Brandywine Realty Trust NYSE: BDN said second-quarter operating results generally met or exceeded its business plan, while management outlined continued efforts to sell assets, reduce debt and improve credit metrics.
On the company’s second-quarter 2026 earnings call, President and CEO Jerry Sweeney said the quarter was “highlighted” by speculative revenue increasing by $1 million at the guidance midpoint and better-than-expected tenant renewals and expansions. He said Brandywine increased its full-year tenant retention range while leaving other full-year operating and financial metrics unchanged from the original 2026 business plan.
The real estate investment trust reported second-quarter funds from operations of $23.6 million, or $0.13 per diluted share. Executive Vice President and Chief Financial Officer Tom Wirth said FFO was above management’s first-quarter guidance and $0.01 below consensus estimates. Brandywine reported a second-quarter net loss of $31.7 million, or $0.18 per share.
Leasing improves, with Philadelphia leading results
Sweeney said Brandywine’s wholly owned portfolio was 90.6% leased and 89.1% occupied at quarter-end. The company recorded 88,000 square feet of positive net absorption during the quarter and expects full-year positive net absorption for the first time in several years.
Quarterly leasing activity totaled 353,000 square feet, including 254,000 square feet in the wholly owned portfolio and 98,000 square feet in joint ventures. Forward leasing commencing after quarter-end totaled 166,000 square feet, with most of that expected to take occupancy this year. The company also achieved $18.3 million of speculative revenue.
Sweeney said tenant retention for the quarter was 85%, prompting Brandywine to raise its full-year midpoint retention guidance to 51% to 53%. He attributed that increase to unbudgeted renewals and expansions in the Philadelphia central business district and the Pennsylvania suburbs.
Brandywine’s same-store results were positive 0.5% on a GAAP basis and 1.9% on a cash basis, both within current guidance ranges. The company’s GAAP mark-to-market was 1.5%, while cash mark-to-market declined during the quarter. Sweeney said management expects improvement over the next two quarters and is maintaining full-year guidance.
In Philadelphia, including the CBD and University City portfolios, Sweeney said the company was 95% occupied and 97% leased, with only 7% rolling annually through 2028. He said that during the first half of 2026, 54% of all new leases signed in Brandywine’s CBD and University City submarkets were at a Brandywine property, exceeding the company’s market share.
By contrast, Austin continued to lag the rest of the portfolio. Sweeney said Austin was 67% occupied and reduced overall company occupancy by more than 400 basis points. He noted that Austin quarter-end occupancy was negatively affected by 3.7% because 405 Colorado, which was 100% leased, was classified as held for sale at quarter-end and subsequently closed.
Asset sales raised to $305 million
Management said Brandywine is ahead of its original capital recycling plan. Sweeney said the company completed approximately $208 million of asset sales, with the remaining sales under agreement with hard money deposits and scheduled to close in the third quarter. Brandywine raised its sales guidance to $305 million, up $15 million from the business plan, with pricing in line with original guidance.
Wirth said the company removed four properties totaling about 775,000 square feet from its core portfolio during the quarter because they were being held for sale. Those properties were a little more than 91.5% occupied. He said the impact of asset sales and assets held for sale on 2026 portfolio statistics would be immaterial.
Sweeney said Brandywine expects to close all $305 million of sales by the end of the third quarter and has several other properties in the market as part of its 2027 disposition pipeline. He said the company generally saw strong market response to assets listed for sale, with typical marketing processes producing seven to 10 qualified bids and interest from institutional investment managers, private REITs, private capital and family offices.
In response to an analyst question, Sweeney said Brandywine would expect additional sales “somewhere in the $200 million range” over the next four to six quarters, though the company has not issued a revised 2026 target or 2027 guidance. Wirth said the cap rate on 405 Colorado was around 8%, or slightly above that on a GAAP basis.
Debt reduction remains the priority
Sweeney said Brandywine’s “paramount objective” is to use the vast majority of sale proceeds to reduce leverage and improve credit metrics. After receiving $192 million of sale proceeds after quarter-end, the company paid off the balance on its line of credit. Sweeney said Brandywine had no outstanding balance on its line and $35 million of cash on hand.
Management said proceeds will be directed primarily toward debt reduction, including potential bond repurchases starting as early as the third quarter. Sweeney said Brandywine may use only about 5% to 10% of net proceeds to repurchase shares until it makes significant progress on leverage targets and credit metrics. He said nearly 50% of outstanding bonds have coupons above 8.8%, creating a refinancing opportunity if capital markets remain constructive.
Wirth said the company will focus planned unsecured note buybacks on higher-coupon bonds, which would have a more immediate impact on coverage ratios. He cautioned that because those bonds trade at a premium, Brandywine may incur one-time debt extinguishment costs that are not included in current FFO guidance.
During the quarter, Brandywine repaid the $178 million consolidated construction loan tied to 3025 JFK, which had been scheduled to mature in July 2026. The repayment was funded with a $90 million seven-year secured loan on the residential portion of the property and the unsecured line of credit. Wirth said the secured financing was swapped to a fixed all-in rate of 5.8%.
Brandywine also exercised its first six-month extension right under its existing credit facility, moving the maturity date to year-end 2026. Wirth said the company continues to work with its bank group and anticipates completing a longer-term amendment during the initial extension period.
Development and recapitalization plans continue
Sweeney said activity levels at One Uptown and 3151 Market increased during the quarter, with the overall pipeline for the projects up more than 10% from the prior quarter. At One Uptown, he said three leases were being finalized and five proposals advancing toward lease negotiations totaled more than 100,000 square feet. At 3151 Market, he said the company had a multi-floor client in advanced lease negotiations, with the project’s overall pipeline around 46% office and 54% life science.
Brandywine plans to recapitalize One Uptown and Solaris, its residential project at Uptown ATX, during the second half of 2026. Sweeney said the company anticipates a full sale of Solaris and a pari passu joint venture at One Uptown. Wirth said recapitalizing both projects is expected to generate $40 million to $50 million in cash proceeds for debt reduction and should be slightly accretive to earnings and improve leverage.
At Uptown ATX, Sweeney said Brandywine plans to begin redeveloping at least one existing building ahead of IBM’s 2027 expiration. The first building consists of 157,000 square feet and is expected to be delivered in the fourth quarter of next year. He said the company is targeting rents 15% to 20% below those required for One Uptown and new development, with a cash yield north of 8%.
Brandywine’s Radnor Hotel opened on schedule in May 2026. Sweeney said the 121-room hotel had already booked more than 8,400 room nights, nearly 99% of its 2026 occupancy projection, while maintaining its target average daily rate in the low $300s. The company expects to stabilize the hotel in mid-2027 and seek alternative capital structures once stabilized.
Guidance narrowed around $0.55 FFO midpoint
Brandywine maintained its full-year FFO midpoint of $0.55 and narrowed its full-year FFO guidance range. For the third quarter, Wirth forecast core FFO of $0.13 to $0.15.
Wirth said third-quarter property-level operating income is expected to approximate $69.5 million, down $3 million from the second quarter. He attributed the decrease mainly to assets that closed in July, which are expected to reduce NOI by $5 million quarter over quarter, partially offset by a full-quarter contribution from the Radnor Hotel and the stabilization of 250 King of Prussia Road.
For year-end, management projected core net debt to EBITDA in a range of 8.0 to 8.4 times in Sweeney’s prepared remarks. Wirth later said the company anticipates net debt to EBITDA in the range of 8.4 to 8.8 and a fixed charge ratio between 1.8 and 2.0, assuming execution of asset sales and ATX development recapitalizations.
Sweeney said the company is seeing monthly increases in its leasing pipeline across core markets and expects 2026 to show earnings growth and lower leverage compared with 2025.
About Brandywine Realty Trust (NYSE:BDN)
Brandywine Realty Trust NYSE: BDN is an internally managed real estate investment trust (REIT) specializing in the acquisition, development, and management of office and mixed-use properties. Headquartered in Radnor, Pennsylvania, the company focuses on creating high‐quality, transit‐oriented workplaces that meet evolving tenant demands for sustainability, technological connectivity, and flexible design. Brandywine's portfolio emphasizes Class A office space, often integrated with retail, residential or hospitality components to foster vibrant, live‐work‐play environments.
Since its founding in 1994, Brandywine has executed a strategy of disciplined property investment and targeted development.
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