Brandywine Plans For 'Transitional' 2025 Amid Falling Stock Value And Negative Absorption

Brandywine Realty Trust has had a rough 2025 so far, with its stock dropping more than 30% since the start of the year.

Still, the Philadelphia-based REIT posted a narrower-than-expected loss in its first-quarter earnings report Wednesday. Its revenue of $121.5M outpaced analyst forecasts by about $13M, and losses were held at 16 cents per share, 2 cents less than expected.

2025 is likely to be “a transitional earnings year” for Brandywine as the firm focuses on project stabilization and net operating income growth in a challenging macro environment defined by tariff uncertainty and high interest rates, CEO Jerry Sweeney said during an earnings call Wednesday.

Brandywine reported its leasing velocity was down from Q4, ending the quarter with 340K SF leased versus 486K SF at the end of last year. It is also dealing with negative absorption of 146K SF due to early terminations and two tenant defaults.

“Our earnings remain impacted by the expensing of our preferred noncash accruals and interest expense charges relating to our two residential projects,” he said. “Stabilizing these development projects remains the top priority for the organization.”

Sweeney said the future looks bright despite tariffs and “a level of macro uncertainty [that] is not helping the decision-making process.”

The company is projecting 306K SF of forward leasing activity in the months ahead, “the highest level of forward leasing velocity we've had in over 11 quarters,” he said.

Sweeney also expressed optimism about Brandywine’s office holdings in greater Philadelphia. The company is heavily invested in Center City’s office market, which continues to be a mixed bag in the wake of the pandemic. 

Vacancy isn't rising as quickly as it was in the immediate aftermath of the lockdowns, but it hit 20.7% last quarter, according to a Q1 report from JLL. Departures in the CBD outpaced move-ins by more than 900K SF.

“Brandywine is 96.2% leased in our Philadelphia CBD portfolio,” Sweeney said. “During the first quarter, we captured 64% of all deals done in the central business district.”

Sweeney shared similar numbers for Brandywine’s collar county office portfolio, which he said was 93% occupied and 96% leased.

Brandywine's operating portfolio leasing pipeline remains strong, he said, adding that the company has almost 160K SF of leases in advanced stages of negotiations.

“So the takeaway on operations is it remains very stable, solid operating performance with very limited rollover risk for several years, good capital control, improving markets and expanding leasing pipeline,” Sweeney said.

But not all of Brandywine's Philadelphia holdings are doing as well.

The firm is plotting an office-to-residential conversion at its 17-story tower at 300 Delaware Ave. in Wilmington, Delaware, which is just 51% occupied, the Philadelphia Business Journal reported.

There has also been hand-wringing about the state of Philly’s life sciences market. Analysts questioned whether Brandywine had taken a hit when Spark Therapeutics laid off 337 workers, or roughly half of its workforce, earlier this month. 

The biotech company was Brandywine's second-largest tenant in Q4. The downsizing impacted Spark employees at two Brandywine-owned properties: Cira Centre at 2929 Arch St. and The Bulletin Building at 3025 Market St.

Sweeney said he wasn’t fazed by the development.

“The city's life science sector, while certainly still in the recovery phase, continues to be a forward-growth driver,” he said.

Brandywine is unlikely to see much fallout from the layoffs, he added.

“Spark is owned by Roche pharmaceutical, so we have an extraordinarily strong credit on that lease,” Sweeney said. “They have no early rights to terminate.”

Spark does have a lease coming due at a pair of Brandywine buildings in University City at the end of next year, but Sweeney said its weighted average remaining lease term with the company was 92 months.

“The operating platform remains very stable, very limited near-term rollover liquidity ... and we're well positioned to take advantage of continued improvement in both the tenant and the financing markets,” Sweeney said in a summation of the company's position.

The company's stock ended the trading day up just more than 2%.

CORRECTION, APRIL 24, 12:45 P.M. ET: A previous version of this story included incorrect details about two Brandywine Realty Trust properties. It has been updated.