.37 Amended and Restated Employment Agreement dated as of December 8, 2000 of Gerard H. Sweeney** (5) 10.38 Amended and Restated Non-Qualified Stock Option Award to Anthony A. Nichols, Sr. ** (5) 10.39 Amended and Restated Non-Qualified Stock Option Award to Gerard H. Sweeney ** (5) 10.40 Non-Qualified Stock Option Award to Jeffrey F. Rogatz ** (14) 10.41 Restricted Share Awards to Anthony A. Nichols, Sr. ** (14) 10.42 Restricted Share Awards to Gerard H. Sweeney ** (5) 10.43 Long-Term Performance Award for Anthony A. Nichols, Sr. ** (5) 10.44 Long-Term Performance Award for Gerard H. Sweeney** (5) 10.45 Long-Term Performance Award for Anthony S. Rimikis ** (5) 10.46 Severance Agreement (Jeffrey F. Rogatz) ** (5) 10.47 Severance Agreement (Anthony S. Rimikis) **
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(5) 10.48 Third Amendment to Restricted Share Award to Anthony A. Nichols, Sr.** (5) 10.49 Third Amendment to Restricted Share Award to Gerard H. Sweeney.** (5) 10.50 Restricted Share Award to Jeffrey F. Rogatz (May 1999).** (5) 10.51 Restricted Share Award to Anthony S. Rimikis.** (5) 10.52 Restricted Share Award to Jeffrey F. Rogatz (January 2000).** (5) 10.53 Loan Agreement with Gerard H. Sweeney.** (5) 10.54 Loan Agreement with Anthony A. Nichols, Sr.** 10.55 Fourth Amendment to Restricted Share Award to Anthony A. Nichols, Sr.** 10.56 Fourth Amendment to Restricted Share Award to Gerard H. Sweeney** 10.57 Severance Agreement (Barbara L. Yamarick)** 10.58 Severance Agreement (Anthony A. Nichols, Jr.)** 10.59 Severance Agreement (H. Jeffrey De Vuono)** 10.60 Severance Agreement (George Sowa)** 10.61 Severance Agreement (Bradley W. Harris)** 10.62 Restricted Share Award to Anthony A. Nichols, Sr.** 10.63 Restricted Share Award to Gerard H. Sweeney** 10.64 Restricted Share Award to Anthony S. Rimikis** 10.65 Restricted Share Award to Barbara L. Yamarick 10.66 Restricted Share Award to Anthony A. Nichols, Jr.** 10.67 Restricted Share Award to H. Jeffrey De Vuono** 10.68 Restricted Share Award to George Sowa** 10.69 Restricted Share Award to Bradley W. Harris** 10.70 Restricted Share Award to Jeffrey F. Rogatz** (15) 10.71 Exchange Agreement (Virginia properties) - Prentiss Transaction (15) 10.72 Exchange Agreement (Pennsylvania/New Jersey properties) - Prentiss Transaction (15) 10.73 Agreement of Purchase and Sale (Fee Transfer properties) - Prentiss Transaction (15) 10.74 Agreement of Purchase and Sale (Entity Transfer properties) - Prentiss Transaction (15) 10.75 Contribution Agreement (Joint Venture Interest) - Prentiss Transaction (15) 10.76 Agreement of Purchase and Sale (935) First Avenue) - Prentiss Transaction (15) 10.77 Form of Fourteenth Amendment to Second Amended and Restated Agreement of Limited Partnership of Prentiss - Prentiss Transaction 21.1 List of Subsidiaries of the Company 23.1 Consent of Arthur Andersen LLP
(1) Previously filed as an exhibit to the Company's Form 8-K dated June 9, 1997 and incorporated herein by reference. (2) Previously filed as an exhibit to the Company's Form 8-K dated September 10, 1997 and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Form 8-K dated June 3, 1998 and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Form 8-K dated October 13, 1998 and incorporated herein by reference. (5) Previously filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference. (6) Previously filed as an exhibit to the Company's Registration statement of Form S-11 (File No. 33-4175) and incorporated herein by reference. (7) Previously filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference. (8) Previously filed as an exhibit to the Company's Form 8-K dated August 22, 1996 and incorporated herein by reference. (9) Previously filed as an exhibit to the Company's Form 8-K dated December 17, 1997 and incorporated herein by reference. -36- (10) Previously filed as an exhibit to the Company's Form 8-K dated April 13, 1998 and incorporated herein by reference. (11) Previously filed as an exhibit to the Company's Form 8-K dated May 14, 1998 and incorporated herein by reference. (12) Previously filed as an exhibit to the Company's Form 8-K dated July 30, 1998 and incorporated herein by reference. (13) Previously filed as an exhibit to the Company's Form 8-K dated August 13, 1998 and incorporated herein by reference. (14) Previously filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference. (15) Previously filed as an exhibit to the Company's Form 8-K dated March 23, 2001 and incorporated herein by reference. ** Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K During the fourth quarter of the year ended December 31, 2000, the Company did not file any reports on Form 8-K. On March 23, 2001, the Company filed a report on Form 8-K to report, under Item 5, a pending acquisition. -37- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and 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 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Anthony A. Nichols, Sr. Chairman of the Board and Trustee March 30, 2001 ------------------------------- Anthony A. Nichols, Sr. /s/ Gerard H. Sweeney President, Chief Executive Officer and Trustee March 30, 2001 ------------------------------- (Principal Executive Officer) Gerard H. Sweeney /s/ Jeffrey F. Rogatz Senior Vice President and Chief Financial March 30, 2001 ------------------------------- Officer (Principal Financial Officer) Jeffrey F. Rogatz /s/ Bradley W. Harris Vice President and Chief Accounting Officer March 30, 2001 ------------------------------- (Principal Accounting Officer) Bradley W. Harris /s/ Warren V. Musser Trustee March 30, 2001 ------------------------------- Warren V. Musser /s/ Walter D'Alessio Trustee March 30, 2001 ------------------------------- Walter D'Alessio /s/ Charles P. Pizzi Trustee March 30, 2001 ------------------------------- Charles P. Pizzi /s/ Donald E. Axinn Trustee March 30, 2001 ------------------------------- Donald E. Axinn /s/ Robert C. Larson Trustee March 30, 2001 ------------------------------- Robert C. Larson /s/ D. Pike Aloian Trustee March 30, 2001 ------------------------------- D. Pike Aloian
-38- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Brandywine Realty Trust: We have audited the consolidated balance sheets of Brandywine Realty Trust (a Maryland real estate investment trust) and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, beneficiaries' equity and cash flows for each of the three years for the period ended December 31, 2000. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brandywine Realty Trust and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years for the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to financial statements and schedules in Item 14 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not a required part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania March 1, 2001 F-1 BRANDYWINE REALTY TRUST CONSOLIDATED BALANCE SHEETS (in thousands, except number of shares)
December 31, ---------------------------- 2000 1999 ----------- ----------- ASSETS Real estate investments: Operating properties $ 1,754,895 $ 1,771,475 Accumulated depreciation (179,558) (125,744) ----------- ----------- 1,575,337 1,645,731 Construction-in-progress 54,311 24,742 Land held for development 44,693 31,880 ----------- ----------- 1,674,341 1,702,353 Cash and cash equivalents 16,040 5,692 Escrowed cash 14,788 10,814 Accounts receivable, net 7,322 9,249 Accrued rent receivable, net 21,221 16,644 Due from affiliates 5,781 7,361 Investment in management company, at equity 392 228 Investment in real estate ventures, at equity 33,566 35,682 Deferred costs, net 19,828 17,960 Other assets 32,161 23,933 ----------- ----------- Total assets $ 1,825,440 $ 1,829,916 =========== =========== LIABILITIES AND BENEFICIARIES' EQUITY Mortgage notes payable $ 527,877 $ 462,809 Borrowings under Credit Facility 338,325 376,825 Accounts payable and accrued expenses 20,099 17,596 Distributions payable 20,428 18,982 Tenant security deposits and deferred rents 17,232 18,871 ----------- ----------- Total liabilities 923,961 895,083 Minority interest 144,974 145,941 Commitments and contingencies Beneficiaries' equity: Preferred Shares of beneficial interest, (shares authorized-10,000,000): 7.25% Series A Preferred Shares, $0.01 par value; issued and outstanding-750,000 in 2000 and 1999 8 8 8.75% Series B Preferred Shares, $0.01 par value; issued and outstanding-4,375,000 in 2000 and 1999 44 44 Common Shares of beneficial interest, $0.01 par value; shares authorized-100,000,000; issued and outstanding-35,681,314 in 2000 and 36,372,590 in 1999 357 364 Additional paid-in capital 851,875 863,962 Share warrants 908 908 Cumulative earnings 131,256 79,384 Accumulated other comprehensive loss (1,731) - Cumulative distributions (226,212) (155,778) ----------- ----------- Total beneficiaries' equity 756,505 788,892 ----------- ----------- Total liabilities and beneficiaries' equity $ 1,825,440 $ 1,829,916 =========== ===========
The accompanying notes are an integral part of these financial statements. F-2 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share information)
Year ended December 31, --------------------------------------------- 2000 1999 1998 ---------- --------- ---------- Revenue: Rents $ 245,460 $ 240,979 $ 163,865 Tenant reimbursements 34,506 35,270 24,140 Other 7,118 6,971 4,856 --------- --------- --------- Total revenue 287,084 283,220 192,861 Operating Expenses: Property operating expenses 65,597 64,586 44,459 Real estate taxes 26,200 25,497 16,365 Interest 64,746 69,800 36,886 Depreciation and amortization 67,012 69,313 48,002 Management fees 12,123 11,998 6,922 Administrative expenses 4,249 3,598 3,199 --------- --------- --------- Total operating expenses 239,927 244,792 155,833 --------- --------- --------- Income before equity in income of management company, equity in income of real estate ventures, net gains on sales, minority interest and extraordinary items 47,157 38,428 37,028 Equity in income of management company 164 80 74 Equity in income of real estate ventures 2,797 979 144 --------- --------- --------- Income before net gains on sales, minority interest and extraordinary items 50,118 39,487 37,246 Net gains on sales of interests in real estate 11,638 3,115 209 --------- --------- --------- Income before minority interest and extraordinary items 61,756 42,602 37,455 Minority interest (9,598) (7,996) (2,427) --------- --------- --------- Income before extraordinary items 52,158 34,606 35,028 Extraordinary items - - (2,003) --------- --------- --------- Net income 52,158 34,606 33,025 Income allocated to Preferred Shares (11,906) (4,790) (702) --------- --------- --------- Income allocated to Common Shares $ 40,252 $ 29,816 $ 32,323 ========= ========= ========= Earnings per Common Share before extraordinary item: Basic $ 1.12 $ 0.80 $ 0.95 ========= ========= ========= Diluted $ 1.12 $ 0.80 $ 0.95 ========= ========= ========= Earnings per Common Share after extraordinary item: Basic $ 1.12 $ 0.80 $ 0.90 ========= ========= ========= Diluted $ 1.12 $ 0.80 $ 0.89 ========= ========= =========
The accompanying notes are an integral part of these financial statements. F-3 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF BENEFICIARIES' EQUITY For the years ended December 31, 2000, 1999 and 1998 (in thousands, except number of shares)
Number of Par Value of Number of Par Value of Number of Preferred A Preferred A Preferred B Preferred B Common Shares Shares Shares Shares Shares ----------- ------------ ----------- ------------ --------- BALANCE, January 1, 1998 - $ - - $ - 24,087,315 Net income - - - Issuance of Preferred Shares 750,000 8 - Issuance of Common Shares - - 13,572,810 Repurchase of Common Shares - - (86,744) Preferred Share distributions - - - Distributions ($1.52 per share) - - - - - ------- --- --------- ---- ---------- BALANCE, December 31, 1998 750,000 8 - - 37,573,381 Net income - - - Vesting of Restricted Stock - - 143,504 Issuance of Preferred Shares 4,375,000 44 Repurchase of Common Shares - - (1,344,295) Expiration of Common Share warrants - - - Preferred Share distributions - - - Distributions ($1.57 per share) - - - - - ------- --- --------- ---- ---------- BALANCE, December 31, 1999 750,000 8 4,375,000 44 36,372,590 Net income Unrealized loss on available-for-sale securities Comprehensive income Vesting of Restricted Stock - - 106,453 Repurchase of Common Shares - - (957,729) Executive stock loans used to purchase Common Shares 160,000 Accretion of Preferred Share discount Preferred Share distributions - - - Distributions ($1.62 per share) - - - - - ------- --- --------- ---- ---------- BALANCE, December 31, 2000 750,000 $ 8 4,375,000 $ 44 35,681,314 ======= === ========= ==== ==========
Accumulated Par Value of Other Common Additional Paid Executive Share Cumulative Comprehensive Shares in Capital Stock Loans Warrants Earnings Income ------------ --------------- ----------- -------- ---------- ------------- BALANCE, January 1, 1998 $ 241 $ 446,054 $ - $ 962 $ 11,753 $ - Net income - - - - 33,025 Issuance of Preferred Shares - 37,492 - - - Issuance of Common Shares 136 307,491 - - - Repurchase of Common Shares (1) (1,656) - - - Preferred Share distributions - - - - Distributions ($1.52 per share) - - - - - - ----- --------- ------- ----- -------- - -------- BALANCE, December 31, 1998 376 789,381 - 962 44,778 - Net income - - - - 34,606 Vesting of Restricted Stock 1 1,894 - - - Issuance of Preferred Shares 94,797 Repurchase of Common Shares (13) (22,164) - - - Expiration of Common Share warrants - 54 - (54) - Preferred Share distributions - - - - Distributions ($1.57 per share) - - - - - - ----- --------- ------- ----- -------- - -------- BALANCE, December 31, 1999 364 863,962 - 908 79,384 - Net income 52,158 Unrealized loss on available-for-sale securities (1,731) Comprehensive income Vesting of Restricted Stock - 2,897 - - - Repurchase of Common Shares (9) (15,268) - - - Executive stock loans used to purchase Common Shares 2 2,498 (2,500) Accretion of Preferred Share discount 286 (286) Preferred Share distributions - - - - - Distributions ($1.62 per share) - - - - - - ----- --------- ------- ----- -------- -------- BALANCE, December 31, 2000 $ 357 $ 854,375 $(2,500) $ 908 $ 131,256 $ (1,731) ===== ========= ======= ===== ========= ========
Cumulative Distributions Total ------------- --------- BALANCE, January 1, 1998 $ (33,482) $ 425,528 Net income - 33,025 Issuance of Preferred Shares - 37,500 Issuance of Common Shares - 307,627 Repurchase of Common Shares - (1,657) Preferred Share distributions (702) (702) Distributions ($1.52 per share) (57,667) (57,667) ---------- --------- BALANCE, December 31, 1998 (91,851) 743,654 Net income - 34,606 Vesting of Restricted Stock - 1,895 Issuance of Preferred Shares 94,841 Repurchase of Common Shares - (22,177) Expiration of Common Share warrants - - Preferred Share distributions (4,790) (4,790) Distributions ($1.57 per share) (59,137) (59,137) ---------- --------- BALANCE, December 31, 1999 (155,778) 788,892 Net income 52,158 Unrealized loss on available-for-sale securities (1,731) Comprehensive income 50,427 Vesting of Restricted Stock - 2,897 Repurchase of Common Shares - (15,277) Executive stock loans used to purchase Common Shares - Accretion of Preferred Share discount - Preferred Share distributions (11,906) (11,906) Distributions ($1.62 per share) (58,528) (58,528) ---------- --------- BALANCE, December 31, 2000 $ (226,212) $ 756,505 ========== =========
The accompanying notes are an intergral part of these financial statements. F-4 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Year ended December 31, ----------------------------------------------------- 2000 1999 1998 -------- -------- --------- Cash flows from operating activities: Net income $ 52,158 $ 34,606 $ 33,025 Adjustments to reconcile net income to net cash from operating activities: Depreciation 64,041 66,493 45,304 Amortization: Deferred financing costs 3,478 3,303 229 Deferred leasing costs 2,971 2,820 2,698 Deferred compensation costs 2,685 1,758 1,488 Straight line rental income (6,396) (8,100) (6,300) Provision for doubtful accounts 332 1,034 2,710 Equity in income of management company (164) (80) (74) Equity in income of real estate ventures, net of cash distributions received (354) - - Issuance of shares to trustees 65 67 29 Net gain on sales of interests in real estate (11,638) (3,115) (209) Minority interest 9,598 7,996 2,427 Distributions paid to minority partners (10,543) (9,158) (981) Extraordinary items - - 2,003 Changes in assets and liabilities: Accounts receivable 3,414 (8,058) (3,490) Due from affiliates 1,580 (1,887) (5,260) Other assets (10,060) (19,194) (14,775) Accounts payable and accrued expenses 2,715 5,167 7,704 Tenant security deposits and deferred rents (1,639) 6,748 6,588 -------- -------- -------- Net cash from operating activites 102,243 80,400 73,116 Cash flows from investing activities: Acquisition of properties (7,010) (20,000) (878,484) Sales of properties 101,075 147,700 14,704 Capital expenditures (113,137) (23,547) (20,184) Investment in real estate ventures (2,748) (21,059) (10,158) Increase in escrowed cash (3,974) (7,325) (3,277) Cash distributions from real estate ventures - 692 323 Leasing costs (6,578) (7,266) (6,117) -------- -------- -------- Net cash from investing activities (32,372) 69,195 (903,193) Cash flows from financing activites: Proceeds from notes payable, Credit Facility 71,000 67,000 1,374,467 Repayment of notes payable, Credit Facility (109,500) (371,500) (808,375) Proceeds from mortgage notes payable 107,397 203,415 19,277 Repayment of mortgage notes payable (42,412) (60,003) (14,669) Debt financing costs (1,656) (5,868) (4,916) Proceeds from issuance of shares, net - 95,366 301,023 Repurchases of Common Shares (15,342) (22,244) (1,657) Distributions paid to shareholders (69,010) (63,144) (51,440) -------- -------- -------- Net cash from financing activities (59,523) (156,978) 813,710 -------- -------- -------- Increase (decrease) in cash and cash equivalents 10,348 (7,383) (16,367) Cash and cash equivalents at beginning of year 5,692 13,075 29,442 -------- -------- -------- Cash and cash equivalents at end of year $ 16,040 $ 5,692 $ 13,075 ========= ======== ========
The accompanying notes are an integral part of these financial statements. F-5 BRANDYWINE REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 1. ORGANIZATION AND NATURE OF OPERATIONS Brandywine Realty Trust, a Maryland Real Estate Investment Trust (collectively with its subsidiaries, the "Company"), is a self-administered and self-managed real estate investment trust (a "REIT") active in acquiring, developing, redeveloping, leasing and managing office and industrial properties. As of December 31, 2000, the Company's portfolio included 197 office properties, 52 industrial facilities and one mixed-use property (collectively, the "Properties") that contained an aggregate of approximately 16.5 million net rentable square feet. The Properties are located in the office and industrial markets surrounding Philadelphia, Pennsylvania, New Jersey and Long Island, New York and Richmond, Virginia. As of December 31, 2000, the Company also held economic interests in thirteen real estate ventures (the "Real Estate Ventures"). The Company's interest in its assets is held through Brandywine Operating Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership and, as of December 31, 2000, was entitled to approximately 94.3% of the Operating Partnership's distributions after distributions to holders of Series B Preferred Units (as defined in Note 3 below). As of December 31, 2000, the Operating Partnership held a 95% economic interest in Brandywine Realty Services Corporation, a Pennsylvania corporation (the "Management Company"), through its ownership of 100% of the Management Company's non-voting preferred stock and 5% of its voting common stock. As of December 31, 2000, the Management Company was managing properties containing an aggregate of approximately 20.3 million net rentable square feet, of which 16.3 million net rentable square feet related to properties owned by the Company and approximately 4.0 million net rentable square feet related to properties owned by unaffiliated third parties. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and the Operating Partnership. The portion of the Operating Partnership not owned by the Company is presented as minority interest. Intercompany accounts and transactions have been eliminated. Certain amounts reported in prior years have been reclassified for comparative purposes. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Real Estate Investments Real estate investments are carried at cost. Depreciation is computed using the straight-line method based on the following useful lives: buildings and improvements (25 to 35 years) and tenant improvements over the shorter of the lease term or the life of the asset. Direct construction costs totaling $1.8 million in 2000, $882,000 in 1999 and $598,000 in 1998 and interest totaling $8.2 million in 2000, $2.1 million in 1999 and $1.2 million in 1998 were capitalized related to the development of certain Properties and land holdings. The Company expenses routine repair and maintenance expenditures. Real estate investments will be reviewed for impairment if facts and circumstances indicate that the carrying value of such assets may not be recoverable. Measurement of any impairment loss will be based on the fair value of the asset; generally, determined using valuation techniques, such as the present value of expected future cash flows. No impairment adjustments have been made as a result of this review process during 2000, 1999 and 1998. F-6 Cash Equivalents 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. Accounts Receivable Accounts receivable and accrued rent receivable are presented net of allowances for doubtful accounts of $1.3 million and $1.1 million in 2000 and $2.9 million and $0.5 million in 1999. As of December 31, 2000 and 1999, no tenant represents more than 10% of accounts receivable. Other Assets As of December 31, 2000, other assets included deposits on properties purchased in January 2001 totaling $21.6 million, prepaid real estate taxes of $4.5 million, an investment in US RealTel, Inc. of $769,000 and other assets. The Company accounts for its investments in equity securities according to the provisions of Statement of Financial Accounting Standards No. 115 ("SFAS 115"), Accounting for Certain Investments in Debt and Equity Securities, which requires securities classified as "available-for-sale" to be stated at fair value. Adjustments to fair value of available-for-sale securities are recorded as a component of other comprehensive income in beneficiaries' equity. Management Company The Company's investment in the Management Company is accounted for using the equity method. The Management Company provides management, leasing, construction, development, redevelopment and other real estate related services for the Company's Properties and for third parties. (See Note 5 below.) Deferred Costs Certain expenditures related to the financing and leasing of the Properties are capitalized. Capitalized financing fees are amortized over the related loan term and capitalized leasing costs are amortized over the related lease term. Accumulated amortization related to these costs was $13.1 million in 2000 and $9.7 million in 1999. Deferred costs include internal direct leasing costs totaling $2.5 million in 2000 and $.9 million in 1999. Fair Value of Financial Instruments Carrying amounts reported in the balance sheet for cash, accounts receivable, other assets, accounts payable and accrued expenses, and borrowings under the Credit Facility approximate fair value due to the nature of these instruments. Accordingly, these items have been excluded from the fair value disclosures. Revenue Recognition Rental revenue is recognized on a straight-line basis over the lease term regardless of when payments are due. The straight-line rent adjustment increased revenue by approximately $6.4 million in 2000, $8.1 million in 1999 and $6.3 million in 1998. Certain lease agreements contain provisions that require tenants to reimburse a pro rata share of real estate taxes and certain common area maintenance costs. No tenant represented 10% or more of the Company's rental revenue in 2000, 1999 or 1998. Income Taxes The Company elects to be taxed as a real estate investment trust under Sections 856-860 of the Internal Revenue Code. In management's opinion, the requirements to maintain this election are being met. Accordingly, no provision for Federal income taxes has been reflected in the financial statements. Earnings and profits, which determine the taxability of distributions to shareholders, differ from net income reported for financial reporting purposes due to differences in cost basis, the estimated useful lives used to compute depreciation, and the allocation of net income and loss for financial versus tax reporting purposes. 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 2000, 1999, or 1998. F-7 The Management Company is subject to Federal and state income taxes. The operating results of the Management Company include a provision for income taxes of $115,000 in 2000, $57,000 in 1999 and $83,000 in 1998. Earnings Per Share Basic earnings per share is calculated by dividing income applicable 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 follows Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for stock-based compensation plans and discloses the fair value of options granted and pro forma earnings as permitted by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Comprehensive Income Comprehensive income for the year ended December 31, 2000 includes unrealized gains and losses on available-for-sale securities. Net income as reported by the Company reflects total comprehensive income for the years ended December 31, 1999 and 1998. New Pronouncements In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 133 establishes accounting and reporting standards for the recognition and measurement of derivative instruments and hedging activities. The Company adopted this statement effective January 1, 2001 and recorded a charge of $1.3 million to comprehensive income for the cumulative effect of an accounting change to recognize at fair value all derivatives that are designated as cash flow hedging instruments. Management believes their hedges are highly effective with changes in effectiveness expected to be reported in other comprehensive income. The impact of any ineffective hedges will be reported in current earnings. 3. MINORITY INTEREST Income allocated to the Minority Interest is based on the percentage ownership of the Operating Partnership held by third parties throughout the year. Minority interest is comprised of Class A Units of limited partnership interest ("Class A Units") and Series B Preferred Units of limited partnership interest ("Series B Preferred Units"). 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 has a stated value of $50.00 and is convertible, at the option of the holder, into Class A Units at a conversion price of $28.00. The conversion price declines to $26.50, if the average trading price of the Common Shares during the 60-day period ending December 31, 2003 is $23.00 or less. The Series B Preferred Units bear a preferred distribution of 7.25% per annum, subject to an increase in the event quarterly distributions paid to holders of Common Shares exceed $0.51 per share. The Company declared distributions of $7.1 million in 2000, $6.1 million in 1999 and $1.5 million in 1998 to the holders of Series B Preferred Units and $3.5 million in 2000, $3.4 million in 1999 and $1.6 million in 1998 to holders of Class A Units. As of December 31, 2000 and 1999, there were 2,156,150 Class A Units and 1,950,000 Series B Preferred Units held by third party investors. 4. ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS 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. 2000 During 2000, the Company sold seven office properties, containing 630,000 net rentable square feet, and two parcels of land, containing 5.0 acres, for $101.1 million, realizing a net gain of $11.6 million. Four of the properties were sold for $72.1 million realizing an aggregate gain of $15.8 million, three of the properties were sold for $27.8 million realizing an aggregate loss of $5.1 million, and two land parcels were sold for $1.2 million realizing an aggregate gain of $.9 million. In addition, the Company purchased 36.0 acres of land for $7.0 million. F-8 The results of operations on a pro forma basis on the above acquisitions and dispositions are not material. 1999 During 1999, the Company sold 27 properties (seven office properties and 20 industrial facilities), containing 2.6 million net rentable square feet, for $147.7 million, realizing a net gain of $3.1 million, and acquired six properties (five office properties and one industrial facility), containing 463,000 net rentable square feet, for $42.0 million. The purchase price of these properties was satisfied with cash of $20.0 million, the issuance of 83,333 Class A Units valued at $2.0 million ($24 per unit), and the issuance of 400,000 Series B Preferred Units valued at $20.0 million ($50 per unit). The results of operations on a pro forma basis on the above acquisitions and dispositions were not material. 1998 During 1998, the Company purchased 153 office, industrial and mixed-use properties, containing 11.6 million net rentable square feet, for $1.3 billion. The purchase price was satisfied with cash of $848.8 million, debt assumption of $265.5 million, the issuance of 1,754,763 Class A Units valued at $41.0 million, the issuance of 1,550,000 Series B Preferred Units with a stated value of $77.5 million; and the issuance of 750,000 Series A Preferred Shares (the "Series A Preferred Shares") with a stated value of $37.5 million. The Company also sold one office property, containing 156,000 net rentable square feet, for $14.7 million, resulting in a gain of $209,000. All pro forma financial information presented herein is unaudited and not necessarily indicative of the results that would have occurred if the acquisitions had been consummated on the respective dates indicated, nor does the pro forma information purport to represent the results of operations for future periods. The following unaudited pro forma financial information of the Company for the year ended December 31, 1998 gives effect to the properties acquired and the Common Share, Class A Unit, Series B Preferred Unit and Series A Preferred Share issuances during 1998 as if the purchases and issuances occurred on January 1, 1998.
Year Ended December 31, 1998 ---------------------------- (unaudited and in thousands, except per share data) Pro forma total revenues $ 266,462 Pro forma net income before extraordinary items allocated to Common Shares 25,272 Pro forma net income after extraordinary items allocated to Common Shares 23,269 Pro forma net income per Common Share before extraordinary items (diluted) $ 0.67 Pro forma net income per Common Share after extraordinary items (diluted) $ 0.62
5. MANAGEMENT COMPANY Management fees paid by the Properties to the Management Company amounted to $11.9 million in 2000, $11.3 million in 1999, and $6.9 million in 1998. The Management Company also receives reimbursement of certain costs attributable to the operations of the Properties. These costs, included in property operating expenses, amounted to $9.2 million in 2000, $7.3 million in 1999, and $5.3 million in 1998. Summarized unaudited financial information for the Management Company as of and for the years ended December 31, 2000, 1999 and 1998 is as follows: F-9 2000 1999 1998 ------- ------- ------- (unaudited and in thousands) Total assets $ 3,248 $ 3,659 $ 1,763 Total revenue 26,190 22,103 13,011 Net income 173 85 77 Company's share of net income 164 80 74 Effective January 2, 2001, the Operating Partnership acquired the remaining shares of capital stock of the Management Company formerly owned by two executives of the Company for approximately $30,000. The Management Company will be consolidated for financial reporting purposes and became a taxable REIT subsidiary for tax purposes in 2001. 6. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES The Company accounts for its non-controlling interests in Real Estate Ventures using the equity method. Non-controlling ownership interests generally range from 15% to 65%, subject to specified priority allocations in certain real estate ventures. These investments, initially recorded at cost, are subsequently adjusted for the Company's net equity in ventures' income or loss and cash contributions and distributions. The Company's investment in Real Estate Ventures is as follows (in thousands):
Real Estate Company's Share Ownership Carrying Venture of Real Estate Percentage (1) Amount Debt at 100% Venture Income --------------- ---------- ------------ ----------------- Two Tower Bridge Associates 35% $ 2,427 $ 7,844 $ 415 Four Tower Bridge Associates 65% 4,936 11,000 598 Five Tower Bridge Associates (2) 15% - 28,023 - Six Tower Bridge Associates 65% 1,977 16,500 505 Tower Bridge Inn Associates 50% 2,652 3,852 - Christiana Center Operating Company I, LLC 50% 2,058 12,786 252 Christiana Center Operating Company II, LLC 50% 299 6,186 21 Christiana Center Operating Company III, LLC 50% 418 - - Interstate 202, G.P. 50% 962 5,774 182 Brandywine Tysons International Partners (3) 25% 11,745 61,500 240 1000 Chesterbrook Boulevard Partnership 50% 5,994 24,182 584 PJP Building Two, LC 30% 60 3,839 - PJP Building Five, LC 25% 38 - - -------- --------- ------- $ 33,566 $ 181,486 $ 2,797 ======== ======== =======
(1) Ownership percentage represents the Company's entitlement to residual distributions after payment by the applicable venture of priority returns. (2) This percentage gives effect to the dilution that will occur upon funding by a third party of an equity commitment that will be used to repay a construction loan upon maturity of the loan in 2001. (3) The other partner in Brandywine Tysons International Partners has an option to exchange its partnership interest for Common Shares after December 31, 2004. Upon consummation of the transaction discussed in Note 18 below, the Company's interest in this partnership will be contributed to Prentiss and the exchange option will be terminated. (4) As of December 31, 2000, the Company had guaranteed repayment of approximately $16.5 million of loans for the Real Estate Ventures. The Company selectively provides completion guaranties on behalf of Real Estate Ventures as part of their development activities. As of December 31, 2000, the Company had provided completion guaranties relating to the construction of three development projects, two of which were substantially completed during the first quarter of 2001, the other expected to be completed during the fourth quarter of 2001. 7. INDEBTEDNESS The Company utilizes credit facility borrowings for general business purposes, including the acquisition of properties and the repayment of debt. At December 31, 2000, the Company had a $450.0 million unsecured credit facility (the "Credit Facility") that matures in September 2001, which can be extended through September 2002 upon payment of a fee. This debt will either be refinanced or extended. The Credit Facility bears interest at LIBOR (LIBOR was 6.71% at December 31, 2000) plus 1.5%, with the spread over LIBOR subject to reductions from .125% to .35% based on the Company's leverage. As of December 31, 2000, the Company had $338.3 million of borrowings and $15.1 million of letters-of-credit F-10 outstanding and $96.6 million of unused availability under the Credit Facility. The weighted-average interest rate on the Company's unsecured credit facilities was 7.84% in 2000, 6.95% in 1999, and 7.05% in 1998. As of December 31, 2000, the Company had $527.9 million of mortgage notes payable secured by 104 of the Properties and certain land holdings. Fixed rate mortgages, totaling $401.5 million, require payments of principal and/or interest (or imputed interest) at rates ranging from 7.18% to 9.88% and mature or matured at various dates from January 2001 through July 2027. Non-interest bearing mortgage loans (included with the fixed rate mortgages), totaling $1.3 million in 2000 and $2.5 million in 1999 with interest imputed at 8.0%, have unamortized discounts of $35,000 in 2000 and $118,000 in 1999. Discount amortization aggregated $83,000 in 2000, $162,000 in 1999, and $234,000 in 1998. Variable rate mortgages, totaling $126.4 million, require payments of principal and/or interest at rates ranging from LIBOR plus .76% to 2.25% or 75% of prime (the prime rate was 9.50% at December 31, 2000) and mature at various dates from January 2001 through July 2027. The weighted-average interest rate on the Company's mortgages was 7.92% in 2000, 7.1% in 1999, and 7.6% in 1998. The Company has entered into interest rate swap and rate cap agreements designed to reduce the impact of interest rates changes on its variable rate debt. At December 31, 2000, the Company had two interest rate swap agreements for notional principal amounts aggregating $150 million. The swap agreements effectively fix the interest rate on $50 million of Credit Facility borrowings at 6.08% and on $100 million at 6.383% until September 2002. The interest rate caps effectively fix the interest rate on two variable rate mortgages. One rate cap fixes the interest rate on a mortgage with a notional value of $75 million at 6.25% until April 2001 and then at 7% until maturity in April 2002. The second interest rate cap fixes the interest rate on a mortgage with a notional value of $28 million at 8.7% until July 2004. The impact of the cap agreements is recorded as a component of interest expense. As of December 31, 2000, the fair value of the interest rate swap agreements, based on quotes from an independent third party, was $1.3 million and represents the estimated amount that the Company would pay if the contracts were terminated. Aggregate principal payments on mortgage notes payable at December 31, 2000 are due as follows (in thousands): 2001 $ 43,625 2002 89,030 2003 37,976 2004 119,285 2005 3,778 2006 and thereafter 234,183 --------- $ 527,877 ========= The Credit Facility requires the maintenance as of certain ratios related to minimum net worth, debt-to-total capitalization and fixed charge coverage. As of December 31, 2000, the Company was in compliance with all debt covenants. The Company paid interest totaling $67.7 million in 2000, $67.3 million in 1999, and $35.0 million in 1998. As of December 31, 2000, the carrying value of the Company's debt exceeded fair market value by approximately $11.4 million, as determined by using year-end interest rates and market conditions. During 1998, the Company wrote-off $2.0 million of unamortized deferred financing costs accounted for as an extraordinary item. 8. PREFERRED SHARES AND BENEFICIARIES' EQUITY In 1998, the Company issued $37.5 million of convertible preferred securities with a 7.25% coupon rate (the Series A Preferred Shares). The Series A Preferred Shares, with a stated value of $50.00, are convertible into Common Shares, at the option of the holder, at a conversion price of $28.00. The conversion price declines to $26.50, if the trading price of the Common Shares during the 60-day period ending December 31, 2003 is $23.00 or less. The Series A Preferred Shares distribution is subject to an increase, if quarterly distributions paid to Common Share holders exceeds $0.51 per share. The Series A Preferred Shares are perpetual and may be redeemed, at the Company's option, at par beginning in January 2004 or earlier, if the market price of the Common Shares exceeds specified levels. In 1999, the Company issued $105.0 million of convertible preferred securities (the Series B Preferred Shares) with an 8.75% coupon rate for net proceeds of $94.8 million. The Company is accreting the discount as a charge to cumulative earnings through the redemption date in 2007. The Series B Preferred Shares, convertible into Common Shares at a conversion price of $24.00 per share, are F-11 entitled to quarterly dividends equal to the greater of $0.525 per share or the quarterly dividend on the number of Common Shares into which a Series B Preferred Share is convertible. The Series B Preferred Shares are perpetual and may be redeemed, at the Company's option, at par, beginning in April 2007. In addition, the Company may require the conversion of the Series B Preferred Shares into Common Shares starting in April 2004, if certain conditions are met, including that the Common Shares are then trading in excess of 130% of the conversion price. Upon certain changes in control of the Company, the holder may require the Company to redeem its Series B Preferred Shares. However, the Company has the ability and intent to cause the Series B Preferred Shares to be converted into Common Shares rather than redeemed in such circumstances. In addition, as part of the transaction, the Company issued the holder seven-year warrants exercisable for 500,000 Common Shares at an exercise price of $24.00 per share. The Company's Board of Trustees approved a share repurchase program authorizing the Company to repurchase up to 3,000,000 of its outstanding Common Shares. No time limit has been placed on the duration of the share repurchase program. The Company repurchased 957,729 Common Shares for $15.3 million (average price of $15.95 per share) in 2000, 1,344,295 Common Shares for $22.2 million in 1999 (average price of $16.69 per share) and 86,744 Common Shares for $1.7 million in 1998 (average price of $19.10 per share). As of December 31, 2000, the Company has repurchased 2,388,768 under the program. At December 31, 2000, 417,537 "restricted" Common Shares were held by certain executives of the Company. The restricted shares, valued at $13.0 million at issuance, are amortized over their respective vesting periods of four to eight years. The Company recorded compensation expense of $2.0 million in 2000, $1.8 million in 1999 and $1.5 million in 1998 related to these shares. 9. SHARE PURCHASE OPTIONS AND WARRANTS The Company maintains a plan that authorizes the issuance of incentive stock options and non-qualified stock options to key employees to purchase five million Common Shares of the Company. The terms and conditions of option awards are determined by the Board of Trustees. Incentive stock options may not be granted at exercise prices less than fair value of the stock at the time of grant. Options granted by the Company generally vest over two to five years. All options awarded by the Company to date are non-qualified stock options. Options were granted at exercise prices ranging from 125% to 165% of fair market value on the grant date in 1999 and 100% to 115% of fair market value on the grant date in 1998. As of December 31, 2000, the Company has 1,994,585 shares available for future issuance under the plan. The following table summarizes option activity for the three years ended December 31, 2000:
Number Weighted- of Shares Average Grant Price Range Under Exercise ------------------------ Option Price From To ------------- ------------ ------------------------ Balance at January 1, 1998 290,000 $ 20.09 $ 6.21 $ 19.50 Granted - at fair market value 654,034 25.06 24.00 25.25 Granted - above fair market value 1,589,670 28.29 26.40 29.04 ------------ Balance at December 31, 1998 2,533,704 25.51 6.21 29.04 Granted - above fair market value 250,763 27.51 25.25 29.04 Canceled (62,609) 27.93 25.25 29.04 ------------ Balance at December 31, 1999 2,721,858 26.38 6.21 29.04 Exercised (5,000) 19.50 19.50 19.50 Canceled (93,144) 27.51 25.25 29.04 ------------ Balance at December 31, 2000 2,623,714 26.36 6.21 29.04 ============
F-12 Using the Black-Scholes option pricing model, the estimated weighted-average fair value of stock options granted was $1.21 in 1999 and $2.12 in 1998. Assumptions made in determining estimates of fair value include: risk-free interest rates of 5.6% in 1999 and 5.8% in 1998, a volatility factor of .280 in 1999 and .187 in 1998, a dividend yield of 8.9% in 1999 and 6.8% in 1998, and a weighted-average life expectancy of 10 years in 1999 and 1998. The following table summarizes stock options outstanding as of December 31, 2000:
Weighted- Average Weighted- Weighted- Range of Number of Remaining Average Number of Average Exercise Options Contractual Exercise Options Exercise Prices Outstanding Life Price Exercisable Price ------------------------------------ ------------- ------------ ----------- ------------ $6.21 to $14.31 46,667 3.6 years $ 12.00 46,667 $ 12.00 $19.50 238,333 1.6 19.50 238,333 19.50 $24.00 to $29.04 2,338,714 7.1 27.34 1,086,231 25.24 ------------ --------- $6.21 to $29.04 2,623,714 6.5 26.36 1,371,231 24.62 ============ =========
The following table summarizes the pro forma effects assuming compensation cost for such awards had been recorded based upon estimated fair values (in thousands, except per share amounts): Year ended December 31, ------------------------------------------------- 2000 1999 1998 -------------- -------------- ------------- Net income: As reported $ 40,252 $ 29,816 $ 32,323 Pro forma 39,635 28,852 31,440 Earnings per common share: As reported Basic $ 1.12 $ 0.80 $ 0.90 Diluted $ 1.12 $ 0.80 $ 0.89 Pro forma Basic $ 1.11 $ 0.77 $ 0.87 Diluted $ 1.11 $ 0.77 $ 0.87 Only options granted after December 31, 1994 are reflected in the calculations. Therefore, the pro forma disclosures are not likely to be representative of future pro forma amounts. As of December 31, 2000, there are 838,772 warrants outstanding to purchase Common Shares of the Company at exercise prices ranging from $19.50 to $25.50. 10. SEGMENT INFORMATION The Company currently manages its portfolio within three segments: (1) Pennsylvania, (2) New Jersey/New York and (3) Virginia. Corporate is responsible for cash and investment management and certain other general support functions. F-13 Segment information for the three years ended December 31, 2000, 1999 and 1998 is as follows (in thousands):
New Jersey/ Pennsylvania New York Virginia Corporate Total ------------ ----------- --------- --------- ------------ 2000: Real estate investments, at cost $ 938,602 $ 605,521 $ 309,776 $ - $ 1,853,899 Investment in real estate ventures, at equity - - - 33,566 33,566 Total revenue 144,943 100,362 39,539 2,240 287,084 Property operating expenses and real estate taxes 45,198 33,611 11,611 1,377 91,797 Interest 7,581 13,012 2,177 41,976 64,746 Depreciation & amortization 32,157 24,472 10,282 101 67,012 1999: Real estate investments, at cost $ 895,697 $ 627,441 $ 304,959 $ - $ 1,828,097 Investment in real estate ventures, at equity - - - 35,682 35,682 Total revenue 142,427 98,507 39,562 2,724 283,220 Property operating expenses and real estate taxes 44,347 34,065 11,671 - 90,083 Interest 6,861 11,318 2,495 49,126 69,800 Depreciation & amortization 34,610 25,328 9,375 - 69,313 1998: Real estate investments, at cost $ 987,268 $ 607,434 $ 313,393 $ - $ 1,908,095 Investment in real estate ventures, at equity - - - 15,315 15,315 Total revenue 110,368 69,271 10,607 2,615 192,861 Property operating expenses and real estate taxes 33,359 25,080 2,385 - 60,824 Interest 1,335 3,258 833 31,460 36,886 Depreciation & amortization 26,894 17,598 2,726 784 48,002
11. NET INCOME PER COMMON SHARE The following table details the number of shares and net income used to calculated basic and diluted earnings per share for the three years ended December 31, 2000 (in thousands, except per share amounts).
For the year ended December 31, ---------------------------------------------------------------------- 2000 1999 ---------------------------------- ---------------------------------- Basic Diluted Basic Diluted ---------------- ---------------- ---------------- ---------------- Net income $ 52,158 $ 52,158 $ 34,606 $ 34,606 Preferred Share discount amortization (286) (286) - - Income allocated to Preferred Shares (11,906) (11,906) (4,790) (4,790) ----------- ----------- ----------- ----------- Income available to common shareholders $ 39,966 $ 39,966 $ 29,816 $ 29,816 =========== =========== =========== =========== Weighted-average shares outstanding 35,807,598 35,807,598 37,348,022 37,348,022 Options and warrants - 16,576 - 14,932 ----------- ----------- ----------- ----------- Total weighted-average shares outstanding 35,807,598 35,824,174 37,348,022 37,362,954 =========== =========== =========== =========== Earnings per share $ 1.12 $ 1.12 $ 0.80 $ 0.80 =========== =========== =========== =========== For the year ended December 31, ------------------------------- 1998 ------------------------------- Basic Diluted ------------ ----------------- Net income $ 33,025 $ 33,025 Preferred Share discount amortization - - Income allocated to Preferred Shares (702) (702) ----------- ----------- Income available to common shareholders $ 32,323 $ 32,323 =========== =========== Weighted-average shares outstanding 36,073,773 36,073,773 Options and warrants - 63,580 ----------- ----------- Total weighted-average shares outstanding 36,073,773 36,137,353 =========== =========== Earnings per share $ 0.90 $ 0.89 =========== ===========
F-14 Securities totaling 11,625,490 in 2000, 11,625,490 in 1999 and 6,497,993 in 1998 were excluded from the earnings per share computations above as their effect would have been antidilutive. 12. DISTRIBUTIONS
2000 1999 1998 ------------- ------------ ---------- Common Share Distributions: Ordinary income $ 1.38 $ 1.44 $ 1.52 Return of capital 0.24 0.13 0.00 ------------- ----------- --------- Total distributions per share $ 1.62 $ 1.57 $ 1.52 ============= =========== ========= Percentage classified as ordinary income 85.2% 91.8% 100.0% Percentage classified as return of capital 14.8% 8.2% 0.0% Preferred Share Distributions: Total distributions declared $ 11,906,000 $ 4,790,000 $ 702,000
13. RELATED-PARTY TRANSACTIONS In 1998, the Board authorized the Company to make loans totaling $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. 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, 2000, the interest rate was 8.12% 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, 2000, the Company had funded loans of $4.3 million to employees secured by an aggregate of 249,164 Common Shares. In December 1999, the Company purchased 384,615 shares of US Realtel, Inc. ("USR") Common Stock for $2.5 million and received warrants exercisable for 600,000 shares of USR Common Stock. The warrants have an exercise price of $8.00 per share and expire on December 31, 2004. The Company loaned USR $1.5 million in 1999 and loaned an additional $1.9 million in 2000. The loans bore interest, payable quarterly, at 12% per annum. In December 2000, the loan balance of $3.4 million and accrued interest were paid in full. In addition, as part of the transaction, an officer of the Company was designated to a position on USR's Board of Directors. In February 2000, the Company loaned an aggregate of $2.5 million to two executive officers to enable them to purchase Common Shares of the Company. The loans have a four-year term and bear interest at the lower of the Company's cost of funds or a rate based on the dividend payable on the Common Shares, but not to exceed 10% annum. The loans are subject to forgiveness over a three-year period, with the amount of forgiveness tied to the Company's total shareholder return compared to the total shareholder return of peer group companies. The loans are also subject to forgiveness in the event of a change of control of the Company. Each executive may repay the loans at maturity by surrendering Common Shares valued at the executive's initial per share purchase price of $15.625. Due from affiliates includes $1.2 million in 2000 and $1.1 million in 1999 advanced by the Company to the Management Company for working capital. 14. OPERATING LEASES The Company leases properties to tenants under operating leases with various expiration dates extending to 2019. As of December 31, 2000, leases covering approximately 2.8 million square feet or 17.0% of the net rentable square footage were scheduled to expire during 2001. Minimum future rentals on noncancelable leases at December 31, 2000 are as follows (in thousands): F-15 Year Minimum Rent ------------------- ------------ 2001 $ 229,499 2002 200,332 2003 166,747 2004 136,199 2005 103,619 2006 and thereafter 290,052 ----------- $ 1,126,448 =========== Total minimum future rentals presented above do not include amounts to be received as tenant reimbursements for increases in certain operating costs. 15. EMPLOYEE BENEFIT PLAN The Company sponsors a 401(k) defined contribution plan for its employees. Each employee may contribute up to 18% of annual compensation. 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 contributions over a five year service period. The Company contributions were $690,000 in 2000, $331,000 in 1999 and $7,000 in 1998. 16. SUMMARY OF INTERIM RESULTS (UNAUDITED) The following is a summary interim financial information as of and for the years ended December 31, 2000 and 1999 (in thousands, except per share data):
1st 2nd 3rd 4th Quarter Quarter Quarter (b) Quarter (b) ------- ------- ----------- ----------- 2000: Total revenue $71,444 $ 72,153 $ 73,076 $ 70,411 Earnings before interest, depreciation and amortization (a) 45,786 46,469 46,912 45,394 Net income 10,590 10,799 19,845 10,924 Income allocated to Common Shares 7,613 7,822 16,868 7,949 Net income per Common Share: Basic $ 0.21 $ 0.22 $ 0.47 $ 0.22 Diluted $ 0.21 $ 0.22 $ 0.47 $ 0.22 1999: Total revenue $70,783 $ 71,672 $ 70,194 $ 70,571 Earnings before interest, depreciation and amortization (a) 45,780 46,316 45,457 45,729 Net income 7,198 7,833 11,064 8,511 Income allocated to Common Shares 6,518 6,763 9,619 6,916 Net income per Common Share: Basic $ 0.17 $ 0.18 $ 0.26 $ 0.19 Diluted $ 0.17 $ 0.18 $ 0.26 $ 0.19
(a) Earnings before interest, depreciation and amortization, excludes gains or losses on sale of real estate investments, minority interest, and extraordinary items. (b) The Company recorded gains on sales of properties of $9.5 million during the 3rd quarter of 2000, $2.0 million during the 4th quarter of 2000 and $3.5 million during the 3rd quarter of 1999. The summation of quarterly earnings per share amounts do not necessarily equal year to date amounts. F-16 17. 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 is a defendant in a case in which the plaintiffs allege that the Company breached its obligation to purchase a portfolio of properties for approximately $83.0 million. In July 1999, the Superior Court of New Jersey, Camden County, dismissed the complaint against the Company with prejudice. The plaintiffs subsequently filed a motion for reconsideration, which motion the Superior Court denied. Plaintiffs then appealed to the Appellate Division, which is the intermediate appellate level court in New Jersey. In December 2000, the Appellate Division affirmed in part and reversed in part the Chancery Division's earlier dismissal of the entire action. The Appellate Division affirmed the dismissal of the fraud and other non-contractual counts in the Complaint, but reversed the contract and reformation counts and remanded these to the lower court for further proceedings. The Company sought review of this decision by the Supreme Court of New Jersey, but in March 2001, that Court declined to consider the appeal. The case will therefore return to the Chancery Division, where it is expected to proceed through the discovery process. In management's opinion, this proceeding will not have a material adverse effect on the Company's financial position or results of operations. In November 1999, a third-party complaint was filed in the Superior Court of New Jersey, Burlington County by BRI OP Limited Partnership ("BRI OP") against the Company as well as several other persons and entities, including against several former affiliates of the Company, relative to Greentree Shopping Center located in Marlton, NJ ("Subject Property"). The Subject Property was owned and managed by a subsidiary of the Company between 1986 and 1988. BRI OP, also a former owner of the Subject Property, has been sued by the present owner and manager of the Subject Property, seeking indemnification and contribution for costs related to the remediation of environmental contamination allegedly caused by a dry cleaning business which was a tenant of the Subject Property. BRI OP, in turn, brought a third-party action against the Company and others seeking indemnification for environmental remediation and clean up costs for which it may be held liable. This legal proceeding remains in the early stages of discovery, as the plaintiff has yet to complete testing that would document its alleged damages. However, the Company believes, based on its assessment of the potential cost of any required remediation, the availability of other parties that are potentially responsible for all or a portion of such cost, and defenses that may be available to the Company, that this proceeding will not have a material adverse effect on the Company's financial position or results of operations. Letters-of-Credit and Other Commitments In connection with certain mortgages, the Company is required to maintain leasing and capital reserve accounts with the mortgage lenders through letters-of-credit which totaled $15.1 million at December 31, 2000. The Company is also required to maintain escrow accounts for taxes, insurance and tenant security deposits that amounted to $14.8 million at December 31, 2000. The related tenant rents 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. As of December 31, 2000, the Company owned 477 acres of land for future development and held options to purchase 89 additional acres. 18. SUBSEQUENT EVENTS (UNAUDITED) In March, 2001, the Company announced an exchange of properties with Prentiss Properties Acquisition Partners, L.P. ("Prentiss"). The Company has agreed to acquire from Prentiss 30 properties (29 office and 1 industrial) containing F-17 approximately 1.6 million net rentable square feet, a four-story 103,000 square foot office building currently under construction and approximately 12.9 acres of developable land for total consideration of approximately $220.0 million. These properties are located in Pennsylvania, New Jersey and Delaware. As part of the agreement to acquire these properties, the Company has agreed to convey to Prentiss four office properties located in Northern Virginia that contain an aggregate of approximately 657,000 net rentable square feet, to assume approximately $79.8 million of mortgage debt secured by certain of the Prentiss properties, to pay approximately $19.6 million at closing and to pay an additional amount of approximately $15.4 million over a three year period subsequent to closing. The Company has separately agreed to contribute to Prentiss its interest in a real estate venture that owns two additional office properties that contain an aggregate of 451,650 net rentable square feet in exchange for a combination of preferred and common units of limited partnership interest in Prentiss having an approximate value of $10.65 million. Consummation of the transaction with Prentiss is subject to customary closing conditions, including receipt of third party consents and, in the case of the property under construction and approximately six of the developable acres of land, waiver by a third party of a purchase right. Accordingly, there is no assurance that all or any part of the transaction will be consummated or that, if consummated, the transaction would follow all of the terms contained in the agreements with Prentiss. During 2001, the Company purchased two office properties, containing 146,000 net rentable square feet, for $18.0 million and one parcel of land, containing 20.0 acres, for $7.6 million. In addition, the Company sold one industrial property, containing 16,000 net rentable square feet, for $785,000. F-18 Brandywine Realty Trust Schedule II Valuation and Qualifying Accounts (in thousands)
Additions Balance at -------------------- Balance Beginning Charged to at End Description of Period expense Deductions of Period ------------------------------------- --------------- -------------------- --------------- ----------------- Allowance for doubtful accounts: Year ended December 31, 2000 $ 3,358 $ 332 $ 1,263 $ 2,427 ======= ======= ======= ======= Year ended December 31, 1999 $ 3,172 $ 1,034 $ 848 $ 3,358 ======= ======= ======= ======= Year ended December 31, 1998 $ 582 $ 2,710 $ 120 $ 3,172 ======= ======= ======= =======
BRANDYWINE REALTY TRUST Real Estate and Accumulated Depreciation - December 31, 2000 (in thousands)
Initial Cost -------------------------------------------- Net Improvements (Retirements) Encumberances at Building and Since Property Name City State December 31, 2000 Land Improvements Acquisition ------------------------------------- ---------------- ------ -------------------- ------------------------------ ------------- One Greentree Centre Marlton NJ 6,575 (c) 345 4,440 228 Two Greentree Centre Marlton NJ - (c) 264 4,693 133 Three Greentree Centre Marlton NJ - (c) 323 6,024 353 One Righter Parkway Talleyville DE - (i) 2,545 10,195 275 457 Haddonfield Road Cherry Hill NJ 8,725 2,142 9,120 1,847 168 Franklin Corner Drive Lawrenceville NJ - 398 1,597 215 8000 Lincoln Drive Marlton NJ - 606 2,887 770 7248 Tilghman Street Allentown PA - 731 2,969 78 6575 Snowdrift Road Allentown PA - 601 2,411 355 7310 Tilghman Street Allentown PA - 553 2,246 530 33 Street Road - Greenwood Square I Bensalem PA - 851 3,407 404 33 Street Road - Greenwood Square II Bensalem PA - 1,126 4,511 1,051 33 Street Road - Greenwood Square III Bensalem PA - 350 1,401 285 456 Creamery Way Exton PA - 635 2,548 - 110 Summit Drive Exton PA - 403 1,647 156 468 Creamery Way Exton PA - 527 2,112 (128) 486 Thomas Jones Way Exton PA - 806 3,256 356 650 Dresher Road Horsham PA - (f) 636 2,501 81 700 Business Center Drive Horsham PA - (f) 550 2,201 250 800 Business Center Drive Horsham PA - (f) 896 3,585 57 1155 Business Center Drive Horsham PA - (f) 1,029 4,124 (211) One Progress Avenue Horsham PA - 1,399 5,629 127 500 Enterprise Road Horsham PA - 1,303 5,188 (180) 500 North Gulph Road King of Prussia PA - 1,303 5,201 496 2200 Cabot Boulevard Langhorne PA - 770 3,117 595 2260/70 Cabot Boulevard Langhorne PA - 415 1,661 133 3000 Cabot Boulevard Langhorne PA - 485 1,940 329 18 Campus Boulevard Newtown Square PA - 786 3,312 11 16 Campus Boulevard Newtown Square PA - 1,153 4,627 (130) 2240/50 Butler Pike Plymouth Meeting PA - 1,104 4,627 395 120 West Germantown Pike Plymouth Meeting PA - 685 2,773 126 140 West Germantown Pike Plymouth Meeting PA - 481 1,976 313 2260 Butler Pike Plymouth Meeting PA - 661 2,727 155 100 Commerce Drive Newark DE - 1,160 4,633 91 King & Harvard Cherry Hill NJ - 1,726 1,069 2,746 One South Union Place Cherry Hill NJ - 771 8,047 738 1 Foster Avenue Gibbsboro NJ - 93 364 8 2 Foster Avenue Gibbsboro NJ - 185 730 17 4 Foster Avenue Gibbsboro NJ - 183 726 76 5 Foster Avenue Gibbsboro NJ - 8 32 3 7 Foster Avenue Gibbsboro NJ - 231 921 12 10 Foster Avenue Gibbsboro NJ - 244 971 73 55 U.S. Avenue Gibbsboro NJ - 1,116 4,435 57 6 East Clementon Road Gibbsboro NJ - 1,345 5,366 300 20 East Clementon Road Gibbsboro NJ - 769 3,055 167 50 East Clementon Road Gibbsboro NJ - 114 964 2 5 U.S. Avenue Gibbsboro NJ - 21 81 3 1000 East Lincoln Drive Marlton NJ - 264 1,059 112 Two Eves Drive Marlton NJ - 818 3,461 90 Four A Eves Drive Marlton NJ - 539 2,168 191 Four B Eves Drive Marlton NJ - 588 2,369 97 Five Eves Drive Marlton NJ - 703 2,819 498 1000/2000 West Lincoln Drive Marlton NJ - 731 3,568 (428) 3000 West Lincoln Drive Marlton NJ - 569 2,293 156 4000/5000 West Lincoln Drive Marlton NJ - 877 3,526 217 9000 West Lincoln Drive Marlton NJ - 610 2,422 193 10000 Midlantic Drive Mt. Laurel NJ 116,190 (g) 3,206 12,857 461 4000 Midlantic Drive Mt. Laurel NJ - (i) 714 5,085 (1,981) 2000 Midlantic Drive Mt. Laurel NJ - (i) 2,202 8,823 355
Gross Amount at Which Carried December 31, 2000 --------------------------------------------------------- Accumulated Depreciation at Building and December 31, Date of Property Name Land Improvements Total (a) 2000 (b) Construction ------------------------------------- ----------- -------------- ----------- -------------- ------------- One Greentree Centre 345 4,668 5,013 2,222 1982 Two Greentree Centre 264 4,826 5,090 2,810 1983 Three Greentree Centre 323 6,377 6,700 3,640 1984 One Righter Parkway 2,545 10,470 13,015 1,692 1989 457 Haddonfield Road 2,142 10,967 13,109 2,279 1990 168 Franklin Corner Drive 398 1,812 2,210 344 1976 8000 Lincoln Drive 606 3,657 4,263 1,186 1983 7248 Tilghman Street 731 3,047 3,778 664 1987 6575 Snowdrift Road 601 2,766 3,367 468 1988 7310 Tilghman Street 553 2,776 3,329 587 1985 33 Street Road - Greenwood Square I 851 3,811 4,662 780 1985 33 Street Road - Greenwood Square II 1,126 5,562 6,688 1,160 1985 33 Street Road - Greenwood Square III 350 1,686 2,036 409 1985 456 Creamery Way 635 2,548 3,183 504 1987 110 Summit Drive 403 1,803 2,206 402 1985 468 Creamery Way 527 1,984 2,511 346 1990 486 Thomas Jones Way 806 3,612 4,418 902 1990 650 Dresher Road 636 2,582 3,218 543 1984 700 Business Center Drive 550 2,451 3,001 483 1986 800 Business Center Drive 896 3,642 4,538 611 1986 1155 Business Center Drive 1,029 3,913 4,942 791 1990 One Progress Avenue 1,399 5,756 7,155 999 1986 500 Enterprise Road 1,303 5,008 6,311 1,459 1990 500 North Gulph Road 1,303 5,697 7,000 1,056 1979 2200 Cabot Boulevard 770 3,712 4,482 664 1985 2260/70 Cabot Boulevard 415 1,794 2,209 347 1984 3000 Cabot Boulevard 485 2,269 2,754 497 1986 18 Campus Boulevard 786 3,323 4,109 684 1990 16 Campus Boulevard 1,153 4,497 5,650 861 1990 2240/50 Butler Pike 1,104 5,022 6,126 1,123 1984 120 West Germantown Pike 685 2,899 3,584 602 1984 140 West Germantown Pike 481 2,289 2,770 467 1984 2260 Butler Pike 661 2,882 3,543 527 1984 100 Commerce Drive 1,160 4,724 5,884 643 1989 King & Harvard 1,726 3,815 5,541 948 One South Union Place 771 8,785 9,556 1,377 1 Foster Avenue 93 372 465 46 1972 2 Foster Avenue 185 747 932 94 1974 4 Foster Avenue 183 802 985 125 1974 5 Foster Avenue 8 35 43 4 1968 7 Foster Avenue 231 933 1,164 115 1983 10 Foster Avenue 244 1,044 1,288 133 1983 55 U.S. Avenue 1,116 4,492 5,608 567 1982 6 East Clementon Road 1,345 5,666 7,011 782 1980 20 East Clementon Road 769 3,222 3,991 429 1986 50 East Clementon Road 114 966 1,080 119 1986 5 U.S. Avenue 21 84 105 10 1987 1000 East Lincoln Drive 264 1,171 1,435 148 1981 Two Eves Drive 818 3,551 4,369 705 1987 Four A Eves Drive 539 2,359 2,898 395 1987 Four B Eves Drive 588 2,466 3,054 413 1987 Five Eves Drive 703 3,317 4,020 524 1986 1000/2000 West Lincoln Drive 731 3,140 3,871 559 1982 3000 West Lincoln Drive 569 2,449 3,018 388 1982 4000/5000 West Lincoln Drive 877 3,743 4,620 598 1982 9000 West Lincoln Drive 610 2,615 3,225 412 1983 10000 Midlantic Drive 3,206 13,318 16,524 2,120 1990 4000 Midlantic Drive 714 3,104 3,818 440 1981 2000 Midlantic Drive 2,202 9,178 11,380 1,352 1989
Date Depreciable Property Name Acquired Life ------------------------------------- ------------ ----------- One Greentree Centre 1986 25 Two Greentree Centre 1986 25 Three Greentree Centre 1986 25 One Righter Parkway 1996 25 457 Haddonfield Road 1996 31.5 168 Franklin Corner Drive 1996 25 8000 Lincoln Drive 1996 25 7248 Tilghman Street 1996 25 6575 Snowdrift Road 1996 25 7310 Tilghman Street 1996 25 33 Street Road - Greenwood Square I 1996 25 33 Street Road - Greenwood Square II 1996 25 33 Street Road - Greenwood Square III 1996 25 456 Creamery Way 1996 25 110 Summit Drive 1996 25 468 Creamery Way 1996 25 486 Thomas Jones Way 1996 25 650 Dresher Road 1996 25 700 Business Center Drive 1996 25 800 Business Center Drive 1996 25 1155 Business Center Drive 1996 25 One Progress Avenue 1996 25 500 Enterprise Road 1996 25 500 North Gulph Road 1996 25 2200 Cabot Boulevard 1996 25 2260/70 Cabot Boulevard 1996 25 3000 Cabot Boulevard 1996 25 18 Campus Boulevard 1996 25 16 Campus Boulevard 1996 25 2240/50 Butler Pike 1996 25 120 West Germantown Pike 1996 25 140 West Germantown Pike 1996 25 2260 Butler Pike 1996 25 100 Commerce Drive 1997 25 King & Harvard 1997 25 One South Union Place 1997 25 1 Foster Avenue 1997 25 2 Foster Avenue 1997 25 4 Foster Avenue 1997 25 5 Foster Avenue 1997 25 7 Foster Avenue 1997 25 10 Foster Avenue 1997 25 55 U.S. Avenue 1997 25 6 East Clementon Road 1997 25 20 East Clementon Road 1997 25 50 East Clementon Road 1997 25 5 U.S. Avenue 1997 25 1000 East Lincoln Drive 1997 25 Two Eves Drive 1997 25 Four A Eves Drive 1997 25 Four B Eves Drive 1997 25 Five Eves Drive 1997 25 1000/2000 West Lincoln Drive 1997 25 3000 West Lincoln Drive 1997 25 4000/5000 West Lincoln Drive 1997 25 9000 West Lincoln Drive 1997 25 10000 Midlantic Drive 1997 25 4000 Midlantic Drive 1997 25 2000 Midlantic Drive 1997 25
Initial Cost -------------------------------------------- Net Improvements (Retirements) Encumberances at Building and Since Property Name City State December 31, 2000 Land Improvements Acquisition ------------------------------------- ---------------- ------ -------------------- ----------------------------- -------------- 15000 Midlantic Drive Mt. Laurel NJ - (g) 3,061 12,254 104 9000 Midlantic Drive Mt. Laurel NJ - (i) 1,472 5,895 19 1000 Howard Boulevard Mt. Laurel NJ 4,862 2,298 9,288 418 1120 Executive Boulevard Mt. Laurel NJ 5,064 2,074 8,415 689 1000 Atrium Way Mt. Laurel NJ - 2,061 8,180 371 Main Street - Promenade Voorhees NJ - 531 2,052 86 Main Street - Plaza 1000 Voorhees NJ - 2,729 10,931 636 Main Street - Piazza Voorhees NJ - 696 2,802 58 Main Street- CAM Voorhees NJ - 3 11 91 1007 Laurel Oak Road Voorhees NJ - 1,563 6,241 13 111 Presidential Boulevard Bala Cynwyd PA - 5,419 21,612 940 100 Berwyn Park Berwyn PA 73,000 (h) 1,180 7,290 343 200 Berwyn Park Berwyn PA - (h) 1,533 9,460 281 300 Berwyn Park Berwyn PA - (h) 2,206 13,422 146 1974 Sproul Road Broomall PA - 841 3,368 405 855 Springdale Drive Exton PA - 838 3,370 69 748 Springdale Drive Exton PA - 236 931 93 500 Office Center Drive Ft. Washington PA - 1,617 6,480 1,243 501 Office Center Drive Ft. Washington PA - 1,796 7,192 1,262 220 Commerce Drive Ft. Washington PA - 1,086 4,338 361 300 Welsh Road - Building I Horsham PA - (f) 894 3,572 430 300 Welsh Road - Building II Horsham PA - (f) 396 1,585 52 655 Business Center Drive Horsham PA - (f) 544 2,529 637 2000 Cabot Boulevard Langhorne PA - 569 2,281 214 2005 Cabot Boulevard Langhorne PA - 313 1,257 206 2010 Cabot Boulevard Langhorne PA - 760 3,091 99 321 Norristown Road Lower Gwyned PA - 1,289 5,176 290 323 Norristown Road Lower Gwyned PA - 1,685 6,751 144 100-300 Gundy Drive Reading PA - 6,495 25,180 1,831 100 Katchel Blvd Reading PA - 1,881 7,423 122 2510 Metropolitan Drive Trevose PA - 3,311 13,218 1,885 1336 Enterprise Drive West Goshen PA - 731 2,946 27 256-263 Chapman Road / Cambridge Newark DE - 292 1,185 39 256-263 Chapman Road / Bellevue Newark DE - 374 1,547 99 256-263 Chapman Road / Commonwealth Newark DE - 351 1,421 179 256-263 Chapman Road / Oxford Newark DE - 410 1,663 294 256-263 Chapman Road / Chopin Newark DE - 484 1,958 209 256-263 Chapman Road / Stockton Newark DE - 291 1,176 4 4550 New Linden Hill Road Wilmington DE - 1,998 7,995 973 301 North Walnut Street Wilmington DE - (g) 8,495 34,016 1,249 201 North Walnut Street Wilmington DE - (g) 10,359 41,509 178 4364 South Alston Avenue Durham NC 93,648 (d) 1,622 6,419 186 1255 Broad Street Bloomfield NJ - 992 3,947 38 104 Windsor Center Drive East Windsor NJ - 977 3,918 1,249 44 National Road Edison NJ - 324 1,288 183 835 New Durham Road Edison NJ - 705 2,553 116 837 New Durham Road Edison NJ - 298 1,184 30 993 Lenox Drive Lawrenceville NJ 68,000 (i) 2,811 17,996 (6,770) 997 Lenox Drive Lawrenceville NJ (i) 2,410 9,700 156 1009 Lenox Drive Lawrenceville NJ 14,573 4,876 19,284 1,379 700 East Gate Drive Mt. Laurel NJ - (d) 3,569 14,436 139 701 East Gate Drive Mt. Laurel NJ - (d) 1,736 6,877 239 815 East Gate Drive Mt. Laurel NJ - (d) 637 2,584 117 817 East Gate Drive Mt. Laurel NJ - (d) 611 2,426 56 303 Fellowship Drive Mt. Laurel NJ - (d) 1,493 6,055 337 305 Fellowship Drive Mt. Laurel NJ - (d) 1,422 5,768 600 307 Fellowship Drive Mt. Laurel NJ - (d) 1,564 6,342 311 309 Fellowship Drive Mt. Laurel NJ - (d) 1,518 6,154 561 304 Harper Drive Mt. Laurel NJ - (d) 657 2,674 240 305 Harper Drive Mt. Laurel NJ - (d) 222 913 11 308 Harper Drive Mt. Laurel NJ - 1,643 6,663 147 East Gate Land Mt. Laurel NJ (d) 1 1 - Park 80 West Plaza I Saddlebrook NJ - (g) 6,242 26,938 3,168
Gross Amount at Which Carried December 31, 2000 --------------------------------------------------------- Accumulated Depreciation at Building and December 31, Date of Property Name Land Improvements Total (a) 2000 (b) Construction ------------------------------------- ----------- -------------- ----------- -------------- ------------- 15000 Midlantic Drive 3,061 12,358 15,419 1,824 1991 9000 Midlantic Drive 1,472 5,914 7,386 848 1989 1000 Howard Boulevard 2,298 9,706 12,004 1,566 1988 1120 Executive Boulevard 2,074 9,104 11,178 1,765 1987 1000 Atrium Way 2,061 8,551 10,612 1,155 1989 Main Street - Promenade 531 2,138 2,669 324 1988 Main Street - Plaza 1000 2,729 11,567 14,296 1,787 1988 Main Street - Piazza 696 2,860 3,556 469 1990 Main Street- CAM 3 102 105 2 1007 Laurel Oak Road 1,563 6,254 7,817 771 1996 111 Presidential Boulevard 5,419 22,552 27,971 3,095 1974 100 Berwyn Park 1,180 7,633 8,813 1,186 1986 200 Berwyn Park 1,533 9,741 11,274 1,325 1987 300 Berwyn Park 2,206 13,568 15,774 1,861 1989 1974 Sproul Road 841 3,773 4,614 602 1972 855 Springdale Drive 838 3,439 4,277 490 1986 748 Springdale Drive 236 1,024 1,260 151 1986 500 Office Center Drive 1,617 7,723 9,340 1,223 1974 501 Office Center Drive 1,796 8,454 10,250 1,338 1974 220 Commerce Drive 1,086 4,699 5,785 663 1985 300 Welsh Road - Building I 894 4,002 4,896 607 1985 300 Welsh Road - Building II 396 1,637 2,033 207 1985 655 Business Center Drive 544 3,166 3,710 600 1997 2000 Cabot Boulevard 569 2,495 3,064 396 1985 2005 Cabot Boulevard 313 1,463 1,776 210 1985 2010 Cabot Boulevard 760 3,190 3,950 470 1985 321 Norristown Road 1,289 5,466 6,755 827 1972 323 Norristown Road 1,685 6,895 8,580 1,032 1988 100-300 Gundy Drive 6,495 27,011 33,506 3,850 1970 100 Katchel Blvd 1,881 7,545 9,426 1,082 1970 2510 Metropolitan Drive 3,311 15,103 18,414 2,301 1981 1336 Enterprise Drive 731 2,973 3,704 455 1989 256-263 Chapman Road / Cambridge 292 1,224 1,516 147 1983 256-263 Chapman Road / Bellevue 374 1,646 2,020 214 1983 256-263 Chapman Road / Commonwealth 351 1,600 1,951 191 1983 256-263 Chapman Road / Oxford 410 1,957 2,367 255 1983 256-263 Chapman Road / Chopin 484 2,167 2,651 271 1983 256-263 Chapman Road / Stockton 291 1,180 1,471 142 1983 4550 New Linden Hill Road 1,998 8,968 10,966 1,102 1974 301 North Walnut Street 8,495 35,265 43,760 3,876 1989 201 North Walnut Street 10,359 41,687 52,046 4,781 1988 4364 South Alston Avenue 1,622 6,605 8,227 592 1985 1255 Broad Street 992 3,985 4,977 359 1981 104 Windsor Center Drive 977 5,167 6,144 1,099 1987 44 National Road 324 1,471 1,795 120 1967 835 New Durham Road 705 2,669 3,374 255 1974 837 New Durham Road 298 1,214 1,512 108 1977 993 Lenox Drive 2,811 11,226 14,037 1,236 1985 997 Lenox Drive 2,410 9,856 12,266 1,159 1987 1009 Lenox Drive 4,876 20,663 25,539 2,354 1989 700 East Gate Drive 3,569 14,575 18,144 1,328 1984 701 East Gate Drive 1,736 7,116 8,852 641 1986 815 East Gate Drive 637 2,701 3,338 276 1986 817 East Gate Drive 611 2,482 3,093 223 1986 303 Fellowship Drive 1,493 6,392 7,885 640 1979 305 Fellowship Drive 1,422 6,368 7,790 638 1980 307 Fellowship Drive 1,564 6,653 8,217 658 1981 309 Fellowship Drive 1,518 6,715 8,233 620 1982 304 Harper Drive 657 2,914 3,571 299 1975 305 Harper Drive 222 924 1,146 88 1979 308 Harper Drive 1,643 6,810 8,453 620 1976 East Gate Land 1 1 2 - Park 80 West Plaza I 6,242 30,106 36,348 4,297 1988
Date Depreciable Property Name Acquired Life ------------------------------------- ------------ ----------- 15000 Midlantic Drive 1997 25 9000 Midlantic Drive 1997 25 1000 Howard Boulevard 1997 25 1120 Executive Boulevard 1997 25 1000 Atrium Way 1997 25 Main Street - Promenade 1997 25 Main Street - Plaza 1000 1997 25 Main Street - Piazza 1997 25 Main Street- CAM 1997 25 1007 Laurel Oak Road 1997 25 111 Presidential Boulevard 1997 25 100 Berwyn Park 1997 25 200 Berwyn Park 1997 25 300 Berwyn Park 1997 25 1974 Sproul Road 1997 25 855 Springdale Drive 1997 25 748 Springdale Drive 1997 25 500 Office Center Drive 1997 25 501 Office Center Drive 1997 25 220 Commerce Drive 1997 25 300 Welsh Road - Building I 1997 25 300 Welsh Road - Building II 1997 25 655 Business Center Drive 1997 31.5 2000 Cabot Boulevard 1997 25 2005 Cabot Boulevard 1997 25 2010 Cabot Boulevard 1997 25 321 Norristown Road 1997 25 323 Norristown Road 1997 25 100-300 Gundy Drive 1997 25 100 Katchel Blvd 1997 25 2510 Metropolitan Drive 1997 25 1336 Enterprise Drive 1997 25 256-263 Chapman Road / Cambridge 1998 25 256-263 Chapman Road / Bellevue 1998 25 256-263 Chapman Road / Commonwealth 1998 25 256-263 Chapman Road / Oxford 1998 25 256-263 Chapman Road / Chopin 1998 25 256-263 Chapman Road / Stockton 1998 25 4550 New Linden Hill Road 1998 25 301 North Walnut Street 1998 25 201 North Walnut Street 1998 25 4364 South Alston Avenue 1998 25 1255 Broad Street 1998 25 104 Windsor Center Drive 1998 25 44 National Road 1998 25 835 New Durham Road 1998 25 837 New Durham Road 1998 25 993 Lenox Drive 1998 25 997 Lenox Drive 1998 25 1009 Lenox Drive 1998 25 700 East Gate Drive 1998 25 701 East Gate Drive 1998 25 815 East Gate Drive 1998 25 817 East Gate Drive 1998 25 303 Fellowship Drive 1998 25 305 Fellowship Drive 1998 25 307 Fellowship Drive 1998 25 309 Fellowship Drive 1998 25 304 Harper Drive 1998 25 305 Harper Drive 1998 25 308 Harper Drive 1998 25 East Gate Land 1998 Park 80 West Plaza I 1998 25
Initial Cost -------------------------------------------- Net Improvements (Retirements) Encumberances at Building and Since Property Name City State December 31, 2000 Land Improvements Acquisition ------------------------------------- ---------------- ------ -------------------- ----------------------------- -------------- Park 80 West Plaza II Saddlebrook NJ - (g) 7,668 30,533 2,224 33 West State Street Trenton NJ - (h) 6,016 24,091 (29) 50 East State Street Trenton NJ - (h) 8,926 35,735 368 100 Voice Road Carle Place NY - 400 1,594 8 110 Voice Road Carle Place NY - 256 1,018 5 91 North Industry Court Deer Park NY - 550 2,191 48 180 Central Ave / 2 Engineers Lane Farmingdale NY - 221 882 5 8 Engineers Lane Farmingdale NY - 194 774 70 19 Engineers Lane Farmingdale NY - 114 452 2 1000 Axinn Avenue Garden City NY - 546 2,507 (294) 645 Stewart Avenue Garden City NY - 414 1,648 9 245 Old Country Road Mellville NY - 1,232 4,903 26 336 South Service Road Melville NY - 707 2,812 29 111 Ames Court Plainview NY - 177 671 40 55 Ames Court Plainview NY - 818 3,259 493 10 Skyline Drive Plainview NY - 239 951 37 11 Commercial Street Plainview NY - 237 942 41 80 Skyline Drive Plainview NY - 484 1,937 215 120 Express Street Plainview NY - 404 1,591 98 7010 Snowdrift Way Allentown PA - (d) 817 3,324 (1) 7350 Tilghman Street Allentown PA - 3,414 13,716 1,072 7450 Tilghman Street Allentown PA - (d) 2,867 11,631 1,210 7150 Windsor Drive Allentown PA - (d) 1,034 4,219 13 7535 Windsor Drive Allentown PA - (d) 3,376 13,400 420 920 Harvest Drive Blue Bell PA - 2,433 9,738 112 925 Harvest Drive Blue Bell PA - 1,671 6,606 171 155 Rittenhouse Circle Bristol PA - (d) 370 1,437 63 150 Corporate Center Drive Camp Hill PA - 964 3,871 51 200 Corporate Center Drive Camp Hill PA - 1,647 6,606 281 300 Corporate Center Drive Camp Hill PA 1,251 4,823 19,301 265 426 Lancaster Avenue Devon PA - 1,689 6,756 - 160-180 West Germantown Pike East Norriton PA 5,521 1,603 6,418 55 50 Swedesford Square Frazer PA - (d) 3,902 15,254 354 52 Swedesford Square Frazer PA - (d) 4,242 16,579 690 922 Swedesford Road Frazer PA - 218 1 4 520 Virginia Drive Ft. Washington PA - 845 3,455 37 2401 Park Drive Harrisburg PA - 182 728 84 2404 Park Drive Harrisburg PA - 167 668 117 2405 Park Drive Harrisburg PA - 424 1,697 228 2407 Park Drive Harrisburg PA - 464 1,864 14 600 Corporate Circle Drive Harrisburg PA - 363 1,452 59 800 Corporate Circle Drive Harrisburg PA - 414 1,653 41 200 Nationwide Drive Harrisburg PA - 100 403 - 500 Nationwide Drive Harrisburg PA - 173 850 285 755 Business Center Drive Horsham PA - (f) 1,363 2,334 601 1000 First Avenue King of Prussia PA - (d) 2,772 10,936 312 1020 First Avenue King of Prussia PA - (d) 2,168 8,576 197 1040 First Avenue King of Prussia PA - (d) 2,861 11,282 1,087 1060 First Avenue King of Prussia PA - (d) 2,712 10,953 32 2490 Boulevard of the Generals King of Prussia PA - 348 1,394 27 610 Freedom Business Center King of Prussia PA - (f) 2,017 8,070 423 620 Freedom Business Center King of Prussia PA - (f) 2,770 11,014 117 630 Freedom Business Center King of Prussia PA - (f) 2,773 11,144 182 640 Freedom Business Center King of Prussia PA - (f) 4,222 16,891 49 600 Park Avenue King of Prussia PA - 1,012 4,048 - 650 Park Avenue King of Prussia PA - 1,917 4,378 1,621 630 Clark Avenue King of Prussia PA - 547 2,190 - 620 Allendale Road King of Prussia PA - 1,020 3,839 3 660 Allendale Road King of Prussia PA - 835 3,343 80 680 Allendale Road King of Prussia PA - 689 2,756 669 751-761 Fifth Avenue King of Prussia PA - 1,097 4,391 - 741 First Avenue King of Prussia PA - 1,287 5,151 - 875 First Avenue King of Prussia PA - 618 2,473 1
Gross Amount at Which Carried December 31, 2000 --------------------------------------------------------- Accumulated Depreciation at Building and December 31, Date of Property Name Land Improvements Total (a) 2000 (b) Construction ------------------------------------- ----------- -------------- ----------- -------------- ------------- Park 80 West Plaza II 7,668 32,777 40,445 4,243 1970 33 West State Street 6,016 24,062 30,078 2,648 1988 50 East State Street 8,926 36,103 45,029 4,019 1989 100 Voice Road 400 1,602 2,002 144 1963 110 Voice Road 256 1,023 1,279 92 1963 91 North Industry Court 550 2,239 2,789 203 1965 180 Central Ave / 2 Engineers Lane 221 887 1,108 80 1960 8 Engineers Lane 194 844 1,038 86 1963 19 Engineers Lane 114 454 568 41 1962 1000 Axinn Avenue 546 2,213 2,759 200 1965 645 Stewart Avenue 414 1,657 2,071 149 1962 245 Old Country Road 1,232 4,929 6,161 444 1978 336 South Service Road 707 2,841 3,548 256 1965 111 Ames Court 177 711 888 66 1959 55 Ames Court 818 3,752 4,570 440 1961 10 Skyline Drive 239 988 1,227 90 1960 11 Commercial Street 237 983 1,220 105 1961 80 Skyline Drive 484 2,152 2,636 198 1961 120 Express Street 404 1,689 2,093 161 1962 7010 Snowdrift Way 817 3,323 4,140 298 1991 7350 Tilghman Street 3,414 14,788 18,202 1,496 1987 7450 Tilghman Street 2,867 12,841 15,708 1,290 1986 7150 Windsor Drive 1,034 4,232 5,266 381 1988 7535 Windsor Drive 3,376 13,820 17,196 1,269 1988 920 Harvest Drive 2,433 9,850 12,283 1,074 1990 925 Harvest Drive 1,671 6,777 8,448 698 1990 155 Rittenhouse Circle 370 1,500 1,870 142 1985 150 Corporate Center Drive 964 3,922 4,886 433 1987 200 Corporate Center Drive 1,647 6,887 8,534 950 1989 300 Corporate Center Drive 4,823 19,566 24,389 2,152 1989 426 Lancaster Avenue 1,689 6,756 8,445 811 1990 160-180 West Germantown Pike 1,603 6,473 8,076 720 1982 50 Swedesford Square 3,902 15,608 19,510 1,405 1988 52 Swedesford Square 4,242 17,269 21,511 1,628 1986 922 Swedesford Road 218 5 223 3 1986 520 Virginia Drive 845 3,492 4,337 425 1987 2401 Park Drive 182 812 994 95 1984 2404 Park Drive 167 785 952 108 1983 2405 Park Drive 424 1,925 2,349 221 1985 2407 Park Drive 464 1,878 2,342 204 1985 600 Corporate Circle Drive 363 1,511 1,874 161 1978 800 Corporate Circle Drive 414 1,694 2,108 181 1979 200 Nationwide Drive 100 403 503 43 1978 500 Nationwide Drive 173 1,135 1,308 102 1977 755 Business Center Drive 1,363 2,935 4,298 414 1998 1000 First Avenue 2,772 11,248 14,020 1,027 1980 1020 First Avenue 2,168 8,773 10,941 788 1984 1040 First Avenue 2,861 12,369 15,230 1,234 1985 1060 First Avenue 2,712 10,985 13,697 1,002 1987 2490 Boulevard of the Generals 348 1,421 1,769 169 1975 610 Freedom Business Center 2,017 8,493 10,510 999 1985 620 Freedom Business Center 2,770 11,131 13,901 1,338 1986 630 Freedom Business Center 2,773 11,326 14,099 1,384 1989 640 Freedom Business Center 4,222 16,940 21,162 2,033 1991 600 Park Avenue 1,012 4,048 5,060 459 1964 650 Park Avenue 1,917 5,999 7,916 699 1968 630 Clark Avenue 547 2,190 2,737 248 1960 620 Allendale Road 1,020 3,842 4,862 435 1961 660 Allendale Road 835 3,423 4,258 405 1962 680 Allendale Road 689 3,425 4,114 377 1962 751-761 Fifth Avenue 1,097 4,391 5,488 498 1967 741 First Avenue 1,287 5,151 6,438 584 1966 875 First Avenue 618 2,474 3,092 281 1966
Date Depreciable Property Name Acquired Life ------------------------------------- ------------ ----------- Park 80 West Plaza II 1998 25 33 West State Street 1998 25 50 East State Street 1998 25 100 Voice Road 1998 25 110 Voice Road 1998 25 91 North Industry Court 1998 25 180 Central Ave / 2 Engineers Lane 1998 25 8 Engineers Lane 1998 25 19 Engineers Lane 1998 25 1000 Axinn Avenue 1998 25 645 Stewart Avenue 1998 25 245 Old Country Road 1998 25 336 South Service Road 1998 25 111 Ames Court 1998 25 55 Ames Court 1998 25 10 Skyline Drive 1998 25 11 Commercial Street 1998 25 80 Skyline Drive 1998 25 120 Express Street 1998 25 7010 Snowdrift Way 1998 25 7350 Tilghman Street 1998 25 7450 Tilghman Street 1998 25 7150 Windsor Drive 1998 25 7535 Windsor Drive 1998 25 920 Harvest Drive 1998 25 925 Harvest Drive 1998 25 155 Rittenhouse Circle 1998 25 150 Corporate Center Drive 1998 25 200 Corporate Center Drive 1998 25 300 Corporate Center Drive 1998 25 426 Lancaster Avenue 1998 25 160-180 West Germantown Pike 1998 25 50 Swedesford Square 1998 25 52 Swedesford Square 1998 25 922 Swedesford Road 1998 25 520 Virginia Drive 1998 25 2401 Park Drive 1998 25 2404 Park Drive 1998 25 2405 Park Drive 1998 25 2407 Park Drive 1998 25 600 Corporate Circle Drive 1998 25 800 Corporate Circle Drive 1998 25 200 Nationwide Drive 1998 25 500 Nationwide Drive 1998 25 755 Business Center Drive 1998 31.5 1000 First Avenue 1998 25 1020 First Avenue 1998 25 1040 First Avenue 1998 25 1060 First Avenue 1998 25 2490 Boulevard of the Generals 1998 25 610 Freedom Business Center 1998 25 620 Freedom Business Center 1998 25 630 Freedom Business Center 1998 25 640 Freedom Business Center 1998 25 600 Park Avenue 1998 25 650 Park Avenue 1998 25 630 Clark Avenue 1998 25 620 Allendale Road 1998 25 660 Allendale Road 1998 25 680 Allendale Road 1998 25 751-761 Fifth Avenue 1998 25 741 First Avenue 1998 25 875 First Avenue 1998 25
Initial Cost -------------------------------------------- Net Improvements (Retirements) Encumberances at Building and Since Property Name City State December 31, 2000 Land Improvements Acquisition ------------------------------------- ---------------- ------ -------------------- ----------------------------- -------------- 180 Wheeler Court Langhorne PA - 608 2,436 192 105 / 140 Terry Drive Newtown PA - 2,299 8,238 1,822 14 Campus Boulevard Newtown Square PA - 2,243 4,217 828 Philadelphia Marine Center Philadelphia PA - 533 2,196 33 1105 Berkshire Boulevard Reading PA - 1,115 4,510 149 1150 Berkshire Boulevard Reading PA - 435 1,748 298 11781 Lee Jackson Memorial Highway Fairfax VA - 3,616 14,468 13 12015 Lee Jackson Memorial Highway Fairfax VA - 5,398 21,563 120 4805 Lake Brooke Drive Glen Allen VA 85,044 (f) 1,640 6,567 27 2812 Emerywood Parkway Henrico VA - 1,069 4,281 - 1880 Campus Commons Drive Reston VA - 5,707 22,768 23 9100 Arboretum Parkway Richmond VA 25,800 (e) 1,363 5,489 248 9200 Arboretum Parkway Richmond VA - (e) 984 3,973 27 300 Arboretum Place Richmond VA - (e) 5,450 21,892 967 9210 Arboretum Parkway Richmond VA - (e) 1,110 4,474 118 9011 Arboretum Parkway Richmond VA - (f) 1,856 7,702 196 9211 Arboretum Parkway Richmond VA - (f) 581 2,433 (1) 600 East Main Street Richmond VA - 9,809 38,255 1,607 2100-2108 West Laburnum Richmond VA 1,529 2,482 8,846 1,150 2244 Dabney Road Richmond VA - (f) 551 2,203 - 2110 Tomlynn Street Richmond VA - 159 637 (2) 2201 Dabney Street Richmond VA - 367 1,470 - 1957 Westmoreland Street Richmond VA - (f) 1,062 4,241 282 2511 Brittons Hill Road Richmond VA - (f) 1,201 4,820 91 2240 Dabney Road Richmond VA - (f) 264 1,059 (1) 2256 Dabney Road Richmond VA - (f) 356 1,427 10 2251 Dabney Road Richmond VA - (f) 387 1,552 29 2120 Tomlynn Street Richmond VA - (f) 280 1,125 26 2169-79 Tomlynn Street Richmond VA - (f) 422 1,695 62 2212-2224 Tomlynn Street Richmond VA - (f) 502 2,014 7 2277 Dabney Road Richmond VA - (f) 507 2,034 - 2246 Dabney Road Richmond VA - (f) 455 1,822 - 2130-2146 Tomlynn Street Richmond VA - (f) 353 1,416 - 2248 Dabney Road Richmond VA - (f) 511 2,049 2 2201-2245 Tomlynn Street Richmond VA - (f) 1,020 4,067 457 2221-2245 Dabney Road Richmond VA - (f) 530 2,123 - 1900 Gallows Road Vienna VA - 7,344 29,308 22 2000 Lenox Drive Lawrenceville NJ - (i) 2,291 12,221 1,820 125 Jericho Turnpike Jericho NY - 963 4,026 359 131 Jericho Turnpike Jericho NY - 340 1,295 188 263 Old Country Road Mellville NY - 1,567 6,266 1 7130 Ambassador Drive Allentown PA 761 3,046 6 630 Dresher Road Horsham PA - 771 3,083 - 630 Allendale Road King of Prussia PA 18,095 2,836 - - 11 Campus Boulevard Newtown Square PA - 1,112 4,067 558 1050 Westlakes Drive Berwyn PA - 13,056 - 1700 Paoli Pike East Goshen PA 458 - - --------- -------- ----------- -------- Grand Total - All Properties $ 527,877 $334,642 $1,361,087 $ 59,166 ========= ======== ========== ========
Gross Amount at Which Carried December 31, 2000 --------------------------------------------------------- Accumulated Depreciation at Building and December 31, Date of Property Name Land Improvements Total (a) 2000 (b) Construction ------------------------------------- ----------- -------------- ----------- -------------- ------------- 180 Wheeler Court 608 2,628 3,236 289 1975 105 / 140 Terry Drive 2,299 10,060 12,359 1,336 1982 14 Campus Boulevard 2,243 5,045 7,288 881 1998 Philadelphia Marine Center 533 2,229 2,762 204 1105 Berkshire Boulevard 1,115 4,659 5,774 587 1987 1150 Berkshire Boulevard 435 2,046 2,481 267 1979 11781 Lee Jackson Memorial Highway 3,616 14,481 18,097 1,306 1985 12015 Lee Jackson Memorial Highway 5,398 21,683 27,081 1,953 1985 4805 Lake Brooke Drive 1,640 6,594 8,234 591 1996 2812 Emerywood Parkway 1,069 4,281 5,350 384 1980 1880 Campus Commons Drive 5,707 22,791 28,498 2,051 1985 9100 Arboretum Parkway 1,363 5,737 7,100 546 1988 9200 Arboretum Parkway 984 4,000 4,984 360 1988 300 Arboretum Place 5,450 22,859 28,309 2,238 1988 9210 Arboretum Parkway 1,110 4,592 5,702 435 1988 9011 Arboretum Parkway 1,856 7,898 9,754 751 1991 9211 Arboretum Parkway 581 2,432 3,013 219 1991 600 East Main Street 9,809 39,862 49,671 3,714 1986 2100-2108 West Laburnum 2,482 9,996 12,478 845 1976 2244 Dabney Road 551 2,203 2,754 198 1993 2110 Tomlynn Street 159 635 794 57 1965 2201 Dabney Street 367 1,470 1,837 132 1962 1957 Westmoreland Street 1,062 4,523 5,585 437 1975 2511 Brittons Hill Road 1,201 4,911 6,112 452 1987 2240 Dabney Road 264 1,058 1,322 95 1984 2256 Dabney Road 356 1,437 1,793 131 1982 2251 Dabney Road 387 1,581 1,968 141 1983 2120 Tomlynn Street 280 1,151 1,431 109 1986 2169-79 Tomlynn Street 422 1,757 2,179 170 1985 2212-2224 Tomlynn Street 502 2,021 2,523 182 1985 2277 Dabney Road 507 2,034 2,541 183 1986 2246 Dabney Road 455 1,822 2,277 164 1987 2130-2146 Tomlynn Street 353 1,416 1,769 127 1988 2248 Dabney Road 511 2,051 2,562 184 1989 2201-2245 Tomlynn Street 1,020 4,524 5,544 470 1989 2221-2245 Dabney Road 530 2,123 2,653 191 1994 1900 Gallows Road 7,344 29,330 36,674 2,640 1982 2000 Lenox Drive 2,291 14,041 16,332 158 1999 125 Jericho Turnpike 963 4,385 5,348 329 1969 131 Jericho Turnpike 340 1,483 1,823 132 1967 263 Old Country Road 1,567 6,267 7,834 418 1999 7130 Ambassador Drive 761 3,052 3,813 174 1991 630 Dresher Road 771 3,083 3,854 134 1987 630 Allendale Road 2,836 - 2,836 - 11 Campus Boulevard 1,112 4,625 5,737 238 1999 1050 Westlakes Drive - 13,056 13,056 - 1700 Paoli Pike 458 - 458 - 2000 --------- ----------- ---------- --------- Grand Total - All Properties $ 334,642 $ 1,420,253 $1,754,895 $ 179,558 ========= =========== ========== =========
Date Depreciable Property Name Acquired Life ------------------------------------- ------------ ----------- 180 Wheeler Court 1998 25 105 / 140 Terry Drive 1998 25 14 Campus Boulevard 1998 25 Philadelphia Marine Center 1998 25 1105 Berkshire Boulevard 1998 25 1150 Berkshire Boulevard 1998 25 11781 Lee Jackson Memorial Highway 1998 25 12015 Lee Jackson Memorial Highway 1998 25 4805 Lake Brooke Drive 1998 25 2812 Emerywood Parkway 1998 25 1880 Campus Commons Drive 1998 25 9100 Arboretum Parkway 1998 25 9200 Arboretum Parkway 1998 25 300 Arboretum Place 1998 25 9210 Arboretum Parkway 1998 25 9011 Arboretum Parkway 1998 25 9211 Arboretum Parkway 1998 25 600 East Main Street 1998 25 2100-2108 West Laburnum 1998 25 2244 Dabney Road 1998 25 2110 Tomlynn Street 1998 25 2201 Dabney Street 1998 25 1957 Westmoreland Street 1998 25 2511 Brittons Hill Road 1998 25 2240 Dabney Road 1998 25 2256 Dabney Road 1998 25 2251 Dabney Road 1998 25 2120 Tomlynn Street 1998 25 2169-79 Tomlynn Street 1998 25 2212-2224 Tomlynn Street 1998 25 2277 Dabney Road 1998 25 2246 Dabney Road 1998 25 2130-2146 Tomlynn Street 1998 25 2248 Dabney Road 1998 25 2201-2245 Tomlynn Street 1998 25 2221-2245 Dabney Road 1998 25 1900 Gallows Road 1998 25 2000 Lenox Drive 1999 31.5 125 Jericho Turnpike 1999 25 131 Jericho Turnpike 1999 25 263 Old Country Road 1999 25 7130 Ambassador Drive 1999 25 630 Dresher Road 1999 25 630 Allendale Road 1999 31.5 11 Campus Boulevard 1999 25 1050 Westlakes Drive 2000 25 1700 Paoli Pike 2000 31.5
(a) Reconciliation of Real Estate: The following table reconciles the real estate investments from January 1, 2000 to December 31, 2000 (in thousands): Balance at beginning of year $ 1,771,475 Additions: Acquisitions 13,056 Capital expenditures 34,905 Dispositions (64,541) ----------- Balance at end of year $ 1,754,895 =========== (b) Reconciliation of Accumulated Depreciation: The following table reconciles the accumulated depreciation on real estate investments from January 1, 2000 to December 31, 2000 (in thousands): Balance at beginning of year $ 125,744 Depreciation expense 63,940 Dispositions (10,126) --------- Balance at end of year $ 179,558 ========= (c) The loans are cross-collateralized and secured by first mortgages on 3 properties. (d) The loan is cross-collateralized and secured by mortgages on 24 properties. (e) The loan is cross-collateralized and secured by mortgages on 4 properties. (f) The loan is cross-collateralized and secured by mortgages on 30 properties. (g) The loan is cross-collateralized and secured by mortgages on 6 properties. (h) The loan is cross-collateralized and secured by mortgages on 5 properties. (i) The loan is cross-collateralized and secured by mortgages on 7 properties. Exhibit Index Exhibit 3.2 Amended and Restated Bylaws of the Company 10.36 Amended and Restated Employment Agreement of Anthony A. Nichols, Sr.** 10.37 Amended and Restated Employment Agreement of Gerard H. Sweeney** 10.55 Fourth Amendment to Restricted Share Award to Anthony A. Nichols, Sr.** 10.56 Fourth Amendment to Restricted Share Award to Gerard H. Sweeney** 10.57 Severance Agreement (Barbara L. Yamarick)** 10.58 Severance Agreement (Anthony A. Nichols, Jr.)** 10.59 Severance Agreement (H. Jeffrey DeVouno)** 10.60 Severance Agreement (George Sowa)** 10.61 Severance Agreement (Bradley W. Harris)** 10.62 Restricted Share Award to Anthony A. Nichols, Sr.** 10.63 Restricted Share Award to Gerard H. Sweeney** 10.64 Restricted Share Award to Anthony S. Rimikis** 10.65 Restricted Share Award to Barbara L. Yamarick** 10.66 Restricted Share Award to Anthony A. Nichols, Jr.** 10.67 Restricted Share Award to H. Jeffrey DeVouno** 10.68 Restricted Share Award to George Sowa** 10.69 Restricted Share Award to Bradley W. Harris** 10.70 Restricted Share Award to Jeffrey F. Rogatz** 21.1 List of Subsidiaries of the Company 23.1 Consent of Arthur Andersen LLP -------------- **Indicates management contract or compensatory plan or arrangement.