REIT Brandywine Eyes Metro DC Investments in 2014

2340 Dulles Corner Blvd in Herndon, VA

Brandywine Realty Trust‘s portfolio in the Washington, D.C. market posted positive absorption of 318,000 square feet to finish 2013 at 87.6 percent occupied and 89 percent leased, a 760 and 350 basis point improvement, respectively.

The company is now looking to increase its exposure in Washington, D.C. and expects additional investment activity in the market over the next twelve months, its executives told analysts during their quarterly conference call last week.

“During 2014, we expect additional investment activity in Washington, DC, Austin, Texas, Philadelphia CBD and several of our town center markets,” said Gerald Sweeney, the firm’s CEO. “We remain a net seller in New Jersey, Delaware, and Richmond, Virginia, as well as continuing our liquidation efforts in California.”

“We are raising our speculative revenue target by $1 million from $42 million to $43 million,” added George Johnstone, Senior Vice President of Operations. “This increase is entirely generated from our Metro DC region and is associated with recently executed leases not contemplated at the time of our original business plan.”

Regarding its leasing in the market, the company says it will be getting back 100,000 square feet from Northrop in Northern Virginia at the end of June. The executives said the firm has a capital program already under way at the building to help reintroduce it to the marketplace. The improvements include addressing the common areas, the lobbies, the restaurants, and the signage around the park.

“We’ve had a couple of very active tours and we have one proposal out on that space at this point,” said Johnstone.

In suburban Maryland, Lockheed moved out of its space since the close of the fourth quarter, giving back 137,000 square feet. The company says it has prospects ranging from 6,000 square feet to 106,000 square feet for that space.

“We’re kind of coming down to the final strokes on a number of those deals,” said Johnstone. “We still have some work to do but we feel good about being able to backfill that space. We’ve already back-filled about 40,000 square feet of the 78,000 square feet Lockheed gave us back in 2013 in the adjacent building and we’re looking for some good news out of the larger one.”

Regarding its Ballston development, which is a joint venture with John Shooshan and his company, the REIT says it continues to market that project for pre-lease.

“We haven’t really established a range of pre-leasing but certainly got to be in that 30% to 50% plus range,” said Sweeney. “But that market is very competitive. There are a couple of buildings that are near to being announced as construction starts up. I think the initial predicate that we went into that joint venture with still remains true. It’s a great piece of property, incredibly well located, right next to where there is going to be mall redevelopment – its part of a mixed use project. We’ll aggressively present that project to tenants in the market, and if we wind up getting one we’ll make a decision to go.”

SEE: Brandywine Realty Trust’s CEO Discusses Q4 2013 Results – Earnings Call Transcript