Edgar Filing: BRANDYWINE REALTY TRUST

Prepared and filed by St Ives Burrups

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

(Mark One)

Annual report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934

For the fiscal year ended December 31, 2003 or

Transition report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934

For the transition period from to

Commission File Number 1-9106

BRANDYWINE REALTY TRUST
(Exact name of registrant as specified in its charter)

Maryland

23-2413352

(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, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Common Shares of Beneficial Interest,
(par value $0.01 per share)
7.50% Series C Cumulative
Redeemable Preferred Shares of
Beneficial Interest
(par value $0.01 per share)
7.375% Series D Cumulative
Redeemable Preferred Shares of
Beneficial Interest
(par value $0.01 per share)

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: none

(Title of class)

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. Yes No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No

The aggregate market value of the Common Shares of Beneficial Interest held by non-affiliates of the registrant as of the last day of the registrant’s most recently completed second fiscal quarter was $903.3 million. The aggregate market value has been computed by reference to the closing price of the Common Shares of Beneficial Interest on the New York Stock Exchange on such date. An aggregate of 45,663,743 Common Shares of Beneficial Interest were outstanding as of March 11, 2004.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the proxy statement for the Annual Meeting of Shareholders of Brandywine Realty Trust to be held May 3, 2004 are incorporated by reference into Part III of this Form 10-K.

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EXPLANATORY NOTE

Brandywine Realty Trust (the Company) is filing this Form 10K/A to address the following:

•

The Company engaged PricewaterhouseCoopers LLP (the firm that audited the Company’s financial statements for the fiscal year ended December 31, 2003) to audit the Company’s financial statements for the fiscal years ended December 31, 2002 and December 31, 2001. The Company is amending Item 15 to include the report, and related consent, of PricewaterhouseCoopers LLP with respect to the Company’s consolidated balance sheet as of December 31, 2002 and the related consolidated statements of operations, beneficiaries’ equity and comprehensive income and cash flows for each of the years in the two-year period ended December 31, 2002 in replacement of the report, and related consent, of KPMG LLP with respect to such financial statements.


		•	In December 2003, the Company incurred a $20.6 million charge in connection with the redemption/conversion of its Series B Preferred Shares. In accordance with EITF Topic D-42, this charge was recorded in retained earnings and presented as a reduction to net income in arriving at net income available for common shareholders. The Company has subsequently determined that a portion of this charge should have been allocated to the Operating Partnership’s Class A Limited Partnership Unitholders as a corresponding charge was recorded at the Operating Partnership when the Operating Partnership redeemed its corresponding Series C Preferred Mirror Units held by the Company. The resulting adjustment of $.9 million has caused the Company’s net income to increase from $85.8 million to $86.7 million and its earnings per common share, basic and diluted, to increase from $1.40 to $1.43 for the year ended December 31, 2003. The respective information contained in Item 6 – Selected Financial Data and Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations have been updated to reflect the aforementioned adjustment.


		•	The Company has eliminated all discussions related to the use of Same Store Net Operating Income as a non-GAAP financial measure in Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

With the exceptions of the foregoing, no other changes have been made to the Company’s Consolidated Financial Statements or Financial Statement Schedules and the Company’s Form 10-K for the fiscal year ended December 31, 2003 has not otherwise been updated.

TABLE OF CONTENTS

FORM 10-K/A

		Page
	PART II


Item 6.	Selected Financial Data	4

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4


Item 8.	Financial Statements and Supplementary Data	16


Item 9.	Change in and Disagreements with Accountants on Accounting and Financial Disclosure	16

	PART IV

Item 15.	Exhibits, Financial Statements, Schedules and Reports on Form 8-K	17

SIGNATURES		22

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Item 6. Selected Financial Data

(in thousands, except per Common Share data and number of properties)

Year Ended December 31,	2003			2002			2001			2000(A)			1999(A)

		(as restated)
Operating Results
Total revenue	$	305,659		$	291,040		$	270,488		$	254,100		$	247,480
Net income		86,678			62,984			33,722			52,158			34,606
Income allocated to Common Shares		54,174			51,078			21,816			40,252			29,816
Earnings per Common Share
Basic	$	1.43		$	1.40		$	0.57		$	1.12		$	0.80
Diluted	$	1.43		$	1.39		$	0.57		$	1.12		$	0.80
Cash distributions declared per Common Share	$	1.76		$	1.76		$	1.70		$	1.62		$	1.57
Balance Sheet Data
Real estate investments, net of accumulated depreciation	$	1,695,355		$	1,745,981		$	1,812,909		$	1,674,341		$	1,702,353
Total assets		1,855,776			1,919,288			1,960,203			1,821,103			1,825,276
Total indebtedness		867,659			1,004,729			1,009,165			866,202			839,634
Total liabilities		950,431			1,097,793			1,108,213			923,961			895,083
Minority interest		133,488			135,052			143,834			144,974			145,941
Beneficiaries’ equity		771,857			686,443			708,156			752,168			784,252
Other Data
Cash flows from:
Operating activities		118,793			128,836			152,040			103,123			81,495
Investing activities		(34,068	)		5,038			(123,682	)		(32,372	)		69,195
Financing activities		(102,974	)		(120,532	)		(30,939	)		(60,403	)		(158,073	)
Property Data
Number of properties owned at year end		234			238			270			250			251
Net rentable square feet owned at year end		15,733			16,052			17,312			16,471			16,607


	(A) In 2000, the Operating Partnership held a 95% economic interest in Brandywine Realty Services Corporation (the “Management Company”) through its ownership of 100% of the Management Company’s non-voting preferred stock and 5% of its voting common stock. Effective January 1, 2001, the Company converted its non-voting equity interest in the Management Company to a voting interest. Accordingly, the Company owns 95% of the equity of and has voting control over the Management Company. Therefore, the 2003, 2002 and 2001 financial results of the Management Company have been consolidated. For purposes of the Selected Financial Data, the 2000 and 1999 results of operations presented above have been restated to reflect this presentation.

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

The following discussion should be read in conjunction with the financial statements appearing elsewhere herein. The results of operations and cash flows of the Company include the historical results of operations of the Properties held by the Company during the years ended December 31, 2003, 2002 and 2001. This Annual Report on Form 10-K 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 Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Although the Company 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. See Item 1. Business — Risk Factors.

OVERVIEW

The Company currently manages its portfolio within three geographic segments: (1) Pennsylvania, (2) New Jersey and (3) Virginia. The Company 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 and optimizing operating economies of scale.

During 2003, the Company sold eight office properties containing an aggregate of approximately 343,000 net rentable square feet, two industrial properties containing an aggregate of approximately 131,000 net rentable square feet and four parcels of land containing an aggregate of approximately 24.1 acres for an

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aggregate of $45.6 million. In December 2003, the Company sold two office properties containing an aggregate of approximately 633,000 net rentable square feet for an aggregate of $112.8 million, of which $52.9 million of proceeds were used to pay off existing mortgage notes payable secured by the two properties. The Company retained a 20% interest in a venture that purchased the properties. The Company recognized a gain on the partial sale of approximately $18.5 million for the piece sold and deferred the gain on the piece retained. The Company also purchased five office properties containing approximately 360,000 net rentable square feet and one parcel of land containing approximately 10.0 acres for an aggregate of $67.8 million.

The Company 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 Company’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 Company.

In the current economic climate, the Company continues to seek revenue growth through an increase in occupancy of its portfolio (90.7% at December 31, 2003). However, with a downturn in general leasing activity, owners of commercial real estate, including the Company, are experiencing longer periods in which to lease unoccupied space, and may face higher capital costs and leasing commissions to achieve targeted tenancies.

As the Company 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.

Tenant Rollover Risk:

The Company is subject to the risk that, upon expiration, leases may not be renewed, the space may not be relet, or the terms of renewal or reletting (including the cost of renovations) may be less favorable than the current lease terms. Leases accounting for approximately 10.8% of the aggregate annualized base rents from the Properties as of December 31, 2003 (representing approximately 11.6% of the net rentable square feet of the Properties) expire without penalty in 2004. The Company maintains an active dialogue with its tenants in an effort to achieve a high level of lease renewals. The Company’s retention rate for leases that were scheduled to expire in the year ended December 31, 2003 was 80.2%. If the Company is unable to renew leases for a substantial portion of the space under expiring leases, or to promptly relet this space, at anticipated rental rates, the Company’s cash flow could be adversely impacted.

Tenant Credit Risk:

In the event of a tenant default, the Company 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 allowance was $4.0 million or 11.2% of total receivables (including accrued rent receivable) as of December 31, 2003 compared to $4.6 million or 12.5% of total receivables (including accrued rent receivable) as of December 31, 2002.

Development Risk:

The Company currently has in development or redevelopment seven sites aggregating approximately 1.1 million square feet. The total cost of these projects is estimated to be $225.5 million, of which $17.9 million was incurred as of December 31, 2003. While the Company is actively marketing space at these projects to prospective tenants, management cannot provide assurance as to the timing or terms of any leases of such space. As of December 31, 2003, the Company owned approximately 445 acres of undeveloped land and held options to purchase approximately 61 additional acres. Risks associated with development of this land include construction cost overruns and construction delays, insufficient occupancy rates and inability to obtain necessary zoning, land-use, building, occupancy and other required governmental approvals.

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CRITICAL ACCOUNTING POLICIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. 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 revenues and expenses during the reporting period.

The Company’s significant accounting policies are described in Note 2 to the consolidated financial statements included this Annual Report on Form 10-K. While the estimates and judgments associated with the application of these accounting policies may be affected by different assumptions or conditions, the Company believes the estimates and judgments associated with the reported amounts are appropriate in the circumstances. The following identifies critical accounting policies that are used in preparing the Company’s consolidated financial statements, including those policies which require significant judgment and estimates:

Revenue Recognition

Rental revenue is recognized on a straight-line basis over the lease term regardless of when payments are due. Certain lease agreements contain provisions that require tenants to reimburse a pro rata share of real estate taxes and common area maintenance costs.

Real Estate Investments

Real estate investments are carried at cost. The Company records acquisition of real estate investments under the purchase method of accounting and allocates the purchase price to land, buildings and intangible assets on a relative fair value basis. Depreciation is computed using the straight-line method over the useful lives of buildings and capital improvements (25 to 40 years) and over the shorter of the lease term or the life of the asset for tenant improvements. Direct construction costs related to the development of Properties and land holdings are capitalized as incurred. The Company expenses routine repair and maintenance expenditures.

Impairment of Long-Lived Assets

Management reviews investments in real estate and real estate ventures for impairment if facts and circumstances indicate that the carrying value of such assets may not be recoverable. Measurement of any impairment loss will be based on the fair value of the asset, determined using customary valuation techniques, such as the present value of expected future cash flows.

In accordance with SFAS No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as real estate investments and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities relating to assets classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

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Income Taxes

The Company may elect to treat one or more of its corporate subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS of the Company may perform additional services for tenants of the Company and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the providing to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated). A TRS is subject to corporate federal income tax. The Company has elected to treat certain of its corporate subsidiaries as a TRS. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts that represents an estimate of losses that may be incurred from the inability of tenants to make required payments. The allowance is an estimate based on two calculations that are combined to determine the total amount reserved. First, the Company evaluates specific accounts where it has been determined that a tenant may have an inability to meet its financial obligations. In these situations, the Company uses its judgment, based on the facts and circumstances, and records a specific reserve for that tenant against amounts due to reduce the receivable to the amount that the Company expects to collect. These reserves are reevaluated and adjusted as additional information becomes available. Second, a reserve is established for all tenants based on a range of percentages applied to aging categories. These percentages are based on historical collection and write-off experience. If the financial condition of the Company’s tenants were to deteriorate, additional allowances may be required.

Deferred Costs

The Company incurs direct costs related to the financing, development and leasing of the Properties. Management exercises judgment in determining whether such costs meet the criteria for capitalization or must be expensed. Capitalized financing fees are amortized over the related loan term and capitalized leasing costs are amortized over the related lease term. Management re-evaluates the remaining useful lives of leasing costs as the creditworthiness of the Company’s tenants and economic and market conditions change.

Purchase Price Allocation

The Company allocates the purchase price of properties 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 the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) the Company’s estimate of the fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancellable term of the lease. Capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancellable terms of the respective leases. Capitalized below-market lease values amortized as an increase of rental income over the remaining non-cancellable terms of the respective leases, including any fixed-rate renewal periods.

The aggregate value of other intangibles acquired is measured based on the difference between (i) the property valued with in-place leases adjusted to market rental rates and (ii) the property valued as if it was vacant. The Company estimates the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, include leasing commissions, legal and other related expenses. This intangible asset is amortized to expense over the remaining term of the respective leases. Company estimates of value are made using methods similar to those used by independent appraisers. Factors considered by the Company in their analysis include an estimate of the carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. 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. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from three to twelve months.

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The total amount of these other intangible assets is further allocated to tenant relationships and 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. Characteristics considered by the Company in allocating value to its tenant relationships include the nature and extent of the Company’s business relationship with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The value of tenant relationship intangibles is amortized over the remaining initial lease term and renewals, but in no event longer than the remaining depreciable life of the building. The value of in-place leases is amortized over the remaining non-cancellable term of the respective leases and any fixed-rate renewal periods.

In the event that a tenant terminates its lease, the unamortized portion of each intangible, including market rate adjustments, in-place lease values and tenant relationship values, would be charged to expense.

RESULTS OF OPERATIONS

Comparison of the Year Ended December 31, 2003 to the Year Ended December 31, 2002

				Year Ended December 31,						Dollar Change		Percent Change

				2003			2002

				(as restated)
				(amounts in thousands)

Revenue:
	Rents		$	256,945		$	248,075		$	8,870		3.6	%
	Tenant reimbursements			37,755			33,263			4,492		13.5	%
	Other			10,959			9,702			1,257		13.0	%

		Total revenue		305,659			291,040			14,619		5.0	%

Operating Expenses:
	Property operating expenses			80,817			74,967			5,850		7.8	%
	Real estate taxes			27,919			25,196			2,723		10.8	%
	Interest			57,835			63,522			(5,687	)	-9.0	%
	Depreciation and amortization			60,592			56,431			4,161		7.4	%
	Administrative expenses			14,464			14,804			(340	)	-2.3	%

		Total operating expenses		241,627			234,920			6,707		2.9	%


Income from continuing operations before equity in
	income of real estate ventures, net gain on sales
	and minority interest			64,032			56,120			7,912		14.1	%
Equity in income of real estate ventures				52			987			(935	)	-94.7	%

Income from continuing operations before net gain
	on sales and minority interest			64,084			57,107			6,977		12.2	%
Net gain on sales of interest in real estate				20,537			—			20,537		—
Minority interest				(9,272	)		(9,265	)		(7	)	—

Income from continuing operations				75,349			47,842			27,507		57.5	%
Income from discontinued operations, net of
	minority interest			11,329			15,142			(3,813	)	-25.2	%

	Net income		$	86,678		$	62,984		$	23,694		37.6	%

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The results of operations for the years ended December 31, 2003 and 2002 include the respective operations of the Properties. Of the 234 Properties owned by the Company as of December 31, 2003, a total of 211 Properties containing an aggregate of approximately 13.6 million net rentable square feet (“Same Store Properties”) were owned for the entire twelve-month periods ended December 31, 2003 and 2002.

Revenue increased to $305.7 million for 2003 as compared to $291.0 million for 2002, primarily due to increased rental rates and additional properties in 2003, offset by decreased occupancy. The straight-line rent adjustment increased revenues by $5.9 million in 2003 and $5.8 million in 2002. Revenue for Same Store Properties increased to $247.0 million in 2003 from $242.3 million in 2002. This increase was the result of increased occupancy as well as increased tenant reimbursements from higher operating expenses in 2003 as compared to 2002. Average occupancy for the Same Store Properties increased to 91.0% in 2003 from 90.9% in 2002. Other revenue represents lease termination fees, bankruptcy settlement proceeds, leasing commissions, third-party management fees and interest income. Other revenue increased to $11.0 million in 2003 from $9.7 million in 2002 primarily due to bankruptcy settlement proceeds received in 2003.

Property operating expenses increased to $80.8 million in 2003 as compared to $75.0 million in 2002, primarily due to increased snow removal costs and additional properties in 2003. Property operating expenses included a provision for doubtful accounts of $.2 million in 2003 and $.9 million in 2002 to provide for increased tenant credit risk. Property operating expenses for the Same Store Properties increased to $75.3 million in 2003 as compared to $69.7 million in 2002 as a result of increased snow removal costs in 2003 as compared to 2002.

Real estate taxes increased to $27.9 million in 2003 as compared to $25.2 million in 2002, primarily due to increased real estate tax assessments in 2003 and additional properties in 2003. Real estate taxes for the Same Store Properties increased to $22.9 million in 2003 as compared to $21.6 million in 2002 as a result of higher tax rates and property assessments.

Interest expense decreased to $57.8 million in 2003 as compared to $63.5 million in 2002, primarily due to decreased interest rates and decreased average borrowings during 2003. Average outstanding debt balances for 2003 were $948.7 million as compared to $1.0 billion for 2002. The Company’s weighted-average interest rate from its unsecured credit facilities after giving effect to hedging activities on the unsecured credit facilities decreased to 4.60% in 2003 from 5.41% in 2002 and on mortgage notes payable decreased to 7.09% in 2003 from 7.27% in 2002.

Depreciation increased to $53.5 million in 2003 as compared to $50.8 million in 2002 primarily due to additional properties in 2003 and additional depreciation from increased tenant improvements during 2003. Amortization, related to deferred leasing costs, increased to $7.1 million in 2003 as compared to $5.6 million in 2002, primarily due to increased leasing activity and additional properties in 2003.

Administrative expenses decreased to $14.5 million in 2003 as compared to $14.8 million in 2002, primarily due to decreased amortization of restricted stock.

Equity in income of Real Estate Ventures decreased to $52,000 in 2003 as compared to $1.0 million in 2002. During 2003, the Company recorded an impairment charge of $861,000 associated with the write-down its investment in a non-operating joint venture.

During 2003, the Company sold four parcels of land containing an aggregate of 24.1 acres for an aggregate of $4.2 million, realizing an aggregate gain of $2.0 million. In addition, the Company sold two office properties containing an aggregate of approximately 633,000 net rentable square feet for an aggregate of $112.8 million, of which $52.9 million of proceeds were used to pay off existing mortgage notes payable secured by the two properties. The Company recognized a gain on the sale of approximately $18.5 million, which is recorded in net gain on sale of real estate interests due to a continuing 20% interest that the Company has maintained in the properties. During 2002, the Company sold two land parcels containing an aggregate of 12.8 acres for $.7 million with no net gain realized.

Discontinued operations decreased to $11.3 million in 2003 as compared to $15.1 million in 2002 primarily due to net gain on sales of real estate investments of $8.6 million in 2002. During 2003, the Company sold eight office properties containing an aggregate of 343,000 net rentable square feet and two industrial properties containing an aggregate of 131,000 net rentable square feet for an aggregate of $41.4 million, realizing an aggregate gain of $9.7 million. During 2002, the Company sold 23 office properties containing an aggregate of 1.4 million net rentable square feet and 20 industrial properties containing an aggregate of .9 million net rentable square feet for an aggregate of $190.1 million, realizing a net gain of $8.6 million. The Company also recorded an impairment loss in 2002 of $665,000 related to one property held-for-sale for which the anticipated net sales price is less than the book value of the asset.

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Comparison of the Year Ended December 31, 2002 to the Year Ended December 31, 2001

			Year Ended December 31,							Dollar Change		Percent Change
				2002			2001			Dollar Change		Percent Change

				(amounts in thousands)

Revenue:
	Rents		$	248,075		$	228,149		$	19,926		8.7	%
	Tenant reimbursements			33,263			31,993			1,270		4.0	%
	Other			9,702			10,346			(644	)	-6.2	%

		Total revenue		291,040			270,488			20,552		7.6	%

Operating Expenses:
	Property operating expenses			74,967			70,604			4,363		6.2	%
	Real estate taxes			25,196			22,435			2,761		12.3	%
	Interest			63,522			67,496			(3,974	)	-5.9	%
	Depreciation and amortization			56,431			67,224			(10,793	)	-16.1	%
	Administrative expenses			14,804			15,177			(373	)	-2.5	%
	Non-recurring charges			—			6,600			(6,600	)	—

		Total operating expenses		234,920			249,536			(14,616	)	-5.9	%


Income from continuing operations before equity in
	income of real estate ventures, net gain on sales
	and minority interest			56,120			20,952			35,168		167.9	%
Equity in income of real estate ventures				987			2,768			(1,781	)	-64.3	%

Income from continuing operations before net gain
	on sales and minority interest			57,107			23,720			33,387		140.8	%
Net gain on sales of interest in real estate				—			4,524			(4,524	)	-100.0	%
Minority interest				(9,265	)		(7,818	)		(1,447	)	-18.5	%

Income from continuing operations				47,842			20,426			27,416		134.2	%
Income from discontinued operations, net of
	minority interest			15,142			13,296			1,846		13.9	%

	Net income		$	62,984		$	33,722		$	29,262		86.8	%

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The results of operations for the years ended December 31, 2002 and 2001 include the respective operations of the Properties. Of the 238 Properties owned by the Company as of December 31, 2002, a total of 194 Properties containing an aggregate of 13.2 million net rentable square feet (“Same Store Properties”) were owned for the entire twelve-month periods ended December 31, 2002 and 2001.

Revenue increased to $291.0 million for 2002 as compared to $270.5 million for 2001, primarily due to increased rental rates and additional properties in 2002, offset by decreased occupancy. The straight-line rent adjustment increased revenues by $5.8 million in 2002 and $5.4 million in 2001. Revenue for Same Store Properties decreased to $233.3 million in 2002 from $236.6 million in 2001. This decrease was the result of decreased occupancy in 2002 as compared to 2001. Average occupancy for the Same Store Properties decreased to 90.4% in 2002 from 94.5% in 2001. Other revenue represents lease termination fees, leasing commissions, third-party management fees and interest income. Other revenue decreased to $9.7 million in 2002 from $10.3 million in 2001 primarily due to reduced interest income earned in 2002 as compared to 2001.

Property operating expenses increased to $75.0 million in 2002 as compared to $70.6 million in 2001, primarily due to increased insurance and security costs and additional properties in 2002. Property operating expenses included a provision for doubtful accounts of $.9 million in 2002 and $2.9 million in 2001 to provide for increased tenant credit risk. Property operating expenses for the Same Store Properties increased to $71.2 million in 2002 as compared to $69.9 million in 2002 as a result of higher insurance and security costs.

Real estate taxes increased to $25.2 million in 2002 as compared to $22.4 million in 2001, primarily due to increased real estate tax assessments in 2002 and additional properties in 2002. Real estate taxes for the Same Store Properties increased to $21.9 million in 2002 as compared to $20.8 million in 2001 as a result of higher tax rates and property assessments.

Interest expense decreased to $63.5 million in 2002 as compared to $67.5 million in 2001, primarily due to decreased interest rates, partially offset by increased average borrowings during 2002. Average outstanding debt balances for 2002 were $1.0 billion as compared to $949.5 million for 2001. The Company’s weighted-average interest rate on its unsecured credit facilities after giving effect to hedging activities on the unsecured credit facilities decreased to 5.41% in 2002 from 6.48% in 2001 and on its mortgage notes payable decreased to 7.27% in 2002 from 7.39% in 2001.

Depreciation decreased to $50.8 million in 2002 as compared to $62.9 million in 2001 primarily due to a change made by the Company in the estimated useful lives of buildings from 25 to 40 years. The impact of this change in useful lives was $19.0 million or $.53 per share for the year ended December 31, 2002. Management determined that the longer period better reflected the useful lives of the buildings. Amortization, related to deferred leasing costs, increased to $5.6 million in 2002 as compared to $4.3 million in 2001, primarily due to increased leasing activity and additional properties in 2002.

Administrative expenses decreased to $14.8 million in 2002 as compared to $15.2 million in 2001, primarily due to decreased amortization of restricted stock.

Equity in income of Real Estate Ventures decreased to $1.0 million in 2002 as compared to $2.8 million in 2001. The 2001 results include a $785,000 gain on the sale of the Company’s interests in a Real Estate Venture. In addition, the Company acquired the remaining partnership interests in three Real Estate Ventures, and, accordingly, the results attributable to these properties are now consolidated from the date of acquisition.

During 2002, the Company sold two land parcels containing an aggregate of 12.8 acres for $.7 million with no net gain realized. During 2001, the Company sold three office properties, eight industrial properties and four land parcels for $31.3 million, realizing a net gain of $4.5 million.

Minority interest from continuing operations represents the equity in income attributable to the portion of the Operating Partnership not owned by the Company. Minority interest from continuing operations increased to $9.3 million in 2002 as compared to $7.9 million in 2001, primarily due to increased results of continuing operations in 2002 as compared to 2001.

Discontinued operations increased to $15.1 million in 2002 from $13.3 million in 2001 primarily due to net gain on sales of real estate investments of $8.6 million in 2002. During 2002, the Company sold 23 office properties containing an aggregate of 1.4 million net rentable square feet and 20 industrial properties containing an aggregate of .9 million net rentable square feet for an aggregate of $190.1 million, realizing a net gain of $8.6 million. The Company also recorded an impairment loss in 2002 of $665,000 related to one property held-for-sale for which the anticipated net sales price was less than the book value of the asset.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

During 2003, the Company generated $118.8 million in cash flow from operating activities. Other sources of cash in-flows consisted of: (i) $220.0 million of proceeds from the Term Loan and draws on the Credit Facility, (ii) $159.1 million in net proceeds from share issuances, (iii) $87.5 million of net proceeds from property sales, (iv) $3.3 million of cash distributions from Real Estate Ventures, (v) $2.5 million from payments on employee loans and (vi) $1.9 million of escrowed cash. During 2003, cash out-flows consisted of: (i) $222.0 million of Credit Facility repayments, (ii) $91.4 million of Preferred Share redemptions, including $1.2 million of related warrant repurchases, (iii) $82.1 million of mortgage note repayments, (iv) $78.8 million of distributions to shareholders, (v) $67.5 million for property acquisitions, (vi) $50.9 million to fund capital expenditures, (vii) $10.2 million of distributions to minority interest holders, (viii) $7.8 million of leasing costs, (ix) $.5 million of additional investment in Real Estate Ventures and (x) $.1 million of debt costs.

During 2002, the Company generated $128.8 million in cash flow from operating activities. Other sources of cash in-flows consisted of: (i) $115.0 million of proceeds from the Term Loan and draws on the Credit Facility, (ii) $78.0 million of net proceeds from property sales, (iii) proceeds from $20.2 million of additional mortgage notes payable, (iv) $2.6 million of escrowed cash, (v) $2.0 million of cash distributions from Real Estate Ventures and (vi) $1.7 million from payments on employee loans. During 2002, cash out-flows consisted of: (i) $102.3 million of Credit Facility repayments, (ii) $75.0 million of distributions to shareholders, (iii) $48.6 million of mortgage note repayments, (iv) $38.8 million to fund capital expenditures, (v) $25.1 million for property acquisitions, (vi) $20.2 million to repurchase Common Shares and minority interest units in the Operating Partnership, (vii) $13.1 million of leasing costs, (viii) $10.6 million of distributions to minority interest holders, (ix) $.7 million of debt costs and (x) $.4 million of additional investment in Real Estate Ventures.

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During 2001, the Company generated $152.0 million in cash flow from operating activities. Other sources of cash in-flows consisted of: (i) proceeds from $135.2 million of additional mortgage notes payable, (ii) $91.0 million of proceeds from draws on the Credit Facility, (iii) $31.3 million of net proceeds from property sales, (iv) $5.5 million of cash distributions from Real Estate Ventures and (v) $1.0 million from payments on employee loans. During 2001, cash out-flows consisted of: (i) $127.9 million of mortgage note repayments, (ii) $107.4 million to fund capital expenditures, (iii) $72.5 million of distributions to shareholders, (iv) $40.4 million for property acquisitions, (v) $35.0 million to repay borrowings under the Credit Facility, (vi) $10.7 million of distributions to minority interest holders, (vii) $9.2 million of leasing costs, (viii) $6.5 million to repurchase Common Shares and minority interest units in the Operating Partnership, (ix) $5.6 million of debt costs, (x) $2.5 million of additional investment in Real Estate Ventures and (xi) $1.0 million of escrowed cash.

Capitalization

At December 31, 2003, the Company maintained a $500 million Credit Facility. (See Item 1. Business-Credit Facility)

As of December 31, 2003, the Company had approximately $867.7 million of debt outstanding, consisting of $305.0 million of borrowings under the Credit Facility, $100 million of borrowings under the Term Loan and $462.7 million of mortgage notes payable. The mortgage notes payable consists of $402.3 million of fixed rate loans and $60.4 million of variable rate loans. Additionally, the Company has entered into interest rate swap agreements to fix the interest rate on $175 million of the Credit Facility. The mortgage loans mature between March 2004 and July 2027. As of December 31, 2003, the Company also had $10.7 million of letters of credit outstanding under the Credit Facility and $184.3 million of unused availability under the Credit Facility. For the year ended December 31, 2003, the weighted-average interest rate under the Credit Facility and the related swap agreements was 4.60%, the weighted-average interest rate for the Term Loan was 2.95% and the weighted-average interest rate for borrowings under mortgage notes payable and the related cap agreements was 7.09%.

The following table outlines the timing of payment requirements related to the Company’s commitments as of December 31, 2003:

	Payments by Period (in thousands)

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

Mortgage notes payable:
Fixed rate	$	402,321	$	10,277	$	24,759	$	40,259	$	327,026
Variable rate		24,815		172		407		552		23,684
Construction loans		35,523		35,523		—		—		—

		462,659		45,972		25,166		40,811		350,710
Revolving credit facility		305,000		305,000		—		—		—
Unsecured debt		100,000		—		100,000		—		—
Other liabilities		11,027		10,279		748		—		—

	$	878,686	$	361,251	$	125,914	$	40,811	$	350,710

The Company intends to refinance its mortgage notes payable as they become due or repay those that are secured by properties being sold. In May 2004, we obtained a $450 million unsecured credit facility. The credit facility will mature in 2007. We have the option to increase the credit facility to a maximum of $600 million. The credit facility bears interest at LIBOR plus a spread over LIBOR ranging from .65% to 1.35% based on our leverage and unsecured debt ratings.

On January 12, 2004, we sold 2,645,000 Common Shares for net proceeds of approximately $69.3 million. We used the net proceeds to reduce the outstanding balance under our revolving credit facility.

On February 3, 2004, we entered into an agreement with Commonwealth Atlantic Operating Properties, Inc., the holder of 1,950,000 then outstanding Series B Preferred Units (the “Series B Preferred Units”) in the Operating Partnership. The Series B Preferred Units had an aggregate stated value of $97.5 million and accrued distributions at 7.25% per annum. During February 2004, we redeemed all of the Series B Preferred Units for an aggregate price of $93.0 million, together with accrued but unpaid distributions from January 1, 2004.

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On February 27, 2004, we sold 2,300,000 7.375% Series D Cumulative Redeemable Preferred Shares for net proceeds of approximately $55.5 million. We used the net proceeds to reduce the outstanding balance under our revolving credit facility, including amounts advanced under our revolving credit facility to fund the redemption of Series B Preferred Units.

On March 3, 2004, we sold 1,840,000 Common Shares for net proceeds of approximately $50.7 million. We used the net proceeds to reduce the outstanding balance under our revolving credit facility.

As of December 31, 2003, the Company’s debt-to-market capitalization ratio was 40.5%. As a general policy, the Company intends, but is not obligated, to adhere to a policy of maintaining a long-term average debt-to-market capitalization ratio of no more than 50%.

The Company’s Board of Trustees approved a share repurchase program authorizing the Company to repurchase up to 4,000,000 of its outstanding Common Shares. Through December 31, 2003, the Company had repurchased 3.2 million of its Common Shares at an average price of $17.75 per share. Under the share repurchase program, the Company has the authority to repurchase an additional 762,000 shares. No time limit has been placed on the duration of the share repurchase program. The following table summarizes the share repurchases during the three years ended December 31, 2003:

	Years Ended December 31,
	2003		2002		2001

Repurchased amount (shares)		—		491,074		373,713
Repurchased amount ($, in thousands)	$	—	$	11,053	$	7,294
Average price per share	$	—	$	22.51	$	19.52

The following table summarized the Class A Units tendered for redemption during the three years ended December 31, 2003:

	Years Ended December 31,
	2003		2002		2001

Repurchased amount (units)		—		364,222		3,247
Repurchased amount ($, in thousands)	$	—	$	8,536	$	64
Average price per unit	$	—	$	23.44	$	19.72

Short- and Long-Term Liquidity

The Company believes that cash flow from operations and current financing alternatives are adequate to fund its short-term liquidity requirements for 2004. Cash flow from operations is generated primarily from rental revenues, operating expense reimbursements from tenants, and by providing management services to third parties. The Company intends to use these funds to meet its principal 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 qualifications under the Internal Revenue Code.

On December 18, 2003, the Board of Trustees declared a quarterly dividend distribution of $0.44 per share, paid on January 15, 2004 to common shareholders of record as of December 31, 2003. Distributions of $1.76 per share were declared in 2003 and 2002.

Future distributions by us will be declared at the discretion of the Board of Trustees and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986 and such other factors as our Board of Trustees deems relevant.

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The Company 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 borrowings under its Credit Facility, long-term secured and unsecured indebtedness, the issuance of equity securities and the disposition of certain properties.

Off-Balance Sheet Arrangements

The Company is not dependent on the use of any off-balance sheet financing arrangements for liquidity. The Company’s off-balance sheet arrangements are discussed in Note 6 to the financial statements: “Investment in Unconsolidated Real Estate Ventures”. Additional information about the debt of the Company’s unconsolidated Real Estate Ventures is included in “Item 2 — Properties”.

Inflation

A majority of the Company’s leases provide for 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 Company believes that inflationary increases in expenses will be significantly offset by expense reimbursement and contractual rent increases.

Interest Rate Risk and Sensitivity Analysis

The analysis below presents the sensitivity of the market value of the Company’s financial instruments to selected changes in market rates. The range of changes chosen reflects the Company’s 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.

The Company’s financial instruments consist of both fixed and variable rate debt. As of December 31, 2003, the Company’s consolidated debt consisted of $402.3 million in fixed rate mortgages and $60.4 million in variable rate mortgage notes, $305.0 million borrowings under its Credit Facility and $100.0 million under its Term Loan. 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 the Company’s 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.

The Company has entered into interest rate swap and rate cap agreements designed to reduce the impact of interest rate changes on its variable rate debt. At December 31, 2003, the Company had interest rate swap agreements for notional principal amounts aggregating $175 million. The swap agreements effectively fix the LIBOR interest rate on $100 million of Credit Facility borrowings at 4.230% and on $75 million of Credit Facility borrowings at 4.215%, in each case until June 2004. The interest rate cap agreement effectively limits the interest rate on a mortgage with a notional value of $28 million at 8.7% until July 2004. The impact of the cap agreement is recorded as a component of interest expense.

If market rates of interest on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $3.8 million. If market rates of interest on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $3.8 million. If market rates of interest increase by 1%, the fair value of our total outstanding debt would decrease by approximately $24.5 million. If market rates of interest decrease by 1%, the fair value of our total outstanding debt would increase by approximately $27.1 million.

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Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary financial data are listed under Item 15(a) and filed as part of this Annual Report on Form 10-K/A. See Item 15.

PricewaterhouseCoopers LLP (“PWC”) is the Company’s independent registered public accounting firm. KPMG LLP (“KPMG”) provides the Company with tax compliance and advisory services. The Audit Committee of the Board of Trustees of the Company has approved the provision of services by PWC and KPMG to the Company.

Report of Management

The management of the Company is responsible for the preparation of the financial statements and related financial information included in this annual report. The statements were prepared in conformity with accounting principles generally accepted in the United States of America and, accordingly, include amounts that are based on informed estimates and judgments.

Management maintains a system of internal controls to provide reasonable assurance that assets are safeguarded and that transactions are properly authorized and accurately recorded. The concept of reasonable assurance is based on the recognition that there are inherent limitations in all systems of internal accounting control and that the costs of such systems should not exceed the benefits expected to be derived. The Company continually reviews and modifies these systems, where appropriate, to maintain such assurance. The system of internal controls includes careful selection, training and development of operating and financial personnel, well-defined organizational responsibilities and communication of Company policies and procedures throughout the organization.

The selection of the Company’s independent auditors, PWC, has been approved by the Audit Committee of the Board of Trustees. The Audit Committee of the Board of Trustees, comprised solely of non-employee Trustees, meets periodically with the Company’s independent auditors and management to review the financial statements and related information and to confirm that they are properly discharging their responsibilities. In addition, the independent auditors meet with the Audit Committee, without the presence of management, to discuss their findings and their observations on other relevant matters. Recommendations made by PWC are considered and appropriate action is taken to respond to these recommendations.

Gerard H. Sweeney, President and Chief Executive Officer
Christopher P. Marr, Senior Vice President and Chief Financial Officer
Timothy M. Martin, Vice-President and Chief Accounting Officer

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

On May 23, 2002, the Company dismissed Arthur Andersen LLP (“Arthur Andersen”) as its independent public accountants and appointed KPMG LLP (“KPMG”) as its independent public accountants. The decision to dismiss Arthur Andersen and to retain KPMG was approved by the Audit Committee. Arthur Andersen’s reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2001 and 2000 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.

During the Company’s fiscal years ended December 31, 2001 and 2000, and the subsequent interim period through May 30, 2002, there were no disagreements between the Company and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersen’s satisfaction, would have caused them to make reference to the subject matter of the disagreement in connection with their reports.

None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred within the Company’s fiscal years ended December 31, 2001 and 2000 and the subsequent interim period through May 30, 2002.

A copy of Arthur Andersen’s letter dated May 30, 2002 with respect to certain of the above statements is attached as Exhibit 16 to the Company’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2002.

During the Company’s fiscal years ended December 31, 2001 and 2000, and the subsequent interim period through May 30, 2002, neither the Company nor anyone acting on behalf of the Company consulted with KPMG regarding any of the matters or events set forth in Item 304(a)(2) of Regulation S-K.

On June 19, 2003, the Company informed KPMG that they would be dismissed effective as of June 19, 2003.

The audit report of KPMG on the Company’s consolidated financial statements for the years ended December 31, 2002 and 2001 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. During its audit for the fiscal years ended December 31, 2002 and 2001, and for the subsequent interim period through June 25, 2003, (i) there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference to the subject matter of such disagreements in their reports, and (ii) there have been no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

The Audit Committee authorized the dismissal of KPMG and appointment of PWC. The Company retained PWC as its independent accountants effective June 19, 2003.

During the Company’s fiscal years ended December 31, 2002 and 2001, and for the subsequent interim period through June 25, 2003, neither the Company nor anyone acting on behalf of the Company engaged PWC regarding any of the items described in Item 304(a)(2) of Regulation S-K.

A copy of KPMG’s letter dated June 25, 2003 with respect to certain of the above statements is attached as Exhibit 16.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on June 25, 2003.

In April 2004, the Company engaged PWC to reaudit its consolidated financial statements as of and for the years ended December 31, 2002 and 2001.

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Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K


		(a)	1. and 2. Financial Statements and Schedules

The financial statements and schedules listed below are filed as part of this annual report on the pages indicated.

Index to Financial Statements and Schedules

			Page

Report of Independent Registered Public Accounting Firm			F-1

Consolidated Balance Sheets as of December 31, 2003 and December 31, 2002			F-2

Consolidated Statements of Operations for the Years Ended December 31, 2003, 2002 and 2001			F-3

Consolidated Statements of Beneficiaries’ Equity and Comprehensive Income for the Years Ended December 31, 2003, 2002 and 2001			F-4

Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001			F-5

Notes to Consolidated Financial Statements			F-6

Schedule II — Valuation and Qualifying Accounts			F-29

Schedule III — Real Estate and Accumulated Depreciation			F-30

		3.	Exhibits

Exhibits No.		Description
(1)	3.1.1	Amended and Restated Declaration of Trust of the Company (amended and restated as of May 12, 1997)
(2)	3.1.2	Articles of Amendment to Declaration of Trust of the Company (September 4, 1997)
(3)	3.1.3	Articles of Amendment to Declaration of Trust of the Company
(4)	3.1.4	Articles Supplementary to Declaration of Trust of the Company (September 28, 1998)

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Exhibits No.		Description
(5)	3.1.5	Articles of Amendment to Declaration of Trust of the Company (March 19, 1999)
(6)	3.1.6	Articles Supplementary to Declaration of Trust of the Company (April 19, 1999)
(7)	3.1.7	Articles Supplementary to Declaration of Trust of the Company (December 30, 2003)
(8)	3.1.8	Articles Supplementary to Declaration of Trust of the Company (February 5, 2004)
(9)	3.2	Amended and Restated Bylaws of the Company
(10)	10.1	Second Amended and Restated Partnership Agreement of Brandywine Realty Services Partnership
(11)	10.2	Amended and Restated Articles of Incorporation of Brandywine Realty Services Corporation
(12)	10.3	Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (the “Operating Partnership”)
(12)	10.4	Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(12)	10.5	First Amendment to Amended and Restated Agreement of the Operating Partnership
(13)	10.6	Second Amendment to the Amended and Restated Agreement of Limited Partnership Agreement of the Operating Partnership
(14)	10.7	Third Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(14)	10.8	Tax Indemnification Agreement dated May 8, 1998, by and between the Operating Partnership and the parties identified on the signature page
(15)	10.9	Contribution Agreement dated as of July 10, 1998 (Axinn)
(15)	10.10	Form of Donald E. Axinn Options **
(4)	10.11	Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(4)	10.12	Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(4)	10.13	Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(26)	10.14	Seventh Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(26)	10.15	Eighth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(26)	10.16	Ninth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(26)	10.17	Tenth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(26)	10.18	Eleventh Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(26)	10.19	Twelfth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(4)	10.20	First Amendment to Contribution Agreement (Axinn)
(16)	10.21	Form of Board of Trustees Designation Letter (Lazard)
(9)	10.22	Agreement dated as of December 31, 2001 with Anthony A. Nichols, Sr. **
(10)	10.23	Amended and Restated Employment Agreement dated as of May 7, 2002 of Gerard H. Sweeney**
(5)	10.24	Amended and Restated Non-Qualified Stock Option Award to Anthony A. Nichols, Sr. **
(5)	10.25	Amended and Restated Non-Qualified Stock Option Award to Gerard H. Sweeney **
(5)	10.26	Severance Agreement (Anthony S. Rimikis) **
(5)	10.27	Third Amendment to Restricted Share Award to Gerard H. Sweeney.**
(5)	10.28	Restricted Share Award to Anthony S. Rimikis.**
(17)	10.29	Restricted Share Award to Gerard H. Sweeney **
(18)	10.30	Fourth Amendment to Restricted Share Award to Gerard H. Sweeney**
(18)	10.31	Severance Agreement (Barbara L. Yamarick)**
(18)	10.32	Severance Agreement (Anthony A. Nichols, Jr.)**

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Exhibits No.		Description
(18)	10.33	Severance Agreement (H. Jeffrey De Vuono)**
(18)	10.34	Severance Agreement (George Sowa)**
(18)	10.35	Severance Agreement (Bradley W. Harris)**
(18)	10.36	Restricted Share Award to Gerard H. Sweeney**
(18)	10.37	Restricted Share Award to Anthony S. Rimikis**
(18)	10.38	Restricted Share Award to Barbara L. Yamarick**
(18)	10.39	Restricted Share Award to Anthony A. Nichols, Jr.**
(18)	10.40	Restricted Share Award to H. Jeffrey De Vuono**
(18)	10.41	Restricted Share Award to George Sowa**
(18)	10.42	Restricted Share Award to Bradley W. Harris**
(19)	10.43	2002 Restricted Share Award for Gerard H. Sweeney**
(19)	10.44	2002 Form of Restricted Share Award for Executive Officers**
(20)	10.45	Third Amended and Restated Credit Agreement
(21)	10.46	Term Credit Agreement
(21)	10.47	Consent and First Amendment to Third Amended and Restated Credit Agreement
(21)	10.48	Second Amendment to Third Amended and Restated Credit Agreement
(22)	10.49	2002 Restricted Share Award to Christopher P. Marr**
(22)	10.50	Severance Agreement to Christopher P. Marr**
(23)	10.51	2002 Non-Qualified Option to Gerard H. Sweeney**
(11)	10.52	Executive Deferred Compensation Plan**
(11)	10.53	2003 Restricted Share Award to Gerard H. Sweeney**
(11)	10.54	2003 Restricted Share Award to Anthony S. Rimikis**
(11)	10.55	2003 Restricted Share Award to Barbara L. Yamarick**
(11)	10.56	2003 Restricted Share Award to Anthony A. Nichols, Jr.**
(11)	10.57	2003 Restricted Share Award to H. Jeffrey DeVuono**
(11)	10.58	2003 Restricted Share Award to George D. Sowa**
(11)	10.59	2003 Restricted Share Award to Bradley W. Harris**
(11)	10.60	2003 Restricted Share Award to Brad A. Molotsky**
(11)	10.61	2003 Restricted Share Award to Christopher P. Marr**
(24)	10.62	Letter to Cohen & Steers Capital Management, Inc.
(7)	10.63	Redemption and Conversion Agreement with Five Arrows Realty Securities III L.L.C.
(25)	10.64	Purchase Agreement with Commonwealth Atlantic Operating Properties Inc.
(26)	12.1	Statement re Computation of Ratios
(26)	14.1	Code of Business Conduct and Ethics
(26)	21.1	List of Subsidiaries of the Company
	23.1	Consent of PricewaterhouseCoopers LLP
	31.1	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
	31.2	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
	32.1	Certification Pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934
	32.2	Certification Pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934


1.	Previously filed as an exhibit to the Company’s Form 8-K dated June 9, 1997 and incorporated herein by reference.


2.	Previously filed as an exhibit to the Company’s Form 8-K dated September 10, 1997 and incorporated herein by reference.


3.	Previously filed as an exhibit to the Company’s Form 8-K dated June 3, 1998 and incorporated herein by reference.


4.	Previously filed as an exhibit to the Company’s Form 8-K dated October 13, 1998 and incorporated herein by reference.

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5.	Previously filed as an exhibit to the Company’s Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference.


6.	Previously filed as an exhibit to the Company’s Form 8-K dated April 26, 1999 and incorporated herein by reference.


7.	Previously filed as an exhibit to the Company’s Form 8-A dated December 29, 2003 and incorporated herein by reference.


8.	Previously filed as an exhibit to the Company’s Form 8-A dated February 5, 2004 and incorporated herein by reference.


9.	Previously filed as an exhibit to the Company’s Form 8-K dated October 14, 2003 and incorporated herein by reference.


10.	Previously filed as an exhibit to the Company’s Registration statement of Form S-11 (File No. 33-4175) and incorporated herein by reference.


11.	Previously filed as an exhibit to the Company’s Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference.


12.	Previously filed as an exhibit to the Company’s Form 8-K dated December 17, 1997 and incorporated herein by reference.


13.	Previously filed as an exhibit to the Company’s Form 8-K dated August 13, 1998 and incorporated herein by reference.


14.	Previously filed as an exhibit to the Company’s Form 8-K dated May 14, 1998 and incorporated herein by reference.


15.	Previously filed as an exhibit to the Company’s Form 8-K dated July 30, 1998 and incorporated herein by reference.


16.	Previously filed as an exhibit to the Company’s Form 8-K dated August 13, 1998 and incorporated herein by reference.


17.	Previously filed as an exhibit to the Company’s Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference.


18.	Previously filed as an exhibit to the Company’s Form 10-K for the fiscal year ended December 31, 2000 and incorporated herein by reference.


19.	Previously filed as an exhibit to the Company’s Form 10-Q for the quarter ended June 30, 2002 and incorporated herein by reference.


20.	Previously filed as an exhibit to the Company’s Form 8-K dated July 12, 2001 and incorporated herein by reference.


21.	Previously filed as an exhibit to the Company’s Form 8-K dated July 16, 2002 and incorporated herein by reference.


22.	Previously filed as an exhibit to the Company’s Form 8-K dated August 27, 2002 and incorporated herein by reference.


23.	Previously filed as an exhibit to the Company’s Form 10-Q for the quarter ended September 30, 2002 and incorporated herein by reference.

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24.	Previously filed as an exhibit to the Company’s Form 10-Q for the quarter ended June 30, 2003 and incorporated herein by reference.


25.	Previously filed as an exhibit to the Company’s Form 8-K dated February 3, 2004 and incorporated herein by reference.


26.	Previously filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2003.

** Management contract or compensatory plan or arrangement.

(b)

Reports on Form 8-K

During the three months ended December 31, 2003 and through March 12, 2004, the Company filed or furnished the following:

(i)

Current Report on Form 8-K filed October 14, 2003 (reporting under Items 5 and 7).


	(ii)	Current Report on Form 8-K filed October 15, 2003 (reporting under Items 5 and 7).


	(iii)	Current Report on Form 8-K furnished October 24, 2003 (reporting under Items 7, 9 and 12).


	(iv)	Current Report on Form 8-K filed December 9, 2003 (reporting under Items 5 and 7).


	(v)	Current Report on Form 8-K filed December 24, 2003 (reporting under Item 5).


	(vi)	Current Report on Form 8-K filed December 29, 2003 (reporting under Items 5 and 7).


	(vii)	Current Report on Form 8-K filed January 7, 2004 (reporting under Items 5 and 7).


	(viii)	Current Report on Form 8-K filed February 3, 2004 (reporting under Items 5 and 7).

	(ix)	Current Report on Form 8-K filed February 5, 2004 (reporting under Items 5 and 7).


	(x)	Current Report on Form 8-K furnished February 12, 2004 (reporting under Items 7 and 12).


	(xi)	Current Report on Form 8-K filed February 27, 2004 (reporting under Items 5 and 7).

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Plymouth Meeting, Pennsylvania on June 22, 2004.

	BRANDYWINE REALTY TRUST

	By:	/ s/ Gerard H. Sweeney Gerard H. Sweeney
		President and Chief Executive Officer

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders
of Brandywine Realty Trust:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) and (2) present fairly, in all material respects, the consolidated financial position of Brandywine Realty Trust and its subsidiaries (the “Company”) at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the consolidated financial statements schedules listed in the index appearing under Item 15(a)(1) and (2), present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These consolidated financial statements and consolidated financial statement schedules are the responsibility of the Company’s management; our responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 20 to the consolidated financial statements, the Company has restated its consolidated financial statements as of December 31, 2003 and for the year then ended.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania
June 18, 2004

	December 31,
	2003			2002

		(as restated)
ASSETS
Real estate investments:
Operating properties	$	1,869,744		$	1,890,009
Accumulated depreciation		(268,091	)		(245,230	)

		1,601,653			1,644,779
Construction-in-progress		29,787			41,986
Land held for development		63,915			59,216

		1,695,355			1,745,981

Cash and cash equivalents		8,552			26,801
Escrowed cash		14,388			16,318
Accounts receivable, net		5,206			3,657
Accrued rent receivable, net		26,652			28,333
Marketable securities		12,052			11,872
Assets held for sale		5,317			7,666
Investment in real estate ventures, at equity		15,853			14,842
Deferred costs, net		27,269			29,271
Other assets		45,132			34,547

Total assets	$	1,855,776		$	1,919,288

LIABILITIES AND BENEFICIARIES’ EQUITY
Mortgage notes payable	$	462,659		$	597,729
Borrowings under Credit Facility		305,000			307,000
Unsecured term loan		100,000			100,000
Accounts payable and accrued expenses		30,290			27,576
Distributions payable		20,947			21,186
Tenant security deposits and deferred rents		16,123			22,276
Other liabilities		15,360			22,006
Liabilities related to assets held for sale		52			20

Total liabilities		950,431			1,097,793

Minority interest		133,488			135,052

Commitments and contingencies		—			—
Beneficiaries’ equity:
Preferred Shares (shares authorized-10,000,000):
7.25% Series A Preferred Shares, $0.01 par value;
issued and outstanding-750,000
in 2003 and 2002		8			8
8.75% Series B Preferred Shares, $0.01 par value;
issued and outstanding- no shares
in 2003 and 4,375,000 in 2002		—			44
7.50% Series C Preferred Shares, $0.01 par value;
issued and outstanding-2,000,000 in 2003
and no shares issued and outstanding in 2002		20			—
Common Shares of beneficial interest, $0.01 par value;
shares authorized-100,000,000; issued and outstanding–
41,040,710 in 2003 and 35,226,315 in 2002		410			352
Additional paid-in capital		936,730			841,659
Share warrants		401			401
Cumulative earnings		310,212			225,010
Accumulated other comprehensive loss		(2,158	)		(6,402	)
Cumulative distributions		(473,766	)		(374,629	)

Total beneficiaries’ equity		771,857			686,443

Total liabilities and beneficiaries’ equity	$	1,855,776		$	1,919,288

	Number of Preferred A Shares		Par Value of Preferred A Shares		Number of Preferred B Shares			Par Value of Preferred B Shares			Number of Preferred C Shares		Par Value of Preferred C Shares		Number of Common Shares			Par Value of Common Shares			Additional Paid-in Capital			Employee Stock Loans			Share Warrants			Cumulative Earnings (as restated)			Accumulated Other Comprehensive Income (Loss)			Cumulative Distributions			Total (as restated)

BALANCE, January 1, 2001		750,000	$	8		4,375,000		$	44			—	$	—		35,681,314		$	357		$	854,375		$	(6,837	)	$	908		$	131,256		$	(1,731	)	$	(226,212	)	$	752,168
Comprehensive income:
Net income																															33,722									33,722
Other comprehensive income:
Cumulative effect of adopting SFAS 133																																		(1,300	)
Unrealized loss on derivative financial instruments																																		(3,371	)
Unrealized gain on available-for-sale securities																																		1,815

Total other comprehensive income																																		(2,856	)					(2,856	)

Total comprehensive income																																								30,866
Vesting of Restricted Stock																175,411			2			3,983																		3,985
Repurchase of Common Shares																(373,713	)		(4	)		(7,290	)																	(7,294	)
Employee stock loans used to purchase Common Shares																71,276			1			1,385			(1,386	)														—
Payment/forgiveness of employee stock loans																									2,524															2,524
Accretion of Preferred Share discount																						1,476									(1,476	)								—
Exercise of warrants/options																86,647						(17	)					(507	)											(524	)
Preferred Share distributions																																					(11,906	)		(11,906	)
Distributions ($1.70 per share)																																					(61,663	)		(61,663	)

BALANCE, December 31, 2001		750,000		8		4,375,000			44			—		—		35,640,935			356			853,912			(5,699	)		401			163,502			(4,587	)		(299,781	)		708,156
Comprehensive income:
Net income																															62,984									62,984
Other comprehensive income:
Unrealized loss on derivative financial instruments																																		(2,548	)
Unrealized gain on available-for-sale securities																																		733

Total other comprehensive income																																		(1,815	)					(1,815	)

Total comprehensive income																																								61,169
Vesting of Restricted Stock																76,454			1			1,895																		1,896
Repurchase of Common Shares																(491,074	)		(5	)		(11,048	)																	(11,053	)
Payment/forgiveness of employee stock loans																									1,658															1,658
Accretion of Preferred Share discount																						1,476									(1,476	)								—
Amortization of stock options																						43																		43
Exercise of warrants/options																						(578	)																	(578	)
Preferred Share distributions																																					(11,906	)		(11,906	)
Distributions ($1.76 per share)																																					(62,942	)		(62,942	)

BALANCE, December 31, 2002		750,000		8		4,375,000			44			—		—		35,226,315			352			845,700			(4,041	)		401			225,010			(6,402	)		(374,629	)		686,443
Comprehensive income:
Net income																															86,678									86,678
Other comprehensive income:
Unrealized loss on derivative financial instruments																																		4,194
Unrealized gain on available-for-sale securities																																		50

Total other comprehensive income																																		4,244						4,244

Total comprehensive income																																								90,922
Vesting of Restricted Stock																82,912			1			1,767																		1,768
Issuance of Preferred Shares												2,000,000		20								47,892																		47,912
Conversion of Preferred Shares						(1,093,750	)		(11	)						1,093,750			11			3,828															(3,828	)		–
Redemption of Preferred Shares, net of minority interest						(3,281,250	)		(33	)												(74,647	)														(16,770	)		(91,450	)
Issuance of Common Shares, net of minority interest																4,587,500			45			110,937																		110,982
Conversion of Class A minority interest units																50,233			1			1,205																		1,206
Payment/forgiveness of employee stock loans																									2,509															2,509
Accretion of Preferred Share discount																						1,476									(1,476	)								—
Amortization of stock options																						104																		104
Preferred Share distributions																																					(11,906	)		(11,906	)
Distributions ($1.76 per share)																																					(66,633	)		(66,633	)

BALANCE, December 31, 2003, as restated		750,000	$	8		—		$	—			2,000,000	$	20		41,040,710		$	410		$	938,262		$	(1,532	)	$	401		$	310,212		$	(2,158	)	$	(473,766	)	$	771,857

	Year ended December 31,
	2003			2002			2001

		(as restated)
Cash flows from operating activities:
Net income	$	86,678		$	62,984		$	33,722
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		54,353			52,944			73,031
Amortization:
Deferred financing costs		2,304			1,795			3,790
Deferred leasing costs		7,032			5,820			5,158
Deferred compensation costs		2,869			3,182			3,710
Straight-line rental income		(5,917	)		(5,930	)		(6,206	)
Provision for doubtful accounts		189			894			2,867
Net gain on sales of interests in real estate		(30,227	)		(8,562	)		(4,524	)
Non-recurring charge		—			—			6,600
Impairment loss on assets held-for-sale		—			665			—
Minority interest		9,789			10,152			8,622
Changes in assets and liabilities:
Accounts receivable		(1,462	)		2,582			(212	)
Other assets		(4,232	)		11,029			17,464
Accounts payable and accrued expenses		1,911			(6,040	)		4,292
Tenant security deposits and deferred rents		(2,432	)		(521	)		5,058
Other liabilities		(2,062	)		(2,158	)		(1,332	)

Net cash from operating activities		118,793			128,836			152,040

Cash flows from investing activities:
Acquisition of properties		(67,490	)		(25,146	)		(40,359	)
Sales of properties, net		87,461			78,019			31,335
Capital expenditures		(50,885	)		(38,787	)		(107,405	)
Investment in real estate ventures		(521	)		(446	)		(2,495	)
Increase in escrowed cash		1,930			2,553			(1,016	)
Cash distributions from real estate ventures in excess of income		3,258			1,969			5,492
Leasing costs		(7,821	)		(13,124	)		(9,234	)

Net cash from investing activities		(34,068	)		5,038			(123,682	)

Cash flows from financing activites:
Proceeds from notes payable, Credit Facility		220,000			15,000			91,000
Repayment of notes payable, Credit Facility		(222,000	)		(102,325	)		(35,000	)
Proceeds from Term Loan		–			100,000			–
Proceeds from mortgage notes payable		–			20,186			135,165
Repayment of mortgage notes payable		(82,131	)		(48,646	)		(127,876	)
Debt financing costs		(112	)		(658	)		(5,557	)
Repayments on employee stock loans		2,509			1,658			1,024
Proceeds from issuances of shares, net		159,107			—			—
Redemption of Preferred Shares		(91,422	)		—			—
Repurchases of Common Shares and minority interest units		—			(20,165	)		(6,494	)
Distributions paid to shareholders		(78,754	)		(75,022	)		(72,534	)
Distributions to minority interest holders		(10,171	)		(10,560	)		(10,667	)

Net cash from financing activities		(102,974	)		(120,532	)		(30,939	)

(Decrease) increase in cash and cash equivalents		(18,249	)		13,342			(2,581	)
Cash and cash equivalents at beginning of year		26,801			13,459			16,040

Cash and cash equivalents at end of year	$	8,552		$	26,801		$	13,459

Supplemental disclosure:
Cash paid for interest, net of capitalized interest	$	52,645		$	61,814		$	74,736

	As of December 31,
	2003		2002

	(amounts in thousands)
Intangible assets (included in Other Assets and Other Liabilities):
Acquired lease asset, net of accumulated amortization of $345 and $99, respectively	$	1,866	$	607
Value of In-Place leases, net of accumulated amortization of $564 and $256, respectively		3,533		959
Value of tenant relationships, net of accumulated amortization of $84 in 2003		2,033		—

Net intangible assets	$	7,432	$	1,566

Acquired lease liability, net of accumulated amortization of $869 and $558, respectively	$	1,305	$	1,547

	Year ended December 31,
	2003			2002			2001

		(as restated)
Net income available to Common Shares, as reported	$	54,174		$	51,078		$	21,816
Add: Stock based compensation expense included in reported net income		2,740			2,553			2,828
Deduct: Total stock based compensation expense determined under fair value recognition method for all awards		(3,191	)		(3,231	)		(3,506	)

Pro forma net income available to Common Shares	$	53,723		$	50,400		$	21,138


Earnings per Common Share
Basic — as reported	$	1.43		$	1.40		$	0.57

Basic — pro forma	$	1.41		$	1.38		$	0.55


Diluted — as reported	$	1.43		$	1.39		$	0.57

Diluted — pro forma	$	1.41		$	1.37		$	0.55

	Annual report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
	For the fiscal year ended December 31, 2003 or

	Transition report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
	For the transition period from to

Commission File Number 1-9106


Maryland	23-2413352
(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, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Shares of Beneficial Interest, (par value $0.01 per share) 7.50% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest (par value $0.01 per share) 7.375% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest (par value $0.01 per share)	New York Stock Exchange New York Stock Exchange New York Stock Exchange


5.	ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS

	Ownership Percentage (1)			Carrying Amount		Real Estate Venture Debt at 100%		Company’s Share of Real Estate Venture Income (Loss)			Current Interest Rate		Debt Maturity

Two Tower Bridge Associates		35	%	$	2,409	$	10,501	$	290			6.82%		May-08
Four Tower Bridge Associates		65	%		2,454		11,000		(21	)		6.62%		Feb-11
Five Tower Bridge Associates		15	%		—		30,600		—			6.77%		Feb-09
Six Tower Bridge Associates		65	%		113		15,683		(46	)		7.79%		Aug-12
Eight Tower Bridge Associates		6	%		1,147		38,219		(189	)		3.34%		Feb-05
Tower Bridge Inn Associates		50	%		2,291		11,547		(235	)		8.50%		Apr-07
1000 Chesterbrook Boulevard		50	%		3,373		27,860		456			6.88%		Nov-11
PJP Building Two, LC		30	%		15		5,738		30			6.12%		Nov-23
PJP Building Five, LC		25	%		238		5,753		94			2.69%		Oct-05
Macquarie		20	%		3,813		74,500		64			4.62%		Jan-09
Florig, LP (2)		30	%		—		—		(861	)		N/A		N/A
Invesco Partnership, L.P. (3)		35	%		—		—		470			N/A		N/A


				$	15,853	$	231,401	$	52

(1)	Ownership percentage represents the Company’s entitlement to residual distributions after payments of priority returns.

(2)	During 2003, the Company recorded an impairment charge of $861,000 associated with this non-operating real estate venture. This amount consisted primarily of legal and acquisition costs related to a parcel of land that ultimately was not acquired.

(3)	Company’s interest consists solely of a residual profits interest.

	1000 Chesterbrook Boulevard Partnership		Two Tower Bridge Associates		Four Tower Bridge Associates		Five Tower Bridge Associates		Six Tower Bridge Associates		Eight Tower Bridge Associates			Tower Bridge Inn Associates			PJP Building Two, LC		PJP Building Five, LC		BDN/ Macquire LLC		Total

Assets
Net Property	$	30,885	$	12,488	$	13,038	$	39,026	$	15,143	$	57,270		$	15,149		$	5,642	$	6,684	$	126,871	$	322,196
Other Assets		3,238		740		613		4,429		1,151		2,063			947			747		678		15,376		29,982

Total Assets	$	34,123	$	13,228	$	13,651	$	43,455	$	16,294	$	59,333		$	16,096		$	6,389	$	7,362	$	142,247	$	352,178


Liabilities and Equity
Other Liabilities	$	244	$	378	$	240	$	967	$	487	$	556		$	342		$	220	$	47	$	24,419	$	27,900
Debt		27,860		10,501		11,000		30,600		15,683		38,219			11,547			5,738		5,753		74,500		231,401

Total Liabilities		28,104		10,879		11,240		31,567		16,170		38,775			11,889			5,958		5,800		98,919		259,301
Equity		6,019		2,349		2,411		11,888		124		20,558			4,207			431		1,562		43,328		92,877

Total Liabilities and Equity	$	34,123	$	13,228	$	13,651	$	43,455	$	16,294	$	59,333		$	16,096		$	6,389	$	7,362	$	142,247	$	352,178


Revenues
Revenues	$	5,079	$	2,057	$	2,255	$	5,976	$	2,966	$	1,507		$	4,245		$	915	$	855	$	788	$	26,643
Tenant reimbursements and other		526		376		397		466		518		109			—			12		308		348		3,060

Total Revenue		5,605		2,433		2,652		6,442		3,484		1,616			4,245			927		1,163		1,136		29,703

Operating Expenses
Property Operating Expenses		743		744		843		1,545		907		1,214			2,483			357		327		219		9,382
Real Estate Taxes		430		148		148		382		233		363			265			49		60		112		2,190
Depreciation and Amortization		1,239		367		676		2,009		807		1,567			711			210		236		263		8,085
Interest		1,929		479		728		2,004		1,231		1,635			990			205		164		220		9,585
Administrative Expenses		4		—		—		—		—		—			—			—		—		—		4

Total Operating Expenses		4,345		1,738		2,395		5,940		3,178		4,779			4,449			821		787		814		29,246

Net Income	$	1,260	$	695	$	257	$	502	$	306	$	(3,163	)	$	(204	)	$	106	$	376	$	322	$	457

2004	$	1,644
2005		45,542
2006		1,823
2007		12,411
2008 and thereafter		169,981

	$	231,401

	Payments by Period (in thousands)
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years

Mortgage notes payable:
Fixed rate	$	402,321	$	10,277	$	24,759	$	40,259	$	327,026
Variable rate		24,815		172		407		552		23,684
Construction loans		35,523		35,523		—		—		—

		462,659		45,972		25,166		40,811		350,710
Revolving credit facility		305,000		305,000		—		—		—
Unsecured debt		100,000		—		100,000		—		—

	$	867,659	$	350,972	$	125,166	$	40,811	$	350,710

			Notional							Fair
Hedge Product	Hedge Type		Amount		Strike			Maturity		Value (Liability)

Cap		Cash flow	$	28,000		8.700	%		7/12/2004	$	—
Swap		Cash flow		100,000		4.230	%		6/29/2004		(1,733	)
Swap		Cash flow		50,000		4.215	%		6/29/2004		(863	)
Swap		Cash flow		25,000		4.215	%		6/29/2004		(431	)

										$	(3,027	)

	December 31,

	2003		2002

	(amounts in thousands)

Real Estate Investments:
Operating Properties	$	6,143	$	8,729
Accumulated depreciation		(906)		(1,235)

		5,237		7,494
Construction-in-progress		—		55

		5,237		7,549

Accrued rent receivable		65		87
Deferred costs, net		15		2
Other assets		—		28

	$	5,317	$	7,666

Tenant security deposits and deferred rents	$	52	$	20



	Number			Weighted-
	of Shares			Average		Grant Price Range
	Under			Exercise
	Option			Price		From		To

Balance at January 1, 2001		2,623,714		$	26.36	$	6.21	$	29.04
Exercised		(83,333	)		19.50		19.50		19.50
Canceled		(61,582	)		27.53		25.25		29.04

Balance at December 31, 2001		2,478,799			26.56		6.21		29.04
Granted		100,000			19.50		19.50		19.50
Exercised		(55,000	)		19.50		19.50		19.50
Canceled		(151,172	)		22.22		19.50		29.04

Balance at December 31, 2002 and 2003		2,372,627			26.70		6.21		29.04

	Pennsylvania		New Jersey		Virginia		Corporate		Total

2003:
Real estate investments, at cost:
Operating properties	$	1,146,350	$	508,906	$	214,488	$	—	$	1,869,744
Construction-in-progress		25,162		4,043		582		—		29,787
Land held for development		38,723		15,352		9,840		—		63,915
Assets held for sale		—		3,649		1,668		—		5,317
Total revenue	$	185,206	$	88,453	$	27,841	$	4,159	$	305,659
Property operating expenses and real estate taxes		64,307		34,278		10,151		—		108,736

Net operating income	$	120,899	$	54,175	$	17,690	$	4,159	$	196,923

2002:
Real estate investments, at cost:
Operating properties	$	1,169,919	$	506,818	$	213,272	$	—	$	1,890,009
Construction-in-progress		51,469		3,619		3,039		—		58,127
Land held for development		25,051		10,023		8,001		—		43,075
Assets held for sale, at cost		—		7,666		—		—		7,666
Total revenue	$	178,145	$	84,291	$	26,652	$	1,952	$	291,040
Property operating expenses and real estate taxes		60,114		30,543		9,506		—		100,163

Net operating income	$	118,031	$	53,748	$	17,146	$	1,952	$	190,877

2001:
Total revenue	$	159,662	$	80,986	$	27,309	$	2,531	$	270,488
Property operating expenses and real estate taxes		52,931		30,182		9,926		—		93,039

Net operating income	$	106,731	$	50,804	$	17,383	$	2,531	$	177,449

	Year Ended December 31
	2003		2002		2001

		(as restated)
	(amounts in thousands)
Consolidated net operating income	$	196,923	$	190,877	$	177,449
Less:
Interest expense		57,835		63,522		67,496
Depreciation and amortization		60,592		56,431		67,224
Administrative expenses		14,464		14,804		15,177
Non-recurring charges		—		—		6,600
Minority interest attributable to continuing
operations		9,272		9,265		7,818
Plus:
Equity in income of real estate ventures		52		987		2,768
Net gains on sales of interests in real estate		20,537		—		4,524

Consolidated income from continuing operations	$	75,349	$	47,842	$	20,426

	For the year ended December 31,
	2003						2002						2001
		Basic			Diluted			Basic			Diluted			Basic			Diluted
		(as restated)			(as restated)

Income from continuing operations	$	75,349		$	75,349		$	47,842		$	47,842		$	20,426		$	20,426
Income from discontinued operations		11,329			11,329			15,142			15,142			13,296			13,296
Income allocated to Preferred Shares		(11,906	)		(11,906	)		(11,906	)		(11,906	)		(11,906	)		(11,906)
Preferred Share redemption/conversion charge		(20,598	)		(20,598	)		—			—			—			—

		54,174			54,174			51,078			51,078			21,816			21,816
Preferred Share discount amortization		(1,476	)		(1,476	)		(1,476	)		(1,476	)		(1,476	)		(1,476	)

Income available to common shareholders	$	52,698		$	52,698		$	49,602		$	49,602		$	20,340		$	20,340

Weighted-average shares outstanding		36,937,467			36,937,467			35,513,813			35,513,813			35,646,842			35,646,842
Options, warrants and unvested restricted stock		—			150,402			—			131,997			—			27,809

Total weighted-average shares outstanding		36,937,467			37,087,869			35,513,813			35,645,810			35,646,842			35,674,651

Earnings per Common Share:
Continuing operations	$	1.12		$	1.12		$	0.97		$	0.97		$	0.20		$	0.20
Discontinued operations		0.31			0.31			0.43			0.42			0.37			0.37

	$	1.43		$	1.43		$	1.40		$	1.39		$	0.57		$	0.57

Year	Minimum Rent
2004	$	249,836
2005		216,862
2006		178,757
2007		148,915
2008		116,708
2009 and thereafter		344,434

	$	1,255,512

	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter

								(as restated)
2003:
Total revenue	$	75,241	$	74,464	$	77,178	$	78,776
Net income		13,917		13,524		17,400		41,837
Income allocated to Common Shares		10,941		10,548		14,424		18,261

Basic earnings per Common Share	$	0.30	$	0.29	$	0.38	$	0.46
Diluted earnings per Common Share	$	0.30	$	0.29	$	0.37	$	0.46

2002:
Total revenue	$	69,021	$	72,491	$	74,390	$	75,138
Net income		23,469		12,800		13,968		12,747
Income allocated to Common Shares		20,492		9,823		10,992		9,771

Basic earnings per Common Share	$	0.56	$	0.26	$	0.30	$	0.27
Diluted earnings per Common Share	$	0.55	$	0.26	$	0.30	$	0.27

	Unrealized Gains (Losses) on Securities			Cash Flow Hedges			Accumulated Other Comprehensive Loss

Balance at January 1, 2001	$	(1,731	)	$	—		$	(1,731)
Change during year		1,816			(7,921	)		(6,105)
Reclassification adjustments for losses reclassified into operations		—			3,249			3,249

Balance at December 31, 2001		85			(4,672	)		(4,587)
Change during year		733			(7,954	)		(7,221)
Reclassification adjustments for losses
reclassified into operations		—			5,406			5,406

Balance at December 31, 2002	$	818		$	(7,220	)	$	(6,402)
Change during year		51			(1,118	)		(1,067)
Reclassification adjustments for losses
reclassified into operations		—			5,311			5,311

Balance at December 31, 2003	$	869		$	(3,027	)	$	(2,158)


The following is a summary of the effects of the aforementioned adjustments on the Company's consolidated financial statements for 2003:


				(in 000's except per share data)

				As Previously Reported			As Restated		Percentage Change

2003 Consolidated Balance Sheet

	Minority Interest		$	134,357		$	133,488		-0.6	%
	Total Beneficiaries’ Equity			770,988			771,857		-0.1	%

2003 Statement of Operations
	Minority interest attributable to Continuing Operations		$	(10,141	)	$	(9,272	)	-8.6	%
	Income from Continuing Operations			74,480			75,349		1.2	%
	Net Income			85,809			86,678		1.0	%
	Net Income available to Common Shares		$	53,305		$	54,174		1.6	%

	Basic Earnings per Share
		From Continuing Operations	$	1.09		$	1.12
		From Discontinued Operations	$	0.31		$	0.31

		Total	$	1.40		$	1.43		2.1	%


	Diluted Earnings per Share
		From Continuing Operations	$	1.09		$	1.12
		From Discontinued Operations	$	0.31		$	0.31

		Total	$	1.40		$	1.43		2.1	%

Description	Balance at Beginning of Period		Additions Charged to expense		Deductions		Balance at End of Period

Allowance for doubtful accounts:

Year ended December 31, 2003	$	4,576	$	189	$	734	$	4,031


Year ended December 31, 2002	$	4,532	$	894	$	850	$	4,576


Year ended December 31, 2001	$	2,427	$	2,867	$	762	$	4,532

							Initial Cost							Gross Amount at Which Carried December 31, 2003
	City		State		Encumberances at December 31, 2003		Land		Building and Improvements		Net Improvements (Retirements) Since Acquisition			Land		Building and Improvements		Total (a)		Accumulated Depreciation at December 31, 2003 (b)		Date of Construction		Date Acquired		Depreciable Life

One Greentree Centre		Marlton		NJ		—		345		4,440		401			345		4,841		5,186		2,656		1982		1986		40
Three Greentree Centre		Marlton		NJ		—		323		6,024		91			323		6,115		6,438		3,856		1984		1986		40
Two Greentree Centre		Marlton		NJ		—		264		4,693		104			264		4,797		5,061		2,998		1983		1986		40
110 Summit Drive		Exton		PA		—		403		1,647		157			403		1,804		2,207		446		1985		1996		40
1155 Business Center Drive		Horsham		PA		2,468		1,029		4,124		(182	)		1,029		3,942		4,971		1,291		1990		1996		40
120 West Germantown Pike		Plymouth Meeting		PA		—		685		2,773		400			685		3,173		3,858		812		1984		1996		40
1336 Enterprise Drive		West Goshen		PA		—		731		2,946		51			731		2,997		3,728		716		1990		1996		40
140 West Germantown Pike		Plymouth Meeting		PA		—		481		1,976		236			481		2,212		2,693		701		1984		1996		40
18 Campus Boulevard		Newtown Square		PA		3,408		787		3,312		22			787		3,334		4,121		1,003		1990		1996		40
2240/50 Butler Pike		Plymouth Meeting		PA		—		1,104		4,627		603			1,104		5,230		6,334		1,791		1984		1996		40
2260 Butler Pike		Plymouth Meeting		PA		—		661		2,727		157			661		2,884		3,545		813		1984		1996		40
33 Street Road — Greenwood Square I		Bensalem		PA		—		851		3,407		419			851		3,826		4,677		1,008		1985		1996		40
33 Street Road — Greenwood Square II		Bensalem		PA		—		1,126		4,511		924			1,126		5,435		6,561		1,593		1985		1996		40
33 Street Road — Greenwood Square III		Bensalem		PA		—		350		1,401		101			350		1,502		1,852		367		1985		1996		40
456 Creamery Way		Exton		PA		—		635		2,548		(47	)		635		2,501		3,136		635		1987		1996		40
457 Haddonfield Road		Cherry Hill		NJ		11,410		2,142		9,120		2,536			2,142		11,656		13,798		4,072		1990		1996		40
468 Creamery Way		Exton		PA		—		526		2,112		(37	)		526		2,075		2,601		562		1990		1996		40
486 Thomas Jones Way		Exton		PA		—		806		3,256		(92	)		806		3,164		3,970		852		1990		1996		40
500 Enterprise Road		Horsham		PA		—		1,303		5,188		(790	)		1,303		4,398		5,701		1,245		1990		1996		40
500 North Gulph Road		King of Prussia		PA		—		1,303		5,201		785			1,303		5,986		7,289		1,630		1979		1996		40
650 Dresher Road		Horsham		PA		1,713		636		2,501		314			636		2,815		3,451		733		1984		1996		40
6575 Snowdrift Road		Allentown		PA		—		601		2,411		473			601		2,884		3,485		1,050		1988		1996		40
700 Business Center Drive		Horsham		PA		1,478		550		2,201		226			550		2,427		2,977		611		1986		1996		40
7248 Tilghman Street		Allentown		PA		—		731		2,969		70			731		3,039		3,770		839		1987		1996		40
7310 Tilghman Street		Allentown		PA		—		553		2,246		582			553		2,828		3,381		869		1985		1996		40
800 Business Center Drive		Horsham		PA		2,234		896		3,585		19			896		3,604		4,500		899		1986		1996		40
8000 Lincoln Drive		Marlton		NJ		—		606		2,887		(194	)		606		2,693		3,299		699		1983		1996		40
One Progress Avenue		Horsham		PA		—		1,399		5,629		144			1,399		5,773		7,172		1,507		1986		1996		40
One Righter Parkway		Talleyville		DE		10,680		2,545		10,195		282			2,545		10,477		13,022		2,633		1989		1996		40
1 Foster Avenue		Gibbsboro		NJ		—		93		364		35			93		399		492		83		1972		1997		40
10 Foster Avenue		Gibbsboro		NJ		—		244		971		72			244		1,043		1,287		224		1983		1997		40
100 Berwyn Park		Berwyn		PA		7,135		1,180		7,290		158			1,180		7,448		8,628		1,717		1986		1997		40
100 Commerce Drive		Newark		DE		—		1,160		4,633		516			1,160		5,149		6,309		1,151		1989		1997		40
100 Katchel Blvd		Reading		PA		—		1,881		7,423		139			1,881		7,562		9,443		1,747		1970		1997		40
1000 Atrium Way		Mt. Laurel		NJ		—		2,061		8,180		390			2,061		8,570		10,631		1,957		1989		1997		40
1000 Howard Boulevard		Mt. Laurel		NJ		3,647		2,297		9,288		434			2,297		9,722		12,019		2,474		1988		1997		40
10000 Midlantic Drive		Mt. Laurel		NJ		—		3,206		12,857		1,127			3,206		13,984		17,190		3,255		1990		1997		40
100-300 Gundy Drive		Reading		PA		—		6,495		25,180		5,829			6,495		31,009		37,504		6,931		1970		1997		40
1007 Laurel Oak Road		Voorhees		NJ		—		1,563		6,241		17			1,563		6,258		7,821		1,314		1996		1997		40
105/140 Terry Drive		Newtown		PA		—		2,299		8,238		2,256			2,299		10,494		12,793		2,575		1974		1997		40
111 Presidential Boulevard		Bala Cynwyd		PA		—		5,419		21,612		850			5,419		22,462		27,881		4,711		1974		1997		40
1120 Executive Boulevard		Mt. Laurel		NJ		—		2,074		8,415		762			2,074		9,177		11,251		2,166		1987		1997		40
15000 Midlantic Drive		Mt. Laurel		NJ		—		3,061		12,254		8			3,061		12,262		15,323		2,813		1991		1997		40
2 Foster Avenue		Gibbsboro		NJ		—		185		730		23			185		753		938		158		1974		1997		40
20 East Clementon Road		Gibbsboro		NJ		—		769		3,055		248			769		3,303		4,072		760		1986		1997		40
200 Berwyn Park		Berwyn		PA		9,592		1,533		9,460		606			1,533		10,066		11,599		2,308		1987		1997		40
2000 Midlantic Drive		Mt. Laurel		NJ		9,421		2,202		8,823		462			2,202		9,285		11,487		2,236		1989		1997		40
220 Commerce Drive		Fort Washington		PA		—		1,086		4,338		536			1,086		4,874		5,960		1,099		1974		1997		40


	The following table reconciles the real estate investments from January 1, 2002 to December 31, 2003 (in thousands):


	The following table reconciles the accumulated depreciation on real estate investments from January 1, 2003 to December 31, 2003 (in thousands):