SecProbe.io

CORRESP
1
filename1.htm

Correspondence

June 10, 2011

VIA EDGAR AND FEDERAL EXPRESS

Securities and Exchange Commission

Division of Corporate Finance

100 F Street N.E.

Washington, D.C. 20549

Attention: Cicely LaMothe

                    Mark Rakip

    RE:

    Brandywine Realty Trust

    Form 10-K for the year ended December 31, 2010

    Filed February 25, 2011

    File No. 1-09106

    Brandywine Operating Partnership, L.P.

    Form 10-K for the year ended December 31, 2010

    Filed February 25, 2011

    File No. 0-24407

Dear Ms. LaMothe and Mr. Rakip:

We have received your May 26, 2011 letter and appreciate your comments with respect to our filings.
We understand that the purpose of your review of the above referenced filings is to assist us in
our compliance with applicable disclosure requirements and to enhance the overall disclosures in
our filings. Listed below are your comments and our responses.

Form 10-K for the year ended December 31, 2010

Item 1. Business

2010 Transactions

Real Estate Acquisitions/Dispositions, page 8

    1.

    In future Exchange Act periodic reports, please include disclosure on weighted average
capitalization rates for acquisitions and dispositions of properties during the reporting
period, including a clear description of how you calculated disclosed capitalization rates.

Securities and Exchange Commission

June 10, 2011

Page 2

We do not believe that GAAP or Regulation S-K requires disclosure of weighted average
capitalization rates for acquisitions and dispositions, unless such information is material
or would enhance investors’ understanding of our performance. Accordingly, we will include
disclosure of weighted average capitalization rates (including definitions of, and
explanations for, the rates provided) in future Exchange Act reports if and to the extent
such information is material or would otherwise enhance investors’ understanding of our
performance. If any such disclosure includes non-GAAP financial measures, then our
presentation will be made in compliance with Item 10(e) of Regulation S-K.

Item 2. Properties

Properties, page 28

    2.

    Based on your footnote disclosure, it does not appear that the average annualized base rent
per square foot disclosure accounts for concessions, abatements, and reimbursements. In
future Exchange Act periodic reports, please revise to quantify the effective rent after
subtracting the adjustments from contractual rents.

You have correctly noted that the amounts we present under the column captioned “Average
Annualized Rental Rate as of December 31, 2010” do not take into account concessions or
abatements; however, the amounts related to triple net leases include tenant reimbursements.

As we disclose in note (c) on page 34, the adjustments that we do make in presenting amounts
under the column captioned “Average Annualized Rental Rate as of December 31, 2010” seek to
harmonize the difference between leases that we write on a “full service” basis and leases
that we write on a “triple net” basis. The base rents payable by tenants under our full
service leases entitle the tenants to a range of services without a separate reimbursement
obligation to us. In contrast, tenants under our triple net leases must, in addition to
their base rents, make expense reimbursement payments to us. Because we write more full
service leases than triple net leases, we adjust the effective rental rates for triple net
leases to include a pro rata portion of annual budgeted operating expenses.

We are not aware of a requirement to present the average annualized base rent per square
foot disclosure after concessions or abatements. As also disclosed in note (c) on page 34,
amounts presented under the column captioned “Average Annualized Rental Rate as of December
31, 2010” reflect the rental rates being paid by our tenants at December 31, 2010 and,
because this data reflects effective rents that our tenants are paying at December 31, 2010,
we expressly do not adjust the amounts to reflect concessions and abatements. In light of
your comment, however, in future Exchange Act periodic reports including this disclosure, we
will revise note (c) on page 34 of our

Securities and Exchange Commission

June 10, 2011

Page 3

Form 10-K to clarify the manner in which average annualized base rent per square foot is
calculated as follows:

“Average Annualized Rental Rate is calculated by taking: (i) for office leases executed as
of December 31, 2010 and written on a triple net basis, the sum of the annualized base rent
utilizing contractual rental rates payable as of December 31, 2010 exclusive of concessions
and abatements plus the prorata 2010 budgeted operating expense reimbursements excluding
tenant electricity and (ii) for office leases executed as of December 31, 2010 and written
on a full service basis, the annualized base rent utilizing contractual rental rates payable
as of December 31, 2010 exclusive of concessions and abatements, and dividing the sum of
such amounts by the total square footage occupied as of December 31, 2010.”

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,
page 42

Overview, page 42

    3.

    We note you have not included disclosure regarding your FFO. Please advise us whether you
consider FFO a key performance indicator. We may have further comment.

In our quarterly MD&A, we seek to satisfy three principal objectives:

    •

    to provide a narrative explanation of our financial statements that enables
investors to see us through the eyes of our management;

    •

    to enhance our overall financial disclosure and provide the context within which
financial information in our filings should be analyzed; and

    •

    to provide information about the quality of, and potential variability of, our
earnings and cash flow, so that investors can ascertain the likelihood that our
past performance is indicative of future performance.

Historically, we have not included funds from operations, or FFO, in our MD&A or, more
generally, in our Exchange Act periodic reports. Rather, our public disclosures of FFO have
primarily been through our quarterly earnings press releases that we furnish under Item 2.02
of Form 8-K, together with (i) a reconciliation of FFO to net income, the GAAP measure that
we believe to be the most directly comparable financial measure and (ii) disclosure of how
we compute FFO and why we believe that the presentation of FFO provides useful information
to investors regarding our financial condition and results of operations. We have also
included FFO, together with the foregoing reconciliation and disclosure, in our quarterly
Supplemental

Securities and Exchange Commission

June 10, 2011

Page 4

Investor Packages that we identify in our earnings press releases and post under the
“Investors Relations” section of our website.

We believe that our disclosure practices achieve our three principal objectives identified
above. We also recognize the Commission’s emphasis that companies should identify and
discuss key performance indicators that their management uses to manage their businesses and
that would be material to investors. In this regard, our management generally considers FFO
to be a useful measure for reviewing our comparative operating and financial performance
because, by excluding gains and losses related to sales of previously depreciated operating
real estate assets and excluding real estate asset depreciation and amortization (which can
vary among owners of identical assets in similar condition based on historical cost
accounting and useful life estimates), FFO can assist investors in comparing the operating
performance of a company’s real estate between periods or as compared to different
companies.

In preparing future filings of Exchange Act periodic reports, we will include FFO as part of
our MD&A (coupled with the information required by, and presented in a manner consistent
with, Item 10(e) of Regulation S-K).

Factors that May Influence Future Results of Operations

Financial and Operating Performance, page 43

    4.

    We note your discussion under this subheading regarding risks to your ongoing operations
resulting from tenant lease expirations/non-renewals. In future Exchange Act periodic
reports, please expand your disclosure in this section, as well as the narrative accompanying
your table disclosure of lease expirations beginning on page 35, to discuss the relationship
between market/current asking rents and leases expected to expire in the next period, as well
as the relationship between rents on leases that expired in the current reporting period and
rents executed on renewals or new leases.

We will include such information in future filings if we conclude that it is material to the
respective period or would otherwise enhance investor understanding of our performance and
financial statements. In addition, we will include such information if and to the extent it
enhances our disclosure of known trends or uncertainties that have had or that we expect
will have a material impact on our revenues or income.

Securities and Exchange Commission

June 10, 2011

Page 5

Critical Accounting Policies and Estimates, page 44

Revenue Recognition

    5.

    You disclose to the extent the tenant funds improvements that you consider to be landlord
assets you treat them as deferred revenue and amortize those amounts to revenue over the lease
term. Please tell us your basis in GAAP for your accounting treatment.

Our basis in GAAP for this accounting treatment comes from ASC 840-10-25-5, which defines
minimum lease payments as “the payments that the lessee is obligated to make or can be
required to make in connection with the leased property.” A requirement for the lessee to
fund capital expenditures during the term of the lease may be a form of minimum lease
payment if all of the following conditions are met:

    •

    The lease contains a requirement that the lessee fund capital expenditures

    •

    The lessee has little or no discretion to avoid the capital expenditure

    •

    The unavoidable capital expenditure is probable and reasonably estimable

    •

    The value of the capital improvements will accrue to the lessor at the end of
the lease, meaning that the asset is not specific to just the tenant funding the
improvement but can reasonably be expected to benefit future tenants.

Results of Operations, page 49

Comparison of the Year Ended December 31, 2010 to the Year Ended December 31, 2009, page 49

    6.

    In future Exchange Act periodic reports, please revise your introductory narrative in this
section to explain in greater detail how you determine the properties that fall within the
“same store” pool, including also a discussion of any properties that were excluded from the
pool that were owned in all periods compared.

We confirm that in our future filings, we will modify the disclosure to include the
additional information requested.

Securities and Exchange Commission

June 10, 2011

Page 6

    7.

    We note that as of December 31, 2010, you manage your portfolio within seven reportable
segments. Please tell us why the discussion of your results of operations does not address
the performance of your segments given that is how you manage your portfolio. Refer to SEC
Interpretive Release No. 33-8350.

While we manage our portfolio in seven reportable segments and include such information in
accordance with GAAP in our footnote disclosures, we look to the guidance in SEC
Interpretive Release No. 33-8350 in preparing an MD&A that affords investors and other
readers of our financial statements an understanding of our financial condition, changes in
our financial condition and results of operations.

The Interpretive Release emphasizes that “within the universe of material information,
companies should present their disclosure so that the most important information is most
prominent.” We believe that presentation of our consolidated financial information, without
a breakdown by segment, generally most effectively presents important information. We
believe that our concentration on same store results of operations, and the impact on our
overall results of operations attributable to acquisitions, dispositions and developments
and redevelopments, provide investors with a clear understanding of our company as a whole
and key drivers of period-to-period changes in our performance. For example, we highlight
changes in key components of revenues and expenses, and the impact of these changes on our
same store portfolio to enhance the ability of users of our financial information to
ascertain the key drivers of changes in our overall performance. We believe that a general
provision of such information on a regional basis would increase the time users would spend
evaluating items that may be immaterial to our company as a whole.

The Interpretive Release states that “companies should avoid unnecessary duplicative
disclosure that can tend to overwhelm readers and act as an obstacle to identifying and
understanding material matters.” Our seven reportable segments primarily own and manage
office properties, and, as such we believe that an MD&A presentation focused primarily at
the Parent Company level (coupled, as applicable, with discussion of regional or property
level information) results in a clear picture of our results of operations.

In the MD&A in our future Exchange Act filings, we will include a cross-reference to the
segment information in the notes to our financial statements. As part of this
cross-reference, and in recognition of the presentation of “net operating income” by segment
in the notes to our financial statements, we will include an explanation of net operating
income and segment net operating income and, in compliance with Item 10(e) of Regulation
S-K, why we believe net operating income provides useful information to investors as a
performance measure.

Securities and Exchange Commission

June 10, 2011

Page 7

We believe the foregoing approach is consistent with, and furthers the objectives of, the
regulatory framework for addressing segments within the MD&A. Consistent with the disclosure principles in the Interpretive Guidance, the last sentence of Item 303(a) of
Regulation S-K recognizes that the handling of segment presentation in the MD&A is
company-specific and requires exercise of judgment; and instructions within Item 303,
including instruction 5 to paragraph (a)(4) of Item 303, and the last sentence of Item
101(b) of Regulation S-K, recognize that a cross-reference to segment disclosure in
financial statements may promote clarity in the MD&A.

Comparison of twelve-months ended December 31, 2010 to the twelve months-ended December 31,
2009, page 50

    8.

    In future Exchange Act periodic reports, please include a summary of your leasing activity
for the reporting period. Please include in that summary a discussion of leasing costs,
including leasing commissions and tenant improvement costs on a per square foot basis.

We will include such information in future filings if we conclude that it is material to the
respective period or would otherwise enhance investor understanding of our performance and
financial statements. In addition, we will include such information if and to the extent it
enhances our disclosure of known trends or uncertainties that have had or that we expect
will have a material impact on our revenues or income.

    9.

    Your tabular disclosure of property portfolio total revenue and property-related expenses
calculates the amount “Subtotal,” which equals net operating income disclosed elsewhere in
your filing. Please tell us how your disclosure complies with Item 10(e) of Regulation S-K,
or tell us how you determined it was not necessary to provide such information.

We previously did not believe that it was necessary to provide addit