The Northern Pennsylvania partnership will be announced within weeks, said Jerry Sweeney, president and CEO, during a third-quarter conference call. That portfolio encompasses between one million and 1.5 million sf in diverse building types and is valued in the $240-million to $250-million range, he said.
As for the value of the fully leased, class A Cira Centre, Sweeney said, "we'll let the market determine that." Regarding the development of Cira Centre South, Sweeney said, "there are several funding options." They include pursuing JV participation in redevelopment of the 862,000-sf former postal facility, which is expected to cost $265 million, including the $28-million acquisition cost, and is fully pre-leased to the IRS; a hotel partner for the hospitality portion of the Walnut Street tower and a residential developer for the 250-unit Chestnut Street tower.
The goal of these transactions "is to create capital for future use," said Howard Sipzner, EVP and CFO, during the call. There will be strong development and redevelopment, he added, "but not much in acquisitions."
Funds from operations for the quarter ended Sept. 30 were $62 million, down from $63.7 million in the same year-ago quarter. For the first nine months of this year, however, FFO totaled $179.6 million, up from $175.9 million for the first nine months of 2006.
As of this Sept. 30, the company's core portfolio was 94.2% occupied and 95.5% leased, which compares with 91.3% and 93.2%, respectively on Sept. 30, 2006. Renewal rent rates were up 2.9% in the most recent quarter, and new lease rates were up 0.3%. The most notable improvements occurred in the Pennsylvania suburbs, Center City Philadelphia and Delaware, Sweeney said, while there were slight vacancy increases in New Jersey and Southern California.
During the quarter, Brandywine paid out $1.4 million in severance charges resulting from a "re-evaluation of personnel infrastructure," Sweeney said. In addition to some asset sales, the company consolidated three operations in the Pennsylvania suburbs into one, and "looked at corporate functions and regional operations to improve efficiencies," which "reduced our head count by 25 people or so."
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