Thank you for standing by. Welcome to the Brandywine Realty Trust Third Quarter 2025 Earnings Call. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Jerry Sweeney, President and CEO.

Jonathan, thank you very much. Good morning, everyone. Thank you for participating in our third quarter '25 earnings call. As usual, on today's call with me are George Johnstone, our Executive Vice President of Operations; Dan Palazzo, our Senior Vice President and Chief Accounting Officer; and Tom Wirth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed on the call today may constitute forward-looking statements within the meaning of federal securities law. Although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release as well as our most recent annual and quarterly reports that we file with the SEC. So during our prepared comments today, we'll briefly review third quarter results, provide updates on our '25 business plan and be prepared to answer any questions you may have. Looking at the third quarter, we posted solid operating metrics again, reinforcing the continued flight to quality and our strong market positioning. As we'll review in more detail, we do anticipate performing within all of our business plan ranges. At the midpoint, we have now executed over 99% of our spec revenue target. Our quarterly tenant retention rate was 68%, and we expect to end the year at the upper end of our range. Leasing activity for the quarter approximated 343,000 square feet, including 164,000 in our wholly-owned portfolio and 179,000 in our joint ventures. Forward leasing commenced after quarter end remained strong at 182,000 square feet with most of those leases taking occupancy in the next 2 quarters. Third quarter net absorption totaled 21,000 square feet. And as anticipated in our business plan, we ended the quarter at 88.8% occupied and 90.4% leased. In Philadelphia, we're 94% occupied and 96% leased. In the Pennsylvania suburbs, we're at 88% occupied and 89% leased with a solid pipeline of prospects for the existing vacancies. Boston remained at 77% occupied and 78% leased. We do, as we forecasted before, have a large known move-out in the fourth quarter that will drop this region further into about 74% by year-end. Looking ahead, we have only 4.9% of annual rollover through '26, which is among the lowest in the office sector and only 7.6% through '27. For the quarter, our mark-to-market was a negative 1.8% on a GAAP basis and a negative 4.8% on a cash basis. Both of those metrics, however, were heavily influenced by a large as-is renewal in Austin that had a negative 16% GAAP and negative 18% cash, but no TIs were invested. Without that lease, the company would have been a 6.2% positive GAAP and 2.8% positive cash. By way of example, our CBD and Pennsylvania mark-to-market were positive at 6.7% and 3.1% on a GAAP and cash basis, respectively. Our capital ratio was 10.9%, slightly above our '25 business plan range. But based on leases already executed for the fourth quarter, we're maintaining our capital ratio range of 9% to 10%, which is the lowest capital ratio range we've had in over 5 years. Tour activity through the portfolio continues to accelerate. Third quarter physical tours were in line with second quarter, but more importantly, the square footage of those tours in Q3 exceeded the second quarter by 23%. Another positive sign is that as we track our deal status, letters of intent, and legal negotiations out for signature is up 170,000 square feet or 25% from Q2 levels. For the quarter, 51% of all new leases were the result of a flight to quality, and we do not have any tenant lease expirations greater than 1% of revenues through 2026. Our operating portfolio leasing pipeline remains solid at 1.7 million square feet, which includes about 72,000 square feet in advanced stages of negotiations. To sum up, operations '25 is characterized by continued strong operating performance, supported by limited rollover risk, excellent capital control, the ongoing strengthening of our marketplaces and an expanding leasing pipeline. Looking at our balance sheet and liquidity, we remain in excellent shape with no outstanding balance on our $600 million line of credit and cash on hand at the end of the quarter. As previously disclosed, we recently issued $300 million of bonds due January of 2031, which generated $296 million of gross proceeds at an effective yield of 6.125%. We used $245 million of those proceeds to repay our secured CMBS loan that was due in February of '28. That term loan payment leaves us fully encumbered in our operating portfolio, which provides much greater flexibility to lease and manage our assets. We bought about $45 million into our unencumbered NOI pool. We have no unsecured bonds maturing until November of '27. And to ensure ample liquidity, we do plan to maintain minimal balances on our line of credit. As noted previously, our overall business plan is still designed to return us to investment-grade metrics over the next several years. As such, we will continue looking to reduce overall levels of leverage. As a point of reference on that, our average cost of bond debt is slightly north of 6%, but we do have $900 million or about 50% of our outstanding bonds with coupons north of 8%, which, assuming capital markets remain constructive, provides very good refinancing opportunities for us over the next several years. Looking at the markets from an overall standpoint, the real estate markets and overall sentiment continue to improve. That perspective is supported by the following fact patterns. Our pipeline activity continues to grow. Tour volume remains at very healthy levels. Rent levels and concession packages remain very much in line with our business plan and in select submarkets and buildings, we continue to push both nominal and effective rents. And all of our 2025 key operating goals have been achieved. The demand for high-quality, highly amenitized buildings remains a strong consumer preference. In Philadelphia CBD, as I noted on previous calls, market vacancy remains concentrated in a small number of buildings, and high-quality buildings continue to outperform lower quality while pushing effective rents. Our competitive set continues to narrow through buildings being removed from inventory for conversion, with several select assets still having financial issues, which essentially removes them from the leasing market. In fact, as an update from last quarter, our numbers now show that potentially 11 buildings totaling 5.1 million square feet of office are in the process of being removed from inventory for conversion to residential uses. As a frame of reference, that's about an 11% reduction in the overall office inventory in CBD Philadelphia. As such, with no construction on the horizon, our quality assets remain in an ever-improving competitive position. The city's life science sector, while still early in the recovery phase, should remain a forward growth driver, particularly with the return of capital as that submarket is backed by a strong regional health care ecosystem that includes over 1,200 biotech and pharmaceutical firms along with 15 major health care systems. Austin also remains in a recovery phase. Leasing activity continues to improve. As of last report, there are over 108 tenants actively seeking more than 3.5 million square feet, with the tech sector accounting for 1.5 million square feet of that demand. So there has been a bit of a resurgence from the tech company space demand standpoint. Third quarter leasing activity was 1 million square feet, which was 70-plus percent higher than in Q2. So green shoots are continuing to emerge in Austin, particularly in the higher-quality product. Our FFO for the quarter was $0.16 a share or $0.01 above consensus. We had two operating items that Tom will amplify in more detail that did impact our '25 guidance revisions. As previously announced, we will be recording in the fourth quarter an earnings charge totaling $0.07 per share related to the early prepayment of our secured notes. In addition, we did anticipate, as outlined on previous calls, making progress on recapitalizing at least one and possibly two projects of our development joint ventures in the second half of the year. We did anticipate these recapitalizations would add around $0.04 per share to 2025 FFO. During October, we did capitalize our 3025 JFK properties as the first step in this process. We do anticipate possibly one more later this year or very early in '26. As we talked before, the objective of these recapitalizations, which includes the full retirement of the preferred equity investments, is to bring high-quality stabilized assets onto our balance sheet, which will deliver high-quality cash flow, improve earnings, reduce overall leverage and open up additional capital options for us on those properties. Due to several factors, including the slower stabilization of several projects and slower-than-anticipated interest rate decreases, these recaps are occurring a quarter or two behind schedule. As such, the full impact will not occur until 2026. As a result of that, our revised FFO range, as we outlined in our press release, is $0.51 to $0.53 per share. Optimizing value in these development projects remains a top priority. With 3025 Avira and Solaris both 99% leased and stabilized, our joint venture development pipeline is really down to one Uptown and 3151 JFK. The leasing pipeline on these projects is up 700,000 square feet from last quarter. But as you noted in the supplemental package, even with this increase, given the uncertain timing of lease executions, the time to complete tenant space plans and the corresponding build-out timelines, we have slid the stabilization dates on both of those properties. Looking at Schuylkill Yards 3025, that commercial component is now 92% leased. We have a very good pipeline for the remaining space in the building. With leasing in place, the commercial component will stabilize in Q1 '26, immediately after our major tenant takes occupancy. Avira, as I noted a moment ago, is 99% leased and achieved full economic stabilization during the quarter. We're also experiencing that project a very good renewal rate with average double-digit rate increases thus far this year. 3151 was substantially delivered in the first quarter of this year and will be in a capitalization phase for the balance of '25. The pipeline on this project has increased to 1.7 million square feet, broken down to 60% office prospects and 40% life science prospects. They range in size from 25,000 to 200,000 square feet. Discussions with many of these prospects are active. Tour activity remains robust, and the project has been very well received. The life science market, as I noted, remains very much in a recovery mode. It's impacted by a challenging fundraising climate and public policy uncertainty, although we are seeing increased traffic coming from that sector. Despite the strong increase in both Austin life science traffic, as I noted, we did slide the stabilization date just to be conservative on when leases will actually commence. At Uptown ATX, we're 40% leased, but have another 15% of the project in the final stages of lease negotiations. The remaining pipeline remains strong with tenant sizes ranging from between 4,000 to 100,000 square feet, including ongoing discussions with several full-floor users. We're also nearing completion on building out some spec space on one of the floors to accommodate the accelerated move-in for several smaller prospects. Solaris, which opened about a year ago, has achieved stabilization during this quarter. We're very successful on that with the renewal program well underway. As noted last quarter, our '25 business plan anticipated $50 million of asset sales. We have sold $73 million of properties at an average cap rate of 6.9% and an average price per square foot of $212. At this time, we're obviously not factoring any more sales closings during '25, but we'll certainly identify a target as part of our 2026 guidance. In general, though, from what we're seeing, the investment market continues to improve, both in terms of velocity and pricing. The pricing increase is notable because many asset trades are still on lower quality or underleased assets. For example, over the last 12 months, there have been about $475 million of sales in suburban Austin at prices per square foot ranging from $75 to $470 per square foot, an average occupancy of 67% and cap rates ranging from the low single digits to upwards of 12%. Likewise, in the PA suburbs, there were $242 million of sales at cap rates that range from 7% to 11% and an average occupancy of 85%. So buyers, including institutional buyers, are continuing to reemerge. We anticipate the investment climate will continue to improve into 2026. On the dividend, as noted, our Board decided to lower our dividend from $0.15 per share to $0.08 per share. We believe this revised dividend is sustainable and represents a CAD payout ratio much more in line with our historical averages. To the extent we continue to experience progress on the developments and cash flow growth from our operating properties, continued low capital costs and reduced borrowing costs to increase CAD, we'll certainly reassess our dividend going forward. But the idea was to set a good solid floor, give ourselves a position to generate $50 million of internal capital that we can use for reinvestment back into our properties. So with that, let me turn the floor over to Tom to review our financial results for the third quarter and an outlook for the balance of the year.

Thank you, Jerry, and good morning. Our third quarter net loss stood at $26.2 million or $0.15 per share. Our third quarter FFO totaled $28 million or $0.16 per diluted share and $0.01 per share above consensus estimates. Some of the general observations for the third quarter, our FFO from our unconsolidated joint ventures totaled a loss of $6 million or $1 million higher than our $5 million forecast, partially due to the delayed recapitalization activity during the quarter. G&A expense was below our re-forecast by $600,000, primarily due to timing and other income, which was $600,000 above our re-forecast due to various items. Other forecasted quarterly results were generally in line. Looking at our debt metrics, third quarter debt service and interest coverage ratios were 2.0, consistent with the second quarter. Our third quarter annualized combined core net debt to EBITDA was 8.1 and 7.6, respectively. Both metrics were within or below our business plan range. From a core portfolio composition during the third quarter, we made one adjustment to our projections. We had forecasted 250 King of Prussia Road becoming a stabilized core property during the third quarter. However, due to a tenant delay in occupancy, the stabilization date has been moved back to Q1 '26. As Jerry highlighted, we completed a successful 5-year bond issuance that closed in early October, which generated gross proceeds of $296 million. Proceeds were used to pay our $245 million secured CMBS loan, which was due in 2028. Both transactions closed in early October. It is important to highlight that in June of '25, we executed an unsecured bond cap of $150 million at 7.04%. The recent issuance represents a 13% decrease in our unsecured borrowings since that June offering. In addition, the coupon on our recent bond issuance is slightly below our pro forma 6.26% weighted average effective rate. So we expect that the significant increases to our interest expense from future refinancing should come down. We continue to maintain a strong liquidity position and use further sales and refinance proceeds to reduce unsecured debt and to improve our credit profile. We have time to work on this improvement with no unsecured bonds maturing until November '27. Giving effect to the CMBS loan prepayment at the end of the quarter, our wholly owned debt was 100% fixed with a weighted average maturity of 3.5 years. This excludes the 3025 construction loan, which will now be consolidated and matures in July of 2026. As highlighted, we adjusted and narrowed our guidance for 2025. The midpoint reduction is 10% and is comprised of a $0.07 reduction from the transaction costs associated with the repayment of the $245 million CMBS loan, a reduction of $0.04 per share is primarily due to the delays in recapitalizing our development projects, which we expected to generate some benefit to our third and fourth quarter results. There is some negative carry from the bond issuance and the CMBS redemption, and we did have a delay in the stabilization of 250 King of Prussia. Looking at fourth quarter guidance, in connection with the October buyout and consolidation of 3025 JFK, the impact to our fourth-quarter results will be an increase to GAAP NOI of $1.9 million, an increase to interest expense of $2.9 million through the consolidation of the construction loan, and a $2.7 million improvement in our loss from unconsolidated joint ventures, with a reduction in interest income of about $600,000 due to our reduced cash on hand balances. While that is muted to our fourth quarter, the opportunity to buy out our higher-priced capital partner ahead of a final stabilization gives us flexibility entering 2026. The $8 million of annualized NOI for the fourth quarter will increase to over $20 million in the first quarter and grow from there. With the property now wholly owned, we have the flexibility to refinance the above-market debt with lower-priced unsecured, secured or agency debt, and we can also assess the opportunity to find a common equity partner and potentially reduce our equity stake. Turning to the rest of the fourth quarter, property level operating income will total about $71 million and will be similar to the last quarter's results, with 3025 being included in the fourth quarter, but lower NOI primarily due to a known move-out in Austin as well as the pushback of $250. Our FFO contribution from our joint ventures will total a negative $2 million, which is sequentially lower than the third quarter, primarily due to the fourth quarter's consolidation of 3025, higher NOI at both Solaris and Avira, and partially offset by a higher loss at 3151. G&A expense for the quarter will total about $8 million, representing a full-year expense of $42.6 million and within our 2025 business plan range. Our interest expense will approximate $38.5 million, and the capitalized interest will be about $2.5 million. The sequential increase in the interest expense is primarily due to the consolidation of 3025, lower projected capitalized interest, and the negative carry impact of the $300 million of unsecured bonds, offset by the $245 million of CMBS loan repayment. Termination fees and other income will total about $2 million and net management and development fees will also be about $2.5 million. We anticipate no property disposition activity for the balance of the year. We anticipate no ATM or buyback activity, and our share count will be roughly 179.5 million shares. Turning to our capital plan, our capital plan for the balance of the year totals $388 million and is fairly straightforward, but with some adjustments based on the recent capital markets activity. Our 2025 FFO payout ratio for the third quarter was 93.8%. Looking at the larger uses, the repayment of the CMBS loan is $245 million. We used just over $70 million to acquire the preferred equity interest at 3025. Our development spend will total $24 million, which includes 165 and 250 King of Prussia Road. Our food hall at One Drexel Plaza is also in those numbers, and we have $14 million of common dividends, $8 million of revenue maintaining capital, and $12 million of revenue creating capital. The funding sources are the $300 million unsecured bond issuance, $25 million of cash flow after interest payments, and $5 million of a proposed and expected King of Prussia construction loan for our hotel. Based on the capital plan, we are anticipating an incremental $58 million of our cash being used and a balance at the end of the year of roughly $17 million, with no outstanding balance on our $600 million unsecured line of credit. While our 2025 business plan net debt-to-EBITDA range is between 8.2 and 8.4 due to the consolidation of 3025 JFK, we project this will temporarily increase to 8.8x at the end of the fourth quarter. However, when 3025 JFK income stabilizes in 2026, that ratio will decrease by 0.3 of a turn for a net increase of 0.1 of turn. Our core net debt to EBITDA will also be impacted temporarily by the same EBITDA adjustments we just made for 3025. We anticipate our fixed charge and interest coverage ratio will be negatively impacted by the financing activity and the consolidation of 3025, and will reduce our fixed charge to about 1.8. With incremental income from the development projects, we anticipate that leverage will then begin to improve as we get into 2026. I will now turn the call back over to Jerry.

Tom, thank you very much. Well, to wrap up, the operating platform remains in very solid shape, with very limited rollover in the next couple of years. We're growing effective rents in many of the submarkets, and we've accelerated some of our leasing programs to make sure that we are doing everything we can to take advantage of both the recovering market and the reduction in our competitive base. We continue to have as a priority focus for the company, stabilizing all these development projects. And while we have seen great success thus far, we still have work to do, and that pipeline has not completely translated to quarterly earnings growth yet. But as Tom outlined, even using 3025 as an example, there's tremendous levels of NOI coming into the balance sheet and P&L over the next year or so. So the groundwork has been laid, and we're building on the continued momentum to drive long-term growth. The operating platform, as I noted, remains stable with very limited rollover and our liquidity is in excellent shape. We're well positioned to take advantage of continued market improvement. So Jonathan, with that, we're delighted to open up the floor to questions. As we always do, we ask that in the interest of time, you limit yourself to one question and a follow-up.

Certainly, and our first question for today comes from the line of Seth Bergey from Citi.

This is Lauren on behalf of Seth. Could you go over in more detail how we should think about the timing and process of the recapitalizations?

Sure. We'd be happy to. In fact, it's a great question because I know the recapitalizations and the timing of them is a big impact. Let me spend a few moments to answer your question. By way of quick background, those preferred structures were put in place as bridge capital for us, that would preserve all the upside of these properties accruing to Brandywine. They were fixed payment structures with costs of capital from the high single digits to the teens. The financial reporting treatment of those structures was that we needed to recognize as a current period of expense the accrued but not paid in cash return on that capital. And those structures were always designed to have the accrued unpaid return paid out of a capital event, which is exactly what just happened on 3025. And as we look at the development pipeline, as I think you all know because many of you have visited the properties, they're all very high-quality, extremely well-positioned assets in two mixed-use master planned communities. Two are now stabilized with 3025, which includes both the Avira and the office component. That took about 24 months from completion to stabilize. Solaris has stabilized. We delivered that in late third, early fourth quarter of '24, and that stabilized about a year later. The pipeline on 3151 and Uptown is big enough where we have a clear path to stabilization, albeit with some uncertainty regarding the timing of when those leases will actually kick in place. But while the approach for each of the ones may vary a bit, the goal is to bring on as much NOI as possible onto our P&L and/or recover significant capital. And as we look at the different options, as Tom touched on a little bit, those recaps can be financed with non-core asset sales, lower-cost financings, pari-passu ventures on some assets. So we have a fairly wide range of options on each one. But just spend a moment looking at each one, let me walk through. So 3025. We recapped at our highest cost of capital partner there. By the expensing of those preferred returns, we were going to incur in 2026, just shy of $10 million of preferred charges or about $0.04 a share. So that buyout eliminates that drag on earnings. And then the capital options we have are very robust. I mean the rate on the current construction loan is just shy of 8%. So if we did an unsecured financing to take out that construction loan, we can save close to 200 basis points or about $4 million in interest. If we actually do an agency level financing on the residential piece, that overall cost of debt could be even lower. We also are looking at exploring a pari-passu joint venture, we could recover some capital. And then obviously, we are always considering whether we sell the residential component or not. So 3025, now with that buy behind us, taking away the highest cost of capital in the rearview mirror, full control by Brandywine. With the debt coming due, we think we have some positive refinancing outcomes at a very straightforward level. Solaris is stabilized, but cash flow and the NOI is still recovering. As we noted on previous calls, to accelerate the lease-up in that market, we did give concessions burning off. We did give concessions to get that original lease-up achieved at the rate that we did. Right now, the capital markets aren't giving full credit to concession-level rents. So we're now in the first wave of our renewals and very pleased with that progress. Our renewal rate on that project is 64%. We're getting about an 8% increase in rates. We are giving out no or very limited concessions on renewals and very limited concessions on new leases. Based on the expensing of that preferred in '26, we had about $4 million or about $0.02 a share of charges on that. So the approach on that project is we're already exploring a recap. That could be a sale or a joint venture on the existing asset. The current debt is just shy of 7% today. Again, agency debt on that would be somewhere in the very high 4s or low 5s. Our target really is in the first half of '26 to kind of achieve that recap once the concessions burn off on the lease schedule, on the renewals and the marketplace recognizes the net effective rents that we're generating on an ongoing basis. For One Uptown, we've clearly some leasing work to do there. We have about 75,000 square feet under advanced lease negotiations that would take that project to 55% to 60% and a really good pipeline behind it. Right now, we're projecting, if we do nothing with that about a $0.025 per share preferred expense charge in '26. And our approach there is to get a little more leasing done to more visibility. We are already talking to several potential partners about a pari-passu recap. We have our lead tenant there has an expansion right in midyear that we'll see if they exercise or not. So One Uptown is most likely a late first half, early second half recap event. Looking at 3151, that's our second-highest cost of capital. And we're obviously dealing with the challenge of getting that property leased up. The project has been very well received based on the pipeline by a number of select investors and several debt sources. So as the second highest cost of capital in our development ventures, we have about $8 million in expense charges on that property in 2026, just from the preferred. So with the process we have underway, we think that a partner buyout is a near-term event that could be financed through other sales or much lower-cost financing. We own that property without any debt on it. So our hope is to get 3151 across the finish line no later than the first quarter of '26. So hopefully, that road map is helpful.

And our next question comes from the line of Manus Ebbecke from Evercore ISI.

Just wondering if you could touch on a little bit more on Uptown ATX. It was good to hear that the pipeline is up and you have some leases in the later-stage negotiation phase. Could you clarify how much of the total leasing prospects that you see at the asset, how much is for spec suites versus other users? What type of tenants those are, if those are real net growth in the market or just kind of relocation tenants? And then on the second one, just the broader scope of the development land out there, what should we expect in terms of starts in '26? I assume, obviously, like the commercial part is further out as we are leasing up the Block A first. But I know there are contemplations for additional residential or hotel projects. So give us an idea in terms of the timeline or what to expect in '26 there as well.

Okay. Great question. Thank you. A couple of overview comments as you look at Austin: Austin clearly has a disequilibrium, particularly in the CBD marketplace. I mentioned the number of tenants in the market looking and the increase in third-quarter leasing activity. About 85% of that leasing activity in the market is being captured by Class A buildings. But when you drill down to the Uptown Domain submarket, which is really our competitive set right now since 405 Colorado downtown is fully leased, that's about 3.7 million square feet. That submarket is about 96.3% occupied. You have about 68,000 square feet of sublease space in two domain buildings in two blocks of 35,000 square feet or so, which is down dramatically from just a year ago. One tenant did put 100,000 square feet on the market for sublease in one of the domain tower buildings. So you've got about 168,000 square feet of sublease space in that submarket. So that's about a 7% vacancy. Overall, a fairly tight market. Also, the train station, which we noted in the supplemental package, started construction. That has spurred a lot of additional interest because now it's estimated to be delivered in the first half of '27. CapMetro projects us to be the second busiest train station along that red line, which is a real people mover that dramatically improves labor pool accessibility. So we think that's a nice catalyst to get some additional activity. The other factor is that we have a number of tenants who are in our pipeline who are downtown or doing market-wide searches, and we're really amplifying the fact through our team that there’s a $23 cost difference between being downtown or being in Uptown. Most of that is because there's a $5 stone in rent, $10 in expenses. So it's a very solid economic decision. With that background, and sorry for all that detail, I want to set the table for why we're still very optimistic about One Uptown's success. We have a number of tenants in the pipeline. We have a number, frankly, that are kind of in-market relocations in the 4,000 to 10,000 square foot range that are kind of spec suite tenant prospects. And then we have a couple of tenants in the 80,000 to 100,000 square foot range. There are multiple floor tenants that have toured the property, and we're in discussions with them. Additionally, we have one full-floor tenant that is a lease under negotiation at this point.

Yes, I believe we have one floor dedicated to spec suites, with leases in advanced stages of negotiation and other potential prospects for that floor, as well as a lease out for another full-floor tenant. We also have expansion rights with NVIDIA, who signed last quarter. Overall, we feel positive about the pipeline and its composition, and the spec suites have been well received. If the market continues to favor spec suites, we are ready to adapt quickly, having already developed two floors for that purpose.

And then to answer the second part of your question: We're focused on Uptown, making no mistake, our absolute top priority is leasing One Uptown and recap both projects. Recognize, the value we have long-term at our Uptown development is significant. We have a number of discussions underway with large users who would be interested in doing build-to-suits at that location. They are still in early stages and are not detracting from our core mission of getting One Uptown leased. We are also, as we've noted in the SIP, moving forward with the planning of Block B, with the objective to submit site plans for approval by the end of the fourth quarter of this year and hopefully getting approvals in late '26. Block B consists of a multifamily property rental, a large retail base, a hospitality component, i.e., a hotel, and obviously, parking. We are working with a retail and hospitality partner as we think through the design components of that. And as those plans get finalized and priced, we'll look for the right capital answer to facilitate that project moving forward. With the partners we have involved, they have capital resources. Brandywine has significant embedded value in the land that this project will sit on. So we think that's a very viable option for us in terms of equity contribution with land value. So we are looking at a number of other, as I mentioned, build-to-suits, but again, very low priority compared to the mission-critical nature of recapping these development projects and getting One Uptown leased. But I'm certainly happy to provide any color on that as the quarters go by.

Operator Instructions. Our next question comes from the line of Dylan Burzinski from Green Street.

Can you explain why you decided to issue the unsecured notes and then pay off the CMBS debt? If I remember correctly, the CMBS debt wasn't very expensive in terms of the rate. I'm curious about your thoughts on your approach to this.

John, Dylan, this is Tom. I think the way we approached this is that we've been looking at the CMBS loan and thought about actually prepaying a couple of assets and bringing them out as unsecured for a couple of reasons, one for leasing and one potentially to do something with them on the capital market side. So we were already thinking about it. When the rates came in as much as they did and the differential in rate was only a quarter, 25 basis points, basically, we thought, let's unencumber the assets. It helps our UAP, it helps all of our unleveraged ratios, and we thought that was a good execution. We knew there was the charge, $10 million of cash that went out the door with that. But we thought it was also a good way to reset our rates with the debt capital markets.

I know there are a few assets available in downtown Philadelphia. I'm not sure if you are considering purchasing any assets. As you reflect on your current cost of capital and your long-term strategies, how do you plan to address the gap between your share prices and our NAV estimates? It would also be useful to understand your longer-term leverage targets.

Yes, Dylan, Jerry. Thanks for the question. Yes, look, we think we have a couple of really good ingredients to start to turn that perception around fairly quickly. That is the leasing up of the development projects and proving out their value proposition, and then recapitalizing, i.e., changing the capital stack of those projects really does remove the earnings overhang. If you take a look at the existing preferred structures without being touched, there's a significant impact to earnings because of the financial reporting treatment we have on those. So simply by clearing up those recaps, getting control of those assets and then pursuing better cost of capital outcomes, we think puts us in a great position as I look at '26 into '27. The operating portfolio continues to perform very well. With any portfolio, there are some soft spots, but we are very encouraged with what's happening in each of the different submarkets we’re in that really give us some significant ability to continue to drive effective rents across the board. We do have some assets that we have on the market, and we will put on the market in '26 that we feel are not great growers for us and actually adversely impact some of our growth objectives going forward. We look at those assets from a net present value standpoint and determine at what point in time we should sell those. The major issue we're focused on right now is proving out the value thesis for these development projects. I think it's generally recognized in the private markets that the land holdings and the approvals we have in place at Uptown and at Schuylkill Yards are incredibly valuable long-term value generators. Our challenge, given our public cost of capital, is to determine from a market timing standpoint when we should move forward with the next phase, but more importantly, how we finance those. I think the objective we had going to this round of development was we did the preferred structures, which had an incrementally higher cost of capital, but left all the residual value to Brandywine. As we look forward at some of the future development starts, assessing different capital structures there will be very important because the ultimate objective is for us to get back to investment grade. We think we have a clear path to do that as we look at the numbers going forward. One of the impediments for us getting to investment grade has really been the impact on our fixed charge coverage. The reality is our fixed charge coverage has been impacted because our debt costs have almost doubled in the last four years. That's why, as I noted in the comments, when I look at the existing bond pricing, our bonds are trading pretty well. We have two bonds outstanding, $900 million at rates north of 8%. We think the refinancing opportunities there, as the time is right, will bring a lot of those financial and operating metrics back into a very good position.

And our next question comes from the line of Upal Rana from KeyBanc.

Could you provide some detail on the Board's decision to reduce the dividend? How should we be thinking about the timing of the cash flow ramping up in '26 in order to maintain a CAD payout ratio that's a little more sustainable?

Yes. Look, I think as we took a look at and recommended to the Board a couple of things. One is, as I've outlined before, the Board really looked at what the operating cash flow was, what our refinancing requirements were, and when we would expect the development projects to ramp up and what capital was really required for the recaps. When they took a look at all of that and we looked at the '25, '26 and '27 landscape, it became very clear that the cost of outside capital was a lot more than our internally generated capital. It simply seemed to make a lot of sense to save $50 million of cash flow at this time when, as I mentioned to Dylan, our public cost of capital is prohibitive. As we looked at the numbers, where we've reduced the dividend to, we feel is very sustainable. We do believe that as we start to bring more NOI onto the P&L, we have the opportunity to grow that dividend. Most importantly, as the last point, we talked to a lot of shareholders. We asked them their opinion on how they view the capital landscape, how they viewed the challenges the office sector faced. A lot of our shareholders are very supportive of a dividend reduction as a pragmatic conservation of capital. So all those factors went into the Board's decision. We had a good discussion and validated that the level that we cut it to is certainly a floor from which we can grow. Hopefully, as the market conditions improve, the debt markets get more constructive, and we can generate more liquidity, we’ll be in a position to go back to raising that dividend.

That was helpful. And do you have any updates on the strategy to deal with the IBM move-out in Austin coming in '27?

We do have updates. IBM will be vacating spaces towards the end of this quarter and into the second and third quarters of 2027. We anticipate that, after considering cost savings from this lease, we will face about a $12 million shortfall. We are exploring several options. One approach involves examining our current leases in ongoing development projects, excluding 3151, and we believe the year-over-year growth in that income will more than compensate for the revenue loss in 2027. We are currently focused on renovating the 902, 904, and 906 buildings at Uptown, totaling around 500,000 square feet. We are in the process of pricing these renovation projects and considering the necessary additional infrastructure. At this moment, we believe we are well positioned to deliver fully renovated buildings. These buildings have strong superstructures, and we aim to replace the facade and mechanical systems to create state-of-the-art spaces at significantly lower prices than current office rents, which we believe will enhance absorption rates. If everything goes according to plan, we hope to complete the first level of renovations by early 2027, coinciding with one of the IBM vacations. One of the reasons we're able to do that, you may recall, is we were very successful in getting some additional approvals from the city of Austin to increase the density at Uptown from 3.1 FAR to 12.1 FAR and increase the height limits on the buildings from 180 to 491 feet. We have the ability to transfer density between blocks. By renovating those buildings, which are lower rise, we're not compromising any future growth density by doing that. The maximum density under our zoning is well beyond what we're currently planning to build. Having that flexibility to respond to changing market conditions, particularly given that train station and the growth of residential neighborhoods in that marketplace, we think it is a very valuable commodity. Our game plan is we think we can bridge the gap with just incremental income coming through the NOI from these new development projects, again excluding 3151. The renovations coming online will help deliver better NOI for us looking into '28 and '29.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Jerry Sweeney for any further remarks.

Jonathan, thank you very much. And thank you all very much for participating in our third-quarter earnings call. Our next call for fourth quarter and '26 guidance will be in early February, and we look forward to talking to you at that time. So thank you very much.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.