Brandywine Realty Trust (NYSE:BDN) Q4 2022 Earnings Conference Call February 2, 2023 9:00 AM ET

Company Participants

Jerry Sweeney - President and Chief Executive Officer, Trustee

Tom Wirth - Executive Vice President and Chief Financial Officer

George Johnstone - Executive Vice President, Operations

Conference Call Participants

Steve Sakwa - Evercore ISI

Michael Lewis - Truist

Michael Griffin - Citi

Tayo Okusanya - Credit Suisse

Camille Bonnel - Bank of America

Bill Crow - Raymond James

Operator

Good day. And thank you for standing by. Welcome to the Brandywine Realty Trust Fourth Quarter 2022 Earnings Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jerry Sweeney, President and CEO. You may begin.

Jerry Sweeney

Catherine, thank you very much. Good morning, everyone and thank you for participating in our fourth quarter 2022 earnings call. On today's call with me today are George Johnstone, our Executive Vice President of Operations; Dan Palazzo; our Vice President and Chief Accounting Officer and Tom Wirth, our Executive Vice President and Chief Financial Officer.

Prior to beginning, certain information discussed during our call may constitute forward-looking statements within the meaning of the federal securities law. Although, we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release as well as our most recent annual and quarterly reports that we file with the SEC.

Well, first and foremost, we hope that you and your family had a wonderful holiday season and are looking forward to a successful 2023. During our prepared remarks this morning, we'll briefly review fourth quarter results, provide color on recent transactions and outline our ‘23 business plan. Tom will then review our ‘22 results and frame out the key assumptions driving our ‘23 guidance. After that certainly Dan, George, Tom and I are available to answer any questions.

So quickly reviewing our ‘22 results we posted fourth quarter FFO of $0.32 per share in line with consensus and full year FFO of $1.38 per share, which exceeded consensus estimates by $0.01 per share. During the fourth quarter of ‘22, we executed 226,000 square feet of leases, including 142,000 square feet of new leasing activity. For 2022, we leased 1.8 million square feet of space, which compares favorably to both our volumes in 2021 and 2022. More specifically, looking at 2022, our new leases that we executed during the year exceeded our ‘21 new leasing activity by 11%, it was equal to pre pandemic levels that we experienced back in the fourth quarter of 2019. We also post a rental rate mark-to-market of 21% on a GAAP basis, and 12.5% on a cash basis. Our full year mark-to-market was just shy of 19% on a GAAP basis and just shy of 10% on a cash basis. Absorption for the quarter was negative by 123,000 square feet. Now half of this negative absorption was the result of a tenant default in Austin, while the other half were known tenant move outs, which resulted in a quarterly retention rate below our annual run rate. So for the year we did post the retention above our business plan guidance at 64%. We did end the quarter at 89.8% occupied and 91% lease which were below our targets. And the previously mentioned tenant default accounted for about 50 basis points on each of those metrics. And occupancy was generally a little bit lower due to anticipated December move into split into January and the sale of our forward Tower Bridge property.