Pruning its portfolio has been a key element of Brandywine Realty Trust’s quest to return to investor-grade metrics, and the Philadelphia-based REIT expects that activity to continue next year.
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Brandywine CEO Jerry Sweeney anticipates $200M or more of dispositions in 2027, he said during the firm’s third-quarter earnings call on Thursday. While that could include some complete buildings, he noted that the strategy will focus heavily on Brandywine’s undeveloped land holdings.
“We're taking a hard look at our land inventory to figure out what parcels we want to liquidate and more effectively deploy that capital,” Sweeney said.
This would be a continuation for the firm, whose Q3 included closing the disposition of its 57% stake in the 341-unit Solaris House apartment complex in Austin last month for $136M.
Brandywine netted $16.3M after paying back a $76.5M construction loan and its preferred partner in the building, which was 90% occupied at the time of the sale.
A spokesperson didn’t respond to Bisnow’s request for more details about the deal.
Sweeney also highlighted the REIT’s sale of 3151 Market St. in West Philadelphia to discount clothing chain Burlington for $240M in September.
The University City deal will be a boon to Brandywine’s broader aspirations for its Schuylkill Yards mixed-use complex surrounding 30th Street Station, he added.
“We had the ability through that building to bring a Fortune 500 company with over 2,000 employees as a base to Schuylkill Yards, and to further cement Schuylkill Yards as the place to be with mass transit access in the city,” Sweeney said.
During Brandywine’s Q2 earnings call, the CEO reported that the REIT was in negotiations with a tenant considering a multifloor lease in the building, but he said it ultimately made more sense to sell.
“The capital markets actually presented an amazing opportunity for us to sell that building,” Sweeney said.
“We can generate significant liquidity, generate proceeds immediately, redeploy those proceeds into buying back higher-price debt, and that higher-price debt was yielding more on retirement to us than the stabilized return on the property,” he added.
Philadelphia office leasing remains a bright spot for Brandywine, even as its stock price has slipped about 20% to $2.95 since this time last year.
Sweeney said 60% of all University City and central business district office leasing through the end of Q3 happened in Brandywine properties, even though the REIT only owns 15% of the market. In the city, its holdings are 95% leased with just 7% annual rollover through 2028.
Home equity lending firm Spring EQ announced its full-floor lease in Brandywine's Cira Centre earlier this month.
But the company continues to struggle in Austin, where Sweeney said a 66% occupancy rate is creating a roughly 400-basis-point drag on the REIT’s overall occupancy numbers.
While the 2027 expiration of IBM’s lease for the campus near Solaris in Brandywine’s Uptown ATX campus is looming, Sweeney is optimistic about CapMetro’s new commuter rail station opening in the neighborhood sometime next year.
He said that boosted interest in Brandywine’s One Uptown office building, which is now 97% leased.
“They expect that to be the second-busiest train station along that line,” Sweeney said. “That was a major draw for us to attract a number of these tenants to One Uptown.”
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