Good day and thank you for standing by. Welcome to the Brandywine Realty Trust Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Jerry Sweeney, President and CEO. Please, go ahead.

Michelle, thank you very much. Good morning, everyone, and thank you for participating in our fourth quarter 2021 earnings call. On today's call with me are George Johnstone, our Executive Vice President of Operations; Dan Palazzo, Vice President and Chief Accounting Officer; and Tom Wirth, Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed during our call may constitute forward-looking statements within the meaning of the Federal Securities Law. Although we believe these estimates are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. For further information on facts that could impact our anticipated results, please reference our press release, as well as our most recent annual and quarterly reports that we filed with the SEC. So first and foremost, we hope that you and yours had a wonderful holiday season and are looking forward to a very successful 2022. In our world, certainly after some reopening delays related to the latest variants, we have stronger tenant interest in high-quality office space, as tour activity, lease negotiations, and deal executions remain on a very positive trend line. A definitive trend that we believe will accelerate is that tenants are requiring very high-quality workspaces, and we believe this trend positions our existing portfolio and our development portfolio extremely well. During our prepared comments, we'll briefly review fourth quarter results, outline our 2022 business plan, and provide color on recent activities, both on the development and transactional side. Tom will then review our 2021 results and frame out the key assumptions driving our 2022 guidance. After that, Tom, George, Dan, and I are available to answer any questions you may have. Looking back at 2021, we closed the year on a very strong note with many business plan objectives achieved. We exceeded our speculative revenue target by $1 million, raising guidance twice during the year. Our executed lease volumes remained in line with last quarter and our operating portfolio leasing pipeline increased by 120,000 square feet. For the fourth quarter, we posted a rental rate mark-to-market of 8.1% on a GAAP basis and 2.6% on a cash basis, with our full year mark-to-market being very strong at 16.2% on a GAAP basis and 10.3% on a cash basis. In addition, we had 116,000 square feet of positive absorption during the quarter. Our full year 2021 cash same store numbers came in below our revised business plan, primarily due to lower parking revenue, bad debts related to one retail tenant, and free rent for a backfill tenancy. Full year capital costs, however, were in line with our business plan range. Tenant retention was 53%, which was at the top end of our full year forecast and core occupancy and lease targets were also within our forecasted range, where we ended 2021 93.9% leased in our core markets. We posted fourth quarter FFO of $0.35 per share, which is in line with consensus estimates, and full year 2021 FFO of $1.37 per share, which was $0.01 above consensus. For 2022, we're providing guidance with an FFO range of $1.37 to $1.45 per share, for a midpoint of $1.41 per share. Our early renewal efforts, expense control programs, forward near-term pipeline visibility, and our recently executed transactions establish a clear pathway for growth. Our 2022 plan is headlined by two operating metrics that demonstrate the underlying strength of our core markets and their excellent growth potential. Our cash mark-to-market range is between 8% and 10%. Our GAAP mark-to-market range is between 16% and 18%. Our GAAP same store NOI growth for both cash and GAAP is between 0% and 2%, and we expect all of our regions will post positive mark-to-market results on both a cash and GAAP basis. In looking at our cash same store NOI range of 0% to 2%, it's impacted by the timing of rollover and the subsequent backfill from leases already executed. For example, in Philadelphia, we renewed a 120,000 square foot tenant commencing February 1 of '22. The free rent in that 16-year deal will last the balance of '22. In addition, we had a 110,000 square foot tenant vacate Cira Centre in 2021. We've already leased 75% of that square footage with a commencement in July. Those lease structures on those replacement tenants are 10 years in term and incorporate free rent for the balance of '22. Just those two transactions represent a 3.1% cash same store impact. We believe based on leases we already have executed and visibility into our near-term pipeline, that portfolio is well-positioned to deliver much better same store growth in '23. Our spec revenue range is between $34 million and $36 million, with $25.6 million or 73% at the midpoint achieved. That speculative revenue range represents approximately two million square feet of leasing velocity, which compares to leasing velocity of 1.2 million square feet in '20 and 1.4 million in 2019. Other key highlights include occupancy levels remaining between 91% and 93%, lease levels between 92% and 94%. We expect a retention rate between 58% and 60%, and the capital for 2022 will run about 14% of revenue, above 2021, primarily due to several of those very large long-term leases commencing during the course of the year. Based on our 2022 leasing activity and higher development and redevelopment spend, we project our net debt to EBITDA to be in a range of 6.6 to 6.9 times. We view this leverage increase as purely transitional while we are in a period of investing significant capital into construction without recognizing any NOI. As income recognition occurs, this leverage will decrease significantly. To amplify this point, we have segmented our EBITDA metrics between core and combined. We've included another leverage metric that focuses just on our core portfolio, eliminating our joint venture nonrecourse debt and our active development and redevelopment spend. We believe that our projected core leverage range between 6.0 and 6.3 provides a more accurate measurement of how we're managing our core operations, eliminating our more highly leveraged joint ventures and the volatility associated with the timing of spending project capital. Over the last couple of years, we've reduced our forward rollover through 2024 to an average below 8%. Looking further out, our rollover exposure is below 10% annually through 2026. Value creation and earnings growth remain a top priority. Key drivers for us include having key vacancies that many of you are familiar with that will generate between $0.07 and $0.10 a share upon lease-up. We continue to make progress on leasing up those spaces, but our 2022 plan only includes approximately $0.02 per share of revenue from those vacancies, of which 20% has already been executed. Our overall leasing pipeline stands at 3.8 million square feet, broken down between 1.4 million square feet on our operating portfolio and 2.4 million square feet on our development projects. The 1.4 million square feet leasing pipeline on the existing portfolio increased by 120,000 square feet during the quarter and is 14% higher than our pre-pandemic levels from the fourth quarter of 2019. The leasing pipeline on our development projects of 2.4 million square feet also increased during the quarter by 100,000 square feet. We have excellent liquidity, and even with our anticipated development spend, and absent any other financing sources, we anticipate having $383 million on our line of credit available by year-end 2022. We anticipate renewing both our line of credit and our $250 million term loan during the first half of the year at similar terms to the existing instruments. The dividend is very well covered with a 54% FFO payout ratio at the midpoint. Our CAD ratio has increased to about 90% in recent years, primarily due to our elevated leasing activity, which is that 2 million square feet we plan on leasing. For 2022, we included all JV capital spend in our CAD calculation, regardless of whether those dollars are financed through funding secured at the JV level, which impacted our CAD ratio by about $0.05 per share or 5.5%. We do anticipate that coverage improving significantly as leases commence and we recognize revenue. From a capital allocation standpoint, we've made progress on many fronts. We liquidated our final property in our Allstate joint venture and recognized a $3 million gain. We also continued selling non-core land parcels during the year. In January, we sold one parcel for $1.4 million, generating a $900,000 gain. The 250 King of Prussia Road development project is scheduled for delivery in the second quarter of 2022. It will be the first delivery in our Radnor Life Science Center, which consists of more than 300,000 square feet of life science space, in what we consider to be the region's best-performing submarket. The project currently has a pipeline of over 260,000 square feet, including 86,000 square feet in lease negotiations. The 405 Colorado project in Downtown Austin is now complete and is 48.3% leased with a growing pipeline. We currently have a leasing pipeline of 144,000 square feet, with 31,000 square feet in lease negotiations and a 26,000 square foot expansion. Our B.Labs incubator at Cira Centre consists of 240 seats and opened in January, now 95% leased to 12 companies, well ahead of our plan. Based on that success, we're planning to add another floor totaling approximately 27,000 square feet by year-end 2022. We also have plans to add another 78,000 square feet of life science capability through Floor 9. In Schuylkill Yards and Uptown ATX, our life science tower at Schuylkill Yards West is on time and on budget for Q3 2023 delivery, with an active pipeline totaling 410,000 square feet for both life science and office components—up 70,000 square feet from last quarter. Our $56.8 million equity commitment is fully funded; our partner's equity investment is being made, and the first funding of our construction loan will occur in Q2 2022. The 3151 Market life science building is fully designed and priced, with a pipeline totaling about 270,000 square feet, up from 150,000 square feet in Q3. Our goal is to start that project this year. At Uptown ATX, our 66-acre community has a development capacity approaching seven million square feet. We've rebranded the project from Broadmoor to Uptown ATX. We broke ground on Block A, which consists of 348,000 square feet of office, 341 residential units, and 15,000 square feet of ground-floor retail. We are pleased with our 50-50 venture with Canyon Partners. That structure is similar to our 3025 Schuylkill Yards West project, with Canyon providing 50% of the equity on a preferred basis. We are currently obtaining a 65% construction loan, which we expect to close before the end of Q1. As discussed, these preferred structures enable Brandywine to retain a significant portion of the value upon stabilization. Under our preferred structures, once the partners in Brandywine receive their accrued return, a significant value accretion comes to Brandywine thereafter. We anticipate the completion of that office component in Q3 2023 and the residential component in Q3 2024, with a pipeline of about 300,000 square feet. Since the project's announcement, we've received inquiries totaling just shy of 1.3 million square feet, indicating a surge of interest. We also broke ground for the train station in a 50-50 public-private partnership with CapMetro, the regional rail authority in Austin. This station will provide Uptown ATX direct access to downtown Austin and the northern suburbs, expected to open for service in 2024. We anticipate starting the first phase of Block F, which includes 272 apartment units, under the same format with Canyon in Q2 '22. While our 2022 business plan did not incorporate any dispositions or acquisitions, we do anticipate being active on the capital recycling front. We expect to continue to sell select non-core land parcels and with the office recovery underway and premium pricing for well-leased assets, we see several opportunities to harvest profits with low cap rate sales. Additionally, we expect sales of select properties out of our existing joint ventures. The proceeds from these activities will be used to fund our development pipeline, continue to reduce leverage, and redeploy dollars into higher growth opportunities. With that, Tom will now provide an overview of our financial results.

Thank you, Jerry. Our fourth quarter net income totaled $4.5 million or $0.03 per diluted share, and FFO totaled $60.4 million or $0.35 per diluted share, in line with consensus estimates. Some general observations on our fourth quarter results: while fourth quarter results were in line with consensus, we had a number of moving pieces and several variances to our second quarter guidance. Portfolio operating income approximated $70 million and was in line with our third quarter guidance. Our portfolio did experience 116,000 square feet of positive absorption. We forecasted two land sales generating $1.3 million of gains which did not occur, as these two land sales have been delayed until '22 and one sale already closed in January, generating a $900,000 gain. Termination and other income totaled $4.2 million and was $1.7 million above our third quarter forecast, primarily due to unbudgeted one-time insurance income. G&A expense totaled $8.1 million or $1 million above our estimate, primarily due to higher employee-related costs and professional fees. Our fourth quarter fixed charge and income ratios were 4.2 and 3.9 respectively, better than our third quarter and year-end forecast. Both metrics benefited from lower than forecasted capital spending. Our fourth quarter annualized net debt to EBITDA was 6.5, meeting the high end of our 6.3 to 6.5 guidance. Regarding cash collections, the overall collection rate for the fourth quarter continued to be over 99% as in previous quarters, and there were no significant tenant write-offs. During the quarter, as we mentioned last quarter, the completion of 3000 Market added to our core portfolio and is 100% leased to Spark Therapeutics. On our financing activity, we restructured and extended our current loan encumbering our joint venture at 4040 Wilson, lowering our average borrowing cost by approximately 100 basis points, generating minimal initial proceeds but allowing for increased borrowings to complete the leasing of the vacant office space. Turning to the 2022 guidance, at the midpoint, net income will be $0.21 per diluted share, and FFO will be $1.01 per diluted share, and our range is built with the following assumptions: our portfolio operating results for GAAP NOI will be about $290 million, an increase of $17 million from last year. We have the full effect of 3000 Market and 405 Colorado, totaling $5 million; 1676 will be about $4 million; 250 King of Prussia Road will generate income, at about $2 million; we expect an increase in our residential income of about $2 million; and the balance resulting from net increases from the same-store portfolio. Our contribution from unconsolidated joint ventures will total about $28 million to $29 million, while G&A will be between $34 million and $35 million excluding a one-time credit in 2021, representing an increase of $1.9 million. Total interest expense, including deferred financing costs, will increase to approximately $70 million to $71 million, due to the higher forecasted spend on our line of credit and higher interest rates. Capitalized interest will increase to about $7 million, driven by ongoing developments and anticipated starts later in 2022. We anticipate $4 million to $5 million of land sales from selling non-core land parcels, with one already having closed in January. Termination and other income are expected to reach $11 million, which is above 2022, again due to some onetime special items we expect. Net income, leasing, and development fees will total between $15 million and $16 million. As Jerry mentioned, we have no property acquisitions or dispositions in our guidance. We plan no ATM or share buyback activity at this time and anticipate refinancing our credit line and $250 million term loan during the first half of 2022. Our share count will approximate 174 million diluted shares. Looking at Q1 guidance, we expect portfolio income of about $72 million, sequentially higher by $1 million, primarily due to 3000 Market and the 116,000 square feet of absorption from Q4, which will be partially offset by several known move-outs a majority of which have already been released later in 2022. FFO contribution from our unconsolidated joint ventures will total $6.5 million for Q1 and G&A is expected to increase from $8.1 million to $9.5 million, consistent with prior years due to the timing of rec compensation expense recognition. Our total interest expense is projected at approximately $17.5 million, with capitalized interest at $2.5 million. Termination fees will total about $3.5 million, while net management and development fees will also total $3.5 million. Additional land sales, besides the one previously announced, is estimated at $400,000, accruing to $1.3 million. Our capital plan totals about $445 million, indicating the CAD range of 84% to 95%, which is higher than normal. However, we expect this number to approach our range in 2020. The sources and uses include $190 million of development, $131 million of common dividends, revenue maintenance of about $55 million, revenue creation at about $40 million, and $29 million of contributions to our joint ventures during the year. Primary sources will comprise $190 million of cash flow after interest payments, $193 million for the line of credit, cash on hand of $27 million, and $35 million of proceeds from land sales. Based on this capital plan, our line of credit will increase by about $217 million, leaving $383 million available. Our net debt to EBITDA is projected to range from 6.7 to 6.9 times, with the main variable being the scope of our development activities. Our net debt to GAV will be approximately 40% to 41%. Furthermore, we anticipate our fixed charge ratio will approximate 4.0, with a sequentially lower interest coverage of 3.8 primarily due to anticipated capital spending. We've included a new metric for our core net debt to EBITDA, which at year-end was 5.9—excluding our joint ventures and active development pipeline—providing a better measure of how we're monitoring our leverage on our core portfolio. With that, I will turn it back over to Jerry.

Great. Thanks, Tom. The key takeaway is that while we are still facing some headwinds as an industry regarding the recovery of the economy and the return to workplace environment, we see this in the context of our portfolio and operations being in very solid shape. We think the leasing activity and the forward rollover reduction we've done over the last couple of years provide excellent visibility for future growth. Our 2022 business plan incorporates strong mark-to-market metrics, managed capital spend, and strong leasing activity. I want to emphasize that we really do see in all of our tenant discussions a real focus on higher quality, safety, health, and multimodal access. We believe that this trend line will continue and will benefit our company moving forward. So with that, we would like to open up the floor for questions. As always, we ask that to respect the time of others, please limit yourself to one question and a follow-up. Michelle?

Thank you. Our first question comes from Manny Korchman from Citi. Your line is open.

Hi. Good morning, everyone. Jerry and Tom, I appreciate the comments on breaking out your leverage stats into core and headline. I guess my question is how do you sort of fix leverage more permanently other than waiting for these big developments to come online? Do you need to do equity? Is it a matter of maybe doing a bigger sale of something more core or just bigger in general to fund the tank? Thanks.

Manny, great question and good to hear from you. No, I think it's an excellent question. We spend a lot of time on how to optimize our capital allocation. We have a number of core land sales that will generate near-term liquidity in a non-dilutive way. We also have some fairly well-leased premium-priced assets both on our balance sheet and within our joint venture structures that can raise capital that we think will be non-dilutive to current earnings. Timing those sales to match some of the nearer-term deliveries remains critical. We have a number of large leases that have already been signed but are currently in free rent periods, which will generate additional liquidity for us soon. We really think we have a lot of near-term opportunities to generate liquidity non-dilutively to manage leverage down throughout this year and into 2023. The long-term opportunity we think is very much solid in the projects coming online will improve metrics significantly as well.

Great. And then Jerry, going back to the same-store growth comment if I understand your guidance correctly. You've got around 60% retention in the guidance and about a million square feet of expiries. How is that going to weigh against the positives of these couple of big leases becoming cash flow positive?

Manny, good morning. Part of what’s not going to renew, we have successfully backfilled, evidenced by the 75% of the space at Cira Centre that Baker Hostetler gave back. So that will be negative retention for us, but we expect to reabsorb the space with the free rent burning off in 2022 and fully cash producing in 2023. The large renewal we did at Logans also has about 11 months of free rent burning off, creating revenue in 2023 where the contributions will be more significant. Regarding the rest of our same-store growth, we have 1,676 down in Tysons, which we anticipate to contribute about $1 million in revenue in 2022, with the rest of the building filling up in 2023.

Thanks, George.

Thank you. Our next question comes from Steve Sakwa from Evercore ISI. Your line is open.

Thanks. Good morning. Jerry, could you break down a little bit about the two million square feet of leasing activity in 2022? How much of that is core portfolio? How much is development and how much would you attribute to renewals versus new leasing?

Steve, good morning. Of the two million square feet, 1.2 million square feet are new deals and about 800,000 square feet are renewals. This is all within the core portfolio and does not include any of our development or redevelopment projects.

Okay. And Jerry, could you talk a little bit about the leasing in Austin? It sounded like the pipeline ramped up, but leasing at 405 Colorado has been slower than expected. Can you elaborate on what's going on there?

Steve, we are certainly hoping to see significant progress in the next couple of quarters. The building just finished construction, with the lobby now open, which should attract more activity. The pipeline remains strong at 405, with over 30,000 square feet in lease negotiations. However, the lease negotiations have taken longer than expected, with several positive discussions ongoing, so the pace of leasing has been slower with some tenants not finalizing decisions yet. The smaller floor plate design also targets tenants in the 10,000 to 20,000 square foot range, compared to larger tenants which are currently more active in the Austin market.

Okay. If I can just ask one technical question for Tom. I didn't hear you provide a number for straight-line rent FAS 141. Do you have that handy?

Not right off the top, Steve, but I will follow up with that right after the call.

Thanks, Steve.

Thank you. Our next question comes from Craig Mailman from KeyBanc Capital Markets. Your line is open.

Hi, good morning.

Good morning, Craig.

Jerry, I just want to circle back to the commentary about your ability to kick off some low cap rate sales to fund development and bring down leverage. Would these be full sales or continue to be kind of in this JV thought process?

Great question, Craig. Right now, we are much more biased towards full sales on existing earning assets. Given our capital requirements on larger scale developments, we think we need to rely on preferred structures for financing. However, for asset sales, we are looking to dispose of existing earnings assets to generate liquidity without creating downward pressure on earnings.

Got it. And you guys are trading in the low 7% implied cap rate. Where do you think this public-private arbitrage is on some of these buildings you'd want to sell?

For the assets we're evaluating for liquidation, the market's cap rates vary between 250 basis points and even lower on some others. We're seeing premium pricing for long leased assets, so there's a real push towards cap rate compression during this recovery phase.

And would this include residential at Uptown, or would you want to retain control at Uptown or Schuylkill?

We are primarily focused on existing assets for liquidation, ensuring the development projects achieve stabilization before considering sales.

Thank you. Our next question comes from James Feldman from Bank of America. Your line is open.

Great. Thanks and good morning. You talked about $0.07 to $0.10 a share from vacancy lease-up but only have $0.02 in your 2022 guidance. Can you talk about the composition of that remaining $0.08 and your leasing prospects?

Sure, George?

Yes, absolutely. The largest piece of that $0.07 to $0.10 is at 1676, comprising about 45% of that number, with a remaining 171,000 square feet to lease. We have about 100,000 square feet planned for 2022, which won't contribute a full year of revenue. Other notable vacancies involve our River Place project in Austin and a few spots in Plymouth Meeting, with good traction in leasing them.

And what are your larger remaining spaces downtown? Are you pretty much buttoned up?

From a downtown perspective on our wholly owned side, we have a well-leased portfolio. However, opportunities remain at Commerce Square with vacancies from Macquarie and Reliance, where we are managing about 150,000 square feet in a leasing pipeline. We're seeing good levels of interest but have not secured large leases yet.

You don't think that will contribute to the $0.07 to $0.10?

No, the numbers cited primarily reflect our wholly owned portfolio. That said, there are vehicle opportunities to increase income streams within our joint venture properties as the market recovers.

You don’t think that will contribute to 2022?

As of now, larger vacancies are anticipated to have minimal impact until the fourth quarter due to lease execution timelines and construction processes. We view 2023 as having a larger contribution.

To your initial comments regarding tenants wanting high-quality workspaces, how do you view your suburban assets? Are they in line with your standards, or will they require CapEx upgrades?

In Philadelphia, our downtown assets are well-leased and have undergone significant upgrades to attract tenants, demonstrating a clear willingness to invest in long-term value. In the suburbs, our King of Prussia and Radnor portfolios are all relatively to well-leased; we recently finished a renovation project in Plymouth Meeting with an increase in activity, confirming that reinvestment strategies are fruitful. We look at current upgrades and their effectiveness before proceeding to ensure we justify each investment.

Lastly, regarding the Austin land sale gain, is that different from what you sold in Q1 and what's in guidance?

To clarify, that land sale was in Richmond, Virginia, not Texas. We haven’t determined how we will report those gains yet; they're not factored into our guidance of $4 million to $5 million for land gains.

Thanks very much.

Great. Thank you. Could you discuss how pro forma rents have trended for non-life science developments? Is there potential upside in rents due to the demand for quality office assets?

We are pleasantly surprised with the production, moving rents across the board strongly. We've maintained a good mark-to-markets, keeping our capital costs below our long-term targets. Despite expectations of falling rents, we have seen resilience across high-end submarkets and strong rent developments in the office sector.

Have you seen any improvements in Philadelphia's ability to attract outside firms, given the city's tax complications?

We anticipate improvement as the city recovers; we've seen businesses wanting to move into the downtown area, especially as more younger workers inhabit the area now. While businesses had concerns about relocating due to the tax structure, the trend suggests they want to capitalize on attracting talent in the downtown area.

Are there any tax consequences regarding potential dispositions?

Some targeted transactions may require a special dividend to address capital gains. We do assess such needs; however, we have not identified concerns regarding coverage of our dividend from the anticipated sales.

Thank you. I am showing no further questions from our phone lines. I would now like to turn the conference back over to Jerry Sweeney for any closing remarks.

Great. Thank you for your attention and engagement with our company. We look forward to updating you on our activities at the next earnings conference call. Thank you very much.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.