Thursday, October 29, 2020

Brandywine Realty makes inroads on Dechert, other leases and pivot to life science focus

By Natalie Kostelni  – Reporter, Philadelphia Business Journal

Brandywine Realty Trust collected 99% of its rents, made inroads on lease negotiations with three of its biggest Philadelphia law firm tenants — Dechert, Blank Rome and BakerHostetler — and saw 58,000 square feet of Covid-related closures in the third quarter.

The bulk of those closures was at 555 Lancaster Ave in. Radnor where Harvest Seasonal Grill & Wine Bar, which occupied 8,000 square feet, and Philadelphia Sports Club, which had 42,000 square feet.

As for striking lease deals with Dechert, Blank Rome and BakerHostetler, Brandywine told analysts on a call Thursday that there has been active dialogue with the firms but “no pen to paper at this point but the expectation is that we should be able to retain a good portion of those tenancies,” said George Johnstone, executive vice president.

Dechert and BakerHostetler occupy space in Cira Centre while Blank Rome is in One Logan Square. Dechert has been looking at new space in a tower Brandywine plans to develop at Schuylkill Yards.

Office landlords such as Philadelphia-based Brandywine (NYSE: BDN) are being closely watched these days for rent collections, new leases, how well capitalized they are and how they are positioning themselves for the future as companies mull their own space needs going forward. The company released its third quarter results this week.

While tenants have been paying Brandywine rent, the company said it has $4.5 million in deferred rent that is expected to be paid back over the next 18 months and, of that amount, $536,000 had already been collected.

In a sign of how much of its space is being used by tenants returning to their offices, Brandywine said that it averages 15% across its portfolio, ranging from 8% in Austin to 25% in the Washington D.C. area. In Philadelphia, it's 15% in the Central Business District and 18% in the suburbs. The disparities reflect the differences in local and state government policies addressing the coronavirus, the company said.

In the meantime, the company continues a proactive effort to get tenants to enter into near-term lease extensions. That outreach has been met with mixed results. So far, it has renewed 45 leases totaling 313,071 square feet and has another 10 deals in active negotiations and other 27 active proposals. A total of 103 tenants totaling 906,619 square feet have declined to renew at this point.

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