Brandywine Raises $235M From JV With DRA

RADNOR, PA-Brandywine Realty Trust has entered into an agreement to sell a 1.6-million-sf office portfolio, valued at $245.4 million, to a joint venture with New York City-based DRA Advisors LLC. Under the agreement, Brandywine will retain a 20% interest in the joint venture and also continue to manage the 29 properties.

The deal is expected to close by the end of this year. It is subject to certain conditions, including the JV’s completion of approximately $187 million of secured property financing. The properties are currently unencumbered, Jerry Sweeney, Brandywine’s president and CEO, tells GlobeSt.com. “The JV identified a third-party lender that will place mortgages on the properties.”

The sale represents a cap rate of about 7.4% according to GAAP and 7.2% cash, based on trailing 12-month net operating income through this Sept. 30, and a 7.9% cash yield, based on 2008 projections. Locally based Brandywine expects total proceeds of $235.2 million, which it will use to reduce debt on its unsecured revolving credit facility.

Sweeney announced this pending agreement during a third-quarter conference call in which he did not identify the partner or the properties. Of DRA, he says, “it’s an opportunity to bring a great partner into the family. The co-investment vehicle will allow us to recycle capital to higher growth opportunities in our target market with a particular emphasis on our current and planned development projects.” He also notes that by retaining a 20% stake and management of the portfolio, “we will share in the upside.” Asked if more JVs are in the offing, he says, “it’s certainly a very viable way for us to raise capital.”

The properties are located in four Pennsylvania suburban markets. Nine buildings in Horsham have an aggregate of 318,137 sf; six in Fort Washington aggregate 457,913 sf; three in Bensalem aggregate 167,280 sf, and the 11 properties in Allentown have a total of 672,897 sf. As of Sept. 30, the portfolio was 95.3% occupied and 96.4% leased.

Three Brandywine properties, which aggregate 260,000 sf in those markets, were not included in the deal. Sweeney says one is a warehouse facility that doesn’t really fit into the portfolio and two are redevelopments. Robert Fahey of the Philadelphia office of CB Richard Ellis represented Brandywine in marketing the portfolio.