BRANDYWINE OPERATING PARTNERSHIP LP /PA - 10-Q Quarterly Report

12. EARNINGS PER COMMON PARTNERSHIP UNIT

The following table details the number of units and net income used to calculate basic and diluted earnings per common partnership unit (in thousands, except unit and per unit amounts):

	Three-month periods ended March 31,

	2005						2004

	Basic			Diluted			Basic			Diluted

Income from continuing operations	$	9,691		$	9,691		$	13,516		$	13,516
Income from discontinued operations		—			—			203			203
Income allocated to Preferred Units		(1,998	)		(1,998	)		(2,850	)		(2,850	)
Preferred unit redemption gain		—			—			4,500			4,500

Net income available to common partnership unitholders	$	7,693		$	7,693		$	15,369		$	15,369

Weighted-average common partnership units outstanding		57,743,873			57,743,873			45,774,045			45,774,045
Options and warrants		—			241,018			—			287,208

Total weighted-average partnership units outstanding		57,743,873			57,984,891			45,774,045			46,061,253

Earnings per Common Partnership Unit:
Continuing operations	$	0.13		$	0.13		$	0.34		$	0.33
Discontinued operations		—			—			—			—

	$	0.13		$	0.13		$	0.34		$	0.33

Securities (including Series A Preferred Mirror Units) totaling 1,339,286 as of March 31, 2004 were excluded from the earnings per common partnership unit computations for the three-month period ended March 31, 2004 because their effect would have been antidilutive. All of the Series A Preferred Mirror Units were redeemed by the Partnership in November 2004 and are no longer outstanding.

13. SEGMENT INFORMATION

The Partnership currently manages its portfolio within five segments: (1) Pennsylvania—West, (2) Pennsylvania—North, (3) New Jersey, (4) Urban and (5) Virginia. The Pennsylvania—West segment includes properties in Chester, Delaware and Montgomery counties in the Philadelphia suburbs of Pennsylvania. The Pennsylvania—North segment includes properties north of Philadelphia in Berks, Bucks, Cumberland, Dauphin, Lehigh and Montgomery counties. The New Jersey segment includes properties in Bucks County, Pennsylvania and counties in the southern part of New Jersey including Burlington, Camden and Mercer counties. The Urban segment includes properties in the City of Philadelphia, Pennsylvania and the state of Delaware. The Virginia segment includes properties primarily in Albemarle, Chesterfield and Henrico counties, the City of Richmond and Durham, North Carolina. Corporate is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions.

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BRANDYWINE REALTY TRUSTOPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

Segment information for the three-month periods ended March 31, 2005 and 2004 is as follows (in thousands):

	Pennsylvania — West		Pennsylvania — North		New Jersey		Urban		Virginia		Corporate		Total

As of March 31, 2005:
Real estate investments, at cost:
Operating properties	$	832,952	$	531,903	$	552,816	$	349,747	$	217,514	$	—	$	2,484,932
Construction-in-progress		13,847		31,101		11,967		5,862		1,883		107,925		172,585
Land held for development		16,304		28,127		14,965		5,647		7,960		1,048		74,051
As of December 31, 2004:
Real estate investments, at cost:
Operating properties	$	830,622	$	533,142	$	553,969	$	349,911	$	215,490	$	—	$	2,483,134
Construction-in-progress		13,140		24,591		10,994		3,581		3,789		88,921		145,016
Land held for development		9,820		27,964		14,585		516		7,959		673		61,517
For the three-months ended March 31, 2005:
Total revenue	$	29,708	$	19,470	$	25,265	$	15,956	$	7,203	$	1,322	$	98,924
Property operating expenses and real estate taxes		10,282		9,187		10,673		6,530		2,864		—		39,536

Net operating income	$	19,426	$	10,283	$	14,592	$	9,426	$	4,339	$	1,322	$	59,388

For the three-months ended March 31, 2004:
Total revenue	$	19,927	$	18,135	$	24,468	$	2,827	$	6,632	$	1,210	$	73,199
Property operating expenses and real estate taxes		6,178		8,569		9,381		1,912		2,991		—		29,031

Net operating income	$	13,749	$	9,566	$	15,087	$	915	$	3,641	$	1,210	$	44,168

Net operating income is defined as total revenue less property operating expenses and real estate taxes. Below is a reconciliation of consolidated net operating income to net income (in thousands):

	Three-month periods ended March 31,

	2005			2004

Consolidated net operating income	$	59,388		$	44,168
Less:
Interest income		780			511
Interest expense		(17,797	)		(12,104	)
Depreciation and amortization		(28,435	)		(15,804	)
Administrative expenses		(4,752	)		(3,489	)

Minority interest attributable to continuing operations		(51	)		—
Plus:
Equity in income of real estate ventures		558			234

Income from continuing operations		9,691			13,516
Income from discontinued operations		—			203

Net income	$	9,691		$	13,719

14. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Partnership is involved from time to time in litigation on various matters, including disputes with tenants and disputes arising out of agreements to purchase or sell properties. Given the nature of the Partnership’s business activities, these lawsuits are considered routine to the conduct of its business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

Environmental

As an owner of real estate, the Partnership is subject to various environmental laws of federal, state, and local governments. The Partnership’s compliance with existing laws has not had a material adverse effect on its financial condition and results of operations, and the Partnership does not believe it will have a material adverse effect in the future. However, the Partnership cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on its current Properties or on properties that the Partnership may acquire.

Other Commitments or Contingencies

As part of our TRC acquisition, the Partnership agreed to issue to the sellers up to a maximum of $9.7 million of Class A Units of the Partnership if certain of the acquired properties achieve at least 95% occupancy prior to September 21, 2007. At March 31, 2005, the maximum amount payable under this arrangement was $8.4 million.

As part of the TRC acquisition, the Partnership acquired an interest in Two Logan Square, a 696,477 square foot office building in Philadelphia, Pennsylvania, primarily through a second and third mortgage secured by this property pursuant to which the Partnership receives substantially all cash flows from the property. The Partnership currently does not expect to take title to Two Logan Square until, at the earliest, September 2019. In the event that the Partnership takes title to Two Logan Square upon a foreclosure of its mortgages, the Partnership has agreed to make a payment to an unaffiliated third party with a residual interest as a fee owner of this property. The amount of the payment would be $0.6 million if we must pay a state and local transfer upon taking title, or $2.9 million if no transfer tax is payable upon the transfer.

As part of the TRC acquisition and several of our other acquisitions, the Partnership has agreed not to sell the acquired properties. In the case of TRC, the Partnership agreed not to sell the acquired properties for periods ranging from three to 15 years from the acquisition date as follows: 201 Radnor Financial Center, 555 Radnor Financial Center and 300 Delaware Avenue (three years); One Rodney Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square and Radnor Corporate Center (15 years). The Partnership also owns 14 other properties that aggregate 1.0 million square feet and have agreed not to sell these properties for periods that expire through 2008. 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 Code or in other tax deferred transactions. In the event that the Partnership sells any of the properties within the applicable restricted period in non-exempt transactions, the Partnership has agreed to pay significant tax liabilities that would be incurred by the parties who sold the applicable property.

In 1998, we acquired a portfolio of properties from Donald E. Axinn and affiliates. Upon completion of our acquisition, Mr. Axinn joined the Company’s Board. The 1998 agreement provides for our acquisition in September 2005 of an approximately 141,724 square foot office building located at 101 Paragon Drive, Montvale, New Jersey for $11.0 million from an entity primarily owned and controlled by Mr. Axinn. The Partnership and Mr. Axinn are currently negotiating a modification of the 1998 agreement that would provide for the following: (i) Mr. Axinn would pay us $500,000; (ii) our obligation to fund $11.0 million to acquire 101 Paragon would be deferred for approximately five years and the amount of our obligation would be reduced to $5.5 million, with Mr. Axinn assuming responsibility to fund the remaining $5.5 million; and (iii) we and Mr. Axinn would share equally in any net cash flow and in any proceeds of a sale of 101 Paragon, and we would each be required to fund any operating expenses associated with ownership of 101 Paragon. Consummation of the modification is subject to several conditions, including preparation of customary documentation.

The Partnership invests in its Properties and regularly incurs capital expenditures in the ordinary course of business to maintain the Properties. The Partnership believes that such expenditures enhance the competitiveness of the Properties. The Partnership also enters into construction, utility and service contracts in the ordinary course of business which may extend beyond one year. These contracts include terms that provide for cancellation with insignificant or no cancellation penalties.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

15. CONDENSED CONSOLIDATING INFORMATION

During 2004, the Company and the Partnership filed a Registration Statement on Form S-3 (the “Registration Statement”) with the Securities and Exchange Commission to register: (i) common shares of beneficial interest, preferred shares of beneficial interest, depository shares and warrants of the Company; (ii) debt securities of the Partnership (“Debt Securities”); and (iii) full and unconditional guaranties of the Debt Securities by the Company and certain wholly-owned subsidiaries of the Partnership (the “Subsidiary Guarantors”). The Partnership has other subsidiaries (“Non-Guarantor Subsidiaries”) that are not Subsidiary Guarantors.

The following summaries the condensed consolidating financial information for the Partnership as of March 31, 2005 and December 31, 2004 and for the three-month periods ended March 31, 2005 and 2004:

CONSOLIDATING BALANCE SHEET

MARCH 31, 2005

(in 000’s)


	The Partnership		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated

ASSETS
Total real estate investments, net	$	916,806	$	472,362	$	1,002,691	$	—		$	2,391,859
Cash and cash equivalents		15,473		—		—		—			15,473
Escrowed cash		6,722		1,078		10,991		—			18,791
Accounts receivable, net		23,727		10,082		14,434		—			48,243
Marketable securities		615		—		—		—			615
Investment in real estate ventures, at equity		12,741		—		—		—			12,741
Investments in Subsidiaries, at equity		1,292,154		—		—		(1,292,154	)		—
Deferred costs, net		26,348		2,409		5,939		—			34,696
Intangible assets, net		4,145		1,174		85,685		—			91,004
Other assets		24,130		17,731		5,800		—			47,661

Total assets	$	2,322,861	$	504,836	$	1,125,540	$	(1,292,154	)	$	2,661,083

LIABILITIES AND PARNTERS’ EQUITY
Mortgage notes payable	$	232,618	$	13,221	$	267,490	$	—		$	513,329
Unsecured notes		636,485		—		—		—			636,485
Unsecured credit facility		200,000		—		—		—			200,000
Accounts payable and accrued expenses		31,640		6,708		5,662		—			44,010
Distributions payable		27,517		—		—		—			27,517
Tenant security deposits and deferred rents		12,375		1,926		5,329		—			19,630
Acquired below market leases, net		631		751		36,424		—			37,806
Other liabilities		654		—		711		—			1,365

Total liabilities		1,141,920		22,606		315,616		—			1,480,142
Redeemable limited partnership units		58,304		—		—		—			58,304
Total partners’ equity		1,122,637		482,230		809,924		(1,292,154	)		1,122,637

Total liabilities and partners’ equity	$	2,322,861	$	504,836	$	1,125,540	$	(1,292,154	)	$	2,661,083

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2004

(in 000’s)

	The Partnership		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated

ASSETS
Total Real estate investments, net	$	912,228	$	453,652	$	997,985	$	—		$	2,363,865
Cash and cash equivalents		15,346		—		—		—			15,346
Escrowed cash		6,501		1,113		10,366		—			17,980
Accounts receivable, net		21,908		9,321		13,411		—			44,640
Marketable securities		423		—		—		—			423
Investment in real estate ventures, at equity		12,754		—		—		—			12,754
Investments in Subsidiaries, at equity		1,260,560		—		—		(1,260,560	)		—
Deferred costs, net		27,170		2,460		4,819		—			34,449
Intangible assets, net		4,720		1,254		95,082		—			101,056
Other assets		21,259		18,211		4,001		—			43,471

Total assets	$	2,282,869	$	486,011	$	1,125,664	$	(1,260,560	)	$	2,633,984

LIABILITIES AND PARNTERS’ EQUITY
Mortgage notes payable	$	233,599	$	13,443	$	271,192	$	—		$	518,234
Unsecured notes		636,435		—		—		—			636,435
Unsecured credit facility		152,000		—		—		—			152,000
Accounts payable and accrued expenses		31,290		11,415		6,538		—			49,243
Distributions payable		27,363		—		—		—			27,363
Tenant security deposits and deferred rents		10,793		3,293		5,960		—			20,046
Acquired below market leases, net		706		766		37,799		—			39,271
Other liabilities		633		—		709		—			1,342

Total liabilities		1,092,819		28,917		322,198		—			1,443,934
Redeemable limited partnership units		60,586		—		—		—			60,586
Total partners’ equity		1,129,464		457,094		803,466		(1,260,560	)		1,129,464

Total liabilities and partners’ equity	$	2,282,869	$	486,011	$	1,125,664	$	(1,260,560	)	$	2,633,984

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTH PERIOD ENDED MARCH 31, 2005

(in 000’s)

	The Partnership			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Revenue:
Rents	$	36,959		$	12,760		$	31,509		$	—		$	81,228
Tenant reimbursements		5,156			2,753			4,173			—			12,082
Other		7,793			44			349			(2,572	)		5,614

Total revenue		49,908			15,557			36,031			(2,572	)		98,924
Operating Expenses:
Property operating expenses		14,113			5,715			12,623			(2,572	)		29,879
Real estate taxes		4,013			1,852			3,792			—			9,657
Depreciation and amortization		11,814			3,272			13,349			—			28,435
Administrative expenses		4,752			—			—			—			4,752

Total operating expenses		34,692			10,839			29,764			(2,572	)		72,723

Operating income		15,216			4,718			6,267			—			26,201
Other Income (Expense):
Interest income		196			403			181			—			780
Interest expense		(12,985	)		(250	)		(4,562	)		—			(17,797	)
Equity in income of real estate ventures		558			—			—			—			558
Equity in income of subsidiaries		6,757			—			—			(6,757	)		—
Net gains on sales of interests in real estate		—			—			—			—			—

Income before minority interest		9,742			4,871			1,886			(6,757	)		9,742
Minority interest		(51	)		—			—			—			(51	)

Income from continuing operations		9,691			4,871			1,886			(6,757	)		9,691

Net income	$	9,691		$	4,871		$	1,886		$	(6,757	)	$	9,691

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

CONSOLIDATING STATEMENT OF CASH FLOWS

THREE MONTH PERIOD ENDED MARCH 31, 2005

(in 000’s)

	The Partnership			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Cash flows from operating activities	$	21,061		$	21,981		$	15,163		$	(31,584	)	$	26,621
Cash flows from investing activities
Acquisition of properties		(5,131	)		—			(6,498	)		—			(11,629	)
Capital expenditures		(8,755	)		(21,622	)		(2,870	)		—			(33,247	)
Escrowed cash		(221	)		35			(625	)		—			(811	)
Leasing costs		(1,541	)		(172	)		(1,469	)		—			(3,182	)
Other, net		(4	)		—			—			—			(4	)

Net cash flow from investing activities		(15,652	)		(21,759	)		(11,462	)		—			(48,873	)
Cash flows from financing activities
Proceeds (repayments) of Credit Facilities, net		48,000			—			—			—			48,000
Repayments of mortgage notes payable		(982	)		(222	)		(3,701	)		—			(4,905	)
Exercise of stock options		7,120			—			—			—			7,120
Redemptions/repurchases of units		(239	)		—			—			—			(239	)
Distributions to preferred and common partnership units		(27,588	)		—			—			—			(27,588	)
Intercompany fundings and other, net		(31,584	)		—			—			31,584			—
Other, net		(9	)		—			—			—			(9	)

Net cash flow from financing activities		(5,282	)		(222	)		(3,701	)		31,584			22,379

Increase (decrease) in cash and cash equivalents		127			—			—			—			127
Cash and cash equivalents at beginning of period		15,346			—			—			—			15,346

Cash and cash equivalents at end of period	$	15,473		$	—		$	—		$	—		$	15,473

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTH PERIOD ENDED MARCH 31, 2004

(in 000’s)

	The Partnership			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Revenue:
Rents	$	36,197		$	12,561		$	14,922		$	—		$	63,680
Tenant reimbursements		3,713			2,616			1,664			—			7,993
Other		2,982			82			48			(1,586	)		1,526

Total revenue		42,892			15,259			16,634			(1,586	)		73,199
Operating Expenses:
Property operating expenses		12,875			5,471			5,390			(1,586	)		22,150
Real estate taxes		3,780			1,549			1,552			—			6,881
Depreciation and amortization		8,964			2,864			3,976			—			15,804
Administrative expenses		3,489			—			—			—			3,489

Total operating expenses		29,108			9,884			10,918			(1,586	)		48,324

Operating income		13,784			5,375			5,716			—			24,875
Other Income (Expense):
Interest income		120			384			7			—			511
Interest expense		(8,437	)		(240	)		(3,427	)		—			(12,104	)
Equity in income of real estate ventures		234			—			—			—			234
Equity in income of subsidiaries		8,208			—			—			(8,208	)		—
Net gains on sales of interests in real estate		—			—			—			—			—

Income before minority interest		13,909			5,519			2,296			(8,208	)		13,516
Minority interest		—			—			—			—			—

Income from continuing operations		13,909			5,519			2,296			(8,208	)		13,516
Discontinued operations:
Income from discontinued operations		(190	)		23			166			—			(1	)
Net Gain on Disposition		—			382			(178	)		—			204

Income from discontinued operations		(190	)		405			(12	)		—			203

Net income	$	13,719		$	5,924		$	2,284		$	(8,208	)	$	13,719

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BRANDYWINE OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

CONSOLIDATING STATEMENT OF CASH FLOWS

THREE MONTH PERIOD ENDED MARCH 31, 2004

(in 000’s)

	The Partnership			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Cash flows from operating activities	$	25,652		$	13,388		$	3,975		$	(9,947	)	$	33,068
Cash flows from investing activities
Sale of properties, net		—			2,012			—			—			2,012
Capital expenditures and real estate development costs		(689	)		(15,116	)		(2,574	)		—			(18,379	)
Escrowed cash		(508	)		5			(356	)		—			(859	)
Leasing costs		(1,676	)		(118	)		(232	)		—			(2,026	)
Increase in cash due to consolidation of variable interest entities		426			—			—			—			426
Other, net		184			—			—			—			184

Net cash flow from investing activities		(2,263	)		(13,217	)		(3,162	)		—			(18,642	)
Cash flows from financing activities
Proceeds (repayments) of Credit Facilities, net		(40,000	)		—			—			—			(40,000	)
Repayments of mortgage notes payable		(36,220	)		(171	)		(813	)		—			(37,204	)
Exercise of stock options		1,200			—			—			—			1,200
Redemptions/repurchases of units		—			—			—			—			—
Distributions to preferred and common partnership units		(20,960	)		—			—			—			(20,960	)
Proceeds from issuance of units, net		175,377			—			—			—			175,377
Repurchase of pref. and common units		(93,835	)		—			—			—			(93,835	)
Intercompany fundings and other, net		(9,947	)		—			—			9,947			—
Other, net		1			—			—			—			1

Net cash flow from financing activities		(24,384	)		(171	)		(813	)		9,947			(15,421	)

Increase (decrease) in cash and cash equivalents		(995	)		—			—			—			(995	)
Cash and cash equivalents at beginning of period		8,552			—			—			—			8,552

Cash and cash equivalents at end of period	$	7,557		$	—		$	—		$	—		$	7,557

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein. This Form 10-Q contains forward-looking statements for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934 and as such may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Partnership to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Although the Partnership believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that these expectations will be realized. The Partnership assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Factors that could cause actual results to differ materially from management’s current expectations include, but are not limited to, changes in general economic conditions, changes in local real estate conditions (including changes in rental rates and the number of competing properties), changes in the economic conditions affecting industries in which the Partnership’s principal tenants compete, the Partnership’s failure to lease unoccupied space in accordance with the Partnership’s projections, the failure of the Partnership to re-lease occupied space upon expiration of leases, the bankruptcy of major tenants, changes in prevailing interest rates, the unavailability of equity and debt financing, unanticipated costs associated with the acquisition and integration of the Partnership’s acquisitions, costs to complete and lease-up pending developments, increased costs for, or lack of availability of, adequate insurance, including for terrorist acts, demand for tenant services beyond those traditionally provided by landlords, potential liability under environmental or other laws, the existence of complex regulations relating to the Company’s status as a REIT and to the Partnership’s acquisition, disposition and development activities, the adverse consequences of the Company’s failure to qualify as a REIT and the other risks identified in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2004.

OVERVIEW

The Partnership currently manages its portfolio within five geographic segments: (1) Pennsylvania—West, (2) Pennsylvania—North, (3) New Jersey, (4) Urban and (5) Virginia. The Partnership believes it has established an effective platform in these office and industrial markets that provides a foundation for achieving its goals of maximizing market penetration, optimizing operating economies of scale and creating long-term investment value.

As of March 31, 2005, the Partnership’s portfolio consisted of 223 office properties, 23 industrial facilities and one mixed-use property that contained an aggregate of approximately 19.2 million net rentable square feet. As of March 31, 2005, we held economic interests in nine unconsolidated real estate ventures that contained approximately 1.6 million net rentable square feet (the “Real Estate Ventures”) formed with third parties to develop or own commercial properties. In addition, we own interests in two consolidated real estate ventures that own two office properties containing approximately 0.2 million net rentable square feet.

The Partnership receives income primarily from rental revenue (including tenant reimbursements) from the Properties and, to a lesser extent, from the management of properties owned by third parties and from investments in the Real Estate Ventures.

The Partnership’s financial performance is dependent upon the demand for office and other commercial space in its markets. Current economic conditions, including recessionary pressures and capital market volatility, have enhanced the challenges facing the Partnership.

The Partnership seeks revenue growth through an increase in occupancy of its portfolio (91.3% at March 31, 2005, 87.6% including the five lease-up assets acquired as part of the TRC acquisition in September 2004) and through acquisitions. However, with a downturn in general leasing activity, owners of commercial real estate, including the Partnership, are experiencing longer periods of rental downtime and are incurring higher capital costs and leasing commissions to achieve targeted tenancies.

As the Partnership seeks to increase revenue, management also focuses on strategies to minimize operating risks, including (i) tenant rollover risk, (ii) tenant credit risk and (iii) development risk.

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Tenant Rollover Risk:

The Partnership is subject to the risk that, upon expiration, leases may not be renewed, the space may not be re-leased, or the terms of renewal or re-leasing (including the cost of renovations) may be less favorable than the current lease terms. Leases totaling approximately 11.2% of the net rentable square feet of the Properties as of March 31, 2005 expire without penalty through the end of 2005. In addition, leases totaling approximately 11.4% of the net rentable square feet of the Properties as of March 31, 2005 are scheduled to expire without penalty in 2006. The Partnership maintains an active dialogue with its tenants in an effort to achieve lease renewals. The Partnership’s retention rate for leases that were scheduled to expire in the three-month period ended March 31, 2005 was 69.3%. If the Partnership is unable to renew leases for a substantial portion of the space under expiring leases, or promptly re-lease this space at anticipated rental rates, the Partnership’s cash flow could be adversely impacted.

Tenant Credit Risk:

In the event of a tenant default, the Partnership may experience delays in enforcing its rights as a landlord and may incur substantial costs in protecting its investment. Management regularly evaluates its accounts receivable reserve policy in light of its tenant base and general and local economic conditions. The accounts receivable allowances were $4.5 million or 8.6% of total receivables (including accrued rent receivable) as of March 31, 2005 compared to $4.1 million or 8.4% of total receivables (including accrued rent receivable) as of December 31, 2004.

Development Risk:

As of March 31, 2005, the Partnership had in development three office properties and had in redevelopment two office properties aggregating 1.0 million square feet. The total net investment in these projects is estimated to be $217.9 million of which $125.5 million had been paid as of March 31, 2005. As of the date of this Form 10-Q, these projects were approximately 79% leased. One of these development properties is Cira Centre, a 28-story office tower located adjacent to Amtrak’s 30^th Street Station in the University City District of Philadelphia. The total net investment in this project is estimated to be $177.6 million and the Partnership expects to complete the project in the fourth quarter of 2005. As of the date of this Form 10-Q, the office portion of this project was approximately 87% leased. While the Partnership is actively marketing space at these projects to prospective tenants, management cannot provide assurance as to the timing or terms of any leases for such space. If one or more of the Partnership’s assumptions regarding the successful efforts of development and leasing are incorrect, the resulting adjustments could impact earnings.

ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS

During the three-month period ended March 31, 2005, the Partnership acquired 6.9 acres of developable land for an aggregate purchase price of $11.6 million.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Partnership’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and assumptions on historical experience and current economic conditions. On an on-going basis, management evaluates its estimates and assumptions including those related to revenue, impairment of long-lived assets and the allowance for doubtful accounts. Actual results may differ from those estimates and assumptions.

The Partnership’s Annual Report on Form 10-K for the year ended December 31, 2004, contains a discussion of the Partnership’s critical accounting policies. See also Note 2 in the Partnership’s unaudited consolidated financial statements for the three-month period ended March 31, 2005 as set forth herein. Management discusses the Partnership’s critical accounting policies and estimates with the Company’s Audit Committee.

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RESULTS OF OPERATIONS

Comparison of the Three Month Periods Ended March 31, 2005 and 2004

The table below shows selected operating information for the Same Store Property Portfolio and the Total Portfolio. The Same Store Property Portfolio consists of 227 Properties containing an aggregate of approximately 15.1 million net rentable square feet that were owned for the entire three-month periods ended March 31, 2005 and 2004. This table also includes a reconciliation from the Same Store Property Portfolio to the Total Portfolio (i.e. all properties owned by us as of March 31, 2005 and 2004) by providing information for the properties which were acquired, sold, or placed into service and administrative/elimination information for the three-month periods ended March 31 2005 and 2004.

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	Same Store Property Portfolio										Properties Acquired (a)				Development Properties

*(dollars in thousands)*	2005		2004		Increase/ (Decrease)			% Change			2005		2004		2005			2004

Revenue:
Rents	$	62,208	$	62,930	$	(722	)		-1	%	$	18,177	$	—	$	843		$	750
Tenant reimbursements		9,316		7,971		1,345			17	%		2,673		—		93			22
Other		3,913		278		3,635			100	%		301		—		74			37

Total revenue		75,437		71,179		4,258			6	%		21,151		—		1,010			809
Operating Expenses:
Property operating expenses		24,275		23,800		475			2	%		7,683		—		515			501
Real estate taxes		7,099		6,663		436			7	%		2,338		—		220			218
Depreciation and amortization		17,979		15,185		2,794			18	%		9,810		—		336			278
Administrative expenses

Total property operating expenses		49,353		45,648		3,705			8	%		19,831		—		1,071			997

Operating Income		26,084		25,531		553			2	%		1,320		—		(61	)		(188	)
Other Income (Expense):
Interest income
Interest expense
Equity in income of real estate ventures

Income before minority interest
Minority interest attributable to continuing operations

Income from continuing operations
Income from discontinued operations (c)

Net Income

	Administrative/ Eliminations (b)						Total Portfolio

*(dollars in thousands)*	2005			2004			2005			2004			Increase/ (Decrease)			% Change

Revenue:
Rents	$	—		$	—		$	81,228		$	63,680		$	17,548			28	%
Tenant reimbursements		—			—			12,082			7,993			4,089			51	%
Other		1,326			1,211			5,614			1,526			4,088			100	%

Total revenue		1,326			1,211			98,924			73,199			25,725			35	%
Operating Expenses:
Property operating expenses		(2,594	)		(2,151	)		29,879			22,150			7,729			35	%
Real estate taxes		—			—			9,657			6,881			2,776			40	%
Depreciation and amortization		310			341			28,435			15,804			12,631			80	%
Administrative expenses		4,752			3,489			4,752			3,489			1,263			36	%

Total property operating expenses		2,468			1,679			72,723			48,324			24,399			50	%

Operating Income		(1,142	)		(468	)		26,201			24,875			1,326			5	%
Other Income (Expense):
Interest income								780			511			269			53	%
Interest expense								(17,797	)		(12,104	)		(5,693	)		-47	%
Equity in income of real estate ventures								558			234			324			100	%

Income before minority interest								9,742			13,516			(3,774	)		-28	%
Minority interest attributable to continuing operations								(51	)		—			(51	)		-100	%

Income from continuing operations								9,691			13,516			(3,825	)		-28	%
Income from discontinued operations (c)								—			203			(203	)		-100	%

Net Income							$	9,691		$	13,719		$	(4,028	)		-29	%


(a) -	Represents the operations of properties acquired that are not included in the definition of the Same Store Property Portfolio.
(b) -	Represents certain revenue and expenses at the corporate level as well as various intercompany costs that are eliminated in consolidation.
(c) -	All properties sold during the respective periods meet the criteria for treatment as a discontinued operation and have been presented as such under SFAS No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long-Lived Assets.

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Revenue

Revenue increased by $25.7 million primarily due to properties that were acquired in 2004 and an increase in other income in 2005 as compared to 2004. Revenue for Same Store Properties increased by $4.3 million due to increased tenant reimbursement revenue resulting from increased property operating expenses in 2005 as compared to 2004 and a $3.7 million net termination fee in other income associated with a single tenant termination in 2005 as compared to 2004. Average occupancy for the Same Store Properties increased to 92.0% in 2005 from 91.3% in 2004. Other revenue represents lease termination fees, bankruptcy settlement proceeds, leasing commissions and third-party management fees. Total Portfolio other revenue increased by $4.1 million in 2005 primarily due a $3.7 million net termination fee associated with a single tenant termination in 2005.

Operating Expenses and Real Estate Taxes

Property operating expenses increased by $7.7 million in 2005 primarily due to the properties acquired in the latter half of 2004 and slightly increased snow removal costs. Property operating expenses for the Same Store Properties increased by $0.5 million in 2005 due to slightly increased snow removal costs at various Same Store Properties.

Real estate taxes increased by $2.8 million primarily due to the properties acquired in the latter half of 2004 and increased tax rates and property assessments. Real estate taxes for the Same Store Properties increased by $0.4 million in 2005 as a result of higher tax rates and property assessments.

Depreciation and Amortization Expense

Depreciation and amortization expense increased by $12.6 million in 2005 primarily due to the properties acquired in the latter half of 2004 and amortization from tenant improvements and leasing commissions paid during 2004.

Administrative Expenses

Administrative expenses increased by $1.3 million in 2005 primarily due to increased spending during the three-month period ended March 31, 2005 due to additional personnel hired as part of the TRC acquisition in September 2004, higher compensation and benefits costs for employees and increased spending on process and technology improvements.

Interest Income

Interest income increased by $0.3 million in 2005 primarily due to interest associated with a receivable the Partnership acquired as part of the TRC Acquisition in September 2004.

Interest Expense

Interest expense increased by $5.7 million in 2005 primarily due to increased debt from the Partnership’s fixed rate unsecured notes issued in the fourth quarter of 2004, offset by decreased interest expense on the Partnership’s unsecured line of credit resulting from a decrease in the average LIBOR rate during the periods as well as the Partnership’s spread over LIBOR.

Equity in Income of Real Estate Ventures

Equity in income of Real Estate Ventures increased by $0.3 million in 2005 as a result of increased net income from the Real Estate Ventures.

Minority Interest

Minority interest from continuing operations represents the income attributable to the interest of the outside joint venture partners in the net income (loss) of the Partnership’s two consolidated real estate ventures. These two real estate ventures were consolidated effective March 31, 2004.

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Discontinued Operations

Discontinued operations decreased by $0.2 million in 2005 primarily due to the timing of property sales for assets included in

discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

General

Our principal liquidity needs for the next twelve months are as follows:

•	fund normal recurring expenses,
•	meet debt service requirements,
•	fund capital expenditures, including capital and tenant improvements and leasing costs,
•	fund current development costs, including $74 million expected to fund continued development of Cira Centre in University City, Philadelphia, and
•	fund distributions declared by our Board of Trustees.

We believe that these needs will be satisfied using cash flows generated by operations and provided by financing activities. Rental revenue, recovery income from tenants, and other income from operations are our principal sources of cash used to pay operating expenses, debt service, recurring capital expenditures and the minimum distribution required to maintain the Company’s REIT qualification. We seek to increase cash flows from our existing 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 sources of revenue also include third-party fees generated by our property management, leasing, development and construction businesses. Consequently, we believe our revenue, together with proceeds from financing activities, will continue to provide the necessary funds for our short-term liquidity needs. However, material changes in these factors may adversely affect our net cash flows. Such changes, in turn, would adversely affect our ability to fund distributions, debt service payments and tenant improvements. In addition, a material adverse change in our cash provided by operations may affect the financial performance covenants under our unsecured Credit Facility and unsecured notes.

Our principal liquidity needs for periods beyond twelve months are for the costs of developments, redevelopments, property acquisitions, scheduled debt maturities, major renovations, expansions and other non-recurring capital improvements. We draw on multiple financing sources to fund our long-term capital needs. Our Credit Facility is utilized for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. In the fourth quarter of 2004 we completed two offerings of unsecured notes and expect to utilize the debt market and common equity as capital sources for other long-term capital needs.

Cash Flows

The following summary discussion of our cash flows is based on the consolidated statement of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented.

As of March 31, 2005 and December 31, 2004, we maintained cash and cash equivalents of $15.5 million and $15.4 million, an increase of $0.1 million. This increase was the result of the following changes in cash flow from our various activities for the three-month periods ended March 31:

Activity	2005			2004

Operating	$	26,621		$	33,068
Investing		(48,873	)		(18,642	)
Financing		22,379			(15,421	)

Net cash flows	$	127		$	(995	)

Our principal source of cash flows is from the operation of our Properties. Our decreased cash flow from operating activities is primarily attributable to the timing of real estate tax payments and deposits on future property acquisitions.

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Increased investing activity was comprised of our acquisition of properties/developable land parcels ($11.6 million) and construction costs related to our Cira Centre development project and various other capital and tenant improvement projects (totaling $33.2 million in 2005).

Increased financing activity was comprised of additional borrowings on our Credit Facility in 2005 ($48 million). These proceeds were used to fund the investing activity discussed above.

Capitalization

Indebtedness

As of March 31 2005, we had approximately $1.3 billion of outstanding indebtedness. The table below summarizes our mortgage notes payable, our unsecured notes and our revolving credit facility at March 31, 2005 and December 31, 2004:

	March 31, 2005			December 31, 2004

	(dollars in thousands)
*Balance:*
Fixed rate	$	1,131,095		$	1,133,513
Variable rate		218,719			173,156

Total	$	1,349,814		$	1,306,669

*Percent of Total Debt:*
Fixed rate		84	%		87	%
Variable rate		16	%		13	%

Total		100	%		100	%

*Weighted-average interest rate at period end:*
Fixed rate		5.9	%		5.9	%
Variable rate		3.7	%		3.5	%

Total		5.6	%		5.6	%

The variable rate debt shown above generally bears interest based on various spreads over LIBOR (the term of which is selected by the Partnership).

The Partnership utilizes credit facility borrowings for general business purposes, including the acquisition, development and redevelopment of properties and the repayment of other debt. The Partnership maintains a $450 million unsecured credit facility (the “Credit Facility”) that matures in May 2007, subject to a one year extension option upon payment of a fee and absence any defaults at the time of the extension. Borrowings under the new Credit Facility generally bear interest at LIBOR plus a spread over LIBOR ranging from 0.65% to 1.20% based on the Partnership’s unsecured senior debt rating. The Partnership has an option to increase its maximum borrowings under the Credit Facility to $600 million subject to the absence of any defaults and our ability to acquire additional commitments from our existing lenders or new lenders. The Credit Facility contains various financial and non-financial covenants. As of March 31, 2005, the Partnership was in compliance with all such covenants.

The Partnership expects to renegotiate its Credit Facility prior to maturity or extend its term.

The Partnership utilizes unsecured notes as a long-term financing alternative. The indentures and note purchase agreements contain various financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40%, (3) an debt service coverage ratio of greater than 1.5 to 1.0, and

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(4) an unencumbered asset value of not less than 150% of unsecured debt. In addition, the note purchase agreement relating to the 2008 Notes contains covenants that are similar to the above covenants. At March 31, 2005, the Partnership was in compliance with each of these financial restrictions and requirements.

The Partnership has mortgages, loans payable and other obligations which consist of various loans collateralized by certain of the Partnership’s Properties. Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.

The Partnership intends to refinance its mortgage indebtedness as they become due primarily through the use of unsecured debt or equity.

Partner’s Equity

On March 16, 2005, the Partnership declared a distribution of $0.44 per Common Partnership Unit, totaling $24.6 million, which was paid on April 15, 2005 to unit holders of record as of April 6, 2005. On this same date, the Partnership declared a $0.44 per unit cash distribution to holders of Class A Units totaling $0.9 million.

On March 16, 2005, the Partnership declared distributions to holders of its Series D Preferred Mirror Units and Series E Preferred Mirror Units to holders of record on March 30, 2005. These units are currently entitled to a cumulative preferential return of 7.50% and 7.375%, respectively. Distributions paid on April 15, 2005 to holders of Series D Preferred Mirror Units and Series E Preferred Mirror Units totaled $.9 million and $1.1 million, respectively.

The Board of Trustees of the Company approved a share repurchase program authorizing it to repurchase up to 4,000,000 of its outstanding Common Shares. Through March 31, 2005, the Company had repurchased 3.2 million of its Common Shares at an average price of $17.75 per share. Concurrent with share repurchases by the Company, the Partnership has repurchased 3.2 million of Partnership Units from the Company at an average price of $17.75 per unit. Under the share repurchase program, the Company has the authority to repurchase an additional 762,000 shares, and, in exchange for the funds required to repurchase these shares, the Partnership will repurchase an equivalent number of Common Partnership Units from the Company. No time limit has been placed on the duration of the share repurchase program.

Shelf Registration Statement

The Company and Partnership have an effective shelf registration statement on Form S-3 filed with the Securities and Exchange Commission that registered $750.0 million in common shares, preferred shares, depositary shares, warrants, and $750.0 million in debt securities. As of March 31, 2005, the registration statement had $533 million of capacity for future issuances of common shares, preferred shares, depositary shares and warrants and had $225 million of capacity for future issuances of debt securities.

Short- and Long-Term Liquidity

The Partnership believes that its cash flow from operations is adequate to fund its short-term liquidity requirements. Cash flow from operations is generated primarily from rental revenues and operating expense reimbursements from tenants and management services income from providing services to third parties. The Partnership intends to use these funds to meet short-term liquidity needs, which are to fund operating expenses, debt service requirements, recurring capital expenditures, tenant allowances, leasing commissions and the minimum distributions required to maintain the Company’s REIT qualification under the Internal Revenue Code.

The Partnership expects to meet its long-term liquidity requirements, such as for property acquisitions, development, investments in real estate ventures, scheduled debt maturities, major renovations, expansions and other significant capital improvements, through cash from operations, borrowings under its Credit Facility, other long-term secured and unsecured indebtedness, the issuance of equity securities and the proceeds from the disposition of selected assets.

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Inflation

A majority of the Partnership’s leases provide for separate escalations of real estate taxes and operating expenses either on a triple net basis or over a base amount. In addition, many of the office leases provide for fixed base rent increases. The Partnership believes that inflationary increases in expenses will be significantly offset by expense reimbursement and contractual rent increases.

Commitments and Contingencies

The following table outlines the timing of payment requirements related to the Partnership’s contractual commitments as of March 31, 2005:

	Payments by Period (in thousands)

	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years

Mortgage notes payable (a)	$	506,066	$	6,482	$	62,665	$	133,906	$	303,013
Unsecured credit facility		200,000		—		200,000		—		—
Unsecured debt (a)		638,000		—		113,000		275,000		250,000
Purchase commitments		11,000		11,000		—		—		—
Ground leases		107,146		1,435		2,870		2,870		99,971
Other liabilities		1,525		837		—		—		688

	$	1,463,737	$	19,754	$	378,535	$	411,776	$	653,672


(a)	Amounts do not include unamortized discounts and/or premiums.

The Partnership intends to refinance its mortgage notes payable as they become due or repay those that are secured by properties being sold. The Partnership expects to renegotiate its Credit Facility prior to maturity or extend its term.

In 1998, we acquired a portfolio of properties from Donald E. Axinn and affiliates. Upon completion of our acquisition, Mr. Axinn joined our Board. The 1998 agreement provides for our acquisition in September 2005 of an approximately 141,724 square foot office building located at 101 Paragon Drive, Montvale, New Jersey for $11.0 million from an entity primarily owned and controlled by Mr. Axinn. The Partnership and Mr. Axinn are currently negotiating a modification of the 1998 agreement that would provide for the following: (i) Mr. Axinn would pay us $500,000; (ii) our obligation to fund $11.0 million to acquire 101 Paragon would be deferred for approximately five years and the amount of our obligation would be reduced to $5.5 million, with Mr. Axinn assuming responsibility to fund the remaining $5.5 million; and (iii) we and Mr. Axinn would share equally in any net cash flow and in any proceeds of a sale of 101 Paragon, and we would each be required to fund any operating expenses associated with ownership of 101 Paragon. Consummation of the modification is subject to several conditions, including preparation of customary documentation.

As part of our purchase of the TRC Properties in September 2004, the Partnership agreed to issue to the sellers up to a maximum of $9.7 million of Class A Units of the Partnership if certain of the acquired properties achieve at least 95% occupancy prior to September 21, 2007. At March 31, 2005, the maximum amount payable under this arrangement was $8.4 million.

As part of the TRC Properties, we acquired our interest in Two Logan Square, a 696,477 square foot office building in Philadelphia, primarily through a second and third mortgage secured by this property. We currently do not expect to take title to Two Logan Square until, at the earliest, September 2019. In the event that we take title to Two Logan Square upon a foreclosure of our mortgage, we have agreed to make a payment to an unaffiliated third party with a residual interest in the fee owner of this property. The amount of the payment would be $0.6 million if we must pay a state and local transfer upon taking title, and $2.9 million if no transfer tax is payable upon the transfer.

As part of the TRC Properties and several of our other acquisitions, we agreed not to sell the acquired properties. In the case of the TRC Properties, we agreed not to sell the acquired properties for periods ranging from three to 15 years from the acquisition date as follows: 201 Radnor Financial Center, 555 Radnor Financial Center and 300 Delaware Avenue (three years); One Rodney Square and 130/150/170 Radnor Financial Center (10 years); and One Logan Square, Two Logan Square and Radnor Corporate Center (15 years). We also own 14 properties that aggregate

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1.0 million square feet and have agreed not to sell these properties for periods that expire through 2008. 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 Code or in other tax deferred transactions. In the event that we sell any of the properties within the applicable restricted period in non-exempt transactions, we have agreed to pay significant tax liabilities that would be incurred by the parties who sold us the applicable property.

We invest in our Properties and regularly incur capital expenditures in the ordinary course to maintain the Properties. We believe that such expenditures enhance the competitiveness of the Properties. We also enter into construction, utility and service contracts in the ordinary course of business which may extend beyond one year. These contracts include terms that provide for cancellation with insignificant or no cancellation penalties.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the exposure to loss resulting from changes in interest rates, commodity prices and equity prices. In pursuing its business plan, the primary market risk to which the Partnership is exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Partnership’s yield on invested assets and cost of funds and, in turn, the Partnership’s ability to make distributions or payments to its shareholders. While the Partnership has not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in losses to the Partnership which adversely affect its operating results and liquidity.

There have been no material changes in Quantitative and Qualitative disclosures in 2004 from the disclosures included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2004. Reference is made to Item 7 included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2004 and the caption “Liquidity and Capital Resources” under Item 2 of this Quarterly Report on Form 10-Q.

Item 4. Controls and Procedures

	(a)	Evaluation of disclosure controls and procedures. The Company’s Chief Executive Officer and its Chief Financial Officer, after evaluating the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report, have concluded that the Partnership’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Partnership in the reports that it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

	(b)	Changes in internal controls over financial reporting. There was no change in the Partnership’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes the unit repurchases during the three-month period ended March 31, 2005:

	Total Number of Units Purchased (A)		Average Price Paid Per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs

2005:
January		20,137	$	29.39		—		762,000
February		—	$	—		—		762,000
March		—	$	—		—		762,000

Total		20,137	$	29.39		—		762,000


(A)	Represent Common Units that relate to Shares cancelled by the Company upon vesting of restricted Common Shares previously awarded to Company employees, in satisfaction of tax withholding obligations.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

•

Brandywine Realty Trust, the Partnership’s sole general partner, held its annual meeting of shareholders on May 2, 2005. At the meeting, each of the eight individuals nominated for election to the Company’s Board of Trustees was elected to the Board. These individuals will serve on the Board until the next annual meeting of shareholders and until their successors are elected and qualified or until their earlier resignation. The number of shares cast for or withheld for each nominee is set forth below:

Trustee	For		Withheld

Walter D’Alessio		51,167,302		1,800,620
D. Pike Aloian		51,289,117		1,678,805
Donald E. Axinn		50,104,539		2,863,383
Wyche Fowler		52,182,925		784,997
Michael J. Joyce		50,898,665		2,069,257
Anthony A. Nichols Sr.		51,301,759		1,666,163
Charles P. Pizzi		51,189,843		1,778,079
Gerard H. Sweeney		51,181,922		1,786,000

•	At the Company’s annual meeting of shareholders, the shareholders voted as follows to ratify the appointment of PricewaterhouseCoopers LLP as the Company and Partnership’s independent registered public accounting firm for the calendar year 2005 as follows:

- Votes For			52,925,451
- Votes Against			25,105
- Abstentions			17,366
- Broker Non-Votes			zero

•	At the Company’s annual meeting of shareholders, the shareholders voted as follows to amend and restate the Company’s 1997 Long-Term Incentive Plan as follows:

- Votes For			44,461,578
- Votes Against			2,446,871
- Abstentions			63,209
- Broker Non-Votes			5,996,264

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Item 6. Exhibits

(a) Exhibits

10.1	2005 Restricted Share Award to Gerard H. Sweeney (previously filed as Exhibit 10.1 to the Company’s Form 8-K dated February 11, 2005 and incorporated herein by reference)
10.2	Form of 2005 Restricted Share Award to executive officers (other than the President and Chief Executive Officer) (previously filed as Exhibit 10.2 to the Company’s Form 8-K dated February 11, 2005 and incorporated herein by reference)
10.3	Amended and Restated Employment Agreement of President and Chief Executive Officer (previously filed as Exhibit 10.3 to the Company’s Form 8-K dated February 11, 2005 and incorporated herein by reference)
10.4	Form of Severance Agreement for executive officers (previously filed as Exhibit 10.4 to the Company’s Form 8-K dated February 11, 2005 and incorporated herein by reference)
10.5	Amended and Restated 1997 Long-term Incentive Plan of Brandywine Realty Trust*
12.1	Statement re Computation of Ratios
31.1	Certification Pursuant to 13a-14 under the Securities Exchange Act of 1934
31.2	Certification Pursuant to 13a-14 under the Securities Exchange Act of 1934
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Management contract or compensatory plan or arrangement

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SIGNATURES OF REGISTRANT

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BRANDYWINE OPERATING PARTNERSHIP, L.P.

	By:	BRANDYWINE REALTY TRUST, its General Partner

Date: May 11, 2005	By:	/s/ GERARD H. SWEENEY

		Gerard H. Sweeney, President and Chief Executive Officer (Principal Executive Officer)

Date: May 11, 2005	By:	/s/ CHRISTOPHER P. MARR

		Christopher P. Marr, Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Date: May 11, 2005	By:	/s/ TIMOTHY M. MARTIN

		Timothy M. Martin, Vice President-Finance and Chief Accounting Officer (Principal Accounting Officer)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended March 31, 2005

or

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from ____________ to ___________

Delaware		23-2862640

State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

401 Plymouth Road, Plymouth Meeting, Pennsylvania		19462

(Address of principal executive offices)		(Zip Code)

(610) 325-5600

Registrant’s telephone number

	For the three-month periods ended March 31,

	2005		2004

Net Income	$	9,691	$	13,719
Other comprehensive income:
Unrealized gain (loss) on derivative financial instruments		—		(76	)
Reclassification of realized losses on derivative financial instruments to operations		113		1,378
Unrealized gain (loss) on available-for-sale securities		192		(792	)
Reclassification of realized (gains) losses on available for sale securities to operations		—		(233	)

Total other comprehensive income		305		277

Comprehensive Income	$	9,996	$	13,996

	March 31, 2005		December 31, 2004

	(amounts in thousands)
Land	$	452,906	$	452,602
Building and improvements		1,897,071		1,892,153
Tenant improvements		134,955		138,379

	$	2,484,932	$	2,483,134

		Page


	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004	3

	Consolidated Statements of Operations for the three-month periods ended March 31, 2005 and 2004	4

	Consolidated Statements of Other Comprehensive Income for the three-month periods ended March 31, 2005 and 2004	5

	Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2005 and 2004	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36

Item 4.	Controls and Procedures	36

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Submission of Matters to a Vote of Security Holders	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

	Signatures	39

	Three-Month Periods Ended March 31,

	2005			2004

Cash flows from operating activities:
Net income	$	9,691		$	13,719
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		21,203			13,606
Amortization:
Deferred financing costs		644			483
Deferred leasing costs		1,950			1,811
Deferred market rents		(505	)		24
Assumed lease intangibles		5,282			490
Deferred compensation costs		691			553
Straight-line rent		(3,275	)		(1,925	)
Provision for doubtful accounts		400			430
Net gain on sale of interests in real estate		—			(204	)
Minority interest		51			—
Changes in assets and liabilities:
Accounts receivable		(213	)		(959	)
Other assets		(4,437	)		6,831
Accounts payable and accrued expenses		(4,356	)		(5,302	)
Tenant security deposits and deferred rents		(416	)		1,808
Other liabilities		(89	)		1,703

Net cash from operating activities		26,621			33,068
Cash flows from investing activities:
Acquisition of properties		(11,629	)		—
Sales of properties, net		—			2,012
Capital expenditures		(33,247	)		(18,379	)
Investment in unconsolidated Real Estate Ventures		(48	)		(77	)
Escrowed cash		(811	)		(859	)
Cash distributions from unconsolidated Real Estate Ventures in excess of equity in income		44			261
Increase in cash due to consolidation of variable interest entities		—			426
Leasing costs		(3,182	)		(2,026	)

Net cash from investing activities		(48,873	)		(18,642	)
Cash flows from financing activities:
Proceeds from (repayments of) Credit Facility borrowings		48,000			(40,000	)
Repayments of mortgage notes payable		(4,905	)		(37,204	)
Payments of deferred financing costs		(59	)		—
Repayments on employee stock loans		50			1
Exercise of share options		7,120			1,200
Proceeds from common partnership unit issuance, net		—			175,377
Repurchases of preferred and common partnership units		(239	)		(93,835	)
Distributions paid to preferred and common partnership unitholders		(27,588	)		(20,960	)

Net cash from financing activities		22,379			(15,421	)

Increase (decrease) in cash and cash equivalents		127			(995	)
Cash and cash equivalents at beginning of period		15,346			8,552

Cash and cash equivalents at end of period	$	15,473		$	7,557

Supplemental Cash Flow Information:
Cash paid for interest, net of interest capitalized	$	8,828		$	10,861

	At September 21, 2004

Real estate investments
Land	$	105,302
Building and improvements		434,795
Tenant improvements		20,322

Total real estate investments acquired		560,419
Rent receivables		5,537
Other assets acquired:
Intangible assets:
In-Place leases		49,455
Relationship values		35,548
Above-market leases		13,240

Total intangible assets acquired		98,243
Other assets		6,292

Total Other assets		104,535

Total assets acquired		670,491
Liabilities assumed:
Mortgage notes payable		79,330
Security deposits and deferred rent		618
Other liabilities:
Below-market leases		39,204
Other liabilities		943

Total other liabilities assumed		40,147

Total liabilities assumed		120,095

Net assets acquired	$	550,396

	Three-month period ended March 31, 2004

	(unaudited)
Pro forma revenue	$	92,967
Pro forma income from continuing operations		9,688
Earnings per unit from continuing operations
Basic -- as reported	$	0.34

Basic -- as pro forma	$	0.21

Diluted - as reported	$	0.33

Diluted - as pro forma	$	0.21

	March 31, 2005		December 31, 2004

Operating property, net of accumulated depreciation	$	294,368	$	294,378
Other assets		28,287		29,944
Liabilities		26,076		26,989
Debt		211,206		209,624
Equity		85,373		87,709
Partnership’s share of equity (Partnership basis)		12,741		12,754

	March 31, 2005

	Total Cost		Accumulated Amortization			Deferred Costs, net

In-place lease value	$	53,295	$	(10,146	)	$	43,149
Tenant relationship value		37,794		(2,469	)		35,325
Above market leases acquired		15,127		(2,597	)		12,530

Total	$	106,216	$	(15,212	)	$	91,004

Property / Location	March 31, 2005		December 31, 2004			Effective Interest Rate (b)			Maturity Date

Grande B	$	80,070	$	80,429			7.48	%		Jul-27
Two Logan Square		73,258		73,511	(a)		5.78	%		Jul-09
Newtown Square/Berwyn Park/Libertyview		65,195		65,442			7.25	%		May-13
Midlantic Drive/Lenox Drive/DCC I		64,666		64,942			8.05	%		Oct-11
Grande A		61,898		62,177			7.48	%		Jul-27
Plymouth Meeting Exec.		45,095		45,226	(a)		7.00	%		Dec-10
Arboretum I, II, III & V		23,580		23,690			7.59	%		Jul-11
Grande A		15,126		17,157	(b)		5.61	%		Jul-27
Six Tower Bridge		15,318		15,394			7.79	%		Aug-12
400 Commerce Drive		12,127		12,175			7.12	%		Jun-08
Four Tower Bridge		10,859		10,890			6.62	%		Feb-11
Croton Road		6,071		6,100			7.81	%		Jan-06
200 Commerce Drive		5,959		5,976	(a)		7.12	%		Jan-10
Southpoint III		5,769		5,877			7.75	%		Apr-14
440 & 442 Creamery Way		5,692		5,728			8.55	%		Jul-07
Norriton Office Center		5,251		5,270			8.50	%		Oct-07
429 Creamery Way		3,048		3,087			8.30	%		Sep-06
Grande A		2,680		3,040	(b)		5.78	%		Jul-27
481 John Young Way		2,405		2,420			8.40	%		Nov-07
111 Arrandale Blvd		1,086		1,100			8.65	%		Aug-06
Interstate Center		913		959	(b)		4.31	%		Mar-07

Principal balance outstanding		506,066		510,590
Plus: unamortized fixed-rate debt premiums		7,263		7,644

Total mortgage indebtedness	$	513,329	$	518,234


		(a)	These loans were assumed upon acquisition of the related property. Interest rates presented above reflect the current market rate at the time of acquisition.
		(b)	For loans that bear interest at a variable rate, the rates in effect at March 31, 2005 have been presented.

Year	March 31, 2005			December 31, 2004			Maturity		Stated Interest Rate			Effective Interest Rate (1)

2008	$	113,000		$	113,000			Dec-08		4.34	%		4.34	%
2009		275,000			275,000			Nov-09		4.50	%		4.62	%
2014		250,000			250,000			Nov-14		5.40	%		5.53	%

Total face amount		638,000			638,000
Less: unamoritzed discounts		(1,515	)		(1,565	)

Total unsecured notes	$	636,485		$	636,435


	(1) Rates include the effect of amortization related to discounts and costs related to settlement of treasury lock agreements.