Brandywine Realty Trust Annual Report 2021

Plain-text annual report

2 0 2 1 A N N U A L R E P O R T Q U A L I T Y | I N N O V A T I O N | I N T E G R I T Y | C O M M U N I T Y From top to bottom (L to R): The Bulletin Building at Schuylkill Yards, Philadelphia, PA; construction crew; The Alley at 1676 International, McLean, VA; street-level view of 3025 JFK, Philadelphia, PA; 250 Radnor at Radnor Life Sciences Center, Radnor, PA; Uptown ATX, Austin, TX; workers enjoying Cira Green, Philadelphia, PA; 1900 Market, Philadelphia, PA; 4040 Wison, Arlington, VA; Metroplex Two, Plymouth Meeting, PA; people passing through Drexel Square, Philadelphia, PA aa AA tt At Brandywine, we view change as an opportunity, and with change, comes transition. How you forge forward can be one of the most impactful times for a business. 2021 was a year of transition, and for us, a time to keep our focus fixated forward. It was a year to embrace our pathway to success, while never losing attention on people, relationships, and long-lasting value creation for all stakeholders. In 2021, we remained vigilant in maintaining safe and healthy workplaces as the pandemic persisted. Our team pushed ahead in servicing our customers at the highest standards— welcoming many tenants back to the workplace while continuing to navigate the disruptions that new Covid-19 variants presented. The strength of our people during this time is a testament to Brandywine’s longstanding culture of persistence and an unwavering commitment to excellence. We’ve never been prouder of the people who make up our company. Our strong foundation enabled us to execute key business objectives that set the pace for transformative new realities and durable value creation. In Austin, we commenced construction on our newly rebranded, 66-acre master-planned community, Uptown ATX, breaking ground on the One Uptown development; and we opened the doors to 405 Colorado, our trophy-class high-rise tower, located downtown. In the Metro DC region, we were selected as master-developer by Terrapin Development Company for a mixed- use neighborhood within the University of Maryland’s Discovery District, and we welcomed Guidehouse to their new headquarters at the reimagined 1676 International building in Tysons, VA. In Philadelphia, we kicked off construction on 3025 JFK Boulevard, the ﬁrst vertical 1 development within Schuylkill Yards, our 14-acre We expect to expand our multifamily portfolio master-planned neighborhood in University City, with the start of construction on two residential Philadelphia, and completed design development projects – the Bellet Building in the heart of for 3151 Market, a trophy-class life science tower downtown Philadelphia, with a thriving young within the same innovation neighborhood. adult population; and The Chase at Uptown ATX, We remained steadfast in our commitment to ESG excellence — making investments in market- in Northwest Austin, known as the city’s ‘second downtown’. leading healthy building certiﬁcations and achieving We are energized by our core markets’ BOMA 360 Performance Building designations. underlying strength and excellent growth Representative of our continued efforts, we were potential. As Philadelphia continues to experience named one of the 50 most community-minded unprecedented life science demand due to its employers in the Tri-State area on the Civic 50 healthcare and pharmaceutical ecosystem, we will Greater Philadelphia list. We selected a Community leverage our scale, capacity, and comprehensive Development Corporation co-development expertise to offer extraordinary workspaces. The partner for 3151 Market as part of our $16.4 million tech sector’s dynamic growth, combined with in- Schuylkill Yards Neighborhood Engagement migration to Sun Belt markets positions our Austin Initiative and reached a new milestone of 11.5 platform to continue to attract next-generation million square feet of Green Building Certiﬁed companies who are invested in workplace space across our portfolio. We enter 2022 well positioned to capitalize on growth opportunities. As the life science sector continues to boom in key U.S. markets, we have over 592,000 SF of lab and research space complete or under development and an additional 2.5+ million square feet planned in the high-ranking Greater Philadelphia region. We opened a new lab incubator, B.Labs at Cira Centre, in January 2022 and will begin construction on 3151 Market later this year – adding 417,000 square feet to the total 2.1M square feet of life science potential within our Schuylkill Yards development. 250 King of Prussia Road will open its doors this spring within our Radnor Life Science Center, bringing 168,000 square feet of life science space to one of the region’s highest performing submarkets. innovation, brand, and culture. In the Metro DC region, we’ll embrace the astonishing growth of quantum physics research, and continue our longstanding history of partnering with revered academic institutions to realize legacy value through innovative real estate. We’ll continue to leverage our diversiﬁed portfolio and active developments in each market to capitalize on trends that have emerged from the pandemic, including a ﬂight to quality workspaces that prioritize healthy building technology and ample outdoor amenity spaces, as well as demand for ﬂexible, move-in ready space which serve as an entry point for tenants to expand within our portfolio. 2 The past two years have been a stark reminder of the importance of human connection and the powerful role physical space plays in bringing people and communities together. In 2022, we will remain ﬂexible, agile, and adaptable to shifting demands. We remain committed to delivering high-performance spaces that enable growth, success, and satisfaction of individuals and businesses alike. And above all, we remain laser-focused on protecting and maintaining trust. The trust we’ve worked tirelessly for 25+ years to earn with our customers, partners, employees, and stakeholders – and the trust we instill in our people to deliver on our future-forward mission. On behalf of the Brandywine Board of Trustees and leadership team, thank you for your continued support and commitment to the company. We are excited about the many opportunities ahead for our business and our people while we deliver business growth and value for you, our shareholders. With best regards, Gerard H. Sweeney President and Chief Executive Ofﬁcer From top to bottom (L to R): Terrace with pool at shared lifestyle club at 3025 JFK, Philadelphia, PA; commuter parking her bike on Market Street, Philadelphia, PA; facade of the Bulletin Building; outdoor common area at 650 Park, King of Prussia, PA; Skyrise at Uptown ATX, Austin, TX; a team working in FMC Tower, Philadelphia, PA; ﬁtness class on Cira Green SENIOR OFFICERS Gerard H. Sweeney* H. Jeffrey DeVuono* George D. Johnstone* President and Executive Vice President, Senior Executive Vice President, Chief Executive Ofﬁcer Managing Director, Life Science Operations Thomas E. Wirth* William D. Redd* Executive Vice President Executive Vice President and George S. Hasenecz Senior Vice President, and Chief Financial Ofﬁcer Senior Managing Director, Investments Austin and Metro D.C. Regions OTHER KEY EXECUTIVES Anna May Abbott Vice President Human Resources, Diversity & Inclusion Ronald Becker Senior Vice President, Operations and Sustainability Ralph Bistline Senior Vice President, Leasing and Business Development, Austin Region Ann Lisa Braun Vice President, Senior Leasing Counsel Paul J. Commito Senior Vice President, Development Christopher Franklin Vice President, Development John Hill Vice President, Construction James Kurek Vice President, Chief Technology and Innovation Ofﬁcer Laura Krebs Miller Vice President, Marketing, Media and Brand Management John Norjen Senior Vice President and Senior Managing Director, Metro D.C. Region Daniel Palazzo* Vice President, Chief Accounting Ofﬁcer and Treasurer H. Leon Shadowen, Jr. Senior Vice President, Development, Austin Region Natalie Shieh Vice President, Development Regina Sitler Senior Vice President, Portfolio Management Shawn Neuman Senior Vice President, General Counsel and Secretary Suzanne Stumpf Senior Vice President, Asset Management, Metro D.C. & Austin Regions Kathleen P. Sweeney-Pogwist Senior Vice President, Leasing, Suburban Pennsylvania Region Donald F. Weekley Vice President, Leasing and Development, Austin Region Jeffrey R. Weinstein Senior Vice President, Construction Anthony V. Ziccardi Vice President, Development * Executive Ofﬁcer per Securities and Exchange Commission rules 4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ☐ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2021 OR For the transition period from to Brandywine Realty Trust Brandywine Operating Partnership, L.P. (Exact name of registrant as specified in its charter) Maryland (Brandywine Realty Trust) Delaware (Brandywine Operating Partnership, L.P.) (State or Other Jurisdiction of Incorporation or Organization) 001-9106 23-2413352 000-24407 (Commission file number) 23-2862640 (I.R.S. Employer Identification Number) 2929 Arch Street Suite 1800 Philadelphia, PA 19104 (Address of principal executive offices) (Zip Code) (610) 325-5600 (Registrant’s telephone number, including area code) 2929 Walnut Street Suite 1700 Philadelphia, PA 19104 (Former address) Securities registered pursuant to section 12(b) of the Act: Title of each class Common Shares of Beneficial Interest Trading Symbol(s) BDN Name of each exchange on which registered NYSE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Brandywine Realty Trust Brandywine Operating Partnership, L.P. Yes ☒ No ☐ Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Brandywine Realty Trust Brandywine Operating Partnership, L.P. Yes ☐ No ☒ Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Brandywine Realty Trust Brandywine Operating Partnership, L.P. Yes ☒ No ☐ Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Brandywine Realty Trust Brandywine Operating Partnership, L.P. Yes ☒ No ☐ Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act: Brandywine Realty Trust: Large accelerated filer ☒ Smaller reporting company ☐ Accelerated filer ☐ Emerging growth company ☐ Non-accelerated filer ☐ If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of Exchange Act. ☐ Brandywine Operating Partnership, L.P.: Large accelerated filer Smaller reporting company ☐ ☐ Accelerated filer ☐ Emerging growth company ☐ Non-accelerated filer ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Brandywine Realty Trust Brandywine Operating Partnership, L.P. Yes Yes ☒ ☒ No ☐ No ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Brandywine Realty Trust Brandywine Operating Partnership, L.P. Yes Yes ☐ ☐ No ☒ No ☒ As of June 30, 2021, the aggregate market value of the Common Shares of Beneficial Interest held by non-affiliates of Brandywine Realty Trust was $2,282,260,692 based upon the last reported sale price of $13.71 per share on the New York Stock Exchange on June 30, 2021. An aggregate of 171,383,912 Common Shares of Beneficial Interest was outstanding as of February 17, 2022. As of June 30, 2021, the aggregate market value of the 823,983 common units of limited partnership (“Units”) held by non-affiliates of Brandywine Operating Partnership, L.P. was $11,296,807 based upon the last reported sale price of $13.71 per share on the New York Stock Exchange on June 30, 2021 of the Common Shares of Beneficial Interest of Brandywine Realty Trust, the sole general partner of Brandywine Operating Partnership, L.P. (For this computation, the Registrant has excluded the market value of all Units beneficially owned by Brandywine Realty Trust.) Portions of the proxy statement for the 2022 Annual Meeting of Shareholders of Brandywine Realty Trust are incorporated by reference into Part III of this Form 10-K. Documents Incorporated By Reference y p EXPLANATORY NOTE This report combines the annual reports on Form 10-K for the year ended December 31, 2021 of Brandywine Realty Trust (the “Parent Company”) and Brandywine Operating Partnership, L.P. (the “Operating Partnership”). The Parent Company is a Marylarr nd real estate investment trust, or REIT, that owns its assets and conducts its operations through the Operating Partnership, a Delaware limited partnership, and subsidiaries of the Operating Partnership. The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company.” In addition, terms such as “we”, “us”, or “our” used in this report may referff to the Company, the Parent Company, or the Operating Partnership. r The Parent Company is the sole general partner of the Operating Partnership and as of December 31, 2021, owned a 99.5% interest in the Operating Partnership. The remaining 0.5% interest consists of common units of limited partnership interest issued by the Operating Partnership to third parties in exchange for contributions of properties to the Operating Partnership. As the sole general partner of the Operating Partnership, the Parent Company has full and complete authority over the Operating Partnership’s day-to-day operations and management. As general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the Parent Company and the Operating Partnership are the same in their respective financial statements. The separate discussions of the Parent Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company’s operations on a consolidated basis and how management operates the Company. Management operates the Parent Company and the Operating Partnership as one enterprise. The management of the Parent Company consists of the same members as the management of the Operating Partnership. These members are officers of both the Parent Company and of the Operating Partnership. The Company believes that combining the annual reports on Form 10-K of the Parent Company and the Operating Partnership into a single report will: • • • te a better understanding by the investors of the Parent Company and the Operating Partnership by enablia facilita ff them to view the business as a whole in the same manner as management views and operates the business; remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a substantial portion of the disclosure applies to both the Parent Company and the Operating Partnership; and create time and cost efficiencies through the preparation of one combined report instead of two separate reports. ng ff There are few differences between the Parent Company and the Operating Partnership, which are reflected in the footnot e disclosures in this report. The Company believes it is important to understand the difference s between the Parent Company and the Operating Partnership in the context of how these entities operate as an interrelated consolidated company. The Parent Company is a REIT, whose only material asset is its ownership of the partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time (and contributing the net proceeds of such issuances to the Operating Partnership) and guaranteeing the debt obligations of the Operating Partnership. The Operating Partnership holds substantially all the assets of the Company, including the Company's ownership interests in the real estate ventures described as a partnership with below. The Operating Partnership conducts the operations of the Company’s business and is structured no publicly traded equity. Except for net proceeds from equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capita al required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of partnership units of the Operating Partnership or equity interests in subsidiaries of the Operating Partnership. ff t t The equity and noncontrolling interests in the Parent Company and the Operating Partnership’s equity are the main areas of ncial statements of the Parent Company and the Operating Partnership. The common difference between the consolidated finaff units of limited partnership interest in the Operating Partnership are accounted forff n the Operating Partnership’s financial statements while the common units of limited partnership interests held by parties other than the Parent Company are presented as noncontrolling interests in the Parent Company’s financial statements. The differences s in the equity issued at the Parent between the Parent Company and the Operating Partnership’s equity relate to the difference Company and Operating Partnership levels. as partners’ equity i ff t 2 To help investors understand the significant differences between the Parent Company and the Operating Partnership, this report presents the following as separate notes or sections for each of the Parent Company and the Operating Partnership: • • Consolidated Financial Statements; Parent Company’s and Operating Partnership’s Equity This report also includes separate Item 9A. (Controls and Procedures) disclosures and separate Exhibit 31 and 32 certifications for each of the Parent Company and the Operating Partnership in order to establia sh that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Parent Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350. In order to highlight the differences between the Parent Company and the Operating Partnership, the separate sections in this report for the Parent Company and the Operating Partnership specifically refer to the Parent Company and the Operating Partnership. In the sections that combine disclosures of the Parent Company and the Operating Partnership, this report refers to such disclosures as those of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and real estate ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Parent Company operates the business through the Operating Partnership. t 3 TABLE OF CONTENTS PART I Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Item 6. [Reserved] Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accountant Fees and Services PART IV Item 15. Exhibits and Financial Statement Schedules Item 16. Form 10-K Summary SIGNATURES Page 7 11 24 25 26 26 27 28 28 44 44 44 44 46 46 47 47 47 47 47 47 53 54 4 Filing Format g This combined Form 10-K is being filed separately by Brandywine Realty Trust Operating Partnership, L.P. (the “Operating Partnership”). rr (the “Parent Company”) and Brandywine Forward-Looking Statements g The Private Securities Litigation Reformff Act of 1995 provides a “safe harbor” for forward-looking statements. This report and other materials filed by us with the Securities and Exchange Commission (the “SEC”) (as well as information included in oral or other written statements made by us) contain statements that are forward-looking, including statements relating to al expenditures, financing sources, business and real estate development activities, acquisitions, dispositions, future capita governmental regulation (including environmental regulation) and competition. We intend such forwa rd-looking statements to be covered by the safe-harbor provisions of the 1995 Act. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. assumptim ons, Although we believe that the expectations reflected in such forward-looking statements are based on reasonablea we can give no assurance that our expectations will be achieved. These forward-looking statements are inherently uncertain, and actual results may differ fromff expectations depending on a variety of facff tors discussed in our filings with the Securities and Exchange Commission (the “SEC”). These factors include without limitation: results and trends may differ materially fromff expectations. Our actual future ff ff • • • • • • • • • • • • • • • • • • the impact of epidemics, pandemics, or other outbreaks of illness, disease or virus (such as COVID-19 and its variants) and the actions taken by government authorities and others related thereto, including actions that restrict or limit the ability of our Company, our properties and our tenants to operate; adverse changes in national and local economic conditions, the real estate industry and the commercial real estate markets in which we operate, which would have a negative effect on, among other things: • • overall market occupancy levels and demand for office and other commercial space and rental rates; the financial condition of our tenants, many of which are financial, legal and other professional firms, our lenders, counterparties to our derivative financial instruments and institutions that hold our cash balances and short-term investments, which may expose us to increased risks of default by these parties; the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue acquisition and development opportunit real estate asset valuations, a decline in which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis. ies and refinance existing debt; and • • t u al; expiration of leases; availability, and increase costs, of capita al and credit markets, including changes that reduced re of interest rate hedging contracts to perform as expected and the effectiveness of such arrangements; re of acquisitions, developments and other investments, including projects undertaken through joint ventures competition from other owners, developers and investors, including for tenants and investment opportunities; our failure to lease unoccupied space in accordance with our projections; our failure to re-lease occupied space upon tenant defaults and the bankruptcy of majoa r tenants; volatility in capita increasing interest rates, which could increase our borrowing costs and adversely affect the market price of our securities; failuff inflation, which, among other things, would increase our operating expenses and costs for supplies and labor; failuff and equity investments in third parties, to perform as expected; unanticipated costs associated with the purchase, integration and operation of our acquisitions; unanticipated costs and delays to complete, lease-up and operate our developments and redevelopments, including on account of shortages of, and delays in shipping of, supplies and materials for our developments and redevelopments; ity unanticipated costs associated with land development, including building and construction moratoriums and inabila to obtain necessary zoning, land-use, building, occupancy and other required governmental approvals, construction cost increases or overruns and construction delays; lack of liquidity of real estate investments, which could make it difficff financial conditions or changes in the operating performance of our properties; potential damage from natural substantial costs to us; impairment charges; uninsured losses dued excess of applicablea to insurance deductibles, self-insurance retention, uninsured claims or casualties, or losses in coverage; disasters, including hurricanes and other weather-related events, which could result in us to respond to changing economic or ult forff a t t 5 • • • • • • • • • • • • • • • tenant services beyond those traditionally provided by landlords; increased costs for, or lack of availability of, adequate insurance, including for terrorist acts or environmental liabilities; actual or threatened terrorist attacks; security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems, which support our operations and our properties; the impact on workplace and tenant space demands driven by technology, employee culture and commuting patterns; demand forff liability and clean-up costs incurred under environmental or other laws; risks associated with our investments in real estate venturt es and unconsolidated entities, including our lack of sole decision-making authority and our reliance on our venture partners’ financial condition; inability of real estate venturt e partners to funff development agreements; failuff arrangements; failuff the impact of climate change and compliance costs relating to laws and regulations governing climate change; risks associated with fede ff complex regulations relating to our statust our failure to qualify as a REIT; changes in accounting principles, or their application or interpretation, and our ability to make estimates and the assumptim ons underlying the estimates, which could have an effect on our earnings; and our internal control over financial reporting may not be considered effective which could result in a loss of investor confidence in our financial reports, and in turn could have an adverse effecff re to manage our growth effectively into new product types within our portfolio and real estate venturt e as a real estate investment trust, or REIT, and the adverse consequences of obligations or perform under our real estate venturt e re of dispositions to close in a timely manner; t on the market price of our securities. ral, state and local tax audits; d venturet Given these uncertainties, and the other risks identifiedff in the “Risk FactFF ors” section and elsewhere in this report, we caution readers not to place undue reliance on forward-looking statements. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. u 6 Item 1. Business Overview PART I We are a self-administered and self-managed real estate investment trust ("REIT") engaged in the acquisition, development, redevelopment, ownership, management, and operation of a portfolio of office, life science/lab, residential, and mixed-use properties. During the twelve months ended December 31, 2021, we owned and managed properties within fiveff markets: (1) Philadelphia Central Business District (“Philadelphia CBD”), (2) Pennsylvania Suburbs, (3) Austin, Texas (4) Metropolitan Washington, D.C., and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Metropolitan Washington, D.C. segment includes properties in Northern Virginia, Washington, D.C., and Southern Maryland. The Other segment includes properties in Camden County in New Jersey and properties in New Castle County in Delaware. In addition to the five markets, our corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions. See Note 1, ''Organization of the Parent Company and the Operating Partnership," to our Consolidated Financial Statements forff our property portfolio, management services and land holdings. Unless otherwise indicated, all references in this Form 10-K to “square feet” represent the net rentable area. d The Parent Company was organized and commenced its operations in 1986 as a Marylarr nd REIT. The Parent Company owns its assets and conducts its operations through the Operating Partnership and subsidiaries of the Operating Partnership. The Operating Partnership was formed in 1996 as a Delaware limited partnership. The Parent Company controls the Operating Partnership as its sole general partner. See Note 1, ''Organization of the Parent Company and the Operating Partnership," to our Consolidated Financial Statements forff the Parent Company's ownership interest in the Operating Partnership. The ownership interests in the Operating Partnership not owned by the Company consist of common units of limited partnership as an “UPREIT” issued to the holders in exchange for contributions of properties to the Operating Partnership. Our structuret is designed, in part, to permit persons contributing properties to us to defer some or all of the tax liabila ity they might otherwise incur in a sale of properties. We have offices in Philadelphia, Pennsylvania; Radnor, Pennsylvania; McLean, Virginia; Mount Laurel, New Jersey; Richmond, Virginia; Wilmington, Delaware; and Austin, Texas. Our principal executive offices are located at 2929 Arch Street, Suite 1800, Philadelphia, PA 19104, our telephone number is (610) 325-5600 and our website is www.brandywinerealty.com. The content on any website referred to in this Form 10-K is not incorporated by reference into this Form 10-K. We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that filff e electronically with the SEC. The address of that site is http:/ c.gov. Our annual // /www.se reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other information filed or furnished ndywinerealty.com, as soon as reasonably by us with the SEC are available, without charge, on our website, http:/ // /www.bra practicablea of charge, upon , freeff written request to Investor Relations, Brandywine Realty Trust, 2929 Arch Street, Suite 1800, Philadelphia, PA 19104. after they are electronically filed or furnished with the SEC. Copies are also availablea t t Business Segments See Note 19, ''Segment Information,n ” to our Consolidated Financial Statements forff information on results of operations of our reportable segments for the years ended December 31, 2021, 2020, and 2019 and balance sheet amounts as of December 31, 2021 and 2020. Joint Ventures partnerships provide us with additional sources of capital to share investment risk and fund capita opportunities with institutt ional investors or other real estate companies. Joint al requirements. In partnerships provide us with additional local market insight or product type expertise. For to our in Unconsolidated Real Estate Ventures,” see Note 4, ''Investment t From time to time we consider joint venturet venturet some instances, joint venturet information regarding our joint ventures, Consolidated Financial Statements. t 7 Developments/Redevelopments Our regular interaction with tenants and other market participants keep us current on innovations in workplace layout and smart living. We leverage this information to identify properties primed for development or redevelopment to meet tenant demands and realize value. The expertise and relationships that we have built fromff managing complex construction projects allow us to add new assets to our portfolio and renovate existing assets in our portfolio. Business Objective and Strategies for Growth al effectively to maximize our returnt on investment and thereby maximize our total Our business objective is to deploy capita returnt • to shareholders. To accomplish this objective we seek to: concentrate on urban town centers and central business districts in selected regions, and be the best of class owner and developer in those markets with a full -service office in each of those markets providing property management, leasing, development, and construction expertise; ff • maximize cash flowff through leasing strategies designed to capturet rental growth as rental rates increase and as leases ff array of property management, maintenance services and tenant are renewed; attain high tenant retention rates by providing a full service amenity programs responsive to the varying needs of our diverse tenant base; cultivate long-term leasing relationships with a diverse base of high-quality and financially stable tenants; increase the economic diversification of our tenant base while maximizing economies of scale; formff t utilize our reputation as a full ff and development opportunit selectively dispose of properties that do not support our long-term business objectives and growth strategies. with high-quality partners having attractive real estate holdings or significant financial resources; -service real estate development and management organization to identify acquisition ies that will expand our business and create long-term value; and joint ventures t • • • • • • We also consider the folff lowing to be important objectives: • • • • • • • to develop and opportunistically acquire high-quality office, life science/lab, residential, and mixed-use properties at attractive yields in markets that we expect will experience economic growth and where we can achieve operating efficiencies; to monetize or deploy our land inventory for development of high-quality office, life science/lab, residential, and mixed-use properties, or rezone from office/industrial to life science/lab, residential, retail and hotel to align with market and demand shifts as appropriate; to control development sites, including sites under purchase options, that could support high-quality office, life science/lab, residential, and mixed-use properties within our core markets; to capitalize on our redevelopment expertise to selectively develop, redevelop and reposition properties in desirable locations that other organizations may not have the resources to pursue; to own and develop high-quality office, life science/lab, residential, and mixed-use properties meeting the demands of today’s tenants who require sophisticated telecommunications and related infrastructure, support services, sustainable feaff tures and amenities, and to manage those facilities so as to continue to be the landlord of choice for both existing and prospective tenants; to strategically grow our portfolio through the development and acquisition of new product types that support our strategy of transient-oriented and amenity based mixed-use properties located in the central business district of Philadelphia, Pennsylvania; Pennsylvania Suburbs; Austin, Texas; and Metropolitan Washington, D.C.; and to secure third-party development contracts, which can be a significant source of revenue and enablea and grow our existing development and construction management resources. us to utilize We expect to concentrate our real estate activities in markets where we believe that: • • • • current and projected market rents and absorption statistics justify construction activity; we can maximize market penetration by accumulating a critical mass of properties and thereby enhance operating efficiencies; barriers to entry (such as zoning restrictions, utility availability, infrastructure limitations, development moratoriums and limited developablea there is potential for economic growth, particularly job growth and industry diversification. land) will create supply constraints on available space; and Operational Strategy We currently expect to continue to operate in markets where we have a concentration advantage due to economies of scale. We believe that where possible, it is best to operate with a strong base of properties in order to benefit from the personnel 8 allocation and the market strength associated with managing multiple properties in the same market. We also intend to al if we determine a property cannot meet our long-term earnings growth selectively dispose of properties and redeploy capita expectations. We believe that recycling capita al is an important aspect of maintaining the overall quality of our portfolio. Our broader strategy remains focused on continuing to grow earnings, enhance liquidity and strengthen our balance sheet through capia tal retention, debt reduction, targeted sales activity and management of our existing and prospective liabilities. In the long term, we believe that we are well positioned in our current markets and have the expertise to take advantage of both development and acquisition opportunities, as warranted by market and economic conditions, in new markets that have healthy long-term fundamentals and strong growth projections. This capability, combined with what we believe is a conservative financial structure, should allow us to achieve disciplined growth. These abilities are integral to our strategy of having a diverse portfolio of assets, which will meet the needs of our tenants. We use experienced on-site construction superintendents, operating under the supervision of our project managers and senior management, to control the construction process and mitigate the various risks associated with real estate development. In order to fund developments, redevelopments and acquisitions, as well as refurbish and improve existing properties, we primarily use proceeds from property dispositions, excess cash from operations after satisfying our dividend and other for new investments and ff ity of funds financing requirements, and external sources of debt and equity capita maintenance of existing properties largely depends on capita al markets and liquidity factors over which we can exert little control. al. The availabila Competition The real estate business is highly competitive. Our properties compete forff tenants with similar properties primarily on the basis of location, total occupancy costs (including base rent and operating expenses), services and amenities provided, and the design and condition of the improvements. As leases at our properties expire, we may encounter significant competition to renew or re-let space in light of the large number of competing properties within the markets in which we operate. As a result, we may be required to provide rent concessions or abatements, incur charges for tenant improvements and other inducements, including early termination rights or below market renewal options, or we may not be able to timely lease vacant space. In such cases, our financial condition, results of operations, cash flow, per share trading price of our common shares and ability to satisfy our debt service obligations and to pay dividends may be adversely affected. t We also face competition when attempting to acquire, sell or develop real estate, including competition from domestic and ons, other REITs, life insurance companies, pension funds, partnerships and individual investors. foreign financial instituti Our competitors may be abla e to pay higher property acquisition prices, may have private access to opportunities not available to us and otherwise may be in a better position to acquire a property. Competition may also have the effect of reducing the number of acquisition opportunities availablea to us, increasing the price required to consummate an acquisition opportunity and generally reducing the demand for office, retail, mixed-use and multifamily space in our markets. Similarly, competition purchasers may result in us receiving lower proceeds from a sale or in us with sellers of similar properties to locate suitablea not being able to dispose of a property at a time of our choosing due to the lack of an acceptablea returt n.r Our ability to compete also depends upon trends in the economies of our markets, investment alternatives, financial condition and operating results of current and prospective tenants, availabila al, construction and renovation costs, land availability, ity and cost of capita our ability to obtain necessary construction approvals, taxes, governmental regulations, legislation and population trends. Regulation General Properties in our markets are subject to various laws, ordinances, and regulations, including regulations relating to common areas. We believe we have the necessary permits and approvals to operate each of our properties. 9 Environmental Mattersrr Our business operations are subject to various federal, state, and local environmental laws and regulations governing land, water, and wetlands resources. Among these are certain laws and regulations under which an owner or operator of real estate could become liable for the costs of removal or remediation of certain hazardous or toxic substances present on or in such the presence property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate such substances, may subject the owner to substantial liabia lity and may adversely affect the owner’s ability to develop the property or to borrow using such real estate as collateral. ff We typically manage this potential liability through performance of Phase I Environmental Site Assessments and, as necessary, Phase II Environmental Site Assessments which include environmental sampling on properties we acquire or develop. Even with these assessments and testings, no assurance can be given that environmental liabia lities do not exist, that the reports revealed all environmental liabilities, or that no prior owner created or permitted any material environmental condition not known to us. In certain situations, we have also sought to avail ourselves of legal and regulatory protections offered by fede ral and state authorities to prospective purchasers of property. Where applicable studies have resulted in the determination that remediation was required by applicable law, the necessary remediation is typically incorporated into the operational or development activity of the relevant property. We are not aware of any environmental liabia lity that we believe would have a material adverse effecff t on our business, assets, or results of operations. ff Certain environmental laws impose liability on a previous owner of a property to the extent that hazardous or toxic substances were present during the prior ownership period. A transfer of the property does not necessarily relieve an owner of such liability. Thus, although we are not aware of any such situation, we may have such liabilities on properties previously sold. We believe that we and our properties are in compliance in all material respects with appli federal, state, and local laws, ordinances, and regulations governing the environment. For additional information, see Item 1A. Risk Factors – Regulatory Risk Factors – Potential liabila environmental contamination could result in substantial costs. ity forff cablea a y Information Securitytt f We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology networks and related systems. The Audit Committee of our Board (the "Audit Committee") and senior management receive and review quarterly reports on cybersecurity matters from our Chief Technology and Innovation Officer, including reports on documented incidents or violations of our IT and security policies. Documented incidents or violations are discussed, and managers are notified forff the appropriate follow-up with our human resources department or the employees involved in such incidents or violations, as needed. Although we have not experienced a data or other cybersecurity breach in the past three years that resulted in a finaff ncial loss, our Board and the Audit Committee regularly evaluate our existing information technology and security policies and controls to address new and novel threats posed to the Company. We have implemented a training program for employees that includes both proactive education modules, as well as reactive anti-phishing and testing modules designed to test the end-user’s ability to put what they have learned into practice. Human Capital Resources As of December 31, 2021, we had approximately 324 full-time employees and 3 part-time employees. We seek to maintain a ive and rewarding work environment for our employees challenging, enriching, respectful, diverse, inclusive, collaborat a whom we consider to be among our most valuable assets. We maintain policies and programs that we believe reflecff t our continued commitment to our employees, including: • • • • • • a competitive compensation program and benefits package. operational protocols which prioritize employee health, safety at promotion of diversity at nd inclusion in our hiring practices. nd well-being. ◦ In 2021, approximately 33% of all new hires were fema ethnic minorities. ff a les and approxi mately 46% of all new hires were training and career development opportunities and a tuit regular assessment of the engagement, satisfaction and retention of our employees. programs such as internally organized affinity groups which are intended to foster an atmosphere of collaborat and inclusion. tion reimbursement program. a ion 10 Environmental, Social, and Corporate Governance We are steadfast in our commitment to maintaining and implementing environment, social, and governance ("ESG”) standards while driving value through continual improvement of our operations, portfolio performance, and community impact. Our reduction targets forff energy, greenhouse gas emissions and water are to reduce consumption 15% by 2025 over our 2018 baseline. In 2021, we earned the highest-level Governance score from ISS, continued to maintain an A rating from MSCI ESG Research, and received our seventh annual Global Real Estate Sustainability Benchmark (“GRESB”) Green Star ranking. We were also recognized as the most committed building owner in the Philadelphia 2030 District initiative to achieve substantial reduction in energy use by the year 2030. We have 11.5 million square feet of green building certifications across our portfolio. With all the challenges over the last two years, Brandywine continues to proactively plan and work to provide safe spaces for to the office while deepening our commitment and culture of giving back to the local community. Our tenants to returnt volunteer efforts and financial contributions included over $20,000 collected by employees and matched by us to support 16 third-party employees in our extended famff and layoffs. Through a meals program in partnership with several of our food and beverage tenants, we funded over 38,000 meals to Philadelphians in need. We also donated $350,000 to the Enterprise Center to launch the Grow Philadelphia Small Business COVID-19 Resilience Fund and provided a loan guarantee of $200,000 to the African American Chamber of Commerce to make low- to Chamber members impacm ted by the COVID-19 pandemic and social unrest. interest loans availablea ily of vendors who were impacted by furloughs ff For further information regarding our environmental, social, and governance strategies and policies, please visit the “Responsibility” section of our website. The information contained on our website is not incorporated by reference into this Annual Report. Item 1A. Risk Factors ff You should carefully consider these risk factor s, together with all of the other information included in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes thereto, before you decide whether to make an investment in our securities. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, prospects, financial condition, cash flows, liquidity, funds from operations, results of operations, share price, ability to service our indebtedness, and/or ability to make cash distributions to our security holders (including those necessary to maintain our REIT qualification). In such case, the value of our common shares and the trading price of our securities could decline, and you may lose all or a significant part of your investment. Some statements in the following risk factors constitutet forward looking statements. Please refer to the explanation of the qualifications and limitations on forward-looking statements under “Forward-Looking Statements” of this Form 10-K. Economic Risk Factors economic and geopolitll ictt al conditions could have a material adverse effect on our resultsll of operations, financial Adverserr conditiontt and our abilityii to pay distribu tt tt tions to our shareholders. Our business is affected by global, national and local economic conditions. Our portfolio consists primarily of office buildings (as compared to real estate companies with portfolios of multiple asset classes). Our financial performanc e and the value of our real estate assets, and consequently the value of our securities, are subject to the risk that if our properties do not al expenditures, our cash flow, generate revenues sufficient to meet our operating expenses, including debt service and capita results of operations, financial condition and ability to make distributions to our security holders will be adversely affected. The following factors, among others, may materially and adversely affect the income generated by our properties and our performance generally: ff • • • adverse changes in international, national or local economic and demographic increased vacancies or our inabila terms, including market pressures to offer tenants rent abatements, increased tenant improvement packages, early termination rights, below market rental rates or below- market renewal options; significant job losses in the financial and professional services industries may occur, which may decrease demand for office space, causing market rental rates and property vt alues to be negatively impacted; ity to rent space on favora conditions; blea a ff 11 • • • • • • • • • a our tenants; changes in space utilization by our tenants dued to technology, economic conditions, impact of pandemics, and business culture may decrease demand for office space, causing market rental rates and property values to be negatively impacted; deterioration in the financial condition of our tenants may result in tenant defaults under leases, including due to bankruptcy, and adversely impact our ability to collect rents fromff competition from other office and mixed-use properties, and increased supply of such properties; increases in non-discretionary operating costs, including insurance expense, utilities, real estate taxes, state and local taxes, labor shortages and heightened security costs may not be offset by increased market rental rates; increases in operating costs due to inflation may not be offset by increased market rental rates; reduced debt financing secured by our properties and reduce the availabila increases in interest rates, reduced availability of financing and reduced liquidity in the capita al markets may adversely affect our ability or the ability of potential buyers of properties and tenants of properties to obtain financing on favorablea their financing one or more lenders under our unsecured credit facility could refuse or be unable to fund commitment to us and we may not be able to replace the financing commitment of any such lenders on favorablea terms, or at all; and civil disturbances, earthquakes and other natural underinsured losses. d values of our properties would limit our ability to dispose of assets at attractive prices, limit our access to disasters, or terrorist acts or acts of war may result in uninsured or ity of unsecured loans; terms, or at all; ff t Our performance is dependent upon the economic conditions tt of the market rr tt n wii s i hich our properties are located. Our results of operations will be significantly influenced by the economies and other conditions of the real estate markets in which we operate, particularly in Philadelphia, Pennsylvania, the suburbs of Philadelphia, Pennsylvania, Austin, Texas, Washington, D.C., Northern Virginia and Southern Maryland. Any adverse changes in economic conditions in any of these economies or real estate markets could negatively affect cash availablea for distribution and debt service. Our financial performance and ability to make distributions to our shareholders and pay debt service is particularly sensitive to the economic conditions in these markets. The local economic climate, which may be adversely impacted by business layoffs or downsizing, industry slowdowns, changing demographics and other fact ors, and local real estate conditions, such as demand for office space, operating expenses and real estate taxes, may affect revenues and the value of properties, including properties to be acquired or developed. ff We may sa uffer adverse consequences due to the financial difficultill es, bankruptcytt or insolvell ncy of our tenants. Periodically, our tenants experience finaff ncial difficulties, including bankruptcy, insolvency or a general downturn in their business, and these diffiff culties may have an adverse effect on our cash flow, results of operations, financial condition and ability to make distributions to our shareholders. We cannot assure you that any tenant that files for bankruptcy protection will continue to pay us rent. A bankruptcy filff ing by or relating to one of our tenants or a lease guarantor would bar efforts by us to collect pre-bankruptcy debts from that tenant or lease guarantor, or its property, unless we receive an order permitting us to do so from the bankruptcy court. In addition, we cannot evict a tenant solely because of bankruptcy. The bankruprr tcy of a balances under the relevant leases, and could ultimately tenant or lease guarantor could delay our efforts to collect past dued preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances dued under the lease must be paid to us in full. If, however, a lease is rejected by a tenant in bankruptcy, we would have only a general, unsecured claim for damages. Any such unsecured claim would only be paid to the extent that funds and only in tcy laws the same percentage as is paid to all other holders of general, unsecured claims. Restrictions under the bankruprr further limit the amount of any other claims that we can make if a lease is rejected. As a result, it is likely that we would recover substantially less than the full value of the remaining rent during the term. See Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Influence Future Results of Operations - Tenant Credit Risk.” are availablea ff Real Estate Industry Risk Factors y We may experience increased opero atingii costs, which mightgg reduce our profitabi .yy liii tyii ii Our properties are subject to increases in operating expenses such as for insurance, real estate taxes, cleaning, electricity, heating, ventilation and air conditioning, administrative costs and other costs associated with security, landscaping and repairs and maintenance of our properties. In general, our tenant leases allow us to pass through all or a portion of these costs to them. We cannot assure you, however, that tenants will actually bear the full burden of these increased costs, or that such 12 increased costs will not lead them, or other prospective tenants, to seek office space elsewhere. If operating expenses office space in our core geographic markets might limit our ability to increase increase, the availabila rents; if operating expenses increase without a corresponding increase in revenues, our profitability could diminish and limit our ability to make distributions to shareholders. ity of other comparablea Our investment in property developme ll nt or redevelopme ll nt may ba e more costly oll r diffidd cult to completll e t tt hantt .ee we anticipate ii We intend to continue to develop properties where market conditions warrant such investment. Once made, these investments may not produce results in accordance with our expectations. Risks associated with our development and construction activities include: • • • • • • • • • • a a markets may lead us to al to pay development costs; and increases in the costs of materials and labor; unavailability of favorable finff ancing alternatives in the private and public debt markets; insufficient capita limited experience in developing or redeveloping properties in certain of our geographic incorrectly project development costs and returns on our investments; dependence on the financial, technology and professional services sector as part of our tenant base; construction costs exceeding original estimates due to rising interest rates, inflation, diminished availability of materials and labor, construction and lease-up delays resulting in increased debt service, fixed expenses and construction or renovation costs; expenditure of funds and devotion of management’s time to projects that we do not complete; occupanc y rates and rents at newly completed properties may fluctuate depending on a number of facff u market and economic conditions, resulting in lower than projected rental rates and a corresponding lower returnt our investment; complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other governmental permits; and increased use restrictions by local zoning or planning authorities limiting our ability to develop and impacting the size of developments. tors, including on a See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Influence Future Results of Operations - Development Risk.” Our development projects att nd thirdii party ptt roperty management business may sa ubject us to ctt ertain liabil itll iett s. i We may hire and supervise third party contractors to provide construction, engineering and various other services for wholly owned development projects, development projects undertaken by real estate ventures in which we hold an equity interest and manage or properties we are managing on behalf of unaffiliated third parties. Certain of these contracts may be structured such that we are the principal rather than the agent. As a result, we may assume liabia lities in the course of the project and be subjected to, or become liable for, claims for construction defects, negligent performance of work or other similar actions by third parties we have engaged. Adverse outcomes of disputes or litigation could negatively impact our business, results of operations and financial condition, particularly if we have not limited the extent of the damages to which we may be liable, or if our liabilities exceed the amounts of the insurance that we carry.rr Moreover, our tenants and third party customers may seek the actions of contractors because of our role even if we have technically disclaimed liabia lity as a to hold us accountable forff legal matter, in which case we may determine it necessary to participate in a finaff purposes of preserving the tenant or customer relationship. ncial settlement forff ff t Acting as a principal may also mean that we pay a contractor before we have been reimbursed, which exposes us to additional risks of collection in the event of a bankruptcy or insolvency. Similarly, a contractor may filff e forff bankruptcy or commit fraud before completing a project that we have funded in part or in full. As part of our project management business, we are responsible for managing various contractors required forff a project, including general contractors, in order to ensure that the cost of a project does not exceed the contract amount and that the project is completed on time. In the event that one or more of the contractors involved does not, or cannot, perform as a result of bankruptcy or for another reason, we may be responsible for cost overruns, as well as the consequences of late delivery.rr In the event that we have not accurately estimated our own costs of providing services under guaranteed cost contracts, we may be exposed to losses on such contracts. ff Our development projects mtt ay be dependent on strategic alliall nces with utt naffiliateii tt d thir d parties. We may faceff a for trust, collaborat driven by the complementary skills and capabi challenges in managing our strategic alliances. As our development projects become more complex, the need risk-sharing is essential to the success of these projects. The alliances we engage in are establishing these lities of our partners. Despite the diligence performed ion, and equitablea a ff 13 alliances, our objectives may not fully align with those of our partners throughout the development project or projects. Disagreements with one or more third parties with whom we partner in the development of one or more of the development components may restrict our ability to act exclusively in our own interests. In addition, failure of one or more third parties with whom we partner to fulfill obligations to us could result in delays and increased costs to us associated with finding a suitablea replacement partner. Increased costs could require us to revise or abandon our activities entirely with respect to one or more components of the project and, in such event, we would not recover, and would be required to write-off, costs we had capita alized in development. We face risks associatedtt withii the developme ll ii nt of mixed-use commercial propertiett s. t We operate, are currently developing, and may in the future develop, properties either alone or through real estate ventures that are known as “mixed-use” developments. In addition to the development of office space, mixed-use projects may also include space forff life science/lab, residential, retail, hotel or other commercial purposes. If a development project consists of a non-office or non-retail use, we may seek to develop that component ourselves, assign the rights to that component to a third-party developer with experience in that use, or we may seek to partner with such a developer. If we do not assign the rights or partner with such a developer, or if we choose to develop the other component ourselves, we would be exposed not only to those risks typically associated with the development of properties forff office and retail use generally, but also to specific risks associated with the development and ownership of non-office and non-retail real estate. In addition, even if we we assign the rights to develop certain components or elect to participate in the development through a real estate venture, may be exposed to the risks associated with the failure of the other party to complete the development as expected. These include the risk that the other party would default on its obligations, necessitating that we complete the other component ourselves (including providing any necessary financing). In the case of residential properties, these risks also include other operators whose properties may be perceived to offer a better location or competition for prospective residents fromff better amenities or whose rent may be perceived as a better value given the quality, location and amenities that the resident seeks. Because we have limited experience with residential properties, we expect to retain third parties to manage our residential properties. In the case of hotel properties, the risks also include increases in inflation and utilities that may not be offset by increases in room rates. We are also dependent on business and commercial travelers and tourism. If we decide not to sell or participate in a real estate venture and instead hire a third party manager, we would be dependent on their key personnel to provide services on our behalf and we may not find a suitablea replacement if the management agreement is terminated, or if key personnel leave or otherwise become unavailable to us. t We face risks associatedtt withii property acquisiti ii ons. We have acquired in the past and intend to continue to pursue the acquisition of properties, including large portfolios that would increase our size and potentially alter our capita The success of such transactions is subject to a number of t factors, including the risks that: al structure. • • • • • • deposit and incurring certain other acquisition-related costs; we may not be able to obtain financing for such acquisitions on favorable terms; acquired properties may faiff l to perform as expected; even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition after making a non-refundablea the actual costs of repositioning, redeveloping or maintaining acquired properties may be higher than our estimates; the acquired properties may be located in new markets where we may have limited knowledge and understanding of the local economy, an absence of business relationships in the area or unfamiliarity with local governmental and permitting procedures; and we may not be able to efficiently integrate acquired properties, particularly portfolios of properties, into our organization and manage new properties in a way that allows us to realize anticipated cost savings and synergies. Acquired propertiett s may subject us to known and unknown liabi liii tiii es. ll Properties that we acquire may be subject to known and unknown liabilities forff which we would have no recourse, or only limited recourse, to the former owners of such properties or otherwise. As a result, if a liabila ity were asserted against us based upon ownership of acquired property, we might be required to pay significant sums to settle it, which could adversely affect our financial results and cash flow. Unknown liabilities relating to acquired properties could include: liabilities for clean-up of pre-existing disclosed or undisclosed environmental contamination; claims by tenants, vendors, municipalities or other persons arising on account of actions or omissions of the former owners or occupants of the properties; and liabilities incurred in the ordinary course of business. • • • ff 14 We have agra eed not to sell certain oii f oo ur properties and to maintaintt indebtedness subject to gtt uaranteett s. tors, of reducing the amount of tax depreciation we can deductd We acquired in the past and in the future may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership interests in our Operating Partnership. This acquisition structuret has the effect, among other facff f the acquired properties, and typically requires that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their tax bases. We have agreed not to sell some of our properties forff varying periods of time, in transactions that would trigger taxable income to the former owners, and we may enter into similar arrangements as a part of future property acquisitions. These agreements generally provide that we may dispose of the subject properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax deferred transactions. Such transactions can be difficult to complete and can result in the property acquired in exchange for the disposed of property inheriting the tax attributes (including tax protection covenants) of the sold property. Violation of such tax protection agreements may impose significant costs on us. As a result, we are restricted with respect to decisions related to financing, encumbering, expanding or selling these properties. These restrictions on dispositions could limit our ability to sell an asset or pay down partnership debt during a specified time, or on terms, that would be favorable absent over the tax life off such restrictions. a We have also entered into agreements that provide prior owners of properties with the right to guarantee specific amounts of indebtedness and, in the event that the specific indebtedness that they guarantee is repaid or reduced, we would be required to provide substitutet indebtedness for them to guarantee. These agreements may hinder actions that we may otherwise desire to take to repay or refinance guaranteed indebtedness because we would be required to make payments to the beneficiaries of such agreements if we violate these agreements. We may be unable t ll o rtt enew leall ses or re-lease space as leall xx ses expire; ll certain l eas ii es may expireii early.yy If tenants do not renew their leases upon expiration, we may be unable to re-lease the space. Even if the tenants do renew their leases or if we can re-lease the space, the terms of renewal or re-leasing (including the cost of required renovations) may than the current lease terms. Certain leases grant the tenants an early termination right upon payment of a be less favorablea termination penalty or if we faiff ity to renew or release spaces and the early termination of certain leases could adversely affect our ability to make distributions to shareholders. See Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Influence Future Results of Operations - Tenant Rollover Risk.” l to comply with certain material lease terms. Our inabila We face significi ant competm ittt iontt from other real estate developers. ll We compete with real estate developers, operators and institutions for tenants and acquisition and development opportunities. Some of these competitors may have significantly greater finaff ncial resources than we have. Such competition may reduce the number of suitablea investment opportunities available to us, may interfere with our ability to attract and retain tenants and may increase vacancies, which could result in increased supply and lower market rental rates, reducing our bargaining leverage and adversely affect our ability to improve our operating leverage. In addition, some of our competitors may be willing (e.g., because their properties may have vacancy rates higher than those for our properties) to make space available at lower rental rates or with higher tenant concession percentages than available space in our properties. We cannot assure you that this competition will not adversely affecff t our cash flow and our ability to make distributions to shareholders. tt Property ott wnership t ii hrough unconsolidatedtt real estate ventures may limi t oii ur abiliii tyii ii to act excl ee usively i ll n oii ur intertt est.tt We develop, acquire, and contribute properties in unconsolidated real estate ventures with other persons or entities when we believe circumstances warrant the use of such structures. For information regarding our unconsolidated real estate ventures, see Note 4, ''Investment in Unconsolidated Real Estate Ventures,” to our Consolidated Financial Statements. We could t become engaged in a dispute with one or more of our venture partners that might affect our ability to operate a jointly-owned property. Moreover, our venture partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives, including objectives that relate to the appropriate timing and terms of any sale or refinancing of a property. In some instances, our venture partners may have competing interests in our markets that could create conflicts of interest. If the objectives of our venturet partners or the lenders to our unconsolidated real estate ventures are inconsistent with our own objectives, we may not be able to act exclusively in our interests and the value of our investment in the unconsolidated real estate ventures may be affect ed. ff 15 ed equity, Preferr ii mezzaee ff structure and that involve privately nll nine loans, and other investments t tt tt hat tt egotiat d or otherwiseii are subordinate structures willii expose us to greater risk of loss. edtt ii junior in an issuer’s c’ apitaltt We may have made preferred equity investments and may in the future make or acquire additional preferred equity investments, mezzanine loans and other investments that are subordinated or otherwise junior in an issuer’s capita al structuret . To the extent we invest in subordinated debt or mezzanine tranches of an and that involve privately negotiated structures or in preferred equity instruments, such investments and our remedies with respect thereto, entity’s capita including the ability to forec ct to the rights of holders of more senior tranches in the issuer’s capita and, to the extent applicable, contractual intercreditor, co-lender and/or participation agreement provisions. Significant losses related to such investments or loans could adversely affect our results of operations and financial condition. lose on collateral (if any) securing such investments, will be subjeu al structure, ff al structuret t t Because real estate is illiqull id, wdd e may be unable t ll o stt ell propertiett s when in oii ur best interest.tt Real estate investments generally, and in particular large office and mixed use properties like those that we own, often cannot be sold quickly. The capita alization rates at which properties may be sold could be higher than historical rates, thereby reducing our potential proceeds from sale. Consequently, we may not be able to alter our portfolio promptly in response to changes in economic or other conditions. In addition, the Internal Revenue Code limits our ability, as a REIT, to sell properties that we have held forff fewer than two years without potential adverse consequences to us. Furthermore, properties that we have developed and have owned for a significant period of time or that we acquired in exchange for partnership interests in the Operating Partnership often have a low tax basis. If we were to dispose of any of these properties in a taxable transaction, we may be required under provisions of the Internal Revenue Code applicable to REITs to distribute a significant amount of the taxable gain to our shareholders and this could, in turn, impact our cash flow. In some cases, tax protection agreements with third parties will prevent us from selling certain properties in a taxable transaction without incurring refusal held by tenants or partners in unconsolidated real substantial costs. In addition, purchase options and rights of first ff estate venturt es may also limit our ability to sell certain properties. All of these factors reduced our ability to respond to e of our investments and could adversely affect our cash flow and ability to make distributions to changes in the performanc shareholders as well as the ability of someone to purchase us, even if a purchase were in our shareholders’ best interests. ff Our property t tt ll cash flows. tt axe s could increase due to property t axtt tt rate changes or reassessment, which would all dversely impactm our Even if we continue to qualify as a REIT forff federal income tax purposes, we will be required to pay some state and local taxes on our properties. The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. If the property taxes we pay increase, our cash flow would be adversely impacted, and our ability to pay any expected dividends to our stockholders and unitholders could be adversely affected. Regulatory Risk Factors g y Changes in t ii axtt ratestt e and regulat orytt requirements may aa dverserr ly affect our cash flowff and resultsll of operations. Because increases in income and service taxes are generally not passed through to tenants under leases, such increases may adversely affect our cash flow and ability to make expected distributions to shareholders. Our properties are also subject to various regulatory requirements, such as those relating to the environment, fireff and safety.t Our failure to comply with these requirements could result in the imposition of fines and damage awards and could result in a default under some of our tenant leases. Moreover, the costs to comply with any new or different regulations could adversely affect our cash flow and our ability to make distributions to shareholders. We cannot assure you that these requirements will not change or that newly imposed conditions will not require significant expenditures in order to be compliant. tt Potenti alii liabiliii tyii for environmental contamination could rll ii esult ill n s tt ubstantial costs. Under various federal, state and local laws, ordinances and regulations, we may be liable for the costs to investigate and remove or remediate hazardous or toxic substances on or in our properties, often regardless of whether we know of or are responsible for the presence of these substances. These costs may be substantial. While we do maintain environmental insurance, we cannot be assured that our insurance coverage will be sufficient to protect us from all of the aforesaid 16 remediation costs. Also, if hazardous or toxic substances are present on a property, or if we fail to adequately remediate such substances, our ability to sell or rent the property or to borrow using that property as collateral may be adversely affected. Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and also govern emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment containing ral and state laws. We are also polychlorinated biphenyls (PCBs) and underground storage tanks are also regulated by fede subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals. We could incur fines forff the costs of remedial action with respect to the foregoing regulated substances or tanks or related claims arising out of environmental contamination or human exposure to contamination at or from our properties. environmental compliance and be held liabla e forff ff Additionally, we develop, manage, lease and/or operate various properties forff considered to have been or to be an operator of these properties and, therefore, potentially liable forff costs or other potential costs that could relate to hazardous or toxic substances. third parties. Consequently, we may be removal or remediation Americans with Disabilitiii es Act complim ance i could be costly.yy ities Act of 1990, or the ADA, requires that all public accommodations and commercial facilities, The Americans with Disabila including office buildings, meet certain federal requirements related to access and use by disabled persons. Compliance with certain disabled persons’ entrances which could ADA requirements could involve the removal of structural adversely affect our financial condition and results of operations. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses. Noncompliance by us with the ADA or similar or related laws or regulations could result in the imposition on us of governmental fines or in awards of damages against us in favor of private litigants. In addition, changes to existing requirements or enactments of new requirements could require significant expenditures. Such costs may adversely affect our cash flow and ability to make distributions to shareholders. barriers fromff t t Disaster Risk Factors A pandemic, epidemi affect us. ic or outbreak of a contagious tt CC disease, such as the ongoing Cn OVID -19 pandemic, cc ould adversely Pandemics, epidemics, and other public health crises, including the ongoing COVID-19 pandemic, have impacted, and could continue to impact many countries around the globe, including the U.S. The COVID-19 pandemic’s long-term impact on ncial markets, and the job market remain uncertain and could result in prolonged economic downturns global economies, finaff and recessions that adversely impact us and our tenants. The global impact of the outbreak has been rapidly evolving and the responses of many countries, including the U.S., have included quarantines, restrictions on business activities, including construction activities, restrictions on group gatherings, and restrictions on travel. These actions are creating disruption in the global economy and supply chains and adversely impacting many industries, including owners and developers of office and mixed-use buildings. Moreover, there is significant uncertainty around the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as its impact on the U.S. economy and consumer confidence. Demand for space at our properties is dependent on a variety of macroeconomic factors, such as employment levels, interest rates, changes in stock market valuations, rent levels and availability of competing space. These factors can be significantly adversely affected tors beyond our control. The extent to which the COVID-19 pandemic impacts our results will depend on by a variety of facff future developments, many of which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, new variants of COVID-19 and the actions taken to contain it or treat its impact. The impact of the COVID-19 pandemic could negatively impact our business in a number of ways, including: (i) deterioration in the financial condition of our tenants and in their ability to pay rents; (ii) reduction in demand for space in our portfolio; (iii) costs associated with construction delays and cost overruns at our development and redevelopment projects; (iv) costs associated with higher inflation rates; (v) reduction in availability of, and increased costs of, capita al; and (vi) failure of our contract counterparties, including partners in unconsolidated real estate ventures, to meet their obligations. The ongoing situation presents material uncertainty and risk and could have a material adverse effect on our business, results of operations, cash flows ncial condition. and finaff ff We face possibleii risks associatedtt withii the physical effects ott f co ii limat e ctt hange.ee The physical effects of climate change could have a material adverse effect on our properties, operations and business. For example, many of our properties are located along the East Coast, particularly those in the central business districts of 17 Philadelphia, Pennsylvania and Washington, D.C. To the extent climate change causes variations in weather patterns, our markets could experience increases in storm intensity and rising sea-levels. Over time, these conditions could result in declining demand for office space in our buildings or our inabila ity to operate the buildings at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptablea , increasing the cost of energy and increasing the cost of snow removal at our properties. While we maintain insurance coverage for flooding, we may not have adequate insurance to cover the associated costs of repair or reconstruction of sites forff a major future event, lost revenue, including from new tenants that could have been added to our properties but for the event, or other costs to remediate the impact of a significant event. There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business. REIT Risk Factors Failur ii tt distribu ualifyi e to qtt tion to our shareholders. as a REIR T would subjeb ct us to U.S. federal income taxtt which would reduce the cash available ll for r federal income tax purposes. We have not requested and do not We operate our business to qualify to be taxed as a REIT forff plan to request a ruli ng from the IRS that we qualify as a REIT, and the statements in this Report are not binding on the IRS or any court. As a REIT, we generally will not be subject to federal income tax on the income that we distribute currently to our shareholders. Many of the REIT requirements, however, are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances that may not be entirely within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from specific passive sources, such as rent, that are itemized in the REIT tax laws. In addition, to qualify as a REIT, we cannot own specified amounts of debt and equity securities of some issuers. We also are required to distribute to our shareholders with respect to each year at least 90% of our al gains). The fact that we hold substantially all of our assets through the Operating REIT taxable income (excluding net capita Partnership and its subsidiaries and unconsolidated real estate venturt es furff ther complicates the application of the REIT requirements for us. Even a technical or inadvertent mistake could jeopardize our REIT status and, given the highly complex of the rules governing REITs and the ongoing importance of factual determinations, we cannot provide any assurance naturet that we will continue to qualify as a REIT. Changes to rulerr s governing corporate taxation, including REITs, were made by legislation commonly known as the Tax Cuts and Jobs Act (the “TCJA”) and the Protecting Americans From Tax Hikes Act of 2015, signed into law on December 22, 2017 and December 18, 2015, respectively. Congress and the IRS might make further changes to the tax laws and regulations, and the courts might issue new rulings or interpretations of tax law, that make federal income tax it more difficult, or impossible, forff purposes and are able to avail ourselves of one or more of the statutory savings provisions in order to maintain our REIT status, t we would nevertheless be required to pay penalty taxes of $50,000 or more for each such failure. us to remain qualified as a REIT. If we fail to qualify as a REIT forff rr federal income tax purposes, and are unable to avail ourselves of certain savings provisions If we fail to qualify as a REIT forff set forth in the Internal Revenue Code, we would be subject to fede ral income tax at regular corporate rates on all of our income. As a taxable corporation, we would not be allowed to take a deduction for distributions to shareholders in computing our taxable income or pass through long term capita al gains to individual shareholders at favorable rates. For tax years beginning before January 1, 2018, we also could be subject to the federal alternative minimum tax and possibly increased state and local taxes. We would not be able to elect to be taxed as a REIT forff ed to led to qualify as a REIT, we would qualify unless the IRS were to grant us relief under certain statutory have to pay significant income taxes, which would reduce our net earnings available forff investment or distribution to our shareholders. This likely would have a significant adverse effect on our earnings and likely would adversely affect the value of our securities. In addition, we would no longer be required to pay any distributions to shareholders. four years following the year we first provisions. If we faiff ff fail ff ff t e of to hett Operatingii Failur ii partnership wii Partnershi or(( ii p ( tt ave serious adverserr a subsidiary partnership oii consequences to our shareholders. ould hll r unconsolidat edtt ll real estate vtt enture) to be treatedtt as a of the Operating Partnership or any of its subsidiary partnerships or If the IRS were to successfully challenge the tax statust for federal income tax purposes, the Operating Partnership or the affected subsidiary unconsolidated real estate ventures would be taxable as a corporation. In such event, we would cease to qualify partnership or unconsolidated real estate venturet as a REIT and the imposition of a corporate tax on the Operating Partnership, subsidiary partnership or unconsolidated real estate venturet distribution from the Operating Partnership to us and ultimately to our shareholders. would reduce the amount of cash available forff t 18 To maintain our REITEE stattt us, we may be forced to borrow funds on a short-tertt m b conditiii ons. rr asis dii uringii unfavorable market As a REIT, we are subject to certain distribution requirements, including the requirement to distribute 90% of our REIT taxable income. These requirements may result in our having to make distributions at a disadvantageous time or to borrow rates. Compliance with this requirement may hinder our ability to operate solely on the basis of funds at unfavorablea maximizing profits. We may pay some taxes even if wi shareholders. e qualifyi as a REITRR , wTT hich willii reduce the cash available ll tt for distribut iontt to our Even if we qualify as a REIT forff federal income tax purposes, we may be required to pay certain federal, state and local taxes on our income and properties. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income, including capita al gains. Additionally, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capita al gain net income and 100% of our undistributed income from prior years. Moreover, if we have net income fromff “prohibited transactions,” that income will be subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale or series of sales is/are a prohibited transaction depends on the facts and circumstances related to that sale. We cannot guarantee that sales of our properties would not be prohibited transactions unless we comply with certain t statutory safe-harbor provisions. In addition, any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded REIT subsidiaries, will be subject to federal and possibly for federal income tax purposes as entities separate from our taxablea state corporate income tax. In this regard, several provisions of the laws appli to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subjeu ct to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the economic arrangements between the REIT, the REIT’s customers, and the taxable REIT subsidiary are not comparablea to similar arrangements between unrelated parties. Finally, even if we continue to qualify as a REIT forff federal income tax purposes, we will be required to pay some state and local real property taxes on our properties, and some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to fede ral income tax on that income because not all states and localities foll ow the federal income tax treatment of REITs. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available forff distributions to our shareholders. cablea a ff ff Legislat e iontt that modifies the rulesll applicable t ll o ptt artnership t ii axtt audits mtt ay affect us. The Bipartisan Budget Act of 2015, effective for taxable years beginning after December 31, 2017, requires our operating partnership and any subsidiary partnership to pay the hypothetical increase in partner-level taxes (including interest and penalties) resulting from an adjustment of partnership tax items on audit or in other tax proceedings, unless the partnership elects an alternative method under which the taxes resulting fromff the adjustment (and interest and penalties) are assessed at the partner level. Uncertainties remain as to the application of these rules, including the application of the alternative method to partners that are REITs, and the impact they will have on us. However, it is possible, that partnerships in which we invest may be subject to U.S. federal income tax, interest and penalties in the event of a U.S. federal income tax audit as a result of these law changes. Legislat e ivtt e or regulatory tr axtt changes relatll edtt to REITsEE could material lyll and adversely rr tt affect our business. ii At any time, the federal income tax laws or regulations governing REITs or the other administrative interpretations of those laws or regulations may be changed, possibly with retroactive effect. We cannot predict if or when any new federal income tax law, regulation or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective or whether any such law, regulation or interpretation may take effect retroactively. We and our shareholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation. 19 on intended to qualifyll as a SectSS iontt 1031 Exchangen is latertt detertt mirr nedii and complem te the acquisitiontt of suitabii ee le replac ement property to effecff to be taxable,ll or if we are unable t ll ott e may face t a SecSS tion 1031 Exchange, we If a transacti tt identifyi adverse consequences. From time to time we seek to dispose of properties in transactions that are intended to qualify as tax-deferred “like kind exchanges” under Section 1031 of the Internal Revenue Code of 1986, as amended (a “Section 1031 Exchange”). It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable. It is also possible that we are unable to identify and complete the acquisition of suitablea replacement property to effect a Section 1031 Exchange. In any such case, our taxable income and earnings and profits would increase. al they received. In some This could increase the dividend income to our shareholders by reducing any returnt circumstances, we may be required to pay additional dividends or, in lieu of that, corporate income tax, possibly including interest and penalties. As a result, we may be required to borrow funds in order to pay additional dividends or taxes, and the to distribute to our shareholders. In addition, if a Section payment of such taxes could cause us to have less cash availablea 1031 Exchange were later to be determined to be taxable, we may be required to amend our tax returns year in question, including any information reports we sent our shareholders. Moreover, it is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties on a tax deferred basis. for the applicablea of capita t to obtaintt ii Failure Zones may have adverse consequences. the taxtt benefitsii and remain cii ll ompliant withii in Qualifi ll ed Opportunityii Zones and Keystone tt Opportunityii Certain of our properties have the benefit of governmental tax incentives for development in areas and neighborhoods which have not historically seen robust commercial development. These incentives typically have specific sunset provisions and incentives. We invest and plan to may be subject to governmental discretion in the eligibility or award of the applicablea continue to heavily invest in Qualified Opportunity Zones as part of the federal program and Keystone Opportunity Zt ones in Pennsylvania dued to the related tax benefits. The expiration of these incentive programs or the inability of potential tenants or users to be eligible for or to obtain governmental approval of the incentives may have an adverse effect on the value of our Properties and on our cash flow and net income, and may result in impairment charges. In addition, the failure to remain compliant with such programs may result in significant tax burdens. tt Certain limitat ii ions willii existii with respect s tt to a third party’stt abilitll y t tt o att cquire us or effec e tuate a change in control. Limitations imposed to protect our REITEE status. In order to protect us against the loss of our REIT status, our Declaration of Trust limits any shareholder from owning more than 9.8% in value of our outstanding shares, although we have granted in the past, and may continue to grant in the future certain waivers of this limitation to certain shareholders under certain conditions. The ownership limit may have the effect of precluding acquisition of control of us. If anyone acquires shares in excess of the ownership limit, we may: • • • • • • legal action to stop the transaction; consider the transfer to be null and void; not reflect the transaction on our books; institutet not pay dividends or other distributions with respect to those shares; not recognize any voting rights for those shares; and consider the shares held in trust for the benefit of a person to whom such shares may be transferred. ii tt o issue Limitation due to our ability t preferred shares. Our Declaration of Trust authorizes our Board of Trustees to cause us to issue preferred shares, without limitation as to amount and without shareholder consent. Our Board of Trustees is able to establia sh the preferences and rights of any preferred shares issued and these shares could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our shareholders’ best interests. Advance Notice Provisions for Shareholder NomiNN nations and Proposals.ll Our bylaws require advance notice for shareholders to nominate persons for election as trustees at, or to bring other business before, any meeting of our shareholders. This bylaw provision limits the ability of shareholders to make nominations of persons for election as trustees or to introduce other proposals unless we are notified in a timely manner prior to the meeting. 20 General Risk Factors We are dependent upon our key personnel. We are dependent upon our key personnel, particularly Gerard H. Sweeney - President and Chief Executive Officer, Thomas DeVuono - Executive Vice President and Senior Wirth - Executive Vice President and Chief Financial Officer, Jeffrey Managing Director, William Redd – Executive Vice President and Senior Managing Director and George Johnstone - Executive Vice President, Operations. Among the reasons that Messrs. Sweeney, Wirth, DeVuono, Redd and Johnstone are reputation, which attracts business and investment opportunities and important to our success is that each has a favora partners and other investors. If we lost their assists us in negotiations with lenders, unconsolidated real estate venturet services, our relationships with lenders, potential tenants and industry personnel could be affected. We are dependent on our other executive officers for strategic business direction and real estate experience. Loss of their services could adversely affect our operations. blea ff ff Our abilityii to make distrii tt ibutions is subjeb ct to various risks. Historically, we have paid quarterly distributions to our shareholders. Our ability to make distributions in the future will depend upon: • • • • • • the operational and financial performance of our properties; capital expenditures with respect to existing, developed and newly acquired properties; the amount of, and the interest rates on, our debt; ; capital needs of our unconsolidated real estate ventures t general and administrative costs associated with our operation as a publicly-held REIT; and the absence of significant expenditures relating to environmental and other regulatory matters. Certain of these matters are beyond our control and any adverse changes could have a material adverse effect on our cash flow and our ability to make distributions to shareholders. We face possibleii federal, statett and local tax audits.tt ral income taxes, but are subject to Because we are organized and qualify as a REIT, we are generally not subject to fede certain state and local taxes. Certain entities through which we own real estate have undergone tax audits. There can be no assurance that futff uret audits will not have a material adverse effecff t on our results of operations. ff Many factors tt can have an adverse effect on the market value of our securitiii es. A number of facff include: • tors might adversely affect the price of our securities, many of which are beyond our control. These factors increases in market interest rates, relative to the dividend yield on our securities. If market interest rates go up, prospective purchasers of our securities may require a higher yield. Higher market interest rates would not, however, result in more funds for us to distribute and, to the contrary, would likely increase our borrowing costs and potentially decrease funds available forff distribution. Thus, higher market interest rates could cause the market price of our common shares to go down; anticipated benefit of an investment in our securities as compared to investment in securities of companies in other industries (including benefits associated with the tax treatment of dividends and distributions); perception by market professionals of REITs generally and REITs comparable to us in particular; level of institutional investor interest in our securities; relatively low trading volumes in securities of REITs; our results of operations and financial condition; and investor confidence in the stock market generally. • • • • • • The market value of our common shares is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash distributions. Consequently, our common shares may trade at prices that are higher or lower than our net asset value per common share. If our future earnings or cash distributions are less than expected, it is likely that the market price of our common shares will diminish. 21 tt Additdd ional issuances of equity stt ecuritiestt may be dilut ivtt e to stt ii hareholders. The interests of our shareholders could be diluted if we issue additional equity securities to finance future developments or acquisitions or to repay indebtedness. Our Board of Trustees may authorize the issuance of additional equity securities a without shareholder approva l. In addition, in the past we have maintained a continuous offering program, which, when such ive, allowed us to issue shares in at-the-market offerings. We may in the future enter into a similar program was effect continuous offering program. Our ability to execute our business strategy depends upon our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including the issuance of common and preferred equity. ff ff The issuance of po referred securities may adversely affect thett i rights ll of holders of our common shares. r s has the power to establia Because our Board of Trustee sh the preferences and rights of each class or series of preferred shares, we may afford the holders in any series or class of preferred shares preferences, distributions, powers and rights, voting or sh the otherwise, senior to the rights of holders of common shares. Our Board of Trustees also has the power to establia preferences and rights of each class or series of units in the Operating Partnership, and may afford the holders in any series or class of preferred units preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders of common units. ii We may incur impai rmen ii t charges. We evaluate on a quarterly basis our real estate portfolios for indicators of impairment. Impairment charges reflect management's judgment of the probability and severity of the decline in the value of real estate assets and investments we own. These charges and provisions may be required in the future as a result of factors beyond our control, including, among other things, changes in our expected holding periods, changes in the economic environment and market conditions affecting the value of real property assets or natural or man-made disasters. If we are required to take impairment charges, our results of operations could be adversely impacted. t An increase in interest rates would increase our interest costs on variable rate debt and could adversely impactm ii to refinanc debt or sell assets on favorable terms or at all.ll e existi ngii ee our abilityii Rising interest rates could limit our ability to refinance existing debt when it matures or significantly increase our future interest expense. From time to time, we enter into interest rate swap aa greements and other interest rate hedging contracts. While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risk that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement or termination of the agreements, the agreements will be unenforceablea and the underlying transactions will fail to qualify as highly- effective cash flow hedges under the applicablea accounting guidance. In addition, an increase in interest rates could decrease the amounts third parties are willing or abla e to pay for our assets, thereby limiting our ability to recycle capital and change our portfolio promptly in response to changes in economic or other conditions. Our degree of leverage could limi or debt securities. ii t oii ur abiliii tyii to obtaintt tt additional ii financ ing or affect the market price of oo ur equity shares Our organizational documents do not contain any limitation on the amount of indebtedness we may incur. We are subject to risks associated with debt financing, such as the insufficiency of cash flow to meet required debt service payment obligations and the inability to refinance existing indebtedness. If our debt cannot be paid, refinanced or extended at maturity, we may not be able to make distributions to shareholders at expected levels or at all. Furthermore, an increase in our interest expense could adversely affect our cash flow and ability to make distributions to shareholders. If we do not meet our debt service losed on, which would have a material adverse effect on obligations, any properties securing such indebtedness could be forec our cash flow and ability to make distributions and, depending on the number of properties forec losed on, could threaten our continued viabila ity. Our degree of leverage could also make us more vulnerable to a downturn in business or the economy in general. ff ff t The terms and covenants rtt elatll ingtt to our inde ii btedness could adversely impactm our economic performance. r Our credit facilities, term loans and the indenturet amended facff governing our unsecured public debt securities contain (and any new or ility and term loans may contain) restrictions, requirements and other limitations on our ability to incur 22 ct to compliance with such financial and other covenants. In the event that we fail indebtedness, including total debt to asset ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt which we must maintain. Our ability to borrow under our credit facilities is subjeu to satisfy these covenants, we would and may be required to repay such debt with capital be in default under the credit facff from other sources. Under such circumstances, other sources of capita al may not be available to us, or may be available only at unattractive terms. In addition, the mortgages on our properties, including mortgages encumbering our unconsolidated real estate ventures , contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. If we breach covenants in our secured debt agreements, the lenders can declare a defaul t and take possession of the property securing the defaulted loan. ilities, the term loans and the indenturet ff ff t A downgradi dd ngii of our debt could subject us to htt igher borrowing costs. In the event that our unsecured debt is downgraded by Moody’s Investor Services or Standard & Poor’s from the current ratings, we would likely incur higher borrowing costs and the market prices of our common shares and debt securities might decline. Discontinuation of the London interbank offered rate and transitiii on to an alternat our operating rn esultsll tt ivtt e benchmark could adversely affect In March 2021, the Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates the London interbank offered rate (“LIBOR”), announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after June 30, 2023. Changes in, or the planned discontinuation of, LIBOR would cause changes in how interest is calculated on our variable rate debt as our variable rate debt is indexed to LIBOR. There can be no assurances as to what alternative interest rates may be and whether such interest rates, such as the Secured Overnight Financing Rate ("SOFR"), will be more or less favorablea than LIBOR. Any other unforeseen impacts of the potential discontinuation of LIBOR could have a negative impact on our results of operations and our variable rate debt. Data securityii breaches may cause damage to our business ii ee and reputati on. In the ordinary course of our business, we maintain sensitive data, including our proprietary business information and the information of our tenants and business partners, in our data centers and on our networks. The risk of a security breach or disruption, mainly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber nd sophistication. Notwithstanding the security measures undertaken, terrorists, has generally increased in number, intensity at our information technology may be vulnerable to attacks or breaches resulting in proprietary information being publicly disclosed, lost or stolen. There can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Protected information, networks, systems and facilities remain vulnerable because the techniques used in such attempted security breaches evolve and may not be recognized or detected until launched against a target. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures. Data and security breaches could: • • • • • • • • ity to properly monitor our compliance with the rules and regulations regarding our qualification the proper functioning of our networks and systems and therefore our operations and/or those of our client disrupt r tenants; result in misstated financial reports, violations of loan covenants, missed reporting deadlines, and/or missed permitting deadlines; result in our inabila as a REIT; result in the unauthorized access to, and destruction, loss, theft, misappropriation, or release of proprietary, confidential, sensitive, or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes; result in our inabila ity to maintain the building systems relied upon leased space; require significant management attention and resources to remedy any damages that result; subject us to claims and lawsuits for breach of contract, damages, credits, penalties, or termination of leases or other agreements; and/or damage our reputation among our client tenants and investors generally. by our client tenants forff the efficient use of their u 23 While we maintain insurance coverage that may, subject to policy terms and conditions including deductibles, cover specific aspects of cyber risks, such insurance coverage may be insufficient to cover all losses. Third parties to whom we outsource certain of our functions are also subjeu . We review and assess the cybersecurity controls of our third party service providers and vendors, as appropriate, and make changes to our business processes to manage these risks. Data breaches and/or the insolvency of such third parties and vendors may result in us incurring costs and may have other negative consequences. ct to the risks outlined above a Terroristii attacks which our securitiestt tt are traded. tt and other acts of violence or war may aa dversely impactm our performance and may affect thett market rr s ott n Terrorist attacks against our properties, or against the United States or our interests, may negatively impact our operations and the value of our securities. Attacks or armed conflicts could result in increased operating costs; forff example, it might cost more in the future for building security, property and casualty i nsurance, and property maintenance. As a result of terrorist t activities and other market conditions, the cost of insurance coverage for our properties could also increase. In addition, our insurance policies may not recover all of our property replacement costs and lost revenue resulting from an attack. We might not be able to pass through the increased costs associated with such increased security measures and insurance to our tenants, which could reduce our profitability and cash flow. Furthermore, any terrorist attacks or armed conflicts could result in increased volatility in or damage to the United States and worldwide financial markets and economy. Such adverse economic conditions could affect the ability of our tenants to pay rent and our cost of capita al, which could have a negative impact on our results. Some potenti alii tt losses are not covered by insurance. We currently carry property insurance against all-risks of physical loss or damage (unless otherwise excluded in the policy) including time element and commercial general liability coverage on all of our properties. There are, however, types of losses, such as lease and other contract claims, biological, radiological and nuclear hazards and acts of war that generally are not insured. We cannot assure you that we will be abla e to renew insurance coverage in an adequate amount or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses dued to earthquakes, terrorist acts and mold, flood, or, if offered, these types of insurance may be prohibitively expensive. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capita al we have invested in a revenue from the property. In such an event, we might nevertheless remain property, as well as the anticipated futff uret obligated for any mortgage debt or other finaff ncial obligations related to the property. We cannot assure you that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our cash flow and ability to make distributions to shareholders. If one or more of our insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such claims could have an adverse effect on our financial condition and results of operations. In addition, if one or more of our insurance providers were to become subject to insolvency, bankruptcy or other proceedings and our insurance policies with the provider were terminated or cancelled as a result of those proceedings, we cannot guarantee that we would be able to find alternative coverage in adequate amounts or at reasonable prices. In such case, we could experience a lapse in any or adequate insurance coverage with respect to one or more properties and be exposed to potential losses relating to any claims that may arise during such period of lapsed or inadequate coverage. a t d retention amounts, to provide risk mitigation forff nsurance, we use a combination of insurance products, some of which include In addition to property and casualty i deductibles and self-insure the potential liabilities associated with various ff liabilities, including workers’ compensation, general contractors, directors and officers and employee health-care benefits. Liabilities associated with the risks that are retained by us are estimated, in part, by considering historical claims experience and actuarial assumptim ons. While we carry general liability and umbrella policies to mitigate such losses on our general liability risks, our results could be materially impacted by claims and other expenses related to such insurance plans if future occurrences and claims differff from these assumptim ons and historical trends or if employee health-care claims which we self- insure up to a set limit per employee (and which are insured above such self-insured retention amount) exceed our expectations or historical trends. Item 1B. Unresolved Staff Comments None. 24 Item 2. Properties Overview As of December 31, 2021, we owned 77 properties that contain an aggregate of approxi mately 13.0 million net rentable square feet and consist of 72 office properties and five mixed-use properties (collectively, the "Core Properties"), one development property and three redevelopment properties (collectively, the "Properties"). The properties are located in or near Philadelphia, Pennsylvania; Austin, Texas; Metropolitan Washington, D.C.; Southern New Jersey; and Wilmington, Delaware. As of December 31, 2021, the properties, excluding properties under development and redevelopment, were approximately 91.3% occupied. As of December 31, 2021, we also owned economic interests in nine unconsolidated real estate ventures ,” to our Consolidated Financial Statements for further information. . See Note 4, ''Investment in Unconsolidated Real Estate Ventures a t t Property Statistics The following tablea years and thereafter. This table assumes no exercise of renewal options or termination rights: shows lease expirations for the Core Properties as of December 31, 2021, during each of the next 10 Year of Lease Expiration December 31, 2022 ................................................................................................................... 2023 ................................................................................................................... 2024 ................................................................................................................... 2025 ................................................................................................................... 2026 ................................................................................................................... 2027 ................................................................................................................... 2028 ................................................................................................................... 2029 ................................................................................................................... 2030 ................................................................................................................... 2031 ................................................................................................................... 2032 and thereafter ............................................................................................ Rentable Square Feet (in thousands) 1,213 818 1,154 1,175 929 1,375 746 1,279 737 443 2,031 11,900 Final Annualized Base Rent Under Expiring Leases (a) (in thousands) 41,266 $ 30,393 46,083 48,790 36,361 55,930 28,863 57,246 35,092 21,348 91,550 492,922 $ Percentage of Total Final Annualized Base Rent Under Expiring Leases 8.4 % 6.2 % 9.3 % 9.9 % 7.4 % 11.3 % 5.9 % 11.6 % 7.1 % 4.3 % 18.6 % 100.0 % (a) Represents the annualized cash rental rate of base rents, including tenant reimbursements, in the final month prior to expiration. Tenant reimbursements generally include payment of a portion of real estate taxes, operating expenses, and common area maintenance and utility charges. The following tablea about our geographic shows the geographic locations for the Core Properties as of December 31, 2021. For more information locations, see Note 19, ''Segment Information" to our Consolidated Financial Statements: a Location Philadelphia........................................ Pennsylvania Suburbs ........................ Austin ................................................. Metropolitan Washington, D.C. ......... Other................................................... Net Rentable Square Feet (in thousands) Percentage Leased as of December 31, 2021 Leased Square Feet (in thousands) 4,846 4,036 2,768 769 620 13,039 98.0 % 93.7 % 93.0 % 68.0 % 74.7 % 92.7 % 4,749 3,780 2,575 523 463 12,090 Number of Properties 12 34 20 4 7 77 Total Base Rent (a) (in thousands) 140,641 $ 113,817 62,849 12,402 7,995 337,704 $ Percentage of Base Rent 41.6 % 33.7 % 18.6 % 3.7 % 2.4 % 100.0 % (a) Represents base rents earned during the year, including tenant reimbursements, and excludes parking income, tenant inducements, and deferred market rent adjustments. 25 lowing tablea The folff tenants exercise renewal options or termination rights, if any, at or prior to scheduled expirations: tenants of the Core Properties as of December 31, 2021 and assumes that none of the shows the majora Tenant Name IBM, Inc. ......................................................................................................................... Spark Therapeutics, Inc................................................................................................... Comcast Corporation....................................................................................................... FMC Corporation ............................................................................................................ CSL Behring, LLC .......................................................................................................... Troutman Pepper Hamilton Sanders LLP ....................................................................... Lincoln National Management Corporation ................................................................... Independence Blue Cross, LLC ...................................................................................... The Trustees of the University of Pennsylvania ............................................................. SailPoint Technologies, Inc............................................................................................. Other................................................................................................................................ $ $ Annualized Base Rents (a) (in thousands) Percentage of Aggregate Annualized Base Rents 19,762 16,847 11,811 11,126 10,693 9,571 9,545 7,892 7,111 7,046 322,573 433,977 4.6 % 3.9 % 2.7 % 2.6 % 2.5 % 2.2 % 2.2 % 1.8 % 1.6 % 1.6 % 74.3 % 100.0 % (a) Represents the annualized base rent, including tenant reimbursements, for each lease in effect at December 31, 2021. Tenant reimbursements generally include payment of a portion of real estate taxes, operating expenses, and common area maintenance and utility charges. Developments/Redevelopments As of December 31, 2021, we were developing/redeveloping 0.6 million rentable square feet of office/life science properties and one parking facility. Item 3. Legal Proceedings We are involved from time to time in legal proceedings, including tenant disputes, vendor disputes, employee disputes and disputes arising out of agreements to purchase or sell properties or unconsolidated real estate ventures and disputes relating to state and local taxes. We generally consider these disputes to be routine to the conduct of our business and management believes that the final outcome of such proceedings will not have a material adverse effect on our financial position, results of operations or liquidity. Item 4. Mine Safety Disclosures Not applicable. 26 Item 5. Equity Securities Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of PART II are traded on the New York Stock Exchange (“NYSE”) under the symbol The common shares of Brandywine Realty Trust “BDN.” There is no established trading market for units of partnership interests in the Operating Partnership. On 17, 2022, there were 544 holders of record of our common shares and 20 holders of record (in addition to February r Brandywine Realty Trust) of Class A units of limited partnership interest in the Operating Partnership. On February 17, 2022, the last reported sales price of the common shares on the NYSE was $13.49. rr rr For each quarter in 2021 and 2020, the Operating Partnership paid a cash distribution per Class A unit in an amount equal to the dividend paid on a common share for each such quarter. r as a REIT, we must make annual distributions to shareholders of In order to maintain the status of Brandywine Realty Trust al gains). Future distributions will be declared at the discretion of at least 90% of our taxable income (not including net capita al requirements, the annual our Board of Trustees and will depend on our actual cash flow, distribution requirements under the REIT provisions of the Internal Revenue Code and such other facff tors as our Board of Trustees deem relevant. Our credit facilities contain certain restrictions on the payment of dividends. Those restrictions permit us to pay dividends to the greater of (i) an aggregate amount required by us to retain our qualification as a REIT forff Federal income tax purposes and (ii) 95% of our funds from operations (FFO). See Item 6., “Selected Financial Data – Liquidity,” and Note 9, ''Debt Obligations,” to our Consolidated Financial Statements forff financial condition and capita further details. ff Our Board of Trustees has adopted a dividend policy designed such that our quarterly distributions are consistent with our quarterly distributions to shareholders; however, the timing normalized annualized taxable income. We expect to make future and amount of future distributions will be at the discretion of our Board and will depend on our actual funds from operations, financial condition and capia tal requirements and the annual distribution requirements under the REIT provisions of the Code. ff ff See Note 15, Statements forff Note 13, ''Beneficiaries' Equity of the Parent Company,” to our Consolidated Financial Statements forff related to our share repurchase program during the year ended December 31, 2021. ''Share Based Compensation, 401(k) Plan and Deferred Compensation," to our Consolidated Financial information related to compensation plans under which our common shares are authorized for issuance. See further information In 2021, we redeemed 157,651 Class A units of limited partnership interest held by unaffiliated third parties forff total cash payments of $2.3 million. During the first quarter of 2022, we redeemed 307,516 Class A units of limited partnership interest held by unaffiliated third parties for total cash payments of $4.0 million. 27 SHARE PERFORMANCE GRAPH on the common shares with the The SEC requires us to present a chart comparing the cumulative total shareholder returnt of (i) a broad equity index and (ii) a published industry or peer group index. The cumulative total shareholder returnt for the common shares with the cumulative shareholder following chart compares the cumulative total shareholder returnt of companies on (i) the S&P 500 Index, (ii) the FTSE NAREIT All Equity REITs Index, (iii) the Russell 2000 Index returnt and (iv) the FTSE NAREIT Equity Office Index for the period beginning December 31, 2016 and ending December 31, 2021 and assumes an investment of $100, with reinvestment of all dividends, has been made in the common shares and in each index on December 31, 2016. Total Return Perforr rmance S&P 500 Index FTSE NAREIT All Equity REITs Index Russell 2000 Index FTSE NAREIT Equity Office Index Brandywine Realty Trust 250 200 150 100 e u l a V x e d n I 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 Indexee S&P 500 Index........................................... FTSE NAREIT All Equity REITs Index ... Russell 2000 Index..................................... ff FTSE NAREIT Equity Office Index.......... ........................... Brandywine Realty Trust rr Period Ending 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 233.41 179.87 176.39 117.68 105.55 100.00 100.00 100.00 100.00 100.00 116.49 104.28 102.02 89.99 84.62 153.17 134.17 128.06 118.26 109.12 181.35 127.30 153.62 96.46 88.33 121.83 108.67 114.65 105.25 114.42 Item 6. Item 7. [Reserved] Management’s Discussion and Analysis of Financial Condition and Results of Operations ring elsewhere The following discussion should be read in conjunction with the Consolidated Financial Statements appea herein and is based primarily on our Consolidated Financial Statements forff the years ended December 31, 2021, 2020 and 2019. This report including the following discussion, contains forward-looking statements, which we intend to be covered by the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance a 28 that our expectations will be achieved. These forwa differ fromff ff expectations. “See “Forward-Looking Statements” immediately before Part I of this report. rd-looking statements are inherently uncertain, and actual results may OVERVV VIEW twelve months ended December 31, 2021, we owned and managed properties within fiveff During the segments: (1) Philadelphia Central Business District (“Philadelphia CBD”), (2) Pennsylvania Suburbs, (3) Austin, Texas, (4) Metropolitan Washington, D.C., and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Metropolitan Washington, D.C. segment includes properties in Northern Virginia, Washington, D.C. and Southern Maryland. The Other segment includes properties in Camden County, New Jersey and New Castle County, Delaware. In addition to the five segments, our corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions. d the management and We generate cash and revenue from leases of space at our Properties and, to a lesser extent, fromff development of properties owned by third parties and from investments in the unconsolidated real estate ventures. Factors that we evaluate when leasing space include rental rates, costs of tenant improvements, tenant creditworthiness, current and expected operating costs, the length of the lease term, vacancy levels, and demand for space. We also generate cash through sales of assets, including assets that we do not view as core to our business plan, either because of location or expected growth potential, and assets that are commanding premium prices from third party investors. t Our financial and operating performance is dependent upon the demand for office, residential, parking, and retail space in our markets, our leasing results, our acquisition, disposition and development activity, our financing activity, our cash requirements and economic and market conditions, including prevailing interest rates. ity of finaff Adverse changes in economic conditions, including the ongoing effects of the global COVID-19 pandemic and inflation, could result in a reduction of the availabila ncing and higher borrowing costs. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it is impacting our tenants, employees, and business partners. Vacancy rates may increase, and rental rates and rent collection rates may decline as the current economic climate may negatively impact tenants.The long-term impact of the ongoing COVID-19 pandemic on the global economy and our tenants and prospective tenants remains uncertain and will depend on new information which may emerge concerning the severity of COVID-19, new variants of COVID-19 and the actions taken to contain it or treat its impact. In addition, the government responses to control the pandemic are creating disruption in the global economy and supply chains and adversely impacting many industries, including owners and developers of office and mixed-use buildings. r Overall economic conditions, including but not limited to labor shortages, supply chain constraints, and deteriorating financial and credit markets, could have a dampening effect on the fundamentals of our business, including increases in past due accounts, tenant defaults, lower occupancy and reduced effective rents. These adverse conditions could impact our net income and cash flows and could have a material adverse effect on our financial condition. We believe that the quality of our assets and the strength of our balance sheet will enable us to raise capita al, if necessary, in various forms and from different sources, including through secured or unsecured loans from banks, pension funds and life insurance companies. However, there can be no assurance that we will be abla e to borrow funds on terms that are economically attractive or at all. We continue to seek revenue growth throughout our portfolio by increasing occupancy and rental rates. Occupancy at our Core Properties at December 31, 2021 was 91.3% compared to 91.9% at December 31, 2020. 29 The table below summarizes selected operating and leasing statistics of our wholly owned properties forff December 31, 2021 and 2020: the years ended Leasing Activity Core Properties (1): Total net rentable square feet owned................................................................................... Occupancy percentage (end of period)................................................................................ Average occupancy percentage........................................................................................... Total Portfolio, less properties in development (2): Tenant retention rate (3)...................................................................................................... New leases and expansions commenced (square feet)........................................................ Leases renewed (square feeff t) .............................................................................................. on (square feet) ................................................................................................ Net absorpti (4): Percentage change in rental rates per square foot ff New and expansion rental rates........................................................................................ Renewal rental rates ......................................................................................................... Combined rental rates....................................................................................................... a Year Ended December 31, 2021 2020 13,039,634 13,412,591 91.3 % 89.6 % 91.9 % 89.8 % 52.8 % 52.2 % 661,826 484,574 (49,724) 861,978 642,112 (91,207) 23.1 % 12.4 % 16.2 % 21.5 % 13.7 % 17.5 % Capita al Costs Committed (5): Leasing commissions (per square foot)............................................................................ $ Tenant Improvements (per square foot) ........................................................................... $ Weighted average lease term (years)................................................................................ Total capita al per square foot per lease year ...................................................................... $ 8.54 18.38 7.0 3.23 $ $ $ 9.18 22.06 7.6 4.01 Includes leasing related to completed developments and redevelopments, as well as sold properties. (1) Does not include properties under development, redevelopment, held for sale, or sold. (2) (3) Calculated as percentage of total square feet. (4) (5) Calculated on a weighted average basis. Includes base rent plus reimbursement for operating expenses and real estate taxes. In seeking to increase revenue through our operating, financing, and investment activities, we also seek to minimize operating risks, including (i) tenant rollover risk, (ii) tenant credit risk and (iii) development risk. Tenant Rollover Risk u expiration, will not be renewed, that space may not be relet, or that the We are subject to the risk that tenant leases, upon to us than the current lease terms. terms of renewal or reletting (including the cost of renovations) may be less favora l annualized base rents as of December 31, 2021 Leases that accounted forff (representing approximately 10.2% of the net rentablea n square feet of the properties) are scheduled to expire without penalty i 2022. We maintain an active dialogue with our tenants in an effort to maximize lease renewals. If we are unable to renew leases or relet space under expiring leases, at anticipated rental rates, or if tenants terminate their leases early, our cash flow would be adversely impacted. approximately 8.4% of our aggregate finaff blea ff t Tenant Credit Riskii In the event of a tenant default, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. Our management evaluates our accrued rent receivablea reserve policy in light of our tenant base and general and local economic conditions. Our accrued rent receivablea allowance was $4.1 million or 2.4% of our accrued rent receivable balance as of December 31, 2021 compared to $5.1 million or 3.2% of our accrued rent receivablea balance as of December 31, 2020. 30 If economic conditions deteriorate, including as a result of the ongoing COVID-19 pandemic and inflation, we may accounts, defaults, lower occupancy and reduced effective rents. This condition would experience increases in past dued negatively affect our future net income and cash flows and could have a material adverse effect on our financial condition. Development Riskii p Development projects are subject to a variety of risks, including construction delays, construction cost overruns, building moratoriums, inabila ity to enter into construction, development and other agreements on favorablea terms, and unexpected environmental and other hazards. terms, inability to lease space at projected rates, inabila ity to obtain financing on favorablea As of December 31, 2021 the following active development and redevelopment projects remain under construction in lowing activity (dollars, in thousands): progress and we were proceeding on the folff Property/Portfolio Name 405 Colorado Street (a) 250 King of Prussia Road (b) Location Austin, TX Radnor, PA Completion Date Q2 2021 (c) Activity Type Development Approximate Square Footage 205,803 Estimated Costs 121,864 $ Q2 2022 Redevelopment 168,294 $ 82,854 Amount Funded $ $ 87,033 28,400 (a) (b) (c) Estimated costs include $2.1 million of existing property basis through a ground lease. Project includes 520 parking spaces. Total project costs include $20.6 million of existing property basis. The parking garage and occupied portions of the office building were placed into service during 2021. In addition to the properties listed above significant redevelopment costs, and one parking facility in Philadelphia, Pennsylvania as redevelopment. , we have classified one office building in Herndon, Virginia that has yet to incur a CRITIC RR ALCC ACCOUNTIUU NGII POLICIES AND ESTIMTT ATES MM Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptim ons that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting periods. to make Certain accounting policies are considered to be critical accounting policies, as they require management assumptim ons about matters that are highly uncertain at the time the estimate is made and changes in the accounting estimate are reasonably likely to occur from period to period. We believe the folff lowing critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Impairment rr We assess each of our real estate investments forff indicators of impairment quarterly or when circumstances indicate that a real estate investment may be impaired. When indicators of potential impairment are present that suggest that the carrying amounts of real estate investments and related intangible assets may not be recoverablea ity by determining whether the respective carrying values will be recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their eventual disposition over, in most cases, a ten-year holding period. If we believe there is a significant possibility that we might dispose of the assets earlier, we assess the recoverabila ity using a probability weighted analysis of the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the assets over the various possible holding periods. If the recoverabila ity assessment indicates that the carrying value of a tested real estate investment is not recoverablea from estimated undiscounted future cash flows, it is written down to its estimated faiff r value and an impairment is recognized. If and when our plans change, we revise our ity analyses to use the cash flows expected from the operations and eventual disposition of each asset using recoverabila holding periods that are consistent with our revised plans. , we assess the recoverabila sales. Real estate investment fair values are estimated based on contract prices, discounted cash flows, or comparablea cash flows used in such analyses are based on our views of market and economic conditions. The estimation Estimated futuret tive and is based on various assumptim ons, including but not limited to market rental rates, of future cash flows is subjec capia talization rates, and recent sales data forff cash flows are discounted when determining fair value of an asset. Most of these assumptim ons are influenced by our direct experience with the real real estate leasing and brokerage firms. estate investments and their markets as well as market data obtained fromff alization or discount rate also requires significant judgment and is typically based on many Determining the appropriate capita comparable real estate investments. Estimated future u ff 31 factors, including the prevailing rate forff the market or submarket, as well as the quality and location of the real estate investment. Changes in the estimated future cash flows due to changes in our plans for a real estate investment, views of market and economic conditions and/or our ability to obtain development rights could result in recognition of an impairment which could be material. sale are carried at the lower of their carrying values (i.e., cost less accumulated depreciation Real estate investments held forff r values less costs to sell. Accordingly, decisions to sell and any impairment recognized, where applicable) or estimated faiff development will result in certain operating real estate investments, real estate investments in development or land held forff r values less costs to sell. The impairments if carrying values of the specific real estate investments exceed their estimated faiff real estate investments and, where estimates of faiff applicable, contracts or the results of negotiations with prospective purchasers. These estimates are subject to revision as market conditions, and our assessment of such conditions, change. r value consider matters such as recent sales data forff comparablea In addition to our real estate investments, we review each of our investments in unconsolidated real estate ventures to determine whether there are any indicators, including property operating performance, changes in anticipated hold periods, may be impaired. If any and general market conditions, that the Company's investment in the unconsolidated joint venturet indicators of impairment are present, we calculate the fair If the fair value of the investment is less than the carrying value, we determine whether the impairment is other than temporary. ff If the impairment is determined to be other than temporary, we record an impairment. value of the investment in the unconsolidated real estate venture. ff t t a We use considerablea judgment in the determination of whether indicators of impairment are present and, in the assumptim ons, estimations, and inputs used in calculating the fair value of the investment, which is generally determined through income alization models. These judgments are similar to those valuation approaches, including discounted cash flows and direct capita outlined above in the impairment of real estate investments. We also use judgment in making the determination as to whether or not the impairment is temporary by considering, among other things, the length of time that the market value has been less than cost, the finff ancial condition of the unconsolidated real estate venturet and our ability and intent to retain the investment long enough for a recovery in value. Our judgments related to the determination of fair value and whether an impairment is other than temporary could result in the recognition of an impairment which could be material. Revenue Recognition The majoa rity of our revenues are derived from leases and are reflected as rents on the accompanying consolidated statements of operations. Rental revenue is recognized on a straight-line basis over the term of the lease. Most of our leases involve some form of improvements to leased space. When we are required to provide improvements under the terms of a lease, we need to determine whether the improvements constitute landlord assets or tenant assets. If the alize the cost of the improvements and recognize depreciation expense associated improvements are landlord assets, we capita with such improvements over the shorter of the estimated useful life or the term of the lease. If the improvements are tenant assets, we deferff ion of rental revenue over the term of the lease. Our determination of whether improvements are landlord assets or tenant assets also may affect when we commence revenue recognition in connection with a lease. the cost of improvements funded by us as a lease incentive asset and amortize it as a reductd tors that may require In determining whether improvements constitutet subjective or complex judgments, including: whether the improvements are unique to the tenant or reusablea by other tenants; whether the tenant is permitted to alter or remove the improvements without our consent or without compensating us for any lost fair value; whether the ownership of the improvements remains with us or remains with the tenant at the end of the lease term; and whether the economic substance of the lease terms is properly reflected. landlord or tenant assets, we consider a number of facff For certain leases, we make significff ant assumptim ons and judgments in determining the lease term, including assumptions when the lease provides the tenant with an early termination option. The lease term impacts the period over which we determine and record rental revenue and impacts the period over which we amortize lease-related costs. Changes in these assessments could result in the write-off of any recorded assets associated with straight-line rental revenue and acceleration of depreciation and amortization expense associated with costs we incurred related to these leases. Purchase Price Allocation When we acquire real estate investments, we allocate the purchase price to tangible assets, consisting of land, building, site improvements, and identified intangible assets and liabilities, including in-place leases and acquired above- and below- market leases, and if appli , assumed debt, based on our estimate of their fair values. cablea a 32 projections that utilize discount and capita alization rates as well as available We assess fair value based on estimated cash flowff market information. The fair value of the tangible assets of an acquired real estate investment considers the value of the real estate investment as if it were vacant. The estimated relative fair value of acquired in-place leases are the estimated costs to lease the real estate investment to the occupancy level at the date of acquisition. We evaluate the period over which we expect stabilized occupancy level to be achieved during the lease-up period. Above- and below-market leases are recorded as an between the contractual amounts to be paid or received asset or liabia lity based upon the present value of the difference pursuant to the in-place leases, and our estimate of fair market rental rates forff the corresponding in-place leases, over the remaining noncancellable term. Assumed debt, if any, is recorded at fair value based upon the present value of the expected future payments. ff A change in any of the key assumptim ons can materially change not only the presentation of acquired real estate investments in our consolidated financial statements but also our reported results of operations. 33 RESULTSUU EE OF OPERATI ONII SNN The folff lowing discussion is based on our Consolidated Financial Statements for the years ended December 31, 2021 and 2020. Refer to Item 7. "Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of the results of operations for the year ended December 31, 2019 which is presented therein in the form of a year-to-year comparison to the year ended December 31, 2020. We believe that presentation of our consolidated financial information, without a breakdown by segment, will effectively present important information useful to our investors. Net operating income (“NOI”), as presented in the comparative analysis, below is defined as total revenue less property operating expenses, real estate taxes, and third party management expenses. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance, management fees, and bad debt expense. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards, and professional fees that are incurred as part of corporate office management. NOI is a non-GAAP financial measure that we use internally to evaluate the operating performance of our real estate assets by segment, as presented in Note 19, ''Segment Information,” to our Consolidated Financial Statements, and of our business as a whole. We believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairments, depreciation and amortization costs, capital expenditures, and leasing costs. We believe that net income, as defined by GAAP, is the most appropriate earnings measure. See Note 19, ''Segment Information,” to our Consolidated Financial Statements for a reconciliation of NOI to our consolidated net income (loss) as defined by GAAP. p Comparison m f of the Year Ended December 31, , 2021 to the YeaYY r EndeEE d December 31,, 2020 The following comparison for the year ended December 31, 2021 to the year ended December 31, 2020, makes reference to the effect of the following: (a) “Same Store Property Portfolio,” which represents 73 properties containing an aggregate of approxi mately 12.5 million net rentable square feet that we owned and consolidated for the twelve-month periods ended December 31, 2021 and 2020. The Same Store Property Portfolio includes properties acquired or placed in service on or prior to January 1, 2020 and owned and consolidated through December 31, 2021, excluding properties classified as held forff (b) “Total Portfolio,” which represents all properties owned and consolidated by us during (c) "Recently Completed/Acquired Properties," which represents four properties placed into service or acquired on or subsequent to 2021 and 2020, sale, d a January 1, 2020, (d) "Development/Redevelopment Properties," which represents four properties currently in development/rett development. A property is excluded from our Same Store Property Portfolio and moved into Development/Redevelopment in the period that we determine to proceed with development/redevelopment for a future development strategy, and ff (e) "2020 and 2021 Dispositions," which represents 15 properties disposed of during 2020 and 2021. 34 Comparison of Year EndeE d December 31, 2021 to the YeaYY r Ended EE December 31, 2020 (dollars arr except per share amounts)s nd square feeff t in millions Same Store Property Portfolio Recently Completed/ Acquired Properties Development/tt Redevelopment Properties Other (Eliminations) (a) Total Portfolio 2021 2020 $ Change % Change 2021 2020 2021 2020 2021 2020 2021 2020 $ Change % Change Revenue: ............................................... Rents .............................................. $422.2 $417.2 $ Third party management fees, labor reimbursement and leasing ... Other .............................................. Total revenue ........................................ Property operating expenses .......... Real estate taxes............................. Third party management expenses Net operating income................. Depreciation and amortization....... General & administrative expenses ......................................... Net gain on disposition of real estate .............................................. Net gain on sale of undepreciated real estate ....................................... — 0.9 423.1 109.0 50.5 — 263.6 158.6 — — 0.9 418.1 106.6 50.4 — 261.1 148.1 — 5.0 — — 5.0 2.4 0.1 — 2.5 10.5 — 1.2 % $ 17.9 $ 10.3 $ 1.3 $ 10.1 $ 10.1 $ 75.9 $ 451.5 $ 513.5 $ (62.0) (12.1)% — % — % 1.2 % 2.3 % 0.2 % — % 1.0 % 7.1 % — — 17.9 4.3 0.9 — 12.7 7.8 — % — — — 10.3 3.0 1.0 — 6.3 6.3 — — — 1.3 0.8 0.3 — 0.2 1.1 — — — 10.1 0.8 1.6 — 7.7 1.7 — 26.4 8.0 44.5 7.8 1.9 12.8 22.0 10.6 30.2 18.6 1.9 96.4 21.8 10.0 10.3 54.3 32.2 30.3 26.4 8.9 486.8 121.9 53.6 12.8 298.5 178.1 30.2 18.6 2.8 534.9 132.2 63.0 10.3 329.4 188.3 30.3 7.8 6.1 (48.1) (10.3) (9.4) 2.5 (30.9) (10.2) (0.1) 41.9 % 217.9 % (9.0)% (7.8)% (14.9)% 24.3 % (9.4)% (5.4)% (0.3)% (0.1) (289.5) 289.4 (100.0)% (2.9) (0.2) (2.7) 1,350.0 % Operating income (loss)........................ $105.0 $113.0 $ (8.0) (7.1)% $ 4.9 $ — $ (0.9) $ 6.0 $ (18.8) $ (8.2) $ 93.2 $ 400.5 $ (307.3) (76.7)% Number of properties ................................ Square feet ................................................ 73 12.5 73 12.5 Core Occupancy % (b).............................. 91.0 % 91.5 % Other Income (Expense):...................... 4 0.5 96.2 % 4 0.6 Interest and investment income ..... Interest expense.............................. Interest expense — Deferff financing costs ............................... red Equity in loss of unconsolidated real estate ventures......................... Net gain on real estate venture transactions .................................... Income tax benefit ......................... Net income............................................ Net income attributable to Common Shareholders of Brandywine Realty Trust ...................................................... 81 13.9 8.3 (62.6) (2.8) 1.9 (73.9) (2.9) 6.4 11.3 0.1 336.8 % (15.3)% (3.4)% (26.7) (18.6) (8.1) 43.5 % 3.0 — 12.4 0.07 $ $ $ $ 0.1 0.2 2.9 2,900.0 % (0.2) (100.0)% 307.3 $ (294.9) (96.0)% 1.77 $ (1.70) (96.0)% (a) Represents certain revenues and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation, third-party management fees, provisions for impairment, and changes in the accrued rent receivable allowance. Other/(Eliminations) also includes properties sold and properties classified as held for sale. (b) Pertains to Core Properties. Total Revenue Rents from the Total Portfolio decreased primarily as a result of the following: • • • • • $64.0 million decrease related to the 2020 and 2021 Dispositions; $9.9 million decrease related to a property that has been vacated and placed into redevelopment in our Metropolitan Washington D.C. segment; $3.7 million decrease related to a property that has been vacated and taken out of service for future demolition in our Austin, Texas segment; $7.6 million increase related to the Recently Completed/Acquired Properties; $2.1 million increase related to the residential and hotel components at the FMC Tower in our Philadelphia CBD segment related to higher occupancy partially due to the lifting of COVID-19 pandemic restrictions; and The remaining $5.9 million increase in Rents is primarily due to partial occupancy at 405 Colorado, a development property in our Austin, Texas segment, and increased occupancy and rental rates for lease renewals at certain properties across our Same Store Property Portfolio, as well as increased use of our properties by the tenants related to the liftiff ng of COVID-19 pandemic restrictions, resulting in an increase in tenant reimbursements. Third party management fees, labor reimbursement, and leasing income increased primarily due to $4.2 million of fees earned from the Mid-Atlantic Office Venture formed in the fourth quarter of 2020, $2.1 million of fees earned from the Commerce Square Venture formed a 35 in the third quarter of 2020, and a $1.9 million increase in fees earned from our MAP Venture primarily related to increases in leasing commissions and construction management fees. Other income at our Total Portfolio increased primarily as a result of the following: • • • • $3.9 million in excess insurance proceeds primarily related to a property in our Austin, Texas segment; $0.8 million increase related to a settlement received from a general contractor for liquidated damages as a result of a construction delay at a property in our Austin, Texas segment; $0.7 million increase in income from the restaurant component of FMC Tower as a result of the lifting of COVID-19 pandemic restrictions; and $0.4 million increase related a legal settlement during the second quarter of 2021. Property Operating Expex nses Property operating expenses decreased primarily as a result of the following: • • $20.0 million decrease related to 2020 and 2021 Dispositions; and $1.1 million increase related to the Recently Completed/Acquired Properties. The remaining offsetting increase of $8.6 million is related to miscellaneous increases in property operating expenses across our Total Portfolio, primarily driven by increased use of our properties by the tenants as a result of lifting of COVID-19 pandemic restrictions and increases in property-related employee compensation expenses, marketing expenses, and repairs and maintenance. Real Estate Taxes Real estate taxes decreased primarily dued to a property that has been vacated and placed into redevelopment in our Metropolitan Washington D.C. segment. to a $7.1 million decrease related to the 2020 and 2021 Dispositions as well as a decrease related Depreciation and Amortization Depreciation and amortization expense decreased primarily as a result of the folff lowing: • • • $23.2 million decrease related to the 2020 and 2021 Dispositions; $9.8 million increase due to the reassessment of the estimated useful life of seven properties in our Austin, Texas segment pursuant to future demolition plans as part of our Uptown ATX master development plan beginning in the second quarter of 2021; and $2.2 million increase related to an early write-off of lease intangibles in connection with a property in our Austin, Texas segment in 2021. Net Gain on Dispositi ii on of Real Estate The $289.5 million gain on disposition of real estate forff 2020 primarily resulted from the following sales transactions: • • • li lsale of a 30% prefe imilllliion rellatedd to thhe imilllliion rellatedd to thhe onsoliddatiion of hthe prope irties $$271.9 res lult ded iin ddec $$15.2 Pennsylva in deconsolidation of the properties and recognition of our investment in the properties at fair value; and $2.3 million related to the disposition of 52 East Swedesford Road, an office property in our Pennsylvania Suburbs segment. bsub burban ffioffice propertiie ls locat ded iin ("Midd-Atlla intic Offiiff ce Portfolf cogni ition of our iinvestment iin hthe prope irties at f ifair v lalue; drred eq iuity iy interest iin One Commerce Square andd Two Commerce Square, hiwhi hch lwelve folio of t imilllliion square feet ( dand, contai iini gng an gagg ggregate of 1.1 equi yty iinteres it in a portf li dand recogni i io"), which resulted lsale of a 60% nnsylva inia dand Marylylrr suburban b b i Net Gain on SaleSS of Undepree e ciated Real EstatEE The gain of $2.9 million recognized during d 2021 is due to the folff lowing: • • $2.0 million related to the formation of the 3025 JFK Venture, which resulted in deconsolidation of the project and recognition of our investment in the real estate venturet $0.9 million related to the sale of three parcels of land in our Other Segment. at fair value; and 36 The gain of $0.2 million recognized during d 2020 primarily resulted from the sale of a land parcel in Horsham, Pennsylvania. Interest and Investment Income Interest and investment income increased by $6.4 million primarily as a result of a preferred equity investment we funded on December 31, 2020 and that was redeemed prior to maturity on September 3, 2021. Of the $6.4 million increase, $2.8 million related to our receipt of an accelerated minimum returnt s paid in cash on the redemption date. There was no income recognized in 2020 related to this investment. and exit feeff ff Interest Expense x Interest expense decreased primarily dued to the following: • • • • $4.8 million decrease due to deconsolidation of One Commerce Square and Two Commerce Square and the associated mortgage loans on July 21, 2020; $4.0 million decrease due to an increase in capita on our investment in 3025 JFK Venture; $3.2 million decrease due to the purchase of the Two Logan Square mortgage in the fourt $2.0 million increase due to a reduction of interest expense recognized during the three months ended September 30, 2020 on account of a contingent payment to an unaffiliated third party. The amount had previously accreted through interest expense and a portion of the contingent payment ceased to be probable in the third quarter of 2020 due to the anticipated purchase of the Two Logan Square mortgage in the fourth quarter of 2020. alized interest on our various development projects as well as capitalized interest h quarter of 2020; and ff The remaining decrease is primarily related to lower interest rates during d 2021 comparem d to 2020. Equity in Loss of unconsolidated real estate ventures Equity in loss of unconsolidated real estate ventures increased primarily dued to: • • • • • $6.4 million increase associated with our Commerce Square Venture formed on July 21, 2020; $2.1 million increase related to our MAP Venture due to lower revenues driven by lower occupancy during December 31, 2021 than the year ended December 31, 2020; $0.9 million increase associated with our BDN AI Venture, which is primarily driven by our $0.7 million share of the held forff sale impairment on the remaining property held by the venture. See Note 4, ''Investment in Unconsolidated Real Estate Ventures" to our Consolidated Financial Statements for further information; $0.8 million decrease associated with our Mid-Atlantic Office Venture formed on December 21, 2020; and $0.4 million decrease associated with our 1919 Market Street Venture. the year ended d t t Net Gain on Real Estate Venture Transactions The $3.0 million net gain on real estate venturet didist ibributiion of hthe salle proce deds to hthe partners during Ventures" to our Consolidated Financial Statements for further information. transactions is due to the salle of hthe rem iai ini gng ffioffice propertyy at our BDN AI Venture during hthe f dand fourth quarter of 2021. See Note 4, ''Investment in Unconsolidated Real Estate h 37 Q LIQUII IDUU ITDD Y AND CAPITAL RESOURCES General Our principal liquidity funding needs for the next twelve months are as follows: ff normal recurring expenses; capital expenditures, including capita debt service and principal repayment obligations; current development and redevelopment costs; ; commitments to unconsolidated real estate ventures distributions to shareholders to maintain our REIT status; possible acquisitions of properties, either directly or indirectly through the acquisition of equity interest therein; and possible common share repurchases. al and tenant improvements and leasing costs; t • • • • • • • • We expect to satisfy these needs using one or more of the following: • • • • • • • our unconsolidated real estate ventures; cash flows from operations; distributions of cash fromff cash and cash equivalent balances; availabila secured construction loans and long-term unsecured indebtedness; sales of real estate or contributions of interests in real estate to joint ventures issuances of Parent Company equity securities and/or units of the Operating Partnership. ity under our unsecured credit facff ; and ility; t As of December 31, 2021, the Parent Company owned a 99.5% interest in the Operating Partnership. The remaining interest of approximately 0.5% pertains to common limited partnership interests owned by non-affiliated investors who contributed property to the Operating Partnership in exchange for their interests. As the sole general partner of the Operating Partnership, the Parent Company has full and complete responsibility for the Operating Partnership’s day-to-day operations and management. The Parent Company’s source of funding for its dividend payments and other obligations is the distributions it receives from the Operating Partnership. As summarized above, we believe that our liquidity needs will be satisfied through available cash balances and cash flows from operations, financing activities and real estate sales. Rental revenue and other income from operations are our principal sources of cash to pay operating expenses, debt service, recurring capita al expenditures and the minimum distributions required to maintain our REIT qualification. We seek to increase cash flows from our properties by maintaining quality standards for our properties that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. Our revenue also includes third-party feeff s generated by our property management, leasing, development and construction businesses. We believe that our revenue, together with proceeds from property sales and debt financings, will continue to provide funds for our short-term liquidity needs. However, material changes in our operating or financing activities may adversely affect our net cash flows. With uncertain economic conditions, vacancy rates may increase, effective rental rates on new and renewed leases may decrease and tenant installation costs, including concessions, may increase in most or all of our markets during 2022 and possibly beyond. As a result, our revenues ient to cover operating expenses, including increased tenant installation costs, pay debt and cash flows could be insufficff service or make distributions to shareholders over the short-term. If this situat ion were to occur, we expect that we would finance cash deficits through borrowings under our unsecured credit facility and other sources of debt and equity financings. In addition, a material adverse change in cash provided by operations could adversely affect our compliance with financial performance covenants under our unsecured credit facility, including unsecured term loans and unsecured notes. As of December 31, 2021 we were in compliance with all of our debt covenants and requirement obligations. d t In addition, we are continuing to monitor the ongoing COVID-19 pandemic and the related economic impacts, market volatility, and business disruption, and its impact on our tenants. The severity and durat ion of the pandemic and its impact on our operations and liquidity is uncertain and continues to evolve globally. However, if the pandemic continues, there will likely be continued negative economic impacts, market volatility, and business disruption which could negatively impact our tenants’ ability to pay rent, our ability to lease vacant space, and our ability to complete development and redevelopment projects, and these consequences, in turn, could materially impact our results of operations. d ially all We have granted rent relief requests primarily to our co-working and retail tenants. The relief requests have substant been in the form of rent deferral for varying lengths of time, but were primarily repaid in 2020 and 2021. For those tenants u 38 we believe require rent relief, wff lease terms through favorablea assurances on the outcomes of these ongoing negotiations, the amount and naturet recovery of the amounts deferred. e have granted deferrals and, in some instances, rent abatements while receiving extended lease extensions. We continue to assess the merits of rent deferral requests and can give no of the rent relief packages and ultimate ncing sources to fund our long-term capita al needs. When needed, we use borrowings under our We use multiple finaff unsecured credit facility for general business purposes, including to meet debt maturities and to fund distributions to shareholders as well as development and acquisition costs and other expenses. In light of the volatility in financial markets and economic uncertainties, it is possible, that one or more lenders under our unsecured credit facility could fail to fund a borrowing request. Such an event could adversely affect our ability to access funds under our unsecured credit facility when needed to fund distributions or pay expenses. ff Our ability to incur additional debt is dependent upon a number of facff tors, including our credit ratings, the value of our unencumbered assets, our degree of leverage and borrowing restrictions imposed by our lenders. If one or more rating agencies were to downgrade our unsecured credit rating, our access to the unsecured debt market would be more limited and the interest rate under our unsecured credit facility and unsecured term loan would increase. The Parent Company unconditionally guarantees the Operating Partnership’s unsecured debt obligations, which, as of December 31, 2021, amounted to $1,851.6 million. We did not have any secured debt obligations as of December 31, 2021. Capital MarkeMM ts The Parent Company issues equity from time to time, the proceeds of which it contributes to the Operating Partnership in exchange for additional interests in the Operating Partnership, and guarantees debt obligations of the Operating Partnership. The Parent Company’s ability to sell common shares and preferred shares is dependent on, among other things, general market conditions for REITs, market perceptions about the Company as a whole, and the current trading price of the Parent Company’s shares. The Parent Company maintains a shelf registration statement that covers the offering and sale of common shares, preferred shares, depositary shares, warrants and unsecured debt securities. Subjeb ct to our ongoing compliance with securities laws, and if warranted by market conditions, we may offer and sell equity and debt securities from time to time under the shelf registration statement or in transactions exempt from registration. See Note 13, ''Beneficiaries' Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our share repurchase program. We expect to fund any additional share repurchases with a combination of available cash balances and availability under our unsecured credit facility. The timing and amounts of any repurchases will depend on tors a variety of facff as determined by our management team. The repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without notice. tors, including market conditions, regulatory requirements, share prices, capita ity and other facff al availabila ff Capital Recycling The Operating Partnership also considers net sales of selected properties and recapitalization of unconsolidated real estate ventures as additional sources of managing its liquidity. During 2021, we closed on the sale of three parcels of land as well as t one office property in our Brandywine - AI Venture for net cash proceeds of $10.2 and $12.6 million, respectively. In development addition, we contributed our investment in a 99-year prepaid leasehold interest in a one-acre land parcel held forff to 3025 JFK Venture. As of December 31, 2021, we had $27.5 million of cash and cash equivalents and $575.8 million of available borrowings under our unsecured credit facility, net of $1.2 million in letters of credit outstanding. Based on the foregoing, as well as cash flows from operations net of dividend requirements, we believe we have sufficient capita al requirements on existing development and redevelopment projects and pursue additional attractive investment opportunities. We expect that our primary uses of capia tal durid ng 2022 will be to fund our current development and redevelopment projects. al to fund our remaining capita Cash Flowsww The following discussion of our cash flows is based on the consolidated statement of cash flows and is not meant to be a comprehensive discussion of the changes in our cash flows forff the years presented. 39 As of December 31, 2021 and 2020, we maintained cash and cash equivalents and restricted cash of $28.3 million and $47.1 million, respectively. We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following tabla e summarizes changes in our cash flows (in thousands): Activity Year Ended December 31, 2021 2020 (Decrease) Increase Operating .................................................................................................... $ Investing ..................................................................................................... Financing .................................................................................................... Net cash flows ............................................................................................ $ $ 190,874 (100,315) (109,336) (18,777) $ $ 225,806 18,290 (288,189) (44,093) $ (34,932) (118,605) 178,853 25,316 Our principal source of cash flows is fromff the operation of our Properties. Our Properties provide a relatively consistent operating expenses, debt service and quarterly dividends. The stream of cash flows decrease in operating cash flows is primarily due to the 15 properties disposed of or contributed to an unconsolidated real estate venturet that provides us with the resources to fund during 2020 and 2021. ff ff acquisitions, development, or redevelopment projects and recurring and Cash is used in investing activities to fundff nonrecurring capita us to take advantage of our development, leasing, financing, and property management skills and invest in existing buildings that meet our investment criteria. During the year ended December 31, 2021, when compared to the year ended December 31, 2020, the change in investing cash flows was due to the folff al expenditures. We selectively invest in new projects that enablea lowing activities (in thousands): t Acquisitions of real estate ............................................................................................................................. al expenditures Capita and capia talized interest................................................................................................ al improvements/acquisition deposits/leasing costs ............................................................................. Capita Joint venturet investments.............................................................................................................................. Proceeds from the sale of properties ............................................................................................................. Proceeds from note receivablea ...................................................................................................................... Issuance of note receivable ........................................................................................................................... ..................................................................... Capita Other investing activities .............................................................................................................................. Increase in net cash used in investing activities............................................................................................ al distributions from unconsolidated real estate ventures t (Decrease) Increase 41,950 25,129 (6,226) (30,924) (267,811) 50,000 50,000 18,027 1,250 (118,605) $ $ We generally fund our investment activity through the sale of real estate, property-level financing, credit facilities, senior unsecured notes, and construction loans. From time to time, we may issue common or preferred shares of beneficial interest, or the Operating Partnership may issue common or preferred units of limited partnership interest. During the year ended December 31, 2021, when compared to the year ended December 31, 2020, the change in financing cash flows was dued to the folff lowing activities (in thousands): Proceeds from debt obligations..................................................................................................................... Repayments of debt obligations.................................................................................................................... Redemption of limited partnership units Repurchase and retirement of common shares ............................................................................................. Dividends and distributions paid................................................................................................................... Other finaff ncing activities .............................................................................................................................. Decrease in net cash used in financing activities.......................................................................................... $ $ (Decrease) Increase (164,000) 281,993 (2,334) 60,000 955 2,239 178,853 40 z ali p Capita ii zati tt on Indebtedness The tablea below summarizes indebtedness under our unsecured debt at December 31, 2021 and December 31, 2020: December 31, 2021 December 31, 2020 (dollars in thousands) Balance: (a) Fixed rate .............................................................................................................................................. $ Variable rate - unhedged....................................................................................................................... Total ................................................................................................................................................. $ 1,750,000 101,610 1,851,610 $ $ 1,775,774 52,836 1,828,610 Percent of Total Debt: Fixed rate .............................................................................................................................................. Variable rate - unhedged....................................................................................................................... Total ................................................................................................................................................. Weighted-average interest rate at period end: Fixed rate .............................................................................................................................................. Variable rate - unhedged....................................................................................................................... Total ................................................................................................................................................. Weighted-average maturity in years: Fixed rate .............................................................................................................................................. Variable rate - unhedged....................................................................................................................... Total ................................................................................................................................................. (a) Consists of unpaid principal and does not reflect premium/discount or deferred financing costs. 94.5 % 5.5 % 100.0 % 3.8 % 1.3 % 3.7 % 4.0 10.6 4.4 97.1 % 2.9 % 100.0 % 3.8 % 1.5 % 3.8 % 5.2 14.6 5.4 Scheduled principal payments and related weighted average annual effective interest rates for our debt as of December 31, 2021 were as follows (dollars in thousands): Period Principal maturities Weighted Average Interest Rate of Maturing Debt 2022 ............................................................................................................ $ 2023 ............................................................................................................ 2024 ............................................................................................................ 2025 ............................................................................................................ 2026 ............................................................................................................ 2027 ............................................................................................................ 2028 ............................................................................................................ 2029 ............................................................................................................ 2030 ............................................................................................................ 2031 ............................................................................................................ Thereafter.................................................................................................... Totals........................................................................................................ $ 273,000 350,000 350,000 — — 450,000 — 350,000 — — 78,610 1,851,610 Unsecured Debt 2.73 % 3.87 % 3.78 % — % — % 4.03 % — % 4.30 % — % — % 1.38 % 3.70 % The Operating Partnership is the issuer of our unsecured notes which are fully and unconditionally guaranteed by the Parent under which the Operating Partnership issued its unsecured notes contains financial covenants, Company. The indenturet including: (i) a leverage ratio not to exceed 60%; (ii) a secured debt leverage ratio not to exceed 40%; (iii) a debt service coverage ratio of greater than 1.5 to 1.0; and (iv) an unencumbered asset value of not less than 150% of unsecured debt. The Operating Partnership is in complim ance with all covenants as of December 31, 2021. 41 The charter documents of the Parent Company and Operating Partnership do not limit the amount or form of indebtedness that the Operating Partnership may incur, and its policies on debt incurrence are solely within the discretion of the Parent s, subject to the financial covenants in the Credit Facility, indenture and other credit agreements. Company’s Board of Trustee r y Equity q In order to maintain its qualification as a REIT, the Parent Company is required to, among other things, pay dividends to its shareholders of at least 90% of its REIT taxable income. During the year ended December 31, 2021, the Parent Company paid dividends in excess of the 90% criterion. See Note 13, ''Beneficiaries' Equity of the Parent Company,” to our Consolidated Financial Statements for further information related to our dividends declared forff the fourth quarter of 2021. Contractual Obligi ations We provide customary guarantees for certain development projects of our unconsolidated real estate venturt es. See Note 20, further details on payment guarantees ''Commitments and Contingencies,” to our Consolidated Financial Statements forff provided on the behalf of real estate ventures. t In connection with the Schuylkill Yards Project, we entered into a neighborhood engagement program and, as of December obligations. We are also committed to making additional contributions under 31, 2021, had $7.0 million of future contractual the program. We estimate that, as of December 31, 2021, these additional contributions, which are not fixed under the terms of agreement, will be $2.4 million. See Note 20, ''Commitments and Contingencies,” to our Consolidated Financial Statements forff further information. t In connection with the formation of the Commerce Square Venture, we committed to investing an additional $20.0 million of preferred equity in the properties on a pari passu basis with our joint venturet partner of which $2.1 million has been contributed by us as of December 31, 2021. As part of our September 2004 acquisition of a portfolio of properties fromff The Rubenstein Company (which the we refer to as the “TRC acquisition”), we acquired our interest in Two Logan Square, a 708,844 square foot office building in Philadelphia, Pennsylvania primarily through ownership of a second and third mortgage secured by this property. This property is consolidated, as the borrower is a VIE and we, through our ownership of the second and third mortgages, are the primary beneficiary. On October 21, 2020, we also acquired the $79.8 million first mortgage on the property fromff the third- party mortgage lender pursuant to an agreement with certain of the former owners. Under the agreement, we have agreed to not take title to Two Logan until the earlier of June 2026 or the occurrence of certain events related to the ownership interests of certain former owners. If we were to sell the restricted property before the expiration of the restricted period in a non- exempt transaction, we may be required to make significant payments to certain of the former owners of Two Logan Square on account of tax liabia lities attributed to them. Additionally, we will be required to pay these certain former owners an amount estimated at approxim ately $0.6 million to redeem their residual interest in the fee owner of this property. The $0.6 million payment is included within "Other liabilities" on the consolidated balance sheets. a As part of our acquisition of properties, from time to time in tax-deferred transactions, we have agreed to provide certain of the prior owners of the acquired properties the right to guarantee our indebtedness. If we were to seek to repay the indebtedness guaranteed by the prior owner before the expiration of the applicablea agreement, we would be required to provide the prior owner an opportunity to guaranty qualifying replacement debt. These debt maintenance agreements may e to us. limit our ability to refinance indebtedness on terms favorabl ff We invest in properties and regularly incur capita al expenditures in the ordinary course of business to maintain the properties. We believe that such expenditures enhance our competitiveness. We also enter into construction, utility and service contracts in the ordinary course of its business which may extend beyond one year. These contracts typically provide for cancellation with insignificant or no cancellation penalties. In addition, during construction undertaken by real estate venturt es we have provided, and expect to continue to provide, cost overrun, and completion guarantees, with rights of contribution among partners in ventures, as well as customaryrr environmental indemnities and guarantees of customary exceptions to nonrecourse provisions in loan agreements. See Note 20, ''Commitments and Contingencies," to our Consolidated Financial Statements forff further details on payment guarantees provided on the behalf of real estate ventures. t t 42 Intertt est Rate Riskii and Sensitiii vityii Analysisyy The analysis below presents the sensitivity of the market value of the Operating Partnership’s financial instruments to selected changes in market rates. The range of changes chosen reflects its view of changes which are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates chosen. ff Our financial instruments consist of both fixed and variable rate debt. As of December 31, 2021, our consolidated debt consisted of unsecured notes with an outstanding principal balance of $1,500.0 million, all of which are fixed rate borrowings. We also have variable rate debt consisting of trust preferred securities with an outstanding principal balance of $78.6 million, a $600.0 million Credit Facility with an outstanding balance of $23.0 million and an unsecured term loan with an outstanding principal balance of $250.0 million. The unsecured term loan has been swapped d rate. All financial instruments were entered into for other than trading purposes and the net market value of these financial instruments is referred to as the net financial position. Changes in interest rates have different impacts on the fixed and variable rate portions of our debt portfolio. A change in interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position, but has no impact on interest incurred or cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position. to a fixeff a As of December 31, 2021, based on prevailing interest rates and credit spreads, the fair value of our unsecured notes was r $1,588.8 million. For sensitivity purposes, a 100 basis point change in the discount rate equates to a change in the total faiff value of our debt of approximately $15.9 million at December 31, 2021. nts to manage interest rate risk exposures and not for From time to time or as the need arises, we use derivative instrume ately speculative or trading purposes. The total outstanding principal balance of our variable rate debt was approxim $351.6 million as of December 31, 2021. The total faiff ately $344.8 million at December 31, 2021. For sensitivity purposes, if market rates of interest increase by 100 basis points the fair value of our variable rate debt would decrease by approximately $10.1 million at December 31, 2021. If market rates of interest decrease by 100 basis points, the fair value of our outstanding variable rate debt would increase by approximately $11.3 million at December 31, 2021. r value of our variable rate debt was approxim a a r These amounts were determined solely by considering the impact of hypothetical interest rates on our financial instruments. Due to the uncertainty of specific actions we may undertake to minimize possible effects of market interest rate increases, this analysis assumes no changes in our financial structure. ) Funds from Operations (FFO) p ( f ition of FFO adopted by the Board of Governors of the National Association of Real Estate Pursuant to the revised definff Investment Trusts (“NAREIT”), we calculate FFO by adjusting net income/(loss) attributablea to common unit holders (computed in accordance with GAAP) for gains (or losses) from sales of properties, impairment losses on depreciable consolidated real estate, impairment losses on investments in unconsolidated real estate ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated real estate ventures, real estate related depreciation and amortization, and after similar adjustments for unconsolidated real estate ventures. FFO is a non-GAAP financial measure. We believe that the use of FFO combined with the required GAAP presentations has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REITs’ operating results more meaningful. We consider FFO to be a useful measure for reviewing comparative operating and financial performanc e because, by excluding property impairments, gains or losses related to sales of previously depreciated operating real estate assets and real estate depreciation and amortization, FFO can help the investing public compare the operating performance of a company’s real estate between periods or as compared to other companies. Our computation of to FFO reported by other REITs or real estate companies that do not define the term in FFO may not be comparablea accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. r ff t We consider net income, as defined by GAAP, to be the most comparable earnings measure to FFO. While FFO and FFO per unit are relevant and widely used measures of operating performance of REITs, FFO does not represent cash flow from operations or net income as defined by GAAP and should not be considered as alternatives to those measures in evaluating our liquidity or operating performance. We believe that to further understand our performance, FFO should be compared with our reported net income/(loss) attributablea to common unit holders and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated finaff ncial statements. 43 lowing table presents a reconciliation of net income attributablea The folff December 31, 2021 and 2020: to common unitholders to FFO for the years ended Year Ended December 31, 2021 2020 Net income attributable to common unitholders............................................................................... Add (deduct): $ Amount allocated to unvested restricted unitholders .......................................................................... Net gain on real estate venture transactions ........................................................................................ Net gain on disposition of real estate .................................................................................................. Company's share of impairment of an unconsolidated real estate venture ......................................... Depreciation and amortization: (amounts in thousands, except share information) 11,948 $ 306,896 421 (2,973) (142) 696 410 (75) (289,461) — Real property .................................................................................................................................. Leasing costs including acquired intangibles................................................................................. Company’s share of unconsolidated real estate ventures............................................................... Partners’ share of consolidated real estate ventures....................................................................... Funds from operations......................................................................................................................... Funds from operations allocable to unvested restricted shareholders................................................. Funds from operations available to common share and unit holders (FFO) ................................. Weighted-average shares/units outstanding — basic (a).................................................................. diluted (a)...................................................... ff Weighted-average shares/units outstanding — fully $ $ 144,261 31,698 52,455 (20) 238,344 (705) 237,639 171,770,843 173,165,898 $ $ 143,877 42,390 37,291 (129) 241,199 (705) 240,494 172,907,713 173,298,710 (a) Includes common shares and partnership units outstanding through the years ended December 31, 2021 and December 31, 2020, respectively. Item 7A. Quantitative and Qualitative Disclosures About Market Risk See discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in Item 7 herein. Item 8. Financial Statements and Supplementary Data The financial statements and supplementary financial data of the Parent Company and the Operating Partnership and the reports thereon of PricewaterhouseCoopers LLP, an independent registered public accounting firm, with respect thereto, are listed under Items 15(a) and 15(b) and filff ed as part of this report. See Item 15., “Exhibits and Financial Statement Schedules.” Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Controls and Procedures (Parent Company) Conclusion Regarding the EffecE tiveness of Disclos ii ure Controls and Procedures Under the supervision and with the participation of the Parent Company’s management, including its principal executive officer and principal finaff ncial officer, the Parent Company’s management conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as ncial officer of amended (the “Exchange Act”). Based on this evaluation, the principal executive officer and the principal finaff ive as of the end of the Parent Company concluded that the Parent Company’s disclosure controls and procedures were effect the period covered by this annual report. ff 44 Management’s Report ee on Intertt nal rr Control Over Financ FF ial Reportingii The management of the Parent Company is responsible forff financial reporting, as such term is defined in Exchange Act RulRR e 13a-15(f). establia shing and maintaining adequate internal control over Under the supervision and with the participation of the Parent Company’s management, including its principal executive ncial officer, the Parent Company’s management conducted an evaluation of the effectiveness of the officer and principal finaff Parent Company’s internal control over financial reporting based on the framework in Internal Control — InteII e grated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation under the framework in Internal Control — InteII Framework,kk the Parent Company’s management concluded e grated that the Parent Company’s internal control over finaff ncial reporting was effective as of December 31, 2021. The effectiveness of the Parent Company’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report that is included herein. Changes in Internal tt tt Control over FinFF ancial Reportingii There have not been any changes in the Parent Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that have materially affecff ted, or are reasonably likely to materially affect, the Parent Company’s internal control over financial reporting. Controls and Procedures (Operating Partnership) Conclusion Regarding e the EffecE tiveness of Disclos ii ure Controls and Proce PP dures Under the supervision and with the participation of the Operating Partnership’s management, including its principal executive officer and principal finaff ncial officer, the Operating Partnership’s management conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on this ncial officer of Operating Partnership concluded that the evaluation, the principal executive officer and the principal finaff Operating Partnership’s disclosure controls and procedures were effect ive as of the end of the period covered by this annual ff report. Management’s Report ee on Internal Control Over Financ FF ial Reportingii The management of the Operating Partnership is responsible forff financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). establia shing and maintaining adequate internal control over Under the supervision and with the participation of the Operating Partnership’s management, including its principal executive ncial officer, the Operating Partnership’s management conducted an evaluation of the effectiveness officer and principal finaff of the Operating Partnership’s internal control over financial reporting based on the framework in Internal Control — Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based Integrated on this evaluation under the framework in Internal ContrCC the Operating Partnership’s e ol — InteII grated management concluded that the Operating Partnership’s internal control over financial reporting was effective as of December 31, 2021. Framework, e The effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report that is included herein. Changes in Internal tt tt Control over FinFF ancial Reporting. ii There have not been any changes in the Operating Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that have materially affecff ted, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting. 45 Item 9B. ff Other Information On February 22, 2022, the Compensation Committee (the “Compensation Committee”) of our Board of Directors approved the restatement of our change in control severance agreements with George, D. Johnstone, our Executive Vice President of Operations, and William D. Redd, our Executive Vice President and Senior Managing Director for the Austin and Metro DC Regions. The restated change in control severance agreements (the “Restated Agreements”) each provide that if a change of control (a “CICII ”)CC occurs and the executive’s employment ceases due to a termination by us without cause or a resignation by the executive with good reason, in either case within two years following the CIC, we will pay the executive two times (the “Severance Multiplier”) the sum of (1) the executive’s annual base salary in effect at the time of the CIC, plus (2) the greater of (A) the annual bonus most recently paid to the executive prior to the CIC, or (B) the executive’s target bonus for the year in which the CIC occurs. In addition, the executive will then also be entitled to continued group health coverage for 18 months and continued group term life insurance coverage for two years. The Restated Agreements are substantially identical to the executives’ prior change in control severance agreements, except the Restated Agreements: (i) increase the Severance Multiplier from 1.75 to 2.0; (ii) reduce the period of continued group health coverage from 24 months to 18 months (the maximum period of continuation coverage generally availablea under COBRA uRR ponu termination of employment); (iii) condition the receipt of payments and benefits under the agreement on the executive’s execution of a release of claims; and (iv) limit transaction-related payments to each executive to the maximum amount that would not be subject to an excise tax under Section 4999 of the Internal Revenue Code, if such limit would increase the executive’s net after-tax proceeds. The foregoing description of the Restated Agreements is qualified in its entirety by reference to the Form of Change in Control Agreement filed as Exhibit 10.28 to this Annual Report on Form 10-K and incorporated herein by reference. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None. 46 Item 10. Directors, Executive Officers and Corporate Governance PART III Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its 2022 Annual Meeting of Shareholders. Item 11. Executive Compensation Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its 2022 Annual Meeting of Shareholders. Item 12. Matters Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its 2022 Annual Meeting of Shareholders. Item 13. Certain Relationships and Related Transactions, and Director Independence Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its 2022 Annual Meeting of Shareholders. Item 14. Principal Accountant Fees and Services Incorporated herein by reference to the Company’s definitive proxy statement to be filed with respect to its 2022 Annual Meeting of Shareholders. Item 15. Exhibits and Financial Statement Schedules. (a) Financial Statements and Schedules of Brandywine Realty Trust (b) Financial Statements and Schedules of Brandywine Operating Partnership r PART IV The financial statements and schedules of the Parent Company and the Operating Partnership listed below are filed as part of this report on the pages indicated. 47 Index to Financial Statements and Schedules Report of Independent Registered Public Accounting Firm (Brandywine Realty Trust) rr (PCAOB ID No. 238) Report of Independent Registered Public Accounting Firm (Brandywine Operating Partnership, L.P.) (PCAOB ID No. 238) Financial Statements of Brandywine Realty Trust Consolidated Balance Sheets as of December 31, 2021 and 2020 Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019 Consolidated Statements of Comprehensive Income forff the Years Ended December 31, 2021, 2020 and 2019 Consolidated Statements of Beneficiaries’ Equity for the Years Ended December 31, 2021, 2020 and 2019 Consolidated Statements of Cash Flows forff the Years Ended December 31, 2021, 2020 and 2019 Financial Statements of Brandywine Operating Partnership, L.P. Consolidated Balance Sheets as of December 31, 2021 and 2020 Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019 Consolidated Statements of Comprehensive Income forff the Years Ended December 31, 2021, 2020 and 2019 Consolidated Statements of Partners’ Equity forff the Years Ended December 31, 2021, 2020 and 2019 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 Page F-1 F-3 F-5 F-6 F-7 F-10 F-11 F-13 F-14 F-15 F-16 F-17 Notes to Consolidated Financial Statements (Brandywine Realty Trust r and Brandywine Operating Partnership, L.P.) F-19 Schedule II — Valuation and Qualifyiff ng Accounts (Brandywine Realty Trust Partnership, L.P.) for the years ended December 31, 2021, 2020 and 2019 r and Brandywine Operating Schedule III — Real Estate and Accumulated Depreciation (Brandywine Realty Trust Partnership, L.P.) at December 31, 2019 with reconciliations for the years ended December 31, 2021, 2020 and 2019 and Brandywine Operating r F-57 F-58 (c) Exhibits 48 Exhibits Nos. Description 3.1.1 3.1.2 3.1.3 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.2.6 3.2.7 3.2.8 3.2.9 3.2.10 3.2.11 3.2.12 3.2.13 3.2.14 3.2.15 3.2.16 rr r rr rr Form 8-K dated Form 8-K filed on March 6, 2018 and incorporated herein by reference) of Brandywine Realty Trust (previously s Form 8-K filed on May 29, 2018 and incorporated herein Articles of Amendment and Restatement of Declaration of Trust filed as an exhibit to Brandywine Realty Trust' by reference) Articles Supplementary relating to opt-out of Marylrr and Unsolicited Takeover Act, filff ed with the State Department of Assessments and Taxation of Maryland on March 2, 2018 (previously filff ed as an Exhibit to Brandywine Realty Trust’s Preferred Share Reclassification Articles Supplementary filed with the State Department of Assessments and Taxation of Maryland on March 2, 2018 (previously filff ed as an Exhibit to Brandywine Realty Trust’s Form 8-K filed on March 6, 2018 and incorporated herein by reference) Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (the “Operating Partnership”) (previously filff ed as an exhibit to Brandywine Realty Trust’s December 17,1997 and incorporated herein by reference) First Amendment to Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated December 17,1997 and incorporated herein by reference) Second Amendment to the Amended and Restated Agreement of Limited Partnership Agreement of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated April 13, 1998 and incorporated herein by reference) Third Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K dated May 14, 1998 and incorporated herein by reference) Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K dated October 13, 1998 and incorporated herein by reference) Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K dated October 13, 1998 and incorporated herein by reference) Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K dated October 13, 1998 and incorporated herein by reference) Seventh Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) Eighth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) Ninth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) Tenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) Eleventh Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) Twelfth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference) Thirteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K dated September 21, 2004 and incorporated herein by reference) Fourteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K dated January 10, 2006 and incorporated herein by reference) Fifteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K dated August 18, 2006 and incorporated herein by reference) 49 3.2.17 3.2.18 3.2.19 3.3 4.1.1 4.1.2 4.1.3 4.1.4 4.1.5 4.2.1 4.2.2 4.3 4.4 4.5 4.6 4.7 10.1 10.2 10.3 10.4 10.5 rr u Form 8-K dated dated as of April 5, 2011 by and among Brandywine Operating Partnership, dated as of May 25, 2005 by and among Brandywine Operating Partnership, mental Indenture dated as of October 4, 2006 by and among Brandywine Operating dated October 22, 2004 by and among Brandywine Operating Partnership, L.P., Brandywine Sixteenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's August 9, 2010 and incorporated herein by reference) Seventeenth Amendment to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K dated April 11, 2012 and incorporated herein by reference) List of partners of Brandywine Operating Partnership, L.P. (filed herewith) Bylaws of Brandywine Realty Trust (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated May 29, 2018 and incorporated herein by reference) Indenturet Realty Trust, certain subsidiaries of Brandywine Operating Partnership, L.P. named therein and The Bank of New York Mellon, as Trustee (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K filed on October 22, 2004 and incorporated herein by reference) First Supplemental Indenturet L.P., Brandywine Realty Trust, certain subsidiaries of Brandywine Operating Partnership, L.P. named therein and The Bank of New York Mellon, as Trustee (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K filed on May 26, 2005 and incorporated herein by reference) Second Supple Partnership, L.P., Brandywine Realty Trust and The Bank of New York Mellon, as Trustee (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K dated October 4, 2006 and incorporated herein by reference) Third Supplemental Indenturet L.P., Brandywine Realty Trust and The Bank of New York Mellon, as Trustee (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K filed on April 5, 2011 and incorporated herein by reference) Form of 4.100% Guaranteed Notes due 2024 (previously filed as an exhibit to Brandywine Realty Trust’s Current Report on Form 8-K dated October 10, 2019 and incorporated herein by reference). Form of 3.95% Guaranteed Notes due 2023 (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K filed on December 18, 2012 and incorporated herein by reference) Form of 4.550% Guaranteed Notes due 2029 (previously filed as an exhibit to Brandywine Realty Trust’s Current Report on Form 8-K dated October 10, 2019 and incorporated herein by reference). Form of 4.10% Guaranteed Notes due 2024 (previously filed as an exhibit to Brandywine Realty Trust's Form 8-K filed on September 17, 2014 and incorporated herein by reference) Form of 4.55% Guaranteed Notes due 2029 previously filed as an exhibit to Brandywine Realty Trust's Form 8-K filed on September 17, 2014 and incorporated herein by reference) Form of 3.95% Guaranteed Notes due 2023 previously filed as an exhibit to Brandywine Realty Trust's Form 8-K filed on November 17, 2017 and incorporated herein by reference) Form of 3.95% Guaranteed Notes due 2027 previously filed as an exhibit to Brandywine Realty Trust's Form 8-K filed on November 17, 2017 and incorporated herein by reference) Description of Brandywine Realty Trust's Securities (previously filed as an exhibit to Brandywine Realty Trust's Annual Report on Form 10-K for the fisff cal year ended December 31, 2019 and incorporated herein by reference) Amended and Restated Revolving Credit Agreement dated as of July 17, 2018 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on July 20, 2018 and incorporated herein by reference) Amended and Restated Term Loan C Agreement dated as of December 13, 2018 (previously filed as an exhibit to Brandywine Realty Trust's Form 10-K for the fiscal year ended December 31, 2018 and incorporated herein by reference) Letter dated August 10, 2015 to Cohen & Steers Capital Management, Inc. relating to the waiver of share ownership limit, including Representations, Warranties and Agreements of Cohen & Steers Capital Management, Inc. (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on August 13, 2015 and incorporated herein by reference) Letter to RREEF America LLC relating to waiver of share ownership limit (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the fisff cal year ended December 31, 2009 and incorporated herein by reference) Amended and Restated Employment Agreement dated as of February 9, 2007 of Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K dated February 1rr incorporated herein by reference) 4, 2007 and 50 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.2 10.21 10.22 10.23 10.24 10.25 10.26 10.27 10.28 14.1 rr Form 8-K dated March Letter Agreement dated March 1, 2012 modifying Amended and Restated Employment Agreement of Gerard H. Sweeney** (previously filed as an exhibit to Brandywine Realty Trust’s 7, 2012 and incorporated herein by reference) Amended and Restated 1997 Long-Term Incentive Plan (as amended effective May 18, 2017)** (previously filed as Appendix A to Brandywine Realty Trust’s definitive Proxy Statement on Schedule 14A filed on April 4, 2017 and incorporated herein by reference) Amendment No. 1 to Amended and Restated 1997 Long-Term Incentive Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2018 and incorporated herein by reference) Brandywine Realty Trust Second Amended and Restated Executive Deferred Compensation Plan (as Amended and Restated, Effective January 1, 2021)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-K for the year ended December 31, 2020 and incorporated herein by reference) 2007 Non-Qualified Employee Share Purchase Plan** (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended March 31, 2007 and incorporated herein by reference) Form of Change in Control Agreement with Executive Officers (Wirth and DeVuono)** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on February 4, 2010 and incorporated herein by reference) Forms of Incentive Share Option Agreement (March 2011) for Executive Officers** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on March 8, 2011 and incorporated herein by reference) Forms of Non-Qualified Share Option Agreement (March 2011) for Executive Officers** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on March 8, 2011 and incorporated herein by reference) Letter Agreement dated May 24, 2011 modifying options of President and Chief Executive Officer** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on May 24, 2011 and incorporated herein by reference) Form of Incentive Compensation Clawback Agreement** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on February 26, 2015 and incorporated herein by reference) Form of Three-Year Restricted Common Share Rights Award.** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on March 6, 2018 and incorporated herein by reference) Schedule of Non-Employe Trust’s Form 8-K filed on March 6, 2018 and incorporated herein by reference) Form of Performance Unit Award Agreement** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on February 25, 2019 and incorporated herein by reference) 2019-2021 Performance Share Unit Program** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on February 25, 2019 and incorporated herein by reference) Form of Three-Year Restricted Common Share Rights Award (with outperform filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on February 25, 2019 and incorporated herein by reference) Form of Two-Year Restricted Common Share Rights Award** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on February 25, 2019 and incorporated herein by reference) Form of Performance Unit Award Agreement** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on March 11, 2020 and incorporated herein by reference) 2020-2022 Performance Share Unit Program** (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on March 11, 2020 and incorporated herein by reference) Form of Restricted Common Share Rights Award (with outperform exhibit to Brandywine Realty Trust’s Form 8-K filed on March 11, 2020 and incorporated herein by reference) Form of 2021-2023 Performance Unit Award Agreement (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on March 10, 2021 and incorporated herein by reference).** 2021-2023 Performance Share Unit Program (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on March 10, 2021 and incorporated herein by reference).** Form of Restricted Common Share Rights Award (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on March 10, 2021 and incorporated herein by reference).** Form of Change in Control Agreement with Executive Officers (Johnstone, Neuman and Redd)** (filff ed herewith) Code of Business Conduct and Ethics, as amended on December 6, 2016 (previously filed as an exhibit to Brandywine Realty Trust’s Form 8-K filed on December 9, 2016 and incorporated herein by reference) e Trustee Compensation** (previously filed as an exhibit to Brandywine Realty ture)** (previously filed as an ture)** (previously ance feaff ance feaff m t t 51 21 23.1 23.2 31.1 31.2 31.3 31.4 32.1 32.2 32.3 32.4 99.1 101.1 104 (filed rr ncial statements of Brandywine Realty Trust List of subsidiaries (filed herewith) Consent of PricewaterhouseCoopers LLP relating to finaff herewith) Consent of PricewaterhouseCoopers LLP relating to financial statements of Brandywine Operating Partnership, L.P. (filed herewith) Certification of the Chief Executive Officer of Brandywine Realty Trust pursuant to 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934 (filed herewith) Certification of the Chief Financial Officer of Brandywine Realty Trust pursuant to 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934 (filed herewith) Certification of the Chief Executive Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., pursuant to 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934 (filed herewith) Certification of the Chief Financial Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., pursuant to 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934 (filed herewith) Certification of the Chief Executive Officer of Brandywine Realty Trust pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) Certification of the Chief Financial Officer of Brandywine Realty Trust pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) Certification of the Chief Executive Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) Certification of the Chief Financial Officer of Brandywine Realty Trust, in its capacity as the general partner of Brandywine Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) Material Federal Income Tax Considerations (previously filed as an exhibit to Brandywine Realty Trust’s Form 10-Q for the quarter ended September 30, 2021 and incorporated herein by reference) The following materials from the Annual Reports on Form 10-K of Brandywine Realty Trust and Brandywine Operating Partnership, L.P. for the year ended December 31, 2021 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, detailed tagged and filff ed herewith. Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ** Management contract or compensatory plan or arrangement (d) Financial Statement Schedule: See Item 15 (a) and (b) above 52 Item 16. Form 10-K Summary. None. 53 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto dulyd authorized. SIGNATURES BRANDYW RR INE REALTY TRUSTRR By: /s/ Gerard H. Sweeney Gerard H. Sweeney President and Chief Executive Offiff cer Date: February 24, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capac ities and on the dates indicated. a Signature Title Date /s/ Michael J. Joyce Michael J. Joyce /s/ Gerard H. Sweeney Gerard H. Sweeney /s/ Thomas E. Wirth Thomas E. Wirth /s/ Daniel Palazzo Daniel Palazzo /s/ Reginald DesRoches Reginald DesRoches /s/ James C. Diggs James C. Diggs /s/ Charles P. Pizzi Charles P. Pizzi /s/ Terri A. Herubin Terri A. Herubin /s/ H. Richard Haverstick, Jr. H. Richard Haverstick, Jr. Chairman of the Board and Trustee February 2rr 4, 2022 President, Chief Executive Officer and Trustee r (Principal Executive Officer) February 24, 2022 Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 24, 2022 Vice President and Chief Accounting Officer (Principal Accounting Officer) February 24, 2022 February 2rr 4, 2022 February 2rr 4, 2022 February 2rr 4, 2022 February 2rr 4, 2022 February 2rr 4, 2022 Trustee Trustee Trustee Trustee Trustee 54 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto dulyd authorized. SIGNATURES BRANDYW RR INE OPERATING PARTNERSHIP, L.P. By: By: its General Partner Brandywine Realty Trust, rr /s/ Gerard H. Sweeney Gerard H. Sweeney President and Chief Executive Officer ff Date: February 24, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capac ities and on the dates indicated. a Signature Title Date /s/ Michael J. Joyce Michael J. Joyce /s/ Gerard H. Sweeney Gerard H. Sweeney /s/ Thomas E. Wirth Thomas E. Wirth /s/ Daniel Palazzo Daniel Palazzo /s/ Reginald DesRoches Reginald DesRoches /s/ James Diggs James Diggs /s/ Charles P. Pizzi Charles P. Pizzi /s/ Terri A. Herubin Terri A. Herubin /s/ H. Richard Haverstick, Jr. H. Richard Haverstick, Jr. Chairman of the Board and Trustee February 2rr 4, 2022 President, Chief Executive Officer and Trustee r (Principal Executive Officer) February 24, 2022 Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 24, 2022 Vice President and Chief Accounting Officer (Principal Accounting Officer) February 24, 2022 February 2rr 4, 2022 February 2rr 4, 2022 February 2rr 4, 2022 February 2rr 4, 2022 February 2rr 4, 2022 Trustee Trustee Trustee Trustee Trustee 55 To the Board of Truste r es and Shareholders of Brandywine Realty Trust rr Report of Independent Registered Public Accounting Firm Opinions on the Finanii ciali Statett ments and Intertt nal rr Control over Financ ii ee ial Reporti ngii and its subsidiaries (the We have audited the accompanying consolidated balance sheets of Brandywine Realty Trust “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income, of beneficiaries’ equity and of cash flows forff each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedules listed in the index appearing under Item 15(a) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial work (2013) issued by reporting as of December 31, 2021, based on criteria establia the Committee of Sponsoring Organizations of the Treadway Commission (COSO). shed in Internal Control - IntII egrated Frame FF r present fairly, in all material respects, the financial In our opinion, the consolidated finaff position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - InteII Framework e grated (2013) issued by the COSO. ncial statements referff a red to above ff Basis for Opinions ii The Company's management is responsible for these consolidated finaff ncial statements, forff maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicablea rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated finaff ncial statements are frff ee of material misstatement, whether dued to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. ncial statements included performing procedures to assess the risks of material Our audits of the consolidated finaff misstatement of the consolidated finaff ncial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated finaff ncial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definitiontt and Limi taii ii tions of Internal tt tt Control over FinFF ancial Reportingii ity of finaff ncial reporting and the preparation of financial statements forff A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabila external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairl y reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. ff t Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. F-1 Criticaii l Auditdd Mattersrr The critical audit matter communicated below is a matter arising from the current period audit of the consolidated finaff ncial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Impairment Assessments of Real Estate InvII estments att nd Investments i tt n UncUU onsolidated Real Estate VentVV ures ncial statements, the Company’s gross carrying value of operating As described in Notes 2, 3 and 4 to the consolidated finaff real estate investments was $3,473 million and its investments in unconsolidated real estate venturt es was $436 million as of December 31, 2021. During 2021, the Company did not recognize an impairment related to real estate investments or an other than temporary impairment related to investments in unconsolidated real estate ventures. Management reviews its real estate investments for impairment following the end of each quarter for each of its real estate investments where events or changes . For real estate investments, management in circumstances indicate that the carrying amounts may not be recoverablea ity based on the estimated undiscounted future cash flows expected to be generated from the operations analyzes recoverabila and eventual disposition of the assets. Estimated future cash flows used in such analysis are based on management’s plans for the real estate investment and its views of market economic conditions. The estimates consider assumptim ons, including but not limited to, market rental rates, capia talization rates, and recent sales data for comparable real estate investments. At least quarterly, management assesses whether there are any other than temporary impairment indicators of the Company’s An investment is other than temporarily impaired only if the fair value of investments in unconsolidated real estate ventures. the investment in an unconsolidated real estate venturt e, as estimated by management, is less than the carrying value and the decline is other than temporary. ff rr t The principal considerations for our determination that performing procedures relating to the impairment assessments of real estate investments and investments in unconsolidated real estate venturt es is a critical audit matter are the significant judgment by management when evaluating the real estate investments and investments in unconsolidated real estate venturt es forff potential impairment. This in turnt ying procedures and evaluating audit evidence related to (i) the estimated undiscounted future cash flows expected to be generated by the real estate investments and (ii) the identification of any indicators that the value of the Company’s investments in unconsolidated real estate ventures may be other than temporarily impaired. In addition, there was significant audit effort in evaluating (i) the significant assumptim ons relating to the estimated undiscounted future cash flows expected to be generated by the real estate investments, related to market rental rates and capita alization rates, and (ii) any indicators that the value of the Company’s investments in unconsolidated real estate ventures may be other than temporarily impaired. led to a high degree of auditor judgment and subjectivity in appl a t Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall ncial statements. These procedures included testing the effectiveness of controls relating to opinion on the consolidated finaff the impairment assessments of real estate investments and investments in unconsolidated real estate ventures, including controls over management’s estimated undiscounted future cash flows expected to be generated by real estate investments and management’s identification of any indicators that the value of the Company’s investments in unconsolidated real estate ventures may be other than temporarily impaired. These procedures also included, among others, testing management’s t process for (i) developing the estimated undiscounted future cash flows expected to be generated by the real estate investments, including the evaluation of the reasonableness of significant assumptim ons, the appropriateness of methods, the reasonableness of the model outputs and testing the completeness and accuracy of data provided by management, and (ii) may be other identifying any indicators that the value of the Company’s investments in unconsolidated real estate ventures than temporarily impaired. Evaluating the reasonableness of significant assumptim ons relating to the estimated undiscounted future cash flows expected to be generated by the real estate investments, related to market rental rates and capita alization rates, involved considering past performance of the asset and whether the assumptim ons were consistent with evidence obtained in other areas of the audit. Evaluating management’s assessment of indications of other than temporary impairment involved considering whether any market economic conditions, past in investments in unconsolidated real estate ventures performance of the asset, or evidence obtained in other areas of the audit may be indicative of other than temporary impairment. t t t /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 24, 2022 We have served as the Company’s auditor since 2003. F-2 Report fof Independent Registe gistered P iublic Accountingting iFirm To the Partners of Brandywine Operating Partnership, L.P. Opinions on the Finanii ciali Statett ments and Intertt nal rr Control over Financ ii ee ial Reporti ngii We have audited the accompanying consolidated balance sheets of Brandywine Operating Partnership, L.P. and its subsidiaries (the “Partnership”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income, of partners’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedules listed in the index appearing under Item 15(b) (collectively referred to as the “consolidated financial statements”). We also have audited the Partnership’s internal control ework shed in Internal Control over financial reporting as of December 31, 2021, based on criteria establia (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). e - InteII grate d FramFF tt present fairly, in all material respects, the financial In our opinion, the consolidated financial statements referff position of the Partnership as of December 31, 2021 and 2020, and the results of its operations and its cash flowff each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the ive internal control United States of America. Also in our opinion, the Partnership maintained, in all material respects, effect over financial reporting as of December 31, 2021, based on criteria established in Internal Control - InteII Framework e grated (2013) issued by the COSO. a red to above s forff ff Basis for Opinions The Partnership’s management is responsible for these consolidated finaff ncial statements, forff maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility ncial statements and on the Partnership’s internal control over is to express opinions on the Partnership’s consolidated finaff financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicablea rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated finaff ncial statements are free of material misstatement, whether dued to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. ncial statements included performing procedures to assess the risks of material Our audits of the consolidated finaff misstatement of the consolidated finaff ncial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant ncial statements. Our estimates made by management, as well as evaluating the overall presentation of the consolidated finaff audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definitiontt and Limi taii ii tions of Internal tt tt Control over FinFF ancial Reportingii ity of finaff ncial reporting and the preparation of financial statements forff A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the external purposes in accordance with generally reliabila accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and faiff rly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and of the company are being made only in accordance with authorizations of management and directors of the expenditures company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. t Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Criticatt l Auditdd Matters tt ncial The critical audit matter communicated below is a matter arising from the current period audit of the consolidated finaff statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or F-3 disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Impairment Assessments of Real Estate InvII estments and Investments i tt n UncUU onsolidated Real Estate EE Ventures As described in Notes 2, 3 and 4 to the consolidated financial statements, the Partnership’s gross carrying value of operating real estate investments was $3,473 million and its investments in unconsolidated real estate ventures was $436 million as of December 31, 2021. During 2021, the Partnership did not recognize an impairment related to real estate investments or an other than temporary impairment related to investments in unconsolidated real estate venturt es. Management reviews its real impairment following the end of each quarter for each of its real estate investments where events or estate investments forff changes in circumstances indicate that the carrying amounts may not be recoverablea . For real estate investments, management ity based on the estimated undiscounted future cash flows expected to be generated from the operations analyzes recoverabila and eventual disposition of the assets. Estimated future cash flows used in such analysis are based on management’s plans for the real estate investment and its views of market economic conditions. The estimates consider assumptim ons, including but comparable real estate investments. At least not limited to, market rental rates, capitalization rates, and recent sales data forff quarterly, management assesses whether there are any other than temporary impairment indicators of the Partnership’s investments in unconsolidated real estate venturt es. An investment is other than temporarily impaired only if the fair value of the investment in an unconsolidated real estate venturt e, as estimated by management, is less than the carrying value and the decline is other than temporary. ff rr The principal considerations for our determination that performing procedures relating to the impairment assessments of real estate investments and investments in unconsolidated real estate venturt es is a critical audit matter are the significant judgment by management when evaluating the real estate investments and investments in unconsolidated real estate venturt es forff potential impairment. This in turt n led to a high degree of auditor judgment and subjectivity in appl ying procedures and evaluating audit evidence related to (i) the estimated undiscounted future cash flows expected to be generated by the real estate investments and (ii) the identification of any indicators that the value of the Partnership’s investments in unconsolidated real estate venturt es may be other than temporarily impaired. In addition, there was significant audit effort in evaluating (i) the significant assumptim ons relating to the estimated undiscounted future cash flows expected to be generated by the real estate investments, related to market rental rates and capita alization rates, and (ii) any indicators that the value of the Partnership’s investments in unconsolidated real estate ventures may be other than temporarily impaired. a t Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated finaff ncial statements. These procedures included testing the effectiveness of controls relating to the impairment assessments of real estate investments and investments in unconsolidated real estate venturt es, including controls over management’s estimated undiscounted future cash flows expected to be generated by real estate investments and management’s identification of any indicators that the value of the Partnership’s investments in unconsolidated real estate ventures may be other than temporarily impaired. These procedures also included, among others, testing management’s t process for (i) developing the estimated undiscounted future cash flows expected to be generated by the real estate investments, including the evaluation of the reasonableness of significant assumptim ons, the appropriateness of methods, the reasonableness of the model outputs and testing the completeness and accuracy of data provided by management, and (ii) identifying any indicators that the value of the Partnership’s investments in unconsolidated real estate venturt es may be other than temporarily impaired. Evaluating the reasonableness of significant assumptim ons relating to the estimated undiscounted future cash flows expected to be generated by the real estate investments, related to market rental rates and capita alization rates, involved considering past performance of the asset and whether the assumptim ons were consistent with evidence obtained in other areas of the audit. Evaluating management’s assessment of indications of other than temporary impairment in investments in unconsolidated real estate venturt es involved considering whether any market economic conditions, past performance of the asset, or evidence obtained in other areas of the audit may be indicative of other than temporary impairment. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania 4, 2022 February 2rr We have served as the Partnership’s auditor since 2003. F-4 BRANDYWINE REALTY TRUST CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share information) December 31, 2021 December 31, 2020 ASSETS Real estate investments: Operating properties ...................................................................................................................................... $ 3,472,602 $ Accumulated depreciation ............................................................................................................................. Right of use asset - operating leases, net....................................................................................................... Operating real estate investments, net .................................................................................................... Construction-in-progress ............................................................................................................................... Land held for development............................................................................................................................ Prepaid leasehold interests in land held for development, net ...................................................................... Total real estate investments, net............................................................................................................ Assets held for sale, net ................................................................................................................................. Cash and cash equivalents ............................................................................................................................. Accounts receivable....................................................................................................................................... Accrued rent receivable, net of allowance of $4,133 and $5,086 as of December 31, 2021 and December 31, 2020, respectively .................................................................................................................. Investment in unconsolidated real estate ventures ........................................................................................ Deferred costs, net ......................................................................................................................................... Intangible assets, net...................................................................................................................................... Other assets.................................................................................................................................................... Total assets.............................................................................................................................................. $ LIABILITIES AND BENEFICIARIES' EQUITY Unsecured credit facility................................................................................................................................ $ Unsecured term loan, net............................................................................................................................... Unsecured senior notes, net........................................................................................................................... Accounts payable and accrued expenses....................................................................................................... Distributions payable..................................................................................................................................... Deferred income, gains and rent.................................................................................................................... Intangible liabilities, net ................................................................................................................................ Lease liability - operating leases ................................................................................................................... Other liabilities .............................................................................................................................................. (957,450) 20,313 2,535,465 277,237 114,604 27,762 2,955,068 562 27,463 11,875 167,210 435,506 86,862 28,556 133,094 3,846,196 23,000 249,608 1,580,978 150,151 32,765 23,849 12,981 22,962 48,683 $ $ 3,474,109 (896,561) 20,977 2,598,525 210,311 117,984 39,185 2,966,005 7,349 46,344 13,536 155,372 401,327 84,856 48,570 176,747 3,900,106 — 249,084 1,581,511 121,982 32,706 21,396 18,448 22,758 47,573 Total liabilities ........................................................................................................................................ $ 2,144,977 $ 2,095,458 Commitments and contingencies (See Note 20) Brandywine Realty Trust's Equity: Common Shares of Brandywine Realty Trust's beneficial interest, $0.01 par value; shares authorized 400,000,000; 171,126,257 and 170,572,964 issued and outstanding as of December 31, 2021 and December 31, 2020, respectively..................................................................................................................... ................................................................................................................................ Additional paid-in-capital a Deferred compensation payable in common shares ........................................................................................ Common shares in grantor trust, 1,169,703 and 1,160,494 issued and outstanding as of December 31, 2021 and December 31, 2020, respectively..................................................................................................... Cumulative earnings ........................................................................................................................................ Accumulated other comprehensive loss .......................................................................................................... Cumulative distributions.................................................................................................................................. Total Brandywine Realty Trust's equity ................................................................................................. Noncontrolling interests................................................................................................................................... Total beneficiaries' equity....................................................................................................................... $ Total liabilities and beneficiaries' equity ......................................................................................................... $ 1,712 3,146,786 18,491 (18,491) 1,122,372 (2,020) (2,578,583) 1,690,267 10,952 1,701,219 3,846,196 $ $ 1,707 3,138,152 17,516 (17,516) 1,110,083 (7,561) (2,448,238) 1,794,143 10,505 1,804,648 3,900,106 The accompanying notes are an integral part of these consolidated financial statements. F-5 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF OPERATRR IONS (in thousands, except share and per share information) Revenue Rents....................................................................................................................... $ Third party management fees, labor reimbursement and leasing........................... Other....................................................................................................................... Total revenue........................................................................................................ Operating expenses Property operating expenses................................................................................... Real estate taxes ..................................................................................................... Third party management expenses......................................................................... Depreciation and amortization ............................................................................... General and administrative expenses ..................................................................... Total operating expenses...................................................................................... Gain on sale of real estate Net gain on disposition of real estate ..................................................................... Net gain on sale of undepreciated real estate ......................................................... Total gain on sale of real estate............................................................................ Operating income .................................................................................................... Other income (expense): Interest and investment income.............................................................................. Interest expense ...................................................................................................... Interest expense - amortization of deferred financing costs................................... Equity in loss of unconsolidated real estate ventures............................................. Net gain on real estate venture transactions ........................................................... Net income before income taxes............................................................................. Income tax (provision) benefit ............................................................................... Net income................................................................................................................ Net income attributable to noncontrolling interests .................................................. Net income attributable to Brandywine Realty Trust ......................................... Nonforfeitable dividends allocated to unvested restricted shareholders................... Net income attributable to Common Shareholders of Brandywine Realty Trust ......................................................................................................................... $ Basic income per Common Share .......................................................................... $ Diluted income per Common Share ...................................................................... $ Basic weighted average shares outstanding .......................................................... Diluted weighted average shares outstanding ...................................................... Year Ended December 31, 2021 2020 2019 $ 451,519 26,444 8,856 486,819 121,890 53,621 12,800 178,105 30,153 396,569 142 2,903 3,045 93,295 8,295 (62,617) (2,836) (26,697) 2,973 12,413 (47) 12,366 (77) 12,289 (421) $ 513,504 18,580 2,768 534,852 132,172 63,032 10,252 188,283 30,288 424,027 289,461 201 289,662 400,487 1,939 (73,911) (2,904) (18,584) 75 307,102 224 307,326 (1,799) 305,527 (410) 554,665 19,626 6,126 580,417 154,361 62,237 9,248 210,005 32,156 468,007 356 2,020 2,376 114,786 2,318 (81,512) (2,768) (9,922) 11,639 34,541 (12) 34,529 (262) 34,267 (396) 11,868 0.07 0.07 170,878,185 172,273,240 $ $ $ 305,117 1.77 1.77 171,926,079 172,317,076 $ $ $ 33,871 0.19 0.19 176,132,941 176,686,813 The accompanying notes are an integral part of these consolidated financial statements. F-6 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, Net income ................................................................................................... $ 12,366 $ Comprehensive income (loss): 2021 2020 307,326 2019 $ 34,529 Unrealized gain (loss) on derivative financial instruments................... Amortization of interest rate contracts (1) ............................................ Total comprehensive income (loss)........................................................... Comprehensive income................................................................................ to noncontrolling interest ............ Comprehensive income attributablea Comprehensive income attributablea to Brandywine Realty Trust r ............... $ 4,817 752 5,569 17,935 (105) 17,830 $ (5,972) 752 (5,220) 302,106 (1,770) 300,336 $ (8,210) 770 (7,440) 27,089 (221) 26,868 (1) Amounts reclassified from comprehensive income to interest expense within the Consolidated Statements of Operations. The accompanying notes are an integral part of these consolidated financial statements. F-7 T S U R T Y T L A E R E N I W Y D N A R B Y T I U Q E ’ S E I R A I C I F E N E B F O S T N E M E T A T S D E T A D I L O S N O C 9 1 0 2 d n a 0 2 0 2 , 1 2 0 2 , 1 3 r e b m e c e D d e d n e s r a e Y e h t r o F ) s e r a h s f o r e b m u n t p e c x e , s d n a s u o h t n i ( l a t o T g n i l l o r t n o c n o N s t s e r e t n I e v i t a l u m u C s n o i t u b i r t s i D d e t a l u m u c c A r e h t O e v i s n e h e r p m o C ) s s o L ( e m o c n I e v i t a l u m u C s g n i n r a E n o m m o C n i s e r a h S r o t n a r G t s u r rr T d e r r rr e f e D n o i t a s n e p m o C n i e l b a y a P n o m m o C s e r a h S l a n o i t i d d A n i - d i a P l a t i p a C n o m m o C f o s e r a h S e n i w y d n a r B s ' t s u rr r T y t l a e R l a i c i f e n e b t s e r e t n i f o r e b m u N / t s u rr r T i b b a R d e r r rr e f e D n o i t a s n e p m o C s e r a h S f o r e b m u N n o m m o C s e r a h S 8 2 0 , 1 1 8 , 1 $ 1 0 2 , 2 1 $ ) 9 0 9 , 3 8 1 , 2 ( $ 9 2 0 , 5 $ 5 2 6 , 5 7 7 $ ) 1 2 0 , 4 1 ( $ 1 2 0 , 4 1 $ 2 1 3 , 0 0 2 , 3 $ 0 7 7 , 1 $ 0 2 1 , 7 7 9 4 2 3 , 3 7 8 , 6 7 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1 0 2 , 1 3 r e b m e c e D , E C N A L A B ) 6 3 3 , 5 ( 9 2 5 , 4 3 ) 0 4 4 , 7 ( ) 1 8 2 , 7 1 ( 7 2 ) 0 8 1 , 2 ( — 7 2 0 , 0 1 — — ) 1 7 0 , 5 3 1 ( 2 6 2 ) 1 4 ( 7 2 ) 6 1 ( ) 7 9 1 , 1 ( ) 3 6 ( ) 7 4 7 ( ) 4 2 3 , 4 3 1 ( ) 9 9 3 , 7 ( ) 6 3 3 , 5 ( 7 6 2 , 4 3 ) 8 6 2 , 7 1 ( ) 3 1 ( ) 9 6 1 , 7 3 3 , 1 ( . . . . . . . . t s e r e t n I l a i c i f e n e B f o s e r a h S n o m m o C f o t n e m e r i t e r d n a e s a h c r u p e R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e g n a h c g n i t n u o c c a f o t c e f f e e v i t a l u m u C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i t e N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s s o l e v i s n e h e r p m o c r e h t O ) 5 9 1 , 2 ( 5 9 1 , 2 ) 3 8 9 ( 6 1 8 1 0 , 0 1 3 6 9 2 4 3 , 1 4 0 8 0 , 7 8 5 4 2 , 1 0 1 2 , 5 4 8 5 8 4 , 7 9 . . . . . . . . . . s e r u t n e v e t a t s e l a e r d e t a d i l o s n o c n i t s e r e t n i p i h s r e n t r a p f o e c n a u s s I . . . . . . . . . . . e r u t tt n e v e t a t s e l a e r d e t a d i l o s n o c n i t s e r e t n i p i h s r e n t r a p f o e s a h c r u P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t i n U P L f o n o i t p m e d e R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y t i v i t c a n o i t a s n e p m o c d e s a b - e r a h S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n a l P n o i t a s n e p m o C d e r r rr e f e D ) o t ( / m o r f e c n a u s s I e r a h S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t s e r e t n i g n i l l o r t n o c n o N f o n o i t a c o l l a e R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) e r a h s r e p 6 7 . 0 $ ( d e r a l c e d s n o i t u b i r t s i D 3 0 3 , 8 8 6 , 1 $ 6 2 4 , 0 1 $ ) 3 3 2 , 8 1 3 , 2 ( $ ) 0 7 3 , 2 ( $ 6 5 5 , 4 0 8 $ ) 6 1 2 , 6 1 ( $ 6 1 2 , 6 1 $ 8 5 1 , 2 9 1 , 3 $ 6 6 7 , 1 $ 2 4 5 , 5 0 1 , 1 5 9 0 , 0 8 4 , 6 7 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1 0 2 , 1 3 r e b m e c e D , E C N A L A B 6 2 3 , 7 0 3 ) 0 2 2 , 5 ( ) 9 9 9 , 9 5 ( ) 7 1 0 , 1 ( ) 2 2 ( ) 6 0 2 ( 6 3 2 , 6 — ) 3 5 7 , 0 3 1 ( ) 9 2 ( 9 9 7 , 1 ) 2 2 ( ) 7 1 0 , 1 ( 6 9 ) 8 4 7 ( ) 5 0 0 , 0 3 1 ( ) 1 9 1 , 5 ( 7 2 5 , 5 0 3 ) 7 3 9 , 9 5 ( ) 2 6 ( ) 3 8 4 , 8 4 2 , 6 ( . . . . . . . . t s e r e t n I l a i c i f e n e B f o s e r a h S n o m m o C f o t n e m e r i t e r d n a e s a h c r u p e R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i t e N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s s o l e v i s n e h e r p m o c r e h t O ) 0 0 3 , 1 ( 0 0 3 , 1 ) 6 0 2 ( ) 6 9 ( 3 3 2 , 6 3 7 6 9 , 0 5 5 8 9 , 3 6 9 0 , 9 0 3 6 5 2 , 2 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y t i v i t c a n o i t a s n e p m m o c d e s a b - e r a h S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n a l P n o i t a s n e p m o C d e r r rr e f e D ) o t ( / m o r f e c n a u s s I e r a h S . . . . . . . . . . . . . . . . . . . e r u t n e v e t a t s e l a e r d e t a d i l o s n o c n i t s e r e t n i p i h s r e n t r a p f o e l a S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s e r u t n e v e t a t s e l a e r d e t a d i l o s n o c m o r f s n o i t u b i r t s i D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t s e r e t n i g n i l l o r t n o c n o N f o n o i t a c o l l a e R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) e r a h s r e p 6 7 . 0 $ ( d e r a l c e d s n o i t u b i r t s i D 8 4 6 , 4 0 8 , 1 $ 5 0 5 , 0 1 $ ) 8 3 2 , 8 4 4 , 2 ( $ ) 1 6 5 , 7 ( $ 3 8 0 , 0 1 1 , 1 $ ) 6 1 5 , 7 1 ( $ 6 1 5 , 7 1 $ 2 5 1 , 8 3 1 , 3 $ 7 0 7 , 1 $ 4 9 4 , 0 6 1 , 1 4 6 9 , 2 7 5 , 0 7 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 2 0 2 , 1 3 r e b m e c e D , E C N A L A B 6 6 3 , 2 1 9 6 5 , 5 2 5 0 , 3 5 6 7 , 2 ) 4 3 3 , 2 ( ) 8 9 1 ( 4 5 3 , 6 — ) 3 0 0 , 1 3 1 ( 7 7 8 2 5 6 7 , 2 ) 4 3 3 , 2 ( 9 6 5 ) 8 5 6 ( ) 5 4 3 , 0 3 1 ( 1 4 5 , 5 9 8 2 , 2 1 ) 5 7 9 ( 5 7 9 9 4 0 , 3 ) 8 9 1 ( ) 9 6 5 ( 2 5 3 , 6 3 2 5 4 6 , 0 7 ) 6 3 4 , 1 6 ( 6 5 6 , 4 4 3 ) 8 5 0 , 8 1 ( . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y t i v i t c a n o i t a s n e p m m o c d e s a b - e r a h S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n a l P n o i t a s n e p m o C d e r r rr e f e D ) o t ( / m o r f e c n a u s s I e r a h S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t s e r e t n i g n i l l o r t n o c n o N f o n o i t a c o l l a e R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) e r a h s r e p 6 7 . 0 $ d e r a l c e d s n o i t u b i r t s i D 5 9 6 , 6 2 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t s e r e t n I l a i c i f e n e B f o s e r a h S n o m m o C f o e c n a u s s I . . . . . . . . . . s e r u t n e v e t a t s e l a e r d e t a d i l o s n o c n i t s e r e t n i p i h s r e n t r a p f o e c n a u s s I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t i n U P L f o n o i t p m e d e R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i t e N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i e v i s n e h e r p m o c r e h t O 9 1 2 , 1 0 7 , 1 $ 2 5 9 , 0 1 $ ) 3 8 5 , 8 7 5 , 2 ( $ ) 0 2 0 , 2 ( $ 2 7 3 , 2 2 1 , 1 $ ) 1 9 4 , 8 1 ( $ 1 9 4 , 8 1 $ 6 8 7 , 6 4 1 , 3 $ 2 1 7 , 1 $ 3 0 7 , 9 6 1 , 1 7 5 2 , 6 2 1 , 1 7 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 0 2 , 1 3 r e b m e c e D , E C N A L A B . s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i n a e r a s e t o n g n i y n a p m o c c a e h T 0 1 - F BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Cash flows from operating activities: Net income................................................................................................................................................ $ 12,366 $ 307,326 $ 34,529 Year Ended December 31, 2021 2020 2019 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization ........................................................................................................... Amortization of deferred finff ancing costs........................................................................................... Amortization of debt discount/(premium), net................................................................................... Amortization of stock compensation costs......................................................................................... Straight-line rent income .................................................................................................................... Amortization of acquired above (below) market leases, net .............................................................. Ground rent expense........................................................................................................................... Provision for doubtful accounts ......................................................................................................... Net gain on real estate venture transactions ....................................................................................... Net gain on sale of interests in real estate .......................................................................................... Loss from unconsolidated real estate ventures, net of distributions................................................... Income tax provision (benefit) ........................................................................................................... Changes in assets and liabia lities: Accounts receivable ........................................................................................................................... Other assets......................................................................................................................................... and accruerr d expenses............................................................................................ Accounts payablea Deferredrr income, gains and rent......................................................................................................... Other liabilities................................................................................................................................... Net cash provided by operating activities.................................................................................... Cash flows from investing activities: Acquisition of properties .......................................................................................................................... Acquisition of partners interest in consolidated real estate venture ......................................................... Proceeds from the sale of properties......................................................................................................... Proceeds from real estate venture sales .................................................................................................... Proceeds from insurance........................................................................................................................... Proceeds from note receivable.................................................................................................................. Issuance of note receivable ....................................................................................................................... Proceeds from repayment of mortgage notes receivable .......................................................................... Capital a expenditures for tenant improvements ......................................................................................... Capital a expenditures for redevelopments ................................................................................................. Capital a expenditures for developments..................................................................................................... Advances for the purchase of tenant assets, net of repayments................................................................ Investment in unconsolidated real estate ventures.................................................................................... Deposits for real estate.............................................................................................................................. Capital a distributions from unconsolidated real estate ventures ................................................................ Leasing costs paid..................................................................................................................................... Net cash provided by (used in) investing activities ..................................................................... Cash flows from financing activities: Repayments of mortgage notes payable ................................................................................................... Proceeds from credit facility borrowings.................................................................................................. Repayments of credit facility borrowings................................................................................................. Proceeds from unsecured notes................................................................................................................. Debt financing costs paid.......................................................................................................................... Exercise of stock options, net ................................................................................................................... Shares used forff employee taxes upon vesting of share awards ................................................................ Partner contributions to consolidated real estate venture ......................................................................... Repurchase and retirement of common shares ......................................................................................... Redemption of limited partnership units .................................................................................................. Distributions paid to shareholders ............................................................................................................ Distributions to noncontrolling interest .................................................................................................... Net cash used in financing activities............................................................................................ Increase/(Decrease) in cash and cash equivalents and restricted cash...................................................... ff Cash and cash equivalents and restricted cash at beginning of year......................................................... 178,105 2,836 (1,951) 7,130 (13,485) (5,377) 918 — (2,973) (3,045) 26,697 47 2,506 (19,325) 2,974 2,986 465 190,874 — — 10,303 — 1,250 50,000 — — (56,830) (48,022) (30,269) 270 (31,643) (2,550) 27,028 (19,852) (100,315) — 154,000 (131,000) — — (63) (1,762) 2,765 — (2,334) (130,255) (687) (109,336) (18,777) 47,077 188,283 2,904 (568) 6,627 (14,743) (4,867) 1,455 1,049 (75) (289,662) 18,584 (224) (2,031) (5,034) 14,374 (12,149) 14,557 225,806 (41,950) — 278,114 — — — (50,000) — (73,166) (21,664) (65,420) 1,488 (719) — 9,001 (17,394) 18,290 (94,993) 318,000 (318,000) — — 47 (1,346) — (60,000) — (131,150) (747) (288,189) (44,093) 91,170 Cash and cash equivalents and restricted cash at end of period ............................................................... $ 28,300 $ 47,077 $ Reconciliation of cash and cash equivalents and restricted cash:................................................................. Cash and cash equivalents, beginning of period....................................................................................... $ Restricted cash, beginning of period......................................................................................................... Cash and cash equivalents and restricted cash, beginning of period ........................................................ $ 46,344 733 47,077 $ $ 90,499 671 91,170 $ $ F-11 210,005 2,768 189 6,876 (11,369) (8,857) 1,470 (1,345) (11,639) (2,376) 10,242 12 (248) 9,368 (5,599) 9,319 (9,115) 234,230 — (2,181) 41,795 9,730 — — — 3,341 (67,258) (53,846) (77,192) (1,035) (253) (4,181) 35,906 (15,485) (130,659) (7,595) 348,500 (441,000) 216,373 (1,965) 3,771 (1,554) 27 (17,282) — (134,140) (747) (35,612) 67,959 23,211 91,170 22,842 369 23,211 Cash and cash equivalents, end of period ................................................................................................. $ Restricted cash, end of period................................................................................................................... Cash and cash equivalents and restricted cash, end of period .................................................................. $ 27,463 837 28,300 $ $ 46,344 733 47,077 $ $ 90,499 671 91,170 Supplemental disclosure: Cash paid for interest, net of capitalized interest during the years ended December 31, 2021, 2020 and 2019 of $8,689, $4,650 and $2,246 respectively $ Cash paid for income taxes Supplemental disclosure of non-cash activity: Dividends and distributions declared but not paid.................................................................................... Change in investment in real estate ventures as a result of deconsolidation ............................................ Change in operating real estate from deconsolidation of operating properties ........................................ Change in investment in real estate ventures from deconsolidation of operating properties ................... Change in mortgage notes payable from deconsolidation of operating properties................................... Change in other assets as a result of deconsolidation of operating properties.......................................... Change in capital expenditures financed through accounts payablea at period end................................... Change in capital a expenditures financed through retention payablea at period end .................................. 2021 Year Ended December 31, 2020 2019 72,391 $ 79,498 $ 785 688 32,765 32,761 (30,073) — — (2,688) 22,744 (613) 32,706 — 427,710 (296,262) (220,271) 1,471 (9,949) 284 66,508 1,385 33,815 1,806 — — — — (10,618) (946) The accompanying notes are an integral part of these consolidated financial statements. F-12 BRANDYWINE OPERATIRR NG PARTNERSHIP, L.P. CONSOLIDATED BALANCE SHEETS (in thousands, except unit and per unit information) December 31, 2021 December 31, 2020 ASSETS Real estate investments: Operating properties ............................................................................................................................................. $ 3,472,602 $ 3,474,109 Accumulated depreciation .................................................................................................................................... Right of use asset - operating leases, net .............................................................................................................. Operating real estate investments, net ........................................................................................................... Construction-in-progress ...................................................................................................................................... Land held for development................................................................................................................................... Prepaid leasehold interests in land held for development, net.............................................................................. (957,450) 20,313 2,535,465 277,237 114,604 27,762 (896,561) 20,977 2,598,525 210,311 117,984 39,185 Total real estate investments, net ................................................................................................................... 2,955,068 2,966,005 Assets held for sale, net ........................................................................................................................................ Cash and cash equivalents .................................................................................................................................... Accounts receivable.............................................................................................................................................. Accrued rent receivable, net of allowance of $4,133 and $5,086 as of December 31, 2021 and December 31, 2020, respectively................................................................................................................................................. Investment in unconsolidated real estate ventures................................................................................................ Deferred costs, net ................................................................................................................................................ Intangible assets, net............................................................................................................................................. Other assets........................................................................................................................................................... Total assets..................................................................................................................................................... LIABILITIES AND PARTNERS' EQUITY Unsecured credit facility....................................................................................................................................... Unsecured term loan, net ...................................................................................................................................... Unsecured senior notes, net .................................................................................................................................. Accounts payable and accrued expenses .............................................................................................................. Distributions payable............................................................................................................................................ Deferred income, gains and rent........................................................................................................................... Intangible liabilities, net ....................................................................................................................................... Lease liability - operating leases........................................................................................................................... Other liabilities ..................................................................................................................................................... $ $ 562 27,463 11,875 167,210 435,506 86,862 28,556 133,094 3,846,196 23,000 249,608 1,580,978 150,151 32,765 23,849 12,981 22,962 48,683 $ $ 7,349 46,344 13,536 155,372 401,327 84,856 48,570 176,747 3,900,106 — 249,084 1,581,511 121,982 32,706 21,396 18,448 22,758 47,573 Total liabilities ............................................................................................................................................... $ 2,144,977 $ 2,095,458 Commitments and contingencies (See Note 20) Redeemable limited partnership units at redemption value; 823,983 and 981,634 issued and outstanding as of December 31, 2021 and December 31, 2020, respectively..................................................................................... Brandywine Operating Partnership, L.P.'s equity: General Partnership Capital; 171,126,257 and 170,572,964 units issued and outstanding as of December 31, 2021 and December 31, 2020, respectively ............................................................................................................ Accumulated other comprehensive loss ............................................................................................................... Total Brandywine Operating Partnership, L.P.'s equity ................................................................................ Noncontrolling interest - consolidated real estate ventures .................................................................................... Total partners' equity ..................................................................................................................................... Total liabilities and partners' equity........................................................................................................................ $ $ 1,690,079 3,846,196 $ $ The accompanying notes are an integral part of these consolidated financial statements. F-13 11,140 11,566 1,689,611 (2,366) 1,687,245 2,834 1,800,945 (7,935) 1,793,010 72 1,793,082 3,900,106 BRANDYWINE OPERATIRR CONSOLIDATED STATEMENTS OF OPERATIRR NG PARTNERSHIP, L.P. ONS (in thousands, except unit and per unit information) Year Ended December 31, 2021 2020 2019 Revenue Rents..................................................................................................................................... $ 451,519 $ 513,504 $ Third party management fees, labor reimbursement and leasing......................................... Other..................................................................................................................................... Total revenue...................................................................................................................... Operating expenses Property operating expenses................................................................................................. Real estate taxes ................................................................................................................... Third party management expenses ....................................................................................... Depreciation and amortization ............................................................................................. General and administrative expenses ................................................................................... Total operating expenses.................................................................................................... Gain on sale of real estate Net gain on disposition of real estate ................................................................................... Net gain on sale of undepreciated real estate ....................................................................... Total gain on sale of real estate.......................................................................................... Operating income................................................................................................................... Other income (expense): Interest and investment income............................................................................................ Interest expense .................................................................................................................... Interest expense - amortization of deferred finff ancing costs................................................. Equity in loss of unconsolidated real estate ventures........................................................... Net gain on real estate venture transactions ......................................................................... Net income before income taxes ........................................................................................... Income tax (provision) benefit ............................................................................................. Net income .............................................................................................................................. Net (income) loss attributable to noncontrolling interests - consolidated real estate ventures Net income attributable to Brandywine Operating Partnership....................................... Nonforfeitable dividends allocated to unvested restricted unitholders.................................... Net income attributable to Common Partnership Unitholders of Brandywine Operating Partnership, L.P. ................................................................................................. Basic income per Common Partnership Unit...................................................................... Diluted income per Common Partnership Unit .................................................................. Basic weighted average common partnership units outstanding ...................................... Diluted weighted average common partnership units outstanding................................... 26,444 8,856 486,819 121,890 53,621 12,800 178,105 30,153 396,569 142 2,903 3,045 93,295 8,295 (62,617) (2,836) (26,697) 2,973 12,413 (47) 12,366 3 12,369 (421) 18,580 2,768 534,852 132,172 63,032 10,252 188,283 30,288 424,027 289,461 201 289,662 400,487 1,939 (73,911) (2,904) (18,584) 75 307,102 224 307,326 (20) 307,306 (410) $ $ $ 11,948 0.07 0.07 $ $ $ 306,896 1.77 1.77 $ $ $ 554,665 19,626 6,126 580,417 154,361 62,237 9,248 210,005 32,156 468,007 356 2,020 2,376 114,786 2,318 (81,512) (2,768) (9,922) 11,639 34,541 (12) 34,529 (69) 34,460 (396) 34,064 0.19 0.19 171,770,843 173,165,898 172,907,713 173,298,710 177,114,932 177,668,804 The accompanying notes are an integral part of these consolidated financial statements. F-14 BRANDYWINE OPERATIRR NG PARTNERSHIP, L.P. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2021 2020 2019 Net income............................................................................................................................... $ 12,366 $ 307,326 $ 34,529 Comprehensive income (loss): Unrealized gain (loss) on derivative financial instruments ............................................ Amortization of interest rate contracts (1)...................................................................... Total comprehensive income (loss)...................................................................................... Comprehensive income............................................................................................................ Comprehensive (income) loss attributable to noncontrolling interest - consolidated real estate ventures.......................................................................................................... Comprehensive income attributable to Brandywine Operating Partnership ........................... 4,817 752 5,569 17,935 3 (5,972) 752 (5,220) 302,106 (20) (8,210) 770 (7,440) 27,089 (69) $ 17,938 $ 302,086 $ 27,020 (1) Amounts reclassified from comprehensive income to interest expense within the Consolidated Statement of Operations. The accompanying notes are an integral part of these consolidated financial statements. F-15 BRANDYWINE OPERATIRR NG PARTNERSHIP, L.P. CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY For the Years ended December 31, 2021, 2020 and 2019 (in thousands, except Units) BALANCE, December 31, 2018.............................................................................. 176,873,324 $ 1,791,591 $ 4,725 $ 2,192 $ 1,798,508 General Partner Capital Units Amount Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest - Consolidated Real Estate Ventures Total Partners' Equity Cumulative effecff t of accounting change................................................................ Net income ............................................................................................................. Other comprehensive loss ...................................................................................... Deferred compensation obligation ......................................................................... Conversion of LP Units to common shares ........................................................... 97,485 1,245 Repurchase and retirement of LP units .................................................................. (1,337,169) Issuance of partnership interest in consolidated real estate ventures..................... Share-based compensation activity........................................................................ 845,210 Purchase of partnership interest in consolidated real estate venture...................... Adjustment of redeemablea partnership units to liquidation value at period end.... Distributions declared to general partnership unitholders ($0.76 per unit) ........... BALANCE, December 31, 2019.............................................................................. 176,480,095 $ Net income ............................................................................................................. Other comprehensive loss ...................................................................................... Deferred compensation obligation ......................................................................... 32,256 Repurchase and retirement of LP units .................................................................. (6,248,483) Distributions from consolidated real estate ventures ............................................. (5,336) 34,460 16 (17,297) 10,027 (983) (3,615) (134,324) 1,674,539 307,306 (206) (59,999) Share-based compensation activity........................................................................ 309,096 6,236 (7,440) 69 27 (1,197) $ (2,715) $ 1,091 $ (5,220) Sale of partnership interest to consolidated real estate venture ............................. Adjustment of redeemable partnership units to liquidation value at period end.... Distributions declared to general partnership unitholders $0.76 per unit)............. BALANCE, December 31, 2020.............................................................................. Net income ............................................................................................................. Other comprehensive income................................................................................. Deferred compensation obligation ......................................................................... Issuance of LP Units .............................................................................................. (18,058) 226,695 Repurchase and retirement of LP units .................................................................. Issuance of partnership interest in consolidated real estate ventures..................... Share-based compensation activity........................................................................ 344,656 Adjustment of redeemable partnership units to liquidation value at period end.... Distributions declared to general partnership unitholders ($0.76 per unit) ........... BALANCE, December 31, 2021.............................................................................. 3,074 (130,005) 170,572,964 $ 1,800,945 $ (7,935) $ 5,569 12,369 (198) 3,052 (2,334) 6,354 (232) (130,345) (5,336) 34,529 (7,440) — 16 (17,297) 27 10,027 (2,180) (3,615) (134,324) 1,672,915 307,326 (5,220) (206) (59,999) (22) 6,236 (1,017) 3,074 (130,005) $ 1,793,082 12,366 5,569 (198) 3,052 (2,334) 2,765 6,354 (232) (130,345) 20 (22) (1,017) 72 (3) 2,765 171,126,257 $ 1,689,611 $ (2,366) $ 2,834 $ 1,690,079 The accompanying notes are an integral part of these consolidated financial statements. F-16 BRANDYWINE OPERATIRR NG PARTNERSHIP L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Cash flows from operating activities: Net income .................................................................................................................................................. $ 12,366 $ 307,326 $ 34,529 Year Ended December 31, 2021 2020 2019 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization ............................................................................................................. Amortization of deferred finff ancing costs ............................................................................................. Amortization of debt discount/(premium), net..................................................................................... Amortization of stock compensation costs........................................................................................... Straight-line rent income ...................................................................................................................... Amortization of acquired above (below) market leases, net ................................................................ Ground rent expense............................................................................................................................. Provision for doubtful accounts............................................................................................................ Net gain on real estate venture transactions ......................................................................................... Net gain on sale of interests in real estate ............................................................................................ Loss from unconsolidated real estate ventures, net of distributions..................................................... Income tax provision (benefit) ............................................................................................................. Changes in assets and liabia lities: Accounts receivable.......................................................................................................................... Other assets....................................................................................................................................... Accounts payablea and accruerr d expenses .......................................................................................... Deferredrr income, gains and rent....................................................................................................... Other liabilities ................................................................................................................................. Net cash provided by operating activities ...................................................................................... Cash flows from investing activities: Acquisition of properties............................................................................................................................. Acquisition of partners interest in consolidated real estate venture............................................................ Proceeds from the sale of properties........................................................................................................... Proceeds from real estate venture sales ...................................................................................................... Proceeds from insurance ............................................................................................................................. Proceeds from note receivable .................................................................................................................... Issuance of note receivable ......................................................................................................................... Proceeds from repayment of mortgage notes receivable ............................................................................ Capital a expenditures for tenant improvements ........................................................................................... Capital a expenditures for redevelopments.................................................................................................... Capital a expenditures for developments....................................................................................................... Advances for the purchase of tenant assets, net of repayments.................................................................. Investment in unconsolidated real estate ventures...................................................................................... Deposits for real estate................................................................................................................................ Capital a distributions from unconsolidated real estate ventures .................................................................. Leasing costs paid ....................................................................................................................................... Net cash provided by (used in) investing activities ....................................................................... Cash flows from financing activities: Repayments of mortgage notes payable ..................................................................................................... Proceeds from credit facility borrowings.................................................................................................... Repayments of credit facility borrowings................................................................................................... Proceeds from unsecured notes................................................................................................................... Debt financing costs paid............................................................................................................................ Exercise of stock options, net ..................................................................................................................... Shares used forff employee taxes upon vesting of share awards................................................................... Partner contributions to consolidated real estate venture............................................................................ Repurchase and retirement of common units.............................................................................................. Redemption of limited partnership units..................................................................................................... Distributions paid to preferred and common partnership units .................................................................. Net cash used in financing activities.............................................................................................. Increase/(Decrease) in cash and cash equivalents and restricted cash........................................................ Cash and cash equivalents and restricted cash at beginning of year........................................................... ff 178,105 2,836 (1,951) 7,130 (13,485) (5,377) 918 — (2,973) (3,045) 26,697 47 2,506 (19,325) 2,974 2,986 465 190,874 — — 10,303 — 1,250 50,000 — — (56,830) (48,022) (30,269) 270 (31,643) (2,550) 27,028 (19,852) (100,315) — 154,000 (131,000) — — (63) (1,762) 2,765 — (2,334) (130,942) (109,336) (18,777) 47,077 188,283 2,904 (568) 6,627 (14,743) (4,867) 1,455 1,049 (75) (289,662) 18,584 (224) (2,031) (5,034) 14,374 (12,149) 14,557 225,806 (41,950) — 278,114 — — — (50,000) — (73,166) (21,664) (65,420) 1,488 (719) — 9,001 (17,394) 18,290 (94,993) 318,000 (318,000) — — 47 (1,346) — (60,000) — (131,897) (288,189) (44,093) 91,170 Cash and cash equivalents and restricted cash at end of period.................................................................. $ 28,300 $ 47,077 $ Reconciliation of cash and cash equivalents and restricted cash:................................................................... Cash and cash equivalents, beginning of period......................................................................................... $ Restricted cash, beginning of period........................................................................................................... Cash and cash equivalents and restricted cash, beginning of period .......................................................... $ 46,344 733 47,077 $ $ 90,499 671 91,170 $ $ F-17 210,005 2,768 189 6,876 (11,369) (8,857) 1,470 (1,345) (11,639) (2,376) 10,242 12 (248) 9,368 (5,599) 9,319 (9,115) 234,230 — (2,181) 41,795 9,730 — — — 3,341 (67,258) (53,846) (77,192) (1,035) (253) (4,181) 35,906 (15,485) (130,659) (7,595) 348,500 (441,000) 216,373 (1,965) 3,771 (1,554) 27 (17,282) — (134,887) (35,612) 67,959 23,211 91,170 22,842 369 23,211 Cash and cash equivalents, end of period ................................................................................................... $ Restricted cash, end of period..................................................................................................................... Cash and cash equivalents and restricted cash, end of period .................................................................... $ 27,463 837 28,300 $ $ 46,344 733 47,077 $ $ 90,499 671 91,170 2021 Year Ended December 31, 2020 2019 Supplemental disclosure: Cash paid for interest, net of capitalized interest during the years ended December 31, 2021, 2020 and 2019 of $8,689, $4,650 and $2,246 respectively............................................................................................ $ 72,391 $ 79,498 $ Cash paid for income taxes............................................................................................................................. 785 688 Supplemental disclosure of non-cash activity: Dividends and distributions declared but not paid...................................................................................... Change in investment in real estate ventures as a result of deconsolidation .............................................. Change in operating real estate from deconsolidation of operating properties........................................... Change in investment in real estate ventures from deconsolidation of operating properties ..................... Change in mortgage notes payable from deconsolidation of operating properties..................................... Change in other assets as a result of deconsolidation of operating properties............................................ Change in capital expenditures financed through accounts payablea at period end..................................... Change in capital a expenditures financed through retention payablea at period end .................................... 32,765 32,761 (30,073) — — (2,688) 22,744 (613) 32,706 — 427,710 (296,262) (220,271) 1,471 (9,949) 284 66,508 1,385 33,815 1,806 — — — — (10,618) (946) The accompanying notes are an integral part of these consolidated financial statements. F-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION OF THE PARENT COMPANY AND THE OPERATING PARTNERSHIP r Brandywine Realty Trust (the "Parent Company") is a self-administered and self-managed real estate investment trust (“REIT”) engaged in the acquisition, development, redevelopment, ownership, management, and operation of a portfolio of office and mixed-use properties. The Parent Company owns its assets and conducts its operations through Brandywine Operating Partnership, L.P. (the "Operating Partnership") and subsidiaries of the Operating Partnership. The Parent Company is the sole general partner of the Operating Partnership and, as of December 31, 2021, owned a 99.5% interest in the Operating Partnership. The Parent Company’s common shares of beneficial interest are publicly traded on the New York Stock Exchange under the ticker symbol “BDN.” The Parent Company, the Operating Partnership, and their consolidated subsidiaries are collectively referred to as the "Company." As of December 31, 2021, the Company owned 81 properties that contained an aggregate of approxi mately 13.7 million net rentable square feet (collectively, the “Properties”). The Company’s core portfolio of operating properties (the “Core Properties”) excludes development properties, redevelopment properties, and properties held forff sale. The Properties were comprised of the folff lowing as of December 31, 2021: a Office properties .............................................................................................................. Mixed-use properties ....................................................................................................... Core Properties.............................................................................................................. Development property ..................................................................................................... Redevelopment properties ............................................................................................... The Properties ............................................................................................................... Number of Properties Rentable Square Feet 12,097,300 942,334 13,039,634 205,803 432,699 13,678,136 72 5 77 1 3 81 development, of In addition to the Properties, as of December 31, 2021, the Company owned 176.1 acres of land held forff which 10.0 acres were held forff sale. The Company also held a leasehold interest in one land parcel totaling 0.8 acres, acquired through a prepaid 99-year ground lease, and held options to purchase approximately 55.5 additional acres of undeveloped land. As of December 31, 2021, the total potential development that this inventory of land could support under current zoning and entitlements, including the parcels under option, amounted to an estimated 13.4 million square feet, of which 0.1 million square feet relates to the 10.0 acres held for sale. As of December 31, 2021, the Company also owned economic interests in nine unconsolidated real estate venturt es (see Note 4, ''Investment in Unconsolidated Real Estate Ventures ” for further information). The Properties and the properties owned by the unconsolidated real estate ventures are primarily located in or near Philadelphia, Pennsylvania; Austin, Texas; Metropolitan Washington, D.C.; Southern New Jersey; and Wilmington, Delaware. t t All references to building square footage, rentable square feet, acres, occupancy percentage, the number of buildings, and tax basis are unaudited. The Company conducts its third-party real estate management services business primarily through seven management companies (collectively, the “Management Companies”): Brandywine Realty Services Corporation (“BRSCO”), BDN Management Inc. (“BMI”), Brandywine Properties I Limited, Inc. (“BPI”), BDN Brokerage, LLC (“BBL”), Brandywine Properties Management, L.P. (“BPM”), Brandywine Brokerage Services, LLC (“BBS”), and BDN GC Services LLC ("BGCS"). Each of BRSCO, BMI and BPI is a taxable REIT subsidiary. BBS, BBL, BPM, and BGCS are tax disregarded entities wholly owned by the taxable REIT subsidiary entities. As of December 31, 2021, the Operating Partnership owned, directly and indirectly, 100% of each of BRSCO, BMI, BPI, BBL, BPM, BBS, and BGCS. As of December 31, 2021, the Management Company subsidiaries were managing properties containing an aggregate of approxi mately 23.1 million net rentable square feet, of which approximately 13.7 million net rentable square feet related to Properties owned by the Company and approximately 9.4 million net rentable square feet related to properties owned by third parties and unconsolidated real estate ventures. a t F-19 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Change in Depree p g ciable Lives of Real Estate Investmentstt f In accordance with its policy, the Company reviews the estimated useful lives of its real estate investments on an ongoing basis. Thhe es itimated ud seful lives of seven operating properties in Austin, Texas were modified to reflect the estimated periods during which these assets will remain in service pursuant to the Company's Uptown ATX master development plans. The estimated useful lives of these properties were decreased fromff approximately 35 years to approximately 12 years coinciding with the remaining terms of in-place leases. The effect of this change in estimate was a $9.8 million increase in depreciation expense during the year ended December 31, 2021. Principles of Consolidation p f The Company consolidates variable interest entities (“VIEs”) in which it is considered to be the primary beneficiary. VIEs nce their endeavors without additional are entities in which the equity investors do not have sufficient equity at risk to finaff financial support or that the holders of the equity investment at risk do not have a controlling financial interest. The primary beneficiary is defined by the entity having both of the following characteristics: (i) the power to direct those matters that most significantly impact the activities of the VIE and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. For entities that the Company has the obligations to fund losses, its maximum exposure to loss is not limited to the carrying amount of its investments. The Company continuously assesses its determination of the primary beneficiary for each entity and assesses reconsideration events that may cause a change in the original determinations. As of December 31, 2021 and 2020, the Company included in its consolidated balance sheets consolidated VIEs having total assets of $46.5 million and $49.2 million, respectively, and total liabilities of $21.0 million and $21.6 million, respectively. When an entity is not deemed to be a VIE, the Company consolidates entities for which it has significant decision making control over the entity’s operations. The Company’s judgment with respect to its level of influence or control of an entity involves consideration of various factors including the form of the Company’s ownership interest, its representation in the entity’s governance, the size of its investment (including loans), estimates of future cash flows, its ability to participate in policy making decisions and the rights of the other investors to participate in the decision making process and to replace the Company as manager and/or liquidate the venture, if applicable. The Company’s assessment of its influence or control over an entity affects the presentation of these investments in the Company’s consolidated financial statements. In addition to evaluating control rights, the Company consolidates entities in which the outside partner has no substantive kick-out rights to remove the Company as managing member. The portion of the consolidated entities that are not owned by the Company is presented as noncontrolling interest as of and during the periods consolidated. All intercompany transactions have been eliminated in consolidation. ff t Use of Estimates f The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("US GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. g Operating Properties p p Operating properties are carried at historical cost less accumulated depreciation and impairment losses. The value of operating properties reflects their purchase price or development cost. Acquisition costs related to business combinations are expensed as incurred, whereas the costs related to asset acquisitions are capita alized as incurred. Costs incurred for the alized to the Company’s investment in that property. Ordinary renovation and betterment of an operating property are capita repairs and maintenance are expensed as incurred. F-20 Purchase Price Allocation as business combinations, we recognize the For acquisitions of real estate or in-substance real estate that are accounted forff assets acquired (including the intangible value of acquired above - or below-market leases, acquired in-place leases and tenant relationship values), liabilities assumed, noncontrolling interests, and previously existing ownership interests at fair value as of the acquisition date. Any excess (deficit) of the consideration transferred relative to the fair value of the net assets acquired is accounted forff as goodwill (bargain purchase gain). Acquisition costs related to business combinations are expensed as incurred. a asset acquisitions is similar to the accounting model forff as asset Acquisitions of real estate and in-substance real estate that do not meet the definition of a business are accounted forff acquisitions. The Company generally expects that acquisitions of real estate or in-substance real estate will not meet the definition of business and therefore are accounted for as asset acquisitions, unless specifically noted otherwise. The accounting model forff business combinations except that the acquisition consideration (including acquisition costs) is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. As a result, asset acquisitions do not result in recognition of goodwill or a bargain purchase gain. Additionally, because the accounting model forff asset acquisitions is a cost accumulation model, preexisting interests in the acquired assets, if any, are not remeasured to fair value but continue to be accounted for at their historical cost. Direct acquisition costs are capita alized if an asset acquisition is probable. If we determine that an asset acquisition is no longer probable, no new costs are capia talized and all capitalized costs that are not recoverable are written off. The purchase price is allocated to the acquired assets and assumed liabilities, including land and buildings, as if vacant based on highest and best use for the acquired assets. The Company assesses and considers fair value of the operating properties alization rates that it deems appropriate, as well as based on estimated cash flowff available market information. Estimates of future tors including the historical operating results, known and anticipated trends, and market and economic conditions. projections that utilize discount and/or capita cash flows are based on a number of facff ff The Company allocates the purchase price of properties considered to be business combinations and asset acquisitions to net tangible and identified intangible assets acquired based on fair values. Above-market and below-market in-place lease values for acquired properties are recorded based on the present value (using an interest rate which reflects the risks associated with between (i) the contractual amounts to be paid pursuant to the in-place leases and the leases acquired) of the difference the corresponding in-place leases, measured over a period equal (ii) the Company’s estimate of the fair market lease rates forff to the remaining noncancellable term of the lease (including the below market fixed renewal periods that are considered probable, if applicable). Capitalized above -market lease values are amortized as a reduction of rental income over the remaining noncancellable terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining noncancellable terms of the respective leases, including any below market fixed-rate renewal option periods that are considered probable. a ff Other intangible assets also include in-place leases based on the Company’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant. The Company estimates the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, including leasing commissions, legal and other d- related expenses. This intangible asset is amortized to expense over the remaining term of the respective leases and any fixeff rate bargain renewal periods. Factors considered by the Company in this analysis include an estimate of the carryi ng costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance, and other operating expenses, and estimates of lost rents at market rates during the expected lease-up periods, which primarily range from four to twelve months. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing, and leasing activities in estimating the fair value of the tangible and intangible assets acquired. The Company also uses the information obtained as a result of its pre-acquisition due diligence as part of its consideration of the accounting standard governing asset retirement obligations and when necessary, will record a conditional asset retirement obligation as part of its purchase price. The Company also evaluates tenant relationships on a tenant-specific basis. On most of the Company’s acquisitions, this intangible has not been material and, as a result, no value has been assigned. a r In the event that a tenant terminates its lease, the unamortized portion of each intangible, including in-place lease values and tenant relationship values, is charged to expense and market rate adjustments (above or below) are recorded to revenue. a F-21 p Depree ciation and Amortizati ii on The costs of buildings and improvements are depreciated using the straight-line method based on the following useful lives: buildings and improvements (5 to 55 years) and tenant improvements (the shorter of (i) the life of the asset (1 to 16 years) or (ii) the lease term). Construction-in-Progress g Project costs directly associated with the development or redevelopment and construction of a real estate project are alized as construction-in-progress. Construction-in-progress also includes costs related to ongoing tenant improvement capita projects. In addition, interest, real estate taxes, and other expenses that are directly associated with the Company’s development or redevelopment activities are capita its al expenditures have been made and ending when the property is placed in service. intended use are in progress and capita Interest expense is capita alized to are being incurred. See Note 3, ''Real Estate Investments," for more information projects in which qualifying expenditures alization of project costs. related to the capita alized using the Company’s weighted average interest rate. Internal direct costs are capita alized beginning when activities necessary to ready the asset forff t Ground Leases The Company is the lessee under long-term ground leases classified as operating leases. The Company makes significant the lease to calculate the present value of the lease assumptions and judgments when determining the discount rate forff payments. As the rate implicit in the lease is not readily determinablea , the Company estimates the incremental borrowing rate (“IBR”) that it would need to pay to borrow, on a collateralized basis, an amount equal to the lease payments in a similar economic environment, over a similar lease term. The Company utilizes a market-based approach to estimate the IBR for each individual lease. The base IBR is estimated utilizing observable mortgage and corporate bond rates, which are then adjusted to account for considerations related to the Company’s credit rating and the lease term to select an incremental borrowing rate forff each lease. The right of use assets and lease liabilities are presented as “Right of use asset - operating leases, net” and “Lease liability - operating leases”, respectively, on the consolidated balance sheet as of December 31, 2021 and 2020, respectively. The lease liabilities and right of use assets are amortized on a straight-line basis over the lease term with the corresponding expense classified in “Property operating expenses” on the consolidated statements of operations. The most recent CPI adjud stment is used to determine the present value of the lease payments forff ultimately the right of use asset and corresponding lease liability. Rent payments forff growth rate will be expensed on a cash basis as incurred and are considered variablea lease costs. an indexed lease and amounts in excess of this estimated Impairment of Real Estate Investments p f impairment following the end of each quarter for each of its real estate The Company reviews its real estate investments forff investments where events or changes in circumstances indicate that the carrying amounts may not be recoverablea . The Company updates leasing and other assumptions regularly, paying particular attention to real estate investments where there is an event or change in circumstances that indicates an impairment in value. Additionally, the Company considers strategic decisions regarding the future development plans for real estate investment under development and other market factors. For real estate investments to be held and used, the Company analyzes recoverabila ity based on the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the assets over, in most cases, a 10-year hold period. If there is significant possibility that the Company will dispose of assets earlier, it analyzes the recoverabila ity using a probability weighted analysis of the undiscounted future cash flows expected to be generated from the operations and ity analysis indicates that the eventual disposition of each asset using various probable hold periods. If the recoverabila , the real estate investment is written down to its faiff carrying value of the tested real estate investment is not recoverablea r value and an impairment is recognized in the amount of the excess of the carryirr ng amount of the asset over its faiff r value. If operations and and when the Company’s plans change, it revises its recoverabila eventual disposition of each asset using hold periods that are consistent with its revised plans. ity analysis to use cash flows expected fromff ff Estimated future cash flows used in such analysis are based on the Company’s plans for the real estate investment and its views of market economic conditions. The estimates consider assumptions, including but not limited to market rental rates, comparable real estate investments. Future cash flows are discounted when capia talization rates, and recent sales data forff F-22 determining fair value of an asset. Most of these assumptim ons are influenced by our direct experience with the real estate investments and their markets as well as market data obtained from real estate leasing and brokerage firms. Assets Held for SaleSS f sale when the transaction has been approved by its Board of Trustees, The Company generally reclassifies assets to held forff or by officers vested with authority to approve the transaction, and there are no known significant contingencies relating to the sale of the real estate investment within one year of the consideration date and the consummation of the transaction is otherwise considered probable. When a real estate investment is designated as held forff sale, the Company stops depreciating the real estate investment and estimates the real estate investment’s fair value, net of selling costs. If the determination is made that the estimated fair value, net of selling costs, is less than the net carryirr ng value of the real estate investment, an impairment is recognized, reducing the net carrying r value less selling costs. For periods in which a real estate investment is classified as held forff sale, the Company classifies the assets and liabilities, as applicable, of the real estate investment as held for sale on the consolidated balance sheet forff value of the real estate investment to estimated faiff such periods. a rr Impairment of Land Held for Development o p p f f development deteriorates, or other When demand for build-to-suit properties declines and the ability to sell land held forff development, it is reviewed for impairment market factors indicate possible impairment in the recoverabila value, the carryirr ng value by comparing its faiff is written down to its estimated faiff r value is generally determined using a market valuation approach, comparing the subject property to recent comparablea market transactions in a similar location; or using estimated cash flows. r value to its carrying value. If the estimated sales value is less than the carrying r value. Estimated faiff ity of land held forff ff rr Cash and Cash Equivalents q Cash and cash equivalents are highly-liquid investments with original maturities of three months or less. The Company ncial institutions in excess of insured limits, but believes this maintains cash equivalents in money market accounts with finaff risk is mitigated by only investing in or through majora financial institutions. The Company does not invest its available cash balances in money market funds. As such, available cash balances are appropriately reflected as cash and cash equivalents on the consolidated balance sheets. Restricted CasCC h Restricted cash consists of cash held as collateral to provide credit enhancement for the Company’s mortgage debt, cash for improvements. Restricted cash also includes cash held by qualified property taxes, capital expenditures and tenant intermediaries for possible investments in like-kind exchanges in accordance with Section 1031 of the Internal Revenue Code in connection with sales of the Company’s properties. Restricted cash is included in “Other assets” in the consolidated balance sheets. Accounts Rtt eceivable and Accrued Rent Receivable Generally, leases with tenants are accounted for as operating leases. Minimum lease payments under tenant leases are recognized on a straight-line basis over the term of the related lease. The cumulative difference between lease revenue recognized under the straight-line method and contractual lease payment terms are recorded as “Accrued rent receivable, net” on the consolidated balance sheets. Included in current tenant receivables are tenant reimbursements which are comprised of amounts recoverablea expenses that are recognized as revenue in the period in which the related expenses are incurred. common area maintenance expenses and certain other recoverablea from tenants forff Accrued rent receivables are carried net of the allowances for doubtful accounts. The allowance for doubtful accounts is an estimate based on the Company's experience of the probability of future events confirming a loss and represents the estimated probable losses. The allowance is generally calculated by assigning risk factors by industry which are primarily based on the current market conditions, which requires Company's historical collection and charge-off experience adjusted forff management's judgment. F-23 Investments i tt n UncUU onsolidated Real EstatEE e VentVV ures Under the equity method, investments in real estate ventures are recorded initially at cost and subsequently adjusted for equity in earnings, contributions, distributions, and impairments. The Company generally allocates income and losses fromff the unconsolidated real estate ventures based on the venturt e's distribution priorities, which may be different from its stated ownership percentage. For real estate ventures that are constructing assets to commence planned principal operations, the Company capita using the Company’s weighted average interest rate of consolidated debt and its investment balance as a basis. Planned principal operations commence when a property is available to lease and at that point in time, the Company ceases capita alizes interest expense to the extent that it is recoverablea alizing interest to its investment basis. t t At least quarterly, management assesses whether there are any other than temporary impairment indicators of the Company’s investments in real estate venturt es. An investment is other than temporarily impaired only if the fair value of the investment in a real estate venturt e, as estimated by management, is less than the carrying value and the decline is other than temporary. To the extent that an other than temporary impairment has occurred, an impairment charge is recorded in the amount of the amount of the investment over the estimated fair value. Management is required to make significant excess of the carrying judgments about r value of its investments to determine if an impairment exists. Fair value is generally a determined through income valuation approaches, including discounted cash flows rr the estimated faiff alization models. and direct capita ff rr between the When the Company acquires an interest in or contributes assets to a real estate venturt e project, the difference Company’s cost basis in the investment and the value of the real estate venturet or asset contributed is amortized over the life of the related assets, intangibles, and liabilities and such adjustment is included in the Company’s share of equity in income of unconsolidated real estate ventures. ff t Deferred CostCC stt f Certain costs incurred in connection with property leasing are capita alized as deferred leasing costs. Deferred leasing costs consist primarily of third-party and internal leasing commissions that are amortized using the straight-line method over the life of the respective lease which generally ranges from 1 to 16 years. Management re-evaluates the remaining useful lives of leasing costs in conjunction with changes in the respective lease term. Notes Receivable The Company accounts forff notes receivable on its balance sheet at amortized cost, net of allowance forff income is recognized over the term of the notes receivable and is calculated based on the contractual agreement. At inception and on a quarterly basis, the Company evaluates notes receivable forff credit losses over the contractual expense) the amount necessary to adjust the allowance forff Management considers performance and/or value of the underlying collateral property as well as the financ a capabi loan losses. Interest terms of each note the current estimate of expected term using a probability-of-default method and reports in net income (as a credit loss losses to reflect management's current estimate. ial and operating lity of the borrower/sponsor in its evaluation. credit ff t t Notes receivable are placed on nonaccrual statust when management determines, after considering economic and business conditions and collection efforts, that the loans are impaired, or collection of interest is doubtful. Uncollectible interest previously accrued is recognized as bad debt expense. Interest income on nonaccrual loans is recognized only to the extent that cash payments are received. Deferred FinFF ancing Coststt g f alized as a direct deduction from the carryirr ng value of the debt, Costs incurred in connection with debt financing are capita alized related to the Company’s unsecured credit facility, which are capitalized within the “Deferred except for costs capita ncing costs are charged to interest expense costs, net” caption on the accompanying consolidated balance sheets. Deferred finaff s which are amortized over the terms of the related debt agreements. Deferff over the related loan term on a basis that approximates the effective interest method. Deferred finaff ncing costs are accelerated, when debt is extinguished, as part of the “Interest expense-amortization of deferred financing costs” caption within the Company’s consolidated statements of operations. Original issue discounts are recognized as part of the gain or loss on extinguishment of debt, as appropri red financing costs consist primarily of loan feeff ate. a F-24 Revenue Recognition g Rental Revenue The Company generates revenue under leases with tenants occupying the Properties. Generally, leases with tenants are accounted for as operating leases. The operating leases have various expiration dates. As of December 31, 2021 and 2020, the Company did not have any leases classified as direct-financing or sales-type leases. Fixed lease payments under tenant leases, determined to be collectible, are recognized on a straight-line basis over the term of the related lease. The cumulative difference between lease revenue recognized under the straight-line method and contractual lease payments are lease payments are recorded as “Accrued rent receivable” on the consolidated balance sheets. Variablea recognized as lease revenue in the period in which changes occur in facts and circumstances on which the variable lease payments are based. Topic 842 requires a binary approach to evaluating leases for collectability. Lessors are required to determine if it is probable that substantially all of the lease payments will be collected from the tenant over the lease term. Should the lessor determine that it is not probable that substantially all of the lease payments will be collected, the standard requires that the lessor write off any accruedrr and begin recognizing lease payments on a cash basis. rent receivablea The Company’s lease revenue is impacted by the Company’s determination of whether improvements to the property, whether made by the Company or by the tenant, are landlord assets. The determination of whether an improvement is a landlord asset requires judgment. In making this judgment, the Company’s primary consideration is whether an improvement by another tenant upon the then-existing tenant vacating the improved space. If the Company has funded would be utilizablea an improvement that it determines not to be landlord assets, then it treats the cost of the improvement as a lease incentive. If the tenant has funded an improvement that the Company determines to be landlord assets, then the Company treats the costs of the improvement as deferred revenue and amortizes these costs into revenue over the lease term. For certain leases, the Company also makes significant assumptim ons and judgments in determining the lease term, including assumptim ons when the lease provides the tenant with an early termination option or purchase option. The lease term impacts the period over which the Company determines and records lease payments and also impacts the period over which it amortizes lease-related costs. The Company considers all relevant factors that create an economic incentive for the lessee and uses judgment to determine if those factors, considered together, signify that the lessee is reasonably certain to exercise the option. For leases where a tenant executes a lease termination, termination fees are generally recognized over the modified term of the lease as rental income. Additionally, any deferred rents receivable are accelerated over the modified lease term. The Company’s leases also typically provide for tenant reimbursement of a portion of common area maintenance expenses and other operating expenses to the extent that a tenant’s pro rata share of expenses exceeds a base year level set in the lease or to the extent that the tenant has a lease on a triple net basis. As the timing and pattern of revenue recognition is the same, rents and tenant reimbursements are treated as a combined lease component and included in the "Rents" caption within the Company's consolidated statements of operations. Fixed lease payments include contractual rents under lease agreements with tenants recognized on a straight-line basis over the lease term, including amortization of lease incentives and above or below market rent intangibles, and parking income lease payments include reimbursements billed to tenants, termination fees, that is fixeff bad debt expense, and parking income that is not fixed under a long-term contract. d under a long-term contract. Variablea t Point of Sale Revenue Point of sale revenue consists of parking, restaurant, and flexible stay revenue from the Company’s hotel operations. Point of sale service obligations are performed daily, and the customer obtains control of those services simultaneously as they are performed. Accordingly, revenue is recorded on an accrual basis as it is earned, coinciding with the services that are provided to the Company’s customers. Parking and flexible stay revenue is recognized within rents and restaurant income is recognized within other income on the consolidated statements of operations. F-25 Third party management fees, labor reimburserr ment, and leasing The Company performs property management services for its managed real estate ventures and third-party property owners of real estate that consist of: (i) providing leasing services, (ii) property inspections, (iii) repairs and maintenance monitoring, and (iv) financial and accounting oversight. For these services, the Company earns management fees monthly, which are costs incurred by its based on a fixeff property management employees as services are rendered to the property owners. The Company determined that control over the services is passed to its customers simultaneously as performance occurs. Accordingly, management fee revenue is earned as the services are provided to the Company’s customers. d percentage of each managed property’s financial results, and is reimbursed for the labor a Lease commissions are earned when the Company, as a broker for the third party property owner, executes a lease agreement with a tenant. Based on the terms of the Company’s lease commission contracts, the Company's performance obligation to the customer has been completed upon execution of each lease agreement. The Company’s lease commissions are earned based on a fixeff d percentage of rental income generated for each executed lease agreement and there is no variable income component. Development fee revenue is earned through two different sources: (i) the Company performs development services for third parties as an agent and earns fixed development fees based on a percentage of construction costs incurred over the . construction period, and (ii) the Company acts as a general contractor on behalf of one of its managed real estate ventures The Company acts as the principal construction company for the real estate ventures and records gross revenue as it provides construction services based on the quantifiablea construction outputs. t t In applying the cost based output method of revenue recognition, the Company uses the actual costs incurred relative to the total estimated costs to determine its progress towards contract completion and to calculate the corresponding gross revenue and gross profit to recognize. For any costs that do not contribute to satisfying the Company’s performance obligations, it excludes such costs from its output methods of revenue recognition as the amounts are not reflective of transferring control of the outputs to the customer. The use of estimates in this calculation involves significant judgment. F-26 lowing is a summary of revenue earned by the Company’s reportable segments (see Note 19, The folff Information,” for further information) during the year ended December 31, 2021 (in thousands): ''Segment Philadelphia CBD Fixed rent...................... $ 149,441 41,585 Variablea 191,026 rent................. Total lease revenue .... Pennsylvania Suburbs $ 113,748 10,358 124,106 Austin, Texas 62,545 $ 34,850 97,395 $ Metropolitan Washington, D.C. 12,410 646 13,056 $ Other 8,020 2,660 10,680 Corporate (a) $ (2,240) $ (257) (2,497) Total 343,924 89,842 433,766 2,064 Amortization of deferred market rents.... Daily parking & hotel flexible stay ................. Total rents..................... Third party management fees, labor reimbursement and 893 leasing........................... Other income ................ 2,117 Total revenue................ $ 207,858 11,758 204,848 (9) 3,322 — — — 5,377 159 124,256 109 100,826 117 13,173 233 10,913 — (2,497) 12,376 451,519 34 276 $ 124,566 452 402 $ 101,680 $ 6,548 144 19,865 $ 3,077 25 14,015 $ 15,440 5,892 18,835 $ 26,444 8,856 486,819 The following is a summary of revenue earned by the Company’s reportable segments (see Note 19, Information,” for further information) during the year ended December 31, 2020 (in thousands): ''Segment Philadelphia CBD Fixed rent...................... $ 166,286 51,410 Variablea 217,696 rent................. Total lease revenue .... Pennsylvania Suburbs $ 128,044 12,951 140,995 Austin, Texas 63,366 $ 35,123 98,489 $ Metropolitan Washington, D.C. 29,830 3,544 33,374 $ Other 8,064 2,401 10,465 Corporate (a) $ (2,412) $ (1,343) (3,755) Total 393,178 104,086 497,264 1,146 Amortization of deferred market rents.... Daily parking & hotel flexible stay ................. Total rents..................... Third party management fees, labor reimbursement and 927 leasing........................... Other income ................ 1,482 Total revenue................ $ 232,028 10,777 229,619 (12) 3,531 — 203 — 4,868 179 141,162 49 102,069 135 33,509 232 10,900 — (3,755) 11,372 513,504 39 412 $ 141,613 689 224 $ 102,982 $ 6,541 173 40,223 $ 2,560 9 13,469 $ 7,824 468 4,537 $ 18,580 2,768 534,852 F-27 lowing is a summary of revenue earned by the Company’s reportable segments (see Note 19, The folff Information,” for further information) during the year ended December 31, 2019 (in thousands): ''Segment Philadelphia CBD Fixed rent...................... $ 178,481 58,580 Variablea 237,061 rent................. Total lease revenue .... Pennsylvania Suburbs $ 125,969 14,282 140,251 Austin, Texas 62,232 $ 34,748 96,980 $ Metropolitan Washington, D.C. 39,420 4,029 43,449 $ Other 7,834 3,080 10,914 Corporate (a) $ (2,412) $ (495) (2,907) Total 411,524 114,224 525,748 3,745 Amortization of deferred market rents.... Daily parking & hotel flexible stay ................. Total rents..................... Third party management fees, labor reimbursement and 876 leasing........................... Other income ................ 3,422 Total revenue................ $ 263,769 18,665 259,471 (12) 4,638 — 486 — 8,857 174 140,413 165 101,783 824 44,273 232 11,632 — (2,907) 20,060 554,665 43 628 $ 141,084 1,956 418 $ 104,157 $ 6,922 303 51,498 $ 2,915 11 14,558 $ 6,914 1,344 5,351 $ 19,626 6,126 580,417 (a) Corporate includes intercompany eliminations necessary to reconcile to consolidated Company totals. Income TaxTT es Parent Company m of its income and assets. As a REIT, the Parent Company is not subject to fede The Parent Company has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to continue to qualify as a REIT, the Parent Company is required to, among other things, distribute at least 90% of its annual REIT taxable income to its shareholders and meet certain tests regarding the naturet ral and state (in states that follow federal rules) income taxes with respect to the portion of its income that meets certain criteria and is distributed annually to its shareholders. Accordingly, a nominal provision for federal and state (as applicablea ) income taxes is included in the accompanying consolidated financial statements with respect to the operations of the Parent Company. The Parent Company taxation as a REIT. If the Parent intends to continue to operate in a manner that allows it to meet the requirements forff Company fails to qualify as a REIT in any taxable year, it will be subject to federal and state (as applicablea ) income taxes and may not be able to qualify as a REIT forff ed to qualify. The Parent Company is subject to certain local income taxes. Provision for federal income taxes is recorded in the income tax provision line item and state and local income taxes have been included in operating expenses in the Parent Company’s consolidated statements of operations. the four tax years following the year in which it first fail ff ff The tax basis of the Parent Company’s assets was $3.1 billion and $2.9 billion for the years ended December 31, 2021 and December 31, 2020, respectively. The Parent Company is subject to a 4% fede ral excise tax if sufficient taxable income is not distributed within prescribed time limits. The excise tax equals 4% of the annual amount, if any, by which the sum of (a) 85% of the Parent Company’s al gain exceeds cash distributions and certain taxes paid by ordinary income and (b) 95% of the Parent Company’s net capita the Parent Company. No excise tax was incurred in 2021, 2020 or 2019. ff ff The Parent Company has elected to treat several of its subsidiaries as taxable REIT subsidiaries (each a “TRS”). A TRS is ral, state and local income tax. In general, a TRS may perform non-customary services for tenants, hold assets subject to fede that the Parent Company, as a REIT, cannot hold directly and generally may engage in any real estate or non-real estate related business. The Company’s taxable REIT subsidiaries did not have material tax provisions or deferred income tax items as of December 31, 2021 and December 31, 2020. F-28 rr Operating Partner ship tt t The Operating Partnership’s tax returns In general, the Operating Partnership is not subject to federal and state income taxes, and accordingly, no provision for income taxes has been made in the accompanying consolidated finaff ncial statements. The partners of the Operating Partnership are required to include their respective share of the Operating Partnership’s profits or losses in their respective tax and the amount of allocable partnership profits and losses are subject to returns. examination by federal and state taxing authorities. For any year beginning on or after January 1, 2017, the Operating Partnership can be assessed with fede ral income tax in the course of an audit by the IRS. Under the partnership audit rules included in the Bipartisan Budget Act of 2015, the Operating Partnership has the option to make a push-out election and allocate the partnership adjustments to all the former partners for the tax year under audit. ff t The tax basis of the Operating Partnership’s assets was $3.1 billion and $2.9 billion for the years ended December 31, 2021 and December 31, 2020, respectively. The Operating Partnership may elect to treat a subsidiary REIT under Sections 856 through 860 of the Code, if applicable. treatment as a REIT under Sections 856 through 860 of Each subsidiary REIT would be required to meet the requirements forff the Code. If a subsidiary REIT fails to qualify as a REIT in any taxable year, that subsidiary REIT would be subject to fede ral and state income taxes and would not be able to qualify as a REIT forff r subsequent taxable years. Also, each subsidiary REIT would be subjeu ct to certain local income taxes. the fouff ff The Operating Partnership has elected to treat several of its subsidiaries as TRSs, which are subject to fede income tax. ff ral, state and local Earnings Per Share g SS Basic earnings per share (“EPS”) is computed by dividing net income available to common shareholders, as adjusted forff unallocated earnings, if any, of certain securities, by the weighted average number of common shares outstanding during the year. Diluted EPS reflects the potential dilution that could occur from common shares issuablea in connection with awards under share-based compensation plans, including upon the exercise of stock options, and conversion of the noncontrolling interests in the Operating Partnership. Anti-dilutive shares are excluded from the calculation. Earnings Per UnitUU g Basic earnings per unit is computed by dividing net income available to common unitholders, as adjusted forff unallocated earnings, if any, of certain securities issued by the Operating Partnership, by the weighted average number of common unit equivalents outstanding during the year. Diluted earnings per unit reflects the potential dilution that could occur from units issuablea ion plans, including upon the exercise of stock options. Anti- dilutive units are excluded fromff in connection with awards under share-based compensat the calculation. m Share-Based Compensation Plans p The Parent Company maintains a shareholder-approved equity-incentive plan known as the Amended and Restated 1997 Long-Term Incentive Plan (the “1997 Plan”). The 1997 Plan is administered by the Compensation Committee of the Parent Company’s Board of Trustees. Under the 1997 Plan, the Compensation Committee is authorized to award equity and equity- based awards, including incentive stock options, non-qualified stock options, restricted share rights and performance-based share units. The Company's share-based employee compensation plan is described more fully in Note 15, ''Share Based Compensation, 401(k) Plan and Deferred Compensation." a Comprehensive IncII ome p Comprehensive income is recorded in accordance with the provisions of the accounting standard for comprehensive income. shes standards for reporting comprehensive income and its components in the financial The accounting standard establia statements. Comprehensive income includes the effecff tive portions of changes in the faiff r value of derivatives. F-29 Accounting for Derivative Instruments and Hedging Activities g g g f its derivative instruments and hedging activities in accordance with the accounting standard for The Company accounts forff derivative and hedging activities. The accounting standard requires the Company to measure every derivative instrume nt (including certain derivative instruments embedded in other contracts) at fair value and record them on the balance sheet as either an asset or liabia lity. See disclosures below related to the accounting standard for fair value measurements and disclosures. rr For derivatives designated as cash flow hedges, the effective portions of changes in the fair value of the derivative are reported in other comprehensive income while the ineffective portions are recognized in earnings. and floating rate debt in a cost- The Company actively manages its ratio of fixed-to-floating rate debt. To manage its fixed effective manner, the Company, from time to time, enters into interest rate swap a greements as cash flow hedges, under which it agrees to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts. a ff VV Fair Value Measurements The Company estimates the fair value of its derivatives in accordance with the accounting standard for fair value measurements and disclosures. The accounting standard defines fair value as the exchange price that would be received for an asset or paid to transfer a liabia lity (an exit price) in the principal or most advantageous market for the asset or liabia lity in an orderly transaction between market participants on the measurement date. It also establia shes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value. Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as folff lows: • • • Level 1 inputs are quoted prices (unadjusted) in active markets forff the ability to access; Level 2 inputs are inputs, other than quoted prices included in Level 1, which are observable forff the asset or liabia lity, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable forff the asset or liabia lity (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals; and Level 3 inputs are unobservable inputs forff assumptim ons, as there is little if any, related market activity or information. the asset or liabia lity, which is typically based on an entity’s own identical assets or liabia lities that the Companym has different levels of the fair value In instances where the determination of the fair value measurement is based on inputs fromff hierarchy, the level in the faiff r value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. Non-financial assets and liabilities recorded at fair value on a non-recurring basis include non-financial assets and liabilities measured at fair value in a purchase price allocation and the impairment. The fair values assigned to the Company's purchase price allocations primarily utilize Level 3 inputs. The fair value assigned to the long-lived assets and equity method investments for which there was impairment recorded utilize Level 3 inputs. ii Risks and Uncertainties - COVID-19 Currently, one of the most significant risks and uncertainties the Company faces is the potential adverse effect of the ongoing global COVID-19 pandemic, which has significantly slowed global economic activity and caused significant volatility in financial markets, causing many to fear a global recession. The responses of many countries, including the U.S., have included mandatory quarantines, restrictions on business activities, including construction activities, restrictions on group gatherings, restrictions on travel and mandatory closures. These actions have disrupted the global economy and supply chains and adversely impacted many industries, including owners and developers of real estate. Moreover, there is significant uncertainty around the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as its impact on the U.S. economy and consumer confidence. Demand for space at the Company's properties is dependent on a variety of macroeconomic factors, such as employment levels, interest rates, changes in stock market valuations, rent levels and availability of competing space. The extent to which the COVID-19 pandemic impacts the Company's results will depend on F-30 future developments, many of which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, future action plans, and vaccination efforts. The COVID-19 pandemic has caused continued negative economic impacts, market volatility, and business disruption, which could negatively impact the Company's tenants’ ability to pay rent, the Company's ability to lease vacant space, and the Company's ability to complete development and redevelopment projects. These consequences, in turn, could materially impact the Company's results of operations. g Recent Accounting Pronouncements In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and is effective between March 12, 2020 and December 31, 2022. The guidance may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may appl as additional changes in the market occur. y elections as applicablea a 3. REAL ESTATE INVESTMENTS As of December 31, 2021 and 2020, the gross carrying value of the operating properties was as follows (in thousands): December 31, 2020 December 31, 2021 Land ......................................................................................................................................... $ Building and improvements..................................................................................................... Tenant improvements .............................................................................................................. Total ...................................................................................................................................... $ 410,144 2,653,492 408,966 3,472,602 $ $ 407,514 2,665,232 401,363 3,474,109 Construction-in-Progress g Internal direct construction costs totaling $7.9 million in 2021, $8.4 million in 2020, and $7.4 million in 2019 and interest totaling $7.0 million in 2021, $4.6 million in 2020, and $3.2 million in 2019 were capita alized related to the development, redevelopment and construction of tenant improvements of certain properties and land holdings. During the years ended December 31, 2021, 2020 and 2019, the Company’s internal direct construction costs are comprised entirely of capita shows the amount of compensation costs (including bonuses and benefits) capita alized for the years presented (in thousands): alized salaries. The following tablea Development ................................................................................................ $ Redevelopment............................................................................................. Tenant Improvements................................................................................... Total ............................................................................................................. $ 4,815 1,170 1,917 7,902 $ $ 4,802 543 3,021 8,366 $ $ 3,047 775 3,609 7,431 2021 December 31, 2020 2019 q 2021 Acquisitions During the year ended December 31, 2021, the Company did not acquire any properties fromff a third party. F-31 q 2020 Acquisitions The following tablea summarizes the property acquisitions during the year ended December 31, 2020 (dollars in thousands): Property/Portfolio Name 145 King of Prussia Road 1505-11 Race Street 250 King of Prussia Road (b) Acquisition Date February 27, 2020 November 5, 2020 November 30, 2020 Location Radnor, PA Philadelphia, PA Radnor, PA Property Type Land Office Office Rentablea Square Feet/tt Acres 7.75 acres $ $ 119,763 $ 169,843 Purchase Price (a) 11,250 9,700 20,250 (a) Exclusive of transaction costs and price adjustments. See purchase price allocation table below for a breakout of the net purchase price for wholly owned properties. (b) This property was placed into redevelopment and is therefore included within Construction-in-progress on the consolidated balance sheets. alized The Company accounted for the acquisition of 1501-11 Race Street as an asset acquisition and therefore capita $0.3 million of acquisition related costs. The Company utilized a number of sources in making estimates of faiff r value (including comparative sales transactions and market leasing assumptions) for purposes of allocating the purchase price to tangible and intangible assets acquired The acquisition values have been allocated as foll ows (in thousands): ff Building, land and improvements................................................................................................................ $ Intangible assets acquired ............................................................................................................................ Below market lease liabilities assumed ....................................................................................................... Total unencumbered acquisition value ........................................................................................................ Amortization period of intangible assets ..................................................................................................... ities assumed ........................................................................... Amortization period of below market liabila q 2019 Acquisitions During the year ended December 31, 2019, the Company did not acquire any properties fromff a third party. 1505-11 Race Street 9,723 2,422 (2,193) 9,952 1.5 years 1.5 years Dispositions p The following tablea in thousands): summarizes the property dispositions during the years ended December 31, 2021, 2020 and 2019 (dollars Property/Portfolio Name 1100 Lenox Drive 2100-2200 Lenox Drive Disposition Date September 8, 2021 Location Lawrenceville, NJ July 6, 2021 Lawrenceville, NJ Mid-Atlantic Office Portfolio (b) (d) December 21, 2020 Various One and Two Commerce Square (c) Keith Valley 52 East Swedesford Road 1900 Gallows Rd 9 Presidential Boulevard July 21, 2020 June 15, 2020 March 19, 2020 Philadelphia, PA Horsham, PA Malvern, PA September 11, 2019 Vienna, VA March 15, 2019 Bala Cynwyd, PA Property Type Land Land Office Office Land Office Office Land Rentable Square Feet/ Acres 5.0 acres $ Sales Price 2,575 Gain/ (Loss) on Sale (a) 68 $ 35.2 acres $ 8,900 $ 842 1,128,645 $192,943 $ 15,164 1,896,142 $115,000 $271,905 14.0 Acres $ 4,000 131,077 $ 18,000 210,632 $ 36,400 2.7 Acres $ 5,325 $ $ $ $ 201 2,336 (367) 751 (a) Gain/(Loss) on Sale is net of closing and other transaction related costs. (b) The Company sold a 60% equity interest in a portfolio of twelve suburban office properties containing an aggregate of 1.1 million square feet ("Mid- Atlantic Office Portfolio"), nine of which are located in the Pennsylvania suburbs and three of which are located in Maryland, to an unrelated third party for a gross sales price of $192.9 million. The transaction resulted in deconsolidation of the properties and formation of PA/MD NNN Office JV, LLC ("Mid-Atlantic Office JV"). The Company recorded its investment at fair value and recognized a gain of $15.2 million in "Net gain on disposition of real estate" on the consolidated statements of operations. See Note 4, ''Investment in Unconsolidated Real Estate Ventures," for further information. F-32 (c) The Company sold a 30% preferred equity interest in two office buildings located in Philadelphia, Pennsylvania, to an unrelated third party for $115.0 million (the "Commerce Square Venture Transaction"), which resulted in deconsolidation of the properties and formation of Brandywine Commerce I LP and Brandywine Commerce II LP (collectively, the "Commerce Square Venture"). The transaction valued the properties at $600.0 million. The Company recorded its investment at fair value and recognized a gain of $271.9 million in "Net gain on disposition of real estate" on the consolidated statements of operations. See Note 4, ''Investment in Unconsolidated Real Estate Ventures," for further information. (d) The sales price includes $4.1 million of variable consideration held in escrow that will be released to the Company over a six to nine month holdback period if certain tenants remain in compliance with certain payment terms of their lease agreements. The Company estimated the amount of the variable consideration that it deemed probable of collection and included such amount in the transaction price. The amount estimated as probable of collection was received during 2021. The Company will continue to evaluate the probability of collection on the remaining holdback and recognize any changes to the amount deemed probable as incremental gain on sale. development at 3025 JFK Boulevard in Philadelphia, Pennsylvania to a newly formed joint venturet In addition, on February 2, 2021, the Company contributed its investment in a 99-year prepaid leasehold interest in a one-acre with land parcel held forff an unaffiliated third party. The project is part of the Schuylkill Yards master development. The Company's investment in the project was valued at $34.8 million and the transaction resulted in deconsolidation of the property and conversion of Brandywine Opportunity Fund, L.P. (formerly a wholly-owned subsidiary of the Operating Partnership) to a real estate ("3025 JFK Venture"). The Company recorded its investment at fair value and recognized a gain of $2.0 million in venturet "Net gain on sale of undepreciated real estate" on the consolidated statements of operations. See Note 4, "Investment in Unconsolidated Real Estate Ventures," for further information. t During the year ended December 31, 2019, the Company also recorded a $1.0 million gain related to contingent consideration received related to a land sale that closed in a prior period in the Other segment. The Company also received additional proceeds from a sale that closed in a prior year related to a property in the Metropolitan Washington, D.C. segment resulting in $0.7 million of additional gain on sale. One Uptown Venture p t and 341 apartment residences and a public park (through the "multifamily On December 1, 2021, the Company entered into two joint venturet agreements with affiliates of Canyon Partners Real Estate to commence development of One Uptown, a $328.4 million mixed-used project in Austin, Texas. One Uptown has been designed to deliver 348,000 square feet of Class-A workspace and 15,000 square feet of street-level retail (through the and a six- "office" joint venture) story parking garage to be shared by the two joint ventures has t construction loan, to fund approximately agreed, subjeu $57.5 million of the combined project costs in exchange for a 50% preferred equity interest in each of the two joint ventures , with the Company retaining a 50% common equity interest in each. The Company is in the process of securing a construction loan forff that would total approximately $213.4 million, representing 65% of the combined project costs. Under the terms of each of the joint venturt e agreements, the joint venturt e partner has no obligation to fund any construction loan. This right prevents the Company project costs until the closing of the applicablea portion of the applicablea closings of the construction loans. from meeting the sale recognition criteria of ASC 606 until the applicablea ct to customary funding conditions, including closing of the applicablea . The Company's partner in each of the two joint ventures each of the two joint ventures " joint venture) ff t t t t HeHH ld for UseUU Impairment p f As of December 31, 2021, 2020, and 2019, the Company evaluated the recoverabila that triggered assessment. Based on the analysis, no impairments were identified during d 31, 2021, 2020, and 2019. ity of the carryirr ng value of its properties the twelve months ended December f Held for SaleSS As of December 31, 2021, the Company determined that the sale of two adjacent parcels of land within the Other segment totaling 10.0 acres was probable and classified these properties as held for sale. As such, $0.6 million was classified as “Assets held forff sale, net” on the consolidated balance sheets. The Company closed on the sale of the two parcels of land on January 20, 2022 for an aggregate sales price of $1.6 million. 4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES As of December 31, 2021, the Company held ownership interests in nine unconsolidated real estate venturt es foff r a net aggregate investment balance of $411.1 million, which includes a negative investment balance in one unconsolidated real of $24.4 million, reflected within "Other liabilities" on the consolidated balance sheets. As of December 31, estate venturet mately 8.2 million net rentable 2021, four of the real estate ventures owned properties that contained an aggregate of approxi a t F-33 square feet of office space; two real estate ventures development; one real estate venturt e owned 1.0 acres of land in active development; one real estate venturt e owned a mixed used tower comprised of 250 apartment units and 0.2 million net rentable square feet of office/retail space; and one real estate venturt e owned a residential tower that contained 321 apartment units. owned 1.4 acres of land held forff t The Company accounts forff equity method. Certain of the unconsolidated real estate ventures cash. t its interests in the unconsolidated real estate ventures are subjeu t , which range from 15% to 70%, using the ct to specified priority allocations of distributablea The Company earned management fees fromff million for the years ended December 31, 2021, 2020 and 2019, respectively. the unconsolidated real estate ventures t of $8.1 million, $4.7 million and $4.3 The Company earned leasing commissions from the unconsolidated real estate ventures million for the years ended December 31, 2021, 2020 and 2019, respectively. t of $3.8 million, $1.1 million and $1.7 The Company had outstanding accounts receivable balances from the unconsolidated real estate ventures $1.2 million as of December 31, 2021 and 2020, respectively. t of $2.5 million and The amounts reflected in the following tablea information of the individual unconsolidated real estate ventures venturet otherwise committed to provide financial support to the real estate venture. s (except for the Company’s share of equity in income) are based on the financial . The Company records operating losses of a real estate or is in excess of its investment balance if the Company is liable for the obligations of the real estate venturet t t The Company’s investment in the unconsolidated real estate ventures share of the unconsolidated real estate ventures follows (in thousands): t t as of December 31, 2021 and 2020, and the Company’s ’ income (loss) for the years ended December 31, 2021 and 2020 was as Ownership Percentage Carrying Amount 2020 2021 Company's Share of unconsolidated real estate venture Income (Loss) Unconsolidated Real Estate Venture Debt at 100%, gross 2021 2020 2019 2021 2020 Office Properties Commerce Square Venture.................................................. Mid-Atlantic Office ff Venture ............................................... Brandywine - AI Venture LLC............................................ Herndon Innovation Center Metro Portfolio Venture, LLC MAP Venture ...................................................................... PJP VII................................................................................. PJP II.................................................................................... PJP VI .................................................................................. Other 4040 Wilson Venture (c)...................................................... 1919 Venture ....................................................................... Development Properties 3025 JFK Venture................................................................ JBG - 51 N Street (c) ........................................................... JBG - 1250 First Street Office (c)........................................ 70% (a) 40% (a) 50% 15% 50% 25% (b) 30% (b) 25% (b) 50% 50% 55% 70% 70% $ 247,798 $ 253,128 $ (15,501) $ (9,150) — $ 213,069 $ 219,168 — 123,015 120,831 31,680 — 15,844 32,996 10,302 16,019 932 (721) (174) 96 185 (2,800) (358) (498) (24,396) (11,516) (8,683) (6,570) (6,102) — — — 31,059 13,791 56,370 21,213 17,751 — — — 34,454 15,434 — 21,237 17,757 — — — — — — (2,258) (2,162) 427 (118) (402) (199) 59 — (457) (227) 190 81 (185) (368) 328 — (313) (255) — 207,302 184,263 — 207,302 185,000 — — — — — — 145,000 88,860 141,857 88,860 — — — — — — $ 411,110 $ 389,811 $ (26,697) $ (18,584) (9,922) $ 961,509 $ 963,018 (a) Ownership percentage represents the Company’s combined interest including preferred and common equity holdings. See "Commerce Square Venture" and "Mid-Atlantic Office JV" sections below for more information. (b) On October 29, 2019, the Company sold its interest in PJP II, PJP VI and PJP VII. See "PJP Ventures" tt section below for more information on the disposal. (c) This entity is a VIE. F-34 lowing is a summary of the financial position of the unconsolidated real estate venturt es in which the Company held The folff interests as of December 31, 2021 and December 31, 2020 (in thousands): Net property ....................................................................... $ Other assets........................................................................ Other liabilities .................................................................. Debt, net............................................................................. Equity (a) ........................................................................... December 31, 2021 December 31, 2020 $ 1,563,263 434,687 331,947 956,668 709,335 1,520,804 488,805 333,049 956,688 719,872 (a) This amount does not include the effect of the basis difference between the Company's historical cost basis and the basis recorded at the real estate venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials occur from the impairment of investments, purchases of third party interests in existing real estate ventures and upon the transfer of assets that were previously owned by the Company into a real estate venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the real estate venture level. The following is a summary of results of operations of the unconsolidated real estate ventures in which the Company held interests during the twelve-month periods ended December 31, 2021, 2020 and 2019 (in thousands): Year Ended December 31, 2021 2020 2019 Revenue ...................................................................... $ Operating expenses ..................................................... Interest expense, net.................................................... Depreciation and amortization.................................... Provision for impairment ............................................ Loss on early extinguishment of debt ......................... Net loss ....................................................................... $ Ownership interest % Company's share of net loss........................................ $ Basis adjustments and other........................................ Equity in loss of unconsolidated real estate ventures . $ $ 214,792 (117,273) (30,569) (97,147) (1,393) — (31,590) $ Various (25,972) $ (725) (26,697) $ $ 150,276 (85,812) (22,661) (70,805) — — (29,002) $ Various (18,540) $ (44) (18,584) $ 132,358 (71,784) (21,908) (53,331) (5,664) (1,231) (21,560) Various (9,865) (57) (9,922) As of December 31, 2021, the aggregate principal payments of the unconsolidated real estate venturt es recourse and non- recourse debt payablea to third-parties are as follows (in thousands): 2022 ........................................................................................................................................................................................ $ 2023 ........................................................................................................................................................................................ 2024 ........................................................................................................................................................................................ 2025 ........................................................................................................................................................................................ 2026 ........................................................................................................................................................................................ Thereafter................................................................................................................................................................................ Total principal payments ........................................................................................................................................................ Net deferred financing costs ................................................................................................................................................... Net original issue premium..................................................................................................................................................... Outstanding indebtedness ....................................................................................................................................................... $ 8,543 477,649 330,317 — 145,000 — 961,509 (5,923) 1,082 956,668 4040 Wilsonll Venture The 4040 Wilson LLC Venture (“4040 Wilson”) consists of one property containing an aggregate of 225,000 square feet of office/retail and 250 apartment units, located in the Metropolitan Washington, D.C. segment. The Company and its partner each own a 50% interest in 4040 Wilson. The residential component and office/retail portion of 4040 Wilson were substantially complete and placed into service during the first quarter of 2020 and the first quarter of 2021, respectively. During the fourth quarter of 2021, 4040 Wilson refinanced the $150.0 million secured construction loan into a $155.0 million mortgage loan secured by the property. The interest rate on this loan is 1.8% over term SOFR and matures in December 2026. d F-35 Brandywine - AI VentVV ure y During the year ended December 31, 2021, Brandywine - AI Venture, recorded a $1.4 million held forff sale impairment charge related to 3141 Fairview Park Drive. The Company’s share of the impairment charge was $0.7 million, which is reflected in “Equity in loss of Real Estate Ventures” in the consolidated statements of operations for the year ended December 31, 2021. The impairment was measured based on an executed sale agreement with a third-party. The Company determined that its investment in the real estate venturet cash is in excess of the Company's basis in the real estate venture. On November 9, 2021, BDN AI Venture sold 3141 Fairview Park Drive, the last remaining office property, totaling 183,618 rentable square feet in Falls Church, Virginia, at an aggregate sales price of $27.6 million. The Company received cash proceeds of $12.6 million after closing costs. The Company recorded an $3.0 million gain within the captia transactions" within its consolidated statements of operations for the year ended December 31, 2021 upon liquidation of the venture. is not impaired as the Company's share of the distributablea on "Net gain on real estate venturet t During 2019, BDN - AI Venture recorded a $5.6 million held forff use impairment charge related to 3141 Fairview Park Drive. The Company’s share of the impairment charge was $2.8 million which is reflected in “Equity in loss of unconsolidated real estate ventures” in the consolidated statements of operations for the year ended December 31, 2019. The impairment was measured based on an appraisal of the property performed by a third party. hThe Compa yny ddetermiinedd thha it its iinvestment iin hthe reall estate venture was not iim ipai dred as hthe Compa yny's hshare of thhe didist ibributablblea ca hsh was iin excess of hthe Compa yny's basbasiis iin hthe reall estate venture. t t During 2019, BDN - AI Venture transferred an office building located in Falls Church, Virginia containing 180,659 rentable square feet to the mortgage lender in full satisfaction of the lender’s outstanding $26.0 million mortgage loan. The mortgage loan was nonrecourse to the Company. The Company recognized its $2.2 million share of the gain on debt forgiveness in "Net gain on real estate venturt e transactions" in the consolidated statements of operations for the year ended December 31, 2019. 3025 JFK VFF entVV ure lBouleva drd iin hilPhil dadel hi is investment iin a 99 y-year prepaidid lleas h l 2, 2021, hthe Compa yny cont ibribut ded iit yuary On rr bFebr h lheld fd forff ddevellopment at 3025 JFK iinvestment iin hithis reall estate venture at February 570,000 square foot approximatelyly $$287.3 approximatelyly $$45.2 Com ypany illwill retaiin a 55% prefe i i drred eq iuity iy interest. imi dxed-us be b iluildingding at propertyy u dnder hthe long-te imilllliion, a dnd hthe je j ioint venturet imilllliion of hthe proje project costs iin exchange partne hr has gagre ded, ehold id interest iin a one-acre lla dnd parc lel lphia, Pennsylvaylva inia to hthe 3025 JFK Venture. Thhe Compa yny's i iini iti lal dd t do devellop a project cost iis o condi itions, to fundd up tu dand hthe ground llease. bsubjjbb ect to custom yary f drred imilllliion. Thhe reall estate venturet long-term ground was forme ff iestimat ded proje equi yty iinterest iin hthe venturet hange for a 45% prefe hThe fundi gng di di i ebruary 2, 2021 was $$34.8 On JulyJuly 23, 2021, hthe 3025 JFK Venture lclosedd on a $$186.7 LIBOR ((subjebjeu cont ibributiion of hthe lleaseh ldhold iinterest at 3025 JFK Venture, thhe Compa yny hhas f Dece bmber 31, 2021. hThe rem iainingning projproject costs ct to a LIBOR flfloor of 0.25%)) per annum dand mature is in Julyuly 2025. In ddi byby hthe je j ioint venturet imilllliion construct addi ition to iits $$34.8 hiwhi hch bbears iinterest at 3.50% lplus credit forff di project costs as of d d partner a dnd hthe constructiion lloan. imilllliion of proje funded $$20.5 iion lloan, ff ilwill bl be f imilllliion unded d d rr dmodell u dnder hthe ac hThe Compa yny hhas ddetermi dined hthat hthe 3025 JFK Venture iis a v iari blabl hthe VIE i Venture. Bas ded upon ea hch me bmber’s hsha dred power over hthe ac itivi iities of 3025 JFK Venture gagreements, Venture iis accounted fd forff ie interest entiity (y ("VIE )"). As a res lult, thhe Compa yny usedd hwhethher to cons lioliddate thhe 3025 JFK dorder to ddetermiine lrelat ded dand project, 3025 JFK dand hthe Compa yny’s lla kck of cont dunder hthe e lrol over hthe ddevellopment iunti gng. dand construc ition hphases of hthe proje ndard for cons lioliddatiion iin iquityy meth dhod of acco dunder hthe opera iti gng counti gng sta d d Mid-Atlantic OffiO ce JV ff On December 21, 2020, the Company contributed a portfolio of twelve properties containing an aggregate of 1,128,645 square feet, nine of which are located in the Pennsylvania suburbs segment and three located in the Metropolitan Washington, D.C segment, to the Mid-Atlantic Officff e JV, for a gross sales price of $192.9 million. After the transaction, the Company owns approximately 25% of the equity interest in the Mid-Atlantic Officff e JV through a $20.0 million preferred equity holding and approximately 15% of the equity interest through a common equity interest (representing 20% of the total mately 40% equity interest in the venturt e. On the closing date, Mid-Atlantic Office common equity), for a combined approxi JV also obtained $147.4 million of third-party debt financing secured by the twelve properties within the venture, with an initial advance of $120.8 million. During the fourth quarter 2021, the Mid-Atlantic Officff e JV borrowed an additional a t F-36 $2.2 million. The remaining funds available under the loan are $24.4 million. The loan bears interest at LIBOR + 3.15% a capped at a total maximum interest rate of 5.6% and matures on January 9, 2024. Commerce Squar SS q e VentVV ure two office properties containing 1,896,142 square feet On July 21, 2020, the Company sold a 30% preferred equity interest in the entities that own One Commerce Square and Two Commerce Square, in Philadelphia, Pennsylvania. After the transaction, the Company owns approximately 32% of the equity interest in Commerce Square Venture through preferred equity interest holdings and approximately 38% of the equity interest in Commerce Square Venture as the sole common mately 70% equity interest in the venturt e. The properties held by the venturt e remain equity holder, for a combined approxi encumbered by the existing mortgages. a PPJP VJJ entVV ures On October 29, 2019, PJP II, PJP VII and PJP VI, three real estate ventures in which the Company owned a 25%-30% interest, each sold its sole operating office property, totaling 204,347 rentable square feet in Charlottesville, Virginia, at an aggregate sales price of $51.0 million. The Company received cash proceeds of $9.1 million after closing costs and related debt payoffs. The Company recorded an $8.0 million gain within the captia on "Net gains on real estate venturt e transactions" within its consolidated statements of operations for the year ended December 31, 2019. Herndon Innovation Center Metrott Portfol f t io Venture, LLC , The Herndon Innovation Center Metro Portfolio Venture, LLC (“Herndon Innovation Center”) consists of eight properties containing an aggregate of 1,293,197 square feet, located in the Metropolitan Washington, D.C. segment. The Company and its partner own 15% and 85% interests in the Herndon Innovation Center, respectively. On March 29, 2019, Herndon Innovation Center obtained $134.1 million of third-party debt financing, secured by four properties within the venturt e, with an initial advance of $113.1 million. The remaining funds available under the loan have not yet been drawn. The Company received $16.7 million for its share of the cash proceeds on April 12, 2019. The loan bears interest at LIBOR + 1.95% capped at a total maximum interest rate of 5.45% - 6.45% over the term of the loan and matures on March 29, 2024. On April 11, 2019, the venturt e obtained an additional $115.3 million of third-party debt financing secured by the remaining four properties within the venturt e, with an initial advance of $94.2 million. The remaining funds available under the loan have not yet been drawn. The loan bears interest at LIBOR + 1.80% capped at a total maximum interest rate of 6.3% and matures on April 11, 2024. On April 12, 2019, the Company received $13.8 million for its share of the cash proceeds from the financing. a a ff MAP Venture The MAP Venture owns 58 office properties that contain an aggregate of 3,924,783 square feet located in the Pennsylvania Suburbs, New Jersey/Delaware, Metropolitan Washington, D.C. and Richmond, Virginia ("MAP Venture"). The MAP Venture leases the land parcels under the 58 office properties through a ground lease that extends through February 2115. Annual payments by the MAP Venture, as tenant under the ground lease, initially total $11.9 million and increase 2.5% annually through November 2025. Thereafter, annual rental payments increase by 2.5% or CPI at the discretion of the lessor. 1919 Venture 1919 Venture owns a 29-story,rr of commercial space and a 215-car structured additional information regarding the related-party note receivablea 455,000 square foot mixed-use tower consisting of 321 luxury apartments, 24,000 square feet parking facility. See Note 5, ''Debt and Preferred Equity Investments" for with 1919 Venture. t JBG VentVV ures JBG Ventures consists of 51 N 50 Patterson, Holdings, LLC Venture ("51 N Street") and 1250 First Street Offiff ce, LLC Venture ("1250 First Street"), with the Company owning a 70.0% equity interest and JBG/DC Manager, LLC ("JBG") owning a 30.0% equity interest in each of the two ventures . 51 N Street owns 0.9 acres of undeveloped land and 1250 First Street, owns 0.5 acres of undeveloped land. t F-37 5. DEBT AND PREFERRED EQUITY INVESTMENTS Q Austin Prefee rred Equity Investment On December 31, 2020, the Company invested $50.0 million in exchange for a preferred equity interest in a single-purpose entity that owned two stabila ized office buildings located in Austin, Texas. The Company accounted for this mandatorily redeemable investment as a note receivable, which was included within "Other assets" on the consolidated balance sheets.The preferred equity interest accrued a 9.0% annual return, compounded and paid monthly. The investment was required to be redeemed no later than December 31, 2023 (subject to a one-year extension option). On September 3, 2021, the $50.0 million investment was redeemed prior to maturity. As a result, the Company recognized an incremental $2.8 million of income on the three early redemption related to its accelerated minimum returnt months ended September 30, 2021, which is included in "Interest and investment income" on the consolidated statements of operations. s paid in cash on the redemption date during and exit feeff d t 1919 Venture Note Receivable During 2018, each of the Company and the other equity partner in 1919 Venture, an unconsolidated real estate venture, provided a $44.4 million mortgage loan to 1919 Venture and, as a result, the Company recorded a $44.4 million related-party note receivablea 4.0% per annum interest rate with a scheduled maturity on June 25, 2023. 1919 Venture used the proceeds from the loans to repay its then outstanding $88.8 million construction loan. See Note 4, ''Investment in Unconsolidated Real Estate Ventures further information regarding 1919 Venture. As of December 31, 2021, the debt investment was performing in accordance with its terms and remains on accrual status. from 1919 Venture. The loan bears interest at a fixed ” forff ff t t 6. LEASES Lessor Accounting The Company leases properties to tenants under operating leases with various expiration dates. Future contractual payments under operating leases at December 31, 2021 are as follows (in thousands): t lease Year 2022 ............................................................................................................................................................... $ 2023 ............................................................................................................................................................... 2024 ............................................................................................................................................................... 2025 ............................................................................................................................................................... 2026 ............................................................................................................................................................... Thereafter....................................................................................................................................................... 328,553 327,981 304,240 274,216 249,045 952,898 Lessee Accounting As of December 31, 2021, the Company is the lessee under six long-term ground leases classified as "operating leases" in the consolidated balance sheets. Certain of the Company’s ground leases contain extension options and the Company considered all relevant factors in determining if it was reasonabla y certain that it would exercise such extension options. The Company concluded that it was not reasonably certain that it would exercise the extension options and, therefore, has not included the extension period in the remaining lease terms. With the exception of certain ground leases that are subject to rent increases periodically based on the CPI index, all lease payments under the ground lease are fixed. F-38 The table below summarizes the Company’s operating lease cost (in thousands) recognized through “Property operating expenses” on the consolidated statements of operations (in thousands): Lease Cost Fixed lease cost......................................................................................... $ Variablea Total.......................................................................................................... $ lease cost.................................................................................... Weighted-average remaining lease term (years) ...................................... Weighted-average discount rate ............................................................... Year Ended December 31, 2021 2020 2,100 43 2,143 $ $ 55.2 6.3 % 2,100 45 2,145 55.9 6.3 % Lease payments by the Company under the terms of all noncancellable ground leases of land are expensed on a straight-line basis regardless of when payments are due. The Company’s ground leases, excluding prepaid ground leases, have remaining lease terms ranging from 8 to 63 years. Lease payments on noncancellable leases at December 31, 2021 are as follows (in thousands): Year 2022 ............................................................................................................................................................... $ 2023 ............................................................................................................................................................... 2024 ............................................................................................................................................................... 2025 ............................................................................................................................................................... 2026 ............................................................................................................................................................... Thereafter....................................................................................................................................................... Total lease payments...................................................................................................................................... $ Less: Imputed interest .................................................................................................................................... Present value of operating lease liabilities..................................................................................................... $ 1,248 1,263 1,305 1,321 1,338 107,793 114,268 91,306 22,962 Minimum Rent The Company obtained ground tenancy rights related to three properties in Philadelphia, Pennsylvania, which provide for al transactions and net operating cash flows of the properties after contingent rent participation by the lessor in certain capita certain returns as contingent rent when incurred. The ground leases also provide for payment by the Company of certain operating costs relating to the land, primarily real estate taxes. The above schedule of future minimum rental payments does not include any contingent rent amounts or any reimbursed expenses. are achieved by the Company. Such amounts, if any, will be reflected ff ff t 7. DEFERRED COSTS As of December 31, 2021 and 2020, the Company’s deferred costs were comprised of the following (in thousands): Leasing costs .................................................................................... $ Financing costs - Unsecured Credit Facility .................................... Total............................................................................................... $ 143,895 6,299 150,194 $ $ (57,445) $ (5,887) (63,332) $ 86,450 412 86,862 December 31, 2021 Accumulated Amortization Deferred Costs, net Total Cost December 31, 2020 Accumulated Amortization Deferred Costs, net Total Cost Leasing costs .................................................................................... $ Financing costs - Unsecured Credit Facility .................................... Total............................................................................................... $ 139,207 6,299 145,506 $ $ (55,656) $ (4,994) (60,650) $ 83,551 1,305 84,856 During the years ended December 31, 2021, 2020 and 2019, the Company capita million, $1.6 million, and $1.7 million, respectively. alized internal direct leasing costs of $2.1 F-39 8. INTANGIBLE ASSETS AND LIABILITIES As of December 31, 2021 and 2020, the Company’s intangible assets/liabilities were comprised of the following (in thousands): December 31, 2021 Accumulated Amortization Intangible Assets, net Total Cost Intangible assets, net: In-place lease value ....................................................................... $ Tenant relationship value .............................................................. Above market leases acquired ....................................................... Total intangible assets, net........................................................... $ 72,376 167 486 73,029 $ $ (44,066) $ (97) (310) (44,473) $ 28,310 70 176 28,556 Intangible liabila ities, net: Below market leases acquired ....................................................... $ 27,025 $ (14,044) $ 12,981 Total Cost Accumulated Amortization Intangible Liabilities, net December 31, 2020 Accumulated Amortization Intangible Assets, net Total Cost Intangible assets, net: In-place lease value ....................................................................... $ Tenant relationship value .............................................................. Above market leases acquired ....................................................... Total intangible assets, net........................................................... $ 91,552 2,091 530 94,173 $ $ (43,400) $ (1,938) (265) (45,603) $ 48,152 153 265 48,570 Total Cost Accumulated Amortization Intangible Liabilities, net Intangible liabila ities, net: Below market leases acquired ....................................................... $ 31,263 $ (12,815) $ 18,448 For the years ended December 31, 2021, 2020, and 2019, the Company accelerated the amortization of intangible assets by approximately $3.6 million, $0.3 million, and $4.5 million, respectively, as a result of tenant move-outs prior to the end of the associated lease term. For the years ended December 31, 2021, 2020, and 2019 the Company accelerated the amortization of approximately $0.6 million, $0.1 million, and $2.2 million of intangible liabila ities as a result of tenant move-outs. As of December 31, 2021, the Company’s annual amortization for its intangible assets/liabila lows (dollars in thousands): early lease terminations, was as folff ities, assuming no prospective 2022 ......................................................................................................................................... $ 2023 ......................................................................................................................................... 2024 ......................................................................................................................................... 2025 ......................................................................................................................................... 2026 ......................................................................................................................................... Thereafter................................................................................................................................. Total......................................................................................................................................... $ Assets Liabilities 9,642 6,724 4,433 3,255 1,195 3,307 28,556 $ $ 2,588 1,540 1,321 1,044 754 5,734 12,981 F-40 9. DEBT OBLIGATIONS The following tablea December 31, 2021 and 2020 (in thousands): sets forth information regarding the Company’s consolidated debt obligations outstanding as of December 31, 2021 December 31, 2020 Effective Interest Rate Maturity Date UNSECURED DEBT $600 million Unsecured Credit Facility.................................. $ 23,000 $ — LIBOR + 1.10% July 2022 (a) Seven-Year Term Loan - Swapped to fixed............................ $350.0M 3.95% Guaranteed Notes due 2023 ......................... $350.0M 4.10% Guaranteed Notes due 2024 ......................... $450.0M 3.95% Guaranteed Notes due 2027 ......................... $350.0M 4.55% Guaranteed Notes due 2029 ......................... Indenture IA (Preferred Trust rr I).............................................. Indenture IB (Preferred Trust I) .............................................. Indenture II (Preferred Trust II) .............................................. 250,000 350,000 350,000 450,000 350,000 27,062 25,774 25,774 250,000 350,000 350,000 450,000 350,000 27,062 25,774 25,774 2.87% 3.87% 3.78% 4.03% 4.30% LIBOR + 1.25% LIBOR + 1.25% LIBOR + 1.25% October 2022 February 2023 October 2024 November 2027 October 2029 March 2035 April 2035 July 2035 Principal balance outstanding ................................................. 1,851,610 1,828,610 Plus: original issue premium (discount), net........................... Less: deferred financing costs................................................. 8,187 (6,211) 10,137 (8,152) Total unsecured indebtedness ................................................. $ 1,853,586 $ 1,830,595 (a) The Company has the ability to extend the term of the Unsecured Credit Facility until July 2023 through two successive six-month extension options. The Parent Company unconditionally guarantees the unsecured debt obligations of the Operating Partnership (or is a co- borrower with the Operating Partnership) but does not by itself incur unsecured indebtedness. The Parent Company has no material assets other than its investment in the Operating Partnership. On July 17, 2018, the Company amended and restated its revolving credit agreement (as amended and restated, the “Unsecured Credit Facility”). The amendment and restatement, among other things: (i) maintained the total commitment of the revolving line of credit of $600.0 million; (ii) extended the maturity date froff m May 15, 2019 to July 15, 2022, with two six-month extensions at the Company’s election subject to specified conditions and subject to payment of an extension fee; (iii) reduced the interest rate margins applicablea an additional interest rate option based to Eurodollar loans; (iv) provided forff ting LIBOR rate; and (v) removed the covenant requiring the Company to maintain a minimum net worth. In on a floaff connection with the amendments, the Company capita alized $2.7 million in financing costs, which will be amortized through the July 15, 2022 maturity date. At the Company's option, loans outstanding under the Unsecured Credit Facility will bear interest at a rate per annum equal to (1) LIBOR plus between 0.775% and 1.45%, based on the Company's credit rating, or (2) a base rate equal to the greatest of (a) the Administrative Agent's prime rate, (b) the Federal Funds rate plus 0.5% or (c) LIBOR for a one month period plus 1.00%, in each case, plus a margin ranging from 0.0% to 0.45% based on the Company's credit rating. The Unsecured Credit Facility also contains a competitive bid option that allows banks that are part of the lender consortium to bid to make loan advances to the Company at a reduced d interest rate. In addition, the Company is also obligated to pay (1) in quarterly on the total commitment at a rate per annum ranging from 0.125% to 0.30% based on the installments a facff ility feeff on the undrawn amount of each letter or credit equal to the LIBOR Margin. Company's credit rating and (2) an annual feeff Based on the Company's current credit rating, the LIBOR margin is 1.10% and the facility feeff is 0.25%. The terms of the Unsecured Credit Facility require that the Company maintain customary financial and other covenants, including: (i) a fixeff d charge coverage ratio greater than or equal to 1.5 to 1.00; (ii) a leverage ratio less than or equal to 0.60 to 1.00, subject to specified exceptions; (iii) a ratio of unsecured indebtedness to unencumbered asset value less than or equal to 0.60 to 1.00, subject to specified exceptions; (iv) a ratio of secured indebtedness to total asset value less than or equal to 0.40 to 1.00; and (v) a ratio of unencumbered cash flow to interest expense on unsecured debt greater than 1.75 to 1.00. In addition, the Unsecured Credit Facility restricts payments of dividends and distributions on shares in excess the Company to continue to of 95% of the Company's funds from operations (FFO) except to the extent necessary to enablea qualify as a REIT for Federal income tax purposes. The Company had $23.0 million of borrowings under the Unsecured Credit Facility as of December 31, 2021. During the twelve months ended December 31, 2021, the weighted-average interest rate on Unsecured Credit Facility borrowings was F-41 1.21% resulting in $0.4 million of interest expense. During the twelve months ended December 31, 2020 weighted-average interest rate on Unsecured Credit Facility borrowings was 1.48% resulting in $0.5 million of interest expense. The Company was in compliance with all finaff Company’s ability to obtain alternative sources of capita al. ncial covenants as of December 31, 2021. Certain of the covenants restrict the As of December 31, 2021, the aggregate scheduled principal payments on the Company's debt obligations were as follows (in thousands): 2022 ................................................................................................................................................................... $ 2023 ................................................................................................................................................................... 2024 ................................................................................................................................................................... 2025 ................................................................................................................................................................... 2026 ................................................................................................................................................................... Thereafter .......................................................................................................................................................... Total principal payments ................................................................................................................................... Net unamortized premiums/(discounts)............................................................................................................. ncing costs.............................................................................................................................. Net deferred finaff Outstanding indebtedness.................................................................................................................................. $ 273,000 350,000 350,000 — — 878,610 1,851,610 8,187 (6,211) 1,853,586 10. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company determined the fair values disclosed below using available market information and discounted cash flowff analyses as of December 31, 2021 and 2020, respectively. The discount rate used in calculating fair value is the sum of the nts or obligations. Considerablea current risk free rate and the risk premium on the date of measurement of the instrume judgment is necessary to interpret market data and to develop the related estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize upon disposition. The use of different estimates and valuation methodologies may have a material effect on the fair value amounts shown. The Company believes ff that the carrying amounts reflected in the consolidated balance sheets at December 31, 2021 and 2020 approximate the fair and accrued expenses values for cash and cash equivalents, accounts receivable, other assets and liabilities, accounts payablea because they are short-term in duration. rr The following are financial instruments for which the Company’s estimates of faiff thousands): r value differ fromff the carrying amounts (in Unsecured notes payable............................................................. Variable rate debt ........................................................................ Notes receivable (b) .................................................................... December 31, 2021 December 31, 2020 Carrying Amount (a) 1,502,368 $ 351,218 $ $ 44,430 $ $ $ Fair Value 1,588,780 344,754 Carrying Amount (a) 1,502,901 $ 327,694 $ 45,230 $ 94,430 $ $ $ Fair Value 1,607,310 308,838 97,372 (a) Net of deferred financing costs of $5.8 million and $7.2 million for unsecured notes payable, $0.4 million and $0.9 million for variable rate debt as of December 31, 2021 and December 31, 2020, respectively. (b) For further detail, refer to Note 5, ''Debt and Preferred Equity Investments.” The Company used quoted market prices as of December 31, 2021 and December 31, 2020 to value the unsecured notes payablea and, as such, categorized them as Level 2. The inputs utilized to determine the fair value of the Company’s variable rate debt are categorized as Level 3. The fair value of the variable rate debt was determined using a discounted cash flowff to the Company for loans with similar terms and characteristics. model that considered borrowing rates availablea The inputs utilized to determine fair value of the Company's notes receivable are unobservable and, as such, were categorized as Level 3. Fair value was determined using a discounted cash flow model that considered the contractual interest and . principal payments discounted at a blended interest rate of the notes receivablea t F-42 For the Company’s Level 3 finaff determine fair value would result in a decrease to the fair value. Conversely, a decrease in the discount rate would result in an increase to the faiff r value is disclosed, an increase in the discount rate used to ncial instruments for which faiff r value. Disclosure about the fair value of financial instruments is based upon pertinent information available to management as of December 31, 2021 and December 31, 2020. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts were not comprehensively revalued forff purposes of these financial statements since December 31, 2021. Current estimates of fair the amounts presented herein. value may differ fromff ff 11. DERIVATIVE FINANCIAL INSTRUMENTS Use of Derivative FinFF ancial Instrume tt f nts The Company’s use of derivative instruments is limited to the utilization of interest rate agreements or other instruments to manage interest rate risk exposures and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure, as well as to hedge specific transactions. The counterparties to these arrangements are majora financial institutions with which the Company and its affiliates may also have other finaff ncial relationships. The Company is potentially exposed to credit loss in the event of non- performance by these counterparties. However, because of the high credit ratings of the counterparties, the Company does not anticipate that any of the counterparties will fail to meet these obligations as they come due.d The Company does not hedge credit or property value market risks through derivative financial instruments. t The Company formally assesses, both at the inception of a hedge and on an on-going basis, whether each derivative is highly- effective in offsetting changes in cash flows of the hedged item. If management determines that a derivative is not highly- effective as a hedge or if a derivative ceases to be a highly-effective hedge, the Company will discontinue hedge accounting prospectively for either the entire hedge or the portion of the hedge that is determined to be ineffective. The related ineffeff ctiveness would be charged to the consolidated statement of operations. ff The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swapsa are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. To comply with the provisions of the accounting standard for fair value measurements and disclosures, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. summarizes the terms and fair values of the Company’s derivative financial The following tablea ents as of December 31, 2021 and December 31, 2020. The notional amounts provide an indication of the extent of the Company’s involvement in these instruments at that time but do not represent exposure to credit, interest rate or market risks (amounts presented in thousands). instrumr Hedge Product Liabilities Swap Swap Hedge Type Designation Notional Amount Strike Trade Date 12/31/2021 12/31/2020 Maturity Date Fair value 12/31/2021 12/31/2020 Interest Rate Cash Flow (a) $ 250,000 $ 250,000 2.868 % Interest Rate Cash Flow (b) — 25,774 3.300 % $ 250,000 $ 275,774 October 8, 2015 December 22, 2011 October 8, 2022 January 30, 2021 $ (2,461) $ (6,627) — (120) F-43 (a) Hedging unsecured variable rate debt. (b) On January 30, 2021, the interest rate hedge contract for this swap expired. The Company measures its derivative instruments at fair value and records them in “Other assets” and (“Other liabia lities”) on the Company’s consolidated balance sheets. a l within Level 2 of the Although the Company has determined that the majori fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that the inputs utilized to determine the fair value of derivative instruments are classified in Level 2 of the fair value hierarchy. ty of the inputs used to value its derivatives falff Concentration of Credit Riskii f Concentrations of credit risk arise for the Company when multiple tenants of the Company are engaged in similar business activities, or are located in the same geographic tures that impact in a similar manner obligations, including those to the Company. The Company regularly monitors its tenant base their ability to meet contractual to assess potential concentrations of credit risk. Management believes the current credit risk portfolio is reasonably well diversified and does not contain an unusual concentration of credit risk. No tenant accounted forff 10% or more of the Company’s rents during 2021, 2020 and 2019. region, or have similar economic feaff a t 12. LIMITED PARTNERS' NONCONTROLLING INTERESTS IN THE PARENT COMPANY Noncontrolling interests in the Parent Company’s financial statements relate to redeemable common limited partnership interests in the Operating Partnership held by parties other than the Parent Company and properties which are consolidated but not wholly owned by the Operating Partnership. p Operating Partnership g p rr The aggregate book value of the noncontrolling interests associated with the redeemable common limited partnership interests in the accompanying consolidated balance sheet of the Parent Company was $8.2 million and $10.5 million as of December 31, 2021 and December 31, 2020, respectively. Under the applicablea accounting guidance, the redemption value of limited partnership units are carried at fair value. The Parent Company believes that the aggregate settlement value of these ff interests (based on the number of units outstanding and the average closing price of the common shares during the last five business days of the quarter) was approximately $11.1 million and $11.7 million as of December 31, 2021 and December 31, 2020, respectively. F-44 13. BENEFICIARIES' EQUITY OF THE PARENT COMPANY Q g p Earnings per Share SS ) (EPS)PP ( The following tablea thousands, except share and per share amounts; results may not add due to rounding): details the number of shares and net income used to calculate basic and diluted earnings per share (in 2021 Year Ended December 31, 2020 2019 Basic Diluted Basic Diluted Basic Diluted (77) (421) 12,366 Numerator Net income .................................................... $ Net income attributable to noncontrolling interests.......................................................... Nonforfeitable dividends allocated to unvested restricted shareholders.................... Net income attributable to common shareholders................................................... Denominator Weighted-average shares outstanding........... 170,878,185 Contingent securities/Share based compensation................................................. Weighted-average shares outstanding........... 170,878,185 Earnings per Common Share: ....................... 11,868 — $ $ 12,366 $ 307,326 $ 307,326 $ 34,529 $ 34,529 (77) (1,799) (1,799) (421) (410) (410) (262) (396) (262) (396) $ 11,868 $ 305,117 $ 305,117 $ 33,871 $ 33,871 170,878,185 171,926,079 171,926,079 176,132,941 176,132,941 1,395,055 — 390,997 — 553,872 172,273,240 171,926,079 172,317,076 176,132,941 176,686,813 Net income attributable to common shareholders................................................ $ 0.07 $ 0.07 $ 1.77 $ 1.77 $ 0.19 $ 0.19 The contingent securities/share based compensation impact is calculated using the treasury stock method and relates to employee awards settled in shares of the Parent Company. The effect of these securities is anti-dilutive for periods that the Parent Company incurs a net loss from continuing operations available to common shareholders and therefore is excluded from the dilutive earnings per share calculation in such periods. Redeemablea 981,634 at December 31, 2019, respectively, were excluded fromff are not dilutive. common limited partnership units totaling 823,983 at December 31, 2021, 981,634 at December 31, 2020 and the diluted earnings per share computations because they Unvested restricted shares are considered participating securities which require the use of the two-class method for the computation of basic and diluted earnings per share. For the years ended December 31, 2021, 2020 and 2019, earnings representing nonforfeitablea above were allocated to the unvested restricted shares issued to the dividends as noted in the tablea Company’s executives and other employees under the Company's shareholder-approved long-term incentive plan. a Common and Preferred Shares SS f On December 7, 2021, the Parent Company declared a distribution of $0.19 per common share, totaling $32.8 million, which was paid on January 19, 2022 to shareholders of record as of January 5, 2022. During the year ended December 31, 2021, the Company issued 226,695 common shares in a private placement to an unaffiliated third party in exchange for the third party's 1% residual ownership interest in One and Two Commerce Square, an unconsolidated joint venture. t Of the 20,000,000 preferred shares authorized, none were outstanding as of December 31, 2021 or December 31, 2020. Common Share Repurchas p e es The Parent Company maintains a common share repurchase program under which the Board of Trustees has authorized the Parent Company to repurchase common shares. On January 3, 2019, the Board of Trustees authorized the repurchase of up to $150.0 million common shares from and after January 3, 2019. During the year ended December 31, 2021, the Company did F-45 not repurchase any common shares. During the year ended December 31, 2020, the Company repurchased and retired 6,248,483 common shares at an average price of $9.60 per share, totaling $60.0 million. During the year ended December 31, 2019, the Company repurchased and retired 1,337,169 common shares at an average price of $12.92 per share, totaling $17.3 million. Former ContiCC nuous Offering Program ff g g On January 10, 2017, the Parent Company entered into a continuous offering program (the “Offering Program”), that permitted the Parent Company to sell up tu o an aggregate of 16,000,000 common shares in at-the-market offerings. There was no activity under the Offering Program during remained availablea d for issuance under the Offering Program, which terminated on January 10, 2020. 2020 and 2019. At December 31, 2021, no common shares 14. PARTNERS' EQUITY OF THE PARENT COMPANY Q Earnings per Common g p CC Partnership Ui nitUU p The following tablea partnership unit (in thousands, except unit and per unit amounts; results may not add dued details the number of units and net income used to calculate basic and diluted earnings per common to rounding): 2021 Year Ended December 31, 2020 2019 Basic Diluted Basic Diluted Basic Diluted 3 12,366 Numerator Net income.................................................. $ Net (income) loss attributable to noncontrolling interests .............................. Nonforfeitable dividends allocated to unvested restricted unitholders ................... Net income attributable to common unitholders .................................................. $ Denominator Weighted-average units outstanding .......... 171,770,843 Contingent securities/Share based compensation .............................................. — Total weighted-average units outstanding.. 171,770,843 Earnings per Common Partnership Unit:.... 11,948 (421) $ 12,366 $ 307,326 $ 307,326 $ 34,529 $ 34,529 3 (421) (20) (410) (20) (410) (69) (396) (69) (396) $ 11,948 $ 306,896 $ 306,896 $ 34,064 $ 34,064 171,770,843 172,907,713 172,907,713 177,114,932 177,114,932 1,395,055 173,165,898 — 172,907,713 390,997 173,298,710 — 177,114,932 553,872 177,668,804 Net income attributable to common unitholders ............................................... $ 0.07 $ 0.07 $ 1.77 $ 1.77 $ 0.19 $ 0.19 Unvested restricted units are considered participating securities which require the use of the two-class method for the computation of basic and diluted earnings per unit. For the years ended December 31, 2021, 2020 and 2019, earnings representing nonforfeitablea dividends were allocated to the unvested restricted units issued to the Parent Company’s executives and other employees under the Parent Company’s shareholder-approved long-term incentive plan. a p Common Partnership rr Units and Preferre f ff d MirrorMM Units The Operating Partnership issues partnership units to the Parent Company in exchange for the contribution of the net proceeds of any equity security issuance by the Parent Company. The number and terms of such partnership units correspond to the number and terms of the related equity securities issued by the Parent Company. In addition, the Operating Partnership may also issue separate classes of partnership units. Historically, the Operating Partnership has had the following types of partnership units outstanding: (i) Preferred Partnership Units which have been issued to parties other than the Parent Company; (ii) Preferred Mirror Partnership Units which have been issued to the Parent Company; and (iii) Common Partnership Units which include both interests held by the Parent Company and those held by other limited partners. F-46 Preferred Mirror Partnership Ui nitUU stt p f In exchange for the proceeds received in corresponding offerings by the Parent Company of preferred shares of beneficial interest, the Operating Partnership has issued to the Parent Company a corresponding amount of Preferred Mirror Partnership Units with terms consistent with that of the preferred securities issued by the Parent Company. No preferred units were outstanding as of December 31, 2021 or December 31, 2020. Common Partnership Ui nitsUU p ) (Redeedd mable and General) ( The Operating Partnership has two classes of Common Partnership Units outstanding as of December 31, 2021: (i) Class A Limited Partnership Interest which are held by both the Parent Company and outside third parties and (ii) General Partnership Interests which are held solely by the Parent Company (collectively, the Class A Limited Partnership Interest, and General Partnership Interests are referred to as “Common Partnership Units”). The holders of the Common Partnership Units are entitled to share in cash distributions from, and in profits and losses of, the Operating Partnership, in proportion to their respective percentage interests, subjecb t to preferential distributions on the preferred mirror units and the preferred units. The Common Partnership Units held by the Parent Company (comprised of both General Partnership Units and Class A Limited Partnership Units) are presented as partner’s equity in the consolidated financial statements. Class A Limited Partnership Interest held by parties other than the Parent Company are redeemable at the option of the holder forff a like number of common shares of the Parent Company, or cash, or a combination thereof, at the election of the Parent Company. Because the form of settlement of these redemption rights are not within the control of the Operating Partnership, these partner’s equity and are presented as redeemable limited partnership Common Partnership Units have been excluded fromff units measured at the potential cash redemption value as of the end of the periods presented based on the closing market price of the Parent Company’s common shares at December 31, 2021, 2020 and 2019, which was $13.42, $11.91 and $15.75, respectively. Class A Units of 823,983 as of December 31, 2021, 981,634 as of December 31, 2020, and 981,634 as of December 31, 2019, respectively, were outstanding and owned by outside limited partners of the Operating Partnership. On December 7, 2021, the Operating Partnership declared a distribution of $0.19 per common partnership unit, totaling $32.8 million, which was paid on January 19, 2022 to unitholders of record as of January 5, 2022. During the year ended December 31, 2021, the Operating Partnership issued 226,695 common partnership units to the Parent Company in exchange for a 1% residual ownership interest in One and Two Commerce Square, an unconsolidated joint venture, an unaffiliated third party in exchange for an equal number of common shares of the t Parent Company. which was acquired fromff Common Unit Repurchas p e es In connection with the Parent Company’s common share repurchase program, one common unit of the Operating Partnership each common share repurchased. During the year ended December 31, 2021, the Company did not repurchase is retired forff any units. During the year ended December 31, 2020 the Company repurchased and retired 6,248,483 common units at an average price of $9.60 per unit, totaling $60.0 million. During the year ended December 31, 2019, the Company Repurchased 1,337,169 common units at an average price of $12.92 per unit, totaling $17.3 million. The common units repurchased were retired and, as a result, were accounted forff nd law, which does not contemplate treasury stock. The repurchases were recorded as a reduction of common units (at $0.01 par value per unit) and a decrease to General Partnership Capia tal. in accordance with Marylarr Former ContiCC nuous Offering Program ff g g On January 10, 2017, the Parent Company entered into a continuous offering program (the “Offering Program”), which permitted it to sell up to an aggregate of 16,000,000 common units in at-the-market offerings. In connection with the commencement of the Offeri costs were recorded to General Partner Capital. ng Program, $0.2 million of upfront u ff There was no activity under the Offering Program during remained availablea for issuance under the Offeri d ff ng Program, which terminated on January 10, 2020. 2020 and 2019. As of December 31, 2021, no common shares F-47 ) 15. SHARE BASED COMPENSATION, 401(K) PLAN AND DEFERRED COMPENSATION ( , ( ) 401(k) Plan The Company sponsors a 401(k) defined contribution plan forff o 100% of annual compensation, subject to specific limitations under the Internal Revenue Code. At its discretion, the Company can make matching contributions equal to a percentage of the employee’s elective contribution and profit sharing contributions. The Company funds its 401(k) contributions annually and plan participants must be employed as of December 31 in order to receive employer contributions, except for employees eligible for qualifying retirement, as defined under the Internal Revenue Code. The Company contributions were $0.4 million, $0.5 million, and $0.4 million in 2021, 2020, and 2019, respectively. its employees. Each employee may contribute up tu Restricted Share Right g s Att wards i As of December 31, 2021, 474,978 restricted share rights ("Restricted Share Rights") were outstanding under the Company's long term equity incentive plan. These Restricted Share Rights vest over one to three years from the initial grant dates. The remaining compensation expense to be recognized with respect to these awards at December 31, 2021 was $1.8 million and is expected to be recognized over a weighted average remaining vesting period of 1.9 years. During the years ended December 31, 2021, 2020, and 2019, the amortization related to outstanding Restricted Share Rights was $4.1 million (of which $0.5 million was capita alized), and $3.9 million (of which $0.3 million was capita alized), respectively. Compensation expense related to outstanding Restricted Share Rights is included in general and administrative expense. alized), $4.3 million (of which $0.4 million was capita The following tabla e summarizes the Company’s Restricted Share Rights activity during the year-ended December 31, 2021: Non-vested at January 1, 2021 ................................................................................... Granted....................................................................................................................... Vested......................................................................................................................... Forfeited ..................................................................................................................... Non-vested at December 31, 2021 ............................................................................. Shares $ 488,735 343,179 $ (339,579) $ (17,357) $ $ 474,978 Weighted Average Grant Date Fair Value 15.19 12.72 15.12 13.55 13.51 On March 4, 2021, the Compensation Committee of the Parent Company’s Board of Trustees awarded to officers of the Company an aggregate of 252,278 Restricted Share Rights, which vest over three years from the grant date. Each Restricted Share Right entitles the holder to one common share upon settlement. The Parent Company pays dividend equivalents on the Restricted Share Rights prior to the settlement date. Vesting and/or settlement would accelerate if the recipient of the award were to die, become disabled or, in the case of certain of such Restricted Share Rights, retire in a qualifying retirement prior to the vesting or settlement date. Qualifying retirement generally means the recipient’s voluntary termination of employment after reaching at least age 57 and accumulating at least 15 years of service with the Company. In addition, vesting would also accelerate if the Parent Company were to undergo a change of control and, on or before the first anniversary of the change of control, the recipient’s employm ent were to cease due to a termination without cause or resignation with good reason. m u The Restricted Share Rights granted in 2021, 2020, and 2019 to certain senior executives include an “outperform ance feature” whereby additional shares may be earned, up to 200% of the shares subject to the basic award, based on the a three-year Company’s achievement of earnings-based targets and development, or investment, based targets during performance period with an additional two years to fully vest. In addition to the basic award, up to an aggregate of 388,840, 316,236, and 228,858 shares may be awarded under the outperformance feature for the 2021, 2020, and 2019 awards, respectively, to those senior officers whose Restricted Share Rights awards include the "outperformance feaff ture." As of December 31, 2021, the Company has not recognized any compensation expense related to the outperformance feature for the 2019-2021 awards. The Company will continue to evaluate progression towards achievement of the perforff mance metrics on a quarterly basis and recognize compensation expense for the outperformance feature of these awards should it be determined . that achievement of these metrics is probablea d t F-48 In addition, on February 23, 2021, the Compensation Committee awarded non-officer employees an aggregate of 49,267 Restricted Share Rights that generally vest in three equal annual installments. Vesting of these awards is subject to acceleration upon death, disabila ity or termination without cause within one year foll owing a change of control. ff On May 18, 2021, the Compensation Committee awarded the Trustees an aggregate of 41,634 fully vested common shares. In accordance with the accounting standard for share-based compensation, the Company amortizes share-based compensation costs through the qualifying retirement dates for those executives and Trustees who meet the conditions for qualifying retirement during the scheduled vesting period and whose award agreements provide for vesting upon a qualifying retirement. Restricted Performance r f Share UnitUU s Ptt lan The Compensation Committee of the Parent Company’s Board of Trustees has granted performance share-based awards (referred to as Restricted Performance Share Units, or RPSUs) to officers of the Parent Company. The RPSUs are settled in common shares, with the number of common shares issuable in settlement determined based on the Company’s total of comparative groups over the shareholder returnt measurement periods. The tabla e below presents certain information as to unvested RPSU awards. over specified measurement periods compared to total shareholder returns t 2/21/2019 3/5/2020 3/5/2021 Total RPSU Grant Date (Amounts below in shares, unless otherwise noted) Non-vested at January 1, 2021........................................ Granted ......................................................................... Units Cancelled ............................................................ Non-vested at December 31, 2021.................................. Measurement Period Commencement Date.................... Measurement Period End Date ....................................... Granted............................................................................ Fair Value of Units on Grant Date (in thousands) .......... $ 206,069 — (3,837) 202,232 1/1/2019 12/31/2021 213,728 4,627 $ 319,600 — (5,545) 314,055 1/1/2020 12/31/2022 319,600 5,389 $ — 380,957 (6,796) 374,161 1/1/2021 12/31/2023 380,957 6,389 525,669 380,957 (16,178) 890,448 The Company values each RPSU on its grant date using a Monte Carlo simulation. The fair values of each award are being amortized over the three year performance period. During the perforff mance period, dividend equivalents are credited as additional RPSUs, subject to the same terms and conditions as the original RPSUs. The perforff mance period will be abbreviated and the determination and delivery of earned shares will be accelerated in the event of a change in control or if the recipient of the award were to die, become disabled or retire in a qualifying retirement prior to the end of the otherwise applicablea three year performance period; provided that, in the case of qualifying retirement for the March, 2021 and 2020 grants, the number of shares deliverable will be pro-rated based on the portion of the perforff mance period actually worked before retirement. In accordance with the accounting standard for share-based compensation, the Company amortizes stock- those executives who meet rr based compensation costs for the February the conditions for qualifying retirement during the scheduled vesting period. 2019 grant through the qualifying retirement date forff For the year ended December 31, 2021, the Company recognized amortization of the 2021, 2020 and 2019 RPSU awards of $4.3 million, of which $0.5 million was capita alizing eligible portions of employee compensation. For the year ended December 31, 2020, amortization for the 2020, 2019 and 2018 RPSU awards was $3.0 million, of which $0.4 million was capita alizing eligible portions of employee compensation. For the year ended December 31, 2019, amortization for the 2019, 2018, and 2017 RPSU awards was $4.2 million, of which $0.6 million was capita alizing eligible portions of employee compensation. alized consistent with the Company’s policies for capita alized consistent with the Company’s policies for capita alized consistent with the Company’s policies for capita The remaining compensation expense to be recognized with respect to the non-vested RPSUs at December 31, 2021 was approximately $6.3 million and is expected to be recognized over a weighted average remaining vesting period of 1.5 yyears. The Company issued 82,513 common shares on February 1, 2021 in settlement of RPSUs that had been awarded on February 28, 2018 (with a three-year measurement period ended December 31, 2020). Holders of these RPSUs also received a cash dividend of $0.19 per share for these common shares on January 20, 2021. F-49 p y Employeeo Share Purchase Plan The Parent Company’s shareholders approved the 2007 Non-Qualified Employee Share Purchase Plan (the “ESPP”), which is intended to provide eligible employees with a convenient means to purchase common shares of the Parent Company through payroll deductions and voluntary cash purchases at an amount equal to 85% of the average closing price per share for a specified period. Under the plan document, the maximum participant contribution for the 2021 plan year is limited to the lesser of 20% of compensation or $50,000. The ESPP allows the Parent Company to make open market purchases, which reflects all purchases made under the plan to date. In addition, the number of shares separately reserved for issuance under the ESPP is 1.25 million. Employees made purchases under the ESPP of $0.6 million during the year ended December 31, 2021, $0.4 million during the year ended December 31, 2020 and $0.5 million during the year ended December 31, 2019. The Company recognized $0.1 million of compensation expense related to the ESPP during each of the years ended December 31, 2021, 2020, and 2019. Compensation expense represents the 15% discount on the purchase price. The Board of Trustees of the Parent Company may terminate the ESPP at its sole discretion at any time. d p Defee rred Compe CC f nsation ff In January 2005, the Parent Company adopted a Deferre d Compensation Plan (the “Plan”) that allows trustees and certain key employees to defer compensation voluntarily. Compensation expense is recorded for the deferred compensation and a related liability is recognized. Participants may elect designated benchmark investment options for the notional investment of their deferred compensation. The deferred compensation obligation is adjusted forff deemed income or loss related to the investments selected. At the time the participants defer compensation, the Company records a liabia lity, which is included in the Company’s consolidated balance sheets. The liability is adjusted for changes in the market value of the participant- selected investments at the end of each accounting period, and the impact of adjusting the liability is recorded as an increase or decrease to compensation cost. The Company has purchased mutual source for the Company’s obligations under the Plan. Participants in the Plan have no interest in any assets set aside by the Company to meet its obligations under the Plan. For each of the years ended December 31, 2021, December 31, 2020 and December 31, 2019, the Company recorded a nominal amount of deferred compensation costs, net of investments in the company-owned policies and mutual funds which can be utilized as a funding funds. ff t t Participants in the Plan may elect to have all, or a portion of their deferred compensation invested in the Company’s common shares. The Company holds these shares in a rabbi trust, which is subject to the claims of the Company’s creditors in the event of the Company’s bankruptcy or insolvency. The Plan does not permit diversification of a participant’s deferral allocated to the Company common shares and deferrals allocated to Company common shares can only be settled with a fixed number of shares. In accordance with the accounting standard for deferred compensation arrangements where amounts earned are held in a rabbi trust and invested, the deferred compensation obligation associated with the Company’s common shares is classified as a component of shareholder’s equity and the related shares are treated as shares to be issued and are included in total shares outstanding. At both December 31, 2021 and 2020, 1.2 million of such shares were included in total shares outstanding, respectively. Subsequent changes in the fair value of the common shares are not reflected in operations or shareholders’ equity of the Company. F-50 16. DISTRIBUTIONS The following tablea provides the tax characteristics of the 2021, 2020 and 2019 distributions paid: Years ended December 31, 2019 2020 2021 (in thousands, except per share amounts) Common Share Distributions: Ordinary income ...................................................................................... $ al gain .............................................................................................. Capita Non-taxablea distributions......................................................................... Distributions per share ............................................................................. $ Percentage classified as ordinary income ................................................ Percentage classified as capital gain ........................................................ Percentage classified as non-taxable distribution .................................... $ $ 0.64 0.01 0.11 0.76 83.90 % 1.20 % 14.90 % $ $ 0.41 0.35 — 0.76 53.90 % 46.10 % — % 0.62 — 0.14 0.76 81.00 % — % 19.00 % 17. INCOME TAXES AND TAX CREDIT TRANSACT RR IONS Income TaxTT Provision/Benefie tf ff tax consequences attributablea al loss and tax credit carryforwards. income taxes using the asset and liability method. Under this method, deferred tax assets and The Company accounts forff s between the financial liabilities are recognized for the estimated future net operating loss, statement carrying amounts of existing assets and liabilities and their respective income tax bases, and forff capita The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the year in which those temporary differences are expected to be realized or settled. The effect on the deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. to the difference rr ff As of December 31, 2021 and 2020 there were no deferred tax assets included within “Other assets” in the consolidated balance sheets. The Company had no accrual r s forff tax uncertainties as of December 31, 2021 and December 31, 2020. For the year ended December 31, 2021, there was no deferred income tax expense and nominal current income tax expense. For the year ended December 31, 2020, there was no deferred income tax expense and $0.2 million of current income tax benefit. For the year ended December 31, 2019, there was $0.1 million of deferred income tax expense and $0.1 million of current income tax benefit.ff These amounts are included in “Income tax (provision) benefit” in the consolidated statements of operations. F-51 ) 18. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ( The following tablea the Operating Partnership as of and for the three years ended December 31, 2021 (in thousands): details the components of accumulated other comprehensive income (loss) of the Parent Company and CC Parent Company Balance at January 1rr , 2019 ........................................................................................................................ $ Change in fair market value during year................................................................................................. Allocation of unrealized (gains)/losses on derivative financial instruments to noncontrolling interests ................................................................................................................................................... Amortization of interest rate contracts reclassified from comprehensive income to interest expense ... Balance at December 31, 2019 .................................................................................................................. $ Change in fair market value during year................................................................................................. Allocation of unrealized (gains)/losses on derivative financial instruments to noncontrolling interests ................................................................................................................................................... comprehensive income to interest expense ... Amortization of interest rate contracts reclassified fromff Balance at December 31, 2020 .................................................................................................................. $ Change in fair market value during year................................................................................................. Allocation of unrealized (gains)/losses on derivative financial instruments to noncontrolling interests ................................................................................................................................................... comprehensive income to interest expense ... Amortization of interest rate contracts reclassified fromff Balance at December 31, 2021 .................................................................................................................. $ Cash Flow Hedges 5,029 (8,210) 41 770 (2,370) (5,972) 29 752 (7,561) 4,817 (28) 752 (2,020) Partnershipii Operatingii Balance at January 1, 2019 ........................................................................................................................ $ Change in fair market value during year................................................................................................. comprehensive income to interest expense ... Amortization of interest rate contracts reclassified fromff Balance at December 31, 2019 .................................................................................................................. $ Change in fair market value during year................................................................................................. comprehensive income to interest expense ... Amortization of interest rate contracts reclassified fromff Balance at December 31, 2020 .................................................................................................................. $ Change in fair market value during year................................................................................................. comprehensive income to interest expense ... Amortization of interest rate contracts reclassified fromff Balance at December 31, 2021 .................................................................................................................. $ Cash Flow Hedges 4,725 (8,210) 770 (2,715) (5,972) 752 (7,935) 4,817 752 (2,366) Over time, the unrealized gains and losses held in Accumulated Other Comprehensive Income (“AOCI”) will be reclassified to interest expense when the related hedged items are recognized in earnings. The current balance held in AOCI is expected to be reclassified to interest expense for realized losses on forecasted debt transactions over the related term of the debt obligation, as applicablea . The Company expects to reclassify $0.6 million from AOCI into interest expense within the next twelve months. 19. SEGMENT INFORMATION As of December 31, 2021, the Company owns and manages properties within fiveff segments: (1) Philadelphia Central Business District ("Philadelphia CBD"), (2) Pennsylvania Suburbs, (3) Austin, Texas (4) Metropolitan Washington, D.C. and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia, Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Metropolitan Washington, D.C. segment includes properties in the District of Columbia, Northern Virginia and Southern Maryland. The Other segment includes properties located in Camden County, New Jersey and New Castle County, Delaware. In addition to the five cash and investment management, development of certain real estate segments, the corporate group is responsible forff properties during development and the construction period, and certain other general support functions. Land held forff construction in progress is transferred to operating properties by region upon completion of the associated construction or project. d F-52 lowing tablea s provide selected asset information and results of operations of the Company’s reportable segments (in The folff thousands): Real estate investments, at cost: Philadelphia CBD ..................................................................................................................... Pennsylvania Suburbs ............................................................................................................... Austin, Texas ............................................................................................................................ Metropolitan Washington, D.C................................................................................................. Other ......................................................................................................................................... Operating Properties ......................................................................................................... December 31, 2021 1,460,510 $ 866,223 778,145 280,921 86,803 3,472,602 $ December 31, 2020 1,433,927 $ 871,530 728,741 352,794 87,117 3,474,109 $ Corporate Right of use asset - operating leases, net ............................................................................. Construction-in-progress...................................................................................................... Land held for development .................................................................................................. development, net............................................. Prepaid leasehold interests in land held forff $ $ $ $ 20,313 277,237 114,604 27,762 $ $ $ $ 20,977 210,311 117,984 39,185 . Net operating income: Total revenue 2021 Operating expenses (a) Net operating income Year Ended December 31, 2020 Operating expenses (a) Total revenue Net operating income (loss) Total revenue 2019 Operating expenses (a) Net operating income (loss) Philadelphia CBD .............. Pennsylvania Suburbs........ Austin, Texas ..................... Metropolitan Washington, D.C..................................... Other .................................. Corporate ........................... Operating properties ...... $207,858 124,566 101,680 $ (73,695) $134,163 84,555 62,306 (40,011) (39,374) $232,028 141,613 102,982 $ (82,505) $149,523 95,332 63,223 (46,281) (39,759) $263,769 141,084 104,157 $(100,219) $163,550 93,666 65,872 (47,418) (38,285) 19,865 14,015 18,835 $486,819 (15,386) (9,840) (10,005) 4,479 4,175 8,830 $(188,311) $298,508 40,223 13,469 4,537 $534,852 (20,791) (9,815) (6,305) 19,432 3,654 (1,768) $(205,456) $329,396 51,498 14,558 5,351 $580,417 (23,455) (9,328) (7,141) 28,043 5,230 (1,790) $(225,846) $354,571 (a) Includes property operating expense, real estate taxes and third party management expense. Unconsolidated real estate ventures: Philadelphia CBD ............................ Metropolitan Washington, D.C........ Mid-Atlantic Office JV .................... MAP Venture ................................... Other ................................................ Total ............................................ Investment in real estate ventures, at equity As of December 31, 2021 317,959 $ 85,867 31,680 (24,396) — 411,110 $ December 31, 2020 268,562 $ 99,769 32,996 (11,516) — 389,811 $ $ $ Equity in income (loss) of real estate venture Year ended December 31, 2020 2021 2019 (15,191) $ (3,755) 932 (8,683) — (26,697) $ (9,090) $ (3,019) 96 (6,571) — (18,584) $ 328 (4,234) — (6,102) 86 (9,922) Net operating income (“NOI”) is a non-GAAP financial measure, which we definff e as total revenue less property operating expenses, real estate taxes, and third party management expenses. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance and management fees. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards and professional fees that are incurred as part of corporate office management. NOI presented by the Company may not be comparablea to NOI reported by other companies that define NOI differently. NOI is the primary measure that is used by the Company's management to evaluate the operating performance of the Company's real estate assets by segment. The Company believes NOI provides useful information to investors regarding the financial condition and results of operations because it reflects only those F-53 income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairment losses, depreciation and amortization costs, capita al expenditures and leasing costs. The Company believes that net income (loss), as defined by GAAP, is the most appropriate earnings measure. The following is a reconciliation of consolidated net income (loss), as defined by GAAP, to consolidated NOI, (in thousands): Net income.................................................................................................. $ Plus: Interest expense........................................................................................ ncing costs .................... Interest expense - amortization of deferred finaff Depreciation and amortization................................................................. General and administrative expenses....................................................... Equity in loss of unconsolidated real estate ventures .............................. Less: Interest and investment income ............................................................... Income tax (provision) benefit................................................................. Net gain on disposition of real estate....................................................... Net gain on sale of undepreciated real estate........................................... Net gain on real estate venture transactions............................................. Consolidated net operating income ............................................................ $ 20. COMMITMENTS AND CONTINGENCIES g Legal e g Proceedings Year Ended December 31, 2020 2019 2021 12,366 $ 307,326 $ 34,529 62,617 2,836 178,105 30,153 26,697 8,295 (47) 142 2,903 2,973 298,508 $ 73,911 2,904 188,283 30,288 18,584 1,939 224 289,461 201 75 329,396 $ 81,512 2,768 210,005 32,156 9,922 2,318 (12) 356 2,020 11,639 354,571 The Company is involved from time to time in litigation on various matters, including disputes with tenants, disputes with vendors, employee disputes and disputes arising out of agreements to purchase or sell properties or joint ventures or disputes of the Company’s business activities, these lawsuits are considered routine relating to state and local taxes. Given the naturet of litigation, to the conduct of its business. The result of any particular lawsuit cannot be predicted, because of the very naturet specific legal sh reserves forff the litigation process and its adversarial nature, proceedings when it determines that the likelihood of an unfavorablea outcome is probable and when the amount of loss is . The Company does not expect that the liabilities, if any, that may ultimately result from such legal reasonably estimablea actions will have a material adverse effect on the consolidated finaff ncial position, results of operations or cash flows of the Company. and the jury system. The Company will establia t t Environmental ral, state, and local governments. As an owner of real estate, the Company is subject to various environmental laws of fede The Company’s compliance with existing laws has not had a material adverse effect on its financial condition and results of operations, and the Company does not believe it will have a material adverse effect in the future. However, the Company cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on its current Properties or on properties that the Company may acquire. ff VV Fair Value f of Contingent Consideration g On April 2, 2015, the Company purchased 618 Market Street in Philadelphia, Pennsylvania. The allocated purchase price included contingent consideration of $2.0 million payablea to the seller upon commencement of development. The liability was recorded at a faiff r value of $1.6 million and has fully accreted through interest expense to $2.0 million as of December 31, 2021. The fair value of this contingent consideration was determined using a probability weighted discounted cash flow model based on the period until development was originally expected to commence. The significant inputs to the discounted F-54 cash flowff determined the inputs used to value this liabia lity fall within Level 3 forff model were the discount rate and weighted probability scenarios. As the inputs were unobservable, the Company fair value reporting. Debt Guarantees As of December 31, 2021, the Company's unconsolidated real estate ventures had aggregate indebtedness of $961.5 million. These loans are generally mortgage or construction loans, most of which are nonrecourse to the Company, except for customary recourse carve-outs. In addition, during construction undertaken by the unconsolidated real estate ventures, including the 3025 JFK Venture, the Company has provided, and expects to continue to provide, cost overrun and completion indemnities and guarantees of customary exceptions to nonrecourse guarantees, as well as customary e provisions in loan agreements. In the agreement with its partner in the 3025 JFK Venture, the Company agreed to provide cost overrun and completion guaranties for the project under development. With respect to the construction loan obtained by 3025 JFK Venture on July 23, 2021, the Company has also provided a carry guarantee and limited payment guarantee up tu o 25% of the principal balance of the $186.7 million construction loan. nvironmental rr Impact of Natural Disasters arr p f y nd Casualty The Company carries liabia lity insurance to mitigate its exposure to certain losses, including those relating to property damage. The Company records the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable fromff the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the amount of the losses is considered a gain contingency and is not recorded until the proceeds are received. In February 2021, one of the Company's properties in Austin, Texas sustained damage from the winter storms and resulting power grid failures. As a result of the damage, during the year ended December 31, 2021, the Company recorded a fixeff d asset write-off totaling $1.2 million. During the year ended December 31, 2021, the Company has recorded an estimated and accrued expenses on the $7.2 million of restoration costs, of which $1.9 million is included in Accounts payablea consolidated balance sheets as of December 31, 2021. The Company has also sustained business interruption loss of $3.9 million related to unpaid rent, which is also fully covered under the insurance policy. During the year ended December 31, 2021, the Company has received $15.3 million of insurance proceeds, resulting in full recovery of the costs incurred to date. The $3.0 million of insurance proceeds received in excess of the fixed asset write-off, total business interruption, and total estimated restoration cost during the year ended December 31, 2021 is included in Other income on the consolidated statement of operations. Other Commitments ott g r ConCC tingencies agreements, the joint venturt e partner is not required to fund project Under the terms of each of the One Uptown joint venturet construction loans. In the event that the Company does not close on the applicablea costs until the closing of the applicablea construction loan forff each of the joint venturt es by June 30, 2022, the joint venturt e partner could elect to assign its interest in the project to the Company and have no obligation to fund the project costs. In addition, the Company has provided cost overrun and completion guarantees, as well as customary environmental indemnities, forff each of the One Uptown joint t ventures . See Note 3, ''Real Estate Investments” for further information regarding the One Uptown joint ventures. In connection with the Schuylkill Yards Project, the Company entered into a neighborhood engagement program and, as of December 31, 2021, had $7.0 million of future fixed contractual obligations. The Company also committed to fund additional contributions under the program. As of December 31, 2021, the Company estimates that these additional contributions, which are not fixed under the terms of agreement, will be $2.4 million. t In connection with the formation of the Commerce Square Venture, the Company has committed to investing an additional $20.0 million of preferred equity in the properties on a pari passu basis with its joint venturet partner of which $2.1 million has been contributed by the Company as of December 31, 2021. The Rubenstein Company (which the As part of the Company’s September 2004 acquisition of a portfolio of properties fromff Company refers to as the “TRC acquisition”), the Company acquired its interest in Two Logan Square, a 708,844 square foot office building in Philadelphia, Pennsylvania primarily through its ownership of a second and third mortgage secured by this property. This property is consolidated, as the borrower is a variable interest entity and the Company, through its ownership of the second and third mortgages, is the primary beneficiary. On October 21, 2020, the Company also acquired the F-55 $79.8 million first mortgage on the property fromff the third-party mortgage lender pursuant to an agreement with certain of the former owners. Under the agreement, the Company has agreed to not take title to Two Logan until the earlier of June 2026 or the occurrence of certain events related to the ownership interests of certain former owners. If the Company were to sell the restricted property before the expiration of the restricted period in a non-exempt transaction, the Company may be required to make significant payments to certain of the former owners of Two Logan Square on account of tax liabia lities attributed to them. Additionally, the Company will be required to pay these certain former owners an amount estimated at approximately $0.6 million to redeem their residual interest in the fee owner of this property. The $0.6 million payment is included within "Other liabilities" on the consolidated balance sheets. al expenditures in the ordinary course of business to maintain The Company invests in its properties and regularly incurs capita the properties. The Company believes that such expenditures enhance its competitiveness. The Company also enters into construction, utility and service contracts in the ordinary course of business which may extend beyond one year. These contracts typically provide for cancellation with insignificant or no cancellation penalties. t F-56 Brandywine Realty Trust r and Brandywine Operating Partnership, L.P. Schedule II Valuation and Qualifyiff ng Accounts (in thousands) Description Allowance forff doubtful accounts: Balance at Beginning of Year Additions Deductions (1) Balance at End of Year December 31, 2021 ...................................................... $ December 31, 2020 ...................................................... $ December 31, 2019 ...................................................... $ 5,086 7,975 12,919 $ $ $ — $ — $ — $ 953 2,889 4,944 $ $ $ 4,133 5,086 7,975 (1) Deductions represent amounts that the Company had fully reserved for in prior years and were subsequently deemed uncollectible. Deductions also represent reversals of the accrued rent receivable allowance as a result of the Company's ongoing assessment of its general accrued rent receivable reserve. F-57 . . 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A t s r i F 0 0 0 1 a i s s u r P f O g n i K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A t s r i F 0 6 0 1 a i s s u r P f O g n i K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) d ( e v i r D r e t n e C s s e n i s u B m o d e e r F 0 3 6 a i s s u r P f O g n i K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A t s r i F 0 2 0 1 a i s s u r P f O g n i K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A t s r i F 0 4 0 1 a i s s u r P f O g n i K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) d ( e v i r D r e t n e C s s e n i s u B m o d e e r F 0 1 6 a i s s u r P f O g n i K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A k r a P 0 5 6 a i s s u r P f O g n i K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A k r a P 0 0 6 a i s s u r P f O g n i K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A t s r i F 3 3 9 a i s s u r P f O g n i K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d a o R h p l u G h t r o N 0 0 5 n o v e D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A r e t s a c n a L t s e W 6 2 4 g n i t e e M h t u o m y l P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d a o R h t u o m y l P 1 0 4 g n i t e e M h t u o m y l P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) d a o R l a c i m e h C 0 0 0 4 ( x e l p o r t e M g n i t e e M h t u o m y l P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e k i P n w o t n a m r e G t s e W 0 1 6 g n i t e e M h t u o m y l P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e k i P n w o t n a m r e G t s e W 0 0 6 g n i t e e M h t u o m y l P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e k i P n w o t n a m r e G t s e W 0 3 6 g n i t e e M h t u o m y l P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e k i P n w o t n a m r e G t s e W 0 2 6 g n i t e e M h t u o m y l P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e k i P n w o t n a m r e G t s e W 0 6 6 g n i t e e M h t u o m y l P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d a o R h t u o m y l P 1 5 3 r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d a o R r e t s e h C r o n d a R 0 5 1 r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . r e t n e C e t a r o p r o C r o n d a R e n O r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d a o R a i s s u r P f o g n i K 1 0 2 r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A r e t s a c n a L 5 5 5 r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . r e t n e C e t a r o p r rr o C r o n d a R r u o F r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . r e t n e C e t a r o p r o C r o n d a R e v i F r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . r e t n e C e t a r o p r o C r o n d a R e e r h T r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . r e t n e C e t a r o p r o C r o n d a R o w T r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d a o R r e t s e h C r o n d a R 0 3 1 r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d a o R r e t s e h C r o n d a R 0 7 1 r o n d a R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d a o R r e t s e h C r o n d a R 0 0 2 n e k c o h o h s n o C . W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t e e r t S m E l t s e W 1 0 1 n e k c o h o h s n o C . W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t e e r t S m E l t s e W 1 n e k c o h o h s n o C . W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) e v i r D r o b r a H r r a B 0 0 2 ( e g d i r B r e w o T r u o F e l b a a i c e r p e D r a e Y f o r a e Y e f i L d e r i u q c A n o i t c u r t s n o C d e t a l u m u c c A n o i t a i c e r p e D r e b m e c e D t a ) b ( 1 2 0 2 , 1 3 ) a ( l a t o T & g n i d l i u B s t n e m e v o r p m I d n a L t e N s t n e m e v o r p m I ) s t n e m e r i t e R ( e c n i S n o i t i s i u q c A & g n i d l i u B s t n e m e v o r p m I d n a L e t a t S y t i C 1 2 0 2 , 1 3 r e b m e c e D d e i r r a C h c i h W t n u o m A s s o r G t s o C l a i t i n I D B C A I H P L E D A L I H P e m a N y t r e p o r P ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( / A N ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( ) c ( / A N 0 1 0 2 4 0 0 2 4 0 0 2 / A N 2 1 0 2 1 1 0 2 5 1 0 2 / A N 5 1 0 2 0 2 0 2 7 1 0 2 7 1 0 2 8 1 0 2 6 0 0 2 6 0 0 2 6 0 0 2 6 0 0 2 / A N 5 1 0 2 5 1 0 2 5 1 0 2 5 1 0 2 5 1 0 2 5 1 0 2 5 1 0 2 5 1 0 2 3 1 0 2 8 1 0 2 8 1 0 2 8 1 0 2 8 1 0 2 5 0 0 2 0 9 9 1 8 9 9 1 8 8 9 1 0 1 0 2 1 8 9 1 9 5 9 1 6 6 9 1 6 1 0 2 / A N 2 2 9 1 7 3 9 1 3 5 9 1 / A N 1 8 9 1 9 9 9 1 0 8 9 1 4 8 9 1 1 2 0 2 1 9 9 1 1 9 9 1 1 9 9 1 1 9 9 1 1 9 9 1 1 9 9 1 1 9 9 1 1 9 9 1 9 1 0 2 9 9 9 1 0 0 0 2 1 0 0 2 1 0 0 2 5 6 7 , 7 6 6 3 1 , 4 5 3 7 3 , 5 6 4 5 0 , 6 5 0 8 0 , 5 2 2 4 1 , 5 2 0 0 8 , 2 1 1 2 8 , 6 3 0 8 , 0 7 8 5 8 , 1 7 7 1 4 0 5 4 2 8 2 9 , 7 6 1 8 , 7 1 3 8 0 , 1 3 8 9 5 , 3 1 2 3 3 , 4 1 1 9 4 2 6 0 , 6 2 5 2 , 5 0 6 5 , 5 3 0 2 , 4 0 7 9 , 5 8 0 8 , 8 2 5 4 , 2 9 8 2 , 6 2 6 0 , 5 7 9 6 , 4 0 9 3 , 5 5 6 8 , 3 4 4 0 , 5 3 4 1 , 6 8 1 0 8 1 , 3 8 1 5 6 8 , 3 4 1 6 1 1 , 3 4 1 3 9 8 , 2 0 1 4 1 8 , 6 8 8 6 1 , 9 2 2 4 3 , 4 2 7 5 5 , 3 7 1 5 8 9 , 7 5 1 2 9 3 , 9 2 1 0 5 0 , 7 2 1 6 6 1 , 6 9 6 4 0 , 9 7 8 6 1 , 9 2 7 7 9 , 0 1 7 8 7 , 9 0 4 7 8 7 , 9 0 4 7 2 1 , 5 2 1 3 7 , 9 8 6 2 , 8 4 6 7 9 , 7 6 1 1 1 7 7 3 , 7 4 5 1 7 , 1 4 1 0 3 0 , 0 5 6 7 7 , 1 4 2 3 1 , 7 4 1 6 4 , 6 2 0 1 5 , 0 2 6 2 5 , 4 2 7 5 3 , 8 1 7 4 0 , 6 2 2 1 6 , 2 3 3 4 3 , 0 1 9 2 8 , 9 1 2 6 4 , 1 4 7 8 5 , 3 6 1 7 1 , 8 6 4 8 2 , 8 5 2 0 4 , 4 7 3 7 2 , 6 1 6 0 , 6 1 1 1 4 4 3 , 9 2 6 7 9 , 7 6 7 7 3 , 7 4 0 3 9 , 2 2 1 8 2 9 , 1 4 9 7 3 , 7 3 2 3 1 , 7 4 6 0 7 , 2 2 8 7 7 , 7 1 8 3 8 , 0 2 3 4 7 , 5 1 8 5 3 , 2 2 6 3 9 , 9 2 3 4 9 , 8 9 2 8 , 9 1 1 2 3 , 0 4 2 9 0 , 3 5 3 2 3 , 7 5 1 1 9 , 7 4 2 0 1 , 1 6 6 8 5 , 2 1 5 9 1 , 5 2 3 7 4 , 4 1 6 6 0 , 6 1 — 7 2 7 , 6 8 6 7 , 7 — 5 6 3 , 3 1 4 5 8 , 8 1 0 7 6 , 3 4 2 9 , 8 1 — — — 2 0 1 , 8 7 9 3 , 4 5 8 7 , 8 1 — 5 5 7 , 3 2 3 7 , 2 8 8 6 , 3 4 1 6 , 2 9 8 6 , 3 6 7 6 , 2 0 0 4 , 1 — 1 4 1 , 1 5 9 4 , 0 1 8 4 8 , 0 1 3 7 3 , 0 1 0 0 3 , 3 1 ) 7 2 4 , 2 2 ( 2 9 9 , 4 8 3 3 6 , 1 2 5 9 7 , 6 2 5 8 8 , 6 2 3 8 7 , 1 6 1 5 7 , 7 6 8 1 , 5 3 9 4 , 9 0 0 3 , 6 8 1 1 1 4 6 2 , 6 1 9 9 5 , 3 4 6 5 9 , 9 0 4 7 , 5 2 4 1 1 , 8 5 7 5 , 6 — 4 3 7 4 , 1 ) 0 1 5 , 1 ( 3 4 4 6 9 , 3 1 1 2 5 , 1 3 2 2 3 , 0 4 1 2 4 , 5 4 5 4 , 3 6 8 2 0 6 0 , 4 0 7 5 , 8 0 2 8 8 1 , 8 9 6 3 7 , 7 0 1 5 5 2 , 0 0 1 8 0 0 , 6 7 3 6 2 , 7 1 7 1 4 , 1 2 1 9 7 , 5 4 9 2 , 0 0 4 — 1 6 0 , 6 0 8 0 , 3 1 7 7 3 , 4 2 — 1 2 4 , 7 3 8 3 5 , 7 9 4 6 9 , 3 3 5 8 8 , 0 3 2 3 1 , 7 4 2 0 7 , 2 2 5 0 3 , 6 1 8 4 3 , 2 2 0 4 7 , 5 1 4 5 3 , 2 2 2 7 9 , 5 1 2 2 4 , 7 6 2 8 , 9 1 — 0 7 6 , 7 4 8 6 8 , 3 5 4 2 6 , 7 4 1 4 0 , 7 5 — — 6 9 4 , 4 1 6 6 0 , 6 1 — — 8 6 7 , 7 — 5 6 3 , 3 1 7 2 8 , 8 1 2 6 6 , 3 4 2 9 , 8 1 — — — 7 3 4 , 8 1 2 5 9 , 7 6 1 3 , 4 — 5 5 7 , 3 2 3 7 , 2 8 8 6 , 3 4 1 6 , 2 9 8 6 , 3 6 7 6 , 2 0 0 4 , 1 — 0 4 1 , 1 6 9 4 , 0 1 9 4 8 , 0 1 4 7 3 , 0 1 1 0 3 , 3 1 A P A P A P A P A P A P A P A P A P A P A P A P A P A P D M A V A V A V X T X T X T X T X T X T X T X T X T X T X T X T X T X T a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) t e e r t S h c r A 9 2 9 2 ( e r t n e C a r i C a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) t e e r t S h c r A 7 1 7 1 ( e r a u q S n a g o L e e r h T a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) t e e r t S h t 8 1 h t r o N 0 3 1 ( e r a u q S n a g o L e n O a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) t e e r t S h t 8 1 h t r o N 0 0 1 ( e r a u q S n a g o L o w T a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . ) d ( ) t e e r t S h t 0 3 h t u o S 9 2 1 ( e g a r a G h t u o S e r t n e C a r i C a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t e e r t S t e k r a M 0 0 9 1 a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t e e r t S t e k r a M 0 2 0 3 a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t e e r t S t e k r a M 4 3 6 - 8 1 6 a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . ) t e e r t S t u n l a W 9 2 9 2 ( h t u o S e r t n e C a r i C t a r e w o T C M F a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t e e r t S t e k r a M 0 0 1 2 a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t e e r t S e c a R 1 1 - 5 0 5 1 a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) e ( t e e r t S t e k r a M 0 0 0 3 a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) e ( ) t e e r t S t e k r a M 5 2 0 3 ( g n i d l i u B n i t e l l u B e h T a i h p l e d a l i h P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) f ( d r a v e l u o B K F J 3 0 0 3 - 1 0 0 3 a d s e h t e B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e v i r D e g d e l k c o R 0 0 6 6 n a e L c M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e v i r D l a n o i t a n r e t n I 6 7 6 1 n a e L c M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e v i r D o r o b s n e e r G 0 6 2 8 a n n e i V . . . . . . . . . . . . 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C D . , N O T G N I H S A W N A T I L O P O R T E M X T , N I T S U A n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) g ( t e e r t S o d a r o l o C 5 0 4 - 1 0 4 n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 g n i d l i u B n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 g n i d l i u B n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 g n i d l i u B n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 g n i d l i u B n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 g n i d l i u B n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 g n i d l i u B n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 g n i d l i u B - - - - - - - d a o R t e n r u B 1 0 5 1 1 d a o R t e n r u B 1 0 5 1 1 d a o R t e n r u B 1 0 5 1 1 d a o R t e n r u B 1 0 5 1 1 d a o R t e n r u B 1 0 5 1 1 d a o R t e n r u B 1 0 5 1 1 d a o R t e n r u B 1 0 5 1 1 n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e g a r a G g n i k r a P - d a o R t e n r u B 1 0 5 1 1 n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) e v i r D s t n i o P r u o F 0 2 1 1 1 ( 3 e r t n e C s t n i o P r u o F n i t s u A . . . . . . . . . . . . . . . . . . . . ) y a w s s e r p x E c a P o M h t u o S 1 0 5 1 ( y a w y k S n o t r a B e n O n i t s u A . . . . . . . . . . . . . . . . . . . ) y a w s s e r p x E c a P o M h t u o S 1 0 6 1 ( y a w y k S n o t r a B o w T n i t s u A . . . . . . . . . . . . . . . . . ) y a w s s e r p x E c a P o M h t u o S 1 2 2 1 ( y a w y k S n o t r a B e e r h T n i t s u A . . . . . . . . . . . . . . . . . . . ) y a w s s e r p x E c a P o M h t u o S 1 0 3 1 ( y a w y k S n o t r a B r u o F 9 5 - 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- - - - - - e c a l P r e v i R e c a l P r e v i R e c a l P r e v i R e c a l P r e v i R e c a l P r e v i R e c a l P r e v i R e c a l P r e v i R n i t s u A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ) y a w k r a P r e t n e C n o t e S 6 1 5 4 ( I I e k a L y r r a u Q R E H T O o r o b s b b i G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A r e t s o F 0 1 o r o b s b b i G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A r e t s o F 7 o r o b s b b i G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A r e t s o F 2 o r o b s b b i G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A r e t s o F 4 o r o b s b b i G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A r e t s o F 1 o r o b s b b i G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A . . S U 5 o r o b s b b i G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A r e t s o F 5 s e e h r o o V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 1 a z a l P - t e e r t S n i a M s e e h r o o V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a z z a i P - t e e r t S n i a M s e e h r o o V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e d a n e m o r P - t e e r t S n i a M n o t g n i m l i W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t e e r t S g n i K h t r o N 0 2 9 n o t g n i m l i W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e u n e v A e r a w a l e D 0 0 3 0 5 4 , 7 5 9 $ 2 0 6 , 2 7 4 , 3 $ 8 5 4 , 2 6 0 , 3 $ 4 4 1 , 0 1 4 $ 9 2 2 , 5 3 6 $ 2 6 3 , 2 7 4 , 2 $ 1 1 0 , 5 6 3 $ : l a t o T 0 6 - F (a) Reconciliation of Real Estate: The following table reconciles the real estate investments from January 1, 2019 to December 31, 2021 (in thousands): Balance at beginning of year ................................................................................................... $ 3,474,109 $ 4,006,459 $ 3,951,719 2021 2020 2019 Additions: Acquisitions ............................................................................................................................. Capital expenditures and assets placed into service ................................................................ Less: Dispositions/impairments/placed into redevelopment............................................................. Retirements .............................................................................................................................. Balance at end of year.............................................................................................................. Per consolidated balance sheet ................................................................................................ The aggregate cost for federal income tax purposes is $3.1 billion as of December 31, 2021. (b) Reconciliation of Accumulated Depreciation: — 134,931 (82,247) (54,191) 9,722 113,221 (619,086) (36,207) $ $ 3,472,602 3,472,602 $ $ 3,474,109 3,474,109 $ $ — 145,378 (50,792) (39,846) 4,006,459 4,006,459 The following table reconciles the accumulated depreciation on real estate investments from January 1, 2019 to December 31, 2021 (in thousands): Balance at beginning of year ................................................................................................... $ 896,561 $ 973,318 $ 885,407 2021 2020 2019 Additions: Depreciation expense............................................................................................................... 136,171 138,822 144,131 Less: Dispositions/impairments/placed into redevelopment............................................................. Retirements .............................................................................................................................. Balance at end of year.............................................................................................................. Per consolidated balance sheet ................................................................................................ $ $ (24,440) (50,842) 957,450 957,450 $ $ (182,526) (33,053) 896,561 896,561 $ $ (16,783) (39,437) 973,318 973,318 (c) Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease to 55 years. (d) Land value represents unamortized prepaid ground lease. (e) Reflects original construction date. Significant improvements were made to 3000 Market Street in 1988 and to The Bulletin Building in 2012. (f) Represent leasehold interests in land parcels acquired through prepaid 99-year ground leases. Development has not yet commenced on the parcel. Building and improvements represent costs related to parking operations. 401-405 Colorado Street partially placed into service in 2021. (g) F-61 [THIS PAGE INTENTIONALLY LEFT BLANK] BOARD OF TRUSTEES James C. Diggs Retired Senior Vice President and General Terri A Herubin Managing Director, Portfolio Charles P. Pizzi Retired President and Chief Executive Counsel, PPG Industries, Inc. Management, Greystar Officer, Tasty Baking Company (cid:132) Chair of Compensation Committee (cid:132) Member of Audit Committee (cid:132) Chair of Corporate (cid:132) Member of Audit Committee (cid:132) Member of Corporate Governance Governance Committee Reginald DesRoches Howard Hughes Provost, Rice University (cid:132) Member of the Corporate Governance (cid:132) Committee Gerard H. Sweeney President and Chief Executive Officer, Brandywine Realty Trust (cid:132) Chair of Executive Committee Committee Michael J. Joyce Retired New England Managing Partner, Deloitte & Touche USA LLP (cid:132) Chair of Board (cid:132) Member of Compensation Committee (cid:132) Member of Executive Committee H. Richard Haverstick, Jr. Retired Managing Partner, Ernst & Young LLP; Interim President of Thomas (cid:132) Member of Compensation Committee Jefferson University and CEO of (cid:132) Member of Executive Committee Jefferson Health (cid:132) Member of Audit Committee (cid:132) Chair of the Audit Committee (cid:132) Member of the Corporate Governance Committee CERTIFICATIONS INCOME TAX INFORMATION Shareholders who hold our common The Company’s Chief Executive Officer Each common shareholder should have shares in “street name” with a has submitted to the New York Stock received a Form 1099-DIV reflecting brokerage firm should direct their Exchange the annual certification the distributions paid or declared by inquiries to their broker or to our required by Section 303A.12(a) of the the Company. Distributions paid to investor relations department. NYSE Company Manual. In addition, shareholders in 2020 totaled $0.76 the Company has filed with the per share of which 53.9% per share Securities and Exchange Commission is taxable as an ordinary dividend and INVESTOR RELATIONS For information about our as exhibits to its Form 10-K for the 46.1% per share represented a capital Company or any other inquiries, fiscal year ended December 31, 2020, gain distribution. Additional information the certifications of its Chief Executive on the taxability of our distributions is please contact: Tom Wirth Officer and Chief Financial Officer available on our web site at required pursuant to Section 302 of www.brandywinerealty.com. Accounting and Investment Services (610) 325-5600 the Sarbanes-Oxley Act relating to the quality of its public disclosure. SHAREHOLDER INFORMATION INDEPENDENT REGISTERED Shareholders who hold our common ACCOUNTING FIRM DISTRIBUTION INFORMATION shares in certificate form should The Company is required to distribute direct any inquiries regarding share at least 90% of its taxable income transfers, address changes, lost to maintain its status as a real estate certificates, distributions (including investment trust. Total distributions inquiries regarding participation in PricewaterhouseCoopers LLP Two Commerce Square, Suite 1700 2001 Market Street Philadelphia, PA 19103-7042 paid in 2020 were $0.76 per common our Distribution Reinvestment and LEGAL COUNSEL share. Although the Company expects Share Purchase Plan) or account Troutman Pepper LLP to continue making distributions to consolidations to our transfer agent: 3000 Two Logan Square shareholders, there is no assurance of future distributions, as they are dependent upon earnings, cash flow, the financial condition of the Company and other factors. Computershare P.O. Box 30170 College Station, TX 77845-3170 Toll free: 1-888-985-2061 Outside the U.S.: 1-781-575-2724 www.computershare.com/investor Eighteenth & Arch Streets Philadelphia, PA 19103-2799 Brandywine Realty Trust (NYSE: BDN) is one of the largest, publicly-traded, full- ser vice, integrated real estate companies in the United States, with a core focus in the Philadelphia, PA, Austin, TX, and Washington, D.C. markets. Organized as a real estate investment trust (REIT), we own, develop, lease and manage an urban, town center and transit-oriented portfolio. Our purpose is to shape, connect and inspire the world around us through our expertise, the relationships we foster, the communities in which we live and work, and the history we build together. Our deep commitment to our communities was recognized by NAIOP when we were presented with the Developer of the Year Award—the highest honor in the commercial real estate industry. 866.426.5400 brandywinerealty.com Front cover, from top to bottom (L to R): 650 Park, King of Prussia, PA; 3025 JFK “The West Tower” groundbreaking, Philadelphia, PA; 405 Colorado, Austin, TX; 3025 JFK “The West Tower”, Philadelphia, PA; Brandywine employee and construction crew; Uptown ATX Block A, Austin, TX; lounge from Drexel Square at Schuylkill space at 1676 at Cira Green, Philadelphia, PA Yards, Philadelphia, PA; International Drive, McLean, VA; view of FMC Tower community programming team collaborating space; lab in Back cover, from top to bottom (L to R): 155 Radnor at Radnor Life Sciences Center, Radnor, PA; team working in lounge space; eco-porch at 3151 Market at Schuylkill Yards; people enjoying a yoga class on Cira Green

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